Jos Sclater: Well, good morning, everybody, and thank you for coming, especially so shortly after the Capital Markets Day. 2026 was the last year of our STAR strategy. That strategy resulted in a materially stronger business. Revenue grew substantially in 2026. Adjusted operating profit grew over 50%, and margins increased to over 17%. The final year of our transformation is now complete. We have improved both operational and financial performance. We now expect much higher cash generation looking forwards. STAR has given us a platform for future growth. The strength in the system is embedded, and we have invested into new products, customer relationships, and sales and marketing. We are moving into the next phase of our strategy: improve, grow, and compound. We will continue to improve the businesses we own.
Jos Sclater: We will invest behind the organic opportunities where we have a right to win, and over time, we will use our capabilities and balance sheet to acquire selectively and create additional shareholder value where we see opportunities to do so. STAR has delivered a stronger core business, and we now have a clear plan to build from it. I will now hand over to Rich, and he will take us through the financials.
Rich Cashin: Thank you, Jos. Good morning, everyone. As trailed ahead of the Capital Markets Day last month, the headlines demonstrate another year of strong progress. Order intake for 2026 nudged up to $354 million, and the closing order book is in line with last year's record $263 million, giving us great visibility into 2027 and beyond. Reported revenue growth of 13% dropped through to strong adjusted operating profit, up 51% at $60.7 million. This translates to EPS of $1.43, 57% up on the year. My preferred area of focus, return on invested capital, came in at 27.6%, even after a modest increase in the amount of working capital in the business as we accelerated Team Wendy's production rates through the year.
Rich Cashin: Cash conversion of 93% represents another good year, and while we saw a late burst in the final quarter, shifting receivables into FY27, we also benefited from the tailwind of a similar effect from the back end of 2025. In summary, revenue growth, operating profit, ROIC, and cash conversion have all exceeded the medium-term targets set out in 2023. Moving on to the P&L, the strong order intake reflects a very strong pickup in H2, notably in Team Wendy, where second-half orders of $140 million included receipt of follow-on awards for both major DOW helmet programs. Revenue growth up of 12% on a constant currency basis reflects another strong performance across the board, with both businesses growing at about the same pace. Operating profit of $60.7 million resulted in margin of 17.2%, an improvement of 440 basis points on last year.
Rich Cashin: This leaves us in the margin range set out at the CMD last month, although there is still some work to do to sustain this, as we benefited from a few one-off tailwinds in the year, which I will talk about in a moment. The other significant change to the P&L is in the tax charge, which has risen to $13.4 million, reflecting the increased profitability of the business at an effective tax rate of around 24%. This is broadly where we expected to stay, absent further changes to the tax regime. This all adds up to adjusted basic EPS of $1.433 per share, an increase of 57%. Finally, the board is recommending a 10% increase to the final dividend, giving a full-year divi of $0.268 per share, up 9% on the year. Avon Protection had another very strong year.
Rich Cashin: Order intake came in a bit lower than the 2025 comparator, which included some benefit from Ukraine, but still represents a very strong performance given that the DOW mask contract expired partway through 2025. We are now actively working on the renewal. The order book remained very strong versus history, and revenue grew 13% on an organic basis, which dropped through to operating profit margin of 22.5%. Revenue growth was driven by a strong year in commercial Americas and continued strong demand from NATO customers under the NSPA framework agreement. Our filter lines have been working flat out following two orders totaling $27 million from the US Department of War and a Middle Eastern customer. The excellent drop-through margin was helped by operational gearing, improving productivity, and some particularly high-margin but non-recurring product sales in H1.
Rich Cashin: Given the continuing strength of the order book and pipeline, Avon Protection is well-positioned to deliver further growth in 2027, although I would expect margins to drop back a little from these unusually high levels as we move towards a more normalized sales mix. Order intake in Team Wendy saw a sharp recovery in H2 to end the year 23% higher than last year. The two main Department of War helmet programs saw combined awards of over $80 million, and there was a helpful acceleration in commercial Americas orders towards the back end of the year. The backlog remains robust, with order cover on both of the DOW programs well into 2028, although I would expect the order book to burn down over the course of the coming year, as we have reached the contract ceiling for ACH orders.
Rich Cashin: As we near the end of the current IHPS contract, we now expect a new follow-on program for a high-cut rifle helmet. This is exciting news, and although we will likely see a slowing in orders over the transition period, we have more than enough coverage to bridge that gap. Revenue growth of 12.6% was driven by higher ACH-2 deliveries as we increased production levels from 4,000 to 9,000 per month during the year, partially offset by a slightly weaker commercial backdrop in the US as the government shutdown held back orders. Operating profit margin saw meaningful improvement, increasing by over 6 percentage points to 11%. Sustainably increased production levels and the benefits of our transformation activities over the last few years were the key contributors, partially offset by the inevitable dilution from ACH shipments, which more than doubled in the year.
Rich Cashin: The sequential H2 on H1 increase in margin, even after ACH growth, gives us confidence in further improvement on an annualized basis, although note that ACH deliveries are expected to increase again in 2027. Now we move on to the usual operating profit walk for the year, starting with the $40.3 million jumping off point for last year after adjusting for FX. The first positive bar of $12.7 million shows the effect of the significant improvements in Cleveland and Salem during the year. This manifested itself in volume growth, but was enabled through the step-up in productivity and efficiency delivered by the Team Wendy team. Then, you see a partially offsetting cost of $3.5 million, which was the dilutive effect of growth in lower-margin ACH shipments.
Rich Cashin: Growth in Avon Protection delivered a further $7.8 million benefit, with top-line advancement and some one-off benefits from commercial settlements of historical liabilities, partially offset by slightly weaker mix with strong growth in filters, boots, and gloves. Tariff refunds gave us a benefit of $0.7 million, and P&L IT costs were $1.9 million lower, reflecting some of the expected annual benefits of the transformation project. As previously mentioned, we invested in more sales capability in the year, totaling $3.1 million, with a bias towards Team Wendy, reflecting the international growth strategy. This is already starting to pay dividends through higher orders and a significantly increased pipeline of opportunities. A further one-off benefit from Ohio state incentives for the Cleveland expansion totaled $0.9 million.
Rich Cashin: Finally, other savings delivered a further $3 million, reflecting improved efficiency in our UK factory, strong cost control, which maintained a functional spend broadly flat despite revenue growth, and higher R&D tax credits. The main things to pull out from the balance sheet include the continued reduction in intangibles, reflecting our disciplined application of a prudent capitalization policy. Working capital, and specifically inventory, increased in the year, driven by two factors. Firstly, we took some raw material purchasing decisions designed to ensure sustained achievement of the elevated production rates in Cleveland. Secondly, we were sitting on a significant quantity of finished goods at the end of the year, awaiting government inspection prior to shipment. The nature of our contract with the customer means that there will always be a bit of the latter, but reducing both of these effects is a key focus for FY27.
Rich Cashin: The pension deficit continued to decline despite a negative impact from adverse actuarial experience. This was offset by contributions and elevated gilt yields, the benefits of which have now been fully locked in through increased hedging. The deficit has reduced from around $80 million just five or six years ago and is now sufficiently stable that we are actively exploring options to eliminate the need to have to keep talking to you about it. Increased profitability and lower debt have seen the leverage ratio come down further to around 0.4 times. Moving on to the cash flow, you can see that net debt came down by over 30% year on year. There is still plenty to go at, however, and as already mentioned, we are now focusing on bringing inventory levels down in line with our ambition to materially increase inventory turns over the coming years.
Rich Cashin: Transformation costs reduced to $6.8 million in the year, and this cost marks the completion of projects identified as part of the STAR strategy back in 2023. The heightened pension contribution of $10.6 million included an additional $4 million payment under the recently agreed recovery plan following the completion of the triennial valuation earlier in the year. As usual, guidance on future contributions and other financial matters is provided in the appendix to the slides. Finally, it is worth pointing out that while cash tax will remain lower than P&L tax for the next couple of years as we burn off historical losses, it will creep up to around 10% in FY27 and increase further in FY28.
Rich Cashin: I have included this slide in the deck to give you a bit of an update on the transformation project we launched late last year, aimed at better aligning our IT estate to the needs of the business, both today and in the future. We focused on creating a better site and SBU-centric support infrastructure, with a relatively thin center overseeing shared platforms and cyber resilience. This has, as predicted, enabled us to reduce the number and complexity of systems across the group, and therefore reducing the amount of internal resource required to oversee these systems. Most importantly, however, it has slashed our reliance on third parties, which means that we have a more innate understanding of our own systems and are much less susceptible to the impact of incremental price hikes.
Rich Cashin: These changes, and the resulting improvements in response times and operational effectiveness, have been achieved while maintaining, and in many cases, increasing cyber resilience. Total investment in this project was $2.7 million, which formed a large part of the transformation cost booked in the year, but we expect annualized benefits of at least $3 million, some of which came through in the year. This is among the best payback projects we have done, and the IT team have done a great job in what has been a very challenging year. As we said at the Capital Markets Day a few years ago, we believe this business has the ability to generate free cash flow of over $175 million over the next three years. Free cash flow is defined as cash generated from operating activities, less interest paid and CapEx.
Rich Cashin: This slide sets out our capital allocation priorities in this context. As ever, our first priority is to invest in the organic business, and we have lots of opportunities coming down the track which could accelerate organic growth and which represent a very low-risk investment for us. We remain committed to a progressive dividend, as you can see from today's proposed full-year dividend increase. After that, we will look to deploy excess cash where it can deliver the greatest shareholder value, whether through disciplined M&A or capital returns. We will retain financial discipline throughout, with target leverage of 2 times or less. Finally, moving on to our expectations for the full year. We expect further good growth in helmet deliveries, with another leg of growth on the ACH program as we annualize the elevated production levels seen in the H2 of 2026.
Rich Cashin: The stronger order book and solid pipeline of commercial opportunities give us confidence that we will see growth here also. Avon Protection will see further top-line growth also, although at a more muted level than last year, as we lap the very high filter volumes and the $13 million of Ukraine-related sales in 2026. These factors combined equate to mid-single-digit revenue growth at the group level. We expect operational improvements in Team Wendy seen through 2026 to sustain into 2027 and beyond, being partially offset by a normalization in Avon Protection margin with the non-recurrence of the one-off benefits seen in 2026. Even after the dilution from further growth in low-margin ACH sales, we are confident that we can deliver operating margin within our 16% to 18% target range.
Rich Cashin: Finally, with no planned transformation costs, significant improvements in working capital efficiency, assuming no prolonged US government shutdown, and a reduction in pension contributions, we expect free cash flow of between $50 million and $60 million, compared to $31 million in 2026. With that, I will now hand back to Jos to update you on the operational and strategic progress and our areas of focus for the coming year.
Jos Sclater: Thank you very much, Rich. I am going to spend the next few minutes looking at what STAR has delivered, the organic opportunities ahead of us, and how we intend to build on them. STAR has fundamentally changed the quality of the group. The strengthened system is embedded. 90% of our people have been trained, and over 200 of our employees are certified on continuous improvement. With almost everybody involved in improving the business, we have an enduring competitive advantage, and we can see the impact across our operational and financial metrics. Excitingly, we still see lots of opportunity to improve things further. Our transformation projects are complete. We have right-sized the business, increased revenue per square foot by nearly 80%, reduced costs in our central functions, and strengthened our sales and commercial functions.
Jos Sclater: At the same time, we have increased investment into our people and new product development, and that investment is creating the next wave of growth opportunities. STAR has done more than deliver great results. It has created a repeatable improvement system for future expansion and a stronger platform from which we can grow. These metrics demonstrate the impact of our strengthened system in practice. Productivity has improved 54%, significantly exceeding the target. Scrap reduced by 54%, and inventory turns improved by 14%. We are a little disappointed to have fallen short of our inventory turns target. Avon Protection made good progress, but in Team Wendy, we focused on achieving contractual delivery rates because it was critical for us to build credibility with the Department of War, and that strategy did pay off with strong order intake.
Jos Sclater: As we move into 2027, we will focus on inventory turns more across both businesses, and we have aligned the annual bonus to incentivize that. We see our strengthened system as strategic. If we can deliver high-quality product reliably and on time, we are likely to grow. If we can do that with lower capital than our competitors, we are likely to beat them over time. This slide brings the scale of the change in Cleveland to life. 3 years ago, helmet capacity in our Cleveland factory was 20,000 helmets a year. Through the strengthened system, we moved from batch production to repeatable high-volume flow manufacturing while building the workforce and improving planning and infrastructure. We believe we are the only helmet manufacturer that does not manufacture in batches. That has enabled us to increase capacity almost 12-fold to 200,000 helmets a year without adding a single additional press.
Jos Sclater: The presses are the most expensive capital needed to manufacture helmets, and we now make more helmets in a month than we used to make in a year. Next, we are implementing our well-proven hybrid tooling to our EXFIL helmet line, which will reduce cycle times on those presses by more than half and double capacity. We expect overall capacity in this factory to increase to more than 300,000 helmets this year without significant additional capital. We have built a much more scalable manufacturing operation capable of supporting our existing programs and giving us the capacity to capture future growth opportunities. In our UK factory, it is a similar story. We moved all the equipment, bringing processes closer together, and created integrated manufacturing cells that flow. At the same time, we have reduced the manufacturing footprint by more than 4,000 square meters, creating capacity for future growth.
Jos Sclater: You can see the impact in the numbers. Productivity is up 78%. Revenue per square meter has more than doubled. Inventory turns have improved by 18%, and scrap as a percentage of revenue is down 45%. Just as importantly, we have changed the way the site operates. Lean flow, standard work, and Kanban are now embedded into the manufacturing system, supported by a strong continuous improvement culture and capability. Turning to the advanced part of STAR that applied during 2026 and before that, our core respiratory franchise in Avon Protection continues to deliver attractive growth and recurring demand. We have delivered nearly half a million Avon masks to NATO countries. Every new system placed creates future demand for filters, spares, and sustainment.
Jos Sclater: We received our first full CBRN ensemble order from our European customer, demonstrating the potential we have to use our CBRN leadership to expand into the integrated CBRN market. Rich has already mentioned the strong demand for filters. The last filter order from the DOW was awarded to a sole source for the first time, demonstrating the credibility that we have built for reliable delivery of a high-quality product. We launched our short-duration CS-PAPR in June and secured the first contract award for 16 systems. This order is an important customer validation of a differentiated new capability. The system allows the user to seamlessly transition between 3 different breathing modes, adapting protection to changing threats. The system provides up to 20 minutes of breathing in high-contaminant or oxygen-deficient environments. Last year, we also launched a new Common Voice Projection Unit.
Jos Sclater: The CVPU provides voice projection and tactical radio communications while wearing our respirators. We already have orders for 5,000 units and a pipeline of opportunities worth over $100 million. Excitingly, only yesterday, we received NIOSH certification for the CVPU, which will help us accelerate the pipeline in the US and will help us maintain the competitive moat around our C50 and M53 mask system. We are excited that both the US and Canadian Armed Forces ordered MITR. It is likely that other militaries and first responders around the world will follow their lead. US law enforcement demand continues to grow, with good demand across our core respiratory products and further growth opportunities across filters, accessories, and sustainment. The core respiratory business is an attractive business. Market-leading products create a growing install base, recurring revenue, and strong long-term customer value.
Jos Sclater: Alongside growth in the core, targeted investment is creating four potential platforms for step-change growth. In US suits, we have been down-selected to phase III of the program and secured an initial order for 1,500 suits. This program has significant long-term potential for us. In rebreathers, we are building on the proven MCM100 platform, creating potential for follow-on sustainment and international growth. We have opportunities in both Europe and the US. In NATO combination systems, we are combining respiratory protection with complementary CBRN capabilities to meet customer demand for integrated mission-ready systems. In next-generation US respiratory, we are working with the customer on the next generation of masks and improved system capability between the mask and the suits. These programs are at different stages, and we are not going to win everything, but each expands our addressable market by building on the areas where we already have strong technology, customer access, and program capability.
Jos Sclater: In Team Wendy, we have made excellent progress maximizing our core programs. Demand for both IHPS and ACH remains strong. In IHPS, we see future demand being driven by the need for greater survivability, increased mobility, and improved protection against blast protection. In ACH, we are very competitive cost-wise and see opportunity to expand gross margins further. As Rich mentioned, we expect orders to dip before picking up again as we transition to a new high-cut version of IHPS and the new ACH contracts. We have enough order cover to bridge that gap. In the North American commercial market, demand was soft in H1 but increased towards the end of the financial year. We currently see a much increased pipeline in US commercial compared to Q1 2026.
Jos Sclater: We are delighted to have received $19 million worth of orders from the US Air Force for our EXFIL helmet. This expands our customer base outside our core Army contracts. Our EXFIL LTP position with the US Naval Aviation Authority also provides a platform for broader adoption across the Navy and other services, which we are pursuing with a strong new international development team. Internationally, we secured a new Australian Defence Force contract for up to seven years, and our first order from a major European military. Team Wendy's international revenue increased by around $5 million, a 44% increase, and international order intake remains strong. This provides early credibility for our strategy to grow our helmets business internationally and to diversify our customer base.
Jos Sclater: The combination of leading technology, competitive costs, excellent credibility with the Department of War, and growing market share in the US commercial business gives us confidence that Team Wendy can continue to grow. Beyond the core, we are building a broader and more diversified revenue base. Internationally, we plan to win share by offering a platform tailored to local markets and requirements and expanding the addressable market for elite rifle-protective helmets. These increase survivability while staying lightweight. As a reminder, there are very few companies in the world that can make rifle-protective helmets. In the North American commercial and federal markets, we are focused on underserved states, extending our military head protection expertise into adjacent end markets, and upgrading our helmet portfolio through our new RECON helmet and EXFIL Endurance helmets. For future Department of War programs, we are helping to shape the next generation of integrated head protection.
Jos Sclater: We are working closely with the US Army on future requirements with the benefit of funded research and development. This includes even higher ballistic threat protection, broader system integration, and improved blast mitigation. These opportunities take our capabilities and apply them to new customers, new geographies, and adjacent markets. Now, turning to the next phase of our strategy: improve, grow, and compound. This is the framework for how we intend to create value going forwards. First, improve. Through STAR, we have codified how we improve businesses. We will continue to use that system to drive higher productivity, strong cash generation, and better returns. Second, grow. We will maximize our market-leading positions and recurring revenue streams while investing behind the exciting new opportunities that I have just touched on. Third, compound.
Jos Sclater: Over the long term, we will use the capabilities we have built and the cash we generate to acquire selectively in protection technology and then improve and grow those businesses. Today, we have a stronger business with an organic platform for growth and the capacity to compound further. As mentioned at our recent Capital Markets Day, we see a large opportunity to build a broader protection technology group. We have a large investable universe of companies in an addressable market worth some $15 billion to $20 billion when close adjacencies are included. We will acquire selectively in areas we understand and where we can make a material difference as an owner. We will apply our business improvement system to improve and grow what we buy. That will enable us to increase returns on capital and cash flow over time.
Jos Sclater: As we generate additional cash, we will reinvest behind future growth opportunities, creating a repeatable compounding cycle of buy, improve, grow, and reinvest again. We have a large investable universe, but we will remain disciplined. We will accelerate only where we see value and as our capability and capacity allow. We have translated this strategy into financial targets. For the current portfolio, we expect organic revenue growth of more than 5% a year, operating margins within the range of 16% to 18%, and EPS growth of more than 10% a year. We are targeting group inventory turns of more than five times and cumulative free cash flow of more than $175 million over the next three years. The cash gives us the firepower to reinvest behind organic growth, pursue disciplined acquisitions, and return surplus capital if appropriate.
Jos Sclater: Over 5 years, our ambition is to build a group with more than $600 million of revenue and returns on capital above 18%, with acquisitions helping drive EPS growth even higher than 10% a year. Whilst the timing of acquisitions will never be entirely predictable, the pathway is clear. Improve the current portfolio, grow organically, generate cash, and deploy capital where we see opportunities. Turning to the main risks and opportunities across the group. At Team Wendy, our plan to improve inventory turns depends on us improving right first-time quality. To do this, we are increasing automated inspection and strengthening process controls, but there is a lot to do. Following the US midterm elections, it is possible that political stalemate could slow new contract awards and lot acceptance in the short term.
Jos Sclater: In the medium term, we know that defense spending is correlated to the global threat environment much more than party politics. On the opportunity side, we are pursuing several new programs at the moment, and those opportunities are not fully reflected in our forecasts. In Team Wendy, we have an opportunity to improve the order-to-cash cycle by shortening the time between completing a helmet lot and getting them approved for shipping by the government. We have strong momentum entering 2027. We hold market-leading positions. Our end markets remain attractive. We have a strong pipeline of opportunities and a clear organic growth plan across both businesses. Our priorities are equally clear. We will improve performance through continuous improvement. We will grow by maximizing the core and investing behind the programs that can materially increase scale.
Jos Sclater: We will compound value through selective acquisitions where we see the opportunity to create value. Importantly, strong cash generation gives us the capacity to pursue these opportunities while maintaining financial discipline and a strong balance sheet. We are entering the next phase from a position of strength, a better business, attractive growth opportunities, and a repeatable system for creating value for our shareholders. With that, I will turn it over to questions. We are going to go to the little chairs, are we, Ray?
Rich Cashin: Why not?
Rob Byde: Morning. Rob Byde from Zeus Capital. Just on the R&D guidance, I think you are guiding to 20% to 30% higher R&D spend this year. You talked about some of the new products. Could you give us a bit more detail on what is driving that increase, please?
Rich Cashin: Yeah. It helps to understand where we are starting from. We do look to push R&D forward every year. 2026 was a bit of an exception, not because we had less engineers. We absolutely did not have less engineers. What we did do was we redeployed a number of our engineering teams to helping the ramp-up, so they became focused a bit more on process engineering than pure R&D, if you like. If you exclude that effect, we are starting from a higher base already, and then we have got a number of programs in development. You have heard us talk about suits, you have heard us talk about the new helmet programs in development. It is pretty clear where we are going to focus those resources. More importantly, perhaps, you have heard us talk about the step change opportunities that we have got in front of us.
Rich Cashin: We want to lean into those and make sure that they are appropriately resourced. It is kind of across the business, really, but from a higher starting point.
Jos Sclater: You have given me an opportunity to talk about something that I probably forgot in my script. We actually just signed a contract for $4.5 million from the US Department of War to fund R&D on the Team Wendy side. We are super excited about that. It may, if we get it right, enable us to generate another generation of helmets with even higher protection.
Rob Byde: Thank you.
Henry Carver: Morning. It is Henry Carver from Singer. Just one on the midterms and what that might mean. Obviously, the military side is, yeah, I see you are smiling. No one knows. But on the military side is one thing, but will it possibly impact the federal and commercial side as well? I mean, is this the kind of thing that could start happening now, or is it more towards the traditional ordering periods of the year that we will start to see it come through? Just any kind of thoughts would be useful. Thanks.
Jos Sclater: Well, I think it could impact the flow of government grants because the shutdown last year did delay the grant funding, and then it started to flow at the back end of this year. We do think there is a lot of grant funding waiting in the wings, so I think that should come through. But if we do have another government shutdown, yeah, it could delay grant funding. The other thing we see is a lot of grant funding flows to Republican states and not Democratic states, so the fact there are a few more Democratic states is not particularly helpful for now.
Henry Carver: Thanks.
Andrew Humphrey: Thanks. Hi, it is Andrew Humphrey at Peel Hunt. I have a couple, if I may. One on Protection, one on Team Wendy. You have called out, I think, filter volumes over the last year as being exceptional. But looking around the world, threat environment is still elevated. There is clearly still a requirement for those sorts of products. There is an incentive to build up inventories. I wonder if you can characterize that a bit and talk about what it was that made those volumes in 2026 so exceptional.
Jos Sclater: Well, we won a big Middle Eastern order from a new customer, actually. They previously bought them from India or somewhere.
Rich Cashin: Yeah, I am not sure where they came from.
Jos Sclater: They effectively upgraded their filters. You can buy industrial-type filters, but they are not military spec and they are not as robust. I think with the increasing threat environment, we are seeing people want to go for the real deal. With the Department of War, we have only ever had one real competitor, and they seem to have pulled out of the market for now. Actually, they have been out of the market so long that their line would need refitting now, which is very expensive. I think we are in a really good position on filters. We are actually just between contracts with the DOW at the moment, but we are working with them on the next one. I do think filter demand is going to carry on being robust, and our filter lines have been killing it.
Jos Sclater: They have been running basically flat out over the last 4 to 6 months, I guess.
Andrew Humphrey: And in terms of pipeline there, can we think about, is there a pool of potential demand out there where people might be looking at upgrading to something higher spec that you are actively exploring?
Jos Sclater: I would look at it more the other way around. We have 2 million masks out in the US, plus the first responder masks, so more than that. And then we have another half million across NATO countries, and we recently won Australia with our masks as well. So every mask you sell creates an installed base that they are likely, not necessarily They could buy cheaper ones, but they are likely to buy our filters to go on our masks. And if you buy the M50 or C50 masks, we are the only people that make those filters because they are a bayonet fitting.
Andrew Humphrey: Great. Thank you. And on Team Wendy, you have alluded to your contract transitions next couple of years. I wonder if you could kind of drill down into that in terms of potential timings of relettings, some of the commercials around that, to the extent you are comfortable talking about it, and what could move either way for the DOW?
Jos Sclater: Yeah. I mean, the ACH contract actually ends back end of this year, beginning of next year.
Rich Cashin: Yeah, 2028.
Jos Sclater: But we are already at maximum. They have capped, they have maxed out the contract to us, so they cannot order any more off us. We have enough to take us well into 2028, enough orders. They have already put out the RFI for the next contract. We have responded to it. We know roughly what volumes they are talking about. I mean, I think that program looks good for a long time to come. We have always said that it was one at challenging pricing originally. We actually regarded that as, well, okay, those are the cards we have dealt, and our job was to make money out of it, which we have got to that position. So we are extremely competitive, but there is quite a delta between us and the competition price-wise. So, I think we would be hopeful that we can extend the gross margins a bit on that program.
Jos Sclater: On IHPS, that is a very exciting story. The US government or US Army recently put out a paper called "How We Fight" or something like that.
Rich Cashin: Something like that, yeah.
Jos Sclater: It really pushes the idea of survivability and mobility. That is right in our zone because the IHPS helmet, the RIFLETECH helmet on the commercial side, are pretty much the only rifle helmets out there in the market. On the commercial side, it is only us and one other that even makes a rifle helmet that you can buy. That elite rifle protection, we think that is going to push into more militaries and maybe even SWAT teams and so on. Because if you are in a threat that might involve a rifle, why wouldn't you buy a rifle-rated helmet? Why would you buy a helmet that will only stop a 9 millimeter round? Then the US DOW specifically, they have decided that the blast protection is better with a high-cut helmet.
Jos Sclater: IHPS is a full-cut helmet, so they are actually going to now migrate into buying a high-cut version of the IHPS helmet, and we think that is going to lead to another fielding wave over the next three years. So, I think the opportunity in IHPS is much better than we were expecting it to be, actually, and that is why I am sitting here feeling quietly confident in the next two or three years.
Andrew Humphrey: Great. Thank you.
Toby Thorrington: Thanks. Morning. Toby Thorrington from Equity Development. Given the improvements in manufacturing capability, particularly Team Wendy, I am curious to know whether customers have started to order in a different way. For example, later notice because the capability in manufacturing is there, shorter blocks of volume. That is the first question.
Jos Sclater: Well, that one is a good question, and we like that question because it is a good answer. Well, hopefully it will be. So we are constantly striving to push down the lead times on our commercial helmets. It is actually reported to me, it is actually every week, it is in the, what we call the tier 3 deck, and we report the lead times we are offering. We are always trying to push those lead times down. We did have them down to about 4 weeks. They have crept up a bit recently because there is a big pipeline of opportunities. But we do try and offer substantially shorter lead times than the competition, and I think it is probably fair we do offer-
Rich Cashin: We do, yeah.
Jos Sclater: substantially shorter lead times than the competition. And if a police department is in a real hurry to get them, we could get them a lot of helmets in a week or 2. So yeah, I think we have got a very responsive manufacturing operation.
Toby Thorrington: Beneficial to work winning then on-
Jos Sclater: Definitely beneficial to work winning. We do see people moving to us because they have either been quoted crazy long lead times by the competition, or they just cannot get the lead times they need.
Toby Thorrington: So, the follow-on to that is, how should we think about book-to-bill numbers going forward? If the order cycle is shortening, or you are getting more frequent smaller orders within the
Jos Sclater: That is another good question. This has always been one of the slightly ironic things about the way the analysts look at this business. The way we look at it is the less order book, the better. We want to reduce the order to ship time as much as possible. But the way defense analysts look at it, they want to see a big order book. So we look at it more as more akin to a fast-moving consumer goods company. If you order a helmet, you do not want it in 6 months, you want it next week, and that is where we are trying to get to.
Toby Thorrington: Okay. So, book-to-bill less than 1 then?
Jos Sclater: It depends a bit on the cycle of the DOW. But what we want is as short an order to ship time as we can possibly achieve. So, ideally it would be lower. Revenue higher, just to be clear for the analysts in the room. But order book lower, yeah, absolutely.
Toby Thorrington: Thank you. I have got a few cash questions for Rich, if that is okay.
Rich Cashin: Go on then.
Toby Thorrington: As well. Not in the technical guidance, I have checked, so perhaps you could fill in a couple of gaps. Pension recovery cash, you mentioned there was a one-off of four in 2026.
Rich Cashin: Yeah.
Toby Thorrington: What will that number be post the triennial going forward?
Rich Cashin: I think it is in the back actually, but I think it is about 5.
Toby Thorrington: Five?
Rich Cashin: Yeah. To be clear, the one-off of 4 was in addition to the 6 we had already planned, so it was 10 for the year.
Toby Thorrington: Is that a flat 5 or is it inflationary?
Rich Cashin: I actually can't remember, but there's definitely a table in the back of the deck there.
Toby Thorrington: Thank you.
Rich Cashin: every year after.
Toby Thorrington: The depreciation numbers seem to jag down a bit as well to a short 9 in 2026. Is that roughly the right number going forward?
Rich Cashin: It will creep up a bit because CapEx is going to creep up a bit as well, but it is never going to be a significant jump year on year. We are not particularly capital intensive.
Toby Thorrington: Okay. That is a reasonable base anyway.
Rich Cashin: Yeah.
Jos Sclater: We try and use wisdom before money.
Rich Cashin: Exactly.
Jos Sclater: It is our philosophy.
Toby Thorrington: Brilliant. Thank you very much.
Richard Hill: Hi. Richard Hill from Jefferies. If I could ask another question on cash, just thinking about the inventory turns, and the target. Rudimentary looking at it looks about a half a turn a year would get you to, all else equal, middle of the guide, et cetera, would get you to your next year's cash target.
Rich Cashin: On average, yeah.
Richard Hill: On average. Is it right to think about it in terms of your production at Team Wendy is going to increase again, therefore you are looking to get that benefit out of protection, or how do the moving parts within the division work in that inventory turn space?
Rich Cashin: No. We expect to see some improvement in both, but actually the opportunity right here, right now in Team Wendy is greater, partly because production is going to go up again, as we have said. But perhaps more immediately, there was a fairly significant amount of inventory coming into 2027 from the back end of 2026. That was there for two reasons. Number one, as I think I highlighted earlier, we were sitting on quite a large amount of finished goods stock as we waited for the customer testing process to run through. Number two, we had deliberately accelerated raw material purchases through the back end of 2026 to support that ramp-up. I would expect both of those aspects to reduce as we go through 2027 and beyond.
Rich Cashin: I think the sort of, in absolute terms, the opportunity in Team Wendy is greater, but we do expect to see improvement in both.
Jos Sclater: Just to pick up on your point in a slightly different way. I think Richard's guidance is sensible, that the businesses are actually incentivized to achieve one turn a year. That is when they hit max bonus. We actually look at it on average to average, but if you look at year-end to year-end, it is a turn a year. That, in my mind, is what they should be doing, and that is what they are incentivized to do, and they are very good teams. I am going to be quite disappointed if they do not hit their bonus maxes, but it could happen. You actually have to do a lot to improve inventory turns. You have to do actual stuff. You cannot just squeeze your suppliers or not pay people or whatever. You have got to actually change your factories and how they operate.
Jos Sclater: But I am still going to be disappointed if they do not hit a turn a year. Not these, because their bonus is my bonus, so
Richard Hill: Thanks. That is very helpful. Could I ask just a second one, then touching upon the order for helmets to your first European military customer. Is that a kind of opening for a wider order, or is it kind of, this is for standard military use, or is it kind of selected group? Appreciate you may not want to give a huge amount of detail on it.
Jos Sclater: What was the question?
Richard Hill: On the new contract for a European military in Team Wendy.
Jos Sclater: Oh, okay. Yes.
Richard Hill: Just in terms of, is that for a selected group, i.e., a more special forces orientated, or wider and therefore could—
Jos Sclater: No, it is for the broader military. We have already deployed some. We actually just had the lots inspected and ballistic tested, and it went very, very well. We hope that that will lead to a framework contract with that customer. At the moment, it was just one-off. It was 4,000 and a bit helmets. So it is a decent order for us, but we hope that is going to lead into a long-term program with the customer, but we have not signed that contract yet.
Richard Hill: Okay. Thank you.
Jos Sclater: Is that it? Sorry, go on. We got Milene as well, so
Rob Byde: I'll do one quickly. M&A. Who does M&A within the group? Is that you guys? Do you have a dedicated team? Are you building a team?
Jos Sclater: No, we do M&A. I mean, just a little bit of history here. I know we've become known for improving businesses, but actually, I was head of corporate finance in a FTSE 100, and Rich was head of corporate finance in a FTSE 250. So between us, I think we've got the M&A side pretty under control.
Milene Kerner: Hello. Milene Kerner from Barclays. Thank you for taking my question. The first one, just coming back on the inventory. How are you going to improve the turns without increasing delivery risk?
Jos Sclater: Well, that's a very fine question. Well, firstly, we pair metrics. So inventory turns, as probably said before, but we see it as the most important metric in a manufacturing business, because it shows the efficiency of your processes. But you don't want it to affect the reliability you deliver to your customer. So when we look at turns, we always look at on-time delivery next to it to make sure they're working together. And we aim for 97% or something on-time delivery to the customers whilst improving the turns. And we look at both of those metrics all the time. The way that we can take inventory down and improve turns is by having more efficient processes that reduce the time it takes from raw material coming in the door to product going out the door to the customer.
Jos Sclater: The raw material coming in the door bit is all about planning and working with your suppliers on their lead times to you and giving them enough visibility that they can deliver a little and often into our factory to keep our inventory levels down. The raw material to finished product flow helps us make that very quick. It used to take us, I don't know, a month. Now we do it in 3 hours from raw material cut to helmet finished and ready to go. Then the next thing is nailing the right first-time quality. What absolutely murders us is where we make product off the end of the line and we put it in boxes, then we sample test it, we find that the quality is not perfect, then we re-inspect it and rework it.
Jos Sclater: That just causes delay between finishing a lot and cash and the customer accepting it. So, if we can get to a position where when the product comes off the line, it is 100% perfect every single time, then it will go out the door quicker and we'll get paid quicker. We're working on all of those things.
Milene Kerner: Correct
Milene Kerner: We're on it, Milene. Promise you we're on it.
Milene Kerner: I'm sure you are. Then maybe on Team Wendy, on slide 17, you were indicating that Cleveland could ultimately exceed 300,000 without significant investment. What needs to change operationally to unlock that additional capacity for this year?
Jos Sclater: You are really giving me good questions here, because I like answering these questions. I could get very excited. Pete is trying to get me to cut off. It is super cool what we have done. We have designed tooling that has channels through it, and we can heat and cool the tools. I am not going to explain in detail how we do that, because it is super secret. We have changed the control systems on all the presses so we can heat and cool the tools quicker. We also make the tools out of a different material to every single competitor.
Jos Sclater: What that enables us to do is it enables us to heat the polyethylene in the helmet, combine that with different pressures, and it enables us to cycle the presses probably twice as fast as our competitors, certainly twice as fast as we used to be able to do it before we implemented this technology. The presses are by far the most expensive piece of kit in the factory, and if we can double the capacity of each press simply by changing the tool design, then that is what we have done, and we have got a few presses left. We have already proved it out on 9 of the 12, something like that.
Rich Cashin: That is right, with another one to come.
Jos Sclater: We have got a few more to come. We do have to change the entire control system and the tooling on the press, so it is a reasonable undertaking in terms of time, but it is not massively expensive for us. Very good.
Rich Cashin: Excellent.
Jos Sclater: Thank you very much, everyone.
Rich Cashin: Thanks, all.
