IMI plc (IMI) Earnings Call Transcript & Summary

[Presentation] All right. Good afternoon, everybody, and welcome to this second capital markets event for IMI. The events this year have both been themed around accelerating our business performance. And I've got to say, I'm pretty excited today to show you more of what we're doing in IMI to generate that profitable growth. If we turn to the next slide. The agenda for today is a very brief recap on what we talked about in June. So a quick look back at what we talked about in terms of Critical Engineering. And then Beth will spotlight on Precision and all of the excellent work that Beth and her team are doing to drive growth in Precision. Then we get a quick coffee break and then come back fully energized to listen to Phil, who with his team is going to show you their growth plans within Hydronic Engineering. Then Dan is going to talk about how we're improving the returns in the business. I'll come back with a brief summary, and then we will have our normal Q&A. Right. Next slide, please. So this next slide is the executive management team at IMI. The sharp eyed amongst you will know that there's been one change. John O'Shea retired after more than 30 years with IMI as Company Secretary. Sad to see John go, but very pleased to welcome Louise. So Louise has joined us for the last couple of months and has hit the ground running, I have to say, as Company Secretary and Legal Director for IMI. Today, you're going to hear from Beth, as I said, and Phil, and then myself and Dan are going to be with you as well for the Q&A. Great. Right. This next slide then is all about our business model. And again, as a quick reminder, we launched our purpose a couple of years ago in our Breakthrough Engineering for a Better World. And that purpose is certainly unleashing a lot of discretionary effort, a lot of energy across IMI. And that was well reflected in our employee engagement scores, which hit 80% for the first time in our history in terms of those employees that would recommend IMI to their friends and family. And then, of course, it's published in the annual report every year. The strategy really condenses down to these 3 areas. It's about customer first, putting the customer right at the center of what we're doing. It's about reducing the complexity in the business, reducing the complexity in our supply chains, taking out the complexity that actually is an anchor on our growth. And it's obviously about market-led innovation and the Growth Hub. Okay. Well, this next slide then is a quick reminder on the Growth Hub. And really, the Growth Hub is all about setting up sprint teams. We've got more than 30 sprint teams working across IMI now to get out there, talk to customers, find customer problems, find customer problems; test customer problems in a very short period of time, but with a lot of customers at a very fast pace; and then to create solutions to those problems, test those solutions, create the business case, present that at a pitch, all in a very, very short period of time; and then if they're successful, take that new product or service through to scaling and then scaling very quickly, often using digital techniques. Perhaps the interesting point on this slide is that now about 700 people across IMI have been involved in Growth Hub, either directly involved in a growth team and a sprint team or sponsoring a team or supporting a team in some way. And what that's doing is certainly changing the culture in the company with many more people talking to customers, many more people creating solutions, and that whole pace of innovation is quite exciting to see. And we're going to give you some examples of that today. So we go to the next slide. I think most of you know that this next slide is my favorite slide in the pack. But what the sharp eyed again amongst you will notice is that the funnel has improved again since June when we presented last. So you will see that there's been more of these projects. And this is a representative version of the projects that we're working on in IMI. More of the projects have moved into Phase 4, which is scaling. And some of the projects have got larger as well in terms of what we think that we can do. So roughly the size of the circle is the size of the business that we think we can create from those projects. So yes, I'm pleased with the way the funnel has moved on. One small fact in the bullets over there on the right-hand side. In the first half of this year, we created 34 patents. Now that run rate is double -- more than double what we did in 2020 and more than double what we did in 2019. So this isn't going to be a constant KPI for IMI or anything, but it's just another little indicator of what is happening within IMI in terms of creativity, which is obviously focused on generating growth and is focused on generating sustainable value and sustainable margins. So next slide is as a very quick recap on IMI Critical Engineering for the Capital Markets Day. Our ambition is to grow that business at 3% to 5%, sustainably at 20% margins. And you will remember that we presented how we're shifting the mix of that business towards more Aftermarket. The Aftermarket in the installed base has had a growth rate of about 5%, and we want to continue or accelerate that growth rate. And therefore, the overall mix of that business will move from about half to about 2/3 Aftermarket over the next few years. And as it does that, obviously, its growth profile changes -- improves, its margins improves and its returns improves. And it becomes quite an exciting prospect as part of IMI's portfolio of businesses. We also talked about with Critical some of the exciting new segments that we're working on, obviously, including hydrogen, where we're doing more and more projects now, early days, but we're doing more and more projects and actually winning some nice orders; pharma, where we bought PBM a couple of years ago, and we're building on that as a platform to get into that pharma space; and marine, where we have more than doubled the business over the last 3 years or so. And we have plenty of exciting opportunities in front of us. So next slide. So moving to today now, the Precision and Hydronic highlights. These are the highlights as far as I see them. Obviously, you're going to see for yourselves from Beth and Phil and get some real insight into the business, and there is growth potential, both of them. But from my perspective, we've got a very ambitious management team now in both divisions. And I think that will definitely come across today. They're both absolutely determined to grow their businesses and do that directly in line with our purpose and creating a better world to really unleash the energy and a lot of excitement actually across those divisions. They've both got very attractive end markets. So obviously, industrial automation, sustainable buildings, pharma and life sciences, obviously, in the case of Precision, and Commercial Vehicles as well because Commercial Vehicles will certainly go through a transition. And from our perspective, we can actually see more opportunity for fluid engineering on a hydrogen fuel cell truck than on a diesel combustion engine truck. So from our perspective, we're quite excited about that transition. And again, Beth's team will talk a little bit about that today. I think the third key point is the tremendous applications expertise that these divisions have. Hydronic, through its Hydronic College of very sophisticated engineers, often with PhDs in fluid dynamics, that can help customers optimize their energy efficiency in a building while making sure the building is at the specified comfort levels. And Precision, of course, with its applications engineers, which help life science customers develop some of the most complex ventilators in the world, for instance. So incredible applications expertise. And the fourth point here, we are certainly investing in growth, and meaningfully. Our margins could be meaningfully higher this year if we weren't investing so heavily in growth. And again, a lot of that will come through in the presentations later today. We've now got a strong digital agenda, which is certainly underpinning our growth potential. And many of these projects that you're going to see today use digital techniques, either to prospect for customers, to win customers, to enable transactions to have -- much more scalably from customers. And even actually in one case, in the case of Adaptix, Precision are now using bots to help customer service. And I didn't think that was something I was going to say in IMI, but that's what we're doing. So quite excited about the ability for digital to help us scale and to help us improve our products, to improve our customers' productivity as well. The sixth and final point in here is obviously the simplification aspect of the strategy. And again, you're going to see some examples today. Phil in Hydronics has gone from 3 warehouses to 1 in Europe. He's also reduced his manufacturing footprint. Beth, as you know, has consolidated over the last few years 4 factories in Precision. And what we're doing is making sure we're investing in the best factories and simplifying our supply chain. So reducing the number of suppliers, giving more business to less of our better suppliers. And over time, as we simplify supply chains, that is obviously a great enabler to growth because that complexity is certainly a drag on growth. Right. So if I go to the next slide, here is Beth, and Beth is going to, with the Precision team, give a real spotlight on Precision. Thank you.

Thank you, Roy, and I'm delighted to be with you today to present the Precision Engineering division and our strategy. Firstly, I'd like to introduce you to my team. It's a great mix of people who have a deep experience of IMI, over 100 years of service between us and some newer additions, including me and Dibyava, who bring experiences from other global industrial businesses. We have 3 global business units focused on different end markets and in Asia Pacific business that leverages the product portfolios of the global business units and continues to enjoy strong growth in the region's emerging markets. These business units are supported by 6 global functional leaders who drive best practices and processes across the division. Today, I'm pleased that Dibyava, Martin and Chris, the leaders of the 3 global business units, will join me to present some of our exciting growth opportunities in each of their respective areas. Next slide. So Precision Engineering has revenues of just under GBP 900 million and is present in a number of attractive end markets. We're well known in these markets for solving customer problems in motion and fluid control through creating customized and highly engineered products. Industrial Automation accounts for over 40% of our revenue, focusing on helping customers to automate factories with pneumatics and automation components. By way of example, in the packaging segment, our patented Excelon Plus air preparation units ensure proper filtration, regulation and lubrication of compressed air for optimum life and performance. Precision Fluid OEM provides flow control solutions for the life sciences and process control industries and accounts for just under 1/3 of the division. An example application here is for our patented proportional valves, which are very small orifices, thinner than a human hair, and enable the precise control of flow rates in the dosing and mixing of gases and anesthesia. Transportation makes up about 20% of the division and produce the solutions for the commercial vehicle and rail industries. These products help our customers to meet increasingly stringent emissions regulations and are acknowledged in the industry for their safe and reliable operation with millions of miles of reliable service. In today's presentation, I'll take you through our strategy to achieve sustainable organic top line growth of 5% and margins of 20% through our market cycle. Next slide, please. Modest historical growth and limited improvement in profitability in recent years have led us to make changes to our strategic direction. Firstly, the introduction of our purpose-led Breakthrough Engineering for a Better World. This underpins everything we do and is really grasped and adopted by our employees. In the time I've been at IMI, we've also shifted the culture to balance the focus between value today and value tomorrow. We've introduced a customer-first transformation program focused on setting up the division for sustained growth. The first step was the reorganization to global business units that align to our customer segments, allowing us to better understand their needs and to scale solutions across the world. Previously, our market experts worked through an additional layer of regional management. We're optimizing our footprint with the closure to date of 4 facilities in the last 2 years, moving us towards a more effective footprint and supply chain to better serve our customers while also improving our profitability. Finally, we introduced the Growth Hub model 2 years ago. Two of our projects have made it to the launch and scaling phase within the last 12 months. I will introduce you to these new and exciting opportunities later in the presentation. So what's the pathway to success? We have a strong foundation, a well-known engineering brand in Norgren and strong market shares across our range of attractive growth markets. We're optimizing our business for customers with the introduction of the Customer First program and continued restructuring of our footprint. And thirdly, our Growth Hub model focusing on customer-led innovation in market spaces that exemplify better world will enable us to grow. Next slide. Since 2017, IMI's Precision Engineering's revenue grew organically just under 1% per year. Following a detailed review of our business, we now have a clear strategy in place to sustainably realize at least 5% annual growth rate through the cycle. Why do we feel so confident about this accelerated growth rate? First, through the Customer First transformation program, we have realigned IMI Precision Engineering with the customer. There are many benefits of this change, which together will accelerate our underlying growth. By focusing on sales and commercial excellence, we can improve our value proposition, get strategic product pricing right and leverage our expertise, especially in key growth markets. By focusing global business units on product portfolios relevant to specific end markets and key customers in those markets, we will remove cost by designing single solutions to universal challenges at a greater pace. We're also improving our product management processes and introducing new teams to support product life cycle from research and development right through to how we forecast demand and manage stock. We're modernizing our routes to market and how we support customers through digital platforms to help them understand our products, share feedback with us to find solutions to their challenges and to streamline the online sales process. And finally, the greater customer intimacy and connection to the market will enable us to truly understand their needs and future challenges, identifying innovation opportunities, which takes me to the Growth Hub, where we are investing significantly with dedicated, diverse teams working at speed to identify and solve acute and industry-wide customer problems. This innovation is where the bulk of our growth will come from, and I will take you through the strength of our pipeline shortly. Next slide. As well as setting the business on a growth path, we have a solid plan to grow our operating profit margins to 20% through the cycle. To realize the structural improvement in margins, we'll focus on 3 key areas: one, implementing changes to our manufacturing footprint to simplify how we operate geographically. We have closed 4 facilities in the last 2 years and are looking further at our footprint and supply chain to reduce cost and minimize the distance to our customers. Secondly, our Customer First program. Earlier this year, we conducted a deep review of 4,500 of our employees' productivity and how we work together. This review helped us to identify opportunities to make the division more customer-centric. Having implemented the reorganization of the division into the 3 global business units in July, we're now moving into a new phase of the program where we expect to drive significant benefits and customer experience at the same time as improving the efficiency of our SG&A. Combined, these first 2 initiatives are expected to deliver GBP 36 million of restructuring benefit, equivalent to about 400 basis points of improvement in profitability at today's revenue levels. In addition, as I described in the previous slide, we're investing in the Growth Hub, developing patented differentiated products and solutions with strong margins. The drop-through from revenue growth related to these innovations will also contribute to operating margin expansion and the achievement of 22% margins at the top of the cycle. The structural improvements to our business from the Customer First program and the simplified footprint will also make us more resilient to economic cycles. We've done a detailed bottoms-up analysis of our cost base, and I'm confident that at the bottom of the normal economic cycle, our margins will exceed 18%. Next slide. Before we look at how we're optimizing IMI Precision Engineering for our customers, I'd like to recap on some of the positive findings from the business review. Paired with the planned changes, our strong foundations provide a great platform to increase operating profit margins and deliver growth. We already hold the deep applications knowledge and expertise customers look for and help them realize breakthrough solutions and unlock value. For example, in the Commercial Vehicles market, we have built a reputation for helping European and U.S. truck OEMs achieve emission standards such as Euro 6, and we're now using this knowledge to develop our solutions such as our Smart Waste Gate valve to help OEMs in China achieve the new China 6 emission standards. We possess a well-recognized and understood product portfolio. This has enabled us to build a reputation for getting to the heart of customers' most acute problems and partnering with them by applying our engineering excellence to find the most effective solutions for them and their industry. This reputation started nearly 100 years ago when Carl Norgren designed the world's first in-line lubricator, and the Norgren brand remains synonymous with pneumatics products and industrial automation to this day. Finally, through the Growth Hub and with our intimate customer relationships, we're able to identify acute customer problems in our attractive markets, both existing markets and adjacent spaces, and apply our engineering expertise to find solutions with real better world impact. This is a key priority to drive growth in the next few years. Next slide, please. There are 2 key components to optimizing Precision Engineering for excellent service to our customers: sustainable growth and improved profitability. First, the Customer First transformation program. We've already removed the level of complexity by removing the regional structure, which acted as an additional layer between the customer and our experts within the business. We're now focusing on activities that will simplify and automate processes and reporting. So our teams can focus on customer priorities rather than internally focused tasks. We're reinvesting a portion of these savings into growth. And I'll talk about the areas we're investing in more in a couple of slides' time. In order to make the business fit for growth, we're also looking to further rationalize our footprint. Fewer sites, a greater proportion in low-cost countries and a simplified supply chain, decreasing our distance to our customers. Next slide 5, please. Central to growth is our relationship with customers. We realigned our business from a horizontal regional structure to portfolio-based verticals, which align with the markets and our customers' needs. Where previously the regional teams managed customer relationships, they're now managed through the global business units. This allows each business to combine and share market knowledge and applications expertise across all geographies more effectively and adopt a more targeted approach to solving global industry problems. This will benefit IMI Precision Engineering's margins and our customer experience, increasing their intent to procure our products and services again in the future. Looking at the growth opportunity for each business unit in turn. Industrial Automation customers are facing the double challenge of the lack of skilled laborers and increasing demand as well as increased focus on employee safety. This is leading to a strong need to automate processes, from machining inside a factory to handling goods in warehouses. These acute industry problems are ones that IMI Precision Engineering is well positioned to solve. Through the Growth Hub, we have already identified a number of these market-disrupting opportunities, including our Adaptix product that has the opportunity to transform the workholding space. Dibyava will share more details on Adaptix shortly. Precision Fluid OEM has exciting macro trends, too. The life sciences sector is facing the challenge of an aging global population and increasing chronic disease. This brings difficult customer problems such as the need to miniaturize diagnostic and analytical equipment to enable faster test results and a greater number of tests within health care budgets, something we can all relate to very easily as a result of the events of the last 18 months. And in the process control sector, the potential for hydrogen is significant. And Martin will elaborate on our first move into this space a little bit later. Transportation is a market that will see significant change within the next decade as the industry seeks to meet ambitious targets to reduce emissions and move away from traditional fuels. We see significant opportunities for growth in this space as a result of this change, which Chris will walk you through. What I hope I've conveyed to you is that the customer challenges in each of these end markets is common across the world, which is why I'm firmly convinced that our restructuring to global business units positions us well to innovate and scale successfully. In order to accelerate our growth agenda, each global business unit will have its own focused Growth Hub tasked of scanning for new opportunities, connecting with innovation ecosystems in our growth spaces and coaching teams to develop better world solutions that address acute customer problems. We've recruited talented people to lead these Growth Hubs, each of whom has a strong track record of success and early-stage growth and an excellent network and innovation ecosystems. In addition, we're investing in the Growth Hub project teams themselves with dedicated teams from stage 3 onwards and external entrepreneurs providing coaching to help the teams move at pace. We're investing in IMI Precision Engineering's digital offering to drive, qualify and nurture digital traffic. Creating a customer-oriented digital experience will simplify the sales process and accelerate sales growth. We're using our Growth Hub projects to test and learn and recently took an order for Adaptix with no human interaction. The customer was attracted to the website through digital marketing. The chatbot helped the customer with their questions, and the customer then configured the product online. In the existing business, we're also simplifying our processes with the introduction of new technology to enable touchless order entry. This has moved us to 30% of orders being touchless so far with further improvements to come. Beyond the technology, we're also focused on improving sales effectiveness by optimizing our sales teams and channels and the new global structure. In Precision Fluid OEM and Transportation, we've introduced a global commercial structure to better serve our global customer base. Finally, product management. Here, we're focusing on clearly articulating our customer value proposition and identifying sales amplification opportunities across our global customer base. In addition, we're improving our product life cycle management, including the right strategic pricing to provide value for both the customer and IMI Precision Engineering. Overall, we're investing about GBP 12 million and 100 talented people back into the division in these 4 areas to support our growth agenda. These reinvestments are included in the net savings that I presented a few moments ago. Next slide, please. Before I describe our Growth Hub in more detail, I want to give you a sense of our progress in the last 12 months. Here, you can see the state of our pipeline this time last year. And as we move to the next slide, you can see the stark difference. Next slide, please. In the last year, we've added more projects and validated the quality of those that are at the advanced stages of the pipeline. We've killed 11 projects in the last 12 months, projects where we found the customer problem was not big enough or our ability to solve it not differentiated enough. This approach to explore new spaces but have the discipline to fail fast if the opportunity is not big enough is a key part of the Growth Hub process. In total, the value of the pipeline, which we measure based on potential sales in 2025, has increased more than 250%. Our rate of patent filings have doubled with 25 filed in the first half of this year compared to full year peaks of 24 in recent years. Next slide. Two of our Growth Hub projects are now launched in the market and gaining traction with customers. Adaptix, our universal soft jaw product that Dibyava will introduce shortly, launched formally last month and already has orders in excess of $500,000. And sales of our new Hydrogreen products have exceeded GBP 700,000 year-to-date, with a current order book of more than a further GBP 300,000. We currently have over 25 people fully committed to Growth Hub and many more actively contributing, too. With over 250 team members having participated in our Growth Hub project since we started, we're really embedding the growth mindset into our culture. The progress over the last year has convinced us of our ability to accelerate growth in the division. Now before I hand you over to my team, who will share more about their respective global business units, I wanted to highlight the key growth markets we're innovating in, each of which fits strongly with our Better World purpose. Automation is one of the global mega trends that is set to shape the future of manufacturing. The increased use of robotics and other automated technology is reducing the reliance on humans in the factory and warehouse environment, leading to improved process and cost efficiency as well as worker safety. We're seeing evidence that this overall trend has, if anything, been accelerated as a result of the pandemic. Manufacturing companies knew us well for our pneumatics capabilities, and we're making good progress on expanding our product portfolio into workholding and warehouse automation. In transportation, the leading truck makers have pledged that all new trucks sold by 2040 will be 0 emission. This commitment is accelerating their investment into the technology transition to alternative powertrains. We have built strong relationships with the global truck OEMs to help them improve emissions in the diesel powertrain world and are starting to work with them now on this latest challenge. Life sciences was already a highly attractive market needing to address the challenges of an aging global population and the increase of chronic diseases. The pandemic has further increased the profile of improving health care and has accelerated innovation in the industry. We have the relationships, application knowledge and engineering know-how to contribute to a better world by improving health care for all. Finally, as mentioned previously, hydrogen is increasingly likely to play a key role in enabling the energy transition. Investment in hydrogen is attracting regulatory support in many key countries, and our expertise in flow control puts us in a great position to play our role in this new market and help to decarbonize the energy system. I'd now like to hand over to Dibyava Ghosh, who leads our Industrial Automation business. Dibyava joined IMI in the middle of this year and brings a wealth of industrial experience spanning product management, supply chain, sales and general management and has a track record of delivering organic growth.

Thank you, Beth. And I'm delighted to be with you today to share more on our growth potential in Industrial Automation. Industrial Automation offers a wide range of core products, mainly pneumatic, across actuators, valves and air prep. We serve the broader industrial market with our end markets, including food and beverage, packaging, automotive and general factory automation. It is a global market, and the market size is around GBP 10 billion. And it has an extremely strong market growth potential, especially in automation and electrification. Here, we differentiate ourselves through offering premier application engineering subject matter expertise that delivers customized solutions alongside a great customer experience. Our fantastic engineers sometimes have even better technical and product knowledge of their customer products than the customers themselves. We have a global reach across Europe, the Americas and Asia, and we utilize multiple channels to go to market. We're currently more distribution focused in the Americas with really strong channel partners, while we're more direct in EMEA. The Norgren name, as you know, is widely recognized all over the globe, and Bimba is a household name amongst industrial OEMs in the Americas. In addition to our core product offerings and a very robust pipeline of new products in these spaces, we continue to expand our offerings into new attractive segments where we see opportunities. For example, CNC workholding is a big one for us. On the next slide, I will cover our brand-new Norgren workholding product, Adaptix, which can essentially revolutionize the market. We also have a very strong engineering capability on the material handling side. In the automotive industry, our NAS business manufactures front-of-line to end-of-line systems. Over there, our sensors, grippers, carbon fiber components, finger tooling and suction cup solutions have a very strong presence in the Americas, and we have expansion plans globally. We also own a vacuum gripper solution under our [ Vacon ] brand that offers gripping and picking solutions for a variety of industries. The end-of-arm tooling market is a highly attractive one. It's got about GBP 2.1 billion of -- in market space, growing at about 9% CAGR. With the engineering know-how from our NAS and our [ Vacon ] businesses, we're innovating in material handling applications such as warehouse automation. And the beauty of this segment is that due to the strong drive to fully automate difficult applications, the market is ripe for disruption and creating IP. Finally, clearly, industrial IoT and digital segments underpins future innovations for us, and we are making great strides to grow in those areas in our market space. At IMI, we are all about understanding and solving the customers' problems with engineered solutions. Whether it's innovating around gripping a CNC job or a soft food product or a big stamping sheet for our automotive customers, we have a unique solution that our customers absolutely love. With all of these innovations in the pipeline, we are confident with our ambition to grow by GBP 250 million in revenue by 2030. Now talking about Adaptix. All of us at IMI are extremely proud of our newly launched business, Norgren Workholding, and its very first product, the Adaptix Soft Jaw. It was launched a few weeks ago during the week of August 9 in the PMTS show in Cleveland, U.S.A., and it was the absolute top of the show. It had the most foot traffic and a long line of customers who couldn't wait to get their hands on our product. In the space of only a few weeks, we have generated an order book of more than $0.5 million with hundreds more leads, and we received acclaim from the industry. In fact, Modern Machine Shop, one of the leading digital publications in the industry, included our product in its top 5 observations from the PMTS show. So what is Adaptix? As you're going to see in the video, the Adaptix Soft Jaw uses adjustable fingers and interchangeable tips to grip a wide variety of parts or workplaces during the CNC machining process. It was specifically engineered to be a one-size-fits-all alternative to standard single application aluminum soft jaws. Single application soft jaws require a significant amount of time, skill and raw material to construct even before a single part is milled. So we saw an opportunity to solve several machining problems with just this one tool and thus design the Adaptix Soft Jaw to grip nearly any part with comparable repeatability and clamping force as single application soft jaws. This singular tweak to the CNC machining workflow can have a huge impact on several pain points in the industry. Using a single jaw to hold hundreds of different parts helps to decrease the time spent preparing for the machining of a part, the amount of raw material needed to create an individual jaw and the warehouse space needed to store the soft jaws, ultimately allowing lean in-house manufacturing operations and limiting vulnerability to supply chain disruptions. Overall, Adaptix continues to automate and improve the safety of the CNC machining process. We believe there are over 500,000 CNC machines installed globally on which this product could be applied, creating a significant market opportunity for this patented technology. We also believe there is the potential to build out a wider product portfolio into adjacent areas like turning machines, fixturing as well as IoT automated versions of the manual soft jaw. Target customers are manufacturers and machine shops, both large and small, that undertake a high mix, low-volume, medium-volume work with a significant setup time between jobs. With a breakthrough solution such as Adaptix, we're taking a completely different approach to marketing and selling, including a mix of traditional methods such as trade shows, established distribution and direct sales, but also employing an innovative digital approach where we're using a range of social media, including the use of influencers and digital marketing techniques. We are actively marketing on many, many social media platforms, LinkedIn, Facebook, Instagram, for example, where we have more than 1,000 followers, almost 2 million impressions and over 20,000 clicks in just a few weeks. We will also be using well-known and highly followed influencers to showcase the product, too. So now please watch the video of the one and only, nowhere else to be found, our very own Adaptix Soft Jaw. Thank you. [Presentation]

Well, I really hope you enjoyed that video of Adaptix. It certainly gripped me. My name is Chris Prince, and I lead our Transportation business. I've been working for IMI for over 40 years, holding a range of senior management roles across the Precision Engineering division. The transportation sector is an exciting area for Precision Engineering. We have 20-plus years of experience, providing solutions for customers' fluid control challenges and have relationships with all the main players across the world, including China. The market fundamentals of this sector are really attractive. There is good underlying growth, and our customers are facing significant technical challenges in meeting emissions and 0 carbon targets, which we are well positioned to help solve. Of our current Transportation business, approximately 1/3 of our revenue is dependent on current internal combustion engine technology. We have a very strong pipeline of customer projects on current diesel platforms, which will be required for the next 10 or 15 years, as well as more strategically exciting projects on hydrogen, air management and thermal management systems for both fuel cell and battery electric vehicles. These new innovations are being developed through our Growth Hub program, and we are also in dialogue with both our existing customer base and new market participants to identify additional adjacent opportunities. The transition to alternative fuel vehicles creates a great opportunity, and we estimate it will increase our addressable market. For hydrogen-powered trucks, customers will need precise control of hydrogen and air flowing into the fuel cell as well as having to solve a complex thermal management problem. We have already secured a number of customer projects in developing solutions to these problems, and we'll have content on early-stage fuel cell vehicles. As a result of increased technological requirement, we estimate that fuel cell-powered trucks will have a greater value per truck potential for us than an equivalent heavy-duty truck today. In the battery electric-powered segment, where we also have content that will be on early-stage vehicles, we estimate that our potential value per truck will be lower than our internal combustion-powered heavy truck today. However, some of our new technology could also be used on medium- and light-duty trucks, the segment which is most likely to see battery electric powertrains and a segment where we have currently relatively low sales today. And so this represents an opportunity to significantly increase our addressable market, too. The focus of this slide has been powertrain, which is where there is the largest change with our customers. However, approximately 2/3 of our existing sales will not be impacted by the transition to alternative fuels, and we are well positioned for growth in these areas, supporting the trend to improve driver comfort and increased levels of digitalization. Altogether, we see a revenue opportunity of GBP 75 million by 2030 through the execution of these programs, which will help our customers deliver the technology transition and contribute to creating a better world. I would now like to hand over to Martin, who will take you through the opportunities for Precision Fluid OEM.

Thanks, Chris. And I'll talk about the hydrogen that those trucks of yours are going to be running on shortly. Good afternoon, everyone. My name is Martin Maas, and I manage our Precision Fluid OEM business unit, focused on life science and process control customers. I've been involved with these customers for just over 17 years now. Life sciences is a very attractive market that undoubtedly fits our better world strategy. The sustained market growth of around 5% CAGR is being driven by an aging population globally and an increase in chronic diseases. Our business has a really differentiated position as a leader in flow control solutions, and we have grown significantly above market in recent years. We have a very strong position in medical devices and analytical instruments with further growth potential and substantial growth opportunities in biotechnology and diagnostics. Just how much of a position we've established in medical devices, specifically the supply of components to regulate the flow of air and oxygen ventilators, became very clear last year in the first month of the COVID-19 crisis. With rising cases in Asia, Europe and the Americas, governments across the world realized they were lacking critical infrastructure to treat patients in respiratory distress. Most countries didn't have enough space in their intensive care wards, and none of them had enough ventilators to treat patients. The vast majority of companies they turn to are customers of IMI. Almost overnight, our customers were faced with a near impossible task of quickly ramping up complex production lines and supply chains. Companies like Ford and General Motors stepped in to help. Supplies were rerouted. The U.S.A. even used the Defense Production Act to compel suppliers to react. Now one thing most of them had specified into their devices is a proportional valve made by IMI, which we now needed to ramp up by a factor of 10. I'd like to share a video with you from my life sciences team that gives you a flavor of our reaction to that situation. [Presentation]

Now I hope that I was able to give you a greater insight into the work that the team did last year and how valued this was by our customers. But I'd now like to turn to how that strengthens an already strong position of ours in life sciences. The relationships we forged and the opportunities we created will long outlast pandemic. We have used those relationships to gain market shares away from our competitors, and we have used the learnings to rapidly break into new growth opportunities. Our biopharma business, for example, has more than doubled since 2019, albeit from a smaller base, and we're working on significant growth projects that will continue this trajectory. We have a Growth Hub project, active controls, that has uncovered a significant customer problem around flow and pressure control that will not only pave the way to future growth but also allow us to use the capacity we've just created for proportional valves. With existing mass flow controllers being cost prohibitive for many applications, we have developed IP to replicate the functionality of those devices but in a much simpler design and hence a significantly lower cost. The patent pending solution involves adding closed-loop control to our existing solenoid valves, calibrating them to customer requirements and thus enabling them to save months of development time while significantly increasing the performance of their instruments. With our deep customer relationships, unparalleled engineering knowledge of how to precisely control fluid flow in very small devices and a reputation for partnering with customers to solve their problems, I am highly confident in our ambition to achieve more than GBP 100 million of additional revenue by 2030, comfortably doubling our current business. Now coming back to Chris and his trucks. Let me tell you about how IMI is going to help keep all those hydrogen vehicles Chris was telling you about fueled and what are the plans we have for the hydrogen economy. Now hydrogen opportunities have been around for a while. And we've all read about past opportunities for fuel cells, hydrogen-powered passenger cars and residential combined heat and power applications. That landscape has changed significantly. And even today, there are still many open questions around how exactly the hydrogen revolution will unfold. What appears certain though is that hydrogen is one of our most viable options to drive the decarbonization of industry and transportation, starting with commercial vehicles, buses and trains. The investment in green hydrogen and the infrastructure required to produce and distribute it is unprecedented. The commitments of European countries like Germany, U.K. and France, economies across Asia Pacific and parts of North America towards those investments are clear. So whilst we can't say for certain that we will see the days of affordable green hydrogen being used to decarbonize cement production, it is clear that green hydrogen production and distribution is the #1 priority for our hydrogen customers. That's why we chose to focus there. Using our Growth Hub process, we identified significant customer problems in pressure regulation and flow control in hydrogen filling stations. Designers and operators of these fueling stations were using off-the-shelf components that were not fit for purpose, causing significant downtime issues in operation due to component failures in addition to much higher installation costs due to system complexity. With our existing capabilities around process valves, we developed 500 and 1,000 bar solutions designed specifically for hydrogen for which we filed several patents. We also build on our existing high-pressure capabilities to design pressure regulators, filters as well as temperature and pressure regulating safety devices, all of this working hand in hand with key customers across the world. We crossed the GBP 1 million revenue mark within less than a year from launch and our close collaboration with customers, partners and hydrogen-focused networks has allowed us to build a reputation giving us access to hydrogen compression and hydrogen electrolyzer OEMs. We will continue to follow the carbon trail to find other big customer problems to solve. All told, our ambition for hydrogen is to achieve at least GBP 75 million of high-margin business by 2030. But enough of me talking about this, let's hear from the team and from some of our customers.

Hydrogen as an energy source is one of the most viable opportunities to address carbon emissions and climate change, and its use as a fuel of choice is likely to expand significantly. At IMI Precision Engineering, we have a deep understanding of the market and the issues facing customers and both the engineering know-how to solve the hydrogen industry problems of tomorrow as well as having breakthrough solutions in operation today.

We heavily invested in supporting customers across the hydrogen value chain. We are working with a breadth of industry sectors and customers ranging from global giants to smaller niche companies to develop breakthrough solutions for a better world.

At IMI Precision Engineering, we're helping engineers to apply solutions for the complex challenges of today and to build the hydrogen economy of tomorrow.

With many countries having implemented policies for low or 0 carbon emissions transportation, we identified a growing demand for hydrogen refueling stations. We are working closely with customers across numerous industries and countries to understand the complex challenges they face and are applying our extensive knowledge and expertise to provide high-quality, safe and reliable hydrogen solutions. We have developed a range of patented products to manage the fall of hydrogen up to 1,000 bar from solid valves in proportion of pressure regulators to integrated manifolds. These products provide advanced technologies compared to existing options at competitive prices, which provide relative value for IMI Precision Engineering and our customers. In the past 12 months, we've been involved in over 40 refueling projects globally, including some of the world's largest and most complex hydrogen infrastructure projects. The customer feedback has been very positive.

[Foreign Language]

We have a great experience so far using these parts on our prototypes, and the service we've had from IMI has been second to none. We've really appreciated the collaborative approach to problem solving whenever we've tried to work out how a new component will behave in a system or what might be right for the future developments of the product. And we really intend to keep using these products going forward.

We'll continue to work with customers to identify and understand their future challenges and to apply our in-house expertise to meet their future needs. And we'll continue to build credibility by working with some of the leading participants in the industry to share our broader knowledge like we did recently by presenting with Mission Hydrogen, a networking group helping to move the hydrogen industry forward at pace.

By applying our expertise and solutions in the hydrogen market and working with customers across multiple sectors, we will continue to grow and diversify into wider applications of hydrogen to create breakthrough engineering for a better world.

Thank you, Dibyava, Chris and Martin for sharing details about these exciting growth opportunities in each of our business segments. We strongly believe that IMI Precision Engineering is well positioned to pivot to a much stronger growth rate with structural operating profit improvement. As discussed earlier, we have a great foundation to build on. We have deep engineering and applications expertise in our business that is well known in the market and helps our customers solve acute problems every day. Second, we're well on the journey of our customer first program. We'll continue at pace to further reduce complexity, improve our processes and optimize our footprint to better serve our customers and deliver structural savings. And third, our Growth Hub is firmly established, receiving significant investment and showing traction with the first new products. Hopefully, we've given you a good feel for this potential with our projects in the scaling phase, Adaptix and hydrogen. These truly exemplified breakthrough engineering for a better world and present tremendous growth potential. This new growth, combined with the growth in our attractive underlying markets is what gives us the confidence of achieving our ambition of 5% compound annual growth through the cycle. Adding our structural improvements, we're committed to delivering operating profit of 20% through the cycle as well. Thank you for listening to our presentation on IMI Precision Engineering. I will be available to take your questions about later. We will now go to a 10-minute coffee break, following which Phil Clifton and his team will present the Hydronic Engineering division. [Break]

Hello. My name is Phil Clifton. I've been the Divisional Managing Director of IMI Hydronic since January 2018, and I'm excited to be here today to give you an update about Hydronic's recent development and the bright opportunities that lie ahead for the division. Next slide, please. But first, let me introduce you to our Hydronic executive team. We have Peter, leading sales and marketing globally, except for the Americas, where this business is led by Amy. Assane runs our operations and supply chain, and Enrico is responsible for R&D and purchasing. In the support functions, we have, Alex, as our Finance Director, Jaime in business development, Claudia in HR and Esther as General Counsel. As you will see, it is a very diverse team with 8 different nationalities out of the 9 of us. I am very proud of the progress that we have achieved together over the past 3 years and the potential for sustainable and profitable growth that we have ahead as a division. Today, you will hear from some of our exec team members, who will talk about the recent developments and growth plans we have for Hydronic. We will also hear from Natalie Zeranska who leads our Foresight teams and will introduce you to our Growth Hub activities at Hydronic. As you know, this division focuses on premium products and solutions for hydronic heating and cooling systems in residential and commercial buildings. You can see some examples of the types of buildings that we supply on this slide, both new build and refurbishment, residential and commercial. Our solutions deliver energy efficiency in buildings, which is key to reducing global CO2 emissions. We support our customers by understanding their problems and providing products that are easy to install and operate. We do this through our unique hydronic experience, our strong brands and excellent customer relationships. The development of our division is impacted by increasingly favorable market trends and legislation. We have been working hard over the past few years in anticipation of this change, moving the business towards the customer problems of the future where digitally enabled products and more energy-efficient, water-based HVAC systems will increasingly play an important role. We can now see early signs of the results of this effort. And as you know, in the first half of 2021, we achieved 20% organic growth and above 20% profitability. For the full year, our expectation remains for sales to be strongly ahead and with margins also higher than in 2020. Our divisional purpose is smart comfort for everyone. This drives us in everything we do, striving to meet what our customers, suppliers, employees and communities require. So you've all seen the improvement in our margins over the past 3 years to a 20% return on sales business, but I know that we can only be truly successful if we are also growing at a strong and sustainable level. You will see in the presentation today the evidence of how we will make this happen. But I want to spend a moment explaining what has changed in the division over the last 3 years and why we are optimistic about our business going forward. Firstly, Hydronic has experienced a significant cultural transformation over recent years, developing a strong and shared purpose across the organization. Inclusion and diversity are also key catalysts of the change in the division, bringing a broader set of skills and capabilities as well as positive energy resulting in a team that is now both more confident and capable to meet the division's future opportunities and challenges. Secondly, we have, like the other divisions in IMI, in place a much more customer-focused approach to innovation with Growth Hub at the center of this. Today, a broader and more diverse number of employees actively contribute to our innovation activities with a view to solve current and upcoming big customer problems. Those problems that will enable us to better serve our customers and really move the needle for our business today and tomorrow. Thirdly, I hope you will agree that our markets are becoming clearly more attractive. While saving energy has been at the core of our business for a long time, we can now see that governments and legislators are actively promoting energy saving in buildings as a key way to achieve the CO2 reduction targets required to mitigate climate warming. As a result, we expect our end markets to develop faster in coming years. And finally, we have a clear strategy to continue to simplify our business always with the customer in mind. Assane will provide one example with an update on our recent manufacturing and supply chain simplification project, which we were able to safely complete despite last year's very complex environment. Clearly, the ambition is to continue along these lines if and when there is a benefit for the customer and value to our business. We hope to give you some relevant examples of these changes in today's presentation as well as in the Q&A that follows. I will now pass over to Alex, our Finance Director, who will walk you through our recent financial performance as well as our ambitions for the future.

Thank you, Phil. And I would now like to review the evolution of the division's performance and our ambition. As we can see in our performance from 2017 to 2021, our core business grew in line with broader market at a 2% CAGR. And we've already seen some acceleration during the rebound for 2020, supported by incentives to drive renovation for energy efficiency. Additionally, investments we made in growth adjacencies where we have achieved a 5% CAGR target faster growing segments, for example, control and actuation, and are beginning to shift the mix of the business. This continues to build on the growth themes in our markets of energy efficiency and smart digitally enabled solutions. Our margin improvement of 380 basis points over this time period is a return to the historical levels of this division. This has been achieved through the underlying volume growth, an improved focus on value pricing and simplification projects that both improve cost to serve customers as well as customer satisfaction. So what do we see going forward? We see an acceleration of growth in both our core business and growth adjacencies, supported by country commitments to significantly cut CO2 emissions. This will increasingly influence our market through government incentives and legislation leading to greater renovation activity. As we have started to see already in 2021, the incentive and legislative environment, including the European Green Deal and the objective to be fossil fuel free in Europe by 2050 is likely to amplify growth over the period. With 80% of the 2050 building stock in existence today, this further supports our view that renovation investments will increase. As a key target segment of our core business, we see this supporting our growth outlook for the period to 2025. Furthermore, we see this market dynamic benefiting our growth adjacencies, where smart, digitally enabled products are already in the portfolio. Thus, we are prepared to address the growing need for smart devices with sensors and measurement and advanced applications for energy efficiency, like data centers and smart green buildings. Additionally, our Growth Hub projects, including our innovative TA-Smart valve, which you will hear more about later, will amplify this growth by not only solving acute customer problems in our traditional markets but addressing problems in new adjacencies like low-temperature hydronic systems. This includes more environmentally friendly and sustainable technologies like heat pumps. In summary, our growth acceleration is supported by the strong legislative and incentive drive, the faster growth adjacencies supported by our Growth Hub innovation and an improving customer experience, underpinning our growth ambition of 5% plus compounded growth while continuing to deliver margins in excess of 20%. This reflects our organic growth ambition and of course, will be further expanded through acquisitions. Thank you, and I will now hand back to Phil.

Thanks, Alex, for running through the numbers. At Hydronic, we believe that a more sustainable world starts with buildings, which account for 35% of resources used and over 40% of the energy and carbon emissions. And given that 80% of the buildings of 2050 are probably here today, decarbonizing buildings requires focus not just on the new but more importantly, on existing buildings. We see accelerating investments in building renovation in the coming years, making them greener and more energy efficient. We also believe that the use of smart digital HVAC technologies will play an increasingly important role, making buildings not only more energy efficient but also more comfortable and sustainable. The move away from oil and gas will also dramatically change the way buildings are heated and cooled. As a result, we expect a faster shift towards electric-powered heat pumps, hydrogen boilers, solar and district energy working in low-temperature hydronic systems to significantly reduce energy consumption and minimize environmental impact, while many of these solutions have more demanding requirements in terms of hydronic control. Clearly, a change of this magnitude cannot take place without government leadership and support. Legislation, subsidies and incentives will continue to support this transition. In Europe, the EPBD has already provided a clear framework to the market. And more recently, the Green Deal has stated the EU's ambition to at least double annual building renovation rates in the next 10 years. Across Europe and even in North America, we see that there are already a number of incentives supporting the energy transition. We anticipate an impact on growth of our markets that could be in the range of 1% to 4%, depending on how fast these programs are rolled out. Our markets are accelerating and also evolving as new customer problems and needs appear, creating opportunity for our division. Over recent years, we have moved to expand our addressable market into faster growing adjacencies that already existed and that will benefit from the energy transition already underway. These include digital products for smarter buildings as well as solutions that improve performance of low-temperature radiant systems. As a result, we today address a market that is close to GBP 3.8 billion. Our strategy is to continue to identify organic and inorganic opportunities brought about by the changes in our industry, and we are actively scouting for new markets where our division can successfully deliver consistent and profitable growth in the future, aiming to reach an addressable market beyond GBP 5 billion. I don't want to steal Natalie's presentation as she will give you a few examples that look at some of the areas that we're looking into later in this presentation. Thank you. And I will now pass over to Peter, who will walk you through the initiatives that we have in place at Hydronic to accelerate our growth.

Thank you, Phil. Yes, for sure, we do have some good market conditions out there, and that will, of course, help us in the future. Good afternoon, everyone. I'm Peter. I'm heading the sales and market team for the division, and I'm so pleased to present to you today what we do for and with our customers and how this is helping us with our value today and continue accelerating our growth. Let's start with keeping the customer at the core. We have started a journey, which I call inspire customer passion, and we can now see the change on mindsets everywhere in the organization no matter internally or externally focused. Today, all people think customer first in all functions and all activities. This is also embedded into the organization, and the shift is accelerating. So our customers are clearly noticing this. This is for me the biggest and most significant mindset change I have seen in the last years, and this has clearly helped us serving our customers better in the hard times we've been passing. We have introduced a customer at the core program with 4 clear priorities: customer experience where we are finding new models to drive customer experience and intimacy through our existing channels and through digital tools, and we are leveraging our Growth Accelerator activities. You will later on see a movie how we are creating and using our communities to better understand our customer needs and bringing value back to them. [indiscernible] we are maintaining our strong commercial relationships with our existing customers but at the same time as we are exploring new routes to market. We, of course, continue our investment into our sales and customer care center teams, and we have created a customer care academy that is not only training our salespeople, but the more important part are customer care center employees that is helping customers every day from their offices. Commercial development, we are expanding our customer base in our core markets and especially around control and actuation where we are now working towards control contractors, system integrators and OEM customers. At the same time, we're investigating new routes to market like online or even web shops. Number four is around our already strong brands where we now are strengthening the identity around sustainability. This is creating awareness internally, but the most important is also sending the right message to our customers in how we can help them achieve their sustainability goals now and in the future. You have already heard the green agenda around buildings is definitely accelerating. We are continuing to shifting our business into higher agents growth markets where we can win of course. We are focusing on smart technologies, energy-efficient and green buildings, and there is already 3 attractive markets identified, which is actually growing more than 2x our core business, control and actuation, radiant systems, and water quality. In these new markets, we are able to leverage our expertise of the hydronic system using our strong brands and already created customer relationships. We are, of course, broadening our digital impact across the whole business, including a reimagination of the customer experience, which you will hear later. We are strengthening our commercial and R&D capabilities, of course, towards the new digital products and digital applications. And the most important mindset change is that we are now focusing on the more acute customer problems arising from the energy transition, which is already underway and accelerating. Happy to now present Natalie that will take a look at our value tomorrow and our Growth Hub activities.

Thank you, Peter. I'm Natalie Zeranska. I am a Hydronics Foresight Lead. I'm very excited to be talking to you today about our Growth Hub activities. Now the Growth Hub is really one of our key drivers to long-term sustainable growth, and in line with the mindset change that Peter was describing, at the core of all of our activities is, of course, the customer. And we try to look not only at the customer of today but also at the customer of the future because the first goal of our Growth Hub is to really try and identify and get behind some of these big problems that we as a business can help solve. Since the start, we've had over 3,000 unique customer conversations, not about selling our products but actually around some of the challenges that they face and what really keeps them up at night. The second goal, especially for our Foresight teams is to challenge ourselves and challenge our business. So what we do is we constantly scan the environment to really understand how things might evolve and change over time and to imagine how we at Hydronic could respond to this. And it's not just about responding to change that is done on to us but also actually to prepare and actively take a part in shaping our future to make a better world. So how has the Growth Hub evolved over the last year? Well, firstly, you can see that our pipeline of activities has filled up not just in quantity but also in quality. So we have added new problem spaces for us to explore as a business within our existing markets as well as extending to the attractive fast growing adjacencies that we've identified, such as control and actuation; radiant heating; and, of course, water quality. Three of the projects that we had in the pipeline have progressed since last year through to the fourth and final phase of scaling. Now these include our newly launched HyInsight program as well as some innovative new digital ways of interacting with and also supporting our customers. And Peter will talk a little bit to that shortly. In addition to supporting our organic growth ambitions, the Growth Hub also aims to build our network and our ecosystem, which can help to identify other players in the market who we can collaborate with and out of which might emerge a future partnership or M&A opportunities. And to give you more of a flavor of some of the projects that we are currently running through the different Growth Hub phases, please take a look at the video. [Presentation]

So I hope you enjoyed hearing from some of the team members talking so passionately about their projects. And Steven Lim, who was one of the last presenters, who is, in fact, our Head of Sales in Asia Pacific, he was talking about the launch of TA-Smart under the HyInsight program. And this is 1 of the 3 projects in scaling that I mentioned earlier. So the idea behind it was really borne out at the identification of 2 industry problems. Firstly, you have, quite often, a suboptimal performance of many buildings versus the planned design, and this can lead to things like tenant discomfort, significant loss of energy efficiency as well as unwelcome surprise system downtime. Secondly, you may remember from one of Phil's first slides that he presented that 40% of the world's energy usage is in buildings, 40%. So clearly, there is a legislative drive and interest around increasing efficiency of buildings whilst they are in use to help optimize and reduce that 40%. Now these 2 are problems for both building owners and facilities managers who are asking for more transparency and sufficient data to understand how a building is actually performing in order to support opportunities for gains and efficiency and comfort. And the solution that IMI Hydronic offers is TA-Smart, a compact valve and actuator combination, which not only provides precise control functionality but is also to able to capture system data and make sense of it, right, to provide relevant actionable insights for performance improvement. Now by that, I mean, for example, insights to reduce the energy required to run a building and the associated costs and CO2 emissions, providing better concept for those inside the building and also decreasing the need for surprise maintenance interventions, which are often costly and cause extended system downtime. So TA-Smart, as Steven Lim said, was launched earlier this year. And it's really thanks to the hard prework that his team as well as others around the world did with customers that really helped it to get off to the flying start. The next video provides more detail on the recent launch of this digitally enabled product. And after that, Peter is back to talk in more detail about our wider digital transformation as an enabler for our business. [Presentation]

I just love that video around HyInsight that is showing a new way of helping our customers solving their problems, actually a place where we have not played before, and I'm really looking forward to see the results of these new products. During the COVID pandemic, where we could not see our customers as we normally do, we have accelerated our digital transformation. And that digital transformation is a vital part of our future growth. Our vision is bring digital innovation to our customers and employees, solving their problems anytime and anywhere while creating tremendous value and protecting our planet. We are, of course, using our accelerated digital agenda in many areas. Let me give you some examples. We will improve or even reimagine the customer experience, which I told you before. And we will do this with digital as a key enabler to actively understand and improve the customer experience. You see an example of this in the video around communities. Introducing a new website, which is a vital digital tool to support our customers 24/7 when we are not able to be there, these have shown even more important during times like the COVID pandemic where we've been able to help the customers better due to this website. IMI College is also moving to digital. This is typical local webinars where we now can have a wider reach and actually IMI College did more than 5,000 seminars during 2020. This is strengthening IMI Hydronic even further, of course, and shows the importance of technical training to our customers, which we will continue doing in the future. Support and technical advice, it's a cornerstone of the IMI Hydronic brand. And actually, more than 65% of our customers, they choose us due to our technical advice and the expertise we have in the hydronic system. And this is very difficult to replicate by our competitors, as you can see, plays a vital role in our future product portfolio. We are already becoming a very significant player with our actuators and controls, and they are performing very well for the moment. And you have already heard about our latest introduction, HyInsight and the Smart valve. That will solve problems in the digital space for our customers. We have also started to introduce more digital tools and equipment to help us in our operational performance journey. So digital is definitely a key enabler for us for the Hydronic strategy. Now let's take a look at the video that explains how we can solve some of our customer problems by creating communities. This video review was made during the COVID pandemic, I know that, but it's still very relevant as a new way of communicating and understanding our customer problems better. And after the video, you will meet Assane that will talk about our activities taking out complexity in operations. [Presentation]

Thank you, Peter, and hi, everyone. I am Assane N'Diaye. I'm responsible for IMI Hydronic operations and supply chain. I'm delighted to give you some insights about our strategy and progress to date. In 2018, we decided to transform our operation and supply chain to become more efficient and to be closer to our customers. To achieve this vision, the first step was to strengthen our leadership team. We invested a significant amount of time to either develop or acquire the best talent in the industry. We also worked hard to build a team capable to deliver at pace. During this journey, we paid great attention to have the right diversity balance. Today, I'm proud to say that nearly half of the operation and supply chain leadership team is female. The second step was to significantly reduce our complexity, indeed, having so many factories and distribution center with a lot of complexity. So in 2020, we took the challenge to massively transform our operational supply chain. We reduced one factory. We consolidated our 3 European distribution center into 1, and we refocused all our factories in their core competency. We successfully completed these projects at the beginning of this year. This is very remarkable knowing that it was entirely done during the peak of COVID-19 pandemic. Firstly, simplification, we are able to respond positively to the volume increase we experienced in 2021, providing the customer with the product they required and a very good service level in a context where the market supply was tight. So now what's next for our operation and supply chain? We want to support the divisional growth agenda. We want to respond even faster to our customer needs. We will continue to reinforce our center of competence by investing in digitalization and flexible production equipment. We also want to be the best in class in all the environment aspects. We are paying a huge attention to constantly reduce our carbon emissions and our waste. We are aiming to be net carbon 0 in the next 2 years. On this, let me hand over back to Phil for the conclusion. Thank you.

Thank you, Assane. Today, you have met a few members of the executive team who have walked you through some of the developments and the opportunities for Hydronic for the coming years. This diverse team and the wider Hydronic organization have led the transformation of our division over recent years, starting with our culture and our growth mindset. In forthcoming years, our division aims to deliver sustainable, consistent, profitable growth. We will do this by always keeping the customer at the core and through relentless innovation with digital as a key enabler of growth. We want to provide our customers with fantastic products and solutions, solving their biggest problems and helping to build a better world. Our markets should benefit from the global challenge to reduce CO2 emissions, and clearly, we believe that Hydronic is well placed to benefit from the upcoming energy transition. Thank you all for your participation in this event. I now hand it over to Dan, the Group Finance Director.

All right. Thanks, Phil, and also to Beth, really great presentations by you and your teams on really how both of you are driving the performance of your divisions forward. So just a few slides for me and 2 of which you've already seen from the July presentations. Just a recap of the first half and where we are in the strategy progression. So next slide, please. So yes, the key messages from the half year, I think you're all aware, really good performance in the first half, 8% organic sales growth and 24% profit with margins going up and really, improvements across all 3 of the divisions. Certainly, there were some easier comps in 2020, but we also, of course, had the ventilator surge as well. So overall, really pleased with that first half performance. And you're already seeing in the figures the benefits of the Growth Hub and the sprint teams coming through and delivering on that growth. $100 million delivered in cash back to shareholders via the dividends and the buybacks. And if you do the math based on our announced buyback, we expect to deliver about $260 million of cash to shareholders in the full year, and that obviously includes the increase in the dividend by 5%. And finally, we did increase guidance at the half year up to 85p to 90p, effectively about a 4% upgrade, and that had some benefits from the buyback. So next slide. So next one, just a reminder again on the margin targets, which we did increase as well across the divisions. For Precision, the 20% through cycle margins and Beth went through that quite a bit today, clearly supported by the restructuring and the footprint activity that she is undertaking with her team but clearly also underpinned by the growth and as we shift into higher-margin new products into those growth opportunities. Jackie, 20% target for Critical and Jackie went through clearly his strategy around driving more and more into aftermarket as well as moving the business into more attractive segments as we go. And finally, Phil, as you saw, 20% margins in the first half of this year, so well on his way to deliver on his targets of getting above 20%. And clearly, the benefits that are coming through and also the new products, which he showed today, are really going to help us continue to drive growth and performance. The next slide and last slide for me, just kind of tying together the 2 Capital Markets Days we had, really looking at the overall performance, what it means for the group. Certainly talked a lot about how each of the divisions is going to drive further growth through their markets as well as improve the operating margins. I wanted just to talk a little bit about what that means, of course, for cash and returns as well as resilience. I think as you've already seen, as we've gone through these last periods, our free cash flow is improving. And as we improve the businesses, we'll see more and more dry powder there, both -- for investment both for organic and inorganic M&A as we go. Clearly, that's also going to drive greater returns on our invested capital in all 3 businesses. I think as they improve their performance, will -- that will help us deliver that. And finally, on resilience. I think -- well, you see some checks on the slide here. We think Hydronic already is a very strong and resilient business, I think both in terms of Precision and Critical, we see the strategies helping them drive even greater resilience in their performance, in terms of Critical as we shift more into less cyclical aftermarket businesses and then also on the Precision side as we drive through the Growth Hub and through our sprint teams into more attractive market segments and driving the product performance as well. So overall drives a much greater performance for the group but also a more resilient financial performance as we move forward. All right. With that, I think I'll turn back to Roy for a final wrap-up. Thanks, everybody.

Well, great. Thank you very much, Beth, Phil and your teams as well for your contributions today. And thank you, Dan, for laying out the pathway to much improved margin so clearly. Okay. So just to summarize then the key takeaways from today, hopefully that you can see that, that strategy that we laid out 18 months or so ago in November 2019, that strategy, which boils down to customer first, complexity reduction and market-led innovation all to generate better returns and higher growth rates is being well executed by these teams. And I think it's been executed with passion, with pace and with a degree of excitement as well as we make real progress. I think the second point from today is about that culture that's forming, that culture which is purpose-driven. It's about breakthrough engineering for a better world. Everybody wants to be part of that. Not just all the engineers who are trained to be part of that, but the whole company wants to help generate a better world and, in doing that, create real growth and returns for our shareholders. The other aspect to our culture, which I think came across very strongly today, is that acute focus on the customer, not just a focus on internal KPIs but a focus on talking to customers, understanding their problems, solving their problems at pace, working with them, becoming partners and innovating to make them safer, make them more sustainable and make them more productive. I mean that's what we are doing here. We're adding value to our customers and capturing some of that value in our business model. And then lastly and what does all of that wrap up into is obviously our overall ambition to create that sustainable profitable growth and to improve our returns and move IMI to an 18% to 20% margin company. Right. Thank you very much. We will now move back to the operator, who will orchestrate the Q&A. Thank you.

Thank you, Roy. My name is Maxine, and I'll be coordinating your Q&A session this afternoon. [Operator Instructions] Our first question comes from Andrew Wilson from JPMorgan.

I have 3 all on a kind of similar subject actually around capital allocation. Firstly, just thinking on the success of the Growth Hubs, given the examples that you've given to us, how does that sort of help you? Or how does that inform your thinking about your sort of propensity to invest in your own business versus investing, I guess, in acquisitions? Maybe if you take one at a time actually, if I start with that.

Brilliant, Andy. Well, good to hear from you. Andy, can you hear me okay?

Yes. I can hear you fine.

Great. Thanks. Just checking if all the line still works, yes. Look, Andy, I mean obviously -- well, you heard, right, in my presentation, we are starting to invest material amount. I mean our margins, I think in the first half, Dan, could have been something like 50 basis points higher if we weren't incrementally investing as much as we are, Andy, primarily into Growth Hub, not only into Growth Hub, obviously into other areas, including product management, including digital on what I call value today but primarily into Growth Hub. So yes, we see through this sort of whole culture change -- as I said, we've got 700 people in our company that have now been involved in Growth Hub projects. And of course, that amount of momentum, that amount of customer problem identification and solution creation is pretty exciting. And so we are determined to fully invest in those opportunities. As we keep saying, not all of them will work. But the way the process works, we filter the opportunities. And the whole ethos is to kill the areas where there isn't a significant customer problem or we haven't got a fantastic solution, kill those projects fast. So our absolute priority is investment in our own business if you think about capital allocation particularly now, right, when acquisitions are expensive, to be honest with you. And so it's even more fortuitous really that we have got this opportunity to invest in our own business and make our own progress. And I think we're making that a clear priority, Andy. Dan, is there anything you would add to that?

No. Just that you nailed the number in the first half. 50 basis points is right, Roy, yes, absolutely, spot on.

Thanks, Dan. And Andy, do you have a couple of follow-up questions?

Yes. They're sort of -- I'll maybe group these together. They're fairly similar. I guess it was -- it struck me that the presentation on Hydronic included more mentions around potential acquisitions and sort of inorganic expansion and more so than the Precision presentation and more so than perhaps we heard previously on Hydronic or at least in my mind. I guess firstly, sort of is that a very sort of deliberate signal to us that there is a preference or perhaps more of a likelihood of acquisitions in Hydronic over Precision? And I guess the second aspect to that, is it -- when you think about acquisitions in Hydronic, is that because there are lots of attractive opportunities? Or is it because you feel like you need to do that in order to sort of maximize potential of the business? I'm just interested in terms of whether that's sort of an opportunity or need?

Yes. It's an opportunity, not a need. And I'm -- that wasn't an intentional message, Andy. If I think about across IMI where we're looking to accelerate growth through bolt-on acquisitions, it's going to be areas like industrial automation. We see good opportunities. It's obviously like pharma and life sciences. Again, we really like that area. Particularly, you saw some of the examples in the video of what -- not only what we've done with ventilators, but what that's then led to in terms of the partnership and customer relationships that's opened up a whole other field of opportunities. So that's a very attractive area for us. And then of course, hydronics is a very attractive area. And what's changed is exactly what Phil said. I mean, I think the culture has changed, number one, but also the external environment is changing, Andy. And certainly, the sheer pressure, the funds, the government attention, the company's attention now to move to a low-carbon environment means that hydronics has a good tailwind, and that gives us opportunity to invest organically and inorganically into that space. So we are pleased with where the acquisition funnel is with hydronics. But as I said, there's equal opportunities across those other areas, life science, pharma, industrial automation. So there's plenty of other opportunities as well, Andy. So it's more about, yes, the opportunities in hydronics but they're across the group, I would have to say.

No. That's clear. That -- for me, for sure. And maybe if I can sort of squeeze one actually just on the end and just to clarify. I just wanted to check the comment Phil made. Was it that he expects sort of the growing legislation around energy efficiency, et cetera, in terms of buildings to add about 1% to 4% of growth per annum? Was that the right number? Or have I misunderstood that?

Yes. That's exactly the right number, Andy. I mean, Phil, I don't know whether you just want to comment because you've done a lot of work on it, 7 years. But that's exactly the right number, Andy.

Yes. Andy, it's quite a range, 1% to 4%. And the reason it's a bit of a range is because it does depend on the speed that some of the regulation comes in, particularly in Europe. And we're seeing that happen quite fast. In France, it's been happening very, very fast. And the other countries, it's a bit slower. So that's why we have a bit of a range there. But overall, we do believe that, that will help us underpin the sort of levels of growth that we've been indicating today.

Our next question comes from Jonathan Hurn from Barclays.

Just a few questions from me, please. Firstly, can I just start off on Precision. So if I look at your geographic exposure there, you seem to be quite underweight, Asia at only around 18% divisional sales. I mean to hit the growth targets that you -- or the growth that you want to achieve, does that need to change? Do you need to increase that exposure to Asia either organically or inorganically?

Brilliant. Thanks. Jonathan, good to hear from you. No, we don't need to change our exposure. Asia is growing really well at the moment, even China. I know there's been a few notes out there, a bit more worried about China, but we're seeing really good demand in China. But if you think about the projects that Beth and the team demonstrated today -- in fact, it's interesting. Jonathan, you're obviously pretty perceptive because we had the same question from the Board yesterday. But if you think about the growth projects, things like Adaptix, things like end-of-arm tooling for robotics, if you think about life sciences -- clearly, there is a major OEM in China, but there's plenty of opportunity in the U.S. And then you think about what's happening with commercial vehicles and the transition, yes, some of it's happening in China where we've got a very good technical center but also there's plenty happening in the U.S. and Europe for us to capitalize on. So we don't have to acquire anything in China or anything like that. We've got good engineers on the ground, and we've got the right footprint to enable the growth and the bolt-ons that we will acquire, yes, basically across the world. I would say there was a slight weighting going towards probably Germany, the U.S. and the rest of Europe, even over Asia, actually, Jonathan. I don't know if you'd add anything to that, Beth.

I think you covered it really well, Roy. I think maybe the only other piece I would add is that Asia has definitely been part of our customer-first process that I described earlier. And we're really -- Jonathan, who leads our Asia Pacific businesses, is really using that program to better serve our customers and really design the organization around where there's growth opportunity are. So as he works with the business unit leaders or the global business units on those growth opportunities that Roy was describing, we're really able to leverage our position in Asia to grow at an even faster rate than we have been growing, which has been quite well in the region. But hopefully, that helps.

Great. That's very helpful, very clear. The second question is, if we look at Critical just in terms of your actions there, you kind of cut the number of sites by half. I think you're down from around about 30 to 14. Now you take on board that you closed for Precision recently, but I still think you're kind of around about 30 as a number of sites. I mean how many of these do you feel that you need to exit to kind of get you to where you want to be in terms of profitability?

Yes. So Jonathan, obviously, this is a sensitive subject for our employees, and we'll always tell them first the exact plans. But you're absolutely right. We started at 32 sites and we're down at 28. So we've consolidated 4. And when we think about 28 sites, within that, we've got some first-class manufacturing sites. They are really lean, very high on the lean scores, very high in terms of culture, customer culture. And we bring -- we can invest more in those. And there, the obvious sites, Jonathan, we set up back in the sort of mid-2000s. So we've got, as you know, Mexico with a very, very good cost position, Czech Republic, India, which we doubled the size of -- was it quite 3 years ago now, Dan -- and China, right? So we're very happy with that. And part of our plans is for the sites that aren't growing, the sites that haven't got that real customer service ethos for the sites that frankly aren't productive enough, then some of those will be consolidated in. We've laid out, as you know, clearly at the half year, the rationalization plans. And as Dan presented today, that is going to give about another 400 basis points improvement to Precision. A big part of that comes from that manufacturing footprint consolidation. And obviously, part of that opportunity came from the acquisition of Bimba, right? So as we acquire other bolt-ons -- I'm sure there'll be more opportunities beyond that. It's not the end of the journey at that point, Jonathan. But with every one we do, we look to increase our ability to grow by cutting complexity, we look at obviously reducing the cost base, and we look at improving our customer service. I mean it's not just about the margin expansion, which obviously has been hit in the bottom line, as you know.

That's great. Very clear. And maybe I can just sort of squeeze one last one in. I mean just listening to you guys today, obviously, there's been a lot of focus on supply chain, particularly in areas such as Hydronic. I wonder if you could just sort of give us a little bit of color on how that's holding up today. Obviously, there's a lot of headwinds out there. I mean how have your chain is sort of impacted? Is everything still okay? Or is it -- the issues that you see?

Yes. I'm going to let Phil talk about it in a second actually. But I would say overall, we have honestly never had a better supply chain team in IMI than we've got today. They're doing an amazing job. They're really busy, Jonathan. I mean it's not easy. There's been plenty of times when they had to be very agile and had to work really, really hard. But it isn't just during COVID. They've spent a few years preparing for this. If you think about Critical Engineering, for instance, probably 3 or 4 years ago, something like that, Jonathan, we had over 3,000 suppliers but we also had over 60 sole-source suppliers. Now Critical have got something like 670. That -- this is direct material suppliers and down from over 3,000, but they've only got 6 sole-source suppliers. So they've got much better, much bigger relationships with their overall direct supply base but they've got far lower risk because they've only got 6 sole-source suppliers, so just to give you an indication of what's been built. In Precision, it's a similar story. So a couple of years ago, we only had 5% of our suppliers under contracts and the preferential contract supply agreements. Now we're up over 20%. And we think that by sort of the end of the first quarter next year, something like that, we'll get close to 40%. So the supply chain teams have worked hard over a period of time, not just during COVID, to build us a more resilient supply base. And so far, they're doing an amazing job of ultimately keeping our customers satisfied. But Phil, do you want to just comment on specifically what you've done in Hydronic?

Thanks, Roy. It's certainly been a challenge. There's no doubt about it. You've been reading all about it in the newspapers and everything that's been going on. So we have got a very good team. They have been working hard. We've had issues, as most people have, around things like availability of PCBs around components if they're coming across continents, particularly from Asia, and also even steel. But we've managed that really, really well. And for -- one advantage I have, I think, in Hydronic is that in Europe, our supply chains are pretty local. And that's very, very important to us. And what we have seen is because we've managed it well, it's clear we have gained market share in some markets. Some of our competitors have struggled, and that's been good to see that customers are coming to us because we're more reliable. So as Roy said, I'm so proud of our team and how they've managed it.

Thanks, Phil. Thanks, Jonathan. Do you have any other questions, Jonathan?

I do but I'll let the other guys come in. I may come back later.

Okay. Thanks, Jonathan.

Our next question comes from Mark Davies Jones from Stifel.

Can I dig into a bit of detail on one of the new products you're pointing to? Because I thought the Adaptix thing was really interesting, but it's quite a long way from your traditional focus within that industrial automation market. So can you just talk us through how you get there? Does it build upon a core skill set of the existing business? And does it mean selling into a -- either a completely different customer set or different individuals within a factory or whatever? And how do you overcome that sort of transition? Because it is quite a change, I guess, for you.

Brilliant question, Mark, and I'm going to let Beth comment any minute now. But yes, I mean, you can see from the way they're scaling -- and obviously, the numbers are bigger now than when we put the presentation together as well. They're moving quite quickly. And I don't want to give away our commercial secrets either, Mark, but let's just say that the Norgren brand is very strong across -- primarily, we're launching this in the U.S. at the moment. Obviously, we will go global because the value add to customers is so big, and that will -- as, I think Dibyava said in the presentation, right, there's about 500,000 machine tools installed base that this is directly applicable to globally. But for now, obviously, we're scaling up in the U.S. mainly. And so we're using a lot of digital content. Clearly, you saw the video. You only have to go into LinkedIn, and you can see our marketing videos. And I would say that although the Norgren brand is super strong, the way we're going to market is much more digital, and that's what's enabling us to get the message across. And then obviously, if the product solves a significant customer problem and it does have a very fast payback for these people -- because as you can see, Mark, they're alternative, which is what they've done for decades. When I was doing this, when I was a lad, is that you make soft jaws so you can grip something that's of a different shape. And obviously, with mass customization, the trend is there's lots and lots of things with more difficult shapes, which means if we're ever changing over your machine and putting new soft jaws in, this obviously negates the need to do that. But Beth, without giving all the sort of family jewels away, do you want to talk a little bit to Mark about what you're doing?

Sure. I think you summarized it quite well also. One of the things that's been brilliant about the Growth Hub process and this entrepreneurial growth mindset that we have brought within -- to IMI and working with the teams and coaching the teams is that we are able, with the teams, to really experiment a little bit more. Because like as Roy said, we've got really strong engineering. So we've got the engineering capability to do this. We've got a great reputation in the industrial space where some of these CNC machines are being used, but it is a more fragmented market out there. As Roy said, there are 0.5 million of these CNC machines out there. And so through this Growth Hub process, we've been able to really look at how do we get to these customers and how do we, one, get the feedback from them but then, two, access them to sell the product as well. And that's where the digital pieces come in. And so Dibyava and the Adaptix team talked about a few things in the video, but they range from leveraging social media in a very smart way, working with influencers to get the message out there. And it's been a really interesting journey for us, and we're seeing really nice dividends from it. You could tell from the video we're getting a lot of pull also. So once the message gets out there about how much value this can really add, we're getting a lot of pull from customers too and interest out there. So some of these communities really start talking about how great this product can be in terms of how much you can save, reduce waste, save time, as you could see in the video, and save money for our customers. So we're really excited about it. It is a little bit different space, but these are the kind of spaces that I think IMI can really achieve -- really do well in because it kind of plays through our applications expertise and really understanding how to solve the real, acute problem of our customers. So I think that, married into digital, is a great combination. We're looking forward to seeing Adaptix as it grows. Hopefully, that helped.

Yes, it does. And can you put a sort of rough estimate of what the financial opportunity might be, the revenue opportunity. You've given indication of number of machines, but obviously, we have no idea what the kind of unit value is. So in money terms, how big an opportunity do you see this being?

Well, without getting too carried away, Mark, because obviously, there's a long way to go, right? So it's still early days and we're obviously very excited about the attention. But roughly, this is more than GBP 1 billion global market that is obviously highly fragmented today because lots of people are making their own soft jaws. And as I said -- so the Norgren brand is perfect to play in that with the digital marketing. So lots of things to overcome between -- anywhere near those sort of numbers, but that will just give you a rough idea of the sort of market opportunity.

That's very helpful. Can I ask another slightly tricky one, which is related, I guess, elsewhere in the division. In the transportation piece, I understand what you're saying about the bigger unit value potentially in some of the potential future configurations. But between where we are now and where we go to in the future as we go through that transition, do you see a risk that the market gets smaller before it gets bigger, effectively? What's the timing around some of these things? Because obviously, the hydrogen and the things has typically been prone to some delay relative to expectations.

Yes. It could do, Mark. It could do. Yes. I could see a scenario where that could happen. Of course, the opposite could happen as well in that the OEMs sort of start scaling up their hydrogen capability alongside the diesel capability. So it's pretty hard to call the timing. I'm sort of more interested in the sort of longer-term view. And as we said in the video, about 30% of our current commercial vehicle business is sort of engine-related -- diesel-engine-related. And for us, really, there's 2 opportunities. One is on hydrogen fuel cells, and that's actually a bigger opportunity because there's more flow control to do on that. And we are working with the leading OEMs on that, as you'd expect. And then the other opportunity is actually the thermal management, as Chris Prince said on his presentation. And on thermal management, again, that is a fluid control issue you can manage because if you manage the batteries correctly, they'll have a longer life. They'll actually give you a longer range as well. So it's quite a crucial -- and we're actually winning some orders already, using some of our valves to help with that thermal management. There's a long way that we can go with it. Now on -- if it was just a battery electric vehicle, we have less content per truck. But what Chris was saying, Mark, in the video is that that's a much bigger market, obviously, because we don't -- as you know, we're mainly in heavy-duty truck...

A broader range of trucks.

That's right. And when you think about that sort of -- the classic, let's call it, digital retailer challenge, right? I mean I might as well say Amazon, right? That last mile that needs to be done eventually in a battery electric vehicle, clearly, that gives us room to play in a bigger market. There are lots of things to overcome and we've got to win until -- yes. But yes, we are working with the OEMs. And for us, yes, it's a nice fluid control problem for us to solve and work with those customers.

Our next question comes from Alexander Virgo from Bank of America.

I had a question, which is sort of [ in takes ], I suppose. I'm just wondering if you can be a little bit more granular around -- or how we should think about the incremental revenue targets that you've set out for automation, transportation, what have you versus the existing business. Because I don't want to -- as you say, don't get carried away and add it all on and grow everything else as well. I'm just trying to understand how we -- how you see that -- those kind of incremental revenue targets in the context of the 5% plus revenue growth. And then second question was less about sort of supply chain constraints right now and more about the implications of supply chain constraints particularly for automation. Is that something that you are seeing in the context of customer discussions, longer-term shifting of supply chains around localization like [ high gas ] rather than the stretched global supply chains that we've developed up until now? And then last question. Hope you're writing them down but I'll come back to it anyway. Last question was just on the customer -- sorry, competitor response to some of the successes you've had in your sprint, value engineering and Growth Hubs.

Yes. Great, Alex. Well, actually, I'm going to let Phil and Beth talk about the competitor response when we come to that. So -- but if we talk about the revenue targets, Alex, we just put it all in, in those numbers. It's a mixture of Growth Hub and existing markets and existing business, today's business, doing -- today's business doing better partly by sharpening things like our applications engineering skills. In some cases, Alex, we're actually starting to digitize that. And in some cases, we're actually starting to monetize that. So yes, we've actually got a fully digital, monetized part of the Valve Doctor program, which you'll remember in Critical. So we've got other digital programs now working towards similar things in areas like hydronics. And Phil, maybe you'll touch on that just slightly when we get to it as well. But those revenue targets are all in, Alex, right? So I'm not going to break it all out into lots and lots of little bits and stuff because Growth Hub is innovation, right? And we built this muscle over the last 2 years. I'm really excited about it. But what I don't want is everybody externally telling my teams that just because we haven't quite got to a certain number, that's not success. Success is going to be when IMI has grown at those new growth rates and generating those sort of margins and returns that we put out there today. And that is what I'm looking forward to actually. In terms of your second question, supply chain constraints. Definitely, automation is being talked about more as a solution. One of Beth's other teams pitched last week in warehouse automation, and we've got -- we haven't shown it today because it's a bit early stage and I don't want to give away the secret sauce although we have got IP applications for it. And again, it's not proven yet. But effectively, what it does in warehouse automation is enable the picking of much more -- a much higher variety of products, which, of course, is what these guys are struggling with the customers. And they are all talking about the same thing, Alex, right? They -- it's not the best job in the world if you're picking in one of those warehouses and they're struggling to get labor right now. And then, of course, they really want to make sure that the quality of the picks and everything is bulletproof, right? So absolutely, we are definitely seeing that through the pitch teams and through our sales force that people are looking for more automated solutions, no question about it. So I don't know. Let's just come to -- let's come to Beth first actually. Anything on competitor response from what we're doing with the growth -- the sprint teams?

Sure. Well, the 2 that we presented today are the ones that are in our scaling phase. And I would say -- taking them maybe in turn. Adaptix is interesting because it's actually not directly taking share from a specific competitor in that case, but it's solving a problem against an old process that was out there. So I think that gives us an opportunity to really carve out a niche. But what's really important there is that we protect it with the IP that Roy was talking about. Across Precision, we're -- in our division, we have seen that doubling of the rate of patents that we've been filing from Adaptix but other growth initiatives as well. So I think that's an interesting dynamic there. And on the Hydrogreen space, and Martin talked about it on video, where we're really helping the fueling stations get up and operating efficiently and working well. And this is a new space and they're learning as they go. And what we did find there, as Martin described, is that they did go with off-the-shelf competitive product to start with, and it didn't work very well because when you have these very technical solutions that you're trying to reach -- and they are. In these cases, we're dealing with hydrogen at very high bar rates of 500 and 1,000 bars that Martin was describing. You really need to put the specialist engineering. We'll do it, and that's where our team has been able to step up and really help solve the problems that they were having with downtime as they're learning and also getting to the scale and their cycles well. So we're trying to be in there early as they're developing their processes and really partner with them to help them with the solutions and prevent that downtime or prevent issues down the road through leveraging our applications expertise that Martin and the team are doing a great job with that. Hopefully, that helps.

Thanks, Beth. Very clear. And Phil?

I think as Roy said, it's important not to get too focused on what the competitor is doing to keep you really focused on what the customer problem is and what's keeping them awake at night because if you can find that out, then you can come up with a solution. That's not necessarily easy to copy. I think a lot of our early Growth Hub teams, growth acceleration teams were very focused on digitally enhanced products. And as we've got into it, we're now seeing more and more digital businesses or digital solutions that may be enhanced by our product. Actually, our digital solution will solve that customer problem using not just the product, our knowledge of the hydronics system, our experience, our engineering experience, which is much, much more difficult for other people to respond to it. So that's where I get excited. And we have -- we're testing actually at the moment our first truly digital business in the United States at the moment. And we can't talk too much about that yet because it's not launched, but that will be very exciting if that takes off.

Excellent. Does that answer your questions, Alex?

Sorry. Thanks, everybody.

Yes. Thanks, Alex. I'll just give you one other...

Yes. Very clear. Thanks, everyone.

I appreciate that, Alex.

Thanks, Alex.

I'll give you one other example because obviously, we haven't got Jackie here today on Critical, Alex. But we had a brilliant example in -- on liquid hydrogen, which is being developed, one of the first projects in Asia, and because we worked with NASA, believe or not, on hydrogen about 8 years ago, I think it was, and developed the valve technology for NASA. Now I'm sure at the time, the business case for that valve, Alex, wasn't the best in the world, right? But obviously, it's a bit of a halo working with NASA. But fortunately, because we've done that, that customer has actually told us that we are the only people that are able at the moment to develop that hydrogen technology for that particular valve because you've got to remember, Alex, liquid hydrogen is minus -- it's somewhere at minus 250 degrees C. I mean you're not far off of absolute zero. So you're dealing with something which is extremely cold. But also, it's -- I think apart from helium, it's probably the element that's most likely to leak. So when you're trying to get a very, very low-temperature, metal-to-metal seal, that technology is demanding. And as you know, Alex, in these industries, they're always looking for references. So people that have done it before are really, really important. They really want to see that you've done it. So yes, increasingly, it's exactly what Beth said. They're looking for that engineering expertise, the applications expertise that enables them to solve the problem that they've got. You've got 3 good questions. Thanks, Alex.

We have a question registered by Robert Davies from Morgan Stanley.

I had a few. One was on the bottom end of the margin target range in the Precision business of 18%. That's above what you've done for a sort of number of years over the last 4, 5, 6 years. And I'd just be kind of curious in terms of the resilience of the bottom end of the margin that gives you the conviction you wouldn't sort of slip below 18%, was the first one. The second was just on some of the growth markets you'd identified in the Precision business. I noticed 2 were there. I don't know if that was on purpose or not -- sorry, 2 that weren't there, which is process control and energy bits. I'd just be curious of what the market was for those 2 segments in particular going forward. And then I don't know if someone's asked it already. I might have missed it, but the 20% to 30% of the Critical business that was potentially up for disposal, just would be kind of curious for an update on that and how that's going given where multiples are and just an update on that would be great.

Brilliant. Thank you, Robert. I appreciate that. Yes. Now as Beth's indicated, right, 18% to 20% is where we see Precision cycling, Robert. Obviously, you can do the maths, right? You get 400 bps of improvement from our customer-first and footprint programs. You shift the whole mean up. Obviously, we're not -- we're talking about a normal cycle, right? We're not talking about a 2009 effect or anything like that. As you know -- or as you've stated, I should say, Robert, the last few years, we haven't been at those levels. But you can see what's happened in the last 18 months in terms of improvement, and we've laid out the clear plans going forward, a lot of which comes from things like the footprint program. And now that we've proven that we can do that, we consolidated 4 sites, we have the processes in place, the people in place, we're now ready to tackle some bigger projects there as well, Robert. So yes, we have a very detailed, clear plan of how we get the 400 basis points of margin improvement. And then of course, it's about sustainable growth, isn't it? And a lot of that is what Beth has presented today plus what we're doing in the core business, the value today business, to improve the growth profile of that...

[ So you're saying just ]...

Look, I'm just getting a bit of feedback. So yes, that's why -- so not a 2009 event, okay, Robert. But in a normal cycle, that's the way we see it cycle in terms of Precision. In terms of the growth markets that we didn't put on there, well, process control is -- if you look at our process control market, about half of it is food and beverage. And we have got some excellent opportunities in that food and beverage market, but they're early stage, I would say, Robert. And we were just discussing actually yesterday with the Board. One of the teams is looking in areas like vertical agriculture. And you probably know -- I think it's about 70% of the world's water is used in agriculture. It's a massive number, Robert. And obviously, there are opportunities for flow control solutions within that. And in fact, we've already won with one of the largest players in the world the flow control -- the exact flow control on farm vehicles. So it enables the pesticide and the fertilizers to be precisely placed rather than sort of a huge amount of waste when they just spread it all over the fields. We've already won that OEM business. So Beth, anything else you would add on the process control part or the energy part for that matter?

I think you said it well. I think just to reiterate that the kind of agriculture or future foods piece would fall under process control, and our hydrogen opportunities also fall in our process control business. We just highlighted the submarket there, but they actually fall under that category as well.

Yes. Good point, Beth, very good point. And then on the energy side, there's clearly opportunities again on the energy creation side of things like hydrogen, but that's -- were actually getting that led by the Critical division for obvious reasons, right, because they already know all of the key players in that market. So there's Precision people working on those teams. But on that side of things, it's actually being run by Critical. That's the only reason. And then the 20% to 30% is going really well, actually, Robert. I have to say part of what you've seen -- what was the margin improvement at the half year in Critical? Was it 200 and -- is it, 40 basis points, Dan?

Yes, 240 at the half year.

240, yes.

Yes.

A part of that will be...

Exactly.

Is -- yes, yes, is those businesses really improving, Robert. And I have to say they are increasing their aftermarket content. So do you remember [ what's the name ] or you remember the Critical strategy? We're going to drive towards 2/3 of aftermarket because we know we can grow that high. It's less cyclical. We -- through the Growth Accelerator technique, the upgrade valve strategy where we go in, replace our own old valves, replace the competitors' valves. But yes, I have to say that in Critical -- well, as I said, that they are winning some projects, important projects in hydrogen in those businesses now, and they're doing the upgrade valve strategy because we've got valves that actually can reduce the fugitive emissions. So without going into sort of competitive detail, in the installed base, we found another scene of competitor valves which have got fugitive emission problems. And as that comes higher up the radar of the end users, that looks like more of an opportunity for us. So we've got more work to do. Believe us, we'll tell you as soon as we come to a decision, but the returns and the growth opportunities are definitely improving in those businesses.

Our next question comes from Michael Tyndall from HSBC.

Just one from me and I'll try to be careful how to word this because it's kind of an odd question. It seems to me as if a lot of the success here is about a cultural change, putting the customer-first mentality. And I guess my curiosity is, how are you measuring that culture within the organization? How do you monitor engagement? Thinking about some of those projects that are in Growth Hub that get rejected, how do you stop people involved with them being demotivated? How do we keep this momentum going or even accelerating as we go forward?

That's a good question, Mike. Well, I'm sure we could probably give you another couple of hours. But I mean -- so let's think about it. It starts at the top, right? So it starts with the exec team and you probably know, Michael, the people that come to the exec meetings come down from 11 people to 7, and it's much more of a decision-making unit. It's much more diverse now, obviously the people on it. And the commitment from the exec team -- we had a physical meeting yesterday with all of us, all 7 of us there. And the commitment to growth and this whole agenda of solving customer problems and, most importantly probably, Michael, creating a better world, right, and that's what we want to do, as I said in my presentation. And that is now -- the Growth Accelerator projects, Growth Hub, sprint teams, has now involved 700 people across IMI. And what's sort of wonderful is for people that go through that experience, some of them have never talked to customers, right, in their whole career. And suddenly, they're talking to tens of customers, and Phil was telling me a couple of weeks ago that some of these salespeople that have been part of the teams are now actively bringing forward acquisitions that will solve some of our customers' problems, right? And that just hasn't happened. We've tried it before. We've tried everything to do that. It just hasn't happened. Because they've been on the team and because they work closely with other parts of the company or the engineers and finance people and -- it's really seeping through the culture. So that's great. We put in a fantastic -- it's not really an intranet, is it, Dan? What would you call it? It's sort of a 2-way communication tool...

Yes.

Where we've got about, what is it, 7,000 of our employees on there.

Yes.

And it creates a conversation. Dan, what -- just describe it.

I mean it's effectively the -- a closed, Facebook-like, social media outlet, which enables everyone to contribute. And it started -- again, similarly, we got the ball rolling and it's just been fantastic in terms of getting feedback from -- yes, from everybody in the organization, good or challenges, and people are getting comfortable sharing their experiences. And it's further connecting and it's unlocking other growth opportunities as well. So it's just enabled us to connect better. And actually, some of the things that we can talk about are bubbling up out of parts of the organization that we probably -- it would have taken a much longer time to get to the center. So it sped everything up, Mike.

Yes. And Mike, so what that does, when there's a Growth Hub win, we all celebrated, right, including me. So I mean I'm quite [ addicted to it ] to be honest with you because it's just part of IMI success stories, and it's just an ability to share incredible information very, very quickly. So I think that -- Liz Rose, who came in as HR Director, put that in a blitzkrieg pace, and that ability to communicate and share the success and build that momentum is really important. And then in terms of the way we measure it -- so we actually stop the company or -- it's roughly half a day each year. It's called the IMI Way Day. And we actually ask our employees' opinions on that day, and we had our highest ever scores by a long way this year. We -- 80% of our employees -- I think the best we've ever had was 73% or something, but this year, 80% of our employees said they would recommend IMI to their friends and family. 85% said IMI was a great place to work. And we had something like 87% felt they've been really well treated throughout COVID. And close to -- I think it was -- 55% were now involved in some way in growth projects. And that was always what I wanted to do. So connect the whole company, unleash the energy of the whole company in growth, get them focused on solving customer problems, give them a few extra tools particularly around digital, where we built this Growth Advisory Board with 7 external members from a digital background of all scaled companies. So we're learning every day. And I think it's a mixture of those -- all of that. As you say, it's deeply cultural and starting with creating with a better world and that focus on solving customer problems. That's what I think gives us all energy and actually will create the growth in the competitive edge. And I don't know whether Phil or Beth want to add anything to that from your perspective?

Yes. I think this is a really special time and a very special place at the moment. And I think you can see that people are checking in and relating to the purpose, breakthrough engineering for the better world. And that better world bit, we mustn't underestimate. And it really does fire people. It fires me up. I mean I love it. I bounce into work because what we're trying to do in Hydronic is about saving energy and contributing to a better world definitely. And I can see that across my team. So I can see that across the other divisions as well. I have someone ring me up on a Saturday a short while ago. And they said, "Phil, we've got to talk to you. I've got to talk to you," and it was one of the development engineers. And he said, "I'm so excited about this. I haven't slept for 2 nights, and I need to speak tonight. I need to talk to you," and he had this idea which was just fantastic. So of course, we then run it forward with a little team [ and not to tens ] so we could do -- so for me, that's amazing when people are doing that or when they're so energized. And I think the other thing that happens is that we -- when we look at projects, when we try to solve customer problems, quite often, we need expertise that goes out of our normal comfort zone. And so we bring in external people, external people who can join those teams and help contribute. But also, we share people across the divisions. So one of my people is running one of Jackie's hydrogen teams. Beth is lending people for some of my teams. So the trust that we have between us, between Jackie, Beth and I, I think, is really, really important. And how we work together on it then sends a signal to the other teams to say, "Yes, let's contribute. Let's cooperate on this." And then you did mention also about the -- how we kill some of the projects. That's different now from where we were 2 years ago. It was desperately -- it was awful. We all got very emotional when we were trying to kill a project. What happens now is that we don't kill a project. The team normally comes to the conclusion that the market isn't big enough or the opportunity isn't big enough, and they come up with a recommendation as to what to do with all the knowledge that they gather, but they do it themselves. And for me, that's fantastic because it's not seen as failure. It's seen as, "We've really achieved something here. It perhaps is going to move to the next phase, but we've actually got this knowledge and experience out of it." So that -- it gives me a buzz when we have the pitches, where we see a team effectively killing their own project. It can be a very exciting meeting nonetheless.

And Phil, sometimes, they don't kill it. They just say the market is not ready for this yet. So we do park things from time to time as well.

Absolutely.

And we're actually seeing some of those ideas start surfacing again as markets have evolved. So I think that also make -- that gives people the energy as well that, look, sometimes we've got to put it on the shelf. And very quickly, I think the thing we very much try to do is get those folks reengaged on a new project, and I think that just keeps the momentum going.

And when they go back into the business -- you're absolutely right, Dan. When they get back into the business, they've got that knowledge. We talk about the growth that's coming from these new Growth Accelerator projects. Actually, the culture that's coming out of this is infecting the business as usual, what we call the value today business. And we're seeing growth, I think, coming from that, just from the experiences that people have had on this Growth Accelerator team. But I'll [ pass to ] Roy because I'm getting excited.

Perfect, Phil. Excellent. I did say to Michael we could talk about this for a while. Beth, just on -- Beth, is there anything you would add to all that or you think...

I think you all said it very well, I mean Roy, Phil and Dan. So I think you covered almost all the areas, and we're definitely feeling that in Precision. That's across all of IMI, like Phil and Roy and Dan said. I think one aspect I might highlight is that one of the things we're doing as well is bringing in some different talent with different skill sets as well. So between that, it's enabling our core employees to learn a lot from them, so experts in scaling, for instance, experts in scanning the markets and networking with forums and different skill sets than we've had in the company. And that diversity of experience and diversity of thought and challenge around how we approach some of these Growth Hubs has been just incredible. And as Phil said, one of my favorite parts is when the teams do kill their own project and they do it for all the right reasons and they learn from that experience. And whether they go into another project or they take that learning back into the core business as well into their role, they all -- whether they're a brand or a senior leader in the organization, they just learn a tremendous amount just by participating in these projects. And we're seeing that. And as Roy said, we have 700 people across the company who have been actively involved in these projects, and you can see that learning coming back into the core business as well. So I'll leave it at that in terms of just in addition, but I think you guys said all other ones.

Very well said, Beth. Thank you. Right. Any further questions?

They're very insightful.

Yes. Thank you. You hit the nail on the head, Michael. I have to say it is -- culture ultimately is the most important thing, right? And once you get to that level of energy from the organization, it makes a much more exciting place to work and, yes, a much more customer-focused place. And again, don't' underestimate the purpose. It's easy to sort of -- to push that to one side, but people really do want to create a better world increasingly. And it's -- yes, it's fantastic actually.

Ladies and gentlemen, this concludes the Q&A session. I will now hand you back over to your host, Roy Twite.

Brilliant. Well, that was -- well, thank you. It's a bit of a long session, wasn't it, to do digitally. But hopefully, you found it as sort of content-rich as I did. I got to just thank Dan, Phil, Beth, their teams again. It's first class. A lot of work goes into this, obviously. I also want to thank you all for attending. And we're going to leave you with one final word, which is that IMI is hydrogen-ready. So if you could please play the final video, and thank you, everybody, for attending. Thank you. [Presentation]