Solid State (LSE:SOLI) — Review of Interim Results and Prospects

0:02 Good afternoon, ladies and gentlemen, and welcome to the SOLID STATE results presentation. We have previously played an introductory video as part of this presentation, but we're not going to do it this time. We've we've done it a few times. For newcomers to SOLID STATE, can I point you to the introductory video and research portal on the SOLID STATE group website as well as the appendices to this presentation, which will be available to revisit after the session? And if you would like any further information, please do contact us at solidstate@walbrookpr.com. Before we begin, we would like to submit the following poll, which which you'll 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 solid state at warbrook PR dot com.

0:56 The company may not be able 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. Finally, we'd like to remind you that this presentation is being recorded. I'd now like to hand you over to chief executive, Gary Marsh group finance director, Peter James and Matthew Richards, managing director of the systems division. Gentlemen.

1:28 Thanks, Tom. I'd like to welcome our shareholders and those of you that are new to SOLID STATE. I hope you find the presentation informative, and we welcome your feedback following the meeting. Peter, Matthew, and I look forward to answering your questions at at the end of the presentation.

1:51 The continued execution of our strategy has enabled us to deliver record revenue in the period, up 51% despite the world publicized supply chain constraints and the geopolitical backdrop. This in turn has driven record adjusted EPS increasing 39%. And following full year dividend increase last year of 22%, the interim dividend will rise a further 4% in February. In h one, we've seen record order intake across target markets, which in turn translates into record open order book of over £112,000,000 at the half year. Pleasingly, this momentum has continued into h two with November closing up a further 5%.

2:40 In this period, we made great strides in developing one of the four pillars of our strategy, namely internationalization of the group, acquiring custom power in The USA in early August through an oversubscribed fundraise at £10.25.

2:57 This acquisition significantly expands the power business unit in our systems division, an area we believe has considerable potential for growth over the medium term. Later, we'll give you an update on custom power and that acquisition four months in. Group development is driven by a combination of acquisitive and organic growth. And the work that began with our customers and suppliers as long ago as the late summer of twenty twenty, when we saw the first signs of looming supply constraints, is now converting from the bookings phase into sales, resulting a 31% organic revenue growth in the six months in the first six months of the year. The benefit of the components division within the group and the semiconductor market intelligence you can share across the group has been invaluable.

3:51 A further pillar of our strategy is talent development, and here, we're continuing to invest in our industry leading team. Finally, we give some color on other CapEx investments that, that we're making that help improve productivity, but importantly, broaden the range of capabilities we can offer our customers. So for those of you not familiar with SOLID STATE, this is our divisional structure, including our latest acquisition custom power. Custom powerful is part of our systems division led by Matthew Richards as division managing director. Matthew, as you've seen, is joining us today. With the components division led by its division managing director, John McMichael.

4:39 The brand Custom Power is valuable to the group, and we're considering adopting this for our large power business unit. As such, we've registered the name in The UK, and we've also registered the domain name custompower.co.uk. I'll I'll now hand you over to Peter, who will talk you through our first half year financial highlights. Thanks, Gary. So first up, a couple of charts here. And, yeah, the revenue growth, as Gary said, has been very pleasing, and that's been across both divisions. Our systems division, as Gary talked to, has benefited from just over one months point of the acquisition of Custom Power, and that's added about 3,400,000 of revenue into the period.

5:28 As we've reported in the past, we also have a natural hedge in terms of U. S. Dollars. So we match our U. S. Dollar purchases with U. S. Dollar sales. This has given us a pretty significant benefit in revenue terms in the first half of GBP 4,400,000. However, because of that natural hedge, it does conversely depress our gross margin percentage with the additional revenue, albeit the absolute margin is still protected. So as Gary talked to, organic revenue growth of 31% is really very pleasing, and that reflects the hard work that, Matthew and John's teams have put in over the last eighteen months to to manage the supply chain challenges we've talked to on on previous, Investor Meet presentations.

6:19 In terms of gross margins there, you can see the third line where gross margins are down 110 basis points. However, those FX headwinds, caused about a 2.7%, two seventy basis point headwind. So on a like for like constant currency basis, underlying margins are up just over 150 basis points.

6:42 That reflects the enhanced value add and technology we've had from the acquisitions and a richening mix of sales. So on the component side, we've added Willow Technologies in last year, and that's helped richen the mix with more own brand product. And on the system side, both active silicon and custom power, add advanced technology, which helps richen the mix in terms of margins as well. Adjusted operating margin, 9.3%, up on the prior year 70 basis points. That benefits from the operational gearing, where we've seen the growth in revenue translate. However, albeit there some benefit from the fact that recruitment of talent has been challenging. Pleasingly, we've been able to add people to the team in the latter part of this period.

7:32 However, we haven't had a full period of cost of those recruits. Growth means, going forward, actually we've got we've created a a rod for our own back because we're no longer gonna be eligible for the SME R and D tax credit scheme. So the profit before tax improvement is up 60%, whereas if you look at the profit after tax, you can see it's up still significantly at 46%, but not at the same level as the before tax. And that's because we're gonna be only eligible for the large company scheme.

8:05 Actually, in terms of timing, we couldn't possibly have timed it better because the chancellor, just in his last budget, announced that he's improving the large company scheme. So actually, the impact is somewhat reduced. That translates into record EPS in the first half of 45.3p. If we look at the full year expectations with the analysts, they're just shy of 80p, which is up 13% on the prior year actuals. Coming on to the balance sheet, I'll spend a little more time on the balance sheet than I have in previous presentations because there are some pretty significant changes with the addition of Custom Power.

8:50 So our acquisition accounting, our provisional acquisition accounting reflected in here reflects the Custom Power balance sheet. So we've added in working capital of $6,500,000 PPE and intangibles of $9,500,000 and deferred tax of about $05,000,000 So overall, we've added in provisional goodwill of $27,500,000 So clearly, very significant changes in the balance sheet on the year end and the prior year half year. If we look at the net assets there, you can see the significant change from half year from year end to half year, and that predominantly reflects the additional equity raised to fund the acquisition of Custom Power, 27,000,000, the retained profit for the period and an FX gain where we've revalued those U. S.

9:47 Dollar assets following the strengthening of the dollar in September. In terms of the funding, the other big factors you can see there are the Lloyd's facility that we took on to part fund the acquisition and the standby letters of credit, where there's the cash on deposit. So you can see the cash and cash equivalents has increased very significantly as well to fund the deferred elements of that consideration.

10:14 So if we move on to the sort of the underlying trading balance sheet side of things, we've seen significant investment in inventory, which is up GBP 3,400,000 on a like for like basis and an increase in receivables with those extra revenues and billings. So we've invested pretty significantly in working capital. If we look net debt, there's been an increase in net debt, which is largely driven by the increase in deferred consideration. The $14,400,000 is made up of two key elements: $2,000,000 related to the final payments for ActiveSilicon and the balance relates to the acquisition of Custom Power. The deferred consideration is $10,000,000 and then there's contingent consideration of $5,000,000 on top of that.

11:01 And the bank facilities, the term loan of $13,000,000 is fully drawn, and we retain our RCF, which is partially drawn at the half year period. So moving on to the cash flow. Obviously, you can see the impact in terms of working capital investments. So our strong cash profits have been invested in our working capital to secure that organic growth in the period. The two big numbers on the cash flow clearly relate to the equity raise of GBP 27,000,000 we talked to previously and the payments for acquisitions. There's GBP 25,000,000 related to the initial payment for Custom Power and just over GBP 4,000,000 related to the deferred consideration for the previous acquisitions of ActiveSilicon and Willow Technologies.

11:50 Here on this slide also, you can see the increased finance charges associated with taking that debt on, So GBP 300,000 in the first half. The full year consensus is just over GBP 1,000,000, because obviously we took that debt on towards the end of the period. Our cash generation from the second half, we will look to use to

12:11 pay down that debt and afford us future flexibility in further investment, be that capital expenditure or future M and A as well. As Gary said on the opening slide, we maintain our progressive dividend policy and our interim dividend is up 4% on the prior year. And across a two year period, if you look back to the full year dividend for 2021, that was 16p and the consensus for the full year this year is 20p. So across the two years, the dividend growth will be 25%, which is pretty strong. I'll hand back to Gary to take you through the investment proposition. Thanks, Pete.

12:57 So what have we achieved over recent years? Significant growth in revenues and profits by executing on our strategy,

13:05 improving operating margins by approximately 200 basis points, which is a one third improvement, with adjusted EPS reflecting close to 25% compound annual growth over the last four years. Over this time frame, we've delivered significant growth in total shareholder return through a combination of organic growth and strategic bolt on m and a. Our ambition is to repeat the success to date. So what would that mean?

13:34 In EPS, replicating that performance with double EPS from 70 to 140p. And in terms of return on investment for shareholders, that means at least a 20% compound annual growth rate in total shareholder return.

13:53 So I'll move to our strategy now, especially for those that are new to the to the story. So this it has four key elements. Firstly, broadening our technology and product portfolio. Recent examples here include active silicon's range of image imaging products, including auto focus zoom cameras that you can see there on on the top right of the slide. With custom power expanding our battery management systems.

14:21 Next is utilization. Sorry. Next is internationalization of the group. Last financial year, the active silicon and Willow acquisitions helped grow the international sales from 30 to 38% of total revenue. Custom Power has a strong position in The US market with tier one OEM customers, and this will bring us to almost 50%.

14:44 Own 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, 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. This last quadrant, I think, above all, has been key to us delivering on our growth ambitions.

15:20 I'll now hand you over to to Matthew, who'll talk you through a couple of slides. Thanks, Matthew. Thanks, Gary. So some detail on that business model and working from the top left. The that extensive industry experience, both technical and commercial, enabled us to successfully manage those macroeconomic challenges of recent years and really respond swiftly to fast moving threats and indeed opportunities. Our specialist technology supports a diverse range of market sectors, giving the group resilience, and this has been further enhanced with those recent acquisitions and really does underpin our business performance.

16:04 The business remains agile and proactive and really able to respond to new and in and existing customer requirements. It's that proactive element that we're really focusing on now, reaching out to customers in our core markets. Over many years, we've we've built strong key key customer customer relationships and are now securing larger contracts as our product range expands, and that's really evolving our proposition with true system engineering and value add.

16:34 We have an extensive supplier base, and that allows the group to design in the best technology for a given application and giving our customers the options, particularly as as we're managing through the the the supply chain challenges, which are are we've been discussed and will continue to be an issue for for a period to come. So we bring all these technologies together across the group

16:58 to provide engineered solutions. We've And we've had had some examples of late, the b b hero and transport for London projects that we announced through RNS REACH, and most recently, the significant NATO contract awards. Really adding value at every opportunity is what we're striving for. Oh, thanks, Pete. So what in terms of of of investment, we're continuing to invest in technology and to develop our capabilities, enhancing our IP and our know how. The this investment is really enabling us to deliver more integrated customer solutions that allow us to differentiate from from our competitors and continuing to drive productivity and margin improvement.

17:46 In terms of these images here, at our Redditch facility, it includes top left, our new EMC, our electromagnetic compatibility test chamber, which has just been commissioned, well, actually, the time of our preliminary results. And we've recently been testing battery product in that chamber as well as computer hardware. Post period, we've added additional equipment that will allow us to perform Tempest testing. That's a technology that, identifies compromising emissions and vulnerabilities from computer hardware, so enabling in house security products to be built and tested.

18:26 The equipment to the top, far right in this image is our new wire bonder at the Crew Kern facility in Somerset. That was ordered in the period and and is now up and running and allows a semi automated battery pack assembly. The current pack in build, the small green image there, uses some 1,700 individual wire bonds. Now that, in a conventional design, it would be one third fewer, something like 600 one one one third of that noise, something like 600 welds. So that 1,700, that's that's giving improved reliability and improved quality whilst operating much quicker, in in this case, some four times quicker than a conventional welding.

19:12 That's driving efficiency, of course. The image there is is showing a battery that's that's in an early phase of its build. The finished product is actually the one that's in test in the in the chamber to the left, the small gray box. Hard to see. But bringing the group

19:29 together, cross site working in action there. Along the bottom are the external images and internal shot of our new custom power facility, and we've got exciting ideas for investment at that site. And then finally, in the center is our Weymouth facility where we've continued to invest in our class seven clean room with the recent installation of a new semi automated

19:54 die bonder technology that's improving throughput, reducing waste, and consequently improving efficiencies again. And it's demonstrating our advanced capability, opening up opportunity with tier one customers, larger projects, and those that have visited that facility have commented how it's separating us from our our competition.

20:19 So So thanks thanks again, Peter. A snapshot of the first few months then of custom power that that comes under my responsibility. Lot on the slide. No apologies for that. Lots of lots of technology to talk about. Capabilities for drones and low temperature battery packs. We're using Mylar heating technology, lightweight insulating materials, foam and aerogels, and we've got embedded temperature sensors and remote diagnostics.

20:50 But the image with the green and red is that a tool for the engineers to interrogate a battery pack to look at its temperature of the individual cells or the packs, the the the balancing of the cells, the the charging status. So that's a capability that we just simply didn't previously have and, again, really distinguishes and separates us from competition. Incorporating lightweight materials, Kevlar, and advanced plastics, again, again, for drone applications of different different market needs.

21:23 Team wise, we we we've got some good teamwork ongoing. We we're taking care particularly on the the ITAR and export control matters, something we've we've got experience on. And and just generally speaking, the team cross pollinating with having people visit the facility and not least myself, but others too over in The US. And and also we have, the key engineering lead coming from from The US to The UK

21:52 for some collaboration discussions. Already had some good team meetings already, but looking forward to having, them come over to The UK. Supply chain, the component issues have have been a a challenge for for for both sides of of of the water for battery production, but we've yet to benefit from from our component division expertise. And we're looking to bring that that to bear along along with ops obsolescence management. And and we're we're also looking at some some options for dual sourcing of supply of of component supply. Again, you bring bringing our skills within the group to to to bear. Had some good wins actually with with the purchasing team already. The US team actually helped to source a particularly advanced foam material for our UK for a UK project, which was was very difficult for us to buy in The UK, and the and the guys in The US sourced that for us and that really, really helped the key key customer.

22:54 Order book, absolutely seeing solid demand, but really positively margins are also trending in the right direction as we focus on the high value packs where our engineering expertise is recognized and and and valued. Market wise, generally, in across our power business, we're seeing some recovery in the energy market, actually. We've got good discussions that are going on from UK customers and US customers looking for production at the respective sites, vice versa. So that's that's something Gary's talked about bringing battery packs are are heavy, and therefore, we can build them close to to our customers, that's a a a benefit and advantage. In terms of markets, absolutely strong in defense, but not exclusively defense.

23:43 Other applications as well for drones and generally robotics and medical devices. So look forward to any questions you've got, but I'm gonna hand back to Gary now. Thanks, Matthew. Our focus on government funded markets and those with high barrier to entry requiring accreditations has has really proved their worth in in this first half. Our order intake continues to be strong in the defense sector with instability in Ukraine's clearly focused investment. Adoption of new tech industrial technologies through organic product development and the recent acquisitions of active silicon, Willow Technologies, and now custom power combined with our strategic CapEx investment will drive future growth across both divisions.

24:32 Our open order book closed at record levels at the end of September, and pleasingly that momentum has continued into the second half, increasing a further 5% to just under a £118,000,000 by the end of November. The strong start to the year, both in terms of the sales and recently announced contract wins has underpinned the board's confidence to upgrade FY '23 and FY '24 expectations. In the next phase of our strategy development, we'll be setting out our growth ambitions. Key market drivers for the adoption of technology means we'll be setting goals now to 2030. This will align with our aspiration to exceed the performance we've achieved over the last five years, being the doubling of EPS and greater than 20% compound annual growth in total shareholder return.

25:26 So that that concludes the presentation. We're happy to take any questions. I see quite a number have come in, so that that's good to see. I'll let Tom take care of the meeting. Yep. Thank you, Gary. Thank you, Pete, Matthew. Now if we could turn to the questions, we had a number of questions that were presubmitted, which we'll come to. But please do continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback. Let's start with one on supply chain if we could, and it's probably one that you may start on, Gary, because I know supply chain's been an ongoing theme for the past few results announcements. What supply chain challenges have you faced in achieving 30% like for like revenue growth?

26:16 Good good question. I think that the first thing to to probably state is, you know, we've got an experienced senior management team. We've we've been through these cycles several times before. For me, in until this this time, the worst one was in ninety nine, two thousand when the dot com bubble burst. But in my career, the one we're currently going to is probably the worst I've I've seen. But it isn't so we've got experience in managing that, and I spoke about that earlier in the in the presentation. It's it's important we engage with both our customers and suppliers as we could see this coming coming down the track. I I don't like using the word unique. I think it's we'll be careful with that. But I think we're one of pretty very few companies on the AI market has the benefit of a components business with within the group, and that that semiconductor market intelligence I mentioned in the in the slides. So I think it's really proved value here.

27:17 Engagement with customers and suppliers early. So getting those bookings, talking to suppliers, getting the the orders in place often, you know, on a year's delivery. So that inventory build has has happened. We're now in that phase, as I've said, of of pulling that through to sales, and that's hence, we've achieved that 30% organic growth rate. Job doesn't end there. The the other side of that coin is to manage the the inventory downwards as as lead times return more to more than that, more to more normality. But again, we've got experience there, and the the team are very much focused on that management of it of inventory as as the market begins to normalize, probably for us the latter part of next year.

28:13 Pete, you want to add anything to that? No. I think that's that's a that's a a very comprehensive answer you've given there, Gary. I guess the only thing that's that's probably really pertinent is, the strength of our balance sheet and the support of our shareholders and bank has enabled us to make those strategic investments in partnership with our customers. As we build our order book, we've been able to place order cover on suppliers, mirrored with order cover from customers. And that yes, not all of our competitors are in that position. And I certainly think that has helped us commercially. Great. Okay. That's comprehensive. Now one that we might put to Matthew in the first instance, if we could, because it's got a Custom Power element to it. But how has your structural growth market strategy changed with the acquisition custom power and a greater exposure to The US?

29:10 Yeah. Thank you. Well, as a business, certainly, defense has has featured significantly in in our in business in in the round, but not particularly in our power division traditionally. So this the acquisition of Custom Power, although they've got a blend, they have some really strong blue chip relationships with some really, really key defense contractors and prime contractors. So that that would certainly be be a a a change and but not exclusively defense. They're in it seems the the medical customer base, agri tech, and some other some other tech as well.

29:55 So I it the I would say that it generally, it's going to see a growth in our defense activity, and that's just some some of the geopolitical status. It's hardly surprising, but it really what it what it will allow us to do is is is get some exposure to to to those those big US defense primes that we haven't previously worked with, but also some some important medical clients too. Great. Okay. And if we can just stick with custom power for a minute, we've got a question from Michael. Michael says, great results. Have the management team from your acquisition of CustomPad been retained, and do they have any leaving restrictions? Let Gary answer that.

30:42 Yes. They have been retained. We we we have a a in The UK, a CSOP scheme, a share option scheme for our senior leadership team. We're we're working on that. I was over with with Matthew a couple of weeks ago to to custom power. We're already working on a similar scheme US based for the lead senior leadership team to incentivize them for growth over the coming years. So that's something to be worked on. There are certain restrictions on on some of the employees, but the the focus really that I was very pleased with this you've made, you know, with the engagement of the of of that team is excellent. That came out in due diligence. I mean, culture is a very important part of our due diligence when we look to acquire a business. And that's great when you're you're about to cry.

31:35 It's very different when you actually turn up and you own the thing. But I was I was really pleased with the engagement of of the team there. Came away very happy, you know, in those first visits. I if I may quickly just just reinforce that. I I the hearts and minds, you know, I've the, well, pleasure on a chilly chilly day like today to spend some time out there, and I'll be spending more time. But we we've really, really focused on that, the the hearts and minds. And they're excited, and they're in for the long long haul. So so I'm very pleased to say they're staying, and they are motivated to do so. Great. Okay. On on the same custom power theme, Scott says, great job. As international sales grow, do you think there will be a need for a US based board member?

32:27 Shall grab that one, Gary, first off, you can add some thoughts? So we we've already announced that we are looking to recruit an additional non executive director. And as part of that process, we will look at candidates that have US experience. I don't think they need to be US based personally. For for me, it's about getting the the right blend of skills. And certainly, US experience would be a a valuable part of that candidate if we can find that suitable candidate. But I don't think it's a a mandatory thing, but it certainly would be a nice to have for me. Great. Okay. Anything to add there, Gary, or does that No. I think I think we've covered it there. Great. Okay. We've got some financials questions now.

33:14 So, Mark, thanks for your question. Excellent results. Thank you, says Mark. Could you please comment on the low operating cash flow, in particular, the increases in inventories brackets from the acquisition question and trade and other receivables and the much smaller increase in trade and other payables? Of course. So yes, as I said on finance side, we generated good cash profits in this period, but against the backdrop of, yes, 50 just over 50% growth in revenue, we absolutely have seen an increase in working capital. So the increase in receivables reflects the strong billings we've had in the first half. The increase in inventories actually is broadly pro rata with the increase in open order book. So if you look at the inventories as a ratio to open order book, it's almost exactly the same ratio at the half year end to the year end.

34:15 Yes, as Darius talked about, with the extended lead times we're seeing, it is higher than we've seen yet pre the shortages and pre pandemic in terms of a ratio. But yes, actually, it's pretty much stable now and reflecting that growth in order cover from customers. And that puts us in a good position for the second half. In terms of payables, unfortunately, our payables, we're not in a position where our suppliers in Asia are as accommodating as we need to be to our Tier one customers in the West. When you're dealing with Chinese and Asian suppliers, typically, they want payment either upfront or very soon afterwards. And when the product comes on a boat, the lead times can be very long.

35:08 So you don't see a benefit in payables that you do where you see the investment in inventory and debtors. Okay. Great. Jeremy, the the two EPS questions, actually. So Jeremy asks, why is consensus EPS forecast for the second half lower at thirty five p than was delivered for the first half at forty five p? So there's a couple of factors to this. The key one is a bit of maths around how EPS is calculated. So because you calculate EPS based on your weighted average number of shares, the shares we issued for the fundraising are only in place for one months, point two months of this period, whereas for the second half, they will be there for eight months.

35:59 So the weighted average shares in issue calculation skews the calculation in the first half's favor. And also, we have absolutely had a very strong first half where the inventories we secured ahead of the first half has enabled us to get product out the door effectively, and that's delivered strong performance in the first half. Yes, we're continuing to be cautious because supply chains continue to be challenging as we go into the second half. Okay. And from Michael, having doubled the EPS over the last five years, what should shareholders expect next? And I know you referred to that briefly, Gary, in your presentation. Yeah. We yeah. I mean, take we I think we we exceeded it. I mean, we we got to 70p.

36:50 We we'd started at thirty five years ago. Like, I recall getting a few sort of raised eyebrows sort doubling EPS in that period, but pleasingly, we you know, the ambition, that stretch goal we had we achieved. So it would be 70 to 140p. Right. I think, Gary, we've also, yes, really started to focus on total shareholder return, as you said in your slide, and really trying to ensure that we maintain that as well over the period ahead. Okay. Super. So we've got a couple of questions on acquisitions, but I'm actually just going to backtrack very quickly because one's coming in and around the supply chain and order book, which I if I might ask Scott has asked, do you get a sense that any customers may have forward ordered to avoid future supply chain issues?

37:50 I think there there has been some of that, certainly, but we there is the the new wafer fabs that are coming on stream tend to be the the the new small geometry fab. So small geometry wafers. So what we're seeing is there's still gonna be issues with supply chain, I think, probably, as far as we can see going into through the rest of this financial year and into the first half of our next financial year, hopefully, in in h two next year. The the semiconductors we we use in our products are industrial grade by and large. So they aren't they aren't particularly affected by that.

38:36 It will take a while for that to transition through to improve improve lead times. So there's certainly some buying ahead, but I think people are are still having to manage those very long lead times, certainly in in cells. On the the battery side, they are still very long lead times there, and and that that will continue. I guess, Gary, what what I would add is, yeah, if if we look pre COVID, which was what I would call more normal times, our order book visibility was typically about twelve months as a business. And I think that was sort of the long term norm that the group had seen. When COVID first hit, the order book visibility really shrank down to probably six months. As Gary said in his opening couple of slides, we engaged with customers early twenty twenty, pretty soon after COVID, and we started to see that order visibility increase as we foresaw the shortages.

39:33 Yes, when we got to year end, we were talking to you about an eighteen month visibility, which is probably where we are at the moment as well. I think it's fair to say we do absolutely anticipate as supply chains normalize, we'll probably hopefully get back to a more normal state of twelve months' worth of visibility. But at some point, as supply chains normalize, there will be a shortening of order visibility we anticipate back towards that sort of historic norm of twelve months. Great. Okay. Super. Right. So we've two questions now on acquisitions. Sam asks, you referenced in your results that you continue to be acquisitive. What are you looking for, and how would you look to finance them? Okay. That's a good question. Yep. It's part of our strategy. It's organic combination organic growth and and growth by acquisition. So we we recognize it's it's a large acquisition made in in customer. We need to integrate that business. So a lot of focus there, but that work in in looking at new acquisitions can really quite fussy on that. We turn a lot away, but we've got some good pipeline on own brand products.

40:51 We're looking at developing our our business in the European Union, especially on the component side of the business, but also other acquisition opportunities emerging in in The US as well. So that's probably the three three areas we'd we'd look at. And as we've done previously, it it will be size dependent on the the demands for the for those businesses, but we've we've always looked to a combination of debt finance on on that, and, you know, that's why we're on the the public markets to fund it through the fundraiser. We can as, you know, very successfully for the difficult market we did there, but I think that will be during during next year, certainly not in the near term. As I said, we're very much at at early phases of of research on on businesses.

41:45 I I guess the the thing I would add in terms of of financing, we're currently yes, the expectations in terms of EBITDA to net debt, just over one:one at year end. So the consensus expectations for net debt is just under GBP 14,000,000, with EBITDA about GBP 13,000,000, so just over one:one. As we look to continue to pay debt down, that affords us more flexibility for some of the investments that Matthew talked about on the previous slide or future M and A as we go into next year as well. Super. Okay. And that leads us nicely on to the final question, which is, does there need to be a period of digestion before you consider any further M and A activity?

42:32 Yes. I think I covered that, hopefully, in the previous answer. Yes. Okay. Great. I guess the one thing I would add is the management team has really grown over the last sort of two, three years. And M and A has been a real big benefit to that. Yes, whether it be custom power, the management team, yes, there was a question earlier that Gary has talked to. They're really very valuable to us. They've got some really excellent engineers that have really bolstered our capability. Active silicon, similarly, have some really fantastic technology leads and engineering in their team. And Willow, yes, their expertise around electromechanical products have really added to our components division.

43:21 So M and A is not only about, yes, technology, it's also about acquiring the talent. And yes, as Gary said, one of the things that is really important through the diligence is making sure we evaluate culture fit an individual's capabilities because we've done and benefited very significantly from the people that have joined through the acquisitions we've done in recent times. Yeah. Great. Okay. That's a less obvious but but very positive way to finish. Great. Okay. Well, look. Thank you, Gary, Pete, Matthew, for updating investors today. Could I ask investors not to close this session as you'll be automatically redirected for the opportunity to provide your feedback? If anyone has further questions or would like additional information on SOLID STATE, please do get in contact via solidstate@WarbrookPR.com.

44:10 Many thanks for attending, and we look forward to updating you again soon. Thank you. Thank you. Thanks. Goodbye. Thanks, all. Bye bye.