Half Year 2025 Avon Technologies PLC Earnings Call

Operator: Well, good morning everybody. Thank you for those of you that came to see us face to face and thank you for joining us on the telephone line. A lot has happened in the last six months, geopolitical and economic uncertainty have both increased substantially. But in the face of the turmoil, we remain resolute in pursuing our strategy and improving our businesses. We still control most of our own destiny. and we're holding our medium-term guide. We're growing sales and profit fast. And we're achieving this while increasing spend in R&D and developing exciting new products to drive future growth.

Well good morning, everybody. Thank you for those of you that came in sales face to face and thank you for joining that is only telephone lines.

A lot has happened in the last six months geopolitical and economic uncertainty both increase substantially.

But in the face of the time oil we remain resolute in pursuing our strategy and improving our businesses, we still control most of our own destiny.

Holding our medium term guidance.

We're growing sales and profit fast.

I'm worried achieving this while increasing spend in R&D and developing exciting new products to drive future growth.

Operator: and we're building our people's capability. to enable our improvement activities to accelerate even more.

And we're building our people's capability.

So a naval our improvement activities to accelerate even more.

Operator: We've moved all production out of our California and helmet facility three months ahead of schedule. And we're busy ramping up production in Salem and Cleveland. Over the last year, we've effectively built and commissioned an entirely new factory in Cleveland. and we're also improving all of our other plants fast. Our order of workers hits another record high. This does give us confidence that we will continue to grow into the future. We remain on track to achieve our margin targets in 2026, which is a year early.

We've moved all production out of our California facility.

Three months ahead of schedule.

And we're busy ramping up production in Salem and Cleveland.

Over the last year, we've effectively built on commission and entirely new factory in Cleveland.

I might also improving all of our other plants fast.

Our order book has hit another record high.

This does give us confidence that we will continue to grow into the future.

We remain on track to achieve our margin targets in 2026, which is a year early.

Rich: I'll now hand over to Rich, he'll take us through the numbers and then Steve will come onto the stage and also talk about the rest of Retreat business, which as you will have seen is performing extremely well. Thanks, Josh. Good morning everybody.

I'll now hand over to rich he'll take us through the numbers and then Steve will come onto the stage and also talk about the respiratory business, which as you would've seen is performing extremely well.

Rich: Thanks, Josh.

Good morning, everybody.

Rich: So before moving on to the numbers, let's look at what has changed in a very dynamic global environment, both from a conflict and a trading perspective. Government efficiency measures in the US have targeted several areas, including the military. We're closely watching what is happening, but we haven't yet seen anything which we think will lead to a significant change in our customers' buying patterns. Investment in strengthening borders and homeland security looks to be growing, which may yield opportunities, particularly in our respiratory business, given our strong competitive position there.

Rich: So before moving on to the numbers, let's look at what has changed in a very dynamic global environment, both from a conflict and the trading perspective.

Rich: Government efficiency measures in the U S of targeted several areas, including the military.

Rich: We're closely watching what is happening, but we haven't seen anything.

Rich: Which we think will lead to a significant change in our customers' buying patterns investment and strengthening borders and homeland security looks to be growing which may yield opportunities, particularly in our respiratory business given our strong competitive position there.

Rich: and then they were tariffed. We're not immune to the effect of tariffs announced to date with the direct impact of around $800,000, which we believe we can largely offset through pricing. Indirectly, there are likely to be some knock-on impacts through the supply chain, although again I don't believe this is going to be significant. On a comparative basis, many of our products are compliant with the Berry Amendment, which requires certain categories of product sold to the USDOD to be 100% domestically sourced. Elsewhere, investment in defence spend in NATO, ex-US, is increasing, particularly towards Eastern Europe. And this has created opportunities for us recently and will continue to do so for the foreseeable future.

Rich: And then there were tariffs.

Rich: We're not immune to the effects of tariffs announced to date with the direct impact of around $800000, which we believe we can largely offset through pricing.

Rich: Indirectly, they're all likely to be some knock on impacts through the supply chain. Although again I don't believe this is going to be significant on a comparative basis. Many of our products are compliant with the Berry amendment, which requires certain categories of product sold to the U S Saturday to be 100% domestically sourced.

Rich: Elsewhere investment in defense in defense spending NATO ex U S is increasing particularly towards eastern Europe and this has created opportunities for us recently and will continue to do so for the foreseeable future. This.

Rich: This is cemented by the widely publicised use by Russia of the Chloropicrin agent in Ukraine highlighting the importance of strong respiratory protection where we have a market leading technical solution. Defense investment growth in Europe is expected to outlive the Ukraine conflict.

Rich: This is cemented by the widely publicized use by Russia of the chloropicrin agent and Ukraine, highlighting the importance of strong respiratory protection, where we have a market leading technical solution.

Rich: Defense investment growth in Europe is expected to outlive the Ukraine conflict.

Rich: More broadly, unrest continues elsewhere in the Middle East and Asia. Our ability to manufacture in the UK insulates us from the potential negative effect of tariff reciprocity from non-US nations.

Rich: More broadly unrest continues elsewhere in the middle East and Asia, our ability to manufacture in the U K Insulates us from the potential negative effect of tariff reciprocity from non U S Nations.

Rich: As Josh mentioned, we've had a good start to the year, with strategic and operational progress feeding through to strong financial performance. The headlines are Closing Order Book up 24%, Revenue up 17%, Operating Profit up 48% and EPS up 76%, all compared to the same period last year on a constant currency basis. As many of you know, my preferred measure of performance is ROWIC, and we've seen excellent progress here, up 660 basis points to 16.3%, which puts us within striking distance of our medium-term goal of 17% or above. As expected, cash conversion reduced in the first half due to building buffer stock to support our facility move plans and lapping the unwind of a particularly high receivables balance coming into 2024.

Rich: As Jos mentioned, we got a good start to the year with strategic and operational progress feeding through to strong financial performance.

Rich: Headlines are closing order book up 24% revenue up 17% operating profit up 48% and the EPS up 76% all compared to the same period last year on a constant currency basis.

Rich: As many of you know my preferred measure of performance is ROIC and we've seen excellent progress here up 660 basis points to 16, 3%, which puts us within striking distance of our medium term goal of 17% or above.

Rich: As expected cash conversion reduced in the first half due to building buffer stock to support our facility move plans and lapping the unwind of a particularly high receivables balance coming into 2020 for.

Rich: Even after this, net debt to EBITDA has come in below one times, a reduction of 0.7 times from last first half. So, a good start, we're growing fast and we're generating good returns on capital.

Rich: Even after this net debt to EBITDA has come in below one times a reduction of <unk> seven times from last half first half.

Rich: A good staff, we're growing fast and we're generating good returns on capital. There is however, much still to achieve an H two to ensure that we hit our 2026 guidance of 14% to 16% operating profit margin.

Rich: There is, however, much still to achieve in H2 to ensure that we hit our 2026 guidance of 14-16% operating profit.

Rich: So, starting with the P&L, and as usual, comparators will be on a constant currency basis. Order intake of $170.5 million gives a book to build comfortably above 1. The record $247 million order book gives us confidence in delivering further growth for the balance of this year and beyond. Revenue of $148.7 million is 16.8% up on last year, with strong growth in both businesses. This has dropped through nicely to adjusted operating profit of $17.5 million, giving margin of 11.8% stronger than we had expected at this stage. Finance costs came down reflecting the lower average net debt, with an effective tax rate of 22% as previously guided.

Rich: So starting with the P&L and as usual comparisons will be on a constant currency basis order intake of $175 million gives a book to bill comfortably above one.

Rich: The record $247 million order book gives us confidence in delivering further growth for the balance of this year and beyond.

Rich: Revenue of $148 $7 million is 16.8% up on last year with strong growth in both businesses.

This has dropped through nicely to adjusted operating profit of $17 $5 million, giving margin of 11, 8% stronger than we had expected at this stage.

Rich: Finance costs came down reflecting the lower average net debt with an effective tax rate of 22% as previously guided this gives an adjusted EPS figure of 38.8 cents per share for the first half up over 76%.

Rich: This gives an adjusted EPS figure of 38.8 cents per share for the first half, up over 76%. The dividend is up 5.6% to 7.6 cents per share, consistent with the increase at the full year as well. Avon Protection has benefited from a healthy order intake in the first half, with order receipts totalling close to $100 million. Around a third of this is from one-off demand, or unicorn orders as we like to call them, with a balance from recurring revenue as defined at the Capital Markets Day last year. As a reminder, today's unicorns feed into tomorrow's recurring revenue as we continue to grow the installed base.

Rich: The dividend is up five 6% seven six cents per share consistent with the increase of our full year results.

Rich: Hum.

Rich: I, even protection has benefited from a healthy order intake in the first half with order receipts totaling close to $100 million around a third of this is from one off demand or unicorn orders as we like to call them with a balance.

Rich: From recurring revenue as defined at the capital markets day last year.

Rich: As a reminder, today's unicorns feed into Tomorrow's recurring revenue as we continue to grow the installed base.

Rich: The order book of $94 million is particularly healthy for this business, which typically has a fairly short winter ship cycle, supporting further growth into H2 and beyond. Revenue growth of 12.2% to $75.5 million reflects the previously announced Australian FM54 respirator order and growth in rebreather deliveries, offset by lower demand in commercial Americas following a couple of very strong years. Adjusted operating profit of $14.3 million, 28.8% higher than last year, gives a margin of nearly 19% for the half, with operational gearing and commercial optimisation gains underpinned by a helpful product tailwind. For the remainder of the year, we expect second half Avon Protection revenue to be a little higher than H2 last year as we start to work through the Ukraine and NATO backdoor.

Rich: The order book of $94 million is particularly healthy for this business, which typically has a fairly short window ship cycle supporting further growth into <unk> and beyond.

Rich: Revenue growth of 12, 2% to $75 $5 million reflects the previously announced Australia and S. M 54, respirator order and grossing rebreathe deliveries offset by lower demand in commercial Americas. Following a couple of very strong years.

Rich: <unk> operating profit of $14 $3 million, 28.8% higher than last year gives a margin of nearly 19% for the half with operational gearing and commercial optimization gains underpinned by a helpful product tailwind.

Rich: For the remainder of the year, we expect second half even protection revenue to be a little higher than H two last year as we start to work through the Ukraine and NATO backlogs.

Rich: Yeah.

Rich: Team Wendy has also seen further progress in the last six months. Order intake did decline in the first half, lapping a particularly tough comparator from 2024 when we received DoD orders totalling more than $50 million. Nevertheless, the backlog showed continued growth, up over 7% to over $150 million, with future DoD orders of over $130 million already in the books. As expected, revenue was up by over 20% as the ACH ramp-up effect started to kick in, with commercial helmets and pads also growing nicely. Higher direct costs, reflecting learner curve and ramp-up in inefficiencies, offset lower scrap year-on-year, with operating leverage and lower SG&A costs driving the improvement in operating margins.

Speaker Change: Tim Wendy has also seen further progress in the last six months order intake did decline in the first half lapping a particularly tough comparison from 2024, when we receive D. O D orders totaling more than $50 million. Nevertheless, the backlog showed continued growth up over 7% to over 100.

Speaker Change: Third and $50 million with future D O D orders of over $130 million already in the book.

Speaker Change: As expected revenue was up by over 20% as the a C. H ramp up effect started to kick in with commercial helmets and pads also growing nicely.

Speaker Change: Higher direct costs, reflecting learning curve and ramp up inefficiencies offset lower scrap year on year with operating leverage and lower SG&A costs driving the improvements in operating margin.

Rich: The focus for the remainder of the year will be on stabilising production capability in our Cleveland and Salem plants so that we can sustain the higher output volumes expected in the coming 12 months.

Speaker Change: The focus for the remainder of the year will be on stabilizing production capability in our Cleveland and Salem plants. So that we can sustain the higher output volumes expected in the coming 12 months.

Rich: For the second half, we expect modest growth versus last year. We do not expect the reduced costs from the Irvine closure to have a big impact on the full year 2025 performance, though we are comfortable with our guidance of 14-16% operating profit margin in 2026 at a group level, which clearly implies meaningful improvement in team work.

Speaker Change: For the second half, we expect modest growth versus last year, we do not expect the reduced costs from the Irvine closure to have a big impact on the full year 2025 performance, though we are comfortable with our guidance of 14% to 16% operating profit margin in 2026 at a group level, which clearly implies meaningful.

Speaker Change: The improvement in team Wendy.

Rich: As usual, this bridge sets out the key moving parts in the reported Adjusted Operating Profit from last year to this year. After a fairly negligible FX impact, the jumping off point on a constant currency basis was $11.8 million. The effect of volume growth, which is essentially this year's volume at last year's gross margin, was $7.7 million. Operational gearing contributed a further $2.6 million, with modest growth in overheads at a group level, being more than offset by revenue growth, resulting in stronger drop-through. Going the other way, the inefficiencies linked to the production ramp-up on the ACH program, which is really a Lerner curve effect, totaled $1.4 million in the half.

Speaker Change: As usual this rich sets out the key moving parts in the reported adjusted operating profit from last year to this year.

Speaker Change: After a fairly negligible FX impact the jumping off point on a constant currency basis was $11 $8 million the effect of volume growth, which is essentially this year's volume at last year's gross margin was $7 $7 million ARPA.

Speaker Change: Operational gearing contributed a further $2 $6 million with modest growth in overheads at a group level being more than offset by revenue growth, resulting in stronger dropped three margin.

Speaker Change: Going the other way the inefficiencies linked to the production ramp up on the a C. H program, which is really a learning curve effect totaled $1 $4 million in the half.

Rich: Avon Protection Margin Improvement contributed a further $3.6 million with better pricing, lower scrap and a helpful mixed tailwind from higher specification products. This was partially offset by a $2.7 million investment in growth initiatives, with increased sales and marketing costs being the single largest contributor. Finally, the last other bar is a headwind of $4.1 million. As usual, this represents a number of things, but in summary, includes growth in discretionary compensation schemes and IT costs. Going the other way, the finance function costs have continued to come down, which I will talk more about in a moment.

Speaker Change: I, even protection margin improvement contributed a further $3 $6 million with better pricing lowest scrap on a helpful mixed tailwind from higher specification products.

Speaker Change: This was partially offset by a $2 $7 million of investment in growth initiatives with increased sales and marketing costs being the single largest contributor.

Speaker Change: Finally, the last of the bar is a headwind of $4 $1 million as usual. This represents a number of things but in summary includes growth in the scrap discretionary compensation schemes and it costs going the other way.

Speaker Change: Finance function costs have continued to come down, which I'll talk more about in a moment.

Rich: Moving on to cash flow, net debt was down by $2.4 million compared to the same period last year. $5.7 million of EBITDA growth was partly offset by a $3.8 million increase in buffer inventory, as described earlier. The balance of the $13.7 million working capital increase is largely attributable to higher receivables as the revenue growth rate accelerated through the first half. This gives cash conversion of 56%, which is clearly below the full year guidance of 80%. However, as the Team Wendy business ramps up through the second half of the year, I would expect cash conversion to improve meaningfully from here.

Speaker Change: Moving on to cash flow net debt was down by $2 $4 million compared to the same period last year.

Speaker Change: $5 $7 million of EBITDA growth was partly offset by a $3 $8 million increase in buffer inventory as described earlier.

Speaker Change: The balance of the $13 7 million working capital increase is largely attributable to higher receivables has the revenue growth rate accelerated through the first half.

Speaker Change: This gives cash conversion of 56%, which is clearly below the full year guidance of 80%. However, as the team when the business ramps up through the second half of the year I would expect cash conversion to improve meaning meaningfully from here.

Rich: Cash costs of transformation activities in the first half were $6.5 million and we remain confident in the great payback this investment will deliver. Beyond cash flow from operations, pension contributions of $3 million were in line with guidance. As a reminder, the higher value in the first half of 2024 reflected a top-up in the plan as part of the agreed triennial valuation.

Speaker Change: Cash costs of transformation activities in the first half was $6 $5 million and we remain confident in the great payback This investment will deliver.

Speaker Change: Beyond cash flow from operations pension contributions of $3 million were in line with guidance as a reminder, the higher value in the first half 'twenty four reflected a top up in the plant as part of the agreed triennial valuation and the other big movements with lower Capex with last year's number including nonrecurring investment in support of <unk>.

Rich: And the other big movements were lower CapEx, with last year's number including non-recurring investment in support of DoD programs. and purchase of our own shares in support of discretionary compensations.

Speaker Change: Programs.

Speaker Change: And purchase of our own shares in support of discretionary compensation schemes.

Rich: As usual, guidance on a number of these items is provided in the opinion.

Speaker Change: As usual guidance on a number of these items is provided in the appendix.

Rich: The important things to pick out on the balance sheet relate to inventory and pensions. As flagged earlier, the higher inventory negatively impacted cash flow and inventory terms in the first half, but this was deliberate and is short-term in nature. We expect to see this start to unwind in H2. On the retirement benefit scheme, the accounting deficit halved from the end of 2024 to $8.5 million, following the adoption of a higher discount rate assumption reflecting changes in corporate bond yields.

Speaker Change: The important things to pick out on the balance sheet relate to inventory and pensions as flagged earlier, the higher inventory negatively impacted cash flow and inventory turns in the first half, but this was deliberate in the short term in nature, we expect to see this start to unwind and H two on.

Speaker Change: On the retirement benefit scheme, the accounting deficit half from the end of 2022 2024 to $8 5 million following the adoption of a higher discount rate assumption, reflecting changes in corporate bond yields I can also confirm that we have exercise the first option here on our revolving credit facility established last year, which.

Rich: I can also confirm that we have exercised the first option year on a revolving credit facility established last year, which takes us through to May 2028.

Speaker Change: It takes us through to May 2020.

Speaker Change: Yeah.

Rich: At the full year results, we provided guidance on expected spend levels on our transformation programme. We remain on track to have largely completed the planned program of investments by the end of 2025 with some spend going into 2026. The left-hand column shows OPEC's spend, year-to-date, of $8.4 million against a planned annual total of $13 million, unchanged from prior guidance. We therefore expect spend to decelerate through the second half. The only change versus prior guidance is that we now expect transformational capex costs of $1 million for the year versus prior guidance of $2 million, as continuous improvement outcomes mean we no longer need to increase our floor space, including As a reminder, we expect the Footprint Optimisation Programme to deliver in the region of $10 million of annualised cost reduction, which represents an excellent payback on the investment over the last two years.

Speaker Change: At the full year results, we provided guidance on expected spend levels on our transformation program.

Speaker Change: We remain on track to have largely completed the planned program of investments by the end of 2025 with some spend going into 2026.

Speaker Change: The left hand column shows Opex spend year to date of $8 $4 million against our planned annual total of $13 million unchanged from prior guidance. We therefore expect spend to decelerate through the second half.

Speaker Change: The only change versus prior guidance is that we now expect transformational capex costs of $1 million for the year versus prior guidance of $2 million as continuous improvement outcomes. I mean, we no longer need to increase our floor space in Cleveland.

Speaker Change: As a reminder, we expect the footprint optimization program to deliver in the region of $10 million of annualized cost reduction, which represents an excellent payback on the investment over the last two years.

Rich: So I've included this slide to bring a bit of balance to the way we talk about Kaizen activities when we present, and we're using Kaizen off the shop floor in all back office processes as well as on the shop floor, which we talk about a lot. We performed a Kaizen on the closed process within the finance team last year with a focus on eliminating waste, defining requirements, aligning processes across the business and removing over-processing. The results were impressive. Month-end close has gone from seven days to two days. Better defined and streamlined processes have largely eliminated rework.

Speaker Change: So I've included this slide to bring a bit of balance so the way we talk about kinds of activities. When we present and we're using kind of an off the shop floor in all back office processes as well as on the shop floor, which we talk about a lot.

Speaker Change: We performed a kaizen on the closed process within the finance team last year with a focus on eliminating waste defining requirements aligning processes across the business and removing over processing.

Speaker Change: The results were impressive month end close so it's coming from seven days to two days better defined and streamline processes have largely eliminated rework and the finance team, which is now 27% smaller than it was when we started has significantly more time available for value, adding business partnering activity, which of course is way more.

Rich: And the finance team, which is now 27% smaller than it was when we started, has significantly more time available for value-adding business partnering activity, which, of course, is way more fun than adding the numbers up at the end of the month.

Speaker Change: Fun, when adding the numbers up at the end of the month.

Rich: Other functions are embracing CI and we look forward to updating you further in the future.

Speaker Change: Other functions are embracing <unk> and we look forward to updating you further in the future.

Rich: So finally for me, the guidance for the full year is essentially unchanged from the trading update we released in March, although represents a healthy uplift from our original outlook back in November. revenue growth year-to-date, combined with the strength of the order book in both businesses. gives us confidence in achieving revenue growth above 10% and the steps we've taken in improving the business in H1 should continue into the second half delivering adjusted operating profit margin for the full year of over 12%. Investments in transformation remains broadly unchanged, but with less CapEx required. And notwithstanding the relatively lower cash conversion in H1, we maintain our view that the conversion for the full year will be at or above the 80% level as our investment in working capital to support the facility move starts to unwind in H2.

Speaker Change: So finally for me the guidance for the full year is essentially unchanged from the trading update we released in March although represents a healthy uplift from our original outlook back in November.

Speaker Change: Revenue growth year to date combined with the strength of the order book and both businesses gives us confidence in achieving revenue growth above 10% on the steps we've taken in improving the business in H. One should continue into the second half delivering adjusted operating profit margin for the full year of over 12%.

Speaker Change: Investments in transformation remains broadly unchanged, but with less capex required.

Speaker Change: Notwithstanding the relatively lower cash conversion in each one we maintain our view that the conversion for the full year will be at or above the 80% level as our investments in working capital to support the facility move stuffs unwind in H T.

Josh: I'll now hand back to Joss to talk about strategic programming. So it's great to get the financial results within two days. We continue to execute the STAR strategy. Every six months we review and refresh the underlying initiatives to reflect what we've learned. But the big picture is that the strategy is working. is increasing and so are returns on capital and cash flow. So we're going to stay the course. Excitingly, we still see lots more opportunity to improve our business. The S of STAR is now all about strengthening our businesses through continuous improvement. When implemented well, this is a very powerful way to improve our business.

Speaker Change: I'll now hand back to Josh to talk about strategic progress.

Thank you.

Speaker Change: I'll say, it's great to get the financial results within two days.

Speaker Change: We continue to execute the star strategy.

Speaker Change: Every six months, we review and refresh the underlying initiatives.

Speaker Change: What we've learned.

Speaker Change: But the big picture is that the strategy is working.

Speaker Change: Growth.

Speaker Change: Is increasing and so our returns on capital and cash flow.

Speaker Change: So we're going to stay the course.

Speaker Change: Excitingly, we still see lots more opportunity to improve our businesses.

Speaker Change: Yeah.

Speaker Change: They asked the staff is now all about strengthening our businesses through continuous improvement.

Speaker Change: When implemented well this is a very powerful way to improve our businesses.

Josh: To that end, we've developed our own strength and system. to help us build capability across the organisation and to drive improvement in safety, quality, delivery, inventory terms and productivity. As those metrics improve, our financials will follow. This slide summarizes the key elements of our strength.

Speaker Change: So that's and we've developed our own strengthens system.

Speaker Change: To help us build capability across the organization and to drive improvements in safety quality delivery inventory turns and productivity.

Speaker Change: As those metrics improve our financials will follow.

Speaker Change: This slide summarizes the key elements of our strength in system.

Josh: And in the interest of time, I won't explain the system in detail now, though I would love to. We've written a book on the strengthen system aimed at building internal capability. But you are welcome to take a copy home with you if you want. There are some on the front. If you don't take them home, I won't be too annoyed with you. For those on the phone lines, there is an e-book available as well. Just let Gabby know.

Speaker Change: And then in the interest of time I won't explain the system in detail now, though I would love to.

Speaker Change: We've written a book on the strength in system aimed at building internal capability.

Speaker Change: You are welcome to take a coffee I'm with you if you want or something on that front. If you don't take them home on why they are.

Speaker Change: So annoyed with you for those on the phone lines are there isn't any both available as well just like every night.

Speaker Change: Uh huh.

Josh: This slide illustrates our vision for the strengthened system. We want to move from traditional batch manufacturing as illustrated on the left of this picture. Our end state is shown on the right. We want to manufacture to the beat of our customers' demand, with the materials flowing wherever possible, or pulling from the upstream process. We want quality built into all of our processes. and this system will result in higher quality. shorter lead times, more reliable delivery to our customers, much lower inventory levels, happier employees and wealth creation.

Speaker Change: This slide illustrates our vision for the strength in system.

Speaker Change: We want to move from traditional batch manufacturing as illustrated on the left of this picture.

Speaker Change: And the state as shown on the right.

Speaker Change: We want to manufacture to the beat of our customers' demand with the materials flowing wherever possible.

Speaker Change: Or pulling from the upstream processes.

Speaker Change: We won't quality built into all of our processes.

Speaker Change: And this system will result in higher quality shorter lead times more reliable delivery to our customers much lower inventory levels happier employees and wealth creation.

Josh: We recently took all of our senior teams to Japan. to enhance their ability to lead the change that we want. This intense week-long training course featured a mixture of lectures, factory visits, and a simulation. And I've seen a renewed burst of energy as a result, with a much better understanding of what we want and all of our factories now improving fast. We're now running so many Kaizen that it would take too long to summarize them. All our plants are taking improvement steps all the time. We've included lots of examples in the appendix if you're interested.

Speaker Change: We recently took all of our senior team to Japan.

Speaker Change: To enhance their ability to lead the change that we want.

Speaker Change: This intense week long training course featured a mixture of lectures factory visits on stimulations.

Speaker Change: And I've seen a renewed burst of energy as a result.

Speaker Change: With a much better understanding.

What we want and all of our factories now improving fast.

Speaker Change: We're now running so many cars on that it would take too long to summarize them.

Speaker Change: All our plants are taking proven steps all the time.

Speaker Change: We've included lots of examples in the appendix if you're interested.

Josh: Overall, our operational metrics are improving. During the last six months we built some buffer stock to support the factory move and we recruited ahead of the production ramp up in Cleveland. So improvement in our metrics has slowed a bit. None the less. We're on track to achieve the operational targets we set out at the Capital Markets Day. As we build stronger capability in Salem and Cleveland, I expect to see these metrics start to improve again.

Speaker Change: Overall, our operational metrics are improving.

Speaker Change: During the last six months, we've built some buffer stocks to support the factory move and we recruited ahead of the production ramp up in Cleveland, So improvement in our metrics has slowed a bit.

Speaker Change: Nonetheless.

Speaker Change: We're on track to achieve the operational targets, we set out at the capital markets day.

Speaker Change: As we build stronger capability inside of them and Cleveland I expect to see these metrics start to improve a guy.

Josh: In Avon Protection, Steve's business, we focused on scrap reduction. As you can see, we are making excellent progress. The charts on this slide show the scrap reduction on three of our most important products. What's interesting to me... is that these lines are very mature. Two of them are over 20 years old. In fact, we'd run them so long that the scrap levels had become normal for the people in the factory. but we knew they could be improved. So we set new targets and focus on taking steps towards them. The results speak for themselves and have helped Avon Protection's margins.

Speaker Change: And Avon protection stays business, we focused on scrap reduction.

Speaker Change: As you can say, we are making excellent progress.

Speaker Change: Chart on this slide show the scrap reduction on three of our most important product lines.

Speaker Change: Well, it's interesting to me.

Speaker Change: Is that these lines are very immature.

Speaker Change: Serve them all over 20 years old.

Speaker Change: In fact, we'd run them, so long that the scrap levels have become normal to the people in the factories.

Speaker Change: But we knew they could be improved.

Speaker Change: So we set new targets and focus on taking steps towards them.

Speaker Change: Our results speak for themselves and have health Avon Protection's margins.

Josh: And there is even more we can do from here.

Speaker Change: There's even more we can do from here.

Josh: The strengthened system is part of a broader business system that we use to improve our businesses. This has four elements. We have a strong strategy process which involves using the power of our own people to develop the strategies for their business. We teach them how to do this. When compared to more typical consultant-led strategies, our approach increases ownership and therefore accessibility. We align the whole organisation to the strategy through objectives and key results and measure progress each quarter, learning and course correcting where necessary. We build capability to deliver the strategy using our STAR Academy. This now has a powerful set of unique courses designed to help us build the capability that we need to deliver our strategy.

Speaker Change: The strength in system is part of a broader business system that we use to improve our businesses.

Speaker Change: It has four elements.

Speaker Change: We have a strong strategy process, which involves using the power of our own people to develop the strategies for the businesses.

Speaker Change: We teach them how to do this.

Speaker Change: When compared to a more typical consultant led strategies our approach increases ownership and therefore execution.

Speaker Change: We align the whole organization to the strategy through objectives, and key results and measured progress each quarter learning and course correcting.

Speaker Change: Necessary.

Speaker Change: We build capability to deliver the strategy.

Speaker Change: Using all Star Academy.

Speaker Change: This now has a powerful SaaS of unique courses designed to help us build the capability that we need to deliver our strategy.

Josh: And we drive improvement every week through the Strengthen system which then frees up resource to invest into technology, sales and marketing to drive growth and create future wealth. As our results show, this approach is working.

Speaker Change: And we drive improvement every week through the strength in system, which then frees up resources to invest into technology sales and marketing to drive growth and create future wells.

Speaker Change: As always I'll show this approach is working.

Josh: Moving on to transformation. slide is now familiar to you. The degree of shading on each star illustrates how far our initiatives have progressed. The green colour points show changes since the end of last year.

Speaker Change: Moving onto transformation slide.

Speaker Change: This slide is now familiar to you the degree of shading on each star illustrates how far our initiatives progressed.

Speaker Change: Green color points show changes since the end of last year.

Josh: In footprint optimization, we've now stopped manufacturing in California. The lease ends in June of this year. We expect to see the cost reduction associated with this project drop through to the bottom line in 2026. In operational accidents, we're making good progress, as I've already discussed. and in functional accidents, we built the plan to remove SAP from the group which is anticipated to save us over a million dollars a year.

Speaker Change: And footprint optimization, we have now stopped manufacturing in California.

Speaker Change: He sends in June of this year.

Speaker Change: We expect to see the cost reduction associated with this project dropped through to the bottom line in 2026.

Speaker Change: And operational excellence, we're making good progress as I've already discussed.

Speaker Change: Functional excellence, we built the plan to remove <unk> from the growth, which is anticipated to save us over $1 million a year.

Josh: in commercial optimization. We remain of the view that we can accelerate sales in both North America and internationally.

Speaker Change: And commercial optimization.

Speaker Change: We remain of the view that we can accelerate sales in both North America and internationally.

Josh: We're therefore very pleased that Stacey Stern has joined us to lead the global sales team. Stacey is well known to us, having been instrumental in building the very successful ultra-forensic technology business. We've also recently increased investment into sales, business development and our marketing.

Speaker Change: Therefore, very pleased that Stacy Stan has joined us to lead the global sales team.

Speaker Change: Stacy is well known to us having been instrumental in building the very successful ultra forensic technology business.

Speaker Change: We've also recently increased investment into sales business development and our marketing team.

Steve: I'll now hand over to Steve to talk through the very good progress in his. Okay. Thank you, Joss.

Steve: I'll now hand over to Steve to talk through the very good progress in his division.

Steve: Okay. Thank you Justin good morning, everybody.

Steve: Good morning, everybody. I'm delighted to be here today. In Avon Protection, we're making some real progress in the markets you can see here. At the top left, we already know Avon is strong in our core market, chemical, biological, respiratory protection. very good competitive moat, long-term sole-source contracts, and a commanding market share globally. Our strategy is aimed at expanding our business, not only in that core market, but across three new markets. for respiratory protection, for non-chem bio applications. integrated chem bioprotection, and underwater respiratory protection. We're also increasing our presence in aftermarket support. Aftermarket support is getting to be really, really important for our users.

Steve: Delighted to be here today.

Speaker Change: And Avon protection.

Speaker Change: We're making some real progress in the markets you can see here.

Speaker Change: At the top left we already know Avon is strong in our core market chemical biological respiratory protection.

Speaker Change: With very good competitive moat long term sole source contracts and a commanding market share globally.

Speaker Change: Our strategy is aimed at expanding our business not only in that core market, but across three new markets for respiratory protection for non Chem bio applications.

Speaker Change: Integrated can buy protection and under water respiratory protection.

Speaker Change: We're also increasing our presence in aftermarket support aftermarket support is getting to be really really important for our users.

Steve: And that's especially true as we continue to increase our market share with that growing install base that we have. All of our products have long-term support tails, consumables, things like filters. They all need replacing, units need servicing, and personnel need training. Typically, we would expect to see around 10 years of recurring revenues from after-sales support, and we've been strengthening in our team with growing levels of expertise in this area. Our core products continue to see strong demand. Our order book increased 69% year-on-year and while Ukraine-related orders were part of that increase. Even without Ukraine, the order book would still be up around 20% year-on-year.

Speaker Change: And that's especially true as we continue to increase our market share with that growing installed base that we have.

Speaker Change: All of our products have long term support tails consumables things like filters, they don't need replacing units need servicing and personnel need training typically we would expect to see around 10 years of recurring revenues from after sales support and we've been strengthening our team with growing levels of expertise in this.

Speaker Change: Area.

Speaker Change: Our core product continued to see strong demand.

Speaker Change: Our order book increased 69% year on year, and while Ukraine related orders were part of that increase.

Speaker Change: Even without in Ukraine, the order book would still be up around 20% year on year.

Steve: Under our NATO mask agreement, we signed three new countries in the first half, and that now brings us to 13 nations that we supply under that contract. Those new customers are over and above the Ukraine contracts that are funded by NATO countries. Despite international efforts to facilitate a Ukrainian peace deal, Russia does continue to use chemical weapons. And the Ukrainians have been pretty clear with us that the only masks that really work on the ground are ours. So we do expect further orders in the second half in support of that. We were really pleased to sign a long-term contract with Thales to supply parts worth around $10 million over six years, with the possibility of some further orders to come.

Speaker Change: Under our NATO mask agreement, we signed three new countries in the first half and that now brings us to 30 nations that we supply under that contract.

Speaker Change: Are these new customers are over and above the Ukraine contracts that are funded by NATO countries.

Speaker Change: Despite international efforts to facilitate the Ukrainian peace deal, Russia does continue to use chemical weapons and the Ukrainians have been pretty clear with us that the only masks that really work on the ground are ours.

Speaker Change: So we do expect further orders in the second half in support of Ukraine.

Speaker Change: We were really pleased to sign a long term contract with Telus to supply parts with around $10 million over six years with the possibility of some further orders to come.

Steve: The UK contract with MOD for GSR remains on track and demand for underwater rebreathers continues. The program to equip the Australian military is progressing well, and in fact we delivered about $6 million in the first half, aligned to that program. We're also hoping Australia will now add filters to their contract alongside the FM50. The order book doesn't currently include the expected mask and filter orders from the DoD. We anticipate receiving these orders in the second half, and we continue to work closely with the DoD on an extension to the M50 supply contract. Nevertheless, good spares and accessories orders from the DoD are continuing.

Speaker Change: The U K contract with M O D for GSR remains on track and demand for underwater Rebreather continues.

Speaker Change: The program to equip the Australian military is progressing well.

Speaker Change: We delivered about $6 million in the first half aligned to that program. We're also hoping Australia when I add filters to their contract alongside the S. M 54 masks.

Speaker Change: The order book doesn't currently include the expected mass can filter orders from the D O date.

Speaker Change: We anticipate receiving these orders in the second half and we continue to work closely with the D. O D. On an extension to the M 50 supply contract. Nevertheless, good spares and accessories orders from the Dod are continuing.

Steve: in non-seborrhean respiratory protection, we made exceptional progress. We launched MITRE Tactical Maths. in January. For those of you who don't know, MITRE is a modular system, fills a capability gap for those who operate in lower-threat environments than we would typically, that products would typically operate in. So places like, or teams like SWAT teams, for example. Here you've got high-end protective equipment, it can be cumbersome and it can impact on the operator's mission effectiveness. So we're starting to see some really early market success with this product. We've already won initial supply contracts with special force users across the 5 Eyes community.

Speaker Change: In non CEVA and respiratory protection, we made exceptional progress.

Speaker Change: We launched that Mitre tactical mask.

Speaker Change: In January so those of you don't know Mitek is a modular system fills a capability gap for those who operate in lower threat environments than we would typically our products are typically operated so places like what seems like Swat teams for example.

Speaker Change: Yeah, Hi, Fi and protective equipment, it can be cumbersome and it can impact on the operator's mission effectiveness.

So we starting to see some really early market success with this product. We've already won initial supply contracts with special force uses across the five Ais community.

Steve: were in trials with US and European SWAT teams. But most notably, at the start of the second half, we secured a new program of record with the DoD. That program is called Enhanced Biodefense Respirator, or ENBD. The goal of EMBD is to develop an innovative personal protective respirator that's based on our MITRE architecture. And we're going to do that in collaboration with the DoD. It will improve the user's comfort, reduce the physiological burden when operating in those lower threat environments. We're in the really early stages of this program, but we'd expect to move over the coming years to a production-ready system, and one that can be fielded across the U.S.

Speaker Change: In trials with U S and European Swat teams.

Speaker Change: But most notably at the start of the second half we secured a new program of record with the Doj.

Speaker Change: That program is called enhanced Biodefense, respirator, or EE and BT.

Speaker Change: BD.

Speaker Change: The goal of the MPD is to develop an innovative personal protective respirator.

Speaker Change: Based on our micro architecture.

Speaker Change: And we're going to do that in collaboration with the D O D.

Speaker Change: It will improve the users' comfort.

Speaker Change: The physiological burden when operated in those lower threat environment. We're in the really early stages of this program, we would expect to move over the coming years to a production ready system and one that can be filled at across the U S military.

Steve: and the world. We're really excited about the potential for MITRE and the EMBD program.

Speaker Change: We're really excited about the potential for mitre and the <unk> program.

Steve: In integrated CBRN, we're growing our market share after launching our extra skin boots, suits and gloves range. We've now got eight NATO countries signed up to the Boots and Gloves contract and we're in advanced discussions with other NATO countries to join the framework over the next 12 months. We won the DoD competition for their Hood Mask Interface program. That's actually three new programs of record with the U.S. government. A win that puts Avon right at the heart of the integration challenges for Chembuyer Integration. Our Exoskin suit range is popular with our customers, we're receiving early orders for complete Avon ensembles, and we're in close collaboration with major NATO and Five Eyes military customers, who've now recognised that the integrated solutions we offer give them significant operational advantage.

Speaker Change: It integrated CBR and we're growing our market share after launching our extra skin boots suits and gloves range.

Speaker Change: We've now got eight NATO countries signed up to the boots and gloves contract.

Speaker Change: And we're in advanced discussions with other NATO countries to join the framework over the next 12 months.

Speaker Change: We won the D O D competition for that huge I'm asking to face program.

Speaker Change: Actually three new programs of record with the U S government.

Speaker Change: When that puts Avon right at the heart of the integration challenges for Cambria integration.

Speaker Change: Our extra skin suit range is popular with our customers.

Speaker Change: We are receiving early orders for complete Avon ensembles and we're in close collaboration with major NATO and five eyes military customers.

Speaker Change: And I recognize that the integrated solutions, we offer give them significant operational advantages.

Steve: We're therefore seeing customer requirements and specifications move in our favour and as a result our medium-term pipeline in this space is increasing nicely.

Speaker Change: We therefore seeing customer requirements and specifications move in our favor and as a result, our medium term pipeline in this space is increasing nicely.

Steve: Finally, we're expanding into the military underwater market with our deep sea rebreather. In the first half, we secured contract wins with two additional European NATO navies. These build on the significant wins for Germany and New Zealand. I'm also really delighted that very recently at the start of the second half we entered a partnership with the Royal Canadian Navy to supply their rebreather also, giving us another 5i Nation for this product. Our production lines are increasing output to meet this ramp-up in demand. We're continuing to see a very strong pipeline for this product. We have more upcoming tenders across NATO and Five Eyes nations, and also opportunities for international exports.

Speaker Change: Finally, we're expanding into the military under water market without deep Sea Ray Brita.

Speaker Change: In the first half we secured contract wins with two additional European NATO navies.

Speaker Change: He's built on the significant wins for Germany, and New Zealand.

Speaker Change: I'm also really delighted that very recently at the start of the second half we entered a partnership with the Royal Canadian Navy to supply their re breeder all side, giving us another five nation for this product.

Speaker Change: Our production lines are increasing output to meet its ramp up in demand.

Speaker Change: We're continuing to see a very strong pipeline for this product we have more upcoming tenders across NATO and five eyes nations.

Speaker Change: And also opportunities for international export.

Steve: As both Joss and Rich said to you a minute ago, we are demonstrating outstanding operational discipline. businesses delivering a stronger order book. And we're executing on a growth strategy, building our pipeline and accelerating momentum. I'm delighted to be part of the success of this business and I'm really excited about it.

Speaker Change: As both Justin Rich said to you a minute ago.

Speaker Change: We are demonstrating outstanding operational discipline.

Speaker Change: Businesses, delivering a stronger order book.

Speaker Change: And we are executing on our growth strategy building, a pipeline and accelerating momentum.

Speaker Change: Liked it to be part of the success of this business and I'm really excited about our future.

Josh: I'll now hand you back to Joss who will take you through Team Wendy. Thank you very much, Steve. Turning to Team Wendy, their order book of $153 million is up around $10 million over the last six months. Perfecting very good order intake on both next-gen iHips and on a... Outside of the too big DoD program. We're making progress with continued demand for our bump helmets from the U.S. Navy and commercial helmets. In commercial helmets, we continue to pursue growth in both the U.S. and internationally with our leading technology and the shorter lead time. Lead times have reduced from two to four weeks on Epic and XFEL.

Jos: I'll now hand, you back to Jos who will take you through the Monday.

Speaker Change: Yes.

Speaker Change: Oh, maybe paper, thank you very much Dave.

Speaker Change: Turning to team Monday.

Speaker Change: Order book of $153 million is up around $10 million over the last six months in.

Speaker Change: In fact, I'm very good order intake on both next Gen I hips and on ICI itch.

Speaker Change: Outside of the two big D O D programs.

Speaker Change: We're making progress with continued demand for our bump helmets from the U S Navy and commercial helmets.

Speaker Change: In commercial helmets, we continue to pursue growth in both the U S and internationally with our leading technology and shorter lead times.

Speaker Change: Lead times have reduced from two to four weeks on epic and ask fell.

Josh: Sorry, lead times have reduced from four to six weeks on Epic and Exfil down to two to four weeks now, and that helps drive continued growth with our customers. During the first half, we launched our new RifleTech helmet into the international military and police market. This helmet can stop common rounds from weapons such as the AK47 and is the lightest helmet of its kind. It's been very well received by our customers and we have a good pipeline of opportunities and requests for quotes. We hope to start receiving orders for this helmet in the second half.

Speaker Change: So lead times are reduced from four to six weeks on epic and ask fell down to two to four weeks now and that helps drive continued growth with our customers.

Speaker Change: During the first half, we launched our new rifle tag helmets, and so the international military and police market.

Speaker Change: This helmet.

Speaker Change: Common rounds from weapons, such as the AK 47 and has the license how met all of its kind.

Speaker Change: It's been very well received by our customers.

Speaker Change: Good pipeline of opportunities and requests for quotes.

Speaker Change: We hope to start receiving orders for this helmet in the second half.

Josh: looking forward. We have exciting plans to expand our helmet accessories range and launch a new generation of our very popular Exfil SL helmets. We're now deploying 3D printed lattice structures within our pad system. This is starting with our RifleTech helmet. The lattice pads have an open structure that promotes a high level of airflow, decreasing heat build-up. while maintaining the comfortable fit and elite protection that our team Wendy Helmets are already well known for. We've made very good progress on our R&D contracts under the PANTHER Research Programme to advance our ability to predict traumatic brain injury.

Speaker Change: Looking forwards.

Speaker Change: We have exciting plans to expand our home accessories range and launch a new generation of our very popular X L. S. L homeland.

Speaker Change: We're now deploying three D printed lapses structures within our pod systems.

Speaker Change: This is starting with a rifle tack helmet.

Speaker Change: The latest parts of an open structure that promote a high level of outflow.

Speaker Change: Decreasing heat buildup.

Speaker Change: While maintaining a comfortable fit and elite protection that our team when they helmets are already well known for.

Speaker Change: We've made very good progress on our R&D contracts under the Panther research program to advance our ability to predict traumatic brain injury.

Josh: This will serve as the basis for designing Fusion. As you can see from the middle row of this slide. We're making real progress towards our medium-term financial goals. Our aim is to have a fast-growing business with high returns on capital in cash. we're making good progress. Yet, we are not complacent. There is still a lot of opportunity in this business to go for. In fact, every time we do a Kaizen, we discover new opportunities. We try and be transparent about risks and opportunities. We made good progress retiring RISC during the first half, we resolved scrap issues on our ACH helmet line and the DoD approved our new IHIPS and ACH production lines in Cleveland.

Speaker Change: This will serve as the basis for designing future products.

Speaker Change: So you can save from the middle row of this slide.

Speaker Change: We're making real progress towards our medium term financial goals.

Speaker Change: Our aim is to have a fast growing business with high returns on capital and cash.

Speaker Change: We're making good progress.

Speaker Change: Yet we are not complacent.

Speaker Change: There is still a lot of opportunity in this business to go for in fact every time, we do a kaizen, we discover new opportunities.

Speaker Change: We try and be transparent about risks and opportunities.

Speaker Change: We made good progress retiring rest during the first half we resolve scrap issues on our ACI home at line and the Doj approved on new <unk> and ICIS production lines in Cleveland.

Josh: That's us. The speed of production ramp up in Team Wendy is unusual and challenging. We're very focused on managing the risk and have made several changes to strengthen the organisation and to strengthen our recruitment, training and onboarding process. to give you an idea of the size of the Rampart Challenge in Cleveland. We need to triple production. and we're currently recruiting six people every single week. Those people all need to be on boarded and trained and finding reliable workers is not always. Trump's policies create both risk and opportunity. As Richard has mentioned, the 10% tariff against the UK affects some of our UK mask components, which we are working to mitigate.

That Seth.

The speed of production ramp up and see when they is unusual.

Speaker Change: And challenger.

Speaker Change: We're very focused on managing the risk and have made several changes to strengthen the organization and to strengthen our recruitment training and on boarding processes.

Speaker Change: To give you an idea of the size of the ramp up challenge in Cleveland we.

Speaker Change: We need to triple production.

Speaker Change: And we're currently recruiting six people every single week.

Speaker Change: Those people only to be on boarded and trained and finding reliable work is not always easy.

Speaker Change: Trump's policies create.

Speaker Change: Both risks and opportunities.

Speaker Change: As rich just mentioned the 10% tariff against the UK effects some of our UK masked components.

Speaker Change: We are working to mitigate.

Josh: If any NATO or Five Eyes country were to implement reciprocal tariffs that would affect us because we make a lot of helmets and most of our filters in the US. But we do have options to move productions between the UK and the US to reduce the impact of any tariffs. that we won't be making any radical moves until there's a bit more certainty about the direction. Tariffs do also represent an opportunity for us because a number of our competitors in the US market make their entire products outside of the US and will therefore be subject to a 10% tariff themselves.

Speaker Change: If any nice sidewall of five eyes country to implement reciprocal tariffs that would affect us because we make lots of helmets on most of our filters in the U S.

Speaker Change: But we do have options to move productions between the U K and the U S to reduce the impacts of any tariffs.

Speaker Change: We won't be making any radical moves until a little bit more certainty about the direction.

Speaker Change: Terrorists. They also represent an opportunity for us because a number of our competitors in the U S market make their entire products outside of the U S and will therefore be subject to attempt to sentara themselves.

Josh: We have seen some development programs impacted by Doge. But, Doge has already been through most of our programmes and all of the ones we like have been kept. We have some interesting international opportunities for our helmets. where we are very highly engaged with our customers. We know from experience that this type of opportunity can slip. At the risk of tempting fate, we do hope to have some orders to announce in the second half.

Speaker Change: We have seen some development programs impacted by Dodge.

Speaker Change: Thoughts.

Speaker Change: <unk> has already been through most of our programs and all of the ones. We like have been capped.

Speaker Change: We have some interesting international opportunities for our helmets.

Speaker Change: While we are very highly engaged rollout customers.

Speaker Change: We know from experience that this type of opportunity can slip.

Speaker Change: So the risk is tempting fate, we do hope to have some orders to announce in the second half.

Josh: So in conclusion... We're improving our businesses really fast. The transformation program is on track to deliver substantially improved margins in 2020. Our markets remain attractive, with European defence spending increasing. And, perhaps most excitingly to me, we have a business system which will continue to deliver strong growth and returns on capital. very much for your time.

Speaker Change: So in conclusion.

Speaker Change: We're improving our businesses really fast.

Speaker Change: The transformation program is on track to deliver substantially improved margins in 2026.

Speaker Change: Our markets remain attractive with European defense spending increasing.

Speaker Change: Hum.

Speaker Change: Perhaps most excitingly to me, we have a business system, which will continue to deliver strong growth and returns on capital.

Speaker Change: Thank you very much for your time with now very happy to answer questions. Obviously, the new cadence is going to get all the hard ones.

Operator: We're now very happy to answer questions. Obviously the new kids are going to get all the hard ones. We're going to take a seat first.

Speaker Change: We're going to take a seat first.

Speaker Change: [laughter].

Speaker Change: Sure.

Speaker Change: Some of them Oh, I've got some quite a few questions, but I'll start with three and then come back.

Operator: Right, I've got quite a few questions, but I'll start with three and then come back. Can you talk about the second half, please, and the work that you still need to do in terms of the evolution of your facilities and your manufacturing footprint?

Speaker Change: Can you hear.

Speaker Change: Oh, I got about nine or so.

Speaker Change: Can you talk about the second half. Please on the work that you still need to do in terms of the <unk>.

Speaker Change: Evolution of your facilities and your manufacturing footprint, what exactly is the kind of the big ticket items that you don't get it right in the second half.

Operator: What exactly is the big ticket items that you've got to get right in the second half? Can you talk please also about competitive landscape on helmets? Clearly we know you're in a good spot, just kind of where you are relative to your peers would be helpful.

Speaker Change: Could you talk please also about competitive landscape on helmets clearly we know you're in a good spot to just kind of where you are relative to your peers would be helpful.

Operator: And then this is a slightly longer term question. Your balance sheet is now below your target of one to two. What is the ultimate aspiration from an M&A perspective? Or is this just going to be M&A as and when it comes, and if nothing comes, then buybacks? Or is there a more determined M&A pipeline?

Speaker Change: And then this is a slightly longer term question your balance sheet now below your target of one to two what is the ultimate aspiration from an M&A perspective or is this just going to be M&A as and when it comes and if nothing comes in buybacks or is more determined M&A pipeline.

Josh: I'll leave answer three to Rich. So the ramp-up in helmets. I'd probably frame it as two things. The first thing we need to do is nail the quality. Cleveland, like actually most of our factories, if I go back two years, inspects quality into the end of the line. That does stop the customer getting defective products, but it causes chaos because then you have to send the helmets back down the line for rework. Our strength and system. Our plan is that we inspect the helmets at every stage in the process, the same applies for respiratory production.

Suresh: Well I'll leave answer three Suresh.

Speaker Change:

So the ramp up and helmets.

Speaker Change: I'd probably frame it as two things the first thing we need to do is nail the quality.

Speaker Change: Lievens like actually most of our factories, if I go back two years inspects quality into the end of the line.

Speaker Change: That they'll stop the customer getting a defective products, but it causes chaos. Because then you have to suddenly homeless back down the line for <unk>.

Speaker Change: Our strength in system.

Speaker Change: Our plan is that we inspect.

Speaker Change: The helmets at every stage in the process. The same applies for our respiratory production. So we're changing all of our lines to write quality criteria get the quality criteria visible on every stage in the line define the quality test and then train the operators.

Josh: So we're changing all of our lines to write quality criteria, get the quality criteria visible on every stage in the line, define the quality test and then train the operators. That's in progress. I'd say we made very good progress over the last month, but we are still working literally this week on the ACH line. What that will do is it will increase write-first time, that will increase productivity, that will increase flow down the lines, and that will help us ramp up production. It will also stop the chaos of finding problems at the end of the line.

Speaker Change: That's in progress I'd say, we've made very good progress over the last months, but we are still working literally this week on the ICA, which line what that will do is it will increase right first time that will increase productivity that will increase flow down the lines and that will help us ramp up production. It will also stop the chaos.

Finding problems at the end of the line.

Josh: Our Japanese lean consultants often describe it as, can you remember what you had for dinner a week ago? And it's the same with an operator. If they make a helmet and then 10 seconds later, the next person in the line inspects it and says, well, this isn't quite right, and hands it back to you, you won't make that mistake again. If it goes to the end of the line and you don't see it for three weeks, no one knows what went wrong by that time. So we're trying to change the culture. We're training people. We're making good progress on it, but there is more to do, for sure.

Speaker Change: Our Japanese link consultant was often describe it is can you remember what you had for dinner a week ago and it's the same with an operator, if they make a helmet and then 10 seconds lighter. The next person on the line Inspector and says well this isn't quite right and hand. It back to you you won't make that mistake again, if it goes to the end of the line and you don't say it for three weeks and no one knows.

Speaker Change: What went wrong by that time, so we're trying to change the culture, we're training people.

Speaker Change: Making good progress on it but there is more to do for sure.

Josh: And then we need to ramp up production on both ACH and IHIPS. That's really a matter of extra shift. We're now running sort of one and a half shifts on IHIPS. We need to get that to two. And ACH, we're running probably two-ish, one and a half, again. We need to get that to three shifts. So we've got to recruit all those people. We've got to train them. Once we get people in and trained, they like it and they stay. And the attrition's only about 1%. But in the first month, the attrition is actually closer to 50%.

Speaker Change: And then we need to ramp up production on both a C H and I hips, that's really a matter of extra shifts.

Speaker Change: We're now running so a one and a half shifts on IHOP. So we need to get that two and a C. H, we're running probably two ish one off again, we need to get that up to three shifts. So we've got to recruit all those people we've got to train them.

Speaker Change: Once we get people in and trained they like it and they stay in the attrition is only about 1% in the first month. The attrition is actually closer to 50% so getting people to actually want to work in a factory is the track if we can get them through the first month or two then they seem to like it.

Josh: So getting people that actually want to work in a factory is the trick. If we can get them through the first month or two, then they seem to like it. But a lot of them don't.

Speaker Change: But a lot of them.

Josh: don't seem to hack it, so that's a bit of a challenge at the moment, but we have made a lot of changes on how we recruit.

Speaker Change: Don't seem to Hackett, sorry, that's a bit of a challenge at the moment, but we have made it all changes in how we recruit people.

Josh: Your second question, helmet competition. Well, on ACH we have 60% of that program for the five-year contract period, so we don't really have competition there. On IHIPS, we have to bid for each block. We had two bids in the first half. One of them we won 60%, one of them we actually won 40%, but at a much better price. And given that we are absolutely maxed out on our production lines, that was not an unhappy result for us. We do think, we still think we are the only helmet manufacturer that is running flow lines through their factories, so we remain of the view that we have a competitive advantage over anybody else.

Speaker Change: Your second question talent competition.

Speaker Change: Well.

Speaker Change: On ACI. So we have 60% of that program for the five year contract parents. So we don't really have competition on.

Speaker Change: On <unk>, we have to bid for each block.

Speaker Change: You had two bids in the first half one of them. We won 60 of Sun one of them, we actually won 40%, but that's a much better price and.

Speaker Change: And given that we are absolutely Max style on our production lines that was not an unhappy result for US. We do think we still think we are the only helmet manufacturer that is running flow lines through the factories. So we remain of the view that we have a competitive advantage over anybody else in the medium term.

Speaker Change:

Josh: Technology-wise, RifleTech has just launched Best Helmet in the World, Andy. I think the customers are going to like it. So I think we feel ahead on the technology side. And actually, there's some good signs of some new programs of record with the DoD, but we'll see what happens with those and other things. But I would say the relationship is very good with the DoD. We seem to have been down-selected for a program that's quite exciting, but if we actually win it, I'll let you guys know.

Speaker Change: Technology Wise rifle Tac is just launched by somewhere in the world on the.

Speaker Change: And the customers are going to like it so.

Speaker Change: So I think we fell ahead on the technology side and how she would there's some good signs of some new programs of record with the Doj.

Speaker Change: But we'll see what happens with those and other things, but I would say the relationships very agreed with the Doj we seem to have been down selected for a program that was quite exciting, but if we actually went in and then I'll, let you guys know but.

Speaker Change: Our relationship is good.

Rich: application. So on current leverage we're just below the 1 to 2 times, we're pretty comfortable with that, that's pretty much in line. Our primary focus is still execution. So as Josh said, we've got a lot to do in Cleveland to get it up to where it needs to be. I don't anticipate taking my eyes off that ball for the next six months. So let's get that one done and we can sort of come back again at the full year.

Speaker Change: Capital allocation.

Speaker Change: So I wasn't on current leverage we'd just below the wants to so I think we're pretty comfortable with that that's pretty much in line.

Speaker Change: <unk>.

Speaker Change: I think.

Speaker Change: Our primary focus is still execution. So as Joe said, we got a lot to do in Cleveland to get up to where it needs to be I don't anticipate taking me lives off that ball for the next six months. So let's get that one done and we can sort of come back again on the full year.

Rich: The next priority then is growth. And you guys will see that come through in R&D, you'll see it come through in increased sales and marketing. And in fact, we've started to see that, so we talked a little bit about that this morning. That is priority number one, really, is driving organic growth. You know, we're pretty comfortable that we can get the margin range of this business sustainably into that 14% to 16% range. If we can drive organic growth at that level of return, that's a great outcome for everybody. And then, of course, we are continuing to invest in and develop the strength.

Speaker Change: The next priority that is growth.

Speaker Change: And you guys will see that come through in R&D, you'll see it come through increased sales and marketing and in fact, we've started to see that so we talked a little bit about that this morning.

Speaker Change: That is priority number one really is driving organic growth.

Speaker Change: We're pretty comfortable that we can get the margin range for this business sustainably into that 14% to 16% range. If we can drive organic growth at that level of return that's a great outcome for everybody.

Speaker Change: And then of course, we are continuing to invest in and develop the strengthened system that Josh was talking about this will clearly improve all of our business. Even further still from where it has already been improved and we do genuinely believe that this business the system could be applied to other businesses to improve those at some point in the future as well so.

Rich: that Josh was talking about. This will clearly improve our business even further still from where it's already been improved and we do genuinely believe that this system could be applied to other businesses. to improve those at some point in the future as well.

Rich: So I mean, those are all kind of focus areas in order of priority. Clearly, if when we've done all of that, there is still excess cash being thrown off and we'll look at other ways.

Speaker Change: I mean, those are all kind of focus our focus areas in order of priority.

Speaker Change: Clearly if when we've done all of that there is still excess cash being thrown off then we'll look at other ways of distributing it.

Thank you.

Speaker Change: Okay.

Speaker Change: All right.

Steve: We can probably hear you, but maybe the people on the phones can't. You made some very interesting comments on tariffs and doge. Can you talk about the pricing environment and your ability to actually lift prices and how do you actually do that? Well, Steve's the only one affected by what little tariffs we've got, so why don't you talk about that? There's a multi-faceted question, I guess. So on doge, pretty much all my programs have been doged. That's a term we can use. And we haven't really got any fallout, I think. People inside the DoD, probably a little bit uncertain, creates a little bit of opacity, just navigating through that, but in terms of the actual program funding themselves, that's pretty good.

Speaker Change: We can profitably.

Speaker Change: People on the phones.

Speaker Change: Yeah.

Robin: Thank you Robin and buy from these capital you made some framing comments on tariffs tariffs and Don.

Robin: I mean can you talk about the pricing environment and your ability to actually list prices and how does how does that how do you actually do that our ability to lift prices.

Robin: This.

Robin: His favorite anyone affected by what little terrorists. We've got so why don't you talk about that.

Robin: This multifaceted question I guess so on dose.

Robin: Like pretty much all my programs are being dosed.

Robin: We can use.

Robin: So and we haven't really gotten any fallout I think.

Robin: People inside the Daddy, probably a little bit uncertain creates a little bit of opacity, just navigating through that.

Robin: But in terms of the actual program funding themselves.

Robin: That's pretty good.

Steve: The M50 contract is up for renewal, so pricing could be on the table there. I wouldn't say we're close to the DoD, we're working with them about what that extension might look like. In other contracts where we have commercial pricing, we can be competitive, we know we want discriminators on our products, we're not a low-cost business, we don't chase that. So we do look for good commercial returns and some of the improvements in the margins you've seen in naval protection, a big part of that is down. better commercial pricing negotiations and structures we've got in place with customers.

Robin: Damn 50 contract is up for renewal.

Robin: <unk> could be on the table there.

Robin: Let's say with close to the D. O D. We are working with them about what that that extension might look like.

Robin: And other contracts, where we have commercial pricing. We can we can be competitive we know we have discriminated on our products.

Robin: We're not a low cost business, we don't chase that business.

Robin: So we do look for good commercial returns in some of the improvements in the margins you've seen Avon protection.

Robin: A big part of that is down to better commercial.

Robin: Pricing negotiation structures, we've got in place with customers.

Steve: So we're not as hamstrung as you might imagine. So how quickly can you push through price increase if you get hit? large additional costs or if there is a reciprocal tariff impact, that kind of thing. of most of our contract reasons. I don't want to put a number on it because I don't know, but reasonably quickly. Two things actually. Firstly, since Doge, he's actually won the ENBD program of records, so that's a good sign programs are still flowing out of the DoD to us anyway. On reciprocal tariffs... Steve can make masks, the same masks, in the UK and the US.

Robin: So we're not hamstrung as you might immediately think when you look at that and say how quickly can you push through price increases if you get hit with <unk>.

Robin: A large additional costs or if there is a reciprocal tariff impact that kind of thing.

Robin: On.

Robin: Most of our contracts reasonably quickly.

Robin: Okay.

Robin: I don't put a number on it because I don't know, but reasonably quickly.

Robin: It's just history.

Robin: Well two things actually firstly since he's actually won the N V. D program of record. So that's a good sign programs are still flowing out of the Doj to us anyway.

Robin: On a surgical tariffs.

Robin: Steve can make mask the same mass in the U K and the U S. So unlike maybe some people we can switch production between those two factories, depending on the tariff environment is not quite so true with filters that math, we can do that.

Steve: So unlike maybe some people, we can switch production between those two factories, depending on the tariff environment. It's not quite so true with filters, but masks, we can do that. Yeah, we can.

Yes, we can.

Steve: Tariffs don't keep me awake.

Robin: Tires don't keep me awake at night.

Steve: Actually, just to clarify on the competition, are we talking about MSA and CARDRA? Are those the two key names? Well, I don't, in mass, but do you want to talk about the competitive environment? Yeah. competitive environment for us in maths. Everybody tries to copy our product. I'm going to be quite arrogant. We've got the world leading product in that M50 baseline. And what goes from it, I was absolutely delighted Australia moved immediately to a 54. I think that's very forward thinking of the Australians to do so. So we, technologically wise, we stay ahead with our 53 and 54 platforms, well ahead of the competition.

Speaker Change: What are you going to actually just to clarify on the competition level are we talking about MSA and contra although those are two key names.

Robin: Hello.

Robin: I think.

Robin: And Mark why do you want to talk about the competitive environment in a month.

Robin: Yeah.

Robin: The competitive.

Robin: Competitive environment for us in masks.

Everybody tries to copy out products and I'm going to be quite arrogant.

Robin: Uh huh.

Robin: We've got the world leading product in that M 50, baseline and what goes through us.

Robin: Absolutely delighted Australia moved immediately to a 54 I think that's very forward thinking of the Australians to do so.

Robin: So so we technologically wise, we stay ahead with <unk> 53, and 54 platforms, but ahead of the competition on reread. This we got three to five year locked in.

Steve: On re-readers, we've got three to five year locked in discriminators through various patterns and bits of IP. I don't think MSA is really a competitor, rather than Mars, and Cadra is more of a distributor thing. I think they make some helmets maybe, but they don't make Mars.

Robin: Discriminated through various patents in bits of IP.

Robin: Thank you.

Robin: And then the MSA is ready to convert sooner rather than mass and cadre is more of a distribute dressing and already I think that makes them helmet Mohammed.

Robin: My mouth.

Robin:

Alfonso Osorio: Hi, good morning. It's Alfonso Osorio from Barclays covering for Milen Koerner.

Stefan Susana: Hi, Good morning, it's Stefan Susana <unk> from Barclays covering 4 billion kroner.

Alfonso Osorio: I have three quick questions if I may. The first one on growth, which you mentioned you expect modest growth for Team Wendy in the second half. Just wondering how that compares to sequentially versus the first half of the year, as I appreciate you have tougher comps from here on out. The second one on margin, just wondering how you budget that internally in terms of the medium term targets you have, the 14 to 16 percent, in terms of what needs to happen to achieve the lower end of the range and the upper end of the range.

Robin: I have three quick questions from me.

Robin: The first one on growth, which you mentioned you.

Robin: We expect modest growth once you might need a second half.

Robin: Just wondering what how that compares to sequentially versus.

Robin: The first half of the year.

Robin: And so I appreciate you have tougher comps from here on out.

Robin: The second one on margin.

Robin: I'm just wondering how you budget that internally in terms of the medium term target you have the 14, 16%.

Robin: In terms of what needs to happen to achieve the lower end of the range.

Alfonso Osorio: I know there is still a lot of investments to do left, but just wondering how you budget internally and your targets for the medium term.

Robin: The range I know it is taller with investments to do left.

Robin: But just wondering when you hold how you push they internally in your target for the medium term.

Alfonso Osorio: And lastly, on the whole European opportunity you guys have for the next five to ten years. I mean, you mentioned a lot of examples in the slides on the kind of contracts you have, contract extensions, partnerships, et cetera, but in the whole context of increased defense spending in Europe, how well are you positioned for that, and how big can that opportunity be for you? I appreciate that you're very highly exploited in the U.S., but Europe should be a big opportunity for you. So just wondering your thoughts on that. Thank you.

And then just lastly.

Robin: On the whole European opportunity you guys have for the next five or 10 years. I mean, you mentioned a lot of examples in the slides on the <unk> contracts you have contract extensions partnerships et cetera, but in the whole context of increased defense spending in Europe, how will you position for that and how big can that opportunity be for you I appreciate it.

Robin: In the U S, but Europe should be a big opportunity for you. So just wondering what's your thoughts on that.

Josh: I think if Rich takes the first two, but maybe we'll do the third one first, give him time Steve can talk about respiratory in Europe. On helmets in Europe, we're definitely seeing some re-equipping. Definitely more troops helps, or at least not cutting troops. But I think we'll actually see more troops across Europe. Every troop needs a helmet and a mask. So that is very good for us. But we are also seeing countries step up the protection level on their helmets. That's also good for us, because our helmets are the leading edge on the technology side.

Robin: Rich so the first two but maybe we'll do the sub one first giving tons thing.

Robin:

Steve: Steve can talk about respiratory in Europe on helmets in euros.

Steve: We're definitely seeing some real quick thing definitely more troops helps or at least not cutting truths about saying well actually see more troops across Europe every treatment as a helmet on the mask. So that is very good for us.

Steve: But we are also saying countries stepfather protection level on a helmet. That's also good for us because all helmets are.

Steve: The leading edge on the technology side. So we are talking to a European military about selling helmets into them it looks powerful but as I say, sometimes these things can slip and sometimes even get surprised.

Josh: So we are talking. to a European military about selling helmets into them. It looks hopeful, but as I say, sometimes these things can slip and sometimes you can get surprised. We have not traditionally tried to sell helmets outside America because we've been absolutely flat out in our factories. We're now starting to get our head up. work harder to build the pipeline in Europe, and we are seeing that pipeline progressing quite well, which is why I said we hope to have something to announce in H2 on that. We have recruited three, well, two salespeople and a category manager in Europe just on helmets.

Speaker Change: We have not traditionally tried to sell helmets outside America, because we've been the opposite you flat all in all factories are.

Steve: We're now starting to get our head off.

Steve: And.

Steve: Work harder to build the pipeline in Europe, and we are seeing that pipeline progressing quite well, which is why I said, we hope to have something to announce and I used to I will not we have recruited three well two salespeople in a category manager in Europe, just on helmets, we've done that in the last six months I thought that SG&A going off is investment in styles. It.

Josh: We've done that in the last six months, so part of that SG&A going up is investment in sales. It will take them a while to build the pipeline in Europe, but we do think we'll get more sales. We're already well covered, as you know, through the NATO contract, you mentioned 13 nations, and of course we have others that are out, you know, NATO nations in Europe, but are outside of that contract. Even the countries we don't tend to win, so some more difficult countries, France, Germany, where it's more difficult to get the military mask, we still have the special forces users, we still have the police user community in the law enforcement community in those nations.

Steve: We'll take them a while to build the pipeline in Europe, but we do think we'll.

Steve: We got more sales over time.

Steve: Virginia masks.

Steve: We're already well covered as you know the NATO contract mentioned 13 nations and of course, we have others that are at NATO nations in Europe and are outside of that contract.

Steve: We even the countries, we don't tend to win say some more difficult countries, France, Germany, where it's more difficult to get in the military market will still have we still have the special forces uses we still have the police user community.

Steve: In the law enforcement community in those nations growing defense budgets, therefore, only a good thing.

Josh: Growing defence budgets, therefore, are only a good thing on the back of that installed base we had. I also talked a little bit about the aftermarket that we're going after, and again, we've sold in excess of half a million masks now, just through that NATO contract, we're only halfway through that. And as that installed base grows, which rightfully said, we install a mask, and then we pull through 10 years of recurring revenue on that.

Steve: On the back of the back of that install base you had also talked a little bit about the aftermarket.

Steve: After.

Steve: And again you know we've we've yeah, we sold in excess of half a million masks now just three that NATO contract, where we're only half way through that.

Steve: As that installed base grows rich rightfully said, we installed a mask and then we pull through 10 years of recurring revenue on that and I think the other part in Europe talk devices.

Rich: I think the other part in Europe I'd talk about is... the sort of impact from Ukraine. legitimacy for want of a better word, of CBRN that perhaps a few years ago started to feel a little bit outdated. We've seen those tactics being used and it's been a real problem for the Ukrainians in defending themselves. So you've got growing defence budgets but an increasing urgency that Europe really does need to protect itself against that kind of threat. We're clearly in a strong position to capitalise on growing defence budgets. On the numbers, so Team Wendy growth, as a reminder, H1 growth this year is lapping an H1 last year that didn't have ACH, so that's the real driver of the 20%.

Steve: The the sort of impact from Ukraine.

Steve: Has created further.

Speaker Change: The just a messy for want of a better word of CBR and perhaps start a few years ago started to feel a little bit outdated. We've seen those tactics being used and it's been a real problem for the Ukrainians in defending themselves.

Steve: And say.

Steve: You've got growing defense budget, but an increasing urgency that Europe really does need to protect itself against that kind of threat.

Steve: We're clearly in a strong position to capitalize on growing defense budget.

Steve: On the numbers so.

Steve: So I would say when the growth.

Steve: As a reminder, H one growth. This year is lapping an H one last year that didn't have a C. H. So that's the real driver of the 20% ish revenue growth you've seen.

Rich: revenue growth you've seen. Interestingly, if you look at it sequentially, it's not nearly as significant because H2 last year had a CAC. H2 on H2, therefore, is going to be nothing spectacular. The question was sequential H2 on H1. Assume flattish, and you won't be far wrong. It might be plus a bit, minus a bit, but it'll be pretty close to flat.

Steve: Interestingly, if you look at it sequentially, it's not nearly as significant because H two last year had ACTH in it.

Steve: H two one H two therefore is going to be.

Steve: Nothing spectacular, but the question was sequentially, it's two and H one assume flattish in Europe, we saw rolling it might be plus a bit minus a bit but it'll be pretty close to flat.

Rich: And then the variability on the 14-16%, that's a really good question. It's probably worth reaffirming the confidence in the 14-16% before we get to what might take it to the upper or lower end. And that is the drop-through of the $10 million of annualized benefit cost reduction. as a consequence of the closure of the Irvine facility. So we're very confident in getting into the range. What really moves it around inside that range, there are going to be a number of things, right? So, on growth, if we see opportunities to invest Good quality R&D in a good quality development product, we'll do that.

Steve: And then the variability on the 14 and 16% and that's a really good question.

Steve: It's probably worth reaffirming our confidence in the 14 to 16 before we get to what might take it to the upper or lower end and that is the drop through of the $10 million have been annualized benefit cost reduction effectively.

Steve: As a consequence of the closure of the <unk>.

Steve: Wind facility. So we're very confident in getting into the range, what really moves it around inside that range, they're going to be a number of things right.

Steve: On growth, if we see opportunities to invest group.

Steve: Good quality R&D in a good quality development product will do that that might move it around because clearly we don't capitalize that sort of expenditure anymore, unless we absolutely have to.

Rich: That might move it around, because clearly we don't capitalise that sort of expenditure anymore, unless we absolutely have to. Volume is a big determinant. We've done a lot of work on getting the cost base of this business right. And therefore, when revenue grows, as you've seen in the respiratory business this year, it drops through remarkably strongly. So if revenue growth, you know, our medium term guidance is greater than 5%, so let's assume that applies to 2026. If it comes in a bit above that, greater than 5%, then that will drop through at a better drop-through margin.

Steve: Volume is a big determinant you know we've done we've done a lot of work on getting the cost base of this business right.

Steve: And therefore when revenue grows as you've seen in the respiratory business. This year it dropped through remarkably strongly so if revenue growth, where you know our medium term guidance is greater than 5%. So let's assume that applies to 2026.

Steve: If it comes in a bit above that greater than 5% then that will drop through at a better margin. So that that's what moves us right inside that range.

Rich: So that's what moves us around inside that range, if that helps.

Steve: I hope.

Operator: Thank you very much.

Steve: Thank you very much.

Steve: Budget for next year.

Steve: Thank you.

Operator: Good morning, Richard Page from Deutsche Numis, just an addendum to that European opportunity question. What sort of lead time would you get on that and be able to fulfil those sort of orders if you did suddenly get a surge in demand? Number two, US rebreather. Is that opportunity completely faded away or is that still out there? And again probably fulfillment time frame given you've already got a good order pipeline.

Richard Paige: Good morning, Richard Paige from Deutsche Numis, just an addendum to that European opportunity question.

Speaker Change: How what sort of lead time or do you would you get on that and be able to fulfill those sort of orders if you suddenly get a surge in demand.

Speaker Change: Troops from that side.

Speaker Change: Number two U S re brita is that opportunity to completely flip faded away or is that still out there and again, probably fulfillment timeframe given you've already got.

Speaker Change: The pipeline.

Operator: And thirdly, I feel like Josh you've been held back a little bit by your team because I think you're looking at JKK procedures in the factory, is that right? Yeah. Is there more you want to discuss on that? I'll just give you a forum to say what other opportunity you might have. Yeah, exactly.

Speaker Change: And thirdly, I still thought Joel she'd been held back a little bit.

Speaker Change: But I will tell you.

Speaker Change: Because I think we're looking at J K K procedures in the factory is not really yeah.

Speaker Change: Is there more you want to discuss on that I'll, just give you a forum to say well other ortho giudici you might have.

Speaker Change:

Speaker Change: Yeah exactly.

Josh: Actually, I asked Steve to talk about lead times on the Ukraine orders in particular because they're a bit of an exception, because they do often want them very quick. Lead times, generally... If you are interested in the strength and system, you'll see that level loading our plants is super important to us, actually for two reasons. Firstly, if you level load the plants, you use your labor much more efficiently, because if you have big peaks and troughs, they're either stressed or underutilized. But the other big thing about level loading plants is that if your plant volumes keep going up and down in a very volatile way, it whips up through the supply chain and causes them absolute chaos.

Speaker Change: I see.

Speaker Change: All states talk about lead times on the Crane orders in particular, because they're a bit of an exception because they do often one of the very quick.

Speaker Change: Lead times generally.

Speaker Change: If you are interested in the strength and system, you'll see that level loading our plants is super important to us actually for two reasons. Firstly, if you level load. The plants you use your labor much more efficiently because if you have big peaks and troughs are either stress door underutilized.

Speaker Change: But the other big thing about level loading plants is that if you found volumes keep going up and down in a very volatile all wire whip solved through the supply chain and causes them absolute chaos and in some cases, we are the supplier to ourselves. So we actually see that ourselves with.

Josh: And in some cases, we are the supplier to ourselves, so we actually see that ourselves with the UK supplying the US, for example, or actually our Salem plant supplying Cleveland. So we know how it feels. It feels awful when you get these surges in demand. So what we've worked really hard on is making sure that we have good visibility on the pipeline and that we can work with the customers to get the orders in a more level loaded way. And actually, Steve's been particularly good on saying to customers, well, do you really need 30,000 mass in one drop?

Speaker Change: The UK supplying the U S. For example, or Archie I'll say them plants supplying Cleveland. So we know how it fails is it feels awful when you get these surges in demand so.

Speaker Change: What we've worked really hard on is making sure that we have good visibility on the pipeline on that we can work.

Speaker Change: What with the customers too.

Speaker Change: The orders in a more level loaded way and actually stay as being particularly good.

Speaker Change: All science customers, what they really need 30000 miles in one drop or can we spread out over that say three deliveries or in the case that she had rebreathe as I won't name the customers of Alpha, but originally they want said hundreds of rebates in one drop and know that taking 30, a month that is so much better for us but also somehow.

Josh: Or can we spread it over, let's say, three deliveries? Or in the case, actually, of rebreeders, I won't name the customers, it's a bit unfair, but originally they wanted hundreds of rebreeders in one drop, and now they're taking 30 a month. That is so much better for us, but it's also so much better for our supply chain. And it's partly just a mentality thing. We weren't asking the customer, do you mind if we deliver in monthly drops? They can't really absorb everything at once anyway. So it's sort of win-win for everybody.

Speaker Change: For our supply chain and it's partly just a mentality thing because we weren't asking the customer do you mind, if we deliver and monthly drops that they cant really absorb everything at once anyway. So it's sort of a win win for everybody.

Josh: Lead times on Ukraine? Well, I guess it's a broader ramp-up in Europe, wasn't it, was your question, as opposed to specifically Ukraine, Richard. So, I think we're clearly quite busy at the moment, so there have been quite a lot of conversations. We're very close to our customers, and so... In the example of Ukraine, where they've needed things really quickly, we're able to work with other NATO nations to say, can we move orders around, and typically I'd say most NATO nations have been fairly accommodating of that. We possibly could ramp further on capacity if we wanted to.

Speaker Change: Lead times on Ukraine.

Speaker Change: He was a quick broader ramp up in Europe wasn't that there's your question as opposed to specific of Ukraine, or I should say I think.

Speaker Change: We've clearly quite busy at the moment say.

Speaker Change: There have been quite a lot of conversations were very close to our customers.

Speaker Change: And say.

Speaker Change: In the example of Ukraine, where they've needed things really quickly we're able to work with other NATO nations to say can we move orders around and typically I would say most NATO nations have been fairly accommodating of that.

Speaker Change: We could we possibly could ramp further on capacity. If we wanted to we know we're not for example, running three shifts at the moment.

Josh: We're not, for example, running three shifts at the moment. in all of the factories, so there is pending resource constraints, pending supply chain constraints, there is a possibility we could ramp further. But I think we also... We also maintain that very close relationship with our customers, so it's highly regular that we get a sudden, here's a massive surge of respirators that we need now. We do, as Josh rightly just explained, we do try and help educate our customers on where lead times happen to be.

Speaker Change: All of the factories. So there is Penn.

Speaker Change: Pending resource constraints pending supply chain constraints, there is a possibility we could ramp further.

Speaker Change: But I think we all say.

Speaker Change: We also maintain a very close relationship with that customer site.

Speaker Change: Our highly irregular that we get a sudden here's a massive surge in respirators that we need now.

Speaker Change: We we do just right and you just explained we we do try and help educate our customers on a sort.

Speaker Change: Well lead times happened to be.

Speaker Change: At the moment.

Josh: U.S. Navy. Oh, U.S. Navy. While we're still working with the U.S. Navy, they're actually visiting us on... Steve and I are seeing them. I don't know what that will lead to, but we're definitely still in contact with them. They did send a nice email yesterday saying they'd had good feedback from the Germans. Who knows? Still definitely still alive, but there isn't actually a procurement process at the moment. So I wouldn't say there's going to be anything fast, but the opportunity is still out there and we're still working with the U.S.

Speaker Change: A U S Navy obviously.

Speaker Change: Wow.

Speaker Change: Still working with the U S. Navy that are actually visiting us on Tuesday.

Steve: Steve and I are saying them.

Steve: I don't know what that will lead to but we're definitely still in contact with them. They just send a nice email yesterday, saying that had good feedback from the German.

Steve: Hey, nice, it's still definitely still alive, but there isn't actually a procurement process at the moment, so I wouldnt say theres going to be anything fast, but the opportunity is still out there and we're still working with the U S. Navy.

Steve: Yeah, I was just going to build on your point around what Germany said. At the risk of my own sales team who's probably watching this, our best sales team are our current customers. in the MCM landscape. It's a reasonably small community and we've developed a very good reputation. Not just for the product, but for the broader expertise and service we provide behind that product. And I think that stands us in very good stead for some of the competitions coming up. Josh is right. I don't think the US quite knows where it's going to go with that program, but it definitely isn't dead.

Speaker Change: Yeah, I was just going to build on your point around what Germany. He said I think.

Speaker Change: But at the risk of my own sales team is probably watching this.

Speaker Change: Our best sales team or our current customers.

Speaker Change: Oh in the MCM landscape, it's a reasonably small community.

Speaker Change: And we've developed a very good reputation.

Speaker Change: Not just for the product so that for the broader expertise and service we provide.

Behind that product.

Speaker Change: And I think that that stands us in very good stead for some of the competitions coming up just as right.

Speaker Change: In the U S quite knows where it's going to go with that program, but it's definitely isn't dead.

Steve: They will need a new rebreather, we've got to work through the usual government machinations as to how you get to it, but we'll almost certainly be a competitor.

Speaker Change: They they they will need a new re breeder just we've got to work through the usual government mass nations as to how you get to it.

Speaker Change: Almost certainly be a competitive tender.

Josh: JKK, which stands for, you're good at this, Jikotei Kanketsu. Okay. It is explained handily in the Stregsys system, but sort of as mentioned earlier really, what we're trying to do is all of our lines, including MCM actually, we just did a Kaizen on this two or three weeks ago. The idea is to stop defects progressing through the line and detect them immediately and immediately rework them before they go down the line, which involves an entire cultural shift because the operators have to stop the line if there's a problem and then people have to quickly align on what the problem was and resolve the root cause.

Speaker Change: J J K, which stands for you'll get it this G codes they can't catch it.

Speaker Change: It is as explained we candidly in the strikes that system, but.

Speaker Change: But.

Speaker Change: Sort of as mentioned now they are ready.

Speaker Change: We're trying to do is all of our lines, including M. C. I'm actually we just did it cause that on this two or three weeks ago. The.

Speaker Change: Our idea is to stop defects progressing through the line and detect them immediately and immediately rework them before they go down the line, which involves an entire cultural shift because the operators have to stop the line. If there's a problem and then people have to quickly align on what the problem was and resolve the root cause.

Josh: It has lots and lots of benefits, but it improves productivity, improves your quality at the end of the line, it reduces rework rates, it reduces scrap rates, and actually it makes the employees happier because they don't like everything being sent back from the inspector at the end of the line saying this isn't right. And people just self-learn. If you give them instant feedback, then they will stop making the mistakes, whereas if they get three-week-old feedback, they don't. So it's harder than it sounds because you have to decide what you're going to inspect at every stage, how you're going to inspect it.

Speaker Change: It has.

Speaker Change: Lots and lots of benefits, but it improves productivity improve quality at the end of the line. It reduces reroute rights it reduces scrap fries and actually it makes the employees happier because they don't like.

Speaker Change: Everything being sent back from the Inspector of the end of the line, saying this isn't right and people just self law, if you'll give them instant feedback then they will start making the mistakes, whereas if they get three week old fab out I've done it.

Speaker Change: It's harder than it sounds because.

Speaker Change: You have to decide what you're going to inspect every stage how your guidance factor in the case of MCM, we actually have to build the electronics things to touch the electronics.

Josh: In the case of MCM, we actually have to build little electronic things to test the electronics at each stage. And then you have to write that into the work instructions and then you have to train the operators on those new inspection criteria. And then you have to sustain it, and when you're recruiting six operators every week, you've got to train every one of those, not only on how to make the product, but also how to inspect the product at their station. At the risk of really boring you, but you did ask, there are two ways of doing it.

Speaker Change: Each stage and.

Speaker Change: And you have to write that into the work instructions and then you have to train the operators on the home those new inspection dry area and then you have to sustain it and and when you were increasing six operators every way you got to try in every one of those not only on how to make the product, but also how to in spite of the product at that.

Speaker Change: That station or the risk of ready for me, but you did ask alright.

Speaker Change: [laughter] there are two ways of doing it either than either the next operator can in spite of the walk the previous operators just done all you can inspect your own work, which is thought even walking your own homework, but it's even more instant feedback we actually do both so they operate and interact with their own water and then the very next faster.

Josh: Either the next operator can inspect the work the previous operator's just done, or you can inspect your own work, which is slightly more like your own homework, but it's even more instant feedback. We actually do both. So the operator inspects their own work, and then the very next person inspects the work of the previous person. By the way, this does sound like common sense, but then all of continuous improvement is common sense.

Speaker Change: And inspects the walk of the previous person by the way this does sound like Goldman Sucks, but then.

Speaker Change: All of continuous improvement as common sense. The question is how do you do it but theres nothing very complicated about it conceptually.

Josh: The question is how do you do it, but there's nothing very complicated about it.

Operator: I knew you wouldn't let me down.

Speaker Change: You wouldn't let me Dan.

Speaker Change: [laughter].

Speaker Change: Uh huh.

Operator: I had Andrew Humphrey at Peel Hunt, just a couple if I can. You talked about Doge and going through programs and looking for efficiencies and kind of what we do want to do and what we don't want to do. And I think, Joss, you sort of said you've... you've kept all the programs you like, which sort of didn't really make sense from your point of view, and the U.S. government came to the view that didn't really make sense from their point of view as well. a fair way of characterizing it, and maybe...

Speaker Change: And Andrew Humphrey at Peel Hunt, just a just a couple if I can.

Speaker Change: You talked about Doge in.

Speaker Change: Going to your programs and looking for efficiencies and kind of what we do want to do and what we don't want to do and I think just you sort of said you've.

Speaker Change: You've kept all the programs you like which sort of.

Speaker Change: Sounds like there were programs in there that maybe you kind of.

Speaker Change: It didn't really make sense from your point of view in the U S. Government came to the view that didn't really make sense from that point of view is when is that sort of.

Speaker Change: Fair way of characterizing it.

Josh: Do you have another question? You can have one after I've answered that one. Actually, when I originally wrote the script, there was a program that we thought had been killed. It now looks, though, like it hasn't been killed, it's morphed into something else. No, we can't. We can't really talk about that. But I'd say at the moment we haven't lost any programs. One of them looks to have slightly changed direction, but is still going. By the way, it's a program that wouldn't make any difference for the next ten years.

Speaker Change: And maybe.

Speaker Change: Do you have another question.

Speaker Change: You can have one off rather answer that one.

Speaker Change:

Speaker Change: Actually when I originally wrote the script there was a program that we thought had been killed.

Speaker Change: And Alex though like it hasnt been killed it morphed into something else do you want to talk about.

Speaker Change: Well count.

Speaker Change: But I'd say at the moment, we haven't lost any programs one of them looks to have slightly changed direction, but its still guy by the way. It's a program that wouldn't make any difference with the next twin 10 years probably anyway.

Operator: Thanks. That may be. I think you've indicated a possibility of some second half orders there. I guess the nature of that business, being commercial and international, is that there's the potential for it to be a bit more ad hoc, a bit more stop-start, at least in the early phases.

Speaker Change: Thanks for that maybe.

Speaker Change: Second question then on rifle Tac.

Speaker Change: I think you've indicated the possibility of some second half orders there.

Speaker Change: Yeah.

Speaker Change: I guess, the nature of that business being commercial and international is that there's the potential for it to be a bit more.

Speaker Change: Talk a bit more stop start at least in the early phases. How are you thinking about kind of integrating that into what we hope will be a very smooth ramp in Cleveland.

Josh: How are you thinking about integrating that into what we hope will be a very smooth ramp in Cleveland? That's a really good question. There is a difference between international militaries and police forces. Police forces we do expect to get in the second half, we can see a pipeline. I think that might be more 20 here, 30 there, 100 here, and it might be more one-off. If we win a country military, which actually we hope we will in H2 on RifleTech, then I think that will be more every year we order 300 or 500. like that.

Speaker Change: Really good question.

Speaker Change: So.

Speaker Change: There is a difference between international militaries and police forces police forces, we do expect to get in the second half we can see a firefly and I think that might be more 'twenty. Here 30, there are hundreds per and it might be more one off.

Speaker Change: If we win a country military which actually we hope, we will and I used to own rightful Tac Oh.

Speaker Change: I think that will be more every year, we order 300, or 500 or something like that and typically if you win a military you'll get.

Josh: Typically, if you win a military, you'll get you'll probably get a deployment for maybe five years and then you'll get sustainment when they need a replacement.

Speaker Change: You probably got a deployment for maybe five years, and then you'll get sustainment when they need a replacement of all of that.

Josh: It is a great question for another reason actually, because it's a useful opportunity to remind people how the Team Wendy business currently works. If we look at helmet sales by volume, The commercial part of Team Wendy is significantly bigger. than the military and, if you like, the long-term contracted bit. Numerically, it's smaller because the value of the product is lower, but the actual volume going through the plant in support of commercial orders, which are, by definition, very fast win-and-shift, is extraordinarily high. So it's not a business model we're unfamiliar with. What we're doing is injecting higher levels of capability and technology into a pre-existing product.

Speaker Change: It is it is a great question for another reason actually because it.

Speaker Change: It's a useful opportunity to remind people of how the team in the business. Currently works if we look at helmet sales by volume.

Speaker Change: The commercial part of team Wendy's significantly bigger.

Speaker Change: Then the military and if you'd like the long term contracted bit numerically smaller because the value of the product is lower but the actual volume going through the plant in support of commercial orders, which are by definition very fast but in ship is extraordinarily high. So it is not a business model, where I'm familiar with what we're doing is injecting higher levels of capability and technology into it.

Speaker Change: Preexisting mobile.

Josh: You actually asked a sort of second question in amongst your question which was quite cunning. The line, so the lines in Cleveland are separate, so there's actually, there's one IHF line, there's two ACH finishing lines, and then there's an EPIC line, and then there's a commercial line, which is actually a mixture of Exfil and RifleTech, the two, there's two different Exfil types of hoses. So that line is designed to be flexible. And we are very focused on just-in-time, so we actually write standard work for different volumes. So, you'll have standard work for this... what we call tactile customer demand.

Speaker Change: U S. Yes, you also sort of second question and amongst your question was quite coming.

Speaker Change: The line so the lines and Cleveland are separate so there's actually there's one I have sinus to aci's, finishing lines in that in those.

Speaker Change: Epic line and then there's a commercial line, which is actually a mixture of X fell and rifle Tac.

Speaker Change: The two those two different types of homeless.

Speaker Change: So that line is designed to be flexible.

Speaker Change: And we are very focused on just in time. So we actually writes down to work for different volumes. So you'll have starting to watch this.

Speaker Change: What we called tactile customer demand. So maybe you need five operators for this amount of demand three arthritis for this amount of voluntary operators for this about one and will house standard work for each demand level and then when we look at the pipeline will decide on how much resource we need to allocate to that line.

Josh: So maybe you need five operators for this amount of demand, three operators for this amount of demand, two operators for this amount of demand, and we'll have standard work for each demand level, and then when we look at the pipeline, we'll decide on how much resource we need to allocate to that line. As things stand, we are expecting actually to spin that RifleTech up in the second half. I think it might be challenging, because it's a new helmet, but it will not impact the DoD lines as completely.

Speaker Change: As things stand, we are expecting actually to spin a rightful tick up in the second half I think it might be challenging because it's a new helmet, but it will not impact the D O D lines as completely separate.

Speaker Change: Okay.

Andy: Hi, it's Andy from Jefferies, back with my final three. Can we talk about inventory turns? My eyesight's pretty bad nowadays, but it looks like your strength chart gets you to 15 times inventory turns. You're currently at three. I know that you've got to buffer stock and all that kind of stuff, so I get it. Is 15 times in our forecasting period of three years, or is it a long-term thing? And is it a bit of a hockey stick or a nice straight line?

Speaker Change: And from Jefferies.

Speaker Change: Final III.

Speaker Change: Can we talk about inventory turns.

Speaker Change: I just want it's pretty bad nowadays, but it looks like your strengths in chart gets you to 15 times.

Speaker Change: Inventory turns you currently have three I know that you've got a bus was talking about kind of stuff so I get it.

Speaker Change: Is 15 times.

Speaker Change: Our forecasting period of three years or is this a long term thing.

Speaker Change: A bit of a hockey stick or a straight line.

Andy: I will answer that. The second question is a quick one for ENBD. Who owns the IP? If you're working with the US from the program of record perspective, are you guys keeping the IP like you have on the gas masks?

Speaker Change: Second question.

Speaker Change: Yes.

Speaker Change: Second question is a quick one for <unk>.

Speaker Change: F N.

Speaker Change: E N B D who owns the IP, if you're working with the U S. From the program of record perspective are you guys keeping the right people you have only on the gas masks.

Andy: And then the final question is one that may have been a bit thick. Your aftermarket opportunity sounds very attractive. My understanding was you have a filters contract. in and out, depending on whether you win the bid online, who is winning the aftermarket opportunity currently, if you're now going for it? Is this a new opportunity? Is it one that someone else is winning? And why has it not been an opportunity for Avon in the last 10 years?

Speaker Change: Then final question is one maybe been a bit thick.

Speaker Change: Your aftermarket opportunity sounds very attractive my understanding was you have a filter as contracts come in and out depending on whether you win the bid online.

Speaker Change: Who is winning the aftermarket opportunity currently if youre not going for is this a new opportunity to use it's one that someone else who's winning and why is it not be an opportunity for Avon in the last 10 years.

Josh: Thank you. So I actually did write this into my script, and then I thought it was too long, so I cut it out. But the targets we have for continuous improvement are very ambitious. We want to get to inventory terms of 15, we want 20% productivity every year, we want 40% scrap reduction every year, and so on. You should not take those as guidance. The reason we create stretching targets like that and get the organisation aligned around them is because we want it to be crystal clear to them that there's no way we'll hit the targets unless they do something very different.

Speaker Change: Accident two questions for Steve on inventory turns.

Speaker Change: So I actually did write this into my script, and then I thought I was too long so I kept it out but the targets we have for continuous improvement all very ambitious.

Speaker Change: We want to get to inventory turns of 15, 20% productivity area, we own 40% scrap reduction every year and so on.

Speaker Change: You should not take those as guidance.

The reason, we create stretching targets like that and get the organization aligned around them is because we want to be crystal clear to the but there's no way, we will hit the targets unless they do something very different.

Josh: because if you set a target of improving returns from 2 to 3... They'll just think, well, I'll just do a little bit more of what I'm already doing. But we're not interested in going from two to three. We want to go from two to... something like that uh... Will we ever get to 15? I think so. I think it would take 10 years, because when you start getting over 10, you've got to work with your supply chain. We would have to have our lean teams go into our suppliers and move them to just-in-time. That's going to take some time.

Speaker Change: Because if you say, it's all going to improve inventory turns from two to three.

Speaker Change: They'll just saying well all of that just do a little bit more of a I'm already doing but we're not interested in going from two three we want to go from two two or.

Speaker Change: Suddenly over sex.

Speaker Change: Uh huh.

Speaker Change: Will we ever get to 15, I think so I think it would take 10 years, because when you start getting over Titan.

Speaker Change: You've got to work with your supply chain, we would have to have all in teams going so all suppliers have moved that into just in time, that's going to take some time.

Josh: So, would I, I mean, Wham-O got there after nine years? So it's definitely doable. It's not a ridiculous target. But in the zone of an analyst, it's probably off to the end of the list. ENBD, the answer is yes, it's based on our MITRE architecture. We've launched that commercially, as I talked about, so all that IP that's gone into that so far sits with us. We'll work with the DoD on any sort of foreground IP that might come out of ENBD, but similar to the M50 program, it's how we envisage that program going forward, so hopefully that's a fairly simple answer.

Speaker Change: Would I I mean, while I'm all got their after nine years.

Speaker Change: So it's definitely doable, if not a ridiculous target.

Speaker Change: And the and the xylem.

Speaker Change: The island, our way out of this is probably off the guidance.

Speaker Change: Sure.

Speaker Change: Hear me Okay.

Speaker Change: The answer is yes, it's based on I might throw architecture, we launched that commercially they talked about say all that IP, that's gone into that so far it sits with us.

Speaker Change: But we'll work with the other day on any to the foreground I paid it might come out at MPT, but similar to the it 50 program is that we envisage that that program going forward. So hopefully that is simple and the aftermarket probably a bit more complicated I think.

Josh: Aftermarket, probably a bit more complicated. I think, if I'm very reflective on this business, I think it has been guilty in the past of letting some of that aftermarket go in the early stages of when the install based on M50 was going out. Some of it is done by militaries themselves. They're not great at doing that. They don't have the best logistics planning system. and they're sort of coming around to accepting that fact. So that creates an opportunity for us. And then beyond that, it's really done by small... distribution type partners who sit out or dotted all across the market.

Speaker Change: If a very reflective on this business I think it has been guilty in the past of letting some of that aftermarket go in in the early stages when the install base on them 50 was getting out.

Speaker Change: Some of it is done by militaries himself theyre not great at doing that they don't have the best logistics planning systems.

Speaker Change: That sort of coming around to accepting that fact, so that creates an opportunity for us.

Speaker Change: And then beyond that it's really done by small.

Speaker Change: Distribution type partners UC types, who thought it all across the market.

Josh: Customers increasingly want us to engage in that, we're certainly expected to provide that. But I think it becomes, you know, our products are used, there's the sale of things like filters into the aftermarket, but then also masks get used, they need cleaning, they need decontaminating, and there's a lot of know-how goes into being able to do that, to make that product reusable again. And so, yeah, we see it as quite a big opportunity for us to really repatriate.

Speaker Change: Customers increasingly want us to engage in that we certainly expect it to provide that.

Speaker Change: But I think it becomes.

Speaker Change: Our products are used there is the sale of things like filters.

Speaker Change: And to the aftermarket, but then it will say masks get used then.

Speaker Change: Cleaning they need Decontaminating and Theres a lot of there's a lot of knowhow goes into be able to do that to make that product reusable again in sight.

Speaker Change: Yeah, we see is quite a big opportunity for us to really repatriate some of that.

Speaker Change: Thank you Jason.

Speaker Change: [laughter].

Steve: Andy Edman, Equity Development. I'll be quick, I can see people looking at their watches. Steve, just as specific on rebreathing, you're obviously very pleased with where it's now got to. Addressable market and where do you think it can get to in the medium term? I think our pipeline over the next three, four years looks very solid. marginal growth rates as to what I think we'll achieve this year on MCM. Longer term, I'm really excited about creating what we would call a shallow water variant of our MCM. So our MCM rebreather is a deep-sea system, serves 100 metres under the sea, it's explosive ordnance disposal.

Speaker Change: Andy Edmond equity development I'll be quick I see people looking at their watches and Steve just as specific on re breathing you're obviously very pleased with where it's now got too.

Speaker Change: Addressable market and where do you think it can get to in the medium term.

Speaker Change: I think our pipeline over the next three four years looks very solid.

Speaker Change: At.

Speaker Change: Marginal growth rates as to why I think we'll achieve this year an M C N.

Speaker Change: Longer term I'm really excited about.

Speaker Change: Creating what we would call a shallow water variant.

Speaker Change: Of our MCM say, our MCM rebreathe as deep sea system serves.

Speaker Change: 100 meters into the seats, it's explosive ordinance disposal. There is a three times bigger market for combat swimmers.

Steve: There is a three times bigger market for combat swimmers. People who do covert entry type stuff, they do crazy things like hang on the outside of submarines and things like that. We're working on developing an MCM based architecture, but for that shallow water variant. Probably three, four years away before we really hit the market on that, but we see that as roughly about three times the size of the market for our deep sea.

Speaker Change: People, who do covert entry type stuff that is crazy things like hanging on the outside to submarines and things like that.

Speaker Change: We're working on developing it.

Speaker Change: M C M based architecture for that shallow water variant.

Speaker Change: Probably three four years away before we really hit the market on that.

Speaker Change: But we see that as a better roughly about three times the size of the market for deep sea, we'd beat it.

Operator: Encouraging, thank you. picture, Richard touched on applying Avon Business. another business and it came up briefly at the AGM. It's hard in that sort of M&A to suddenly decide to go and do it. There is a process to identifying targets. I'm just curious if that's already started or whether it's seen as a distraction on the Excellent work being done on focus and all the internal...

Speaker Change: Good encouraging thank you and then pick.

Rich: Bigger picture rich touched on applying Avon business systems to another business and it came out briefly the AGM.

Rich: It's hard and that sort of M&A to suddenly decide you can do it there is a process to identify and target. So I'm just curious if that's already started or whether it is seen as a distraction on the.

Rich: Excellent work being done on the focus and it will be.

Josh: We're not looking at M&A opportunities at this point. We believe that the best way to generate wealth for shareholders at the moment is growing the business organically and self-help. We actually think that there'll be opportunities. for at least the 10 years to come to keep improving our businesses. Nonetheless, we definitely do think we could improve other businesses, and at some point maybe we get to that, but for now it's not our focus. Progress speaks for itself, and it's encouraging to hear of all the opportunities you're still identifying.

Rich: We're not looking at M&A opportunities at this point.

Rich: We believe that the best way to generate wealth for shareholders at the moment is growing the business organically and self help.

Rich: Where she's saying that there'll be opportunities.

Rich: Or at least the 10 years to come and keep improving our businesses.

Rich: Nonetheless, we definitely do think we could improve other businesses and at some point, maybe we get to that but for now it's not our focus.

Rich: Right.

Rich: This speaks for itself and it's encouraging to hear all the opportunities you see a lot of it.

Operator: So, thanks.

Rich: It makes sense.

Rich: Okay.

Operator: peace, giving me the cut my neck sign. So I think that means that we need to call it a day.

Rich: Our pace, giving me the come on that.

Rich: So I think the thing that made February let's call it.

Operator: Thank you very much, everyone. Thanks for your interest.

Rich: Thank you very much everyone.

Rich: Yes.

Rich: Yes.

Rich: [laughter].

Rich: Yes.

Rich: [music].