Solid State (LSE:SOLI) — Capital Markets Day

0:01 Good morning, ladies and gentlemen, welcome to the SOLID STATE PLC Capital Markets Day. Throughout this recorded meeting, attendees online will be in listen only mode. Questions are encouraged. They can be submitted any time during the using the Q and A tab situated on the right hand corner of your screen. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. And then I'd like to hand over to CEO, Gary Marsh. Good morning. Thanks, Mark.

0:26 Yes, I'm Gary Marsh, CEO of SOLID STATE. Welcome to our inaugural Capital Markets Day. So any constructive comments are always welcome. Thanks for taking the time to to come out and see us. They, you know, very good attendance. I know we've got a great attendance through IMC. I think a 130 have signed up, which is is fantastic to see. And I think the main purpose of today is a busy schedule, but for you to sort of get under the skin of the company a bit more and get a better understanding of of what we do and how we do it. We run regular site visits to Redditch where you can get to see our components and systems business in particular the the computer side in action. So if you like what you see today and you want to do a bit more, they run very regularly.

1:15 You speak to Tom Cooper, Albert PR. He can he can sign you up for that. So I'd recommend that. Good way of kicking the tires and we get very good reviews from it. So please think about that.

1:30 So I'll just run quickly through the agenda this morning. I'll myself and Peter James, our CFO, will do a quick introduction to to the group. We'll then move to the the meat of the meat of the day, really, the components division presentation, and there's a customer video now. Scott Brenton will talk you through that. Then q and a. It's in a ten minute break to wire up the systems team for their presentations. And then there'll be a systems overview. And then we've got a really good demo on on some of own brand products there on that communication side of the business. And that'll be talked through with by James Hall.

2:16 We've been in the defense sector, which is what that product is particularly aimed at for over half a century now. We're very embedded in that market and it's great we're rolling out some of our own brand products organically into that. And as I say, we'll give you a good feel of that later. Again, q and a, there'll be some concluding remarks from myself and Peter. And then lunch and more chance for Q and A if you've got the stomach for it. So this is our presenting team. You'll get some real I feel I feel really good feel of the business. They really bring it to life in this morning's session. So no pressure chaps.

3:11 So I'll turn to I'll spend a little bit of time on this slide. So the quote at the bottom of the slide, I think, really does encapsulate what what we do. But I I can hear you say, yeah, that's great, Gary. But but how do you do that? And it really boils down to two things. It's it's the know how in the company and our capabilities.

3:34 The know how really comes from our our team. We spent a good many years developing our our team across the group. We have a fantastic industry leading team of people now in the company, and their job is to design in our technology into our customers' demanding applications, into the chosen market sectors we we we wanna work in. And they're very good at doing that and getting us repeat business and new business annually. And I'll I'll come on to the team in a bit more on on the following slide. Capabilities, again, very important. We spent decades building those. Whether it is a field anechoic test chamber for RF antenna manufacture, our EMC test chamber, We have a a class class of clean room for our up manufacture our our optical products, and an array of environmental test capabilities across the group. We've built that. We continue to invest in that annually.

4:46 And I'd say there's very few, if any, people in The UK now that have that level of capability to showcase to customers. And what what that is about, really, collectively, the know how and their capabilities really help us to come in an extension of the engineering team of of our customers, and that really does build stickiness with our clients. That that really helps. Obviously, business is very important too. We're always seeking out new new business. We do that through several ways, marketing initiatives.

5:24 Glad to say trade shows since pandemic are well and truly back. We exhibit at numerous trade shows around the world, all backed by now a 56 team 56 people team of BD and salespeople. So we've got a very strong team there. Also 56 strong team of engineers. So that's that's really good to see. I'll move on now to how we're organized a little bit. So those of you that that have known us a while will re will see we've we've rebranded and done some brand refresh. So the insignia you see on the left hand side, we'll roll out and that that will form part of new businesses as as they join the group. But I think it's important to get that family feel for the company.

6:14 We've got quite desperate. I think it's probably overdue, the the rebranding and the brand and the the new brand launches. But you'll you'll get that that can only help with cross selling and cross fertilization of stuff in in the company. So starting with STATE PLC, STATE is the first acquisition we ever made twenty two years ago. Up until end of March, they were focused on all three of those segments. You see the bottom power, communications, and computing. They're now focused on the communications to computing part of the business, with power now transferring to custom power, the business we bought in Fountain Valley, California a lot two years ago. And that we've we've harmonized that. It's all under one brand now.

7:01 So we've that's that's important. We're getting, requests from our US customers to start doing work for them in in Europe and having under one brand I think will be will be much easier. It's also gonna help certainly in us us looking to design in and simplify how we approach the market with with our high altitude aerial drone battery packs. So we've got a good customer set in Europe for that. And, you know, having that sort of seamless integration across custom power USA and and and in Europe, I think will will really help there. Active silicon remains as our image our imaging business. They work very closely with STATE PLC. We bought them in 2021, and they work in close collaboration.

7:50 I won't go on about SOLIZER too much because JD will tell me off because he's got it on a later slide. But suffice it, I think the we need we've we've made four acquisitions in this in our components business over the last few years, and it needed to consolidate behind one one identity. And that's that's done very well. I I say I won't I won't steal his thunder, but JB will talk to you about the franchise owned brand of value added services we wrap around that. But that's been really well received. So we're we're really pleased about that. So I said I'd talk to you about about teams, but these are the this is our strategic pillars of our group. We set this up in 2018.

8:50 It's it's obviously constantly under review, but those those pillars haven't changed. Investment and development of talent, that for me is the most important of the four four pillars of what of what we do. Our team's really important whether that's nurturing and developing our homegrown team, attracting high caliber individuals to join the group through through recruitment, But also, very importantly, is the acquisition of talent in the company. Have people joining the company through acquisition is really important to us. Where is he? Chris, can you stand up, please?

9:34 So Chris Harrington, his firm, Rugged System, joined SOLID STATE in 2010. He was managing director of that firm. He now heads up a very important part of our business, communications, particularly our radios division. And he's, you know, he's he's integral to that. And I could name others as well. So we're really blessed with having a very good team. As I say, industry leading. So long way that continue. I think the other aspect of it for us is is retention of people. We work really hard on retaining staff, having low low churn. You know, it's very expensive to recruit people. They leave. You've got to re recruit. That's a big on cost for that. And we're really pleased with, you know, we have very good retention rates.

10:22 Moving to the next element, ongoing process adding complementary products. So you take our components division years ago, it was semiconductors. It moved into, displays, opto, electromechanical devices. We're constantly constantly looking to broaden out that that product set and the technology profile we can do in the services we do. So they talk a bit a bit later about the training we're doing for that product. So we've got we've got a training program, people qualified to train train the army on that, and that's you know, we've we've got that out for a year or more now. So but that's a combination of organic complementary additions and acquisitive ones.

11:09 Own brand, lots of work here on that, both organically and again through acquisition targeting. Big big thrust on that. Typically, on our components business is 10% better gross margins than it is for our franchise our franchise work, but that's an own brand product.

11:29 So it's not it isn't simply just for our systems sorry, our components side of the business. We look at we look at developing it across across the entire group. And and lastly, internationalizing the the company. We felt years ago, it's it's really important for us to decouple ourselves from The UK growth pattern. So in 2019, international sales represented 20% of the company's total sales. 2030 2023, it could be 43% and we'll have made good progress this year to the end of March twenty four on that and there'll be more on that when we do our results in July.

12:14 What I will now do, if I can find the page right, is hand you over to Peter to Thanks, talk you through some other Gary. That's great. So I guess the the graphs sort of speak for themselves fairly well. The group's made fantastic progress over the the last five years that we're very proud of, and that's been against the backdrop of some pretty turbulent times. Yeah. Brexit, COVID, and, latterly, some of the the sort of troubles in Ukraine and Gaza and the like. The diversity of our products and our offering has given us real resilience. So when COVID hit, a really good example is we supplied batteries into commercial aerospace. Clearly the demand for those fell very rapidly when COVID hit.

13:01 However, we also supply batteries into medical powered respirators. They took a year's worth of demand in two months. So that diversity meant, yeah, through that period where COVID hit, we didn't see huge turbulence in our in our performance. It was difficult. The team had to work incredibly hard to to meet the change in demand, but it was a a real test of our resilience, and and we came through that well. This year, we were pleased to announce in our recent trading update some really strong performance. We had a very strong end to the year with some of the systems products shipping in this financial year that we had expected to ship in next. So you can see that in the recently upgraded consensus, which is the last bar there in white. So revenues, just over 160,000,000, adjusted PBT approaching 15, operating margins getting close to 10, and adjusted EPS close to a pound as well.

14:00 So really pleased really pleasing with the the financial progress we've seen over the last five years. In terms of shareholders, the founders, Gordon Comden and and Gary's dad, Bill, began to reduce their holding back in sort of 2011 from $90.90 pence per share. That's been to fulfill institutional demand. We've seen really good support from our institutional holders, some long standing holders with sort of or Hargrave Hale and now Canaccord, and others as well, Schroders, Charles Stanley. We did a fundraise in '22, which was supported by BGF and Charles Stanley and others, and it brought in new holders as well like Herald and JPMorgan.

14:49 In terms of other institutions, there's a number that are below the 3% disclosable amount, Lion Trust, Amarti, Aegon to name but a few.

15:00 So this slide is an overview of what we do, and really I hope brings to life the fact that actually our broad offering means we have multiple touch points in the in the markets that we we target. And if I pick the the UAV in the top left hand or top, yeah, top left hand corner as I look at it, If we if we look at that, we've got specialist battery solutions, as Gary talked about, that work in the cold and batteries don't like the cold, leading edge camera systems, and communications and antenna products. And the guys will will talk a little about some of our communications products later. And without further ado, I'm gonna hand over to to the gentleman at the back there who will bring to life some of our components offering that we have. And so, yeah, I'm gonna hand over to Scott, I believe.

15:54 Scott? Yes. Who will take you through our components business. Thank you, Peter. No worries. Good morning, everybody. My name is Scott Brenton. I'm the IoT tech director, for Solstad, which is the components division of the SOLID STATE group. So today, we're gonna talk about what the components are, where they're used and where you're likely to see them in your everyday lives, and I'm also going to talk about our value added services, and why that's really important to us. The value added services piece I'll leave with and then I'll hand over to John who will talk about the the components and where you'll see them. The value added services that we offer are critical to us. It's what separates us from our competition, and it's what enables us to retain our customers as repeat customers.

16:47 So I want to give you some flavor of what it is we do for our customers and why it's important. Whenever we talk to our customers, we always try and understand where can we add value to the supply chain. We want to be more than just a component supplier to them. We try and understand their pain points and try and remove them, and we use our services to understand their business objectives and how we can best align those to help them achieve it. And I'll give some examples of some case studies where I believe we've done that very well. But what are the value added services we're talking about? Fundamentally, we break them probably easy into two halves. One is our facilities and their functions, and the other is our peoples and their expertise. And I'll start with the the facilities.

17:33 As a distributor, of electronic components, it's fully expected of us to ship components, electronic components, the correct and proper way. And, of course, with our quality quality systems, we've been doing that for some years, but we want to be more than that to our customers. We want to add value. So we offer additional services such as device programming so a customer can receive a component bespoke for their application. We will do that at our purpose built facilities. We'll do kitting and configuration for them so they can receive a kitter part as they require them. We'll also do things such as plug and play so they can receive a device that do nothing more than plug it in or ship it to their customer's customer so they can plug it in. And again, I'll have a case study that shows where that adds some color to that, where that really made a difference.

18:21 And then for our military medical customers, we have a class seven clean room in Weymouth. Military medical manufacturing and assembly, which we do, has some of the highest requirements in terms of quality control. The fact that we can offer that in our facility in Weymouth, backed with these additional services, is all about adding value. We want our customers to see us more of as a partner, not just a supplier. But then there's our people. Our team at Solstad, they're technology experts. They are able to help our customers navigate the myriad of technology that's out there, but they're also scanning the horizon for what's new and what's coming so they can bring the leading edge to our customers. They become extensions of those customer teams. When they're designing the next greatest thing, they invite us to that table. They want to know what technologies they should use. That's the value add we do with our people.

19:12 Equally, we've become trusted advisers on a repeat process. It's not just once. So the next project, the next projects, and the next projects. Now at this point, I was hoping to introduce a customer who was gonna talk about how great our value added services are. Unfortunately, Simon Gordon, the founder of Facewatch, he was due to meet the, police minister this afternoon. That meeting got called forward to now, and he's now over in parliament having that discussion. Parliament wins over us, apparently. So what I able was 11:00 last night. Could you put a video together to share the experience? And that's what he's kindly done. Before we play the video, what I'd like to do, just give you a little bit of an overview, the best I can, of who FaceWatch are. You may have seen FaceWatch recently in the news.

20:02 These are it's a very exciting company for us to be working with. They developed a facial recognition system for the prevention of shoplifting in major retail stores up and down The UK. They're recently on the BBC, Sky News talking about the changes they're making. Equally, it's about protecting staff. As a company, they've really embraced technology. They've embraced AI and facial recognition, as I've mentioned, and they've come to us about connectivity, working on four g and five g to take these images and push them to the cloud, and that's where we've consulted. I'm gonna hopefully play the video through now and let Simon let this play through. This is what Simon would have presented if he was here today.

20:50 Hello, everybody. Simon Gordon speaking from Facewatch. Thank you, Scott, for allowing me to speak today. I'm really sorry that I'm not there. Unfortunately, I had a meeting with the police minister, which was organized after Scott kindly asked me to to originally do this. And although we tried to squeeze it in unfortunately in the end it became impossible. So I've done a rather amateur recording here, not used to doing these recordings, so please forgive me if it's not you know, if it's not 100% the sort of quality that you come get used to on television. Anyway, I wanted to talk about Facewatch and how Solstre has helped us.

21:36 So we've been going for fourteen years in total, but about, five years ago, we started our current business, which, is to prevent crime in retail stores.

21:50 And this uses facial recognition, which before we started really wasn't good enough for the job. But now, of course, as everyone knows, it works amazingly. And we had to roll out to stores, and we had to be able to do it in a way that was fast and very simple. So we could just say to a store, right, yeah, we can put it in next week. We couldn't really be going through months and months of delay waiting for fixed lines to be installed, etcetera. So we decided to go down the route of having mobile routers. So the way we prevent crime in retail stores is to have a camera connected to a router and a switch.

22:42 The camera detects all the faces of people walking in. And as they walk in, the camera is processing locally because it's got Ambarella AI chips in in the cameras, and it's comparing it to our database of subjects of interest. If someone walks in who's on that database, it will immediately ping an alert up to our cloud and send that out to the store. But not only does it have to do the the pinging of the alerts, but also we need to be able to provide each of the stores with access to, all the faces of the people that have walked in, which we retain for seven days, basically, so that they can get very high quality images of people walking in, which then become, if necessary, if somebody does commit a crime, which then become part of our database of subjects of interest.

23:44 So we're using up an awful lot of data. We're sending up about 10 gigabytes of data a month. Mostly it's uploads, and it's extremely challenging with the mobile networks as they are to be able to do this in all the sites. You can see in that map on the left, there are these are all our installations at the moment. So we're up to almost 1,500 cameras out there. We've got a growth rate of a 150 a month, so we're growing at 10 to 15% a month at the moment. We've doubled every year for the last four years. So it's very, very rapid.

24:32 So we have a very small number of extremely good partners, and SOLID STATE is one of them, because we don't have the expertise to do to choose the right hardware necessarily, and to choose how to, you know, how to roll this out in the most efficient way. So by having excellent partners, we've been able to rise to the challenge of rolling out at this sort of speed, which which is pretty, challenging. So we've managed now to create this network whereby all these cameras are talking to our main server, and we can control all of them and make sure they're all online, that they're all in focus, that they're all set up correctly, and that the detections that are coming through are all good enough quality.

25:30 We've got a team of people that do that obviously because there's a there's a lot of stuff to look at.

25:36 But what SOLID STATE has done for us over the years, and they've been involved since the start of this, of the of the current product, they've helped us right from the beginning with choosing the right hardware. They've also given us technical support and they've helped us through what's been a very exciting, but also very challenging few years. They've also recently been helping us and getting involved in our project to upload data more efficiently, more cheaply, but also with less issues, which we occasionally get when networks go up and down. So we're working on a project with them right now and with their router partners to be able to actually roll out even more effective routers.

26:29 They've always been there for us. They're great at ensuring they've got stock. They've never let us down once. They are always at the end of the phone. There's been a lot of setup of routers. All the technical side of that they've helped with. They've ensured that when the routers are delivered, they've got all the correct settings. They're ready to go for us. And any other equipment that we need, they can also assist with. So I just really wanted to speak today because I wanted to just say how amazing they've been. You know, when you're growing very, very fast, it's really important to have the right partners, because otherwise, if you get it wrong, your reputation can go down the tubes very, very quickly.

27:16 We're very lucky. We've got very happy customers. We're reducing crime significantly in some stores reducing it by up to 70%, 80%, 90% someone said the other day. So, you know, it's incredibly effective. But if you don't have the data and you don't have the alerts and the detections coming up to the cloud so that you can act on those and send out the appropriate alerts to the customers, you really don't have a product or we don't have a product. So, yeah, SOLID STATE has been there all the way through. They're gonna carry on with us growing rapidly. We've signed up some massive retailers recently and we've got more in the pipeline.

28:04 It's the way of the future as far as security is concerned, I believe, and the results we're getting from retailers is fantastic. And I'm more than happy to stand here or sit here and say thank you very much to Solstre and to Scott and the team who have always supported us. And I'm looking forward to finishing the current project and moving forward. And as equipment changes and improves, they will no doubt continue to keep us fully updated, and they'll be working with us right the way through as a trusted partner. So thank you, guys, and look forward to working with you for the next few years until we take over the world. Thank you.

28:56 Bye.

28:58 You cannot come again with testimony like that. What I'm hoping that you're picking up from this, it's we're trying to be more than just shipping a thing, shipping a device. We add value through our people and the advice we give and the services that our facilities offer our customers. And you heard it from Simon there. It's about long term relationships. We want the customers to come and come again, and that's what we're always looking to to achieve. I've just got a few more examples, of where else our value added services and why it's so important to us. I'll just talk about these briefly. There's three there to to focus on. We were working with a digital signage company that were putting the typical signs that you see into retail environments, the latest offers and the news and whatnot.

29:46 They had won with a major retailer a deployment of 450 sites across The UK and Europe, but they had an issue. They wanted to remotely change the content without having to send expensive engineers on-site. So they came to us and said, how do we do this? Because if we hook into the retailer's network, there's cybersecurity concerns. They sought our advice, we were able to navigate that particular piece. Equally, they wanted to be able to deploy on these sites without having to send an engineer to install every single one. So using our facilities, we developed a configuration of a device that could be sent and plugged in and switched on. And that saved them enormous amounts of money in engineering time, and it meant that we deployed to just over 450 sites, and all 150 sites came online immediately with zero rejects.

30:35 And that's through our value added services. And the long term partnership, they continue to come back to us for the next project from here on in. They trust us as their partners. They come back time and time again. We had a military customer. It's a customer it's been a customer of ours for some time. They were buying a particular device from us. The manufacturer of that device, for for whatever reason, made a decision that they were gonna no longer manufacture it. This was a problem for this military customer because they were providing to a platform they had to guarantee for ten years. So they reached out to us and said, look. Could you secure the stock and use your long term storage facilities to secure them the right way that they're environmentally controlled, and also use your testing and screening process to make sure that in five years they still fit, form, and function? Of course, we're happy to help, and we linked up with our people to the manufacturer, and we secured that business for this client for the next eight years. We understood their business objective, and we helped them address it.

31:33 And the last one was something that took place last year deployed last year. A major UK water company in the South Of England had around four four thousand five hundred sites, which were things from manned buildings, sluice gates, water treatment facilities, a a of different sites. But all of them were connected using analogue phone lines, which as many of you may know, were switched off by BT as part of the digital transformation. What do they do? They need communication to do a borehole in the field somewhere, and they need comms to the to these devices. That's where they came to us. Initially, they know because they found the product and they link that to us, but how do we deploy? And that's where our people came and developed a system to deploy in. We also customized the device because there were certain network protocols they needed on that device, so we helped them customize that piece of software.

32:26 And we actually, with one of our manufacturers,

32:29 got them to onboard with a piece of software that helped them deploy, monitor and manage these sites out in the field. So with those three examples and Simon's testimony, I hope you take away from this is it's about adding value to the supply chain and that's what differentiates us from our competition and why we have long term partnerships with our customers. I'm gonna hand over to John now who's gonna talk about what the components are, where they're used, and where you may see them. Okay. Thank you, Scott. Good morning, everybody. So I wanted to give you a bit of a flavor about what are the component side of our business. What is it all about? So what is a component? What do we mean by a component? For us, a component is a product or a device that we supply somewhere that goes into something else with a load of other components to make it work.

33:20 Rarely are they supplied as one thing on their own. They generally would work with other things. They're not solutions like we get from our sister company.

33:29 These can be semiconductors, can be electromechanical devices, they can be wireless routers, they can be anything and everything that comes out of the Silicon Valley area of America, out of China, out of everywhere else to create this massive swell of electronic componentry that we supply into. It's not a surprise to any of us that the proliferation of electronic components is is enormous. They are absolutely everywhere. You look around the room and then you can see them everywhere. We take the humble toothbrush. The humble toothbrush used to be simply a a standalone device that you scrub your teeth with. Now it's electronic! Not only is it electronic, you can now get an app that links to your toothbrush to give you data back on how well you're brushing.

34:11 So what we've done is turned a toothbrush into a connected toothbrush through the proliferation of electronic components. If you take a fridge for instance in the kitchen, you can now get a fridge that's got a camera inside the door and an LCD on the front. You can dial in and access it from your smartphone look what's in your fridge so you know what you've got to pick up on the way home. What we've done again is turn a fridge into a connected fridge. Okay? Again, it's the proliferation of electronic components. They are everywhere and everywhere that you see them.

34:43 But components on their own need an application. Our customers are the people that come up with the ideas.

34:50 They're the ones that are coming up with what should we do next? Where do we go next? What are we trying to do? And that may be something where they found a gap in a new emerging market that they want to try and exploit. Or it may simply be that they want to increase the benefits and the features of their current product for the next iteration. Either are just as suitable and both of these operate in many different markets. We work with people from a medical customer into industrial infrastructure through satellite comms, through ground based communications, and into the defense sector. So it's very, very broad in terms of what we're offering. But it's the customers who are the solution innovators. They're the guys that are saying, this is what we want to try and do.

35:37 What we do is try and deploy our resource to assist them in doing that and talk to them about how to do that. That's what we're trying to get to.

35:48 We understand the emerging technologies as well. So, we understand AI. We understand machine learning. We understand IoT. We understand edge computing. We understand how that can benefit each of these customers. Given some of the applications that customers come up with, we'll now look at it in a little bit more detail and say: You want to develop something with AI. Well, do you really want to develop something with AI? Is that what you're trying to do? Because a lot of customers now are looking for low power, highly efficient means of getting data. And firing data up into the cloud all the way to a center that's that's generated all this information, stored all this information in a data center somewhere is very power hungry. So maybe for that application, machine learning on the edge, very close to the process node, where the power requirement is far less, is a better solution.

36:45 Maybe it's not. Maybe like FaceWatch, we need to fly it to the cloud because the data is that, is that compressed. The idea is that we can do this in both ways. We understand how to utilize this technology, this emerging technology, how it can benefit certain customers. It doesn't suit everybody. We understand IoT incredibly well. Scott will speak to you at length about IoT. We understand the need for creating a product that can now be connected. And then what do we do with the data? How do we work with a customer to try and monetize the data that now they're getting out of this connected device? And again, we can guide them in this fashion in the same way. Every opportunity that we talk to customers about, every application, is unique.

37:34 There is some crossover. Sure. There are some standards. Sure. But, actually, the individual application area is unique every time. And it's this uniqueness that allows us to bring our technical knowledge to the forefront about being able to adapt very slightly what they're trying to do to make it unique for them. It means that they will have the product that will differentiate them in their marketplace. We understand where they're trying to go, and we understand how we can try and get them there. We work with our franchise partners, and we term our franchise partners as, the innovators of technology. While the customers may be the innovators of the solution, it's the companies over on the left and many more alongside that are the innovators of the technology. They bring the technology to market through us.

38:28 We work incredibly closely with them. They trust us to take their technology to the solution innovators, which are our customers. And they trust us because of the team we have in place. Scott's mentioned already the expertise we have. That's what we get. We get this reputation of we work with you because we trust you to do what you say you're gonna do, and we take this innovation to the customers. Our market knowledge is is vast around this. Gary mentioned that the company has been in existence for over fifty years. There's a huge amount of market knowledge within our business, with our business development teams, with our engineering teams, with our sales teams, with our marketing teams. Huge amounts of market knowledge that we can deploy. This means that we can take the customer's idea and match it to the technology available.

39:17 We refer to this as closing the gap between, application and specification. What a customer wants to do and what actually the state of the art will allow it to do and marry that up, try and close that gap for them. Our partners see us as, solutions, technology companies see us as partnerships. They really do. They invest in us, and we invest in people to make sure we're growing with them. They want to be part of what we're trying to do. They see the value in what we're trying to do. They like how we go to market. They like how we do stuff. We're continually getting more and more companies want to come and be part of the SOLIZTER family because they like how we go to market.

40:04 They like the value add that we bring. It's not just, as Scott said, trying to, ship a box. It's so much more than that. And they like that we want our customers to be successful because if our customers are successful, so are we. There's no value for SOLID STATE whatsoever in working solely with a customer to find that the product they launch doesn't work and it doesn't function. There's no market. That's no benefit for anybody. So it's in our best interest to do the best job we can and get that product out there to make it successful so that they buy more from us and we become more successful. Gary mentioned earlier the own brand products. We have a number of areas of these. They're broken down into two areas for us fundamentally. Firstly, they're I would call 'application specific'.

40:53 So it may be a ground based laser rangefinder for a military customer. It may also be an air bubble detection piece of equipment for a dialysis machine. They're about as far apart as applications as you get. And yet, the technology for building them out of the Weymouth facility that Scott referred to in our clean room is exactly the same. It's the application that makes them specific. We then have JuraCall. JuraCall is a line that we develop that has a range of relays and contactors. There is relays and contactors here, metromechanical devices go into the automotive industry. They go into the off road EV market.

41:40 They go into energy harvest and energy storage facilities. Well, some of the semiconductors we work with are leading edge from a semiconductor point of view, and they're smaller and they're low power. There's still no substitute for a big real air contactor switching that high end energy. You can't get away from that. The physics isn't there yet to switch high currents and high voltages in a very small package. So we're still selling an awful lot of these. It's a great line that we work with. At SOLID STATE, we pride ourselves in being at the center of the electronics industry. We work with understanding the technologies, we understand the suppliers, and we understand the products that our customers and our OEMs need.

42:30 We can navigate the challenges, understand the solutions and applications, and deliver the services that they want in order to make them successful and deliver them a great product that they can take to market. We understand how important security is for IoT. Currently, there are estimated to be something like 17,000,000,000 connected devices on the planet. That's anticipated to be double by 2,030. That's a huge amount of a security concern somewhere that you've got to make sure everyone is unhackable, is not accessible to people who wish to do us harm. It's a big piece of the pie. We also understand the application of AI, machine learning, and programming on the edge.

43:21 Again, we work with customers to try and guide them to the point where they understand what is the best solution for them. Do they need to go through a cloud service provider? Do they need to do the, decision making on the edge, close to the process node? We can talk to them all about this and supply the components that do this. It's this consultative approach that customers like from us. We have a vast array of services that Scott mentioned also that we can deploy to help customers get product to market, to help them protect it. But the value added services we supply don't come for free. You'll be pleased to know. It's a value add that we provide. But what it means is the total cost of ownership for the customer is still far better because of the value add that we're providing. It's our unmatched technical knowledge, our connections, our entrepreneurial spirit that we think makes us the electronic component distributor in The UK.

44:15 Quite simply, we believe we are the vital component. That concludes my presentation. We're happy to take any questions. Lovely. Lesham, if you have any questions, I'll just pass you the microphone. Do you have any questions for the guys from the room? Perfect. Thank you. Okay. Good Sorry. Good morning, and thank you. I suppose given how embedded your products are and and the service into customers, Could you what other than price, what what would mean that you didn't win a contract? Some of the other reasons for for perhaps not not winning customer contracts. Generally, when we say not winning contracts, what we'd mean is we miss out on the design phase. Okay?

45:06 And it may be simply that we do not have the offering for the specific point that that customer needs, whether it be a processing power, whether it be a a power usage amount, whether it be an infrastructure piece. We don't have every single franchise supplier, electronic component supplier manufacturer in the world on a as a as a partner. There are a lot more outside of this, and there are a lot of people doing what we do. Some of them do it quite well. A lot of them, less well. So And I suppose follow following on from that, what are there in terms of gaps in your product range, where where would you like to to actually expand on your range? There are always gaps in the product range because there are our our engineers and our business development people are always out identifying where we could be taking additional business if we had the right product.

45:55 If I take interconnect, plugs and sockets, we don't enter into that space at all at the moment. It is an area that we've targeted that we would like to grow. You don't just go and buy a or or or sign an agreement with a a connector company. We would need to bring in the expertise to run that company as well. But it is absolutely unidentified area where I think, yeah, that's a gap for us. You know? We can connect everything wirelessly for any protocol that you wish. But a hard and fast plug that goes in here, yeah, that's not our bag. But there's still a huge amount of value in there. So that's an area that one area that we're looking at. Absolutely. If I can expand on that, another area that is software services for generation recurring revenue is a is an area that we're we are looking at right now because it creates recurring revenue but also maintains a customer relationship way beyond shipping a product.

46:44 And that's something that we've started to look at with some force this year. So that's something that is a gap right now. Just wanted to follow-up on that example you gave about the customer comes along and asks about AI. And then he said, actually, we've got a much more cost effective practical solution, which doesn't need AI. Right? Okay. How often does the customer go, okay then. You're right. Let's let's go ahead with that. But I still want to see what the AI solution would look like. They very rarely to us say, okay. Yes. Let's do that. Exactly. Some do. But the majority say, okay. Well, I thought my IDO was quite good. So now you're telling me it's not. I need to understand that. It's a tricky balance with a customer telling them that you think you might have a better idea than they've come up with.

47:32 And it's it's it's the expertise that our teams have in the field to be able to talk them through why are you doing this? Ask the questions. Why are you looking to do this? Why do you want to do this? We've seen an awful lot of customers over the years that have wanted to do things that that don't make a huge amount of sense initially. For instance, a customer that wants to put, a camera in a field, to see how often the gates opened, and his solution was to stream video, high definition video, twenty four hours a day, seven days a week. Okay. That's huge amounts of data cost to you. That's you know, it's one way to do it, but why not put a sensor on the gate, we'll put a very low latency two g, mode in there when it can just ping you when that gate opens? Oh, yeah. That's a far better idea. So we talk to customers and work with customers to help them understand. We're not the experts in their application. They are.

48:23 What we are good at is bringing the bringing the products and seeing how they can use them differently. There are absolutely some times when we say, we don't have a product for this. I'm ever so sorry. We're not we're not afraid of that. Given the consultative nature and the bespoke nature of all the applications, although there's a communal tech platform that you can apply, how much of is there a challenge of scaling up each time because it's on a case by case basis, or or is there a volume play you can do with the with this with this work? There is a volume play. We run seminars at our Hopefully, some of you have been around the facility in Reddington. You've seen the training facility we have there. We'll run a seminar for one of our suppliers or two of our suppliers to talk about our latest platform and try and get more and more customers to be looking at that. So we can standardize to a degree on that. Every customer does things slightly differently.

49:12 Every customer's got different experiences of products, whether it be ST, whether it be microchip, whether it be analog devices, whether it be anybody else. And you have to build on that. Electronic component engineering is built out of the engineers that all come out of university with the same degree. It's it's different today than it was thirty years ago because the technology's moved on. But, fundamentally, the principles are still the same. So that's the baseline that we build upon. And all of our business development guys are degree qualified engineers, so I've had that. Most of them have been on the bench and developed product for themselves. So it's understanding the experience that these guys have to be able to say, I've seen somebody doing something like this. What about if we bring this in and add that to it? Would that give you something more? Oh, yeah. No. That could really differentiate. Thank you.

50:00 You know? A design engineer or a customer wants to do a really good job. So he's listening to our engineers because they can help him do a really good job. Just to expand on that. Sorry. Just the look. Because we are linking up the industry, if there are areas of expertise we don't have, we're able to call and bring that in as we need to. So we can scale externally as well as internally. It sounds like given the very kind of specific requirements that customers have, a lot of this is is customer pull. But how easy is it for you to go out and prospect for business and and actually say, well, we've got solutions that you might not even have thought about. Yeah. How big a part of the the kind of new business win is you actually going out and prospecting for customers? Very easy.

50:49 I mean, at the the the the entry level, everything is off the shelf. So it's easy to have a broad net if that's the way you wanna do it. We choose to differentiate because we wanna add value. So it's very easy. If we wanted to just scattergun a whole heap of customers, we could do that. But we want to focus on those customers. We can add value. Otherwise, you're just a phone call away from being outpriced at some point. And are there synergies also then in terms of you develop a product for a particular customer and then think, well, actually, there's others out there that we could probably provide similar service to? Absolutely. Working sideways through an industry is is often what we do as a result of an innovation somewhere that we suddenly develop or stumble across, and we say, okay. There are other people who benefit from this. So absolutely. Can you just talk a bit about product life cycle? So once you're designed in and you're supplying that component in, sort of what happens maybe further down the line when that solution you know, becomes a bit more commoditized? Do you start to get sort of pricing pushback?

51:50 Or if there's a product sort of upgrade cycle, does it automatically come back to you? How much sort of work do you lose there? Just yeah. Yes. So a customer will design a new product. And in the first instance, it will have all the bells and all the whistles that they'll take it out there. They mostly have the intention of a later date coming and doing a cost reduced version of it to maximize this. North of 50% never get there because what they've actually moved on to is not cost reducing this, but started on the next iteration of that product. They only have a limited amount of engineering resource, so how they deploy it is really important. So some of them do go back and cost down it. Absolutely. And they will cost that down through look at component choices, but they'll also look at where it's being manufactured.

52:36 Maybe being manufactured in The UK, the the volume has increased such that now they're going to a Far East or Indian or Indonesian manufacturer to populate their circuit boards. We can track that business and pick it up out there. Yes. It gets harder. Yes. It's a far more competitive landscape out there, and we have to work harder to get it because we've not got boots on the ground out there. The product life cycle changes depending on the industry as well. So we work from the military people where we're talking up to thirty years of a product that they have to support. Submarines don't get spun around every six weeks, but a new iPhone will come out every six months. We don't work with Apple. We're not in the iPhone at all, but you understand the commoditized nature of that type of product all the way through to products that are gonna be around for a long period of time. Oil and gas is another industry where products stay around for a long period of time. So the industry drives an awful lot of this.

53:33 Thanks. Just thinking about the sort of growth in the business the last few years, I mean, how do you break that down between sort of volume on on sort of going up on particular components versus bringing in new lines versus sort of new geographies, that sort of? Yeah. We we look at our growth every year and understand understand where it's come from, where it's coming from next year in just the same way. We have a design pipeline that we're looking at for what designs are going to come into fruition in the future. What technology is that driving? It's far more interesting to be looking forward and seeing what are we gonna get in the next financial year that's coming through. What are the new drivers in the medical industry that we're involved in? What are the new drivers in the industrial space that we're working with? And we'll try and convert them. Yes.

54:19 We try and increase our customer count, selling more to the same customer and selling more to new customers. They're the only two ways we grow our business, really. So we try and access both at the same time. Yeah, nothing to add. Okay. Terms of that's been and how that's respectively the sort of contribution? Well, that's a bit. So it helps a little bit. If we look at historic growth, it's been about half and half between organic, yeah, high single digit organic growth and complementary m and a on top of that. If you look at total growth, it's been, yeah, about fifty fifty. Organic's a little bit less. M and A has been a little bit more in recent times.

55:08 And in terms within that organic, yeah, we've had the question in the past, how much of it is price and how much of it is volume? It's actually quite a hard one to answer because the mix of projects changes. So you on as JV has talked about, you do see cost down on some of the existing projects where prices fall, but people design in the new iteration of components. And the new components, the price goes up. The older ones, the price goes down. So, actually, it's probably of the organic growth, it's probably about half and half is yeah. If you were to look at it in terms of price and volume. Any further question? Sorry. You. Just two on own brand, I guess.

55:59 I guess, what what are the key considerations for for for customers to kind of move to to a name brand product over a franchise product? What are kinda seeing there? And then are there any kind of particular gaps in your own brand product that you you'd kind of want to address? So from an own brand point of view, we have a team based out of, Pangborn, just outside Reading, who work with customers to design things with them. So that's very bespoke. The things that we design out of that, the the special projects group tend to be specifically for a customer and funded by that customer in nonrefundable engineering charges, etcetera. That tends to be something that's that's only available for them because it will be them ready. It's not that it's IP owned. It's just that the look and feel of that product is for that customer. It's tailored for that customer. When we look at the relays and contactors, they are far more prolific. They will go anywhere into anything.

56:54 And we we sell them into many different industries. I mentioned a few. We sold them into many more and can go almost anywhere, particularly in the industrial space. Can we get more own brand products? Absolutely. No question we can. We are looking to expand that range. We have now people working for DuraCall for us in Mainland Europe and The UK whose job it is to expand that product portfolio out. What else do we need? Where can we go and get a particular contactor in a particular way that fits in a particular industry and grow that? We want to grow it in the area that we've got the knowledge and expertise. We don't wanna just go and get a whole load of other stuff and try to sell anything. The value we add is knowing these products inside out of the the own brand products that we have. And working with the people that we work with to manufacture these to make sure that we do know them inside out means that that range will ultimately grow.

57:45 I think the other point, James, is we don't want to compete with our franchise suppliers. So it's complementary own brand products rather than competing with yeah. And we're never gonna be a semiconductor manufacturer. You've mentioned a few times that, like, you have very sticky customers and that you want long term partnerships. And I think FaceWatch said they wanna work with you for at least the next few years. Do you have any numbers around average amount of year number of years that you're working with the same customer, and is that number growing? And what are you doing around trying to trying to improve that and really ensure that you are getting some sort of sticky recurring revenue?

58:34 Yes. We are trying to increase that. We're always looking to increase customer counts. Unfortunately, the nature of the world is some customers don't last. Some customers do fall away. We have approximately about a 20 attrition rate every year on business that we have. Everything else is customers that we've been dealing with for many, many, many years, and we try and retain that. And it's the level of service. It can't just be on price. It has to be level of service and the products that we supply them from a value add point of view that keeps us tied in. It's it's the experience that the customer has that keeps them coming back again and again and again. And there are customers, I'm sure, that go back to when Gary was running the component side of the business that are still customers today. Sector. I mean, we've got customers that have been with us thirty, forty years, a long time. So equally on on some of our franchises, see, I dug out our our AIM admission document, and there's a supplier on there called Microsemi.

59:38 We signed in 1993. So it's a it's part of the the Microchip family now, but, yeah, we've equally got very long supplier relationships as well, which are equally important. Development. Could you you may have touched on this already, but could you just clarify whether value added services is a revenue generating line, or is it a lead into selling products in the first instance? Revenue generating. It certainly is. And it it helps maintain a a relationship with the customer for a long time because it goes beyond I can get it 10¢ cheaper from somebody else. That's it's a it's a tactic, but it is definitely a revenue driving. Alright. So crudely, is that billing engineering hours then?

1:00:25 It could be, a flat rate per device that we add as an additional adder, or it could be for engineering time if somebody's looking for us to do, some research with them. It it can be cut many ways. So it could be all of the above, truth be told. It tends to be an adder, as an additional service. Okay. Could I twist your arm to split the revenue in components between the three elements? Not me. You couldn't. Maybe John's. It's it's almost impossible to do because, as Scott said, it's it's an addition per component. So we we sell the pro the product at better margin at better prices. So yeah. Yeah. What price would you sell? Yeah. If you look components, the broad line distributors set the floor, the catalog sales.

1:01:13 Yeah. We look and do secure much better margins within our components division as a result of the value that the team adds to customers. Okay. I'll try another one then. Can can I twist your arm to give us something you mentioned lots of different industries that you supply to, and I think this information is available at group level. But for the components division, can you give us a sort of approximate industry split, please? Yeah. I would say, industrial components is and the industrial market is probably 35% to 40%. Military, we would expect to be around about 15% to 20 Medical is about 10, but growing, and the rest fall into a whole different array. The challenge with tracking some of the industry information is when we sell products to a a subcontract manufacturer.

1:02:03 So this contract manufacturer may be assembling print printed circuit boards for people in 10 different industries. Trying to track which one that one is for can start to get a little bit dicey. So we never get to what is a number that is completely reliable. Okay. And oil and gas? Because that's pretty specific. Yeah. Oil and gas is still a big part of our number, and I would imagine that's probably lower now. It's probably sub 10%. Eight to 10, I would expect. Perfect. Thank you. Hi, guys. Just a few questions on the software thing that you were talking about. Is this something customers are asking you for, or is this something that you think that customers will want to incorporate into their solutions? The latter. There's an education piece for customers because it's the the unknown. We didn't know we could do this. And once you take the lid off it and show what's possible, then they become incredibly interested.

1:02:59 So it's the latter, I would say. There are very well informed customers for sure that know exactly what they want, and they have their own software solution or even their own incumbent software supplier, and we'll happily work with that supplier in tandem. But particularly, you know, I'll talk about Simon Facewatch. I was unaware that you could remotely monitor these sites and do some low touch control. There's an education piece. So, yes, it's more the latter, I would say, for for my particular experience anyway. Thank you. And can I just ask with regards to I I I know it's something in the future, but how do you reckon this is gonna go? Is this gonna be something that'll be built in house or you're gonna maybe do a small bolt on acquisition? For software?

1:03:45 Yep. I think we're well, initially, I mean, we're working with software partners. So they own the software, so we're introducing them. We're generating a small amount of recurring revenue as a result. What that looks like in the future really depends on what that growth looks like for us. I mean, we're not a software company, but we know of a lot. So don't know is the honest answer. But today, it's really standing on the shoulders of those who already doing it. Thank you. Hi. Do you have much of a sort of cross sell opportunity into customers as in selling more products into the same customers? And how how do you approach that, if so?

1:04:34 Cross sell with whom? To your customers. So say you sell one product and you're customer at the moment trying to sell two. So, we're always trying to maximize. We refer to it as maximizing the bill of materials cost. So, for the components that sit on a printed circuit board, that produces a list of parts, and that's referred to as a bill of materials. We want to take as much of that as we can. Selling one part onto a bill of materials means that you're incredibly at risk of being vendor reduced at some point. The more parts you supply on there, the better off you are. So, absolutely, we're looking for more. Yes. Every single time, we wanna sell more to that same customer on that bit of materials. Absolutely. And we've got the product range these days to be able to do it. John, can I just ask you one that's come in online and and relates actually to an earlier point you made in respect to security?

1:05:23 How do you ensure there are no security risks in the components that you buy in to build your solutions products given the current fear of, for example, Chinese commercial espionage? Don't you just? Okay. So all of the components that we buy in are from a franchise source. They're the people that are manufacturing. They're controlling the manufacturing process from wafer all the way up through encapsulation, final product and test, all the way through to us. These are big multinational companies that have got, the quality systems in place to ensure there's traceability all the way back down to the fabrication point. So we rely on them. We don't get product from microchip that is that doesn't work, that hasn't got a problem. It works every single time. And if there's not, they take it back and they do a analysis on the failure, and they'll come back to us. But we we rely on our partners to deliver that to us, and we don't have a problem with it.

1:06:17 Great. Any more questions from the room? If not, obviously, you, John, Scott, Peter. We've got ten minutes perhaps just a bathroom break, grab a coffee, and then I'll invite you back here, say, at quarter two, and then we'll get onto the the stuff over there that I not sure if I set off when I sat over there. But thank you. Lovely. If I just ask,

1:19:20 just to take your seats if you could, that'd be great. Thank you very much indeed. Lovely. Alastair, the, the floor is yours, sir. Okay. Thank you very much. Everybody can hear me okay, I hope? Ready for the next 300 slides that I've got to present for you? I'll just give you a quick overview of the system side of the business now and broadly that is divided into the computers. We have power, we have imaging, we have antennas And then the gentlemen here are going to talk to you more about the communications business in-depth and such. The thing that pulls it all together because this is the question I've had a number of occasions is well, what makes you a thing? And it's probably it's harsh environments, it's rugged things. So we don't do computers that sit on your office. We do rugged harsh environment fit for purpose products.

1:20:07 So the things that brings all of it together is the fact that we are in difficult. So whether it's noisy, vibration, extreme heat, etcetera. So hopefully that brings it into little bit of a line. And then just a bit of infographics. Found these super useful to try and explain to purchases project managers what do we do. And you'll notice on the website, we've got clickable links through. So it really sort of brings it together. Here we're talking about the intelligent transportation systems and we work with a number of companies that are looking at surveillance of course. We've talked earlier with our sister company about that, about pollution control as well and sad to say also AMPR and CCTV, which I hope many of you haven't been on or not one of our cameras. But what we will do is we'll work with a with a with a customer to develop the rugged computer that goes with the right camera, that goes on top of the gantry, that then takes the pictures as and when you break break the the the bus lane or or the law on it. The reality is that over time, we we've we talk about sticky customers. We've moved from having servers down below, bigger computers, and we're all getting down to smaller and smaller computers with bigger and bigger processing powers.

1:21:20 So on the top of that gantry now, you've got a computer and a camera and a system that has to withstand the inundation that you've seen over the last couple of days. The extreme heats. We were in 40 degrees somewhere, I think, couple of years ago. We hit that for the first time. So when we talk about extremes, mean that both cold and hot. If we get it wrong, then the customer has to go and pick it up and repair it. And that's, you know, cherry pickers, time, energy, huge cost to them to do it. So the benefit for us is that we will do something that will last for a period of ten to fifteen years. And then we'll be working on the next iteration as technology moves along. So you'll get this continual cycle between four and five years where we'll start on the next iteration of what's going on. Our customers are sticky. I like that phrase.

1:22:08 I'm gonna keep using that phrase, which means long term relationships. And it's engineering led. That's the other thing. It's not purchasing led. It's not it's not led by sort of other aspects of the business, the operation side. It's all about the engineering side of it. It starts with the scope of work. Look at the scope of work. We come up with a compliance matrix, and then you end up with a statement of work, which is what we're going to do. And that's very collaborative. And engineers aren't sentimental people. They like to work with facts and figures, and they like to come up with solutions. And so you put our engineers together with the engineers of the company that we're dealing with, and you then come up with that cooperative spirit. So that hopefully gives you a little bit of an idea about the the process of it. So intelligent transport systems is one area. Industrial warehousing, the element that we worked for a number of years is in the power side of it, so autonomous robotics.

1:23:01 To get a a battery to work in cold conditions, if any of you got EV cars, you know the difference in your range from a cold day to a hot day is extreme. You put our battery into a refrigerated environment, we've got to select the right cell, we've got get the battery management system correct, and it's got to be in the correct ruggedized mechanical system as well. So it operates at high speed and at very low temperatures. Difficult to do. And that's why, you know, we fit in that lovely sort of Goldilocks area where the big boys could do this, but the volumes probably aren't there for the big boys. So we fit in that area underneath where the volume's enough for us to do it, it's specific enough for us. But also because it's difficult, there's a lot of SMEs that wouldn't be able to do it because they haven't got the EMC chamber. They haven't got the we talked about the anechoic antennas chamber over in Levenster as well. So it's having all of those facilities to facilitate the project and to bring it in on time as well.

1:24:02 The other thing I wanted to talk about is our supply chain. You only realize that your supply chain is no good when things go wrong. I guess when what we saw through COVID with all of the component crisis that we're still living with a little bit, actually, the relationships that we have with those suppliers were super good and super, super important. And we only had, I think, one customer in the end that went away because of a lack of ability, over the 700 or 800 customers we're dealing with, we were pretty pleased with that. But we continue to expand our supply chain. Clearly, there was a question earlier about China. We work very heavily with the Taiwanese. We work with those guys super closely. We're allowed to adapt their computers. We're allowed to get into their computers and change their networks, do the GPU, all of those kind of things.

1:24:49 And also, we're beginning to develop into the North American market as well, particularly on the back of the power business, but I'll talk to you a bit more about that in a minute. The other key important area for us is medical. And I think one of the gentlemen talked about the PAPR stuff, which is the one on the right hand side there. We bought an imaging company a couple of years ago and that's enabled us to get into many more medical solutions. Advances in AI are creating higher demands in this. We've got patient positioning, for instance, for radiotherapy treatment, advanced computer vision assisted surgery capturing, transmitting and displaying HD digital and analog video for real time training purposes and also supporting machine vision medical applications.

1:25:38 You think of AI, you think of what we're doing, we're bringing it down to the level for the medical world. We're also actually working in the ventilator world. The sleep apnea ventilator is a particular hot topic at the moment. We happen to be dealing with the customers there. Global demand ramps up. And again, these things are difficult, but basically, it's an emergency supply. If if the if the main hospital power unit goes down, it kicks into gear. So it has to work. Power, antennas, and imaging are really what I would call our global businesses. So power, we bought a business in California, which is the battery pack assembly bit. We have an office over in in Maryland now, is our imaging company. And then antennas. Probably about 20% of the antennas business is American.

1:26:28 But we recognize the North American market for those areas is the biggest market, and so we have plan to get boots more boots on the ground. We've already recruited two more people, and we are also looking at assembly in North America as well, particularly with some of the defense and security projects that are coming up. We're acutely aware that with the change in president, potentially, either Trump or Biden, we've got to be ready for that, ensuring that that capacity, if you like, to be able to extend into the North American market and being seen as a friendly US based company. So we've got facilities over there. We're gonna be building that American to American face of of the company as well. So if you remember, one of the original pillars was to become more international.

1:27:16 The the North America is is the number one priority for the system side over the next few years. It's a bit of a whistle stop store. But again, some of the conversations I've had with you all is that we're incredibly diverse. When they say, what is it you really do? We do work with industrial. We work with defense and security. We work a little bit with oil and gas. And we work in the transportation markets as well. But I just say, to wrap it up, it's all about rugged conditions, difficult to do, which is why we are having great success with this at the moment. I'm now going to pass you over to James and Chris and they're going to give the communications solutions overview, which is a good example, I think, of where an idea from a customer has come into reality and using our partners as well.

1:28:09 So over to you. Hi. Good morning, James Hall. I'm the senior business development manager for the communications business unit within the systems division. So I'm here to really talk to you about our manufacturing ability and how we develop products, in line with customer to basically develop the state of the art product lines, working with customers integrated into their teams to make sure we solve real life problems. So our communications business unit is the exclusive UK value added reseller for persistent systems, wave relay mobile ad hoc radios. They are the global leader in mobile ad hoc technology, and therefore, gives us a really good foot in the door and a good opportunity to, work into these defense markets and other sectors where we are integrated within their teams, which gives us a a head start in developing products that meets their needs.

1:29:04 This particular product line has been a really good revenue generator, which you'll have seen through our NATO contract that was awarded last year. CITO previously supported a UK Ministry of Defense exercise in The United States. We were there to test wide relay communication systems as an innovation product line for the defense to take forward. Whilst doing that, we exposed to their current system. So as you can see from the slide on the screen, on the right hand image is their current solution, and then on the left two images are the wave relay system that we were proposing at the time. Due to the exercise, they were moving the battlefield headquarters very regularly to avoid detection. They were being hunted by a simulated US enemy, so they were moving their headquarters very regularly to avoid detection.

1:30:01 When they got to each location, it was clear that this equipment wasn't practical. The cables were tangled. There was not enough power outlets to power the equipment. So it was inherent that it was a problem for them, and it wasn't as effective as it could be. It would take something like thirty minutes to an hour to set this equipment up at at each location after they moved. That wasn't practical. So it quickly became apparent that the in service solution and the solution we were proposing wasn't appropriate for this type of scenario. On arrival at each location, as I said, the the cables were tangled, and this created a problem for them. They had to be deconstructed every time they moved, which was also an issue in terms of packaging, transportation.

1:30:51 So we work with the, the customer in order to develop a new product, which is shown on the screen. STATE took took the knowledge and the feedback gained from supporting our Ministry of Defense customer and work with end users to design and manufacture a field deployable communication system that solved these issues that were previously highlighted on the previous slide. The crib is special in terms it incorporates product lines and capabilities from the rest of the systems group, including the wave relay communication system, embedded computing, and also antennas from our antennas division in Lehmster. Obviously, we flipped over to the cameras that are showing the live products that we brought with us today. We can go into that in more detail.

1:31:47 It highlights synergy across the group and our engineering ability to design new products based on customer requirements. If we flip back to the slides now. Customer support is a core value for STIRE TIGHT and SOLID STATE. Working closely with our customers enables STIRE TIGHT to develop new products to meet customer needs and demands. The Crib is a great example of this. Designed to improve users' effectiveness, efficiency, and survivability, which is a key aspect to UK Ministry of Defense customers, it can be set up in under five minutes. It instantly provides connectivity to the network, providing voice communications, video streaming, and also situational awareness to see where other troops are deployed.

1:32:38 This prevents incidents that have happened previously, like blue on blue incidents. On your right, have the working example, demonstrating the deployable headquarters. We're streaming local video from the dismounted SOLIDER and the rugged display controller you can see on the desk. We're streaming live remote video from our headquarters in Redditch, where you can see PTZ video on the screen, not on me. So if we if I think the camera's gonna pan in onto the actual crib unit, where you'll see the the videos from our office in Redditch. These are fully controllable from anywhere in the globe using the controller that you can see on the desk. We can take control of those PTZ cameras and actually control them.

1:33:25 In addition, we have simulated drone footage and live positioning on the map. This shows the location of other users. Over lunch, we're to give practical and live demonstrations of the crib unit and the other equipment that we have here today, so you can see it in more detail first hand. It really highlights our manufacturing and engineering ability to take customer ideas, work with customers in order to design state of the art products that actually solve these real life problems. This just summarizes what we were discussing before in terms of the solution that was currently in service, the problems that they had with that, and then the technology that we went away and designed to solve these issues.

1:34:20 As you can see, rapidly increasing setup time, breakdown time, increasing effectiveness and survivability, as mentioned previously. The crib is not just a defense product. It's actually been taken on by Plymouth Marine Laboratories, who is a autonomous testing site down in Plymouth, and also the German EOD police. So a slightly different sector have taken on the crib unit as part of their operational needs and to deliver a capability into their customers. I'm just now gonna hand you over to Chris, who will go into the other areas of the industries that we deal with. Thanks, James.

1:35:18 Hopefully, we click it the right way. We've got, James is talking about the crib and the, the origins and how we worked with a customer. We saw the problems and, the crib was the result of that. Talking about, air and maritime sectors now, we we were looking at, the maritime environment is particularly a difficult environment. Alastair mentioned about rugged. You've got problems with, solar radiation. You've got problems with salt spray. You've got, problems there where you could things can go can go wrong rapidly in that environment. We would we were working with an unmanned surface vessel company, and they asked us to take a new approach to the communications to that unmanned surface vessel.

1:36:08 So with the wave relay technology, we were looking to put that into the unmanned surface vessel to actually we can swarm unmanned surface vessels if we want to with the technology. We can have one on ones. We can have them lined up with the technology. But that and they wanted then something that they could actually use on the unmanned surface vessel which would survive that environment. And the this, so the the picture in the circle on the on the screen there shows a a typical, use, where it's it's it's slightly it's a typical, there's a radio in there, there's a mask mount, there's some antennas, there's some wires, there's all sorts of, extra bits and bobs. So we they asked us to produce a custom product.

1:36:57 That custom product only wanted one connector, power and data. So if somebody got on the unmanned surface vessel who was not authorized, shall we say, unplugged it. It's useless because there's no power. So it was a very specialist, requirement. And the the custom product was successful. It's deployed. It was designed, it was paid for to be designed by us. So that's that's that was important. And the result was, effectively what we're calling the MMCU. And that, has been offered, as a a standard product to the open market, which looks like this in the next slide. We call it the masked mountable communications unit, which is a a subset of what I've just been discussing.

1:37:49 The, this, the RF module is the black bit, and the encased and the case around it is, as I say, where it's been designed so it will withstand that maritime environment I discussed earlier. The picture you see there is where the mount it's mounted underneath on the bottom there where the circle is. Then some RF connectors go up to the antennas at the top of the the unit. Now that's a rigid hull inflatable boat that it's sat on. And, yeah, that's installed in that structure. And the solution's already been designed and installed with a a key customer who, undoubtedly is happy with with the solution, shall we say. And it's, again, it's a situation where you've got the WaveRelay technology along with the MMCU is providing you can network ribs together. They'll all talk to each other.

1:38:52 You can send video across the network. So it's a network solution and, that entails them. Also, they can have, for instance, SATCOM bring in the information from satellite comms as well. So it's a it's a it's part of that forming a network for that solution. This slide shows something I mentioned earlier that, on the left hand side, you've got an existing client solution. You've got cables. You've got loads of connectors. Those connectors could be, could be a problem when it you got saltwater, and you've got then a solution that's not elegant, shall we say. So we ended up, as I say, on the right hand side, with the the MMCU solution, which is the stair type product, not the custom product.

1:39:52 Similar story to the crib where the requirement or need from the customer ended with this design. And we also recognize that the unmanned market is becoming larger and larger. That's unmanned surface vessels, drones, UAVs, and, that is that's an area where obviously it's, it's important to compete in. This is for the benefit of everybody not in the room. It's actually on a tripod over on the right hand side there. That's the actual product itself. The antennas we've stuck on the the top there, but they could be cables going up to, the solution that you saw on the the rib design in the picture.

1:40:46 And then you'll have one connector generally going up to that which takes power and data, and that data will then be a computer or some sort of, could be a camera, could be any form of sensor, on the, on the rib or unmanned surface vessel for that matter. Air operations are drones are probably even bigger market than unmanned surface vessels. You see the the in the news today, you you see drones all over the place, and you'll see some pictures there.

1:41:33 We've got, in the middle, it's, that's the the future. That is a an air taxi. You've got balloons, all sorts of types of balloons as well, but also drones that do give you generally, they're used for ISR work where you wanna see what's going on. Could be inspection work on cables. It could be all sorts of different types of requirements where you want to inspect, things that even wind farms on the in the North Sea, you need to inspect them. So a drone is very useful for that sort of thing as well. The technology we use enables that to have a connection to you on the ground. You can have a point to point connection. You can have as I say, these drones can swarm, we can all talk to each other. You can decide then what you want to do with that drone.

1:42:31 So we've worked closely with the a lot of these customers. It's customer driven. As James mentioned earlier, the data the the the WaveRelay technology allows us to actually enter that door, and then we talk to them about the bigger problem. And, this is this is where we, we we we get to to talk to them. You see the the actual here on the left is it has wave the wave relay installed in it. The tracking antenna on the right will track that out to about a 150 kilometers.

1:43:20 So you can have people on the ground. Those people on the ground could actually then see the video, that the drone is seeing. So you can actually then you can track it from some distance away. It's got different uses, but certainly in the defense market, it's, it's very useful. James was talking about, the the dismounted solution that I'll talk about. Next slide. But the you enable you can actually control a PTZ camera, using this data technology. So the PTZ camera could be in the drone. The guy on the go ground then has the ability to move that camera and, see what he wants to see, and it's not the guy a 150 kilometers away that he has to ask, can you move the camera, please? So the technology there is enabling, different ways of working, shall we say, in different vertical markets.

1:44:26 The final thing is that we we talked about, persistent systems. We're we're SOLI, UK distributor. We also have rights to basically Western Europe with, European presence. We've got a network of partners across Europe where we work with these those guys, and we've been doing that for some years now. The so that's the value added solution where especially in the defense and security sector, but there's it does have different vertical markets, as I mentioned earlier. Picture on the top right, shows different hardware solutions for different, installations.

1:45:17 The, the circle on the left is actually showing what we call a dismounted solution. And the dismounted solution, you'll see, commonly called Sergeant STIRRTA. He's standing over there. And he actually is wearing the solution. Enables him to do voice, but also data. Modern technology allows you to do text chat. So it gives it's basically a network. All the soldiers are all networked together, and they can just chat away. Modern way of doing things. Nobody talks to anybody anymore. So, but the soldiers can text chat and it's silent. It's a you don't have to actually even talk and you can then do that. You can move, you can text chat, you can do you can see video coming onto the screen, which is on his chest and, that will enable him potentially to see certain things that he could never see.

1:46:17 And, that, that's the sort of technology we're talking about, but that's a dismounted solution, that enables him to receive a lot more data than he ever used to. And that that's basically the as I say, part of the communications network. So the crib and the MMMCU are nodes on that network, all parts of that solution. And we've built around this technology. We've also developed services. We talked about approved trainer up here. Those services, include training. We've got, trainers that go out. So it's we're doing a training course probably every other week at the moment, to different customers, predominantly defense, but that, is a very high tempo, and, we're, we're yielding. That helps as well because, it's amazing what somebody will talk to a trainer about, rather than the salesman.

1:47:20 So, it's quite and you get some interesting stories coming back saying, oh, we could use that here. So it it it helps in all sat there, that communications as well in parts of the, the process. I think that brings us on to any questions. That's great, James. Thank you very much indeed, and, Chris. Thank you. Alison, if I could invite you back up, that'd be great. Thank you. If I could take any questions from the room, I've passed you the microphone. Thank you. Hi. Yeah. Two from me again. Just on the products and, I guess, the challenges of of the design process. Do you find the ruggedized nature is more of a challenge or the technical capability more often than not? And then more on the kind of lead generation piece, do you find that you find leads coming more from the system side, of the business more often or the component side, or or does it kind of work autonomously between the two?

1:48:23 Yeah. We're we're all if I can just take that first bit there, we're all working on something called Pipedrive now, which is a CRM system. So between Solstre and ourselves, it gives us greater visibility of leads, so just as a step forward for us. But again, there are new. We watch the website very carefully. A lot of our customers are quite cagey. You'll see a lack of case studies on our website and that's because nobody wants us to talk about what we do. And I don't mean the defense and security, I just mean generally with the customers. They don't really want the customer to know that they haven't got the entire solution. So we have some software that we can help actually now see who's coming to our website. If So you had a look at our website, we'll probably know who it is. We won't know specifically. We don't want to be that intrusive, but it gives us a clue.

1:49:08 But we do have a BD team now which is actively pursuing customers. But it's fair to say that a lot of what we do is project based, and projects mean that you've got to have a window of opportunity. So what we're trying to do is establish that communication with the team because the cloud will break at some point, and it'll be that they need this new solution coming through. Engineers are really who we're trying to pitch to. They're the only people that make the difference with these kind of technical solutions. And when they're ready to talk to you, they'll do it, but they've got to know who to talk to you. Very often, we find an engineer will move from one company to another that we've never deal with, and guess what? We get a phone call. So we're trying to to to establish more creative ways to reach the engineer. And so when he does think, hang on. I've got this rugged thing going on here. Who do I know? I tell you what, these steer type boys are there. So it's but that's a slow burn. You know? New customers are tricky, But it's also with our existing customers, some of the very big ones we deal with.

1:50:03 They themselves are super siloed, so they actually don't know what the other companies the other side of their business is doing, and they may be only six feet away. So you can see the challenges we've got there. But the good thing about being around a long time, we know those challenges, and we're doing everything we can to break down those barriers. I forgot the first bit of the question. Maybe that Rugged. Rugged, yeah. To answer your first bit about the ruggedization and technology, obviously, that's the biggest challenge is designing products for harsh environments. We have a history of doing that and doing it well. But recently, we have a team of ex military people who know the environment. We've we've got lessons learned from connectors that don't work in salt fog. So we work with our engineering team to advise them on the best practices for designing products for rugged and harsh environments.

1:50:51 So I think with a team of x users and a good team of engineers, we develop products that really hit the nail on the head, and we we sort of don't miss any gaps when it comes to that rugged and harsh environment. Just on that, we're we're not a test house, but many of our products have to go through a test house to be officially certified that they're fit for purpose. So what we now run internally is we've got the EMC chamber, as we talked about. We've got the vibration. We've got the heat. We've got all the things that we can push that product through so we know it's going to pass because we'll have the same criteria for it. And the advantage for that is the customer knows they're not going to go back to square one if you end up because very often a shock shock and vibration test is is is the worst, and that's a prototype that we use. It tends to ratchet it around.

1:51:36 But that generally, in our world, it works because they've been through all those iterations making sure that it does it. So it's but it's hard. As James rightly says, that's super hard to do. The software is is the easy bit very often, but it's actually making it work in situ, which is which is difficult. And the phrase the engineers always use, as long as it doesn't break the law of physics, we can probably do it. Because very often, we get a lot of out there ideas sometimes. And certainly, the component boys, I suspect, will have more of those bewildering ideas that actually will break the laws of physics. So, yeah, thank you. Hi, guys. Thank you. Can I ask about the SOLID distribution agreement with what was it, Persistent Solutions? So you've worked with them for a long time. Can I ask about that obviously brings you some value?

1:52:22 Can you talk about, like, renewals and length of agreement and so on? Yeah. I mean, yeah, it's it's fair to say it's been a long, long relationship. So but you you want to to go go with that? The renewal used to be it started every year, then it went to two years. Now it's I think it's three or four years, the renewal. So it's it's grown from that point of view, from a renewal point of view. And we push that more than just as much as anything, but, obviously, it's a it's a two way street. We're doing the business, so we've got a bit of power from that point of view, I guess. The we're we've we've grown the business from is that me? Is that we've grown the business from not a lot literally in 2012. It was literally, identified one particular project, went for it, won it, and then ten years later, we're we're we're it it's a it's a different proposition, shall we say. So, obviously, what you see with these products here.

1:53:23 So the, very strong relationship, and it's, it it gets renewed for an even longer period of time there from that point of view. And if I could just add, it's quite hard to take it away as well. It's an American company. And because of some of the projects we're involved with, you've gotta be a UK person. There's got all sorts of security clearances. So they recognize that we get access to places that they wouldn't. And on that same nature, we work with Western European people who are working, primarily with NATO, customers as well. Again, the same criteria arrived. You've gotta have a local person in situ. So, there's a great deal of trust between us, I think, which has been great, and, and the business has has benefited vastly because we're on both sides. They've also grown significantly. Yeah. I think I'd I'd add there that every year, the the CEO from Persistent Systems comes to see us. He doesn't do that for anybody else.

1:54:16 We've got him coming over again in June, and, they've grown as a business. They're privately owned. Two two guys own the business, and it's he's one of them. He comes to see us every year. And he we we do do do various customers, etcetera. But that's that's a bonus as well because he he gets to know us, and we're we're you know, from that point of view, it's it's good good from that point of view. And just a a slightly different question. The crib and the m MCU, obviously, very clever bits of kit. Who owns the IP there? Can you guys protect that, or can someone else just replicate? Good question. Yeah. They they will own the IP. We'll have very often let me get this right. It's the the the background IP we'll own because some of the wizard we put together will be ours, but the foreground tends to be theirs with the software. But that's, if you're a lawyer, is always a little bit of an area that gets discussed. But, yeah, we'll own the background stuff. So that works on all of our the principle of all of what we do.

1:55:17 So with the battery packs, that's our design. What they put around it is theirs. And so there's that challenge there. So but, yeah, a good a good good question. Thank you. Any other questions from the room? Yep. Perfect. Can you just talk a bit about between the two divisions? How much you sort of you you you use your own components? How much they're sort of competing against you as they're trying to move up the value chain? Yes. So there's lot of between us as systems and increasingly with SOLID STATE as well. We tend to work increasingly close together. So I'll give you an example on the on the MMCU bit of kit there. We probably, a few years ago, wouldn't have talked about the antennas. And in fact, as an antenna business, we did not do these dipole antennas, but we recognized the opportunity with a NATO contract with other things. So we then started to manufacture these ourselves.

1:56:13 And so on the back of what was happening there, we identified an opportunity, and that's now going gangbusters. So, frankly, a different technology. It was kind of not what our antenna people really were at, but, actually, it's proved incredibly helpful for us. So we're trying to do more and more of that. I think we mentioned the UAVs. We've got battery packs going into some UAVs. We've got data links. We've got cameras. Trying to bring all of those together and present that is what we're trying to do. But remember, in all of those disciplines, there'll be a different engineer involved very often. So it's not always as straightforward as you think as, can I introduce you to my colleague? Because that engineer actually tends not to not worry about it, but we're getting better at doing that. That's why this demonstration works. Basically, that stair type systems in a box is how we refer to it, because we can talk about all of our disciplines just in that one product area.

1:57:04 Yeah. The others perfect. Thank you, guys. Gary, Peter, I think it's over to you, sir. You're very kind to us. Gonna give them the difficult ones now. Thanks very much, Chris. Thanks, Alastair. Okay. So last couple of slides, one from me. So, yeah, I guess, hopefully, the guys have done a pretty good job of bringing to life what we do as a group and what the group and the team have to offer. As I said on the the earlier slide, we've delivered pretty strong growth over the last five years, and and the ambition is to continue to replicate that to our to our next goal of 2030.

1:57:53 And as it says here, the the ambition is to to become an international leader of sustainably engineered components and systems. And that will we hope to innovate, providing customers with our trusted technology for their demanding applications. And and how are we gonna achieve that? Really, the the two key drivers for that are continuing to, replicate the success we've seen in terms of growth of operating margins. Over my tenure with the group, which is now seven years, unbelievably, it's gone from six to nine and, yeah, approaching double digit. The ambition is to see that, replicate that, and go from nine to 12, and then to complement that with the operational gearing, of growing the top line as well. And hopefully, that will enable us to maintain our our TSR growth of about 20%, which we've achieved over the last six or seven years since I've been with the group.

1:58:50 And I'll hand over to Gary to to do a final wrap up. Thank you. Every company has its challenges sort of day to day. You know, it's whether it's customer challenges, suppliers, or internal challenges. What we've been really good at is is navigating those in our own business and really driving our our strategic ambitions and and and doing this. We formed in September an executive board, reports of the group board. It's it's very much not an operational board. It's really about taking our our strategy, developing it, obviously, reporting to the group board, but then deploying it. And since September, I've I've been amazed at how well that's working. It's really good. There's seven seven of us on the team. There's a four executive directors, group head of HR, John Baxter and Alastair Wallace on it. The work done on that and the speed of delivery is really good to see.

1:59:56 I'm I'm probably known to be quite prudent in measuring my style, those those of you that know me, but I must say I'm the most excited I've ever ever been of the prospects of the medium term growth of the company. It's just it's just amazing. Whether that be the the plan just roll out our antenna assembly in in The USA, largest market on the planet. You know, Alice has already spoken about, you know, whether it's republican or democrat taking over, you know, built in America will be really important, and that's that's something we we will rise to that challenge very very definitely. Opening our integrated systems production facility in the summer. So we're moving from from products that's sort of yay big to enormous great systems there.

2:00:44 And we've got we're opening new 16,000 square foot facility there to build that. That's to that's to really address the demands of our tier one defense customers. They they are very, very busy. They need to lean on good good good supply chain. There are very few of us now in The UK that can do that, and we're talking about programs here that are years, multi years, decades long. And we we will work, and that's part of the infrastructure piece I spoke about. We're investing in the business, and we're continuing to do that. And lastly, on on own brand product development, we're going this this trips around at the moment on that, on how we develop that, and that's something certainly in early July when we now we do our our prelims roadshow.

2:01:30 We'll be to give you more of an update on how we're investing in own brand. But a great pipeline of acquisition opportunity there to bring in new layers of own brand products into into the group. And as I say, it's very margin additive. But for me, it's the it's the organic stuff. That's where you get the best margin. That that would give us the best return, and that's that's really, really exciting. And I think together that it it just strengthens the diversity and resilience of the business as we look to achieve our TSR goals and and over the, you know, our strategy horizon that takes us to 2030. So I'd like to make a few thank yous, if I may. So thanks to to Tim from Redfern and the Cavendish team for organizing today. It's been a lot of work, but appreciate that. Thanks to Tom for helping us out. We've been with Warbrook PR for many, many years. They're really, you know, really supportive to us. So thanks again for that.

2:02:34 Happy to take questions now. We'll have a chance over lunch if you want to do more one on one rather than in an audience. I understand that and we can take that now, very happy to take any questions now. Just one in terms of your margin progression. When we think about that, is that to move up to 12% by adding even more value and moving even further up the value chain in terms of components? Or will the growth just come more from those areas? And actually, there's a lot of work you're already doing that's there, and actually, it's just gonna be less of the commoditized stuff or that's unfair, but you know what I mean, coming out the bottom. I think it's it's a combination of all of the things you described for me. So the different drivers in in the two halves of the business.

2:03:28 Own brand is clearly important in both. Own brand, as Gary said in the outset, is typically 10 points higher than franchised. Own brand at the minute is a relatively small part of what we do, so as we add that, that will richen the mix. If we look on the system side of what we do, it's about more engineering value added. And clearly operational gearing also helps as well as we continue to scale. So it's a combination of enrichening the mix of what we do combined with continuing to grow, which hopefully will continue the the successes we've had to date. Great. Thank you very much indeed. If there's no further questions, it's just me between you and your lunch. If I could just thank all the presenters today, Gary, Peter, Alastair, John, Chris, Scott, James for updating investors.

2:04:20 Thank you to you all. If I could ask investors online not to close the sessions, we'll now automatically redirect you so that you can provide feedback, to the company. On behalf of the management team of SOLID STATE, I'd like to thank you for attending today's presentation. Good afternoon. Thank you, guys.