Avon Technologies Stock

Well, good morning, everybody, and thank you for coming, especially so shortly after the Capital Markets Day. 2026 was the last year of our Star strategy. That strategy resulted in a materially stronger business. Revenue grew substantially in 2026. Adjusted operating profit grew over 50% and margins increased to over 17%. The final year of our transformation is now complete.

We've improved both operational and financial performance. We now expect much higher cash generation looking forward. Star has given us a platform for future growth. The strength in the system is embedded, and we've invested into new products, customer relationships and sales and marketing. Now we are moving into the next phase of our strategy, improve, grow and compound. We will continue to improve the businesses we own. We will invest behind the organic opportunities where we have a right to win. And over time, we will use our capabilities and balance sheet to acquire selectively and create additional shareholder value where we see opportunities to do so. Star has delivered a stronger core business, and we now have a clear plan to build from it.

I'll now hand over to Rich, and he'll take us through the financials.

Thank you, Jos, and good morning, everyone. So as trailed ahead of the Capital Markets Day last month, the headlines demonstrate another year of strong progress. Order intake for 2026 nudged up to $354 million, and the closing order book is in line with last year's record $263 million, giving us great visibility into 2027 and beyond. Reported revenue growth of 13% dropped through to strong adjusted operating profit up 51% at $60.7 million. This translates to EPS of $1.43, 57% up on the year.

And my preferred area of focus, return on invested capital came in at 27.6%, even after a modest increase in the amount of working capital in the business as we accelerated Team Wendy's production rates through the year. Cash conversion of 93% represents another good year. And while we saw a late burst in the final quarter shifting deliveries into -- shifting receivables into FY '27, we also benefited from the tailwind of a similar effect from the back end of 2025.

In summary, revenue growth, operating profit, ROIC and cash conversion have all exceeded the medium-term targets set out in 2023. Moving on to the P&L. The strong order intake reflects a very strong pickup in H2, notably in Team Wendy, where second half orders of $140 million included receipt of follow-on awards for both major DoW helmet programs. Revenue growth up 12% on a constant currency basis reflects another strong performance across the board with both businesses growing at about the same pace.

Operating profit of $60.7 million resulted in margin of 17.2%, an improvement of 440 basis points on last year. This leaves us in the margin range set out at the CMD last month, although there is still some work to do to sustain this as we benefited from a few one-off tailwinds in the year, which I will talk about in a moment. The other significant change to the P&L is in the tax charge, which has risen to $13.4 million, reflecting the increased profitability of the business at an effective tax rate of around 24%. This is broadly where we expect it to stay absent further changes to the tax regime.

This all adds up to adjusted basic EPS of $1.433 per share, an increase of 57%. And finally, the Board is recommending a 10% increase to the final dividend, giving a full year divi of $0.268 per share, up 9% on the year. Avon Protection had another very strong year. Order intake came in a bit lower than the '25 comparator, which included some benefit from Ukraine, but still represents a very strong performance given that the DoW mask contract expired partway through 2025.

We are now actively working on the renewal. The order book remained very strong versus history and revenue grew 13% on an organic basis, which dropped through to operating profit margin of 22.5%. Revenue growth was driven by a strong year in Commercial Americas and continued strong demand from NATO customers under the NSPA framework agreement, and our filter lines have been working flat out following 2 orders totaling $27 million from the U.S. Department of War and the Middle Eastern customer.

The excellent drop-through margin was helped by operational gearing, improving productivity and some particularly high margin but nonrecurring product sales in the first half. Given the continuing strength of the order book and pipeline, Avon Protection is well positioned to deliver further growth in '27, although I would expect margins to drop back a little from these unusually high levels as we move towards a more normalized sales. Order intake in Team Wendy saw a sharp recovery in the second half to end the year 23% higher than last year.

The 2 main Department of War helmet programs saw combined awards of over $80 million, and there was a helpful acceleration in Commercial Americas orders towards the back end of the year. The backlog remains robust with order cover on both of the DoW programs well into 2028, although I would expect the order book to burn down over the course of the coming year as we have reached the contract ceiling for ACH orders. As we near the end of the current IHPS contract, we now expect a new follow-on program for a high-cut rifle helmet.

This is exciting news. And although we will likely see a slowing in orders over the transition period, we have more than enough coverage to bridge that gap. Revenue growth of 12.6% was driven by higher ACH II deliveries as we increased production levels from 4,000 to 9,000 per month during the year, partially offset by a slightly weaker commercial backdrop in the U.S. as the government shutdown held back orders. Operating profit margin saw meaningful improvement, increasing by over 6 percentage points to 11%. Sustainably increased production levels and the benefits of our transformation activities over the last few years were the key contributors, partially offset by the inevitable dilution from ACH shipments, which more than doubled in the year.

The sequential H2 on H1 increase in margin even after ACH growth gives us confidence in further improvement on an annualized basis, although note that ACH deliveries are expected to increase again in 2027. Now we move on to the usual operating profit walk for the year and starting with the $40.3 million jumping off point for last year after adjusting for FX. The first positive bar of $12.7 million shows the effect of the significant improvements in Cleveland and Salem during the year. This manifested itself in volume growth but was enabled through the step-up in productivity and efficiency delivered by the Team Wendy team.

Then you see a partially offsetting cost of $3.5 million, which was the dilutive effect of growth in lower-margin ACH shipments. Growth in Avon Protection delivered a further $7.8 million benefit with top line advancement and some one-off benefits from commercial settlements of historical liabilities, partially offset by slightly weaker mix with strong growth in filters, boots and gloves. Tariff refunds gave us a benefit of $0.7 million and P&L IT costs were $1.9 million lower, reflecting some of the expected annual benefits of the transformation project.

As previously mentioned, we invested in more sales capability in the year, totaling $3.1 million with a bias towards Team Wendy, reflecting the international growth strategy. And this is already starting to pay dividends through higher orders and a significantly increased pipeline of opportunities. A further one-off benefit from Ohio state incentives for the Cleveland expansion totaled $0.9 million. And finally, other savings delivered a further $3 million, reflecting improved efficiency in our U.K. factory, strong cost control, which maintained a functional spend broadly flat despite revenue growth and higher R&D tax credits.

The main things to pull out from the balance sheet include the continued reduction in intangibles, reflecting our disciplined application of a prudent capitalization policy. Working capital and specifically inventory increased in the year, driven by 2 factors. Firstly, we took some raw material purchasing decisions designed to ensure sustained achievement of the elevated production rates in Cleveland. And secondly, we were sitting on a significant quantity of finished goods at the end of the year, awaiting government inspection prior to shipment.

The nature of our contract with the customer means that there will always be a bit of the latter, but reducing both of these effects is a key focus for FY '27. The pension deficit continues to decline despite a negative impact from adverse actuarial experience. This was offset by contributions and elevated gilt yields, the benefits of which have now been fully locked in through increased hedging. The deficit has reduced from around $80 million just 5 or 6 years ago and is now sufficiently stable that we are actively exploring options to eliminate the need to have to keep talking to you about it.

Increased profitability and lower debt have seen the leverage ratio come down further to around 0.4x. Moving on to the cash flow. You can see that net debt came down by over 30% year-on-year. There's still plenty to go at, however. And as already mentioned, we are now focusing on bringing inventory levels down in line with our ambition to materially increase inventory turns over the coming years. Transformation costs reduced to $6.8 million in the year, and this cost marks the completion of projects identified as part of the Star strategy back in 2023.

The heightened pension contribution of $10.6 million included an additional $4 million payment under the recently agreed recovery plan following the completion of the triennial valuation earlier in the year. And as usual, guidance on future contributions and other financial matters is provided in the appendix to the slides. And finally, it's worth pointing out that while cash tax will remain lower than P&L tax for the next couple of years as we burn off historical losses, it will creep up to around 10% in FY '27 and increase further in FY '28.

I've included this slide in the deck to give you a bit of an update on the transformation project we launched late last year aimed at better aligning our IT estate to the needs of the business, both today and in the future. We focused on creating a better site and SBU-centric support infrastructure with a relatively thin center overseeing shared platforms and cyber resilience. This has, as predicted, enabled us to reduce the number and complexity of systems across the group and therefore, reducing the amount of internal resource required to oversee these systems.

Most importantly, however, it has slashed our reliance on third parties, which means that we have a more innate understanding of our own systems and are much less susceptible to the impact of incremental price hikes. These changes and the resulting improvements in response times and operational effectiveness have been achieved while maintaining and, in many cases, increasing cyber resilience.

Total investments in this project was $2.7 million, which formed a large part of the transformation costs booked in the year, but we expect annualized benefits of at least $3 million, some of which came through in the year. This is among the best payback projects we've done, and the IT team have done a great job in what has been a very challenging year. As we said at the Capital Markets Day a few years ago, we believe this business has the ability to generate free cash flow of over $175 million over the next 3 years. Free cash flow is defined as cash generated from operating activities less interest paid and CapEx.

This slide sets out our capital allocation priorities in this context. As ever, our first priority is to invest in the organic business, and we have lots of opportunities coming down the track, which could accelerate organic growth and which represent a very low-risk investment for us. We remain committed to a progressive dividend, as you can see from today's proposed full year dividend increase. And after that, we will look to deploy excess cash where it can deliver the greatest shareholder value, whether through disciplined M&A or capital returns. And we will retain financial discipline throughout with target leverage of 2x or less.

Finally, moving on to our expectations for the full year. We expect further good growth in helmet deliveries with another leg of growth on the ACH program as we annualize the elevated production levels seen in the second half of '26. The stronger order book and solid pipeline of commercial opportunities give us confidence that we will see growth here also. Avon Protection will see further top line growth also, although at a more muted level than last year as we lap the very high filter volumes and the $13 million of Ukraine-related sales in 2026.

These factors combined equate to mid-single-digit revenue growth at the group level. We expect operational improvements in Team Wendy seen through '26 to sustain into 2027 and beyond, being partially offset by a normalization in Avon Protection margin with the nonrecurrence of the one-off benefits seen in '26. Even after the dilution from further growth in low-margin ACH sales, we are confident that we can deliver operating margin within our 16% to 18% target range.

And finally, with no planned transformation costs, significant improvements in working capital efficiency, assuming no prolonged U.S. government shutdown and a reduction in pension contributions, we expect free cash flow of between $50 million and $60 million compared to $31 million in 2026. And with that, I'll now hand back to Jos to update you on the operational and strategic progress and our areas of focus for the coming year.

Thank you very much, Rich. I'm going to spend the next few minutes looking at what Star has delivered, the organic opportunities ahead of us and how we intend to build on them. Star has fundamentally changed the quality of the group. The strength in system is embedded. 90% of our people have been trained and over 200 of our employees are certified on continuous improvement. With almost everybody involved in improving the business, we have an enduring competitive advantage, and we can see the impact across our operational and financial metrics.

And excitingly, we still see lots of opportunity to improve things further. Our transformation projects are complete. We've rightsized the business, increased revenue per square foot by nearly 80%, reduced costs in our central functions and strengthened our sales and commercial functions. At the same time, we've increased investment into our people and new product development, and that investment is creating the next wave of growth opportunities.

Star has done more than deliver great results. It's created a repeatable improvement system for future expansion and a stronger platform from which we can grow. These metrics demonstrate the impact of our Strengthen System in practice. Productivity has improved 54%, significantly exceeding the target. Scrap reduced by 54% and inventory turns improved by 14%. We are a little disappointed to have fallen short of our inventory turns target. Avon Protection made good progress. But in Team Wendy, we focused on achieving contractual delivery rates because it was critical for us to build credibility with the Department of War.

And that strategy did pay off with strong order intake. As we move into 2027, we will focus on inventory turns more across both businesses, and we have aligned the annual bonus to incentivize that. We see our Strengthen System as strategic. If we can deliver high-quality products reliably and on time, we are likely to grow. And if we can do that with lower capital than our competitors, we're likely to beat them over time. This slide brings the scale of the change in Cleveland to life. 3 years ago, helmet capacity in our Cleveland factory was 20,000 helmets a year.

Through the Strengthen System, we move from batch production to repeatable high-volume flow manufacturing while building the workforce and improving planning and infrastructure. We believe we're the only helmet manufacturer that does not manufacture in batches. That has enabled us to increase capacity almost twelvefold to 200,000 helmets a year without adding a single additional press. The presses are the most expensive capital needed to manufacture helmets, and we now make more helmets in a month than we used to make in a year.

Next, we are implementing our well-proven hybrid tooling to our EXFIL helmet line, which will reduce cycle times on those presses by more than half and double capacity. We expect overall capacity in this factory to increase to more than 300,000 helmets this year without significant additional capital. We have built a much more scalable manufacturing operation capable of supporting our existing programs and giving us the capacity to capture future growth opportunities.

In our U.K. factory, it is a similar story. We moved all the equipment, bringing processes closer together and created integrated manufacturing cells that flow. At the same time, we've reduced the manufacturing footprint by more than 4,000 square meters, creating capacity for future growth. And you can see the impact in the numbers. Productivity is up 78%. Revenue per square meter has more than doubled. Inventory turns have improved by 18% and Scrap as a percentage of revenue is down 45%.

But just as importantly, we have changed the way the site operates. Lean flow, standard work and Kanban are now embedded into the manufacturing system, supported by a strong continuous improvement culture and capability. Turning to the advanced part of Star that applied during 2026 and before that, our core respiratory franchise in Avon Protection continues to deliver attractive growth and recurring demand. We've delivered nearly 0.5 million Avon masks to NATO countries. Every new system placed creates future demand for filters, spares and sustainment.

We received our first full CBRN Ensemble order from our European customer, demonstrating the potential we have to use our CBRN leadership to expand into the integrated CBRN market. Rich has already mentioned the strong demand for filters. The last filter order from the DoW was awarded to a sole source for the first time, demonstrating the credibility that we have built for reliable delivery of a high-quality product. We launched our short-duration CS-PAPR in June and secured the first contract award for 16 systems.

This order is an important customer validation of a differentiated new capability. The system allows the user to seamlessly transition between 3 different breathing modes, adapting protection to changing threats. The system provides up to 20 minutes of breathing in high contaminant or oxygen-deficient environments. And last year, we also launched a new common voice projection unit. The CVPU provides voice projection and tactical radio communications while wearing our respirators. We already have orders for 5,000 units and a pipeline of opportunities worth over $100 million.

Excitingly, only yesterday, we received NIOSH certification for the CVPU, which will help us accelerate the pipeline in the U.S. and will help us maintain the competitive moat around our C50 and M53 mask system. We're excited that both the U.S. and Canadian Armed Forces ordered MITR. It is likely that other militaries and first responders around the world will follow their lead. And U.S. law enforcement demand continues to grow with good demand across our core respiratory products and further growth opportunities across filters, accessories and sustainment.

The core respiratory business is an attractive business. Market-leading products create a growing installed base, recurring revenue and strong long-term customer value. Alongside growth in the core, targeted investment is creating 4 potential platforms for step change growth. In U.S. suits, we've been down selected to Phase 3 of the program and secured an initial order for 1,500 suits. This program has significant long-term potential for us. In rebreathers, we're building on the proven MCM100 platform, creating potential for follow-on sustainment and international growth.

We have opportunities in both Europe and the U.S. In NATO Combination Systems, we're combining respiratory protection with complementary CBRN capabilities to meet customer demand for integrated mission-ready systems. And in next-generation U.S. respiratory, we're working with the customer on the next generation of masks and improved system capability between the mask and the suits. These programs are at different stages, and we're not going to win everything. But each expands our addressable market by building on the areas where we already have strong technology, customer access and program capability.

In Team Wendy, we have made excellent progress, maximizing our core programs. Demand for both IHPS and ACH remains strong. In IHPS, we see future demand being driven by the need for greater survivability, increased mobility and improved protection against blast protection. In ACH, we're very competitive cost-wise and see opportunity to expand gross margins further. As Rich mentioned, we expect orders to dip before picking up again as we transition to a new high cut version of IHPS and the new ACH contract. We have enough order cover to bridge that gap.

In the North American commercial market, demand was soft in the first half but increased towards the end of the financial year. We currently see a much increased pipeline in U.S. commercial compared to the first quarter of 2026. We are delighted to have received $19 million worth of orders from the U.S. Air Force for our EXFIL helmet. This expands our customer base outside our core Army contracts. Our EXFIL LTP position with the U.S. Naval Aviation Authority also provides a platform for broader adoption across the Navy and other services, which we are pursuing with a strong new international development team.

And internationally, we secured a new Australian Defense Force contract for up to 7 years and our first order from a major European military. Team Wendy's international revenue increased by around $5 million, a 44% increase. And international order intake remains strong. This provides early credibility for our strategy to grow our helmets business internationally and to diversify our customer base. The combination of leading technology, competitive costs, excellent credibility with the Department of War and growing market share in the U.S. commercial business gives us confidence that Team Wendy can continue to grow.

And beyond the core, we're building a broader and more diversified revenue base. Internationally, we plan to win share by offering a platform tailored to local markets and requirements and expanding the addressable market for elite rifle protective helmets. These increase survivability while staying low weight. As a reminder, there are very few companies in the world that can make rifle protective helmets. In the North American commercial and federal markets, we're focused on underserved states, extending our military head protection expertise into adjacent end markets and upgrading our helmet portfolio through our new Recon helmet and EXFIL Endurance helmets.

And for future Department of War programs, we're helping to shape the next generation of integrated head protection. We are working closely with the U.S. Army on future requirements with the benefit of funded research and development. This includes even higher ballistic threat protection, broader system integration and improved blast mitigation. These opportunities take our capabilities and apply them to new customers, new geographies and adjacent markets.

Now turning to the next phase of our strategy: improve, grow and compound. This is the framework for how we intend to create value going forward. First, improve. Through Star, we have codified how we improve businesses. We will continue to use that system to drive higher productivity, strong cash generation and better returns. Second, grow. We will maximize our market-leading positions and recurring revenue streams while investing behind the exciting new opportunities that I've just touched on. And third, compound. Over the long term, we will use the capabilities we've built and the cash we generate to acquire selectively in protection technology and then improve and grow those businesses.

Today, we have a stronger business with an organic platform for growth and the capacity to compound further. As mentioned at our recent Capital Markets Day, we see a large opportunity to build a broader protection technology group. We have a large investable universe of companies in an addressable market worth some $15 billion to $20 billion when close adjacencies are included. We will acquire selectively in areas we understand and where we can make a material difference as an owner. We will apply our business improvement system to improve and grow what we buy that will enable us to increase returns on capital and cash flow over time.

And as we generate additional cash, we will reinvest behind future growth opportunities, creating a repeatable compounding cycle of buy, improve, grow and reinvest again. We have a large investable universe, but we will remain disciplined. We will accelerate only where we see value and as our capability and capacity allow. We have translated this strategy into financial targets. For the current portfolio, we expect organic revenue growth of more than 5% a year, operating margins within the range of 16% to 18% and EPS growth of more than 10% a year.

We're targeting group inventory turns of more than 5x and cumulative free cash flow of more than $175 million over the next 3 years. The cash gives us the firepower to reinvest behind organic growth, pursue disciplined acquisitions and return surplus capital if appropriate. Over 5 years, our ambition is to build a group with more than $600 million of revenue and returns on capital above 18%, with acquisitions helping drive EPS growth even higher than 10% a year.

Whilst the timing of acquisitions will never be entirely predictable, the pathway is clear: improve the current portfolio, grow organically, generate cash and deploy capital where we see opportunities. Turning to the main risks and opportunities across the group. At Team Wendy, our plan to improve inventory turns depends on us improving right-first-time quality.

To do this, we are increasing automated inspection and strengthening process controls, but there is a lot to do. Following the U.S. midterm elections, it is possible that political stalemate could slow new contract awards and lot acceptance in the short term. And in the medium term, we note that defense spending is correlated to the global threat environment much more than party politics. On the opportunity side, we're pursuing several new programs at the moment, and those opportunities are not fully reflected in our forecasts.

And in Team Wendy, we have an opportunity to improve the order to cash cycle by shortening the time between completing a helmet lot and getting them approved for shipping by the government. We have strong momentum entering 2027. We hold market-leading positions. Our end markets remain attractive. We have a strong pipeline of opportunities and a clear organic growth plan across both businesses.

Our priorities are equally clear. We will improve performance through continuous improvement. We will grow by maximizing the core and investing behind the programs that can materially increase scale. And we will compound value through selective acquisitions where we see the opportunity to create value. Importantly, strong cash generation gives us the capacity to pursue these opportunities while maintaining financial discipline and a strong balance sheet. So we're entering the next phase from a position of strength, a better business, attractive growth opportunities and a repeatable system for creating value for our shareholders.

And with that, I will turn it over to questions. We're going to go to the little chairs over there.

Rob Byde from Zeus Capital. Just on the R&D guidance, I think you're guiding to 20% to 30% higher R&D spend this year. Can you -- and obviously, you talked about some of the new products. Could you give us a bit more detail on what's driving that increase, please?

Yes. It helps to understand where we're starting from. We do look to push R&D forward every year. 2026 was a bit of an exception, not because we had less engineers. We absolutely didn't have less engineers. But what we did do was we redeployed a number of our engineering teams to helping the ramp up. So they became focused a bit more on process engineering than pure R&D, if you like.

So if you exclude that effect, we're starting from a higher base already. And then we've got a number of programs in development. You've heard us talk about suits, you've heard us talk about the new helmet programs in development. It's pretty clear where we're going to focus those resources. And more importantly, perhaps you've heard us talk about the step change opportunities that we've got in front of us. We want to lean into those and make sure that they're appropriately resourced. So it's kind of across the business really, but from a higher starting point.

You've given me an opportunity to talk about something that I probably forgot in my script. We actually just signed a contract for $4.5 million from the U.S. Department of War to fund R&D on the Team Wendy side. So actually, we're super excited about that. And it may, if we get it right, enable us to generate another generation of helmets with even higher protection.

It's Henry Carver from Singer. Just one on the midterms and sort of what that might mean. Obviously, the military side is -- yes, you're smiling, no one knows. On the military side is one thing, but will it possibly impact the sort of the federal and commercial side as well? And I know -- I mean, is this the kind of thing that could start happening now? Or is it more towards the sort of traditional ordering periods of the year that we'll start to see it come through? Just any kind of thoughts would be useful.

I think it could impact the flow of government grants because the shutdown last year did delay the grant funding and then it started to flow at the back end of this year. We do think there's a lot of grant funding sort of waiting in the wings. So I think that should come through. But if we do have another government shutdown, it could delay grant funding. The other thing we see is a lot of grant funding flows to Republican states and not Democratic states. So the fact there's a few more Democratic states is not particularly helpful for now.

It's Andrew Humphrey at Peel Hunt. I've got a couple, if I may. One on Protection, one on Team Wendy. You've called out, I think, filter volumes over the last year as being exceptional. But looking around the world, threat environment is still elevated. There are clearly still a requirement for those sorts of products. There's an incentive to build up inventories. I wonder if you can kind of characterize that a bit and talk about what it was that made those volumes in '26 so exceptional.

Well, we won a big Middle Eastern order from a new customer actually. They previously bought them from India or somewhere. So they effectively upgraded their filters. You can buy sort of industrial type filters, but they're not military spec and they're not as robust.

So I think with the increasing threat environment, we're seeing people want to go for the real deal. And then with the Department of War, we've only ever had one real competitor, and they seem to have pulled out of the market for now. And actually, they've been out of the market so long that their line would need refatting now, which is very expensive. So I think we're in a really good position on filters. We're actually just between contracts with the DoW at the moment, but we are working with them on the next one. So I do think filter demand is going to carry on being robust. And our filter lines have been killing it. They've been running basically flat out over the last 4 to 6 months, I guess.

And in terms of pipeline there, can we think about -- is there a pool of potential demand out there where people might be looking at upgrading to something higher spec that you're actively exploring?

I would look at it more the other way around. We've got 2 million masks out in the U.S. plus the first responder mask so more than that. And then we've got another 0.5 million across NATO countries, and we've recently won Australia with our masks as well. So every mask you sell creates an installed base that they're likely not necessarily -- they could buy cheaper ones, but they are likely to buy our filters to go on our masks. And if you buy the M50 or C50 mask, we're the only people that make those filters because they're for fitting.

Great. And on Team Wendy, you've alluded to contract transitions in the next couple of years. I wonder if you could kind of drill down into that in terms of potential timings of relettings, some of the commercials around that to the extent you're comfortable talking about it and what could move either way to the DoW?

Yes. I mean the ACH contract actually ends back end of this year, beginning of next year.

Yes, '28.

But we're already at maximum. They've capped -- they've maxed out the contract to us. So they can't order any more of us. We have enough to take us well into 2028 enough orders. They already put out the RFI for the next contract. We've responded to it. We know roughly what volumes they're talking about. I think that program looks good for a long time to come. I mean we've always said that it was one at challenging pricing originally.

We actually regarded that as, well, okay, those are the cards we've dealt and our job is to make money out of it, which we've got to that position. So we are extremely competitive. But there is quite a delta between us and the competition price-wise. So I think we would be hopeful that we can extend the gross margins a bit on that program. And on IHPS, that is a very exciting story. The U.S. government or U.S. Army recently put out a paper called how we fight or something. And it really pushes the idea of survivability and mobility. And that is right in our zone because the IHPS helmet, the RIFLETECH helmet on the commercial side are pretty much the only rifle helmets out there in the market.

On the commercial side, it's only us and one other that even makes a rifle helmet that you can buy. And that elite rifle protection, we think that is going to push into more militaries and maybe even SWAT teams and so on. Because if you're in a threat that might involve a rifle, why wouldn't you buy rifle-rated helmet? Why would you buy a helmet that only stop a 9-millimeter round? And then the U.S. DoW specifically, they've decided that the blast protection is better with a high-cut helmet. IHPS is a full cut helmet. So they're actually going to now migrate into buying a high-cut version of the IHPS helmet, and we think that's going to lead to another fielding wave over the next 3 years. So I think the opportunity in IHPS is much better than we were expecting it to be actually. And that's why I'm sitting here feeling quietly confident in the next 2 or 3 years.

Toby Thorrington from Equity Development. Given the improvements in manufacturing capability, particularly Team Wendy, I'm curious to know whether customers have started to order in a different way, for example, later notice because the capability in the manufacturing is there, shorter blocks of volume. That's the first question.

Yes. That one is a good question, and we like that question because it's a good answer, we -- hopefully, it will be. So we're constantly striving to push down the lead times on our commercial helmets. It's actually reported to me, it's actually every week, it's in the -- what we call the Tier 3 deck, and we report the lead times we're offering. We're always trying to push those lead times down. We did have them down to about 4 weeks. They have crept up a bit recently because there's a big pipeline of opportunities. But we do try and offer substantially shorter lead times than the competition. And I think it's probably fair we do offer substantially shorter lead times than the competition. And if a police department is in a real hurry to get them, we could get them a lot of helmets in a week or 2. So I think we've got a very responsive manufacturing operation.

Right. So beneficial to work winning then on.

Definitely beneficial to work winning. We do see people moving to us because they've either been quoted crazy long lead times by the competition or they just can't get the lead times they need.

So the follow-on to that is, how should we think about sort of book-to-bill numbers going forward? If the order cycle is shortening or you're getting more frequent smaller orders within?

That's another good question. This has always been one of the sort of slightly ironic things about the way the analysts look at this business. The way we look at it is the less order book, the better. We want to reduce the order to ship time as much as possible. But the way defense analysts look at it, they want to see a big order book. So we're looking at -- we look at it more as more akin to a fast-moving consumer goods company. If you order a helmet, you don't want it in 6 months. You want it next week. And that's where we're trying to get to.

Okay. So a book-to-bill less than 1 then?

It depends a bit on the cycle of the DoW. But what we want is a shortened order to ship time as we can possibly achieve. So yes, ideally, it would be lower. Revenue higher, just to be clear for the analysts in the room. Order book, absolutely.

I've got a few cash questions for Rich, if that's okay as well. Not in the technical guidance I've checked, so perhaps you could fill in a couple of gaps. Pension recovery cash, you mentioned there was a one-off of $4 million in '26. What will that number be post the triennial going forward?

I think it is in the back actually, but I think it's about $5 million. Yes. And to be clear, the one-off of $4 million was in addition to the $6 million we had already planned. So it was $10 million for the year.

Is that a flat $5 million or is it inflationary?

I actually can't remember, but there's definitely a table in the back of the deck there, so...

So the depreciation number seem to drag down a bit as well to a short [ $9 million ] in '26. Is that sort of roughly the right number going forward?

It will creep up a bit because CapEx is going to creep up a bit as well. But it's -- I mean, it's never going to be a significant jump year-on-year. We're not particularly capital intensive.

Okay. But that's a reasonable base?

Prime use is wisdom before money. That's our philosophy.

Rich Hill from Jefferies. If I could ask another kind of question on cash and just thinking about the inventory turns and the kind of target kind of rudimentary looking at it, it looks about half a turn a year would kind of get you to -- all else equal, middle of the guide, et cetera, would get you kind of to your next year's cash target.

On average, yes.

On average. Is it right to think about it in terms of your production at Team Wendy is going to increase again, and therefore, you're looking to kind of get that benefit out of Protection? Or kind of how do the moving parts in the division works in that kind of inventory turn space?

No. So we expect to see some improvement in both. But actually, the opportunity right here right now in Team Wendy is greater, partly because production is going to go up again, as we've said. But perhaps more immediately, there was a fairly significant amount of inventory coming into '27 from the back end of '26. That was there for 2 reasons. Number one, as I think I highlighted earlier, we were sitting on quite a large amount of finished goods stock as we waited for the customer testing process to run through.

And number two, we had deliberately accelerated raw material purchases through the back end of 2026 to support that ramp-up. I would expect both of those aspects to reduce as we go through '27 and beyond. So I think the sort of -- in absolute terms, the opportunity in Team Wendy is greater, but we do expect to see improvement in both.

And just to sort of pick up on your point in a slightly different way. I think Rich's guidance is sensible that the businesses are actually incentivized to achieve 1 turn a year. That's when they hit max bonus. We actually look at it on average to average. But if you look at year-end to year-end, it's a turn a year. That, in my mind, is what they should be doing, and that's what they're incentivized to do. And they are very good teams. I'm going to be quite disappointed if they don't hit their bonus maxes, but it could happen.

You actually have to do a lot to improve inventory turns. You have to do actual stuff. You can't just squeeze your suppliers or not pay people or whatever, you've got to actually change your factories and how they operate. But I'm still going to be disappointed if they don't hit a turn a year, not least because their bonus is my bonus.

That's very helpful. Can I ask just a second one and then touching upon the order for helmets to your first European kind of -- European military customer. Is that a kind of opening for a wider order? Is it kind of -- this is for standard military use? Or is it kind of selected group? I appreciate you may not want to give a huge amount of detail.

What was the question?

On the new contract for a European military in Team Wendy.

Okay, yes.

Just in terms of -- is that for a kind of selected group, i.e., kind of a more special forces orientated or wider and therefore, could...

No, it is for the broader military. We've already deployed some -- we actually just had the lot inspected and ballistic testing, and it went very, very well. We hope that, that will lead to a framework contract with that customer. At the moment, it was just one-off. It was 4,000 helmets. So it's a decent order for us, but we hope that's going to lead into a long-term program with the customer but we have not signed that contract yet.

M&A, who does M&A within the group? Is that you guys? Do you have a dedicated team? Or are you building a team?

No, we do M&A. I mean just a little bit of history here. I know we've become known for improving businesses, but actually, I was Head of Corporate Finance in a FTSE 100 and Rich was Head of Corporate Finance in a FTSE 250. So between us, I think we've got the M&A side pretty under control.

Milene Kerner from Barclays. The first one, just coming back on the inventory. How are you going to improve the turns without increasing delivery risk?

That's a very fine question. Well, firstly, we pair metrics. So inventory turns, as I probably said before, but we see it as the most important metric in a manufacturing business because it shows the efficiency of your processes. But you don't want it to affect the reliability you deliver to your customers. So when we look at turns, we always look at on-time delivery next to it to make sure they're working together. And we aim for 97-or-something percent on-time delivery to the customers whilst improving the turns, and we look at both of those metrics all the time.

The way that we can take inventory down and improve turns is by having more efficient processes that reduce the time it takes from raw material coming in the door to product going out the door to the customer. The raw material coming in the door there is all about planning and working with your suppliers on their lead times to you and giving them enough visibility that they can deliver a little and often into our factory to keep our inventory levels down.

On the raw material to finished product, flow helps us make that very quick. It used to take us, I don't know, a month. Now we do it in 3 hours from raw material cut to helmet finished and ready to go. And then the next thing is nailing the right-first-time quality. What absolutely murders us is where we make product off the end of the line and we put it in boxes and then we sample test it, we find that the quality is not perfect and then we reinspect it and rework it, and that just causes delay between finishing a lot and cash and the customer accepting it. So if we can get to a position where when the product comes off the line, it is 100% perfect every single time, then it will go out the door quicker and we'll get paid quicker. And we're working on all those things at the moment. We're on it, Milene. I promise you we are on it.

I'm sure you are. Then maybe on Team Wendy, on the Slide 17, you were indicating that Cleveland could ultimately exceed 300,000 without significant investment. What needs to change operationally to unlock that additional capacity for this year?

You're really giving me good questions here because I like answering these questions. I could get very excited, my pace is trying to get me to cut off. But -- so it's super cool what we've done. We've designed tooling that has channels through it, and we can heat and cool the tools. I'm not going to explain in detail that because it's super secret. And we've changed the control systems on all the presses, so we can heat and cool the tools quicker.

We also make the tools out of a different material to every single competitor. And what that enables us to do is it enables us to heat the polyethylene in the helmet, combine that with different pressures, and it enables us to cycle the presses probably twice as fast as our competitors, certainly twice as fast as we used to be able to do it before we implemented these technologies. So the presses are by far the most expensive piece of kit in the factory. And if we can double the capacity of each press simply by changing the tool design, then that -- well, that is what we've done. And we've got a few presses left. But we've already proved it out on 9 of the 12 something like that.

That's right, with another one to come.

We've got a few more to come. But we do have to change the entire control system and the tooling on the press. So it is a reasonable undertaking in terms of time, but it's not massively expensive for us. Very good.

Excellent.

Thank you very much, everyone.

Thanks, all.

Well, good afternoon, everybody. It's great to see so many of you here today, especially as at the last Capital Markets Day about 3 years ago, we apparently tried to torture everybody with uncomfortable chairs. [ Andy Bruff ] is so scarred by the last Capital Markets Day. He's got a cushion with him to this one, just to make sure he can get through it.

In the 3 years since the last Capital Markets Day, we have been very busy. And we've had a lot of fun along the way. We also had some ups, and we have had some downs. I never thought I would spend so much time on the factory floor in Cleveland. It does turn out that trying to triple production and run an ambitious transformation program is quite difficult.

Nonetheless, over the last 3 years, we have delivered on all of our targets. In fact, we've exceeded every target that we set at the last Capital Markets Day, most of them by a considerable margin. That, of course, is not due to me. It is due to a fantastic team. That team, we have not got by accident. We've recruited great people. We've promoted great people, and we have developed great people. And now we have an army of amazing people that know how to improve businesses, and they are ambitious to use that skill to take this business even further.

And that really is the genesis of the strategy. We can, of course, improve our existing businesses even more. We can grow them, and we have lots of opportunity to do that. But in addition, we do see an opportunity to exercise our capability across a broader platform and compound value for shareholders over the long term. This is the road map for today.

First, we're going to talk about how we improve businesses, and we will provide some proof points to demonstrate that our methodology actually works. We will talk about how we're going to grow our existing businesses. They have resilient cores, but they also have some interesting step change opportunities that could grow them even faster.

And we will talk about how we will exercise our capability to create value across a broader platform if we see opportunities to buy and improve other companies.

But we are mindful that we are trying to create value for shareholders. So we are very keen both on EPS growth and on returns on capital, and we see those as our 2 critical metrics. Rich has drummed into me return on capital is all that matters over the last 3 years. So we will keep focused on that. The agenda follows the improve, grow compound structure. Then Rich will come and talk about the numbers, which is the bit all the analysts are going to be interested in.

Then we will have Q&A, and we will have the technology showcase. The team has done a great job on the technology showcase. So please do stay and have a drink afterwards and chat to the guys about the technology. If you are in a difficult situation and you want gear that will protect your lives, our gear is the best you can buy in my view.

This is -- these are your presenters for today. Rich, you all know, I think, he has added very strong financial discipline to the group over the next 3 years and will keep us on track going forward. Steve Elwell has led the improvement and then the growth of Avon Protection with great success.

Casey Galligan, you won't necessarily know. He owns Avon Protection's relationship with our biggest customer, the Department of War. As an ex special forces Green Beret, he talks the language of the customer. He hangs out with the users and he brings the voice of the customer into the company to enable us to develop the technology that they want. Vasilios has recently taken over as the leader of Team Wendy. He is a polymath. He's good at pretty much everything. But perhaps the most important thing is that he, along with our Head of R&D, Vinny, pretty much invented the modern polyethylene helmet.

They pretty much invented the entire ballistic helmet category at the moment, and they are very, very well placed to lead us in the next stage of Team Wendy's growth. And Enrique has been instrumental in the tripling of production in Cleveland, but it has been more than that. We have also gained credibility with the customer and our increasing standing with the customer has led to more orders during the second half.

So the first step of this presentation, I'm going to talk about how we improve businesses. We have much, much better businesses than we had in the past. And we have a proven system.

Interestingly, as we have improved our businesses, we have also codified how we improve businesses so that we have a repeatable model that we can do again and again. Just to take a step back in time, 2, 3 years ago. At that point, revenue in the group was declining, adjusted EBIT and adjusted EPS were also declining. Margin was only 8.7% and spookily, return on capital was the same number. Cash conversion that year was only 7%, and the balance sheet was stretched. It was not an auspicious place to start, but we saw potential in these businesses, and we thought we could improve them.

There was quite a lot of heavy lifting to do. We had to get the right organizational structure. We had to get the right strategy. We had to get a team that could execute. This is actually a slide from the last Capital Markets Day 3 years ago. The point we were making, and we still believe in this philosophically, is that a business will not change direction if you don't do something different to it. We set out then to do something radically different. But having a vision of change is one thing, making the change happen is another. Humans are incredibly adverse to change.

As many of you will know, there's a book called Change or Die, and it shows that 90% of people that have heart bypass surgery or a heart attack do not change their lifestyle going forward. So literally, if you have to change to avoid dying, 90% of people do not change. That is how hard it is to change a business. It does start with having a clear strategy. Your employees need to know which hill they are going to take. We came up with STAR. Most of you are going to be very familiar with this. So I'm not going to go through it now.

Perhaps what's more interesting is what we learned from it. We did learn that it is common for businesses to be underinvested and to have obvious opportunities for improvement that they probably deep down know exist, but they haven't gone after them perhaps because it's all a bit hard. We tackle that through a suite of transformation programs. We do have a set of levers we pull to improve business performance, but the exact recipe does depend a bit on what we find in the businesses. Where we are different, I think, is that in parallel to a transformation program, we also build a culture and a capability of continuous improvement.

The idea here is that as the transformation programs go up and then start coming down in their intensity, in our case, ending now, continuous improvement comes up and increasingly improves the business not just for this year, but forever into the future. We did wonder whether it would be possible to run a transformation program and continuous improvement in parallel. It did seem quite ambitious. But I think one of the interesting things we found is that the more obvious it is that a business has to change radically, the easier it is for the business to change because the employees are kind of resigned to the fact that everything is going to change.

In our case, that is what we did. We also learned that continuous improvement is not just a tactical tool. It is a strategic tool in the sense that if you deliver high-quality product on time to your customer, the customer is likely to order more of it from you. And we have seen that very recently in both of our divisions. In Avon Protection, they recently won 100% of the DoW's filter requirements. And in Team Wendy, we recently had major orders on both of our programs with them. That is because we deliver reliably on time with great quality to our customers, and they have faith in us and not all of our competitors can do that.

We also learned the defense cycle is long. If a business is to sustain growth in the long term, it has to invest early. We have invested a lot of money into R&D and sales and marketing over the last 3 years. And many of those programs are now nearing a point where we hope that they will generate good revenue growth for us, and you will hear that later.

This is the results of our efforts. We improved -- we increased revenue by over $100 million. And on EPS, ROIC and EBIT, we tripled all of them or greater. These are the targets we set out for 2027 at the Capital Markets Day that Andy remembers so well.

We have delivered every single one of these targets or exceeded them, and we have done it a year earlier than we originally anticipated. But I'm not saying this because we want to take credit for what happened in the past. The important thing to take away is that we believe we have an improvement system that works and the numbers tell us that, that is the case. And that is why we have confidence that going forward, this is a methodology that is repeatable and can work again. This is our business improvement system. We have covered a lot of this in the past, but to recap, we start with a philosophical view that if a business is to own its strategy and be accountable for delivering it, then it should control all the resources it needs to deliver that strategy.

We do have a slight out unless there is a compelling reason to do something different. The only thing we have in that category is we do have a shared U.S. sales team because the customer buys helmets and masks together. We then like to work with our businesses to help them develop their strategy. But we do not use consultants to set strategy.

It still amuses me that when we launched STAR, someone said, "Oh, a consultant must have come up with that." But we do not use consultants to tell us what strategy is. In fact, our philosophy is the opposite. Our philosophy is if the businesses develop their own strategies, they are much more likely to do their strategies.

It might not be quite as good as if McKinsey had done it, but that isn't really the point because we think that most businesses fall down because they don't deliver their strategies. In our case, we want the businesses to own their strategies, create their strategies and deliver their strategy. We do also have a cadence where every year and every quarter, we look at what's worked in the strategy and we course correct. We nudge the tiller a bit here and there because we effectively have a continuous improvement approach to strategy we learn as we go along. Transformation is about creating a set of time-bounded projects. We actually regard this as catching up with the sins of the past in most businesses.

If a business has continuous improvement, it really has it, not just talks about it, a business shouldn't need a suite of transformation programs. But we find often that, that is not the case, and we need to kind of catch up and invest some money. We look for a 3-year payback. We normally model a 50% attrition rate between the initial business case and what actually hits the P&L. And I would say we're roughly right on that in our experience. Continuous improvement is an extremely powerful way of ensuring that a business improves all the time, but it's also a powerful way of delivering to the customer on time and with the right quality.

When we started this journey, we asked every plant to have a 1-week Kaizen every month, and they all looked at me like I was absolutely mad. They basically said, we can't do that. We don't have the resources. With less resource now, every plant has improvement projects every single week. So as time goes on, these businesses learn how to improve and they learn how to do it faster and faster. But a business is about process and it is about people. To get all this to work, we need people that can teach this system, coach others on this system and make this system happen. So we spend a lot of time developing our people.

And of course, in our case, our people have just implemented this methodology over the last 3 years. So we think we have an edge over private equity because we've got 1,000 people, and they all know how the system works. How does this all translate into actual money? Well, we actually focus on the inputs rather than the outputs. We focus on improving safety, quality, delivery, inventory turns and productivity. We call those our SQDIP metrics, and you would see them on every single line in every single one of our factories. By improving quality and -- well, improving quality improves margin and it improves cash flow.

Improving inventory turns also drives your cash flow forwards. Productivity drops through to margin. And all of this creates financial firepower and human capital that we can then reinvest into the front end of the business. We reinvest into sales and marketing, and we reinvest into product development. And we've invested heavily in those areas in the last 3 years across both of our businesses. We see this as 2 sides of the same coin. In order to grow a business, we have to improve a business because it's the improvement bit that frees up the money and the people in order to drive the front end of the business. You can't really do one without the other without tanking your margins.

What this has led to is growth in sales and it has led to a more diversified customer base and a more diversified portfolio, which helps create resilience in the businesses. I just wanted to demonstrate that this isn't just a PowerPoint thing. A lot of people can talk about an improvement methodology. What is much harder to replicate is how deep ours goes. For example, our Strengthen System is a set of principles, methods and tools. It builds out as you go down. And all of that helps us to remove waste from our businesses. We level load production, which drives efficiency.

We have one-piece flow, which removes work in progress from the lines, but it also enables us to deliver just in time to our customers with less stock. We work hard on making sure our machines are reliable, which reduces CapEx requirements. It also means that our lines stop less often and we get improved productivity. And we build quality into our processes, reducing scrap rates, increasing right first time, improving margins. We train every single employee in the entire organization on the Strengthen System. I would love to talk to you about this all day, and we could do that. But just to save me doing that, we do have copies of our Strengthen System here.

This is the basis of the manual we use to train our own employees. It is free to anybody because we don't mind teaching our competitors our Strengthen System because the tricky bit is actually implementing it.

This relates to the people side. It's all very well having an improvement methodology and a Strengthen System, but we need people to deliver it. When I arrived at Avon, we did not have any development courses aligned to our strategy. In fact, there was only 1 development course in the whole organization. Since then, we have built courses that go all the way from the shop floor to senior leaders, and we've built courses that teach everyone the Strengthen System, and we take our senior team to Japan to show them what excellence looks like.

We also have a program management teaching that teaches our people how to manage complicated programs and how to reduce risk on those programs. Enrique has been a large part of that, but also Gary Turner originally helped us set that up 3 years ago. The important thing here, though, is that our development programs are linked to our strategy. They teach our people to implement our business improvement system. This does mean that they cannot -- the work cannot be outsourced. We wrote all of these courses. I personally wrote a lot of these courses, and I teach several of them.

All of our leadership team is involved in training our people and creating this content. We do not abrogate responsibility for developing our own people.

Now I am going to switch tack slightly. Moving on from improvement, we're now going to talk about our businesses. They do, of course, have further room for improvement. We actually love opportunities for improvement, and there is more to come. They have resilient cores, and we can maximize that over the next chapter of their progress. But we also have a suite or program of opportunities that we call our step change opportunities.

We actually have quite a number of these. Not all of them are going to work out, but we hope quite a lot of them will work out and many of them are very big and could be transformational in themselves. And then I'm going to come back and talk a bit more about how we're going to compound growth over the long term.

So I'm now going to hand over to Rich, and he is going to set the scene for the businesses by talking about our markets and what we see there.

Thank you, Jos. Good afternoon, everyone. Nice to be back and not doing results. So as you just heard, Avon is a much stronger business now than it was a few years ago, and our business improvement system is working. So the next part of the plan is grow. And our organic plan starts with attractive markets. They're well aligned to our vision, which is helping our heroes survive and thrive.

But market growth alone is not the investment case here. What really matters is that we've got leading positions. We've got installed base. We've got customer trust, and we've got innovative technology, which will help us capture more than the average share available in the market.

We'll look at the structural trends that are shaping demand overall. And then Steve and Vasilios will come and stand up and talk about the fairly unique opportunities that those guys see in front of them. And then the objective is to distinguish between the resilient core and these focused and in many cases, very sizable opportunities to grow above our trend rate.

So let's start with the overall backdrop. I mean, the overall market or demand environment has changed pretty significantly over the last few years. Most of you will be aware why, but some of the flash points on the map on this chart go some way to help explain it anyway.

Governments are rebuilding readiness. They are replacing aging equipment, and they're dealing with pretty complex threats. And in the background, for the first time in a very long time, NATO troop numbers are growing, first responder numbers are growing. And one thing we have learned about drone warfare is that it is now easier than ever before to drop gas and grenade. And that's the sort of stuff that our products protect against. So there's a huge amount of opportunity just looking at the backdrop. Our story isn't just about higher defense markets, higher defense budgets, although they do help in fairness. But it's about the type and the urgency of procurement.

Customers need equipment on the shelf. They need systems that work together, and they need to be able to protect their users without compromising mobility or mission performance. So these trends do point customers again and again back to established suppliers with qualified products with a strong level of customer trust and the ability to deliver at scale fast. They also support demand in the sort of spares, replacement, sustainment, replenishment cycle. So the relevant market for Avon extends way beyond just gas masks and helmets. The way we define critical protection technology markets is essentially the equipment, systems and spares and accessories that protect military and first responder personnel as they operate in hazardous environments.

Our current core markets are already pretty sizable, $5 billion to $10 billion, and that covers the sorts of products that we sell today plus the sorts of products that we're working towards actively developing right now. But interestingly, when you add close adjacencies, and there's a number of them listed on the slide that I won't go through, but that market opportunity can very easily double. There are a number of characteristics that make this market attractive to us.

I'll just pick out 3. Number 1, qualification, performance and customer trust build a competitive moat.

Number 2, long program life cycles support demand for spares, sustainment and replacement.

And number 3, the supplier base is, in many cases, highly fragmented, which gives us opportunity for organic growth, but it also gives opportunity over time for selective acquisitions.

The total addressable market, therefore, is useful context, but our approach is really to focus on the areas where we either have or can build a credible advantage. Internal and external analysis supports that there is growth in our core selected markets of respiratory protection and head protection. And the rates do vary by product type. They vary by geography. But the overall message is pretty consistent, and that is that these markets are growing. And when I look at areas like, for example, military and commercial helmets, you can see that those growth rates are actually pretty compelling.

Importantly, though, Avon doesn't just need, or doesn't need market growth in order to grow. In several areas, notably in Avon Protection, our market share is very high and supports a very durable core. And in other areas like commercial and international helmets, our current share supports ample headroom for further growth. So that combination gives us a pretty balanced plan. We've got a large amount of the portfolio where the priority is to defend and extend. And then we've got a whole load of areas which are frankly underpenetrated by us, where we can go and grow faster than the market. So to put it more simply, we're very strong where we play, and we have loads of headroom for growth in areas where we haven't historically played.

We have a durable competitive advantage, and it's not really built on 1 or 2 product features, although they are important. It comes from a number of interrelated and mutually reinforcing strengths. So number 1, we work really closely with our customers. This customer intimacy, and that's quite often before the new requirements of a new product are defined. So that level of customer intimacy helps to inform the intellectual property that we develop. Then there is rigorous testing, certification, production readiness. These approvals are quite hard to achieve. And once we've jumped through those hurdles, we create fairly high switching costs, which is obviously a good place to be.

Meanwhile, the long program life cycles keep on with the spares sustainment replacement demand. And operational capability then completes the system. We must be able to manufacture a pretty complex and diverse portfolio of products reliably at scale efficiently and with as little working capital as possible. So these advantages result in durable positions that make the new product introductions and installed bases that we have today economically valuable for many years. And then just before I hand over, a number of you will remember that when we stood up 2.5 years ago at our last Capital Markets Day, we highlighted that a large amount of our business benefits from a very stable and predictable recurring revenue stream.

I just wanted to show you how that has progressed over the last couple of years because it tells an interesting story. The first takeaway is that the recurring revenue element has indeed remained very resilient, which I guess shouldn't be a surprise, but it's gratifying to see it.

The other story, which kind of jumps off this chart is that the overall business has benefited from a huge amount of new program growth over the last couple of years. That's come in the form of ACH and IHPS for the Team Wendy business. It's come in the form of NSPA masks and a range of other things for the Avon Protection business.

But the point is new program growth today will generate recurring revenue in the form of spares, sustainment, replenishment, replacement for many, many years to come. So the key message is that a large and highly profitable part of our business is very stable, very repeatable and very predictable.

And with that said, I'll now hand over to Steve to talk about the resilience of his business and the sizable opportunities he's got coming his way.

Thanks, Rich. Okay. So well, good afternoon, everybody. I think I recognize quite a lot of people in the room. But for those of you, I guess, I haven't met yet, I'm Steve Elwell, and I run our Avon Protection business. So we've now completed the transformation of Avon Protection. And the result of that is a much more resilient and much stronger business with a very, very consistent performance outlook. From there, we build into our growth strategy, and that's pretty straightforward, our growth strategy. So first and foremost, we maximize what is a very high-quality respiratory core business that we have.

And then second to that, we concentrate our investment into a small number of high-growth programs that we'll touch on over the next few slides. But before we really dive into the strategy, I just want to show you a little video that maybe brings to life some of what we do and why we do what we do.

[Presentation]

Sure you can imagine, I've seen that video quite a lot over the last few days. But one thing that hits me every time I watch that is it doesn't matter who you are. We can definitely make you look really cool. So we love what we do. So this slide here shows you our scalable respiratory platform. And we just have, we have a single scalable respiratory platform that we serve our users with.

Now respiratory protection is a constant trade-off for our users between the level of protection they need and the burden that equipment places on them versus the duration of that mission they need to be on. But there's one thing that's absolutely dead certain, and that's if whatever operation you're on, if you can't breathe, you simply cannot operate. And that's why the respirator always goes on first with any of our users. This platform allows us to tailor what we do to our users. So if you start on the left here, for routine operations, products like our MITR half mask, you can see that outside today. This is used in things like weapons training where extended exposure in a shoot house will have downstream health consequences for users.

And so this is just a very, very lightweight basic respiratory protection system. You skip right over on to the far right-hand side of this, you get into our combination system. This is for very high threat, very physically demanding missions. So in this environment, you'd carry a mask, you'd be wearing a mask. You'd also have powered systems, you'd have supplied air. That's for things like subterranean warfare or tunnel warfare, as you may know it better, where a user may be physically exerting themselves quite a lot and then suddenly face an environment where there is no oxygen. And if there's no oxygen in the atmosphere, it doesn't matter how much filtration we give you, you can't filter oxygen into somebody's mask. You have to then carry the equipment with you.

So because you can tailor our equipment in this way to the mission, essentially, what we do is we reduce the overall risk for any of our users. That means we can solve more missions. That means that we capture a higher value per user. And that means it's very, very hard for users to then switch from us once they become part of the Avon family. Our competitors are not able to offer that same breadth of end-to-end proven capability that this company can provide. The overall result of that is that Avon Protection is the global leader in respiratory protection in the CBRN markets. But by that, I'm talking more than just simply market share.

We actively support over 4 million users in over 75 countries worldwide to date. We have very deep relationships with the U.S. military, with NATO and with Five Eyes allied nations around the world. And our customers buy proven performance. You have to do in this market, you have to trust your equipment. You don't get a second chance to put that equipment on if it fails you. That trust that we build with our users is built over decades of working with them. They need to be confident in the products that they're carrying, confident in the certification of those products, confident in the supply chain and confident in the support that we put behind it.

That also means for us that we have very long product life cycles. It means we create a lot of recurring revenue in the form of pull-through of filters, spares, accessories, outserts and replacement masks. When you combine all of that together, it means our core is extremely resilient and it's very, very strategically valuable to us, makes it very difficult for the competition to displace us.

So over the last few years, I think probably 3 years ago, I spoke at the Capital Markets Day, we touched on trying to diversify this business, but it was where we were heading at the time. So over the last 3 years, we have been extending and we have been successful in going into adjacent markets that are still close to our core, but nevertheless, do broaden our market access.

Here, we have the same types of technology, the same user groups, the same qualification barriers, similar routes to market that really give us that advantage that we carry. On the left of this chart, integrated CBRN, that takes us from the respirator into suits, boots, gloves and more importantly, all of those things being designed to work together. In this space, it's the interface with the respirator that gives us the credibility to go into that market as well as our access to NATO user community that gives us very, very well established routes to adoption.

Underwater in respiratory protection, you'll have heard me talk before about our underwater rebreather our MCM100. That's now widely deployed across NATO and across Five Eyes users.

That means we have a strong platform for further international and U.S. growth. The result of that is our portfolio is now broader than it was 3 years ago. It's deeper, it's more integrated, and we're starting to win in these markets as well.

Now Rich touched a little bit on the market. If I dive just a little bit deeper into some of what's going on. So global demand for respiratory and CBRN protection gear is higher than at historical norms. So geopolitical instability, armed conflict and increases in the CBRN threat landscape are all driving new investment in this space. The left-hand side of this chart shows an independent survey that governments are increasingly worried about being involved in armed conflict, but they're also increasingly worried of the use of chemical and biological agents in those conflicts.

The real message for us in our market, however, is not simply that the world is spending more on defense and defense equipment is that a greater share of that defense investment is going into chemical biological protection and into the modernization of that gear. So for us, that gives us basically a double tailwind in our market. The changes apply equally across military and law enforcement markets. Users are out looking for lightweight, better integrated systems that protect them against that broader threat landscape without compromising their ability to operate in a combat environment and their overall mobility. These shifts play directly to our strengths where we are.

So after talking about the use, I am briefly now going to hand over to Lieutenant Colonel, Casey Galligan, who will take you through how we engage with users and why that's meaningful. Casey?

Thanks, Steve. So I use Avon's gear most of my military career. So when Steve asked me to join, there was no hesitation. The reason I say most of my military career is because despite the young look here, I actually joined the military 5 years before Avon won the M50 contract for the U.S. DoW. But I can assure you after that point, anytime I was visiting great tourist destinations such as Afghanistan, the jungles of South America. I always had my Avon respirator with me. So joining the company that makes and sells the best protection gear was an easy decision. Now working with the King's English, CBRN has always been a specialized market, but the customer expectations are changing. They are no longer looking for stand-alone respirator filters or protective equipment. They are looking for integrated systems that improve your survivability, readiness and combat effectiveness.

So if you see here on this chart next to me, about a year ago, the DoW conjunction with us and submarines, we went out there and ran these guys through a gauntlet of test wearing all our gear that you can see here. So what does this really mean? I want you to understand that, a, from a commander on the ground, I can have the highest levels of protection or I have this fleet of respirators to choose from.

And if you look at the MITR, the MITR have actually almost performed the same as your combat effectiveness with wearing nothing, right? So Steve mentioned that earlier, but that shift to these integrated systems that play directly into our strengths. For years, we have invested in a complete protection ecosystem because we recognized early that protection is not a collection of individual products.

It is an integrated system where your respiratory protection, your protective equipment, communications, anything a soldier must carry must all work together. So you may also have seen in my attempts to be LinkedIn famous, I spend pretty much all my time in the field with the operators, the requirements, professionals as well as the acquisition writers. So we can be at the forefront of these discussions. Honestly, it is why I love my job. You can see here, we are at the Best Ranger Competition, putting our MITR there on the lane. And you should know a Ranger has the most incredible ability to give you the most brutal honest feedback you will get.

And it is actually very helpful. It is these engagements with the soldiers, with the special operations units, while we're working on future concepts is for you to know that, again, we are not on the sidelines. We are not watching these requirements emerge. We are standing there with these guys shaping them. And that proximity to these operators matters because, again, operators, they don't care who makes their equipment or the name on it. They care that your equipment solves their problems. Our job, as I like to say, is to make their life suck less in the worst environments in the world. If they ever have to fight dirty, they need equipment that works and allows them to win. And like Steve said earlier, if you can't win, you cannot breathe.

The mask will always go on first, and it's not a catch phrase, that is their standard operating procedure. Ukraine has proven to be a modern day example. Delivery mechanisms may change, but the requirement to protect the war fighters' lungs does not. Whether that chem/bio threat arrives in an artillery shell, a rocket or a $20 drone, that soldier needs their mask. And that mask needs to work because in our world, the CBRN, you do not get second chances. That trust is why Avon will have a seat at the table and continue to work on these future requirements as they develop. In many cases, we are not responding to these requirements. We are helping to find them and demonstrating prototype solutions that can be evaluated by the customer.

At the same time, CBRN protection is expanding beyond traditional CBRN protection. Customers are increasingly focused on occupational health and the cumulative exposure they face. The conversation is now shifting from surviving that single event to preserving a career and lifetime of service. That's why programs like the MITR are gaining traction, and that is why we will continue to lead in this area. The bottom line is simple. Avon wins because we are trusted by the customer. We make the best gear, we understand their mission, and we are delivering integrated solutions for tomorrow's requirements, not just today's fight.

Now let's talk more about the MITR. So for decades, respiratory protection has existed between these 2 extremes. On your left, you had your disposable respirator. On the far right, you had our full face respirator. What was missing was that solution to protect the operators from the threats they encounter every single day. And that gap is why we created the MITR. Now for me, this was personal. You heard my background. It was 2012. I'm sitting there in Fort Bragg, North Carolina, and we are monitoring the lead levels and those guys that lived in the shoot houses, lived on the ranges and did the breaching operations. Their lead levels were off the charts, okay?

So here we are thinking when I go down range, I'm sure I'm going to encounter stuff. There's going to be contaminants on the battlefield. There's burn pits. But what we found out when you were home for that 3-year assignment and supposed to go home every night to your wife and children, that is actually when you were doing the most long-term health. And I sat there back then and I said, "Wow, we got to do better." Here we are a decade plus, working at Avon Protection, and we are. And MITR is part of that answer. And I take a lot of pride and sleep really well at night knowing that we're making a difference. Respiratory protection is following the same path that hearing protection did 20 years ago.

There was a time when your hearing protection was just considered an acceptable loss and part of the job. Now every soldier is issued hearing protection. It's mandated because we understand the long-term consequences. Respiratory protection is approaching that same inflection point and awareness of that occupational exposure, cumulative health effects, force readiness and then really the elevated cancer risk within these high-exposure communities like SOCOM is changing how they are thinking about their protection. That is also why companies like HunterSeven have chosen to partner with us. HunterSeven is a phenomenal nonprofit organization dedicated to early veteran screening and cancer detection.

They have a laundry list of statistics that really make the case why MITR should be part of your daily protection. There's firearms, residue, the synthetic opioids, fentanyl, riot agents, particulates, smoke, breaching, something as simple as an airborne operation where we're sitting out there on a tarmac or a flight line for 3 hours and inhaling that jet fuel. These are just all examples of the hazards that make the case that they get into the lungs and they will impact the soldier's long-term health.

MITR can prevent that from happening. And the simplest way to think about it is this. If the M50 was focused on surviving the worst day of your career, the MITR is focused on protecting you throughout your career.

My good friend, [ Chachi ], that is his name. He's a retired Air Force Pararescue Jumper that works for HunterSeven and a phenomenal human being, but nobody said it better. Every soldier is going to walk out there and look at you in the eye and say, yes, I am absolutely willing to die for my family. The question we pose now is, what are you willing to do to live for? If that doesn't resonate, what does, right? And operators understand this because they are concerned about their long-term health and their life after service, and this is our contribution to protecting those that serve us.

So with that, I will hand it back to Steve and discuss how we are converting this user engagement and momentum into continued growth for our business.

Thanks. I'd recommend to anybody as well, if you're trying to deliver a change program, having a Green Beret on your campus, really useful. So thank you, Casey. Brilliant. So our job is now to really convert that user engagement and customer understanding into valuable and repeatable growth inside this organization. You can see on the chart here, we have 3 deliberate strands to our plan. Now the first is we keep strengthening our organization through continuous improvement. That's delivering the margin expansion. It's creating capacity. It's freeing up cash, whilst it's maintaining the operating discipline that we've worked very hard to build over the past 3 years or so.

Continuous improvement in this organization is, without a doubt, a strategic and competitive advantage for us that underpins everything that we do and is the bedrock of our strategy as we build it.

Secondly, we maximize that core business, and we'll dive deeper into that core business in a moment and what that means, but that's really about further extending our leadership in the U.S. DoW and across those NATO nations. Here, we're expecting to grow ahead of the market, increasing further the value of that installed base that we have, whilst we sustain strong margins and cash generation.

And then third, we'll really accelerate our growth by selectively investing behind a small number but of very large programs that are capable of materially transforming the scale of this business. Now each part in this strategy here reinforces the next. It's continuous improvement that funds our growth. It's our core that gives us credibility. It gives us scale and it gives us customer access. And it's that selective program investment that really creates the opportunity for step change growth in this organization.

So this slide here, this shows how our Strengthen System has given us repeatable and driven repeatable excellent performance inside this organization, better flow, better planning, better problem solving has measurably reduced scrap and inventory. And as you can see, it's increased our productivity, enabling us now to produce more from the existing footprint that we have. All the time we've been doing that, you can see on the right-hand side of this chart, we've improved our customer service and our delivery out to our customers.

The financial impact of this, I expect for you all is pretty straightforward, but costs are lower, more cash is generated. We have more capacity to support growth in the future. And because that CI system is so well embedded inside our workforce and across our organization, it is a repeatable system that we have, and it will continue to keep delivering for us. This is not the end of this. This is ultimately what fuels the growth engine inside this business. So this slide shows you where our core business is heading. And this is really where our market leadership and our large installed base is the underlying basis of our growth plan.

You can see we split it here between U.S. and the broader Americas market and European NATO and international markets. Now we'll go into a second into, there are some regional differences between those 2 markets. But ultimately, there are common strengths that we have across both of them. These are we have very long-standing customer relationships. We have very high qualification barriers. We have well-established contracting mechanisms, long-term contracting mechanisms, and we have very strong replacement or recurring demand in all of those markets.

That ultimately means we have very predictable revenues and then we have a credible growth story inside of our core. So if you drop into each of these now, I'll start with the U.S. So in the U.S., our military installed base today, we have 1.8 million M50 respirators in use across the U.S. military. We are the sole source supplier, and we know that mask will remain in service for the foreseeable future. So we will see, as a stand-alone in that, we will see long-term demand for filters, accessories and replacement masks.

However, perhaps more tellingly, today, around 150,000 of those masks reach 20 years old every year. A similar situation exists for us in terms of filter restocking, where we already have started the restocking program there, and you can see that in record order backlogs we have across all of our filter lines. So perhaps with the mask, it gives you a sense of the size of the restocking opportunity we see ahead of us going forward. Now earlier, Casey did touch on the growing understanding of respiratory health impacts in the military.

So it's against that backdrop that the fantastic news that we are able to now announce the U.S. SOCOM, the special forces, the Tier 1 users in the U.S. have selected MITR, full MITR system, the half mask and the goggle to be rolled out across all of their Tier 1 users. Now that in itself is absolutely incredible news for us. It makes the U.S. the third Five Eyes nation to fully select MITR for their special forces community, because 2 of them have got to catch up. They know who they are.

And, but for us, adoption within Special Forces is not just the program itself. It's a very, very powerful validation of that capability for broader military and law enforcement adoption of a capability. And we're starting now to see with users like SOCOM adopting it, those broader market opportunities opening up for MITR across generalist user base. And so while MITR is not yet equivalent at all to the recurring base that we see from our installed CBRN respirators, it's that same customer trust and qualification pedigree that will give us that broader market adoption.

The overall result of this is we have strong confidence in the long-term demand outlook for our U.S. business. If I now just quickly dive into Europe. So European sales for us have grown 90% over the last 3 years. That statistic alone is substantially ahead of the growth in defense spending over that same period. Sure, I don't need to tell you that. We now have more than 0.5 million respirators in circulation in Europe, and we have a multiyear backlog of our boots and gloves products having won the NATO contract.

All of our products are NATO qualified. We've got well-established long-term routes to market, both through NSPA and also through direct contracting mechanisms into a number of European nations. So with the rise in European defense spending and the increasing CBRN threat that's seen there, we know we've got the right products, the customer credibility and the market access to capture that next phase of European chemical, biological modernization. We are starting to build some more localized partnerships in Europe.

There are some programs out there where perhaps we do need a different footprint in Europe, and we're starting to build that through partnerships. And also on top of that, as I just said in the U.S., MITR and adoption of the half mask and the goggle in the same way as it's been driven in the U.S., we're seeing that same trend across Europe. So you take that together, the European market momentum, the established access that we've got, the changing customer need, all of that means that our core business in Europe will remain a credible growth engine for this organization.

So that's the core, and that gives us predictable and sustainable organic growth. However, there is additional upside in this business that potentially comes from a number of small but well-qualified programs. We call them step change programs internally, and you can see them listed on the chart here behind me. Any one of these programs could add meaningful scale to this organization. Now I should say these aren't speculative ideas. These are all very well-qualified opportunities. There's clarity of customer demand, there's clarity of funding that's in place. And in each case, Avon has a very strong right to compete and to potentially win these programs.

So what I'll try and do is dive into each of these over the next few slides. So the first opportunity is around U.S. suits. But before I just touch on that opportunity, I'd like to give you a little understanding of why our products suits are so well placed in a program like this. We touched on some of this already, but just to remind you, modern forces, they do need to be protected, but of course, they also need to stay mobile and combat effective in a contaminated environment.

Now one of the hardest challenges in CBRN protection is getting the interface between the respirator and the hood, which is on a suit, getting that interface right. It's at that interface where a CBRN system works or a CBRN system fails. And because we lead in the respirator space, we have very deep user insight into that, and we can optimize that critical interface in a way that any stand-alone garment supplier just simply can't. Of course, I'm sure you're all still aware, we do still lead the U.S. DoW's hood mask interface program.

We have done for a number of years now. We've learned a lot through that program. It's fed into our product designs, and it supported us building a new bank of intellectual property in the suit and in the integration space. The result of that is our range of suits that we've launched on the market delivers lower burden protection for those modern missions that we talked about.

So user feedback on this is repeatedly highlighting the exceptional, what they would call breathability of a suit and comfort that those suits have compared with any other suits.

What that means for an operator is it means it reduces their combat stress when they're in an operational environment. We've undertaken a lot of independent testing, particularly around that hood mask interface that I touched on, and we're able to objectively demonstrate and independently demonstrate significant improvements in that interface as well between the suit and between the mask. So we've got a strong product, very strong installed base, very strong understanding of the integration space and knowledge of how to manage large-scale government CBRN programs.

So that gives us a strong capability that stand-alone competitors would find very, very hard to build from scratch. So if I touch on the suit opportunity itself a little bit, this program is a very significant near-term opportunity to establish and accelerate our ensemble position into a market that's worth around $800 million a year. The program itself is stepping through a phased competitive process. You can see that on the slide here. We've successfully moved from the very early stages where we provided small quantities of suits.

And then very recently, we were, it was announced we were successful in entering as listed here, which is Phase 3 of the program, where we're now manufacturing a larger number of suits that go into some advanced trials programs. Every stage or every phase of this program narrows the competitive field down. It builds evidence around the technical progress, technical performance, user acceptance and overall supply chain readiness. Our focus here is pretty simple. We perform in the current evaluation. We derisk our supply chain and our manufacturing plans, and we use that evidence to strengthen that position for the larger follow-on program. We expect we'll know the decision on final down select during fiscal '27 for us.

The second opportunity we touched on in our step change programs was related to rebreathers. So I'm sure many of you see in the newspapers and the media, subsea security, which we haven't really touched on today, is getting more attention. Navies around the world, they're investing in mine warfare and in critical national infrastructure protection. At the same time, the missions they're on are becoming much more complex and many legacy naval rebreather fleets are at or beyond replacement age.

Avon's rebreather, the MCM100 seen on this slide, it is differentiated from the competition. It's safer, it's faster to deploy, it's easier to operate and it's purpose-built for the military diving community. Basically, the system allows the diver to focus on their mission whilst the system looks after them. Traditional rebreathers require divers to calibrate and interpret the system, therefore, creating a system that's not as safe, therefore, taking the diver away from the mission that they happen to be on.

That differentiation we have is well protected in a very broad intellectual property bank sitting around the MCM. Today, our system is very widely deployed. It's different from 3 years ago. It's widely deployed across NATO. It's widely deployed across the Five Eyes community. So we've also got interoperability between allied forces and commonality in logistics and supply chains, very, very pertinent to the U.S. Navy. We do continue to invest in the system. We do continue to upgrade the system. So it remains today as the most capable deep sea rebreather on the market.

So the U.S. rebreather opportunity is roughly about 1/4 of the total deep sea rebreather market around the world or the accessible market. It's a live program. It's a competitive program with the U.S. Navy, but MCM has been formally down selected to be included in that competitive evaluation process. So the next stage for us will be dive evaluation trials, followed by down select process. And if it's successful through that, we'd enter into low rate and then full rate production in line roughly with the time scale that's on this chart.

In parallel to this, we're also investing in building U.S.-based production and support capability whilst we're upgrading the MCM itself. So our aim here is not just to try and sell an MCM as it stands, it's to create a U.S.-specific version for the U.S. Navy, giving the customer a system that's tailored to their requirements. But this is a safety critical piece of kit that we've proven in deployment with NATO and Five Eyes users. It's different to the kit that's out there.

And it's supported by a much more resilient supply chain, providing economic benefits in the U.S., creating jobs in the U.S. We believe together that gives us a strong position in this program and a right to play.

The third opportunity was on that slide was called NATO Combination Systems. I just step back a second, I'm sure you're all very aware, we're now 6 years into a 10-year program with NATO through the NSPA organization, where we supply our FM50 masks, filters, accessories and so on. So far, 16 nations have bought from us under that contract. And without a doubt, that has undoubtedly been a major growth driver for us on the 90% growth we touched on across Europe earlier. The result of all that is a significant installed base in Europe, well-established route to market, trust in the products we supply and a well-trodden through life support model.

Feedback from that user community is exceptional in the products that we provide. They're very, very satisfied with what we deliver, very, very satisfied with the capability that it provides them. And the combination systems program is also through NSPA.

What that would do is it would extend that relationship we have with NATO into the powered and supplied air capability that we showed on the earlier chart on the product life cycle, and it would move up that product value chain compared to where we are today.

So that gives those users a very clear upgrade path to the full respiratory portfolio that we're able to provide, supporting the European defense modernization, some of those changes in the European market that we touched on. Ahead of the program, we've gone out and we've secured independent CE certification for our latest systems, giving them the independent credibility they would need. And we've got very strong support from our European user community and in particular, the 16 nations that buy from us, they all see the very clear benefits of staying with the same product architecture to upgrade their capability.

Clearly, for us, that would give us sales of higher-value systems as well as a very long tail of recurring demand as we've come to see and expect from our [ mask ] programs itself. Of course, it would also substantially extend the sole source relationship we have with NATO and NSPA. Given that established European position, the very clear synergies that the users see and sticking with the same kit and adopting the full respiratory portfolio from Avon, again, we feel we're in a very strong position to go out and win this program.

Now the fourth of those opportunities is a little different, to be fair to the others. So this is about the next generation of U.S. respiratory protection. So this is a long-term program, and the requirements are still being shaped, but that's basically why we're engaged very early in that process. We are working very closely with the U.S. customer here in understanding what any future system would need to deliver. It's a combination of this program of customer funding and Avon funding, where we're rapidly testing out new ideas, new concepts and starting to define and provide evidence that any future procurement decision would likely require.

I'm not claiming we've won a future mask contract or production contract here, but we are helping to define the problem, and we're positioning our technology for that downstream competition rather than waiting for any finished specification that's likely to come out.

At the same time, we're doing what we always do. We're building a broad bank of intellectual property behind us, where we expect the market to go and that supports that long-term value creation for us. We're expecting a ramp-up in customer funding in the near term with low rate production probably towards the end of our planning period assumptions.

The objective, of course, here is to turn decades of respiratory leadership into leadership of the next technology cycle with the U.S. Now in order to win these programs, we've introduced a campaign-led model inside of our organization in order to give them greater focus and discipline. Now it's a big strength of Avon's to be able to bring together well-led cross-functional teams around demanding objectives. So this slide just really tries to show a little bit of detail on how we do that. So it's that reach and credibility that we have in our core business means we can shape an opportunity early.

We can do that through customer and user engagement. We then bring together technology, partners, users, as Casey touched on. So we're able to quickly learn what does and what doesn't work, and we can take full concepts and knock concepts out. From there, we build out our win strategy, and that's backed by very strong commercial discipline and very strong internal decision gates. And finally, we can deliver on our customer commitments and the returns we promised through the strength of the operating model and the continuous improvement culture that we've built.

Now we dedicate resources to our campaigns. It's not an add-on on top of somebody else's job. So every single 1 of those 4 programs you just saw, they all have an executive sponsor from my leadership team. That executive sponsor is able to knock down internal barriers quickly. And every single one of them has a dedicated program lead who has the ability to pull resources as and when needed. So we put the right focus on the right programs early, and we keep the organization focused on winning. It's that focus that really differentiates us. So bringing together technical, commercial, operational and leadership skills across the business and focusing on the opportunities that matter most to us.

So if I try and look to summarize around Avon, Avon Protection is the market leader in its category. It's a customer position. It's been built over decades, remains exceptionally difficult for anybody to challenge this. Our product platform, sorry, is fully interoperable. It's scalable, provides customers with a very trusted product place, and it provides them as a low-risk partner for their complete mission portfolio moving forward. We're operating in a market that is undoubtedly growing, and we have a very resilient recurring core base with very strong visibility and attractive economics.

We've successfully expanded the business over the last few years into some of those selected adjacent markets we touched on at the start, and we're seeing that we are winning in those markets. And now we're starting to concentrate our investment on to those small opportunities, small number of opportunities where we can see a genuine right to win and where we can materially increase the scale of this business going forward.

So I think the way you think about Avon is pretty simple. It's a very high-quality business. It's got a very resilient core. We're operating in a growing market, and we have meaningful upside opportunity going forward. That gives us confidence in our ability to deliver sustainable growth and long-term value creation.

So thank you for listening to me. Thank you for your time. I think we're going to have a short 10-minute break now, and then I'll hand over to Vasilios, who will talk to you more about things that go in your head. Thank you.

[Break]

Well, welcome back, everyone, and thank you for coming back. I'll take that as a good sign. Thank you also to Steve and Casey, an amazing job talking about the business there. In a minute, the legend that is Vasilios Brachos is going to come and talk about Team Wendy. But before that, we are going to have a short video just to showcase what they do.

[Presentation]

Well, hello, everyone. Thank you, Jos, for that incredible introduction. I hope you enjoyed the short video that showed who Team Wendy is, and what makes us unique in the marketplace. I'll talk a little bit more about some of the things you saw splash through the screen a little bit later in the presentation. But first, let me introduce myself. I am the new guy on the block here. So my name is Vasilios Brachos. And as you heard from Jos, I've been recently trusted with the Team Wendy business reins by the group. I've been with the company 22 years, majority of that time was spent developing and fielding lifesaving protective gear. And I can tell you, there's nothing more rewarding than going home at night after a long day's work, knowing that a soldier or a police officer or an emergency responder could go home to their family that night because they were wearing a helmet that we developed, protected their life.

It is definitely a very fulfilling part of the job, and I've enjoyed it for all the years in my career with the company. Of course, I've done a little bit more than development. I've touched on business development and operations throughout the years that have been with the company. So I feel really ready for this next challenge and also excited to lead Team Wendy into the next part of the growth.

So having said that, I'm also very likely to have an incredible team around me, across commercial, operational, business development, finance and R&D, including Enrique, who's here with me today, is our new COO; as well as [ Vin Bourbon ], who though he's not here today, has definitely been instrumental in developing a lot of these technologies we'll talk about and the position we're in now throughout the years and has recently rejoined us to lead the development efforts moving forward.

Over the past few years, Team Wendy has transformed from a narrow and operationally constrained business to a strong platform for growth. You've heard a lot of what has happened across the business altogether. And Enrique will talk more about that part of it. But our objective now is to continue improving operationally. It is -- and while maintaining our very strong foundation of DoW business that we've built throughout the years, we are going to try to develop and expand our portfolio effectively to enable us to grow more in other markets such as the U.S. commercial and international markets.

This diversification will make the biggest -- the business larger, more resilient and will have us not needing to depend on single programs in the future. Of course, the starting point of all this is a differentiated combination of ballistic and impact technologies that you saw a little bit splash in the video, but I want to talk about more right now. And I don't have a lot of jokes, but I do have a prop. So this is a ballistic helmet, this is one of our newest developments, the endurance helmet and bringing together the Ceradyne ballistic expertise with the Team Wendy impact performance capabilities has created a combination of capabilities and technologies for our company that our competitors cannot easily replicate, okay? These are basically anchored by our seamless shell technology, which is a technology of how we actually form a molded shell that maintains the fiber continuity throughout the shell and that allows us to maximize the ballistic resistance for as minimum weight as possible.

The next one is the no-thru-hole design. That maintains the ballistic coverage integrity throughout the surface of the helmet while still allowing us to have very secure attachment of external components such as these rails NVG's shrouds. And finally, we have the Zorbium Foam, where -- helps us make all these complicated pad systems here that are also -- allows us to tailor our fit, our comfort and our impact protection for the user.

These, of course, are coupled with some proprietary in-house tooling capability that allows us to be very flexible in design and accelerate the design-to-scale-up cycle of any new product. And all these together have created some firsts for the U.S. military. And we've been doing this for the U.S. military for the past 15 years, and we are proud to say that we -- these kind of technologies created the first ever rifle protective helmet for the U.S. military, back 15 years ago. And beyond that, created the first ever rifle protective helmet with no-thru-hole capability for the U.S. military. And finally, we also were able, together with the Zorbium Foam create the first-ever helmet to meet 14 feet per second impact protection. The standard right now is 10. You say that 10, 14 is not a big difference. But the difference in velocity is double the energy that we have to absorb during an impact. So that's a significant improvement in protecting the wearer of the helmet.

So this technology will allow us to tailor protection, weight and comfort and cost for different user needs. And together, they will underpin our capability for future helmet development and product development. The technologies alone, of course, are not valuable if there is no market for it. As you've heard multiple times already today, the global market is growing. The unrest around the world and from places and dots that Steve showed or I think Rich showed in the world, they are driving sales up across the world. And at the same time, the users are -- the requirements by the users are changing across military, law enforcement and the emergency responder community.

The military users, for example, are seeking more and more fragmentation and rifle protection capability without unwanted weight increase. That is key because their ballistic threats keep growing and the ability of drones to deliver fragments from the air is making everybody's life a lot more miserable. They need more protection while they're out there. At the same time, military users are also very -- their need is -- revolves around compatibility with communication systems, other sensors and overall soldier systems that they also need to put on their heads. The law enforcement community is responding more and more to active shooter situations as well as to public unrest requirements.

And at the same time, I talked about enough protection before, traumatic brain injury is becoming more and more a concern across all these communities. So it's very important that we need to now pay more attention to blast and impact protection capabilities. The opportunities also vary by regions. In the United States, the local production requirement is very strong. And of course, the integration capability with different things is also very important. In Europe and Allied forces, procurement is increasing, but also local content is becoming more and more important for them as well.

Finally, in many other different areas of the world, there are different needs for tailored performance, weight and cost requirement with some local access capability. Team Wendy's technology base will help us expand our portfolio and serve more of these needs. Provided, we, of course, match the right capability to the right market reach so that we can tailor our capability and our product for the right customer.

This strategy trend -- of these trends translate into a strategy with 3 steps. Three key priorities, which Enrique will talk about next.

Thank you, Vasilios. Good afternoon, and welcome, everyone. Thank you for joining us. So my name is Enrique Carrera as Vasilios mentioned, and I'm the Chief Operating Officer at Team Wendy. So today, I'm going to be talking about our strategy and how operations is going to be an enabler of that strategy. We will continue to apply the Strengthen System to drive improvements in our safety, quality, delivery, inventory turns and productivity. This will make us more efficient and cash generative while also creating the capacity to scale. At the same time, we're going to maximize the core by extending our DoW programs, expanding across military services and shaping the next-generation military portfolio.

Lastly, we will accelerate our growth by developing and tailoring new products on a common platform that will allow us to expand our North American and federal sales, scale internationally and enter selected adjacencies. This will result in a broader revenue base built on a common technology platform that will improve cash generation and returns.

If you go back 3 years, Team Wendy was under significant strain. Since then, we've delivered a successful transformation where we've closed the Irvine plant, consolidated production into our Salem and Cleveland facilities, and dramatically increased our volumes. You can see how that volume increase has impacted and improved our results across various financial metrics, more than doubling revenue and moving us into profitability.

Quite amazingly, from just first quarter of this year to the last quarter of this year, we've increased our volume output by more than 50%. In the first quarter, we were averaging approximately 13,000 helmets a month. And in this last quarter, that increased to over 20,000 helmets a month with almost 22,000 helmets in September. We've built and trained a workforce and implemented a production system that drives accountability, improves flow, and it makes our opportunities very visible. These results are evidence that the operating model is working. The next phase now is to make those results more efficient and cash generative.

While we've created scale, the production ramp has exposed our next set of opportunities. Now that we've stabilized production, we've seen that despite a massive ramp up, our average inventory turns have remained stable. Now actually, I think that's quite impressive, but it's really not where we want them to be. This will be a priority for us. However, we also think there's opportunities across our scrap, productivity and our delivery. This makes the capability that we've built in Team Wendy in terms of continuous improvement, critical to our future. We view operational excellence as core to our business model and we will continue to apply the strengthen system to make improvements across all of these areas.

As we improve quality on the line, you'll see improvements in rework and scrap and this will make our business more productive and more profitable. Furthermore, now that we've stabilized our production, we've strengthened our SIOP program, and that will allow us to work on decreasing our raw material and WIP levels, improve our inventory turns, and release cash that will support the business. This will provide us with a robust operating base that will support our strategy.

Now the beauty of flow manufacturing is that it makes our opportunities very visible. In batch manufacturing, the high inventory levels create a buffer that masks the system -- the symptoms. Each station just carries on producing. In a flow line, when something goes wrong, it stops the line. In theory, this forces you to address the root cause of the problem and find a permanent corrective action. However, this is particularly challenging when you're trying to ramp up production as we were in Team Wendy. We learned that it's very difficult to hire, train and retain a workforce when you stop the line. Lean manufacturing is challenging. It is challenging. However, it's even more challenging when you have a new workforce. We needed to build and train this workforce first, to help us sustain the improvements that we were making every day on the line. Now I'm certainly not saying that we're anywhere near the final product. But we really feel that now that our opportunities are visible, we know exactly where we need to go to get after them.

With stable production, we can turn our attention back to improving our inventory turns, minimizing our WIP and minimizing our inventory. This will make our product move through the system much faster. Every improvement we make in quality will reduce our rework and reduce our scrap, which will in turn improve our productivity metrics. Lastly, the closer that we get to one piece flow the closer that we tie our production floor to our customers. This will make us much more responsive to customer demand, and it will make our lead time shorter. We view this as a competitive advantage. Operations is the foundation that will enable us to win in new markets.

And so now I'm going to turn it back to Vasilios who's going to talk about those new markets and how we will grow in them.

Thank you, Enrique, and actually a shout out to the whole team and Team Wendy for embedding the Strengthen System into our DNA now. This is going to be a key part of our growth strategy moving forward. We cannot stress that enough. But I'm now going to talk to you about the second part of our 3-step strategy, which is to maintain and maximize our core. We have been in a very lucky position to have some pretty big programs with the U.S. DoW. And the business has not only helped us increase grow quite a bit in the last few years, but we intend to maintain that as a key foundation of our future business growth.

We will do that by continuing to maximize existing contracts. This is trying to get from the customers, the maximum delivery orders that they can award us throughout every year. That's how typically they give us the orders every -- annually. They look at our capabilities. They review again, everything that we can show them and they give us a delivery order. I can say that we have been very lucky at maximizing those this past year. And the root cause behind that is a lot of the improvements that we have shown in our business and demonstrated to the customer that not only do we have a good product, but we're able to produce it effectively and at scale.

But we will also continue to try and to update our product as well as develop new products so that we can position ourselves as best as possible for the follow-on opportunities to these programs, such as there is going to be a new ACH GEN II sustainment program that's going to come from DLA at the end of this current program. And of course, the follow-on potential NG IHPS program, which most likely will be a high-cut helmet. The objective here is to use our technology, our performance and our credibility with the customer that we have built by delivering these products so far to win more broadly with the DoW.

So the strength of the DoW is not just the revenue that we received from these big contracts right now. This comes from our customer access and understanding as well as the technology gradability we've built with them, with our products, something that we have done exceptionally well over the last 15 years with core DoW customers such as the U.S. Army, this is a business that our TWC affiliate continues to manage and expand. At the same time, the evidence that we can deliver critical programs to scale that we have now started to demonstrate repeatedly to the customer. We couple -- we take all this, and we add on top of that our differentiated technology that we've delivered -- developed throughout the years and will continue to develop. And those will be using to try to win through 3 different ways. One is win from existing positions, which is follow-on programs, as I mentioned earlier, as well as sustainment through pads and other accessories of the helmets. Expand across other military services by using our proven technology to existing customers to go into adjacent military requirements. And finally, by shaping the next portfolio, that is critical. We have always been ahead of the competition in understanding the customer need, working with them to develop their next -- the next-generation capabilities.

So this is not just generating product variance of what we currently bring to the table, but also generating the next threat protection capabilities for the customer. All these actions together will help us keep the DoW business strong in the future.

But that's not the only part of our strategy. The third part of the strategy, the third step is to accelerate growth. And we can do that on top of the DoW foundation by using these 2 growth engines to expand our revenue base. First, internationally, where NATO and allied forces, as I said, continue to increase spending and other opportunities are arising all over the world as global unrest continues to increase. We will approach that with new products, pricing and partnership tailored to local requirements.

On the other growth opportunity, the growth engine, which is the North American commercial engine, that for us includes a local and federal law enforcement markets as well as the emergency response markets, such as certain rescue and fire response markets. These we will support with better partner coverage and also Headstrong product demonstrations that allow us to convert sales opportunities faster.

I want to take a moment here to talk about these demonstrations. It's probably the first time you heard that term, but Headstrong demonstrations are actually live shooting demonstrations in front of a customer, which have become a pretty powerful sales tool for us. They really are the customer. They are -- I don't think any of our competitors has the confidence to go in front of the customer and shoot the helmet repeatedly. So those we're going to continue to increase not only in North America but also internationally.

Now if you want to watch a little bit of that, I think there is a small portion of a Headstrong demonstration embedded in the video that's running outside in the product showcase.

So internationally, as we said repeatedly today, the demand is growing. Now we have been underrepresenting, Team Wendy has been underrepresented internationally historically. Now the constraint for that has not been product quality. I mean we have been very successful in selling our premium product line into several elite forces and top-tier militaries across the world. But in order for us to grow substantially into this market, we need to work on a better fit between our portfolio and the market that has different price, performance, tender requirements and local access expectations in different areas of the world.

We will address this through 3 levers: first, by developing additional product, including a variety of low-cost and specialist variants that are built from a common platform. You'll hear that term a lot today, and it's critical to our success in this last part of our growth strategy. Second, we will address that with right price, which means market and volume specific pricing supported by design to cost. And third, by local access, which means credible partners that will provide for us customer access and relationship, product content locally as well as service, follow-on service throughout the life cycle of the product. Well, of course, as we've said repeatedly, the international market is large, but requires a dedicated commercial model.

In North America on the other side, we have a strong brand. and pretty strong market presence. But our coverage and penetration in this market varies -- is very uneven across different market segments. Examples of that are the fact that more than 50% of our law enforcement sales comes from only 5 states. Also, in the fire response market, we have a very small portion of that. And finally, even in the search and rescue market where we have a very good product, a SAR Tactical, we could grow more into that market as well. The plan here is straightforward. We need to reach more customers through stronger geographic and federal coverage. That means more partners, better positioned to get us more business in those areas. We need to convert more opportunities through demonstrations, partner capability and knowledge and finally, with sales follow-up.

Finally, we need to increase customer life cycle value through accessories, complete system configurations, refurbishments, refresh, everything that will take every sale we make into a start of a customer life cycle rather than the end of a transaction.

Our technology platform gives us ways to basically execute this expansion. But we have distinct strengths in ballistic capability. We've talked about it already. Our technology gives us the ability to tailor performance weight and cost trade-offs for different needs and budgets. And all those are coupled with our unique tooling and molding technologies that allow us to be flexible and fast, bringing a new product to the market. And these unique strengths are going to drive growth by basically expanding the portfolio through tailored design to cost products through local partnerships and disciplined route to market and also using shared technology, we will launch faster and compete across more market segments.

We're also going to work very hard on expanding our accessory capability like mandibles and visors, which complete a helmet system for a lot -- in a lot of customers' eyes and build recurring revenue generations through these components as well as other replacement revenues such as accessories, pads for the helmet. The common ballistic platform is central to doing all that without adding excessive complexity.

So this is a market framing graph we put together to kind of show you how the market -- the ballistic -- we view the ballistic market. The vertical axis shows a combination of price of performance against the addressable market size on the horizontal axis. And we also have on the chart, 3 volume representative bubbles that basically represent different unique market segments. You have your international military generalists and U.S. law enforcement market, which is a huge market. You have the elite forces and top-tier militaries and of course, best-in-class, which is mostly an extension of that.

If we position our current portfolio into this graph, you'll see that we have -- we're really strong at the premium end of the ballistic market. and particularly on the elite users and top-tier militaries. And of course, that's highlighted by our rifle tech helmet, which is the highest performing ballistic helmet to weight in the industry as well as some very successful top-tier military helmets as the EXFIL ballistic. On the much larger pool of the market, our EPIC family has been very successful at the top end of that market. But in order for us to have a broader reach into that market segment, we need a different approach. That can be accomplished with a common helmet platform that will allow us to address this larger market with clear performance and cost tiers that will reuse architecture, components and manufacturing capability.

So as we expand our portfolio, our premium product will retain their best-in-class protection and low weight combination, while now our entry and midrange products on the bottom right of the graph, will provide a more competitive performance to cost proposition for law enforce -- U.S. law enforcement as well as general military and international tenders. The benefit to this is not just adding more products, we will provide a coherent family of products to the market that we compete across more of the market. They respond more quickly to a number of different tenders based on the combination of cost and performance and will direct customers to the right combination of protection, weight and affordability through that capability. The architecture here, this common architecture must remain disciplined so that it does not create unmanageable complexity. That is why the common platform design and our flow-based manufacturing will actually are going to be very critical to our strategy.

So what really is the barrier for us in the market who actually have been extremely successful in winning on protection, on comfort and on user experience. Anecdotally, we compete in a lot of tenders internationally. And part of these tenders, a lot of times, they require samples to be evaluated by the users as part of their method of choosing the right product. Of course, in many of these cases, they provide feedback back to us. I can tell you that the majority of the cases, the feedback back to us is that we far exceed any other competitor in user evaluation. However, we do lose a lot of these tenders despite how much the user loves us on price. So price -- premium price points does become a barrier to the market for expanding internationally. Our response to this now is this shared helmet architecture with common design principle, common components, common sourcing and clear performance in cost tiers. That is what our new portfolio will be able to provide. The approach will reduce our unit cost. We'll simplify configuration, will allow a broader portfolio without the proportionate overhead and inventory requirements.

The strategic objective here is to expand the addressable market while maintaining margins, inventory turns and short lead times. Common platform approach will enable this for us. We'll apply a similar portfolio logic to our bump helmets. Now in the bump market, again, our brand is strong, and it's usually associated with comfort, great comfort, great fit and excellent user experience. We will use these strengths to broaden the customer base by entering new applications. One of them could be the riot helmet application that will give us access to new customers with the idea that we'll follow up with sales of our core product to these new customers. We will also use new products such as this RECON that's depicted here to expand into adjacent markets.

And finally, even in this particular segment, we plan to increase the value per customer by tailoring configurations, accessories and replacement, refurbishment opportunities. The objective in the up market again is to serve more users, sell more relevant capability to more to each customer and participate in a large share of the addressable market.

Another chart here that shows you how we view the bump market. This market is a little bit more segmented than the ballistic helmet market. It spans many different applications with different requirements and specifications, but we identified 3 distinct groups in this market. One is the search and rescue segment that is driven mainly by the mountaineering and military impact standards. Second is the tactical bump market, that is on the upper part of the market and a big portion of it is driven by the military impact standards, but there is quite a bit of market on the lower end of that, that does not have any standards associated with it.

And finally, the fire responders in roadside assistance responder teams, this is a new development market that is driven mainly by NFPA and ASTM standards. Each triangle shape, by the way, is unique because we would like to represent with it the range of price on the height of the triangle as well as the potential volume at the base of the triangle. When we populate this map with our product, our -- SAR Tactical is our flagship helmet in the search and rescue market. We have our EXFIL Carbon, which is the top-of-the-line product that we offer in the military tactical bump market. And of course, a big seller for us has been the EXFIL LTP, which is a purpose-built for a wide range of bump capabilities. But at this point, it does not meet the military impact standards.

When we add the new products, we -- RECON brings into the industry leading protection, quality, versatility into this tactical bump market with a more accessible price point and gives us opportunity to, as I said, use it into adjacent markets as well. We also plan to introduce a roadside safety product to start accessing that untapped market for us in the fire responder and roadside safety segment.

The updated portfolio will give more entry points for customers, more opportunities to build relationship across accessories, replacements and also adjacent products. And as with the ballistic helmets, it's key to broaden this reach without losing clarity, quality or operating discipline.

So after all this, bringing back this updated product portfolio, our new market reach as well as the operating improvements that Enrique covered earlier, Team Wendy will become an even strong platform for growth moving forward.

To summarize, our growth will be fueled by 5 key drivers. First of all, our strong DoW business foundation; second, differentiated technologies that will give us the ability to strengthen and strength for future product development; a tailored portfolio approach that will expand our opportunities across more markets; a U.S. market that has clearly identified opportunities for expansion; and an international market that, as we said, has immense headroom for us, and we plan to explore it through a blend of targeted product and market reach.

All these are underpinned by our continuous improvement focus and also by this common product architecture, a common product platform that is going to be the core in our development efforts moving forward to -- and at the same time, all these are aligned with our 3-step strategy of improving the business, maximizing the DoW core and accelerate growth through the U.S. commercial and international markets. By executing this strategy, we will ensure that Team Wendy grows into a more profitable and cash-generative business while maintaining high levels of protection, quality and customer focus.

And with that, I will pass it back to Jos, who will explain how we can apply these capabilities broader and also compound value in the future.

Thank you very much, Vasilios. Great job. As I hope you've heard, we have 2 wonderful businesses. And actually, those businesses on their own will deliver very strong EPS growth of 10% or more, depending on how the step change programs go. They also generate very strong returns on capital now. So we could stop there, but our ambition is bigger than that. What we want to do is build a leading technology platform over the next decade and beyond. This involves 3 simple steps or simple to explain, at least, but maybe trickier to execute. The first is to acquire selectively. The next step is to improve the businesses that we acquire using our business improvement system. And then after that, as we gain momentum on this strategy and as we build financial firepower and people capability, we would like to accelerate and compound even faster.

I am well placed to lead the first part of this strategy. I spent 15 years buying and selling companies and over that time, led billions of dollars worth of deals. So I feel that I'm well placed to do this. And then more recently, I have focused on improving companies. Hopefully, now I can bring these 2 skills together for the first time, and we can create value for shareholders going forward.

We are going to focus on our core protection markets. We see these as fragmented markets, and we see lots of opportunity in them. In core respiratory, we see other respiratory protection companies that we can invest in, and there are lots of other helmet companies that we can invest in, particularly internationally. In CBRN ensemble, we are still quite small, although we have big opportunities ahead of us, but there are other companies that we could acquire and improve. And underwater systems, we have a leading product but it is pretty fragmented in the underwater space, and there are broader opportunities for us.

There are some technologies which we would love to buy to accelerate the business' strategies particularly in power and data, we are increasingly seeing power and data flow through the helmet and through the rails. And we're very interested in performance textiles because our CBRN suits require very high-end textiles that are difficult to get hold of. In close adjacencies, there are a number of areas where we already play, but which we would love to have much greater scale. For example, in eye and face protection, we already have outserts for our masks. We already make the MITR goggle. We also already made visors for our helmets. However, we are still quite small in this area, and it is a big category. We would love to gain greater scale there. Similarly, we do already work in the communication area. We've actually just developed a brand new VPU for our masks. And I think it's going to sell extremely well. We're seeing a lot of customer interest, and it does interface with their communication systems.

However, again, we could gain significantly more scale here, and we could offer our helmet as a system with hearing protection. That would expand our offering, and it would enable us to put more through our very strong channel to market. We are still interested in body armor, and we do already make components for bomb protective suits, but we would love to expand in that area more. And we're interested in CBRN detection systems, an area we don't play in at the moment, but it is a common customer base. So we've built an investable universe of companies. There are over 100 of them in our investable universe, but of course, they won't all come for sale at the same time. There are about 3 of them for sale right now. We're interested in them, but that does not mean necessarily that we will buy any of them. We are very focused on whether or not we can create returns for shareholders, and we have time. We are not in a hurry. You shouldn't necessarily expect to see anything exciting happening imminently.

We have developed some acquisition criteria. These are as much about what not to do as what to do. Firstly, we're interested in companies in the protective equipment space. I've just talked about that. We want businesses with similar attributes to our existing businesses. We do want to see underlying quality in the businesses in the form of customer relationships, technology, maybe route to market, patents. We like that type of competitive moats, but we don't necessarily need businesses that are performing well. In fact, what we really love is businesses that aren't being run very well that we can improve. And that leads us on to the third bit of our acquisition criteria. When we started 3 years ago, we created a transformation program, and we know roughly what continuous improvement can do for us, even more now over the last 3 years. And we modeled that and we were pretty much right. That's how we created the target for the Capital Markets Day.

When we look at acquisition opportunities, we apply the same methodology. We look at -- well, if we introduce our business improvement system to this scenario, what value do we think we can create and that tells us whether or not we can generate returns on capital well above our cost of capital within 3 to 4 years. And that is our hurdle. As a reminder, we are unusual in many ways, probably. But as a leadership team, we have a considerable amount of stock invested in this company. And much of it we bought with our own money. So we are as interested in you in generating positive returns on capital through acquisitions. And the way we think we can do that is through the application of our business improvement system.

This is our acquisition process. We have our investable universe. We will select companies where we think we can create value from them. Then we go into our business improvement system. We start by enabling them to succeed. We work with them on what their strategy is. We work with them on getting the right organizational structure in the business, and we work with them on ensuring they have the right people to enable them to deliver perhaps we go external, perhaps we work with what we've got, but we will always coach and help and train the people in a business to deliver our business improvement system. And then we start implementing our business improvement system. We may well have a suite of transformation programs. We will definitely introduce our Strengthen System. We will always move factories from batch manufacturing to flow to just in time as it's sometimes called. And as our businesses generate cash and we develop more and more people, we will look to reinvest and grow faster and faster. This is a multi-decade strategy, not a multiyear strategy.

This is our vision of compounding. We would like to get to about $600 million of revenue in 5 years. But my aspiration does go a lot further than that. I wanted to give a 10-year aspiration but all the advisers said that's a really bad idea. So I'm not going to do it, but we do want to go further we do see the ability to take this model a long way and beyond me being here because our whole reason to be is to develop people that can deliver this model. So this will survive and go on for decades to come if we get it right.

We have 2 very strong businesses. They're going to generate a lot of cash over the next 5 years. They're going to do that because the transformation stage of the journey has ended for those businesses. We invested $30 million over the last 3 years. So it was a drag on cash, partly offset by inventory turns improvement. And going forward, we're not going to have that investment. So those businesses will generate a lot of money for us. That enables us to acquire selectively if we can find the right opportunities.

As we do that, we will apply our business improvement system, and we will raise the performance of what we buy, and this leads to 2 forms of compounding. Firstly, it creates more and more cash that we can use to invest in further opportunities if we find them. But secondly, as we buy businesses, we will start developing the people in those businesses on how to apply our business improvement system. So we get more and more people that know how to improve businesses and have recently practiced it, which, over time, we think, will enable us to buy and improve with an increasing velocity.

Now Rich is going to talk to us about what does all this mean in terms of financial performance.

Thank you, Jos. You all should feel very lucky. You've got the finance guy twice. So Jos has described the strategic cycle. From a financial perspective, the most important thing to understand about the strategic cycle is that every step in the cycle should strengthen the next. Further progress in operational execution will drive improved cash flow, it will drive increased turns. And you'll see that starting to come through in cash conversion. And on top of that, a bit of organic growth. And so you get further incremental cash generation. Clearly, more cash generation equals more opportunity to invest in disciplined, sensible, high-return investments.

If we acquire businesses, the same discipline applies. So anything we acquire must have a credible route to returns higher than our cost of capital within a sensible time frame. And it must not only generate cash, which is a given, but it must also, as Jos has highlighted, generate organizational capability. This thing has got to be able to replicate and replicate. This means that compounding isn't just about adding revenue. It's about improving returns. It's about improving visibility. It's about improving cash generation and returns well -- all the while actually retaining the capacity to make the next rational capital allocation decision. So let's have a look at what we expect the plan to deliver. As Jos has kind of flagged already, we do expect free cash flow to increase over the next 3 years. So that's good. Actually, it's going to increase to quite a big number.

There are 3 drivers behind this. Number one, growth. There's quite a lot of growth in the plan. We'll cover that off in just a moment. Number two, the exceptional demands of cash through transformation that Jos highlighted $30 million over the last 3 years, that's a big number that isn't going to repeat. So that elimination adds to cash. And then thirdly, the release of further cash on the balance sheet through higher inventory turns. Even after we continue to grow our investment in the core business, we would expect all of this to tot up to over $175 million in 3 years. That cash is strategically important because it creates choices.

I'll go through the capital allocation policy in just a moment, but at the risk of stating the obvious, if you generate more cash today, that gives you more cash in your pocket to make value-added investments tomorrow. Just to try and frame this for you. This level of cash generation, assuming a sensible level of gearing equates to over $250 million of incremental investment capital.

So this is a simplistic and stylized view of how we think this organic growth plan is going to pan out. So Mr. Paige, don't get your ruler out if it's diagrammatic. But on the left, you've got the expected FY '26 outturn. You might have noticed we put out a trading update this morning. So most people are fairly clear on roughly, roughly what that's going to be. Then the green bar, what's in the green bar. This is our organic growth opportunity. There's a bit of market growth in there. There's a little bit of market share gain in there. And then there are the step change opportunities that you've just heard, Steve and Vasilios talking about. They're all in that green bar. So add it all together, that's a very, very big number.

We do suspect that we might not win everything. We might, but we might not. And we're certainly not going to tell you we're going to win until we have. So we're going to sensitize that down just a little bit. And we actually think that a sensible threshold growth rate for this business is around 5%, which gives us that 2030 organic target. And over and above that, we do expect to do some level of M&A, which then, of course, gives us a pretty high degree of confidence but we can achieve a rate of revenue growth well above that threshold 5% rate.

So on to capital allocation. Our first priority remains funding organic investment opportunities. It's by far and away, the lowest investment -- lowest risk investment we're going to make. It's a market we understand well. And again, as you've heard from Vasilios and Steve, there are tremendous opportunities to build products and capabilities within markets and for customers that we completely understand. So loads and loads of opportunity to invest there.

We also want to maintain a progressive dividend. Now beyond that, disciplined M&A and capital returns to shareholders are perfectly legitimate uses of excess cash generation. The decision will depend, of course, on the prospective returns we're going to get from our organic investment, and they're going to depend on the price availability and quality of the M&A pipeline. And as we stack all of that sort of stuff up as we go through this process, it will define how that cash ultimately gets allocated. But we will retain financial discipline throughout. So we're going to target to do all of this while maintaining a sensible view of leverage with 2 turns or less of debt.

What we want this to do is allow us to invest in -- make sensible investments that generate good returns, but without compromising resilience. This resilience supports our ambitious but grounded set of financial plans. So the boxes on the left show how we expect these businesses to perform organically. 5% revenue growth, at least. 16% to 18% operating profit margin, which is pretty enviable for a business operating in the space that we operate in. And if we achieve that, all of that will drop through to around 10%-ish. 10 percentage points improvement in EPS every year.

As I've mentioned, strong cash generation driven by elimination of transformation plus freeing up of cash on the balance sheet through increased inventory turns, $175 million. That gives us a lot of money to invest in sensible value creative and maybe even inorganic investments. which means that we end up with a view where we have a clear path to generating in excess of $600 million of revenue, annually, 5 years from now. The point around maintaining capital discipline is that ROIC point. We're not going to drop below 18%. And in fact, until such time as we see sensible investment -- sensible acquisitions come our way, we're going to be materially above that 18%. And of course, if we deliver this plan, what that will drop through to is EPS growth well in excess of the 10% contemplated by the organic plan. So these targets are ambitious, but they are grounded in the businesses we have today and the opportunities we see in front of us.

And with that, I'll hand over to Jos to summarize the investment case.

Excellent. It's good. I think we're going to deliver the CMD presentations just in time for drinks at 5:00. So our strategy is improve, grow and compound. That's the strategy, and it is the investment case. We're going to improve our existing businesses. We're going to grow the existing businesses. And then we're going to apply both of those skills to potentially acquire and improve other businesses. Our overall vision is to compound EPS growth somewhere in the teens, and I'm sure our Chairman will be aligning our incentives to that ambition, and our ambition is to keep ROIC at a strong level. We see those 2 metrics as synergistic and important to us. And we have the team that can do this. We spent 3 years improving businesses, and we spent 3 years codifying our improvement system. So we have literally hundreds of people that understand how to do this, and we're going to leverage that to help us accelerate. We have 2 fantastic businesses already.

Avon Protection is the global leader in its field and Team Wendy, amazingly actually, has gone from really quite a small player to probably the joint #1, certainly in the top 2 in the U.S. ballistics market. Now it needs to repeat that trick internationally. And the markets we play in are very supportive. We're swimming with the current, which is certainly better than swimming against it. Our businesses have durable competitive advantage. Rich has gone through that, but we do see resilience in our market positions. And we think we can grow above our markets because we've got a suite of opportunities, many of which are very material. Not all of them will work out. But we think there's enough opportunity there that there's a good chance we can grow these businesses above 5% a year.

And the businesses are going to be very cash generative. We've got the strengthened system already working to improve inventory turns and the transformation investment in those businesses is now over. As they grow, they are going to generate a lot of cash. In this business, there is no contract accounting for the analysts in the room. So profit and cash are very similar in this business. We are going to use that cash to reinvest in a discipline to if we can see opportunities to buy and improve other businesses. And our ambition is to keep compounding value over the years and decades to come for our shareholders.

So with that, I will open it up to Q&A. I will ask my colleagues to join me on the stage that they can fill any difficult questions.

And we're super excited to talk about the strategy today. We're slightly less excited to talk about FY '26 numbers. We've given you a clue about what they are. That's about as much as we know. So if we stick to strategy questions, please.

It's Henry Carver from Singer. Just one around capital allocation, innovation spend, CapEx spend I mean it feels like still very much all the spend is linked to specific opportunities that you see. I mean, you could say sort of reactive in terms of what's coming down the pipe. But I sort of had the impression that maybe you were going to start spending more on things that perhaps weren't out there yet that you could take to customers like the DoW and others. And just can you give us a feel for kind of -- I mean, probably not in percentage terms, but just roughly how that's split between the sort of product and reactive.

Do you want to start on that?

I think you go for that, it sounds complicated.

I mean the point I made, we're not standing up here just a few moments ago, investing in the organic business is by far and away the lowest risk investment we can make. We want to do more of it. There is a lot of it contemplated in our plan already. So if you look at those step change opportunities that Vasilios and Steve were talking about, those are all funded to some degree already in our plan. We know we're not going to win them all or we don't know. We're not going to win them all actually, but we suspect we might not. And so we're disciplined in the way we sort of let the rope out on funding those programs.

But the suit is a classic example. This was a relatively new opportunity only 12 months ago. In the spirit of U.S. government procurement, we would expect that to arrive at a purchasing decision sometime in the mid-2030s. That's not what's going to happen on this program. It's considerably accelerated. And so we're accelerating our commitment to it at the same time. So organic investment, there's a lot of it assumed in the plan. So in other words, at a higher rate.

Quite a lot of it is customer funded. Some have -- both divisions have a lot of customer funding, probably, the biggest is actually Vasilios' next-generation helmets or the new threat that we're working towards, which is to stop -- I'm not allowed to say it. It's a -- I'm not allowed to know it, but it's a much more difficult bullet to stop and Vasilios is working on developing the technology that can do that. But it's funded by the customer.

You did talk about CapEx, by the way, we don't see the need for a lot of CapEx. We find that if we maintain machines well and if we reduce the tool change over time, and if we reduce the cycle times, then all of that increases capacity without needing a lot of new kit. So I think CapEx will sort of stay broadly in line with depreciation probably.

Using wisdom before money.

Yes, that's the mantra, internally.

It's Richard Paige from Deutsche Numis. I think I've got 3. I'll work my way through to see how well you answer on each of these. First off, the margin guide. So if we go back to the CMD in 2024, I think you gave yourself quite a bit of wiggle room, which has proven to be very conservative. What are you thinking in terms of the 16%, 18% because that is quite high as a largely defense supplier. What's the customer equation in that?

A lot of our sales are actually commercial. So -- and all of our military contracts are what they call bidding contracts. So they're not cost plus and therefore, we're not constrained by government accounting. We think we are the most efficient manufacturing. So therefore, we would expect to generate a greater margin. And our philosophy is that we set our pricing at the market price, whatever that may be, we obviously try and win, but we try and get as close to the market price as we can. And then we work super hard to make sure that our cost base is such that we make very good margins on the products. And our view is the customer should want us to make good margins because it enables us to invest in the future and makes us a strong supply. But we're not pushing them beyond 18%, though because there is a point where they might start going a bit unhappy.

And to Henry's point, we do want to keep investment in the business. And we don't capitalize a lot of that investment. In fact, we've capitalized a very, very small amount of it, is a drag on earnings.

And I think in the helmet side, there is at least one contract you inherited, it's got repricing opportunity.

There is, definitely. There's a big gap. So the ACH program has 2 competitors and our price is significantly less than the other competitor. And then actually interesting, the DoW made a small award to a third helmet company. It has subsequently been canceled, but it was at $700 a helmet. So substantially above our price. It is actually double our price almost. So we think there's probably room to increase the price in the next round and still win the biggest share, but we'll see when we go there. I mean our job is just to make sure we are super efficient in manufacturing and then -- enable us to win.

Next question probably go to Steve. In terms of the M50 mask, I had -- I did a double-take up 20 years in service because it reminds me how old I am. But if I recall, the replacement demand hasn't been as strong. The products, obviously being very good in the field. Is the 20-year top line natural essentially one of the replacement demand at the moment for that?

Yes. that's that 150,000 a year statistic I threw up. So 20 years is about the useful life of the respirator. There's some mix in there. Some of those 1.8 perhaps haven't been deployed as effectively. So don't take -- we're going to see at least 150,000 a year. Don't take that as red. But certainly, we're expecting that to increase compared to where it has been. And as I said before, the other competitive parts are in there, we remain sole-sourced that mask is going nowhere certainly in the near term. So yes, we do see a ramp-up in replacement demand.

And then last one on the acquisition side. You're clearly showing you're performing very well for a key customer, DoW. You've obviously got a range of areas, it's quite fragmented there. Is there any push one way or other from the key customers for you to do these acquisitions?

No, they don't really look at the industry. like that. I mean, conceivably, if someone was struggling, they might say, could you buy them and help them, but we're not seeing that.

It's Afonso Osorio from Barclays. I have the first question on the free cash flow. Once you get to your inventory turns targets, what's the structural free cash flow conversion in the long term? Because I obviously have these tailwinds now coming for you, but longer term, what's the actual structural cash conversion? Because Jos, I think you touched on is point I don't think you're similar to all the defense names in Europe to the extent that they need contract prepayments, justify that free cash flow generation. So I was just curious to see longer term, what sort of free cash flow conversion you have for the business?

You've given us a bit of a gimme there to answer a question that helps us. So I'll let Rich do the detail. But on your big picture point, which we're very supportive of, we hardly have any prepayments. So we're not like a normal defense company that gets a big prepayment at the beginning of the program, and then they do a lot of work and they effectively burn it down. We make product, we ship it, we get paid. That, that is as simple as that. The DoW pays very quickly. Some other militaries who I mentioned pay a bit slower. But generally, there's a pretty quick time between shipping and payment. And there's no contract accounting, there's a very little prepayments. It's -- this is a very simple business. Revenue translates to profit and then it drops through to cash in a straightforward way.

Yes. Profit minus cash profit equals cash minus timing, basically. So super straightforward. That step from 3 turns to 5 would drop through about $45 million. So it's not an -- it's not nothing at. And we tell you 5. As you know, we set somewhat different targets internally. We're not aiming for 5 internally.

Right. And maybe one for Steve, if I can. Like in terms of your U.S. opportunity in market, you're the sole supply in a lot of these opportunities in markets. You just said that you don't see any strong competition coming through in the short term. But longer term, how do you see the market evolving over the next 5 to 10 years in the U.S.?

I think in the U.S., the big program for us is that next-gen respirator depends why we're involved early in that, and we're using that relationship as Casey talked about with the user to make sure we're well placed for it. But I think, yes, we've been very successful in the near term sole source on the masks, as you rightly say, Jos mentioned, we previously would have been 60-40 split on filters. We've made some good moves there. We won the last filter orders, 100% order to us. 0 went to our competition. We're not guaranteed that we're going to maintain that, but we're certainly going to do our best to try and maintain that on filters as well. So I don't see M50 or the M60 being displaced anytime soon. You can disagree with that, but I don't think that's going to happen. Longer term, yes, it's important for us that we secure our position in that next-generation respirator program.

Joseph Edwards with Fidelity. It's a question for Vasilios on your platform in a Team Wendy piece, which is it looks great in the presentation, and you've got pictures of the helmets, but like how far advanced is the program of making each of these different ones for the different segments? Are they already fully designed and ready? Are there -- or is it like more there's a couple and in principle, it should be okay? And yes, the development of them?

Yes. the development has started. I would say that one of the variance was driven by an international tender is much further along than the other variants that we're designing for. But because they're common, we have to bring all of them along to a certain stage because we need to commonize all the components that we're going to use, tooling, things like that. So we're -- I want to say that we're probably very close to having enough information across all the variants to lock down the commonality of the platform.

Toby Thorrington from Equity Development. One for Rich and one related, I think, for the 2 divisional heads. So just on the $175 million cumulative free cash generation. Just to be clear, from the slide, that's after tax, right?

Yes. It is. Yes, tax is on the slide. It is on the slide, yes.

So that's -- if you assume that receivables, payables days stay about the same, which doesn't seem unreasonable, that suggests that inventory has got quite a bit of heavy lifting to do to get to that number?

We haven't assumed the full $45 million, but if you look at the size of that working capital bar, it's not nothing.

So should we expect no growth in inventory? Or are you talking about generating cash from inventory from current levels?

Well, I'm going to give a really unhelpful answer to that, which might not surprise you. We've given you a threshold growth rate, and we've kind of painted a picture of an aspirational growth rate. And I don't know where between those 2 lines we're going to end up. But the answer will be informed by that.

Yes. Okay. Helpful. And relatedly, on the inventory front, I'm interested to know perhaps in both divisions and take FY '23 to '26 and your 5-year strategic time horizon, where there's been a strategy of in-sourcing more components over that time to increase the control over the process, I guess. or whether more has gone the other way and you've got more trusted suppliers and whether there's any difference between the 2 divisions?

It's a good question. Do you want to start?

Yes. I may have -- I may answer that actually. It's a good question in the sense that we're thinking of the same thing. So we would like to in-source more. As I probably mentioned earlier, we are different in many ways. And one of them is that we actually don't think outsourcing is a good idea. We think in-sourcing is a very good idea. And Steve maybe can talk about his specific project to in-source in a second because it brings color to this. But conceptually, we like controlling the end-to-end value chain, and we're already unusual that we take raw polyethylene and we make it into helmets and we take raw rubber and we make it into masks.

So we're already vertically integrated, but we don't make everything. There's plastic components we don't make and we could. And there's other components, which Steve can talk to, which we could make over time. So I think the more we in-source, the more we shorten the supply chain, the more we reduce WIP from the process, the more we enable ourselves to respond quickly to customer demand. So we do like that as a concept.

And Steve, do you want to just talk about a real example.

If I may, just before, there's a couple of comments that you can add on to that. I mean, Jos referred to the WIP. That's super important internally. And getting to 5 turns of inventory, that's kind of well within our gift. If we're going to legitimately take that further, we're not going to do it without the supply chain. So to get from 5 to 10, 10 to 15, you need full buy-in from your supply chain or a tighter control of your supply chain in whatever form that takes. And we have actually got an example in Team Wendy where we've done exactly that. I wouldn't be so bold as to call it an in-sourcing strategy.

I think it was kind of driven by other factors at the time. But Team Wendy, when it was acquired back in 2020, sold the ballistic helmet, but Team Wendy didn't make ballistic helmets. Team Wendy bought the shell of the helmet from a third party. We now make all of our own ballistic helmets, including that one. Sorry, Steve...

Steve, do you want to...

Yes. I guess there's a couple of points I'd make on it. In terms of the actual in-sourcing part, the program that Jos is referring to, we do an outsert that goes around our masks. It's -- initially, it's a clear outsert that prevents scratching the visors and things. So because of some supply changes we've got there, we are now embarking on in-sourcing that product. And that's going to be our first foray into plastics molding and optics molding. And like everything in this business, that's going to be fun. I'm sure we're going to have a good time along the way. But that's the first part of some real sort of vertical integration we've started to do.

I think the other point Rich just touched on is as our Strengthen system has become that powerhouse that it has inside the organization, certainly, within protection, we've now increasingly deployed that into the supply chain. So it's not necessarily vertical integration. But we found it really powerful to work with suppliers and say, "Hey, look, this is something we're good at. You're going to see some of these changes from us in terms of the way we want to order from you, the way we want you to deliver to us.

So we're going to help you. We're going to teach you some of what we know. And the feedback from the suppliers has actually been phenomenal. And we've deployed that in a number of different areas through that core business around respirators. We've increasingly started to deploy that for us in the textiles area, for example, around suits. So we are very interested on the acquisition front around further vertical integration where it makes sense, but then also how do we deploy some of that super power that we've got through Strengthen into our supply chain. And that just flows back. That's better for everybody. We win, the suppliers win. Yes, it's a powerful system.

Thank you very much for the last 3 years. I was at the last one. I'm a private investor. I think you've done a sterling job compared to many other organizations. So all of you, many thanks indeed. Then 2 questions. Inflation is everywhere. Can you pass that through? Or do you have to absorb it?

It's a very good question. Certainly, in our commercial product arenas, we have pricing power that we can push through inflationary pricing. We do try and deal with it another way, though. Where we have obvious exposure to inflationary cost pressures, and we have consistency of expected output, we will try and lock our supply base into a pricing regime, which is excluding inflation.

Now if we then get hit with the inflationary pricing, we can pass that through on commercial products. There are a range of contracts that we have where we frankly don't have a huge amount of wiggle room to put the price up every year. We're quite open about which one of those are. So for example, ACH would be the biggest single one that I can think of. That is a fixed price contract 4, 5 years.

Jos has already explained the dynamics of that, where we're already materially cheaper than the competitor. And clearly, that is coming up for a repricing opportunity soon. But in general, we get -- we have a fairly significant amount of opportunity to pass inflation through.

Yes. And that contract is back to back, by the way, in the polyethylene price. So we're not subject to inflation on the biggest component of...

Secondly, listening to the Team Wendy current business and aspirations, it sounded to me as if you're really the Porsche, you're right at the top end in terms of your technical capability, et cetera. I don't fully understand strategically why you also start to want to make Volkswagen and Skodas and smart cars and whatever else.

Yes. I'll take that. I think the key here is growth, volume. There are so many Porsche you can sell. And for us to continue growing at the levels we want to grow, we want to make sure we capture more levels of the market. Now it's very clear that part of our strategy here is to make sure that we keep that very clear distinction between our Porsche line and our Volkswagen line and also make sure that the cost that we design into our Volkswagen line is proportionate to what we want to sell it for.

I think all of that is absolutely spot on. But your analogy isn't also quite right in the sense that the Americans want -- all want Porsches and they'll pay for it. And the international markets don't want Porsches. They all want Volkswagen. So we don't make any Volkswagen. So if we're going to access the international market, we're going to make Volkswagen. That's probably the better way of looking at it. But we're not going to try and sell the Americans Volkswagen. We're going to keep selling them Porsches. And Vasilios is going for the next generation of even better Porsche.

Lamborghinis.

Yes, exactly.

And one other comment on that, I think it's a great question, by the way. The one other comment is if you look at what the Strengthen system is all about, the ultimate goal is to make ourselves the most efficient producer of helmets in the world at whatever price point that is. That will help us to develop the platform of products that Vasilios was talking about design to cost that addresses the needs of a multiple -- of a multitude of different users.

And that doesn't sort of bump into the fact that what you're describing is at the moment, we are the producers of the best products in the categories that we work in.

I'd like to take that, too. I think that even in that new range of products that we will produce, we will still be the producer of the best product for that category. We're not going to lose our leading position. We will try to bring the best product to that market from a performance to weight perspective, but design it in a way that we can keep our costs low and our margins high to be able to compete in that market and get us a good profit. So we still are going to approach that market by the fact that we will bring to them the best performance, the best fit and the best comfort.

I think you're probably next, Andrew.

It's Andrew Humphrey at Peel Hunt. I've got one for Steve that he might not thank me for. But on the 4 step change opportunities in protection, I'm not going to ask you to kind of go through them and kind of itemize your chances on each, but would you say they're all the better than even chance?

I think we've shown you those 4 programs, and I tried to articulate we truly feel we're well qualified to play a part in those programs. I'm not going to sit here and tell you where I think our chances are going to be. But I do think we are very credible and I also talked about how we deploy resources into those programs. That shows you quite how seriously we are taking them. And we are dedicating our people to be focused on winning those programs. So I can't guarantee we'll win all of them. Weird stuff happens in competition. I've seen it many times in my career. I can tell you, we are putting absolutely everything we've got behind them.

Great. And then on Team Wendy, clearly, the sort of move to ship more types of product to more types of customer in a kind of, in a non-Avon Technologies world, I can imagine a scenario where that leads to increasing number of SKUs, upward pressure on inventory, more complicated production lines. Clearly, that's not a world that we're looking at. But is there anything fundamental or are there additional changes that need to happen on the production line in whichever factory you'll choose for the specific operations to, I guess, mitigate that risk?

Yes. As I said, the whole part of the -- for our strategy to work is to develop this common platform to mitigate that risk, commonality of components to keep our inventory at acceptable levels. We're not really creating a wide range of completely different SKUs. We're creating a wide range of different tiers of product, but they have a lot of common components.

So that's going to reduce the complexity and also work well in our factory where things are -- there's a flow in our factory and little changes on the product are the manufacturing capability is flexible for that.

An important point. I'm just going to illustrate it in a slightly different way. Vasilios is right, and we're going to try and minimize complexity through the common platform, but we're also unique amongst our competitors in being able to deal with complexity because our helmets. So polyethylene comes out of the warehouse and goes on the cutting floor and 3 hours later, it's a helmet. So we can make to order, whereas the competitor, that is going to take a month because between every process, the part built product goes back to the warehouse and then some ERP system tries to pull back out again to schedule it to another process and so on in a month or longer probably. If they're like us 3 years ago, it would be longer than a month, it takes an ages to change. And then the other thing is we've worked relentlessly on tool change in both divisions actually.

So it used to take an entire shift to change the tools in press in Steve's business and in Vasilios', and now both businesses have got that down to less than half an hour. So we can change the tools, change the helmet very, very quickly, and we can make the product the customer wants. And that's why we'll win against the competition.

It's Charles Spungin from Investec. Just got a couple, maybe just to start with a relatively straightforward one. You obviously talked about a ceiling of 2x EBITDA for debt. Is that kind of hard ceiling? Or would you go above that for the right deal? Would you consider the use of equity if necessary?

So the -- there's no such thing as a hard ceiling. Our view is that we should be able to deliver the plan we've articulated to you today without going above 2x net debt to EBITDA. On using equity for the right deal, if the right deal comes along, we'll let you know, but we've got no plans to do that.

And then...

Before you go on to your next question, there is an interesting point here, I think, that obviously, debt is a lot more expensive than it was. Historically, I mean, in recent times, we would be competing with private equity on all of these deals. And that might stop us finding opportunities where we can create value.

But as the cost of debt goes up, hopefully, they are going to be less competitive and we can find more opportunities. And bear in mind, this is a long-term strategy. We actually want expensive debt because it hopefully will remove some of the competition for the quality assets, and we're not going to gear up very significantly.

And then the second one is just around the sort of sensitivities on the 5% plus revenue growth target. I mean, could you just sort of give us a little bit more color around some of the assumptions that underpin that? Have you said, for example, that I know historically, the market has grown at 5%, and we're assuming it grows at 3% or we've historically won 80% of the things we bid and we're assuming we win 60%. Just in terms of getting a bit of color about around where that could go.

Around where that could go? Yes. It's a decent question. Funny enough, the 5%-ish hasn't really changed. It's survived the last 3 years, although we haven't actually delivered 5% in any one of those 3 years. I think we've averaged 13% over the 3 years. And the assumptions actually that fall into that 5% haven't changed materially either, but we have had a supportive market.

Now we know that the market -- actually, when we set the targets, we thought the market was growing at 3% to 3.5%. And we said as much in the Investor Day 2 years ago, it's probably grown at 4% to 4.5% because of the load of exogenous factors, some of which were on my little sort of explosion chart on the slide. We don't know that that's going to continue, but the long-term average is 3% to 3.5%, and we think that's an appropriate benchmark to use. That's point one.

Point two, we've run through a number of those step change programs. There were 4 that Steve pulled out. There are actually others in his business, but the 4 that we pulled out and the 4 that we think are most relevant. There are a number in Vasilios' business as well. We don't know how successful we're going to be, but we think that we've got a good chance of being able to offer a credible voice on all of those things.

What I have done is I've kind of sized the top end, if you look very carefully at the chart. I do recommend you don't get your rubber out, but it has got a line at the top that gives you a number. So there's a range of outcomes. We don't know where that is, but we think a sensible threshold is 5%, and it's using sensible assumptions.

And then just a very quick question on Team Wendy. In terms of the capturing the international opportunity, do you feel you can do that out of the current manufacturing footprint? Or do you have a plan for how you might have to sort of accommodate international customers if that became a big part of the business?

Yes. We believe that our current capacity has significant growth opportunity as well as we continue to improve our manufacturing, we have managed to free up probably 100% of capacity over the last 2, 3 years of our continuous improvement process. It's incredible. And I can tell you this from experience. I came out of our Salem facility when Jos first stepped foot there, he looked at the facility. I told them we could use another big press. And he says, "Oh, you have room for another big press. I'm like, look at us." He says, well, run through this process, and you'll see. And thank God, I didn't bet any money on because a year later, we did not only have an additional press, we had 3 additional presses into that facility. This system continuously gives us more room to grow from with our existing capital in terms of capacity. So yes, I believe we're well positioned to take a lot more volume in the coming years.

Do you want to talk about localization in Europe?

Yes. At the same time, we -- as I mentioned in the market opportunities, there's a lot more push, particularly in the European community for more localization. Well, our approach to this is that we're going to try to find the right partners to localize, but we're not going to let go of the core part of our product. We're going to continue manufacturing that in our current facilities, and we're going to offload maybe some of the end part of the product that will free up even more space for us if we need it.

Of course, if you need a footprint in the U.K.

Yes.

I'll do a good deal.

This is where I need to make a joke about the U.K. reentering EU.

It's a bold strategy you've set out today matched only by the boldness of the socks on display, actually. For the Vasilios, I think you're a work in progress. You're...

I did not get the Avon...

You didn't get the memo, yes. Just when you're talking about vertical integration, if you kind of go back before your time or before the 3-year period, one of the issues surrounding the business was the supply chain. And obviously, you mentioned the kind of move towards vertical integration. Can you just give us an idea of how far down that path you are? And is the kind of end game totally vertical integration or other things that just -- it doesn't make sense to go all the way, is it worth?

We're actually already pretty vertically integrated. And as Rich mentioned, the big step was that shell production used to be outsourced, and now we do it all ourselves. So we do go all the way from raw materials to finished product already. The main thing that we are not vertically integrated in is plastic injection molding. It is a commodity. Lots of people do it, but we may still build that capability because of our desire for fast response times from our supply chain. But other than that, we are already pretty well vertically integrated.

I'd like to add a little bit on, what you just said is great. But we're actually more vertically integrated in the helmet system itself than any of our competitors in the U.S. because we produce our own pads and our own retentions, which is something that's very, very strange for a U.S. manufacturer. That's typically something that you outsource. In many cases, you outsource outside the country. So we have that as a huge advantage for us.

We actually do all the sewing ourselves. We have maybe not 80, 40 sewers in Cleveland and one factory -- actually, Cleveland is really a campus. So there's actually 2 factories, ballistic shell manufacturing and pads and retentions and the shell manufacturing side pulls from the other factory, the retention side. So as it makes helmets, it pulls retentions from them and they make the retention. So it's all integrated. It's very cool. And we flowed all the sewing lines. So we know that no one else does this. So we've been to see the professionals, and it's all batch manufacturing. So we could sort out sewing houses as well, but it's not top of our worry list.

Jos, it's Rob Manning from TrinityBridge. Would you agree that buying a body armor business would come with higher reputational risk?

I mean I obviously understand why you should say that. So I mean, actually, I don't -- body armor might not meet our requirements on durable competitive advantage because polyethylene plates are actually quite easy to make. There is a high end of it with technical clothing as well, which could be potentially interesting. What we certainly would not do is buy a body armor business that only had one program and a program that they weren't qualified on. But that is not typical of body armor businesses. Most body armor businesses in Europe have lots and lots of customers, a broad customer base, broad product portfolio. They don't have that downside.

So I'm not going to say we would never buy a body armor business, largely because a lot of helmet businesses come with a body armor business. So you might get one accidentally. But just because one program did not work out, does not mean the whole body armor industry is a bad industry.

Good afternoon, ladies and gentlemen, and welcome to the Avon Technologies Plc Interim Results Investor Presentation.[Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Avon Technologies Plc. Josh, good afternoon, sir.

Good afternoon and afternoon, everyone. Thank you for joining us. I'm Josh Sclater, I'm the CEO. And on my right is Rich Cashin, the CFO; and on my left is Steve Elwell, who runs our Avon business. And we'll take you through the slides. They are the slides that we gave at the results, but we will try and go through the narrative maybe a bit quicker than we do with the results. It was a very good first half for us. We delivered very strong revenue growth, strong profit growth and excellent margin progression. We actually moved our margin into the target range that we originally set for 2027. So we delivered it 18 months earlier than originally planned. We are now getting to the end of our transformation program. It was always expected to be a 3-year program.

It will end as anticipated at the end of this year. It has involved a lot of heavy lifting for the team that you see in front of you. As that comes to an end, it does free us up a bit more to really focus on organic growth and potentially, if we found a value-accretive idea, we would look at buying and improving other companies in our space. We do have a strong balance sheet. It continues to get stronger, and we anticipate it will get stronger still as we go through to the end of this financial year. This does give us some latitude either to look at acquisitions or if we couldn't find anything to return capital to shareholders.

So with that, I'll hand over to Rich, and I'll take you through the financials.

Thanks, Jos, and thanks, everyone, for joining. So as Jos said, we've had a strong start to the year. We've made some good strategic and operational progress, and that's starting to feed through into a pretty strong financial performance.

Headlines are order book is down a bit as we work through the military backlog, and we'll talk about a bit more about that in a moment. But revenue is up 7%, operating profit is up 39% and EPS is up 45% compared to the same period last year. The standout number for me though, given that my preferred measure of performance is ROIC is that our return on invested capital is up 450 basis points to over 20%. This puts us comfortably ahead of that 2026 goal of ROIC of over 17%. Cash conversion wasn't particularly great at 38% but we did have a late flurry of deliveries in March, which pushed the receivables balance over the balance sheet date. We actually received $18 million of cash very early in April. Had that been captured, cash conversion would have been 100%. Notwithstanding all of that, net debt to EBITDA at the end of the half was still around 0.9. So the balance sheet is in great shape.

So looking at the P&L, as usual, comparatives on a constant currency basis, but order intake of GBP 118 million was down on a very strong first half last year. We have got a very robust order book of GBP 220 million, which covers us well into 2027 and beyond. Revenue growth of 7% up to $161 million with particularly strong growth in Avon Protection more than compensating for a bit of a slow start in Team Wendy. That's dropped through very nicely to operating profit, as Josh said, within the 14% to 16% guidance range of 15.2% or $24.5 million. Finance costs came down again, reflecting the lower average net debt. So that gives us adjusted EPS of $0.564 up over 45%.

The dividend is going to move up about 6.5%, which is broadly in line with the increase of the full year to $0.081 per share. Within Avon Protection, order intake dipped a bit, but that compares to a very strong first half in 2025, where we benefited from about $30 million worth of what we would class as one-off or unicorn orders, including some support for Ukraine. If we strip those out, you can see that actually the underlying momentum is continuing to progress strongly. And in fact, we announced an additional order on Wednesday with the half year results for a $14 million filter contract from the U.S. Department of War, and that will be for delivery over the next 12 months.

Order book is continuing to grow at $112 million. And that's quite significant because historically, this business has had a very low order book. It's a fairly fast in and ship business. So we've got enormous confidence in the second half and beyond in this business. Revenue growth of 23% reflects excellent underlying trading, particularly in relation to our European contract, the NSPA contract, where we acquired an additional 2 nations. And the drop-through to adjusted operating profit gives margin of over 22% for the half. That is exceptionally strong. We benefited from some product mix. And we also -- the margin was flattered to an extent by -- whilst we have a desire to continue to grow investment in growth around R&D and new product introduction, it's very hard to grow that investment at the same rate as revenue growth when revenue is growing over 20%.

So I do expect those factors to normalize over time, but a very strong first half. Team Wendy has actually made a lot of strategic progress in the first half, but not all of that has flowed through to the numbers yet. Order intake did decline and we're burning through the order book. We do see that as a bit of a positive actually because whilst we have very strong order cover on the DOW contracts well out into the middle of 2027, the Department of War is not motivated to give us any more orders until we start delivering the ones we've got.

So the quicker we can deliver that backlog, the sooner we will get new work. And I'm sure Josh will talk about that later. Revenue, therefore, was held back. We did have that slower ramp-up than planned in the first quarter, and we saw some commercial softness as the grant funding in the U.S. was held back by government shutdowns. We are seeing recovery in all of the above, and we are now up to full production rate on both ACH and IHPS. So I do expect to return to growth in the second half and for the year as a whole in Team Wendy -- what I will say though is that the improvements we've been making over the last 18 months are now starting to feed through to operating profit, which is up 100 basis points to 5.4% in the half.

And then just before I hand back to Josh, it's worth stepping back given some of the changes in the world we're seeing around us and looking at some of the longer-term growth opportunities in our markets alongside the sort of near-term stuff that I've just been talking about. The geopolitical environment has certainly shifted materially over the last few years.

We're seeing more conflict now than we have since World War II. This is clearly driving higher investment, particularly in Europe as Europe moves to a reinvestment cycle and the U.S. adjusts its positioning within NATO. In the near term, demand has been reinforced by the conflicts in Ukraine and the Middle East, both of which have highlighted the continued use of conventional warfare and the increased threat from chemical weapons -- so what we're seeing is defense budgets are going up and the amount of money in those defense budgets that's being diverted towards CBRN equipment is also going up. On -- so that certainly helps Avon protection specifically.

In Team Wendy, improved ballistic protection remains a key theme with increasing numbers of military and first responder people and increasing gun crime, particularly in the U.S. driving upgrade cycles. And then on the right-hand side of that chart, very high-level view, but you can see that the trends in all of our key market growth drivers are moving in the right direction and at a stronger pace than they were last time we did this analysis 2 years ago.

I'll now hand back to Jos to run through an update on our strategy.

Thank you very much, Rich. So just a reminder of our high-level strategy. The first part of the top left is that we continuously strengthen our businesses through our strengthen system, which is -- it's our own proprietary version of continuous improvement. We are still running 2 projects on transformation. One of them is to increase production reliability in our Cleveland farm, and I'll talk a little bit more about that in a second. And the second is improving our IT function whilst simultaneously reducing the cost of it, which sounds counterintuitive that we can do both.

But in fact, what we found is that it was less efficient than it could be and less effective than it could have been, and we're addressing both of those. It will lead to a run rate saving of $1.5 million or so once we've completed that project. It is going extremely well so far. Advance is all about building sales capability and developing products that deliver medium-term growth. And revolutionize is all about investing into long-term projects. And by that, we really mean projects that are unlikely to result in revenue growth for at least 5 years.

So we're looking really in the 5 to 10 year period there. We'd like to keep an eye on that to make sure that we are investing into developing products that drive growth in the long term for us. This slide just shows how we see continuous improvement. I think people sometimes assume that the benefits of continuous improvement are linear. We actually see the benefits of continuous improvement as exponential because each improvement adds to previous improvement. So it does compound over time.

We've seen that in Avon Protection, which is entering Phase 4 now that it's some way up the curve and has had extremely good results and its margin now is up to over 22% operating profit margin. Team Wendy is earlier in its maturity. It took a bit longer for us to embed the culture, but we do now see it starting to improve every single week, and we're very happy with the capability we've got there.

So we do expect to see further improvements coming through with increasing pace in the future. This just shows how we've delivered opposite the nonfinancial metrics that we set out 3 years ago now. We originally wanted to increase productivity by 35%, and we have delivered a 44% improvement in productivity so far, and it's perhaps worth bearing in mind that originally that target was for next year rather than this year. We do believe that productivity ultimately equals wealth, both for our internal people and most importantly, for our shareholders. Scrap rates have come down 62%, again, exceeding our target 18 months early. They have actually crept up a bit recently, although not really through our fault one of our -- we were forced to change a supplier, critical supplier actually because they stopped making the product that we needed and the quality of the new supply is not yet where we want it to be, but we are working on improving that, and I'm sure it will come down in the second half. And then on inventory turns, as you can see, they have steadily increased.

At the moment, we're actually more focused on improving production rates in Team Wendy. But over the medium term, we're aiming for a target of 5%, and we are still aiming for that target and we'll look to make more progress next year. Production rates are important to us in our Team Wendy business. The higher the production rates, the better margins it makes. And also in the first half, we had a situation where we recruited people in the first quarter in order to increase production rates in the second quarter, which did mean that productivity temporarily dipped in the first quarter and margins were there.

IHPS has been steady. We're already making at the rate of the customer demand. We have, however, achieved the rate we need on 1 shift, whereas formerly it used to be on 2. And on ACH, we've actually doubled production over the last 6 months, and we are now hitting the rate that the customer wants and actually, it's the rate that we've contracted to demonstrate that we can deliver as well. We were contracted to deliver at 9,000 a month. And in March, we actually delivered 9,800 a month.

So we've exceeded what the customer wants us to do. We are the only supplier, I think, to hit the contractually required rate at the moment. Just a quick summary of what's driving growth across the business. As Rich mentioned, the threat environment is increasing. I actually see it, there is a question on the change in government affect demand. The answer to that is not really. Demand for a business like ours is really driven by the perception of conflict.

At the moment, Russian aggression, Iranian intransigence, and the potential for Chinese aggression most notably against Taiwan. All of that increases the threat environment and then governments respond by increasing spend on defense. And then in addition, we do sell into the police market.

The threat of civil unrest in the U.S. and increasing gun crime also provides demand for us. We continue to drive competitive advantage through continuous improvement. We see continuous improvement as strategic because we believe that by improving every week, we create enduring competitive advantage versus our competitors, and it enables us to win more business by ensuring that we are cost competitive.

We continue to expand our portfolio. Steve will talk more about that in the context of Protection, and I'll talk about it in the context of Team Wendy. We have invested a lot into the sales team recently, most notably the international sales team. And when we say international, we mean outside of North America, and we are diversifying our business into adjacencies and Steve will touch on that in a second.

Okay. Thanks, Jos. So as you've already heard, quite pleasingly, Protection continued its growth journey. Revenue was 23% up, order book increased 19% pipeline ahead of us is at record levels. Just a few examples on this slide. Demand across NATO remains really strong, and we now have 16 nations purchasing the FM50 respirator under that NSPA contract. Earlier in the year, we announced a $30 million order in the Middle East. It was a new customer for our filter products. We're very, very pleased to have won 100% of the latest Department award for filters that was worth $14 million. This was the one that we announced post close of the half year period. So you can't see that reflected in our results. This program is particularly exciting as it's the first time we've secured full filter program for what is normally a dual source award.

Later this year, we will launch our new digital voice protection unit, which improves speech clarity in the demanding operating environments our users operate in. You can see the pipeline on the screen. It's very strong and units are already in quite advanced trial stages with military users around the world. And then lastly, the pipeline for our next-generation power and supplied air systems looks great.

We expect to receive independent European certification for our latest supplied air system fairly soon, and that will open up a broader market in the European defense market. Part of our growth strategy as well as the core I just talked about is expanding protection into the adjacent markets.

In non-Chem/bio, we were delighted to secure a multiyear Canadian Armed Forces contract for MITR, which we announced this week, and we've now started to receive orders under that contract. That's the first Five Eyes nation to adopt our half mask capability, and we expect some other Five Eyes countries to do so the same fairly soon. The MITR Half Mask also achieved independent U.S. and European certification in the first half of this year, and that opens much broader law enforcement and first responder markets where that certification is required. MITR remains the only half mask that is both independently NIOSH certified and is purpose-built as a military system, which reinforces the market-leading position of this company.

In integrated CBRN, we expanded the suits range and been successfully then selected to take part in competitive evaluation trials with the U.S. Department of War. So we've now got several hundred suits that have been ordered to support those trials, and we're in the process of delivering those now. That's a significant potential opportunity for us in the next fiscal year, and we're building the support of the supply chain to support any potential future ramp-up there.

On boots and gloves across NATO, the contract ceiling for our NSPA contract with that product line has been increased by 50% to meet the European real demand and demonstrates the demand we have across Europe that order book for that product now runs well through until the end of 2027. Underwater, disappointingly, France did cancel their Rebreather tender with some budgetary challenges, and we expect that to recompete later in the year. However, we are working on opportunities with the Australian Navy, the U.S. Navy, the U.S. Marines and the U.K.'s Royal Navy as well as being extremely busy delivering the backlog for this product.

So this slide tries to demonstrate some of the major programs we have in place, and we can see in the future. Across the top there, M50 and M53A1 are expected to remain in service with the U.S. military at scale for the foreseeable future. And we're working with the customer to simplify contracting and bring those 2 programs together.

In parallel to that, we are engaged on Mid-Life Upgrades to the masks, and those are designed to materially reduce the burden on the soldier and improve their combat effectiveness -- this will create a fairly compelling upgrade path for that U.S. customer from what is now an aging M50 installed base to more modern M53-like systems. Longer term, that will position us well also for the next-generation respirator program and gives us continuity and volume visibility whilst that transition takes place. Alongside masks, we've got a number of long-term opportunities across filters, suits and as a new NATO systems program that provides an upgrade path for that growing FM50 installed base in Europe to more modern 53 and 54 masks as we go forward. And then finally for me, revolutionize is sort of longer term.

We're now starting to move beyond some of those stand-alone products and really transition to be a true end-to-end CBRN ensemble provider. The Department of mask upgrade is a compelling performance enhancement, improving their combat effectiveness and will create export opportunities on the back of that program. Alongside that, our lightweight EXOSKIN suit is reducing thermal burden, improving mobility and allowing operators to stay effective for longer in the demanding combat operations that they're in.

This is the type of user innovation that our customers want. And worth saying for the past 2 years, the user community has voted our suit the #1 most wanted CBRN capability during their experimentation events.

We're single source on the U.S. Hood Mask Interface program, and that builds our Ensemble integration capability. And actually this week, we won the CBRN Innovation Prototype Award for that HMI solution from the Department of War. So altogether, the pipeline is building real depth across our Ensemble, and we're doing this in direct collaboration with our customers. The business has got proven execution, deep customer relationships and a very, very clear pipeline means it's well positioned to outperform the market and deliver sustainable medium-term growth.

I'll hand you back to Jos.

Thank you very much, Steve. So we just go back a slide actually. It's worth touching on this slide. This shows the Artemis 2 astronauts and rescuers and all of them are wearing our bump helmets and search and rescue helmets. That is obviously absolutely excellent for our credibility and very good publicity for us. One of the things that we don't maybe talk about as much as we should is we actually sell more bump helmets and search and rescue helmets into the Navy and search and rescue teams than we do ballistic helmets. And as we'll see in a minute, we're actually upgrading our portfolio.

In our core ballistic and bump portfolio, demand for IHPS we see continuing in its current format for several years to come. We're expecting more orders as we go through the back end of this year. ACH demand remains very strong. We see at least the next 6 years with the continuing requirement from the U.S. Department of Defense, and we do expect more orders during this calendar year. And the pads that go into our helmets and other people's helmets, we continue to see strong demand there as well.

In the commercial area, the new RIFLETECH helmet continues to get a lot of interest. And the Australian contract is performing strongly. We expect more orders under that framework contract this year. And actually, we expect a new framework contract to be signed last year in the next 5 years. And the [indiscernible] in the Middle East is driving some demand for us. We've actually had an order for our brand-new Endurance helmet where Middle Eastern customers already ordered 400 of those, and we haven't even launched it yet. So that's a good sign of things to come. This is our new recon helmet. Unfortunately, you can't actually see how cool it is in this slide as well as you can in real life. It's actually a hybrid construction of carbon fiber and polycarbonate that makes it light and also enables it to have very high impact protection. It's the first helmet we think of its type that is able to meet the blunt impact protection standards under 3 different certification requirements under combat mountaineering and White water. And that means that offices like the one on the right of this photo will no longer have to carry 2 helmets when they go on mission.

In this case, you've got our bump helmet, which is combat rated and he's got someone else's helmet for climbing up a clip once he land up with helicopter, that obviously doesn't make a lot of sense and our new helmet is designed to solve that problem and will, in turn, extend our addressable market size. This is our new Endurance helmet. Also, [indiscernible] you can't see it in real life, you have to take my word for it that it looks great.

This is a lightweight ballistic helmet. It's the type of helmet that SWOT teams would use. It has sold well historically, but it did not have our new and proprietary No through hole system , which means that the rails that you can see in both photos actually, on everyone else's helmet, those rails are attached by bolts that go through the helmet. That creates a weak point in the helmet, and we have demonstrated with competitors helmets that if you shoot the helmet near to those holes, the bullet can go through. We also know from extensive real-world scenarios that if a bullet goes through the shell, it is extremely bad for the user.

So -- we design our helmets where we have bosses that the rails screw onto and we don't create a weakness in the ballistic properties of the shell, and we've upgraded this helmet to that technology. We do expect it to sell well going forward. We will launch it later this year, although as I mentioned, we've actually already got an order of it prelaunch. This is our contract portfolio on the helmet side. IHPS, we expect to run through to the end of 2028 in its current form and then for sustainment to continue after that.

We are already working on the third generation of helmets with the Department of War, and they have ordered 100 of them of our RIFLETECH helmet, which is our commercial rifle-rated helmet. They've ordered that so they can do trials in the desert to see whether that might be suitable for the third generation. And then beyond that, we are actually working on an even higher rated helmet that can stop some of the newer ballistic threats that we're seeing in Ukraine. And we are ordering a very large press to start running trials on that. We are also working with the U.S. Department of War funded by them actually on integrating data, night vision and power onto the helmet to make a complete helmet system.

That may one day involve making integrating respiratory protection with a bulletproof mask as well. The U.S. Air Force continues to buy EXFIL. We may see them moving to IHPS in the future. We continue to supply pads, and we are expecting -- we have been told, in fact, that the Australian contract will be extended all the way through to 2030 and beyond.

We are interested in applying our proven skills in improving businesses to other businesses. We would be looking at things in our area. We sort of see it in 2 ways. We would like companies that help us accelerate our strategy. For example, if we can accelerate our suit development program through smaller bolt-on acquisitions, we'd be interested. And we'd also be interested in other companies in a similar space for us that we believe we could apply our recipe for improving businesses to improve them.

If we could deliver the same kind of margin improvement that we've seen in our existing businesses over the last 3 years, we would be confident in creating shareholder value. That said, we don't like overpaying, -- we'll be selective if we can't find something that we think we can improve and find shareholder value, then there is a capital allocation policy in our results deck that shows that if there is spare capital, we'll return it to shareholders.

This just shows our performance over the duration of our strategy, including the last 12 months. You can see that over the last 12 months, we've actually delivered our revenue growth targets, our margin targets, our ROIC targets and very nearly delivered our cash conversion target as well, and we've delivered -- in fact, we're actually better than our leverage target. That does mean that we've delivered all of our targets apart from missing cash conversion by a fraction, 18 months earlier than originally planned.

So in summary, we're doing what we said we would do. In fact, we're doing it faster than we originally said we would do 18 months earlier than expected. We're in the final year of transformation, -- that does mean that cash flow is set to improve next year as the transformation programs cease. We're increasingly confident in production rates in Cleveland and margin expansion in Team Wendy. Our strengthened system goes from strength to strength and is delivering in all of our factories, and we are increasingly focused on investing into growth for the future. So with that, we'll hand over to questions.

If i may just jump back in there and thank you once again to all of you for updating investors this afternoon. [Operator Instructions ] We have received a number of questions, and thank you to all of those on the call for taking the time to submit their questions. But if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Okay. I'll read out the questions. So in the current market climate, are all defense stocks too expensive? Or are there potential acquisition opportunities that enhancing the current growth?

I don't think we see all defense stocks is too expensive Actually, we don't see our own stock is too expensive. I think it's going to depend a bit on the sale process. We do see private equity driving the prices of some companies up to high levels. I think if something was very dilutive or not accretive to us because it's rated higher than us, then we would clearly think very carefully about that.

And related to that, what particular characteristics are you looking for in M&A?

Well, I think our baseline is that we want the return on capital to be higher than our cost of capital within 3 years. We do believe that in many cases, our improvement system would enable that to happen. People can see how much we've improved return on capital in the businesses that we took control of 3 years ago. And we would -- as mentioned previously really, we would be looking either at bolt-ons to accelerate our existing strategy or businesses that are close to our existing space.

As Team Wendy scales, how far margins realistically progress and steady state?

That's a good question. I mean Team Wendy margins in the first half of 5.4%. That doesn't really give the full story of what was going on in the first half. As we were ramping up production in the first quarter, we were taking on all the employees we needed to hit the higher production rates, but we weren't hitting the higher production rates. And so actually, Team Wendy was loss-making in the first quarter, but was materially more profitable in the second quarter.

Team Wendy is quite sensitive to output rates. And actually, as we went through February and March, the level of profitability in Team Wendy was significantly closer to the group average than you might expect. I wouldn't necessarily encourage you also to model it staying at 15% for the rest of the year. But I think the consensus has us at around 10% for the full year for Team Wendy, and I think that's appropriate.

Can you describe the share register, U.K. versus U.S. percentage? Is there a shift to U.S. investors?

You can answer that one...

So there's around 20% U.S. investors on the register at the moment. We do also have a large shareholder that's actually based in Spain. And predominantly, most of our register is based with U.K. small mid-cap as you would expect. And as we've moved into the FTSE 250 last year, we had a higher number of index funds that are buying FTSE 250 stocks as well.

It's worth saying actually on that question that we are very relevant to U.S. investors. 70% of our business is in the U.S. 70% of our revenue is generated in the U.S. one way or another. And actually, when we get the opportunity, we go and speak to U.S. investors, and we always fill the slots available. So there is certainly interest on that side of the [indiscernible] .

It's really a U.S. business listed in the U.K. for historic reasons.

Yes. And as we get larger, we're starting to get more relevant. liquidity is always a problem with U.K. small mid-cap companies and U.S. investors. So as we get bigger, that will start to -- another question, brilliant progress. Thank you.

To what extent does the erratic nature of the U.S. administration and Congress affect your ability to achieve stock turns and cash conversion you see now your improvement program nearing completion?

Good question. Yes, it's been thankful in the first half, particularly in Team Wendy because the way our contracts work is we produce a lot of, say, 1,300 helmets. And then the government comes in, inspect a lot and then they randomly choose helmets that get sent to a government lab. That government lab was shut, which meant that we couldn't ship any lots during the government shutdown. And that does definitely slow down inventory tons because it lengthens the time between completing the lot and sale of the lot to the U.S. government.

We hope it's in the back of U.S. government shutdowns, although nothing seems to surprise us. However, in the second shutdown, the lab was actually deemed essential, which meant that it didn't shut down in the second government shutdown. So I think there is hope that if there are further government shutdowns, the lab that we rely on, the Department will relies on will stay open, and that would increase the velocity as we would look at it from lock completion to payment.

I mean it's actually an excellent question because what we really care about, as I was explaining on the cash conversion point earlier, we never try and land the balance sheet on a 6 months at the end of the reporting period. That's not a particularly effective or efficient use of our time. But what we do care about is average working capital.

And as Jos said, clearly, if you're making helmets, but you're inhibited from being able to deliver them, that impacts your average working capital, which is where value can be destroyed if we're not careful. So it is an issue that we're keeping a close eye on. Hopefully, we're through it for now, but that's this space.

And [indiscernible], I might need more information on your next question. The question I've got here is non-U.S. production getting closer. I'm not sure if that's related to tariffs.

I think we can have a go. I mean we already manufacture masks and rebreathers in the U.K. and boots and gloves. In helmets, we only manufacture in the U.S. We do get good operational gearing by making everything in our Cleveland factory. So if we could get higher volumes and make them in Cleveland, then we would love that.

However, there are customers, particularly in Europe that are interested in local production. We don't want to build a factory that doesn't have any work. But on the other hand, if we could win a program in Europe and it required European production, then we would certainly look at moving some production or a bit of our production to Europe. There is a scenario where we can mold shells in Cleveland where all the expensive capital equipment is and finish them in Europe, what we call [indiscernible] .

Perfect, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review.

But Jos, perhaps before really now just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Well, I wasn't expecting closing comments. I mean I think -- I mean, 3 years ago, we set out to radically improve this business. The team you see in front of you and gas is behind the camera. We have developed a strategy to improve the business, and we delivered on the strategy to improve the business, and we've actually done it faster than we thought. We now think the business is very well positioned to grow organically going forward, and we're going to focus on investing into new product development and driving growth as fast as we can.

Perfect, Josh. That's great. And thank you once again to all of you for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. On behalf of the management team of Avon Technologies Plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.

Good morning, everybody, and thank you for all of you that have come in person. In the first half, we delivered strong growth in revenue, profit and margin and achieved our financial targets 18 months ahead of schedule. That progress reflects the benefits of transformation and our growth strategy coming through across the businesses. With transformation now coming to an end, we're increasingly able to focus on the next phase of driving sustainable growth. We have a supportive market, lots of opportunities for organic growth and a balance sheet that provides further options for acceleration. We see lots more potential in the group and are looking forward to the next chapter. I'll now hand over to Rich, and he'll take you through the numbers.

Thank you, Jos, and good morning, everyone. So, as Jos mentioned, we have had a strong start to the year with strategic and operational progress feeding through to strong financial performance. The headlines are closing order book down a bit as we work through some of the Team Wendy military backlog, revenue up 7%, operating profit up 39% and EPS up 45%, all compared to the same period last year on a constant currency basis. As most of you know, my preferred measure of performance is ROIC, and we have seen excellent progress here, up a further 450 basis points to 20.8%. This puts us comfortably ahead of our 2026 goal of ROIC above 17%.

Cash conversion at the end of the first half was not particularly good at 38%, but $18 million of cash related to a late flurry of orders -- of product deliveries in March was received in early April, which would have resulted in conversion of around 100% -- Even without this, net debt to EBITDA at the end of the first half was 0.9x. So the balance sheet is in great shape. So a strong first half. We're growing fast, and we're generating excellent returns on capital.

So starting with the profit and loss account. And, as usual, comparators will be on a constant currency basis. Order intake of $117.9 million was down on a very strong first half last year with book-to-bill below 1. I'll talk about drivers for this over the next couple of slides. But, in summary, I am not concerned, and there are already signs of improvement. The very robust $220 million order book gives us confidence in delivering further growth for the balance of this year and beyond.

Revenue of $160.8 million is 6.8% up on last year with exceptional growth in Avon Protection more than compensating for a slow start in Team Wendy. This has dropped through nicely to adjusted operating profit of $24.4 million, giving a margin of 15.2%, over 300 basis points higher than last year and comfortably within our target range for the year. Finance costs reduced, reflecting the lower average net debt with an effective tax rate of 24% as previously guided, which gives an adjusted EPS figure of $0.564 per share, up over 45%. The dividend is up 6.6% to $0.081 per share, consistent with the increase at the full year results.

Avon Protection's order intake dipped a bit in the first half compared to a very strong H1 '25. But as a reminder, last first half benefited from about $30 million of one-off or unicorn orders, including support for Ukraine. Stripping these out, we continue to see strong U.S. commercial and military momentum. And as today's announcement of our $14 million filter award from the U.S. Department of War demonstrates, this is continuing into the second half. The order book of $112 million is particularly healthy for this business, which has historically had a fairly short win to ship cycle, giving confidence in future growth. Revenue growth of 23% to $92.9 million reflects excellent underlying trading, notably in support of NSPA awards and continued execution of rebreather deliveries, further buoyed by the fulfillment of all outstanding Ukraine demand.

The outlook for the year remains robust with modest sequential growth expected in the second half. Adjusted operating profit of $20.7 million, 44.8% higher than last year, gives a margin of over 22% for the half. This has been achieved through strong operational execution, strong operational gearing, a helpful product mix tailwind and the rate of top line expansion outstripping increased investment in future growth. I would, therefore, expect profit margin to normalize at a lower level over time as some of these factors unwind.

Team Wendy has made strong progress in the last 6 months, although quite a bit of this is not yet visible in the numbers. Order intake declined in the half, driven by 2 key factors. Firstly, our U.S. Department of War order cover remains strong, so we wouldn't expect further orders on the 2 helmet programs to come through until later this calendar year. Secondly, commercial orders in the first half have been soft, driven in part by grant funding delays to law enforcement customers as a result of government shutdowns. There are now clear signs that this factor is easing, and our strong pipeline suggests a recovery in the second half.

Revenue in the first half was held back by delays in Department of War shipments caused by a slower-than-expected production ramp with the commercial market weakness also being unhelpful. However, based on current output rates and strong indications of commercial demand recovery, I do expect to return to good growth in the second half and for the year as a whole. The improvements made over the last 18 months are, however, starting to feed through to profitability with 100 basis points of margin improvement despite the strong growth in ACH production, which remains dilutive to gross margin.

These production rates will drive meaningful improvement to operating margin in the second half. So as usual, this bridge sets out the key moving parts in the reported adjusted operating profit from last H1 to this. The effect of volume growth, which is essentially H1 revenue growth at last year's gross margin was $6.2 million. We also benefited from a helpful product mix tailwind in Avon Protection with strong commercial mask sales offsetting lower Department of War and filter deliveries. And then going the other way, the dilutive effect on gross margin from increased ACH shipments was $1.7 million in the half.

There will be a further modest impact in the second half as the full run rate, which we reached in the second quarter, laps lower deliveries in H2. The positive $2.4 million Team Wendy site optimization bar is the benefit of our transformation journey starting to come through with increased productivity and lower cost of doing business following the move from California to Cleveland. External impacts are called out separately, having represented a $1.5 million headwind. This comprises the effect of tariffs, the increased employers national insurance contributions and an increase in U.S. health care costs. These largely represent the annualization of numbers called out in the full year results in November. There remains some debate on whether we can -- whether we will be able to recoup some or all of those tariff costs. As ever, the other bar is a collection of things that sums to a small number this time around.

Moving on to cash flow. Net debt increased by $3.1 million compared to the same period last year. $5.9 million of EBITDA growth was offset by a $21.1 million increase in working capital with inventory ticking up at a slower rate than sales growth, more prompt payments to suppliers and an increase in receivables relating to product shipments in March. As I said, the cash for these shipments has now been received. This gives us cash conversion of 38%, which is clearly below the full year guidance of 80% to 100%. However, if we adjust for the cash receipts in the first week of April relating to March deliveries, conversion would have been 100%.

Cash costs of transformation activities in the first half halved to $3.2 million and the benefits of the transformation investments over the last couple of years are now starting to come through. Beyond cash flow from operations, pension contributions of $3.3 Million were in line with our communicated deficit recovery plan and the step down in lease costs reflect the exit from our Californian facility last year. As usual, guidance on these and a number of other items is provided in the appendix.

So turning to the balance sheet and our financial position continues to strengthen. Average inventory turns held steady at 3x, which is a good achievement given the production delays and the effect of the government shutdown. We would expect to see some improvement in the second half. The reduction in lease liabilities reflects capital repayments and the accounting pension deficit benefited from the recent increases in bond yields. This deficit has now come down from almost $100 million in the last 5 years. Post period end, we made an additional GBP 3 million contribution to the pension scheme to lock in the benefit of these heightened yields, further derisking the balance sheet. The wider triennial pension review process is due to be finalized shortly with an updated schedule of expected cash contributions provided in the technical guidance.

Average working capital turns saw further improvement year-on-year, but the pace of improvement was held back by the acceleration in production in Team Wendy in the first half. If we can hold production rates at their current levels, I would expect further improvement through the remainder of the year. And finally, on the balance sheet, I can confirm that our revolving credit facility has been extended by a further year to 2029. Overall, the balance sheet is in great shape, giving us optionality to explore future growth opportunities.

The outlook for the year remains robust. Our strong order book and pipeline visibility into the second half and beyond give us confidence that we're on track to deliver high single-digit revenue growth for the year. At an operating margin level, while I wouldn't expect the 22% margin in Avon Protection to be sustained for the full year, the potential for improvement in Team Wendy during the second half as the benefits of transformation come through on higher output volumes is meaningful. I would, therefore, expect adjusted operating profit margin to be towards the upper end of our 14% to 16% range.

Classification of investment in transformation as an exceptional cost will come to an end in FY '26, as previously guided. The investment in manufacturing ramp-up in Cleveland is now nearly complete, and the project to improve our IT capability is progressing well. Based on the run rate of spend to date, our total $7 million cost will remain in line with guidance, but with a higher weighting towards OpEx than originally expected, and I remain very confident in the payback that this investment will deliver.

Finally, we remain confident in achieving cash conversion of above 80% for the full year. Given the changes we're seeing in the world around us, it's, kind of, helpful to step back and look at both the long-term growth opportunities in our markets alongside the near-term outlook that I've already covered. The global geopolitical environment has shifted materially over the last few years with active conflict at the highest level since World War II. That shift is driving higher defense investment, particularly as Europe moves into a rearmament cycle and as the U.S. adjusts its positioning within NATO.

In the near term, demand has been reinforced by the conflicts in Ukraine and the Middle East, which have highlighted both the continued use of conventional warfare and the increased threat from chemical weapons. We're also seeing heightened focus on readiness and stock replenishment across our installed base. For Avon Protection specifically, this backdrop is translating into increased emphasis on CBRN capability. The U.K. Strategic Defense review last year explicitly identified CBRN risk as a priority area for future investment. And customers are also increasingly focused on better integration of CBRN and on upgrading mask fleets, shifting from survive to fight mindset to survive and fight.

In Team Wendy, improved ballistic protection remains a key theme with increasing numbers of military and first responder personnel and increasing gun crime in the U.S. driving upgrade cycles. And on the right-hand side of the slide, you can see that the trends in all of our key market growth drivers are moving in the right direction. I'll now hand back to Jos to run through our progress on STAR.

Thank you very much, Rich. Our overall strategy continues, but we continuously refine the activity set that delivers it. The strength in the system delivers operational excellence and competitive advantage. In transformation, we're down to 2 final projects. One is focused on increasing output reliability in our Cleveland factory. I'll talk more about that in a moment. The other is building a much higher impact and lower cost IT function. IT is now able to support the pace of change that we want. And we're increasing the use of AI to amplify software development, support material science innovation and reduce repetitive activity. In advance, we're building our medium-term pipeline. And in revolutionize, we're investing in long-term research and capability building. We believe that our strengthened system creates enduring competitive advantage.

Our competitors can try to catch up, but it will be hard for them because every day, we get better. We do not consider the benefits of our strengthened system to be linear. As leadership, culture and capability strengthen, improvements build on each other and the rate of progress accelerates.

This chart shows how we see our businesses progress through the 4 phases of our strengthened system from building the base through improving to acceleration. We see Team Wendy now entering Phase 3 with a lot more to come. And we see Avon Protection now entering Phase 4. Our strengthened system is about people as well as process. As is often the case, we do things differently here in Avon. The content of these courses has been designed by our senior leadership team, not by external consultants or HR. We want to teach our people how to solve problems instead of solving problems for them. Our people development program support our broader business improvement strategy, helping us develop and execute action.

Since we launched our operational targets exactly 3 years ago, group average labor productivity is up 44%, well ahead of our 35% target. H1 productivity could well have been even better, but was adversely impacted by the U.S. government shutdown and recruitment ahead of higher production rates. This is now improving in the second quarter. We've reduced scrap as a percentage of revenue by over 60%. Scrap rates crept up in both businesses in H1, but we're running our problem-solving methodologies to reduce them back down again.

Average inventory turns are now at 3x, up 6% on H1 2023. Avon Protection is at 4 turns. We have more to do in Team Wendy, but a focus on higher production rates and reduced supply chain risk for now. Higher turns will certainly be one of our objectives for next year. Moving to transformation. We've built an entirely new factory in Cleveland over the last 2 years using our philosophy of product continuously flowing. This strategy is now starting to pay off. As these charts show, production rates have increased significantly since we last reported to the market. We're delivering both IHPS and ACH at or above the contractually agreed rates. Importantly, by demonstrating our operational capability on both our Department of War programs, we're well positioned to win further orders.

Now that we've achieved our production rates, we're shifting our focus to production consistency. We're driving improvement across shop floor engagement, production and supply chain planning, machine reliability and quality. We have also made some leadership changes in Cleveland, which has resulted in better prioritization, more focus and increased speed. Just to give you a sense of what we're doing as part of our machine reliability work stream. The chart on the right shows how the reliability of our computer-controlled cutting machines has improved over the last 2 months. We believe this project alone could save us over $400,000 a year in reduced CO2 usage and less line downtime.

We have consistently grown well ahead of our core markets since we launched our STAR strategy 3 years ago. We expect this momentum to continue for the following reasons. The external environment is supportive, and we've made good progress creating the sales team that can capitalize on it. Our strengthened system is improving execution, creating capacity and generating cash to reinvest in growth. We're investing more in innovation and building a strong differentiated pipeline of new products, coupled with world-class sales and marketing functions.

And finally, our balance sheet gives us the ability to accelerate growth further through M&A if we can find suitable opportunities. Taken together, this explains why we're outperforming our markets today and why we are confident that this momentum will continue. I'll now hand over to Steve to take you through the Avon Protection strategy.

Thanks, Jos. Good morning, all. So before I begin, I wanted to really highlight the picture that's on the screen here. So this was taken recently at what's called the Best Ranger Competition, an event that takes place annually at Fort Benning in Georgia. And the event really aims to test the physical, mental endurance of the U.S. Army's very best soldiers. One of the tests is combat breaching, and we were delighted that our MITR mask was used, demonstrating how it protects the war fighter from metal toxicity and other hazards. You can also see in the image how well the MITR system integrates with the U.S. Army's ACH helmet as supplied by my colleagues in Team Wendy. Feedback on MITR from the event has been overwhelmingly positive. So as you've heard, Avon Protection continued its growth journey, revenue up 23% order book up 19% and a record high pipeline ahead of us. Demand across NATO remains strong with the nations now purchasing our FM50 respirator under the NSPA framework increased to 16.

As announced, we secured a $13 million filter order in the Middle East, and we're seeing increased pull from U.S. law enforcement ahead of their preparations for heightened operational demand later this year. We're very pleased to have won 100% of the latest DoW order for filters worth $14 million. This was secured post close of the half year period, and so is not reflected in our results. This is a particularly exciting program as it's the first time we've secured the full filter program on what is normally a dual-sourced award. Later this year, we'll launch a new digital voice projection unit, which improves speech clarity in demanding operating environments. Interest is strong globally and units are already in advanced stage trials with multiple military users around the world.

The pipeline for our next-generation CS PAPR continues to build, and we expect independent European certification for our latest SCBA system soon, opening up a broader opportunity space in the European defense market. A key part of our growth strategy is expanding Avon Protection into adjacent markets. In non-CBRN, we were delighted to secure the multiyear Canadian Armed Forces contract for MITR and have now started to receive orders under this contract. This is the first Five Eyes nation to fully adopt the capability, and we expect other Five Eyes nations to do so very soon. The MITR half mask also achieved independent U.S. and European certification in H1, opening broader law enforcement and first responder markets where certification is required. MITR is the only half mask that is both independently NIOSH certified and purpose-built as a military system, reinforcing our market-leading position.

In integrated CBRN, we expanded our suits range and we were successfully down selected to take part in competitive evaluation trials with the U.S. DoW. Several hundred of our suits have been ordered to support these trials, and we're delivering those now. This represents a significant potential opportunity for us in the next fiscal year, and we're strengthening our supply chain to support any future ramp-up. Across NATO, the contract ceiling for our NSPA boots and gloves contract has been increased by 50% to meet the European rearmament demand and our order book for this product range now runs well into FY '27.

Underwater, France canceled its rebreather tender, and we expect to recompete in the coming year. We are, however, working on opportunities with the Australian Navy, the U.S. Navy, U.S. Marines and the U.K.'s Royal Navy. We're also extremely busy delivering our backlog for this product and building the support infrastructure that these users require. So this slide shows some of our major programs. M50 and M53A1 are expected to remain in U.S. service at scale for the foreseeable future. And we're working with the customer to simplify contracting by bringing the 2 programs together. In parallel, we are engaged on mid-life upgrades to the mask that materially reduce soldier burden and improve combat effectiveness. This creates a compelling upgrade path for the U.S. customer from an aging M50 installed base to more modern M53-like systems.

Longer term, it positions us well for the next-generation respirator program and provides continuity and volume visibility through that transition. Alongside masks, we have several significant long-term opportunities in progress, including filters, next-generation suits and a new NATO systems program that provides an upgrade path for our large European base of FM50 users to more modern 53 and 54 masks.

This is only part of the picture, but the mix of replenishment, fleet upgrades and new contract opportunities gives us strong near-term visibility and attractive growth. Overall, our competitive remains strong.

Turning to our revolutionized projects, which are positioning us to grow in new and adjacent markets. We're moving beyond stand-alone products to become a true end-to-end CBRN ensemble provider, integrating across the whole system. The DoW mask upgrade is a compelling performance enhancement that improves combat effectiveness and it will create new export opportunities. Alongside that, our lightweight EXOSKIN reduces thermal burden, improves mobility and allows operators to stay effective for longer in highly demanding combat environments. This is exactly the user-driven innovation that our customers want. And for the past 2 years, the U.S. user community has voted our suit the #1 most wanted future CBRN capability during their experimentation events. Being selected as the single-source partner on the U.S. HMI program strengthens our ensemble integration capability and positions us at the center of the system. I'm delighted that today, our HMI solution has been awarded the CBRN Innovation Prototype Award from the U.S. DoW.

And finally, our next-generation filter development work keeps pace with the changing threat landscape and ensures protection evolves whilst reducing soldiers physical load. Taken together, this development pipeline builds real depth across the ensemble in direct collaboration with the customers who use our kit today. It underpins sustainable growth, increases program value and cements our position as the leading full ensemble CBRN protection provider. Although not on the slide here, we're also moving ahead with our shallow water combat rebreather. This brings the market-leading and proprietary technology from our deep sea rebreathers while expanding our addressable market. You can see several of the innovations here today, and you are very welcome to try the kit on if you so feel the need.

So in summary, our strategy is delivering demonstrable value. It's protecting and growing the core while expanding selectively into adjacent markets. We're defending and growing our installed base, extending aftermarket support and driving repeat revenue through upgrades, enhancements and accessories. Beyond the core, we're investing in new technology in growing adjacent markets, and we're capturing market share. MITR is addressing the growing awareness of respiratory impacts in modern combat and policing.

We've secured early contract wins and customer-funded development, demonstrating there's a real need in this space. Customers increasingly recognize their CBRN protection is only as strong as the weakest part of the system, and that shift in thinking is opening attractive growth opportunities where we're very well placed to win. And our deep sea rebreathers remain the most capable system on the market today, well positioned for several upcoming programs. Through proven execution, deep customer relationships and a clear pipeline, we're well positioned to outperform the market and deliver sustainable medium-term growth. I'll now hand you back over to Jos.

Thank you very much, Steve. Certainly, lots going on. Before I get into the core of this section, it's worth just touching on the photo on this slide. It shows the Artemis II astronauts and their rescuers wearing our bump helmets. That sort of PR is hard to buy. We see a very strong pipeline for Team Wendy. Demand for both IHPS and ACH remains strong with order cover well into 2027. We're also seeing ongoing demand for helmet pads and liner systems from the U.S. Army and Marine Corps.

During the first half, orders from U.S. police and agencies were adversely impacted by delays to grant funding following U.S. government shutdowns. We expect grant funding to start flowing as the One Big Beautiful Bill Act starts to take effect. Recent media reports suggest the U.S. Department of Justice may release up to $3.5 billion in law enforcement grant funding. Internationally, momentum in EXFIL continues to build. We're expecting further orders from the Australian Defense Force, and we received an order for our new EXFIL Endurance helmet from a Middle Eastern customer.

Overall, we're seeing growing interest across European and Middle Eastern militaries. We have recently launched a completely new helmet called the RECON. You can see one of the launch videos playing on this slide. We have brought a helmet with us here today, a RECON helmet. It's on the side over there. Again, you're welcome to try it on later to go with your CBRN suits. When designing this helmet, we listen carefully to our customers and design something that we think has a big addressable market. We see opportunities for this helmet with the U.S. Navy, Coast Guard, search and rescue and NATO militaries around the world. This helmet is designed to achieve a triple rating against combat, mountaineering and white water standards. We believe it's the first helmet to do that.

This means that search and rescue officers, like the officer on the right-hand side of this slide, will no longer need to carry separate helmets for different missions. This helmet is also extremely comfortable containing our new pad system. We've also developed a new ballistic helmet called the EXFIL Endurance. The one we have here on the side is unpainted, so you can see the carbon fiber construction, which keeps it very light. It also has clear rails on this one, so you can see our unique no through hole attachment system. This increases ballistic protection by eliminating holes through the helmet. We've also introduced our latest cooling pad technology to support extended wear and change to a reverse dovetail rail design, which allows a broader range of accessories and a larger addressable market.

The result is a helmet that offers greater protection, flexibility and better comfort. It is a good example of how we continue to evolve the commercial portfolio by responding directly to real operational requirements. This slide shows the depth, durability and momentum of our U.S. Department of War programs. Demand for IHPS is expected to continue strongly through 2028. Beyond that, the programs will move into sustainment. There is also the potential for additional sales of a third-generation IHPS, which we are actively working on with the DoW now. That development work alongside our delivery track record strengthens an already well-established Department of war relationship and potentially expands the program well into the next decade.

We're expecting further ACH orders to take us through to spring 2028. And after that, we expect another 5-year IDIQ to be let, which will give us an opportunity to move our price in line with the market. Importantly, our contractual performance on quality, delivery and reliability positions us well for those near-term orders and for the follow-on ACH contract. Alongside the U.S. programs, the Australian EXFIL contract extension is progressing well, adding further visibility to the portfolio.

Turning to Revolutionise. We're working with the Department of War on several exciting projects. They're assessing our RIFLETECH helmet and accessories as part of their ongoing research into the third-generation IHPS and have ordered 100 for evaluation. We're also developing solutions to increase threat protection and to integrate power, data, night vision and hearing protection into the helmet. We're increasingly confident in Team Wendy's ability to grow in the long term. For the Department of War, we win through excellent products, reliable delivery and competitive pricing. That allows us to push further into the Navy and other U.S. forces supported by continued investment in new technology upgrades. In the North American first responder market, we've grown market share. We strengthened the sales force. We're demonstrating how good our products are by allowing our customers to shoot them at our well-established Headstrong events, and we're expanding the portfolio.

Internationally, we've made targeted sales investment, optimized dealer networks and are introducing products specifically tailored to meet European requirements. Team Wendy has the technology. It has the brand, the channels and the people to grow faster than the core market and to gain share. Now moving from Team Wendy for our vision for the group as a whole. Our long-term vision is to compound value by acquiring other companies and improving them. Our business improvement system is a powerful tool for improving any business. We have a recipe for success and are keen to take our learning and apply it to create further value for shareholders by buying and improving other businesses. If we buy another business, we will immediately start building a culture of experimentation and continuous improvement and move from batch to flow manufacturing. And in parallel, we will drive transformation where required. We know this approach works.

We're looking for businesses that are in our area and which we believe we can improve pretty fast. But we're not in a hurry to buy something and note the high multiples for some assets at the moment. We will remain disciplined and are happy to keep our powder dry until the right opportunity arises. Turning to risks and opportunities. Supply chain risk is lower than 6 months ago, but parts of our supply chain are still adjusting to higher production rates. Many of our raw materials are oil derived. Raw materials and freight are likely to increase in costs, which we will seek to mitigate where we can through pricing. In opportunities, earlier-than-expected pipeline conversion in both businesses could exceed our current forecast.

We're increasing capacity through continuous improvement and investing in some inventory to ensure we can respond if needed. There's also an opportunity for additional margin expansion as we sustain and improve execution in Cleveland and through operational gearing in Avon Protection. Early in my time in Avon, we set financial targets, and they felt ambitious at the time. Those targets are shown at the bottom of this slide and were originally set for 2027. In the last 12 months, we achieved the growth, margin, ROIC and leverage targets, all 18 months ahead of our original time scale.

In conclusion, we've delivered ahead of plan with strong progress in growth, margin and returns. Our transformation is delivering. Our operational performance is improving and confidence in Cleveland continues to build. That gives us a stronger platform, greater capacity and more cash to invest in growth. With supportive markets, a strengthening product pipeline, a recipe for success and balance sheet flexibility, we are well positioned for the next phase of value creation. We look forward to providing you with midterm targets later this year. Those targets will reflect the increasing scale of our ambition. Thank you for your time this morning. We'll now open it up to questions. And I'll invite my colleagues to come and sit in the dragon's den at the front.

It's Henry Carver from Singer. Just one -- a little bit more detail around Cleveland, if possible. So if I understand it right, you've got production rates up, but there's still an issue with consistency. Just sort of any more kind of color around that? And does that affect just the ACH or also RECON and EXFIL as well? Although I suppose rates are not quite as high as some of the other...

So production reliability has been an issue in the last 3 months. We're hitting the rate, and we're hitting the customer contractual numbers. In fact, we overdelivered in March, I think we delivered well, I know how much we delivered, but maybe I won't share it, but we delivered more than the customer requires from us. So that puts us in a very good position with the customer. However, we do still see more machine unreliability than we would like. We've launched a big program on preventative maintenance. We've actually created our own version of the Toyota preventative maintenance program, and we've launched it now well into a month on that. I think that is going exceptionally well, and I think it will reduce the machine downtime and that will improve reliability.

And then the other area really is around people where we have had some unreliability in people coming in, especially on Fridays. At the moment, we're actually overstaffing and that's got around the problem, but that does cost us a bit of money. So I think in time, we will whittle down the most reliable employees, and that will solve that problem. We will get on top of it. And then the last thing is because our production rates have increased so fast, so significantly, we are outstripping our supply chain's ability to deliver to us. And we are still a bit hand to mouth on some raw materials. And actually, some weeks, it is still slowing production a bit.

I'm very confident we're going to get through that in the next month. We've recruited a new head of procurement. The forecasting into the supply chain is much better, and the suppliers are just getting used to the rates we're delivering at. So I think all in all, I feel we're making excellent progress. I'm super happy with the team we've got there. I think we need another month or 2 until it is really, really reliable every week. But even with the unreliable, we're smashing our targets.

You did ask about commercial as well, though. Commercial is a totally different story. Commercial demand was not very strong in H1. So we had no problems making what was ordered. The interesting thing about commercial is we see a wave of demand coming in H2. So what we're trying to do there is get ready for that wave of demand to hit us. It's not always clear exactly when it's going to arrive, but it's either going to be sort of second half of the fourth quarter or it could possibly be next year, it could be very significant. We think we may end up doubling production in commercial, which is why we're investing in people and inventory in that area to kind of get ahead of the curve and make sure we can deliver when the orders drop. And we think what's going to happen is all this grant funding is going to wash through into the place and they're all going to suddenly order, and they may want it all delivered by the end of the financial year. So it's frustrating.

Will that be similar machinery with the similar reliability issues being sort of suddenly having to kick in or...

It's mostly the same. We use CNC machines for DoW and we use a laser for commercial, but that's probably in the weeds yet. But the CNC machines have been a pain for us, now fixed.

It's Andy from Jefferies. I guess 2.5 questions. The CBRN suit opportunities are probably for Steve or Jos. Can you just give us an update on that in terms of from a competition perspective, from a timing perspective, from a reach perspective, has anything changed? Or is this just getting stuff through the DoW from your side? Or is there more to it than maybe you talk?

Yes, I can talk to that for sure. So the program is still competitive. It's less competitive than it was. So we've been through a few hurdles, and we've seen that sort of start to whittle down. It's moving faster than we originally predicted. And that's driven by the existing suit not really delivering the capability that the users need. So there is a near-term push to get the program to run at pace. Timing-wise, there's a little bit of opacity around quite when it will reach the end, but we'll certainly be nearing that over the next 12 months, I would have thought. So we should have a lot more to share at that point. But yes, the program is running at pace and the suits we have, as we've talked about before, do have a differentiated edge to them compared to what's on the market. So we feel good about it, but it is a competitive program.

And the Voice Projection Unit, that you talked about the $100 million,excuse my ignorance, is that a unique product in the market? Or are you guys catching up with other people who are maybe different?

No. So we really have a Voice Projection Unit, which is out there. We sell a lot of those. This is a modernized version, more digitized version. It gives better speech clarity. One of the big differences between the current systems and the new one. At the moment, if you're a M50 user, you have to have a 50 Series VPU. If you're a M53 or FM54 user, you have to have a M53 or FM54 VPU. The new digital VPU that we're launching will -- it basically automatically detect. So when you put it onto a mask, it will decide I know I'm on a M50, or I'm on a M53, I'm on FM54, and then it will digitally tune itself such that it amplifies the speech in an optimal way.

So that's the big upgrade opportunity for the customer. I think also One of the things that holds customers back, and we talked a little bit about moving particularly U.S. and European customers from the M50 platform to M53 and FM54. Once you're on to a M50 with a 50 Series VPU, if you want to upgrade to a M53, you've got to buy both again. Actually, what this now starts to give you is the ability to have a common Voice Projection Unit and then start to upgrade your mass fleet alongside that without having to repurchase VPUs.

So the differentiation for the customer is pretty big. Our systems also are certified. So they're what's called intrinsically safe. So that gives you a degree of independent certification and validation that you're going to be able to have speech clarity. A lot of VPUs in the market are quite crackly. They don't necessarily give the users guarantee of what they're going to get in terms of speech amplification.

And then last one for Jos, which is a bit of, I guess, a big picture question. If we think about revolutionize and you can talk about M&A if you want, -- if you take a step back and think 3 years ago what you thought the outlook for Avon is in terms of what you want to do with the business, let's say, 2030 and beyond in terms of building manufacturing plants across the globe, whatever it may be, where do you sit now compared to maybe a couple of years back as to what you think Avon in 3 to 5 years looks like? Because it feels to me like you could do M&A here and there, you could go manufacturing sites globally. But I don't know whether that's actually the optimal plan for you guys. So just any thoughts there on what that looks like and what's maybe changed over the last few years?

I think we'll probably talk more about that at the end of the year. At the moment, we've still got quite a lot to do with our existing businesses. There is more to go in those businesses. That said, though, I think we are ambitious for the group. And as we get our heads out of running factories, which I have done quite a lot of this year, we will focus increasingly on whether we can really accelerate growth inorganically as well. But so far, we're actually not spending a lot of time thinking about it. So I'm going to duck your question for now.

Rob Byde, from Zeus Capital. In Avon Protection, you talked about a normalizing of margins. Can you talk a bit more about the drivers? Is it price or cost? And should we expect those margins to dip below 20%? Is that what you're in the round saying?

I'll take that. I think -- well, the drivers, I tried to set them out, but the first half certainly benefited from a little bit of a mix tailwind mix comes and goes. So can I categorically say that's going to unwind next time around? No. That's a little bit dependent on what orders come in and when they come in. But the mix tailwind that we saw was around sort of particularly commercial sales outstripping military and filter sales. And we already know that filter orders are now strong. So that's a bit of a leading indicator. But the other driver for outperformance was top line growth of 20-odd percent. That's always going to drop through quite quickly unless you can reinvest at an accelerated rate.

And whilst we grew investment in capital, we grew investment in R&D and we grew investment in new products, we didn't grow them as fast as revenue grew. So that sort of disproportionate growth is going to drop through in the short term. I would expect that to unwind. In fact, I quite like it to unwind because I want growth investment to continue to increase. Is it going to dip back below 20%? I'm not going to give explicit guidance for the second half. We've long said that protection trades in the sort of high teens to 20% margin range. I still think that that's reasonably appropriate over the medium term. Is it going to drop all the way back in the second half? Probably not.

Just to answer a question you didn't ask. We may not have emphasized enough just how astonishingly successful Steve and his team have been on filters. So we won $13 million from a Middle Eastern customer from a competitor. So it's a new customer. Hopefully, it will repeat. And for the first time ever, we're the sole source supplier to the DoW on the latest filters order. That's another $14 million. So for the first time in our time here, our filter lines, both filter lines and Cadillac are running absolutely full out, and we've had to add people. So historically, gross margin has been a bit lower on filters than the rest of the business, but we are going to see good operational gearing in filters running through the second half. So it will be interesting to see what happens on the mix. It will be dilutive, but maybe not as dilutive as it used to be.

Dilutive at the gross margin level, not at the OP level.

Just a quick sort of technical follow-up. On scrap, where does that cost go to? Does it go to R&D or specifically D?

No, it's all in gross margin.

Yes. And the scrap is irritating for us because we work so hard and so successfully on it. But one of our suppliers stopped providing the chemical that we make the visors from. We had to switch supplier. The new chemical has proved to be tricky.

It's a learning curve. So scrap rates have actually gone up after we spent several years successfully getting it down. It's annoying, but we will get it down again.

Andrew Humphrey at Peel Hunt. I've got a couple on commercial, which are slightly woolly, so apologies for that. And then on protection. On commercial, I wanted to ask a couple of things. Firstly, around the contracting environment. Clearly, the protection performance in commercial was strong, and there's a lot of demand coming through there. Team Wendy less so and you've highlighted kind of DHS funding as being the bottleneck there. Is it the contracting environment that's driving those variable performances between the 2 parts of the business?

It's different funding lines. So you are correct that Avon's commercial sales in the U.S. to police forces is actually up about $5 million. It was up because it's using emergency funding lines, people like ICE buying mask, whereas the helmet, it's dependent on grant funding and the grant funding has been snarled up since the end of 2025. So we expect -- well, we do expect to see a wave of funding arriving. We're actually starting to see it a little bit now. The big question for us is how quickly does it flow. We are doing something quite interesting. We are going to help the police forces and the agencies write their grants because there's going to be quite a short window to get the applications in. So we're basically grant writing for police forces.

And I think that's sort of part answering my second question around that, which is not asking for any predictions, but there are midterms later this year, you'll be used to kind of dealing with the divided government if the polls manifest as they're currently kind of looking. Is there other stuff you can do to sort of derisk the business? I mean DHS is obviously the part of it that you call out that has become kind of quite heavily politicized are there steps you can take within the business on contracting to derisk that?

I don't know. I think we're sort of subject to macro trends there. I'm not sure there's much we can do. So for diversify out of U.S. police. But actually, U.S. police and agency market is a very attractive market for us, notwithstanding some of the craziness around how the grants flow because it is an enormous market. It's interesting on Team Wendy, we've increased market share from 14% to 20% in the last year. So when the grants start flowing, we actually have a bigger share of the market than we used to. Steve is 90% or North of 90% North of -- but there are opportunities to upsell filters, the latest generation of mask VPUs, SCBA. So I think we like the U.S. commercial market, notwithstanding the fact that it does have a little bit of sort of year-to-year or in-year cyclicality.

I think it's probably worth pointing out that we're not chasing after massive market growth that we're contingent on funding for here. The 2 things that we are looking at are, number one, the regular replacement cycle. So helmets get replaced every 5 years or so. So we're just looking for the replenishment cycle and then there's a little bit of market share growth that Jos was talking about. So those are the 2 drivers. The actual contracting and availability of funds is a timing issue. The demand hasn't changed.

I'll answer that if I may as well. I mean the other side we've done is we've kept that sales team together. So they dual sell effectively, that team. And of course, with the moat that we have on the respirator side of the business, it does allow us to leverage that across to help support sales of helmets as well. And of course, you'd expect Team Wendy helmet and Avon Protection masks to work well together. They do. They work better than any other combination in the marketplace. So we do try and leverage that market share we have on protection.

That's great. And then maybe kind of following up on the protection side. Clearly seen some very strong growth there. Part of that's been Ukraine related as you called out. The question I want to ask is a broader one around kind of increased throughput you've had through that business over the last couple of years now, the performance improvements that you've made in it. clearly, there's an element of demand that is sort of related to those unicorn orders that you called out. You have increased capacity in that business now. So I wonder, is there a sort of virtuous circle there with the customer where there's a pull and you can fulfill an order. And I wonder sort of where you are or where you think you are in that cycle?

So for sure, I'd say we've seen demand spike initially through Ukraine. I think Ukraine, I guess, forced the European market to learn a bit of a lesson. So you've carried across perhaps now what was a CBRN threat that was perhaps people are a little bit complacent around. We've seen that spike in Ukraine. So I think we've got a double sort of growth drivers at the moment in European markets. You've got increased defense spending, but also an increased awareness around CBRN. So those 2 things coupled together, as we touched in the U.S., you touched on protection position, whether that be the NATO contract, we have boots and gloves and our masks, whether that's the U.K. MoD contract. We have very strong barriers to entry against the competition there. So we are seeing that increased demand. So I think there is sustainment beyond Ukraine. And our lead times, I would still like our lead times to be shorter than what they are. So you're right, we have increased capacity, but I think demand continues to increase for the business. So we do feel very well positioned in that market.

It's Afonso from Barclays. I have a few last questions from you, please. First one is a quick one on cash flow. If you could talk about the bridge from the 38% conversion you've done in the first half to the 80% plus you're guiding for the full year. I know there are some timing effects from some prepayments, but can you talk about that one by one...

Yes, yes, let's go one by one because I'll forget them. So the -- I mean, the conversion, the 38% conversion, frankly, was largely self-inflicted in the first half. We were aiming for a nice steady increase in production rates through the first half. Actually, that growth period got compressed to the last couple of months. And so February and March were very, very busy months for us. And a large amount of product was delivered in March, which was ultimately paid for in April. That's an $18 million swing in cash, which is enough to move the 38% to 100%, depending on how you -- when you draw the line as to when to measure it. Also in the first half, we saw inventory build on an average basis. We do look at average inventory turns rather than period end because it's more meaningful. And that's unsurprising given the increase in production rates I've just described. So when you get to a steady state, as we now believe we are at, you're no longer building inventory. quite the opposite, you can start to unwind it. And so you've got a couple of drivers there for the second half, which will provide a fairly straightforward bridge.

The second one is on M&A. Apologies for coming back to this, but I appreciate you're not in a rush at the moment given the multiples we have in the industry. But is that going to be bolt-ons? Is it going to be supply chain vertical integration? Is it going to be Europe, U.S.? How do you think about that in terms of timings and then in terms of -- secondly, in terms of the contribution that it's going to have for long-term growth?

We're actually interested in both. So we're interested in bolt-ons that can accelerate the strategy. Suits might be an example or rebreathers or some of the power and data around the helmets. There are bolt-ons that would be interesting for us. Let's call that strategy acceleration acquisitions. But I think we are more ambitious than that. We believe we can improve any industrial business. I'm not saying we would buy any industrial business, but we believe our skill set could improve any industrial business, and we would be interested in buying and improving other businesses that have enough scale that it makes a difference for shareholders.

And last one is on the supply chain. I have one slide on that in your deck. It's normal as you achieve these high production rates. So can you specify what are the key bottlenecks you're currently seeing? And what are you currently doing to mitigate those risks in the short term?

Well, we've actually had -- we've had shortages of quite a number of things actually. Maybe it gives you some color to go through them, the plastic skins for the helmets, the retentions for the helmets, the rails for the helmets, glue, paint, all sorts of things. it's sort of hard to get across in the slides how much the production rates on particularly ACH have increased over the last 6 months. It would be fair to say they've doubled. I think last month, we made. Can you remember how many helmets...

9,800.

That's just one line. I mean, overall, it was like 17,000 helmets or something in a month. It's the highest production rate Team Wendy has ever achieved. And as that rate increases, it's basically surprised the supply chain, even though we gave them forecast, I don't think they really believed it. And then we're running right up to the wire on some of those materials. I mean sometimes they're coming in the day we need them, which is more just in time than we would actually like. As I mentioned earlier, though, I think we would be a bit depressed about this if it weren't for the fact that a month ago, we replaced the Head of Procurement and the new Head of Procurement is absolutely killing it.

A month is too short for him to fix all the issues, but he's definitely making a big difference, and I think we'll get on top of it in the next month or 2. And forecasting internally is getting better, forecasting into the supply chain is getting better. Our ordering consistency is getting better. And the lines are getting more consistent, which helps the supply chain as well. But it is fair to say running out of stuff has been a frustration over the next -- over the last 3 months.

So we have a question from Richard Paige at Deutsche Numis. May I ask on your first U.S. 100% filter contract win, great news. Was this due to customer contracting change or performance or a change of competitors?

Do you want to take that?

Yes, happy to. I thought that would happen. So why did we get 100% of the filters? I think we've worked closely with the customer on this, and we've really shown them a way as to how they can do that. So it also was supported by what we just touched on. We've managed to ramp up manufacturing rates. We've managed to make sure deliveries are on time. We've got a very, very strong track record of delivering to the DoW. So all of those things combined basically meant the customer was happy to award us 100% of the contract.

And next question is also from Richard Paige from Deutsche Numis, which is what is your H2 visibility and the likely pipeline timing for the full year?

So visibility in the order backlog for H2 is very strong, unusually strong, actually this year. So we always have a little bit of win and deliver as we go through the year, particularly in Steve's business. It's a much shorter win and ship cycle, but the coverage for the full year is stronger than it normally is. When that feeds through to revenue, I'm not going to sort of get staked out in the sun on giving Q3 and Q4 guidance now, but we're pretty confident that FY '26 will be a good outturn.

I think one anecdote that's interesting is that Team Wendy commercial sales pipeline is up 90% over the last 6 months. Now when exactly they drop is always the question, and you can get disappointed by timing. But overall, when we look at the pipeline, it is up significantly.

And the final question is from Rob Manning at TrinityBridge. -- is any guidance on forecast leverage? Is there an update on your capital allocation policy, returns less acquisition opportunities and how you think about these trade-offs strategically?

So on leverage, the expectation is it will come down. And I think consensus has a net debt, excluding leases of around $31 million, $32 million. I think that's not a ridiculous assumption, but we don't give explicit guidance. What was the other one? Capital allocation, yes. So there's no updates to the capital allocation policy currently. The slide is in the back of the deck. So it's still there, but we will give you an update on capital allocation later in the year.

Very good. Thank you very much for coming, everybody.

Good afternoon, and welcome to the Avon Technologies Plc 2025 for your Results Investor Presentation. [Operator Instructions]. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO, Jos Sclater. Good afternoon to you.

Hello, and good afternoon, everybody. We're just going to go through a cutdown version of our results back and then what we really like is questions, so please save your questions for later.

Our results actually are video and the whole script and video is available on the website. If anyone wants more information that we can give in the time we've got available on this call. So last year was a good year from a financial perspective. Revenue and profit both grew very well. Revenue is actually probably a bit above expectations and actually we ended up the year overall a bit above expectations.

Our strengthened system, which is our version of the Toyota production system that tailored for our own needs, continues to deliver sustainable competitive advantage for us. That's helped us drive improvement in productivity, reduced scrap rates and improved inventory turns or less cash tied up in inventory.

We are also nearly through our transformation program, which we set out in 2023. We've got a bit more to do this work -- this year with a couple of projects. But the main heavy lifting has now been completed. We have closed the factory in California and built a new factory in Cleveland and have ramped up production nearly to where we need in Cleveland with a bit more to do this year.

We have increased our investment into R&D during the last financial year, which has led to some exciting new products and new markets opening up to us, which we'll talk more about later. And we have, over the last 3 years, developed a business improvement system, which we believe can be used to improve not only our own businesses, but any industrial business. And therefore, we are starting to get our head up and think about how we can augment our organic growth with M&A opportunities as well. That is not an immediate pivot.

We just want to signal that over the next 5 to 10 years. We see this as a company that will continue to grow organically as well as through small bolt-on acquisitions over time. Overall, we have actually exceeded all of the targets that we originally set a 2027 apart from margin and margin, we expect to achieve those targets this financial year. So with that, I'll hand over to Rich, and he will take you through the numbers.

Thanks, Jos. As you can see, the headlines demonstrate [indiscernible] pretty solid progress. The order book, up 16% at a record $263 million leaves us pretty well covered going through FY '26 on both elements and respirators. So that's a great move in the right direction. Revenue growth of 14% was as Jos alluded, slightly slower than people expected. And that dropped through to operating profit, which was up 31% in the year to $40.3 million. And the third area of focus is return on invested capital. That came in at 18.6%.

Our very strong progress was made reducing the average working capital [indiscernible] in the business. I [indiscernible] probably come back and talk about that a bit more later. Cash conversion 90% is another good year even after a pretty [indiscernible] burst in deliveries in Q4 let us find a bit of a receivables over going into the new year. That receivables overhead has now evaporated. We haven't paid for all of those procedures. So that's good progress again.

And net debt average is in a very strong position despite actually quite considerable investment into the business through the year. So revenue growing cash conversion and leverage are now all better than our medium-term targets, which were originally slated to be achieved by 2027. And actually, operating margin is well on its way, and we'll [indiscernible].

Moving on to P&L. As you can see, order intake in the year was very healthy at $352 million, book-to-bill 1.12x. Orders were slightly lower -- slightly lower year-on-year in [indiscernible], reflecting very high pull-offs against U.S. Department of [indiscernible] programs in 2024. So coming off a very high base. But you can see that the book is still very well covered going into '26.

Actually, those [indiscernible] will be reasonably lumpy. It's just an [indiscernible]. The record closing order book of $263 million is so strong, particularly [indiscernible], where actually the U.K. and international orders were incredibly strong.

Revenue of 14% revenue growth reflect very strong performance across the board with [ AM Protection ] up 16% at [indiscernible], up 12% year-on-year. Operating profit, as I said, of $40.3 million is over 30% higher than the prior year, resulting in a margin of 12.8%, which is 130 basis points higher than 2024, and it is a very helpful step on the road to achieving our medium-term target of 14% to 16%.

Net finance costs reduced by 16% to $5.4 million, largely driven by lower average net debt and the tax charge of $8 million represents an effective tax rate of 23%, which is where we think it will stay over the next few years, absent any further changes to the tax regime.

All of that are up to adjusted basic EPS of $0.92 per share, 35% up year-on-year despite the step-up in tax rate from last year's 17% where we benefited from some more one-off divestments. Quick [indiscernible] through the divisions. [indiscernible] has actually had an [ autumn ] year. Order intake up 18%, order book up 63%, revenue up 16%, operating profit margin of 160 basis points of almost 20%. This does show the ability of the business to lead into a strong demand environment to drive cost growth.

The growth in orders and in order and backlog has been not only driven by strength in international markets, as I said, offsetting a slightly softer year in commercial Americas, which actually saw a very strong year in 2024. Ukraine related demand now accounts for just $13 million in that order book. And we've always seen Ukraine-related demand as something of a [ unicorn ]. It won't be around forever.

But what is interesting is that partly even after stripping that out, order book is growing very nicely. And actually, where we are seeing strong demand, which one could argue is Ukraine related is countries that are peripheral to Ukraine and Russia, where clearly governments are concerned the Russia's ambitions might not just stop in Ukraine.

Revenue growth in the year was driven largely by Australian FM 54 deliveries, strong demand for [ CBRN ] boosting glass format customers and I say some prior with another good year for rebreathers. The excellent [indiscernible] margin was helped by operational gearing, improved productivity and sales mix. And actually, given the strength of the order book, over protection is exceptionally well positioned to drive further growth in 2026.

As I said, order intake in team [indiscernible] was a little bit softer year-on-year, but the backlog remains robust and the strengthened product portfolio is driving an excellent pipeline of opportunities as we enter the new year. Revenue growth of 12% was driven by further growth in military ECH2 deliveries moved towards full rate production and actually we saw further strong demand for [indiscernible] and for a number of customers, but particularly the U.S. Air Force and Navy.

Operating profit margin nudged 4 to 4.6% from 3.9% the year before, which is a good improvement, but it's still somewhat of [indiscernible] internal ambitions. But we are confident to further progress in '26 as we demonstrate the sustainability of the production rate increases that we saw in the last quarter of '25. And as the benefit of cost reduction largely through the transition from California to Ohio comes through to the bottom line.

As a reminder [ ACH2 ] will grow further in 2026 as we step up the production rate again. And whilst it is profitable, it will remain dilutive at the margin level. But notwithstanding this, we do expect further progress on margin as we go through the new year.

So just moving quickly on to the outlook for the year before I hand back to Jos. We do expect further good growth in helmet deliveries, as I said, as we finish the [ CH2 ] ramp-up. And we also expect good growth in Avon Protection underpinned by the very strong order book in the business. These factors combined will equate to what we expect to be a high single-digit revenue growth at the group level.

We do expect the financial benefits of the transformation program to drop through this year with a modest weight into the second half. And even after the additional dilution from the growth in lower margin ACH sales, we are confident that we can deliver our operating margin within our target range of 14% to 16%.

As highlighted, given the call on Wednesday, we do expect transformation investments to drop to around $6 million in 2026, and we expect return on invested capital will progress nicely as well. And just addressing 1 of the questions that was pre-submitted, it was pointed out that we have made $20 million of adjustments to operating profit around $15 million of which relates to the transformation.

The question was when can we expect these translation adjustments to come to an end, and the [indiscernible] is 2026. '26 represents the last year for transformation adjustments coming below the line. And finally, we expect cash conversion to remain above 80% despite further increases in investment in the business to drive future organic growth. So I think '26 show have to be quite a positive one.

Yes, absolutely. Thank you, Rich. So we continue with our Star strategy, which was set up written in 2023. Though it's not a static thing. Every year, we set new initiatives for the year ahead, and we've already done that for 2026. But the big picture remains the same. We have our strengthened system that we use to continually improve the business, that will continue forever, and we still see plenty of opportunities to improve our businesses and therefore, drive cash flow and free our resources to invest in the business.

Our transformation program is nearing its end. And this year, as Richard said, is the last year. In advance, we are investing more into R&D. Most of that we expense, so it does impact our profit in the year we spend it. We think that means that we have good discipline around spending our money wisely. And in revolutionized, we continue to work on new products, which will support growth in the long term, and we are starting to look at opportunities to acquire other companies to accelerate that growth and that is a slight refinement of our revolutionized [indiscernible].

This slide shows our business improvement system, starting with strategy. We are unusual in many ways. One of them is the way we do strategy. We actually teach and coach our businesses on how to set strategy but we want them to set their own strategies because our view is that they're much more likely to actually execute on their strategies, and we build where most strategies fall down is that they go and actually get done and translated into action.

We translate our strategy into action through an objective and key results setting process where we cascade the objectives all the way through the organization to align every single employee to our strategy. We have our own proprietary STAR Academy to build capability in our people A lot of that is actually focused around how you continually improve business and the tools that enable you to do that.

And this year, we sold 30 people to Japan, to Milan from people like Toyota that have been doing it for 50 or 60 years. And actually, next week, we're sending another 20 people to Japan. We feel it's a worthwhile investment in people development. And then our strengthened system continues to deliver results, and we continue to improve.

We build out the system of staff. These are our key operating metrics. Our view is that if we improve these metrics, the profit will follow. Since we originally launched the strengthened system, we've improved productivity 28% obviously more than offsetting inflation. We've reduced scrap by 62%, and we've improved inventory turns by 46% and we see more to come on inventory terms, bring up more cash to invest in the business.

Over the summer, we needed to increase production in our Cleveland factory to meet customer demand. We have considerable demand for helmets, actually from all around the world, but particularly the Department of War in the U.S. It's a [ micro ] to have to have too much customer demand, but those also cause challenges. I was actually increased them for 2 months myself, and we ran 14 improvement projects over 2 months with a view to increasing production. And over that time, we actually tripled production on our 2 main Department of War lines as this chart show.

Avon Protection also had a great year on using our strengthened system to improve its business. We could have used any number of examples, but there's just a few on this page. In [indiscernible], improved productivity by nearly 80%. We reduced scrap by over 50% and in boots and gloves which, it's not a product line we talk about very much, but it's actually been wildly successful. We've got enormous demand for our chemically resistant boots and gloves, so much demand. We've actually got 2 years order backlog on that.

So we also needed to increase production there. We managed to increase production rates 47% in the year without really adding a lot of presses, we are now adding 4 extra presses to increase production even more, although we managed to get those secondhand from a company that's scaling back their rubber production.

If you actually look at our results as a area of the transformation of our U.K. site, -- it's actually the only 1 we did a time lapse of which is shame because the other side would have shown something similar. But as well as the [ watch ] for those who are interested, the point we're trying to make is that our factories have changed almost every single week as we move them from batch manufacturing to flow.

One of the reasons we are very happy to talk about our strengthened system and I think a copy of our book on the strength in system is available on our website because it is one thing to know how to improve the factory. It is quite another thing to actually do it. And the point we're trying to get across is how much is involved in actually moving a factory from batch supply.

This year, it is a pivotal year in the sense that we are moving from the fixed stage of our strategy to both are entirely on growth. We have very good markets. They provide a tailwind. We certainly think it's better to be seeing with the current and against it. Defense spending is going up. The threat of chemical attack is going up considerably.

We were told by someone from the Ukrainian front line only last week actually, the Russians have had 5,000 gas attacks over the last year against the Ukrainian trips, all those trips need gas mask and everybody proximate to Russia. So many of the other countries on the fringes of the Russian border are also stocking up on gas mask for the same reason. And numbers of military personnel are increasing, and they all need resistance against chemical weapons and gun crime in the U.S. continues its long-running trend of increasing, unfortunately.

We're increasing investment into innovation. We do that by using our strength and system to free up cash and resources, some of which we then put back into the business in the form of investment in engineering. And we now have an ability because of our rock solid balance sheet to accelerate through inorganic growth as well or acquiring as a company.

Last year, Avon Protection saw a 63% increase in its order book. It's pipeline of opportunities beyond that was also losses out demand is for masked from the U.S. Military and Australia, which is a new military that we won a year ago, was it? We continue to sell mask under our NATO framework contracts and are now up to how many countries? 16 countries buying boots and gloves and masks and filters under the NATO framework contract.

We won 3 new navies last year for rebreathers. We bid for 2 more and hope that we will win one of those or both of those this year. And looking a bit further out, we're still working with the Department of War on filters, although our filters line actually are maxed out at the moment on one shift, but we could add another shift if we can win more work from the Department of War and we are expecting to win more from them this year.

Our new [indiscernible] mask and goggles, we are actively working with 4 out of 5 of the special forces groups across the 5 stations and typically general purpose trips tend to follow special forces. And then ensemble, we have interest from the Middle East, Europe and America on our chemically resistant suits.

We developed the [indiscernible] using our own money. But interestingly, we've now won 2 programs of record from the Department of War to take the [indiscernible] system forward and add functionality to it, like hot swapping filters, filters that mold closer to your face so that you can get a better achieved on rifles, new client communications system and increased protection generally.

The important thing is that they are actively trialing our products, giving us feedback on it and paying for the development of that system to meet their needs, which increases the likelihood that they will then take it up and purchase it once we finish the development stage.

And [indiscernible] one, there's a couple of pieces of good news. The first is that our strategy of selling complete systems involving chemical-resistant boots and gloves and suits and masks and Power & Air Systems has paying off. We have won orders with Turkey for that system. And we are working actively at the moment with the U.S. Department of War on 2 suit programs, well, 1 suit program, but they're looking at 2 of our suits as potentials to sell into the U.S. military and they're actually funding a testing program with us at the moment, which will run through this year, we hope could possibly result in the sale of around 700 suits this year. It could be less depending on how we get on in the first phase of that project.

We did lean forward and spend more on R&D during the year. We've spent $14 million on R&D, up a couple of million dollars. With that money, we developed a new generation of our [ CS paper ] system, which is multimode. When you don't -- when there's oxygen in the environment, it will pump air through our filters into the mass where that enables users to breathe more freely and exhale -- they're able to exhale more than they would be briefing through normal gas mask. But in addition to that, they suddenly find themselves in an area with no oxygen, they can switch to supply our systems and carry on our activities.

We've also developed a new communication system for our market. It actually goes across all of our masks and enables users to project their voice out to an audience very useful, for example, for riot police. It also connects to their communication systems so that they can talk to other people wearing our systems. In [indiscernible], we are working on a shallow water [indiscernible].

We're also working with various militaries to try and get some more funding for that development and we are working on a novel new filter, which actually replaces 3 existing filters with 1, considerably reducing the logistics burden for people using our mask.

In Team Wendy, we've got plenty of demand for the [ IHPSalmer ] for our general purpose summit for the U.S. military and for [indiscernible] from the Australian forces. One of the other things we probably haven't talked enough about is we sell a very large amount of bump permits to the U.S. Navy, which they deploy across the fleet to users. In fact, if you do -- if you see an aerial view of an aircraft carry out U.S. Navy, you'll see each team has different colored [indiscernible], and we make those helmets. We actually sold 25,000 of them last year to the U.S. Navy. And looking forward, we've got good demand for our [ Epic ] helmets, from militaries internationally and from police and first responders in the U.S.

We launched a brand new helmet last year called [ Rifle tech], and we're seeing good demand from that. From foreign military is, when we say foreign, we mean non U.S. but also interestingly from [ fee sources ] in America, which is a bit of a surprise to us because it's reassuring the expenses on that. And we are gaining market share in the U.S. [indiscernible] market.

Last year, we were up 15% in that market, and the market was probably up 4% or 5%. This is a new [indiscernible]. It's innovative in many ways. It can stop an AK-47 bullet muzzle velocity. It also has an innovative path system, which makes it cooler to wear and also more comfortable. It's so comfortable that when we were testing it, some deep have got to take it off at the end of their shift and went home with it on their head. It also looks great, which is very important, one of the first rules of being in the military is the look cool and the second role is not to get lost. And the third rule is if you do get lost to make sure you look cool. So [indiscernible] will say does meet on those requirements. Well, I'm not sure how people not get lost, but the other [indiscernible].

We continue to invest in helmets much of the future. We are being funded to carry out research on how you minimize traumatic brain injury, including from glass, for example, from improvise bonds. What does all that add up to? So in 2023, we set up targets originally actually for 2027 where we certainly thought we could grow the business on the top line by more than 5%. We said we thought we could get margin to 14% to 16%. So we get ROIC or return on invested capital above 17%, we thought we could deliver about 80% to 100% cash conversion over that period and we thought we could get leverage below or within a range of 1 to 2x of profit.

We've actually ticked all of those 2 years early, apart from the margin one, while we've got a little way to go. In fact, if we were to look at the exit rate for the last quarter, we would have been pretty well there but we think we'll get there for the full year in 2026. So we will have delivered every target at least the year early most than 2 years.

So in risk, well, yes, we're unusual. I think possibly still unique. I'm still hoping someone might copy us, but they haven't yet as far as I know. But we are quite front and center of our risks and opportunities. We think that every business has risks and opportunities. In our case, the thing we're still worrying about most is how do we successfully increased production yet again in Cleveland.

That means we've got to swap the assets there, we've got to run the lines faster. We need to avoid having to rewire gaming products. We need to make sure that quality is 100% baba. We have struggled to recruit the people we need. We've recruited 300 people in the last year. Many of them are amazing. Some of them perhaps are not what we want. So there will be some selective increases in capability as we go through this year.

So I think that's probably our biggest risk. The other reps are a bit more minor. We are seeing a new entrant potentially into the IEP program and irritating in us actually nothing to do with us. Our competitor failed to pass first half the testing first time round and the Department of War was very keen to have 2 suppliers, so they actually funded another supplier to get them into the program. That hasn't yet, first test [indiscernible] they are in testing. So we'll see if they get that. We don't expect it to have a big impact on our volumes over the next couple of years.

On the opportunity side, we still see plenty of opportunities to expand our homeless internationally, and we do see opportunity to [ for ] further margin expansion. If the strengthen system continues to deliver as well as it has been we could see some upside there. Similarly, volumes were a bit higher than we expected, we guess and drop through and that would help on margins.

So with that, well, over to you guys -- oh, no not with that. There's a summary. And the summary, we are coming to the end of the transformation stage of our strategy. We have fantastic world-beating products and we are investing in technology to deepen the competitive moat around the business, and we continue to invest in patents. We are increasing market share and we have supportive growing markets and we have a business improvement system, which we think is a recipe for success both in our own businesses and if we were able to acquire in our business. So with that, I hand over to you, guys.

[Operator Instructions]. I would like to remind you that a quarter of this presentation, along with a copy of the slides and the published G&A can be accessed via your investor dashboard. And Jos, Rich, as you can see, we have received several questions throughout this presentation. And if I may now hand back to you and kindly ask you to read out the questions, were appropriate to do so, and I'll pick up for you both at the end.

Well, the first question in front of us is how do we balance product development between meeting known program requirements and pursuing disruptive innovation. I think in general, we try to deeply understand the needs of our customers. The U.S. Department of War is particularly helpful in that they run events that they invite us to where we can show our prototypes to the users, and they will actually trial them sometimes for 2 or 3 days, and we get feedback on them that enables them to improve them. We don't have always develop stuff in response to programs of record. But we generally do develop things in response to a customer need.

Good examples of that of [indiscernible] actually originally a program that the Department of War never actually went forward with, but we thought the idea was good, and we thought the need was real, so we developed that with our own money. That's been interesting to us because once they've seen the product we've developed, they now have funding for its development to go further.

Similarly, chemically resistant suits. We knew there was a program in America. We weren't on it but we thought we could make a better suit. We understood the customer need very deeply. We developed the suits with our own money but now the Department of War has invited us to submit that suit in response to bids because they can see the technology we've got.

So I think overall, to spend money wisely, we'd like to make sure we're very close to the customer, but we will leave forward ahead of the program record.

The next question is how much of the current backlog benefit from contractual inflation pass-through? Well, I mean there'll be a bit of inflation about 3%, I guess. Not much.

Not much is a short answer.

Yes. How much competition do we have for our various products? It very much depends on the products. In masks, there isn't a lot of competition for masks as high-end as ours. In filters that the bin was theoretically to suppliers, although the other supplier at [ 3M ] appears to [indiscernible], that's built a line. We're not too sure whether they're going to compete with us going forward. There are 2 Chinese filters and probably from other countries as well. However, they're not built for military applications are not as robust as our filters, so I wouldn't advise anyone to buy them.

In [indiscernible] is one of the 2 competitors, although none of them have our technology, and we have a pan moat around our [ rebreather ] that makes it pretty hard perhaps impossible for anyone else to catch up with us. In Helmet, there's a lot more competition, especially at the lower end of the market, lots of people can make [indiscernible]. Quite a few people can make polyethylene helmets, which is what we make, how the [indiscernible]. There's only one manufacturer that can make a rightful resistant helmets and that's a company called [ Gentex ] who we respect a lot. They're very good, although we would say that [indiscernible] helmet isn't as good and doesn't look as cool. What else that --

Yes, that's [indiscernible]. And the next question is linked. I mean, what are your current market shares and what do you think are realistic market share targets over the next few years?

I mean if you just split the business in 2 and look at respiratory on gas masks. We have a pretty strong market share currently. Our market share in North America is probably around 91%, 92%. And in Europe, it's pretty high between 60% and 70%. And the reason why it isn't higher is because a number of nations choose to buy domestically sourced product, which is entirely understandable. I'm not going to put the market share target for [indiscernible], but I can guarantee that it's unlikely to go much above 100%. So if we're looking to grow respiratory, we need to not just grow market share but also grow wallet share, which we are seeking to do and Jos touched on a few of the innovations that we've come out with around boots and gloves, suits, powered and supplied our products, so that's how we're continuing to grow that business.

On rebreathers, we -- our market share, I don't actually know the answer to that question, but it probably isn't that high. [ Rebreathers ] getting installed into the market and then they last quite a long time. We're a relatively new entrant to that market, probably having sold our first rebreather in about 2018, 2019.

But what I will say is that all of the business that we have entered in the last 5 years. We've only lost one and it was quite small. So that market share is growing very, very nicely. And then in helmets, just looking at the U.S., our market share is probably 25% or thereabouts within the U.S. military, it's growing from around that level to 50% over the next few years based on contracts we are already supplying under.

We have seen market share growth in U.S. commercial, as Jos alluded to. But our [indiscernible] business is largely U.S.-centric. And so market share outside the U.S. is minimal. But we do think that there's huge opportunities to grow that over time. So we've been investing in sales and marketing activities, quite heavily in 2025, we will continue to do so in '26. And hopefully, we'll be able to report back with some market traction outside North America when we talk to you next year, of course.

Thank you, Rich. Next question is there a [ show slide for the permits]. The answer is yes. Well, they're warranted for a period, it depends a bit on the home actually. Sometime it's warranted for 5 years, some for 10, [indiscernible] actually wanted to [ turn]. In America, especially, they won't use the helmet beyond the warranty period because they're worried about liability.

However, some countries will refurbish helmets. Australia is a good example. They have a very good refurbishment program for our [ xFi ] helmet that we sell them. That's also good for us. So they're bringing them in after 5 years. They sound [indiscernible], they've repaid them and they've got new pass in them, maybe new retentions, and we make parts and retention. So we got after market on them.

And actually, we are expanding that into, masks as well. We've got -- we've just done a deal actually with UK Police Force where after 5 years, they're selling the mask back to us and we refurbish them, make them as good as new and sell it to them again.

Next question is when the Department of War funds development, do they only IP? The answer to that is a benefit on the contract. Sometimes, they will own the IP that they have paid for, but they never own the IP that we've already developed, what we call background IP. [ Mike ] is a good example of the [indiscernible]. So we develop [indiscernible] on our own dime. If they pay us to develop a new communication system or something that might be at least shared with them, but they can't make the mask, but as we already developed that before we started working with them.

Let's move on to -- thank you, [ Pete, Alan about wearables]. [indiscernible] question is as industry veterans, can you talk us through your thinking on M&A? There was a recent Barenberg. Now, they actually initiated investment -- sorry, investor, they initiated coverage on us. They call us industry [indiscernible] and then the more recent at times also call mid industry [indiscernible], which I'm a bit sore about.

We're very bitter.

[indiscernible] to say anyway. We have been around defense and industrial is a long, long time. I've been in industrial or my whole career. Our thinking on M&A is that we -- firstly, we're not an [ RE ] to do anything. But we do see some areas of our supply chain that we could usefully derisk if we acquire companies that's particularly -- there's a bit of that in rebreathers actually. It is particularly true in suits where we have quite a complicated consortium of partners.

We may be able to increase supply chain reliability by buying some of those. There are also areas where we would like to control the IP a bit more, and that may lead to acquisitions. So I would look at those as small acquisitions to bolster supply chain resilient and get more control of the technology. And then we also -- we would also be interested in bolt-on acquisitions that expand market share, most likely in helmets because we already have very high market share in the respiratory products.

And the final piece to that, I think, is we do have very strong distribution channels that we've built over 20 years of supplying into the U.S. If we can find opportunities to push more through those distribution channels. That feels potentially very synergistic if it's aligned to our core areas of business.

We're probably answered about the [ IL ] acquisition I mean I could probably embellish the answer. We believe that most companies in the industrial space still manufacture and batches and that includes Avon when we came in.

Interestingly, when we first arrived in Avon, I was told categorically by the factory manager in the U.K. that there was no further room for improvement because they've already been doing continuous improvement for the last 20 years. And yes, we have managed to improve and we single operating metric in that factory. We have relaid out absolutely everything. There's no piece of equipment that is in the same place as 3 years ago.

Just to give you a real example. 3 years ago, they scrapped 40% of every filter they made for the U.K. MoD as of last week. They scrap 0.5% of what they make, which obviously considerably enhances our profitability. We think there are lots and lots of companies out there that are similar to how we found a 1, 3 years ago, running batch manufacturing at high levels of scrap or quality and high inventory.

If we could find a company that had some good contracts and some good contracts but was manufacturing inefficiently and have high levels of inventory we would for sure be interested in that because we'd be very confident we can improve them.

That's great. Fantastic, Jos, Rich, if I may just jump back in the investors today. [indiscernible] before we direct investors to provide you with a feedback, which is particular importance to the company. Can I please ask you for a few closing comments?

We've got 1 more question actually. Given the Department of War and Trump localizing reduction, do you see Avon being a U.S. target?

Not really. It's not something we worry about. Our job is to keep improving the revenue and the profit, the share price will follow. If we're price right, we shouldn't be particularly attractive to other people.

And just to be clear, I mean, the localization of supply for the U.S. is not new. -- we make in the U.S. for the U.S., and we always have to see to all intents and purposes when the U.S. Department of Wars acquired -- made their acquired from a U.S. country.

Yes. Not too sure how [indiscernible] question, how many of these loss and not companies can you and your colleagues cope with?

I mean, in terms of acquisitions, that's going to -- we'll build the capability over time. Obviously, Rich and I, maybe you know history from -- as industry veterans. We've both got mergers and acquisitions background. We're very familiar with it. I actually started life as the mergers and acquisitions lawyer, although that was quite a long time ago.

But yes, we excitedly feel we have the capability, but we wouldn't be looking at more than 1 or 2 acquisitions a year, certainly not [indiscernible].

When can you expect the adjustments of profit? I answered this question earlier, but when can we expect the adjustments to profit for the reorganization to [indiscernible] the answer is 2026. So investment in transformation in '24 was 13 million in '25, it was 15 million. In '26 6, it will be 6 million as set out in the results, and it will be 0 from the [indiscernible].

Very good. Well, thank you, everyone, for your questions. We appreciate them a lot. Very interesting to talk to all of you guys. We think 2026 will be another year of progress for this company. We think we see moving forward on all metrics actually, and we have probably the biggest pipeline of opportunities that we've ever had partly helped by the market and partly helped by the investment we made into research and development. So we look forward to moving our transformation and focusing on growing the company.

That's great, Jos, Rich. Thank you for the questions. And thank you once again for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order other that the Board can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company.

On behalf of the management team of Avon Technologies plc. We'd like to thank you for attending today's presentation, and good afternoon to you.

Good morning, everybody. Thank you very much for those of you that have come in person, and welcome to those on the phones. I thought I'd start by thanking our employees. The speed of change across Avon has been challenging at times but people love being part of a team that is up to something exciting. We've grown the company and EPS has doubled since 2023. We now have an exciting pipeline of new products, a solid balance sheet and more strategic options. We could only do all this with such a great team.

We made excellent progress in 2025. Revenue and profitability grew rapidly. We've transformed every factory using our strengthened system. We reduced costs by closing our Californian factory. In 2025, we invested $14 million in R&D, most of it expensed, fueling a pipeline of innovative products and generating excitement amongst our customers. The order book and pipeline are both stronger than ever. We have a scalable platform facing into growing markets and we're firmly on track to exceed our revenue targets and reach our margin target range in 2026.

I'll now hand over to Rich and he'll talk you through the numbers.

Thank you, Jos. Good morning, everyone. So as you can see then, the headlines demonstrate another year of strong progress. As usual, all of the comparators will be on a constant currency basis. The order book at the end of 2025 has hit another record at $263 million, 16% higher than the prior year. This leaves us very well covered for FY '26 across both helmets and respirators. Revenue growth of 14% dropped through to strong adjusted operating profit, up 31% at $40.3 million. And my preferred area of focus, return on invested capital came in at 18.6% after significant progress was made reducing the average level of working capital tied up in the business.

Cash conversion of 90% represents another good year even after a late burst in Q4 resulted in a high receivables balance as we crossed into FY '26. And the combination of all of these factors saw the balance sheet strengthen further with net debt leverage of below 0.9x despite considerable investment into the business during the year. Revenue growth, ROIC, cash conversion and leverage are now all better than our medium-term targets and operating margin is well on its way.

Moving on to the P&L. Order intake in the year was very healthy at $352 million, giving a book-to-bill of 1.12. Orders were slightly lower year-on-year, reflecting very high call-offs against the U.S. Department of War helmet programs in '24 and a slightly lower share of IHPS awards in '25. The phasing of these call-offs will always be fairly lumpy in nature but the record closing order book of $263 million benefited from strong growth in Avon Protection, more than offsetting a modest decline in Team Wendy, largely reflecting the increased Department of War deliveries and the phasing of orders already mentioned.

Revenue growth of 13.8% reflects a strong performance across the board with 16% growth in Avon Protection and 12% growth in Team Wendy. Operating profit of $40.3 million, over 30% above prior year levels, results in margin of 12.8%, an improvement of 130 basis points year-on-year and a helpful step on the road to achieving our medium-term objective of 14% to 16%. I will walk through an operating profit bridge shortly to pick out the key moving parts. Net finance costs reduced 16% to $5.4 million, driven by lower average net debt and the tax charge of $8 million represents an effective tax rate of 23%, which is roughly where we would expect it to stay absent further changes to the tax regime.

This all adds up to adjusted basic EPS of $0.912 per share, an increase of 35% despite the step-up in tax from last year's 17%, which benefited from some one-off adjusting items.

Avon Protection has had a tremendous year. Order intake up 18%, order book up 63%, revenue up 16% and operating profit margin up 160 basis points at almost 20%. This shows the ability of the business to lean into a strong demand environment and deliver profitable growth. The growth in orders and backlog has been largely driven by strength in international markets, offsetting a softer year in Commercial Americas following a particularly strong 2024. Ukraine-related demand now accounts for just $13 million in the backlog for delivery in FY '26. This may not repeat, but even after stripping this out, you can see that the order book has grown very well. Revenue growth was driven by Australian FM54 deliveries, strong demand for CBRN boots and gloves to NATO customers and some Ukraine support, coupled with another good year for rebreather deliveries.

The excellent drop-through margin was helped by operational gearing, improving productivity and sales mix. Given the strength of the order book, Avon Protection is exceptionally well positioned to deliver further profitable growth in FY '26. Order intake in Team Wendy came in a little softer year-on-year, largely owing to lower receipts from the Department of War following very strong intake in '24. The backlog remains robust at around 1x sales with the strengthened product portfolio driving an excellent pipeline of opportunities as we enter FY '26. Revenue growth of 12% was driven by further growth in ACH II deliveries as we move towards full rate production, further aided by strong demand for bump helmets from a number of end customers, including the U.S. Air Force and Navy.

Operating profit margin nudged forward from 4.6% -- to 4.6%, excuse me, from 3.9% in the prior year, which is a good improvement, but still some way off our medium-term ambitions. We are confident in further progress in 2026 as we demonstrate the sustainability of the production rate increases in Q4 and as the benefits of cost reduction following the Irvine site closure start to wash through. As a reminder, ACH II shipments, although driving top line growth, will remain dilutive at the gross margin level. We expect financial performance to accelerate through the year as we improve quality and productivity, which will skew Team Wendy operating margins towards the second half.

Now as we move on to the usual operating profit walk for the year, starting with the $30.8 million jumping off point for last year after adjusting for FX. The first positive bar of $15.4 million shows the effect of the 14% revenue growth seen in the year, split roughly 2/3, 1/3 in favor of Avon Protection. Then you can see a further $7.6 million benefit through the combination of operational gearing, product mix and CI activities that have improved efficiency and reduced scrap costs.

Note that as previously guided, there was a dilution effect of $2 million from growth in sales of the lower-margin ACH II helmet. There is a $7.1 million headwind from the step-up in investment in future growth, which includes increased sales and marketing, commissions, training and the increased net R&D charge to the P&L. There's a further $2.6 million headwind for increased comp, including share scheme costs. And I've also pulled out the $1 million drag on earnings from tariff costs and increased national insurance in the U.K.

And then finally, the other bar of $2.8 million inevitably covers a multitude of things, but the big ones are increased travel, additional investment in IT and costs incurred in tidying up some of our back-office processes. Moving on to the cash flow statement. You can see that net debt ticked up by $6.6 million in the year. The big driver was the $12 million outflow in working capital as production rates in Team Wendy ramped up, culminating in very strong product deliveries in Q4. This resulted in a high receivables balance at the end of September, all of which has now unwound. The pension contribution of $6 million was as expected. And as usual, guidance on future contributions and other financial matters is provided in the appendix to the slides.

Purchase of shares to fund discretionary comp schemes increased by $4 million to $9 million during FY '25, reflecting the increase in share price and the strengthening outlook. This prevents future dilution. It's worth pointing out that cash tax will remain lower than P&L tax for the next couple of years as we burn off historical tax losses. The big items to highlight on the balance sheet include inventory remaining broadly flat despite the 14% growth in revenue, resulting in improved inventory turns and the high receivables balance at the end of the year impacting the other current assets line. As already mentioned, this has now normalized following strong cash receipts in the first quarter.

Despite the modest increase in net debt, the leverage ratio continued to improve, driven by the increased profitability of the business. Overall, average working capital returns, which is a measure I like as it eliminates the impact of period-end ROIC improved by 15%. The other item worth drawing to your attention is the further increase in the pension deficit or decrease, I think, in the pension deficit to $13.8 million, down from $17.2 million last year. This is due to our $6 million contributions, offset by modest asset underperformance. I've included the capital allocation slide in the deck again this time, reflecting a further reduction in the year-end net debt-to-EBITDA ratio, which is now comfortably below our target level of 1 to 2x.

As Jos will cover shortly, we are expanding the revolutionize point of our STAR strategy to incorporate acquisitions as one explicit avenue to future growth, which, if executed thoughtfully, will present opportunities to deliver compounding shareholder returns. While we're still at the very early stages of developing this muscle, we felt it worthwhile to call out. And beyond that, the chart is essentially unchanged, highlighting the prioritization of organic growth and the progressive nature of the dividend.

Moving on to transformation. It's worth highlighting that transformation costs came in a little higher than expected in FY '25, reflecting a crescendo in effort in second half activity as we aggressively ramped up production rates in Cleveland. As flagged when we launched the transformation project back in 2023, expenditure will fall significantly in FY '26 with the expected outlay of approximately $6 million linked to two specific projects. The first and already communicated is the completion of transition away from SAP in our Salem facility, which we expect to save us over $1 million per year. This is progressing well and will be complete by the end of the first half.

The second and new project is a continuation of the functional excellence work stream with the focus on the way we deploy IT services across the group. We expect to invest up to $4 million of OpEx plus a little bit of CapEx in the design and execution of a new target operating model for IT, which we believe will deliver significant returns in a very short time scale. The investment will be completed in FY '26 and the overall project will have a payback of less than 24 months. This project reflects the end of transformation-related costs taken below adjusted operating profit.

So finally, moving on to our expectations for the full year. We expect further good growth in helmet deliveries as we finish the ACH II ramp-up with additional growth coming from commercial and international markets. We also expect good growth in Avon Protection, underpinned by the robust order book in this business. These factors combined equate to high single-digit revenue growth at the group level. We expect the financial benefits of the transformation program to drop through this year with a modest weighting to the second half.

Even after the additional dilution from the growth in low-margin ACH sales, we are confident that we can deliver our operating margin within our 14% to 16% target range. As highlighted on the previous slide, we expect transformation investment in FY '26 to drop to around $6 million and return on invested capital will continue to progress nicely. And finally, we expect cash conversion to remain above 80% with continued improvements in operating efficiency being partially offset by further investment in future growth.

And with that, I'll now hand back to Jos to update you on the operational and strategic progress and focus for the coming year.

Thank you very much, Rich. We continue to focus on delivering our STAR strategy, refining it each year with new initiatives. Our strengthened system has become a powerful engine for continuous improvement, and we still see lots of opportunity ahead. Much of our transformation program is complete with two newer projects running into 2026. The transformation program will finish in 2026 but the strengthened system will continue. Kaizen is forever, as we say internally.

In advance, we're increasing investment into R&D, sales, marketing and people. 2026 will see our most ambitious new product development program yet. In revolutionize, we've been very successful in securing customer-funded development programs. This year, we're expanding revolutionize to include acquisitions. Our long-term vision is to compound shareholder value by complementing our organic growth with targeted acquisitions. We have the team, the capability and the business improvement system to extract value from acquired assets. That said, our immediate focus remains on organic growth. While acquisitions are part of our long-term strategy, we're not in a rush. We will wait until we find the right opportunities at the right price.

As a reminder, this is our scalable business improvement system. The STAR strategy and objective setting process keeps our people focused on action. Our STAR Academy builds the capability of our people and the strengthened system enables us to continuously improve our processes, creating cash to invest into the front end of the business. During the year, we trained every employee on our strengthened system, developed 20 proprietary courses in our STAR Academy and took 30 of our senior employees to Japan for intense continuous improvement training. Another 20 people are going next week.

We believe that improving our operating metrics ultimately drives growth and profit versus 2023, when we originally set out our ambitions, productivity has improved 28%, scrap has reduced 62% and inventory turns have improved 46%. But this is just the start. There is more to come. At the midyear, we highlighted the operational risk in Team Wendy associated with production ramp-up and the move from batch to flow manufacturing. This turned out to be prescient. The speed of the ramp-up was difficult. Yet as these graphs show, we are making progress.

Over the summer, we tripled production on our Department of War lines as we implemented flow manufacturing. This demonstrates the potential of our new lines. We now need to increase production rates again on the ACH lines by another 50%, and we need to ensure we can deliver consistently every week. We are not out of the woods yet. We learned a lot over the summer and have used this to improve our strength and system. We learned that teams can go much faster than they think. We ran 14 improvement projects over 8 weeks. Leadership from the front is critical. We need to show people rather than just tell them.

A line that flows can only run as fast as its slowest operation. The fastest way to speed up a line is to deeply understand each process and tackle the biggest bottleneck one at a time. Lines cannot be improved by sitting in an office. Change needs employee buy-in. We spent a lot of time explaining what we expected of our operators and training them on the strength of the system. From a strategic perspective, our aim is to make the most advanced and best looking helmets with the lowest lead times and cost of production.

Avon Protection also made excellent progress as this slide illustrates. In the electronics value stream, which includes rebreathers, productivity increased 79% and scrap halved. In boots and gloves, production increased 47%, improving return on capital and helping us deliver on high customer demand. Both divisions have transformed every production line from batch to flow manufacturing. We've moved almost every single piece of equipment across the entire group, often more than once. You can see the scale of the change in this time lapse video of our U.K. site over the past year. One of the reasons that we're happy to share our strengthened system is that it's not about knowing what to do. It's about actually doing it. Real progress comes from making tangible change every week. That's what delivers sustainable benefits.

Moving on to transformation. As you can see, most of our initiatives are nearly complete. We expect to see benefits this year and beyond. Just to pick out a few points. In footprint optimization, we closed a factory in California and built a new one in Cleveland. In operational excellence, we've transformed all four of our factories. In functional excellence, we've reduced costs and improved quality in the finance function and we have a plan to make IT more efficient. In commercial optimization, Stacy Stern, our new VP of Sales, has developed a strategy to improve our sales capability and we have more bid activity than ever before. We will also hold more marketing events where we arrange for our customers to shoot our helmets so they can see how good they are for themselves.

2026 marks an important milestone. The transformation phase we started in 2023 will end in 2026 as planned. During this phase, we've fixed a lot and have done much to improve the business. There's more to do this year but we are starting to get our heads up and look to the future as we move from the fixed phase to growth. Our markets are supportive. Defense spending is up, CBRN threats are growing and user numbers are increasing. We are investing more in innovation and are building a strong pipeline of new products, and we're not just reacting to demand, we're shaping it. We have a repeatable and scalable business improvement system that creates the platform for future growth, supported by a strong balance sheet and the potential for acquisitions. In Avon Protection, the order book is -- the order book of $117 million is up 63%.

As you can see, both revenue and the order book are well diversified across customers and product lines. This year, we reached a milestone of $100 million of total orders under our NATO framework contracts to 16 countries for restorators, boots and gloves. Each country we win creates recurring revenue for the future. Beyond the order book, our pipeline of opportunities is bigger than ever. We have large potential filter orders from the U.S. Department of War and from the Middle East. Our MITR lightweight Half Mask and powered goggles were launched this year. We have opportunities for MITR sales with the special forces of 4 out of 5 of the 5 I's. This is important because regular forces tend to follow the lead of the special forces.

In rebreathers, we won orders with Canada and 2 European Navies and have bid for 2 additional new navies. In addition, we're actively engaged with the U.S. Navy, U.S. SOCOM and the U.S. Marines on rebreather opportunities and expect to receive invitations to tender this year. In Ensemble, we have opportunities for our lightweight chemically resistant suit in the Middle East with NATO and the United States. Overall, our pipeline of opportunities is up considerably and we are going for some big pieces of business. We will not win everything. But with a weighted pipeline up more than 80%, we should continue to grow. We mentioned at our interims that we are working with the U.S. Marines to develop MITR further on a program called ENBD.

Since then, we've been awarded another development program by the Department of War as part of their push to combat irregular warfare. The aim of this program is to develop a scalable tactical assault respirator, which they call STAR. I suppose I should be flattered that they've chosen to copy our acronym. STAR builds on the MITR platform and adds functionality and equipment. The exciting thing about STAR is that it has a very wide range of interested user groups, including the U.S. Special Forces, the Air Force, LAPD and the FBI. These programs will enhance the capability of MITR and develop it into a complete system that will create an entirely new market for us.

In addition, we've achieved CE and NIOSH approval of the MITR Half Mask and particulate filter, which opens the U.S. Federal market to us. Interest in our EXOSKIN suit increased during the second half. We're optimistic that our lightweight, low-burden suit is what the users want. Two different versions of our EXOSKIN suits have been chosen by the U.S. Department of War for trials, which could lead to the sale of 700 suits. There is potential for a larger program beyond that but competition will no doubt be fierce. We've also won a key order with the Turkish MoD for a full ensemble system, including suits, boots, gloves, masks and CS-PAPR systems. This shows that our strategy to sell full ensemble packages meets the needs of our customers.

So far, we're working with technology partners in this area, but there is potential for selective technology acquisitions to help us accelerate. We continue to launch new products to drive growth. This year, we'll launch the next-generation CS-PAPR. This has been trialed at several end-user events, and they love the way it helps enable them to escape from sudden high-threat situations by seamlessly switching to supplied air. We've also developed a new voice protection unit for our 50 series of masks, which we plan to start delivering in the first half. The new unit offers users improved functionality and less complexity. Looking further out, we're working on a new shallow water rebreather and expect to bid for funding to help us accelerate this program. We're also looking to exploit our new multilayer filter bed technology, which provides a far broader spectrum of protection than existing carbon filters.

Team Wendy's order book of $146 million largely consists of next-generation IHPs, ACH and EXFIL for the Australian Defense Force. We saw good growth in the U.S. police and first responder market, which was up 15%. And we had another year of very strong demand for combat helm pads and liner systems. Our support for Navy for EXFIL bump helmets has also been a key driver of growth with over 25,000 helmets shipped to the U.S. Navy in 2025. These helmets offer enhanced impact and work with hearing protection, addressing long-standing gaps in legacy systems. The pipeline in Team Wendy is also promising.

The EPIC helmet range has taken our leading military technology into commercial helmets. This has helped us win market share. Internationally, we're working with two militaries on new opportunities that look hopeful. We launched RIFLETECH in the first half and have seen encouraging early demand. It delivers elite ballistic protection and all-day comfort in a lightweight mission-ready design. The new pad system is so comfortable that during testing, one user forgot to take the helmet off at the end of their shift.

Furthermore, I'm told that the first rule of being in the military is to look cool, and RIFLETECH certainly delivers on that. We've now shipped Rifle Tech to an international military, made our first e-commerce sales and sold units to U.S. police forces. This demonstrates that there is demand for a very high-end helmet in the market. In 2026, we'll launch our most ambitious development program yet with two new ballistic helmets built around our latest technology and our no through-hole attachment system. These will upgrade our range with higher protection at lower weight. We also plan to launch a new generation of bump helmets, offering leading protection and multi-certification to cover a broader range of user requirements.

Together, these launches will increase our range into new markets and further differentiate Team Wendy from its competitors. We'll share more at the midyear. Meanwhile, demand for Integrated Head Protection continues to grow. In 2025, we secured a new Department of War funded program to develop a helmet that can withstand an even higher ballistic threat with integrated eye and hearing protection and night vision compatibility. This is important because it positions us well for the next generation of Department of war helmets.

As you can see from this slide, we have achieved most of our goals that were originally set for 2027. The only exception is margin where our aim is to achieve our target this year. With regard to risk, we still need to increase production rates on ACH Gen II. We know how to do this, but there is a lot to do. Recruiting good people at the speed we need remains challenging. There is a risk of increased competition on the NextGen IHPS program with a new supplier potentially entering the market. This would take the number of suppliers from 2 to 3 with demand continuing to look strong.

The government shutdown currently prevents the delivery of helmets to the DOW but does not slow production. We expect to see a temporary impact on working capital in the first half but no long-term impact. Looking at opportunities, we are bidding for several major U.S. and international programs, which are not currently in our forecast as timing is uncertain. There may be upside here but it's too early to tell for now. The strength of the system does have the potential to deliver higher margins than guided but we remain of the view that it's rare for everything to go right.

To wrap up, nearly 2 years ago, we set out to transform the group through our business improvement system. The original transformation projects are largely complete. We've launched world-leading products and technologies and partnered on a record number of development programs, further strengthening our competitive moat. Our markets remain highly attractive with rising defense spending and a record order book backed by a robust pipeline of new opportunities. We have a scalable business improvement system, which is a powerful tool for improving businesses and generating shareholder value. In summary, we see opportunities ahead and believe that we have the people and the processes to realize those opportunities. Thank you very much for listening, and thanks to the guys in the room.

We'll now open up for questions.

It's Andrew Douglas from Jefferies. I've got a few questions. I'll maybe go into two spots and come back later. On the IHPS, can you explain to us why there's new competition to the market? You've got two people who are doing a good job. Is the DOW wanting a third one? And if a third entrant does come to the market, is it not going to take them a while to get fully up to speed with FAT approval, ramp-up approval, et cetera, et cetera?

Yes, it's a very good question. We asked the same thing. The answer is that Gentex was slow getting FAT. In fact, I think it failed that first time around. And as a result, the Department of War reached out to another company and asked them whether they have been interested for applying for FAT. Somewhat irritating that Gentex then did pass FAT but the other party was some way down the road of working how to build the helmet itself. So they are now in FAT. We don't yet know whether they're going to pass or not. It is a difficult technical challenge that helmet. And even if they do get FAT, one thing to get FAT is another thing to work out how to make it as we've discovered ourselves, it's quite tricky. But I think there is a possibility that we'll get a third player in the market, annoyingly nothing to do with us because we pass FAT first time around.

Second -- just I've got some for Jos, some for Rich. On the M&A side, where are we in terms of the pipeline? I mean it sounds to me like we're now thinking about it. Do we have a pipeline of -- I don't know how many companies you need in the pipeline, but do we have one and then you're trying to work your way through to figure out what's the best? Or do you know what you want to buy? It's a question of when it comes up and at the right price?

I think it's early days. We are focused this year very much on organic growth and getting the margin into our range. We want to deliver on our promises before focusing on other things. I think this is the year where we'll start to get our heads up and look a bit more externally and go and visit more companies. But with M&A, you have to kiss a lot of frogs to find a princess. And it's going to take us a while to build up a pipeline of opportunities. I think the only potential exception to that is I think we've got a good set of partnerships for suits but there are some options there where acquisition might help us accelerate better than partnerships, but they'd probably be very small.

And then just a few quick ones for Rich. On the receivables, how much was it? And is that just a question of you delivering lots in the fourth quarter and get paid in the first quarter? Or is there something else going on?

No, it was exactly that. So the overhang, $25 million to $26 million was $17 million, all owed by one customer and now all paid by set customer.

And then on one of the slides, you talked about a GBP 10 million benefit in '26 from transform basically finishing. Is that all in '26? Or is that an annualized number that we should think about by '26?

It is an annualized number, but most of it will come from...

It's Richard Paige from Deutsche Numis. Three from me as well, please. Given what you've said on Q4, it sounds like there was not -- for want of a better word, not a scramble but quite a surge towards the end of the period. Could you just talk through a bit more what happened, please? I think you're on the ground lately.

I don't know if you're set up for that. Yes. I mean the summer was pretty intense. I was actually in Cleveland for 2 months solidly on the factory floor for the entire 2 months. I actually spent the first 3 weeks in the paint booth trying to get that to working, which we did eventually do. We have an automated paint line, but it was not painting in an automated way to start with. After that, we just started debottlenecking the lines and knocking down problems one at a time. I think it was very intense. It was very tiring for people. There were a lot of 12-hour days. I'd say it was also very rewarding though because every week, we could see the production rates coming up and more helmets getting approved by the DoD.

So -- but yes, it was a hard push for sure. Not for the faint-hearted and actually, you've given me the opportunity to thank all the team in Cleveland. I mean it was really hard work. It's not -- I mean, they probably don't -- I think they did love having the CEO there for 2 months, but probably in the first week, they say, "Oh my God." But we ended up creating a really strong team, and they work really, really hard. So I'm very grateful to them.

You've alluded to second half weighting for the year ahead. Could you just give us a little bit more flavor around that, please? Yes.

I think we're trying to get the numbers. So we can come back to that. But the drivers for the weighting are twofold. So firstly, demonstrating ability to hit rate was the important thing for Q4 '25, which we did. In the first half of '26, two things need to happen. So firstly, we need to demonstrate to ourselves that, that rate we have hit is sustainable. And then secondly, as Jos mentioned in his slides, we've got to increase it again by another 50% on one of the helmet types. So there is still a lot to do. And of course we operate [indiscernible] margin level, it is helpful from an operational gearing perspective. So that clearly weights margin a little bit on in the first month, then great. But I don't think we will. I think it will take us the half. So maybe instead of 48%, 52%, think 46%, 54%.

My last one is a little bit selfish. I think of my Christmas stocking list, you've moved all of your facilities to flow manufacturing. In your own words, you moved almost every bit of equipment in the firm. What are you writing a book about, Jos?

I'm not writing. We are going to -- I think we're going to do a second edition of the strength of the system just to put in some of the learning. So I think we should continuously improve it as we learn ourselves. It's one reason -- I've actually got a longer deck of what we learned over the summer in Cleveland that we've started training our people internally on you've just got one slide from it in this deck. But I actually do have a new mission. I don't think we're very good at helping our people transition from being technical specialists to leading teams. So I want to write a training program around that to help them kind of make that important career move from technical specialists to leader of bigger teams. We have had a number of people where I think we probably could have helped them more than we have done. So that's my next mission.

[indiscernible] Very grateful for having something to do to keep him busy in the afternoon.

Toby Thorrington from Equity Development. Question is all for Rich, I think. So good improvement in gross margin in the period. Scrap looked like a decent size. Scrap reduction looked like a decent sized contributor to that. If I read the chart correctly, scrap rates not much more than 1% now. Is there much more to come from that? And what's the gross margin outlook generally?

That's 2 questions, that's cheating. I finished yet. On scrap, yes, there's plenty more to go. I mean, interestingly, I remember standing up here 2 years ago pointing out that we were scrapping $1 million a month in one of our factories. That $1 million has now gone down to $0.25 million, which is obviously great, but that's still $0.25 million a month that we're scrapping in that factory, and we've got 4 factories. So there's still plenty to go at on scrap. Gross margin improvements, we do expect that they will continue to come through. We've got the annualized effect of closing Irvine that we expect will come through in 2026 and a lot of that will come through in gross margin. The cost of doing business on an operating level in California is somewhat different to Ohio. So that will come through in gross margin. Going the other way, of course, as we increase ACH deliveries by another 50%, that will be dilutive to gross margin. But I expect to see good solid progression in '26.

Okay. And relatedly, but further down the P&L, I think SG&A increased more than revenue in the period but it's sort of consistently so first half, second half. Just what's behind that and the outlook again for that, please?

Yes, that was the $7.3 million bar that I picked out in the operating profit walk. And I picked out because it's healthy SG&A, that's kind of investment in future growth. So you've got R&D in there. And don't forget, we capital -- we expense almost all of our R&D costs now. So every dollar we spend is an effective headwind in the year. But it's also sales and marketing. Jos called out the new appointee to head the sales team. The activity of taking helmets out to customers and shooting them or allowing customers to shoot them, that doesn't come for nothing. But it's an incredibly high-quality investment in our product. It allows customers to pick it up, play with it, see it, see what it's capable of and then buy it. So pretty good quality investment in SG&A. Actually, run rate SG&A, which is all the stuff that we've always done, came down year-on-year despite a 14% revenue growth.

Yes. We have -- it's a good piece of analysis that we have a view that many companies are not thoughtful enough about reallocating resource. And what we've done is we've taken a lot out of what you might call the back office and operations. And then we've invested into the front end of the business, sales, marketing, bids. We've stepped our bids because we've got a lot more bids, so we had to recruit some people to support that and R&D. And that was always our intention 3 years ago to invest more into that area.

Sure. Okay. And final one, just on cash, I'm not sure whether transformation costs and cash out were aligned in FY '25. But is that -- will that be the case in FY '26, $6 million all in cash out?

Yes. So '25, no, it wasn't aligned because $3 million of the transformation was accelerated depreciation, which is obviously noncash. We've now done with accelerated depreciation. So basically, all of '26, this $6 million will be cash.

Andrew Humphrey at Peel Hunt. Just a couple. Just building on that question about investing for future growth. Clearly, the year ahead guidance includes a fairly meaningful step-up in self-funded R&D and CapEx. Sort of -- and that kind of seems to match up with the pretty kind of full list of bids and opportunities that you've outlined in the statement. Maybe can you tie those two things together? Does that kind of step-up in the money you're investing in the business kind of tie up to conversion of 50%, 75%, 90% of those opportunities? How should we be thinking about how that kind of gets toggled next year? I've got one more.

Do you want to start on that?

I think you go for that.

I mean talking about the jump from '25 to '26 is actually quite hard because it's contingent on a lot of things happening that we don't yet know will happen. So it might be easier if we look at '24 to '25. The sort of things that we were investing heavily in, in 2024 included finalizing development of the Half Mask, sort of getting beyond 50% through the development of the goggle that go with the MITR system and essentially starting and finishing development of RIFLETECH. And all of those things have started to contribute to revenue in '25. So if you think about that linkage, that's quite important. The other thing I would think about is Avon Protection is an international business and has been for 20 years. So very significant sales outside of the U.K. and U.S.

Team Wendy is not in that same situation yet. 90-something percent of everything that Team Wendy sells is inside the Continental U.S. with the balance really being the Australian Defense Force. If Team Wendy is to grow in the way that we think it is capable of growing, it needs to push its boundary into the Rest of the World, which requires investment. And so we've talked about investing in sales. We've talked about investing in marketing. A large part of that push has been building a sales team that's capable of addressing international opportunities. And that is a team that is qualified to talk to international customers in a language that they understand. U.S. Department of War customers have a very specific language. U.S. police forces have a very specific language. That doesn't always translate into international customers.

I don't know whether this is answering your question, but there's obviously a bit of a -- there's a period where you have to develop a new product, which takes time, probably quicker on helmets than MITR, MITR took us about 18 months. Then there's a period where we have to seed the market, build the marketing materials, they have to assess it. That probably all takes you a year. We're starting to see RIFLETECH sales. We're starting to see a lot of interest in MITR but actually it's this year that the sales should step up on those. The new helmets we launched, I think they'll probably benefit us maybe the back end of this year, but probably the real sales are going to come next year, 2027 on those.

Suits, we actually developed the suits maybe 2 to 3 years ago. We probably carried on refining them. They're probably the best. We would say they're the best chemical resistant suits in the world. They're way lighter than anyone else's. They're more breathable but it's taken us a long time to get the market to buy into the fact that they are an improvement over what's out there at the moment. And now suddenly, we're seeing customers super interested in them, but the sales at the moment are very small suits. So it's kind of all upside for us. And then the new -- the bid team we've got, again, we're bidding for a lot more of it, it's going to take us a while to see it.

And the new international sales team in helmets, we're bidding for more there as well, but it's going to take a little while to come through. So this could be a year where we start seeing all the bidding activity from '25 coming through in 2026. You also asked about CapEx. I don't think we need a lot of CapEx this year. And the guys, we have a phrase internally of used wisdom before money. The area where we're absolutely stacked at the moment in addition to helmets is boots and gloves. We've got a very long order backlog. We bought 4 secondhand presses from another company that's sort of shrinking in the U.K. We're refurbing those. They cost us like $15,000 each. They're $250,000 new. So we've got basically no depreciation on them, so that should let us be very competitive.

Okay. And maybe one more on U.S. government shutdown that you called out as a risk factor and particularly around the working capital impact. Like clearly, we're through a phase of that now and one would hope that kind of in the next few months, things will normalize. But have you sort of put that down as a risk with sort of half an eye on what may happen again in January? Or is that just that it kind of -- it all takes time to work through the system?

Before the latest movement in the shutdown ending. But I would say actually, our program office was very helpful. We have a plan with them that we could actually carry on shipping ACH and carry on being paid for it even in government shutdown. So it was only IHPS where we were making but not shipping. Could we get another shutdown in January, perhaps, but we would expect that still to apply. So it would only be IHPS affected.

The other thing that was quite interesting about the shutdown is our program offices did not shut down because they're essential. And perhaps more interestingly for us, the suits program with the U.S. DoD, they were furloughed, but then they came back and they issued the contracts and then they went back on furlough. So I guess what I'm saying is it's so important to the U.S. government that they actually took people off furlough to issue the contracts.

Going back to the rebreather in the U.S., we had a deal a couple of years back in those big numbers. We've now got 3 customers would appear. Now it might be one customer in 3 ways. I don't know what 3 different customers -- so is the opportunity there as we kind of previously thought? And does that include the shallow water thing is that a non-U.S.?

They're still refining their requirements. Some of them seem to want everything, something that does deepwater and shallow water. I think we're going to end up developing a shallow water variant. But the numbers are the same for the Navy and then Marines and Special Forces are on top of the original numbers but they are smaller. But you certainly look at 700 or 800 units, but we may not win. I think we're working with them closely and I've had a number of meetings with them so as the team. I'm sure our competitors are doing the same.

Still down to 1 or 2 competitors?

Still seems to be the same number of competitors. touch wood, we still haven't lost a bid but that could happen at some point. Unfortunately, it's a capitalist world, and we have competitors.

Thank you for coming.