Volex Group Plc Ord

Good morning, ladies and gentlemen, and welcome to the Volex PLC interim results investor presentation. Throughout this presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just please simply type in your question and press send. The company may not be in a position to answer every question received due to the significant attendees on today's call, but the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your InvestorMeet company dashboard, and again, we'll notify you by email when they are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll, and if you would give that to your kind attention, I'm sure the company will be most grateful. And I'd now like to hand over, if I may, to John Bowden, CFO, and Nat Rothschild, Chairman from Volex. Good morning.

Good morning, everyone. And welcome to the half-year results presentation for Volex PLC. As you know, my name is Nat Rothschild, Executive Chairman, and I'm joined today by John Bowden, our Chief Financial Officer. I'm in New York, so I apologise for the hotel backdrop. Our strategy at Volex has been to build a diverse and resilient business that is focused on the customer and delivers profitable growth. These results demonstrate the continued progress we are making towards our long-term objectives, despite having to operate in a challenging environment due to extended lead times in the supply chain and inflationary pressures. All the hard work transforming the business has made us more flexible and able to respond to the macroeconomic challenges we've seen through the first half of the year. Today, we'll start with an overview of our performance, and then John will take us through the financial results. We will conclude the presentation with an update on our strategy and the outlook for Volex. At the end, there will be time for questions.

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Turning to the next slide, I would like to take you through what we've achieved in the period. We increased revenue by more than 44% this year. This includes the acquisition of DECA, the leading manufacturer for the European power cord market acquired in February. John will take us through the revenue movements by customer sector shortly. We are particularly proud of the progress we have made in the electric vehicle sector, and we will return to this later in the presentation. We've increased our underlying operating profit, which is up to $27.3 million, an increase of over 30% from last year. This means that our underlying operating margin is now at 9.3%. We have successfully navigated headwinds from both higher and more volatile commodity costs, plus the disruption in the global freight market by working closely with our customers. We are understandably proud of the margin achieved, which is an exceptional performance in unprecedented times. Since last year, we've announced three acquisitions. Irvine Electronics and TC operate principally in the attractive defence market, a sector that our management team know well. Protomex, based in Mexico, complements our acquisition of DECA, providing further access to the white goods market in North America. we will pay an increased interim dividend of £1.2 per share, a 9% increase on the prior year. I'm also pleased to report that customer demand has been very strong, with a notable recovery from many of our medical and complex industrial technology customers. Our factories have remained extremely busy throughout the period, as we've responded quickly to a dynamic situation to balance supply and demand. Turning to slide three, let me take you through some of the operational highlights. The issues of extended lead times in a global supply chains have been widely reported. And it doesn't seem to be a sector of manufacturing that is unaffected. We are a low volume, high mix manufacturer with significant expertise in navigating dynamic supply chains. Our sourcing experts have worked incredibly hard to proactively respond to the supply chain challenges. During the first half of the year, it has been important to communicate effectively with our customers and help them to respond to the challenges they are facing. I'm incredibly proud of our exceptional customer service, allowing us to deepen these relationships. We've invested in vertical integration to maintain our status as a leading low-cost manufacturer for the electric vehicle sector. Our forward thinking and technical expertise are delivering real progress in this expanding market. Our strategy is to deliver sustainable growth in this area as the market matures and evolves. Our product engineers have successfully developed 400 gigabit per second high speed cables that use for use in data centers. We are expecting strong sales when the industry transitions from existing deployed technology to the new generation of cables. We are winning new business with our expanded sales and marketing teams through cross sales and with new customers. An increase in worldwide demand across a wide range of products is causing inflationary pressure on a number of commodities and components. We have seen shipping times lengthen and freight costs go up. The model in our industry is that as input costs increase, they are passed on to customers, as we've previously explained in relation to copper. This approach has allowed us to maintain strong margins in the face of cost inflation. And with that, I would like to hand over to John Bowden, who's going to take us through Volex's financial performance. We're in their corner and on it because their local agent is a small business owner too.

Good morning, everyone. And thank you, Nat. As Nat mentioned, it's been another excellent set of results for Volex and we've delivered revenue and profits growth. We increased revenue by $90 million year on year. This includes a strong performance from Deka, the European power cord manufacturer we acquired last year. The business also delivered good organic growth, particularly in the EV market. I'll take you through the movements by customer segment on the next two slides. Underlying operating profit is our preferred measure as it strips out the amortisation of intangible assets, the cost of share-based payments and acquisition costs. Underlying operating profit has increased by 31% to $27.3 million. On a statutory basis, profit before tax has increased by 35% to $19.4 million. Underlying operating margin for the first half of the year is 9.3%. We believe that an operating margin of approximately 10% is optimal for a business of our type, balancing customer mix, our desire for top-line growth and our intention to invest in people and development activities where we can deliver excellent returns. In the comparative period, we achieved 10.3%. reflecting beneficial foreign exchange rates and commodity prices. I will bridge this in more detail later on. As the business has grown, we've continued to control operating costs very tightly, with these now at just 12% of revenue compared to 14.8% in the first half of last year. Earnings per share is up to 11 cents per share. Earnings per share is an after tax measure and therefore reflects the low effective tax rate that we have achieved across the group. And as Nat mentioned earlier, the dividend is up with an interim dividend of 1.2 pence per share. If we now turn to slide six, I can take you through the movements in revenue by sector and give you some colour on the trends that we're seeing in each area. We deliver further significant growth in electric vehicles and we continue to build an excellent reputation in this sector. We have a slide later in the presentation where we'll give you a bit more colour on our operational priorities and how our investment is securing a position as a leading low-cost manufacturer of quality product in this growing market. We use different routes to market in the EV space, selling either directly to OEMs or through partnership with one of four major tier one automotive supply chain customers. this has allowed us to work with many of the largest automotive brands supporting their rollout of new models the popularity of electric vehicles is increasing and consumers are embracing the technology as adoption grows charging infrastructure is developing we are supporting this trend with a range of products that support ac wall charging turning to consumer electricals which is our biggest customer sector and includes revenue from deca Our major customers are global consumer brands across consumer electronics and domestic appliances. Demand for consumer electricals has been very strong in the first half of the year. We work with a broad range of household name manufacturers and having a mix of quality customers has helped us manage any variability in demand if our customers experience extended lead times in their production schedules. Our acquisition of Deka, the leading manufacturer of power cores for the European white goods market, has been a tremendous success. Their factory has been operating at full capacity since acquisition and we're investing in additional production lines to help meet future demand. This is the area of our business that is most sensitive to changes in the price of copper. We reacted quickly to the significant increases in the spring by repricing with our customers, and we've continued to reflect changes in the commodity markets in our pricing throughout the period. Moving now onto medical, where we deliver complex assemblies that are used in a wide variety of complex medical devices. A year ago, due to COVID, the challenge our customers faced was getting into hospitals, which delayed the installation of large medical devices. We've seen a strong return in demand back to pre-COVID levels, and our customers are reporting significant increases in their order books. This is to support healthcare providers around the world who are facing a backlog in procedures. Some of the complex assemblies we build contain a multitude of individual components and substitution to the bill of materials may not be possible due to medical regulatory qualification process. We have been proactive and responded to the challenges caused by extended lead times. Each facility produces a mix of assemblies for a variety of customers so we take a flexible approach to scheduling. This means we adjust our plans around the arrival of key components. We are working hard to minimize any disruption from extended lead times, and we've maintained high levels of utilization in our factories. Complex industrial technology. In the first half this year, we've seen demand increase. The other elements of complex industrial technology, of course, are high speed cables for data center customers. What we saw in the first half of last year was significant additional demand from customers who were stocking up to minimize any disruption that might be caused by the pandemic. This year, we've seen a more typical level of demand, and it hasn't hit the peaks that we saw a year ago. And that is why, when you look at the overall revenue number, it has reduced slightly. The other dynamic to be aware of in the data center cables is the move to the next generation of cloud infrastructure, as the market transitions from 100 gigabit to 400 gigabit per second. As this transition takes place, customers are reducing their demand for the 100 gig product, and we anticipate that demand for 400 gig will ramp up in FY23. Stepping through the movements we've seen in margin, the margin has been resilient in the face of headwinds we've seen in the first half of FY22. and this gives us confidence that we can achieve our objective to deliver an underlying operating profit margin of 10% in FY24. As we reported 12 months ago, last year we achieved unusually high margins in the first half as we benefited from low commodity costs and weak Asian currencies as a result of the pandemic lockdown in China. What we have seen this year is an increase in the copper price, starting around February of 2021, and also a normalization of foreign exchange rates. It's probably worth taking a moment to remind everyone of our approach to copper. For our power cord customers, where copper is a significant element of the product, we have contractual arrangements in the majority of contracts, allowing us to pass on increases in the price of copper. There is a short delay before the pricing change takes effect, which means that temporarily, There is an adverse impact on margins when copper costs are rising, but margins benefit when copper prices fall. When we pass on the higher copper costs, our absolute profit on a product remains the same. This means that there is a slight reduction in margin as a percentage of the sales price. Our gross margins have been adversely impacted by these factors and changes in product mix. Despite this, we've maintained a healthy operating margin. Within our business, we are continually looking at ways to optimize margins through a number of actions. We run continuous improvement programs, identify opportunities for vertical integration and targeted automation, and through our procurement initiatives. The challenges in the global supply chain have meant that input cost savings have been difficult to achieve. However, we've been active in other areas carefully controlling operating costs to optimize profitability moving on to the last slide in the finance section which is slide nine covering our cash flow we can see an improvement in underlying EBITDA of just under 31 percent and an increase in capital expenditure in the first half of the year in FY21 we slowed down capex while we waited to understand the impact that COVID would have on our business. This year, we've been accelerating CapEx, really focusing on the areas of our business where we can deliver future growth, including the EV sector and high-speed cable product sets. In the second half, we have a number of significant projects completing, including further deployment of vertical integration capability in Suzhou and the delivery of additional capacity for DECA. we had an adverse movement in working capital. As the business grows, there is an expected increase in working capital and part of the movement is due to the growth in revenue we experienced during the year. Our levels of receivable days and payable days are consistent with the position that we had at the year end. Where we have seen a movement is in the level of inventory. There are two reasons for this. Firstly, shipping times have lengthened goods transferring from our facilities in Asia to customers in North America and Europe so those times have lengthened and secondly the extended lead times in the global supply chain mean that we're holding additional inventory at some locations to ensure that we have raw materials on hand to meet customer requirements overall this represents roughly one week's extra inventory at the half year We expect this to normalise as supply chains and shipping lanes return to normal, but we are not expecting material improvements in these conditions in the second half of the year. We keep inventory under close control, but we need to strike a balance between meeting customer expectations and managing working capital. Interest in tax has increased slightly. We have had higher net debt since acquiring DECA in February. and there have been some timing impacts related to when payments and tax payments are made. Our cash effective tax rate for the first half of the year was 15.8%. The acquisition costs include the first round of earn out payments for DECA, which is trading ahead of the acquisition business case. Our acquisition of Irvine completed on the 29th of October and Prodamex and TC are expected to complete in the second half of the year. I will now hand over to Matt to go through some key points around operations and strategy.

Clearly, a huge amount of management focus, planning and hard work has gone into creating this diverse and resilient business. We have shown that we can grow sales, optimize margins identify compelling acquisition targets and acquire them at attractive valuations our team have overseen a comprehensive transformation of our operations delivering the quality business we have today our approach remains to control costs deliver excellent quality expand our product offering and keep our customers happy acquisitions are an incredibly important part of our successful expansion and the diversification of volex identifying acquiring and integrating the right businesses is a key pillar of our strategy going forward we are very selective and we will pursue only the best acquisition opportunities collectively our management team owns over 26 percent of bolex's equity So we see ourselves as perfectly aligned with our shareholders. On slide 12, I can go into a bit more detail around five key elements of our strategy. We work with customers to understand their particular requirements, which can be varied and complex. Our research and development team ensure that we stay at the forefront of technological developments. such as the next generation of high-speed cables that will deliver improvements in cloud computing infrastructure. We have been rolling out power calls based on our own extrusion technology. We put the customer at the heart of everything we do, ensuring we have strong, regular and clear communication. All our operations teams are measured on customer satisfaction and will continue to develop and enhance our sales team to ensure we have a deep understanding of our customers to identify opportunities to support them. We aim to create a best in class organization, leveraging our global footprint and scale to optimize production. This global footprint is incredibly important right now as customers look to reduce complexity in their supply chain by sourcing closer to their production sites. We are delivering several operational improvement projects with a particular focus on EV and high-speed cables. We think like owners, and when we deploy capital, we do this in a measured way. Capital investment is up this year, reflecting strong customer opportunities. People is the final element of our strategy. Our senior management team are aligned around a clear set of goals with a clarity of focus and shared purpose. These goals are cascaded through the organization to ensure everyone is working towards common objectives. So I would now like to go into a bit more detail about one of our most successful sectors, electric vehicles. We have a leading position, the leading position, in the manufacture of grid cords, which allows drivers to charge their vehicles at home. In the last 12 months, we've grown our customer base and the range of products that we offer. We work directly with automotive brands as well as with leading tier one automotive suppliers. This allows us to accelerate our involvement in new projects and delivers products into this fast growing market. We are now working with four tier one suppliers, giving us access to their respective automotive brand partners with new customers approaching us as the market leaders. As the adoption of electric vehicle technology continues to take off around the world, infrastructure for charging is developing. This is a further opportunity for us to deploy our capabilities and we are selling products that support the AC wall charging market as well as a number of new products under development. Our continued expansion in the EV sector is underpinned by investment in automation and vertical integration. allowing us to deliver these complex and safety critical items at a competitive price point. This will be a crucial differentiator as competition in the EV space increases. We've stepped up our capital investment activity this year. This is allowing us to pursue new customer opportunities and to improve the profitability of our sites. Much of the investment we make is driven directly by customer demand. In fact, the expansion we delivered in Batam last year, where we doubled the size of the manufacturing site, has been so successful that we are already considering further expansion at this facility. We have 2,000 people in Batam now working and we're already considering further expansion. Product development investment focuses on key growth areas, including our high speed cables and our electric vehicle product set. Our engineers are working to solve the real world issues that our customers are facing. As part of this, we identify new technology and register a small number of patents every year. We have made significant steps in optimization to improve efficiencies, automating production and vertically integrating. Our EV development facilities have been a focus for much of this investment. Our modest ERP investment is progressing well. This investment will allow us to improve the consistency of operations between our sites, simplifying cross-selling opportunities and helping us to globalize the customer experience. the majority of our investments pay back within just two years, helping us to deliver incremental operating profit and allowing us to maintain a robust return on capital.

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Turning to our acquisitions, and starting with an update on Deka, the business we acquired in February 2021. Deka is the leading manufacturer of power cords for the European white goods market, selling to the major manufacturers. It has traded very strongly since acquisition, beating our stretching acquisition targets. We've already secured a cross-sell opportunity with a new significant customer for DECA through an existing relationship we had within Volex. As well as power cords, DECA also makes wire harnesses for domestic appliances. We are now working with one of DECA's top customers in Batam, where we are also manufacturing wire harnesses. In October, we completed the acquisition of Irvine Electronics, a specialist manufacturer of printed circuit board assemblies for mission-critical applications in military aerospace, defence technology and medical applications. It works to the highest standards of quality with an impressive list of blue-chip customers in the US defence market, the largest defence market in the world. The defence market is attractive with long relationships and long-term programmes. Given the specialist nature of production and the fact that volumes are low, the margin profile is compelling. We have printed circuit board assembly capability from Irvine in California and Servatron in Washington, and we are now exploring a rollout of these capabilities in Tijuana. As well as cross-selling between the sites, we will match capabilities and capacities with customer requirements. We also announced the acquisitions of Prodimex and TC last month, and we expect both of these deals to complete in quarter three. Prodimex produces wire harnesses for global domestic appliance manufacturers. This is a great complimentary fit with our Decker acquisition in Europe and our factory in Batam, giving us a truly global customer proposition. As well as cross-selling, we will identify economies of scale to enhance margins. Buying Prodomex gives us immediate scale in the North American domestic appliance market. Prodomex operates from a modern plant in central Mexico, and this will be our third facility in Mexico. As mentioned earlier, we have a large complex assembly facility in Tijuana that specializes in high-mix, low-volume requirements. We also have a facility in Juarez, that specialise in quick-turn, low-volume manufacturing for complex industrial technology and medical customers. With the addition of Prodomax, we have further capacity for higher-volume projects, allowing us to provide a truly flexible manufacturing solution. TC is a long-established defence manufacturing business in Canada that specialises in wire harnesses for military vehicles and for off-highway automotive applications. This will be complementary to Irvine and will further build our presence in the defence market. The integration of these three businesses will be led by an experienced regional operations team who will look to maximise synergies.

And onto the final slide to take you through the outlook.

We made excellent progress in the first half of the year. and our facilities have been running at extremely high levels of utilization. Demand for consumer electricals has been strong for the last 12 months as consumers have had limited opportunities to spend on entertainment and travel and have focused on bringing technology into the home. We anticipate normalization in demand in the second half of the year as the economy opens up for consumers. The electric vehicle sector continues to demonstrate significant growth and we are proud of the important role that we are playing in this market. It is an area where we are continuing to invest to secure our long-term success. Lead times associated with consumer electrical and EV products are expected to be stable. However, there may be some flexibility in the demand profile as customers deal with variability in their overall production. We anticipate strong levels of demand to continue in the second half for our medical and complex industrial technology customers, although the extended lead times will create complexity in delivery. Our management teams and supply chain specialists will continue to work hard to mitigate any impact from our lead times on our ability to deliver to customers and to support them through these challenges. We are continuing to look at a number of very interesting acquisition opportunities. We have a great track record with the acquisitions we've announced so far. We will continue to focus on this area. With investment this year to deliver further customer growth, we are making great progress towards our long-term goal of $650 million of revenue and $65 million of underlying operating profit in FY 2024. And that is the end of the presentation. We'll now take some questions.

Beyond your contracts, allowing for you to pass on copper price increases, to what extent would inflation and other costs impact results? So as we said in the presentation there, it is standard practice for us to pass on inflationary costs to our customers. And we do that through repricing, we do that through contractual mechanisms, depending on the nature of the contracts. In terms of labour inflation, which is another inflationary pressure that we deal with, we have been operating factories in markets with high levels of labour cost inflation for many years, and we're very experienced in managing labour cost inflation through continuing to introduce technologies such as vertical integration, and through automation so that we can improve the efficiency in our factories and we manage those inflationary pressures as well. But it's something we've done proactively and effectively through the period is passing on those higher input costs, whether that's as a result of component cost increases or whether it's due to higher rates of freight. The next question from Matthew is, With the continuing acquisition strategy, will the business need to issue equity in the future? And in terms of our acquisition strategy, look, we retain ample firepower to fund our M&A plans, given our strong cash flows and our availability of our RCFs. However, like any company, we keep our options open regarding future capital structure and any acquisition funding, we're keeping our options open as well. So hopefully that answers that question. Have you got anything to add on that, Nat?

The only thing I would add is that if we did issue equity, which we have no plans to do at the moment, my interests and the other senior management team would stand their corner in any equity raise. I think that's very different to many other public companies and I think it sort of underlines the point that we truly think like owners in this business and I just want to underline that point because I think it's important.

Yeah, thanks Nat. The next question is a really good question from Kevin. Kevin says, Volex is a relatively small company compared to its customers which presumably makes Volex more of a price taker than a price maker. Do management recognise that as a risk and what actions do you take to reduce its impact? Did you want to say something about that, Matt?

Yeah, I mean, I would start by saying that we have a very, very sort of rigid understanding of our value to these customers. And so... know the best example of that is in the is in is in the EV space where we do deal with some big automotive companies and our view is look if you want to use our business you can use it if you want to if you if you don't don't you go to someone else and and right now we're in a situation where we have a very very good product we have a uniquely global footprint that it that that that um allows for the localization that these companies are are looking for and we are able to stand our ground despite being a much um as you say a much smaller company so so i think that we are we are our business is not as it is not as um it's not commoditized at all at the moment we're in a very very strong We've got a good product, we've got a good factory footprint, we're well managed, and we enjoy robust pricing discussions with all of our customers.

Thanks, Nat. The next question is from Robin, and Robin's question is about how the share prices responded today following this announcement. And look, our focus as a management team, as Nat said, we're shareholders in the business, so we're very aware of the share price, but we feel we've delivered a strong set of results. We're very pleased with the progress that we made and the growth that we have demonstrated. And as a management team, we're doing all the right things and we're focused on delivering our long-term objectives. And I think that We're confident that we've got a fantastic business here that's delivering great results. So, I mean, that's all I can really, really say because it's very difficult to give any commentary on what goes on in the stock market. Things move for a variety of reasons. Just moving down just so I can try and answer some more questions. So there's a question here from Ian. about providing more detail on figures related to share-based payments and are these ongoing for senior management or one-off related to acquisition? So it's a good question, Ian, because actually it's a combination of things. And in terms of the time we have available today, I would point you to the annual reporting accounts where we break out in our disclosures, quite extensive disclosures in there about the different moving parts. But we do occasionally use share-based payments to incentivize management teams that come on board as part of an acquisition and clearly it's important to retain that talented capability and then in addition like all listed companies there is an element of share-based compensation that's used to incentivize our senior management and align them with the interests of shareholders so please feel free to Look at our annual reporting accounts on the website if you want to go into a bit more detail about the different elements that are in there. Next question comes from Damien. So Damien asks, are supply chain issues causing customers to reduce their order levels because of their own component shortages? So in terms of what we are seeing from our customers, in fact, many customers, they're increasing their order levels because they're asking us to secure supplies of components and they want to put in orders for a longer period of time. So if a customer, as an example, may order for three months, some of those customers are now ordering for six months or even longer to help secure the supply. Every customer is different, have a different set of facts and circumstances related to them. But overall, we've seen very strong demand and we've been managing that demand throughout the first half of the year.

Just finding a next question. There's a question from Mark.

And Mark says, do you have any sense of how much the supply chain issues are due to excess ordering to ensure continuity of inventory levels in the future? He says, Infineon alluded to this yesterday. Is there a possibility this might quickly unwind? Now I'd be interested in Nat's perspective on this, but I would say we have a very experienced management team who have been in this industry for a long time and we of being very careful that we don't get caught out by customers over ordering and then those orders changing. But do you have a perspective on that issue, Matt?

Look, there's definitely an element of it. There's no doubt that you saw it with high speed customers over ordering the first half of last year. You also see it the other way. You see customers being worried about being able to fulfill looking at component shortages and therefore under-ordering because they're worried that when they receive our goods, they won't be able to assemble what they are making as their end product. So there's definitely... an element of this, but what you are seeing in the inflation numbers that are coming out, for example, in North America at the moment, you saw the US inflation numbers yesterday, there is an enormous amount of demand that has been created by the COVID stimulus that has been brought in across governments across the world to stimulate the economy to come out of COVID. So that is creating tremendous tremendous opportunity in our business and we are managing it as best as we as we can and i think we're managing it as as well as anyone and if if not better than anyone in our in our in our uh in our sector good thank you matt thank you for that perspective there's another question from mark so mark says do you have any insights

in being able to split pent-up post-pandemic demand versus structural growth trends and how to manage that. Look, in terms of how much benefit we see in revenue through to pent-up demand from COVID, I mean, my feeling is that our strong revenue growth reflects high levels of customer demand across all of our sectors, as well as the acquisition of DECA. And it's difficult to split out, but there is undoubtedly some impact from pent-up demand as a result of COVID. particularly within medical, and that's because there's a need for medical equipment to accelerate patient screening and therapy following the deferment of treatment during the pandemic. I think demand for EVs was particularly strong regardless of any COVID impact, and we've seen that in the fact that the revenues more than trebled year on year, and that just really reflects our growing presence in this sector. So I think it's different depending on the different sectors. I mean, we did mention in the presentation that consumer electricals has been buoyant and we think that will come to an end at some point and it will return to normal levels. And we're very comfortable with that because we've been winning new customers and we've been achieving cross sales between DECA and our other factories. Did you have anything to add on that, Matt? No, it was a good answer. Thank you. Question from Steve. What do management see as the barriers to competitors entering the company's key markets? And how will management respond to the trend towards the commoditization of products? Well, I think we answered the second part of Steve's question earlier. In terms of the barriers to entry, for us, it's really about the reputation we've built as quality, reliability, customer service and being a low-cost manufacturer. So there's a lot of things that you have to get right. And if I look at an area such as electric vehicles, clearly that will be an attractive market for our competitors, but it's a very difficult product to produce. There's a lot of technology that goes into the power products that we supply into the electric vehicle market. And we have significant expertise that we've built up over years, not only of how to design those products for the successful manufacturer and keeping to the utmost quality standards that automotive suppliers expect?

Yeah, I would add a couple of points to that. I mean, first of all, on the EV side, safety certifications are a critical point. So we are well known to the safety regulators around the world we have literally hundreds of safety certifications through our our our strong global position in power core so that's why we got into ac vehicle charging in the first place and that's why some of the world's largest companies have approached us and we have a a global footprint in this space so we're the only truly global power cord producer. There are many China-centric businesses out there, but there are none that have our global footprint. So that is also incredibly important. And I think the final point I would make is that there is a move towards these large global players wanting to deal with companies with a certain size and scale. And the fact that we are a public company with a publicly available balance sheet, we're not a single site. We have 19 sites, I think, or 18 sites around the world. That is very, very important. And so we punch above our weight. Although we're a company now with a market cap of almost a billion US dollars, We are put in the same bracket as an Amphenol or as a Molex, which are companies that are 20 times our size. Because we have a great brand, we have, as I said before, a global footprint. And we are in a very, very strong position because of our cost base and where our factories are located. Good.

Thanks, Nat. We've got one more question. question that we have time for so there were lots of questions so i apologize if we didn't get to your your question i've tried to go through as many as possible but the question from from john a was where do you see gross margins going and i think um hopefully through the presentation we explained to you some of the factors that have impacted the margins that we had in the first half of the year. Some of those are temporary factors and I feel that we've dealt very successfully with the inflation repression and passing those through to customers. In terms of addressing the question, we are focused on targeted operating margin and our operating margin is to be at 10% operating margin in 2024. So we will make sure that we have the right mix of operating costs and gross margin through our businesses and the mix of customers and products that we support to deliver that. And that's still very much our plan. So that's the last question. I'm going to hand back to Nat just to wrap up.

Okay, thanks, John. And listen, everyone, I just want to apologize again for the kind of communication issues that we had. I tried to sort of say something earlier on, which is that this is why we need higher data transmission rates and why we need to accelerate the move from 100 gigabit per second cables to 400 gigabit per second. So John's and my communication issues hopefully will be seen as a bullish indicator for our complex assemblies customers going forward so I hope everyone has got something from this presentation most of all I want to thank the people who work at Bolex we have 7,000 people in the company today and I cannot express more strongly thanks to them because they have worked incredibly hard during this half year period to generate the results that we have achieved we have been able to present today so thank you to them and thank you to everyone on this call