Great to see everyone, especially being a Friday. That was an interesting thought on our part, how many would turn up? But look, we're really delighted to have you here this morning. This is our half year results update, and in actual fact, standard format, we'll go through a bit of an overview, and we'll take you through the financial review. I'll come back and do a business review on the three geographic areas. Then we'll come back to summary and outlook, and at the end, Q&A. I know from last sessions, we've had quite a lot of in-depth questions, so we're, you know, very happy to reserve required time to do that. But overview, just to start with, I mean, strong progress in the first half of the year.
Our revenue is up, you know, 6.3%, or, you know, more sensibly, 8.7% on a constant currency basis, with organic up just under 1%. So, operational excellence and pricing discipline has underpinned, you know, a further enhancement in our margin, operating profit margin, up to 22.4%. We'll take you through a little bit more detail on how we've delivered that as we go through. And again, strong cash generation. I say again, strong cash generation. We're not surprised about our strong cash generation. Our model dictates that we expect to have ongoing strong cash generation, but it is actually our lowest leverage since we listed at 0.7 times.
Of course, it does provide significant headroom for further acquisitions, which is, you know, a huge essential ingredient of our long-term strategy. We've made good progress against our sustainability targets, and we'll talk about those targets. They're absolutely part and parcel of what we do. That's an essential ingredient to our success in the marketplace, and we'll go through those in a little bit more detail. I'm particularly excited about a couple of things we've done in respect of engagement. First, group-wide engagement survey completed, so just under 2,000 employees. We carried out our first survey, very, very pleasing results, and we intend to give a lot more color on that as we go through to the full year and include in our annual report.
And also our fourth management development program launched, and this is, this is something I'm particularly pleased about. We'd planned to kick off the fourth program just before COVID. This is a program where we bring, you know, high potential leaders from across the business together. So clearly, running that program through COVID wouldn't have made any sense. But this is very important for us as we continue to grow by acquisition, as a lot of the people on this program are companies that have been acquired in the last three, four, five years. And it's essential for us that we keep strengthening that bench, and, and that we've got that sort of like-minded ambition and focus on delivering our, our ongoing strong performance.
So our strong performance in the first half of the year certainly gives the board confidence in delivering an adjusted EPS for the current financial year that's slightly ahead of consensus, and we'll take you through that, in a little bit more detail. But look, delivering on our strategy, just a reminder here, you know, our strategy is largely the same as it has been since, you know, we first came to market in 2014. Organic growth, 0.9%. I mean, our, our long-term range is between 3%-5%, so a little bit lower, but I, I, you know, I personally believe that against the wider context of the market, your organic growth is, is, is quite rarefied at, at the moment.
So we're pleased about our 0.9%, and there are some variations and so forth, and we'll take you through that detail in a moment. But let's not forget, you know, from our strong cash generation, I mean, it's not quite organic, but it's all self-financed from our own cash generation. We've grown inorganically by 7.8%, and there's three acquisitions that we made last year. Sorry, that's not correct. We made two acquisitions in the last financial year. That was, VMI in France and, i-Vent in Slovenia. And then right at the beginning of the new financial year, on the fourth of August, we acquired DVS Ruwern Systems. And look, our pipeline, I think it's fair to say that our pipeline is always full, active. Actionability and timing is the only question mark here.
We spend a lot of time courting, focusing on what comes next. Operational excellence, it's embedded, and I think if you look at the last three or four years in particular, I talk about this sort of relentless pursuit and ambition to improve everything around our business. You know, successful in the first half of the year, predominantly from a U.K. enhancement, but operating profit margin's up to 22.4%. You know, product cost reduction, enhanced mix, very good factory efficiencies, excellent levels of customer service, which I personally believe in some markets have helped us to grow share. You know, we're certainly focusing at the moment on optimizing our inventory. You remember a couple of years ago, certainly through COVID, we made a strategic decision to hold more inventory.
We put investment into that inventory, and now we're optimizing it, and we think in some areas we can actually bring inventory levels down, so that further supports our strong cash generation. Talked about sustainability. We have these three Ps: product, planet, and people. And on the product side, the important metric for us is low carbon content of revenue, and we made such strong improvement over the last few years that we actually set ourselves a new target. Originally, our target was to deliver 70% of our revenue from low carbon revenue streams by 2025. We've actually increased that now to 75% by 2026, and we delivered in the first half of the year, 70.5% of our revenue, so an improvement over the 69.4%.
Interesting dynamic here is that our heat recovery proportion of revenue actually reduced from 32% last year to 30.7%, and that's an interesting dynamic, mainly to do with U.K. residential new build, where we had strong growth in what we call continuous ventilation solutions, that are low carbon, but don't include heat recovery. And when we look at some of the revenue declines that we've had in continental Europe, they're actually in areas of heat recovery. So the mix changed a little bit there, but over the medium term, we're still confident about that direction of travel. Heat recovery, as a proportion of our overall group revenue, will continue to grow over time. And look, we're a company that is all about product solutions that help improve indoor air quality.
And I'm particularly delighted there that we recently won two awards at the CIBSE Building Performance Awards. One for our Sentinel Apex, that's a commercial heat recovery unit. I've talked about it for some years. It was quite late in coming to market, but it's fantastic. We've already won an award, and we're getting some good traction on new specifications. And also, our Diffusion brand won the Highline 270 product won an award also. So, it's all well and good us talking about a great product portfolio, but there's nothing better than third parties crediting us with awards. On the planet focus, increasing our recycled content, we're up to 77%. It's getting harder. I always said this would get harder.
We've set ourselves an extremely ambitious target of 90% of our plastics processed in our facilities from recycled sources by 2025. We've inched forward a little bit in the year, but it's becoming more difficult. You know, it is very evidently law of diminishing returns. We haven't given up on the target. I think that's an outstanding performance. If I look at our peer group in the space, if I look at other ventilation companies, it's hard to think of many that are using anywhere near the level of recycled content in their products. And that's partly to do with the fact that we're very vertically integrated, and that we injection mold our own parts and so forth, and that gives us the ability to use recycled plastic in our production. The trick for us here is to make more progress in the Nordics.
We've got an ambitious plan to increase that. In actual fact, our U.K. facilities are running at well into the 80s now. But we have to make a sort of transformation in the Nordics in order to hit the 90%. And on the people side, look, our ultimate ambition is to is we want our people to be safe. We want them to come into work, have a great time helping us provide healthy air, and go home. And we've made an improvement in our accident frequency, and also just at all levels in respective engagement, the fourth management development program, the employment engagement survey, the way in which we're communicating. And, you know, credit to our, relatively new, two years, head of group HR, Michelle Dettman, who's really helping the wider team to drive this forward.
I'm gonna hand over to Andy now on the financial review, and then I'll come back on the business review in a bit more detail.
Thanks, Ronnie. Morning, everybody, and so echoing Ronnie's thanks for you turning out on a Friday. Friday and Gold Cup week, and St. Patrick's Day, so plenty of good reasons not to be here, but, appreciate you being here. So look, our usual opening financial slide here, so just laying out this interim set of results against the last five reporting periods. Over the coming slides, we'll go into a little bit more detail on the key numbers here, and then Ronnie, you'll obviously sort of pick up the, the regional construct of the revenue. But for me, and for us as a business, I think the really pleasing thing is, A, that all of these numbers are moving in the right direction, and it's the consistency of delivery now over multiple years.
So if you look at, you know, look at the revenue growth, you look at the operating profit and, and that sort of strong margin, which we'll come on to. So as most of you recall, we set ourselves a target of being greater than or equal to 20% margin back in 2019, and, and over the last four periods, you know, nicely ahead of that in some very, very unpredictable times and environments. Earnings per share up 10.5% relative to the comparator period last year, and, you know, slightly lower than the operating profit, but of course, that's, that's a function of the, you know, the huge ratcheting up in, in finance costs due to the movement in interest rates over the period. So I think, you know, notwithstanding that, still able to deliver double-digit earnings per share growth.
And then bottom right, I guess the one metric which we're quite happy to see going in a downward rather than upward direction, being leverage, 0.7 times, pretty certain is the lowest it's been in the group's sort of reported history. And as Ronnie mentioned, you know, we have ambitions for what we can do with the headroom that creates. On the revenue side of things, you know, here we have revenue up 6.3%, or 8.7% constant currency adjusted, to GBP 172.5 million. Organic growth of just under 1%, or 0.9%. Regionally, the highlight performer, undoubtedly the U.K., and within that, U.K. residential. I'll leave Ronnie to give you some more color on that.
Europe, a more mixed picture, but actually, again, I think our message there would be against a really quite challenging backdrop. It's a solid and resilient performance with some areas of very strong performance, some areas where things have been a little bit more challenging, and a decent performance in Australasia, again, notwithstanding the market conditions. Preempting the obvious question, organic growth, splitting it between price and volume. You know, over the last couple of years, we've sort of talked to you about maybe 3, 3.5% price growth on a group basis. In this period, it's more like 2.5%. I did say that, you know, the pace of those price increases will have been normalizing over time.
So, you know, you can think of that 0.9% as being sort of roughly 2.5-2.6% price, and then a very small sort of counter on the volume. Inorganic growth there, all three of the new acquisitions contributing to this and contributing positively, and in line with how we'd have expected them to be. France, I think we've said all along, it's a slow burn there, and the growth story is really about: How can we bring new product solutions into that market? We started introducing those in this half, so we're really excited about the opening up and the expansion of the product offering to the market. But clearly, that takes time, and it's a gradual process to get that turning into revenue, but happy with where that is.
DVS in New Zealand, it's the slow season for New Zealand, whereas obviously, peak gets more towards the Southern Hemisphere winter, so we will expect that ratcheting up of activity as we get towards May, June and July. But a decent performance in the half, given, again, a, you know, an external market, which isn't super bullish and super confident at the moment. And probably of the three, the one that we've been particularly pleased with in this first half has been i-Vent in Slovenia, so a really, really strong delivery in the first half of the year.
And indeed, those of you who do go to the back of the financial statements will probably have noticed, you know, what that meant in terms of the first tranche of earn out, which actually we're in the process of paying this week, because they hit the top end of the targets there, which was, you know, always the check that we're most pleased to write as a business. Operating profit, you know, I think I've probably covered the key points here. For us, it's about the consistency of delivery, you know, if you look at that bottom left chart there.
You know, these last three or four first halves, indeed, these last three or four years, you know, have been littered with supply chain, inflation, price adjustments, and now this period, with some fairly fundamental mix shifts in the business and some areas suffering tough volume, some areas you know, delivering good volume. And within all that, we've still been able to maintain this sort of delivery nicely ahead of our targets. And on the bottom right, I think again, actually really encouraging to see that all three of the regions are, in fact, all three of the regions improved margins in the period, particularly in the U.K., and all three of them nicely ahead of this sort of target that we're looking to keep delivering.
Cash, I've already mentioned, so look, our key metric here, cash conversion, we set ourselves a 90% cash conversion target for a full year. Generally speaking, conversion will be a few percentage points higher in a half two than a half one because of the way our seasonality and working capital profile works. So I'm not promising it'll be higher than 98, but the fact that it's 98 in the first half, I think is really, really strong in the period. You know, working capital, you'll see that working capital increased ever so slightly in the period, GBP 2.5 million, but of course, that's on, you know, we've got activity growing a good bit more than that.
Just within that GBP 2.5 million, actually, inventory reduced by a similar amount—inventory reduced by about GBP 2.5 million in the period, and there was a sort of nearly close to GBP 5 million change in receivable, payable balance offsetting it, but the inventory optimization, Ronnie's already sort of touched upon. And the outcome of this is low leverage, very significant headroom, so just under GBP 100 million of available liquidity at the end of the period and continuing to generate cash as we move through into the second half. This is the new metric that we introduced for the first time at the full year results back in October, so our return on invested capital. And again, really pleased, really stable, consistent performance here.
What we said is, as we, we believe that we can continue to add in small bolt-on acquisitions, even though they are generally dilutive at the point... well, they are dilutive at the point of entry because of the investment in the, in the capital. So you'll see the, the average invested capital going up GBP 13 million in the period. That is predominantly because of bringing in DVS, plus also with the three data point averaging. You've now got two periods of the other acquisitions versus one last time around. So continuing to increase the, the acquisitions coming into the group, but still because of the delivery of margins, the delivery of the organic business, and the improvement as we get the acquisitions into the group, meaning that we can maintain, and we're confident in maintaining, these returns in the mid-twenties while carrying on investing and growing the business.
So the final slide from me, no change to the targets that we communicate and the targets that we focus on. So, you know, our revenue growth target, 10%, yes, slightly short of that in this period, but I think, you know, we don't vary our target for the market conditions, and I think probably the period we've just faced hopefully will be one of the tougher sets of cumulative market conditions that you might be trying to deliver those targets in. Ditto for organic growth. So look, we believe in relative terms, those are both strong performances. The operating margin, 22.4%, probably the highlight for us. Cash conversion, I've already touched upon, ditto ROIC, and EPS 10.5%, so slightly ahead of our 10% target. So with that, I'll pass back to Ronnie.
Okay, brilliant. Thanks, Andy. Thanks very much. Just a reminder, so three geographic areas, just having a look at where we are. We've introduced a little bit more color for you here in terms of the detail, but 41% of our group's revenue is from the U.K. as it were, U.K. and export market. But if you actually, if you take out our, OEM, about half of our OEM is exported in the U.K., you see that about 40% of our group revenue is in the U.K. geography, and then 60% is elsewhere. And of course, we expect through continuing M&A, and more likely that M&A is not in the U.K., that our group becomes more international over time. But nevertheless, the U.K. is the standout in the first half of the year. But look, a couple of statistics on here.
We are 72% versus 28 or 70/30 resi to commercial. We've, we've always said that we're more predominantly a residential ventilation business, and again, interestingly, 70/30 RMI new build. And, yeah, we, we like the RMI market. We, we know that there's greater regulations, you know, there's, there's more definite regulations around the new build space, but in RMI, as, as I'll take you through in a moment, there's some really strong tailwinds around indoor air quality awareness, refurbishment, mold and condensation problems, and so forth. And if I go into the U.K. and just talk specifically now about what happened, and I was just reminding myself about this U.K. residential performance. You know, 19% residential revenue growth in the first half of the year. We are, we are focusing on public, private refurbishment and new build inside that category.
And I know there's been a sort of request and desire to see a little bit more detail inside the residential and the split. One of the problems that we've talked about over the last couple of years is that as continuous ventilation starts to get more traction in the market, it's harder for us to differentiate whether those products are ending up, particularly in RMI, in a public or private application. So in some cases, so what we didn't want to do is to be quite granular about the public/private split when we're not as certain. You know, we have sort of guiding numbers internally, and we can talk roughly about a 60/40 split in our RMI being sort of private versus public, but it is becoming increasingly difficult to have that visibility.
But look, we grew 19% in residential, and that was off the back of a strong comp last year, and I was just reminding myself that Volution grew over 6% organically in the first half of last year. So I just wanted to remind everybody that in this sort of difficult construction phase, where organic growth has been quite rarefied, we've continued to grow throughout. You know, this is not, this is not 1% growth on weakness in the prior year. This is plus one on plus six, overall. 310 basis points of margin improvement. You know, how have we managed to put such a strong margin improvement? And indeed, it's interesting because for some time, Andy and I have had questions around why is the U.K. the outlier in respect to margins?
I think we've dealt with that now by bringing the U.K. margins up in line with the rest of the group. But look, we had, you know, exceptionally strong residential performance, delighted about what we've delivered there. We've gained share, we have market statistics and trade statistics, and we know in continuous ventilation, we've gained share. And also, I want to credit our, you know, our partners in distribution and so forth. You know, we've talked about leveraging our distribution partners, and that's worked really well, and very, very, very pleased about the performance. And growing residential new build seems counterintuitive when we think about completions and so forth. But this is the extent to which the unit value of continuous ventilation, and indeed heat recovery, is significantly higher than more traditional extract fans.
We talked about this for some time, but I think we're seeing it now. We're seeing the impact of the building regulations. I know some have talked about sort of up to 5x increase in revenue over time. We think that might happen over the long term, but certainly, we're seeing a year-on-year improvement in unit revenue. So look, that was the standout. U.K. residential was the standout, enhanced mix, increasing share, but also pleased in commercial, where we delivered 6% revenue growth, and we're underweight in commercial. You know, we don't claim to be the leading commercial ventilation player, but certainly, it's an opportunity for us, and certainly through the innovation and new products that we brought to market, it's an area where we think we can do better over time.
And again, in export, predominantly, our export market is to Ireland. Ireland is a market that has moved up the scale in terms of regulations in new build construction, and we have a strong position in the Irish market. Also, I think we've got, thankfully, quite a strong outlook with regards to house construction and the robustness of the local market. Whereas we talk about uncertainty in U.K. residential new build, or maybe less uncertainty now than we maybe had four or five months ago, it feels much more certain in Ireland, and we're moving towards... We've just introduced what we call a Passive House solution, so it's a product that's certified under the Passive House. It, it's basically a much more airtight dwelling, making good traction in Ireland.
So the shame here, of course, is that all of those areas were growing very strongly, and, and overall, in the U.K., we grew 5.6%. And if we think about our long-term target being, say, let's call it circa 5% of revenue growth, this would have been an in-line performance for the market. But of course, it would be remiss not to talk about the 41% decline we had in OEM. That wasn't a surprise to us. We flagged it. If you look back at the full year 2023, we flagged how challenging OEM has been. A couple of things happening here that have exacerbated it. We had strong new build demand for our motors across Europe.... And then we got ourselves into a situation where customers have been overstocked.
What we're seeing now is that demand from our customers is lower than the demand for their products, and as they destock, we're confident that that starts to turn around. But we've mentioned on, on the slide here a couple of things that we're doing. In our OEM activities, we have two facilities in Swindon. In actual fact, we had our board meeting, on, on site on Tuesday this week, and we announced a restructuring in September, October last year, that's now largely complete. We're closing our second facility, and by the end of this financial year, we'll have moved everything into the one facility. And in actual fact, I think we took about a GBP 400,000 cost through the income statement in half one to do with that restructure. But the OEM situation will continue to be difficult.
Our expectation as we start to move around to sort of April, May, June this year, we come up against some very weak prior year comps, and that situation will be much easier. We have, however, increased the use of the OEM proposition inside the group, and that further helps to expand operating profit margins. So 24.3% operating profit margin, you know, exceptionally strong performance in the U.K., in spite of the fact that OEM has been a drag. We move to Continental Europe, and again, this is where I like to think about the sort of diversity of the group. You know, for some years, we talked about strong Continental European performance and maybe the U.K. being left behind. Now, we're talking about strong U.K., residential performance and Continental Europe being quite difficult.
You know, we had an organic decline in the first half of the year, and it's been really quite challenging in a couple of geographies in particular. Germany is difficult, was difficult second half of last year. In the next couple of months, we start to lap those comps, so it does get easier. Certainly, I would say that the Nordics has been quite challenging, but probably a little bit easier now, and we're seeing customer destocking maybe coming to an end. But look, in spite of all of that, you know, we've delivered a 24.2%, 20 basis points improvement in operating margin. We brought 2 new acquisitions into Continental Europe since the first half of last year. That's Ventilation BMI in France and i-Vent in Slovenia.
i-Vent in Slovenia is delivering ahead of group operating profit or in line with, let's say, Continental European operating profit margins. Ventilation in France is some way behind, and that acquisition is very small in a large market. You know, we have big ambitions to grow organically in France over time. We're rolling out new products and so forth. Actually, we had a big catalog update now in March, and we've got big expectations as we look to increase our share of the French ventilation market over time. But overall, you know, we improved our operating profit by 7.4% over the prior year, but of course, largely assisted by, by the M&A. And again, the, the split 70/30 RMI, sorry, 70/30 residential, commercial, you know, 2/3 RMI, 1/3 new build.
Australasia, continuing to expand our margins, which is particularly pleasing when you consider that DVS, as Andy talked about, DVS Proven Systems we acquired in August. And because of seasonality and so forth, actually, we've had quite a lean period so far in the first six months of trading. The busy period is the mold and condensation season that we look forward to as we move into the second half of the year.
So the DVS profit contribution is far greater in half two than it is in half one, but a 7.8% improvement in Australasian revenue, a small organic growth, you know, a big improvement in operating profit, which is, of course, supported by the acquisition and the margin expansion, and a 130 basis points margin improvement in Australasia, up to sort of 23.9%. So actually, across the group now, we've got a very similar operating profit margin throughout. We are predominantly residential, as you can see here, 95% residential. Our business in Australia is almost exclusively residential. Our business in New Zealand has that commercial element, and again, very RMI versus new build focused. So that's, yeah, it's very quick go through. I'm sure, no doubt there'll be some questions in a moment.
And so the recap there, I won't read each of the bullets on the slide again. But look, I think the performance that we delivered in the first half of the year, the strong carry on the operating profit margins in each of the three local geographies, the tailwind that we will continue to get from the acquisitions in the second half of the year, has sort of given the board and that confidence to think about our full-year earnings being slightly ahead of the current consensus. And just to remind you here, this is a slide that we put together last time, you know, our clear compounding growth model.
Just to remind us that, you know, we would like to grow our revenue sort of circa 10%, including M&A, each year, and, you know, an EPS that's ahead of 10%. So in a difficult market, in the first half of the year, we're still delivering in line with our long-term metrics. You know, we still believe that there's large elements of our markets that have recovery to look forward to, certainly in Continental Europe, certainly in U.K. residential new build. So in spite of that, we're delivering, you know, in line with our long-term compounding growth model. We think the business is hugely differentiated, and one of the things I want to sort of remind everybody of is that, you know, purity is key for us.
We are fully focused on providing healthy air ventilation solutions, and that, I believe, gives us an intrinsic advantage over many of our peers... because we're staying very, very focused, and we'll continue to stay focused on that ventilation proposition. And albeit still relatively small compared to our long-term ambition, we think we're delivering scale in some of these markets now that we can leverage. And I think what you've seen is that manifests in that improvement in the operating profit margin. So that's the sort of formal proceedings and the canter through. And as I said, you know, we believe that we're slightly ahead of current consensus, and we've had a very good start to the second half, as it were.
We're only five, six weeks in, but we'd be delighted to hand open to the floor for questions. Ainsley, over to you. We've got a mic for you there, so.
Thanks. Just two questions. But as you mentioned, your operating margin targets, you're above those targets now. Some of the markets are quite weak, so how should we think about that going forward? Is there opportunity to push it further ahead, or is it more kind of, you know, market share gains giving up about that margin? Just interested in your thoughts there across the three market divisions. And then on the leverage, 0.7x, you've mentioned M&A a couple of times. I mean, what would you be comfortable pushing leverage up to? Do you look at the IFRS 16 leverage, or is it more kind of around the reported leverage 0.7?
Okay, 1, 1 each. All right. Margin, I think we've said this now, I think we've said it every time, haven't we, you? We're above the 20% target. Is there a new target? No, there's not a new target. The target remains above 20%. Look, if we... And I'll let Andy answer the leverage question in a moment, but if we made, you know, a more profound, more sizable acquisition over time, there's every likelihood it would come with a lower margin. So that would be dilutive, and I think having that more than 20% medium to long-term target is sensible. Of course, the way in which we run the business is that we strive to run the business as efficiently as possible.
So I'd like you to think that it's not-- the margin is a product of the actions that we take, not in itself the action. So we run the business very efficiently in all areas. Interesting conversation about share gains versus margin. We don't believe that being ultra price competitive, being lowest price in some of our areas, will at all increase our market share. I'd like to give you one really good example in residential new build. You know, we've got competitively priced solutions, but they're market-leading innovation that has enabled us to take share. And that innovation, of course, comes with an investment, and we believe that it's sensible that we get a return on that investment that we'll continue to make. But pricing those products more aggressively would not increase volume at all. It's pretty binary.
Either you're specified, and you've been successful. Now, that doesn't mean that on the other side, we would necessarily expect to increase prices much more than where we are. But it's not. Price isn't a vehicle or a lever, I should say, to substantially increase share or at all. I think over time, it's pleasing the margins have moved upwards. We won't set a new target, but the initiatives that we've delivered this year to underpin margin expansion are ones that we run all the time. So I like to think there's a sort of conveyor belt of initiatives that we're running all the time, and they'll continue to deliver. And as I say, it's possible our margins will move further upwards, but it's not something we necessarily are committing to.
Then just, excuse me, Andy, picking up the leverage point. So I think just to start by saying, you know, our cash generation is very, very reliable, so we've modeled it out over multiple years, and typically speaking, in a year with no acquisitions, but with a normal profile of dividends, tax, interest, operation, et cetera, et cetera, we would think of delevering sort of half a turn a year, absent acquisitions. And the acquisitions that we bring into the business, you know, we're not turnaround specialists. We're not buying distressed assets that are loss-making or needing lots and lots of investments. We're buying business that we think we can improve, but from day one, all of our acquisitions should be, stroke, will be profitable, should be, stroke, will be cash generating.
It's an asset light business, whether the ones we own or the ones we buy. So again, you don't need to pump lots and lots of cash into it. So as soon as we get something in, we will delever quickly the other side. At the moment, as you saw, we're at 0.7 times, and that was 2 months ago, and it keeps on going downward. If we, you know, so if we moved up somewhere between 1.5 and 2 times at the point of making either multiple acquisitions at the same time or one or two more significant ones, we wouldn't have any qualms about that, knowing that over the forthcoming period, it comes back quickly the other side.
Absolutely. Should we take Rob, and then we'll come back to David in a moment? Thank you.
Thanks. Hi, Robert Chantry, Berenberg. Thanks for the presentation. Three questions from me. So firstly, on, on European markets, clearly been an area of focus from investors over the past six months to a year. Could you just give us some guidance on the, the peak to trough volume change, i.e., what percentage down have volumes settled in Germany and the Nordics versus, say, 22 run rate? Secondly, i-Vent in Slovenia, I think you bought it at a very strong margin at the time, and you said you'd put some more cost in to kind of professionalize it and, and kind of bring it up to scratch. But you called it out as a, as a very good performer in, in this set of numbers, and just kind of looking for some detail why and where those margins are settled.
And then thirdly, I guess if you kind of look at the broader acquisition target and kind of the scope of what you can now achieve across Europe, how many other kind of product adjacencies are you looking at, where you can kind of potentially branch into other areas? You know, I know heat pumps market is struggling across Europe, but is there any discussion on how broad you could go under the umbrella of ventilation? Thanks.
... Okay, thank you. We're just trying to work out who's, well, I'll, I'll...
Put it right against it.
Yes, thank you very much. Volume, I mean, very interesting. So many moving parts for us in Europe, and I've talked, and maybe unfairly, I've talked about the things that have gone weakly. Now, in ClimaRad, in the Netherlands, we're growing. We're growing quite strongly. We're very pleased about the proposition. In Germany, Germany's been weak. You know, Germany, our exposure. The reason why we gave you the color on new build versus RMI is our, our decentralized heat recovery activities in Germany, that through 2021, 2022, we talked about strong revenue growth in Germany, and decentralized had started to win over against central systems in new build. And this sort of collapse of new build in, in Germany has had quite a profound impact on the business.
Also, some subsidies, if you talk to companies that trade in the German market and are supported by those subsidies, there's been a lot of concern and worry over the sort of on, off nature of subsidies and so forth. We're seeing some of that come back. But look, the volume decline in Germany, you know, from peak to trough is probably of the order of 30%-40%. And that's largely as a result of new build. We talked last time around about pivoting towards RMI, and we've had some successes there, but nevertheless, we want to be positioned in both areas because new build will come back. You know, we know that there is a structural shortage of homes, not just in the U.K., but all across Europe, and that starts to come back.
And look, I'm not gonna make any great predictions about interest rates and mortgage rates, but it does feel as if we're probably over the worst and that's something to look forward to later. In the Nordics, I would say that in the Nordics now, the situation is, you know, if we look at it, and again, we've got Norway, Sweden, Denmark, Finland. Finland's been the most weak area for us, and that's because our proposition in Finland is much more new build focused. So again, the same sort of drivers there. I would say that in Sweden and Norway, trade RMI, our position is very strong. We've seen some competitor restructuring, one competitor in particular, having a very difficult time.
But what we're not sure of is just quite how much is destocking, and of course, you could argue maybe we benefited from that stocking when it went in originally. But look, in the Nordics, my sense is that it's probably 5, 6, 7% peak to date. It's not so profound because the RMI has been more resilient. And then in places like Belgium and the Netherlands, aside from ClimaRad in the Netherlands, we're seeing sort of, you know, 5%-10% volume decline, maybe over the last couple of years. You know, ERI, Energy Recovery Industries in North Macedonia, where we manufacture aluminum heat exchangers, is again, a big new build play, and we've done very well in ERI since we acquired it. But we, we're seeing a situation at the moment where revenue's broadly constant, so it hasn't declined.
Personally, I think from what we see is that's more about gaining share because we know that our end customers are doing fewer new build projects. Then Andy's gonna do it.
Yeah, so, Robert, quite right. So when we completed the acquisition, we said, actually, this is a high-margin business, and think of something in the low thirties as a typical margin there. But I guess just to context it, why is that the case? Actually, it's very similar and very consistent with ClimaRad, with Germany, again, totally focused on that decentralized heat recovery product, which is, you know, if you were doing a price pointing, that is, sort of typically speaking, our highest price pointed product. So high margin business, and it's delivered very nicely in this first half of the year. When we talked about investing in a bit of back office infrastructure, we're really talking of, just to context it, we're talking about two or three key sort of management and organizational roles. We're not talking about big, big spend here.
So, you know, things like finance, things like a bit of HR support, you know, the sort of stuff that just helps the governance and the running of the business, and it fitting nicely into a PLC environment without sort of scuppering the ability of the sales team to go out and sell and win business, which they've done very successfully in the first half of the year. So it, it's not gonna distort that margin profile. The one thing that is interesting there, again, as we referenced it, as regards the earn-out achievement, it's a very seasonal business, so it does, its sales are very, very concentrated in the winter months. So November, December, particularly strong. January, also good.
By the time we get into the summer, things do sort of slow down a little bit.
Just one thing to add in, Ivan, there's quite a big synergy opportunity in terms of new products, and replacing some products that currently we don't have in our capability and are sourced, and that's a benefit that we look forward to delivering certainly in the next financial year, as Andy says, with the seasonality, when the volumes in this particular area go again in the first half of next year. We've got quite a nice project that we're working on. Coming onto adjacencies, I said that purity is, I think, key for us, and, you know, unashamedly, we would just want to keep focused on providing, you know, indoor air quality, primarily residential buildings, but we like commercial niches.
We don't have an objective to be a major commercial ventilation player. Well, my sense is it's a little bit more commoditized. If you look at the peers, you know, we've got some very, very high quality, you know, more commercially focused ventilation peers, but the margins intrinsically are, I think, a little bit lower. So it's residential, but important commercial areas, such as with heat recovery or system ventilation. The market is significant. We continue to focus on UK, Continental Europe, and Australasia. There's plenty of opportunity for us without veering off too far. And I've always maintained that, you know, we, we're working with somebody recently, we talked about this sort of right to play. Now, why do we have a right to play in these adjacencies?
And I think we have an absolute right to play in anything that is residential ventilation in a, in a building. You know, of course, by definition, it will be in a building, but, but the point is, I think we're supremely confident that in that residential space, we can generally do a better job and deliver better returns. And our market share on the overall ventilation opportunity is still quite small. So that's where that is, stick to our knitting, as it were, and keep very, very focused. Because I think over time, that's that's what will give us the confidence to keep delivering these, these, these levels of returns. David? Thank you.
Thanks. David Farrell from Jefferies. A couple of questions for me. Just following on the M&A angle, can you maybe help explain kind of what it is in terms of the markets that make them attractive to you? What are the characteristics of a market that say, "Yes, I want to be present in there"? Clearly, kind of Slovenia has been very attractive and good for you. You know, Southern Europe, for example, is there anything stopping you going there because of the makeup of the market? And then my second question was around kind of new products. It sounds like you got something coming in commercial you're quite excited about in the U.K., but is there anything else in the pipeline that you're rolling out that you think can help take market share?
I mean, attractive markets, Dave, simple, simple terms, if I keep it around our three geographies, UK, Continental Europe, and Australasia, there's none that we wouldn't find of interest, within reason. So look, it's not, not going to pretend that we had some super focus on targeting Slovenia, but actually, anything that's part of the European Union or starting to be adopting and thinking about European regulations, European building standards, is interesting. So Slovenia, Central Europe, Southern Europe, you're quite right. There's some really interesting, opportunities there as well. So it's more about, you know, is it the right quality of business? Is it, as Ronnie said, sort of pure? I think some...
If I think about the things that we've looked at and ruled out versus the things that we've ruled in, typically speaking, it'll be because ventilation is a part of what they do, but it's only a small part, and maybe the other parts are a distraction, or they're things that we're not quite sure what we would do with them. It's not the geography that's ruled them in or out. So I'd say, you know, if it's, if it's, if it's pure, if it's a ventilation, air quality, particularly if it's residential, but residential sort of commercial things that we like in any of our geographies, we'll take a really good look at it.
Absolutely. We've got a map that we show green and white spaces, and those white spaces are pretty much any geography in Europe that we don't have a presence in at the moment, and they're all up for grabs. You know, I'm confident that with the right, you know, the right route to market or the right proposition with our capability, we can make attractive returns in every country in Europe. It's just not as easy as we would like in terms of opening up those opportunities. I mean, some of the conversations that we've had, I mean, look, DVS is a, I know it's in New Zealand, great example. That's an acquisition that was in the...
You know, an acquisition that nobody else was ever going to do, in my opinion, but 4 or 5 years before we actioned it. And of course, we've been doing this for a long time now. So that pipeline, that courting process is well down the track. But what I can't say to you with any certainty is it's 1 month or 6 months or 12 months, but on average, 2.5 transactions a year, and we've only done 1 so far this year, and there's no guarantees that there will be any more, but hopefully. Just on products and innovation, we probably don't do ourselves justice in terms of the products and innovations. We have so many new products coming to market all the time. Interestingly, we share a marketing report with the board.
We've got our chairman here today supporting us, and if you look at the number of new products that we launch all the time, you know, I could reel off a new positive ventilation product in the U.K. that's helped us grow in social housing, a new continuous ventilation device in residential new build that's getting really good traction, the Apex product and commercial heat recovery that helped us win the CIBSE award that's starting to get more traction in schools, the new hybrid ventilation product in Breathing Buildings that was at the Morgan Sindall conference. And, you know, we've just launched a new product in Germany, a new exhaust fan with better controls.
The thing is that a lot of these products don't, in themselves, have huge revenue streams attached to them, which is actually quite nice because we don't have this sort of high level of dependence on one or two SKUs that can be attacked. It's a very wide product range that we iteratively develop. And we have a new group technical director joining us in May, a further upgrade. I think we've just grown massively over time, and we want further leadership in that place to help coordinate our engineers. But a lot of where we're successful is this sort of iterative development, and maybe it's something we should do a better job of at the full year results, just a little bit more showcasing of some of the new products that are coming to market.
Thanks.
Thank you.
Thank you. Clyde Lewis at Peel Hunt. I think I've still got four, Ronnie, if that's all right. Probably one for Andy around destocking. Obviously, you indicated that you've done some. Can you give us an idea as to how much more you think is the potential is? Commercial expansion, touched on a little bit around the M&A. Are you thinking, again, it's more acquisition-led, or is it more organic? Again, product development, I'd be interested to hear about that a little bit. Just wondering if there are any other regulatory changes that you're hearing in your various markets. You normally give us a bit of an update there, it'd be useful. And the last one was on France. Still early days with Ventilairsec, but what's been the reaction from the competitors, the bigger competitors in that market?
I'd be interested to hear what they're doing and thinking about your products.
... new entry into, into a big geography like that.
Well, thank you, Clive. You've given me the easy one, I think. So, yeah, I mean, with inventory, the word we used in the deck here was optimizing, and it was a very carefully considered word. So I think what it's trying to say is, yes, we do think there is an improvement and a reduction that's there, but we didn't wanna call it reduction. Because what we don't want... You know, what we've learned over the last few years is supply chain volatility, you know, whether it's now the Red Sea, which we've said is fine, we've got that under control, it's no problem. But if that initially hit, and you're running with super lean inventory, that's a problem.
So we've said, since we made that investment a few years ago, where we put circa GBP 12 million in, we said, we're not gonna bring that GBP 12 million out because we think the risk of doing so and the risk of what that might mean if there's further interruptions, is just too significant an impact. But what we do see is that there are certain parts of the business where either because activity's been a bit more challenged over the last period, and perhaps the ordering profile didn't sort of project that and think about that, and so people carried on ordering at levels slightly ahead of activity, or because in that initial increase, they maybe slightly overdid it. There are a few areas where we think we can just sort of take the edge off.
So as I mentioned, we reduced inventory sort of circa GBP 2.5 million in the first half of the year, which, which we think was a sensible and prudent thing to do. There's probably not a dissimilar amount that's out there, whether it comes through in this half, whether it comes through a bit in this half and a bit in the next half, that's fine. And for most people, the message is actually, you should be able to... So the businesses that can regrow their top line should be able to do it without adding inventory. So I think where it'll become more evident is percentage of revenue, percentage of activity as the activity recovers.
Great. So, commercial, tactically, in some areas, new product development in the U.K., we're underweight. There is an opportunity. It's not easy, you know, the competition is formidable in that space, but there is an opportunity to do better. I would say from an M&A perspective, not specifically are we saying, we want to be a bigger commercial player, as such, but there are some areas where we would definitely either complementary or from a virgin perspective, be active, looking at sort of a more commercial focus. But when I say commercial focus, I'm thinking about, you know, schools, offices, light commercial, not industrial ventilation. That's not, that's never going to be, I don't believe, an area for us.
So again, it's in both sides. Think about the proportion of our revenue that is commercial, then, of course, the focus is on how we can grow that quicker, organically in the future and do better. When you talk about regulatory issues, you know, Future Homes Standard is exciting. I'm more pragmatic about these sorts of things. There's not a step change coming. You know, I've heard some commentary recently that talks about a big step change. It's not gonna happen. You know, and I've heard some interesting numbers about the increase in the size of the market, but we're already seeing the benefit of it.
Our residential new build performance in half one benefited from a regulatory change that took place in June 2022, that we said would support the move to continuous ventilation. But what I like about those regulatory changes, they, they're gently underpinning, they're helpful, and they're starting to help RMI. You know, we're very focused on moving continuous ventilation solutions into refurbishment as well. And we believe through our distribution partners, we've got the biggest share of voice in the U.K. market, and we can do that, and a very wide, strong product portfolio. So those regulations are very helpful. But also indoor air quality awareness. I mean, I didn't talk at length about social housing, the social housing tailwind, the 5 million homes that are in a poor quality.
This is a multi-year issue, and the awareness around indoor air quality, mold, and condensation problems has never been as high, and it won't go away. So it's hard regulations that prescribe more energy-efficient solutions. And on the other side, the consumer awareness has been very, very helpful, and that's why residential performance in the U.K. has been strong. We're starting to see a tightening around regulations in Europe, around refurbishment, you know, the sort of Fit for 55, and over time, how we have to refurbish, you know, public buildings. We're seeing in Germany a return to providing some subsidies to do with ventilation and energy efficiency, and those regulations will continue. And I think as markets improve, you're likely to see that accelerate.
But we just think regulations are there for us, gently assisting, helping over the next 10 to 20 years. But it's not, you know, I don't want to get into heat pumps in too much detail, but you get this sort of bang, and we don't want that in our market. We're very happy with this underpinning, and it won't go away. And France, oh, I don't know specifically how our French competition feel about us. They're probably not too concerned, are they? We only have sort of circa EUR 10 million of revenue in a French residential ventilation market that's probably, you know, EUR 400 million-EUR 500 million or something. Our proposition is about taking something that's a bit more imaginative, a bit more innovative. We're a challenger. It's actually, you know, as...
It's sometimes easier to be the challenger, and we've got some really wide experiences in other markets. So what we're doing is picking the best of our mix, as it were, and putting it in our portfolio and taking it to market. I'm going to see the team in April. We're really excited about it, but it'll take time. And we've got an ambitious, driven managing director locally, but it will take time. But it's, you know, it's already ahead of where it was when we acquired it. The margins will expand. There's lots more for us to introduce into the market, and it's a big, it's a big space for us to go after, so I'm really excited about it.
... If-
We have, we may have some online views.
If we have no further questions in the room, we have a few from the webcast. You have mentioned a few of these before, but the first question comes from Gavin Laidlaw from Stockwatch UK: "The commercial revenue base got a few mentions as being small and an area for growth. As you grow commercial, will margins be lower?
Oh, no, no. No, I think that the reason we talk about niche commercial or selective commercial is that we don't want to play in the wider sort of air handling unit market, where the margins are structurally lower. I don't think we bring anything particularly special to be able to buck the trend. But no, I would say that there isn't a risk if we do expand commercial revenue over time, that we see margin dilution. Absolutely not, not a risk.
Thank you very much. The next question is from Charlie Huggins from Wealth Club: "Can you explain why private residential RMI was so strong despite very weak market conditions? Will you entertain large M&A, and if so, would you need to raise equity, and what returns would you target on larger deals?
Okay, I'll cover the first one very, very quickly. Some people talked about consumer confidence, affecting demand. Well, I'm not so sure that that's the issue. I think in the U.K., what we've seen is very worrying pictures around the impacts of mold and condensation in public housing, but also in private housing. We've gained share in private RMI. Well, not launched, we enhanced the product portfolio around what we call positive input ventilation. And I've given credit to our distributors, because our distributors had faith in our proposition and really engaged with us when we said, "This is the opportunity that's coming," and we managed to massively increase share from other competitors that sell directly, and we think that's a huge advantage of having these distributors.
So in PIV, we grew share, and I don't think the private refurbishment market, it's not so consumer related. I think if you've got a mold and condensation problem, you'll probably find the wherewithal to deal with it.
Yeah, look, and on the larger M&A deals, we haven't done them in the past, but not because we've shied away from them, just because actually it's generally the nature of the market that it's very fragmented, most of the targets are much smaller. There are some larger opportunities out there, and, you know, we have the headroom and the appetite to participate in those, as long as the pricing is correct and appropriate, and that we believe that what it can do to the group metrics and targets and group overall contribution also makes sense. Look, clearly, if I think about... Let me pick one of the targets. If you think about the ROIC target, we've always said, at the point of entry, you know, any acquisition is gonna be dilutive to a 27% return on invested capital. Yes, it is.
And so that's why our target there is sort of in the 20s, which obviously is lower than it currently is at, because that gives us hopefully the space to think about these things in a thoughtful way. But look, if something was gonna fundamentally change the financial model of the business, it probably wouldn't be the right transaction for us.
Great. And we have one final question from the webcast, from Christen Hjorth from Numis: "How far is U.K. social housing upgrading ventilation to deal with issues such as mold?
I think, sorry, how far along is that, probably, yes?
Yes.
So the worry, of course, is, you know, is this bubble in social housing refurbishment going to burst? I, you know, sadly, I mean, only recently, Michael Gove issued a further requirement on responsiveness, which I don't believe social housing are gonna deal with, but it's—I think it's within a couple of weeks of the problem being reported. You know, the stock is in a very poor state of repair. We have the most comprehensive sales team in this arena with a couple of brands that focus on it. You know, I'm close to what those teams are seeing on a daily basis. I've talked about this being a multi-year issue, and it absolutely is, and I think, you know, the risk is...
I mean, I heard a statistic the other day about the number of social housing properties that are in this hard to heat category, that won't qualify for a heat pump, you know, the state of the stock is poor. There is a recognition, there is an appetite to deal with it, and these are still relatively small numbers, of course, compared to the size of the problem. We need to think about the Social Housing Decarbonisation Fund, because we're only talking about bringing this stock up to a, you know, a decent standard, if you want to call it that. That was what the labor government brought out back 20 years ago, the Decent Homes Standard, and a lot of these properties don't meet Decent Homes.
Then, when you talk about the ambition to reach EPC C and to further improve the energy efficiency, we're miles away. We believe that decentralized heat recovery ventilation starts to go into social housing. We're the leader. I think the last trade statistics I looked at was that we had a 98% market share in decentralized heat recovery ventilation, but it's an underdeveloped market, and we're very, very focused on ensuring that that product portfolio goes into social housing. So this, this is a multi-year opportunity, and, and rightly so. You know, it needs to be dealt with. Okay.
Thank you.
Oh, that's absolutely perfect timing. We're on, we're on the hour. Any final questions from the room? Well, look, thank you very much. Great to see everybody. Hope, hope you enjoyed that. We certainly enjoyed giving you the update. Thank you. Thanks very much.