2022 half year results Q&A session. My name is Lauren, and I will be coordinating your call today. There'll be an opportunity for questions, and if you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand you over to Andrew Heath to begin. Andrew, please go ahead. Thank you very much, and thank you everyone for joining us this morning. You will have seen our release that went out early this morning, as well as our webcast presentation, which I hope you've had a chance to read. Before we just get into the questions and the Q&A session, maybe I'll just make a few opening remarks. I mean, firstly, I'd like to say that I'm very pleased with the execution of our strategy for profitable growth. It is working strongly for us. Over the past three years, we have transformed the Group into a more focused, more profitable, and more resilient business with the ability to compound growth at a higher rate through the cycle. Today, Spectris is in a position of strength with a robust balance sheet. We're well-positioned in attractive end markets with strong fundamentals, and we're also supported by key sustainability themes to deliver structural growth. During the first half, we continued to make good progress, achieving strong growth, really through our focus on premium precision measurements, as well as our focus on growth markets, with all our priority markets growing well for us at the moment. We're also delivering on a consistent basis, even in the face of continued supply chain challenges. I have to say, I'm very proud of the team for all the work they've done over the last six months in delivering the results we posted this morning. I think our results also demonstrate the value of our customer focus and connectivity, where we're solving customers challenges, whether that be in pharma, semiconductors, automotive, advanced materials, or in a variety of technology-led industrial markets, particularly in smart manufacturing. We've increased investment in R&D, as you've seen, and the improvements we've made to our internal R&D processes as well as our focus on driving our strategic initiatives against, the key drivers we see in our end markets, over the last three years is really coming through in strength and demand and market share gains. We increased the investments, I said this year, and that's very much based on our confidence and the outlook we see for our business through the cycle. You'll also see we continue to apply self-help, driving operational excellence through the deployment of the Spectris Business System, reducing waste, improving throughput, and improving our competitiveness. Clearly, we look to accelerate and compound that growth through attractive M&A, and we've made or announced GBP 100 million worth of acquisitions year to date. We're now moving into the next phase of our strategy, delivering on our ambition to be a leading sustainable business. I look forward to updating you later in the year on that in more detail. Thank you again for joining. Very happy to take your questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. Our first question comes from George Featherstone from Bank of America. George, please go ahead. Morning, Andrew and Derek, and morning everyone else. A few questions for me. I'll go one at a time. Firstly, I'd like to start on the quite a big step up in R&D year-on-year. I just wanted to know if you structurally expect now to be above 8% of revenues in terms of R&D spend going forwards. If there are any parts of the portfolio where you feel there's been underinvestment, hence the increase, or conversely, are there any particular areas where you see an opportunity to gain further market share through new product launch and innovation? I assume you're gonna ask some more questions, George. Sorry. Yes, I mean, we've stepped up investment in R&D, as I said, sort of in my brief opening remarks. I mean, that's really as a consequence of the strategic initiatives that we've been running over the last two years, focusing on sort of core parts of our end markets where we see we have the biggest opportunity for structural growth. You know, whether that be in sort of drug development, life science applications, whether that be in, you know, really helping to support the capacity build out in semicon, all the way through to smart manufacturing using our sensors, high precision sensors, to enable, you know, our customers to make smarter devices. Going forwards to your point, you know, we certainly anticipate sort of increasing our range. I mean, historically, we've sort of been in sort of 6%-7% guidance in terms of R&D. We've clearly gone through that, but I think that's consistent with what we have been saying, as we've been looking forward to increase progressively our R&D spend. As we look forward now with, you know, the sale of Omega, which had relatively small amounts of R&D in it, the mix there has helped a bit, and that's pushed us over the 8% threshold. We are incrementally investing as well. Your question about, you know, is there any underinvestment areas? No. You know, we are spending a bit more of our engineering time on supporting all the supply chain challenges at the moment than we'd have liked to have done. In part, that's also increased the R&D bill a little bit, because inevitably our engineers are having to support operations in terms of finding alternative suppliers or redesigning, you know, printed circuit boards, et cetera, to make sure we can deliver for our customers. We are having to spend a little bit more there. You know, that's, you know, I would hope to unwind progressively from sort of here on in. In terms of market share gains, you know, absolutely we're confident that we are seeing gains in market share as a consequence of the initiatives that we've launched over the past two to three years. You'll have seen in our various press releases that we've made in that period, you know, progressively increasing commentary in terms of new product launches, you know, and the impact they're having in the market and the problems they're solving for customers. That gives us the confidence to continue to sort of progressively increase our spending and invest in R&D. Okay, thanks very much, Andrew. Turn to the next question. In the first half, revenues, you've mentioned that there's been some extended lead times in delivering from the order book. I just wondered what portion of your order book that you delivered in that period had price increases that reflected the new pricing that you'd have liked to have put through, given the current cost inflation environment? Yes. You know, if you sort of break down sort of you know the you know orders versus revenue, we certainly you know looking at the visibility we have, and we've you know that visibility has increased progressively over the last 12-18 months. We've now got sort of five and a half to six months of sort of aggregate order cover, or you know baked into the order book. Within that is sort of 4%-5% of sort of price increase. It just depends a little bit on mix, you know by business and product. Sort of you know the phasing that we talked about in the press release, you know we put our prices up in the first quarter of last year, then the middle of last year again. Put prices up again in Q1 of this year, and we're just in the process of putting prices up again, given you know inflation has been running at a much you know more elevated level and for longer than we anticipated. Effectively, you know, the prices that were in the order book coming into the beginning of the year were set at the middle of last year. That's really been you know that's really dictated the price going into the revenue through the first half. There's been an incremental uplift on price that's in the order book to say to the tune of 4%-5%, which will then start you know has started to progressively come through from really sort of late May into June, but will build as we go forward now into the second half. We certainly anticipate, you know, a 4%-5% pricing benefit in the second half. Thank you. Maybe one for Derek on cash flow. Clearly cash conversion below your normal typical levels, which is understandable given what you said on working capital requirements for some of the investments you've made. Should we expect the cash conversion to return to normal levels by the end of the year? That's certainly the plan, George. There are a couple of specifics in the first half, which we didn't state, but just bringing that out again. We did buy a new building which pretty much doubles the capacity of our PMS operation. There's $20 million spent in the first half on that, and then the remainder is supporting working capital to facilitate deliveries. It is our expectation we'll go back to our normal range of kind of 80%-90% conversion for the full year. Okay, thank you very much. Thank you, George. Our next question comes from Andrew Wilson from JP Morgan. Andrew, please go ahead. Hi, good morning, everyone. Thanks for taking my question. It's two, I think, somewhat clarification, I guess. Just talk about the price cost dynamics and appreciate the detail you gave Andrew in terms of the backlog pricing and how it's obviously set to improve second half. Should we think about price cost being positive for the full year? I'm just trying to sort of understand how much catching up you need to do in the second half and if we look on a full year basis, yeah, quite where that's gonna come out. Well, I mean, as we said before, I mean, we're not looking for prices to get ahead of inflation. You know, we're certainly looking for our pricing to, you know, maintain our gross margins. That's certainly our expectation for the full year. You know, if you consider our usual sort of first half, second half weighting in terms of revenue growth, plus the 4%-5% of pricing that's coming through, that's already in the order book, and we can see it, you know, the operating leverage therefore in the second half will be, you know, very strong. That's helpful, thank you. Second, it's slightly, I guess, linked to one of George's questions earlier. Just on the market shares, and clearly some of the growth in some of the markets has been super strong, even in supportive markets. I guess, just interested if there's any particular markets where you would single out where you think you're sort of definitively taking share. I think if you sort of look at our key target markets and start with pharma, we were up 12% in the first half in pharma and life sciences. That's been with a strong performance in both Malvern Panalytical and PMS. We have seen a sort of reduction clearly in sort of vaccine development work. But that's been replaced by continued investment in both conventional drug development as well as large molecules, protein-based drugs and RNA treatments, mRNA treatments, sorry, that's driving demand for Malvern Panalytical products. Our sort of aseptic monitoring solution PMS is doing particularly well also. We're seeing strong growth there. In automotive, I mean, we're up 15% in the first half. Very strong growth, particularly in North America, but also in Europe. I mean, Asia was a little bit softer. China was softer, really because of Q2, with the lockdowns, which meant, you know, we weren't able to recover all of our sales within HBK into China in the second quarter. But I think, you know, the fact that we are very much the, you know, helping to drive the electrification trend within automotive, our electrical powertrain testing, our battery testing solutions are selling particularly well. And if you look at, you know, our simulation virtual test offering, and we put the numbers in the press release and in the webcast. You know, if you look over the last three years, I mean, sales have grown incrementally there by GBP 60 million. You know, we are seeing very strong growth there. It is, you know, still a sort of relatively new market, but one that's growing very strongly, and we have a very strong offering. You know, there's never been a better time certainly to help, you know, our automotive customers and customers at large to drive their own productivity in the face of all this inflation. That, you know, that is certainly helping to accelerate time to market for our auto OEM customers, reducing risk, reducing cost as well. Within semi, I mean, we have some very strong offerings in semi that you know are certainly you know benefiting from the very large CapEx cycle that's going on at the moment. While you know there is talk that some you know production volumes may start to come down or given some of you know some of the commentary from some of the larger semi producers in terms of inventory levels you know but we certainly see that CapEx cycle continuing as they need to continue to both build out capacity the onshoring trend continues as well as the investment in the next generation nodes. Our offerings across Malvern Panalytical and PMS in particular around Servomex are doing very well there. Maybe if I can just squeeze, sorry, just one clarification as well I meant to ask on the pricing. Apologies if I've missed this, but did you split out the organic growth in the first half in sales between price and volume? Of the 11% revenue growth in the first half, 4% due to price, 7% due to volume. That's very helpful. Thank you. Our next question comes from Andrew Douglas from Jefferies. Andrew, please go ahead. Morning, guys. I've got 3 quick questions, please. Just going back to R&D, I understand the increase to 8%. Are we happy that we're getting bang for buck on that 8%? I think when you joined Andrew, one of the issues that you faced was that actually you weren't getting necessarily full bang for buck from that kind of 6%-7%. And that was a key bit. Going up to 8%, are we confident that that is now still coming through? Secondly, on going back to the kind of cost and price increases, are we still confident or how confident are you that the price rises that you're putting through now will stick, particularly if we get into a slightly more challenging macro backdrop, and it seems that most raw material prices are now kind of rolling over a bit, so just understanding the confidence there? If you can give us, please, an update on the M&A pipeline, the size of deals, things you're looking at and whether you think that pricing is at an appropriate level. Thanks. Okay. Thank you. Nice hearing from you, Andy. Firstly, just in terms of R&D, I mean, you're absolutely right to characterize it when I came to the business 3.5 years ago, I was concerned at the amount of, I would say, what I would call sustaining the maintenance engineering effort that was going in at the time. I mean, sort of over half of our R&D spend was going into sort of just maintaining and sustaining older products. As a consequence of both, you know, tidying up the portfolio at a Group level, and really concentrating on the core businesses we want to retain and investing in the engineering capabilities and the processes there, you know, that has certainly helped in terms of giving us better bang for the buck, to use your expression. Also within the business, you know, the retained businesses, you know, we've worked through the portfolio of products and services within each of those businesses as well, and either discontinued or end of life to a number of products. We've sold a number of products as well over the last three years, you know, some of these older products that are taking a lot more maintenance burden. That has all helped to improve the vitality. You know, as I said, you know, we had timed our processes, and we've also replaced the engineering leadership within those businesses as well over that period. I have a lot more confidence in our capability. Equally, you know, the strategic initiatives that I've spoken about, market share gains, you know, we are seeing the products we're launching and getting good traction with customers and solving problems for them that are, you know, then driving greater sales. In terms of sort of our vitality index, you know, that is now starting to, you know, progressively improve. You know, we're all pleased on that front, and we'll talk more about this when we get to the Capital Markets Day, later in the year. In terms of cost versus price, yes, still very confident we have pricing power. All of the pricing increases that I talked about on the previous question are sticking. We are getting good realization of those price increases. You know, in some instances, you know, we've also gone back retrospectively with customers, and we've had to increase some prices, and that's worked. I mean, that's, you know, I don't think I, you know, wouldn't make too much of that, but it just demonstrates that, you know, even when we have to go back retrospectively, we've been able to. We've also, within our contracts, built in terms such that we can charge for surcharges around sort of, you know, excess freight costs, excess energy costs as well as needed. You know, to the nub of your question, have I got confidence in pricing power? The answer, in answer to that is yes. In terms of the M&A pipeline, clearly, you know, we've done a, you know, a number of acquisitions over the last 12, 18 months, I think four acquisitions and one announced. So you know, we've been executing a number of those bolt-ons. You know, in terms of the pipeline, I think it's fair to say we're sort of now in a little bit of a, sort of a refresh state as well. We've got a number of opportunities that we are currently considering, as we always do. But given the sheer number of transactions that we have completed, you know, we are in a slight refresh phase. I think it was the other part of the question around pricing or valuation. Yeah, just. Well, yeah, pricing and valuation of assets and kind of where that sits now given the slightly more dark clouds on the horizon? Yeah. I mean, we've not seen, I would say, any sort of evidence of pricing valuation shifting at the moment. Albeit clearly debt markets are a lot tighter, and that's putting some downward pressure on pricing. I think it's a bit too early to say. You would expect, you know, hopefully that some of that valuation expectation, price expectation is starting to come off. Okay. Thank you. No, thank you for the question. Our next question comes from André Kukhnin from Credit Suisse. André, please go ahead. Good morning, everyone. Thank you very much for taking my questions. I'll go one at a time. First just wanted to look a bit more into the H1, H2 margin cadence. Really think kind of what the reasons behind the implied margin improvement in the second half and the guidance. First, on the acquisition-related expenses, and I think fair value adjustments of GBP 6.8 million, am I right to think that most of that is of one-off nature and in absence of another large deal in the second half, not assuming that, then that GBP 6.8 million should not reoccur? Yeah. André, apologies for that. That is, I mean, it's one-off in the sense that it relates to acquisition activity that we've undertaken in the first half. It's also an amount that we exclude from our adjusted operating profit. In that sense, it's below our typical APM, so it doesn't impact the reported operating profit or adjusted operating profit. It's more of a statutory method. Clearly, if we have some M&A activity, it can be big or small. There could be other costs going through that. You're right, it's one-off in nature. I've got it. Thank you. On the China lockdowns impact, given that you've got 16% of sales there, could you help us quantify the impact in the first half? I mean, our team has actually, as I think I said at the beginning, did an excellent job in terms of recovery in China, sort of towards the back end of May and through June. It hasn't, you know, the backlog hasn't fully unwound, in particular within HBK, as I spoke about some of their automotive. That, you know, that will give us a little bit of an extra coming into the second half. Should we think about GBP 2 million or so, or is that? Yeah, I mean, it's not. I wouldn't say it's, you know, hugely material. Okay, great. Thank you. I have a couple of broader questions. One is on Industrial Solutions. Given the change in the management structure there, and noting some differentiation in terms of level of investment across a couple of businesses versus others, should that signal more openness to maybe further portfolio changes there and is there a kind of timescale on that? In terms of Industrial Solutions, back in December, we talked about looking at how we could integrate the three businesses, PMS, Servomex, Red Lion into a more integrated division. That was very much, you know, coming into the new year, the work that we undertook. As we went through that work, you know, the thesis didn't really prove itself out to the extent that we anticipated. You know, as we look at sort of the frictional costs from the sale of Omega and just looking at management costs overall, we took the decision to effectively, you know, not continue to go down that path with Industrial Solutions and instead keep the three businesses as three sort of independent operating companies. You know, they report into myself and, you know, that allows us to effectively take out the intermediary management structure that, you know, we've had in place over the last, two, three years or so to manage ISD when it was a portfolio of the right businesses going through a disposal program. You know, that's really the logic, and it also gives us a bit more flexibility going forward. Great. Thank you. If I may, just the very last one, to take this opportunity. If we go back to the Oxford Instruments deal and just think about the fundamental attractions that you saw in that deal at the time and kind of set everything aside and, kind of think of a kind of hypothetical scenario, have those attractions fundamentally changed for you, in the current world, with the events that have happened since, or not? I mean, I think, André, I'll just say I repeat back what we said at the time, really. I mean, you know, it was a very sensible transaction for us to consider. The combination with Malvern Panalytical would have been very powerful. It would have created significant value for shareholders, in our opinion. You know, that said, you know, it was the right transaction, but at the wrong time. You know, the world changed just to the point we were looking to try and consummate a deal with Russia invading Ukraine and all the macro uncertainty. You know, it was right for us to put our pens down. In terms of, you know, the logic for the transaction, that logic still remains. Clearly, there's a number of things that need to come together, you know, to make that sort of, you know, financially attractive proposition. You know, we remain disciplined in our approach to M&A and are focused on how we create shareholder value. You know, for the avoidance of doubt, you know, we continue to explore, you know, other acquisition opportunities. Very clear. Thank you very much for your time. Appreciate it. Our next question comes from Mark Davies Jones from Stifel. Mark, please go ahead. Thank you very much. Hi, Andrew. I was also gonna just follow up on the Industrial Solutions thing, because it looks as though that is quite a big change of mind. It was only back in December that we had Mary Beth setting out the sort of strategy there, and that seems to have gone to reverse. I'm assuming, firstly, that she's left the Group. Is that right? She has, yes, that's correct. Okay. In thinking about what happens to those three businesses, I mean, they're three quite attractive but sort of unrelated businesses. Is there any scope for sort of further Group reorganization? PMS, for instance, seems to have a fair amount of overlap with parts of Malvern Panalytical. Is that something we can think about, or do you think these are to be seen as three standalone units that may in time get built out to platforms, but we'll have to wait and see? What's the outlook there? Look, Mark, thanks for your question. I mean, I feel, as I said, it sort of provides flexibility in going forward. You rightly say there are overlaps within Industrial Solutions between them, particularly sort of between sort of Servomex, PMS equally. You know, PMS serves the same end markets as Malvern Panalytical. You know, as we look forward when it comes to Capital Markets Day, you know, we'll give you more color and insight into our thinking around all of that. But clearly, as I said, part of the rationale for the decision, you know, was not just cost, but also about providing some sort of flexibility on how we proceed with the Group. Okay, understood. At the risk of flogging a dead horse on the price cost thing, I just wanted to ask, it sounds as though input costs rose more than you were anticipating or more than you budgeted for in the first half, hence the lack of margin leverage that you delivered. But is there any particular area where those costs have come through higher? Is it labor costs beginning to rise on you, or is it just the same sort of materials and logistics things we've been dealing with for some time? Well, yeah. I mean, when we put the budget together sort of November last year, we were certainly anticipating inflation to be peaking around sort of 6%-7% through the first half and then declining down to the 3%-4%, in line with how everyone else saw the situation back in November. Clearly, as I said earlier, inflation has been running much hotter, higher and more, you know, prolonged than was anticipated then. When we put our prices up, certainly sort of in the middle of last year, you know, given our stronger order book and increased visibility, the flip side of that clearly is that it takes longer for, you know, pricing changes to come into effect, you know, as the order book unwinds itself. Yes, you know, we did see higher input costs than we anticipated when we put the budget together. Key areas, electronics, semiconductors, you know, other standout areas, you know, I would say it's not getting any worse, and there are some signs that it may be starting to ease, but I think it's going to take some time still to fully unwind. On the labor side, yes, we have had to increase some of our own labor costs, you know, as a consequence of both, you know, inflation, tight labor markets in some areas of the world, and just, you know, the cost of living squeeze, and we're taking an appropriate and responsible approach to, you know, making sure our employees are suitably remunerated. Okay. Thank you. As a reminder, to ask any further questions, please press star followed by one on your telephone keypad. Our next question comes from Jonathan Hurn from Barclays. Jonathan, please go ahead. Good morning, guys. Just a few questions from me, please. Can I just come back firstly to the supply chain and obviously looking forward into the second half? I wonder if you could just give us a little bit of detail about where the biggest supply chain issues are by division, please. Thank you. Good morning, Jonathan. From a supply chain perspective, as I just said, really, it comes down primarily to you know, electronics. Semiconductor availability has been the biggest issue that we've had to face over the last six months. Equally, as I said, I mean, we are starting to see maybe some signs that things are easing. Chip availability is getting a bit better. Whereas in, you know, go back two or three months, at times when sort of critical shortages, you know, we were having to scour the market and, you know, still get commitments. It is easier to get commitments from the manufacturers now, than it was. Now, whether that's the start of a trend, you know, it's maybe too early to say, but, I'm hopeful that we are starting to see the signs of things easing up. As I said at the beginning, you know, our teams have done a really good job in terms of being able to deal with the situation, being more flexible in terms of how we schedule, how we prioritize, how we resequence the manufacturing lines, how we build modules, you know, part inventory, waiting for shortages, such that when the parts do arrive, we can quickly assemble them and get them shipped to customers. You know, we have, we're being much more agile in how we manage all of that. Clearly, you know, that comes, you know, there is a cost associated with it, and that's, in part, has also impacted our gross margins in the first half. As all this unwinds with the pricing that we've got in the order book, plus, you know, the extra volume, the higher level of production efficiency we get from that also, as supply pressures start to unwind, that should certainly, you know, help, and that gives us confidence in terms of our outlook, as we've said. I think but in, you know, I think you can't rule out the fact that there'll be some, you know, surprises. There's the known unknowns. You know? We know that there'll be some things that our supply chain, you know, isn't aware of that may hit us and put some stop ship on certain product lines. As it stands at the moment, we're, you know, managing it, you know, reasonably well. Just in terms of the risk by division, does one division stand out as potentially having more risk in H2 than others, or would it be sort of quite equal among the three? No. I mean, I think the biggest area comes back to the electronics and semi supply chains. The two businesses that are most exposed to that are HBK and Red Lion. They have the, you know, the biggest content, I would say, in terms of electronics going into their products. You know, equally, you know, that's where we've also seen, you know, us putting up the prices, you know, most significantly to address that. Great. Same question just on PMS. Obviously, great business. You've spent GBP 15 million or GBP 15 million on a new facility. Can you just talk us through sort of the timeline here? When that capacity comes online, how ultimately fast it ramps? From this, obviously, this extra facility, what do you think is the potential sort of revenue opportunity for PMS, please? Well, I wouldn't, you know, I'm not gonna give a revenue guidance for PMS directly, but I will say that, I mean, PMS has been growing double digits for the last three, four years. You know, clearly, you know, it, you know, half its revenue comes from semiconductor manufacturing, where we provide class-leading particle counters to measure the impurities in air and liquids that go into the manufacturing process for semi. You know, we have the, you know, the highest accuracy sensors, you know, on the market, which makes it very attractive for the semi guys who are developing, you know, smaller and smaller nodes in terms of, you know, the semiconductors. As such, they need higher and higher levels of quality. You know, that is a major driver for PMS's success on that front. Equally, their aseptic monitoring solution, where we provide, again, particle counters for clean rooms to make sure, you know, our customers can measure the effectiveness of their clean rooms. We also provide a full sort of software monitoring suite, whereby customers not only can, you know, ensure that the quality of the air going into the clean rooms, but equally, you know, when the regulator comes in, they have all of the monitoring in place such that they can meet the certification requirements to say they've been operating at the right levels of cleanliness. That, again, has been hugely successful. That's very clear. Then just maybe last one, very quick one, just in terms of order book. Obviously, good growth in the first half, but have there been any cancellations of orders within the order book during the period? Any signs of- Uh- -cancellation? No. I mean, in terms of sort of customer behavior, we're not seeing any signs at all that, you know, customers are starting to get anxious about what's in the order book. We've repeatedly said on these calls over the last 18 months, it's something that we track routinely on a month-to-month basis, and we've seen no change in behavior from our customers in relation to sort of cancellations or delays. That's very clear. Thank you, guys. Our next question comes from Bruno Gjani from BNP Paribas. Bruno, please go ahead. Hi. Morning, all. Thank you for taking the question. Just on orders, if I could just follow up. Could you provide some color on how orders trended sequentially if we exclude that pre-buy impact in Q1? Would you expect the current run rate of orders to be sustained if we look out to Q3? Do you expect things to slow? I guess, can you take anything away from July trading so far? Yeah. Bruno, thanks for your question. I wasn't quite sure about your, the pre-order point you made. I just remember from the Q1 IMS, you talked of certain divisions benefiting from a pre-buy effect in terms of the strong order growth that you saw in Q1. Some orders had been pulled forward. If we just strip away that from the Q1 base sequentially, what did you see in your orders? Well, okay. Yes, I mean, yes. I wouldn't say it was sort of a, you know, I wouldn't characterize it as a pre-order. Maybe it's just language. I mean, we certainly- Mm-hmm. As we came to the beginning of the year, we extended lead times or coming out of last year, which had supply chain pressures. We did get some benefits in terms of that in Q1. If you look at you know order growth and you compare it to you know last year, I mean, in Q1 last year, orders were up 5%, we did 31% this year. Last year, orders were up 28%, and we did 11% this year in Q2. You know, we are still seeing very strong order intake despite some real you know much tougher comps. You know, we've had the flash results for July, and we're still seeing strong order flow in July. You know, as I said, you know, we have no evidence as yet to suggest that, you know, customers are pulling back on placing orders. Got it. Just in terms of the lead times on current orders that you're booking, are the lead times European customers coming down somewhat, or is there no change really? No, it's really stabilized. Okay. You know, we're as a consequence of the demand that we're seeing, you know, and again, you know, supply chain ability to satisfy, we're keeping our lead times broadly, you know, where they were. Having said that, I mean, we are using the Spectris Business System extensively to look at how, you know, we can reduce not only our the throughput inside our own facilities. Those of you who came to the Malvern site earlier in the year when we did the Malvern Panalytical Investor Day, and we showcased the Mastersizer line. Malvern Panalytical have done a similar exercise with the Zetasizer. So if you add the Mastersizer and Zetasizer, that's about a quarter of Malvern Panalytical's revenue. There we have, you know, we've doubled the throughput in a smaller footprint with less, you know, specs, you know, needing less people. Also, you know, the operations and supply chain personnel teams have worked with suppliers as we put in the press release. I mean, we've actually, you know, almost halved our order lead time there. In that case, you know, we've actually reduced our order lead time, and that's allowing us to, you know, gain incremental demand from customers 'cause we can meet their needs faster than the competition. Mm. We're very much using Spectris Business System as a self-help to reduce cost rates, but also, you know, make us more competitive as well. If I could just touch upon guidance. High single digit like sales growth to my mind implies 8% growth for the full year, which is what consensus models. Now, given that pricing is expected to be 5%, this implies, you know, H2 volume growth is closer to 1%, which in the context of, you know, stellar order growth seems a bit cautious in my view. I guess, would it be fair to characterize a like-for-like sales guide for this year as being a tad cautious, with it reflecting, you know, uncertainty in relation to supply chain? Or, yeah, any color on that? Well, I'll let Derek get into some of the details, but I think as you know, as we look forward, you know, we have confidence in our outlook and maintaining the guidance that we've, you know, talked about back at the beginning of the year. I mean, there are still some uncertainties in the supply chain, as spoken to us. We've clearly increased working capital to provide more inventories to protect our delivery to customers, which is exactly the right thing we should be doing. It's more, I would say, you know, it's more about the sort of known unknowns. It's the things that we know are gonna happen, we don't yet know where they're gonna come from. Therefore, you know, we've got to be pragmatic in the face of that. Relative to the visibility that we now have in the order book, you know, that gives us very, you know, high degrees of confidence to give that high single digit growth. I'll let Derek get into some of the details there. Yeah, I mean, I would add, if you look at our math, then there is opportunities potentially on the volume side that, as Andrew just pointed out for the reasons we listed, we are being cautious. I mean, as we just talked about guidance, it's just worth looking at. I wanna make sure everybody has picked up on page 48 of our statement. This is where we set out the impact of Omega. I know there's a little bit of confusion and noise this morning around the first half profit number. I don't think that everyone quite captured the announcement we put out at the beginning of July that set out the impact of the disposal of Omega. There were a number of sort of range of ideas as to where the profit number should be, but I just want to make sure everyone spots that with Omega revenue, the prior year profit number was GBP 68 million for the first half, and our growth was 6% on that. I think there was a consensus of about 17.5% growth, which I don't think anybody actually would've believed. The growth in the first half was 6% and 68, and as pointed out for the full year last year, it was GBP 189 million of profit excluding Omega. Just to make sure as you guys update your numbers, you capture that. In terms of our broad guidance, we're not expecting expectations for the full year to change off the back of the statement this morning. Got it. That's all I had on my side. Thank you, guys. Thank you. Our next question comes from Mark Henderson. Mark, please go ahead. Thank you. I'm a private shareholder, not often seen at these meetings, but I'm a little bit concerned about the not your company, but many companies, of the impact of inflation and to the extent to which we're seeing growth in profits being illusory profit growth rather than real core profit growth. That's manifest in your figures by the amount that's going into increased inventories. I think over half year to half year they're 30% up and the reduction or the lack of cash flow conversion. This is typically what we see in inflationary times, and that I wondered to what extent you would envisage a reduction in those inventories, in other words, an unwinding of this inflationary pressure. Mark, good morning. It's Derek Harding here, Finance Director at Spectris. You're absolutely right that the increase in inventories simply down to price. As opposed to volume, that risk of inflation coming through would be a sort of warning sign, certainly against the cash flow. I think in our case, the predominant reason for the increase in inventory is to combat the supply chain issues that have been well documented. Throughout the first half of this year, where we have had opportunities to obtain input materials, we have taken those opportunities, and in certain cases, that's involved us buying more inventory than we would normally hold, with the purpose of making sure we can hit customer demand. That also results in us as well, having a number of parts and products that are part-built, sitting on the balance sheet at the half year, particularly if they're awaiting a final component in order to get them completely built and then shipped. There are a couple of sort of specific volume-related issues that mean inventory is higher than we would normally have. Notwithstanding that, our working capital sits within the range that we typically guide towards, to 11%-15% of sales. We're broadly comfortable with the position and it's entirely intentional for customer service. To move on to your next question, you know, will that unwind? Our expectation is that it will. We have significant orders coming through in the second half. As Andrew talked about, we expect to see that volume pick up in the second half. As a result of that factor, and hopefully, reductions in supply chain issues over time, we ought to see that inventory unwind. As I said earlier on the call, we expect our cash conversion for the full year to be back in our normal range of 80%-90%. But there's also a cash impact in our conversion in the first half through the purchase of a building for PMS in Colorado, which again is a one-off in some ways, when you look at our typical cash conversion. But the net effect is that we anticipate strong cash generation this year back in line with our normal range. Thank you very much indeed. Our final question comes from Michael Tyndall from HSBC. Michael, please go ahead. Morning, gents. Just a quick couple from me. The first one, just in relation to post the immediate disposal, we had reallocation of overheads to the other divisions. To what degree can you bring them down? I mean, effectively, you're a smaller sized business now. I wonder to what degree there's a variability in some of those overheads that we can expect you to kind of try and drive that down. The second one is really a clarification. I'm not sure I heard you correctly, but was there an element of the R&D uptick that related to redesign because of the supply chain issues? If so, can you give us some sort of quantification of how much that was? Thanks. Let me answer your second part of your question first, Mike, and then pass you to Derek. I mean, I wouldn't get carried away in terms of the you know, the amount of engineering time that we're having to spend on supply chain. I mean, it's you know, it's an irritant, but it's not that material. In the scheme of things, you know, the growth to 8.4% of revenue and R&D spend, you know, the vast majority of that is a you know, real and meaningful increase in our investment for future growth. On the overhead cost, Mike, it's a fair point. If you actually look at the H1, we spent in the prior year, you'll see that there's GBP 2.2 million cost left over, if you like, if you had, if you deleted the overhead profit, it's GBP 4.8 million for the full year last year. You've got to be slightly careful with if you categorize that all as kind of head office cost, if you like, 'cause a lot of it relates to shared services and shared capability. If you think about sort of IT, cyber security, some of those sorts of skill sets where we hold a stronger skill set at the center, and then allocate it to the platforms serving businesses, so we don't end up duplicating the cost. Nevertheless, there is opportunity to reduce that central cost, and we would aim to do it. But as I say, what we need to do is look at the cost base across the entire Group, and it's a question of where it sits best. Through the Spectris Business System, through some of the investments that we're making in terms of our ERP improvements and some of our process improvements, over time, you'll see that come down. But it'll all get captured in the overall margin of the Group, which of course we still believe we can improve year-over-year, and that remains the case for the remainder of this year. Brilliant. Thank you. We have no further questions, so I'll hand back over to Andrew Heath for closing remarks. Right. Thank you very much. Again, thank you everyone for joining the call and for your questions. By way of closing, I'd just like to make a few points. As I said, you know, I'm very pleased that we've delivered, you know, good financial performance in the first half of this year. We absolutely have confidence in delivering high single digit organic growth and margin expansion for the full year. I'm looking forward to talking to you at our capital markets day in October and talk about really the next phase of our development. You know, we are a business that has a clear purpose with sustainability at its core. As I've said earlier, we're a more focused, high quality, more profitable, less cyclical, more resilient business as a consequence of all the work we've done through executing our strategy for profitable growth. We're now very much positioned in diverse, attractive markets with structural and sustainable growth drivers. We've got an excellent balance sheet that supports both our ambitions to invest organically, improving our internal efficiency, as well as investing in growth through accelerating our spend in R&D, as well as alongside that being able to compound growth through disciplined M&A. As such, I think we're in a strong position to drive our ambition to be a leading sustainable business. With that, thank you very much again for joining, and look forward to catching up with you all soon. Thank you very much. This concludes today's call. Thank you for joining. You may now disconnect your line.