Volex Group Plc Ord

Good morning, ladies and gentlemen, and welcome to the Volex four-year results presentation for the year-ending 5th of April 2020. Before we begin, we'd like to submit the following poll. For your information throughout this presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. The company may not be in a position to answer every question it receives during the meeting itself, but the company will review all questions submitted today and publish answers where it's appropriate to do so. Finally, I'd like to remind you that this presentation has been recorded. I'd now like to hand over to Darren Morris, CFO, and Nat Rothschild, Executive Chairman of OLEX. Thank you, guys.

Thank you very much. And thank you to everyone who has joined this call today. this morning. This is the first of these calls that we as a company have done for about five years. So we're very happy to be back online and we're glad that we have a good set of results to go through with you today. So if you turn now to slide two, or we will turn to slide two, let me just go through the overview of this year's results. 46% increase in underlying operating profit to a record $32 million. Underlying operating margin up to 8.1% from 5.8%, driven by better sales mix and a move to much higher margin sales. Record revenue of $391 million, an improvement of 5.2%. We hoped to get to 400 million for the year, but the shutdown in our China facilities in January and February didn't help. Two successful acquisitions in the year. Exceptional three cash flow of 48.8 million. And, of course, a robust debt-free balance sheet, which is fantastic. certainly a differentiating factor for many of our competitors. So onto slide four, financial results. Operating margin up to 8.1%. Our target is 10%. We've really prioritized margin over volume. We're not so interested in top line. Cash in the bank is what really excites us. Careful cost control. We've invested in automation. significant cash and undrawn facilities at year end. So we've got good relationships with our banks. We can turn to our banks if we want to dip into the facilities that we have. Dividend is a critical part of our philosophy. So we want shareholders to share with us in the success of the business. So a three-peer share dividend. And the dividend policy is going to be progressive. So we want to increase the dividend next year. We're making acquisitions. So acquisitions is part of our DNA. And we'll continue to do that. We did two last year. We've done five in total. Just to give you an idea, acquisitions make up about 25% of our revenues at the moment. And then we're investing outside of China. So we're conscious of the geopolitical risks associated with China. So we're putting money into our manufacturing facilities outside of China. But we're not... moving out of china we we like china still but we're just trying to create a natural a natural hedge so on to slide five it really shows in uh diagrammatically what what i've just been uh what i've just been talking about and i think maybe the main thing to to point out here is in the um is in the bottom left hand corner margins in in both divisions are improving nicely So on to slide six. Again, this is just really articulating what we've already said in previous slides. The one thing I would point to here is the return on capital employed. So we have about 100 million of assets and we're making about $30 million a year off those 100 million of assets. So the business does not need a lot of outside capital. And these are pretty interesting businesses to be involved with. And that number is an important barometer of our financial health. And it's one of the reasons why we like this business so much and why we think we can grow it and why we think just to remind everyone that we have a a plan a five-year plan to grow this business to 650 million dollars in revenues and 65 million dollars in profit through a combination of organic and inorganic growth and throughout that we consider we can we're committed to a consistent dividend payment So on slide seven, we just talk a little bit about group revenue, how we got from last year to this year. The important point to note is the IMS division is growing organically and inorganically. So the organic growth last year was about 5%. And on top of that, we were able to include in the acquisition of Servitron. The power side of the business has increased. gone back slightly but this is a reduction that has been consistently flagged in all of our results and we believe that it has plateaued and we're hoping this year coming that we're going to be able to see some growth in power again and that growth will come because we've lowered the overall cost we've made the business more cost competitive and that's enabled us to win new business from new customers And within that, we've got a nascent electric vehicle business that is growing very nicely. And that growth has obviously been delayed somewhat by the COVID-19 outbreak. So in FY 2020, we estimate that there was a reduction in revenue of about $8 million, as I referred to earlier. And we now believe that the growth should come, should steadily start to come back in EV within our power products division. So on slide eight, again, that just puts into numbers what I've already talked about. I mean, what is interesting is that the business in FY 2021, so this year, is from a profit standpoint, is actually ahead of where we expected to be. So our operating margin is actually ahead of last year. And that's because of a very favourable mix coming through from our data centre products. People have to work at home at the moment. There's a tremendous demand for the construction of data centers and the replenishment of existing data centers. And we are really benefiting from that today. We've seen some weakness in the medical install side of the business, which we've obviously talked about in our in our results and we also delivered margin improvements through operating efficiencies and and that's again credit to our to our to our team in in inside of um inside of volex the last thing i would say on this slide before we before we turn over is we are moving up the value chain so so we've bought businesses in the last two years that have enabled us to do more things for our customers. So printed circuit board manufacturing and also box builds. So we are very much a company that is able to do more and to spread itself out across the requirements of our customers. So slide nine is just a little look at the power side of the business. Again, Our revenues have gone down. It's been absolutely flagged throughout the last two years, but our profits have gone up. And again, profits are what we care about. Top line is vanity. Profit is sanity. And cash and bank is reality. So we are happy about the performance of this business. And as I said earlier, it has plateaued and we do expect it to grow again next year.

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So moving on to slide 10, that's just, again, just to show you where the margin improvement has come from, principally in integrated manufacturing services, which is the large of our two divisions. You can see that central costs have been nicely kept under control. And the business that we bought last year, Servatron delivered $2.6 million of operating profit in the eight months since the acquisitions. We've done five acquisitions in the past 24 months and we have a very strong M&A expertise inside of Volex. And that's meant that we've been able to keep the cost down. So all in all, a terrific, terrific result from an operating profit margin standpoint. So group cash flow. I'm now going to turn the call over to Darren and he's going to talk through the group cash flow statement. Darren, over to you.

Thanks, Nat. I'm just checking that you can hear me. Perfectly. Excellent. Okay. So the cash in the year, as Nat said, very strong performance. Obviously, looking at the top, the EBITDA was stronger. Our capex, about $4 million, a little bit higher than last year. We've started to expand, as Nat alluded to, outside of China. So we're putting in significant additional capacity at our site in Batam, which is about a 45-minute boat from Singapore. We've purchased some land and we are expanding our facility next year. So the capex next year is going to increase up to about $8 million and then come back down again. Very strong performance in the year from Working Capital. what has happened there is that we have purposefully reconfigured our business to basically reduce our exposure to the low margin commodity power cord business and go into the higher margin IMS business. So as we've shrunk the power cord business, increased the IMS business, The IMS business is higher margin, and the customers generally pay on better payment terms. So that's caused a one-off benefit to cash flow to the tune of about $10 million to $15 million in that working capital number. Interest in tax is what it is. We do in the results flag that we've had some success in reducing our cash tax rate going forward. So old Volex, for those of you on the call that know Volex from old, has got significant tax losses from the business, both in the UK and the US. And what we've been able to do, because we've now got profits in the UK and profits in the US, we're able to offset those profits against our tax losses. And that means our marginal tax rate is falling, which is good news. So it's a hidden synergy, if you like, when we do acquisitions. So underlying free cash flow, overall nearly $50 million. We deployed about half of that into acquisitions during the year of Servatron and Tasing. and then the rest of the cash is used to basically settle deferred payments on acquisitions, earnouts, and the dividend as well. So net-net, we think the model is working, and this is what our plan is going forward, is to generate sufficient cash in the year to make one or two acquisitions and to service the dividend. And that's what we'd like to do, is to Keep the business with a healthy balance sheet and keep investing, keep growing, but keep paying the dividend. I think that's very important. Just turning on to the next slide, it just puts it in a pictorial form so you can see exactly the point. We started the year with cash and we finished the year with cash. And you can see how we've deployed the money. One thing that I would say is, obviously, we have, bless the accountants, we have two cash balances. So our real cash balance at the moment is $31 million. But for IFRS 16 purposes, we have to report the cash balance if we paid out all of our leases on our properties to maturity. So... You know, it's a bit of a, in my view, a bit of a false cash balance, but it shows what our liability is on our leased factories if we had to pay that lease liability today. So our reported cash and the cash in Bankat Bank today is of the order of 30 million. Adjusting items. So this is the difference between operating profit, EBITDA, and reported profit. Historically, we've had some restructuring costs. Going forward, we don't intend to have restructuring costs. So I think a lot of companies are criticized for constantly putting through recurring restructuring costs. So our policy is that we will not be doing that. Nat mentioned the acquisition costs are very, very low, basically just a little bit of external legal costs in relation to the acquisitions. So we wouldn't expect these numbers going forward to increase. We don't use expensive advisors on the acquisitions. The main element of the adjusting items is obviously goodwill amortization, which is non-cash. When we buy a business, we have to do a the difference over a period of time. And then share-based payments. I think the way really to look at this is that If you go to our annual report this year, we detail it and split down what it is. So it's a combination of share options for management. And there's also, when we buy a business, we often do a profit-based earn out. So maybe three years of profitability. And if the profit targets are hit, then we will issue shares to the target management team as an incentive to make them perform and to also retain them. Now, what has obviously happened during this year and the reason why this charge is so high, and it's an estimated charge, it's not a cash charge, but the reason why it's so high is that obviously our share price has gone up a lot. So the value of the shares out there that may or may not be issued has increased. To be honest with you, the way that most people look at Volex and the way we tend to look at Volex is we say, look, what's our share number and issue? And what's the potential for dilution? So we look at the fully diluted share capital, which is how most people look at it. Because obviously, if, for example, the acquisitions were to miss their targets, this share-based payment number could quite quickly swing the other way and be a credit rather than a debit. So I think the easiest way is to just look at the fully diluted share number. And then just to summarize what Nat said earlier about our financial strength, we have around about $30 million of cash in the bank today. Our working capital swings between $5 and $10 million intra-month. And then we have a $40 million facility with two banks, HSBC and Lloyds. So in theory, we've got around about $70 million, $60 to $70 million of cash there. in order to make acquisitions. And if you look historically, the size of the businesses that we've been buying are between $15 and $30 billion of spend. So the plan is to continue to make acquisitions of that sort of scale. And the key area for us in terms of acquisitions is that What we want is obviously businesses that do what we do today, i.e. contract manufacturing businesses, either in power core, power products, or in cable assemblies, printed circuit boards, and subsystems. But what we're after is new market segments, so new customers or new geographies. And that's really the main criteria, and we have a pipeline of acquisitions which we're working on. Nat, do you want to just say a few words now on the strategy slides, or do you want me to continue?

I'll go ahead on customer concentration, and then we can ad lib between each of us. So I think if you look back from 2014 and you come forward to 2020, one of the biggest differences in this business today is is the diversification. And that's why we put this slide in. In 2014, one customer represented 25% of our revenue, and the second biggest customer was 17%. Today, the biggest customer represents 17%, and then the next biggest are all less than 5%. And even in that large customer, it's spread out between six or seven different subsidiary businesses who don't really talk. to each other so diversification has reduced risk significantly and and volex itself is a is a much stronger business for that and i think that the way we've traded through the coronavirus is is is is evidence is evidence of that so your company our company today is a much stronger company than the one in which we inherited as a management team in 2015. The other thing that is different is the... is what is what we do has expanded dramatically and this what I call the kind of evolution of man's slide is actually is actually very is actually very important so the we started off as a assembler of power cords and and a cable assembler and today we have um We have many, many more strings to our bow, and we're able to offer many more solutions to our customers. And we're also vertically integrating, and that's a key difference. So we acquired last year a company called Tarshing, who we proved to be buying our raw cable from. And we've now taken that in-house, and it's helped us lower our cost. We've also acquired Servatron in North America, which is a printed circuit board manufacturer that I mentioned earlier, and Silcotec in Slovakia, is it gives us the opportunity to make box builds for our customers. On electric vehicles, we obviously have a very strong position there. We were actually in the number one position there. And again, we're moving towards vertical integration in the electric vehicle space to help lower our cost further. We have our own data center product. So we actually make a product that we sell to large companies, some of the largest companies in the world in our Batam and Suzhou facility. And as a company, we have very, very strong... Sorry, the mic just went dead. We have a very, very strong engineering pedigree that differentiates us from our competition. So, Darren, do you want to take the slide number 18?

Yeah, so what is IMS? I mean, IMS, in terms of the products that we make, we make... A lot of components that go into kid inside hospitals, so from defibrillators or ultrasound machines all the way up to very, very large x-ray machines, MRI imaging machines. And the customers that we have, we can name the customers, but in general it's people like You know, Siemens Medical, GE Medical, Philips, Intuitive Surgical, large OEMs in the medical sector. So we've deliberately focused our IMS business into the medical segment. And the reason for that is because, number one, it's very diverse. Lots and lots of opportunities for cables, different types of cables. Another reason is that it's all FDA regulated. So if you're making paddles for a defibrillator, it's obviously critical that if you want to use that machine on a patient when they're having a heart attack that it works so that the cables don't separate in your hand. So all the devices that we make products for are touching the patient and are safety critical and therefore there's very, very tight controls around our manufacturing procedures and the components that we can use. And what that means generally in this business is that you're sole source. So if you get onto a machine and you're the partner with a Philips Medical on a machine, you're on that machine for the entire life of the machine. It could be 20 years. And there's obviously OE business and then there's also support business for those machines as they're upgraded and improved over their life cycles. So in IMS, if you think about it, we do very, very simple cables all the way up to complete sub-assemblies, like, for example, the example we use is a is a $10,000 power supply for an oncology laser for treating cancer. So a very, very broad spread of business. And what we're trying to do is to do more outsourcing with the customers. So the customers are saying to us constantly, look, Voletz, can you not just supply me components, can you take responsibility for an element of the supply chain? And so that is what we do. As an example, on a medical production line, we're delivering particular kits of our components and other people's components to the line to make the assembly process easy. So medical for us is a very, very steady business. Industrial, we do all sorts of cables for all sorts of industrial applications, air conditioning applications, factory automation, telematics. So again, a very, very broad spread in that business. And then the highest growth area in the business at the moment is our data center products. So as Nat said, what we do is we make the high-speed copper cable that allows you to transmit very, very fast between a storage device in the data center to the switch where the data leaves the data center. And these products are obviously selling very well at the moment because there's a huge amount of additional bandwidth being put in to support cloud applications. And so we're seeing very, very strong performance right now in this segment that's offsetting some weakness in the medical segment. And what's going on in the medical segment, just to touch on that, is obviously for the last three months, it's been very, very difficult for our customers to get into hospitals to maintain and to install machines. And so we are now seeing a bit of a backlog build until they can get access to the hospitals. But fortunately for us right now, other areas of our business and the diversity in our business is offsetting the weakness that we're seeing there. Power Products, when we came into the business back five years ago, this business was not making any money. And it was actually quite a... a frightening prospect because it's a big business. It employs a lot of people. It makes a lot of products. So it had a fairly large cost base. And what we did was we had to work out what we needed to do to make money in this business. And we really found two problems. One was that we were competing in a segment of the market where we weren't set up to compete, i.e. we weren't at the right point on the cost curve. So we were making commodity products like laptop power cords, which we were selling at breakeven at best, sometimes at a loss. And so we had to do two things. One was we had to turn off some of that business and exit some of that business. And the other thing that we had to do was on the business that we could stay competitive on, we had to automate and vertically integrate to reduce our cost structure so that we could compete. And it sounds quite simple, but we did that at the same time as focusing on to sort of higher value niches within the segment. So we do a lot of stuff that's got more aesthetic content in. So rather than doing a boring black power cord for a refrigerator that you plug in once and then you never see it again. We do a lot more now with companies like Dyson and Nespresso where people touch and feel the products and they have multiple colors in them, some design features in them. And so that's how we've repositioned the business. And now, as we've said, following that restructuring that we've done, repositioning that we've done, we think this segment is set for growth. Performance here today has been strong. Again, a lot of people buying products because they're stuck at home. They've been buying laptops and monitors and coffee machines. So the business has performed very, very well the last couple of months. And then within this business is also our EV business, where we make the home power cord, the power charger for the plug-in electric vehicle. And we obviously are working with... you know, the leader in the sector in the Western world in this market. And we're starting to see new business coming through now from other automotive OEMs as they launch products as well. So we're pretty excited about the growth prospects in this side of the business now.

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The next slide just really touches on operational excellence and what we've done to improve the factory. All I would say is that we do this constantly. So we have a very skilled operations team that we've been able to grow as we've improved the profitability of the business. And they found savings and optimizations that I would never have been able to find as a finance guy looking at this from a top-down basis. So we have a team that roves around the world and are constantly in the factories improving supply chain and improving our processes in the factory. And what this does, obviously, is... In our business, the worst thing that you can do is let a customer down on quality. Because if you let a customer down on quality, you cause things like production lines to stop, you cause product recalls, and all of that is a very, very bad outcome for the customer, for their brand, their reputation. So we are trying, and I think it's critical for us, to deliver the highest quality. And if we do that... then it's a kind of virtuous circle because the customer really, really does appreciate that and it really is a way of us defending our position and winning that business perhaps from lower cost or lower quality customers. So our quality levels now, we're very, very proud of them and they're probably the best in the industry. Acquisitions, I mean, we just list here the two businesses we bought and why we bought them. Servatron takes us in a slightly different direction. What Servatron do is they do printed circuit boards, but it's very, very niche. So they're doing it for high-end medical devices in relatively low volumes. There's aerospace in their defense, a lot of kind of IoT, Internet of Things business as well. Comm systems are going to hospitals, patient monitoring, that sort of stuff. But what is good about Servitron is the quality and the customer base that they had. And what we're finding is that our customers, Volex customers, want to use Servitron. Servatron's capabilities. So we're seeing some success there in cross-selling between the two groups both ways. So Servatron customers wanting to use our facility in Mexico for some commodity assemblies and then our customers wanting to use Servatron in the US. And then Tasing has been a long-term supplier to us, so supplied us for many, many years. The owner wanted to retire, and it fitted into our strategy of vertically integrating. So what we manage to do now with Tasing is, for the first time in 20 years since Rolex left the U.K., We've now got Volex vertical integration on the consumer power cords. So when you buy a product, it'll have a Volex plug on it and a Volex cord. And what that means is that we can make that product cheaper and we can readdress and re-attack some business that we've perhaps given up over the last few years. Because the issue with Volex in power cords is not You know, we have the brand. Volex, you know, owned that market 20 years ago. We are qualified to work with every single consumer electronics manufacturer in the world. The issue that we had is that we'd become fat and lazy and not cost competitive, so we lost share. Now we're lean again. We're starting to win that share back. So as I said, we're pretty confident about the outlook for the power business. Now, do you want to talk about... Coronavirus?

Sure. So the way I would characterize this slide is like many companies in China, we were faced with a closure of our plants after Chinese New Year. So in February and March, we were shut for around for around three weeks. That gave us, I suppose, the added advantage of being able to prepare for the outbreak of the pandemic elsewhere in the world. And I think it was a very important learning experience for us. And it's enabled us to keep all of our sites open around the world during the COVID-19 crisis. So many of our competitors were forced to close. we've managed to insulate our customers from the worst of this pandemic. Of course, our priority has been the health and well-being of our employees. And we've had, I think I'm right in saying, we've had one coronavirus case out of our 6,000 or so employees, and that was in... That was actually in Juarez in Mexico. One confirmed, yeah. One confirmed. So we've obviously been affected because customers have had to cease production. We've been affected because suppliers have had to cease production. But I think versus many, many companies, we have been remarkably insulated from this terrible situation. And then that is really down to the preparation that our ops team was able to put in place after what we ourselves experienced in China. And we've had a little bit of a kicker from certain ventilator projects. So we have been involved in two out of the three of the UK government ventilator projects. We've had a spike in demand from some of our existing business that we do with companies that manufacture ventilators. So we have had a, a slight tailwind in some areas of our business. And I think more generally, if you look at data centres, which we've talked about on the call already, and also what we call internally our sort of legacy PVC power call business, there's been a big demand for laptops, there's been a big demand for printers, there's been a big demand for Xboxes, and there's been a big demand for streaming devices, all of which we manufacture for. So we're coming to the end of the presentation. As you know, as a public company, we have to put out an outlook and a guidance statement. And it's been very difficult to do this year. And we thought long and hard about how we should go about it. We are extremely optimistic about the business prospects for this company. And we have a target, as I said earlier in this presentation, to get to $650 million in revenue within the next five years. And we're very optimistic and we're very confident of hitting that target. Had it not been for COVID-19, we think we would have had an absolute breakout year this year. And we've had to scale back those forecasts for a multitude of reasons. But the prospects for the company are still very good this year. We're continuing to work closely with our customers to understand demand and to respond appropriately. We've obviously flagged that medical installations are going to be delayed due to restrictions on access to hospitals. And this is definitely affecting some of our customers. But on the flip side, data center activity and the legacy laptop business is very, very strong. And the electric vehicle business, which is so important to our customers, to the growth in power products is starting to aggressively ramp up in the last couple of weeks. So we're seeing a slow but important reopening of that business. And it does appear that demand is very, very strong. And obviously, you're seeing tremendous tax advantages for people in countries like the UK, incentivizing them to buy electric vehicles. The acquisition pipeline that we work on daily is also very strong. And we have, as we've highlighted in this presentation, capital to deploy. And the way to think about this on a very high level is we started this year with around $30 million of cash in the bank. We bought two businesses and we've ended the year with around $30 million of cash in the bank. So this is a very important way to think about Volex going forward. It's going to be a combination of organic and inorganic growth. We're continuing to invest back into the business for future growth and margin enhancement. And that's, again, going to be the story of Volex going forward. So if I were to summarize where we are today as a company, your company, we are extremely well positioned. We have a very, very diverse customer base. We've got some of the best customers in the world and we have strong relationships with those customers. So they are robust and they are firm but they like us and they have worked with us for a long time. And as Darren said earlier in this call, we really have to make a big mistake with a quality issue or a supply issue to get those customers offside. We consciously repositioned Volex towards the medical market. And certainly last year, that was one of the strongest areas of our business because it was... it's a less cyclical area of the market. This year it's been weaker, but we expect it to come back. And again, the diversification point is all apparent because the weakness in medical has been more than offset by the strength in data and legacy PVC. We're moving up the value chain, so we're cross-selling between plants. And we are a very unusual business in our geographical diversification. So we have 14 manufacturing sites around the world. There's very, very few companies like us, maybe one or two others globally who have that global footprint, which provides such flexibility and resilience. So we're big shareholders in Volex. So we take a lot of our compensation in stock and we also own a lot of stock. And we're very focused on adding value for all shareholders. And that's why the dividend is so important to us. We really believe that companies should pay dividends and should share in their success with the stockholders. And so the dividend is something that we want to increase and progressively over the future. We have a rock solid balance sheet. So if things did go terribly wrong, we're very well interested in that because we have no debt. And that's very unusual in a company like ours. We're also highly, highly cash generative. So right now we've got more cash in the bank than when we put out these results. We are operating now in sectors where we have a team of executives who have a deep understanding of this space. And again, we inherited a business from a team of executives who did not have a deep understanding. So this is a good business. This can be a very, very good business if it is correctly run. And again, I would say that we now have a platform to really push on and to grow this business very, very dramatically over the next five years. Acquisitions are part of our DNA and that is... going to be a feature of Volex going forward. We want to grow by acquisitions. And those acquisitions, probably the key point is we want to use them to increase our margin. So we're not going to dilute our margin with any deals that we do. We're not going to chase revenue for the sake of growth. We're chasing margin. All of the companies that we have bought have been bought with an earn-out-based model. So we want to partner with management teams. I often say to the management teams that if we buy their company, it's the start of the acquisition, not the end. And that differentiates us from traditional acquirers who buy a company and then... look for synergies by removing management. We don't and we want to grow with these companies and keep the management in place. And that's also true of what we call here a light touch integration approach. So we're a strong business today and we're a misunderstood business. We think we're a very undervalued business and we think over the next few years that that value and that value creation that we demonstrated we're capable of achieving over the last five years is going to accelerate and that is include into a challenging FY 2021.

Thank you. Nat, Darren, thank you very much for that presentation. Ladies and gentlemen, please continue to submit your questions using the Q&A tab situated on the right-hand corner of the screen. Darren and Nat, I know you've answered a number of those questions that have been submitted during this presentation directly back. And for all the attendees, we'll make these all visible via the Invest and Meet company platform as soon as is possible after the event itself. I'd like to remind you that a recording of this presentation along with a copy of the slides, the published Q&A and the recording will be available via InvestorMeet company dashboard. And lastly, before I do hand back to Darren and Nat, I'd like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations. um and darren nat i think there's just a few questions i guess are um there i'm not sure if you just want to have a quick review we've got about 10 minutes and then perhaps just give a summary wrap up and then i will direct everybody for the feedback thank you very much indeed guys okay i mean i'm just going to pick one off here that's just come up are there any intentions to transfer from aim to the main market in the future

The answer to that one is, from my perspective, is no. We moved two and a half years ago from Maine to AIM principally to allow us to do small size acquisitions without having to do prospectuses and working capital statements. So for our model, which is to buy businesses of, say, $40 million to $50 million a year, we think it's much cheaper and more efficient for us to be on AIM. So at the minute, we're very, very happy with AIM. And we're hoping we'll be in the AIM 100 next time around. Let's have another look here. There's one here from Sam M. It's encouraging to hear that the power business could see like-to-like revenue growth for this to happen. Is this dependent on electric vehicle growth? I think what you've got to remember about the power business is that it's a very diverse business. Many, many customers, all sorts of consumer electronic products. So now that we're at the right point on the cost curve, We should be able to grow the business organically off the back of the brand and the capability that we have. And then on top of that is the EV business. We don't separate the EV business out in our accounts as yet because it's not quite big enough. but it's growing from a base of the order of $20 million, and we should see that multiply over the next three years based on how strong the demand for electric vehicles is. So I think the answer to that one is no, it should grow ex-electric vehicles as well. There's another good one here from Matt G. Are the top three customers lower margin than the group margin? Okay. Our largest customer gets a very good deal because they touch many of our factories and we have, I think, about 6,000 or 7,000 active part numbers from them. So they're a great partner and baseload for our business and it's been very, very steady growth. So we've grown. consistently with them over the years. So I'd say that they are not below the group margin, but they certainly in the IMS segment are probably getting a good deal and are probably below the average margin. The next two customers, one is an IMS customer in data centers. The other one is in the power business. Both of those are higher margin than the average. So it really depends on the type of products that we're making for them, I think, and what the investment has been in those products and what our position is. I think on those two, the second two customers, we are actually the main partner in the products that we do, so the competition is lower. Margins are better. Now, do you want to answer the one on China that's here? Have you seen this one? It's... Do you see any issues between the US and China and any effect on our manufacturing?

Yes. So the answer is we're insulated because we have a lot of manufacturing capability outside of China. And so what we've been able to do is to move production when customers wanted it out of China principally into our Batam site, just off the southern tip of Singapore. So right now, We're not worried about US-China relations. We're actually more worried about the labour costs in China, which are around $4 an hour versus, say, $1.75 in Batam. So China is moving towards being a higher cost country. That's what I'd say about that.

Okay. Got one here on the defined benefit pension liability. Is that a material issue? Fortunately, Volex only ever put the executives historically into the pension scheme. So I think we only have about 150 people in our pension scheme, which is now closed. The size of it is around about 15 million of assets, 20 million of liabilities. So, you know, the answer, I think the mark to market deficit at the moment is about $4 million. So we don't have an issue with our pension deficit.

There's a question here. Earlier in the presentation, did you say that the company was running ahead of So in the first three months of this year, we're running ahead on our profit. So our operating margin is ahead of last year. We're running a little bit lower on sales. And so that's because of the mix in the business.

Okay. There's another one here about stripping out the effect of acquisitions, like-for-like sales down 10% versus last year. So IMS, the answer on that side of the business is that there is organic growth in that business. On the power business, you're right. The growth, the business has shrunk on a like-for-like basis. Two reasons for it. If you go back and look at Volex, back in 2012, we had one huge customer, a consumer electronics customer, a very, very well-known player. And the issue was that Volex had a contract and the competitive dynamics there were that the margins were at best break-even and actually... In many periods, many quarters, we're actually loss-making. So we've set out a deliberate strategy to reduce our business with that customer. We didn't turn business off. What we did was not go on to the new programs. So as they produced a new laptop or a new PC, we decided not to be the supplier on that new program. So that business has shrunk from over $100 million in our revenue to $10 million this year. We still supply, still have a good relationship, but we've chosen to be a smaller supplier. So you have to offset that backdrop where we've had that big customer reducing. And then combined with that, we have actually exited in the year some other commodity sales of the order of $20 million. We now think we've got a business where every single customer we have today, we want to keep. and we want to grow with. So we're no longer in the position where we have any customers that we don't want to supply to.

Perfect. Thank you, Darren. Just obviously mindful of time, Darren, and obviously all the Q&A from today will be sent to the investors once it's all been uploaded on the platform. But I don't know if you just want to summarize and then obviously hand back and then we'll send the investors for the opportunity to provide you guys feedback. Okay.

Now, do you want me to summarize or would you like to do it? Go ahead. So, I mean, I think just overall, we've had a very good, relatively very good COVID experience. We got hit early in China. We responded to it and we responded to it globally. So we set every factory on alert and we were ready. We've not let any customers down through the period. We've supported the customers. We've had no outages or shortages of product. And as a result, the businesses in that set has performed very well in the first quarter. As we look forward now, I think we just see that there is going to be know a tough six months across the world um you know i think people are going to be looking at capital budgets and you know we have this access issue right now into hospitals but overall um i think we feel that that um the business is in in a very strong position we didn't have our balance sheet hold we're still generating cash every day we're still profitable every day And we're investing into the growth areas. So EV, key growth area for us, high-speed data centers, all of the cloud for people like Facebook and Google and Amazon, all these guys. All of those services, the video services, are all going through our cables. So we expect that to continue to grow. And then medical... is a very, very steady, good visibility business. It's just right now there's an access issue on the hospitals. All those machines still need to be maintained. They all need to be installed. It'll come back. It's just going to have a couple of months where it's going to be difficult. So overall, I think we're very, very positive about the future.

Thank you very much indeed, Darren. Thank you, Darren. Thank you, Nat. Thank you for updating investors today as part of your investor roadshow. Could I ask investors not to close the session as you'll be automatically redirected for the opportunity to provide feedback. If you access this meeting via our website, the feedback appeal will appear. If you access it from the link, if we could just ask you to simply follow the instructions, log in and give the company your feedback. So on behalf of Volex PLC, thank you, ladies and gentlemen, for attending today. Thank you very much, Darren. Thank you very much, Nat. Thank you.

Thanks. There are times I wonder. Why can't I wear white after Labor Day? Something on your mind? Chew on it, Twizzlers.