Senior plc (SNR) Earnings Call Transcript & Summary

[Presentation] Thank you all. Welcome also to those of you who are participating via the live webcast. It's good to be together again here at the London Stock Exchange. And I hope you didn't mind our little video indulgence there. It's always good to show off some of the wonderful end applications for our products and equipment. Before we get going to -- just a quick word on safety. If the fire alarm goes off, please follow the nearest exit sign to you. There's 2 here and there's 1 at the back there. There's not one at that side. I'd also appreciate if you keep your phones off during the presentation. The original information we sent you indicated it was a London Stock Exchange policy to wear masks when moving around. In fact, they just changed the policy this week. So mask wearing is now at your discretion. Today, it's about providing a deeper insight into our strategy and, in particular, our focus on fluid conveyance and thermal management capabilities. Those of you who were here for our 2019 Capital Markets Day will be somewhat familiar with some of the themes. But as you all know, we've had massive distractions over the past 2 years. So we're looking forward to explaining in more depth just what that means. And to bring that to life, we're going to showcase a couple of our great proprietary product businesses that are operating across diverse and attractive end markets. One of the reasons I'm excited about this strategy is that fluid conveyance and thermal management technology is highly relevant for a low-carbon economy. This is something that we have known for a long time and which others are now appreciating. We'll explain why. And of course, I chose this strategy is only meaningful if it delivers for its stakeholders. We will demonstrate why we believe this will deliver good returns for our investors. So let me quickly run through the agenda for the day. This morning, we will focus on two of our excellent U.S. businesses, that they're designing and manufacturing proprietary products and subsystems for various end markets, including aerospace and defense, land vehicle, power and energy and the semiconductor equipment. We'll pause for Q&A at the end of that session, and then grab a COVID secure lunch while having the opportunity to examine some of the product examples which we brought with us and to network with the various company personnel that are here. That includes Mike Sheppard, who runs our Flexonics in division; Launie Fleming, who runs the Aerospace division; Martin Barnes, who's our Group Business Development and Strategy Director; and our company Chairman, Ian King. And after lunch, we will focus on the future as we describe the forces that are shaping market trends and showing how our response to that represents a medium- and long-term opportunity for us. And then we'll put all that into a financial context before finishing with a further opportunity for questions and answers. The key presenters this morning are John Cory, who runs our Senior Aerospace Metal Bellows business based just outside Boston; and Carl Armbrister, who is Director of Business Development for Senior Flexonics pathway based near San Antonio in Texas. And this afternoon, you will hear from Ryan Collins, Director of Engineering at our Bartlett facility, which is near Chicago. As well as being one of our largest manufacturing sites, we do much of our product and technology development there, which Ryan is responsible for. Rob Vaughan has had a slightly shorter journey to get here. Rob runs our Crumlin facility in South Wales, where we undertake significant research and development work and design products that are built in our manufacturing facilities around the world. I've got 3 quick slides just to finish setting the scene. A few years ago, you've heard me saying that we have 33 operating businesses in 14 countries around the world. With our print-to-growth strategy, we've tidied up the portfolio somewhat. So now we have 26 operating businesses in 12 countries, but our global footprint is very important to our customers. In the first half of this year, the revenue split was roughly 2/3 Aerospace division and 1/3 Flexonics. Though as you will see today, we do have significant non-aerospace sales, some 11% of group revenue emanating from some of our Aerospace division businesses. And John is a good example of that. Despite the pounding that the aviation sector has taken during the pandemic and which we're thankfully starting to emerge from now, Civil Aerospace remains our largest end market. Our purpose in Senior is to provide safe and innovative products for demanding thermal management and fluid conveyance applications. With our markets now recovering, we are well positioned for growth, which underpins our strategy to maximize shareholder value. We'll focus on various elements of our investment case today. In particular, as you've seen from our agenda, we will elaborate on why we firmly believe that focusing on our intellectually property rich fluid conveyance and thermal management technology is the right strategy and will provide increasingly attractive financial returns. We don't have a separate agenda item on ESG today, and that's not because it isn't important to us. On the contrary, we continue to lead the way on ESG in our sector. And for years, I've spent a considerable part of my time ensuring we are fulfilling our commitments. Remember, we were the first aerospace and defense company in the world and the first industrial company in the U.K. through of our Scope 1, 2 and 3 greenhouse gas emissions reductions targets approved and verified through the science-based targets initiative. We are well advanced in our scenario planning for TCFD, the Task Force for Climate-related Financial Disclosure and those customers who engage with us on ESG have told us directly that we are their leading supplier in this area. Today, you will see how we're very well positioned to support and indeed enable the transition to a low-carbon future. Given today's theme, we will not be spending much time on our Structures businesses. Our strategy for those are straightforward. We have excellent machining businesses that serve both airframe and aero engine customers, as well as 2 machining businesses in Flexonics that supply into power and energy and off-highway fuel system customers. They are all well equipped, having been invested in for REITS we were building at pre-pandemic in which we can see returning over the next few years. Our strategy is to fill our existing capacity, continued diversification into space and defense and to secure additional market share. As markets recover, this will generate good revenue growth. Our most important financial metric is return on capital employed. Our minimum ROCE target in the medium term is 13.5% pretax post IFRS 16. The building blocks are all in place to support achievement of that goal, and today we're focusing on the second block from the top, which is fundamental to our future success. But this afternoon, Bindi will elaborate on each of the blocks and explain how we ensure that all of our businesses are aligned in supporting the group's ambition. So hopefully, that sets the scene for what we're covering today. And without further ado, I'd like to hand over to John Cory followed by Carl Armbrister, who will share with you insights into two of our excellent fluid conveyance and thermal management businesses. John joined Senior in 1997 as a project engineer. He was then Director of Engineering at Metal Bellows for a decade before being promoted to run the business in 2012. And Carl's had an almost his long career with Senior. He joined in 1998 as the CFO of Pathway and also spent 5 years in our Aerospace division as CFO of one of our large businesses in the Seattle area. And then he rejoined Pathway last year as Director of Business Development, where he is now focused on growing the business. So John, over to you.

Good morning, everybody. I'm excited to be here today in person to tell you about the Senior company that I run, Senior Metal Bellows. I'm going to start with a little bit about Metal Bellows' history. I'll then get into the strategy, sales and products. And then I'm going to look a little bit ahead and tell you about some of the products that are going to offer us future growth. I want to tell you about our engineering capabilities and how we're automating the factory, and then I'll wrap it all up with a quick summary. So Metal Bellows' history. I think the takeaway from this slide is you can see the long-term growth of Metal Bellows by the size of its facility as we go through the years. Metal Bellows was founded in 1955 by Ray Shamie. The original facility was in Wellesley, Massachusetts, which is just south of Boston. It was a 10,000 square foot facility. In 1963, due to growth, Metal Bellows built a new facility in Sharon, Massachusetts, a little more south of Boston, and moved the business to that location. That facility has been expanded upon to support Metal Bellows' growth over the years. And then, the big news. In 1994, Senior plc bought Metal Bellows. Now as David said, I've worked for Metal Bellows for over 24 years. So I've been with Metal Bellows almost since Senior acquired it. And I can say that Senior has been an excellent owner. Senior has invested wisely in Metal Bellows and supported our growth. Most recently, we've expanded our facility to almost 120,000 square feet. We have about 300 employees. And last year, in 2020, we were about 10% of the Group's revenue. Now strategy. The first thing I want to point out is right in the middle, front and center. Health and safety is our top priority at Metal Bellows. The leadership team and I communicate this with the employees regularly. We have strong safety programs, an excellent safety record, and this is all augmented by the strong group health and safety programs. Before I get into the business strategy, I wanted to talk about culture. We all know that the culture at a business has a lot to do with its success. You can see on the left of the slide here, what we call is our vision. And what that is, is the type of culture we're constantly striving for at Metal Bellows. And I want to highlight at the top in capital letters, the words ONE TEAM. If you went to Metal Bellows and you asked employees, what's John passionate about? I am confident that they would say health and safety, but I'm also confident that they would talk about working together as one team. I tell employees that working together as a team has been the biggest factor in our success to date. And how well we work as a team will be our biggest factor in our success going forward. I'm confident that at Metal Bellows, we will continue to work hard to be a team and contribute to our future success. So now the business strategy. So if you took Metal Bellows' strategy and you boiled it all down into one sentence, here it is. It's a big sentence. There's a lot in it. The one thing I wanted to highlight is right in the beginning: Our strategy is to achieve profitable 6% year-on-year growth or greater. Now to dive a little bit deeper into that strategy. At Metal Bellows, we are engineering custom products for our customers using our intellectual property. We don't do any build-to-print work, and we're selling into multiple and diverse, attractive end markets. To do this, we get real close with our customers, and we use a value sales approach. And I'll talk a little bit more about that on the next slide. Now at any company, in the end, it's all about the people. The people at a company -- what make everything happen. So a key part of our strategy is to attract, retain and motivate talent. So we have a lot of programs that we do to contribute to this. But real briefly, we've been building a strong pipeline for incoming talent, and we use the group survey to get employee engagement feedback from all our employees so we can make our work environment better and continue to keep them motivated. And we're always striving for world-class performance, and we're leveraging the senior operating system to do this. So it's really easy to put strategy bullets on a slide or communicate them. But if you want to enable a strategy at a company, that's not enough. At Metal Bellows, we have a strategy deployment process, which we've been using successfully for many years, where a couple of times a year we're determining the top initiatives for our strategy in the company with goals and objectives. And of course, these continue to evolve as the company evolves. But that still is not enough. So to support that strategy deployment, we have technology road maps that are in every area of the company that have actions, and they're all supporting the top initiatives of the strategy deployment. We also have our operational excellence programs that include product family teams, cross-functional teams and daily management teams on the shop floor that are also supporting every day our top-level strategy deployment. So what this creates is a way for our strategy to be driven down through the entire organization so it touches every employee. And every employee has input to it, and every employee's actions and the things they're doing are all supporting the strategy deployment, which enables our strategy. So like I said, I wanted to talk a little bit more about our value sales approach. We go to market as the industry leader for the type of products we sell. We are not selling commodities. We're also not selling systems. We're operating in between there where we're selling a custom engineered device that performs a function in our customers' system platform or vehicle. So we engineer products that differentiate themselves in the marketplace. And what I tell employees is we want our products to be designed so that when a customer uses them in their system platform or vehicle, it makes their system platform or vehicle more attractive and adds value for their end users, because if we can do that, then our customers will always come to us. With this type of approach, we get real close with our customers. We have to know what they want, especially their engineering teams. And we like to think of our engineering, and our customers have actually told us, this is the way they think of us, that our engineering is an extension of their engineering team. And of course, we're always looking to exceed our customers' expectations. So the last bit about our strategy that I wanted to dive into is that we sell into diverse and attractive end markets. So these pie charts showing our market breakdown by sales for 2015, '19 and '20 illustrate that. We sell into the semiconductor market. And to be clear, we're designing and offering products that go into the machines that make microchips or integrated circuits. We're in the defense market, commercial aerospace, industrial, medical and space. Space is a new market for us. It's a growing market. And we see an awful lot of opportunity in space for the future. One of the things you can see as you look at the progression from 2015 to '19 and '20 is the strong growth in our semiconductor market. The other thing you can see in these pie charts from 2019, of course, pre-pandemic, and 2020, in the pandemic is, of course, our commercial aerospace market shrank, but our semiconductor market grew and our defense market stayed very strong. And I'm happy to report that we actually grew our sales from 2019 to 2020. So that's all I'm going to talk about regarding strategy today. But of course, what's important is how is the strategy working? Well, I'm happy to report, it's working extremely well. And here's a little bit on how we're doing. This is sales for a 10-year horizon. And you can see from 2015 strong sales growth at Metal Bellows. And in the more recent years, you can see that, that growth exceeded our 6% year-on-year target. I am confident in saying that if there wasn't a pandemic, that growth would have continued on. Of course, with the pandemic, it's caused a little bit of a pause in our growth but not a decline. In the dotted line we have projected shows continued growth, and I believe we can beat these numbers. And we've shown in the past at Metal Bellows that we can beat our projections. So we have a really strong sales profile, but the other thing, of course, that's important is how are we performing. So here's a chart showing return on trading assets, a value tree. This is for half 1 of this year 2021. You can see the top half of the value tree is green. The bottom half of the value tree is green. And that gives us an overall ROTA very strong at 69%, which is green and exceeds the Group's target. I'm happy to say that Metal Bellows consistently exceeds the Group's ROTA target. So now the fun part of the presentation, at least for me, the technology. So at the heart of all of our products is what's called an edge-welded Metal Bellows. In a lot of our products, you can even see the edge-welded Metal Bellows, but it's what differentiates our products in the marketplace. We make them out of various materials. We make them from the diameter of a pen or a pencil, all the way up to a few feet in diameter. You can see in the video on the bottom left, how we manufacture the bellows. We stamp in-house, male and female diaphragms out of sheet metal. We then weld them at the inner diameter and then we weld them together at the outer diameter to create the all-welded hermetic dynamic seal that you see in the video on the right. So I wanted to tell you about some of the products that are driving our current sales. I'll start with Aerospace, both commercial and defense, where most of our products are either used in hydraulic systems, coolant systems or fuel systems. We make maintenance-free accumulators, thermal valves, water system compressors, pressure sensors, fuel controls, anti-skid couplings and a number of simpler products. And again, this is just a highlight, there's a lot more. For the semiconductor market, we mainly provide precision pneumatic actuators. And again, these actuators are going into the machines that make microchips. We have pneumatic actuators that use optical fiber sensing. Some use programmable sensing, using a Hall effect approach. Some of these actuators are actually lifting the wafers in the processing chamber. Some of them are opening and closing doors to the process chamber. And some of them are moving various pieces of processing equipment in the process chamber. So for some of our other markets, space, medical, industrial, here's some of the products driving current sales. Coolant reservoirs, which we provide into the space market, and we're really excited again about the growing opportunities in this area. One of our biggest medical product lines is reservoirs that go into implantable devices. In industrial, we do sell into the oil and gas market. One of the products is high-pressure seals. And we also have a whole line of industrial vacuum pumps and compressors. So that was the products again, just to highlight that are driving our current sales. And now I wanted to look ahead a little bit and show you some of the products that are going to drive our growth in the medium term. In Aerospace, we have our high-pressure hydraulic accumulators. We have an example actually out on the table of a smaller one of these. We also are working with OEM jet engine manufacturers as they try to make their engines more and more fuel efficient. They're running them hotter and hotter, which plays right into our all-welded metal technology. To help them with running at hotter temperatures and better fuel efficiency, we're working with them on dynamic seals using our technology, and we're getting more and more into thermal management, with thermal compensators and also our thermal valve product line. I am happy to report that we've already shipped prototypes of our products for electric aircraft. So we also have a lot of products that are going to drive medium-term growth in the semiconductor area. These products are really next-generation products of the current pneumatic actuators that we make now. These next-generation products are higher precision, which is real important for our customers. And we're designing for cost, we're automating our processes so we can provide these higher-performing actuators at a lower price to our customers, giving them increased value. We're really excited about the growth opportunities we have here. So I just talked about some of the products that are going to drive our medium-term growth. But we always have to be looking to that third horizon, that long-term growth, and be doing product development for that now so that we can continue to meet our strategy of year-on-year growth. One of the products we're really excited about is for the semiconductor market. Our current pneumatic actuators are 1, 2 or 3 position. The new technology we're working on gives our customers infinite position control with feedback, using a servo-pneumatic technology. We're real excited about how we can grow with this product. Another product, which is we're targeting for longer-term growth is engine bleed valves. We recently patented our own engine bleed valve. You can see a picture of it here. And yes, inside of it is an edge-welded metal bellows. Our product can be used on engines that run on conventional fuel or sustainable aviation fuel. Again, as the OEMs are having their jet engines run hotter and hotter for greater efficiency, the current technologies struggle with this. Our bleed valve technology being all metal works very well at extremely hot temperatures. And the other thing about our bleed valve that's really key is it's maintenance free, which is also extremely important to our customers. So here's a slide showing the depth of our -- or trying to demonstrate a little bit the depth of our engineering capabilities. And it's pretty busy, but you can see here a hydraulic accumulator, and we have a pressure vessel analysis. These hydraulic accumulators are operating and have to hold thousands of PSI of pressure. And of course, for aerospace applications, our engineers have to design them to be as light as weight as possible. We have real expertise in this area. In the middle, you can see a finite element analysis of our bellows. And below that, we have optimization programs that can run thousands of bellows analysis in a second to determine the most optimal design for any given application. On the right, in the video, you can see an example of the vibration analysis we do, which is extremely important in aerospace applications and, of course, space applications. Below that, you can see from our test lab, we have in-house vibration testing which allows us to ensure that our vibration analysis is accurate, and we can also use it to qualify our products for service. As we've gotten more and more into thermal management, we've developed the capability to do fluid flow analysis using computational fluid dynamics. You can see an example of that on the left, where we're analyzing the flow through one of our valves. And we also do detailed thermal analysis. You can see a picture of that on the right for one of our thermal valves. Besides continuing to increase our real heavy engineering capabilities, we're also automating our manufacturing processes. This is important to continue to improve our productivity year-on-year and increase our competitiveness. The other thing this does is it allows us to grow our business without the need for as many skilled labor employees. You can see on the left in the video an example of the automation of our inner diameter bellows welding process. On the right, you can see a video show an example of the automation of our outer diameter bellows welding process. I didn't talk about it with any of our products today, but we do make some non-round bellows as well. On the left, you can see an example of a robot welding the inner diameter of one of our non-round, our rectangular bellows. And when you're doing all the intricate welding that we're doing, one of the most important things that's key to the process is that we have very clean parts. So we have a lot of very sophisticated cleaning processes, and we've automated those processes as well. You can see a video of that on the right. So there's a lot of information. Hopefully, you learned a lot in that short amount of time about Senior Metal Bellows. With our IP-rich products, operating in diverse and attractive end markets with custom-engineered solutions and consistently strong financial results, the future is bright for Metal Bellows. Thank you. And now I'll hand it over to Carl Armbrister.

Thank you very much, John. One team. Good morning, everyone. It's my pleasure today to join you here at the stock exchange to give you some more information about Senior's operating business, Senior Flexonics Pathway. The agenda today is going to take us through a history of pathway, some detail about our products, our sales history, the differentiations and applications of our product, our growth areas. And then we will summarize Pathway's path to improving and increasing our shareholder value through the IP that we deploy in the various markets that we serve. Pathway's history. And I'm not starting quite at the beginning, I'm taking the significant milestones in the company's history. In 1980, the Pathway -- the business that has become Pathway was actually moved to Texas with a new facility to have a dedicated stand-alone expansion joint business. The reason for selecting Texas was so that we could be close to our customers in the Gulf Coast, which is the hub of refining and petrochemical production in North America. In 1999, Senior acquired Pathway Bellows, who at the time was the leader around the world in supplying expansion joints. It was merged with the business in Texas and rebranded Senior Flexonics Pathway. To extract maximum synergies from this merger, in 2004, the Texas facility was expanded, and all of the operations of Senior Flexonics Pathway was consolidated to the Texas site. Again, Senior made another strategic decision, which was to purchase WahlcoMetroflex, a leading business in the damper and diverter manufacturing and supply globally. That business, too, was then merged as part of Senior Flexonics Pathway. Today, Pathway operates in 2 facilities: One in Lewiston, Maine; the other in New Braunfels, Texas. We have approximately 170 employees operating out of 200,000 square feet, and Pathway represented in 2020, roughly 5% of the group's total revenue Pathway's DNA is on the fluid conveyance side of Senior's strategic strategy of thermal management and fluid conveyance. Our feet is plantly -- is firmly planted in that lane of those 2 strategies. To do so, though, Pathway and its engineers do have to address issues of temperature in the products that we manufacture and design in order to accommodate for thermal stresses. But the main driver of our technology is squarely fluid conveyance through our systems that we provide into the market for many different manufacturing processes and systems. I'll describe what our products are, both expansion joints and dampers, starting with expansion joints. What an expansion joint is, it is an assembly that come -- that compensates for movements which occur due to temperature, pressure or both. What it does distinctly is that it maintains the integrity of the system, allowing it to safely compensate for these changes, which are either expansion or contraction as it is going -- as it is employed in processes throughout our supply base. The construction of an expansion joint really has 2 or 3 main components. First of all, the bellows technology or the bellows element, which you can see on the left is a thin-walled corrugated bellows made from various metals -- various metal types. And it is attached to end connections and other hardware that you can see on the right to make up a complete expansion joint assembly. This technology is the core across Senior, as John just explained, and it's certainly one of the key -- the key in terms of expansion joints, technology that Pathway deploys for the benefit of its customers. The bellows technology, in terms of its differentiation, is what John described in a slide where he said the differentiation actually comes from the in-depth knowledge and applications to maximize the capabilities of the bellows in the applications that are served. That happens both at Metal Bellows and it happens with Pathway. Now as you can see from the picture, one of the differentiations between these 2 businesses is generally the size of the products that they make. At Metal Bellows, you can generally hold their assemblies in your hands and manipulate it. At Pathway, the products are much, much larger. You have to be -- you have to manipulate these products via crane. One of the other distinctions is the way that the bellows, which is central to our technology, is actually formed. At Metal Bellows, they are edge-welding; at Pathway, they are either hydro formed through punching -- they are hydro formed or they're punched, which is a mechanical process. Dampers, which are the products that came with the WahlcoMetroflex acquisition. What dampers do is that they generally a valve within a piping or a ducting system. And that valve allows for the product to regulate or isolate the flow of the media going through our products or going through a ducting system. And there are 3 products here. As you can see, there is a guillotine damper, which looks and operates much like it sounds. There's a butterfly damper in the middle and a louver damper. And these dampers all regulate the flow of media going through piping systems and ducting systems in industrial processes around the world. Pathway's annual sales has had somewhat of a challenging ride over the past 5 years. One of the reasons for that is in 2016, we had a significant collapse in oil prices, where oil went from a high of roughly $112 a barrel in 2014 to a low of under $29. Oil price is an influencer in the way our business -- it influences our markets, especially our petrochemical markets, and it also has a knock-on effect in other industrial markets. And that's why you see the decline in sales between 2015 and 2016. Sales then became flat as oil prices meandered at a very low level in the low 30s. And then we began to see some uptick in 2018 and 2019. Unfortunately in 2020, we had the pandemic. And at the end of 2020, Pathway sales to the -- for the Group was 5%. I am going to spend some time talking about the dotted line, which is our growth trajectory for our strategic planning years 2021, which is current year, through 2026. But I will do so in a later slide, if you indulge me. Our markets. This slide demonstrates mainly that Pathway has 3 very broad, 3 very stable markets, roughly equaling the same size. They are petrochemical markets, industrial markets and power generation markets. And you could see between '19 and '20, there's roughly very little change in terms of the overall makeup of Pathway's revenue. There's just a slight downtick in petrochem, which is where the majority of the impact of lower prices and lower demand for oil would be felt and a slight uptick in power generation. In 2015, which is the peak year that you saw in the previous slide, those sales for petrochem, which is 46%, is really driven by the fact that oil prices were very strong in the prior year. And Pathway brought into 2015, a backlog that included a [indiscernible] project valued at about $15.4 million. Without that spike in 2015, not that we didn't want to spike, in fact, I would say that [indiscernible] projects tend to be the icing on the cake for Pathway. And in another slide, I will tell you exactly why that is. ROTA. One of the favorite measures of Bindi, and as a former CFO, one that I like as well. This is an overarching measure of the effectiveness of managing your business. It touches on key drivers for the business, tying it together in terms of how is the business controlled and how are you executing against your plan. And, if I may answer those for Pathway, you can see that we have a very strong ROTA, 194%. So Pathway is amongst one of the top performers in terms of ROTA within the group. And like John's business, it is very consistent in producing very high ROTAs for the group. The nature of our supply and one of the reasons why this is the case, our supply is very customized to every customer. It puts us, therefore, at an advantage when it comes to asking our customer to provide advanced payments for their projects. In other words, our customers have some skin in the game. And therefore, Pathway is able to produce the products without deploying very much of its working capital. Pathway is also not a very highly intensive capital business. And when you combine these factors alongside very robust margins, it drives this outstanding result. And so for half year 2021, we are well ahead of our targets. And if I might just say, things tend to be bigger in Texas. It is a fact, and that is also true of ROTA. Pathway's differentiation and technology we've addressed in this slide in a very simple way. If we were to focus on the products on the bottom, it describes in its simplest metallic form, just a simple bellows. And as you go across, we go from a metallic bellow to a metallic expansion joints to metallic hoses, fabric expansion joints, et cetera. I won't read it all the way across. And at the top, we have stratified some our petrochemical or petrochemical markets into refining petrochemical and chemical. Industrial, we left it -- industrial is a really broad swath of industries. We left that as just industrial for now. And in power generation, we gave you some of the sectors that we serve. What is really important about this slide is that every product or service across the bottom can be sold into any one of these markets. And that's why you see such a balance in terms of our sales to the group. That balance indicates that Pathway is not dependent, sorry, on any single customer at any year or any time. And one of the other differentiators for Pathway has to do with the capabilities in terms of the size of the products that it can produce. On the left, some of our largest expansion joints in terms of our bellows capability goes up to over 200 inches or 5 meters. On dampers, the size can range up to just short of 40 feet. So these are products that not everyone can build. And to some extent, this gives us some degree of insulation from broad swaths of competition. Also, I'd like to point out from this slide since the businesses have been owned by Senior, Senior has done much in terms of investing to make sure that we maintain this differentiation and this competitive edge. So I'll speak next to four of the applications that we sell our products into. And here, I come back to Catofin. If you recall, we mentioned that Pathway in 2015 supplied Catofin project, which was $15.4 million. And Catofin is a very, I'll call it, a sweet spot for Pathway. It's not -- it's not an industry that provides us with consistent annual projects. But what's unique about this project is that for every plant, it is a very expansion joint intense application. It depends on the capacity of the plant that is being built. And in expansion joints, most of the plants that we see, a full plant would take anywhere between 120 to 160 assemblies to build out an entire Catofin plant. The other thing that is very unique for Pathway is that we were the first to actually supply expansion joints into this particular application. And in addition to that, we have a significant lead over our competitors in terms of the number of units that are in service around the world, somewhere over 1,200 units. That is a significant lead that is not measured or not closely followed by any of our competitors. Refining. Refining is one of the more challenging applications that we have from the standpoint of service severity. And the products here tend to be very large in terms of diameter. And the application faces 1650 degrees in operating temperatures at a max. And what we generally do here is that the products have to -- because of the temperatures and because of the severity of the service, they often lined and insulated with other materials, such as a concrete layer, so that you can maintain the temperatures and keep the units from growing uncontrollably while they are in service. This process, unlike Catofin, only utilizes about 10 to 12 expansion joints in its process. But because of the sheer size and complication, these units in terms of a full plant are also fairly expensive. They're not quite $15 million, but they're not cheap, and we like that. In the power generation application, you can see 4 products that we've shown here: one in nuclear, the other in natural gas, coal-fired and marine exhaust systems. You can see the variety in terms of the products, whether they are simple or not. On the right, you have what is a fabric expansion joint that is used very commonly in coal-fired power plant as well as a crossover unit. The nuclear unit that you're seeing here, I will come to a little bit later in the slide, but that was recently supplied into our customer, Bruce Power in Canada. New -- I'm sorry, industrial applications. As I said, there are many, many industrial applications that could be addressed and are addressed in our product offering. However, Pathway has chosen to be very strategic and not chase every single application, but to chase those applications where the IP -- the IP strength of Pathway can deliver for the group the strongest possible return on its sales. In other words, we look for the most challenging application where our quality and our differentiation in terms of our ability to give the customer the very best product is welcomed and really wanted by our customers. On-site service. On-site service is an aftermarket service for Pathway, where we go out to the customer site, at they're asking to do inspections, replacements, repairs. And that -- those inspections and repairs often repair our competitors' products in the field. It is a very tough -- it's a very tough environment to be in because you are often asked to go to a site and you describe the problem. When you get there more often than not, as you begin to take the unit apart, you're pointing to other areas of deficiency within their piping system that now needs to be addressed within the very short turnaround cycle. And Pathway has worked very diligently and very well over the years with our customers in order to get a solution for them within the time frame of the turnaround, whether that be a temporary fix and, at the next turnaround, a full replacement of the units. And that really ties our business together well from the perspective of hardware sales and the connection between our engineers and our customers' engineers. I go back to this slide because I would like to now address the confidence that we have in the growth of the business in our outward strategy period. First, we will address this from the standpoint of 4 themes that we believe underpins the growth that we will see in the future. And I will give you the theme, and then I will give you an example of that theme being worked and providing results in 2021. The first theme is that the transition to low carbon technology will seek strong IP and innovation. And our first example of that is in the nuclear market. And many of you may have read one of Senior's press release where we spoke about Bruce Power. And I'll give you a little background and then I'll go into the details of the transactions here and how that supports growth in the future. Who is Bruce Power? Bruce Power provides roughly 30% of Ontario, Canada's power, half of which it generates through nuclear power. Bruce Power has recently -- recently as in 2 years ago, launched a major component replacement program for every one of its plants, its nuclear plants, that provides power into Ontario. And if you were to look to the right of -- the top right on this slide, you will see each of the units and the time line for those replacements. Unit #6 and unit #3 represents the $18 million that was outlined in the press release. Roughly $6 million of that unit 6 has already been completed by Pathway, which means the runway in 2022 and 2023 for delivery is roughly $12 million. Now one might wonder, $12 million. We know -- we are seeing challenges, headwinds, if you will, a little waning on the coal-fired power plant sales. But we're more than offsetting it with our nuclear sales that we are generating. And these sales are really being generated because not only is Bruce Power simply replacing these expansion joints, but they are leaning on our expertise because they are redesigning their plants for those units to be safer. So they're upgrading the standards of their plants, and we are using the most current Bellows technology in providing the products to Bruce Power. There is a second technology in nuclear that is on the horizon. It hasn't -- in terms of low-carbon technology, it hasn't gotten the fanfare that wind, solar and hydrogen has. But in the U.S. and also in Europe, there is what's called small nuclear reactors. And what they are, a smaller footprint plant meant to be both more cost-effective to build and to provide power to smaller communities. And also one of the advantages is it now allows a power plant -- there's a lot of concern about cybersecurity around power generation, and these plants allow for a smaller footprint plant. And it means that it's a little bit more challenging for those who may want to do something on towards in terms of bringing down the power grid. They would have a much smaller impact if they were to impact one of these facilities. So how does Pathway interact with these small nuclear reactors? One, I'll start with the 2 technologies. One is a land-based reactor, which will be used for commercial power. And there were 2 such plants already announced to be built in the U.S. The first is TerraPower, and if you look to the top right, you will see the planned schedule for the start and finish of each of these. On the land small modular reactor, we've already got contracts to supply expansion joints for the new scale energy. The TerraPower is using a slightly different cooling technology. And we know that our fluid conveyance technology has a part to play here, but they're not as far along in terms of development of what products they're going to seek from the industry. Now one might ask, will Pathway get that opportunity? And the answer is yes. And the simple reason for that is we are the only company in North America who has a nuclear stamp that allows us to sell expansion joint -- metal expansion joint and hoses into the nuclear power industry. It is just a matter of time. The takeaway here is that we want to show you that Pathway is in on the ground floor of this emerging technology, and we are solidly locked into the nuclear power that is the much larger power grids and power plants that companies like Bruce Power and others are operating. Additionally, one final point on nuclear is that there are already U.S. nuclear plants, who are going to be -- who have filed for life extensions, and therefore they too will be doing major component replacements in the coming years. There is also a broader strategy. And the theme that we have here is one of expanding our product offering and expanding our markets. And we are doing so by looking at the core competencies that we have and trying to add to it and offer our customers Pathway as an avenue to do other things beyond expansion joints. And the reason we are doing this, there are 2 strategic reasons for going into this direction. One is there is a value multiplier effect that we will see by simply tacking on adjacent piping to expansion joints to sell into the current markets that we serve. And there is also another benefit, which has to do with low-carbon technology. In many of our -- at many of our customers, one of the things that they will have to address first is how to lower emissions, and one of the technologies out there that is highly touted is carbon capture. And carbon capture is simply capturing the emission before it goes into the air, transporting it, more than likely it's going to be stored on the ground. And really, the transfer or the conveyance mechanism is going to be pipes, and they're going to need expansion joints. And we want to have examples where we are doing just that. We are supplying into our customer base already, expansion joints and pipes. It makes it a very simple proposition and a very compelling proposition when we do so to our customers. From this strategy, this year alone, we have already generated an additional $2.4 million in business. This transaction to the top is one where the expansion joints at the bottom, which we've pulled these apart, the crossover expansion joint is what we would have typically sold into the market. And when we were approached by the customer, we asked them, and they obliged, and we gave them a very good price. They were looking for a relatively short delivery. It was a demanding schedule. And we supply the entire system to them. That was a multiplier effect of 125%. There are other values. There are other examples of that, but this is one that I wanted to highlight. The other thing that we are doing, we talked about working with Canada on Bruce Power, and that has worked very well in terms of the collaboration between these 2 Flexonics companies. And we now have where within weeks, I would say, of finalizing a similar agreement where we will work with Senior Flexonics Castle for them to sell our expansion joints into Europe, into -- It's not a new market, but we are trying to increase our penetration there. Vice versa, they will allow us to sell some of their products into the U.S., into our markets, and we believe this will add value to Pathway. Lastly, we are in search of new markets, and one of the markets that we are exploring today is the space market. There is clearly a new space war, and Bellow's technology is widely used in that particular application. They're in launch systems, they're in main fuel lines, they're on rocket engines. We are the experts. We will be playing in that particular area. As I wrap up, -- actually, if I may, I will give you 2 quick examples of the [ third ] themes around our projected growth. One is there will be a reversal of the maintenance spend curtailment that we are currently seeing. One of the things, as I mentioned, that happens when oil prices get very low is that many of our petrochemical and other facilities actually begin to suppress spending on capital and on maintenance. That cannot go on indefinitely, and we believe that, that is already beginning to lift. We've recently won a million-dollar order from a refiner, who is replacing several expansion joints and a bypass stack, and that project will be shipped next year. Also and finally, we believe that the global market post-COVID will get back to where it was prior to the 2019 level and begin to grow beyond that. And in the area of Catofin, there has been one plant, which was on hold over the past 2 years, that is now going through procurement stages. This plant will be build -- built in the Middle East. So growth will indeed come back. And I will wrap up now by talking about how we use this IP to strengthen our own business and to strengthen our shareholder appreciation. As we've indicated over the last few slides, our IP is relevant to the low-carbon technology. Also, the infrastructure for this new technology has a runway that is probably 1 to 2 decades. During that time, Pathway is well positioned to serve the build-out of that infrastructure and also to continue to serve the current economy for expansion joints that we serve. As Pathway deploys this IP to each of the customer and each of the applications, our commitment to fluid conveyance on our strategy to broaden our product offering, we believe that we will continue to give Senior very strong financial results. And as these actions are executed as we've demonstrated just here shortly, you can expect big things from Senior Flexonics Pathway. We are in Texas after all, big things are expected. Thank you. And I will turn you back over to David.

All right. Thanks very much, Carl, and to John. So hopefully that gives you an insight into just a couple of the really good sort of fluid conveyance and thermal management businesses that we have in Senior. We could have brought quite a number of others with us as well, SSP, Calorstat from France, Bird Bellows from the U.K. They're all sharing very similar underlying technology, but these 2 alone represent 15% of the group, even at slightly depressed levels in Pathway for the past couple of years, which, as Carl has rightly pointed out, is going to grow.

So we got to the point in the presentations where we're going to have some Q&A. We thought we'd break up rather than trying to keep everything for the very end. So if there's any questions around what you've seen so far, either from my short introduction, but more especially from what John and Carl have talked about, we'll be happy to take them. So I'm going to invite John and Carl back to join Bindi and I here on the platform, so we can look everything in the eye. So come and sit, guys. So any questions? Andy?

First one is for John on Metal Bellows. Can you just talk to us about how you guys go to market? Do you guys have a salesman for Bellows, who goes to a space customer or to [ aerospace] customer or to a civil aerospace customer? Or do you kind of go down verticals? Can you explain how you kind of sell to customers?

Well, I guess the first thing is when we go to market, we actually don't go to market to sell Bellows. As I described, the Bellows is in the heart of the applications, but we're really going to the customers to solve problems with our technology. So it is a little different, and it's what really has helped us. We do have some people in the field doing business development work. It's kind of broken up in different ways for big customers. We sometimes have an account manager assigned and a business development person assigned. But for some of the others, we have sales and business development kind of going across customers and industries as well. So I hope it came through the complexity of our business. The diversity of our business is a huge strength, but it makes our business very complex as well. So it's not a real clean concise answer, but it's because the way we're doing business is not clean and concise either.

And one follow-up, in terms of new projects that are coming up Middle East, Catofin project. Does it matter where these projects are geographically? So if there was a new Catofin project in Kazakhstan, could you win that? Or do you kind of typically win stuff that's kind of closer to home from a tax perspective? Are -- you're truly global? And how does your competition really kind of, I guess, attack you guys?

Sure. In terms of our overall sales, if you -- on the Catofin projects, if you are -- specifically, most of the ones that we've done has actually been overseas. We've done in China, we've done in the Middle East. There has been some in the U.S., there will be more in the U.S. In terms of the competition, there is competition. But Pathway has a reputation and also technology advantages over the others. So while there may be a price advantage at a competitor, really, we sell on the value and the expertise and the quality of what we do. And more often than not, -- and these are sold typically through EPCs. They want a product because they have to build the plant and hand it over, and they want a product that's going to work for their customer. And ultimately, we are -- we know that we are the best at what we do, but it doesn't mean that we don't have to compete from a price perspective. We don't necessarily have to be the lowest, but we do have the best technology in the marketplace.

And I'll just add, Carl and [ Dori ], who runs the business and Eric, who is the BD guy, they track every Catofin project, wherever it's going to happen. So we know there's a couple of potential in the States. Some places are harder to do business than others, of course, and we take that into account. And then maybe just the other thing as well, which Carl certainly mentioned during his presentation, once these are installed, there's a huge aftermarket. So one of the reasons why our sales in Pathway have maintained at a relatively stable level is because there's a huge amount of aftermarket there, spares, replacement, emergency call out. So we've got engineers, some of them are based in Texas, some are based in Tennessee, flying all around the world, India, the Middle East and so on to carry out those repairs, et cetera. So it is a valued service that Carl described earlier.

Do you get competition trying to repair your kit that you don't get access to, if you were to take aftermarket retention rate pretty high?

Yes, so -- yes, there are probably -- I know there were times when we are not able to get to a customer when they need, and they make -- they will have alternatives. But here's what generally happens because of the supply base or the installed base that we have. Your product is in the plant. It has a tag number. There are clear records as to who the supplier is, and you will get the first call. You just need to be in a position to respond. And normally, we already have. We have agents on the ground. You spoke to John about how they go to market. We go to market with agents in certain geography. So they don't necessarily have to -- there's a time zone difference. They don't have to wait for Pathway to be open for business on Tuesday. They can go to someone within the region and reach out to them immediately.

I've just got a couple of questions for John actually. The first one was, I mean you talked about custom engineered devices. Obviously, there's a lot of IP, and you mentioned that a couple of times in the presentation. And when I looked at your sales split by end market, about 1/3 of that's defense. I just wondered if you could talk about the arrangements for that IP. Do you own it? Is it shared with the customer? Because obviously, it's normally quite different for defense and aerospace. That's the first question.

In all our markets, we own all of our IP. And we ensure, as much as our customers try to, in the contracts, get some ownership where it's kind of a showstopper with us. And so we always make sure we own our own IP.

And then secondly, on your rate slide, cost of sales was in red box. And I just wondered if you could give us some color on that? Whether it's the result of maybe the inflationary environment we're in, some cost inputs increases? Or it's about yield and scrappage as you move to automation, just anything?

Well, mainly it's kind of a simple answer because it's measured against budget. And of course, our sales were green because they were higher. Well, when sales are higher, the cost of sales is a little higher too. So as you could see, as you went through the value tree, everything else was green because, obviously, it's all good.

[indiscernible] David?

Can I maybe ask a couple? Just to understand a little better, both for John and for Carl. Guys, for both your business, can you give us a sort of sense of how high your value add is? So what's your rough bill of materials as a percentage of your overall cost base? And sort of little bit of a sort of feeling of raw material exposure. And maybe just sort of the industrial environment broadly in the U.S., from my sort of very simple narrow perspective, seems to be fairly buoyant, fairly hot. How are you sort of seeing pricing environment at the moment in the U.S.? And then turn to the sort of cost side again. In terms of ease of hiring and pay rates, raw materials, supply shortages, can you give us some qualitative feel for how you're finding your supply chain at the moment?

So a couple of questions there, so let's start with the -- obviously, you've got a lot of added value in there. It's not just material, but maybe just a couple of words of explanation without going into too much detail.

I can say for our products, the cost of the raw materials isn't a huge factor for us. We have seen with different raw materials, especially the sheet metal we buy, that there are -- some prices are coming up. But again, it's not a huge factor for us in our type of products. However, with that said, we are actually passing those increases on to our customers anyway. So I feel like we're in a pretty good place.

And probably similar Pathway is going...

Yes. Pathway is in a similar position. Most of our contracts are spot contracts. And therefore when we quote them, we know -- we understand what the material environment is like from an inflationary perspective. And so we get a quote that is a spot quote. We put some protection factors on it within our quote. And as long as we are awarded an order and can go to market to secure the material relatively quickly, we are somewhat insulated from significant adverse impact of inflation.

And as a reminder, Harry, for the majority of our business, our aerospace business is straight pass-through to the customer. For [ Loni's] business here, the aluminum is a core raw material, but sometimes titanium. And those typically go up and down with the indices. So we're quite well protected there, not to say there aren't inflationary pressures around at the moment. Of course, there are. But as we mentioned at our trading update yesterday, you have to see our operating business has been doing a fantastic job in managing those very diligently. What about a word on maybe in Massachusetts and Texas on the war for talent and how we're coping with that? Maybe Carl, do you want to start with Texas?

Sure. In Texas, we -- based on the level of activity that we're seeing, we don't have a significant demand at the moment to ramp up our direct employees. Clearly, given the reduction in revenues over the last 2 years, we too have restructured the business. In terms of bringing talent back, it's going to be in support of sales. We don't believe that this will be gradual, in our opinion, in terms of the recovery of sales. And we don't -- we're not currently feeling like we are under much pressure from the standpoint of wages. We are seeing the most fluctuation, and what we have to manage very closely, is the inflation around material cost.

John?

So in the Massachusetts area, for the professional ranks, basically, mainly engineers, but also some salespeople, being close to Boston in a highly educated area of the United States, we don't have any trouble finding that kind of talent. As far as direct labor, there are some challenges. Turnover is up a little bit. And so we are working, as I said on the slide, that's a key part of our strategy is we're working on building a strong talent pipeline. We have programs with vocational schools that we're working with, and we've already hired people through those pipelines. We have recruiters we've teamed up with and a lot of really positive things going on. And I think I'm excited about how that's going to go, and we've already seen some positive results of incoming talent. The automation, like I said, is also key because that will allow us to grow and not have to hire as much direct labor talent. So I'm really feeling good about our plan.

If I may as well, one of the other things, I'm -- many of you may know or have read, Senior recently did an employee survey across all of its businesses. So one of the things that the businesses are now wrestling with is the feedback that it has gotten. So in terms of, will there be wage pressure? I certainly believe that as if demand rules back, there will be. But we also have to address within our business, how do we make the work environment a friendly a place. We -- at Pathway, we've got people with very long tenures. So the culture within the business is excellent. It's one of the reasons I've stayed with Senior for 20 years. And we have many others at very different stratas of the organization that -- we had a barbecue last week, in fact. And there are people there for 47 years, 40 years, 30 years, it's amazing. So kudos to the culture across the group. I think that...

By the way, if you have a barbecue in Texas, you don't kind of roll in the barbecue. You drive it in behind a truck, right? True story, I'll tell you that at the break. Okay. Any more questions? Yes.

Just to come, if I may. In terms of the revenue trajectory that you report, specifically Pathways, is there an implicit assumption there for what we all try to start? Does it assume that it stays at its current level or moves higher? Secondly, just related question. If that chart that showed margin for Pathway for 15 through to 2020 and then the budget going forward, would you assume that given the shift in the mix of business, that you'll be able to get back to the margins in 2015? And then finally, apologies if I missed it, but is there a revenue opportunity maybe you could give perhaps for some of these smaller modular reactors within the nuclear opportunity?

So some very specific questions there, Carl. I think, first and I'll do a bit of tick tack here, I think from our discussions previously, the oil price is important, but economic activity is probably more important. Is that right, Carl?

Yes. There's not a straightforward way to answer the margin question. And I would I'd say part of the challenge here is mix is important in our business in terms of where is the growth going to come from? However, to your other question, in terms of can we put a value on the small modular reactor? At the moment, we cannot. And the reason is, we're in the very -- in terms of the land base, we do have a small contract with one of the EPCs for some of the expansion joints. There are other elements of the piping system that has not come out as an inquiry yet. On the mobile platform, all of the OEMs in a build and demonstrate mode, and our participation at the moment with both OEMs is really an engineering support role. At the moment, what we're doing is, they've given us their piping design, and we are specifying what types of expansion joints we believe is best suited for certain points in the system. And one of the other things that we're also assisting them with, because it's a mobile application that needs to be transported to different places, weight is going to be critical. So it's not just what expansion joint fits its what's and what material, but is how do we minimize the weight of what we recommend to them.

So early days.

It's very early days.

For value some, but would [indiscernible]. And Carl's gonna add a little bit color on your question. You don't get to that level of return on your trading assets without healthy returns on sales. So rest assured, those continue very well, and the core reason for that is all the aftermarket business. Yes?

One for John, I think. So you mentioned the opportunity from more fuel efficiency or the requirement from your fuel efficiency, meaning hotter engine, more thermal management. Longer term when you talk about, let's say, vehicles move more to alternate fuels or electric vehicle, how does that look for the requirement for thermal management products?

We're going to get into that in a big way this afternoon. I mean that's what Ryan and Rob will talk about this afternoon. But from Metal Bellows products, still fantastic opportunities are there, John, right?

Yes I mean, like David said, there's a lot of detail on that, and -- but for our products, specifically the type of fuel, whether it's conventional sustainable aviation fuel, our products are going to work in those systems either way. And I made the statement on purpose about, we've shipped our first prototypes for electric aircraft already. Because I see opportunities for us in thermal management on those as well, and we're really excited about it.

But hold that thought for us this afternoon. We'll get into that in detail. Andy, another question?

Just got for John, on semiconductor, could -- you probably want an answer this in terms of massive detail. But in terms of the customers that you work for, are you kind of broadly agnostic as to who kind of wins in semicon? Or are you serving the entire market? Or are you specifically focusing on customers in certain parts of the world? Or can you just give us a feel for how you guys pitch to the semiconductor market?

In the semiconductor market, again, we're selling to the OEMs, who make the machines that go into the fabs to make the microchips. And there's a handful of major players. One of those customers for us is a big customer, and we're right now expanding into other customers in that area. So...

And we've shared before, if you look at our top customers' breakdown from our half year results, you'll see Lam Research on there as a big customer for John, but they're not the only one.

But there's no restriction as on who you can sell to?

There are no restrictions.

And we aim to service other customers. So we see a lot of opportunity there.

Okay. Any more questions before we break for lunch? Yes?

How much capital are you going to need, or how well invested are you to pursue those growth lines that both businesses have shown?

So [indiscernible] asking are you well -- do you need more investment, or how well invested are you to achieve the growth that we put in those trajectories.

Do you want me to start?

Yes.

So for Metal Bellows, we're in a good place, the year-on-year investments that Senior has made, and we have every expectation will continue into Metal Bellows are the type of investments that are going to achieve the growth that I projected.

For Pathway, we are very well capitalized at both facilities. When the growth comes back we have no restraints in terms of capital. It will simply be a matter of adding direct labor to achieve the output.

If I can add to John's point, I mean in his history slide, he showed about the recent expansion to take their footprint to 120,000 square foot. That investment was made a couple of years ago. So that already bakes into account achieving their strat plan with that facility expansion Senior made. And then when you look at the ROTA, the business is generating, that's off the back of that investment with further growth still to come from that investment.

Any last questions before lunch? There'll be plenty of chances to ask John, Carl some questions as in network. So the plan for the next bit outside, but now there should be some products there, some of which John and Carl were describing this morning. Well, not many of the Pathway ones, to be fair, won't fit in the building. But some of the smaller ones, and also some of the stuff that Ryan and Rob will be talking about this afternoon. So some -- I think we are really cool of our thermal management products for electrification. You'll see that out there as well. So take some time and ask the guys about it. And also the Senior team here will be mingling. Feel free to ask them any questions. I think it's like a sandwich lunch in a box. So were due to start again at 1 p.m. So if you can be back sharp at 1 p.m., that would be great. Thank you very much. [Break]

All right. Thanks so much, everybody, for coming back promptly. Hopefully, you've got a chance to talk to some of my colleagues about what's going on in the business and maybe even some of the products. And you might want to have a closer look at some of the products after the next section from Rob and Ryan. So we're moving on. So you've heard about some of the work that we do today and also some of the growth plans and some of the great product development that we've got underway in a couple of really good businesses. And as I said before, we could have heard a lot of other business up here giving similar presentations, about how we're very focused on generating value from our current product portfolio and how we extend that to deliver increased sales and returns. This afternoon, we're switching focus slightly, but it's a natural kind of progression. And we're really talking about technology development, and this is where we'll be explaining why our products are very relevant for the transition to a low-carbon economy, and our view on what that transition looks like and how we will respond to it. So to do that, I'm delighted to introduce Rob Van and Ryan Collins, Now Rob joined Senior in June 2015 as a Business Unit Director for our thermal management products, so very familiar with this subject area. And he is now the Managing Director at Senior Flexonics Crumlin. Crumlin is in South Wales, not far from Newport, I guess, Rob. And it's a real design center, product development center, R&D center. But also it's kind of the sales center, in particular, for many of our land vehicle customers. So Rob's team are designing and marketing products that are then built in our factories around the world, so including the Czech Republic, China. India and Capetown. And Ryan is based out of our Bartlett facility, which is near Chicago and Illinois as I mentioned. Joined Senior straight from university, I think, in 2004 as a university intern. And as you know, he made his way steadily through the -- or rapidly through the organization in a variety of some engineering management roles. And now Ryan is a Director of Engineering. It's kind of, to some extent, it's a mirror image of Crumlin because we do a lot of design and development, and the 2 of them work very closely together on that in Bartlett. But it's also a big manufacturing site, and it's also responsible for our manufacturing site in Saltillo in Mexico, where we build a lot of sort of land products. Now in addition to running engineering, Ryan also runs our special products business units. So he's actually running a business as well, and that's a business that's supplying into a range of attractive and diverse end markets. It's not dissimilar to some of John's, who got magical in there and various industrial applications. So he's a businessman as well as being really good engineer. So I'm going to hand over to Ryan and Rob, and they're going to do a bit of a double act here for the next hour.

Thank you, David. So as David mentioned, this afternoon, we're going to get a little bit deeper into the product strategy and some of the actual hardware that we're working on to support some of the changes in the market. So to start off, I really want to focus on the 3 key market segments for Senior, which are land vehicle, aerospace, power and energy. And what's happening at this moment is you have these 2 key technological trends of electrification and hydrogen power that are really simultaneously affecting all 3 of those markets. And it's that simultaneity that really is kind of unprecedented in terms of how all the markets are moving at once. So certainly, these markets have seen disruption before. They've seen evolution. They've seen change. But the fact that with the electrification and hydrogen power is really happening all 3 at once, really kind of defines our product strategy and how we're able to deploy those products. So from there, we have our 2 key product segments, thermal management and fluid conveyance, which you've heard of before. But it's kind of important to elaborate a little bit when you talk about those product segments and the trends that are happening. We're not kind of just hoping that we can slot in a component we've made for many, many years just in some sort of new trend that's happening in the industry. The products that we're working on and developing really define the overall value offering for our customers. So when you talk about electrification and hydrogen power, these are primarily energy conversion and energy storage technologies. And the metric for their success, for their place in the market is efficiency, really specifically thermal efficiency, how well they can convert these energies. And then the thermal management and the fluid conveyance products that they integrate into those systems end up defining their efficiency and their value overall. So what we're working on directly feeds into our customers' success. From there, what we're obviously concerned with is the opportunities, capitalizing those and getting our products into the market. And what you kind of quickly see here is a multiplicity effect all of these different opportunities with all of these different markets. So we have, again, land vehicle, aerospace, power and energy. But within each of those, you've got your electrification, your hydrogen power, I kind of repeat it over. But then within each of those technology trends, the key enabling technologies are the thermal management and the fluid conveyance. So you've got this branching effect. You've got all these opportunities coming out of these areas. But then when you get down to the product side, you've actually got repetition of the same products, the same types of components being needed in each of the ideal places. So really from there, you can take some common IP, some common knowledge of product and then just start applying this to the different industries for their unique and specific needs. So this kind of branching and this relationship here is going to kind of define Rob and I's presentation. So what we'll do is first, Rob is going to talk through how our markets are impacted. So kind of looking right through the center, this electrification, this hydrogen power, what is that doing to our markets, what is the timing, all of those different details. Because certainly, those interactions are what's going to define our product strategy. And then from there, I'll step back up, and we'll talk about specific product strategy. I'll get into some actual metals, some actual hardware, some nice details, but again, looking at how once we understand the impact, how these technological trends translate in the actual hardware you saw it in the lobby and how we can move forward from there. So with that, I'll hand it off to Rob.

Thanks, Ryan. Good afternoon, everybody. So as you'll all be aware, many of the changes we see across our core markets today are driven by legislation, which aims to curb the causes of global climate change and global warming. Next month in Glasgow, the U.K. will be hosting COP26, which is the 2021 United Nations Climate Change Conference. And the primary aim of this meeting is to secure global net zero by 2050 and keep the 1.5 degree Paris Agreement within reach. To achieve this, countries are expected to accelerate the phaseout of coal, total deforestation, speed up the switch to electric vehicles and encourage investment in renewables. On the left of this chart, you'll see 6 megatrends identified by the UN for the next 10 years, and each of them in some way will impact our markets. We've taken these 6 megatrends and we've identified the resulting technological implications for us. These are electrification, which includes hydrogen fuel cell and battery electric; hydrogen combustion, which is already under development in both aerospace and land vehicle applications; sustainable fuels, specifically sustainable aviation fuel and biofuels; carbon capture in support of low carbon hydrogen production; fuel cells for stationary power generation applications and increase in the renewable energy sources and their contribution to the generation of green hydrogen; the installation of an energy storage network to buffer and balance energy from renewable sources; and an ever growing semiconductor demand and spend on medical technologies. Each of these technological trends has a direct impact on our end markets, these being aerospace and defense, land vehicle, power and energy, semiconductors and medical devices, and specifically, all of these integrated into our IP-rich portfolio of fluid conveyance and filler management products. So delving a little deeper into the regulatory deadlines and government commitments, we can see that the global administrations have set some challenging targets. In aerospace, the European Commission has adopted a sweeping set of climate proposals aimed at reducing net greenhouse gas emissions by at least 55% by 2030. This will significantly impact the aviation industry. The Hydrogen-Powered Aviation report, which is compiled by McKinsey & Co, suggests that aircraft up to medium range will start to be replaced with hydrogen aircraft by 2030 to 2040. They also suggest that after a ramp-up of manufacturing capacity over 3 or 4 years, all new aircraft in commuter and short range and 50% of medium range aircraft would be powered by hydrogen. In this scenario, 40% of all aircraft are switched to liquid hydrogen by 2050. By 2050, there's also an ambition to transition to the use of sustainable aviation fuel. The EU has set a target of 63% usage, the U.K. is targeting 75% usage, and the U.S. aims to have capacity to meet 100% of demand by 2050. At the same time, Norway has set some aggressive targets. By 2030, they plan to introduce their first fully electric aircraft on domestic routes. And by 2040, they intend for all domestic flights to be electric. In land vehicle markets, the regulatory requirements are implemented even sooner. The California Air Resources Board has mandated that NOx emissions from heavy-duty trucks should be reduced by 75% from 2024. This rises to 90% in 2027. And by 2025, the EU is also stipulating that CO2 emissions from heavy-duty applications should be reduced by 15%, rising to 30% by 2030. Legislation of passenger cars is on an even steeper trajectory. By 2030, the U.K. government has announced a complete ban of the sale of traditional petrol and diesel cars. And in 2035, hybrid vehicles will be outlawed, meaning only battery electric and hydrogen-powered models will be for sale. In the U.S., half of all car sales will be zero emission by 2030. States such as California and New York, for example, will ban the sale of petrol vehicles in 2035. And in China and the EU, all cars must be zero emission by 2035. Looking then at the power and energy sector, they are equally ambitious targets. The EU is aiming for 40% of all energy generation to come from renewable sources by 2030. And the U.S. and Great Britain are targeting a carbon-free electricity model by 2035. All of these measures are designed to contribute to the net zero 2050 target. So digging a little deeper into the aerospace net zero target. The challenge here is to reduce emissions by 50% while managing a twofold increase in air traffic. The chart that you can see on the left shows how this might be achieved. The solution comes from a blended approach using multiple technologies to match the application. The largest contributor to the solution will be the adoption of sustainable aviation fuel, which is made from sustainable feedstocks, such as cooking oil, plant or animal waste oil, food scraps or wastepaper and textiles, which otherwise would have been sent to landfill or have been incinerated. Sustainable aviation fuel gives a reduction of up to 80% in carbon emissions over the life cycle of the fuel compared to traditional jet fuel it replaces. Most crucially, it can be used in any aircraft that is approved to use traditional jet fuel today. So this means the biggest -- single biggest contributor to reducing air transport CO2 emissions is fully compatible with Senior's existing range of fluid conveyance and thermal management technologies. The second largest contributor to the reduction of air transport CO2 is the adoption of new powertrain technologies. All major OEMs have already started development work on hybrid electric, battery electric, hydrogen fuel cell and hydrogen combustion technologies, and each of these solutions requires a complex arrangement of fluid conveyance and thermal management products, which is highly complementary to our portfolio and expertise. So we're engaged with our customer base on a number of projects relating to these new technologies to ensure we are well positioned for the future. What this means for Senior is continued growth through our existing core business, complemented by the adoption of new technologies to satisfy changing market demands. So to give some context regarding the chart you can see on the right, this isn't intended to be a sales plan out to 2050 because I know we've not yet given guidance for 2022. This chart assumes our content on platforms remains constant and extrapolates the sales out to 2050 based on future trends. You'll see that we don't expect to see meaningful sales of new technologies in aerospace until the 2030s, which highlights the importance of sustainable aviation fuels in reducing carbon emissions. However, if the penetration of hydrogen EV or EV technologies start sooner, we'll be ready to meet market expectations as we're already involved in the development of these products today. In land vehicle markets, legislation is driving change even sooner. Today, 15 countries and 31 cities have announced plans to phase out the sale of combustion vehicles over the next 10 to 20 years. The adoption of electric vehicles vary significantly depending on both application and geography. EV adoption is generally driven by cities as urbanization and e-commerce are leading to new efforts to reduce local pollution and improve the quality of living. Today, e-buses already account for about 40% of global sales, and they'll reach about 80% by 2040. The adoption of electric light commercial vehicles is also picking up pace, reaching 30% share in 2030 and up to 60% in 2040. And in the passenger car market, Europe and China are leading the switch to electric powertrains due to government legislation and the financial incentive schemes they have in place. So as an example, between April and June this year, 1 in 12 cars sold in Europe run on batteries alone. If we take into account hybrids as well, the number jumps to 1 in 3. Within 4 years, 1/4 of new cars bought in China and nearly 40% of those purchased in Germany are expected to be electric. Looking globally, 1/3 of passenger cars are expected to be electric by 2030. This rises to 2/3 in 2040. But there's still a place for the traditional combustion engine products. If half of all cars sold globally in 2035 are electric, the other half will be using an internal combustion engine. Likewise, the shift away from combustion in medium- and heavy-duty trucks is much slower. Due to the heavy loads and long distances traveled, it's expected that ICE powertrains, which includes diesel, petrol, natural gas and hydrogen combustion, will make up around 90% of sales in 2030 and will still account for over 70% in 2040. The balance of sales will then come from battery electric and hydrogen fuel cell vehicles, where the technology best suits the application. This is great news for Senior. We have a long established range of products, which will continue to be in demand for years to come. At the same time, we're using our knowledge and expertise to develop new fluid conveyance and thermal management products to meet the requirements of new land vehicle technologies today. Again, the chart on the right shows an assumption of steady content extrapolated to show future trends. To give some context to this, in half 1 this year, land vehicle sales made up 18% of group revenue. And of this 18%, 14% was truck and off-highway, with the remaining 4% being passenger car. So you can see the biggest impact to Senior is therefore the truck portion of this chart where cleaner combustion engine vehicles will remain the dominant powertrain. However, we're already active in development to support the electrification of both truck and passenger car, and we are ready to grow in line with market demands. So last week, as you may have heard, the U.K. government announced plans to ensure 100% of Great Britain's electricity supply came from renewable sources by 2035. So this will need to be delivered by a huge investment in renewable and nuclear energy sources. This statement is no doubt a result of the recent surge in the cost of natural gas and the upcoming COP26 conference in Glasgow. But this sentiment is also echoed across many other nations. The U.S. has set a similar target of carbon-free electricity generation by 2035, and the EU is aiming for 40% of all energy generation to come from renewable sources by 2030. The chart that you can see on the left shows the scale of the challenge required to hit the Paris Agreement, to achieve net zero emissions by 2050. To hit this target, global energy-related emissions need to drop 30% below 2019 levels by 2030 and 75% below 2019 levels by 2040. The chart in the center of this slide shows how this might be achieved. So analysts have proposed a number of scenarios, but all are going to require significant growth in solar, wind and nuclear energy sources to offset the use of fossil fuels post 2030. To support these green but unpredictable energy sources from wind and solar, a network of storage buffers will be required. These buffers are likely to be in the form of hydrogen electrolyzers, which will convert renewable electricity into hydrogen and then back into electricity when required later on. Another likely storage solution is the use of lithium-ion batteries as stationary energy storage modules. So the chart on the right is extrapolated in line with the market forecast shown in the center of this slide. It's very possible that wind and solar energy sources will offset some of the assumed nuclear growth. But either way, our range of fluid conveyance and thermal management products will come into play. From nuclear, as discussed earlier by Carl, to solar and wind using our hydrogen technologies to store energy from renewable sources, we are well positioned to follow this growing market. In summary, the routes to net zero will require a combination of new and existing technologies. So to summarize, in aerospace, small electric vehicle -- sorry, small electric aircraft will become viable this decade, with hydrogen technologies, including fuel cell and hydrogen combustion, becoming established on regional routes by 2035. The most widely adopted solution will be sustainable aviation fuel, which is fully compatible with all existing aircraft models today. In land vehicle markets, the shift towards electrification of passenger cars is accelerating at a rapid pace. Medium and heavy-duty trucks will still largely rely on ICE, internal combustion engines, which will include the use of biofuels and hydrogen combustion to reduce carbon emissions. Battery or fuel cell technologies will be the preference for urban applications. And in power and energy markets, oil and gas use will likely peak in the next decade as governments strive to achieve the net zero target of the Paris Agreement. Offsetting the use of fossil fuels is going to require an increase in nuclear and a targeted switch to solar and wind and energy generation, supported by hydrogen and battery infrastructure to balance peak demands. Overall though, our IP-rich portfolio and technical expertise will enable us to grow with these evolving markets to ensure we deliver significant shareholder value over the coming years. I'll now hand back over to Ryan, who will dive a little deeper into our technologies and customer development.

Thank you, Rob. So now that we've heard a little bit about how our markets are being impacted by all these changes, I am going to pull us back to the products themselves and the actual technology we're developing. But as I kind of start off into that, I do want to bring us back to the point that we are having shifts in our markets. There is change happening in our products, and everything have to react to that. So it's worth kind of taking a look at how Senior's reacted to these changes in the past because I mentioned this is nothing new for our markets in Senior. So if we take a little bit of a trip back look at our main operating businesses, originally, we were primarily supplying industrial products, kind of brochure catalogs, types of parts in the various industrial applications. From there, the space industry actually had a big impact in a lot of Senior's industries. And really, what that brought to us was both a scale from a funding standpoint as well as a technical sophistication of our products and our processes that we hadn't had in the past. We're able to take that scale, that technical sophistication and bring that to new areas. So on the aerospace side, the vast expanse of consumer aerospace allowed us to start integrating our products in the bleed air systems and other advanced components. And then on the automotive side, the adoption of emission systems also found a home for some of our products, but then brought us scale and volume that we had not been used to in the past and allowed us to really scale up a lot of our operations. Change then continued on the aerospace side. What began as kind of single components located in certain parts, grew into entire subsystems. And then the temperature started to escalate the drive towards efficiency, brought a lot more additional complexity to our products, our modeling capabilities, simulations, et cetera. And then on the land vehicle side, what again were smaller scale, simpler components for passenger car grew significantly in content and value and physical size as emissions regulations started really hitting hard on the commercial vehicle and large diesel engine side of things. And I would also note, this is where a lot of heat exchanger capabilities started to come online and reshape our products. So moving from there, we're going to talk about applications, hydrogen trucks, electrolyzers, blended wing, hydrogen aircraft, so all sorts of exciting new stuff coming. But what I really want to emphasize is, when we look 10 to 15 years in the future, this is going to be nothing more than just some extra arrows, some extra picture examples. That's going to be that steady progression of Senior's technologies and products, because what we specialize in isn't necessarily a specific component. So if you go look at the product samples over in the lobby, you'll see all sorts of different shapes and sizes. And certainly, those are the ones we could fit on the table, different materials, different function. So what we've needed to survive, what's been integral in our success isn't the need for just a specific component. It's that, that technological change exists. So as long as the markets are being shaped as long as we're being pushed on the technology side, we feel confident that we're going to keep being successful with our products and processes. But I do want to move into the product segments, talk about a little hardware. So you've kind of heard us talk about thermal management and fluid conveyance. So the question is what does that actually mean in terms of the products? So starting with thermal management. We've kind of got 2 main types of products, and you would have seen some examples outside there. And really what these are doing, as I mentioned before, is these are enabling the performance of the systems of our customers. So with Chill Plates, you can kind of picture here typically kind of wide, long, thin primarily metal components. And what they're doing is they're coming into direct contact with something and primarily pulling the heat out of that component, allowing it to operate efficiently. So this is kind of easy to picture with battery Chill Plates, where the batteries are discharging heat, they're trying to operate efficiently, and they're trying to flow a significant amount of power and the efficiency and effectiveness of the components we're designing kind of allow that. Another easy way to think about that is some of the really high-performance electric vehicles out there with astonishing speeds and everything, what you're actually paying for with those real top-notch electric vehicles isn't necessarily a bigger motor or a bigger battery pack. It's better Chill Plates, better connections, the things that allow the power to flow through because oftentimes, heat discharge is a limiting factor in the performance of these vehicles. So the better the component design, the higher content there, the more power that can be driven through as well as the same thing with fast -- 0 to 60x in terms of power delivery, comes on the inverse side for fast charging times, which is obviously a very big topic in the industry. So the more efficient, the better these components are designed, the higher the charging rates, the more quickly we can move to adoption of these overall technologies. Heat Exchangers are similar, except now we have 2 fluids coming into contact with each other, and you can imagine what these parts are doing is essentially moving heat around a system. So I mentioned that the overall efficiency of the system is kind of a thermal efficiency, how much of that heat can be turned into usable work. Well, oftentimes, you need to move that heat around to find a different place for it to be harvested, a different use for the heat. So these heat exchangers are typically deployed in many parts across the system, again to take advantage of the overall energy we're trying to retain in the power process. Now fluid conveyance, that's a bit of a mouthful term, but it breaks down quite simply in the sense that we're just talking about tubing, expansion joints. You can think about this as the components that are necessary for these thermal management systems to operate. And you can also kind of realize that as these systems grow more complex, there's more and more need for additional fluid conveyance. The example I would give there is if you kind of imagine opening the hood to a 1960s automobile, you'd open it up, you look in and you'd see a power device, in this case, an internal combustion engine. But you see a lot of simplicity and not a lot of complexity. You kind of see they are going in the top. Exhaust coming out the back, lots of open space, not a lot of additional componentry. Now if you open that same hood on a modern internal combustion engine, same basic power device, but you'd see tubing everywhere. And you have a heck of a time figuring out where it all goes, you'd see piping going to the turbocharger, all sorts of different components. And really, you'd also see heat exchangers just did it all across that engine. You've got charge air coolers, you've got oil coolers. You've got all these heat exchangers, all this fluid conveyance. Same basic power process, but the efficiency has grown significantly. And you can kind of really see how our products play into the growth and efficiency of any sort of power system. And I would note, this really carries over that example just the same to a jet engine. So not quite as easy to do at home, but pop the hood on the jet engine, look at all the different tubing, the heat exchangers, everything else, the same thing is happening. And even an electric vehicle, different power unit, which you've got the same subsystems, you've got a battery subsystem, you've got a power inverter subsystem, motor units, you've got different heat exchangers, you've got fluids going all over the place. So really, there's a consistency kind of regardless of the power unit that's being used in terms of driving for efficiency, utilizing thermal management fluid conveyance to get there. So from there, the way I'll kind of tackle all these different markets is we'll talk a little bit about the products for all 3, and then we'll go from there to kind of talk about a specific case study that lets them get into a little bit more detail of an example. So starting with land vehicles, these are kind of the easiest to picture. And certainly, electric vehicles and hydrogen vehicles get a lot of news press, so there's stuff we're familiar with. But again, on the thermal management side, we're talking battery cooling, electronics cooling, again, devices that allow both the efficiency and allow the technologies just plan to be deployed in the first place because I mentioned something like charging rates essentially defines the viability of the technology in the first place, not just some incremental difference between competitor A and competitor B. And then fluid conveyance, all sorts of different tubing, the expansion joints, you can picture these expansion joints really necessary because we have all these different subsystems. They have to move relative to each other, they have to talk to each other. So expansion joints and tubing kind of allow that to happen. But also all of these products are taking steps forward. So they need to continue to be upgraded over time. The processes need to move along. We need to adopt different materials than we've used in the past. You can imagine the tubing side, the temperatures are different, are lower in the case of electric vehicles. So there's increasing use of composites over steels. So there's a lot of evolution of the products but the function is actually pretty consistent. It's just a question of having the correct IP, the correct advancement of those products to keep them at kind of the cutting edge of the industry. And then a case study I want to give here. So this is on electric vehicle inverter heat sinks. So there's a couple of those sitting on the table out there. What these are, are small heat sinks used for the power inverter, so they're kind of in direct contact with chips, and they're keeping them cool, allowing the energy to flow through at a significant rate. And they're quite small. So it's about the size of a Cadbury bar. So the application here is for a Tier 1 power inverter, passenger car market. And we had a kind of a sales lead through traditional channels. And what was happening is this particular gentleman was trying to find a competitive supply base to supply this product. So they're struggling with the current supply base that existed, making small heat sinks, primarily folks with backgrounds in heat sinks for like computing and electronics and that type. So they came to us just due to some previous experience, asked us to take a look at it. So we did. And what we quickly had to do is figure out how to make a component that look nothing like what we've made in the past. And to do that, we kind of had to go find the various expertise needed to kind of quickly put a sample in a performing product in this customer's hands. So as I mentioned, copper was not a standard material for us to use in our heat exchangers. So we actually had to go find copper expertise, which we actually found in some of the instrumentation bellows, we've been making for quite a few years. We then needed the heat transfer expertise, which we found mostly with our EGR cooler product lines. So that's both the kind of design knowledge, the simulation, but also the array of testing systems and everything else to kind of design and deploy heat exchanger. And then we actually defined some manufacturing expertise as well. So all this isn't just on the design side. We were able to utilize and leverage some really advanced techniques for forming the bellows that, of course, has been a big historical product line for us to figure out some really novel ways to shape the internal geometry here to maximize the heat transfer. Because as I mentioned, this is kind of tied to that piece about the better this product performs, the more current can flow for the power inverter, the faster you can charge the vehicle. So these things are directly related in terms of our customers' goals and what they needed out of a component supplier. So we were able to stitch those pieces together. We were able to put a sample in the customers' hands quite quickly. We actually had a design that was patented, which we call the Omega Fin. And without getting into kind of a lot of technical detail, you can kind of see a little exert from the patent down there. What we did is there's an internal fin of that part that can't be seen from the outside. And that's really the difference between competitor A, B and C here in this discussion. We found a real novel way to shape those fins, utilize some of the same manufacturing techniques we use for bellows and actually pull heat significantly faster out while maintaining the spacing and everything needed to have the coolant flow smoothly through. And actually, the feedback we got from the customer was obviously very positive. But the way they explained it was quite simple and quite novel in the sense that we're actually supplying components in both copper and aluminum, copper being kind of the higher-performing piece. So they tested both. They looked at our aluminum product and compare it against the competitor's copper product and said that our aluminum product actually had the same performance as our competitor's copper one. And if you're familiar with materials and kind of thermal connectivity at all, copper is the absolute gold standard when it comes to heat transfer. Nothing beats copper. So aluminum, if it can match copper's performance, it's really just kind of an intuitive demonstration of how neat we're able to get with the geometry and the IP in order to bridge that. And then one can go from there and only imagine the performance we got out of our copper heat sink, which is what really started to enable these charging rates for the customer. So kind of a good example of quickly being able to deploy new technology, finding the capabilities within a strong, wide organization and deploying that to take advantage of a very specific opportunity, but then this is now an entire product lineup for us. And that's kind of a repeating example as well as, hey, we've got an opportunity, we need to pull these things together, push ourselves a little bit, put something out there, take advantage of that. But now we have that, and now we can find all sorts of extra places to deploy that same technology. And then the last piece I wanted to mention there is, so we had this novel product. But of course, all that ultimately matters is manufacturing and selling it to the end users. And what we quickly found is while we were developing this product in the Chicago land area, what was actually happening is that it was being launched in Europe and China markets first, just as the way the overall platforms are rolling out. So from there, we again kind of leaned on this overall senior network, and we're actually able to launch and develop launching for the products in Eastern Europe and China as well from senior -- existing senior facilities and kind of stage our product launch right alongside of our customers. The plants are within a couple of hundred miles. And then those same products will eventually migrate over to the U.S. as the overall kind of product rollout happens for the customer base. So you kind of got that neat piece of the designs combining, deploying, manufacturing technologies, and then ultimately the factories that have to make this are also lined up as well. So from there, moving to aerospace. One of the first things that might jump on in aerospace is you've got the exact same pictures for the battery cooling and electronic cooling. And in addition to a little bit of lazy PowerPoint construction, the other goal here is just to kind of really emphasize that the products themselves are the same. We've got all sorts of differences in the aerospace market, certainly recognize that quality certifications, processes and everything else. But lithium-ion battery pack is the same whether you put it in automobile or an aircraft, power inverter. So the base technology, the base components, things like the Omega Fin, what sets it apart apply equally across these areas. So what really helps us with that is that we're able to take this IP, take this product knowledge and deploy it into these other markets such as aerospace very quickly. And on the fluid conveyance side, you've got that same example of lifting up the hood of a jet engine, and you've just got all sorts of plumbing. The complexity of these systems as temperatures rise, is growing dramatically. The need for efficiency, the need to use that bleed air in every way you can, take advantage of that heat. So that just keeps stepping forward with our customers, which keeps utilizing more fluid conveyance. And then our fluid conveyance products need to keep advancing as well. So there's kind of product design pieces that are moving along, different materials, better installation, these types but also processes. So for example, additive manufacturing, 3D printing. So this is something we've invested in quite heavily. And we're now in a position where our customers in the aerospace side were actually specifying our exact process, the types of machines that we utilize, which then kind of gives us the ability as we have our components and subsystems coming together to have unique capabilities that just can't be matched by the competitors. They have no ability to bid on that same job that we're bidding on. So really, these elements help set us apart and helps set us up for success as these systems are changing, and as they're evolving more quickly too, I would know. So on the aerospace side, which hasn't necessarily been defined by quick product cycles historically, but those product cycles are increasing as they need more and more efficiency. They're happening more quickly. And when you have the cutting-edge products and processes that Senior has, this gives you more and more opportunities to add content to the overall ship sets and the overall systems. And then the case study on the aerospace side. So this is a really exciting one. What you have here is a major aerospace OEM who's dedicated some significant funding and resources to a flight demonstrator unit by 2025 for full hydrogen powertrain. Now when you say the hydrogen powertrain, it's actually a pretty complex set of systems. So you've got a hydrogen fuel cell and the componentry associated with that. You've also got an entire electric powertrain. This is actually kind of a consistent story when you talk about hydrogen powertrains even for vehicles. You've kind of got the hydrogen fuel cell tank storage piece, but you still need an electric drivetrain to actually move any of those vehicles forward. So you've got motors, battery systems, power inverters, all those types. And in this particular case, they also chose to run the whole thing at cryogenic temperatures just to get the last bit of efficiency out of the system. So you've got a hydrogen system, you got an electric vehicle system and you've got a cryogenic system all working together to kind of enable this demonstrator unit. So customer needs these technologies, reaches out to the supply base. And first and foremost, they're certainly looking for somebody with the right technologies. But then from there, they need somebody who's got the aerospace experience, quality systems, all those types because it's important for them to not just find somebody who can help supply some cones to get them through this immediate target. They need to develop suppliers and work with suppliers who are going to be long-term partners who can help them as they scale these products up into an actual production environment. So they are specifically looking for those as well. So in this case, obviously, Senior Aerospace has these relationships, has these quality systems, has everything that's needed to be a strong aerospace supplier, of course. But then they will define over in Senior Flexonics, the Senior -- the fuel cell, battery technologies, those types for that hydrogen and electric vehicle subsystem. But then we also define this cryogenic piece. Now I've got this whole other part that's typically, certainly in the land vehicle side, not part of those systems. And if you kind of remember when Rob was walking through some of the various markets, the medical piece at the bottom, we're actually able to find that cryogenic experience over in medical and bring that to the overall discussion. So we have actually been supplying components, bellows and fluid conveyance subsystems for MRI machines for quite some time. And if you're familiar with MRI machine at all, you've got basically a huge electromagnet that's cooled by a liquid helium system to allow it to run efficiently. So there again, kind of a neat example of go find over here the expertise in cryogenic systems, which are materials, thermal shrinkage, all these different details that go out running at something at that low of a temperature and add those to the fuel cell and battery technologies over to the aerospace folks for the relationship and quality systems, really bring all that together, develop a proposal, move forward with the funding and kind of bring the project to fruition. And then in addition, now we know how all those subsystems move together. So again, it's that piece of bringing it all together, taking advantage of an opportunity in front of us, but now having that opportunity and that expertise available for the next version. Then the last sector, power and energy. Again, you'll start to see these themes are repeating themselves in terms of chill plates and heat exchangers. One thing that is very different about the power and energy side is the history and implementation of hydrogen power, which is quite a bit different than the land vehicle and aerospace market. So it's actually -- when I talk about these different case studies, what would have made a fantastic case study roughly a decade ago with Senior's partnership with some of the fuel -- hydrogen fuel cell OEMs in particular that we're deploying into power generation markets. So this is something that Senior has been doing for quite some time. There's components out on the table for hydrogen fuel cell systems. They have been in production for many, many years and high volume production, I would note. So some of those components out there are being produced by the thousands on a weekly basis. So there's a scale and a history with hydrogen fuel cell that Senior's really participate in quite well for some time. what's happening in the market right now is just a vast expansion of the hydrogen focus. So it's even probably the specific biggest difference from the last Capital Markets Day a little over 2 years ago, it's just the industry's conversions on hydrogen to the point where it's essentially the technology of choice now for energy storage, and we're seeing investments across our customer base, across the market, the Press Media, everything else. So there's a huge amount of focus on hydrogen, which really works well with just the focus we've had from a product and even production system standpoint for quite some time. So we've got some really exciting hydrogen products that are evolving as well. So certainly, temperatures are different with different particular solutions, volumes and everything else. So these products are continuing to advance. And then we do have the electrification side as well. So Rob had kind of mentioned this briefly, energy storage, battery pack storage, all these different types are coming to this area. And these products just carry over pretty much directly, and then it's at adaptation and that continual advancement of those products that's necessary to kind of stay at that cutting edge. Now my last case study, again, as I mentioned, hydrogen would have been a great one about a decade ago for Senior. So I decided to go something a little bit more new for us. And this is industrial battery packs. So again, battery packs are mostly talked about these days in the space of electric vehicles, but there's kind of a whole other industry and a whole other movements to also kind of eliminate the ICE and replace those with battery packs because the internal combustion engine is used for all sorts of power generating areas, again, outside of vehicles. And the easiest way to kind of picture this is lawn and garden equipment, which, of course, for many decades, has primarily relied on internal combustion engine where performance and power was a factor, but that's changing quite quickly. So in this case, we had an industrial battery pack manufacturer that was growing at a very significant rate. So a healthy step above a startup, growing at 30% a year. And this is what they specialize. And they find areas where now lithium-ion battery packs are needed. They create that product, they launch it in the market, and they've been growing quite nicely. So as they look at the different places that they can put these battery packs into the market, they start to realize that they need to get them to larger format battery packs as they kind of keep attacking new places in the market. So they need larger format battery pack, all the battery technology and everything else, very much in their wheelhouse. But then they quickly realized that it needs thermal management. And that's the big difference. As you start to get larger with the battery packs, you start to scale up, the heat -- rejection of the batteries just scales directly with the number of battery cells, and you get to a certain size and you need this active liquid-cooled thermal management. Of course, these smaller-scale stuff, picture of cordless drill that you might have at home, that's actually got the exact same in some cases, lithium-ion cells inside there but there's only 2 or 3 and that heat can just be dissipated right through the plastic case, no active management needed. Now active management is needed, and this customer doesn't have that background or experience in order to provide that themselves. And this is kind of in sharp contrast with the vehicle side of the world where picture a Daimler or Cummins, they've been designing cooling systems for over 100 years. They got software suites, they got teams. They're ready to go in terms of designing this overall system. And speaking of that system a little bit, you can kind of see a little diagram of those different pieces, but there's a ton of these different components that I'll have to interact with each other to make the system work it's kind of a balancing that's important as well. So you can kind of imagine you've got to make this decision of how much coolant do I need to flow through that chill plate to keep those batteries cool. And as I kind of push more liquid through there, I'll be able to carry the heat out faster, keep the batteries cooler. But to push that liquid, I need a pump. So I need some sort of coolant pump. Well, to spin that pump, I need an electric motor. Well, to power that electric motor, I need electricity, that I'm stealing from that exact same battery pack. So do I go, how big do I want that pump to be in order to perfectly balance the need for cooling with the fact that the more pump I have, the more electricity I'm taking. So it's that kind of interaction. Now picture you've got radiators, you've got different valves, you've got all these different pieces that need to work together. So they were struggling with this. They came to Senior, and we actually worked with them to put together a proposal where we would take over the system design piece as well as design a very bespoke chill plate to go inside the battery pack. And what we're able to do is take advantage of that. We also had a lot of experience with these systems, just having designed different chill plates over time, working with vehicle manufacturers. We are also aware that there is software available in the industry that handles this type of simulation. So we kind of knew the right place to go to get the software we needed to do this optimization. And we're able to use that to kind of help design the system and, of course, lock in a proprietary Senior design from a chill plate standpoint. So you've got the kind of detailed component technology. And then you've got us pushing forward a little bit -- pushing ourselves a little bit, bringing industry expertise as well as various expertise from within the company to put together this proposal to do the system design and to move forward with the opportunity overall. And again, we kind of come back to that theme of now we know how to do that. Now we have the software. The software is certainly not dedicated to this project. So we've got the ability to start doing these types of designs in other places, new and clever ways to lock in our technologies from a component standpoint and just really bring a new offering to a market where there's certainly a need much different than the vehicle side of the industry. So in summary, what I kind of hope you've heard consistent trend is we've got these key markets. We're seeing these big technical changes. We've got all these different opportunities that are branching out of that, that we've got synergy in the product itself. So the product strategy, the IP, there's a lot of commonality there and there's the ability to focus on those products to expand those products capabilities, to really have the best technology out there and then look at this wide array of markets and opportunities within Senior and exploit those and turn those into real opportunities and business. And again, this is a neat kind of story. We think it's a good recipe for success but it's also kind of a standard recipe for success from Senior's pass. So this is what we've done continuously. The products keep changing, the exact function, the exact shape. What we've consistently shown is that it's not the products, it's the change that we've been successful at capitalizing on. And we intended to do that well into the future. Thank you. And with that, I'll hand it over to David.

Okay. Thank you very much, Ryan and Rob. So hopefully, you're starting to get a sense of why I'm quite excited about this whole area of fluid conveyance and thermal management. It's directly relevant for much of what we do today and it's increasingly relevant for where markets are taking. We spend a lot of time research and market trends. Tony is here, our market research analyst, he does a fantastic job in making sure right at the front end of what trends are taking place. And then we're very closely connected to our technology council, which David Beavan, who's our outgoing Business Development Strategic Director runs and which Martin will take over once David retires. So we have this collaboration across the whole company. We typically have 60 engineers on these calls now, working together, understanding what the market trends are, and then forming smaller teams are looking how we collaborate together to come up with some novel solutions for the opportunities that we're seeing. You have some time to ask Rob and Ryan some questions later on. But firstly, I'm going to hand over to Bindi, who is going to try and put some financial context about what we've been talking about today.

Thank you, David, and thank you, Ryan, and Rob. Good afternoon, everyone. I'm going to describe the key elements supporting our confidence in delivering minimum 13.5% return on capital employed over the medium term. We have a clear strategy to maximize shareholder value by focusing on the supply of our IP-rich fluid conveyance and thermal management technology and products into diverse and attractive end markets. Markets that are showing clear signs of recovery and share compelling structural growth characteristics. We're confident that by doing so, we will deliver a minimum 13.5% ROCE in the medium term. The key building blocks are in place to drive this improvement. The ongoing end market recovery, coupled with the benefits from our restructuring program will deliver strong profitable growth. Senior's end markets are showing clear signs of recovery. In the chart on the top left, you can see in civil aerospace, air traffic recovery is evidently underway as travel restrictions continue to ease globally and the COVID-19 vaccine rollout gather pace. For example, in the U.S., domestic flights are currently only 9% below pre-COVID levels, while international departures from the U.S. have recovered from nadir of 80% below pre-COVID levels to only being currently 23% lower. IATA forecast that world passenger flows will return to 2019 levels by the end of 2022 and will reach 105% of 2019 levels by 2023. So as air passenger demand recovers, production volumes of new aircraft supported by the replacement of older less efficient aircraft. Government interventions on climate can only help further. Beyond this, the driver supporting air traffic growth over the long term of around 4% per annum remain in place. With our diversified product portfolio and especially the attractive positions we hold across the newest generation of single-aisle aircraft platforms, we are well positioned to benefit from this recovery. In defense markets, they have remained stable. Our focus for defense is primarily on the U.S. market, where defense spending is almost as high as the next 12 countries combined. And series production volumes reached meaningful levels for sustained periods, which in due course, will also generate good aftermarket sales for our fluid conveyance products. As you can see from the chart in the top middle column, a strong recovery is already underway in land vehicles, which covers truck, off-highway and passenger vehicles. ACT Research is forecasting North American heavy truck production to increase by 24% this year and a further 26% next year. We sell a range of proprietary products to major land vehicle OEMs, a current exhaust gas recirculation and waste heat recovery products continue to support evolving powertrain systems as they become more efficient and lower their impact on the environment. And as you've seen from the earlier presentation, we are well positioned for other applications which need innovative thermal management and fluid conveyance solutions. In Power and Energy, economic recovery is leading to higher demand for energy. Given improving economies and the sustained recovery in crude oil prices, the inflection point for upstream oil and gas will be at the end of this year. So we expect to return to growth in 2022. In the medium term, we are well positioned to grow our nonfossil fuel business building on our existing renewables and nuclear energy customer base. Therefore, the recovery in Senior's key end markets will drive revenue growth across the group with strong operating leverage. In a nutshell, the benefits from the decisive restructuring activities we took and our operating business was already well capitalized, mean that across the group's operating businesses, near-term operating leverage ranges from 25% to 30% to 35%. Of course, not all of the restructuring savings are permanent. Yes, we will need to hire back direct labor as volumes recover. However, we are now an even leaner and more efficient business. This gives us the confidence that as volumes recover, we will see strong profitable growth. Whilst absolute growth in profits has the most influence in increasing the group's ROCE, we will also focus on more efficient work capital employed. We have demonstrated our strong focus on cash generation throughout the pandemic, and our business model is intrinsically cash-generative. Our operating businesses are already well capitalized and prepared for recovery and growth. Across our aerospace businesses, Senior has already invested the capital to supply at much higher build rates. For example, on the A320 aircraft, we were already at rate 60 per month pre-pandemic compared to Airbus' announced rates of 45 per month in Q4 this year, rising to 64 per month in 2023. For our structures businesses, our focus is on filling our existing capacity with work that meets our returns criteria. Therefore, over the medium term, capital expenditure for the group is expected to be lower than depreciation. In terms of working capital, whilst we may see an increase in absolute levels naturally associated with growth, the underlying process improvements we've championed through the pandemic should deliver working capital efficiencies over the medium term. For example, we expect a reduction in inventory days on hand over that time frame. Our strategic focus on IP-rich, fluid conveyance and thermal management is supported by investment in R&D. So for a mechanical engineering company like Senior, we expect to maintain R&D at around 2% to 3% of revenue, including investing in technology that future-proofs the business. As you can see from the chart on this page, we have invested at these levels since 2015, including through the pandemic, and we plan to continue to do so. You've already heard the exciting opportunities in fluid conveyance and thermal management that we have in land vehicles, aerospace and power and energy from Ryan and Rob's presentation. From a financial perspective, Senior is well placed to support these evolving technology trends in our end markets. In addition to our technology and product development activities, another central plank of our strategy is portfolio optimization. The group continuously reviews its overall portfolio of operating businesses and evaluates them in terms of their strategic fit within the group. We will continue our Prune to Grow strategy by divesting, closing or combining non-core or performance challenged assets. And where appropriate, we look to add value-enhancing strategic acquisitions in our target areas of fluid conveyance and thermal management. I've described the key elements supporting our confidence in delivering that minimum 13.5% ROCE over the medium term. Now I'd like to share how we break this down into measurable targets for our operating businesses. So the group's ROCE target is translated into a minimum, ROTA, return on trading asset target for each of our operating businesses. These minimum targets are set taking into consideration the capital intensity of the operations activities and their design and manufacturing technology capabilities. So that is why our minimum ROTA target ranges from 20% for our structures and machining businesses to 30% for our Flexonics fluid conveyance and thermal management businesses, to 35% for our aerospace, fluid conveyance and thermal management businesses. As you saw from John and Carl's presentations before lunch, some of our businesses such as metal bellows and pathway are already delivering well above these targets. John and Carl also shared with you the value trees for their businesses. These set out the key drivers of ROTA, which measured every month starting with revenue, cost and margin driving profitable growth on the top branch and working capital and CapEx efficiency, driving the asset base on the bottom branch. In addition, whenever David and I review investment requests, be it CapEx, R&D or M&A, we assess each of these in terms of, does the investment align with the group strategy, are the minimum ROTA and margin targets specific to the operating business being met, how quickly is the cash being paid back, and of course, the net present value generated for both the base financial case and the risk factored sensitized case. Senior's financial resilience through the pandemic is a reflection of this disciplined approach and the business is well positioned to deliver enhanced shareholder value. Thank you. And I will now hand back to David to curate the Q&A session before his closing remarks.

Thank you, Bindi. So hopefully that gives a little bit more flavor around how we tackle the subject of trying to increase our financial returns against the backdrop of these wonderful businesses that we have and the great technologies and capabilities that we believe will help us to grow even as we transition towards this low-carbon future. So just before I close off for the day, and we've got -- we need time for more Q&A. And I thought some of you might have some questions in particular for Rob and Ryan. But of course, Bindi will be happy to -- Bindi and I will be happy to answer any of the financial questions and other questions, too. So maybe I'll invite Rob and Ryan back to join us up here and if people aren't too tired after lunch, please fire some questions. Andy?

Just a quick question on the technology road map. How confident are you that there's no gaps in your group technology to maximize the opportunity for all those evolving end markets because it feels to me like there's a lot going on at the moment, and you guys need to maximize specialty cans. So is a scope for M&A to try and maybe get to more technologies into the group, which means you can maximize it? Or are you confident that where you are now, you got everything you need?

I will comment on our in-house capabilities, and maybe I'll add a bit afterwards. But...

Yes, I'd be happy to. So when it comes to technology road map, certainly, there's plenty of different end-user technologies being weighed and deployed. But actually, I think what kind of came through in the discussion is thermal management and fluid conveyance are consistent technologies with all of these systems. So that's really the part of our focus there is because kind of regardless of the exact adoption rates of these different technologies, the components we're supplying enable all of them to be efficient and really are a good place for us to focus and then not have as much kind of stake, so to speak, in terms of exact adoption rates.

Yes. So Rob, I don't know if you want to add to that?

Yes. Echoing what Ryan said, I mean, the knowledge and expertise that we have is consistent with all the future trends that we see. I mean, there are some new technologies, some new processes, for example, that we are exploring as well as the use of adhesives, different types of brazing, but it's all expertise we have in-house and where we sometimes need outside expertise, we've got a network of people we can speak to for that as well.

And I think from -- but that wouldn't mean, we wouldn't be interested in potential acquisitions. If that brought some complementary technology to the group. We're very -- we've got an active pipeline, very much around the fluid conveyance and thermal management areas. And we regularly see some interesting technology businesses, and we would assess those to see if they were inside the group as opposed to maybe just partnering with that company wouldn't make sense. So we're not opposed to that idea. Any other questions? Yes.

In terms of platform content. How in the new applications you talked about, how are you performing in terms of content you're getting per vehicle or applications today versus historical existing products?

Look at that by end application clearly for aerospace, it's early days, right? So new content now is still very much around our existing product base and will be for a long time. But looking forward, and we've asked ourselves this question over and over, we were debating it last night over -- there's no fundamental reason why the content with our sort of newer type products should be less than our existing products. I think Mike Sheppard and Launie Fleming at the frontier, Mike, maybe from our Flexonics perspective, you might want to stand up and just give your view on that so they can hear you.

No, I think there's a lot of opportunity when you look at the complexity of some of the all kinds of opportunity. And you do the math, it's early days. We would say we should have every opportunity to have a higher content. It's early days. Competition and customers still have a lot to say about that but we're in a good position, absolutely.

Thank you Okay. And Tom, I think you had a question. Yes.

Just in terms of the portfolio optimization you talked about, I guess, we've seen a couple of the standout performers presented today, but for every halfway to 190 plus for the same ROTA, there must be a number of business units that are underperforming. So would you just give us a sense as to how many of the 26 business units are either below or materially below the ROTA target of their respective buckets that you've provided for

No point having targets as to make sure we can encourage everybody to get there. And through the prune to grow activity we've done, we've done quite a bit of that optimization already. Not to say there won't be a little bit more. So you might expect a bit more of that prune to grow activity to come. But of course, I now tend to use the word performance challenges on an underperformer. If you're in a business that's lost 50% of its sales because of a pandemic, I call it bad luck rather than underperforming. And those businesses will come rocketing back as those aerospace growth. So it won't surprise you to learn that our civil aerospace, our businesses are predominantly focused in on civil aerospace, some of those structures businesses, of course, they're below the target ROTA at the moment. But as those sales come back very quickly over the next few years, that's the single greatest thing that will help them back to the ROTA target. And some of those businesses performed very well, and we've got a good return on trading assets. So I won't give you the exact number though, but there's no reason why what we've got in our portfolio, we'd expect them all to have a path to get there. And if we don't, then we'll employ our prune to grow.

Turning on the other way around, specifically it tends to prune to grow, we should say probably low- to mid-single digit sensitive sales is the maximum end of that prune to grow...

We've done the majority of our prune to grow already.

Just one final question, if I may. Working cap but it has moved as a percentage of sales over the years. Is there any renewed sort of target there? Or is it very much as you were previously?

So we will continue being as efficient as possible on working capital. And you'd have seen pre-pandemic, we were already bringing that down as a percentage of sales. Now through the pandemic, we've actually -- when demand drops, sometimes it's actually even easier to drive working capital out. But from a finance perspective, I actually want to see some investment back into working capital because that's a signal for recovery and growth to come, which is why we expect that towards the end of this year. But as I said, what we need to make sure we do is what we've -- where we've made our underlying processes more efficient. So we had inventory champions across all of our businesses, driving inventory efficiency all the way from sales order being placed, how that works into the inventory system, manufacturing and product going out the door and how do we make the cycle times leaner so that we get an absolute reduction in inventory days on hand post-pandemic once the recovery is underway compared to where we were before. So we expect to continue driving our cash performance. We've delivered that in the past, and we will continue to do so going forward.

Yes...

If you think about capacity utilization, obviously, there's a story there in Aerostructures, but also you're not standing still trying to fill some of that with defense and space work. Is there a requirement from some customers in similar space to hold that as they can see a multiyear ramp back up to those volumes? Or how are you sort of -- how are you juggling that need to fill that capacity near term with the longer-term opportunity as civil recovers?

I maybe can add to this in a moment, some specific questions. But from a top, haven't got rid of any of our capacity other than selling our Connecticut business previously. We've still got all the equipment, and we're looking forward to being able to utilize that a lot better. But there's a pretty active engagement and dialogue with customers on the capacity planning side, isn't it, Launie?

There is, yes. We're really focused on capacity planning. We do have a lot of capacity. That's for sure. We're aware that the demand is going to come back. We're aware that we're -- we haven't lost the business. So we know where that needs to go. But in the interim, there's no contractual requirement that we have to keep the capacity. In the interim, we've been able to add some customers into the capacity we have to, but we're well mindful of it...

And just a word on -- are we seeing the rates we're expecting to come through?

We're seeing -- I'm not really sure how to answer that. Yes. The fragile aerospace market is kind of stabilizing. Because from my perspective, inventory levels are coming down to naturally where they should be. So therefore, we're starting to see that demand back on. There's -- I'm getting more and more confident with the single-aisle business. The elephant in the room is the large aircraft. That's -- when is that really going to come back. But we're starting to see it come back, which hopefully, that continues and COVID does...

it's as expected. So thanks, Launie. Should . Right, any more questions?

How many sites did you close as part of the restructuring part, prune to grow?

You asked how many sites did we close as part of the restructuring. So we closed one of our Flexonics businesses in Malaysia that was kind of oil and gas related, Mike took that decision, and we did that pretty quickly and actually retained some of the very good talent for our Aerospace business in Malaysia, which is still very much to the fore. And then we're also just completing the closure of our Senior Aerospace Bosman business in Rotterdam and the Netherlands. In that case, it's a little bit different because they were transferring all the manufacturing to our French aerospace facilities, Ermeto and Costa which are great businesses. The guys in the Netherlands have been fantastic. They've trained our French operatives who have been in country. We've done most of that product migration, customer -- big engine customers very satisfied with the way we've managed that whole process. And those will be more profitable in our French business because Rotterdam is subscale. So those are that we've really done most recently. If you look at over 5 years, we've either closed, sold or combined 7 businesses. Any more questions? We are all blinded by the science on the technology side. There's no such thing as a dumb question. I've learned this.

One more for me. In terms of the competitive set, but in some of these emerging areas say nuclear, for example, kind of new applications in alternative fuels. What do you come across a different set of competitors?

Again, it varies by market area, really doesn't. So on the land vehicle side, some new, some old, I guess, Ryan, right?

Yes. So there's obviously different competitive sets in different markets. So it depends a lot on the commodities and the area. I do think one thing that's interesting is we do run into different competitors in different areas, and Senior often has the ability to branch much better than our competitors do. So as we kind of mentioned some of the technologies we're bringing across different industries to help with our competitive set, and our competitors oftentimes are locked in a very specific industry, unable to make those bridges. And that kind of works to our favor in a lot of cases.

But hopefully, we're perhaps a bit more agile than some of our competitors. And I think Ryan did a very nice job and Rob of describing how we can quickly pull together different parts of our organization and come up with a solution. So perhaps agility and responsiveness is an advantage that we have. And on the Aerospace side, again, a bit early to tell how the competitive landscape is going to change. Remember for most of the next 20 years, we're selling the same products as we sell today. So it's the same competitors for the newer products, perhaps we've been edge there because of everything we have in the land vehicle side. Yes, Miguel?

So one is on the plane electrification and two, the electrification of certain systems, is this a risk for you? So for instance, I don't know the landing gear, if they decide to electrify and not go into hydraulic, would you see a risk or an opportunity? And then the second one is if the planes were to move to hydrogen, same as in car, the electric car has more loops of cooling systems. And you will get much more content if you are exposed to that. Would you have a similar situation or a similar case in a hydrogen plane where you would get more loops of cooling systems and more content per plane?

Yes. So again, aerospace is probably at the earliest. I think on the electrification, anything that's electrified, you probably need some thermal management, I guess, is what we would say. We don't do anything on landing systems today. I always thought we should do some machining on that, but we don't actually today. So I guess if that becomes more electric, then it's like you got some heat issues to deal with. You need some heat sinking, for example. And then on hydrogen, again, you're talking potential hydrogen as a combustion vehicle or hydrogen along as a fuel cell scenario. And I think what Ryan was trying to describe there is that in both cases there are wonderful opportunities because you're going to have a plethora of ducting and tubing to bring the cooling and sometimes a cryogenic cooling to the point of use as well as the fundamental thermal cooling plates itself. So I think that's why, that's one is the same question I asked Mike, we probably feel the same way. There's no reason why our content should be less and sort of a hydrogen aircraft in the future, there are some reasons, yes, it should be more.

Maybe just one on Airbus production rates. I guess, pre-pandemic, we're in a sort of ramp-up basis. Is Airbus and Boeing now Airbus are clearly talking about very high production needs over the next 2 to 3 years. How are you feeling about it internally about the investment required to go to those rates, rates perhaps thereafter. Are you ready to go there now? Or is there some significant to get there? Or how are you thinking about that?

Yes, good question. So from an equipment perspective, absolutely. So if you think back to first quarter last year, we were already manufacturing at rate 63 on Airbus single-aisle. Airbus, I think, were at 60 or about to go to 63 themselves. So we were already at 63 because we're slightly further back in the supply chain. And equally, before the grounding of the 737 MAX, we were already at rate 57. Boeing were at rate 50, and they were about to go to rate 57, but we were already manufacturing 57. So we're fully capitalized for that level of production. We've had quite a lot of dominant capacity in the meantime. And then if you think about the ramp. So Airbus had to be at rate 45 by the end of this year as long as just alluding to in single-aisle. We're now seeing order rates coming through that level. And I wouldn't second-guess, Guillaume Faury, the CEO of Airbus. If he says he thinks he can get to 63 and then 70 and beyond, then I would tend to believe them. You can't get a new aircraft for many, many years if you order it now in the single-aisle family. So something has to happen to increase capacity. So for us, up to about that rate 65, we're okay. And then we might need a bit more of the same sort of equipment, beyond that so many years out. Labor is a different matter. We'll need to hire back specialists and skilled laborers. So for us, it's machinists, it's welders, it's assemblers. So that's really the key for us to make sure that we're able to hire in line with the customers' requirements. They gave us very good visibility, much more than is in the public domain. It gives very good visibility of what those ramps are and the key gates for each one, and we have a very interactive dialogue with our Airbus Customer Relations Manager who lives in Toulouse and spends all of his time in the Toulouse facility, making sure we truly understand what's happening for each of our businesses and what we supply. So we're ready for that ramp absolutely, and we've got all the equipment up to the rates over the next few years. That went even higher, which I think really depends if the engine guys are prepared to go there. Then it's straightforward for us just to scale up a little bit.

Just on that labor comment, do you expect to have a pool of labor kind of really good to go over the next 3 years? Or would you think you'll have to kind of find people, train them up in order to get into a position. How quickly will you be able to get labor element...

Yes, it kind of depends by country. For aerospace, I also say we've had a good test run in Flexonics this year. So no doubt, we've been battling hard, for example, in Bartlett to hire folks. But bit easier in Mexico. We have quite a high turnover in India, but still we can get people there quite well. I think on the aerospace side, Thailand and Malaysia, we feel confident, we can ramp up and a lot of our manufacturing is done there. We'll need to work harder in the Pacific Northwest and California. But there are signs that some of the people that we unfortunately had to lay off maybe be able to come back. And then we've got very good apprentice programs, training programs in place to train up new workers as well. But I'm not trying to belittle that challenge, but it's one that we're ready for, and we discussed in detail our business reviews. Any more questions? Yes, sorry.

David, it's just kind of a couple of technical ones, and forgive me just my ignorance. In the ROTA calculation, are trading assets a net number after deduction of liabilities specifically advances...

So when you said technical, I was going say, talk to Ryan, but it was actually for Bindi.

So when we look at trading asset, it's attributable trading assets. So what's the plant and equipment, software, working capital requirements, so that will be net of your normal trade working capital -- trading working capital in there as well.

Business that has high customer advances that will be netted off.

One of the reasons Carl said around the fantastic ROTA pathway.

That's good. And just thinking back in my memory, which is always hazardous. I think at the CMD a couple of years ago, one of the things we talked about in terms of the pathway to the ROCE goal was the fade of new product introduction costs over time. And we haven't really talked about NPI today because there was big global event over the last 18 months. But can you give us a feeling of -- any kind of feeling about how those NPIs are fading and the benefit of that...

So it's a good question, I remember, Tory . It was a big feature and it was one of the reason I explained why our margin is a bit lower for a period of time. We've done bulk of that NPI. So really, this is about building the same products as the rates pick up now. We're still hoping to win some more business. We are still winning some new business. But the levels of money that we're spending on new product introduction are a fraction of what they were back in those peak periods. So we don't see that as a big headwind.

So the kind of, if you will, the flip side is the tailwind of that to current ROCE is kind of in the numbers already?

Yes. I mean as a bit of learning curve, we've building products for a while or at the level. There's always a bit of learning curve in there. But yes, that is not really the headwind we experienced before. And it's all about getting those volume back through the business and getting that strong operating leverage that Bindi described.

That's the benefit of the restructuring activities we've taken and as you get the volume recovery come through. That's why I said, over the near term, we will -- depending on specific businesses, but we'll get operating leverage ranging from 25%, 30% to 35%.

Yes?

Just to come back to Andy's question earlier on the range of opportunities. How should we maybe think about R&D going forward on a normalized sales level? And what sort of mix of expense to capitalize would you expect that to like to begin to?

I think on what Bindi highlighted, 2% to 3% of sales on an ongoing basis is where we feel it. If we see a great business case, it needs a bit more money. Of course, we'll look at that investment on a stand-alone basis, but we really think that's the right level for a mechanical engineering company. I always ask the guys, Rob, Ryan, have we got enough money? Are there any constraints, have you had more money available, more could you do. And we'll just keep making the right decisions there as we see the opportunities. And for Senior, I mean, we expense all our R&D. So with all these huge development projects, we don't have a lot of capital in R&D in the balance sheet. Do we, Bindi?

And on that, I mean, 2% to 3% is about the right amount for mechanical engineering company for us. And that's already baked in when we looked at the strategic plans for pathway and metal bellows and when we look at the group R&D requirements over that medium-term horizon, that's still within that 2% to 3%. And within that, we will net off where customers fund some of the R&D. And I think Ryan spoke to that earlier as well, so there'll be that. Sometimes we will get grants as well from governments to help with certain technology developments included within that. But throughout history, particularly in the Flexonics and fluid conveyance and thermal management side, we have already been evolving our product range, making it more durable. So it's not like there's suddenly a big can opening of activity happening. This has always been evolving within Senior.

Any more questions just before I finish off. One last question? Okay. So just got a couple of minutes. So let's just think about what we've seen today, excuse me. Didn't hear that, but. Anyway, so I hope you've enjoyed today's presentations and that we've been able to explain in more detail and in more depth our strategy to enhance shareholder returns by focusing on our IP-rich fluid conveyance and thermal management technologies and products. These are capabilities that are very relevant for our customers to date. As you will have seen from the metal bellows and pathway presentations, but they are equally relevant as the world transitions to a low-carbon economy. We can debate long and hard. I'm sure we will, what pace that transition will run at clearly for some sectors like passenger vehicles, it's going to be relatively quick. While for other longer-cycle businesses such as civil aerospace, it is likely to take longer. Given our track record and commitment to the high standards of ESG, it won't surprise you to learn that I'm firmly in the camp of the sooner the better from an environmental perspective. And we could also debate in certain cases, what the winning or predominant technologies will be. What is clear is that the option all require advanced thermal management and fluid conveyance solutions. So we are very well placed whatever the outcome. We will be ready, and we'll grasp all the opportunities that change brings. And in the meantime, our focus will remain on building a high-performing business to create value for all of our stakeholders. Anyway, so thank you to everyone who's joined in via the webcast today and to all be here at the London Stock Exchange. Thank you very much for coming, and please have a safe journey home. Thank you.