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Operator: Good afternoon, ladies and gentlemen, and welcome to the Volex plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. And I'm sure the company will be most grateful for your participation. I'd now like to hand over to Group Chief Executive, Nat Rothschild. Good afternoon.
Nathaniel Philip Victor Rothschild: Good afternoon, everyone, and welcome to the Volex half year results presentation. I'm going to provide you with a summary before handing over to Jon, who will give you more detail on the performance in each market. Following this, I'll update you on our strategy before we take questions at the end. Before we turn to the results, I'd like to talk to you about a further step in our strategic journey I'm delighted that Dave Webster has agreed to join as our Non-executive Chair, enhancing an already exceptional Board of Directors. Dave has unique industry experience. In his current role, he's led the transformation of CPM, a global leader in advanced process automation equipment. And prior to that, he was the driving force for growth and transformation as the CEO of Electrical Components International or ECI, a leader in consumer electrical and off-highway harnesses. He brings decades-long customer relationships in our space, particularly in North America, and he will strengthen the Board's sector insight. His experience will be invaluable as we scale our North American operations and deepen our customer partnerships in this important market. This month, incredibly marks 10 years since I joined the Board of Volex and became Executive Chairman in effect, combining the Chairman and CEO roles. I came into a business that was in decline with less than $400 million of revenue and a market cap of about GBP 50 million. And in fact, it dropped down to GBP 30 million at the low and I set about building a new organization, including talent from within Volex who had not been given the leadership they deserved. So with this excellent team to support me, a lot of hard work and endless travel, we've created one of the true standout success stories in U.K. industrials. A significant architect of this success is John Molloy, our global COO. And he will continue in the same role and is every bit is committed to the business as I am, and both of us have very significant personal investments in Volex. Indeed, my move into the Chief Executive position in Volex merely underlines my deep and ongoing commitment to driving further growth and customer engagement. I will continue to lead from the front, delivering our ambitious plans and bringing in new customers. And I'd also like to say that none of this would be possible without Jon Boaden exceptional financial skills and cool head as the business has become increasingly complex. I'm very grateful to Jon who is sitting next to me. I'm very much as well looking forward to working with Dave and the existing Board to pursue growth in our markets. There are very substantial opportunities ahead, and we have big ambitions. This is a sensible time to align more closely with corporate governance best practice given the scale of our organization and the strong performance we are setting out today. Moving on to the results. We've delivered another excellent first half with revenues of $584 million at an operating margin of 9.8%. We've generated further strong organic growth at 13% despite a challenging macroeconomic backdrop. And in particular, we've seen very strong growth in electric vehicles and data centers. And later in the presentation, Jon will take you through exactly what has happened in each sector. The strong performance is proof that our strategy is working. Investment we chose to make in previous years is supporting growth this year and beyond. Our capabilities make us a first choice provider of critical connectivity solutions for global technology businesses. As the world changes, we're changing with it, and we are evolving our footprint to follow the demands of our customers who are reconfiguring their supply chains to deal with tariff challenges. Our move towards centers of excellence where we can deliver a range of the most advanced Volex solutions in a single location has resonated strongly with customers. It also gives us the opportunity to rationalize smaller sites, thereby improving the overall efficiency of the group. We continue to win new projects with our customers, particularly with electric vehicle customers and in the North American off-highway space. Our first half performance positions us strongly relative to our 5-year plan, which, as you may recall, sees us getting to $1.2 billion of revenue by the end of FY '27. Our strong results for the first half or another significant step towards these objectives. Before we break out the individual markets, it's worth talking about how our customer-centric approach delivers deeply embedded customer relationships, giving us confidence in our strategy. As you should all know by now, we work with the biggest technology brands in the world who have earned recognition as leaders in their fields. They trust us to deliver manufacturing solutions that meet or exceed their quality, reliability and functionality requirements. Although our assemblies might be a small part of large and complex systems they play a critical role every time. This is no different whether we are powering a domestic appliance that brings convenience to everyday life or connecting the key components at the heart of life-saving technology. We've built a business that revolves around the customer. We anticipate their needs and rise to their challenges. Our engineers define innovative production solutions and optimize processes for products that are assured to perform in challenging environments. This creates strong customer lock-in and sticky relationships. In many cases, regulatory requirements form a barrier to our substitution in the supply chain. In others, our deep expertise and consistently strong delivery position us as a preferred manufacturing partner. So this customer-led approach, disciplined reinvestment and daily operational excellence form the foundation of a business that compounds value over time. Many of our largest customers have been working with Volex for longer than I have been operationally involved in the business. Over the past decade, revenues have trebled given by expanding share with existing customers, winning new products and customer projects and customers and a targeted acquisition strategy. Operating margins have strengthened from 2% to a consistent 9% to 10% range, maintained successfully for the past 5 full years. And as a result, operating profit has grown from $7 million in FY '16 to $106 million in FY '25. This performance reflects stringent cost control, relentless operational improvement, talent attraction and retention from the top to the bottom of the organization, plus targeted investments in future growth, each aligned with our customers' priorities. And this combination of growth and margin expansion has translated into basic earnings per share rising from $0.015 in FY '16 to over $0.36 in FY '25. Volex continues to steadily build capability, deepen relationships and deliver consistent, sustainable returns creating shareholder value that compounds year after year. I'll now hand over to Jon to take us through the financial performance in the end market.
Jonathan Boaden: Thank you, Nat. So first and foremost, I'm incredibly pleased with the results that we've been able to deliver and this is an excellent performance of $584 million of revenue in the first half of the year, which represents organic growth of 13%. Profitability is towards the top end of our margin target at 9.8%, which means we've delivered $57.2 million of adjusted operating profit in the first half of the year. With lower interest costs, that means we've increased basic earnings per share by 30% to $0.197 per share on an adjusted basis. We've maintained a strong track record around return on capital employed despite the investment that we made in our business, which includes putting in additional working capital to support customers. And as a result, we've stayed at 20% return on capital employed. These results are an indication of a business that is in great shape and navigating dynamic market conditions effectively. Over the next few slides, I'm going to take you through what we've seen in each of our end market verticals. We've established a market-leading capability in electric vehicles and are recognized for our proficiency in both designing and producing key components to power the next generation of transports. Our long-standing partnership with leaders in EV technology has positioned us well to support a broad cross section of the EV market. Much of our 13% organic growth has come from expanding our capabilities laterally to meet evolving market demand. This includes delivering complete AC charging solutions through integrated end-to-end manufacturing. Consumer demand for electric vehicles has continued to grow in our key markets in the U.S., Europe and China. EV sales as a percentage of new car sales recently hit 30% in Europe and 58% in China. While changes in government incentives in some markets such as the U.S. may soften short-term consumer demand, long-term prospects across key geographies are strong. Our footprint allows us to be flexible around customer requirements. For example, we are moving a new program to Mexico to support the customers' tariff optimization strategy. And while this will push out the timing of the initial ramp-up, it is exactly the type of dynamic problem solving that strengthens relationships. With enhanced capabilities supporting a wide range of global automotive brands, we have confidence in our ability to grow EV in the medium term. It's worth starting the explanation about consumer electricals with some context about the performance we've seen over the last 18 months. We have what you might call a post destocking rebound in the first half of FY '25 when we hit $132 million of revenue. This normalized to $125 million in the second half of FY '25. For the first half of this year, we delivered $126 million, slightly down versus a year ago and more in line with the H2 performance. This represents an organic decline year-on-year of 6%. Main voltage power cord continue to represent the largest share of what we do. We work with some of the biggest consumer brands in the world where reliability, reputation and customer experience are key priorities. These brands choose Volex because they have confidence in our ability to exceed their quality and safety demands. Vertical integration and scale in this market means that we have relationships with all the major domestic appliance manufacturers. This is giving us significant traction as we continue to push our harnessing capabilities, an area where we see strong opportunities for growth. In fact, harnesses and other complex assemblies now constitutes almost 1/3 of revenues. In the second half of the year, we have a new incremental harness opportunities in Europe. We've seen some secondary impacts from tariffs on European domestic appliance manufacturers. Some of the Chinese competition have reallocated their marketing spend from the U.S. to Europe and are pushing inventory into the European market in response to U.S. tariffs. This is likely to result in some short-term rebalancing with medium-term growth weighted more towards harnessing opportunities. Now moving on to medical. Although medical is the smallest of our sectors, we proudly support health care innovators whose technologies are transforming patient outcomes and improving lives. Our assemblies distribute power and data through sophisticated medical equipment, ensuring reliability, accuracy and patient safety. The first half of the year has seen disruption in demand for complex medical devices, reductions in spending for both medical research and public health care and the impact of tariffs are leading to reduced or delayed orders for some large medical equipment. The effect is different between customers with some customers continuing to increase demand during the period, but others looking to reduce orders and manage inventory levels. We have the flexibility to manage this variability within our operations and support customers as demand pattern shift. It is against this backdrop that we saw our sales in the medical sector declined by around 10% organically during the first half of the year. It is likely that the uncertainties caused by the impact of tariffs and policy changes will continue in the short term and will result in a headwind to medical demand. However, we remain very positive in relation to the medium term. This is partly due to the success in winning new projects with significant medical brands, expanding the range of customers that we work with. In addition, structural growth drivers are very strong in this sector with rising demand due to demographic change and advances in technology, creating new diagnostic and treatment options. And with our significant and in-depth understanding of our customers' requirements, we are well positioned to meet the needs of these health care innovators. We've seen excellent organic growth of 48% in complex industrial technology with data centers a significant part of that, but we've also had growth across the other categories. Outside data centers, which I'll come back to shortly, we're delivering complex assemblies, both wire harnesses and printed circuit board assemblies into highly specialist and demanding applications. Our customers need exceptional quality and complete confidence that the solution will work first time and every time. Meeting their challenging technical and scheduling requirements takes coordination across our operations and engineering experience to support the build process. When we successfully deliver, we unlock additional project opportunities and further repeat business, which contributes to our growth. We are well positioned in the U.S. market with advanced facilities, which are accredited to deliver defense and aerospace products. This includes involvement in major programs that is stepping up to address current defense challenges. Our overall organic growth outside data centers was over 20%, and much of this came from defense projects. In parallel, we're seeing increased demand from core industrial applications such as building environmental systems. Although the end users are different in all cases, customers are relying on us to deliver a complex solution with maximum reliability in a competitive way. Our additional capacity in Mexico is an important part of fulfilling these requirements. In data centers, we're supplying high-performance copper data interconnect, operating at speeds of up to 800 gigabits per second. These cables form the critical physical links between servers, switches and storage systems within data center racks, enabling ultra-low latency, high bandwidth connectivity for AI and cloud applications. Growth in data center investment globally is fueling demand for these products and revenue is up by 80% compared to the comparative period. As with so much of our portfolio, our ability to manufacture in a variety of locations gives us a competitive advantage given in the ever-changing tariff landscape. And finally, turning to off-highway. Here, we've delivered really strong organic growth of 20% in the first half. This included a project for specialist military vehicles in Europe that doesn't repeat in the second half of the year. This was a project that we were able to win because of our ability to move quickly and respond to customer demand. Our success in this market is down to supporting specialist vehicle manufacturers in areas such as construction, agriculture and large passenger vehicles who have demanding requirements across a significant variety of products. Our ability to leverage our advanced manufacturing platforms to deliver efficient and repeatable solutions despite variable lot sizes is a differentiator in this market. We're making excellent progress in the North America, where expanded capacity and our highly skilled engineers and sales colleagues are securing new project wins. This comes at a time when U.S.-based manufacturers are looking for regional production to manage their supply chain objectives. Let me step you through what we've achieved in margins during the period. We are blending together various operating margins across our entities and then adding in investment in capacity growth and capability expansion. These investments include adding incremental manufacturing space or additional salespeople. On a year-on-year basis, we've improved our first half margins to 9.8%, which is towards the top end of our 5-year plan margin range of 9% to 10%. In achieving this, we've identified cost optimization improvements worth 0.7%, which broadly offsets the impact of inflation during the period. The optimization includes further benefits from rolling out automation as well as the productivity actions highlighted as part of the integration of Murat Ticaret. We also achieved savings through site rationalization of 0.5%. We have a mix benefit, which reflects lower consumer power cord sales and higher revenues from our data center customers. There was a small adverse impact from the weakening of the U.S. dollar, which is our main sales currency. Overall, 9.8% is a very strong first half result, particularly given the amount of investment that has gone into our business recently, Nat will come back to the theme of investment shortly. So now moving on to cash flow. As in previous years, there are some factors in the first half that tend to result in lower cash generation in H1 compared to the second half of the year. EBITDA was up to $73.6 million, a 20% increase over the comparative period. Capital expenditure was lower at $21.3 million, which is approximately 3.6% of revenue and well within the 3% to 4% range that we had guided to. Once again, we had an increase in working capital and higher inventory is a big driver in this. About half of the increase in inventory is coming from data centers, where we hold stock in hub locations to support timely fulfillment of demand. The remaining increase in inventory is across our other go-to-market sectors and reflects the impact of increased demand as well as building buffer stock to support relocation activity. Part of this expansion includes an increase in defense projects, where we hold a greater level of raw materials for operational reasons. Interest and tax are similar to the comparative period, which reflects the timing of tax payments and current debt interest costs in our growing business. The repayment of leases shown below free cash flow includes the exercise of an option to secure the freehold of 2 existing sites at a significant discount to market value, providing greater security and control. Our covenant net debt ratio, which is our preferred way of looking at leverage and excludes operating lease commitments, improved from 1.3x to 1.1x, giving us great balance sheet strength and flexibility. Our capital allocation priorities are unchanged from prior years. Our primary focus is on organic investments. In addition, we continue to explore acquisition opportunities in a disciplined way. I'll now hand back to Nat to update on our strategy.
Nathaniel Philip Victor Rothschild: Thank you very much, Jon. I wanted to return to the key pillars of our strategy and outline how this contributed to our first half performance. First and foremost, we are in the right markets where we are winning new business, and I'm particularly pleased with the progress we've been making in off-highway in North America. Our team is getting a huge amount of traction with customers who are looking for a high-quality and cost-effective solution. It is an opportune time for Dave Webster to join our organization. And later this month, Dave and I will be on the road meeting with our customers and visiting a brand-new site we are opening this month in Central Mexico. The substantial growth we have delivered in the last 2 years reflects our ongoing investment program. For example, our product development strategy in EV is delivering growth. Our global capacity investments have given us capability in the right locations to support our customers' tariff mitigation strategies. And this is particularly the case in Mexico, where we have an abundant pipeline of opportunities, many of them new just in the last 6 months. We are a critical manufacturing partner for our customers who depend on our engineering capabilities, our attention to detail and our ability to meet challenging specifications. We build deep relationships by exceeding their expectations. Moving complex production from a competitor or between sites is a big decision. In the last 12 months, we relocated multiple programs for our customers without any major surprises and they have confidence in our ability to deliver. Our people are central to our performance. We trust our teams to deliver. We put our skilled managers at the heart of customer relationships. With the demand into our facilities in North America, we've been augmenting our team in the region, and we are seeing the benefits of this. And finally, acquisitions have been a significant element of our growth story, although it's just over 2 years since our last deal. In the first half of the year, we looked at a handful of varied opportunities but nothing met our strict criteria. With a huge amount of organic growth and new customer programs to deliver, we are looking for well-run businesses with strong management teams that can slot into our organization. We are continuing to pursue some interesting opportunities, but we won't compromise on our acquisition criteria. Every deal we do has to be the right deal for Volex. This investment approach is an important part of how we drive consistent growth and how we position ourselves to win incremental programs with new and existing customers. The qualification process we go through for major new programs is understandably stringent given our critical role. We built capacity ahead of demand based on market knowledge, so we can dedicate space to customers during the qualification process. This has been very successful. Take Batam, Indonesia, where we have now almost filled the additional space we opened last year and also Tijuana, Mexico where we are experiencing strong demand for tariff-free manufacturing, having doubled the size of the facility last year. This month, as I mentioned just a moment ago, we are opening a further purpose-built site in Central Mexico, doubling our capacity in this area. However, footprint is only part of the story. We need to have the right capabilities in our facilities to support evolving requirements and to enhance efficiency. An increasing number of our new programs are built to be highly automated from day 1. In addition, we are retrofitting automation technology to existing lines, reducing operating costs and enhancing throughput and yields. Our vertical integration is at the core of our competitiveness and this differentiates from many of our competitors. And we are currently rolling out additional specialist wire products that we extrude ourselves as well as making complex plastic components and connectors in-house. Our investment in product development focuses on both power products to meet evolving demands in the EV space as well as the next generation of data center cables. And we continue our strong focus on cash payback with the majority of capital programs achieving cash payback within 2 years and often much quicker. This market-leading approach to investment, it helps us to secure benefits quickly and gives us confidence to continue investing in our business. So it seems like yesterday, but we are 3.5 years through our 5-year plan. And our first half revenues of $584 million is a significant demonstration that our strategy is working. It's also proof that we are rapidly closing in on our target of achieving $1.2 billion of revenues. We've been comfortably maintaining our operating margins towards the upper end of the 9% to 10% range, and we are achieving this even after significant investment in growth. And this gives us a high degree of confidence that we will achieve the 5-year plan. So now is the time to summarize our performance and take you through the outlook for the second half. These are, once again, excellent results, a real achievement against the backdrop of tariff-related uncertainty and difficult macroeconomic conditions. And our growth is proof that the strategy is working powered by our investments in incremental capacity and capability. And in addition, as we scale up the business, we continue to achieve healthy margins at the top end of our target range as our operating leverage increases. We have confidence to invest and to pursue acquisitions because we have a strong balance sheet and very significant financial flexibility. And looking forward, we are off to a very good start for the second half of the year. We are mindful of the challenges for short-term uncertainty, particularly arising due to tariffs. However, this is a diversified business with deep long-term customer relationships. Those customers have supported our ability to grow despite these tough conditions, and we expect second half revenues to be broadly in line with the first half. In fact, we see the changing global trade environment as an opportunity for Volex. With our geographic capabilities and ability to support customers moving manufacturing between countries, we are well placed to secure further growth. Given our sustained focus on long-term value creation and our tremendous progress against our current 5-year plan, we have started working on a new 5-year plan and this new plan will reflect the strong and scalable business we have created and set out our ambitions for both revenue growth and margin improvement for the next stage in our journey. We will share this plan with investors in due course. And now we would be very happy to take your questions.
Operator: [Operator Instructions] Jon, Nat you've had a number of questions from investors today. So thank you, firstly, to everybody for engagement. Jon, if I may just hand back to you, if you can take us through the Q&A and then I'll pick up from you at the end.
Jonathan Boaden: Yes, of course. Thank you, Mark. Yes. So I'm going to collate the questions because often we get several questions on the same topic. So what I want to try and do is try and answer as many as possible and go through a broad cross section of the things that are being asked today. So the first question, one of the pre-submitted questions is, will your manufacturing center around Turkey or might you expand in the U.S. partly in order to mitigate the impact of tariffs?
Nathaniel Philip Victor Rothschild: Do you want me to answer that one? So look, we've got 5,000 people in Turkey. We have, I think, 8 sites there at the moment. So we're committed to Turkey. We have more than enough expansion space at the moment, should we need it. And we've also just opened a brand-new low-cost site in the center of Turkey, where labor costs are highly competitive. I think in North America, North America has always been a critically -- the critically important market for us. And if you look at what we've done in Mexico where we have doubled the size of our Tijuana site, and as I said, at least one occasion in my presentation, we've opened a new purpose-built site or we're going actually next week to open a new purpose-built site in Central Mexico. So we are covered for the U.S. market through our investments in Mexico. So I think the -- and we have 2 sites -- 2 existing sites, 2 specialist sites in the U.S.A. at the moment.
Jonathan Boaden: There's another question here about -- we announced that we were manufacturing partners for AFC Energy. And the question was to understand how significant that partnership is.
Nathaniel Philip Victor Rothschild: So I think that you would need to go and extrapolate from the AFC business plan what -- how big the opportunity could be. But we have the capability to take costs out of the AFC, the portable hydrogen generators that AFC makes. And AFC's success will be contingent on dramatically reducing the cost of those generators. And we're working with AFC as we speak. And I think you need to look at their management team to answer that question.
Jonathan Boaden: There's a question about when the San Luis Potosi facility will be operational, which is actually operational now. It opened at the beginning of the previous week. And Nat and I, as well as John Molloy and Dave Webster actually going to San Luis Potosi to see the new facility and to cut the ribbon on the site, but also more importantly, as an opportunity to introduce Dave Webster to the operations of Volex and to also take the chance to meet with customers. So that's a really exciting trip for us. So there's a question about Medical organic revenues have declined by 9.9%, driven by reduced global spending on health care and research. What is the plan to turn this around? And that's a question from Anthony. And I'll start and if you like Nat, you can add your thoughts. But really, we're not planning to do anything different in medical. Because actually, the strategy we have is working. We have some excellent deep relationships with customers. We have some excellent facilities and overall, we see very long-term structural growth drivers in the medical market, and we feel that we're well positioned. And it's a great strength in the portfolio effects we have across the 5 markets that if one of those markets is experiencing a short-term dip for various reasons, in this case, it's related to tariffs and changes in legislation, then we can still deliver 13% organic growth across the piece. So we don't feel that we need to do anything significantly different in medical because we're already doing all the right things.
Nathaniel Philip Victor Rothschild: Yes. And just to add, if you strip out our largest medical customer, we grew organically year-on-year in Medical by a few points. And the medical business we have requires very little capital investment. So the sites we've got, for example, in Poland, and in Slovakia that are exclusively medical, they kick out big dividends up to the group every year. They have very, very healthy margins. The business is incredibly sticky. And we've managed to grow our -- we've managed to diversify our medical business tremendously over the last 10 years. And I'm very optimistic about the medical business. I think the amount of destocking that's occurred over the last 12 months. I think some of the customers have gone too far, and I think you can have a really kind of rip come back next year.
Jonathan Boaden: Good. Thanks, Nat. It's a question from Stuart about the fact we referenced tariff-related uncertainty multiple times. And he'd like us to explain which specific tariff regimes by region products are the most material to Volex's P&L. So in terms of tariffs, it's our strategy with tariffs from the beginning has been to pass the costs on to our customers, and we've done that in 100% of cases that we pass through the cost of tariff to our customers. And in these results, there's only really 2 areas which we referenced in the presentation where we've seen the impact of tariffs. Part of it is in Medical, where some of our particularly euro-centric customers are seeing reduced demand as they sell into the U.S. And the other area that we mentioned in the presentation is in relation to consumer electricals where Chinese competition are flooding the European market with product at the moment, and there will be a rebalancing that will occur over a period of time in terms of demand. And we addressed the Medical piece earlier on why we still feel very confident in Medical. And in terms of the consumer piece, as we've talked about in the presentation, the big opportunity in consumer is around harnesses. Now quite often for domestic appliance manufacturers, we will sell them a power cord for $1, a harness for a washing machine or an other domestic appliance, we might sell that for $6. So you can see quite quickly that if we can grow the share of that harness market, that, that could have an appreciable impact on our revenue over a period of time, and that's very firmly where we have our sight set in that consumer electricals business. So there's a question from Peter about which of our 5 end markets, EV, consumer, medical, complex industrial technology and off-highway, do you expect to grow the fastest and why? And I feel that that's a question that's best saved for when we release our new 5-year plan. We've clearly seen tremendous growth over the life of the current 5-year plan, particularly in EV, in complex industrial technology. And the next 5-year plan that we will set out in due course will give an indication of where we think that future growth can come from. But overall, we feel very positive about the opportunities in end markets. And to that end, is there a particular end market that you feel particularly optimistic about, Nat, in terms of long-term growth opportunities?
Nathaniel Philip Victor Rothschild: Well, true to form, I still feel optimistic about all of them. But I would pick out -- I think, look, we said it a lot that you have a situation where labor rates are going up in Mexico, and there is an opportunity to showcase low-cost manufacturing in Southeast Asia. And the -- it's reason of consumer electricals and then it's, for example, the commercial HVAC market, which are really suited for manufacturing in Southeast Asia. And those are areas of business that require less capital investment than some of our other silos. And I think those are very interesting areas. So there's a little piece of -- a growing piece of complex industrial technology, which -- and then there's the consumer electrical side where we are seeing -- we're getting great traction. So I've always said that the consumer electricals side of our business is very, very underappreciated. And where we came from 10 years ago, we had a non-vertically integrated power cord business and we had no consumer electricals harnesses at all. Now we have a business doing around $0.25 billion a year of revenue. And it's a very, very underappreciated part of our portfolio.
Jonathan Boaden: Good. Thank you, Nat. So there's a question which is asking for -- from RW asking for some clarification because there's a statement I made, which is along the lines of that there's an increase in working capital driven by investment in inventory. And I mentioned that part of that is because we're operating through a hub model in data center sales. And the question is, can I please explain what that hub model means. Now how that works, how certain customers ask us to support them is by putting inventory into hub locations, particularly in the U.S., and that allows us to manufacture in Asia, and then we ship to the hub locations and then that inventory is available for the customer to pull to meet their requirements. And it works very well for the customer because that inventory sits on the Volex balance sheet which is one of the reasons why you see this adverse movement in working capital. But for operational reasons, from a customer's perspective, they like that confidence that as there are peaks and troughs in demand of their particular use case. So when they're building data centers that they need to move very quickly to populate the data center with infrastructure, which includes all the service switches. And then, of course, the cables that critically connect all of those things together. They want the confidence that they can go to these hub locations in the locality of where the data centers are being built and move very quickly to achieve their build-out requirements. There's a question from [indiscernible] about if we could explain or if I can explain the decline in revenue in Asia. So within the earnings release. We report revenue both in terms of the go-to-market sector, for example, EV or consumer electricals, but we also report a regional split and there is a reduction in Asia and quite a significant increase in North America, and it really just reflects the end markets where we've seen the biggest pull of data center products and the particular customer mix in those markets. So it's just really a function of how we report where particular customer revenue comes from as noted in that release. Question from Melvin. How significant is the volatility of the copper price to the business and what stocking, destocking is taking place in response. So as we've said previously, and remains to be the case for assemblies and products where copper is a significant element of the bill of materials, it is our policy to pass that copper risk through to the customer. So there is a repricing mechanism around copper and when copper goes up, then we're able to charge higher prices, which means our margins remain consistent in the face of copper volatility. And that is a process that has worked very well for us, but it also is something that's very well understood and accepted by the customers. And we haven't seen any significant evidence that customers are either stocking up or destocking in advance of anticipated moves in the copper market. So of course, the copper market moves very regularly and sometimes quite unpredictably. And for some of our customers where they choose not to take that risk, then we back off that risk ourselves by going up to a bank and hedging the copper exposure. There's a question here from Anthony saying that the markets have reacted favorably to these results has been seen by a substantial increase in the share price. Do you think the present share price and market cap is a true reflection of the value of the business? Or do you think the business is still undervalued given the future growth opportunities?
Nathaniel Philip Victor Rothschild: So look, I think investors have to decide how to value Volex. I think given our growth rate, our organic growth rate, where we compare against other U.K. industrials, we should trade on a higher multiple.
Jonathan Boaden: Good. There's a question from Theo about has Volex ever considered entering the grid electrical cable market given its growth? And if not, why? So I think this is referring to more like the national grids that the supply side of the electricity distribution market. Do you have any thoughts on that, Nat?
Nathaniel Philip Victor Rothschild: This is a different business to us. So this is a business that is dominated by companies like Prysmian and Nexans and other large multinational businesses. And this is not what we do. And Also, the business has much lower margin characteristics. Those are sort of single-digit operating margin businesses. So we're looking for niches. We're trying to be maneuverable. We're looking for more -- for kind of less commoditized business.
Jonathan Boaden: Yes. Great. There's a question about the percentage of revenue that each of our largest customers make up in the markets that we operate in? Well, in terms of customer concentration that we have a very broad range of customers. And there's nothing that we, from a management perspective, feel particularly concerned about in terms of customer concentration risk. We do have some larger customers, which tend to be very well-known household names that are leaders at the frontier of technology developments and in particular, we see that within complex industrial technologies and within the EV sector. And what's great with working with companies at the forefront of technology is through our manufacturing partnerships and the complex products that we offer to them, we're able to learn a lot about developments in the technology, and that helps us as we engage with other customers who are perhaps a bit behind the -- a bit further from the leading edge. There's a question about whether the boost that gold miners have had this year with rising gold prices has led to an increase in demand for off-highway vehicles to sort of support the gold market. Now I don't think we have seen anything down to that level of granularity. But perhaps a few words on where you see things in the off-highway space and particularly, I suppose, obviously, you have North American opportunity?
Nathaniel Philip Victor Rothschild: Well, interestingly, we won a contract with Fortescue to make the wire harnesses that go into the next generation of electric mining trucks and I went down to their headquarters last year and met Dr. Andrew Forrest and had a tour. And that contract has actually unfortunately, gone away because of the decision by Fortescue to move all their production to China and partly because of some of the decisions that this government has taken. And we're trying now to kind of requalify ourselves on the China part of that business. But that's an example of exactly the type of business that we like to do, which is a big off-highway super customized, heavy harness with tons of complexity to it. Overall, the off-highway business has grown 20% in organically through our acquisition of Murat in Turkey in 2022, we've got almost every single one of the major customers and we're now trying, as we said in previous calls, we're trying to then cross-sell those opportunities into other geographic locations. So that includes North America and obviously, Asia as well.
Jonathan Boaden: There's a question I'll take from Nick. Given I run one of our support functions, the finance team. And it's about given the growth of AI, what steps are Volex taking to implement AI in our own organization. And it's a good question that there's a tipping point now in terms of how these technologies have developed that it does allow you to run things in a more efficient way. And AI is just one of the avenues that we are looking at and actually using on a regular basis to become more efficient in the back office of Volex. And that's really important because as we grow revenue, if we want to look to enhance our margin position, and we need to do that through further operating leverage, which is all about running as efficiently as possible in the support functions of the organization so that the operating leverage comes through. And as well as AI that we're using cloud technology, we're using lots of applications. We're rolling out a new ERP system, which is going incredibly well and is giving access to a new feature set, and we're using more tools for greater collaboration across the business. So all of these things come together to put us in a position where we're enhancing the efficiency. I think as a final question. We had a question from Chris who says excellent results, well done. I know it's somewhat futuristic, but do you see data centers opening into space? So I didn't know whether you had -- any thoughts on that as we come to close the Q&A session. A rather left field question for the very end.
Nathaniel Philip Victor Rothschild: Well, maybe on asteroids as well in space, but it's -- no, the answer is I don't have any great insight into the thinking of Elon Musk. He is the only person who could possibly pull something like that of.
Jonathan Boaden: Very good. Thank you.
Operator: That's great. Jon, Nat, thank you very much indeed for updating investors. And of course, if there are any further questions, Jon will give those to you post today's call. Thank you once again to you both. Nat, perhaps before I redirect those on the call to give you their feedback, which I know is particularly important to you both, perhaps I could just ask you for just a couple of closing comments.
Nathaniel Philip Victor Rothschild: Well, it's 10 years since I've been doing this, and I think it's 5 to 6 for you now, isn't it as well. So we're in the midst of the journey, and we're grateful for the support of all of the retail investors and also the Investor Meet platform, which is very important to us, and we look forward to seeing you in 6 months' time.
Operator: That's great. Jon, Nat, thanks once again for updating investors. If I please ask investors not to close this session as we'll now automatically redirect you to provide your feedback. It only take a few moments complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Volex plc, we'd like to thank you for attending today's presentation.