Solid State (LSE:SOLI) — Review of 2022 Results and Acquisition of Custom Power

0:03 Good afternoon, ladies and gentlemen, and welcome to the SOLID STATE PLC results presentation and introduction to the acquisition of Custom Power following the successful general meeting held this morning. To start with, if we could cover a couple of housekeeping items. Before we begin, we'd like to submit the following poll, which you will see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen or if anyone has dialed in via solidstatewarbrookpr.com. The company may not be in a position to answer every question it receives during the presentation. However, the company will review all questions submitted today and publish responses where appropriate. These will be available via your investment company dashboard.

0:55 Finally, we would like to remind you that this presentation is being recorded. Now on this particular occasion, we're going to start the presentation with a short video. We have had a request in the past from investors that they would like to see an illustration of the types of products that that the the group is is responsible for and also some of those products that have come from some of the acquired companies as well. So in this instance, we're going to show the Harrier range of cameras from the acquisition of ActiveSilicon, which we'll play in just a second. We also have in handouts a glossary of terms, which has been asked for in the past so that in terms of the acronyms, you can see exactly what those mean. So following the video, you will hear from chief executive Gary Marsh, group finance director Peter James, and Matthew Richards, managing director of the systems division.

1:49 Mark, if I could ask you to turn to video. ActiveSilicon, providing the perfect autofocus zoom camera for your application. Auto Harrier autofocus zoom cameras range from full HD to four k imaging and include the option for additional onboard video processing. Our highly reliable cost effective imaging solutions can be easily integrated into new or legacy systems.

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3:39 Hi, Peter. If you could just unmute your mic, that's great. Thank you. Hello. Good afternoon. Welcome to our presentation this afternoon. We hope you find it informative, and we're very happy to take your questions after we've completed the slide deck. I'll just kick off now. So we've you've heard the introductions. You've got a lovely photos there. The only points I'd make here really are we've got an experienced and stable both executive and senior management team. And the acquisition of Custom Power will be under responsibility of Matthew, who's joining us today within the Power Business Unit. So I'll kick off now.

4:27 So SOLID STATE provides trusted technology for demanding environments. We do that in partnership with a blue chip customer base that we've built up now for more than five decades. The business operates through two divisions. Our Components division supplies both own brand and franchise components into the electronics market and these include semiconductors, optoelectronic and electromechanical devices. Our systems division provides engineered solutions where quality, reliability and performance are paramount to our customers' harsh environment applications. The systems division focuses in three core areas: Power, as I've just mentioned, that's battery pack manufacturing computing and communications. Across the group, our sales are engineering led, designing high value added solutions to fulfill our customers' demanding applications.

5:19 We don't operate in commoditized markets or supply commoditized products, so securing strong and resilient margins. We service the diverse markets where there's really one common thread, the need for high reliability and high performance, specifically targeting high growth markets in green tech, industrial IoT, defense, medical and transport.

5:45 I'll briefly touch on the operations of the company. Our headquarters are an industrial heartland of The UK in Redditch, just South of Birmingham. We operate a decentralized business model with five production locations here in The UK, and currently one in The USA based in Indiana. And we've got a growing team of approximately now three twenty five employees. One point I would make here that this decentralized approach really served us well during the pandemic. It was key to our success during that period. Our extensive industry experience has enabled us to successfully manage the macroeconomic challenges of recent years. Our specialist technology supports a diverse range of market sectors, giving the group resilience.

6:33 And the business remains agile and proactive to respond to new and existing customer requirements. We've built over many years strong key customer relationships and are now securing larger contracts as the product range expands.

6:48 We have an extensive supplier base, allowing the group to design best technology for a given application, enabling preemptive management and mitigation of supply chain challenges. We bring together technologies across the group that provide engineered solutions. The most recent examples I'd give you are projects we've had for Si and Cano, BeHero and TFL. We've announced all of these through the RNS reach. So if you get to look at those at your leisure, they give you some more color. For those not familiar with SOLID STATE, this is our divisional structure, including our latest acquisition, Custom Power. Custom Power will form part of our systems division under Matthew's leadership.

7:36 The brand Custom Power is valuable to the group, and we're considering adopting this for our enlarged power business unit. As such, we've registered the company name in The UK. We've also registered the domain name custompower.co.uk. Post deal, we put in place some marketing promotional plans to significantly raise our profile both in The UK and The U. S.

8:05 We've got quite a lot of material to cover in presentation, so I'll only briefly touch on this slide. But looking in more detail at our organization structure, here you can see it's made up of four business units in each of our systems and components divisions.

8:30 We're very proud of our track record in acquisition selection and integration. Last year, we celebrated a double anniversary, fifty years since the company was founded, together with our twenty fifth year on AIM. Throughout, we've been consistently cash generative and return profits to our shareholders. We acquired STATE PLC in 2002 and this was really the genesis of the Systems division that you see today, introducing computing and battery pack manufacturing to the group. Prior to Custom Power, we've acquired 12 businesses, including, as you can see there, two last year. And we seek out earnings enhancing, cash generative companies that are clearly aligned to our strategy. So looking at our strategy, it has four key elements.

9:18 Firstly, broadening our technology and product portfolio. Recent examples here include ActiveSilicon's range of imaging products, including autofocus zoom cameras that you can see top right and you also saw in the video we've just played. With custom power enhancing our battery management systems, pack heating and fuel gauge software, we'll come into that in a little bit more detail later. Internationalization of the group. Last year, the ActiveSilicon and Willow acquisitions helped increase international sales from 30% to 38% of total revenue. Custom Power has a strong position in The U. S. Market with Tier one OEM customers, and that will bring us much closer to 50%. Owned brand products. Here, the group continues to build on our optical sensor range for medical applications, Our electromechanical relays and contactors from the recent Willow acquisitions are used in energy storage and EV applications.

10:20 And Custom Power now introduces high reliability, lightweight battery pack solutions for drones. And finally, investment and development of our talent, both through recruitment and acquisition is there above all has been key to us delivering on our growth ambitions. I'll hand over to Pete now to talk you through to some of the numbers. Thanks, Gary. So this is our investment case. And you can see here that it shows our track record over the last five years. So, pleasingly, we've been able to deliver growth in in revenue and, profits, and that's been through a combination of organic growth and acquisitive growth.

11:09 During that five year period, we've not had any dilution. Obviously, we have issued shares to fund the acquisition of Custom Power.

11:20 The historic performance in terms of, revenue, we're seeing, 16% CAGR over the last four years. Operating profits are up to 230 base 210 basis points to 8.7% this year, and the adjusted fully diluted EPS has shown 23% CAGR. So we're very pleased with those results, over the last four years.

11:47 Looking forward, we monitor and, yeah, manage cash generation as a critical metric for us. We this is critical because it enables to ensure we can deliver our progressive dividend. We've increased the dividend to 19 and a half p this year. We deliver value through both a combination of income and growth. And, yeah, the key metric there is is TSR that we'll be monitoring going forward. In terms of the chart there, you can see on the slide, we manage our expectations prudently. The dark blue sections are the expectations, the guidance that was there at the beginning of the year. We really only count chickens when they hatch. You can see the light blue is the outturn at the end of the year, and pleasingly, we've been able to issue pretty significant upgrades in each of the last four years.

12:37 Pleasingly, the record order book at the end of May, just shy of 90,000,000, gives us really good confidence that going into the year ahead, we can we can hopefully aim to continue that trend. So coming on to the results for this year, let's start with a couple of charts. We can see there some very solid results. Foreign exchange headwinds have hampered the top line growth this year. However, that does, yeah, have a have a consequence at a revenue level, But, actually, it does depress the, reported revenue growth, but it does benefit the gross margin. So you can you can see the the benefit there at the gross margin level because we have a natural hedge. So coming on to the the numbers in the table, the reported revenue growth benefits from the first full year of Active and Willow. So like for like revenue growth is up mid single digit. Gross margins, as I said, benefiting from the FX headwinds, are up a couple of percentage points. But on an underlying basis, they're up they're marginally up but stable.

13:46 But pleasingly, the operational gearing, you can see coming through with that improvement in operating margin to to just under 9%. With those acquisitions and the acquisition of Custom Power, there's some pretty significant deal costs this year, and nonrecurring costs associated. The the acquisition fair value adjustments relates to an increase in deferred contingent consideration for active silicon, which is really pleasing because that represents outperformance above our initial expectations. So we've increased our provision for deferred consideration in this year. So what does that deliver? End of the year, 70.6 p of fully fully diluted adjusted EPS, which was ahead of our five year target of doubling EPS to 60 p. So, yeah, very pleased with that outturn.

14:39 Coming on, that that strength of of performance has given us the confidence to increase the dividend to 19 and a half p, as I said previously. If we look at cash generation, the strong cash generation has really enabled us to invest in inventories. That's been absolutely critical to delivering the revenue this year, but also to securing the ability to have a good start to the year ahead. We've invested about £7,000,000 in inventories this this period, and you'll see that when we look at the balance sheet. In terms of CapEx, we have increased our investment this year with investment in EMC and a wirebonder in our battery facility down in Krugern as as two of the bigger programs we've invested in, and those are gonna be really critical to delivering operational efficiencies as we go forward.

15:30 Acquisition payments. Payments in the year relate to active silicon and Willow. The deferred consideration you see there on the balance sheet of 6,600,000, again, relates to the deferred consideration for those two acquisitions. 4,600,000 of it was paid in q one just gone, and the last 2,000,000 is the final part of deferred consideration for active silicon payable next year. So final one for me before I hand over. The balance sheet, as I said, you can see there the very significant increase in inventories. That's absolutely critical for us and secures our our ability to get products out the door in q one where we've had a a really strong start. Net debt, 5,200,000, which reflects the deferred contingent consideration, and 1,400,000 cash with banks.

16:21 And in terms of custom power, yeah, following the general meeting today, we've raised 28,000,000 of equity roughly, and we've got a new term loan facility with Lloyd's for £13,000,000. I'll hand over to to Matthew who will, add a little color on the acquisition of Custom Power. Yes. Thanks, Pete. So there is a comprehensive investor presentation on the SOLID STATE website, and that details the acquisition. The next few slides provide some color on the transaction, and Pete will talk through the structure of the deal, the funding, and the financial metrics shortly. So the electrification of most everything is driving significant market growth. Net zero targets, autonomy, and a cordless world are creating enormous opportunities.

17:11 We actively sought out the opportunity to acquire Custom Power. It followed an extensive search. We we worked with a a consultant that was recommended to us. And including custom power, we researched 47 businesses, principally in The US, but also in Canada. We were looking for a battery pack producer that was profitable, cash generative

17:35 business in markets that were complementary to our own. That search highlighted actually there were very limited options that fulfilled the criteria. Many were smaller regional players at early stages of their development in this growing sector. This transaction is a fantastic fit. It delivers on the four strategies that Gary highlighted. So internationalization, own brand product, technology enhancement, and talent development. Now this business looks and feels like our power business, albeit they've got the the palm trees there. But in serious in all seriousness, like our battery operation, it's well established, highly profitable, and cash generative with significant opportune opportunities for growth. And you add to that the

18:23 force multiplier effect of bringing two great businesses together. It's a formidable union. Having had our team of five people visit The US and Custom Power CEO, Mel Weiss, come to The UK, it was clear, and it is clear to us, that we share culture and values, much in common and complementary too by way of markets, customers, suppliers, technology, and skills. So with a dozen acquisitions under our belt, we know how important that fit is. And and in this case, the indicators are absolutely positive and the deal risk reduced as a result. So where do we fit in the supply chain and where is that value generated? Both businesses are not into the materials in the blue, the the the or or cell manufacture in the middle there in green. We're not chemists.

19:15 We both operate across all of the red section here where the value resides in the battery management system, the software, the module design, pack materials, and pack assembly. Now I expect you're familiar with the likes of Ilica and Amtipower. They are absolutely working on exciting chemistries, and we have relationships with those businesses and overseas producers too. We consider those certainly complementary relationships. We we can make product in volume, so adding significant value with today's chemistries while remaining agnostic as new offerings come to the market. We can provide a road map to our customers as trusted subject matter experts. Now cell supplies are conservative.

20:00 They will only work with trusted proven pack manufacturers with scale, risk management combined with in house design skills. And this position will be further enhanced with the marriage of custom power and SOLID STATE. Pete touched on it. Our recent investment in wire bonding technology allows us to to produce battery packs more efficiently, enhance safety and reliability, and that's a technology we would look to roll out into custom power. Thanks, Pete. So the five synergies that will power the wheel, as we say. Reciprocal territory benefits with cross selling opportunities, blue chip customers existing and prospective are looking for a supplier that can support them on an international scale.

20:46 Custom Power have some exciting technology, including fuel gauge solutions, battery heating products, and experience in lightweight materials for drone technology.

20:56 Our UK operation brings a pedigree in the energy sector and the use of primary high temperature battery tech technology. In markets, Custom Power brings aerospace and defense experience along with medical, and there's good synergy in subsea, UAVs, transport, and energy. By way of market split, it's something in the order of 45% industrial, 30% defense, and 25% medical. We've got customers that that have existing interest in our plans for The US. But furthermore, we look to exploit the existing custom power relationships, and they have some prestigious names on their books, Lockheed Martin, Philips, Honeywell three m, and others too.

21:44 In the world of batteries, the relationship with the cell manufacturers is crucial, and both businesses punch above their weight with the major brands. You you might not have heard of Molly, but it it it's a industrial provider

21:58 to to many household products that you might see today in your home, not least a bag that's vacuum cleaners. And we know we know that firm, Molly, very well at the senior level personally and my management team. And this this deal will only be will only enhance that relationship. Not gonna spend long on this slide here, but it just reiterates the importance of supply chain and relationships. Some important brands here

22:26 to the right. It's some of the traditional brands that we've worked within the high power sector multiple chemistries over to the left, including Enesis, who are actually strong in lead acid. It's still an important technology. And we share these down the center of some household names that you'll recognize where we share supply chain. So I'll hand over back to Pete now, and he'll give some financial detail. Thanks, Matthew. So probably the the the first point to make on on this slide, which has got a a three for Custom is Custom Power is margin accretive to the existing group at every level, gross margin, operating margin, and net margin.

23:12 On this slide, you can see there's a there's a three year financial history. I've stripped out a couple of nonrecurring contracts that they had in in 2019 where they had a a piece of business that went to a low cost solution rather

23:25 than a bespoke solution. And in 2020, they had a a one off contract where they did some battery packs for COVID hand sanitizer pumps. So that contract, pleasingly with COVID subsiding, is is not recurring. So what you can see in the body of the table is their their growth in their target markets where they've really focused on customers where their engineering value, is recognized. And if you look back in 2019, they had one account that was over $1,000,000.

23:55 By 2021, they've grown that to nearly nine accounts that have got over $1,000,000 worth of business. So they've really focused on those key market sectors of defense, medical, and industrial where their engineering prowess is, is really valued.

24:13 Coming on to the the the next slide here, you can see here what I've done is the the deal structure is $30,000,000, on completion, $10,000,000 deferred, and $5,000,000 paid, based on a performance hurdle, achieving a revenue performance of 37,500,000.

24:34 They've got eighteen month window in which to achieve that hurdle. We believe that hurdle has got a stretch, but it's eminently achievable as well, particularly when we bring the two businesses together. The the first column in the table is a is a repeat of the 2021 results. The second column, models them achieving that 37,500,000 using the margins from 2021. And you can see there that had delivered $3,200,000 of of profits at the bottom line. We were we've been asked many questions about margin pressure and inflation pressure. And and whilst, yeah, absolutely, their business, the the entire world at the moment, is seeing inflationary pressures, I've not modeled any operational gearing benefits. And you can see on the previous slide, there are some significant operational gearing benefits.

25:26 So we believe that this picture is relatively prudent as the operational gearing will far outweigh inflationary pressures.

25:33 So overall, this is a a very positive acquisition. It's earnings in accretive to the group. And the final column on that table just translates that to pounds at at one pound twenty five to one. Thanks, Pete. So just to summarize then, what's the investment case? Custom Power, it's profitable. It's cash generative business, and we consider we have negotiated attractive deal terms. The acquisition will be built on strong foundations both businesses enjoying record open order books and exciting prospects. There's very little overlap giving us great cross selling opportunities. And with the international client base adding scale, we'll we'll be in a position to offer our customers much enhanced

26:20 engineering capabilities. Prior to the deal, the group's revenue was something in the order of a 6040% split components to power and systems. Post deal, it will be closer to a fifty fifty split with the power business unit representing some 30% of the enlarged group. So we consider that the transformational nature of this acquisition will open up the prospect or when when prospects for for the markets improve of a valuation rerating for all of our shareholders. Thanks, Matthew. So just to to finish off here. In technology expansion, our product range across the two divisions, both organically and through current and future acquisitions, will enable us to penetrate these high growth markets and so gain market share.

27:13 We've demonstrated resilience through our long established focus on government backed high barrier to entry sectors in security, defense and transport. And we've seen record order intake in the period with this momentum continuing into Q1, giving us confidence over customer demand in the year ahead.

27:33 The collaboration with customers and suppliers that began as long ago as the late summer of twenty twenty to manage and mitigate supply chain challenges is now translated to strong organic sales growth in this new financial year. And finally, this financial year marks the beginning of our next five year target. The acquisition of Custom Power coupled with our organic growth initiatives provides the group with a strong platform for further growth. So thank you for your time, and we're happy to take any questions now. Super. Yes. Thank you, Gary. Thank you, Pete. Thank you, Matthew. So now if we could turn to the questions. We had a number of questions submitted ahead of the presentation. However, please do continue to submit questions using the Q and A tab. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard on the Investor Meet company platform, and that will be available shortly that shortly after the presentation itself.

28:32 Additionally, your feedback is important to the company. So immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback. While you're submitting questions, maybe we can just turn some that were submitted in advance. And what I'd like to do, if I can, is just break them into two sections. So we've got questions that relate to the results and group, and then, obviously, we've got lots around the acquisition itself. So if we can just

28:57 start with with the group and results based ones. I'm gonna combine two questions if I can. They both relate to inventory. Thank you, Nick B. How are you dealing with issues around supply chains, and how do you ensure you can meet the group the growing needs of your customer base? Is it simply through increasing inventory?

29:17 And if we can couple that with another question, which is how do you manage a return to normal levels of inventory, both related? Pete, do wanna take those? So if I start with those, I think it's far from just about increasing inventory. The the teams, both Matthew and John's teams, work very, very hard with the customers to understand their demands over the the period. So the the order book you can see has the by working with customers, we've got extended visibility. We've then worked with our our supplier relationships to ensure that we've got scheduled orders with suppliers,

29:57 and that has, required us to take inventory to ensure we guarantee supply. So it's a it's a combination of many things, but it's about managing that that relationship between customer demand supplier availability. And the teams at the at the coal phase in Matthew and John's businesses work very, very hard to to manage that. And I think it's fair to say our strength of balance sheet has given them a competitive advantage over some of our smaller competitors who who aren't necessarily in a position to put that inventory in place.

30:31 I guess coming to the second part of the question, Tom, where you talked about how do we normalize, get back to a normal position. I think supply chains yeah. If John were here, he would say they're not going to we're not going to see significant improvement in this financial year, so the year ending March 23. But as we come out of the period beyond, certainly, we do hope to see a normalization, and that will provide an opportunity for us to to reduce the level of inventories that we're holding as as lead times reduce from the very extended periods we're we're seeing at the moment. I think, yeah, inevitably, the level of unwind will take some time, and it's about managing the unwind as the teams have managed the build of inventory.

31:19 And we're already starting to work with suppliers and customers to to manage that process today. I'd I'd add that, I mean, it is closely monitored by the board. I mean, from a market, we have a face. Stock is something we do every day. Big part of managing the business. But, of course, not just executive team, but also in our senior management team. We have a lot of experience of going through these cycles semiconductor industry, and it will be. Yeah. Great. Okay. And one other group related question. Now that you have greater interest in The US, what is the FX effect? So, yeah, custom power obviously adds pretty significant US dollar revenue, cash, and profits.

32:13 So, traditionally, we've managed currency by establishing a natural hedge. Because we have deferred and contingent consideration to pay, the excess dollars that come out of custom power will be used to fund, some of that consideration in the near term, and then that gives us some runway to reestablish a natural hedge in on a go forward basis. As a as a medium sized organization, we absolutely can and do look to use currency contracts should it be appropriate, but far more effective for us is to to establish natural hedges, and it's something the business has done for a long time to to manage that risk. Great.

32:58 Okay. So if we could just move on now to to some questions which relate to to the acquisition. I'm just gonna group a few together again if I can because, actually, I think these these talk to your your acquisition strategy, and you have touched on a couple of these answers already. So so this will help just bring it together. So first, the question which you did answer was, what was the process used for making this acquisition? How many potential acquisition targets did you look at before choosing this one? If I can just combine that with one of Matthew r's questions, great results. In terms of your acquisitions, do you lock in key personnel? And moving forward, what's your thoughts on further acquisitions? If I could just combine that with John s who said, you mentioned that it's important for acquisitions to have a similar culture.

33:50 We I'd be grateful if you could describe this culture. Yeah. Maybe if start here, Chuck's your feature to to join in. It was a long process. It's two years in the making, the acquisition of Custom Power. We as we said in the presentation, we researched 47 businesses across the whole of North America. We looked at markets were very important. We don't like high concentrations in certain markets. We found a few examples where they were highly concentrated. We looked very closely at supplier and customer concentration as well. And again, that was a key criteria. So took a lot of research, but we believe we found an excellent acquisition in The United States for us.

34:45 I mean, it's Matthew. I'd like to chip in on the culture. Maybe it's a I mean, it's a I I did touch on it. Well, more than touch on it. I I made it a main point of one of my slides. It it and why I consider it because of the the good good culture. We've already established great working relationship. It's what I do, actually. It's it's culture concerns for me. And I think it's very complementary in skill sets with the custom power team, and and I will be investing a lot of my time to ensure that that that culture continues. We have brilliant culture within SOLID STATE already, and what I've witnessed and seen, they have they also have it in custom power. So I confident on on that particular point.

35:36 I think that's that's an area. It's not a sort of classic sort of due diligence area to look at. But having made 12 acquisitions, it's something we've learned over the years that, that cultural fit to make the acquisitions work is key. Matthew, maybe you want to talk about the areas that good business and and and not. Yeah. Very much. It's as much as knowing what constitutes bad business to help us, we found to, you know, to target good business. And we, again, shared much in common and had some good good conversations about the sorts of business that we would avoid, commoditized business. Essentially, we are looking for challenging applications where we can use our engineering capability and resource to differentiate and add value for ourselves, obviously, but our customers as well. So harsh environments and challenging applications, but OC autonomy, increasingly UAV based for for both defense and industrial. Anything that's difficult, so batteries don't like the cold, we set the bar high, but that that allows us to to real barriers to entry.

36:48 So I I won't go through the the catalog of things that we we avoid, but we we are concentrating on medium volumes with with some hundreds or thousands of packs might be produced a month with with good vision, good horizon for production. So get designed in. The clue is in the name custom power, and we we we rather like it. As Gary said, we we we produce solutions for our for our customers, but then get designed in for the for the long term. I guess the the final point of the question there, Tom, was around the the staff and how we tie the staff in. Custom Power have got a, very experienced senior management team led by Mel Weiss, their CEO. They are battery experts through and through.

37:36 They are very additive and complementary to the team that Matthew's already got in his power business, and I think both teams are looking to work looking forward to working together. The senior team, all have some level of, equity stake, and therefore benefit from the the earn out element of the, consideration as well. But we will also look to establish, long term incentive plans, share options plans for the the key members of that US team, as we've done with our senior team in The UK as well. Clearly, that needs to be slightly different because of the the different tax regime in the in The United States. Alright. Any areas we've we've not covered there, Tom? No. No. I think I think the point that you've made previously is that, you know, for for people coming into the enlarged group, it gives them greater career opportunities as well. So, actually, it does cut both ways for for those people who come in through the acquisition strategy.

38:34 Yep. Super. So another quick one in relation to synergies. What revenue synergies does this business have with your existing business? I I mean, I I'd pick up on that one. Hopefully, my my responses and my slides gave you some some color, and I really recommend that you you look actually on our website at the full slide deck, which really talks a lot about about synergies. We we are both producers of custom battery packs. Actually, there there is not a very significant customer overlap, which is is is exciting. We've got customers existing that are looking for us to be able to produce solutions in The US. Batteries are heavy, as I mentioned, and and therefore, being being able to manufacture them close to their to your customer or or or significantly close to the the end use application is a good thing. So there's there's there's there's there's real synergy there. Some of the blue chip customer names that Custom Power have on their books are surely going to be interested in a global capability.

39:47 These are global companies. So having global supply a company able to provide solutions on a global scale is is the lot desirable. So so that, I I would say, is the case. So synergies as well, I mean, broadening the question, technology and and markets as well. So I I would say some nice overlap, but also higher levels of complementary markets and customers. Right. Okay. Will the components made by the acquisition target be used in the products manufactured in Europe? I would say that's unlikely for the reasons I actually mentioned above, which is, you know, we're not going to be shipping batteries around the world. It's the opposite, really. We're we're looking to what we are going to do is to carefully exploit the technology and know how very much in line with with export control. We understand that. But but the the custom power team actually have a really strong engineering group.

40:58 I've met them. I'm impressed with them. And then, again, overusing the word complementary, but they really do add to to this the skill set of our of our team. So rather than bringing products over, I would think bringing out solutions and know how in in some of those fields, battery heating, fuel gauge technology, lightweight materials, they're working with Kevlar, for example, in their in their battery solutions. Great. Thank you. International sales is a topic. So can you thank you, Matthew. Can you expand on how you look to expand sales internationally? How important is The U. S. In your plans moving forward? I'd say it's very important. It's the largest market in the world.

41:46 It's got we've we've had customer requests, as I think Matthew touched on earlier, to to have a presence over there. So it's important. One of the areas that Custom Power brings is through what's known as ERA, the Rep Association in The United States. So probably 13 territories across The US, which Custom Power have representation all of those. And we will look to introduce other products from the group through that rep network into to cover the whole of The United States. It's very important. Also for us, development of business in Mainland Europe is key. And that's something we will look at with future acquisitions. Okay.

42:31 And what impact do you think five gs will have on revenue growth across the business? We have a good portfolio of products in five gs. It's an important area along with industrial IoT, AI for industry. That's important areas. And we're developing our suite of products there, not just in systems that we're talking about here, but very much so in our components division. And it will be an important area of growth. Think I've touched on that in the final slide of the slide deck. Great. Thank you. Right. Scott, Anne, thank you for your question. What caused Active and Willow to perform so strongly last year?

43:21 Partly partly coming out of COVID. They've got some good design as we found in our own business, they had some some very good designs that were that were certainly held back with with the the pandemic, moved into a a sort of production phase as we as we came out of the pandemic. I think it helped being part of a larger group. Matthew, do want me to touch on early successes we've had with with active service? I was going to. The success is for many reasons, as Gary's already described, but it gives me opportunity to mention success that we had jointly with active silicon. You might have read the RNS on the project for the London Underground. It's actually for Piccadilly line or deep tube program, and it's for the safety of opening and closing of the doors.

44:17 And the the project customers we knew very well, but we didn't have the technology necessarily to to to execute that. But Custom Power had that skill set, ability to design custom computing solutions. So the effect there was the sum was greater than the parts. And that's something I'm looking to model again on this with Custom Power acquisition. I'd also say very similar with Willow. On the component side, you look at some projects we've had sort of six or seven years ago, we might have had one or two devices in a project with the addition of Pacer and certainly Willow and other acquisitions we've made in on the component side of the business, we're expanding our range. So we're now achieving larger contracts with our customer base, so get into five, six devices and beyond.

45:18 And certainly, we were able to reduce customers to Willow and vice versa. We hadn't had an EMEC range the group electromechanical range in the group. And that's been very important, but we've certainly taken advantage of that opportunity since the acquisition. I think, Tom, the other thing I would add is the structure of the group having both the systems and the components division has enabled us to manage the supply chain challenges that we've seen in the semiconductor industry. Having the strength of the group balance sheet, again, has helped us manage and mitigate some of those challenges. And I think, yeah, I've been part of that bigger group, as Gary said, has been absolutely critical in terms of them being as successful as they have in the last twelve months.

46:09 Oh, great. Okay. That's super. And last question and rather fittingly, a question relating to your growth ambitions. Thank you, Melville. Would you agree that doubling EPS over five years could be seen as somewhat conservative? What, if any, constraints would you see in aiming rather higher, question mark, perhaps sacrificing dividend growth? It's a I believe it's growth ambition for us. We we we set that ambition to double it and actually exceeded it during the the previous five years. And we we always strive to do the very best we can, and we, as I said, we we beat that ambition in the previous five years. But it isn't just EPS.

46:55 It's total shareholder return. That's a metric that's important to us. And I think 20% compound annual growth rate over the period will be a good target to achieve. It's important we balance both dividend and other areas in the that we look at. So I think dividend will be important. Clearly, we have strong growth ambitions for the business, but we're very proud of our track record having made paid a dividend to our shareholders for all of the last twenty five years that the group's been on aim. But we'll continue to monitor that, but we it's important we provide a progressive dividend to our shareholders. I think for me, it drives really good business behaviors. It really keeps us focused on making sure that we are generating cash.

47:46 It's very important to ensure that we are profitable, cash generative. It's a key part of what we look for with acquisitions. And, yeah, I I think, yeah, the dividend yield is is relatively lower now than than it was five years ago. And as we continue to grow, it will become a smaller part of our total shareholder return. But, nonetheless, in terms of a business discipline and a and a cultural behavior, it's absolutely part of the management team, the executive, and the board's focus to make sure that we are profitable and cash generative as a group. Yeah. Agreed. Okay. And I think that's echoed by Scott M, who closes out with a comment rather than a question, but says, great job, guys. Congratulations on great results. So thank you, Gary, Pete, Matthew, for updating investors today. And could I ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide feedback?

48:42 If anyone has further questions or would like additional information on SOLID STATE, please do get in contact via solidstate@walbrookpr.com. And we will later now take the opportunity to close this session and thank everybody for attending.