Good morning, and welcome to those of you in the room, and welcome to those of you joining online. Thank you for taking your time to join us. I hope you're all keeping safe and well. My name's Iain Percival. I'm the Chief Executive Officer of Trifast. 2
Yes, and I'm Kate Ferguson, and I'm the CFO.
This morning we will be talking you through the first half-year results of our FY 2026. The agenda for today looks like this. I will be taking a few minutes to walk us through the highlights from the first half-year, and also just a teaser of the strategic progress that we are making. Kate will then come up and talk us through the details of our financial performance, and then I will come back and add a bit more color to that strategy execution, and of course talk about the outlook for the full year. Let us start with the highlights. It has been a very challenging macroeconomic environment thrown at us in this first half-year.
Yet despite that, I'm really proud and pleased of the performance that we've delivered as a team, improving our gross margins by 150 basis points and really driving EBIT margin on an FX-adjusted basis by 20 basis points. If we exclude the extraordinary impact of FX in this first half-year, actually our underlying margins are at 7.2%. That is significant improvement as we work our way towards that medium-term goal of 10% or better. We've seen equally from the execution of our strategy into strong growth sectors, really good strong growth in smart infrastructure, double-digit growth again for the second year running, and I'll come back and add a bit more color to smart infrastructure later. Also medical equipment, another longer-term growth sector where we've seen good above-market growth in this first half-year. Some really good execution of the focused growth part of our strategy.
We've been excellent in managing those things that we can control, whether it's operational costs or organizational costs, and making sure we continue whilst doing that to invest in the future and the technology that the business needs to be able to sustain long-term accretive performance. Finally, I think we're really pleased with the disciplined approach that we've taken to manage working capital in a challenged environment. Great to see that we maintain a really strong balance sheet with our leverage ratio below one and sustained now for a significant period of time below one. Given the, you know, given the macroeconomic environment, the challenges we've faced into, I think that's a really strong set and a resilient set of results and performance.
That leads us to declare that the outlook remains unchanged in terms of the guidance that we've set for underlying earnings, and importantly that we maintain our trajectory towards that medium-term ambition of double-digit margins. I said I would just give a little bit of a teaser before handing over to Kate on strategic execution. Those of you familiar with our story will remember the bridge that we laid out on the left-hand side showing how we expected last year the strategy to evolve over the medium term and through the four strategic initiatives of margin management, focused growth, organisational efficiency, and organisational effectiveness enable us to deliver that double-digit margin.
What you can see on the right-hand side is how the real world has transpired since we launched that strategy, and clearly the impact of those headwinds that we've been facing into, and in particular, you know, this year with the Liberation Day tariffs, ongoing weaker industrial PMI, and of course not to mention some of the auto, the broader auto supply chain, and even in this country specific auto supply chain disruption we've seen with cyber attacks and so on. Despite that, what you can see is the team has delivered strongly again this half-year and over the period in managing the things we can control, driving those largely self-help actions to sustain improvement period after period in our underlying EBIT margin.
I'll come back and give a bit more color on how we've been doing that later, but for now let me hand you over to Kate to walk us through the financials.
Thank you and good morning everyone. Before presenting the half-year results, let's review our revenue performance by region for the first half of FY 2026. This review is on a constant currency exchange rate basis. North America continues to be a bright spot leading our growth with particularly strong performance in smart infrastructure and medical equipment. In fact, smart infrastructure revenue in North America increased by 15% and medical equipment by 32%, reflecting our strategic focus in these areas. However, the U.K. and Ireland post significant headwinds. Our customers in this region were impacted by a cyber attack on a major OEM, production slowdown due to US tariffs, and ongoing pressures from EV transition. Policy inconsistencies also undermined demand, making this a particularly challenging region and environment. In Europe, the decline was mainly driven by the soft automotive volumes.
They were also impacted by the OEM cyber attack and also a reduction in white goods volumes. This was partly due to our strategic decision to exit low-margin business and the fact that some customers have transitioned their production to other regions. Asia also saw lower volumes primarily due to tariff uncertainty and increased competition, especially in China's EV market. In some non-core sectors, our customers' market share has been eroded, and that has driven lower production volumes as well. Overall, our regional performance reflects both the resilience of our growth markets and the impact of external disruptions, particularly in automotive and in the U.K. Now let's look at our revenue by end market, which highlights our ongoing efforts to rebalance our portfolio and reduce our reliance on automotive.
Automotive volumes were materially impacted by U.S. tariffs, the slowdown in the EV transition, and the cyber attack on the large U.K. OEM, which actually impacted more than 20 of our customers. As a result, automotive declined 12.2% to GBP 38.1 million this year. On a positive note, smart infrastructure continues to be a key growth engine for us, with revenue up 11.5% to GBP 19.4 million. This growth has been driven by strong demand for data centres and now accounts for 18% of our total revenue, up from 16% in the last half-year. Medical equipment is another area of strength, with new custom wins in medical robotics and dental equipment, and it's a significant growth area for North America. Distributors were adversely impacted by the fall in stainless steel market prices and the general economic performance as measured by PMI.
These challenges, however, were well mitigated with only a marginal decline to GBP 15.4 million. The other category, which includes white goods and negotiated exits, saw a 14.9% decline to GBP 31.4 million, reflecting the impact of tariffs and our strategic decision to exit low-margin business. It also includes some customers which were facing increased competition in their own end markets. This end market breakdown demonstrates our progress in diversifying the business and focusing on higher growth, higher margin sectors. Coming on to the revenue and EBIT bridges, this slide here highlights the impact of market contraction on revenue and also EBIT, with positive outcomes from focused growth and margin management. On the revenue bridge, you can see that the US tariff situation has created some upside as we recovered the cost of the tariffs through higher pricing and invoicing for tariff surcharges. However, this was also diluted to margin.
What stands out on the right-hand side is the foreign currency. Following Liberation Day, which was just after our FY 2025 year end, we were hit by significant weakening of the US dollar, and this affected the revaluation of some USD-denominated assets in Asia, creating unrealised FX losses. Historically, we have not adjusted for, well, adjusted our EBIT at constant currency for these unrealised FX movements, and to maintain consistency, we have not done that this year as well. However, it should be noted that the impact has been unprecedented, and it somewhat distorts our operational performance. Importantly, if it were not for those market conditions mainly created because of the tariff uncertainty, we would be reporting a materially more favorable result. However, we can only control the controllables.
While market uncertainty exists and remains, our focus is on protecting profitability through our self-help actions and positioning the business for recovery as the market stabilizes. Coming on to this bridge, here you can see the decline in revenue for U.K. and Europe on the left-hand side has resulted in positive contribution to group EBIT margin improvement on the right-hand side. This has been through margin management, efficiency improvements, and cost savings. Asia, however, is the only adverse component on the EBIT bridge, and this is because nearly half of that 1.4% you can see there is attributable to the impact of that unprecedented FX loss. If we exclude the impact of foreign exchange in both HY 2025 and HY 2026, the group's underlying EBIT margin would improve from 6.5% to 7.2% this half-year. North America's revenue included the recovery of tariff costs and strong performance in smart infrastructure.
Like U.K. and Europe, they also worked hard to improve their margins and manage overheads as reflected in their improved EBIT margins. Central cost savings were also achieved, and I'll come on to that in a little bit more detail in one of the following slides. These demonstrate the effectiveness of our margin management initiatives and our ability to drive operational improvements even in a challenging environment. We remain committed to further strengthening our margins as conditions allow, and we are confident that our disciplined approach will continue to deliver results. Now let's take a closer look at financial performance for the first half of FY 2026.
Despite the revenue decline and the dilutive impact of tariff recovery on margin in North America, we achieved a significant improvement in gross margin, which increased by 150 basis points to 28.9%, and this was the result of disciplined margin management. We also achieved savings from a strategic project to optimize inbound freight in Europe and continued benefit from the operational improvement programs that we implemented in FY 2025, including the consolidation of the National Distribution Centre in the Midlands. We also had continued savings in central driven by headcount reduction and further intervention to reduce overhead. The successful outcomes on overheads were notwithstanding inflationary pressures and also the national insurance and minimum wage increases in the U.K. Our underlying EBIT margin increased from 6% to 6.2%, and as mentioned before, you know, if we excluded the FX, it would have increased from 6.5% to 7.2%.
We also had interest reductions of around 11%, and that was thanks to lower interest rates. We also reported lower separately disclosed items. They are lower by about GBP 1 million, which further contributed to an increase in or an improvement in our profit before tax. These results show that our strategy is resilient and we can deliver margin growth even when top line conditions are tough. This slide illustrates the key movements in the underlying profit before tax, and here you can see the impact of the lower revenue volumes and the effect of the foreign currency exchange on EBIT, reflecting the challenging trading environment and the currency volatility. This has been mitigated by margin management, demonstrating the strength of our strategic execution. Lower overheads and lower interest costs supported our bottom line. Overall, self-help actions and margin management have helped protect our profitability in a difficult market.
Turning to our cash flow and our balance sheet, we continue to tightly manage leverage and liquidity, and our ROCE has improved up to 7.8% up from 6.3% last year, reflecting better capital efficiency and profitability. Operating cash flow before changes in working capital improved notwithstanding market conditions, and our net debt position remains well controlled at GBP 17.4 million. Leverage remains low at 0.9x , unchanged from last year, and our banking facility headroom remains strong at GBP 73.4 million, giving us significant financial flexibility. We had higher creditor and provision balances in the half-year 2025, and that contributed to a lower cash inflow from working capital than we reported last year. Also, combined with the revenues, our working capital as a percent of revenue has also slightly increased, which we view as temporary, and we're actively addressing through efficiency measures and tighter controls.
Not surprisingly, we've been hindered from achieving some of our inventory targets, and this is due to the lower demand in the automotive sector, which has resulted in some larger holdings of older stock. Also, the cost of the tariffs in North America has created higher inventory on our balance sheets. However, this should not be interpreted as us taking the eye off the ball as we continue to focus on improving our inventory turnover through the use of data and also initiatives such as the sale of excess and obsolete stock back to customers. Encouragingly, we reported a significant improvement in our collections of receivables compared to half-year 2025, but the progress has been slowed also by some automotive customers. This comes with credit to all of our teams, especially to our very new shared service centre team in Hungary, who have picked up processes quickly and effectively.
Finally, coming on to the net debt bridge, net debt continues to be tightly managed with strong underlying cash inflow, which included the payment of our FY 2025 bonuses. Last year, we had GBP 1.1 million in CapEx compared to GBP 3.4 million in this half-year, and the higher capital expenditure reflects our investment in digitisation projects, and these are essential for our future growth and efficiency. I'm pleased to confirm that these projects all remain on track and on budget. Lower interest costs have also supported our financial position, and tax and dividends are broadly in line with last year. Despite challenging market conditions and external disruptions, the business has demonstrated resilience through that disciplined margin management, operational improvements, and strategic focus on higher growth sectors, resulting in the improved EBIT margin.
Looking ahead, continued self-help initiatives and commitment to operational excellence position us well for revenue and margin improvement when market conditions stabilize. That is all from me, so hand back to you, Iain.
Thank you. There you go. Thank you. Perfect. Thank you. Thanks, Kate. I said I would come back and share a bit more color on some of the execution of the strategy that we have been putting in place, and of course, I will close off with the outlook. This slide shows you the examples of the activities that we are driving in each one of the four key strategic initiatives that are driving the margin enhancement of the business.
Kate and I have mentioned the progress and success that we've been driving in margin management, and remember that's about driving value-based pricing with our customers and making sure that we're getting competitive costs from the suppliers that we use. I think this is a key, for me, this is a key commercial growth engine and a fundamental change. If we think back to one of the challenges that the business faced in that post-pandemic period, it was the inability to be able to manage margins. I think what we have been building deliberately is a much more data-driven, much more professional, and much more consistent approach with training and investment in our commercial teams to be able to have professional focused discussions with customers on those areas of the portfolio where we see either low margin accounts or low margin products.
I think, again, delivering the change and creating a commercial growth engine and a capability to drive margins and maintain discipline around margins is not just something that's helping us, you know, last year and this year. It's going to be something that will sustain margin progression as we drive forward. In focused growth, really excited to announce today that we've received approval from the Saudi Arabian Ministry of Investment for Saudi Arabia, or MISA, for a focused growth project, an investment into the Kingdom of Saudi Arabia, and importantly, that's supporting significant smart infrastructure customer growth, and it's underpinned by an agreement, commercial agreement with that customer. Really exciting growth projects.
Saudi Arabia and the Middle East is a significant growth part of the world, and certainly when it comes to smart infrastructure, we see a lot of existing customers with demand for strong, capable supply chain solutions backed up by the engineering and manufacturing capabilities that TR brings, wanting TR in the region. I think it's a very exciting growth project. We're launching today. We expect to be in operation in the Kingdom sometime in the early second half of our next financial year. On top of that, we continue to make, as I said, investment in our commercial teams, also our engineering teams. That's important, especially as we pivot and put more emphasis into smart infrastructure and medical equipment, where historically the focus has very much been within TR on the auto sector.
We've been retraining, reskilling, diverting, and investing in resources to make sure that we're set up for success, again, not just in the short term, but in the long term for growth in those exciting sectors. I'll come back to smart infrastructure as a deeper dive in a minute. As Kate mentioned, you know, the financial strength that we've created, and in particular, thanks to Kate's team for the rigor over the last two years in bringing the financial strength of this business back to the shape it's in, you know, gives us the ability, should we see the opportunity for accretive, bolt-on, strategic fit acquisitions, gives us the opportunity and the flexibility to be able to do that.
Moving to operational efficiency, Kate mentioned we took a decision to create more efficient back office operations in centralizing accounts, payable accounts, receivable as a first step into our TR Hungary location. Fantastic team effort, really supported by existing teams as well as the new team in Hungary, and delivering, as you just heard from Kate, a significant contribution to the first half in terms of managing receivables in particular from customers. We also took a difficult decision to exit our historic home of Buxted Park in East Sussex, the home of TR for many, many years, but from an efficiency point of view, consolidating and reducing the cost of our footprint in the U.K. is something we continue to look at, and moving those teams into existing alternative warehouse locations in East Grinstead and in the National Distribution Centre is a good example of driving that efficiency in overhead.
You may recall that at the full year results, we talked about supply chain technology solutions and our plan to release our TR inventory management solution, or TRIM, smart bin solution, smart technology that allows real-time data to be transferred from a customer's location, point of use, back into our ERP system and creates a much more efficient logistics and supply chain solution. Delighted to say that our pilots have been installed and are going well, and we've got further implementations planned in the second half year, and that's definitely, again, a good step forward from where we started, you know, 18 months ago on supply chain technology solutions. I think a good demonstration that we're delivering that commitment on getting the best technology and value support to our customers. Finally, on operational efficiency, lots to talk about here.
In Italy, our manufacturing unit in Europe has just completed the second stage of its solar power generation, and that now, together with the green steel qualification that we have in TR Italy, makes this one of the greenest, most efficient fastener factories in Europe. Very exciting and important as we consider the forthcoming carbon border adjustment mechanism legislation, which is due to impact from January next year. We see that as a real opportunity to drive customers towards a green, sustainable, competitive European solution versus Asia sourcing. Finally, on the strategic initiatives, organisation effectiveness, again, Kate mentioned the investment that we are deliberately making in technology. We're so pleased that we connected now all of our TR locations using Office 365 technology. It means we're one interconnected TR team, very much in the spirit of the one TR culture that we're driving towards.
As Kate mentioned, we're on track with the digital investment that we're making in ERP. It is very exciting that at the beginning of December we will be going live with India and Malaysia on D365. ERP investment is connected, again, using that data, as I mentioned earlier, to help drive performance in the business. Of course, there is ongoing investment in skills and development as we seek to make sure we've got the right capabilities, not just for today, but for the future. That is color on the four strategic initiatives. I said I would talk a little bit more about what is really exciting in smart infrastructure. Again, there is double-digit growth in this sector for the second year running. If we talk about what we mean by smart infrastructure, we talk about five sub-segments that are on this slide.
Data, communication and connectivity, lighting, heating and air conditioning, fluid distribution and power distribution. I'm sure all of us can imagine, you know, how each of those individually, we can understand how each of those sub-sectors is driving growth. I think just pulling it together in something we all read about or watch each and every day is data centres. Data centres are a good example of smart infrastructure because they need all five of those sub-sectors to make a data centre. From our own analysis, you can see the growth projected in the need for data centre installation is shown on the right-hand side of the chart. More than 20% CAGR growth in demand and need for data centres. On the left-hand side, last year we installed, our research shows that we installed about 20 GW of additional data centre capacity.
Each megawatt needs 200,000 fasteners. That means last year alone, 4 billion fasteners were added to service the demand of this, the appetite for data that we all have each and every day. This is a really exciting growth engine within that world of smart infrastructure. If we were just to take a very micro lens on how much growth are we seeing in the world of data centres, that number becomes close to 50% year on year. It is a very, very exciting area of growth within a broader sector of smart infrastructure. Why is data centre such a rich vein of growth for us? This slide shows, again, on the right-hand side, just an example of some of the products that we use to service demand from customers in data centres.
Whether it is the self-clench range or the EPW screw, the patented EPW screw for sheet metal cabinetry, or whether it is the PLASTEC 3020 range, sustainable plastic fasteners for injection molding and cabling solutions, or, you know, I could go on and on, all the other ranges you see here. What we are able to bring is that supply chain solution, remove the complexity from the customer, service their needs with that supply chain solution, add value through the engineering and product expertise that we have in all of these ranges. Of course, we add competitive value in some of the complex cold form fastenings in our own manufacturing capability. It is a really exciting area, really good fit for TR's capability, just like we identified in the strategy, and we are seeing really strong growth and long may that continue.
That was a bit of a deep dive into the world of smart infrastructure and a bit of color on the strategic execution. Just to close out, I wanted to summarize with three key messages. Firstly, what we're demonstrating is a continued rigorous focus on strategic execution, irrespective of what's happening in the market. We are determined to make progress on the self-help levers, and we're demonstrating that period after period. Secondly, our expectation for FY 2026 remains as stated. We're on track. Thirdly, we're on track to deliver the medium-term margin commitment of double-digit EBIT. Before I open the floor initially for questions, let me just take a minute to say thank you to all of the TR employees worldwide who work so hard in a challenging economic environment to deliver excellent service and quality to our customers each and every day. Sincere thank you.
With that, let me close the presentation, and we will gladly take questions from the room. We have a microphone so that we can make sure not only we hear you, but people on the webcast can also hear you. After we have taken questions from the room, we will then flip to take any questions that have been submitted. Yes, Sanjay. Morning.
Sanjay Vidyarthi from Panmure Liberum. Just one for me. Since the greatest margin benefit in the first half, was there much coming from the mix effect, either of geography or kind of product category? How should we think about that if we start to see a stabilisation in some of those areas where you have seen a slowdown?
Yeah, there is certainly some benefit that comes through from mix with smart infrastructure and medical equipment being stronger margin growth, stronger margin in the mix than other sectors.
That has some impact from a product perspective as we drive more of the higher value complex products into our own manufacturing. That will also help. That is less of an impact in this first half year, but certainly is an opportunity as we look forward, again, a self-help opportunity as we look forward. Thank you. Lauren.
Thank you. Hi, a couple from me. First one, looking at the numbers, full year guidance unchanged. What needs to happen in H2 so we get to that earnings number for the full year and, I guess, specifically for the margin improvement?
Okay. Do you want to take that? Yeah. First of all, I mean, there are a number of factors between H1 delivery and H2, and they are all contributory to the enhanced EBIT that we expect to see in H2.
The first thing is we're not anticipating the same level of FX volatility and impact that we saw in H1, which, as Kate described, you know, was significant and, frankly, we think unprecedented on the back of Liberation Day tariffs. That's one of the building blocks. The second building block is we've obviously been working, again, on pricing and sourcing benefits. We expect, again, more of that to come flow through in the second half year as negotiations have closed out in the first half, both on the cost side and on the customer pricing side. As Kate also mentioned, we've taken some tough decisions, but some necessary decisions on managing costs. Again, some of that operational and organizational efficiency benefit will be H2 weighted given the timing of implementation. I mean, I think those are key drivers of H1 to, or H2 over H1.
I think we're being cautious when it comes to expecting any revenue-based upside, whilst there's certainly expected benefit here in the U.K. because, as we all know, the disruption in the supply chain has eased and production has restarted. We're expecting here in the U.K. to have a slightly stronger H2, but there are still challenges in North America and in Asia associated with demand and uncertainty. We're very focused on delivery based on the things we can control rather than having to rely on external market factors.
Thank you. On the M&A topic, I guess just an update on things that you're seeing in the market and this North America manufacturing continues to be sort of the focus.
Yeah, we've been actively looking at a range of opportunities in North America when it comes to installing a manufacturing or adding a manufacturing capability.
Remember, from a three-leg perspective, we want to be able to have both manufacturing distribution capability and engineering support in each of the regions that we operate in. North America does not have today the manufacturing capability, hence why we are looking at opportunities. We are not only looking at direct potential acquisition opportunities, we are also exploring other sources like joint ventures or part relationships. It does not have to be a wholly owned acquisition to achieve that positioning, but we have been active in looking at a number of longlist candidates and identifying shortlist potentials. It is not only about manufacturing and it is not only about North America. It is also looking more broadly into growth markets.
Obviously, we made the decision on Saudi Arabia ourselves to go ourselves, but we're looking at other areas where we, other markets geography-wise and where potential acquisition targets would help accelerate the execution of our strategy, particularly in smart infrastructure and medical. Of course, being disciplined in terms of what we're prepared to pay and the multiples, and also making sure that it's accretive to margin. You know, we're being disciplined in our approach. There's plenty for us to focus on internally and we'll continue to do that. We're cognizant that now is also an, there are opportunities in the market and will be over this midterm for acquisition growth. Thank you. Tom.
Dominic King from Zeus. Just a brief one. Could we go through Asia in a little bit more detail, taking on board what you said about the currencies, etc.?
I'm sure it's been very tough on that. Is there also a mix aspect, automotive exposure, just a little bit more flavor on that, if that's all right?
Yep. I think looking at Asia's EBIT performance, obviously most of that was impacted by the FX unrealized losses reported there. Also, you know, there was a decline in volumes as well, again, mainly automotive. That has kind of impacted them. I feel that their ability to absorb some of the fixed costs is a challenge for us. That is certainly something that we'll be looking at in the next quarter and in FY 2026. How to improve our efficiency in Asia, I think, is a key objective for us. Probably the next area for, you know, some more transformation. Is that fair?
Yeah. I mean, I think that's absolutely right, Kate.
You know, let's keep in mind that Asia is where we have the bulk of our manufacturing. When you have a volume impact, my experience tells me that it's less easy to adjust your fixed cost base when it's a more manufactured, installed base than when you've got a distribution supply chain. As Kate says, you know, the team there supported by us is all over that in the short term, but long term we look at Asia. I think increasingly, frankly, the direction of travel is we want to drive Asia for Asia. You may remember just over a year ago we talked about the investment we've made in China because China for China.
But in the same way, we want to reduce the exposure for the group of having Asia supporting manufactured products into the other region and really use Asia for Asia market growth. Thank you. Any other questions, Kate? If not, then Danielle, shall we go to questions that have come in over the webcast?
Thank you. So, we have a few from David O'Brien at Equity Development. First couple for Kate, perhaps. So, you mentioned that you expect to improve cash collection during H2. Where do you expect the level of debtor days to shift to, and is this position sustainable?
Yeah. I mean, our debtor days are still way too high. We're over 80 days, and that's something Iain and I inherited when we came on board. We can certainly improve on that, and we are improving on it.
We've got significant improvement that we can make on that as the answer. We'll get to sub 80, I assume, by the end of this full year, and then we've got a lot more to go at.
Thank you. What proportion of the inventory is considered obsolete?
At the moment, our provisions are probably around about 10%. That's a high provision. We believe it's a high provision, and it's something we'll be looking at in H2 as well, just to make sure that, you know, we've got the right methodology in place so we're not just continually having stock adjustments every month applying our policy. We do believe that's high, and, you know, it's probably not a true reflection of the stock that we could sell.
Thank you. Now, perhaps Iain, some for you.
What was the monthly exit run rate of sales in H1, and has this trend continued into early H2? How does the run rate differ from Q1?
I think what we can say is Q1 was impacted, I would say, abnormally by the Liberation Day tariffs. I'll just give a couple of examples. In North America, we saw, not just in auto, actually across all customers, we saw not through all of the first quarter, but certainly into late April and May, customers adjusting their demand forecasts as they, frankly, as they scrabbled to work out how to manage the impact of Liberation Day tariffs. Some of those demand forecast changes were up to 20%-25%. Quite dramatic in those first weeks.
However, quickly rebalanced, and obviously, as Kate showed you on the revenue bridge, North America rebounded quite well, actually, during Q2 and had a good strong Q2. We saw that in North America. We saw that run rate continue into the start of Q3. I think as we're heading towards Thanksgiving and Christmas shutdowns, I think we are hearing more noises again from the auto industry that programs are moving around as they decide to curtail EV and hybrid programs and go back to ICE programs. I don't think it's a stable platform, and that's why I said that we're not reliant on, we're not placing any bets on revenue being our friend in H2 to deliver the margin.
Just another example here in the U.K., put the OEM cyber incident to one side for a minute, which has definitely been a significant impact in the U.K. auto industry and well publicized. We also saw that as an initial shock, just simply the increase in tariffs for export vehicles into the US, we saw several of our U.K. customer supply chains take pretty dramatic action and, again, cuts of up to 30%. In one particular case, almost 100% stop for almost five months. That has recovered. Again, the automotive supply chain has sort of bounced back from those challenges, and I think we expect here in the U.K. a stronger auto, famous last words, or stronger auto performance in H2 than we saw in H1.
I think it's a mixed picture because if I take Asia, we're seeing also in parts of our Asia business, mainly, as Kate said, that have exposure to auto, we're seeing, again, some of the challenge around Chinese EV impacting local market and therefore demand and forecast shift. It's a pretty mixed picture. I wouldn't say it's easy to say the run rate from, you know, second quarter is going to be consistent, but I think over the H1, H2 period, we can be reasonably comfortable with the outlook on revenue. As I say, our focus is irrespective of that, making sure that we're controlling what we can to drive the margin enhancement and EBIT improvement that we've committed to.
Thanks, Iain.
Considering the scale of the medical-related business representing circa 1% of revenues in H1, is it sensible to anticipate an acquisition in this area at some stage? What growth rate is this market currently displaying?
The growth rate is mid to upper single digits in medical equipment. And, you know, one can take quite a narrow view, and again, we all read different examples, don't we, about what's happening in the healthcare industry. If you take medical equipment and life sciences more broadly, I think mid to upper single digit growth rates, CAGR growth rates, is not an unreasonable expectation. Remember also that in any of these sectors, you know, our market share is tiny. We have opportunity in all of these market sectors to drive growth by executing on our value proposition.
You know, I think we're demonstrating that in H1, both in smart infrastructure and in medical. As I mentioned, when it comes to acquisitions, if there was an opportunity that we saw that fits all the criteria and gives us an accelerated position in either smart infrastructure and/or medical equipment, then for sure that makes that an attractive option.
Thanks. Finally, just as a follow-up from the smart infrastructure deep dive, what is your five-year target for smart infrastructure as a proportion of revenues?
Yeah. I mean, I think what we've said is we want to see a balanced portfolio. At the moment, we're still weighted heavily towards auto. I think with the growth rate and the focus that we're putting into smart infrastructure, it's not an unreasonable expectation to see that grow.
You know, 30%-ish of the portfolio is not an unreasonable expectation over the longer term, I think, for that sector. Again, back to Sanjay's point, that should be also mixed accretive. I think that's the ambition. I think even in medical equipment, whilst we've always said that's a longer-term lead time to grow into, just simply because of the regulatory environment and the lead times to bring new equipment to market, you know, clearly we're not satisfied with seeing a sector that's in our focus at 1%. We want to definitely see that accelerating growth. It will happen, but it needs to be taken into account based on the lead times of new business wins.
Yeah, I mean, I think this is fundamentally the strategy was always about creating a much more balanced portfolio and to reduce the exposure that the business had and has still into the auto sector.
Thanks, Iain. There appears to be nothing further online, so I'll hand back to you for closing, Iain.
Okay. Thank you, everybody who dialed in to the webcast. Thank you to those of you in the room for braving the cold weather here in London to be with us. Thank you very much for your time. Again, maybe just as closing comments, leave you with the three key messages. What we've demonstrated today is, despite a tough macroeconomic environment, we are executing the strategy that we laid out. We're delivering on the commitment, period over period, to improve margins in this business and maintaining discipline on a strong, healthy balance sheet.
Secondly, we've reconfirmed our underlying expectations for this financial year, and we're on track to deliver that. We've explained how we see the bridge to get there. Thirdly, and for us, most importantly, the North Star is we're committed and we're on track to deliver the double-digit margins that we set out strategically to deliver this business back to. Thank you very much for your time and attention. For those of you who joined us online, thank you, and have a safe journey home.