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And look, really good momentum with FY twenty twenty five earnings And we're expecting to be ahead of consensus, and we can talk a little bit more about that. Look, FanTec and I'm mindful that this sort of completed in December, But as you can see on the slide there, we're very excited about FanCheck. It is the leading position in Australia and New Zealand. So we've consolidated an overall leadership position It was fully funded through cash and RCF. And so if you look at the post deal leverage, it's still very, very manageable. We've been much closer to the business more recently, and we knew this beforehand, but there's no substitute for being inside. I spent a bit of time there a couple of weeks ago, and it is as we expected, a very high quality local management team. And it will effectively form our local leadership for the region. It's the larger business that that we've acquired and that's really helpful. And look, our trading post completion has started really well, particularly in Australia. We'll talk about New Zealand and the New Zealand market. Later on, but particularly strong in Australia and a little bit more difficult in New Zealand.

But in aggregate, very pleased with how things are going. And typical to what we normally do, we're working on cross selling a new product introduction initiatives. There's significant procurement opportunities, quite a few common suppliers and opportunities there. And over time, we just think there's an ability to be more efficient with the way that we manage resources locally to leverage the opportunity. I mean, I always talk about Australia and those that have spent time there. It's a big country and logistically, we're very well positioned in all of the major areas to service our customers very well. Just one for us that's important, and that's focusing on sustainability, healthy air sustainably. This underpins what we do with our customers. Our low carbon revenue in the year was about the same as the prior year. It was 70.4%, 70.5% in the prior year. So actually no progress there underlyingly and actually some dilution as we bring Fantaq into the group. The Fantaq proposition has a much well today a much lower low carbon content than we have across the wider group. But look, that's an opportunity U. K. And Europe is decarbonizing Australia and New Zealand may be a little bit further behind, but inevitably will decarbonize as we go into the future.

And then our recycled plastics initiative, We've set ourselves an extremely stretching 90% target, 90% target. So only 10% of our material in our facilities will be from a virgin source. To move to 84.6%. I still don't know how we get to that 90% target. It's stretching and we believe in it. And that's been largely driven by U. K. Business with good progress in The Nordics more recently. But your credit to the team there, fantastic job getting up from 77% last year to 84.6%. And this is so important for our customers. Our customers are looking for recycled content in their projects. We get asked in tenders to how much of the content of your product is from a recycled source. And this is very helpful. And then largely so lastly on sustainability, SBTI targets assessed and approved. We're very pleased about that. We could talk a little bit probably a little bit more detail at the full year but very pleased now that we've got targets out there that have been assessed and approved. Developing our people, keeping our people safe, pleased about our accident frequency two two in the prior year. I'm very pleased to witness firsthand the sort of health and safety culture that we have in Fantik is similarly strong, as with our wider group.

And I think there's some sort of cross fertilization and learning there. Important point to draw out now, we can eleven year history and sort of our 12% compounding of revenue and earnings, clearly, there's a leadership bandwidth challenge there that we have to address. And what we're trying to do is to be ahead of the curve there. So delighted that in the period, were some internal promotions to create what I would call regional leaders. So two regional leaders for our European area, a regional leader designate for the Australasian business, and that will come from within the Fintech Volution. And also just bringing in, attracting some high quality people to look at some of the opportunities internally. New operations leader in OEM, and we'll talk about OEM and what we've been doing there to turn around that proposition And also additional support in our technical teams to complement the new Group Technical Director who joined us early last year. And last but not least, fourth group wide management development program completed in October, last year and will kick off management development program five later this year. And there'll be a greater Volution region for obvious reasons. So I'm going to hand over to Andy now.

I know he's quite looking forward to taking you through the numbers. So Thanks, Rodney. And just to your lines to rest, I'm not going to be waxing on for an hour, because I am looking forward to the numbers, but I will make sure there's plenty of time for Q and A. So look, just as an opener slide, reminder, these are our long standing sort of six key financial KPIs. And against each one, the little green block is our target number and the little lighter blue above it is where we came out for the half year. And again, will go through some more of them in more detail in subsequent slides. But I guess really, really pleasing to see us ahead of the target on all of those key metrics. If I just pull out a couple of them and just where there's a little bit of additional color here to help you. So So revenue growth, Ronnie will obviously go into more detail around the regional pick in the next section of the presentation. But organic our target of 3% to 5% per year You may recall, those of you who would have seen our last statement, which was the four month statement that we put out early December, the time of the AGM, we were talking about a 2.5% for the first four months constant currency organic growth that's nudged up to 4% at the half year.

So look, really percent is a a number that we're very, very pleased with. It's flat bang in the middle of our range. In frankly, what still remain mixed markets at best and in some places quite difficult markets. So to start with a four is great. Of course, from a trajectory perspective, that slight uptick in the second period of the half sets us up well going into the balance of the year. I always get asked volume and price. I always give you volume and price, but normally I don't write it down. So I thought just in case you didn't hear rather than waiting for Q and A, let's just put it out there. This is approximate, but we're saying, look, it's about 1% of that 4% is price and about three is volume. And And really that's the normal when we think of why we set a three to five strategy, circa 1% on a like for like price basis is really, if you like, normal behavior. So compared to the last few years where each period dealing with inflation and therefore previously going slightly bigger on price, I would say that's now very, very much back in a in a sort of normal mode of sobriety.

Top right there, I think really pleased with that cash conversion performance there. So we set ourselves a 90% target across the full year. And ordinarily, half two might tend to be slightly stronger than half one. So a 90% number is good for half one. 110% is therefore a really, really pleasing number. And I guess it's doubly pleasing because as we'll talk about later on the cash flow slide, obviously had a lot of money going out this half for very, very positive reasons, both in terms of fintech and then also acquiring the remaining 25% of Klimarad. And so cash generation for us is always super, super important as the the engine to fuel M and A strategy. But the result of that half one performance is that we ended the period at 1.5 times pro form a leverage. So still very, very comfortable balance sheet wise. Despite a really active period on the M and A front. And then then bottom right there, adjusted EPS up almost 12%. And those of you that remember the sort of the ten year compounding graph, slide that we put in our results back in October. 12% is what we've been delivering for the last ten years, and it's great sort of keep that [indiscernible] going in this period.

Bit of repetition here because obviously, again, we're sort of largely talking about the same the same indicators and the same KPIs. But think showing it on the five year basis is helpful because again, if you look at the look at the year by year progression on all of those graphs, we are very, very proud of this consistency of delivery, this sort of compounding of performance. On both the revenue and operating profit growth there, you'll see that we've also quoted constant currency against each. And funny, it seems to be the case every single time that currency is not our friend. But there's about a two just under 2% adverse headwind on both of those metrics. So $8,900,000 revenue was actually $10,600,000 constant currency. Profit. 10.4% reported 12% constant currency. Of the currencies got a little bit tougher for us versus sterling. Particularly profound in Australia and New Zealand. So and I think that at the moment, we're sort of broadly speaking, as of today, same as we were in the first half of last year. Euros got a little bit more helpful to us Aussie and Kiwi have got a little bit worse again. So probably not unreasonable to think that that carries on for the next few months, but who knows?

I'm not a currency trader. Operating margin is up to 22.7%. So really, really pleased to see that continuing to nudge forward. Despite a tiny bit of dilution. And I say tiny because it's two months that we had Fantech in. I would also say that yes, the fintech margins are lower than our group margins at the point of entry. But actually, the gap is not quite as significant as we thought it might have been when we acquired in September. October. So it's a really, really strong margin business, and they're already executing continue to improve that. And then bottom middle layer, operating cash flow up 23%. So that again is back to that. Sort of cash generation leverage point. I don't think there's too much to pull out here that I haven't already covered. The perhaps just briefly mentioning the dividend. So we've nudged the dividend up to three the interim up to 3.4p per share. 2.8p was the equivalent last year. So that's up just over 20%. It's not a change of our strategy, but hopefully that's just a reflection of the confidence that the Board and the management have in the business. So Ronnie, I say, will go into more detail on the geographic breakdown in the next section.

But 4% currency organic, very, very pleased with that. Yet U. K. Again, are sort of strongest, so just over 7% in The UK. 2.4% in Europe, which was a bit of a tale of two halves. So the Nordics remaining challenging.

Particularly where we operate in the more new build parts of that market, so places like Denmark and Finland. I would say Central Europe, so for us Central Europe, quite loosely defined geographically, is everything apart from the Nordics, actually had a really, really good second half. And I think to be fair, contributed to that. I think Klimarat particularly strong Germany, getting better. Still not where it was a few years ago, but definitely getting better France developing well along the strategy that we've set out there. [indiscernible] positive and encouraging picture in Europe. Very, very small organic reduction in Australasia, so 1.7% constant currency, Australia, holding up very nicely New Zealand, as Ronny has already trailed, [indiscernible] And then you see the impact obviously of two months here of fintech coming in And of course, it's not two of their strongest months in Australia because it's Christmas season, which tends to be the longest holiday period. But that's two months of fintech and then the adverse of currency already touched on. On the margin front, so I guess the thing I'd pretty zoom in on here is the bottom left and bottom middle chart. So the bottom left continuing that half on half [indiscernible] at a group level, which we're really, really pleased about.

No, we're not resetting the target. And then in the middle, how that breaks down geographically by region. So good I mean, U. K. Margins now up at almost 26%. I remember sort of three, four, five years ago, we were if you like, having to almost explain away why The U. K. Margins were not on par with the rest of the group, particularly Europe. And there were reasons at the time, but candidly, we said there's no reason why it shouldn't be the case. And look, delighted with the execution there that the UK team is delivering.

Continental Europe flat. There's always a a business mix effect there. And let's say, Nordic not easy, and that's one of our higher margin businesses. So I think to hold the margin there is again a good performance. And in Australasia, just to help you out with how does Fintech impact on that regional level? You've got three bars there, so you've got last year's half one. You've got half one this year, as reported. And then on the right, you've got half one this year. If you just looked at the organic businesses. So I think to be fair, credit to the organic businesses, particularly actually the team in New Zealand, a really, really difficult revenue Volution. But performing and delivering very well on a margin perspective. So the organic margin in [indiscernible] slightly dilutive, but still a good strong margin that we enjoy there. [indiscernible] definitely won't go through the full detail of this slide because there's quite a lot of numbers in here, but just to help lay out a bit more detail for the analysts, the sort of the cash performance in the period. So [indiscernible] for me, the key points leverage is, say, 1.5x having completed the FanTec deal and the Klimarad transaction.

I think when we announced it back in December, we said that we would indicate we would guide to a likely landing at sort of between 1.5 times and 1.7 times post the transaction. Obviously, we're right at the bottom of that range. As a reminder, we would think of ourselves typically as delevering about half a turn per year absent any acquisitions. So if you apply half a year of that to your 1.5 by the end of the year, we're in a very, very I mean, we already are, but we're in a super comfortable position [indiscernible] that's not a promise that there's something coming immediately, but it just means that we're definitely, definitely very well placed to be able to capitalize on acquisition opportunities. As and when they arise. [indiscernible] Return on invested capital 25% versus 27.5% a year ago. Clearly, as we've always said, acquisitions will be dilutive at the point of entry because if we're acquiring at a nine, ten times multiple, of course, forget Fantaq was 8.5, which was a really, really good multiple, but it is not a 25% return on entry. So actually, I think that's very, very encouraging still. And we've said that organically, if we hadn't done FanTec, we would have increased the the returns by about 100 basis points.

So again, the recipe here is hopefully continuing to acquire. There's an acquisition dilution improve the acquisitions, continue to drive the organic business what we're saying is we're still confident of maintaining above 20% over the medium term while continuing to invest and grow.

In the business. So with that, hand back across to Ronnie. Thank you very much. Thank you. You, Andy. So [indiscernible] on the business review and maybe a little bit less, detail, but bigger picture stuff. So this is sort of Volution And if you think about our market exposure, so top left newbuild about a third, 35% and then RMI. Two thirds. And then this sort of commercial residential split, but this is actual half one, so only includes two months of Fintech. We will see that sort of split resi commercial change fullness of time. So we probably move to forty-sixty commercial resi. And we've already signaled that an M and A perspective, we're always interested in expanding our position in the residential markets. We'd said for some time, commercial niches, I guess, is fintech a commercial niche? We'll probably not, probably more than that. We remain interested in both areas of the market. Residential definitely commercial, more niche. And the reason I say more niche is that commercial market opportunity is bigger. It's a much bigger available market, but we're choosing to play in certain parts of it, certain areas where we believe the returns are acceptable to us in Volution.

And we'll demonstrate that to you over the fullness of time through Fantech. There is some entry dilution There is plenty of improvement potential. But the opportunity in that local market in Australia and New Zealand is hugely compelling. This I was thinking about this in terms of the success of our group over time and the recipe, if you like, and why why do we believe that we can continue to sort of outperform the wider market and deliver sort of 12% plusminus compounding revenue and earnings growth. And I think the slide shows it really well. We have three geographic areas. So this on the right hand side is pro form a the revenue that came into the group basis FY 2024. And it's a very nice symmetry there. It's almost a third each between The U. K. Continental Europe. And Australasia. And Andy has already taken you through, and I'll go into a little bit more detail in a moment, Not all of our markets go up at the same time, but we do believe that pretty much all of the markets that we operate in have this sort of regulatory driver that we can exploit through innovation technology.

And tactical execution. So having this geographic diversity is actually a huge help to us through the fullness of time. We're complaining about the New Zealand economy at the moment, but I also remind myself of four or five years ago where we talked about healthy homes and some of the tailwinds that we had in that market. And I think it would be unreasonable for us, although we can be unreasonable with our demands, but unreasonable us to expect that every one of our geographic areas will be pointing upwards all at the same time. And so a little bit more detail here, but I don't really want to go into lots of detail. It may be repetitive with Andy there. I mean, The U. K. Operational performance is outstanding. A call out to the team exceptional team delivering great results and I'm very proud of what the team been doing. I know some of them will be listening in this morning, so they should hear it from me. Because it is an outstanding result. And if you look at it, residential residential performance, our outstanding performance there is in residential newbuild, which is really counterintuitive. I've seen some statements even over the last couple of days calling out how far the volumes have come off in residential newbuild So why is this our strongest area of performance?

And it's a relatively simple recipe. We brought some new products to market that are capturing that regulatory opportunity. And we've gained share And so I look forward to this residential newbuild recovery in The U. K. Market because we will absolutely benefit from that if we build more houses in The UK. And maybe, maybe we do start to see some of that we go down the track [indiscernible] Calling out some of the areas that were less less well performing, 7% growth in The U. K, but that's in spite of a disappointing it is a disappointing 5.5% commercial decline. But in actual fact, the leading indicators that we've got there, in actual fact, we had the commercial representative gave a little bit of an update to the board on Tuesday about what we're doing in commercial. And we've got good momentum. We've spent the last five years improving our product portfolio and bringing new solutions to market. And the order intake in the first half of the year. And it's predominantly a project business. But the order intake was actually quite strong. And that's a really good indicator of what comes next and the direction of travel for half two.

And in OEM, the 5.7% decline is actually off the back of a much more severe decline that we talked about in the prior periods. And we've done a lot of work in OEM consolidating into one facility, quite a lot of indirect cost reduction [indiscernible] Going forward. This is third party revenue. It's worth pointing out that OEM is now contributing about one third of its of the production in our facility goes into our own products. Into our own Volution. And that, of course, is a margin enhancement. Coming back to how do we put 160 basis points of margin on, we've had headwinds. We've got inflation. We're not dissimilar to others in the market. We've got some further inflation to come. Around national insurance and national minimum wage increases and so forth. But we think with the initiatives product mix and sort of self help levers that we're pulling on, we don't have any undue concerns about maintaining margins as we go forward in The U. K. And it is the highest growth number on the page there, although a relatively smaller part of our revenue. But 20% growth in export, of course. A very strong performance in the half year. [indiscernible] Continental Europe, again, don't want to duplicate [indiscernible] Anne has already said.

Nordics has been tough, but our RMI business is actually performing better in the Nordics. We've got some probably better growth momentum in some of the other areas in Europe. Germany have been really hard for us over the last few years. And some of the regional management changes, I think, are helping bring a little bit more focus into what we're doing there. And and aid some of our cross selling. So actually a little bit more optimistic about our Continental European performance. In spite of the fact that it wasn't actually didn't actually add that much to the result in the first half of the year. But still 24% operating profit margins. Klimarad was probably the standout performance there offsetting some of the weakness that we had in the Nordics. And then finally into Australasia, and I've talked about FanTec and no doubt there'll be some questions from the floor when we when we finish now. But Australia is going very well for us. New Zealand has been really tough and been tough for a couple years. The economy has been tough. And we've sort of got this lens now across a lot of different brands. We have our Cymec brand through distribution.

We have DVS, which installs direct to consumer selling. We have Fintech, which is predominantly a commercial proposition. We have another brand called NCS Acoustics, which is a specialist acoustic play in New Zealand. When I look at those read across, if you like, from those different brands, we know how tough the market is. And I'm not necessarily calling out New Zealand as being much stronger in the next six months, but we have more to play with now with the addition of FanTech. And how can we take additional share utilizing those brands and those products. To benefit. And what we've done, this is the first time that we've done it here, is sorry, I'm on the wrong slide, is split the not keeping up. It's to split the residential and commercial revenue. So previously, all you saw for us Australasia was one number. Now we're splitting it out into residential and commercial of course, the 576% growth is because we had a very small existing organic commercial position and Fintech is largely commercial. These numbers will make more sense once we've had a full year of [indiscernible] But just I already said it there, I was there a couple of weeks ago.

It only just takes me about a week now to get over my jet lag. So second week back isn't too bad, but an absolute pleasure to be with the team. I know quite often we're asked about investor trips out to see facilities. It's probably just pushing the envelope, but it's an amazing amazing facility I was there a couple of weeks ago. Group Technical Director had the first occasion to be there, and it was busy. I walk around the facility, I've seen it now four or five times. Get a sense of the business and it was really busy. And the product the product breadth and the way we service that Australian market is very exciting. So very reassuring for us. There's only so much you can do in due diligence before you get inside. You write the check, there is a bit of a leap of faith. But one that we have complete confidence in. So very, very pleased. About FanTec. So look, that was a sort of whistle stop tour of what's going on repeating ourselves here, but good revenue growth 8.9% supported by the FanTec acquisition. Of course, we get more support from the Fantaq acquisition in half two.

This was two months out of six, good organic growth at 4%, Andy talked about the 2.5% to December. But look, we've had a good a good momentum over the last couple of months. And certainly, February is just the first month of half two. Has continued that trend. Fantaq acquisition we're super excited about, but that's not that's not the end. We talk to potential suitors. We are serial serial acquirers. That's what we do. We will continue to acquire We're continuing to cultivate other opportunities. And our ambition is exactly the same as it was prior to the FanTec opportunity. Andy's talked about the headroom that we have to deploy so excited about that. And look, good momentum. We're ahead of consensus. I'm pleased to be sort of upgrading our view for the full year. With a high degree of confidence. So that's the presentation really. I think we're absolutely on the half hour almost. So we've we've managed to achieve our bit. So over to you guys now for questions. We'll go with Tanya first, sorry. Good morning.

Tanya from RBC. Just a couple of questions. I guess start with FanTec. Margins were were better than think about this as an already very, very well run, well executing, strong margin business that hopefully we can to. So like I mentioned on the slide, there is going to be some product opportunity more about the residential piece than the commercial piece. So on the commercial piece, we're not saying that we can bring products to the commercial offering. No. We might be able to help with some of the cost pieces on the procurement side of things. But I think I think the residential, there is probably both product sharing opportunity and a procurement opportunity, although again, they are buying generally pretty well. And on the commercial, maybe it's more on the costing side of things. So I think really there, it's it's thinking about the things that we think about in all of the existing businesses already. It's less about going, oh, wow, there's a really obvious 50% cost out that we can do on component A or component B. That's what we get on some of the smaller acquisitions. I think that's not the case here, but there is definitely opportunities and more to the point an agenda as there is with everybody to care on improving.

You used the word restructuring. I wouldn't use the word restructuring, but I think what there is is probably facility and footprint opportunities. And it's both way opportunities because one of the beauties of fintech is it's got this complete coverage across what is a pretty large landmass in Australia. We For example, we've got we've got good presence with our pre existing Vent Air business, but it's by no means complete and comprehensive. So can our existing Ventay business benefit from being able to use some of Fantech's distribution and network capability almost certainly, yes. Over time, will there be sort of some think about a little bit what we've done in The U. K, where we've had multiple brands that have come through time over various acquisitions and then not in a big bang, not dramatic change, but progressively, we've looked at how to synergize the back off for example. So you're not changing your go to market, you're not changing your brands, but there's some back office opportunities. There'll be some of those as well. So that's sort of how we're thinking about [indiscernible] And I think on The U. K, no, I mean, it's just really, really good execution again continuing there.

It's the same things I just mentioned in terms of what we're always focused on. So are there can we continue to use our sort of procurement capability and power? Can we bring innovative new products to market and hopefully get improved and enhanced margins as those sort of start to sell through.

Commercial there may be a tiny bit of a mix effect if commercial and OEM start to get more in line with the growth levels of residential because we do typically make slight stronger margins on residential, but I wouldn't overthink that. So, no, look, we're we knew we could get to here. We're really pleased that we've got here, and we just keep on looking for those small incremental gains.

Just to add to that, it's I said about why do I feel confident are we confident about the sort of growth that we've been delivering is that we've we've had this vision for some time. We've set it up with the infrastructure. Through innovation. Our innovation is coordinated across all of the group. It's locally managed but coordinated group wide. I had the marketing directors sorry, the technical directors report the other day, and I can see every project that's running in the group and how it's running. And so what we're doing is we're plugging in more brands, more opportunities over time to scale up. And that scale is eminently helpful for us, whether it be procurement initiatives, technical innovation. We've been doing a lot of work on apps We were talking about rolling out some new products in Australia. We've got the infrastructure. We want to have the products branded locally under Fantech. We'll launch some heat recovery residential heat recovery products into the market It's a relatively easy play.

So the margin issue for us is of the work that's been going on over the last couple of years and it just it just keeps rolling forward rather than necessarily a new specifically new initiative and it's absolutely part of our DNA. So I'm very proud of the way that continues to run forward.

I think Ainsley?

Thanks. Ainsley Lammer from Investo. I think I've just got two, actually. Just an euro interest is seeing any kind of improvement, maybe the market's bottomed in Nordics, etcetera. So some of the kind of bit more color around trends on trade in there. And then the second question, just obviously EPS has grown amazingly strongly for the last ten years. The margin level where it is, is it fair to say that maybe the group's got more emphasis going forward on kind of delivering a bit bit more organic growth or tools that top end of that 5% rather than the 3% to keep that compound growth rate in earnings? And are you confident you can do that with upsell in and cross products, etcetera?

So market, Nordics has been a frustration for some time and the split is predominantly RMI, but some newbuild. So I talk about Denmark as an example. Newbuild construction, Denmark still very weak. We had lots of projects previously I was there a little while ago. The local leader was showing me all these apartments that hadn't sold. But lower interest rates are going to be helpful. And I think the good news is that Europe is seeing an interest rate rollover faster than anywhere else. So I'm not saying necessarily in the next couple of months, but I think directionally that's really helpful. And of course, lots of chatter around Germany at the moment in terms of actually taking the break off and maybe seeing a bit more activity there. We've certainly seen stronger performance, I think, through the half The Continental European business performed better. We've been able to hedge some of that weakness because Cleaner Rad has had some outstanding performance to offset. But if you look at ERI, it's an acquisition still super excited about ERI and the investments that we're making in North Macedonia to scale up. Our aluminum heat exchanger production, but that's predominantly newbuild.

And it's done quite well in spite of the fact that newbuild projects have been lower. So you're cautiously optimistic, I would say. And certainly feels as if that we've probably come off the bottom there. And it's been a couple of difficult years. The EPS point, and you're absolutely right. One thing that's quite interesting is we've actually delivered 4% organic growth on average since we listed now for Assuming we only deliver 4% for this year, it will be 4% in eleven years. And I know it's the Holy Grail, And of course, we want to push harder on it. But I think the recipe to that continuing 12% Andy could take you through it in more detail, but actually if all we do is generate good cash over the next twelve months, and pay down debt and have lower interest, That's a tailwind to EPS. So we've got quite a bit in our back pocket as it were. That doesn't mean we won't do more M and A or we're not focusing on more M and A. We've just got that optionality. Pay down debt, And in actual fact, the EPS growth is probably harder now than it was when we first listed because the interest costs are higher.

Our interest costs, I remember one of our banking arrangements, actually had a floor on the interest rate so that it couldn't go negative. But that was the sort of period we were in and money was much cheaper. And in spite of that, we were still delivering 12%. We're now at a higher interest rate. But of course, we've got that debt [indiscernible] We're generating cash really well. We'll continue to I mean, the track record I don't think there's a year in we listed that we've been under 90%. It was an 89% year one year.

I think the track record and of course that gives the board a high degree of confidence if we're proposing new acquisitions and maybe pushing the debt level slightly higher than 1.5 times. So yes, I think the one point that's obvious here in continuing to compound the EPS is we're going to need to do more or bigger deals. And it's quite helpful that we've just done our biggest deal [indiscernible] But that's going to be the challenge. But I just think it's a component of one third organic, two thirds inorganic. Still. And if the organic can go a little bit faster, that would be helpful. But back to that hopefully, conservative over time, 3% to 5% range. [indiscernible] [indiscernible] David Farrell from Jefferies. Just following up on that point, Obviously, from an M and A perspective, you've got a dominant position in The U. K. And Australia now in residential. Is the increased focus on commercial a fact that actually if you want to grow it the 10% top line growth, you actually have to grow either more in European Residential and now giving yourself the option to grow in the commercial market where you're don't have such high market shares?

Yes. I said at the beginning, just having more optionality, but not losing our focus. It's so important I am have been and completely aligned with the Board. We want to be a [indiscernible] and focus on our knitting because there's no point bringing stuff into the group that we then can't improve. We've got a higher bar in terms of return on invested capital. And if we can't improve things, then why do we believe that we're the right next owner for an opportunity? But you're right. In U. K, we are underweight in commercial. I think there's an organic play. There's an opportunity to do better there. But if the right opportunity arises in The U. K. For commercial, we'll avail ourselves of that. And the nice thing is we've got to slot it into an infrastructure that works really well. Credit to the way our U. K. Finance team have consolidated all of the sort of back office and that works really well. So bringing in other brands would be complementary. I think that interesting one in Australia because probably could do more in the resi space. I think we're probably more dominant in the commercial space.

So the resi might still have [indiscernible] we are still materially underweight in Germany, in France, not in Spain, not So yes, love to do more in Europe. And look, over time, I think it's early days, yes, but just maybe thinking about other geographic areas over time. But look, at the moment, we're still saw a relatively small market share. And there's still plenty to go after. And having that commercial demonstrating that we can add a lot of value through a big commercial Volution, I think gives more confidence to do more in the future.

Thanks. A follow-up question for Andy. Just on inventories, obviously, managed to release some cash there again in the first half of this year. How much is there left to go on inventories? Or is that pretty much it?

Yes. I mean, there wasn't I mean, there was a nice reduction in the first half, but it wasn't dramatic. It was about 1,000,000 or so organically if we strip out the acquisition piece. So there are parts of our business still where we think that people have got a little bit too much. But it's not profound or it's not profound to the level at which we're going to have much focus on it because I think the problem is if you overstress that as an indicator, cutting down the inventories that are easier to cut, which tends to be the stuff that you sell more of. And that's the last thing we want to do. So it's a careful balance. Are there bits we could still do a little bit better on definitely? Fantech carries quite a large inventory, which is, again, partly a function of geography. Because long supply chain to get to Australasia, same as our existing businesses there. But probably they could be a little bit tighter on it too. So I think we'll just carry on looking for small optimizations, but it's not going to be I think we said two, three years ago when we had the big inventory put in, we said, look, we can probably nudge it down period by period, but we're not going to crash it down because that could have an unintended consequence.

Over here. I think Rob has and then Charlie, I think Sorry, Charlie.

All right. Thank you very much. So yes, Rob Chunty from Berenberg. Thanks for the presentation. Just three questions. So two on Germany and then one on M and A. So in Germany, could you just kind of comment a bit on how much is market versus focus? I think was there an internal management change in the German Division? Has That Had An Impact? Secondly, Also In Germany, obviously, this kind of relatively early stages of a recovery there. Can you just comment on I guess, the production channels that are moving first and are working? Kind of leading that recovery. And then thirdly, obviously lots of progress on M and A. Have you or would you ever consider The U. S. As a geography to go into in any material way? Thank you.

Okay. I mean, Germany, we are one of the leading providers of what we call decentralized seat recovery with a route that supplies direct to contractors and is specified. There wasn't an internal change with local management, but it's a part of the regional structure now. So [indiscernible] we hired to look after Klimarad, that we now own 100% of runs a larger region that includes Germany. And I think that's evidently sensible because the Clean Rad proposition is decentralized heat recovery and we think there's cross selling opportunities into Germany and vice versa. We had intentionally pivoted a little bit more towards RMI. Over the last couple of years because of the challenges in newbuilds. So I think those that pivoting towards RMI some new product Volution, quite detailed now, but we brought a new exhaust fan to market about a year ago. We brought some new sound insulation products. And that's really important. If you're retrofitting heat recovery in areas that are in a city close to a railway station, noise ingress. That was a gap in the product portfolio. So I think some good tactical plays I know we're further professionalizing our approach to our agents. So I think all of that has been helped early more recent success in Germany is as a result of self help.

And maybe the market gets a little bit more helpful for us next. I would say more generally, the market is still tough. New build construction is still very low. And typically, as we talk about in almost every country in Europe now, there is this housing shortfall and they do need to do need to build more homes. So I think that could be helpful. And I can sort of talk about this next question on M and A. I mean, look, we still we don't want to lose focus on the markets that we're operating in. Clearly, there is a big North American market. And we've started to do a little bit of sort of early investigatory work about the opportunity I think there are some niche plays there around heat recovery ventilation that could grow in The U. S. Or certainly in Canada and so forth. And so it just makes sense. If you think medium to long term, then if we carry on growing at 12% compounding, then I think that doubles the size of the business every six or seven years.

At some point, we're going to have both the firepower and maybe the requirement to look at other geographic areas in order to support our ongoing growth ambition. So yes, just sort of tentatively but not it's not we're not expecting to turn up with the next acquisition between North America but would be remiss not to sort of think about how that fits in the bigger picture over time.

Charlie Campbell at Stifel. I've got two actually. Just to sort of pursue the commercial theme a bit more on the M and A. Presumably that's kind of margin dilutive We've seen that in the past. Should we therefore think about the 20% operating margin target is kind of a floor, therefore, as commercial kind of picks up that wouldn't want to see it much below that. Does that also mean kind of we we should think about kind of the M and A spend accelerating? Is this presumably more options in that space? And then the second question was about indoor air quality. Obviously, a lot of the regulation changes to now seem to be about energy efficient and also more. And not so much about indoor air quality. Just wondering if that might change whether that maybe means more kind of monitoring and that kind of thing in the group? [indiscernible] So commercial, Charlie. So is it margin dilutive? I mean probably more commercial businesses will be lower than residential businesses, I agree. We've always used the word niche, and as we said, FanTech is perhaps not a niche. But what we have also said is the really big industrial low margin massive bits of kit, air handling, that's not going to be that's not our bag and it's never going to be our bag.

Why was fintech really, really appealing aside from its size and its performance, but actually it's got really good fundamental financial characteristics. Had that been an 810% margin business with no obvious prospect of it moving forward, it probably wouldn't have been of interest for us. So I think they might be slightly margin dilutive, but we would not be likely to pursue something that was materially lower than the group margin without a route to improve it. And I think the route to improve tends to be easier in residential. Because there is more product synergy. The products are smaller. You can move them around more. Procurement synergies are more obvious. As we said to you earlier, the question the cross selling type opportunities on Front Tech Commercial are going to be limited. So had that if it needed a massive gap to make up, it would have been less attractive. Attractive. So there might be a small amount of dilution if more commercial came in, but I think I wouldn't overthink it because we won't pursue things that are materially lower that can't improve. 20% is a floor. Language, isn't it? Is it a flaw? Is it a target?

I mean, we've always said why we're not going to up the target. So if that means it's a floor, then happy for you to use that language. We just carry on looking for the routes to improve both the existing businesses and newly acquired ones. Will M and A accelerate? Well, hopefully, just by dint of, if you if you were to carry on drawing the graphs and go 12% per year, you're throwing off more cash. Therefore you've got more to spend. Wouldn't say it's we are delighted that even after doing something which is materially bigger than anything we've done before, we still look at the balance sheet now and go, if the right thing was there tomorrow, we'd happily go ahead and execute it. So look, I think the opportunity is there. We will have to do more in total pound notes to carry on supporting that growth. And we think the opportunities there too.

Great question on regulations and energy efficiency and driving that has been supportive. But the indoor air quality awareness, and I've been in this industry now for seventeen years. I joined in 02/2008, and we talk about indoor air quality in a way that we never never did previously. And some of that is, for example, in The U. K, we're benefiting in residential newbuild from cooling. [indiscernible] The building regulations, overheating risks. And we've got a very, very good cooling arrangement. I saw them kitting it the other day in the factory, and I looked at the component parts and thought, this is a strength of ours because there were bits coming from Belgium and bits coming from the net and put into a box and providing a cooling solution. I think that's just the strength of our product portfolio and how we exploit the opportunity we take solutions to our customers. Indoor air quality mold and condensation, big program on Panorama a few weeks back. It's still in a bad way. It is an impact on your health. So I think this health issue is gaining traction. But I've said this throughout, we just have this gentle tailwind that every year gets a little bit stronger.

And it's not boom bust. And I don't want it to be. All of a sudden we had a whole raft of regulatory changes that went for stellar growth over a couple of years, we'd be inevitably coming back later I just do not see anywhere in any jurisdiction where regulations become less helpful. They just become more helpful over time with more of an emphasis on indoor air quality and monitoring and so forth. So I talked about apps, and that's becoming important because consumers do want to see or visualize what's happening. [indiscernible] [indiscernible] Deutsche Nimus. Two for me. First of all, just trying to get a sense of first of underlying market recovery potential that you have, because obviously you've grown nicely, but markets have been challenging. Should I think about the one third that's housebuilding will just recover you get your outperformance on top of that? The two thirds RMI, I suppose you've had like social housing structure [indiscernible] And I think you get a similar question to this every time, but given The U. K. Margin on ramping up, are you seeing anything in terms of competitive backdrop and change? Because you obviously got a really high margin in the pretty low Black Capital white base.

So you think that would maybe attract some new people into the industry? Yes.

That's my 2¢.

Yes. Good question. The way we look at our margin is, our margin isn't because we're selling at a higher price than everyone else. I guess what I'm arguing is we're executing to be more effective. In actual fact, we've brought some very competitive solutions to housebuilders because we know that they demand competitive solutions to solve their problems. But earning decent margins off the back of it, but satisfying the customers' needs not leaving ourselves unduly open to attack from existing ore new competition. I think the competitive landscape we talk about The U. K. Is the same brands in the same sectors doing a better or worse job as we go along. And of course, tactically, we're competing with them all the time. New entrant wise, I think the barriers are quite high. For us and for others. So I don't see I'm not going to go into explicit detail, but I could. I look at the competitive landscape in The U. K, there are fewer competitors, but still very strong ones. Ones that we admire and we respect greatly. And this is the sort of mantra that I demand internally is that we have to be at our best.

Customer service has to be excellent. Quality has to be excellent. Innovation and closeness to regulations. And I think we've got some advantages there just in terms of our association with the trade body in The U. K, our insights about REGs and also the read across. Are able to look at what's happening trends. We start with the team in Australia talking about what's happening in different markets. And we have a very, very good sharing The Business Development Director, Lee Nurse, he's got double the experience in this industry that I have, and I'm catching up. But the way we share this knowledge about tactically what we do Volution competition is there. The space is attractive. We take it very seriously. I mean, on the margin piece, sorry, on the wider market piece, absolutely right. Residential newbuild volumes are not great, although some of the noises from housebuilders are definitely better. And government's trying. And if the regulatory framework improves, and we get actual cost of mortgages come, then maybe, maybe there is a bit of a recovery coming later in that sector, and we would absolutely benefit from that. And it's been our fastest growing area already, so that would be most welcome.

Social housing, refurbishment, still an awful lot of work to do. I mean, I'm nervous about our ABS Law that goes live in October. This is a twenty four hour remedial requirement to distressed properties. I mean social housing landlords are already struggling to keep up, and that's only going to flick the switch and make it harder. But we're there to support them. And I think we've got some great solutions that are doing a really good job there. And the private RMI demand isn't particularly strong. It's cost of living and it's not it's not particularly great. What we try to do is upsell. I've always said this, ventilation in your home doesn't have to be noisy. We can help you out. It can be more silent. It can be more energy It can be better controlled. And the premium that we charge for the product is relatively small. Compared to the install cost. Almost not noticeable as part of your install. So that's the self help piece and how do we keep going. As you quite rightly say, Christian, the markets are they're okay. But they're not easy. They're definitely not easy. Toby? We're going to stop on the half hour.

So we do but we've got time, sorry.

Can I bring it back to U? K. Margins, please?

Eye catching number gross margin improved by two sixty basis points from a decent level already, which is extraordinarily good. Can you just give us a bit more insight behind that? Please? So obvious place to go is lower raw material costs, interested that respect. How much the recycling content [indiscernible] contributing. To that. I'd also be interested in sort of vitality index, if you like, for The U. K, if that's a number track, whether that's a material contributor to the improvement also? $160,000,000 wasn't it?

Yes. 160. I'm sorry. The gross amount, yes, sorry.

I think in terms of the gross margins, operating margins, [indiscernible] you talk about raw material costs, and I'd say product cost is super, super important to us, but don't think about it as some sort of tracking of commodities that just ebb and flow. It's absolutely through a procurement driven strategy. Engineering and procurement driven strategy, which to say, if we're bringing a new product in, setting a really clear cost to Ronnie's point about it's not that we're selling for a lot more than anybody else. We're saying if we're going to develop that new product, this is the cost that it's going to come to market at. And if our teams bring it forward and it's not hit that cost, they've got to carry on working till it hits that cost. It might mean it takes a few months longer to get there, but that's better in the long run. So really being really, really diligent on the engineering and the design, not putting in anything putting in the right functionality and the right features, but not putting in stuff that effectively the customer is not paying for. That costs money. Looking at how well we can source things and of course, hopefully that sourcing opportunity only gets bigger as the group gets bigger and the aggregation of spend gets bigger and we can sort of play that size piece.

Going back around on pre existing products and seeing if we can improve their cost through engineering and redesign and tweaking and changing of supplier or component input without changing the functionality and the improvement of it. You [indiscernible] We don't track or follow that. We believe in bringing good innovation to the market at the appropriate pace. It's not a market that demands lots and lots of change all the time. Recycled is helpful. Absolutely. So recycled plastic is cheaper than virgin, and it's also not got the volatility of virgin. So that's helpful. But I think it's a lot of small things done very well rather than one massive lever that sort of changes it dramatically, which hopefully also means that it's more sustainable because it's not something that then flips back the other OEM was a drag in the first half of last year as well. We've obviously consolidated two facilities into one. But as Andy says, we're it won't come as any surprise to you that we track all of these initiatives in intimate detail. I said it's part of our DNA. And when I say our, I mean the the wider organization, we've got a strong U. K. Management team that are holding themselves to account And the you can see it's not price.

We've talked about our price improvement over time. It's been relatively relatively low. We have got some price increases going in now because we've got some inflationary headwinds around [indiscernible] And facilities costs. One of the things I've noticed we leased quite a few of our properties in the Southeast Of England and property lease costs have gone up. Substantially, but that's already largely included in our numbers. It's just little and often that desire to seek out and be as good as we can be. Okay. Brilliant. Do we have any no questions on Lockbox?

That's perfect timing. Well, look, thank you very much for your attention. We were really delighted with our first half year results. We think we've got good momentum and look forward to seeing of you in a bit more detail during the course of the next week or so. Thank you.