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Okay. Good morning, everybody. Nice to see you. Thank you all for coming. A few new faces in the audience. So I shall do a quick few introductions. I'm Nick Jefferies, joined here by Bruce Thompson, our Chairman; Simon Gibbins, our Finance Director; and Lili -- I lost her again, Lili Huang, our Head of IR. So look forward to talking to you individually as well. So these are the results for the year ended March 26. I'll start off by taking us through a quick sort of highlights of what's been going on. Simon will then take us through the numbers, and then I'll come back to an operational review and the outlook.

So the key point is we've seen increasing trading momentum through the year, which finished with what we consider to be a very strong exit, orders up 14% organically in Q4 sales up 5%, leaving us with organic sales for the year of 2%. Both divisions are in growth. We'll talk more about that later. The order book is up 5% by the end of H2 compared to H1. It's a function of orders being higher than sales. And we'll talk a little bit more about that later, but that's continuing to grow. We're also investing in future growth. We've added additional production, sales and management capability, specifically in Europe -- or principally in Europe and the U.S., but also a little bit in Asia.

We'll talk more about that. So that means that our adjusted operating profits are up 1% and our adjusted operating margin down just 40 basis points on last year, but still at 13.8%, still a very creditable level. Adjusted EPS up 4%. Cash flow, as always, has been very strong, 92% conversion. That keeps us -- keeps our average over the last 10 years of around about 100%, which, of course, is a key function of this model, enabling us to self-fund more of our acquisitions. And we've made 3 acquisitions recently, most recently announcing 3G, just to cut 3GMetalworx just a couple of weeks ago for GBP 50 million, Sterling for 90% of that business. Trival, we completed on last month or April, sorry, which we acquired for GBP 40 million.

And then in December, we acquired Keymat, which trades as storm for GBP 5.5 million. So those are 3 high-margin, higher-growth businesses with a key focus on particularly the at least the last 2 on the defense and aerospace markets. So we're very pleased with those acquisitions and looking forward to 3G coming through to completion in the next few months. The multiple of those 3 overall with an EBIT multiple of 9, which we think is appropriate for -- given the growth and the level of margins and cash that these businesses generate. Going into the new year, we have a very strong pipeline of design wins and acquisition opportunities, and we'll talk a little bit more about that later. So -- and we'll come to the outlook. But we feel as though the business is in good shape. These results are very much an in-line set of results. We've exited strongly, and we think we're in very good shape for the year ahead.

So with that, I'll pass over to Simon to take us through the finances.

Thanks, Nick, and good morning, everyone. Okay. First up for me, the financial highlights. So it's been a robust performance for us. Conditions have been a little tricky. We've seen the sort of back end of destocking in our Controls division, Controls unit. And that's the last unit of ours to recover, and that has now recovered and is back to growth in the final quarter. So as you can see, we've returned orders and sales back to organic growth. We've returned the order book back to growth. We've got a positive book-to-bill. We've actually delivered our best profits, our best earnings, both adjusted and reported. And once again, we've delivered, as Nick said, strong cash flow. And through all of this, we've been investing for growth. We've invested in new resources, in new capacity, in working capital and in accretive acquisitions.

So just a reminder, these are our KSIs that we have. The top line is our medium-term target, that's full year. The middle line is our strong through-cycle performance that we've delivered over the last decade. And underneath, you can see our results for the year. So -- so in terms of sales on the left, 5.5%, very healthy 5.5% organic growth on average across that 10-year period. This year, we're back to growth at 2%. The strong Q4 finish, as we said, that's 5%, which is getting on towards that average growth level. In terms of operating margin, you can see over 10 years, we've actually added over 8 percentage points to margin. This year, we could see the pickup happening. And therefore, we've invested in -- we've invested for growth.

And yes, that does hit the margin in the short term. But in the longer term, it will pay back as we push towards that 17% margin target, which we're very much on track to achieve. EPS, we're coming out of the bottom of the cycle. We've delivered 4% EPS growth. That's adding to 14% growth we've delivered on average over the last 10 years. Cash flow is strong, as I said, nicely above that 85% target that we've set ourselves. ROCE, it's down a little bit, and that's the investments we've made, growth investments, but it's still above our 15% target. And you can see at the end, we're still doing great progress in terms of reducing our carbon footprint, 68% down in 4 years, 65% was our target this year. Next stop, net zero in 2030.

Right. This is profit and margins. And you can see that sort of sketched out on the chart there since FY '18. And underneath, you can see if you got good eyesight, in orange, I put the organic sales performance. So hence, you can see the cycles at play. In terms of operating profit, that's obviously a combination of sales, gross margin, OpEx. Gross margin has stayed strong, and I'll talk to that on the next slide. In terms of OpEx, we put in GBP 4.4 million of OpEx this period. Half of that is into growth investments. And with -- we've invested in new sales resource, new engineering resource, new capacity in Asia, in Thailand, in South Korea and also a new facility we're building in India, which is very exciting, and that will complete in August.

The thing about new resources for us is it can take over a year for those new resources to start actually delivering value. So timing is all important. We saw the pickup, and therefore, it was the right thing to do to make the investment now. short-term impact on margin. So margin would have been slightly ahead if we hadn't made that, but it's the right thing to do as we push towards that 17% target. Obviously, the profits themselves have been clipped by that GBP 2.2 million investment. We're still up GBP 0.5 million, and we're still continuing our growth profile, 16 years of growth in terms of profits. And actually, FY '18 -- since FY '18, 17% compound growth in profits. It's nearly doubled or doubled since COVID. So they're none too shabby in terms of track record through the cycle.

This gives you a walk. I do like this graph. I don't know how many other peers do it, but it basically gives you a walk from last year's profits, GBP 60.5 million, this year's profit, GBP 61 million and splits it up between inorganic performance and acquisitions. So the first -- the 4 bars on the left, that's our organic performance, split between sales, gross margin, it's mix effect and it's had OpEx. So revenue is 2% is GBP 3.4 million of profit equivalent. So gross margins are actually up. If you look at the businesses, they're up on average by 0.2 percentage points. But actually, that's been offset by the mix effect we've got with magnetics, which is a lower-margin part of our business, growing more strongly than controls, which is actually the higher-margin business.

So it sort of offsets. And there's the GBP 4.4 million that I talked about. So without the OpEx investment for growth for GBP 2.2 million, organic profits would have been up 0.7%. With the investment, we're down GBP 1.5. but actually, that's more than offset by the acquisitions we've made in the last 18 months. So that's Burster, that's Hi-Volt, that's Storm adding GBP 2.2 million. So profits up overall up 0.7% CER, 0.5% at a reported level. And I do like this graph. I think it's a good illustration. You can look back in terms of our model. It's about organic growth. It's about operating efficiencies, and it's about accretive acquisitions. Next, a look at the 2 divisions. We've invested in both divisions, both operationally for the future and acquisitively as well.

If you look at S&C, S&C sales are up organically 2%, and that's led by Medical and Security and by North America. If you include the acquisitions, they've got Burster and Hi-Volt and include the investments we've made in the OpEx, then sales are up 8%. EBIT is up 7% CER and a slight clip on the margin, down 0.3 percentage to 17.8%. M&C, likewise, that's also up 2% organically. In this case, it's actually led by renewables and it's led by Europe. Now the profit themselves have been impacted partly by the mix, partly by the investments we've made, but it's sort of limited to a 2% reduction in profits and a 0.8 percentage point reduction in margin. But with Controls now back into growth, all divisions are sort of well set -- all units are well set for growth as we move into the future. I'll skip through this.

This is a quick slide just obviously walks you down from profit down to EPS, 1% profit growth becomes 4% EPS, lower interest, lower tax. We've actually got lower acquisition costs. So we're delivering 18% growth in reported EPS. That's a big record for us. Dividend up 4% as it was last year. In terms of cash flow, this gives you a walk from the adjusted EBITDA, GBP 68 million down to free cash flow of GBP 37 million. The 2 bars on the left, that's our capital investment. So we've invested GBP 5.5 million into working capital, and that's to support our growing sales and our growing order book. And actually -- but during that time, we've actually reduced working capital as a percentage of sales from 17.2% down to 16.6%. So good work there.

Investment in CapEx, GBP 6.6 million. That includes the facilities that I talked about earlier, but it's still only 1.5% of sales, similar to last year. So it's very, very capital light. Operating cash flow, GBP 56 million, 91% conversion, similar to the free cash flow conversion, which is 92%. And you can see at the base of that chart, our conversion rates over the last 12 years. So as Nick said, that's averaging around 100%. So it's a really strong part of our model. And you can see in the middle chart, but actually operating cash is slightly lower than it was in the previous 2 years, and that's just purely a function of working capital. This year, as I said, we've been investing in working capital to support sales to support growing order book. The previous 2 years, sales were reducing a little. And so it was the order book, and so we were releasing working capital.

So that's a pure dynamic at play there. But even with the cash where it is, it's sort of 19% CAGR growth over 12 years. So that's none too shabby. That's a very good level, very cash generative. In terms of balance sheet, GBP 81 million net debt, that's a gearing of 1.2, which increases with the inclusion of Trival, which completed in April of 3G, increases to 2.2, and we expect that to reduce to 1.8 over the course of this new financial year, very much in line with our target gearing range. Finally, just a look at our financial journey over the last decade. And ultimately, what you'll see through those KPIs is very strong performances when times are good and very resilient when macro times are tougher.

So we're -- it's been a good year, and we're sort of exiting with a number of good growth levers in place and the year is well set. So with that, I'll pass to Nick for an operational review. Thank you.

Okay. So just a very quick summary. I mean we have a very clear compounding growth strategy. We focus on selling into markets with structural long-term growth drivers. Everything we do in our organic programs and our acquisitive programs is about generating growth over not just the short term, but medium and longer term. All of the acquisitions we make are with the sort of can these businesses grow over the next 10, 20-plus years. So a very long-term view, and we target design opportunities and identifying design opportunities and design wins in markets that have those characteristics. And that should and does enable sales growth well ahead of GDP over the -- through the cycle. And as the previous chart that Simon put up sort of showed, you can see that that's the case.

We then acquire highly differentiated businesses. We like businesses that have higher margins, high growth, good market exposure to those target markets we're looking for. We generally target the businesses. We don't generally get involved in sort of public auctions and things like that. So we identify a list of targets and then we develop relationships with those businesses, hoping that they'll sell to us over time. And it's a big market. There are a lot of businesses out there to look at and a small portion of those businesses are the ones that are suitable for us, but that's still a lot of businesses. We focus on enhancing the operating margins. We do that 2 ways through efficiency programs, which we've been delivering now for over 10 years, which has driven the margin to where we are now.

And then we acquire higher-margin businesses on top of that as the 3 that we've recently announced demonstrate. And that puts us in very good shape for 17% by FY '30. Very cash generative, as Simon talked about, and then we want to minimize our impact on the environment. So we have a very clear, consistent strategy that we believe is one that delivers results, both for the short and longer term. Worth also mentioning 2 things on the right. Our products are unique and very, very hard to replace. Once they're designed in, it's very difficult for customers to design them out. It's not something they want to do. And so generally, we have very sticky revenues. The other thing to just bring out is that we have a low -- relatively low customer concentration. Our top 20 -- top 10 customers account for 20% of our sales with our largest customer being about 6.5%.

A quick recap on the sales. So we've got -- so firstly, we're a global manufacturing business. We have -- we've made 30 acquisitions since 2011. As of today, we have 36 manufacturing sites around the world, occupying a total footprint of just over 1 million square feet. So we have a widely dispersed manufacturing base, which is -- which benefits both -- or provides both close to customer manufacturing, which helps us in situations when tariffs in the U.S. are introduced. But also, we have larger sites in lower-cost labor regions where we can get economies of scale as well. So we have a very, very, very flexible manufacturing footprint. The recovery that we've seen through the last year is really driven -- well, firstly, you can see on the bar chart at the bottom, Europe was the stronger region of the 3, growing at 3% organically.

That was led by Western Europe. Germany within that was particularly strong. We had some -- actually some big renewable energy projects, and big industrial products and some big medical -- German medical customers leading that growth. Nordic was actually down 2%, but that was because one of our major customers asked us to move, transfer production from Europe to India. So we're now making that very same kit in India so that our customer can benefit from the Make in India program and supply their end equipment, again, renewables actually into the Indian market. North America was flat for the year, but it was very different H1 over H2. So H2 was up 10%. We think that was in part due to the sort of settling of stabilization after the introduction of tariffs at the beginning of the year and sort of settling down in the customer base.

Asia up 2%, but actually very much second half driven again. China up strongly -- sorry, India up strongly because of the production transfer and China up again in the second half with the sort of global industrial recovery. So overall, a pretty broad spread recovery. Actually, by the end of the quarter, all of the regions -- by the end of the second half, all of the regions were in growth. And you can just see on the right, the gradual development of the sales through the year. The M&C division, I think really just to sort of bring out a couple of points. There's been a lot of talk over the last year about the controls unit and its destocking.

We've seen 2 things in M&C. We've seen strong growth in the Magnetics division, and we saw the destocking in controls. We're pleased to say that the controls destocking has well and truly finished. By the end of -- or by H2, orders in both units, Magnetic and Controls were in double-digit growth terms. So we are sort of back to the races. We're seeing recovery across most market sectors. We saw a bit of a delay due to some of the commercial security delays in the U.S., slowed down some of the programs there, somewhat, we think, influenced by the U.S. shutdown. But that seems to have now passed. So EBIT down slightly of the GBP 2.2 million additional cost investments that we've made during the year, 2/3 of that was into the Magnetics Controls division and obviously, the other 1/3 into sensing and connectivity.

And of the 3 acquisitions we've recently announced, the Storm business goes into controls. Sensing & Connectivity, so that's 40% of group sales, slightly higher than average margin. What we saw there was orders were down organically for the full year, but that was principally off a strong prior year comp actually this time the year before, we had quite a strong pickup in that area. So it's really as much to do with that as it is anything else. Europe led the recovery -- sorry, Europe was up 2% led by Germany again. We had quite a big recovery in Central Europe, in Germany, Slovakia, some of our fiber businesses and some of our other connectivity businesses doing quite well. In the U.S., we were up by 4%, led principally by some of our sensing businesses.

So just different -- lots of different moving parts. Operating profit up 7% margin at 17.8%, which was down 30 basis points. Recent acquisitions, both Trival and 3G will go into the Connectivity division. So our existing wireless cluster with 2G and Antenova is in the Connectivity division. So Trival will sit alongside that and 3G will sit alongside MTC, which was actually the second acquisition we made 15 years ago, the other electromagnetic shielding business. So this is -- this chart shows the order book sort of since -- well, over the last 10 years. And you can see the spike post COVID, you can see the resettling. And then just towards the end of the year, you can see the recovery in the second half. That recovery in order book is continuing in the first quarter as orders remain ahead of sales, mathematically, the order book goes up.

So that will continue. We have about 4.5 months sales coverage, which is plenty. And what we're seeing is with the growing order book is we're seeing actually similar proportions of order book -- similar proportions going into both short term, 6 months or less order book and longer term sort of 7 to 12 months. We're not seeing any great sort of divergence in the pattern in the order book, which is a good thing because that will drive short- to medium-term growth as well as later in the year. So this is a trival. This is the antenna business that we completed on in April. It's based in Slovenia, just in between the airport in Ljubljana. It's a terrific little business that makes antennas and antenna masks for principally defense applications. So the manpack radio, they call it antenna that's a big antenna, you can kind of fold over.

They make bits of kit like that and various other antenna simple and complex. They also make antenna masks, such as what you can see in this photo. The photo on the left is of up to an 18-meter mask and the photo on the right is the mask mounted on the side of a vehicle. They're very lightweight. Those masks are very lightweight and very quick to deploy, and the whole thing is entirely designed and made by the team in Trival along with the antennas that go on the top. High margin, good growth, great customer list, low customer concentration, high margins. And we see a very good pathway to further growth over the next 3 years of that business, more than 3 years, but at least 3 years. 3GMetalworx. So this is the electromagnetic shielding business. So electromagnetic shielding is basically bits of bent metal that need to shield electromagnetic interference in every bit of electrical and electronic kit.

There will be tons of it in this room in all of the speakers and all of the kit that these -- the AV guys have got will be full of electromagnetic shielding. For those of you old enough to remember it, when you used to have a turn your car radio on, your car on and you had your mobile phone in your pocket and the interference will pick up on the radio, that's because in those days, car radios didn't have electromagnetic shielding. These days, it's one of the regulatory requirements -- and so every bit of electrical and electronic kit has to have it. And so you can see -- and so it's varying complexities of bent bits of metal from the simpler products on the bottom left there, where that's just a standard form sheet of metal with holes punch in it to the piece just above it, that is a milled piece of aluminum in that case with separating regions on the case and then bits of conductive foam, the black bits are conductive foam and gaskets to provide an absolutely tight seal and shielding in a very complex environment.

And those complex environments might be aerospace, commercial space, military, where any kind of even tiny emission is an absolute no, no. So they make as well as some of the simpler stuff, 3GMetalworx make very complicated bespoke, highly bespoke bits of kit. And that's why we're so excited about it. With our existing business, MTC, which we've owned for 15 years, that's been a very, very successful acquisition for us. The products are -- they have similar products and some overlap, but very minor overlap. So we see great opportunity for cooperation between those businesses. And indeed, the ongoing management in 3G have known the management of MTC for many years. So there's a good platform for cooperation. In fact, there's a conference just next month to kick off all the synergy activity. So yes, it's a good business based in Toronto with production sites in Florida and California.

We're acquiring 90%. The ongoing management retain 10%, 2 key management, CEO and the Head of ops. They retain 5% each on a 3- to 5-year put call option arrangement. So we're currently waiting for regulatory approval. We've applied for all the approvals in the U.S. and Canada, and we expect -- hope that they'll come through over the summer. And just -- I'm not going to go through all of this. There's a lot of detail, but this is just an example of the activity and the scope that we have to supply into the defense markets. This is for UAVs and UAS unmanned aerial systems, the kind of component capability that we have. You can see Trival on the middle left. But you can also see businesses like CPI, one of our sensor businesses based in North America, makes very rugged thermal switches.

Foss on the left is a fiber optic producer in European fiber optic producer, Cursor controls, human machine interface, electronic bespoke embedded computing controls, Silvertel power Ethernet modules for docking drone docking stations, MTC that I just talked about, thermal management and so on. There's a whole raft of products. And this is just for the UAV/UAS marketplace. And we have similar broad portfolios of product capability for other sort of defense-based application areas that we're marketing quite heavily. We recently hired a business development capability that is working across the group who put this together, this data together with Lili and establishing our product offer into the defense space in a very sort of coordinated and we think quite compelling fashion.

And so far, we've only been doing it a few months now, but we're getting a very positive reaction. And indeed, our design opportunities and design win register, you won't be surprised to hear, is growing quite rapidly. And then just lastly, so this is an example. I talked a little bit about fiber optics. So we bought 10 years ago a fiber optics business based in Norway with production and development facilities in Bratislava, Slovakia. Since then, we've made 2 small bolt-on business acquisitions for this business as well. And this is just a snapshot of how this business has developed over the last 10 years. The key points are 6% CAGR revenue growth with 10% CAGR operating profit growth, delivering now a ROCE of 53%.

And this is the key strengths of the model playing out. If you just get even just moderate compounding organic growth with a couple of small bolt-ons and you keep doing that for long enough, the returns really start to take off. And that's what the businesses that we've owned for these kind of periods of time are doing just that. So the more recent acquisitions that we've been making, we expect fully the same kind of thing to happen. And on the right, you can see just a quick summary of the things that we've done. When we bought Foss in 2015, it was very much focused on the fiber-to-the-home market, principally in Norway. Our reason for acquiring it way back then was to be -- was to move to a more industrial and now defense-based marketplace where that same capability can be offered into a more industrial and defense-based marketplace.

And over the last few years, we've developed sales into that security market segment to the extent that it now accounts for 13% of revenue. At the same time as that, we've diversified revenue beyond just Norway, which is where it was when we acquired it. Now over 1/4 of sales are international and most of the future growth we expect -- well, not most, half of the future growth will come from international revenue. So it's a really good example of us building a cluster of fiber optic businesses. So that really sort of wraps up the run through the results. Just a quick summary and the outlook. So Q1 trading has started very well. We have got very strong growth in organic orders, and that is delivering good sales growth momentum coming through into organic sales. So we're very pleased with that.

Our order book is growing well. Our orders are well ahead of sales. And so that leaves us in a very positive mindset for the -- or outlook for the rest of the year, in line with the Board's expectations at this early stage in the year. We expect the H1, H2 split to be fairly even as normal, just sort of marginally H2 loaded, but pretty even overall. And then, of course, we've got in the next few months, hopefully, the completion of the 3G acquisition to bring into the numbers as well. The growth drivers are in good shape. The organic design wins and the opportunities are as strong as ever. We've delivered further good growth during the year, which is exactly what we need to be doing. The security market exposure is looking good, both organically and acquisitively, out of the 3G and Trival acquisitions.

And then when the funding allows, we've got a very active pipeline of other acquisition opportunities that we'll bring in as and when it's appropriate to do so. So we feel that we're in good shape, and we've got a good outlook for the year ahead.

Thank you. So that concludes the presentation. I'll now go over to Q&A. Henry, you're first up. [indiscernible] sit down.

It's Henry Carver from Singer. Just a couple. First of all, in Controls, now back in growth. Can you just confirm that the first 2 months of this year, that has continued within Controls? And also, which business is driving that? Is it primarily defense? Or is it anything [indiscenible].

Yes. Controls is in growth, yes. And it is defense, medical and yes, and industrial, yes.

And then just secondly, the OpEx investment, the growth investment, GBP 2.2 million, is that -- how much of that is into Noratel? I get the sense that quite a lot of that is going into the renewables sort of in anticipation of some growth there.

Yes, there is -- yes, a chunk of it is into Noratel. Yes. It's a meaningful chunk of the 2/3.

Andrew Humphrey at Peel Hunt. I've got 3, if I may.

One is on the -- just following up on Henry's question on the investment in resources to support future growth. You sort of mentioned the geographic areas of the business that you're investing in and kind of some of the product groups. Are there any kind of particular areas of expertise in terms of products that you think that investment relates to that you'd highlight?

Well, they're all very specific. I mean they're engineers for a certain product in a certain country. Most of our engineering investments are in Europe and the U.S. and as indeed are our sales. We also have in the U.S. made a couple of more senior or high-level finance appointments. And in Europe, we've also added a couple of senior commercial leaders. There are also -- the value -- some of money involved are smaller, but we've also expanded our engineering capacity a little in China and India.

Great. And a couple on acquisitions, if I may. On the sort of more recent group of acquisitions, clearly, we've sort of started to factor those into estimates at this point, I think, in a relatively conservative way, but I'd appreciate any kind of shorter-term commentary on how those businesses have been growing compared to the historical financials that you disclosed on the announcement.

Yes. So the 3 acquisitions, the 2, we have the trading data, live trading data, and they're trading very, very well, very, very well, very good growth. 3G, I haven't seen the latest numbers for the month of May, but up to April, it was doing very, very well indeed.

And then on -- I mean, given the sort of higher level of activity on M&A that we've seen recently, there's maybe a risk that we sort of overlook the development of the last wave. I'm thinking about kind of Burster and Hi-Volt. And clearly, those are kind of in the zone now in terms of how much time has elapsed that you'd be looking at product synergies, areas where they can work with some of the other businesses in the group. I appreciate any color you can give on that.

Yes, that's a good question. So Burst, we acquired in February 2025. It's had a flat year. We thought it would -- it could be fairly flat. And actually, it was really more sort of a German market economy thing. We've actually seen that pick up in the last few months, pleased to say. As sort of things have turned more generally and as Germany, at least in -- for us has turned positively. They're seeing that. So yes, and so it's kind of -- it's lower than the sellers wanted it to be, but it's kind of where we sensitized that it might be. The Hi-Volt business is going like a steam train. Actually, where -- we've expanded the business, put a small expansion on about a year ago. We bought that in August '24. We're now looking at a larger scale expansion.

We have some large medical and industrial customers that have got some very strong demand growth, and we need to enlarge the facility for that. I mean the absolute numbers in our investments are actually pretty small because it's a relatively small business, but the growth is quite healthy. [indiscernible] James.

James Bayliss from Berenberg. 2, if I may. You've obviously started using case studies on defense a bit more to show your exposure to the market. And 2 of the last 3 acquisitions are focused towards that think of the woods. Can you give us an idea of where the portfolio is in terms of revenue focus -- sorry, revenue split on Defense now? And then should we be thinking about that growing faster than the rest of the group given comments around business development acquisition focus?

Well, so clearly, the defense market is a good growth market for what seems like a good -- with a good long road ahead of it. The ideal for us is that we have this blended 5 blended markets that provide smooth and steady growth without the downside cyclicality over a sustained and long period of time. And defense fits in that well, but we still have -- defense is still not a large market in our overall revenue. So the other markets have got to still keep delivering. And at the moment, they are. And so they are -- in terms of absolute quantum, they are the largest part of the delivery of the numbers in the recovery that we've seen towards the end of the year. So those -- the industrial automation market, the renewables, some of the transport, some of the medical have all picked up very significantly.

So of course, defense will be a higher growth market for the foreseeable future, but the other markets have got to keep growing. And it's that blend of growth that should produce this consistent above-average growth rate organically, and that's what we're aiming for. We've obviously enlarged it quite significantly this year because we -- Trival is 100% focused on defense and 3G is about 50% focused on defense. So that does -- to Nick's point, just gives us some decent critical mass in that area and in security alongside the other ones.

And then second one for me on pricing. You previously talked about the fact that part of the journey has been optimizing the kind of the pricing muscle and function of businesses you've acquired. Where are you on that journey? Should we think about the kind of the companies that have been in the group for a few years now running at proper pricing levels? And is the journey now more about optimizing the more recent acquisitions? Or is there still more to be done across the whole portfolio?

Well, there's always more to be done on pricing, and we're in a period of inflation at the moment. So we -- raw material inflation. So we need to be sort of managing that as we've done before and making sure that we're pricing appropriately as those effects come through. I mean our gross margin, when you take -- as Simon said, when you take the mix effect out, our gross margin was up 20 basis points. So the core margin activity in the businesses is very strong. And we have, I would say, quite -- particularly in the longer-standing businesses, we have a relatively well-defined view on pricing and how to manage it appropriately. You can't treat every customer the same. You have to manage the pricing according to what you're providing and the value you're creating or we're creating. With the newer businesses, then they're more -- there's work to do. Some of the more recent acquisitions have got more to do. And inevitably, some manage it better than others. Some of the very recent acquisitions manage it very, very well. So yes, it's very much case by case.

James Beard, Deutsche Numis. I've got 2 questions, please. Firstly, on S&C. So organic revenues went backwards in the second half. Just wondering if you can talk through where you saw sort of negative growth impacts in that side of the business? And then secondly, on orders, obviously, very strong group organic order growth in Q4. When you reported that the trading update a few weeks ago, you said sort of want to sort of wait and see whether that's sort of pull forward of demand or whether that's genuine to firm ordering. Can you sort of with a bit more of the elapse of time, give a little bit more color on what you're sort of seeing from customers and sort of how strong and firm that order growth is? And perhaps also give some color on which parts of the business is seeing particularly strong order growth.

Yes. So the first one, why did S&C go backwards?

So part of the so part of it was a strong prior year comp. But also in S&C, we had one customer that supplied a production site of theirs into Ukraine, and that was damaged in an attack there. And so that led to the demand from our customer then dropping. which is not huge in the numbers, but it does partly explain the negative. And we also have actually quite a large defense contract that we are -- we're expecting to replace a previous piece of revenue that hasn't yet come through. So at some level, in both cases, kind of Antenova and [indiscernible] was always a project we're waiting for, and there's always something moving that we need to move more quickly.

But that is actually those 2 were part of it. But as I say, it also relates to a stronger prior year comp as well. So that was -- the prior year, that business had -- sorry, that operating division had quite a strong second half in the prior year. So that was also in play. So it's just -- nothing really more than that to it. On the issue of orders, so the orders have continued to grow strongly in the new year. And our orders are all customers -- the orders customers place with us are all firm orders. So they're not the kind of orders that we generally -- well, we just don't accept cancellations. an order is a firm order. They may be allowed to reschedule it once or twice. But when they order it, they've got to take it because we -- because this is a bespoke manufactured product. And we're seeing the orders coming in for both short-term demand, which is kind of typically 3 to 6. It's nearer sort of 4 to 6 at the moment months. But also, we're seeing a similar proportion going into 6- to 12-month order book. So we're seeing that the balance of order book waiting isn't actually changing as much as we perhaps might have thought it would.

We might have thought more would be going into the second half in the short term, but actually, that's not the case. So what we're seeing is -- and all of the customers are telling us that this is firm short-term demand and they're firming up their order books. No customers are telling us that they're building stock just in case or anything like that. The message is very clear. This is for real demand. They have firm demand.

The industrial cycle has turned, and therefore, they're getting orders in place. Now the order book is building and probably going to build quite strongly. So there will probably inevitably be a bit of stocking up again, but it's very, very difficult to actually quantify that.

It's Joel Spungin from Investec. Simon, I'm going to try one for you because you've said nothing and give you an opportunity.

So I was just wondering if you could help with the -- just think about the margin development through '27. And obviously, we know that you've got the acquisitions coming in that they're high margin, they're going to help enrich the mix. But like if I think about your chart on which page is Page 8, where you show the bridge, which is very helpful. Like do you expect in '27, it will look similar? Do you think -- how do you think mix, for example, might develop given what you know about the order book? Will there be some sort of annualization of the incremental investment coming through? Maybe just sort of give us a bit of color around that would be helpful.

Yes. I think it's the chart you referred to, I think if you sort of look back, it does give a really good reflection of how things move depending on the cycles. I certainly expect we're going to be seeing organic growth. -- at this stage, obviously, it's very early, but we're hoping to see some reasonable organic sales growth, and that will contribute to organic profit growth. And then on top of that, we've got the 2 acquisitions, which will give quite a big spike from an acquisition point of view. And in terms of margin, those 2 deals on an annualized basis will be lifting margins upwards of about 0.8 percentage points quite quickly. So where the dip we have now, which I said was to do with the investment.

If you annualize the acquisitions that we've got, we're sort of ahead of where we were last year anyway, and there's more to come. So we're -- as I said, we're very comfortable we're going to be able to get to that 17% target in the next 4 years.

You'd expect that growth to be fairly broad-based. And we're not going to have a situation where maybe say magnetics, which is lower margin is kind of a leading and therefore, you get a negative mix effect from that.

No, I think that was a particular one-off this year where you had magnetics were particularly strong. They've been -- they've come out of their position they were particularly strong and controls was the opposite. So that was a particular year. I think they'll both -- as we said, the order book is very good for both, and we'd expect both to grow well from now.

And just in terms of that margin bridge, we've talked before, but we do expect -- historically, we've delivered 50% from operational improvements. Organic improvements of 50% for acquisitions. And we -- in terms of going forward, we expect 2/3 from acquisitions and 1/3 from organic. And I think that's where we expect it to be.

Great. And then Nick, maybe one for you. Just thinking about your sort of M&A pipeline and where you are now, maybe just sort of give us an update in terms of what's going on, how much sort of dry powder you feel you have? And at what point might you sort of consider potentially using equity if need be?

Yes. So the pro forma gearing to 2.2, which will be down to 1.8 by the year-end. We've got capacity for a small bolt-on in -- of the sort of storm key size, plus a bit, one of which is in the pipe and may happen sooner or later. But we -- and then behind that, there's a whole raft of opportunities, and it's just the rate at which we progress them, and that will be driven largely by how quickly our gearing comes down, the timing of the deals and how we sort of feel about those forms of funding. So it's kind of all in there, and we keep it under constant review. But certainly, the pipeline of opportunities is there. We're ready to go. We're just -- we're dealing with the ones we've got, and then we'll bring the others in as and when we're ready. So there's a lot -- there's an awful lot there to do.

Just reminding that the -- when we renewed our bank facility at the half year, our bank covenant was increased from 3 to 3.5, and that gave us scope to move our target up to say that we're happy to go above 2.

We're comfortable taking the gearing over 2 because of that extra 0.5 point on the covenant with an expectation that it will come down quite quickly. And that is exactly what you see with 3G.

Yes. And the other point just to build on what we've shown over the last few years and did in previous cycles is the operating profit, the EBITDA, the gearing is we can manage our cost base so that we -- when volumes come down a bit, we don't get this massive drop-off in the profitability and a gearing spike. So we've demonstrated over more than a decade now that we can manage that whole element quite smoothly, quite effectively. So we feel.

Yes, which came out from that cash flow chart that when things do dip down, we do release working capital. And actually, you get quite a lot of cash flow coming out. So higher cash flow 2 years ago than we've got now, but just purely because of the benefits you get from working capital release.

Nick or Simon, it's Luke from Investec. Just a couple of case studies from end customers that you're proud about that illustrate maybe cross-selling or medical orders coming back. What are you seeing at the?

So we've got a terrific project that has recently been won in the Nordic region. It's on a -- I won't use any sort of commercial names, but it's an item that clamps onto the hull of a ship. And it's a bit like a sort of robotic lawn mower.

It goes around and cleans the barnacles off the ship when it's in port. And we provide the fiber optic communications interfaces for that. And that's a very exciting project because it reduces fuel bills on large shipping by between 10% and 20%. So as it comes into port, the little sort of robotic thing starts up and goes around under the water line, sort of cleaning all the particles off. And that has potentially very wide rollout opportunity, developed by our fiber optic business in Norway and just early days in terms of commercial revenues, but just starting to get going.

We have other -- we've got quite a lot in the defense space. You won't be surprised to here. There's another fiber optics, we supply, again, fiber optic comms for drone stations, drone comm stations and actually some of the even flyber-wire drone fiber optic cables, which is unsheathed or very lightly sheathed fiber optic cabling with connectors for defense drone-based applications.

Yes, I mean, yes, there are a lot like that.

[indiscernible]. Just 2 from me. Firstly, following on, I think there was an earlier question on the defense market and the revenue share. I understand the broader point that I think you were making on the mix of the target markets. So maybe asking it a slightly different way. Is there an internal ceiling that you kind of see for defense as a proportion of the revenue?

No. I mean it's smaller than it can be. I think it will probably grow as a proportion over the next sort of 3 to 5 years, both what it will organically and by acquisition. We won't -- we don't want to get it to being the dominant business part of the business. We don't want it to dominate everything else, but we wanted to make a meaningful contribution. And so a balance, if we've got 5 markets, then if they were all 20% of revenue each, that would be the perfect balance. So it's going to always be around the 20 plus or minus a few points, I would imagine, that we'll try to get it to.

We spent a lot of time trying to generate -- develop a model, which is sort of derisked. So you don't have big exposure to big customers or big areas. So we're -- a lot of what we've done is focused on that de-risking into sort of different technology areas. So to Nick, we just don't want to end up getting hot in one particular area, which at some point will go down. So you need to counterbalance from other areas.

Sure. And then on 3G, I think, obviously, all of the last 3 acquisitions were very high margin. I think 3G, obviously, we need to wait until it gets approved and everything, but I think that one was particularly high.

And obviously, founder-led and they're staying within the business, the deal was structured slightly differently to previously. So I'm just trying to think on maintaining that margin. Do you see an added sort of integration risk with 3G, assuming it goes ahead? Obviously, hopefully, it does. But just given that pricing model?

Well, it's going to sit alongside MTC. I mean, MTC is based in Germany and 3G is based in North America. So they'll sort of coexist. The management have known each other for many years anyway. So there's a sort of natural communication flow because of that. We will see benefits through being able to potentially produce each other's of those businesses products by the other one, yes, well, in both cases. So that would only be margin enhancing. In the case of 3G, they're going to put in as part of the business plan, some more resource in certain areas.

So we're beefing up the finance function, for example, but that's all within the existing margin plan. So -- but that's -- we kind of do that with most of our acquisitions. So no, the margin won't -- we don't expect the margin to go down at all. It's high margin. We expect to maintain the margins. And if we do that, that will have a very accretive effect on the overall group margins. As Simon said, the 2 acquisitions add 80 basis points on an annualized basis to our group margin, which given the size of them relative to the group is quite a chunky number.

It is a technology area. We've known for a long time. It was our second -- MTC was our second acquisition. So it's -- we've had 10 years of MTC, which 15 years, which has grown significantly in that time. It's now making more profit than actually we paid for the business in the first place, quite a lot more.

So they ended up -- they're now similar size, MTC and 3G are very similar sort of sized businesses. So we know that this sort of area will grow. It's a really rich theme to go after. So I think together, it's only going to be additive.

And yes, several of our businesses and in some of the acquisitions, we're increasing our exposure, not only in defense and aerospace, but also into the low earth orbit satellite space, where we've got a number of projects and already revenue coming through. That's a very, very exciting market space as the world becomes populated with these low earth orbit satellites. And we have products designed into satellites and satellite comm stations. And that potentially is quite interesting. One of the -- just recently, I think Starlink applied for a license to put up 1 million of those satellites. So it's potentially could be quite exciting.

So we think those areas should provide us -- well, we're already seeing a little bit of it organically coming through anyway, but we think some of the acquisitions should help accelerate in those sort of spaces.

Just to check on the annualized margin for the 2 acquisitions, say 80 basis points.

Yeah.

Mark Fielding from RBC. Just touch a bit more on the sort of OpEx growth investment. And I suppose the level of sort of one-off step change versus something that could be a feature at different points.

And I suppose I'm thinking not so much necessarily 2027, but looking out in your business, do you see places where you think actually this area is coming up against capacity issues or either in manufacturing or people or investments you might need to make, say, for the driving of cluster synergies or that sort of thing. So just what's the thought process there?

Yes, we're always looking at that. We're just in the process as we -- this week of approving -- or hopefully approving an investment into a new -- one of our new European facilities because we've got booming marine demand. And we're kind of running out of space. And if we don't make that decision in the next few months, then we're going to run out of capacity in 18 months' time. So and it takes 6 months to build a shed to put the production equipment in. So that kind of planning ahead is underway. I mean that's what we were doing with India 2 years ago.

We're now this summer, we're going to formally be opening a brand-new facility in Bangalore, which is over 100,000 square feet. It's 2.5x the existing facility. We did a greenfield staff up in Bangalore 8, 9 years ago, we built out this -- what we thought was a very large shed at the time. That's now full to the rafters. And now we're going 2.5x larger than that again. And that's as a -- in that case, that's a 2-year planning cycle to, in that case, identify a piece of land, buy the land or get someone to buy the land, design the units. And in that case, it's a facility for one of our businesses, but it will have a facility within the building for other DiscoveryIE Group companies. So planning of production capacity is an ever-present consideration.

It doesn't have to be a new facility. We do all the time, look at expanding shift numbers. It could be 1 shift, you take it to 2 shifts. So there's lots of that, that goes on. But ultimately, it's an exciting point to be in that we're actually looking at facility expansions that obviously is a good sign of growth.

Yes. And that's a good point on the shift point. We -- the sort of rule of thumb is you want to run on a 2-shift basis, that's most efficient. And that gives you room capacity to go up to a 3 shift on to a 3-shift basis if you get a demand spike. And you can do that for a period. But we don't like to do it longer term. So -- but it gives us the flex to be able to deal with short-term demand whilst we work out what the longer-term solution to that capacity. Okay. Great. Okay. Well, I think if that concludes the questions, thank you very much for coming and for your questions, and good to see you. Thanks again. Have a good day.