Halma (LSE:HLMA) — Investor Update

0:02 Good afternoon, and welcome to the HALMA Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please simply The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you would give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Charles King, Head of Investor Relations and Mark Ronketti, CFO from HALMA. Good afternoon. Good afternoon. Thank you very much, Mark, and a very warm welcome to everyone listening in to this presentation today.

0:47 Mark has already introduced us, but just to

0:49 reintroduce us as a team, I'm Charles King, the head of investor relations at HALMA, and I'm joined today by Mark Rolketti, our chief financial officer. In terms of the agenda today, it's a pretty simple one as you can see. As this is the first time we're presenting on the investor meet company platform, I thought it was appropriate that we give it a brief introduction to HALMA to start off with. So I'll spend about ten minutes that. And then I'll turn over to Mark who will discuss two areas. One is our sustainable growth model, and then he'll give an overview of our first half twenty twenty two results. And following that, as Mark said, we'll have time for some questions. So just in terms of that introduction to HALMA. So as you can see, we're a a global group of life saving technology companies, and we provide innovative solutions to many of the key problems facing the world today.

1:47 Those problems include areas like climate change, the increasing scarcity of natural resources, the pressures that come from growing, aging, and urbanizing populations.

1:59 Our purpose that you can see on the slide there, of growing a safer, cleaner, healthier future for everyone every day defines our culture and ensures that we focus on providing solutions to challenges that are essential to people and the planet. And I'd like to now show you a video that brings that purpose to life and shows how we create value as a business.

2:27 We are a global group of companies United by a purpose. A purpose that keeps us moving forward. We know that every problem has a solution. And that's what motivates us. When we face the biggest problems of our time. Like water pollution. Chronic illness. And climate change. We know it isn't easy, but that's why we do it. It's in our DNA to work the problem.

3:19 The problem of how to make roads safer. How to make the air we breathe cleaner. How to keep an aging population healthier. We see real problems. We look at each one from a different angle. And we innovate to solve them. Working with each other. And with our partners. Every year, we're enabling 200,000,000 tests to keep people's water clean and secure.

4:00 Every day Our technology helps support thousands of life changing surgeries. And every minute Our technology is supporting the change to green energy. Just some of the impact that's made us one of Britain's most admired companies. And we'll continue to work to find solutions To grow a safer Cleaner Healthier future For everyone, every day.

4:51 So let's start with some numbers around what you've just heard in the video there. And here's just an overview of some of the key numbers about HALMA. We're a global group of around 50 companies, each focused on niche markets with strong underlying growth drivers. We have over 7,000 employees. We operate in over 20 countries, and we provide our products and services in over a 100 countries. We're listed in London, and we've been a member of the FTSE hundred Index since December 2017.

5:24 In the last financial year, to March 2021, we delivered revenues of just over £1,300,000,000 and profitability of 278,000,000, which was an increase over the prior year despite the challenges we saw from the COVID pandemic. And Mark will talk a little bit about that in in a moment or two. And we were also able to continue our almost unique track record of delivering dividend growth of 5% or more for more than forty years. And we're proud of our ability to deliver robust financial performance in terms of growth and returns whilst also ensuring that we meet the broader needs of stakeholders. This has been recognized not only by the financial markets who which value us at around 9,000,000,000, as you can see there, but also by a broader range of stakeholders, who in January 2021, for example, awarded us the accolade of Britain's most admired company.

6:22 But, actually, the most recent most admired company survey from management today just came out a few days ago, and we were once again in the top 10 of the most admired companies in The UK. So, those accolades keep coming. That's the third year running we've been in the top 10. Moving on just to have a look at our markets. I've already mentioned that we're a global group of companies, and this slide shows our main markets by geography on the left and by our three sectors on the right. Looking at the left hand chart, you can see that The US is our largest market representing nearly 40% of our revenues, followed closely by The UK and Europe, which together are over one third of revenues. Other mainly developing markets in Asia Pacific and elsewhere around the world, including in The Middle East and South America, represent together around a quarter of our revenues.

7:19 We have three sectors aligned with our safer, cleaner, healthier purpose, with safety being the largest at 45% of revenues in the last financial year, and medical and in and environmental and analysis, each accounting for nearly 30% of the revenues each.

7:39 This slide shows the market areas in which we operate. Our growth in these markets is underpinned by very long term and fundamental trends. Global demographic changes as populations grow, age, and urbanize, climate change, and the need to address the increasing scarcity of and pollution of life critical resources, such as water and air, as you heard in the video, and the growing demand, of course, for high quality health care globally. Set out under each of the headings of safer, cleaner, and healthier are our main areas of operation. Let me me bring this to life a bit by describing some more of these in a bit more detail. Starting with safety.

8:27 In the safety sector, our two largest business areas are fire detection and people and vehicle flow. They incorporate two of our largest companies, Apollo Fire Detectors based here in The UK, and BEA based in Belgium. Apollo is the largest of our seven fire detection companies. Its solutions protect people from fire in over a 100 countries around the world. And we also protect a number of iconic buildings. You can see there, The Shard, but amongst others that we protect are the Albert Hall, Buckingham Palace, and the White House. Overall, we estimate that Apollo's fire detectors keep people safe in buildings covering an area of 5,000 square kilometers.

9:13 That's an area equivalent to twice the size of Luxembourg. Our other fire detection businesses around the world include Ampac in Australia, which has a similarly leading position to Apollo. And you can see there the Melbourne Arena, one of the the iconic buildings that they protect down in Australia. And two more recent acquisitions, Ramtek, which provides temporary fire detection systems for use, for example, in construction sites, and FireMate, which provides a software solution for fire system installers to ensure that they keep systems up to date. In people and vehicle flow, we have two companies, BEA, I've already mentioned, a leading manufacturer of sensing solutions for automatic door systems products could be found around the world everywhere from your local supermarket, from your office to transport hubs, and large industrial and logistics facilities.

10:09 And in 2018, we added NavTech to our portfolio, which uses radar technology to keep critical infrastructure, such as airports, safe and secure, and also to improve road safety on increasingly busy motorways and road tunnels, including, as you can see here, the M 25. Moving on to environmental and analysis. And highlighting two market areas, water analysis and treatment, and and gas gas detection, which are key areas in addressing climate change, waste, and pollution. HWM is one of our seven companies operating in water analysis and treatment. It helps utilities monitor the performance of water, wastewater, and gas networks.

10:57 Its leak detection solutions, for example, enable UK utility companies to save billions of gallons of water if every year through the prompt detection of leaks. And you may have seen in the video, PalinTEST, their water analysis technologies are used in over 200,000,000 tests annually. And we supply of those 200,000,000, we supply around 5,000,000 water quality tests each year to partners working in international relief and development. In gas detection, we have three companies, Crocom, Sensitron, which are focused on detecting hazardous gases mainly in industrial environments, and SENSIT, which enables natural gas utilities, distribution, and transmission companies to detect leaks, preventing emissions of what is a potent greenhouse gas. So natural gas is mostly methane, and that is a very potent greenhouse gas.

11:54 So, clearly, stopping those leaks is very important. Overall, we estimate that our gas sensor products protect the safety of more than a quarter of a million people every single day. And finally, medical. In the medical sector, our products support more than 7,000,000 surgeries a year. MST, for example, provides instruments for eye surgery, enabling treatment of two major causes of preventable blindness, cataracts and glaucoma. And PermaPure's products, in oxygenation have been in high demand during the COVID pandemic, increasing patient comfort ventilation. In health assessment on the right hand side of the slide, we supply over a million diagnostic products a year, for example, in blood pressure monitoring where Suntec's products enable accurate measurements in challenging environments, for example, in air ambulances or when a patient is running on a treadmill.

12:57 And then on the bottom right, you can see Kila, which has supplied innovative ophthalmic instruments for well over a hundred years. Visited an ophthalmologist, it's quite likely that they've used tequila product in their diagnosis. So that's a very brief introduction to HALMA. I'll now hand over to Mark who will describe our sustainable growth model.

13:19 Thanks, Thanks, Charles. Hi, everybody. So, yes, I'll be running through shortly our sustainable growth model in terms of how we deliver. I guess to start the section, just worth an overview of the output, so an overview of our performance over the last decade. And as you can see, even with that challenging year in 2021, which included the peak of the effects of the COVID pandemic, delivered double digit revenue and profit compound annual growth over this period.

13:54 Further to that and coming out of the pandemic, we've we've talked before, but absolutely believe that the pandemic has further the value of our sustainable growth model, the benefits of our clear purpose and strong culture, our positioning that we take in global niche markets with those strong long term growth drivers, and the flexibility of our business model, which allows our companies to be agile and responsive

14:22 in fast changing markets. So I'll pick up on the key elements of this model as we work through, and, of course, how has that model enabled us to sustain that strong performance over the last decade. So if we start with our headline sustainable growth model, and everything starts with our purpose of growing a safer, cleaner, healthier future for everyone every day. This purpose sits at the heart of our sustainable growth model.

14:53 It defines our culture and ensures that we're focused on providing the solutions to challenges that are essential to people and the planet. We describe and talk about our culture through the HALMA DNA. This gives us an inclusive, motivating, and stretching ambition for everyone at HALMA to play their part in delivery of our purpose. There are then four other core elements of our sustainable growth model, all interlinked with each other and with our purpose and, of course, with our DNA. First up, we have our growth strategy, which is to focus on those niches in global markets, those niches that have resilient long term growth drivers.

15:41 We sustain and expand our growth opportunities through continuous investment in organic growth and in acquisitions.

15:51 We then move on to our business model, the way that we're structured. This This enables us to be agile and responsive to changes in technology and in our end markets. In the longer term, this gives HALMA that agility to evolve our portfolio by buying and selling businesses. And then in the shorter term, it allows our companies the freedom and their own resources to be innovative, agile, and responsive to their market changes, all of this supported by the expertise of our centrally funded HALMA growth enablers. For this model to work, we need to constantly ensure that we've got the very best leaders and people for the future.

16:36 Examples this past year have shown how effectively we manage our leadership succession as we grow, and this included a new chair, new set of CEOs, divisional CEOs, and company MDs, and and we we continue to build a highly inclusive and diverse culture by setting ambitious targets at all levels. Finally, we have our sustainability framework. This prioritizes the areas of sustainability which are most material for HALMA and supports our companies to achieve them. We've been really disciplined over a long period to evolve and align all of these elements collectively, and this has enabled our companies to create value through many different circumstances.

17:25 For example, like our peers, in the first half of this financial year, we experienced on the one hand substantially higher demands and accelerated pace of change in our markets. And on the other hand, increased macroeconomic uncertainty and supply chain, logistical, and labor market disruption.

17:45 Through our sustainable growth model, HALMA companies are empowered and able to meet these challenges in a variety of ways, either through finding alternative supplies because they have their own procurement functions or by designing in alternative components because they have their own r and d capability. They can increase contingency stock of key components where they're able to because they have their own manufacturing operations and their own individual balance sheets. And, of course, by selectively increasing pricing because they have their own channel to market and their own individual strong market positions. So now let's look a little more deeply at our growth strategy and our financial model.

18:35 As I mentioned, our choice of end markets results in a highly sustainable financial model. With a disciplined focus on markets which have resilient long term growth drivers and market niches that offer consistently superior organic growth and high returns. We seek to have leading positions within these niche markets and to sustain them through continuous reinvestment.

19:04 This supports our delivery of consistently strong growth and high returns, but it also means that we're highly cash generative. And this allows us to maintain modest levels of leverage while making substantial investments in future growth and returns. If I think about our capital allocation, the first priority of this continuous reinvestment is back into organic growth in r and d and product innovation to maintain those strong market and product positions and drive growth and maintain high return on sales. That strong cash generation also allows us to make value enhancing acquisitions in core and adjacent markets to expand our growth opportunities and our geographical reach.

19:55 And finally, while allowing us flexibility to invest, it also enables us to sustain a dividend a progressive dividend policy for our shareholders as we heard from Charles as we've done now for more than forty years.

20:11 Let's have a look at how we create value. Our sustainable growth model creates value for our stakeholders over the long term through delivering the combination of growth and returns that I've just discussed, but also positive impact. That positive impact that we have on the world through how we operate and the solutions we provide as you just heard from Charles. There's five key areas which are the focus for our investment and resources. Number one, organic growth. Secondly, m and a, talent, our sustainability, and, of course, our infrastructure. In the first half of this year, so just kind of putting this into context of of the short term, we further increased our investment in all of these areas to sustain our growth and returns and positive impact over the long term.

21:06 So as I say, let me just now just finish by bringing that to life with an overview of our first half results. I was really pleased to present at the half year that we delivered a strong performance in the first half. We had a particularly pleasing financial performance given the ongoing volatility faced by our operating companies. So let me walk you through that, and I'll start with the headline performance.

21:35 As you can see, we delivered record half year revenue and adjusted profit strong growth across all sectors in all major regions, high rates of organic growth, and a good contribution from recent acquisitions. If we look over that longer term, it's great to see that that compound average growth rate of both revenue and profit are in excess of our internal KPIs at 11%. Looking now across kind of the key areas that we assess in our half and full year results. So So firstly, firstly, starting with with growth. It was good to see revenue was up 19%. This supported by continued good order momentum.

22:20 Our adjusted profit increased by 27%.

22:24 And it's also worth noting that revenue was 13% higher and profit 20% higher than in the same period two years ago. It's clearly the comparator here was in the peak of COVID with our financial year running from the first of April through to the end of March. There was an impressive 74% increase in statutory profit. This did include the gain on disposal of Txcom, one of our businesses in the second quarter. That said, even with these very high levels of growth and the consequent demand on working capital, we continue to deliver solid cash generation and increase investment. Cash conversion was 85%.

23:11 We maintained a strong balance sheet with gearing unchanged from the year end at 0.7 times. Our R and D spend increased in line with our growth and was maintained at 5.6% of our revenue. And it was also pleasing to see that we were able to complete 10 acquisitions in the first half of the year with the spend totaling a 107,000,000 in the first half. And then since our half year results, we've completed a further two acquisitions, taking our total spend for the year to date to 146,000,000.

23:48 As a result of that strong growth, our stable gross margin and the slower than expected return of variable overhead cost reductions where we had made savings in response to COVID pressure on the top line, we delivered high returns with return on sales increasing to 21%, which is actually towards the higher end of our target range of 18% to 22%. Our growth in key measure for our business up more than two percentage points to 14.9%. This reflecting the benefit of the strong constant currency growth. And then overall, I guess, you take a big step back and you think through this strong performance, our financial strength, our confidence in the future supporting the increase at the half year and our interim dividend dividend of 7%, which maintained that long term progressive dividend policy.

24:49 So now just having a look at our performance against our financial k p o KPIs. Overall, really pleasing and excellent performance in the first half of the year. As I said, with record revenue and profit growth substantially ahead of our KPIs and a solid cash performance, especially given those working capital that's being required to support that exceptional level of growth. And this growth was delivered alongside high returns with RoTIC benefiting from those strong levels of constant currency growth and return on sales, as I mentioned, above average levels. Of course, then this short term performance was delivered whilst maintaining those high levels of investment both organically with the r and d spend also through acquisition.

25:41 So to summarize, the core elements of how the sustainable growth model continue to to enable us to make substantial progress in both the short, medium, and the longer term. As you've just seen, we delivered record first half revenue profit in dividends and continued strong returns supported by that agility in our companies in what remain fast changing markets. We further increased our strategic investments to sustain our growth, returns and the positive impact over the long term. And we've got a healthy m and a pipeline covering all three of our sectors. In the half year, we updated in terms of the outlook, and we said that our shorter term trading remained positive.

26:31 This supported by a strong order book and order intake remained ahead of our revenue in the same period last year. So taking all of these factors into account, we said that we expect to continue to make progress in the second half of the year. So with that, the summary of who we are, what we do, how we execute through our sustainable growth model, and hopefully, some reinforcement through our half year results, and we've now got some time for some q and a. So thank you for listening, and we'll hand over for for q and a. That's great. Charles, Mark, thank you once again for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the right hand corner of your screen. Just please simply type in your question and then press send. But just while Mark and Charles take a few moments to review those questions submitted already, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investment company dashboard, and we'll notify you by e mail when they are ready for your review. Charles, obviously, if I could ask you to open up the Q and A tab, you'll see investors have submitted a number of calls throughout today's If I could, if I may, ask you to read out the questions, perhaps who it's from, and give a response where it's appropriate to do so, and I'll pick up from

27:47 you at the end. Great. Thank you, Mark. I'm very happy to do that. So we'll start with the first question from Peter Ray. Thank you for the question. What is the split between organic and acquisition growth? Is it fifty fifty, Mark? Yep. No. More more than happy to to, I guess, put a little bit of color onto what I referred to as our financial model. So our our stated aspiration is to double the size of the group every five years. To enable us to do that, we need to grow at 15% per annum. And we split that 15% growth, seven and a half percent organic, and seven and a half percent through m and a. So we're looking to double. As you saw in the slides, with that aspiration, we've been achieving sort of 12%, and it's largely fifty fifty, a a little little bit bit swayed swayed towards organic.

28:42 The key part in there for the financial model to come back to that high returns, high cash generation is that that's a self funded model. So

28:51 we're we're able to deliver that organic growth, reinvest organically that frees up the cash to allow us to also invest inorganically to deliver that growth, as I say, with an aspiration of 15% per annum. Great. Thank you, Mark. So the next question comes from Simon c. How do you think HALMA has improved as an organization through COVID from an operational perspective? Yeah. Lot lots of answers I could give in terms of what have we learned, how have how we improved from from COVID. I I think the first thing that I alluded to it in my my presentation is actually, once again, it's reinforced our sustainable growth model, whether that is those actually, how do we ensure that we remain focused on those long term growth drivers? How do we ensure that we're in those critical niches which enable us to be critical throughout, enable us in many instances to be mandated through the pandemic. So certainly on the being in the right markets, being aligned to our purpose is is reinforced.

30:01 But I think a couple of things more importantly are around then the org design and, in fact, the agility that that gave us by in the center being able to run many models in the beginning, but quickly being able to speak directly to to the the MDs and the boards of each of our operating companies, sharing the context of some of the decisions that we're making, some of the challenges that we were faced with, but then allowing them with their deep knowledge of their markets, deep knowledge of their customers, ownership of their own p and l balance sheet cash flow to go and take the appropriate action for their business meant that we could react really quickly. So I guess the the final point around that agility was just how we were able to stand up very quickly away from nine times out of 10, it's appropriate to operate through our sector structure. So very much you would be operating sector by sector, not by geography.

31:01 But certainly with the pandemic and the challenges that it caused, there were many more things that were needed to be spoken about on geographical background. So, again, just being able to stand up those networks really quickly, putting contact with people locally was a key learning for us and something that we'll continue to leverage when we need to moving forward. K. Thanks, Mark. One now about geographic exposure from Matthew r. With nearly 40% of your revenue from The US, how do you see that balance moving forward? I guess that's the balance of geographies across the business. And how would you look to balance the geographic exposure through m and a? Yeah. Good question. And and certainly sort of winds back ten, fifteen years, and and I think then the group were looking at how does APAC and in particular China become a strategic priority for the group and how do you grow in the region?

32:01 And at that time, interestingly, they set themselves a target of x percent of the group's revenue to be in markets outside of UK, Europe, and The US. But quickly, what they learned was because we were in such good markets locally, we were able to generate really good growth in those home markets where we already had a good standing. So it wasn't about how do I actually get a percentage of the group's revenue in a different region, but very much how do we get faster growth in the new regions because we can deliver strongly. Moving forward, we've been very successful. I think Asia Pacific in particular is a good opportunity for us. And if you think with China, with their latest five year plan, so much more now focused on a greener China, a transition into a more sustainable China, that has to be an an opportunity.

32:58 We've grown really well over the last ten, fifteen years organically locally. But what that has now shown us in our experience actually in The US is that to really accelerate your growth exactly to your question, you need to be looking at inorganic growth in region. And we now feel that with the number of employees, the number of companies, our hub in region, that that's a nice platform for us moving forward. So strategically, we're not saying we need to get to this percentage, but we absolutely see in line with our purpose if we're going to be safer, cleaner, healthier for everyone every day, then we can look at further expansion internationally. Perhaps another one on acquisitions while we're we're on that topic, Mark. With acquisitions an important part of your business model, could you explain the integration process of newly acquired companies?

33:56 Yes. Yes. Of course. I think the stock point there is it's relatively light touch, but I think it's almost worth just winding back a step or two in terms of our approach to m and a, which feeds into that integration process. So what we're actually looking to do is, I guess, in its simplest form, acquire companies that aren't for sale. So we're looking for successful companies with all of those attributes that we've talked to in terms of alignment, purpose, culture, all of the the right end markets, the right financials. We're then looking to build relationships with those businesses over a period of time. And then at the point they come to sell, HALMA becomes a home for that business.

34:42 So we're not looking necessarily to go into auction processes. We're talking to, on average, between six and seven hundred companies at any one time in terms of those companies we're building relationships. That relationship may be as short as six months before we we look at acquisition, or it could be as long, and I think Charles mentioned AMPAC earlier. Mhmm. We knew Alf, the owner, for over twenty years before acquiring his business. So by building up that relationship, part of the what we call our transformation plan at the outset, Firstly, what you're doing is laying out the future cash flows. Secondly then is what are we doing on the integration process? So the key focus of the integration is twofold. First up is how do we ensure that this business has the appropriate governance control and compliance culture.

35:34 With that, we've got a very clear integration process. It's about having the appropriate controls, having the appropriate systems. It's not a consistent system, but have we got the right controls that are owned locally? And then secondly, it's about going back to that transformation plan saying, when we made the decision to invest and acquire this business, these were the key areas that we were looking at to drive those future cash flows. So how are we performing about even making those investments, making those changes? And, again, we track that through. The key thing in all of this is that every business that we acquire, one of the prerequisites is that we have a HALMA employed divisional chief exec who then chair that operating company. And those DCs chair four or five HALMA companies, and they become a really critical link between the group and the operating company to help them through that integration process.

36:36 And perhaps we could do one more on acquisitions, and then maybe I'll answer one and give you a break, Mark. Okay. Another one from Peter Ray. As you grow, is it more difficult to find suitable acquisitions? Yeah. There's a few facets to to to that question that that we often get asked. So let me just, I guess, answer that question from a scalability perspective. I guess two angles there on on the scalability perspective. One is, you know, we've got 50 companies. How many could you have if you keep acquiring? The reality is sort of ten, fifteen years ago, we had forty, forty five companies. Today, we we have 50. So on average, we're buying five or six companies a year. We're probably merging two together and and divesting.

37:24 So don't get much of an expansion in terms of the number of companies. In addition to that, our sector structure where we have the three sectors actually probably enables us to have at least 50 companies in each structure. So plenty of of bandwidth there in terms of scalability on on m and a. The other, I guess, angle then is from a financial model perspective. Surely, it becomes harder and harder. You're looking to acquire seven seven and a half percent. Surely, you'll have to do a transformational deal. And I guess the point there is even if you just work back the the mathematics on that, we're looking to acquire seven and a half percent. So make the math a little bit easy. 300,000,000 of profit looking to acquire seven and a half percent rounded up.

38:18 You'll then think, yeah, okay. How do we acquire 25%? Double that again. You're still only ever really looking. So that's how do we acquire 25,000,000? Apologies. Not percent. How do we acquire 25,000,000 next year? Relatively easy over five years. Double that again in five years. Double again. Long, long time before you you get to having to do a transformational deal. And then finally, I guess, the the restriction would be availability of of assets on the market. And as I say, today, we're talking to between six and seven hundred companies. From a scale perspective, we've got everything from sort of 500,000, 1,000,000 profit companies all the way up to those that are a similar size to the largest companies in the group, so sort of $2,530,000,000 of profit. Again, we've got confidence that we can grow those companies within the group. So from that perspective, we don't see any end to the runway in terms of acquisition opportunities.

39:22 And then maybe I'll just pick up a couple that I can see on on my screen here, one from Dennis b. In which sectors would you like to make further acquisitions? I think the answer is across all three of our sectors, and that pipeline that Mark talked to is is comprised of strong pipelines in each of our individual sectors in safety, medical, and in environmental and analysis. So a broadly spread pipeline with lots of opportunity as you can hear. One other question then from Barry m. The discharge of raw sewage in The UK is very topical and pressure is rising on water companies. How do you see this impacting HWM? Well, absolutely, I think it's a very interesting opportunity for HWM, which historically has been more focused, I would say, on the the the the preservation of clean water, so particularly leak and pressure detection in clean water networks.

40:18 But over the last few years, we've recognized that that the the regulatory pressure from The UK water regulator, Ofwat, also turned to not just preserving clean water, but ensuring that sewers don't overflow and and pollute and cause disruption. And we've launched a number of products. HWM has launched products into that to address that issue, particularly a float sensor that that remotely triggers warnings to water companies if a sewer is backing up and might be at risk of overflow. So it absolutely is an opportunity for HWM as it moves forward and one that we would expect to to be picked up by The UK utilities to to stop those kinds of issues in the market. So, yes, it's a it's a it's a good opportunity in in wastewater for them as well as, obviously, on top of the opportunities that they have in in clean water.

41:13 So perhaps I can turn back to you, Mark, in a slightly different area looking at health and health care, one from Bob m. What are your plans to develop your business in higher tech and software enabled segments of health and health care? And perhaps thinking of our recent acquisition of Perigen, for for example, amongst others, I would guess. But Yeah. It's it's a good question because, obviously, med tech, everything in terms of that technology software in in health care is is booming at the moment and certainly a lot of interest. I think a couple of things to to think about is each of our individual businesses is thinking through with the support of our central innovation digital team. And when I say central team, that's kind of a core team of four or five experts that are there to support and enable each of the individual operating companies.

42:10 And what we're then doing with each individual operating company is a start point is thinking through what's the scale of the opportunity, where are the threats, where do I sit today in terms of the the digital value chain, where do I sit on what we call our digital playing field, and most importantly, where do I need to get to and by when. And, of course, what is the reason for getting there? Is it a defensive play to maintain current market positioning growth? Is it a growth opportunity play in terms of if we can get there quicker, there's more superior growth? So that's happening down at the individual operating company level. And then quite rightly, it's sector. The sector are then looking and thinking, okay. What individual assets are out there that potentially, on their own route, might stand up in terms of their technology, in terms of their growth, in terms of the business, but how could we use that technology and expertise elsewhere in the group? And to Charles' point, recently acquired Paragen, which is a AI company in terms of of birth care.

43:18 So, again, a new market for us, but really interesting both in terms of its standalone operating company, but how can we use and share that expertise wider. So it's very much bottom up aligned with with top down. I think the key in all of this is ensuring that we absolutely keep focus on those niches, absolutely keep focus on what problem are we solving for whom and how much are they willing to pay for it and ensure that we're competing or working with partners as appropriate. K. Thank you, Mark. Perhaps another one here from Peter Ray, just a very simple one what's your target ROCE. Do you want me to take that? Or I can take that. So, Peter, you'll see that that that we've that we published a set of KPIs amongst them is a return on total invested capital.

44:12 That's a post tax return, and our threshold for that is 12%. Most recently, we delivered 14.9, so well above that threshold. And that's right. That 14.9% is pretty much double our cost of capital. So what we're really looking to do is deliver consistently strong returns well above, well ahead of our cost of capital in each year. So and that's what we've if you look at the the historic track record of doing that, that's been very strong. So we've we've certainly done that for for ten years plus, and that's the that's the intention to keep doing it. So on a return on total invested capital post tax, a 12% threshold.

44:59 We also publish in our annual report a return on capital for the for the company for the company's overall pretax return, and that's between 7075%. But we don't set a target or a KPI around that, but we always do report on it. So very visible there. And I think probably to conclude, actually, looking at the questions, I think a general one here from Michael d, what milestone should shareholders look for in 2022? It seems an appropriate one to ask as the last question. No. Very good. And think, really, it's it's about a continuation of that sustainable growth and and those aspects of the the sustainable growth model. So if you're thinking about that organic growth, that acquisition growth, that continued growth with returns, but most importantly, through how we're now thinking about that sustainable growth model of growth plus returns plus positive impact.

46:00 And I think the milestones within that, we're very clear about our KPIs from a growth perspective. We've we've touched on those today. We're very clear about our returns. And with that purpose aligned growth in addition to our sustainable network in terms of reducing our negative impact, leaves us really well placed in terms of growth plus returns plus impact moving forward. Charles, Mark, thank you very, very much indeed. And I think you've taken all those questions you can from investors. Of course, the company will be able to review all questions submitted today. And of course, we'll publish those on the Investor Meet company platform and notify you by email when they're ready for you your review. Charles Mark, I know investor feedback is important to the company, and I will shortly redirect investors to provide you with their thoughts But I guess before doing so, if I may, just ask you for a few closing comments to wrap up with. And then as I said, I'll redirect investors to provide you with their thoughts and expectations.

46:57 Great. Thanks, Mark. And I I guess first thing to say is is thank you, Mark, to you and and the investor company. It's been a pleasure working with you and having our our first presentation. So thank you. And also just thank you to the attendees today. There were some really good questions in there and really focusing on the bright areas of our strategy. So to to conclude, I think, really, three key areas. Firstly, taking away how we create value as an organization, and we do that through a combination of growth plus returns plus impact. We then think about how do we execute in terms of delivery of of that value creation, and that's through our sustainable growth model. So through everything being aligned to our purpose, the end markets that we're operating in, the DNA, the culture of the group, the org design, the financial returns, all of that is absolutely critical in terms of the how we can deliver that sustainable value.

47:58 And then finally, all of this comes together to come back to a couple of words. It's that delivery of consistent growth and returns over the medium and the long term. Mark, thank you very much indeed, Charles. Once again, thank you to you both for updating investors this afternoon. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of HALMA PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. Good afternoon Tio