Right. Good morning, everyone. Thank you for joining us today, whether in person or online. As usual, we'll start with a presentation before moving to Q&A. If you're watching online, you can ask a written question by using the toolbar at the bottom of the webcast platform screen. Just select the question icon, and you'll be able to type it in. Okay. I'll start with the highlights and the key takeaways. Matt will then cover the financial performance, and then I'll go into more color on our trading performance by sector and the progress we've been making across the business.
Turning to the highlights, as I've said before, our focus has been on things we could control and improving our operational and cash performance while we prepare for the market recovery. That is what we've been doing. We've further improved our supply chain and operational execution while continuing to win with customers. This is against the backdrop of the unusually challenging trading that has been going on for the last couple of years across our industry. We are starting to see the start of the recovery and the end of destocking in two of our three sectors, with a solid performance in the third sector.
Overall, orders were up 31% on the prior year and up 19% on the second half of last year. We saw a book-to-bill above one times for the first time since the second half of 2022. The focus on operational performance has resulted in gross margin improvement and a further reduction in our inventory levels. The performance gives us confidence that we can return to mid-40s gross margin when the markets fully recover.
We are seeing positive signs in all three sectors, and we expect a stronger second half of 2025 after a weak first half. The precise timing of the full recovery remains difficult to predict with the broader macroeconomic concerns. On that, I'll hand over to Matt to cover our financial performance.
Okay. Thank you, Gavin. Morning, everyone. Let's just review the numbers, starting with some KPIs. I'll start with revenue. First half revenue of GBP 110.9 million was 11% lower than the prior period in constant currency as the rate of customer destocking reached a peak within the industrial technology and healthcare sectors. Encouragingly, whilst revenue slowed, order intake improved markedly. Order intake for the first half totaled GBP 112.7 million, which was up 31% on the prior period in constant currency, with progress broadly based across all three market sectors, which was particularly pleasing to see. The improvement in orders helped to drive book-to-bill above one. Whilst the markets showed encouraging signs of improvement, our focus remained unchanged, that being to serve the customer, deliver our long-term strategy, and maintain the cost and cash discipline that has served us well to date.
There is clear evidence of this discipline within the numbers, as I will highlight. Adjusted gross margin increased by 80 basis points to 41.4%, with cost reduction and supply chain efficiency improvements overcoming reduced leverage of fixed factory overheads in a lower revenue period. First half adjusted operating profit of GBP 4.8 million benefited from some additional overhead efficiency measures, but was held back by a significant currency headwind that was largely one-off in nature. We are confident that our underlying rate of profit generation as we enter the second half is greater than our first half performance. I've got a slide that explains that later. Adjusted cash conversion was once again strong at 290%, helped by a 16% reduction in inventory in the period. Net debt closed the half at GBP 57.9 million, representing leverage of 1.8x , slightly lower than our expectations at the time of the recent equity raise.
Let's take a brief look at the income statements. As I mentioned, revenue reduced by 11% in constant currency and by a further 2% due to currency movements. Gross margin increased by 80 basis points to 41.4%, and I'll explain how this was achieved later. Operating expenses of GBP 41.1 million were significantly impacted by currency movements. The dollar weakened materially towards the end of the period, reducing the value of certain dollar-denominated assets in our balance sheet, resulting in a one-off revaluation charge of GBP 2.3 million in H1 2025. This compares to a gain of GBP 0.5 million in H1 2024. The year-on-year swing in this one item therefore drove the majority of the GBP 3.1 million increase in expenses shown here. Absent the currency impact, underlying overheads increased only marginally, with targeted headcount attrition offsetting the cost of inflation. Net finance expense reduced to GBP 4 million.
Net debt at period end was just over half of what it was a year ago, as we have prioritized continued deleveraging. The half-year effective tax rate was high at 75%, but this can happen in a period of relatively low profit, as there is a greater chance of unrelieved tax losses in some jurisdictions. This should improve in the second half, with the full-year rate expected to be 30%. Further profit growth should lower the tax rate thereafter. All of this resulted in adjusted EPS of GBP 0.004. Okay, order intake was undoubtedly the highlight of the period. It increased by 31% on the prior year and 19% sequentially to GBP 112.7 million. You can see from the bottom chart that all three sectors contributed to the improvement, albeit we saw the strongest progress from the two sectors hitherto most impacted by channel destocking, namely industrial technology and healthcare.
We have not yet reached what we would consider to be normal order intake, so there's still a way to go, but growth in these sectors is an important and much anticipated step in our recovery. The progress was not only broad, but it was also sustained. Progress sustained sequentially from half to half, but also within the half from quarter to quarter in constant currency terms. Okay, so revenue slowed by 11% in constant currency to GBP 110.9 million, which we expected. The reduction was driven by customer destocking within the industrial technology and healthcare sectors, which, based on the improvement in order intake, would appear to be in its final stages.
Sales into the semi-sector, which have been less impacted by the destocking cycle, were only slightly lower than the prior period, despite that period benefiting from a significant amount of backlog clearance within our high voltage, high power business. This therefore required strong double-digit growth elsewhere in that sector, which was encouraging to see. It was also encouraging to see revenue grow by 12% from Q1 to Q2, as increased order intake began to underpin and increase our sales. Okay, so with the market showing signs of improvement, we have remained just as focused as ever on cost efficiency to accelerate the progress towards recovery. Let's start with the actions taken to improve gross margin. It is very challenging for any manufacturing business to maintain its gross margin in a period of slow sales.
Factories come with a high fixed cost base that is not easy to reduce as volumes slow. Clearly, we have seen a slowdown. Our revenue is currently around 30% lower than the peak in 2023, and yet our gross margin is essentially the same as it was then. How have we achieved this? By making it a priority to improve the efficiency and effectiveness of our supply chain in a period of slower activity. Better sourcing deals, better purchasing, reduced inventory holding costs, rationalization of fixed costs, and more low-cost country manufacturing, to name but a few ongoing initiatives. The benefits of this work in the half are shown in the top chart. There is more to come, which makes us confident that we can return our gross margins to mid-40s levels as volumes recover. Now let's cover operating costs.
Most of the major actions to reduce overheads were taken by the start of 2024, but we have taken advantage of some natural headcount attrition where appropriate to generate some additional savings to help fund wage and other inflation while recovery gains momentum, as shown in the bottom chart. I mentioned earlier that we believe our run rate of profitability as we enter the second half is greater than the first. This slide explains why. Firstly, we expect the recovery to continue and for revenue to grow, but I'm not quantifying that here. I am quantifying the beneficial impacts of two items that are wholly within our control: FX and cost savings. You heard me say earlier that the FX headwind we experienced in the first half was one-off in nature. How can I be confident of this?
It overwhelmingly relates to the revaluation of intercompany balances that we are now removing in order to reduce our FX volatility going forward. If we had removed them before H1 started, our profit would have been GBP 2.3 million higher. We have also taken further cost reduction actions recently that did not fully benefit H1. We expect the profit benefit from these actions to increase by GBP 1.6 million from H1 to H2. Most of these savings will arise within cost of sales. Taking account of these items, our pro forma H1 profit is GBP 8.7 million. Revenue growth in H2 would be in addition to this. Okay, so turning to the cash flow, we turned GBP 4.8 million of operating profit into GBP 13.9 million of operating cash. This increased the total amount of operating cash generated since our funding plan launch in late 2023 to GBP 91 million.
Over the same time period, for your information, we have delivered GBP 26 million of annualized cost savings and lowered our inventory by GBP 41 million cumulatively, far surpassing the original targets of that plan. This has significantly benefited our funding position. CapEx, including capitalized product development, totaled GBP 4.7 million net, albeit this was reduced by GBP 2.4 million of contributions from a government grant and a landlord contribution, meaning that gross CapEx was GBP 7.1 million. This included GBP 1.5 million spent on Malaysia, which is progressing well. Period end leverage was 1.8x , including a 1.2x reduction from March's share placing to improve balance sheet resilience. We have monitored and managed the U.S. tariff situation closely, and we are satisfied with progress overall. Our major tariff exposures by country are shown at the top of the slide and are as previously disclosed.
This translated into a GBP 1 million incremental cost in the first half, which we have recovered in selling prices. We are pleased to see relatively low tariff rates agreed with both Vietnam and Malaysia compared to other competing nations. As you can see, our exposure to U.S.-China trade is low, and it is reducing. We expect to be able to continue to mitigate or recover the impact of tariffs going forward. Some quick comments on 2025 modeling assumptions. We continue to expect an H2 weighting for the reasons I set out on slide 11. We do expect some sequential revenue growth in H2, which you can assume drops through at 50% - 60% of revenue. The amount of revenue growth will become clearer once we have Q3's orders.
We expect to pass through any unavoidable tariff costs, but we are not aiming to mark them up, meaning that there will be an increase in revenue for no change in profit, meaning a mathematical margin erosion. This will be a natural headwind to the margin benefit of the supply chain efficiency actions that we continue to take. I've already mentioned the 30% tax rate for the full year, and regarding cash, conversion will remain comfortably above 100%, and total CapEx spends should be around GBP 20 million, including product development, slightly lower than previous estimates. That's it for the numbers. I'll hand you back to Gavin.
Thanks, Matt. I just want to, I know we've used this slide many times, but I just want to take a couple of minutes to talk about our strategy and how our consistent application of it positions XP for a strong future. Just highlighting a few key points here on this chart. Our focus is on accelerating and maintaining organic growth. We have a market-leading product portfolio, which we have significantly enhanced in the year through new product launches and customer-specific products. We're focusing on working with our customers where we bring our extensive specialist knowledge to solve their power problems. An NPI with our customers is almost at a record level. Building on these relationships will definitely drive growth over the medium term. We also continue to invest in our business to ensure we can deliver on our medium-term potential.
So far in 2025, we've opened a new design center in Manila in the Philippines, and the new production site in Malaysia is on track to be completed by the end of the year for commissioning in 2026. The key point is we've consistently applied this strategy, and that has enabled us to deliver growth ahead of the market, including during the last couple of years of weakness. We believe we remain in a strong position to deliver our ambitions in the medium to longer term. Just for clarity, we continue to focus on structural growth markets where we have market-leading positions. As you know, each of the semi, healthcare, and industrial tech markets have faced challenges in recent times, but the fundamental drivers underpinning their long-term growth trajectories remain firmly in place.
The semiconductor end market is in growth, driven by multiple factors, including AI, machine learning, the shift to electric vehicles, and the digital transformation across many different industries. This will translate into the growth in the wafer fabrication equipment in the short term, which will continue to benefit us. The destocking in healthcare and industrial tech is nearing the end, with many customers back to normal order patterns. We're seeing further order growth, and we're seeing further order growth driven by innovation in multiple industries. When the markets fully recover, we believe we're well positioned to benefit from tailwinds with recent customer wins and new products coming to market adding to this. Talking to new products, I just wanted to take, talking about our strategy, I just want to take a few slides to highlight the progress we've been making on delivering our strategy.
This page just shows a range of our new products that have come to market. You know, having a market-leading product set is key to our strategy, and we've been stepping up our innovation over recent years. On this page, you can see a range of some of the products that will be brought to market so far in 2025. They're all market-leading products ranging from low voltage, low power for medical and industrial tech applications to a configurable multi-output power supply with a digital core and industry-leading power density. They also expand our reach into new areas such as battery charging infrastructure and semiconductor test equipment and build our portfolio in focus areas like semiconductor and analytical instruments. The other way of looking at this chart is to consider the expected future revenues.
We track both new products and customer projects the same way: the best year value of that product, i.e., what is the expected peak year revenue over the product or project lifecycle? For new products, we target to add $30 million per year of best year value. This can be through many smaller products or through larger, higher potential products. The products on this page vary in potential from circa best year value from circa $2 million - circa $15 million per annum. In total, they represent $30 million of best year value, i.e., we've hit our target for the year in the first half of the year, with more to come in the second half of the year. We continue to be successful with customers, and we have a strong pipeline to fuel future growth.
As I said, we manage our customer projects and our pipeline by tracking the indicative best year value. Given the number of customer projects we supply, some of these are in their infancies, some are at their peak, while others are nearing the end of life. Today, we have a total of $850 million of live customer projects in varying parts of their lifecycle. You can see from the chart on the left, the strong growth, 12% CAGR since 2019, representing the customer wins we've been maintaining over that period. This gives us confidence in the short to medium terms as projects naturally go through their growth lifecycle. We also continue to add to this with new customer wins.
If you look to the bottom part of the left-hand charts, we have a further $625 million of customer projects in our live pipeline, i.e., we're actively working on them, including $320 million where the customer has received a sample from us and are finalizing the project or product. We will not win all of this, but it does try to indicate the scale of opportunity. Our established customer relationships combined with the new products will ensure this momentum of customer wins continues. We're well positioned in each of our sectors as these markets resume their long-term growth. Our markets are changing faster than ever, and we are driving this with innovative new product development and customer wins that demonstrate how successful we're being with our customers. Customers are changing, particularly in semi and healthcare. Now they want solutions to problems or challenges provided by long-term partners.
They are focused on outcomes, not just the power supply, which few of our competitors can deliver. We're providing integrated solutions built on existing products to customers. We develop integrated solutions, combining the power supply hardware with firmware to integrate with the customer's product or tool. This requires a change in culture and mindset, and our North American business is very much leading the approach across XP Power. If you look to our North American business, covering the engineering services products, the high voltage, and RF power solutions, circa 85% of our revenue comes from designed-in solutions, the balance from standard products. Asia and Europe are following this trend, but a few years behind. Just to summarize the progress we're making, we have a strong new product development program combined with a solution mindset that is driving continued success with our customers, which gives us confidence for the future.
I now wanted to cover each of the sectors and talk about what's going on as we're seeing. Industrial technology, it's a strategically important segment of the global technology value chain. Latest forecasts suggest the market will grow at circa 7.5% over the medium term. If you look to the graph, you can see the impact of the stock build in 2023 and the destocking in 2024 and 2025. You look to the revenue, but you can see a very different trend in the orders, which are up 47% in the first half with a book-to-bill of 1.2. Now, within industrial tech, there are many, it's a very diverse sector, but we also include here our high service level distributors like DigiKey, Mouser, RS, and Premier Farnell.
The order intake from these distributors, who are typically good bellwethers for the wider market, grew by 91% year-on-year in constant currency in the first half, as distributors start to restock as the end customer demand picks up. In the broader sector, a key driver of this growth is innovation by our customers. Our customers' applications are becoming increasingly more complicated and connected, and our focus has been making our products digital to support customers' requirements. Within industrial tech, we focus on many sub-sectors with good long-term growth potential and attractive niches. Typical applications are in areas such as robotics, analytical instruments, test and measurement. In summary, destocking is coming to an end, customer by customer, and we expect the momentum in this sector to continue in the second half of 2025, but at differing speeds across the globe, with North America leading Europe and then Asia.
Turning to the semiconductor manufacturing equipment sector, as you know, this is a highly specialized and strategically important segment of the broader technology landscapes. Forecasts suggest AI and data will drive the end market to over $1 trillion by 2030. The manufacturing equipment sector is very much linked to this growth. It grows in the end semiconductor demand, and significant investment over the coming years will be required to meet the end demand. Our products for this market are complex and have long qualification and life cycles, leading to a very strong customer lock-in, high barriers to entry, and good levels of recurring revenue. This market remains a great opportunity for XP Power, and we're well positioned with the leading players as we see a step up in the new projects across the differing processes.
With semi, we're through the trough, orders are in growth, up 10% year, and revenue will start to recover despite cycling the 2024 exceptional high voltage demand and our exit from the China market. Finally, healthcare. This remains a long-term growth opportunity for XP Power. Customers demand the highest level of precision, safety, and regulatory compliance, and the power supply is integral to many solutions, and customers see XP as a key partner. The market remains strong, and customers see good demand levels, so the underlying demand is being masked by destocking and is stronger than our reported results suggest. The medical device market is also showing strong growth, which is forecast to continue above 6% out to 2030 using the external data we have. What's driving it? What are we seeing?
It's the two mega trends of the aging global population, but probably more importantly, innovation in medical technology. We're seeing ongoing infrastructure upgrades, but innovation is driving products into new areas such as pulsed field ablation, robotic surgery, advanced diagnostics, and the innovative use of technology for patient treatment. We're a partner for many of the healthcare players in these areas. We're also at the start of the AI impact on medical imaging and patient treatment devices, and growth in new treatment technologies driving innovation solutions that we can provide. We're also in this sector seeing destocking come to an end with many, but not all of our key customers. Order intake was up 33% in the first half of the year. In summary, we expect demand to continue as inventory is used up and growth to return during the second half of 2025.
Finally, I just wanted to talk to our outlook. The markets are definitely improving with clear signs of destocking coming to an end. We're mindful of the wider macroeconomic environment and how it could impact overall demand, but with the destocking coming to an end, we see improvements. As Matt has outlined, we've taken further steps to improve our profit performance, including further efficiency gains and cost reductions that will improve the second half performance. This also gives us confidence we can return to the mid-40s gross margin and towards 20% operating margin. Looking forward, we believe we're well prepared for the market recovery. We're confident the end markets will resume their long-term growth trajectories. Our well-established customer relationships in the right sectors provide clear growth opportunities, and we have a healthy pipeline of new product launches and design wins.
In summary, we're well positioned for growth as the market and order levels recover. On that note, we're ready to take your questions. Let's start with questions in the room before taking questions online or on the phone. For those in the room, please could you state your name and company before your question for the benefit of those joining via the webcast? Okay.
Tom Elgar, Deutsche Numis. I've got two or three if that's all right. I think just firstly on that product pipeline slide, obviously really interesting, that 12% relative CAGR that you've talked about there. Could you elaborate a little bit more on potentially the balance of market share gains versus expanding your addressable markets? Because obviously you refer to the sort of technology solutions transition that you're going through as part of that R&D. Just kind of dig into that a little bit. I guess on that Asia and Europe sort of 30 %- 40% versus North America at 85%. Generally speaking, the sort of strategy ambition versus that balance, just firstly starting on that product pipeline.
Short-term market share is always difficult to track, particularly with what's going on in the broader market with destocking. We're confident over the medium term we'll be gaining share. Short-term, it's literally customer by customer whether your customer's coming out first or not. We've got a real range. As I said, some customers are through, others are still sitting on inventory. It's difficult to call in the short term. What we're trying to demonstrate is we are, through this down cycle, we've maintained good relationships with customers and that the appeal of the XP offering is still very relevant. As I said, NPI with some of our customers is probably at record levels. There's a lot of innovation, and that innovation is very much at the moment very North American focused.
That's almost why you've got that big disparity between the 85% and perhaps the mid-30s to 40% of North America and Asia. A lot of that core innovation in semi in healthcare is coming out of the U.S. We've also been doing it a lot longer, and it was why we were confident that the new innovation center we put into Silicon Valley, replacing our existing facility last year, would be a success. It's proving to be, it's proving that very clearly just with the customer interest, customer demand, and we've now got an area we can showcase our portfolio. We've got customers who'll come in and engineers will come in and work with us in our facility rather than us having to go to them. It's been a benefit. Does that cover?
Yeah, just following up on obviously the continued or sustaining that sort of 30% order intake growth in Q2. Just trying to ask, in terms of what you're seeing from your customers, have there been any, you know, given the wider uncertainty, has there been any focus on just trying to get a sense of, I guess, the margin profile of that order intake? Are they focusing on maybe lower cost items? Have you seen any sort of mix shift within that at all?
I think the one good thing about the improvised order intake that we've seen is it's been so broad.
Lastly, obviously, you announced the additional cost savings. Is there anything you can talk to around where capacity now looks at from, say, a two, three-year view given where you are with those actions? That'd be great.
Yeah, so I think the cost savings that we've made and we've highlighted in the announcement, they're mostly within cost of sale, so therefore that does speak to manufacturing capacity. It's been quite targeted. We talked about the high voltage, high power business having a great 2024 and a slower 2025 as a clear backlog. As the manufacturing volume is reduced, obviously our next step is then to look at the cost base. There's been some cost saves there. We've transferred some manufacturing from China to Vietnam again to save some costs. It's been quite targeted in that respect. Even despite those actions, we still have plenty of manufacturing capacity to spare, so we can accommodate a significant amount of growth. Plus also we have Malaysia coming on stream.
Hi, David Farrell from Jefferies . A couple of following questions from that. Just firstly around Malaysia as we go into next year and commissioning that. Is that coming on irrespective of where your order intake is? What does that mean for kind of depreciation as we go into next year and progress in margins?
I mean, I think obviously the key has been to get the building into a position where we can commission it, you know, as slowly or as quickly as we wish. We will see how H2 develops and the speed of the sort of final commissioning will be determined by that.
Thanks. Picking up on the kind of customer services revenue in the U.S. being 85%, what would that have looked like a couple of years ago when you were at peak? Is there a risk that you're being selected because of your niche and your ability to do that, but perhaps some of the more standard products that maybe you were delivering revenue from two or three years ago have gone elsewhere?
Okay, now I hadn't thought of it that way. No, they've absolutely been maintained. I don't think we've lost, you know, you get a natural life cycle, but once you're designed in, you are designed in for the life of it. It's almost been the growth in other areas that's been doing it. You know that at that 85% has been gradually increasing, but that's almost naturally at the focus of that direct sales team. Going forward, there's probably a further growth opportunity for the more standard products. The pickup in high service level distributors is a good example of that. We do need to, we are considering options of how we do service the mid-tier of customers, which would generally be where standard products would be more appropriate.
Okay, thanks. Just final question on semicon. I think book-to-bill was 0.88. I guess your customers sound as if they're kind of less optimistic about the shape of recovery over the second half. Just your thoughts about trajectory in that market.
Good. If you look at customers' forecasts for WFE for 2025, last week you had some upgrade in their outlook, some downgrade in their outlook. The outlook for WFE is about $100 billion - $105 billion. The outlook for 2026 is + 10% on that. I think there is some overall growth. The uncertainty is China. For us, part of the book-to-bill message was, you know, we've stopped, we've still got some final shipments. We're not taking orders from customers in China. That's one of the gaps from one. The other is the high voltage piece where we destocked last. We had a backlog of demand with one of our North American customers for high voltage. That came to an end at the end of the year, as Matt highlighted. Within the sector, you've got very different dynamics by different customers. It depends on what end markets they service.
One of them has been pretty robust through the whole cycle. The other is now placing significant orders and returning to growth. We're absolutely no concerns about semi-market. There's just going to be some lumpiness to it as things go forward.
Good morning. Tom Rands from Berenberg. Three questions, if I may. I'll take them separately just to make it easier for you to write down. First one is just on the very strong growth in the distributor channel. Is there any extra kind of detail you can give us from kind of within those, I think you mentioned four kind of key customers from a region or any kind of particular end market or any detail that they give you? Because I think the detail historically has been very good that they provide. Anything you can give to give us a bit of extra color on that growth and maybe what we could expect in the second half? Start at 10, please.
Okay, of the ones I quoted, some of them, if you think of DigiKey, they have one global warehouse. We will ship all of our product into that warehouse in the U.S., and they will then distribute globally from it. We do get the extra detail we do get from, we do get the point of sale of what their end customer is doing, and we also get detail on the inventory holding that they're doing. We know their target inventory levels, and we see that they're coming down. They've been above those target inventory levels over recent years. They're now coming much more into equilibrium, hence they're starting to place orders ahead because of the lead time, just to make sure they have the inventory in place to service end customers. As to, it's very broad across as to where it's going. We don't get that level of detail.
The weight of purchase is generally increasing, which is a good indication. I think it's about four or five, actually I don't, but it is generally increasing as companies feel more optimistic. In total, this is about 7% of our total revenue is through the distributor channel, the high service level distributors.
Okay, thanks for you. Just to add to that, I think it also is a little microcosm of what we see generally in the business, in as much as I think it's fair to say that the order intake growth that we've seen from North American distributors has been greater than what we've seen from others. There seems to be a little bit more optimism, a little bit more willingness to hold a little bit more inventory in North America than there is elsewhere.
Okay, great. Thank you. Good detail. Second question was around healthcare and new business wins. I think you mentioned in the statement kind of advanced patient treatment as an area where you're gaining. Can you just give us a bit more detail of what is advanced patient treatment, kind of examples, and why you think you're winning, and how long you've been working on these customers, and potentially what the longevity of these products could be?
The ones that come to mind, pulsed field ablation, which is the treatment of the heart, is, if you just Google it, you will see the end market demand with a number of players. One has come to market. To quote, it treats cardiac arrhythmia through pulse field electric, replacing an induced thermal ablation, which could risk of damage. It's expected to be, it's about a $1 billion market at the moment, growing at about 32% CAGR. That's an area of real innovation where we've been working with a number of partners. This is, we're only in recent years got, well, in last year got FDA approval. It's very new. We've done products for cancer treatment, specific cancer treatment, where the end party is doing developing things, and they need a partner. It takes multiple iterations to come up with a finished solution.
We're seeing work in, for medical imaging, where AI is being adopted. We're working with a number of partners there. The overall trend on robotic surgery, I mean, it's now we're getting to specific robots for specific treatment. Before, it was more of a generic tool. Now we're getting for specific cancer treatment, for example.
Okay, thank you. That's quite exciting stuff. Third question is for Matt on the intercompany balances and the FX kind of volatility. I guess the question is, why now? Is it just the volatility we're seeing in the dollar, or is there other kind of reasons why now is the right point to make these changes?
Yeah, I mean, it's really the volatility. I did identify this back in 2023, and we tried to solve it back then. Our chosen method of solving it could have given rise to a tax liability that I was keen to avoid. That's why we didn't proceed with it at that time. Of course, I didn't expect the dollar to move by 10% in Q2 of this year. If I could have had my life again, I would have done it quicker. Nevertheless, we've got an alternative plan. We're confident in that plan, and we're going to get that delivered during Q3.
Thank you.
Lydia Kenny, Investec, just a few quick ones. On the inventory levels, obviously reduced quite significantly on much lower volumes. Could you maybe talk us through the strategy as that picks back up where we should be working capital?
Yeah. I think we say in the statement, you know, don't expect sort of further fireworks on inventory in the second half. I think we are, you know, at a broadly speaking, the right level for the rest of this year. There might even be a slight increase for different reasons, but broadly, broadly flat. As we get into 2026, of course, you know, we do expect, you know, certainly in the second half of this year, going into 2026, continued revenue improvement. It would ordinarily mean more stock on the shelves. We do have a supply chain improvement project, which we're currently running, which I'm not in a position to share details with you today, but my hope is the efficiency savings we get from that will at least offset a good chunk of the inventory that we need for growth.
The order book is kind of a burning question. I had the visibility on that. Are these a lot more longer dated projects, or should we see a good chunk of that come through in H2 or early next year?
As always, with our order book, you've got some short-term orders and some customers who put longer-term orders in place. You have a natural mix. We're almost, we're back to normalized lead times of about 16 weeks, four months. You get a good indication, but within there, there's always a range, and it depends on customer planning.
Let me just add to that. If your question is how much coverage do we have of the full year revenue as a result of our order book, if that's kind of where you were heading, yes. I would just point you to the notes to the back end of our, in the notes to the accounts, we run our usual going concern disclosures. It talks there about the percentage coverage we have, and you can actually work out from there what coverage we have today, roughly.
That's great. On the sort of new product range that we have, are these designed alongside customers, or are they just the next generation of the products?
They're the next generation.
Perfect.
They will be used with engineering solutions to do it though. They're not customers, none of those are customer specific.
Great, thank you.
Hi there. You talked about the increasing demand from customers for solutions as opposed to just taking the power supply units. What implications does that have for your manufacturing capacity? Where can you actually set up those solutions? You talked about starting to open up Malaysia as and when it's necessary. What do you expect to be the first types of products that you make in Malaysia?
Okay, the way we work with the solutions business, the probably the easiest example is Silicon Valley. We'll have core products that just come from our normal supply chain. The design teams will work with customers to develop prototypes of what they need to their solutions. We try and make sure we're the fastest to prototype of any of the players in the market. You might develop prototypes, you'll do prototype builds in Silicon Valley. When it gets to maturity or at volume, we'll rapidly transfer it to Vietnam, who manufacture those products. That's essentially the same model in Europe, where we have a smaller design team based in the U.K. who do that work with customers across Europe. In Asia, there's a team in Singapore. It's U.K. and U.S. that do the local builds, and then when they get to a volume, they'll move it to Vietnam.
On what's going to be the first product out of Malaysia, I don't know is probably the best answer. Where it is going to be, to Matt's point, it was almost, I think it was, are we putting it in place irrespective of what demand is? No, it'll be looked to meet demand and business continuity requirements. Exactly. Remember when we built, I mean, when we build a facility, it's the building that is the main thing. That's what we will have. We then can choose to put in what we will. We will put in SMT lines to be able to do our own PCB boards, and then we'll do assembly of whatever products it will be. The intent is it is more, the original intent was more on the complex products, but that's still to be determined depending on requirements and demand. Okay.
Turning to questions from the webcast, we only have one question, and it's for Matt. Matt showed that quarterly orders are recovering, but noted they have not yet reached normal levels. Can you add more detail on what you consider normal quarterly order figures?
Yeah, I think probably the first thing to say is that our peak revenue performance was obviously 2023, $316 million. What we know now is that, of course, they've benefited from the channel stocking itself up. I'm not going to suggest the normal is a run rate of $316 million. As to what the new normal is, that's a little bit more difficult to judge, but for me, it sort of feels somewhere in the $250 million- $300 million kind of range. You can work out the quarterly run rate from there.
Okay, any other final questions? In that case, we'll finish the meeting there. Thanks everyone for joining in person or online. Thanks very much.