Cohort Aktie

Okay. Well, good morning, everybody, and thank you very much for those joining us in the room and for those joining us virtually as well. I'm Andy Thomis. I'm the Chief Executive at Cohort plc, and I'm here with Simon Walther, who's our Finance Director. Cohort provides advanced defense technologies and services to the U.K. and allied nations worldwide. And Simon and I are here to present our latest financial results and to explain the innovation, geopolitics, market drivers that support our growth.

Now there we are. Cohort's businesses share a common purpose, which is developing advanced technologies that contribute to our customers' national security and defense. Each of our businesses brings its own specialist expertise. Collectively, they deliver innovative solutions that help customers address increasingly complex operational challenges.

Operating through our Communications and Intelligence and Sensors and Effectors divisions, we offer a broad range of capabilities, as you can see from this slide. We'll say more about demand patterns, but I'll highlight counter drone, anti-submarine systems and seabed warfare as areas that are clearly relevant to the needs of defense customers today.

As a background to the results, I thought it would be helpful to show you Cohort's total shareholder return since our IPO 20 years ago this year, and it's benchmarked against both the AIM, All Share Index and our peer group of U.K.-listed defense firms. Over the period, as you can see, Cohort has significantly outperformed the broader AIM market and delivered returns ahead of our peer group. Now while there has naturally been some share price volatility during the period, the overall trend is of sustained growth underpinned by strong operational performance, increasing order intake and since 2022, a favorable defense spending environment.

The sharp acceleration you can see from 2024 onwards reflects growing investor recognition of Cohort's market position and the opportunities arising from increased defense and security investment across the U.K. and allied nations. And what this shows is that we've been able to create value consistently for shareholders over a long period through the successful execution of our strategy.

And this slide shows in more detail how we've delivered that shareholder return. The chart on the left shows the progression in adjusted operating profit since 2006. And from a relatively modest base, we've steadily expanded the business through a combination of organic growth underpinned by investment in both technology and capacity and strategic acquisitions. Despite periods of economic uncertainty and changing geopolitical conditions, the overall trajectory has remained strongly upwards, culminating in the record performance that we've seen this year.

The chart on the right demonstrates our commitment to delivering value to shareholders through our progressive dividend policy. Since 2006, the dividend has increased every year, reflecting both the resilience of our business model and the confidence that we have in the group's long-term prospects. Together, these trends highlight the strength of Cohort's strategy, the quality of our businesses and the growing demand for the specialist defense and security capabilities that we provide. This year's results represent the continuation of a long-established track record of profitable growth and increasing shareholder returns.

And this slide shows the financial highlights of our '25-'26 financial year. And it was another outstanding year for Cohort, delivering record revenue and record adjusted operating profit. That revenue has continued to increase now over GBP 306 million, and our operating profit has grown this year by 32% to more than GBP 36 million. Demand for our products and services remained robust throughout the year, and I'm pleased to report an order intake of GBP 314.2 million, exceeding our revenue, and that brought us to a year-end order book of nearly GBP 620 million. And that provides excellent visibility of future revenues with contracted work extending out to 2037.

As expected in the year as a whole, operating cash flow and net funds were lower than the exceptionally strong levels reported last year, primarily reflecting working capital movements and investments associated with the growth of the business, about which we'll have more to say. Nevertheless, the group remains in positive net funds and continues to maintain a strong balance sheet.

And we're pleased to recommend, again, a full year dividend increase of 10% to 17.9p. And that reflects the continued confidence in the group's prospects.

And now I'd like to invite Simon to share some more details of our financial performance. Simon?

Thanks, Andy. Good morning to you all. I'll move on. Now this slide highlights the performance of our divisions, Communications and Intelligence and Sensors and Effectors, both of which continue to benefit from strong and growing demand across their respective markets.

Starting with Communications and Intelligence. Revenue increased by 27% to GBP 158.9 million, while the adjusted operating profit rose by more than 50% to GBP 32.4 million. The operating margin improved significantly to 20.4%, reflecting strong program execution and a favorable mix of higher-margin activity. During the year, the division secured several important contract awards, including integrated communication systems, networks and satellite communication systems for the Portuguese Navy. We also continue to see strong demand for drone capability, resulting in significant contract wins with the U.K. MOD.

Turning to Sensors and Effectors. The revenue for this division was relatively flat at GBP 147.5 million. Profitability was below last year, mainly a result of the disposal of our high-margin noncore transport business earlier in the financial year. The order book and the pipeline for this division gives us confidence that it will grow in the coming year and improve its net margin with improved operational performance at Chess, the first deliveries of sonar systems for the Italian submarine project and closure of low-margin projects at SCA. The combined offerings of our Communications Intelligence and Sensors and Effectors businesses remain a key strength of Cohort, providing both resilience and exposure to a broad range of markets, defense markets and security capability requirements across an international customer base.

Moving to the net funds bridge. You'll see it's been quite a swing this year. We moved from opening net funds of GBP 5.3 million to net debt of GBP 32.5 million at the half year, primarily due to significant working capital outflows associated with the execution of major programs. As expected, the second half improvement was much improved, generating an GBP 18 million -- over GBP 18 million working capital inflow alongside strong profitability. Consequently, the group returned to a positive net funds position of GBP 2.2 million at year-end. This demonstrates that the movements in cash were largely timing related and that the underlying business remains strongly cash generative.

We move to the next slide. This gives you the last 5 years of the group, and you can highlight the capital allocation. So we've generated GBP 142 million of cash from operations, providing the flexibility to invest in future growth while continuing to deliver returns to shareholders. In those 5 years, we invested approximately GBP 60 million organically across the business, including the completion of our state-of-the-art manufacturing facility in Kiel, Germany, investment in KraitSense and the development of our ENLITOR and ERAZOR technologies in response to increasing demand for undersea infrastructure protection. These investments strengthen our position -- sorry, strengthen our capabilities, support innovation and position the group for future growth.

Alongside organic investment, we deployed just over GBP 40 million on acquisitions, net of funds raised, completing the EM Solutions and Interactive Technical Solutions transactions. These acquisitions have expanded our technology portfolio into satellite communications and broadened our regional growth opportunities, particularly in Australia and Asia Pacific markets.

We are pleased to have maintained our commitment to shareholder returns, distributing GBP 30 million through dividends over the last 5 years. Overall, this allocation of capital reflects our strategy of investing for growth while maintaining a strong balance sheet and delivering returns to shareholders. And looking forward, we enter this financial year '26, '27 with a strong level of visibility supported by an order book that already underpins 88% of our expected revenue for the year. Combined with an encouraging pipeline of opportunities across our markets, this gives us confidence in our growth outlook.

As we look towards 2030, our strategic objectives remain unchanged. We continue to target a net margin in the mid-teens and expect to deliver double-digit percentage earnings growth per annum for the coming year and the 2 years after that through a combination of organic growth and operational leverage, improving our net margins.

The chart on the right illustrates our 3-year capital allocation framework. We expect to generate approximately GBP 140 million of cash from operations. Of this, around GBP 60 million will be reinvested in the business to support organic growth initiatives, including GBP 15 million in a new facility at Horsham for Chess, which should be completed in early 2028 and enable increased capacity to meet demand and improved efficiency to achieve the mid-teen margins. It also includes spend on innovation and future capability development.

After this planned investment, we expect around GBP 80 million of cash generation to remain available, assuming the continuation of our progressive dividend policy, we anticipate returning approximately GBP 30 million to shareholders through dividends over the coming 3-year period. This leaves around GBP 50 million of available funds on top of which we have a significant new bank facility. Together, these provide significant flexibility to pursue value-enhancing opportunities, including strategic acquisitions whilst maintaining a strong balance sheet. Overall, our guidance reflects both confidence in the underlying performance of the business, a disciplined approach to capital allocation that balances investment, shareholder return and future growth opportunities.

With that, I'll hand back to Andy.

Thank you very much indeed, Simon. And before we move on to the strategic context, I wanted to highlight some operational initiatives that we've taken in the last year. So earlier this year, we appointed Chris Axcell as the Group's first Chief Operating Officer. And Chris is here in the room with us. So if you have questions of an operational nature to ask later on, I shall throw them in his direction. Chris joins us from Leonardo U.K., where he held multiple technical and leadership roles, including Vice President, Surveillance and Protection Technologies, Vice President, Sensors and most recently, Senior Vice President, Integrated Sensing and Protection, where he was responsible for 2 of Leonardo U.K.'s major facilities. He brings extensive experience and expertise in managing business operations within the defense sector and adds deep industry knowledge and values to the group's headquarters team.

And as Chief Operating Officer, Chris will work alongside Simon and me to provide oversight and strengthen operational performance across the group. He'll also take over from me the day-to-day relationship with certain of our operating businesses and support me more widely across the range of my responsibilities, including, for instance, identifying acquisition targets. And Chris' appointment has enabled us to take several initiatives with the aim of enhancing our operational performance.

So we've launched under Chris' leadership, a group forum for engineering operations and supply chain teams, creating opportunities to share best practice to solve common challenges and to leverage the collective experience of our businesses. And we now plan to create a project management forum, again, under Chris' leadership, further strengthening program delivery across the group. And that will include the introduction of a group-wide project life cycle framework to provide a consistent approach to bidding, project execution and governance.

And in addition, we're introducing integrated project teams at Chess, bringing together the key disciplines required for successful delivery under a single structure. And this approach is improving accountability, decision-making and program execution, helping to drive on-time delivery and customer satisfaction. And we're also, as Simon has mentioned, about to invest around GBP 15 million, moving Chess from its current 13 buildings in Horsham to a single new facility that will make a big contribution to its operational efficiency. And collectively, these initiatives are enabling us to enhance our operational capability right across the Cohort Group.

So in this next section, I'd like to share with you some of the strategic highlights from the past 12 months and to talk about the outlook for future years. The 3 components of our strategy are to grow organically, to accelerate that growth through targeted acquisitions and to maintain sound culturally rooted governance to underpin that growth.

And in terms of capital allocation, that translates into 2 areas: internal investment in new products, technologies and facilities and external investment in acquisitions. So this slide focuses on the first of those 2 areas, how Cohort continues to invest in technical innovation that provides solutions to the defense challenges facing our customers. Our KraitSense towed array sonar is a key anti-submarine warfare capability designed for both crewed and uncrewed platforms. And the focus is on delivering a flexible, modular and scalable system with a small footprint, lightweight and low power requirements. And that unique combination of features makes it particularly suitable for a wide range of naval customers and platform types. And demand is increasing, especially for cost-effective anti-submarine capabilities based on uncrewed vessels as Navy seek to expand maritime surveillance and deterrence.

And staying with the underwater battle space, we're developing 2 complementary products, ENLITOR and ERAZOR to protect underwater infrastructure. ENLITOR is a passive underwater surveillance system designed to provide persistent monitoring of undersea infrastructure. And working alongside ENLITOR, ERAZOR provides an active countermeasure designed to enable threats to be intercepted and neutralized.

And then as a third example, in satellite communications, we're progressing development of combined optical and radio frequency terminals. Now this technology integrates traditional radio frequency communications with high-capacity lasers within a single antenna system. And the approach has got the potential to deliver greater bandwidth, resilience and operational flexibility, supporting future defense satellite networks. The laser communication system, although it's limited to use in suitable atmospheric conditions, is effectively unjammable, which is a vital capability in time of conflict. So together, these technologies address the evolving needs of defense customers as they respond to growing risks and the changing nature of conflict.

The second area of strategic investment I wanted to highlight is acquisitions. Over the years, since our IPO, we've executed 7 major transactions. There is always risk associated with acquisitions, but our industry knowledge and our experienced team have enabled us to manage these with some success, as I think this slide demonstrates. I'll particularly highlight our very first acquisition, MASS, which last year generated operating profit of almost GBP 11 million, not far short of the GBP 13.5 million purchase price. And our most recent acquisition, EM Solutions, also showed a very material improvement in performance after just 1 year.

Now we haven't executed any new acquisitions in the 2025, '26 financial year, although we do continue to see a steady flow of opportunities. And we review those carefully against our criteria. We're looking for successful, profitable defense technology businesses of the right size and with a culture of innovation and agility. And beyond that, we're looking for exposure to growth opportunities within the overall defense market and some kind of sustainable competitive advantage based on technology, incumbency or historic relationships. And over the last 20 years, our acquisition strategy has been a driving force in the growth of the group, and we expect that to continue into the future.

Now we continue to see a strong demand picture in response to the deteriorating security environment and ongoing conflicts that we see around the world. And none of us should welcome that. The risks that we now see coming from that are real, and I'm sorry to say that they have the potential to affect us here in the United Kingdom. And in regions where threats are perceived as being the most pressing, governments are under pressure to upgrade and modernize their defense capabilities at speed. And this is where mid-tier businesses like those within the Cohort Group have the agility and expertise to provide innovative solutions to those defense challenges.

In 2025, global defense spending reached USD 2.63 trillion. And that growth reflects an increasingly uncertain geopolitical environment and a widespread reassessment of national security priorities by governments around the world. The chart shows the way that defense expenditure has grown since 2021. It excludes Russia and China. And as is clear from that chart, you can see that the United States remains the largest single defense spender, but also that the fastest growth has come in Europe and in Asia. In Europe, the driver is clearly the continuing intense and bloody conflict in Ukraine.

And as well as driving increased defense spending, the conflict has highlighted the importance of sea, air and land drones for a range of tasks, including reconnaissance, strike and logistics. It's also highlighted the importance of air and missile defense systems. The U.K.'s recent defense investment plan includes a strong focus on maritime capability to protect the North Atlantic region from Russian submarine incursions and interference with underwater infrastructure and uncrewed vessels will play a major part in those plans.

In Asia, Chinese investment in its armed forces together with its increasingly aggressive use of its Navy and Air Force have catalyzed strong growth in defense spending, notably in Japan, Taiwan, Australia and the ASEAN nations. And although China is increasing spend in all areas of its defense, its threat to its neighbors is significantly maritime in nature, both on and below the sea surface.

The continued instability in the Middle East, including the conflict between U.S., Israel and Iran and the consequent regional security concerns is also driving increased demand for defense technology, in particular, for Communications and Intelligence Solutions. Now these trends align closely with the capabilities that we have in the Cohort Group in communications, intelligence, cyber, electronic warfare, sonar, maritime systems and counter drone technologies. And that provides us with a really supportive backdrop for long-term growth.

Now this slide highlights the strength and diversity of Cohort's geographic exposure and importantly, the alignment of our business with regions where defense spending is expected to grow most strongly over the coming years, as I've shown you in the previous chart. So what this shows is a comparison between 2024-'25 revenue, '25-'26 revenue and the revenue that is held in our order book, breaking it down by percentage regionally.

And the most striking features that you can see are the growing proportion of our output going to Europe and Asia Pacific with the proportion going to the U.K. and Australia reducing. Now the increases are in line with the international demand patterns that I've described. But in Australia, we're delivering our existing order book really quite rapidly, but we expect that to be supplemented by some large opportunities in the next few years.

In the U.K., it's too early to say exactly what the consequences of the recent defense investment plan are going to be, but there may be a less rapid falloff in the proportion of our work going to the U.K. if the new Prime Minister follows through on promises to increase defense spending further.

Looking at the order book revenue, the third column, what's particularly encouraging is that it's diverse, well balanced across regions and closely aligned with those markets where defense spending is increasing most rapidly. The U.K. remains an important source of revenue, but the trend illustrates our ability to tap those markets where spending is growing most rapidly.

Now this chart shows a similar comparison between '24, '25, '25, '26 and order book revenue, but this time, broken down by end user domain. And you can see from here that maritime remains our largest domain and has grown as a proportion of group revenue over the last year. And the trend is even more evident in the order book, where maritime programs account for almost 80% of contracted future revenues. And that reflects the long-term nature of maritime defense programs, which provides strong visibility and support sustainable growth over many years, in this case, out to 2037. And our land domain work is also very strong and long term.

Now those proportions represent our technical strengths, but they also are a function of the demand patterns that I've described in Europe and Asia. Our cyber and information work is important, but the small proportion that's there in the order book represents the relatively short-term nature of contracts in that area. Air and space work remains substantial, but the other category, which you can see is a thin layer on top of '24, '25 and '25, '26 has almost disappeared following the sale of our transport business last year.

Overall, we expect that future revenue will include a healthy balance of long-duration maritime and other contracts, supplemented by shorter duration orders in areas where agility is at a premium. And that long-term base of on-order revenue is an excellent building block on which we can build our future growth.

Now this slide, which many of you will be familiar with, gives more detail on a breakdown of that important order book. On the 30th of April, the value of the order book stood at over GBP 618 million. And as I mentioned, that includes contracted revenue that will be recognized out to 2037. And of the total order book, approximately GBP 264 million is scheduled for delivery this year, providing us with very good revenue visibility. And importantly, that's balanced quite well across our 2 reporting segments with Communications and Intelligence contributing GBP 128 million and Sensors and Effectors contributing GBP 136 million.

And looking further forward, a substantial proportion of the order book extends into later years, reflecting the long-term nature of many of the programs that we work on. And that includes around GBP 132 million that's scheduled for delivery beyond the '28-'29 financial year. And overall, that runoff profile highlights both the quality and longevity of our order book. It provides strong revenue visibility, supports confidence in our medium-term outlook and gives us a solid platform from which to pursue further organic growth and new contract wins.

And now above and beyond the order book and across both divisions, demand remains strong and is being driven by those same geopolitical and defense spending trends that I've spoken about. Within Communications and Intelligence, we continue to see significant opportunities for electronic warfare and secure communications, particularly in Europe where lessons from the conflict in Ukraine continue to shape procurement priorities. And we're also pursuing major naval satellite communications opportunities in both the U.K. and Japan, while our electronic warfare and operational support capabilities are gaining increasing traction in export markets, including the Middle East. The Portuguese Navy program provides an excellent example of how multiple Cohort businesses can work together to deliver integrated solutions combining communications, networking and SATCOM technologies.

Within Sensors and Effectors, we see a substantial pipeline of opportunities for counter drone systems through established partnerships. Demand is also growing for technologies that can detect, monitor and protect critical underwater infrastructure, reflecting increased concern around maritime security and seabed protection. We continue to see strong opportunities for our sonar and sensor technologies as submarine and surface fleet modernization programs progress across a number of international markets. And programs such as the Royal Thai Navy's new frigate demonstrate the benefits of collaboration across the group, bringing together complementary technologies and expertise. And we also expect to benefit from investment associated with the U.K.'s Atlantic Bastion initiative and wider NATO efforts to strengthen anti-submarine warfare and underwater infrastructure protection capabilities. So overall, that pipeline of opportunities is strong, reflecting the patterns of growing global expenditure and the market relevance of our products and technologies.

So as we come to the end of the presentation, I wanted as a final point to summarize how we aim to generate value for our shareholders. First, I mean, the business benefits from robust financials underpinned by strong cash generation and a healthy balance sheet. We remain focused on investing in areas that generate sustainable returns, prioritizing expenditure on research and development and expanding our capacity. Across the group, we maintain and invest in innovations that address mission-critical customer requirements and reflect the security challenges they face in today's world, as I hope I've shown you this morning.

We're also well positioned through access to growth markets and have demonstrated our agility and responsiveness to geographical market trends. Our acquisition strategy has been an important contributor to shareholder value creation. We've got a proven track record of acquiring high-quality businesses and integrating them successfully, identifying opportunities to collaborate across the group where appropriate. And finally, we have a consistent dividend track record, having increased the dividend every year since our IPO 20 years ago. And that reflects both the strength of the business and the Board's confidence in the group's long-term prospects.

Before closing, I want to take the opportunity to mention the great contribution to our success made by our management teams and employees right across the group. I'm very grateful to all of them for the part that they've played in helping us achieve these good results. It has been a successful first 20 years, and we look forward to the future with confidence. And let me leave you with this extract from our preliminary statement, and we'd be delighted to take any questions that you might have.

Thank you. We have had a number of questions pre-submitted and submitted live. [Operator Instructions]

Our first question is, the order book remains incredibly strong. Can you give us a feel for how much of that is genuinely new work versus extensions of existing contracts?

That's an interesting question. I don't have that precise breakdown. But I'm tempted to say that a large proportion of it is new work. So for example, I mean, the large components of the order book are things like our program to supply the new sonar suites for the new fleet of Italian submarines, the contract to supply missile defense systems to the Royal Navy in the U.K. Now these contracts do tend to get extended and changed over time. They're long and complex. And indeed, the Italian submarine contract has already been extended on a few occasions. So perhaps I should have included that in my initial response.

But I think for the most part, it is new contracts. What I should also emphasize is that they are all legally binding contracts, and there is nothing speculative in there. Nothing that wouldn't -- that would need a contractual change in order to be removed or extended or whatever.

Simon, would you add anything to that? Is there any further color you...

The only thing I'd add, Andy, is that I think a lot of what I would call the repeat work is the smaller orders that we get and often deliver within the period. So they don't really get seen in the order book because they're sort of turned in the period. So small orders, spares, repairs, that type of work often come in, go out in the same year. Some will extend. But when you look at our order book and the longevity of it out to 2037, all of that mostly is work that these are lumps that we've won. There will, at some point, be extensions terms, no doubt about that. They will grow. The ancillary order, which is the longest, I expect that will be extended once we get into full service support and things. That will be for a few years.

Yes. I mean just reflecting on it actually. So we have, as I've said, seen the original Italian submarine contract extended from originally 2 submarines now 4. And I would certainly expect to see the ancillary contract extended into further ships. And our large contract in Australia, not yet clear whether that will be extended or whether there will be a new contract to cover for the ships, but certainly, we will be doing more of the same work for the Australian Navy. Sorry, we couldn't give you a precise numerical answer, but I hope that gives you a flavor.

The next question reads, the cash position still looks healthy. Is the priority more acquisitions, paying down debt or continuing to grow the dividend?

As Simon's slide shows, all of the above. I mean we're driven by different things. We -- in relation to investment internally, we do what's needed. And also, when we see good opportunities to see a good return on internal investments, for example, through product development, those are things that we will certainly pursue. Acquisitions have to be more opportunistic because we can only acquire something if it's for sale. We didn't make any acquisitions in '25, '26, as I said in the presentation earlier. But that's really because we're looking for very particular special acquisition targets, and we don't see them all the time. We've done 7 since we IPO-ed back in 2006.

And the growing dividend is something that we've always been committed to, but each year, we reconsider carefully in terms of the cash available and future prospects. And I'm happy to say that we've always seen it appropriate to continue increasing that dividend.

Simon, is there anything else you would add to that?

I'd only add on the final point, the dividend that we -- as you can see, and we've been increasing it pretty much at 10% per annum, which is what our targeted earnings growth is. And we -- our policy is to look for around about 3x earnings to dividend cover each year. Actually, we've been running at slightly higher than that in the last few years. But no, that's certainly the case. I think on the investment, as you said, Andy, it's more driven by what -- it's -- that's more of a bottom-up and a top-down approach. It's what our businesses need, and we assess it each year as part of a 3-year strategic plan is well thought out. And sometimes it's higher and sometimes it's lower depending on what the demands are.

Yes. And with the new bank facility in place, we certainly got plenty of flexibility to invest when we need to.

Which markets or business segments offer the greatest growth opportunities over the next 3 to 5 years?

Well, I think in terms of geographical markets, the answer is Europe and Asia. In Europe, we're in a period of transition really from sort of post-cold war period of low defense spending and the peace dividend to a realization. Well, I think in the words of the last Defense Secretary now recently appointed to the Chancellor, we're moving into a pre-war period rather than a post-war period. And so people are once again looking at defense spending as a very, very important form of insurance with the aim of hopefully, rather than having to activate defensive measures.

So we're in a progression from maybe sort of 1% or 2% of GDP on defense for most European countries up to 3.5% or above. And some countries are in front of others on that. Germany is moving very fast. Poland is moving very fast. The Nordic countries, the Baltic countries are moving very fast. The U.K. so far has moved a little slower, but indications from the new Prime Minister and particularly the installation of Mr. Healey as the new chancellor of the Exchequer suggests that we may be prepared to go further than the original defense investment plan proposed.

And we see a similar situation in Asia, a very wide region, of course, where China is investing a huge amount in defense forces, both Army, Navy and Air Force. But where its main effort to exert its influence is maritime, and that affects its neighbors in the ASEAN region around South China Sea. It affects Japan, Korea, all the way down to India and Australia. And so across that wide region, countries are looking to build their defensive capabilities so as not to be intimidated by this kind of behavior and make sure that China doesn't feel that it can exert its influence without consequence.

So both of those regions are growing very significantly. And those are augmented by the policies of the administration in the U.S., which is, firstly, pushing the non-U.S. NATO members to spend more on defense. And secondly, perhaps some of its behavior in relation to allies and for example, talking about annexing Greenland or invading Canada and this sort of thing is encouraging these countries to think should we rely solely on the U.S. as a means of support of provision of defense equipment, too. I hope that answers the question.

How is the company managing supply chain risks, inflation and labor costs?

Well, supply chain risks, the -- I mean, I mentioned in the presentation that we have brought in, for the first time, a Chief Operating Officer into our headquarters team, Chris Axcell, who is a very experienced guy has spent 26 years in Leonardo and its predecessor organizations in the U.K. and a lot of that time in managing production operations in defense. So that adds to our team, a new capability to enable us to support our businesses. And several of them are undergoing that transition from engineering-led businesses where the main value is created by designing clever solutions into more production-led organizations where we create value by producing in a regular repeatable way, significant numbers of the equipments that we've designed.

And he has instituted cross-group forums on several important operations-related matters, and one of those is supply chains, identifying potential supply chain pinches, particularly those that affect more than one company across the group. and enabling us to put in place policies for dual sourcing or increasing stock holdings and so on so that we can manage those matters. And so far, I think the only sort of cross-group supply chain issue that we've noted is the supply of permanent magnet motors, which has been limited by the availability of rare earth elements, which are needed for the permanent magnets. And so that's an issue that we're dealing with.

As far as the other matters are concerned, those are primarily dealt with through commercial terms. Simon, do you want to say a word or 2 about inflation and labor costs?

Yes. Let's deal with inflation first. Obviously, that comes from both our own costs, our labor costs primarily and our supply chain. In contracts really where anything more than normally 2 years in duration, certainly 3 years and above, we will look to put in inflationary clauses into each contract. Effectively, they are price indexed to deal -- and they will be linked to industrial indices often of a national nature. And we'll -- and literally will be adjusted. So good examples are the large Australian contract, the Italian contract and Cilia all having there in the variation of price clauses to do with inflation.

There in other contracts where we may not be able to get inflationary clauses, we build in contingency to deal with potential inflation risk. So effectively, we put the price up to cater for future costs. And obviously, of our own labor inflation, well, mostly, that's about remaining sort of trying to keep our cost to what we think enables us to be competitive whilst ensuring that we attract and retain the best people. We could -- if we go too low, we will lose the good people and end up delivering a bad service. So that way, we don't make money and the customer doesn't get very happy -- is not very happy with the service. So the main protection for us is obviously ensuring that our pricing is correct. And the variation on contracts on pricing is very important on long contracts, very important.

Thank you. Export revenue to other Europe nearly doubled. To what extent is this growth contingent on urgent short-cycle procurement related to the Ukraine conflict versus multiyear sovereign programs?

Right. To what extent is it related to urgent operational requirements for Ukraine? A very limited extent is a short and easy answer to that. Yes, most of what we're doing is serious long-term stuff. And for the reasons that I outlined before, people are not embarking on a sort of wild shopping spree of things that they need in short order. European countries are considering very carefully how they need to build up the forces over a number of years and embarking on some really pretty major programs. And that's what we're seeing coming through into our order book.

Andy, I would add that the revenue that was linked to effectively the conflict in Ukraine directly was around 1% for the group last year.

Thank you. The next question is, is there any customer that accounts for a bigger proportion of the revenues than you'd ideally like? Or is the business now well diversified?

Well, I hope you'll have seen from the charts that we presented that the revenue streams now are really very well diversified. In particular, I mean, we're a U.K.-centered group, 4 of our 7 businesses are based in the U.K. But for the first time, our revenue fell -- derived from the U.K., and that includes directly from the government and also from suppliers who supply into the U.K. government fell down to -- well, below half down to about 40%. So our dependence on the U.K. is reducing. That's a factor of 2 things really. One is that we're doing more outside the U.K. We acquired a business in Australia, which is delivering significant revenue and profit EM Solutions. And also because compared to several of the other European markets that we're in, the U.K.'s defense spending is growing relatively slowly.

Now we've got a new defense investment plan, which is good. That -- we expect and hope that, that will result in a better process of defense procurement in the U.K. We found over the last year in the absence of that plan that things have been quite slow. Projects have stopped and started, even very small levels of expenditure needed ministerial approval. So we hope that, that will come to an end. And as I mentioned a moment ago, perhaps with the new government in place, certainly with the indications that Mr. Burnham has given, then we may see an uplift to that defense investment plan, and that will be very good news as well. But no, I think we do have quite a diverse revenue base, and I would expect to see that continue.

Thank you. You've guided for roughly GBP 140 million in operating cash flow over FY '27-'29. How much of this is predicated on a permanent reduction in the working capital intensity of the naval and SATCOM programs versus simply the timing of milestone payments?

Simon, I think that's one for you.

Actually, it's pretty much what we expect to generate from operations. There is a bit of working capital unwind, particularly on the Italy project, which should come back to an overall cash positive position around about March '28. But really, what it is, is what -- the reason we've done it over 3 years is to deal with the issue of the working capital moving up and down over the periods. There will be projects coming in and there will be projects going out over that period. So there's nothing in there that sort of assumes that suddenly I'm going to be able to reduce our debtors by sort of half or something over that period.

In fact, I expect over that period because of the growth we expect in the group that the working capital actually will grow over the 3 years. And that in effect is assumed. So the GBP 140 million actually has potentially got an upside. And I would suggest that the final figure in that slide, which shows a GBP 50 million cash sort of coming out of it pre any M&A probably is more likely to be in the range of probably GBP 30 million to GBP 80 million, depending on the working capital timing.

Thank you. Management has acknowledged a mini boom in defense tech multiple. What specific ceiling is being applied to IRR hurdles or EBITDA multiples for the GBP 50 million allocated to M&A over the next 3 years to ensure you don't overpay in competitive mid-market auctions?

Right. I'm not sure we did acknowledge a mini boom in defense multiples. And I'm not quite sure what a mini boom would be. And we also have not allocated GBP 50 million for acquisitions over the next 3 years. So the premise of the question, I think, has put words in our mouth slightly. What I'd say about multiples is that they're very different in the part of the market that we are most interested in, which is small and midsized defense businesses coming up with innovative solutions that have got -- that are trading profitably and have got good products, are small enough and fast enough to be agile to deal with the sort of changing world of defense that is at the moment, perhaps with a region of GBP 5 million to GBP 15 million of annual EBIT, something like that. And that's really, really different to the Rheinmetalls and Saabs of the world.

And we -- the multiples that we've paid over our history have varied between sort of 7-ish and the biggest one, the highest one was our very first acquisition of MASS, which we paid 13.5x. Although as I mentioned, it's making nearly GBP 11 million a year in EBIT now. I mean that's turned out to have been quite a good acquisition. We paid about 10x EBIT for our most recent acquisition, which was EM Solutions. A little bit higher than the average we've paid over the years and the run-up to that, but that's reflecting the fact that it had a very strong order book and a very strong set of opportunities. And one feature of the new situation that we see since 2022 is that demand is stronger and so businesses are coming to us with larger order books and stronger sets of opportunities.

And in those circumstances, we are prepared to pay a slightly higher multiple of EBIT because the business is simply a higher quality and worth more. But I think that gives you an idea of the kind of range that we're paying at the moment.

Thank you. Moving the S&E division from 7.1% today to the mid-teens by 2030 is key to the midterm plan. How much of this 800 bps expansion is purely reliant on the completion of low-margin legacy SEA projects versus structural improvements in the new contract hurdle rates?

Okay. Let me pass this one over to Simon again to talk about.

Thank you, Andy. The legacy projects at SEA will pretty much -- one of them will close out this financial year, and the majority of the others will be pretty much done this financial year. In fact, I don't expect them to have an ongoing impact, particularly on our margin. So that's quite a quick turn. The real driver of Sensors and Effectors getting to mid-teens is actually Chess returning from a sort of just above breakeven position to a decent trading position of somewhere around 10% and then moving up into the mid-teens in the next couple of years. And the investment in the new facility for Chess will help with that.

Thank you. The order book increased only slightly from GBP 616.4 million to GBP 618.8 million despite strong defense markets demand. What needs to happen for order intake to accelerate materially above the current book-to-bill ratio of just over 1?

Well, I mean, we're delighted to have a book-to-bill ratio of greater than 1 in a year when there were no sort of marquee orders. The largest order that was part of that order intake in '25, '26 was about EUR 40 million. So not much more than 10% of the total. And the fact is order intake, it's a lumpy business. We do get very large numbers of relatively small orders every year, and that's what made up the majority of the order intake in '25, '26. But we also do get larger orders, which on their own move the dial. And by their very nature, those don't necessarily come along multiple times a year.

So hence, if you look back at our order intake history and progress of our order book, you've seen it's been going up for many years, but not always by the same sort of amount. So I think it's sort of natural result of the nature of defense spending and the way that we get orders. So I would just say that we're hoping to continue that progress and perhaps accelerate that progress in the course of the year.

Thank you. Our next question is, how will you measure the impact and success of the operational initiatives you are introducing at Chess and across the Sensors and Effectors division.

By that margin improvement that Simon was talking about, but I'm going to pass it over to him to talk about it again.

No, that's exactly right, Andy. I mean we're looking to do, as I said, is for Chess to move from breakeven in '25, '26 to somewhere around, I would say, 8% to 10% net margin in '26, '27 and to move on from there. Chess has got a very good order book. It's our most covered business for this coming year. It's well over 90% covered. So it's not a business that needs to win work to hit its figures. It needs to deliver. And the focus of Chris Axcell, our new COO, and the new MD at Chess, Andy Smith, is to do that, and that is what they're very much focused on. Although I have to say Chess continues to win good orders.

Thank you. We are now moving on to our final question for today. If you have any further questions, please e-mail the team who will respond to any questions that weren't covered this afternoon.

Which of the group's companies do you think has the biggest growth opportunities?

You're asking a mother, which is her favorite child. Well, we see some really good growth opportunities across the group actually. I mean, Simon has mentioned that Chess has already got a really strong order book. Chess is exposed to one of the best counter drone capabilities anywhere in Europe in terms of providing a significant piece of value in all of the sales of Rheinmetall mid-caliber counter drone weapons. And that, I would certainly expect to lead to good growth in the coming years. If you look elsewhere, SEA is seeing very strong demand for its lightweight towed array sonars because they're especially effective on uncrewed vessels, which are very much the coming thing. That was a big part of the defense investment plan in the U.K., the move to a hybrid Navy, which includes uncrewed as well as crude vessels.

If you look at ELAC Sonar, we see a lot of submarine programs around the world, and we see one of the world's leading providers of digital sonar equipment. I mean the sonars they're providing for us are amongst the most advanced in the world. So we see very significant opportunities there, both for submarines and for surface vessels. At EM Solutions, we've got a great niche there where we've got really strong technical capability that's better than any competitor. And there are some very good growth programs around there at the moment. In Australia and the domestic market, there's a lot more that they will get under contract there. We're very optimistic. And there are some big other opportunities in the U.K. for one example, in Japan for another. So we see plenty of opportunity there as well.

I haven't really mentioned all of them at all, but I think there are lots of opportunities, and I'm encouraging our MDs to try and show which can exploit those opportunities best and get into the lead. I mean at the moment, our leading provider of profit to the group is EM Solutions. Will that continue? Well, we'll wait and see. I think there are plenty of opportunities out there.

Thank you. We currently have no further questions. So I hand back over to the management team for any closing remarks.

Thank you very much indeed, Josh. It's been a pleasure to talk to you this afternoon. Thank you very much for all of these interesting questions. I hope that we've been able to answer them in a way that's satisfactory. But if not, please feel free to add any supplementaries via e-mail as Josh has invited. I'll just conclude by saying that it's been an exciting time for us. We've had, I think, another very good year. We're looking forward with optimism to '26, '27 and beyond. As I have demonstrated, the first 20 years, we've had a degree of success. And I'm optimistic that we will continue to do that in the years ahead.

Thank you very much indeed for your attention.

Thank you to the management team for joining us today. That concludes the Cohort plc investor presentation. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available on Engage Investor. I hope you enjoy today's webinar.

All right. Welcome to everybody. We will just allow 30 seconds or so for all the interested parties to come on, of which there are many. I'm glad to say, so just bear with us for a little while. Okay, right. I think we're nearly there. So another welcome to everybody. We're very pleased to welcome back the Cohort team having just released their results for the 12-month period to the end of April, the record results, of which you're about to hear an awful lot more. A little bit of admin for me. This presentation is being recorded.

So if you miss a little bit, don't worry, it will be available publicly in a day or 2. The presenters will be using a slide deck that is already up on the Cohort Investor Relations page, should you want to go back and study that in detail. [Operator Instructions] Right. We're delighted to welcome back Finance Director, Simon Walther; and CEO, Andy Thomis, and I'm now going to pass over to Andy.

Thank you very much indeed, Andy. I hope everyone can hear me. And good afternoon, and thanks for joining us. you've got us in large format, I'm actually speaking to you. I'm Andy Thomis. I'm the Chief Executive at Cohort plc, and I'm here with Simon Walther, who's Cohort's Finance Director. Cohort for anyone who doesn't know, provides advanced defense technologies and some services to the U.K. and its allied nations around the world. And Simon and I are here to present our latest financial results and to explain some of the technical innovation, the geopolitics and the other market drivers that support that growth.

So a word about our capabilities. Cohort's businesses all share a common purpose in developing advanced defense technologies to contribute to our customers' national security and defense. And each of our businesses brings its own specialist expertise. Collectively, they deliver innovative solutions that help customers address what are increasingly complex operational challenges. And we operate through 2 divisions: Communications and Intelligence and Sensors and Effectors. And across those 2 divisions, we offer really quite a broad range of capabilities, as you can see from this slide.

Now I'll talk more about demand patterns later in the presentation. But just looking at this list, I would highlight the counter-drone capability, the anti-submarine systems, seabed warfare, others as well, but these are all areas that are clearly relevant to the current needs of defense customers. If we can move on to the next slide, Andy. As a background to the results, I thought it would be helpful to show you Cohort's total shareholder return since our IPO, which is 20 years ago this year. This is our 20th anniversary. And the chart shows it benchmarked against both the AIM All-Share Index and our peer group of listed U.K. defense companies.

As you can see from the chart there, over the period, Cohort has significantly outperformed the broader AIM market and delivered returns well ahead of our peer group. And as you might expect, while there has naturally been some share price volatility over that extended period, the overall trend is sustained growth, underpinned by strong operational performance and increasing order intake. And since 2022, at least, a favorable defense spending environment.

And that sharp acceleration that you can see from 2024 onwards reflects growing investor recognition of Cohort's market position and the opportunities arising from increased defense and security investment in the U.K. and across our other markets in its allied nations. And the conclusion from all of this is that we've been able to create value consistently for shareholders over a long period through the successful execution of our strategy. If we can move to the next slide because this slide shows in a bit more detail how we've delivered that shareholder return. The chart on the left shows the progression in adjusted operating profit since 2006, our IPO.

And from a relatively modest base, we've steadily expanded the business through a combination of organic growth, and that's underpinned by investment in both technology and capacity and strategic acquisition. And despite periods of economic uncertainty and changing geopolitical conditions. And I'll pick out the arrival of austerity with the coalition government in 2010 and the post-COVID hangover in 2022. Overall, the trajectory has remained strongly upward, culminating in, as I will explain in a moment, a record performance this year. And the chart on the right demonstrates our commitment to delivering value to shareholders through our progressive dividend policy.

Since 2006, the dividend has increased every year, reflecting both the resilience of our business model and the confidence we have in the group's long-term prospects. And I'm reliably informed that as a company that has increased its dividend every year over a 20-year period, we are now officially a dividend hero. I'm not sure how that lands with you, but anyway, it sounds pretty good to me.

So can we move on to the next slide, please, because this shows the financial highlights of our '25/'26 year, the year finished in April 2026. And it was another outstanding year for Cohort. We delivered record revenue and record adjusted operating profit. The revenue has exceeded GBP 300 million for the first time, now over GBP 306 million, and the operating profit grew by 32% to more than GBP 36 million. And of course, with that, we've enhanced our margin as well, moving it towards our longer-term aim of mid-teens.

Demand for our products and services remained robust throughout the year, and I'm pleased to say that our order intake of GBP 314.2 million exceeded our revenue, and that brought us to a record year-end order book of nearly GBP 620 million. And that provides excellent visibility of future revenues and contracted work, which goes out to 2037. As expected, operating cash flow and net funds were lower than the exceptionally strong levels reported last year, primarily reflecting working capital movements and investments associated with the growth of the business, about which we will have more to say. Nevertheless, the group remains in a positive net funds position and continues to maintain a strong balance sheet. And we're very pleased to recommend a full year dividend of 17.9p, once again representing an increase of 10% on last year's, and that reflects the Board's confidence in the group's continued success. So now I'd like to invite Simon to share some more details of our financial performance. Simon, you just need to unmute.

Thank you, Andy, and good afternoon to all of you. If we move to the next slide, please. This slide highlights the performance of our 2 divisions, Communications and Intelligence and Sensors and Effectors, both of which continue to benefit from strong and growing demand across their respective markets. Starting with Communications and Intelligence, Revenue increased by 27% to GBP 158.9 million, while adjusted operating profit rose by more than 50% to GBP 32.4 million. The operating margin improved significantly to 20.4%, reflecting a strong program execution and a favorable mix of higher-margin activities.

During the year, the division secured several important contract awards, including integrated communication systems, networks and satellite communication systems for the Portuguese Navy. We also continue to see strong demand for drone capabilities, resulting in significant contract wins with the U.K. MoD.

Turning to Sensors and Effectors. The revenue for this division was relatively flat at GBP 147.5 million. Profitability was below last year, mainly a result of disposal of our high-margin noncore transport business earlier in the financial year. The order book and pipeline for this division give us confidence that it will grow in the coming year and improve its net margin with improved operational performance at Chess, the first deliveries of sonar systems for the Italian submarine project and closure of low-margin projects at SEA. The combined offerings of our Communications and Intelligence and Sensors and Effectors businesses remains a key strength of Cohort, providing both resilience and exposure to a broad range of defense and security capability requirements across our international customer base.

Move to the next slide. This slide shows the factors behind the net funds movement throughout the year. We moved from opening net funds of GBP 5.3 million to net debt of GBP 32.5 million at the half year, primarily due to significant working capital outflow associated with the execution of major programs. As expected, second half cash improvement was much improved, generating an GBP 18.1 million working capital inflow alongside strong profitability. Consequently, the group returned to a positive net funds position of GBP 2.2 million at the year-end.

This demonstrates that the movements in cash were largely timing related and that the underlying business remains strongly cash generative. And in this next slide, Here, we see the capital allocation over the past 5 years. During this period, the group has generated GBP 142 million of cash from operations, providing the flexibility to invest in future growth while continuing to deliver returns to shareholders. We invested approximately GBP 60 million organically across the business, including the completion of our state-of-the-art manufacturing facility in Kiel, Germany, investment in KraitSense and the development of our ENLITOR and ERAZOR technologies in response to the increasing demand for undersea infrastructure protection, and Andy will refer to these later in the presentation.

These investments strengthen our capabilities, support innovation and position the group for future growth. Alongside organic investment, we deployed just over GBP 40 million on acquisitions net of funds raised, completing the EM Solutions and Interactive Technical Solutions transactions. These acquisitions have expanded our technology portfolio into satellite telecommunications and broadened our regional growth opportunities, particularly in the Australian and Asia Pacific markets. We are pleased to have maintained our commitment to shareholder returns, distributing GBP 30 million through dividends over the last 5 years.

Overall, this allocation of capital reflects our strategy of investing for growth while maintaining a strong balance sheet and delivering growing returns to shareholders. Looking ahead, we enter '26/'27 with a strong level of visibility, supported by an order book that already underpins 88% of expected revenue for the year, combined with an encouraging pipeline of opportunities across our markets. This gives us confidence in our growth outlook.

As we look towards 2030, our strategic objectives remain unchanged. We continue to target a net margin in the mid-teens and expect to deliver double-digit percentage earnings growth per annum for the coming year and the 2 years after that through a combination of organic growth and operational leverage, improving our net margins. The chart on the right illustrates our 3-year capital allocation framework. We expect to generate approximately GBP 140 million of cash from operations. Of this, around GBP 60 million will be reinvested in the business to support organic growth initiatives, including GBP 15 million on a new facility at Horsham for Chess, which should be completed in early 2028 and enable increased capacity to meet demand and improved efficiency to achieve mid-teens margins.

It also includes spend on innovation and future capability development. After this planned investment, we expect around GBP 80 million of cash generation to remain available. Assuming the continuation of our progressive dividend policy, we anticipate returning approximately GBP 30 million to shareholders through dividends over the coming 3-year period. This leaves around GBP 50 million of available funds on top of which we have a significant new bank facility.

Together, these provide significant flexibility to pursue value-enhancing opportunities, including strategic acquisitions while maintaining a strong balance sheet. Overall, our guidance reflects both confidence in the underlying performance of the business and a disciplined approach to capital allocation that balances investment, shareholder returns and future growth opportunities. With that, I'll hand back to Andy.

Thank you, Simon. And before we move on to the strategic context, I wanted to highlight some operational initiatives that we've taken in the last year. If we can move on to the next slide, please. Earlier this year, we appointed Chris Axcell as the group's first Chief Operating Officer. And Chris has joined us from Leonardo, where he held multiple technical and leadership roles, including Vice President Surveillance and Protection Technologies, Vice President Sensors, and most recently, Senior Vice President Integrated Sensing and Protection, where he was responsible for 2 of Leonardo's major U.K. facilities.

He brings extensive experience and expertise in managing business operations within the defense sector and adds deep industry knowledge and values to the Group headquarters team. And as COO, Chris will work alongside Simon and me to provide oversight and strengthen operational performance across the Group. He'll also take over from me the day-to-day relationship with certain of our operating businesses and support me more widely across the range of my responsibilities, including identifying potential acquisition targets.

Next slide, please. Chris' appointment has enabled us to take several initiatives with the aim of enhancing our operational performance. So we've launched under Chris' leadership, a group forum for engineering, operations and supply chain teams, creating opportunities to share best practice, solve common challenges and build on the collective experience of our businesses. And we now plan to create a project management forum, again under Chris' leadership, further strengthening program delivery across the group. And that will include the introduction of a group-wide project life cycle framework to provide a consistent approach to bidding, project execution and governance.

And in addition and more specifically focused on Chess, we're introducing their integrated project teams, bringing together the key disciplines required for successful delivery under a single structure. And this approach is improving accountability, decision-making and program execution, and that's helping to drive on-time delivery and consequently, customer satisfaction. And we're also about to invest about GBP 15 million, moving Chess from its current 13 buildings at a single site in Horsham to a new facility that will make a big contribution to its operational efficiency.

And collectively, these initiatives are enabling us to enhance our operational capability right across the Cohort Group. If we have the next slide, please. So in the section coming up now, I'd like to share some of the strategic highlights from the past 12 months and to talk about the outlook for future years. The 3 components of our strategy are to grow organically, to accelerate that growth through targeted acquisitions and to maintain sound, culturally-rooted governance to underpin that growth. And in terms of capital allocation, that translates into 2 key areas: internal investment in new products, technologies and facilities; and external investment in acquisitions.

And this slide focuses on the first of those 2 areas, how Cohort continues to invest in technical innovation that provides solutions to the defense challenges facing our customers. So taking these in turn. Our KraitSense towed-array sonar solution is a key anti-submarine warfare capability designed for both crewed and uncrewed platforms. And the focus is on delivering a flexible, modular and scalable system with a small footprint, lightweight and low power requirements. And this unique combination of features makes it suitable for a wide range of naval customers and platform types.

And demand is increasing for cost-effective antisubmarine capabilities based on uncrewed vessels as navies look to expand maritime surveillance and deterrence. Staying with the underwater battle space, we are developing the ENLITOR and ERAZOR products to protect underwater infrastructure. ENLITOR is a passive underwater surveillance system designed to provide persistent monitoring of undersea infrastructure like Internet cables or gas and oil pipelines. And working alongside ENLITOR, ERAZOR, which I think you can just about see at the top of that graphic, which is a sort of small torpedo, provides an active countermeasure capability, enabling threats to be intercepted and neutralized.

And the third example in satellite communications is the development of our combined optical and radio frequency terminal. And this technology integrates traditional radio frequency satellite communications with high-capacity lasers within a single antenna system. And it's an approach that has the potential to deliver faster communications, greater resilience and operational flexibility supporting future defense satellite networks. The laser communication system, although it's limited to use in suitable atmospheric conditions, is effectively unjammable, which is a vital capability in time of conflict.

And together, these technologies are good examples of what we're doing to address the evolving needs of defense customers as they respond to growing risks and to the changing nature of conflict. If we can move on to the next slide, please. The second area of strategic investment I wanted to highlight is acquisitions. Over the years, since our IPO, we've executed 7 major transactions. And indeed, all 7 of the businesses that are part of the group now are the result of acquisitions. And there's always a risk associated with acquisitions, but our industry knowledge and our experienced team have enabled us to manage these with some success as the slide, I think, demonstrates.

I'll particularly highlight our very first acquisition, MASS, which last year generated operating profit of almost GBP 11 million, and that's not far short of the GBP 13.5 million purchase price back in 2006. And our most recent acquisition, EM Solutions, also showed a notable and strong improvement in performance after just 1 year.

Now we haven't executed any new acquisitions in the '25/'26 financial year, although we do continue to see a steady flow of opportunities, and we review these carefully against our criteria. What we are looking for is successful profitable defense technology businesses of the right size and with a culture of innovation and agility. And beyond that, we're looking for exposure to growth opportunities within the overall market and some kind of sustainable competitive advantage, whether that's based on technology or incumbency or historic relationships. And over the last 20 years, this acquisition strategy has been a driving force in the growth of the group, and we expect that to continue into the future.

If we can have the next slide, please. So let's turn to the demand picture. And we continue to see strong demand in response to what are still deteriorating security environment -- still deteriorating security environment and the ongoing conflicts that we see across the world. And obviously, none of us should welcome that. The risks that we now see in Europe are very real. They have the potential to affect us here directly in the United Kingdom. And in regions of Europe where the threats are most pressing, governments are under pressure to upgrade and modernize their defense capabilities at speed.

And this is where mid-tier businesses like those within the Cohort Group have the agility and expertise to provide innovative solutions to those defense challenges. And in 2025, global defense spending reached a new peak of USD 2.63 trillion. And that growth reflects the increasingly uncertain geopolitical environment and a widespread reassessment of national security priorities by governments around the world. And this chart shows how defense expenditure has grown since 2021 across the world, but excluding Russia and China, which are not great markets for us.

As is clear, the North American market, of which all but a tiny sliver is the United States remains the largest defense spender. But the fastest growth has come in Europe and in Asia. In Europe, the driver is clearly the continuing intense and bloody conflict in Ukraine and as well as driving increased defense spending, the conflict has highlighted the importance of particular technologies like sea, air and land drones in those cases for a range of tasks, including reconnaissance, strike as well as logistics.

It's also highlighted the importance of air and missile defense systems. The U.K.'s recent defense investment plan includes a strong focus on maritime capability to protect the North Atlantic region from Russian submarine incursion and interference with underwater infrastructure and uncrewed vessels will play a major part in those plans. In Asia, Chinese investment in its armed forces together with increasingly aggressive use and particularly its Navy and Air Force that have catalyzed the strong growth in defense spending. And that's notably strong in Japan, also in Taiwan, Australia and the ASEAN nations.

And although China is increasing spending in all areas of defense, its threat to its neighbors is significantly maritime in focus, both on and below the sea surface. And in addition to those 2 big drivers, the continued instability in the Middle East, including the conflict between the U.S., Israel and Iran and the consequent regional security concerns is also driving increased demand for defense technology, in particular, Communications and Intelligence solutions. And those trends align closely with the capabilities that we have across the Cohort Group in communications, intelligence, cyber, electronic warfare, sonar, maritime systems and counter-drone technologies. And that provides a supportive backdrop for long-term growth. Now we've jumped ahead a slide, which is good.

This slide highlights the strength and diversity of Cohort's geographic exposure and very importantly, the alignment of our business with regions where defense spending is expected to grow most strongly over the coming years. What it shows is a comparison between '24/'25 revenue, '25/'26 revenue and the revenue that is held in our order book and breaking it down by percentage regionally. And again, you'll see the most striking features are the growing proportion of our output going to Europe and to Asia Pacific, with the proportion going to the U.K. and Australia reducing.

Now those increases are in line with the international demand patterns I've described a moment ago. In Australia, we're delivering our existing order book quite rapidly, but we expect that to be supplemented by some large opportunities in the next few years, which will change the look of that chart to a certain extent. In the U.K., well, it's too early to say exactly what the consequences of the defense investment plan will be. But it's possible there may be a less rapid falloff if the new Prime Minister follows through on promises that he's made to increase defense spending beyond that set out in the DIP.

Looking at the order book revenue, what's particularly encouraging is that it is diverse, well balanced across regions and closely aligned with those markets where defense spending is increasing most rapidly. The U.K. remains an important source of revenue, but the trend illustrates our ability to tap those markets where the spending is growing. If we can move on to the next slide. This chart shows a similar comparison between '24/'25, '25/'26 and our order book. But this time broken down by end user domain. And what you can see here is that maritime remains our largest domain and has grown as a proportion of group revenue over the last year.

And that trend is even more evident when we look at the order book where maritime programs account for about 80% of contracted future revenues. And that reflects the long-term nature of maritime defense programs, which provide strong visibility and support sustainable growth over many years, and in this case, right out to 2037. And our land domain work is also long term. So those proportions represent our technical strengths, which are particularly good in maritime and land, but also the demand patterns that I've described in Europe and Asia.

The cyber and information work that we do is important, but the small proportion in the order book reflects as much the relatively short-term nature of contracts in that area as it does overall demand. Air and space work remains substantial. But the other category, which was noticeable in '24/'25 is now almost disappeared following the sale of our transport business last year. Overall, we expect that future revenue will include a healthy balance of long-duration maritime and other contracts, supplemented by shorter duration orders in areas where agility is at a premium. And that long-term base of on order revenue provides an excellent starting point on which we will build our future growth.

Next slide, please. So this slide provides more detail on that very important order book. On the 30th of April 2026, the value of the order book stood at over GBP 618 million, has grown since, of course. And as I mentioned, that includes contracted revenue that will be recognized out to 2037. Of the total order book, approximately GBP 264 million is scheduled for delivery this year, providing very strong revenue visibility. And importantly, that's broadly balanced across our 2 operating segments with Communications and Intelligence contributing GBP 128 million and Sensors and Effectors contributing GBP 136 million.

Looking further forward, a substantial proportion of the order book extends into later years, reflecting the long-term nature of many of the programs that we're working on. And that includes about GBP 132 million scheduled for delivery beyond 2028/'29. Overall, this runoff profile highlights both the quality and longevity of our order book. It provides strong revenue visibility, supports confidence in our medium-term outlook and gives us a solid platform from which to pursue further organic growth and new contract wins.

If we can have the next slide, please. Thank you. And beyond that order book across both divisions, we see strong demand continuing, which is being driven by the same geopolitical and defense spending trends that I've spoken about. Within Communications and Intelligence, we see significant opportunities for electronic warfare, secure communications, particularly in Europe where lessons from the conflict in Ukraine are shaping procurement priorities. We're also pursuing major naval satellite communications opportunities in both the U.K. and Japan, while our electronic warfare and operational support capabilities are gaining increasing traction in export markets, including the Middle East.

The Portuguese Navy program provides an excellent example of how multiple Cohort businesses can work together to deliver integrated solutions that combine communications, networking and SATCOM technologies as well. Within Sensors and Effectors, we see a substantial pipeline of opportunities for counter-drone systems through established partnerships. Demand is also growing for technologies that can detect, monitor and protect critical underwater infrastructure, reflecting increased concern around maritime security and seabed protection.

We continue to see strong opportunities for our sonar and sensor technologies as submarine and surface fleet modernization programs progress across a number of international markets. And programs like the Royal Thai Navy's new frigate demonstrate the benefits of collaboration across the group where we have 4 of our 7 business are independently working with Hanwha Ocean on that program, bringing together complementary technologies and expertise. And we also expect to benefit from investment associated with the U.K.'s Atlantic Bastian initiative and wider NATO efforts to strengthen anti-submarine warfare and underwater infrastructure protection.

So overall, the pipeline of opportunities is strong, reflecting the patterns of growing global expenditure and the market relevance of our products and technologies. Next slide, please. So I'm almost coming to the end now. And as a final point, I wanted to summarize how we aim to generate value for our shareholders. First, as you've seen, we benefit from robust financial results, including strong cash generation and a healthy balance sheet. We remain focused on investing in areas that generate sustainable returns, prioritizing expenditure on research and development and on expanding capacity.

Across the group, we maintain and invest in innovations that address mission-critical customer requirements and reflect the security challenges they face in today's world. And we're also well positioned through our access to growth markets and have demonstrated our agility and responsiveness to geographical market trends. Our acquisition strategy has been an important contributor to shareholder value creation. We have a proven track record of acquiring high-quality businesses and integrating them successfully, identifying opportunities to collaborate across the group where appropriate.

And finally, we have a consistent dividend track record, having increased the dividend every year since IPO, and that reflects both the strength of the business and the Board's confidence in the group's long-term prospects. We move to the last slide, please. Before coming to a close, I wanted to take the opportunity to mention the great contribution to our success made by our management teams and employees across the group. And I'm grateful to all of them for the part that they've played in helping us to achieve these good results. It has been a successful first 20 years, and we look towards the future with confidence. And let me leave you with this extract from our preliminary statement. And also to say we'd be delighted to take any questions that you might have.

Great. Thank you very much, gentlemen. Very clear presentation and obviously, a very, very successful year. Lots of questions in already. I would encourage people to use the Q&A button to add any more, but let's get cracking. We've got a couple about Chess to start with. The first one says, you must have quite a lot of confidence in the demand for Chess' services to be investing a sizable sum of money. Do you have outlined realistic financial expectations as to what benefits might come from this consolidation of the physical assets?

Yes, I'd say a word about that. So the short answer is yes. We have a great deal of confidence in Chess' future revenue. I mean, this year, it's got the highest level of order cover of any of our businesses at over 90%. And it has a very strong tailwind of future demand and a very solid order book going forward. Chess has not performed as we would want it to perform this year. Its performance -- I mean it's been profitable, but really at a very low level. That is not because of the profitability at the gross margin level. Its products are really very good.

It's been a combination of some supply chain tightness that we've experienced and also some issues in -- and we highlighted this at the half year point some issues in operations and production delivery. Now that's one of the reasons that Chris Axcell has joined us as Chief Operating Officer. I know Chris is in the audience today rather than on the panel, but I'm sure he'd want to chip in at this point if he could. But Chris is very experienced in managing operational delivery in defense very successfully. And we also appointed last year, Andy Smith as the new Managing Director of Chess.

Andy and Chris both worked at Leonardo for a long period of time, although Andy joined us, in fact, from Marshall. But he's also very experienced in delivery. And so we're confident that with their expertise and the action that they're already taking that I outlined that we'll be able to enhance Chess' delivery. In terms of the new investment, well, of course, at the moment, we're leasing a facility and that lease is coming to an end. So the development -- the new facility will immediately give us a return on saving the rent that we otherwise have had to pay. But much more than that, it will enable much more efficient production as we're able to line up production facilities really from beginning to end in a single space.

We'll be able to organize test at the right points in that. And we'll have the ability by having more space simply to add more supply chains and multiply our capacity as is needed. And we do expect capacity to need to grow because we see a lot of demand for Chess' products. I hope that answers the question.

It does indeed and a good message. And perhaps following on from that, Simon, one for you, a question of what is the time scale? And when will the CapEx of GBP 15 million actually be allocated against the balance sheet for this project?

The time scale, the plan is that we should be into the facility in the early part of 2028. So that's '27, '28 financial year. And the spend will be over the next 2 years, probably around about GBP 10 million in this financial year and the balance in the second financial year. So sort of 2/3, 1/3 split.

Good. I think your microphone might just need plugging back in, Simon again there, but I think we got the basic numbers for there. Moving on, could you give someone a bit more detail on progress for the ELAC SONAR work for the Portuguese Navy on the submarine communications contract?

Yes. I mean, not a great deal. I mean that's really -- I'm not sure what we're thinking about here. I think if we're thinking about the submarine upgrade program, that is some years in the future before ELAC SONAR is likely to do that. They will be providing underwater communications equipment for the new vessels that the Portuguese Navy is acquiring. And these, as far as we're concerned, are very straightforward sales. These are well-established products. We've got a very efficient production line for them. So I would expect those to happen in a very straightforward manner. But these are -- they'd be relatively modest size. Unless Simon, you have anything else, I'm not sure quite what the question is referring to here. It might be a good idea to bail out and come back in again because I think your microphone is playing one of its tricks.

Right. I'll direct this one to you then, Andy.

Let's hope it's...

Looking at the defense investment plan, the DIP, we have a question, which of your subsidiaries are most aligned to its recommendations, particularly on developing hybrid crewed or unmanned fleets?

Okay. Well, it's -- 2 of our subsidiaries are most aligned with the U.K. generally. And those are MASS and SEA or I should add an MCL as well, but that MCL in a slightly different way. And I think of the U.K. businesses, it's SEA, which is most aligned with the defense investment plan and particularly the maritime aspects of it that I highlighted a moment ago. They've already been involved in Atlantic Bastian, which is one of the small number of projects, which did actually make some progress even in the absence of the defense investment plan.

So I'm optimistic that they will play a part in that. And when we look at the plan, the very ambitious plan to move towards a hybrid Navy, that is to say, more uncrewed vessels supported by a small number of motherships. Then what we see there is that the proportion of expenditure that goes on those -- that goes on the kind of systems that we provide, particularly SEA provides, but beyond that, things like communications, sensors for intelligence gathering, sensors for environmental awareness and weapon effectors as well. All of those things, a much higher proportion of the overall value of the platform will be spent on those things. And so we see that as a positive for us as well.

Great. And whilst we're talking about the MoD, you pointed out the very strong performance of overseas revenue providers. And that has brought the MoD-related revenues to about 40% of the group, which is historically quite a low level. So a question in here, which regions do you see today as having the most potential for genuinely strong growth in the medium term? Might it be Asia Pacific, might it be NATO, both of which you've got good order flow already or potentially even Canada is the question.

Yes, that's an interesting one. Well, all of the ones just mentioned are showing really strong growth. I think within them, there are particular countries that I'd highlight. Japan is a market that we're not doing an enormous amount at the moment, but is becoming increasingly open to European providers. So we've been providing satellite communications terminals into Japan. But some of the signals are that Japan is likely to become a more important market. So I'll pick out the fact that for the first time, they're actually exporting frigates, serious major service competence to Australia through the Mogami class, which indicates a new interaction with Five Eyes countries.

They joined -- they're part of GCAP, the very important future combat aircraft program. And all of these things indicate that Japan is recognizing that it needs to form alliances beyond its traditional alliance with the U.S. and so it will become a more open market. For the last few years, it's been -- there's been a DSEI exhibition in Japan, not as big as the one that's held in London every 2 years, but nevertheless, very substantial and itself an indicator of an opening up, and we'll be attending that next year. In Europe, I think particularly at the moment, it's those countries that see themselves as being most exposed to the Russian threat.

So the Nordics, the Baltics, Germany and Poland, particularly are increasing their investment. Germany is the standout. In the next few years, they'll be the largest defense spender in Europe. By 2030, they'll be spending more than the U.K. and France put together, a very important market for us, but those others are as well. And I couldn't -- shouldn't go past without mentioning Canada, which has traditionally not been a large defense spend, but now is both increasing its defense spend as it sees -- starting to see a threat from the south as well as the north. And perhaps not surprisingly in those circumstances, looking to widen its defense industry relationships as well. And we've actually set up a manufacturing facility in Canada as we've got a significant combination of orders and prospects there relating to the purchase of 12 new major combat vessels.

Great. Now I see you're back with us, Simon.

Hopefully it's fine.

That sounds much better. Right. We were going to land you straight in it with a question on counter unmanned aerial systems. So someone is -- curious if you're allowed to say for the CUAS business, you're presumably providing sensors to third parties who then supply a total package. Can you indicate what proportion of the end package cost to an end user Cohort might be providing?

We -- basically, the system is provided by Chess. The value per system, it varies depending upon the actual specification. But you're looking at a per unit value of somewhere around the region of GBP 220,000 to GBP 250,000 to GBP 260,000. That's the value to us.

Yes.

We don't know the final selling price, but that's going to be between 5% and 10%.

Very clear. We'll keep you while we got you, Simon. A question on margins between the 2 divisions. And obviously, at the moment, one division has much higher margins than the other. What will make that change and over what time horizon?

Well, one will change. Let's start with Communications and Intelligence, which was very strong margin over 20%. I expect that over time to drop back a bit probably, but not much, probably in the 19%, very high teens to 20% a year for the foreseeable future. And that's driven by primarily the MASS and EM Solutions businesses. It is the other division, Sensors and Effectors, where we need to get that moving from sort of sub-10% to mid-teens. And it is that which will then drive the group's net margin up into the mid-teens. And the plan is to get Sensors and Effectors hitting somewhere around 10% this coming year to move on from there. And my plan is that by 2030, the group should be delivering a 15% net margin. And the main driver, as I said earlier in my thing, the 3 factors in that will be the operational improvement at Chess, delivering on the Italian project and closing out some lower-margin projects at SEA. Chess is the main driver there. That's the real driver of it.

And going the right way, it seems, great. Nice simple question here. Are you presenting at the Farnborough Air Show?

Short answer, no.

.

We used to go there, but there isn't that much there for us is the short answer. And if you've ever had to undergo the bus journey from Farnborough North to the show, you'll know why we don't go if we don't have to.

That's a long answer, but totally understandable. Right. A question here on divisional or sort of subsidiary cooperation. EMS seems to have been integrated very well into the group and is working closely with other related subsidiaries. Can you remind us how the executive team promotes and organizes cross-selling and the sharing of contacts within the group?

Yes. All of our managing directors meet quarterly as far as possible face-to-face. All that's become slightly more difficult with some of them 12,000 miles away. But at those meetings, every MD provides a presentation to the others about what they're doing, what their opportunities are, what their challenges are. And that naturally lends itself to conversations about how they can work with each other. And we've seen that happening in a number of areas. Our very substantial Ancilia program where we're delivering missile defense for surface ships to the Royal Navy is a close cooperation between SEA, who's the lead and Chess.

And if we didn't own either company, we would be quite happily saying those would be the ideal partners to deliver this kind of capability because of the particular expertise that each has. We see a geography-based cooperation as being very important. So we -- people may have seen we recently had a substantial order for satellite communication systems from Portugal for our Australian business. And of course, our business based there in Lisbon will be able to support those hold spares, provide maintenance and so on. And that will be -- that's an absolutely natural relationship to have. And we see that going on elsewhere as well.

So what we don't do is force businesses to cooperate together. If there are better partners outside the group, then we say that those should be the ones you should find on the basis that 50% of something is better than 100% of nothing. And also that forced cooperation leaves wounds that can take quite a long time to heal.

Having a happy end client.

Indeed.

Right. Questions around -- well, you mentioned how important innovation is to the group and its success and mentioned some new products like ENLITOR and ERAZOR. I'm sure there's not a definitive answer on this, Simon. But we have a question, what is a reasonable expectation of time from a project or a product being on a design board to actually generating commercial sales? Is it 1 year, 2 years? Or could it even be longer?

It will vary. It will vary. I think in the case of ENLITOR and Andy, you're probably a bit closer to me, but -- to it than me. I think that from initial design to now being in proven trials has taken probably around a year, 18 months.

Yes. Something like that.

And in terms of commercial, that really now is more in the customers' hands and where they move forward, but we could see the first sales of it, I think, within the next year or 18 months. So you're looking at possibly 2 to 3 years for that one. Others take longer. Others are much shorter, particularly if they're customer-driven. If a customer wants a quick solution or something, he normally is putting the money up straight away. I mean, bear in mind that of our development money that we spend as a group, I think last year, we spent around about GBP 31 million across the group on development. Our own spend on that was around about GBP 8 million. The balance was paid for by customers, which tends to -- so you could argue that some of our development is paying for it as it's being done.

Very sensible model. Right. Question on M&A, if you're capable of expanding on it. Could you identify which preferred areas of technology, technological expertise the group would most like to add into its current structure in the medium term?

Well, we are making some efforts to look at it that way. And there certainly are some areas that might be interesting, and there might be some candidates in them. I mean, as you can imagine, the experience of conflict of very intense conflict in Ukraine has done an awful lot to evolve technology and also evolve tactics and the use of technology. And that's generating some very interesting insights. But one has to be very careful with all of that. I mean, at the moment, you're seeing almost a sort of mini boom in terms of valuations of counter-drone companies, not particularly operating in the area that we do, which is sort of midrange use of mid-caliber weapons against drones.

I mean there, there's a very clear leader in the market, and that's the -- that's the business that we're associated with. But in terms of short-range radio frequency attack of drones, all sorts of strange ideas. There was one I saw in Eurosatory a few weeks ago, which had drones actually flying out with nets and dropping them on other drones in order to catch them, which struck me as quite elaborate, although one can understand why one might want to avoid bits of debris falling on the center of cities and things.

So there's an awful lot of players in that market with a lot of quite similar technology. The same would be true of first-person view drones and autonomous attack drones where a lot of people are developing very similar software to do that kind of thing. So we're not really interested in being an also ran in an area where many people are developing the same kind of technology. We'd much rather find a niche. And EM Solutions would be a good example of that, where there's some growth opportunity, where the niche is small enough that it doesn't attract the attention of the Lockheed Martins of the world and where we're able to show a bit of technical leadership compared to those competitors that are in there. So that's the kind of thing that we're really looking for.

Yes. Sounds very sensible. All right. Just a couple more questions. One on capital allocation and someone congratulates you on the long-term visibility of your order flow out to 2037. And I'm curious in the light of that, how regularly does the Board consider adjusting its plans for future capital allocation, the division between R&D, capital spend, dividends, shareholder returns and residual capital. Are you constantly looking at what is sitting in the order book 5, 10 or 15 years further down the road in making that decision?

Well, I think I might ask Simon to comment on this, but let me just first say that, yes, we've got a lot in the order book going out to 2037. But actually, the majority of what we'll be generating in 2037 has yet to be won. So we expect to see future growth looking at the markets and the opportunities that we have in front of us at the moment. And I think it would be a bit reckless of us to predict with sort of decimal point accuracy what our cash flow is likely to be like in 2037. What I would say is that the Board does regularly review capital allocation, particularly in the context of dividends and in the context of investment internally. We tend to do it on the basis of individual investments. And of course, with acquisitions, that's the way we do it. We don't decide at the beginning of the year, we're going to spend this much on acquisitions. It's very much about opportunity. But Simon, is there more you could say about that?

No, no, I would say you're absolutely right, Andrew. On the M&A, we don't set out at the start of the year and say we will spend x on M&A. It just doesn't happen because we don't know what's going to turn up and what it will be. But what we can say at the start of the year as we do our budgeting and strategic processes is what we plan to spend in terms of capital and product development. Now that doesn't mean it's fixed because people will come up with ideas as things move, the world changes. But so if you look at that in that forecast where I said about approximately GBP 60 million being spent in the next 3 years, that's based on our current budgeting and plans.

Now if everything goes to plan, that's what we'll spend, but things will change. I think the Chess CapEx will happen. But in terms of innovation, we may find some of the businesses find that the innovation plans they have will change. That may require less spend or more spend or possibly customers coming in at an earlier point to fund it. So rather than us paying -- so effectively, that spend moves out of that line into the top line of cash generation. The dividends, well, as I said earlier, that's on the -- on our progressive dividend policy approximately of a 10% uplift per annum, which we've been doing for the last however many years it is quite a long time. So that's -- those 2 numbers are somewhat, I would say, not baked in, but they're fairly predictable. The one in the middle, that's the one I can't predict.

Yes. Well, that's a very neat intro to the final question, which definitely requires a crystal ball. So I'll see which one of you are going to take it. We have a question or a statement that the U.S. President recently showed off a map, which included both Canada and Greenland under the stars and the stripes. Do you fear for the future of NATO, gentlemen?

Well, I think if one took everything that the U.S. President said at face value, one would fear for one's sanity. I think that we -- I think NATO is a very solid alliance. We have to plan for a reduced U.S. presence in Europe and a reduced U.S. commitment to NATO because those signals have been very clearly sent. And one doesn't have to have a crystal ball to see that the U.S. looks West rather than East when it sees the greatest challenge to its economic prosperity and security. So Europe has to respond to that, and Europe is doing. At the moment, it's responding very strongly in terms of defense spending. I think it's going to have to respond to it in terms of institutional arrangements as well.

I think we're going to need a stronger European wing of NATO. But NATO is the most persistent longest, most successful military alliance in history. And I think it's withstood many a challenge and will withstand this one.

Yes. Yes, very wise words to conclude with. So I'd just like to thank the audience for their good range of questions. And please don't log off immediately when this closes because you will be receiving a feedback form, which the company is naturally very interested to hear your thoughts upon. Our strong thanks to Andy and Simon for the excellent performance and for making the time to speak to all of the investors. And of course, 20 years unbroken dividend, we wish you the best of luck in extending that many, many further years going forward.

Thank you very much indeed, Andy.

Thank you all. We're still live, Andy. So I'll just close this off, which it's reluctant to do. So I'll just say goodbye and thank you now and pick up later on.

All right. Thank you very much, Andy.

Okay. Well, good morning, everybody, and thank you very much for those joining us in the room and for those joining us virtually as well. I'm Andy Thomis. I'm the Chief Executive at Cohort plc, and I'm here with Simon Walther, who's our Finance Director. Cohort provides advanced defense technologies and services to the U.K. and allied nations worldwide. And Simon and I are here to present our latest financial results and to explain the innovation, geopolitics, market drivers that support our growth.

Now there we are. Cohort's businesses share a common purpose, which is developing advanced technologies that contribute to our customers' national security and defense. Each of our businesses brings its own specialist expertise. Collectively, they deliver innovative solutions that help customers address increasingly complex operational challenges. Operating through our Communications and Intelligence and Sensors and Effectors divisions, we offer a broad range of capabilities, as you can see from this slide. We'll say more about demand patterns, but I'll highlight counter drone, anti-submarine systems and seabed warfare as areas that are clearly relevant to the needs of defense customers today.

As a background to the results, I thought it would be helpful to show you Cohort's total shareholder return since our IPO 20 years ago this year, and it's benchmarked against both the AIM All-Share Index and our peer group of U.K.-listed defense firms. Over the period, as you can see, Cohort has significantly outperformed the broader AIM market and delivered returns ahead of our peer group. Now while there has naturally been some share price volatility during the period, the overall trend is of sustained growth underpinned by strong operational performance, increasing order intake and since 2022, a favorable defense spending environment.

The sharp acceleration you can see from 2024 onwards reflects growing investor recognition of Cohort's market position and the opportunities arising from increased defense and security investment across the U.K. and allied nations. And what this shows is that we've been able to create value consistently for shareholders over a long period through the successful execution of our strategy.

This slide shows in more detail how we've delivered that shareholder return. The chart on the left shows the progression in adjusted operating profit since 2006, a relatively modest base. We've steadily expanded the business through a combination of organic growth underpinned by investment in both technology and capacity and strategic acquisitions. Despite periods of economic uncertainty and changing geopolitical conditions, the overall trajectory has remained strongly upwards, culminating in the record performance that we've seen this year. The chart on the right demonstrates our commitment to delivering value to shareholders through our progressive dividend policy. Since 2006, the dividend has increased every year, reflecting both the resilience of our business model and the confidence that we have in the group's long-term prospects. Together, these trends highlight the strength of Cohorts strategy, the quality of our businesses and the growing demand for the specialist defense and security capabilities that we provide. This year's results represent the continuation of a long-established track record of profitable growth and increasing shareholder returns.

This slide shows the financial highlights of our '25-'26 financial year. And it was another outstanding year for Cohort, delivering record revenue and record adjusted operating profit. That revenue has continued to increase now over GBP 306 million, and our operating profit has grown this year by 32% to more than GBP 36 million. Demand for our products and services remained robust throughout the year, and I'm pleased to report an order intake of GBP 314.2 million, exceeding our revenue, and that brought us to a year-end order book of nearly GBP 620 million. And that provides excellent visibility of future revenues with contracted work extending out to 2037.

As expected in the year as a whole, operating cash flow and net funds were lower than the exceptionally strong levels reported last year, primarily reflecting working capital movements and investments associated with the growth of the business, about which we'll have more to say. Nevertheless, the group remains in positive net funds and continues to maintain a strong balance sheet. And we're pleased to recommend again a full year dividend increase of 10% to 17.9p. And that reflects the Board's continued confidence in the group's prospects.

And now I'd like to invite Simon to share some more details of our financial performance. Simon?

Thanks, Andy. Good morning to you all. I'll move on. Now this slide highlights the performance of our divisions, Communications and Intelligence and Sensors and Effectors, both of which continue to benefit from strong and growing demand across their respective markets.

Starting with Communications and Intelligence. Revenue increased by 27% to GBP 158.9 million, while the adjusted operating profit rose by more than 50% to GBP 32.4 million. The operating margin improved significantly to 20.4%, reflecting strong program execution and a favorable mix of higher-margin activity. During the year, the division secured several important contract awards, including integrated communication systems, networks and satellite communication systems for the Portuguese Navy. We also continue to see strong demand for drone capability, resulting in significant contract wins with the U.K. MoD.

Turning to Sensors and Effectors. The revenue for this division was relatively flat at GBP 147.5 million. Profitability was below last year, mainly a result of the disposal of our high-margin noncore transport business earlier in the financial year. The order book and the pipeline for this division gives us confidence that it will grow in the coming year and improve its net margin with improved operational performance at Chess, the first deliveries of sonar systems for the Italian submarine project and closure of low-margin projects at SEA.

The combined offerings of our Communications Intelligence and Sensors and Effectors businesses remain a key strength of Cohort, providing both resilience and exposure to a broad range of markets, defense markets and security capability requirements across an international customer base.

Moving to the net funds bridge. You'll see it's been quite a swing this year. We moved from opening net funds of GBP 5.3 million to net debt of GBP 32.5 million at the half year, primarily due to significant working capital outflows associated with the execution of major programs. As expected, the second half improvement was much improved, generating an GBP 18 million -- or over GBP 18 million working capital inflow alongside strong profitability. Consequently, the group returned to a positive net funds position of GBP 2.2 million at the year-end. This demonstrates that the movements in cash were largely timing related and that the underlying business remains strongly cash generative.

We move to the next slide. This gives you the last five years of the group, and you can highlight the capital allocation. So we've generated GBP 142 million of cash from operations, providing the flexibility to invest in future growth while continuing to deliver returns to shareholders. In those five years, we invested approximately GBP 60 million organically across the business, including the completion of our state-of-the-art manufacturing facility in Kiel, Germany, investment in KraitSense and the development of our ENLITOR and ERAZOR technologies in response to increasing demand for undersea infrastructure protection. These investments strengthen our position -- sorry, strengthen our capabilities, support innovation and position the group for future growth. Alongside organic investment, we deployed just over GBP 40 million on acquisitions, net of funds raised, completing the EM Solutions and Interactive Technical Solutions transactions. These acquisitions have expanded our technology portfolio into satellite communications and broadened our regional growth opportunities, particularly in Australia and Asia Pacific markets.

We are pleased to have maintained our commitment to shareholder returns, distributing GBP 30 million through dividends over the last five years. Overall, this allocation of capital reflects our strategy of investing for growth while maintaining a strong balance sheet and delivering growing returns to shareholders. And looking forward, we enter this financial year '26, '27 with a strong level of visibility supported by an order book that already underpins 88% of our expected revenue for the year. Combined with an encouraging pipeline of opportunities across our markets, this gives us confidence in our growth outlook. As we look towards 2030, our strategic objectives remain unchanged. We continue to target a net margin in the mid-teens and expect to deliver double-digit percentage earnings growth per annum for the coming year and the two years after that through a combination of organic growth and operational leverage, improving our net margins.

The chart on the right illustrates our three-year capital allocation framework. We expect to generate approximately GBP 140 million of cash from operations. Of this, around GBP 60 million will be reinvested in the business to support organic growth initiatives, including GBP 15 million in a new facility at Horsham for Chess, which should be completed in early 2028 and enable increased capacity to meet demand and improved efficiency to achieve the mid-teen margins. It also includes spend on innovation and future capability development.

After this planned investment, we expect around GBP 80 million of cash generation to remain available. Assuming the continuation of our progressive dividend policy, we anticipate returning approximately GBP 30 million to shareholders through dividends over the coming three-year period. This leaves around GBP 50 million of available funds on top of which we have a significant new bank facility. Together, these provide significant flexibility to pursue value-enhancing opportunities, including strategic acquisitions whilst maintaining a strong balance sheet. Overall, our guidance reflects both confidence in the underlying performance of the business, a disciplined approach to capital allocation that balances investment, shareholder return and future growth opportunities.

With that, I'll hand back to Andy.

Thank you very much indeed, Simon. And before we move on to the strategic context, I wanted to highlight some operational initiatives that we've taken in the last year.

So, earlier this year, we appointed Chris Axcell as the group's first Chief Operating Officer. And Chris is here in the room with us. So if you have questions of an operational nature to ask later on, I shall throw them in his direction. Chris joins us from Leonardo U.K., where he held multiple technical and leadership roles, including Vice President, Surveillance and Protection Technologies, Vice President, Sensors and most recently, Senior Vice President, Integrated Sensing and Protection, where he was responsible for two of Leonardo U.K.'s major facilities. He brings extensive experience and expertise in managing business operations within the defense sector and adds deep industry knowledge and values to the group's headquarters team. And as Chief Operating Officer, Chris will work alongside Simon and me to provide oversight and strengthen operational performance across the group. He'll also take over from me the day-to-day relationship with certain of our operating businesses and support me more widely across the range of my responsibilities, including, for instance, identifying acquisition targets. And Chris' appointment has enabled us to take several initiatives with the aim of enhancing our operational performance. So we've launched under Chris' leadership, a group forum for engineering operations and supply chain teams, creating opportunities to share best practice, to solve common challenges and to leverage the collective experience of our businesses. And we now plan to create a project management forum, again, under Chris' leadership, further strengthening program delivery across the group. And that will include the introduction of a group-wide project life cycle framework to provide a consistent approach to bidding, project execution and governance. And in addition, we're introducing integrated project teams at Chess, bringing together the key disciplines required for successful delivery under a single structure. And this approach is improving accountability, decision-making and program execution, helping to drive on-time delivery and customer satisfaction. And we're also, as Simon has mentioned, about to invest around GBP 15 million, moving Chess from its current 13 buildings in Horsham to a single new facility that will make a big contribution to its operational efficiency. And collectively, these initiatives are enabling us to enhance our operational capability right across the Cohort group.

So in this next section, I'd like to share with you some of the strategic highlights from the past 12 months and to talk about the outlook for future years. The three components of our strategy are to grow organically, to accelerate that growth through targeted acquisitions and to maintain sound culturally rooted governance to underpin that growth. And in terms of capital allocation, that translates into two areas: internal investment in new products, technologies and facilities and external investment in acquisitions.

So this slide focuses on the first of those two areas, how Cohort continues to invest in technical innovation that provides solutions to the defense challenges facing our customers. Our KraitSense towed array sonar is a key anti-submarine warfare capability designed for both crewed and uncrewed platforms. And the focus is on delivering a flexible, modular and scalable system with a small footprint, lightweight and low power requirements. And that unique combination of features makes it particularly suitable for a wide range of naval customers and platform types. And demand is increasing, especially for cost-effective anti-submarine capabilities based on uncrewed vessels as Navy seek to expand maritime surveillance and deterrence.

And staying with the underwater battle space, we're developing two complementary products, ENLITOR and ERAZOR to protect underwater infrastructure. ENLITOR is a passive underwater surveillance system designed to provide persistent monitoring of undersea infrastructure. And working alongside ENLITOR, ERAZOR provides an active countermeasure designed to enable threats to be intercepted and neutralized.

And then as a third example, in satellite communications, we're progressing development of combined optical and radio frequency terminals. Now this technology integrates traditional radio frequency communications with high-capacity lasers within a single antenna system. And the approach has got the potential to deliver greater bandwidth, resilience and operational flexibility, supporting future defense satellite networks. The laser communication system, although it's limited to use in suitable atmospheric conditions, is effectively unjammable, which is a vital capability in time of conflict. So together, these technologies address the evolving needs of defense customers as they respond to growing risks and the changing nature of conflict.

The second area of strategic investment I wanted to highlight is acquisitions. Over the years, since our IPO, we've executed seven major transactions. There is always risk associated with acquisitions, but our industry knowledge and our experienced team have enabled us to manage these with some success, as I think this slide demonstrates. I'll particularly highlight our very first acquisition, MASS, which last year generated operating profit of almost GBP 11 million, not far short of the GBP 13.5 million purchase price. And our most recent acquisition, EM Solutions, also showed a material improvement in performance after just one year. Now we haven't executed any new acquisitions in the 2025, '26 financial year, although we do continue to see a steady flow of opportunities. And we review those carefully against our criteria. We're looking for successful, profitable defense technology businesses of the right size and with a culture of innovation and agility. And beyond that, we're looking for exposure to growth opportunities within the overall defense market and some kind of sustainable competitive advantage based on technology, incumbency or historic relationships. And over the last 20 years, our acquisition strategy has been a driving force in the growth of the group, and we expect that to continue into the future.

Now we continue to see a strong demand picture in response to the deteriorating security environment and ongoing conflicts that we see around the world. And none of us should welcome that. The risks that we now see coming from that are real, and I'm sorry to say that they have the potential to affect us here in the United Kingdom. And in regions where threats are perceived as being the most pressing, governments are under pressure to upgrade and modernize their defense capabilities at speed. And this is where mid-tier businesses like those within the Cohort group have the agility and expertise to provide innovative solutions to those defense challenges.

In 2025, global defense spending reached USD 2.63 trillion. And that growth reflects an increasingly uncertain geopolitical environment and a widespread reassessment of national security priorities by governments around the world. The chart shows the way that defense expenditure has grown since 2021. It excludes Russia and China. And as is clear from that chart, you can see that the United States remains the largest single defense spender, but also that the fastest growth has come in Europe and in Asia.

In Europe, the driver is clearly the continuing intense and bloody conflict in Ukraine. And as well as driving increased defense spending, the conflict has highlighted the importance of sea, air and land drones for a range of tasks, including reconnaissance, strike and logistics. It's also highlighted the importance of air and missile defense systems.

The U.K.'s recent defense investment plan includes a strong focus on maritime capability to protect the North Atlantic region from Russian submarine incursions and interference with underwater infrastructure and uncrewed vessels will play a major part in those plans.

In Asia, Chinese investment in its armed forces, together with its increasingly aggressive use of its Navy and Air Force have catalyzed strong growth in defense spending, notably in Japan, Taiwan, Australia and the ASEAN nations. And although China is increasing spend in all areas of its defense, its threat to its neighbors is significantly maritime in nature, both on and below the sea surface.

The continued instability in the Middle East, including the conflict between U.S., Israel and Iran and the consequent regional security concerns is also driving increased demand for defense technology, in particular, for communications and intelligence solutions.

Now these trends align closely with the capabilities that we have in the Cohort group in communications, intelligence, cyber, electronic warfare, sonar, maritime systems and counter drone technologies. And that provides us with a really supportive backdrop for long-term growth.

Now this slide highlights the strength and diversity of Cohort's geographic exposure and importantly, the alignment of our business with regions where defense spending is expected to grow most strongly over the coming years, as I've shown you in the previous chart.

So what this shows is a comparison between 2024, '25 revenue, '25-'26 revenue and the revenue that is held in our order book, breaking it down by percentage regionally. And the most striking features that you can see are the growing proportion of our output going to Europe and Asia Pacific with the proportion going to the U.K. and Australia reducing. Now the increases are in line with the international demand patterns that I've described. But in Australia, we're delivering our existing order book really quite rapidly, but we expect that to be supplemented by some large opportunities in the next few years. In the U.K., it's too early to say exactly what the consequences of the recent defense investment plan are going to be, but there may be a less rapid falloff in the proportion of our work going to the U.K. if the new Prime Minister follows through on promises to increase defense spending further.

Looking at the order book revenue, the third column, what's particularly encouraging is that it's diverse, well balanced across regions and closely aligned with those markets where defense spending is increasing most rapidly. The U.K. remains an important source of revenue, but the trend illustrates our ability to tap those markets where spending is growing most rapidly.

Now this chart shows a similar comparison between '24/'25, '25/'26 and order book revenue, but this time, broken down by end user domain. And you can see from here that maritime remains our largest domain and has grown as a proportion of group revenue over the last year. And the trend is even more evident in the order book, where maritime programs account for almost 80% of contracted future revenues. And that reflects the long-term nature of maritime defense programs, which provides strong visibility and support sustainable growth over many years, in this case, out to 2037. And our land domain work is also very strong and long term. Now those proportions represent our technical strengths, but they also are a function of the demand patterns that I've described in Europe and Asia. Our cyber and information work is important, but the small proportion that's there in the order book represents the relatively short-term nature of contracts in that area. Air and space work remains substantial, but the other category, which you can see as a thin layer on top of '24, '25 and '25, '26 has almost disappeared following the sale of our transport business last year.

Overall, we expect that future revenue will include a healthy balance of long-duration maritime and other contracts, supplemented by shorter duration orders in areas where agility is at a premium. And that long-term base of on order revenue is an excellent building block on which we can build our future growth.

Now this slide, which many of you will be familiar with, gives more detail and a breakdown of that important order book. On the 30th of April, the value of the order book stood at over GBP 618 million. And as I mentioned, that includes contracted revenue that will be recognized out to 2037. And of the total order book, approximately GBP 264 million is scheduled for delivery this year, providing us with very good revenue visibility. And importantly, that's balanced quite well across our two reporting segments with Communications and Intelligence contributing GBP 128 million and Sensors and Effectors contributing GBP 136 million. And looking further forward, a substantial proportion of the order book extends into later years, reflecting the long-term nature of many of the programs that we work on. And that includes around GBP 132 million that's scheduled for delivery beyond the '28-'29 financial year.

And overall, that runoff profile highlights both the quality and the longevity of our order book. It provides strong revenue visibility, supports confidence in our medium-term outlook and gives us a solid platform from which to pursue further organic growth and new contract wins.

And now above and beyond the order book and across both divisions, demand remains strong and is being driven by those same geopolitical and defense spending trends that I've spoken about. Within Communications and Intelligence, we continue to see significant opportunities for electronic warfare and secure communications, particularly in Europe, where lessons from the conflict in Ukraine continue to shape procurement priorities. And we're also pursuing major naval satellite communications opportunities in both the U.K. and Japan, while our electronic warfare and operational support capabilities are gaining increasing traction in export markets, including the Middle East. The Portuguese Navy program provides an excellent example of how multiple cohort businesses can work together to deliver integrated solutions combining communications, networking and SATCOM technologies. Within Sensors and Effectors, we see a substantial pipeline of opportunities for counter drone systems through established partnerships. Demand is also growing for technologies that can detect, monitor and protect critical underwater infrastructure, reflecting increased concern around maritime security and seabed protection.

We continue to see strong opportunities for our sonar and sensor technologies as submarine and surface fleet modernization programs progress across a number of international markets. And programs such as the Royal Thai Navy's new frigate demonstrate the benefits of collaboration across the group, bringing together complementary technologies and expertise. And we also expect to benefit from investment associated with the U.K.'s Atlantic Bastion initiative and wider NATO efforts to strengthen anti-submarine warfare and underwater infrastructure protection capabilities. So overall, that pipeline of opportunities is strong, reflecting the patterns of growing global expenditure and the market relevance of our products and technologies.

So as we come to the end of the presentation, I wanted as a final point to summarize how we aim to generate value for our shareholders. First, I mean, the business benefits from robust financials underpinned by strong cash generation and a healthy balance sheet.

We remain focused on investing in areas that generate sustainable returns, prioritizing expenditure on research and development and expanding our capacity. Across the group, we maintain and invest in innovations that address mission-critical customer requirements and reflect the security challenges they face in today's world, as I hope I've shown you this morning.

We're also well positioned through access to growth markets and have demonstrated our agility and responsiveness to geographical market trends. Our acquisition strategy has been an important contributor to shareholder value creation.

We've got a proven track record of acquiring high-quality businesses and integrating them successfully, identifying opportunities to collaborate across the group where appropriate. And finally, we have a consistent dividend track record, having increased the dividend every year since our IPO 20 years ago. And that reflects both the strength of the business and the Board's confidence in the group's long-term prospects.

Before closing, I want to take the opportunity to mention the great contribution to our success made by our management teams and employees right across the group. I'm very grateful to all of them for the part that they've played in helping us achieve these good results. It has been a successful first 20 years, and we look forward to the future with confidence.

And let me leave you with this extract from our preliminary statement, and we'd be delighted to take any questions that you might have. So questions, please? Yes.

Joe Spooner from Shore Capital. How well advanced are the plans you have in place for the new facility for Chess? Are things like the new sites secured and identified? And to what extent have just the physical 13 sites you've operated contributed to the problems that you've had in that division?

Thanks, Joe. Yes, so we're progressing with the plan. The site is identified. Planning permission discussions are underway, and we've reached a potential agreement with the seller subject to all of the usual conditions precedent. So yes, that's proceeding pretty well.

In terms of the current situation at Chess, well, we've gradually -- I mean, we started or Chess started in just one facility in that site at Horsham, and it's gradually expanded to fill pretty much the entire site. And as I said, that's 13 buildings. And you can imagine, I mean, it works well enough overall. The buildings are split into different functions. But as you can imagine, it involves transporting equipment between buildings, potentially out in the open and in the rain over ground, which isn't quite as flat as it might be. And inevitably, that does cause issues. And the fact that people aren't all under the same roof and readily available to speak face-to-face to each other is a disadvantage, too.

So combined with the very strong and growing demand that we're seeing for Chess' products, we think it's absolutely vital to move to a facility which offers greatly improved operational efficiency.

And then on one of the slides talking about the cash flow outlook, you spoke about GBP 60 million of organic investment. There's GBP 15 million in the Chess facility. I think business as usual CapEx might be GBP 20 million to GBP 25 million over that time frame. What's the kind of the missing piece in that, that you also plan ahead?

Let me invite Simon to comment on that.

Joe, that will be the private venture research and development that we would spend. Bear in mind that we spend around -- I think last year, we spent GBP 30 million actually on identified R&D, of which our customers are kind enough to fund sort of north of 70%, 75% of it. So that is really our investment in absolute things like ERAZOR and ENLITOR is where we're spending money and things like KraitSense. So there, we're doing our own money rather than the customer necessarily funding. Obviously, targeting customer needs. We won't be doing it just for the sake of something new.

Actually it's worth mentioning that a lot of that is expensed rather than any sitting on balance sheet. We don't generally capitalize R&D, except in a few very limited circumstances.

Hence why I sometimes refer to as cash after R&D spend before cap because CapEx, obviously, I put on the balance sheet and then amortize but not R&D.

And just a final one, if I may. On the Sensors and Effectors division, I think the margins there were about 7% in this period. You talked about in excess of 10% or greater than 10% for the year ahead. What are the moving parts there? And is Chess, I guess, still the key risk in that?

Yes. Chess does remain the key risk. It also remains the key factor in driving that net margin up. As I said in my commentary, the other factors will be delivering the first Italian boat set, which hopefully will enable us to look at the risk on that program. And the third is SEA sort of closing out some legacy low-margin projects. But the real driver is Chess moving from a sort of pretty much a breakeven position up to a decent return in the next year or two and then onwards from that. part of that, it's got the demand. It's got the order book. It will have the facility sort of back end of '27, early '28, but we'll be doing that before then. That really will then drive the efficiencies that we expect to see.

David Farrell from Jefferies. A couple of strategic questions. In the presentation, it seemed -- you talked quite a bit about kind of collaboration across businesses, group-wide frameworks, et cetera. Looking down the line, is there a scenario whereby the businesses actually get brought together under single leadership and don't operate as stand-alone entities?

Not in the foreseeable future is the answer, David. I mean there's always a calculus where you have to stack up the benefit -- the efficiency benefits that you can gain from having combined HR, marketing, engineering teams and so on versus the lack of agility and responsiveness that, that gives you. And combining our resources in that way into an integrated business, apart from being an incredibly painful process in itself. And if anyone observed Ultra Electronics as it went through that, I think it took them three chief executives. So I'm not in a hurry to do that. It's actually been a basic operating principle that we aim to have midsized responsive, agile, innovative businesses that are able to meet defense needs. Now we're not trying to build the next nuclear submarine. So we don't need 20,000 engineers marching in perfect step. What we're doing is building the things that will make that nuclear submarine useful when it gets to do what it needs to do. And that -- and our size of businesses are much better geared to doing that.

Okay. You obviously mentioned kind of with Chris' arrival, it frees you up a bit more time to kind of look at M&A. From a kind of optics perspective, what should we look out for? Is this a greater cadence of deals? Is it pushing the envelope on where those kind of deals are? What's the output that you're looking for in terms of delivering more on the M&A?

Our M&A activity is not driven by a lack of internal resource or lack of opportunity. I mean, essentially, it is finding those businesses that will really fit with us and will enable us to do the same as we've done with ELAC and with EM Solutions. And there aren't that many of those around.

What Chris' arrival does is provide us -- I mean, aside from the specific expertise in operations, provides us with much more senior level bandwidth, executive level bandwidth in the headquarters team, which will enable us to grow the business further. So out to several more businesses, for example, before we need to do that again.

And sorry, final question. When you provided the kind of the breakdown by order book and revenue by geography, you kind of flagged Australia as kind of reducing in size. Is there a potential whereby EM Solutions has a bit of an air pocket in terms of orders and doesn't show continuous growth from here? Or I'm just thinking in terms of the margin profile and mix in that division, are you kind of sub flagging that, that could potentially be a risk?

Nothing is certain in this world, and I have no crystal ball. And naval programs are known for being a bit on and off until they're finally on. But actually, EM Solutions has got a really strong set of opportunities. So I mean to sort of flesh that out a little bit. At the moment, they're on contract for providing pretty much the entirety of the existing naval fleet with satellite with its satellite communications antennas. But the Australian fleet is growing significantly. We're getting the new Hunter class, which is the equivalent of the Type 26 frigates coming in. We're getting a number, I think, 11 new Mogami-class frigates, which are being bought from Japan. The first one is coming in just a year or so. And we're -- they're also investing significantly in landing craft, which sound like sort of large bath tubs, but in fact, a bit more like RoRo ferries. So all of those are going to need satellite communications. And the Australia has made a commitment to using EM Solutions for that. And that's on top of all of the European and potentially Japanese demand that we see. So no, I think EM Solutions has got a good future.

Ben Varrow, RBC. First one, just on growth for this year. Consensus is around 5% top line. Are you able to break down some of the key drivers to that?

Yes, I can answer that. I mean the growth actually, yes, 5% is probably -- with 88% cover, one would assume that's reasonably prudent. My risk is delivery, not infill. I've taken the view over the next few years that as you've seen the charts that Andy showed, we've got good demand in export markets in some of our domestic markets. Portugal has woken up. Australia will continue to spend. Germany, obviously, is an incredibly strong defense market at the moment. So I'm seeing probably expecting more than double-digit growth in some of our export markets over the next few years.

To balance against that is the U.K. I'm not saying the U.K. is not shut, it is doing business. But you can see it's still 40% of our group revenue and will remain still a significant part of our group revenue. A couple of our businesses are very reliant on the MoD. But I'm not expecting the sort of growth we're seeing at the moment in export markets in the U.K. So when you bring the two together, I would thought our revenue growth are probably around the sort of high single-digit percentage per annum for the next few years is reasonable. So that's my thoughts on it. I mean what I can't tell you is it's going to be here, there.

Next one, coming back to Chess. Obviously, still some operational challenges at least based on the prior year. I guess what gives you confidence to put GBP 15 million into the business when we at least haven't seen the uptick in the margin yet?

The strength of demand is the answer from two of Europe's largest defense contractors, in fact, are Chess' customers. And we're seeing a very strong demand pattern from both of those driven by end customer purchases. So we see very good prospects for Chess.

And obviously, that's with a certain customer, has there been any development there in terms of signed orders? Or is that more still sort of prospective at this stage?

I think we are getting a steady stream of orders from one major European customer, in fact, from both of the major European customers that I've mentioned. I mean, not sort of enormous multi-hundred million simultaneous orders, but a steady stream of smaller orders.

Last one on Saab, someone has to ask it, sorry. Obviously, they've announced a fixed order there a couple -- a few weeks ago. Anything else you can share on that for the time being?

Not much. I think if we were to be successful in supplying Saab with sonars for that submarine program, we would announce it at the time. Further questions? Yes, Andy.

Andy Edmond, Equity Development. Just a couple. Going back to investments in new products, and Simon said you're not waking up one morning and just thinking you're going to build something. But with ENLITOR and ERAZOR and other things coming along, can you talk a little bit about how involved potential end clients are in your areas where you select to invest in the technology?

Well, we're very involved. I mean that has a very significant impact on our choices about product development and technology development. So Ancilia would be a good example of that, which was a result of close dialogue with the Navy over an extended period, which resulted in SEA developing a prototype missile protection system for use by surface ships. And that then was the key to them winning that significant program. ERAZOR and ENLITOR, in those cases, are the result of very close conversations between ELAC SONAR and the German Navy, which, as you can imagine, in the Baltic Sea, there's a lot of underwater infrastructure to protect even apart from the bits that the Ukrainians haven't already blown up. So yes, I mean, it's all about understanding customer need and what their priorities are and how they intend to solve those priorities.

Yes. That makes perfect sense. Has it changed since the Ukraine one of the great strengths of Cohort is its speed and agility to respond. So is there more input coming from the sovereign clients, as you mentioned, they need to satisfy needs quickly as well?

Yes. And very much so in very obvious ways like the need for counter drone and so on and air and missile defense and in sort of more subtle ways about the way that things are being used, techniques, tactics and so on. And we respond to that, making the use of the capabilities that we have and identifying niches where we can be most effective. I mean we're not going to be knocking out 20,000 drones a month. But there are plenty of areas, for example, on uncrewed naval vessels, both on the surface and under the sea, where we can provide sensors, communications and other technology, which are really vital to those capabilities.

And then I am sitting next to Chris, so it would be rude not to involve them. But normally, I ask Simon one or two silly questions about supply chain and risk. But Chris, if I could ask you, first of all, what attracted you to Cohort? I hope you're enjoying it, which I'm sure you'll say. And then secondly, looking at critical materials, logistics, all of which are suffering from the same woes of the world as defense and geopolitical disturbance and how important, I saw it mentioned on your slide, is that going to be going forward?

Yes. So firstly, sort of I am enjoying the first few months. Thank you. So it's been very positive. I've been around all the businesses and had a chance to meet everyone and get under the skin of it.

Yes, as you say, in terms of supply chain, yes, it's very important, particularly at Chess where we're focusing on improving the output. And it's a lot really about just gearing up for sort of multiple sources of supply, strengthening the sort of MRP systems, the planning. And as Andy and Simon said, in concert we're doing with the investment in the new facility, it's just restructuring it and sort of increasing that planning and pipeline of material to be able to deliver. So it's -- yes, it's very positive. Nothing we need to do is sort of beyond the wit of man. It's just spending the time to put that sort of structure in.

Okay. Thank you. Further questions? Do we have any questions online? Okay. Well, thank you, everybody, for coming in this morning. It's been a pleasure to talk to you. Thank you.

Welcome to everybody who is joining. Right. I think we've got a reasonable number now. So just a little bit of administration first. This presentation is being recorded, so you will get a chance to listen to it again. And I hope that you are all familiar with how to use the Q&A button to put questions into the management, they will give their presentation, and then we'll try to address them all later on. We're very pleased to welcome back Andy Thomis and Simon Walther for the presentation, and I am now going to pass over to Andy to start it off.

Andy, thank you very much indeed. And good afternoon to everyone. Thank you very much indeed for joining us. As Andy said, I'm Andy Thomis, I'm the Chief Executive at Cohort plc, and I'm here with Simon Walther, Cohort's Finance Director, to take you through the results for the 6-month period that ended on the 31st of October last year. By way of introduction, Cohort is a group of 7 businesses providing technology-based defense products and services to the U.K. and its allies around the world. Our business model aims to maximize the autonomy and independence of our businesses, consistent with good financial and regulatory governance. And that means that decisions are taken quickly and close to the customer. It maximizes agility and innovation while supporting our businesses with a strong balance sheet and market reach of the wider group.

So today I'll start by talking through the highlights, which you can see on the screen from the first 6 months of this financial year. Simon will then provide more detail, including a divisional breakdown. And then I'll share some thoughts on the demand picture and on our future prospects. And there'll be an opportunity, of course, for questions at the end. But in essence, it's been a robust first half. Revenue is up. We've got an order book and prospects that provide the basis to drive a strong performance in the full year and beyond, and our full year expectations remain unchanged. So as you can see here, revenue has increased to a record GBP 128.8 million for the first half. Profit is in line with expectations. Following a record performance in the prior period, we expected a small decline in adjusted operating profit in the first half, which now sits at just under GBP 10 million. It was another good period for new orders. And of course, those are the best leading indicator for future growth. And with order intake of GBP 122.3 million in the first half, that's kept our order book close to April's record level and over GBP 600 million. And as of early December, at the time of the results announcement that covered 96% of the external revenue forecast for the year, and will be generating revenue for us well into the mid-2030s.

Adjusted earnings per share for the 6 months ended 31st of October decreased to 16.16p and the effective tax rate was 15.5%. The operating cash outflow of GBP 27.9 million was, as expected, reflecting a build in working capital ahead of second half deliveries as well as payments in relation to dividends and capital expenditure. And that resulted in a net debt position as at the 31st of October of GBP 32.5 million. The capital expenditure included a further spend of GBP 7 million on ELAC's new facility, which was completed on time and has now been moved into. And we expect our net funds to be in line with previous expectations at the year-end. We've declared an interim dividend of 5.8p, once again, representing an increase of 10% on last year's, and that reflects the Board's confidence in the group's prospects. So that's the summary. Simon will now talk you through our financial review of the first half in a bit more detail.

Thank you, Andy, and good morning to -- good afternoon to you all. As Andy has already said and I reiterate, another growth in revenue for the group, with contributions from our latest acquisition, EM Solutions, offset an expected drop in revenue at MCL. The drop at MCL, along with the mix in Sensors and Effectors accounts for the marginally lower trading performance of the group, again, in line with our expectations. As we indicated at the year-end, we expected the revenue of U.K. MOD to fall back from its high level as a share of the group's overall revenue to fall below 50%. The growth in our overseas domestic and export markets will see the U.K. MOD activity probably remain below 50% going forward for the foreseeable future.

Our expectations for the second half are much stronger, with 96% of our revenue now in order or delivered and producing a full year net margin of around 12%. Starting with Sensors and Effectors. Thank you, Andy. The change in mix in this division, despite higher revenue was the cause of the group's overall lower first half trading performance when compared with last year. We saw good order intake at Chess and a return to profitability. We expect this improvement to continue. And under new management, we are looking for Chess to drive more sustainable growth, especially on the back of demand for counter drone systems and to achieve mid-teen net margins by 2027, '28. At ELAC, the first half saw the relocation of production to the newly completed purpose-built facility in Kiel. Increased contribution from the Italy contract, which has still been prudently traded ahead of second half deliveries has suppressed ELAC's trading margin in the first half.

We are on course to deliver the first boat set on this program in the first half of 2026 calendar year and when we will review the project's contingency levels. SEA, following the sale of its Transport business at the end of June, delivered less revenue. Overall net margin for SEA reduced against prior year as lower margin work formed a greater proportion of mix in the first half, especially for a delivery to an overseas customer. This project will complete in early '26, '27. The order cover for this division is 98%, and we expect a much stronger second half, delivering a net margin of around 10% for the full year. The order book of more than 2x annual revenue gives confidence for future growth. Turning to our Communications and Intelligence division. It also reported increased revenue of GBP 62.5 million, up 13%. The maiden first half contribution from EM Solutions in line with our expectations, offset the fall in MCL's revenue from the exceptional achieved -- level achieved last year.

Underlying improvements of both EID and MASS further drove the higher revenue for this division. The adjusted operating profit of GBP 10.4 million for the 6 months to the 31st of October '25 was 23% higher, delivering an adjusted operating profit margin of 16.8%. A major factor in the improved net margin was the contribution from EM Solutions. EIDs loss for the first half was less than last year's equivalent. The order book at EID continues to strengthen, and we expect significant orders in the second half from the Portuguese Navy. EID will return to profitability for the year and our net margin target of mid-teens is likely to be achieved in the next 3 years. MASS saw good performance from its high-margin Electronic Warfare Operational Support operations, and we expect MASS to perform strongly in the second half. The division's order book increased to GBP 203.6 million and its revenue cover at that time was around 87%.

This is typically lower than Sensors and Effectors with the short-term nature of some of this work, most notably MCL. EID infill is linked to the domestic orders, which are in progress. Net margin for this division is now expected to be over 17% for the full year.

Finally, turning to the net funds bridge. This slide shows the factors behind the net funds movement in the period. The first half performance has been driven by 2 primary outflows. Firstly, the expected CapEx spend on ELAC's new facility, which completed on time in September...

Simon, Simon, can you move a little bit closer to the microphone. I think, we're just losing you.

ELAC's new facility, which completed on time in September, and we will see the final outflows in the second half. Secondly, a return to historic trading patterns as the first half saw working capital -- significant working capital outflows, building for a marked increase in second half deliveries. As usual, the nature of our receipts and payments, a total of around GBP 600 million for the year, some of which can be many millions of pounds in size, makes it hard to predict in the short term, but the group remains highly cash generative. Our expectations for the second half are much stronger performance with 96% of our revenue now on order or delivered, and producing a full year net margin of around 12%. Our expectations of closing net funds of around GBP 10 million to GBP 15 million for the year-end remain unchanged. With that, I'll hand back to Andy.

Yes. I think maybe your microphone is just catching on your tie Simon or there's certainly a bit of interference. So I'm not sure where it is.

It might be a job for switch it off and switch it back on again. Anyway, thank you very much for that, Simon. And if -- I mean, I hope that was audible but if people do have any more questions of detail, Simon will be able to tackle those in the Q&A session. So looking towards the mid and longer term, we see a number of opportunities for the group, and I wanted to take you through some of the key factors that are driving those opportunities. If we could have the next slide, please, Andy. So we continue to see a strong demand picture in response to the deteriorating security environment and ongoing conflicts that we're seeing across the world.

Clearly, none of us should welcome that and the security risks that we now see affecting the U.K. amongst many other countries are real and a matter of concern. And in regions where these threats are at their most immediate, governments are under pressure to upgrade and modernize their defense capabilities at speed. And that, of course, is where mid-tier businesses like those within the cohort group have got the agility and expertise to provide innovative solutions to those defense challenges. The main catalyst of demand for defense equipment continue to be the conflict in Ukraine, coupled with the rising tensions between China and its neighbors in Asia Pacific. Research from the Stockholm International Peace Research Institute shows that the biggest defense spenders last year include China at $313.7 billion and Russia at $149 billion. And the persistent geopolitical forces caused by their behavior are causing a long-term demand for defense capability enhancements.

A further catalyst to demand is the arrival of new technology, allowing artificial intelligence-enabled and autonomous systems to be integrated into defense forces. And a good example of that is the U.K.'s recently announced Atlantic Bastion program. And the words and actions of the current U.S. administration significantly diluting the U.S. commitment to NATO add a further accelerant as far as European defense spending is concerned. So what we've seen as a result of these drivers is increased defense spending in Europe and in Asia Pacific as well, of course, as the recently announced large increase in defense spending proposed in the U.S. The NATO countries at the summit last year committed to raise their defense-related spending to 5% of GDP by 2035. And many European countries, particularly those in the North and East are already increasing their defense spending significantly and looking to accelerate that target. But in the U.K., the government remains committed to increasing defense spending to 3.5% of GDP by 2035, with a further 1.5% of GDP on security-related investment. And we are now expecting -- we don't have a date yet for it. We're expecting the U.K.'s defense investment plan to outline how the objectives that were set out in last year's strategic defense review will be funded and prioritized.

And the need to increase defense spending to meet growing threats has been recognized well beyond the immediate vicinity of Russia and China, and modern conflicts demand systems that can adapt quickly and operate autonomously. The cohort group is well placed to meet that need and has responded with investment in research and development and in future technologies. And we continue to see the increased focus on protecting underwater infrastructure, providing opportunities for both ELAC and SEA. The need to protect our forces from both cyber and kinetic threats, including missiles and drones are generating opportunities for MASS, Chess and SEA. The growth in manned and unmanned submarine and surface ship programs worldwide are generating opportunities for SEA, ELAC, EM Solutions and EID.

The need for secure digital communications for multinational forces are driving demand for systems like EID's TDCIS and MASS' JEFNet. And the need for electronic warfare, drones, counter drone and communications for the U.K. and its allies is driving demand for MCL's products as well. The practical result of these geopolitical developments is a sustained higher level of demand for our equipment and services. And to share some examples of the kind of opportunities we're seeing. EID is focused on providing communication and network systems for new Portuguese Navy vessels as well as multiple communication systems opportunities from NATO and Asia Pacific customers, and we expect to see some significant order intake there this year.

EM Solutions is also pursuing opportunities with the Portuguese Navy alongside potential fleet installations for New Zealand and the remainder of the Australian fleet that it isn't providing already. Their installation on the Japanese Maritime Defense Force trials is ongoing, and they're working with the British Royal Navy on SATCOM renewals as well. And at MASS, as the focus on cybersecurity increases, MASS has seen an increase in training and electronic warfare exercises for the U.K. as well as coalition defense customers, too. And at MCL, well, they continue to work as a trusted partner to the U.K. MOD. And we're seeing some potentially significant orders there for electronic warfare and in the short term for uncrewed systems as well.

In our Sensors and Effectors division, Chess is seeing a steady and increasing demand for their ground-based and drone defense systems. ELAC SONAR continues to support the Italian Navy program and is also looking at programs, new programs in NATO countries and in Asia as well. And finally, in SEA, we're seeing significant growth in opportunities and indeed orders for our KraitSense and KraitArray, towed array sonar systems. Now these are all prospects rather than orders and value and timing are both uncertain and the probability of win varies. But what I've hoped to try and do here is to paint a picture of the strong demand and opportunity picture that we see for the group.

So moving on, as the group has developed, our international presence has also widened. And that global expansion reflects our commitments to being closer to our customers and to developing defense technology solutions that will be able to support their future needs with the local support as well. And in earlier presentations, if you've seen us present before, you'll have heard updates on ELAC's new facility in Kiel in Germany. And I'm very pleased to confirm that following our GBP 21 million investment and a lot of hard work from the team at ELAC, that facility is now fully operational and we look forward to sharing more details of that during the official launch, which will take place later this year.

The Italian Navy submarine program continues to be a very important focus for ELAC's team. and opening an office in La Spezia in Italy has been a key step in strengthening our support for the Italian Navy, enabling closer collaboration, faster response times and sustained local value for this important customer. And I was present, as you can see in the picture there, at the launch event and the enthusiasm from the Italian Navy for ELAC's contribution to their submarine capability was absolutely unmistakable. And then finally, on this slide, SEA has also expanded its geographical footprint with the opening of a state-of-the-art manufacturing site in Ottawa in Canada. And our vision is that this new facility will be the main manufacturing site for SEA's Torpedo Launcher Systems initially for our customer in Canada, but eventually for customers worldwide.

And as well as delivering profitable revenue, these strategic investments support our business development activities in important international programs and thereby our long-term growth. Now another interesting example of our global expansion is the memorandum of understanding that I signed with the major Korean shipbuilder, Hanwha Ocean at the Defense & Security exhibition in Thailand last November. And that agreement signals our ambition together with Hanwha jointly to deliver defense technologies to address the needs and requirements of the Royal Thai Navy's second phase frigate acquisition program. And that memorandum of understanding will provide opportunities for businesses across the group to come together and provide a package of defense technology solutions that could include sonar systems, Torpedo Launcher Systems and communications management as well. And the agreement is a key milestone in our growing relationship with Hanwha Ocean and an important step in strengthening Cohort's international partnerships.

By combining the expertise and technology from across the Cohort group with Hanwha Ocean's, we can deliver together naval platforms that enhance operational effectiveness and through our unique modular and open architecture design, future-proof vessels to support long-term capability and security. And we're excited to be exploring new opportunities alongside Hanwha Ocean as well as delivering the Cohort group's market-leading maritime capabilities to the Royal Thai Navy. Now in January this year, we acquired -- I'm sorry, January last year, I should say, we acquired Australian Satellite Communications specialist, EM solutions, expanding our naval defense offering and reinforcing the group's presence in Australia. And led by the joint Managing Directors, Georgios Makris and John Logan, EM Solutions are developers of innovative naval satellite terminals that help to deliver high-speed telecommunications across the world.

And EM Solutions is now fully integrated as the group's seventh business. Their unique capabilities have enabled us to access the expanding satellite communications market. And they've also strengthened our performance in the first half, making the largest contribution, in fact, to group profit of all of our businesses as well as generating AUD 28.6 million of order intake. EM Solutions sees much more opportunity ahead in the coming months. Their team made an important contribution, as you can see in the picture there, to Cohort's presence at the large DSEI defense exhibition in London in September last year. And that was an important event for their long-term prospects in Europe, Australia and Japan. And it also provided an excellent opportunity to discuss partnering with EID in the provision of satellite communications terminals to Portugal.

Overall, it's been a very encouraging start for EM Solutions as part of the group, and they'll continue to work with our other businesses to gather intelligence on opportunities to promote their Cobra family of satellite communication terminals. So I've explained something about the key factors that are driving demand for our defense technology products and services. And this slide shows quantitatively how that demand is translating into orders for the group. As I said at the beginning, the group's order intake was GBP 122.3 million, delivering a closing order book of over GBP 600 million, just below, in fact, the year-end record of GBP 616 million. And our on-contract revenue stretches out to the mid-2030s with particularly good order intake from MASS and EM solutions within Communications and Intelligence, and Chess and SEA in Sensors and Effectors. And our full year expectations for order intake remain unchanged. And we continue to see a positive outlook for organic growth in the medium term, underpinned by that healthy demand in our core defense markets.

Now that brings me to the end of our presentation. And I wanted to finish with a summary of the main points that we've presented to you. So it's been another strong interim results period for the cohort group. In part, that reflects the growing demand picture. And importantly, though, it's also a result of the agility and innovation that our business model is designed to optimize and our experienced and entrepreneurial leaders. We have an active acquisition strategy and look for businesses that will complement our product portfolio and provide opportunities to enter new markets or to strengthen relationships with our existing customers. And the contribution of EM Solutions in this latest results round is a good demonstration of how this strategy works out in practice.

Our financial strength and public listing underpin customer confidence and enable future investment in acquisitions and product development. And finally, we sustained our strong order book. And looking forward, we have an exciting pipeline of further opportunities ahead. And as a result of that performance and our prospects, the Board has felt confident to increase the dividend once again by 10%. And before closing, and in these presentations, I always want to take the opportunity to mention the great contribution to our success that's made by our management teams and employees. In the first half, we welcome some new members to our leadership team. Andy Smith took over as Managing Director at Chess, following a successful career to date at Leonardo and at Marshall's. And Michael Flowers and Clint Thomas joined us as nonexecutive directors at EM Solutions, and we look forward to working with them to build on the success of the group.

Within our subsidiaries, our reputation as a leading mid-tier defense technology group continues to attract new talent and it's the expertise, dynamism, practicality and integrity of our people that will help secure future business success. We believe that the strategy for organic and acquisitive growth that we've adopted will offer our investors high-quality, long-term returns. And we'll aim to do that while creating employment opportunities, driving innovation and enhancing the security of the U.K. and its allies. Thank you very much indeed for your attention. If you have questions, we'll now be delighted to try and answer them.

Great. Thank you, gentlemen. Very, very clear. I hope you're back with us, Simon vocally.

Just -- can you hear me okay?

Yes, that's much better. Lovely, thank you. Right, lots of questions, so we should dive straight in. Undersea communications infrastructure, a lot of publicity for it lately. And you mentioned it specifically as opportunities for ELAC and SEA. Can you elaborate a little bit further on how those subsidiaries might address the threat to the U.K.?

Yes. So SEA is heavily involved in Atlantic Bastion, which is a U.K. program for monitoring underwater activity in the North Atlantic, which is examining a number of different concepts. And we believe that the KraitSensor is going to be extremely valuable in that because it's low power, lightweight, very sensitive, very good at detecting underwater threats and is ideally suited to working with uncrewed vessels. So we're teamed with the European artificial intelligence specialist, Helsing, working on a concept that could bring that to life. And ELAC is developing or has in fact developed some specific products aimed at combating the threat to underwater infrastructure.

A product called Enlitor is designed to provide long-term surveillance of underwater infrastructure. And of course, by that, I mean things like underwater gas pipelines, oil pipelines, internet cables and power cables and detect any oncoming threat. And watch this space for news about what we might be able to do to physically combat those threats as well. So we've got some really interesting work going on in that area, Andy.

Great. Good to hear. EM Solutions looks to have been a great acquisition, and you mentioned the strong order book. Is it too soon to claim that some of that order book would not have been won without them being part of the cohort group or are those benefits further down the road?

That's a very difficult question to answer. I suppose I should say, yes, we were responsible for it all. But actually, they're a great business, and they've got some very strong relationships. And whereas I'm sure that we are assisting in those territories where we've got a strong presence, particularly Portugal and the United Kingdom. It's their excellent products and technology, which have won those orders.

Okay. A couple of questions on Chess. Can you first remind some of the newer parties on this call, what were the challenges that Chess has faced in the last year or so? And then secondly, can you update on progress even since the interims and explain what are the drivers for the return to profitability or return to higher margins?

Yes, sure. So Chess has got some really great products and some really great engineers. And it's that, that has won it really an awful lot of work. In particular, we're providing the optical tracking elements of Rheinmetall's ground-based air defense systems, which are of considerable importance to European security, they're being acquired in very substantial numbers. And as you can imagine, being used actively at the moment given the situation in Central and Eastern Europe. The issue has not been at all with the quality or pricing of those products, which has been very, very good and -- but they've been undergoing a transition really from an engineering centered business to one which also needs actively to manage volume production, driven really by the strong demand patterns that we're seeing at the moment. And that's proved to be a challenge. And Simon and I did our best to support Chess through that transition period.

But ultimately, we came to the view last year that we needed a change at the top of management, so we brought in a new Managing Director in October, a very experienced guy, I mentioned Andy Smith initially from Marshall's, but also with a long experience at Leonardo, with very strong capability in the area of managing effectively high-quality production and defense at volume. And we're already seeing some improvements. Definitely, production has become more predictable. And that's had a good impact on the relationship with our key customers. We've -- since then, Chess is now experiencing a certain degree of tightness in its supply chain as well, which we'll have to deal with. But I don't expect that to have a material impact on the results this year at Chess. And we've got the right people on board to manage that sort of thing. So -- but getting control of that supply chain and really putting in good practice into supply chain management because that's critical for Chess. And managing the stocking and assembly and quality management of production is going to be critical. And I'm convinced that we've got the right team in place to do that now.

Great. Now Simon, maybe 1 for you. There's a couple of questions relating to potential delay on programs or projects and you've got a very healthy 96% revenue cover at the moment. Is that a conservative level that might take account for some of those slipping into the next financial year?

Well, the 96% was as of last December when we announced these results, so mid-December. So we've had a month literally since then and things have obviously progressed. And the infill, the 4% is not my concern really for the year-end. It's more all about delivery. It really is about delivery across the group. So no, I've got no concerns there. Clearly, what we are winning now, much of it will be filling up next year and the years beyond. So no, the 4% is not a concern. It's really now about the businesses turning that order book into revenue in the coming months.

Okay. And a related factor looking at the Italian submarine contract. You mentioned that the contract has got about GBP 10 million of provisions on your balance sheet. Can you talk through the milestones or the time line for some of these provisions to be released and unwound?

Well, hopefully, they will be. They are, obviously, in case we do need them. Where we're at, at the moment is in what's called the factory acceptance testing, which is a suite of tests taking place. They've started already and we'll carry on into the early summer of this calendar year. Once we're through those 4 complete factory acceptance tests for boat set 1, we certainly will then look at some of the contingency. But the key steps, there's 2 further key steps, which is the harbor acceptance trial. And the most important of all is the sea acceptance trial when the submarine goes to sea with all of its crew on and all of its kit working. Clearly, the earlier tests try and ensure that the -- what we call the SAT issues, the sea acceptance test issues are minimized. Once we're through boat set 1, really, it should be simply then a matter of production for boat sets 2, 3 and 4. So we certainly see some of this contingency, either being utilized or released over the coming couple of years as we make our way through these programs in stages..

Very clear. And perhaps another one for you, definitely another one for you, Simon. The reader, the viewer believes that you're currently in discussions to renew and expand the revolving credit facility. If you can comment publicly, how is that going at the moment?

Well, yes, we have -- we started -- I had some discussions before Christmas. I've actually come off a call this morning with another potential provider. We -- the facility in place is GBP 50 million with our existing 3 banks, and that's been in place really for about the last 10 years. All I can say is that the group, obviously, over those 10 years the revenue has certainly almost tripled, the group is much larger. And obviously, we have an Australian business. So the size of the facility is going to be somewhat -- at least twice as big as what it is now, probably towards 2 or 3x as large. We will be adding an Australian bank into the banking group alongside the 3 existing providers. I suspect there will be 2 or 3 others that may join. And I have to say the demand I've seen from banks, the appetite for defense stocks and the debt position is a sea change from what we would have seen 5 years ago, an absolute sea change. Banks that did not do defense are now queuing up to see me.

So I think I've got -- I'm probably going to end up seeing around about 12 to 15 new banks over the next few weeks through discussions, all of them are interested. So that tells you that the appetite is out there.

Good to hear. Well, bad to hear and good to hear, but Cohort [indiscernible] very good news, yes. Right. A couple of questions about M&A. Selective M&A has been very much a successful part of Cohort's growth. The question is, in the current very positive environment for trading at defense stocks, presumably, the rating multiples that possible vendors are seeking have increased materially and will this put you off in the short term?

Well, let me take that one. I think we -- I mean, we -- we look at the Rheinmetalls and Saabs and large European defense players and look at the ratings that they've got on public markets. Those do not necessarily translate down to the area that we are interested in where we're talking about businesses with typically earnings before interest tax in the range of GBP 5 million to GBP 10 million annually. And really, the multiples that we're prepared to pay depends very strongly on the quality of the individual business. So if we see a business that's got a strong order book and a verifiable and strong pipeline of future opportunities, we're going to pay more for that than one that doesn't have one. Simply because it's going to grow more in the coming years. And that calculus really hasn't changed. I suppose 1 thing that we have seen over the past year is we've seen some financial buyers coming in with heavily leverage and as a result, very generous bids. And when that happens, it happens. Good luck to them.

But the businesses that we see there are many good reasons to choose us as an acquirer. I mean reputation is one, we look after businesses, and we grow them. And we can be very flexible in the structures that we offer as far as acquisition is concerned. So no, I don't see them being insuperable barriers. The issue is more finding ones that will really work for us. We got a lot coming through. But really, only a small proportion of those, we really think are worth pursuing.

Yes, that explains the strategy very well. And following on, there's a question, in a perfect world, and I'm afraid we're definitely not in 1 of those, which subsidiaries or which geographies would you most like to increase group exposure to via a suitable deal?

Well, what we look for in our potential new subsidiaries, if we want to add businesses to our portfolio are a combination of access to growth. So parts of the market that are growing, uncrewed systems, autonomy, for example, others too. And also some kind of sustainable competitive advantage. So we're not just competing with peers on the basis of who's prepared to accept the lowest margin. And I think there are quite a few of those. In fact, we've just brought on board an experienced new strategy person who's taking a proactive look across the market, trying to identify a few of those little niches that we might explore and look at perhaps taking some proactive action.

I mean there are some areas, for example, drone manufacturer, where you see certainly large demand and potentially large sustained demand in a conflict situation, but where barriers to entry are really very low and where it's not going to be easy to sustain a high margin given that there are so many competitors that could do what you could do. In some other areas, we see new technical developments, making possible new opportunities that simply weren't there before. I mean, artificial intelligence is one of those areas. And by teaming with some artificial intelligence players, I think we've opened up some interesting market opportunities. Space is another area where the significant reduction in launch costs for low earth orbit satellites has enabled new players to come in with new technology ideas, which might not have been feasible before. So we'll see how things pan out. But I think there are a number of really interesting technology areas.

Great. And you've mentioned Andy Smith a couple of times and as well as his appointment at Chess, also some very senior advisers helping with EMS. And what do you think is most attractive to people of this experience and standing to join Cohort?

Well, we can offer really exciting careers to people. The businesses that we run, operate, as I said right at the beginning with a high degree of autonomy. And that means that the right leadership team really gets to experience the fruits and results of their decision-making and their leadership. And for good people, that's a really exciting opportunity. Of course, not so good people prefer to rely on a complex web of reporting change that they can hide behind. But for the kind of people that we want, then that's a really great opportunity and it carries an awful lot of excitement and challenge with it. And of course, it's rewarded appropriately as well.

So we've always found that whenever 1 of our senior leadership positions and the subsidiaries comes up, we get a very high level of interest from very high-quality candidates. Now talking about our nonexecutives in Australia. I mean we felt it was very important to get some local really experienced support for our executives there because it's not so easy to mentor and work closely with from 10,000 miles away. So Michael, some of you who may know the business Chemring, was formerly the CEO of Chemring before Mick Ord took over. He's a very experienced Australian businessman and an ex-army man as well. So very experienced in the defense world. And Clint Thomas, our other Non-Executive Director is a distinguished retired Admiral from the Royal Australian Navy, who was also the Managing Director of Serco's business in Australia as well. So 2 very talented, experienced and well-networked people helping us out in Australia.

Great. Another one probably for Simon. There's a couple of mentions of supply chain and there's always a risk of blockages. And we've got a question in there has been a recent spectacular increase in the prices for not just precious metals, but basic ones, including copper and also rare earths that have many technological uses. Do you fear any impact on your production costs yet? And do you take the precaution of stockpiling any critical raw materials?

I think Andy can answer some of this for me, with me. I think we don't generally stockpile things like raw materials and rare earth metals and things like that. There clearly have been some challenges. We've seen it in Chess a bit. Generally, with pricing, we protect that. So obviously, we agree fixed prices with our supply chain. And obviously, anything that's a key element which may involve some of these parts would be fixed in advance of the contract being signed. And then we would obviously have no exposure. We also have in longer contracts where you may not be able to do that, we'll have indices, clauses go into the contract to give us some protection against inflation. And finally, we obviously have contingency to deal with some of these risks. I mean the real key for us, I haven't seen issues particularly, Andy, in the pricing side of it. it's probably more in the actual supply side. It's actually getting your hand on the bits. And I think, Andy, you may want to say something there.

Yes. I think -- I mean the commodity prices don't have a direct impact because they make up a very small part of our overall cost base. And we aim to keep our supply chains as local as possible as well, relying on good general engineering partners, contract electronics manufacturers and so on, in the localities of our businesses to keep supply chains tight, close and to ensure maximum resilience and reliability. Some things are inevitably going to be exposed to those global tightness. I mean, we saw that with a high-performance semiconductor chips in the aftermath of COVID. And as I mentioned earlier, we saw a little bit with permanent magnet motors, which form a part of Chess' equipment more recently.

So yes. I think we do need to look at those areas. And 1 important matter that Chess is going to be addressing is now as it moves into higher volume production and more extended production, maintaining some stocking, not necessarily at Chess, but throughout the supply chain to ensure a high degree of resilience to economic or supply shocks of 1 kind or another.

Right. Now a question specifically for the U.K. There was a noticeable slowdown in U.K. defense ordering last year as parties awaited the strategic defense review. Is there a risk of -- or are you seeing further delays as people now wait for the defense investment plan that was expected to have been out of the way by the end of 2025?

Yes, it was. Well, I mean I thought the strategic defense review is a really good piece of work for the U.K. I mean it was very clear, very articulate, and I think it was very well argued as well written by some real experts. And that gave me a lot of confidence for the future of U.K. defense, coupled as it was to the announcements in long-term increases in defense expenditure. And it's been very disappointing that, that hasn't so far been translated into action. And I think we've seen a very tight spending position in the U.K. generally. We've seen some self-inflicted wounds like the Ajax program that people may be familiar with in the U.K. MOD. But we're waiting with a lot of interest really to see this defense investment plan because that will help us focus our own investments and priorities for the future as well in the U.K. But what I would say is that the whereas we haven't seen that step change in defense spending in the U.K. in non-U.S. NATO more generally in 2024, which is last year, we got figures defense spending, actual spending, not politicians talking about it, went up 19% and if you look over to the east, Japanese spending went up 21% in that period.

So these are real increases in spending and reflected in the large growth that we saw last year in our revenue and profit and U.K., for the first time, is significantly under half of our revenue in the first half of this year.

Great. And given current events, it would be a surprise not to have questions about across the other side of the Atlantic. And we have one, which is caveated that nobody has a crystal ball, but do you with your great experience think that Trump's direct involvement in Venezuela has indeed increased the chances of China risking a similar move with Taiwan?

Well, I'd caveat any comments with this that I am not a diplomat, and I'm not a foreign policy specialist. But it is clear that by acting unilaterally and without a clear legal cover in invading a neighbor. The rules-based order where that sort of thing wasn't supposed to happen has been undermined to a certain extent. And it does give a certain degree of diplomatic license for Japan potential -- sorry, China potentially to interfere in Taiwan and could even be certainly in debating terms and diplomatic terms, used as a certain degree of cover by Vladimir Putin in Ukraine. So to that extent, it is regrettable. On the other hand, I don't think many people are likely to regret the departure of Maduro.

Very true. Back to a couple of specifics. Can you say -- give a little more detail about the program that Chess has working with Rheinmetall and indicate how much revenue per Skyranger system and how many Skyranger systems you might expect to be selling in coming years?

Yes, I mentioned, we provide the optical tracking systems and the multisensor tracking systems, which are actually fundamental to that system, absolutely vital part of it in providing precise location information about the drone for the weapon to take on. But Simon, would you like to say a word or 2 about expected order flows and value?

Yes. Where we're at is to date, we've had in total, there are a number of variants of the system. We've had 173 systems ordered by Rheinmetall for Chess. We are -- we've been recently agreeing prices going forward. We tend to be fairly sensitive about prices because commercial reasons and various things. But I can basically guide that each system is worth somewhere over GBP 200,000 to us in revenue terms, a bit north of that. And looking forward, we are -- I mean these are numbers that are available from Rheinmetall. They're looking at potentially orders of up above potentially 1,600 systems for the Skyranger across a number of markets. These are the sort of numbers they're talking about. They have not placed orders with us yet for the first quantum, but we will see. But there is significant demand and some territories in Europe are looking at many hundreds of these systems potentially. I think Germany is probably the largest potential buyer of these systems.

That's very helpful. And a similar question about KraitArray, where there was a recent large contract with Liquid Robotics. And again, if you can just talk a little bit more about the potential size of the market and what you might hope to take of that over time.

I can comment on that. I think the answer that we see quite a few varied uses for the Krait. I mean it's most sophisticated form, actually, it provides a complete antisubmarine warfare system for light manned vessels or larger uncrewed vessels, complete with a full software suite and providing the ability with an operator to locate and track submarines. And that's quite a high-value system. And then it is in its most basic form, it's simply the array itself, which can be coupled to artificial intelligence and on crude vessels. Typically as part of a multi-sensor system to operate over a wide area to localize and track submarines. And I can confirm that the system has been used operationally and successfully for tracking hostile submarines by at least 1 of our export customers.

We see it's hard to be precise about numbers. But if, for example, we are selected that -- the sensor is selected for Atlantic Bastion, we would see that opportunity alone driving demand for hundreds of the basic sensors. And we also see, as our first successful implementation of the sophisticated full submarine tracking system, we see more demand for that as well, and that's a pretty high value system.

Great. Now we've got time just -- I think, for a couple of more questions. There are quite a few here about prime contractors, the larger groups in defense. First one is, is it different working with a newer business like Helsing compared to established primes?

Well, yes, of course. I mean the culture is very different, especially compared to the large primes. Personally, and I think as a group, we welcome the arrival of some of these newer software-driven businesses with some new thinking into defense. I think it's got the potential to unlock some very interesting new capabilities. And it's going to be most successful where they work hand-in-hand with businesses like ours. Ideally, sort of businesses like ours that are agile and innovative and able to bring technology into fruition, into use. And also because we understand the way that our customers work and the way that the end users need to use the product and we bring that to them as well. So I see that cooperation as being potentially a very valuable thing, I mean, not only just for us but also for defense more widely.

You've kindly answered the next question on primes, which is how do you so successfully compete against them. And the answer is that you are doing different things in different areas in your own high-quality way.

Well, we work with all of the prime customers and indeed, in some cases, as suppliers as well. So they're not just competitors. And I don't pretend that we would be a good choice to make the next nuclear submarine for the United Kingdom. I mean we simply don't have the resource in terms of numbers of engineers or the processes that are required to actually have them all running in lockstep to produce that incredibly complicated system while meeting all of the demands of safety, functionality, speed, lethality, emissions, all of the many things that they have to achieve. But what we can do much better than what they can do is put those systems that make it effective, the communication system for surface ships, missile defense systems, torpedo launch systems, sensor systems, intelligence gathering systems. And we can do that because the processes that are used by those primes to manage this vast engineering projects would simply strangle and add cost to those small but innovative systems where you've got to move fast.

Well, we've talked a lot about the success of Cohort and we have a question that there was a short period of decline in the share price at the end of last year after what has been a spectacular run. And the question was simply, there have been public notifications of the directors the top slicing some of their positions, which seems unlikely to have impacted the share price. Do you happen to know of any other reasons why the shares ended the year with a brief downtick?

Well, yes, we had -- I mean I don't have the full details of this yet myself, but the answer is that we had an institutional seller made a strategic decision to depart and did so perhaps not in the most orderly way imaginable. So we had downward pressure on the share price really from that seller coming out with successive sell orders over an extended period until they succeeded in selling the remainder at the end of their stock. And at that point, we've seen the situation turn around and the share prices in positive territory again. So I mean, these are the technical factors that affect shares. I mean, it's relevant that in that period, I don't think we had a single RNS announcement of any sort of significance. So it wasn't stuff that we were putting out, and it wasn't market gossip that I'm aware of anyway. It was simply that technical factor of more sellers than buyers.

Just last question, crystal ball again. Well, not quite crystal ball. We've had the inquiry. If the Ukraine war was to be settled in the next few weeks or months, would that have any material effect or any effect at all in your future revenue confidence?

The answer to the question is no. The reason for that, I mean we did actually see in '24, '25, a material impact from Ukraine with our business, MCL, which had a record year that year. For various reasons of U.K. strategy and approach, I mean a different approach has been taken to supporting Ukraine. And so we've seen that, although it's not disappeared, it's significantly fallen off this year. So we actually have very little impact of Ukraine directly in what we're doing at the moment. But if you're thinking more widely about the question, if the conflict in Ukraine stops, everyone could stop worrying and we can go back to not spending all this money on defense anymore. I really don't think that -- I think that Rubicon has been passed, I'm afraid. And it's very clear that Vladimir Putin has got wider objectives than just Ukraine.

I mean that's apparent from the hybrid warfare that Russia is carrying out against countries like Poland at the moment. I don't know if anyone heard the interview on ready for the Polish PM this morning, but essentially, if we -- and I wish it would because it's continued to carry a terrible loss of life. If the Ukrainian conflict came to an end in a matter of weeks what we would see would be a highly contested border in the center of Ukraine with the buildup and forces on both sides as Russia continue to build up its capability with the aim of having another go. And on our side, the need to build up in order to deter that. So that, coupled with the fact that Russia's economy is on a war footing of a tremendous nature, and it would be tremendously economically a challenge for it to actually stop that now, I think means that we're in a period of structural and unavoidable tension, which is going to be very difficult to get out of.

Yes. Sober but very, very accurate assessment, I'm afraid. Great. Well, I think that's what we have time for. I'd like to thank the audience for their attention and a very wide range of interesting questions. I'm sorry, we haven't quite got through all of them. We'll try and do that later on, there are 1 or 2 about forecasts and estimates, which obviously the company can't look forward. But if you do go to the equity development website, you'll see our latest note that followed the interims and quite a lot of other coverage, which also covers, of course, forecasting and valuation. The audience will get questionnaires about the event and Andy and Simon and the rest of us would be delighted if you can put in a little time to share your thoughts on that. And last but not least, thank you very much to Andy and Simon for a very, very clear presentation and addressing lots of questions. and we wish you all the best for a good second half and ongoing success.

Thank you, Andy.

Thank you, Andy. Thank you.

Thank you very much for joining us this morning. For anyone who doesn't know, I'm Andy Thomis. I'm the Chief Executive at Cohort plc. I'm here with Simon Walther, Cohort's Finance Director, to take you through our results for the 6-month period ended 31st of October this year.

By way of background, Cohort is a group of 7 businesses, providing technology-based defense products and services to the U.K. and to its allies around the world. Our business model aims to maximize the autonomy and independence of our businesses consistent with good financial and regulatory governance. And that means that decisions are taken quickly and close to the customer. It maximizes agility and innovation while supporting our businesses with a strong balance sheet and market reach that we have as a group.

So today, I'm going to start by giving you the highlights from the first 6 months of the year. Simon will then provide more detail, including a divisional breakdown. And then finally, I'll share my thoughts on the demand picture and on our future prospects. And of course, there will be an opportunity for questions at the end.

In essence, it's been a robust first half. Revenue is up. We have a strong order book and prospects that provide the basis to accelerate the full year performance and beyond. And our full year expectations remain unchanged. So let's take a look at the numbers.

So revenues continued to increase to a record GBP 128.8 million for the first half, and our profit is in line with expectations. So following a record performance in the prior period, we experienced a small decline in adjusted operating profit, which now sits at GBP 9.7 million. It was another good period for new orders, which are, of course, the best leading indicator of future growth. The order intake of GBP 122.3 million in the first half has kept our order book close to April's record level at GBP 604.5 million.

As at early December, that covered some 96% of external revenue forecasts for the year and will be generating revenue for us well into the 2030s. Adjusted earnings per share for the 6 months ended 31st of October decreased to 16.16p. The effective tax rate was 15.5%. The operating cash outflow of GBP 27.9 million was as expected, reflected a build in working capital ahead of second half deliveries as well as payments in respect of dividends, capital expenditure. And that resulted in a net debt position as at 31st October of GBP 32.5 million. The capital expenditure included GBP 7 million on ELAC's new facility, which was completed on time. And we expect our net funds at the year-end to be in line with previous expectations.

We declared an interim dividend of 5.8p, once again representing an increase of 10% on last year's, and that reflects the Board's confidence in the group's prospects. So Simon will now talk you through our financial review of the first half of the year. Simon?

Thank you, Andy, and good morning to you all. As Andy has already said, and I will reiterate, another growth in revenue for the group with contribution from our latest acquisition, EM Solutions, offsetting an expected drop in the revenue at MCL. The drop at MCL, along with the mix in Sensors and Effectors accounts for the lower margin -- for the marginally lower trading performance of the group, again, in line with expectation.

As we indicated at the year-end, we expected the revenue from U.K. MOD to fall back from its high level and as a share of the group's overall revenue to fall below 50%. The growth in our overseas domestic and export markets will see the U.K. MOD activity probably remain below 50% going forward for the foreseeable future.

Our expectations for the second half are a much stronger performance with 96% of our revenue now on order or delivered and producing a full year net margin of around 12%.

Starting with Sensors and Effectors. The change in mix in this division despite higher revenue was the cause of the group's overall lower first half trading performance when compared with last year. We saw good order intake at Chess and a return to profitability. We expect this improvement to continue. And under new management, we are looking for Chess to drive more sustainable growth, especially on the back of demand for counter drone systems and to achieve net -- mid-teen net margins by 2027, '28.

At ELAC, the first half saw the relocation of production to the newly completed purpose-built facility in Kiel. Increased contribution from the Italian contract, which is still being prudently traded ahead of second half deliveries has suppressed ELAC's trading margin in the first half. We are on course to deliver the first boat set on this program in the first half of 2026 calendar year when we will review the project's contingency levels.

SEA, following the sale of its Transport business at the end of June, delivered less revenue. Overall net margin for SEA reduced against prior year as lower margin work formed a greater proportion of mix in the first half, especially for delivery to an overseas customer, a project which we will complete in the early part of '26, '27. The order cover for this division is 98%, and we expect a much stronger second half, delivering a net margin of around 10% for the full year. The order book of more than 2x annual revenue gives confidence for future growth.

Turning then to Communications and Intelligence division. It also reported increased revenue at GBP 62.5 million, up 13%. The maiden first half contribution from EM Solutions in line with our expectations, offset the fall in MCL's revenue from the exceptional level it achieved last year. Underlying improvements at both EID and MASS further drove the higher revenue for the division. The adjusted operating profit of GBP 10.4 million for the 6 months to 31st of October 2025 was 23% higher, delivering an adjusted operating profit margin of 16.8%. A major factor in the improved net margin was the contribution of EM Solutions.

EID's loss for the first half was less than last year's equivalent. The order book at EID continues to strengthen, and we expect significant orders in the second half from the Portuguese Navy. EID will return to profitability for the year, and our net margin target of mid-teens is likely to be achieved in the next 3 years.

MASS saw good performance from its high-margin EWOS operations, Electronic Warfare Operational Support, and we expect MASS to perform strongly in the second half. This division's order book increased to GBP 203.6 million, and its revenue cover is now 87%. This is typically lower than Sensors and Effectors with the short-term nature of some of the work at MASS and most notably MCL. EID infill is linked to the domestic orders, which are in progress. The net margin for this division is expected to be over 17% for the full year.

This slide shows the factors behind the net funds movement in the period. The first half performance has been driven by 2 primary outflows. Firstly, the expected CapEx spend on ELAC's new facility, which completed on time in September, and we will see the final outflows in the second half. Secondly, a return to historic trading patterns as the first half saw significant working capital outflows, building for a marked increase in second half deliveries. As usual, the nature of our receipts and payments, a total of probably around GBP 600 million for the year, some of which can be many millions of pounds in size, makes it hard to predict in the short term, but the group remains highly cash generative.

Our expectations for the second half are a much stronger performance, as I've already said, with 96% of our revenue now on order or delivered and producing a full year margin of around 12%. Our expectations of closing net funds remain unchanged at GBP 10 million to GBP 15 million for the year-end.

With that, I'll hand back to Andy.

Thank you, Simon. So looking towards the mid and longer term, we see a number of opportunities for the group. And I'd like to show you some of the key factors that are driving those opportunities.

So we continue to see a strong demand picture in response to the deteriorating security environments and ongoing conflicts that we see across the world. None of us should welcome that and the risks that we now see are real and a matter of concern. In regions where threats are more immediate, governments are under pressure to upgrade and modernize their defense capabilities at speed. And that is where mid-tier businesses like those within the Cohort Group have got the agility and the expertise to provide innovative solutions to those defense challenges.

The main catalysts of demand for defense equipment continue to be the conflict in Ukraine, coupled with the rising tensions between China and its neighbors. Research from SIPRI shows the biggest defense spenders include China at a remarkable $313.7 billion last year and Russia with $149 billion. And those persistent geopolitical forces are driving long-term demand for defense capability upgrades. A further catalyst is the arrival of new technology, allowing artificial intelligence-enabled and autonomous systems to be integrated into defense forces. And a good example of that is the U.K.'s recently announced Atlantic Bastion program.

These drivers are pushing increased defense spending in Europe, in North America and parts of Asia Pacific. As we've seen, the NATO countries have agreed to raise their defense-related spending to 5% of gross domestic product by 2035. And many European countries, particularly those in the North and East, are already increasing their defense spending significantly.

The U.K. remains committed to increasing its defense expenditure to 3.5% of GDP by 2035 with a further 1.5% of GDP on security-related investment. And the imminently expected and awaited defense investment plan in the U.K. is expected to outline where investment will be prioritized.

Now the need to increase defense spending to meet growing threats has been recognized well beyond the immediate vicinity of Russia and China. Modern conflicts demand systems that can adapt quickly and operate autonomously. And the Cohort Group is well placed to meet that need and has responded with investment in R&D and future technologies. We continue to see the increased focus on protecting underwater infrastructure, providing opportunities for ELAC and SEA. The need to protect our forces from both cyber and kinetic threats, including missiles and drones, generating opportunities for MASS, for Chess and SEA. The growth in manned and unmanned submarine and surface ship programs worldwide, providing opportunities for SEA, for ELAC, for EM Solutions and for EID.

The need for secure digital communications for multinational forces, driving demand for systems like EID's TDCIS and MASS' JEFNet; and the need for electronic warfare, drones, counter drone and communications for the U.K. and its allies at short notice, driving demand for MCL's products. And so the practical results of these geopolitical developments is a sustained higher level of demand for our equipment and services.

To share some examples of that demand, EID is focused on providing communication and network systems for new Portuguese Navy vessels as well as multiple communication systems opportunities for NATO and Asia Pacific customers. EM Solutions is also pursuing opportunities with the Portuguese Navy alongside fleet installation opportunities for New Zealand and Australia. Their work on the Japanese Maritime Defense Force trials is ongoing, and EM Solutions is also working with the Royal Navy here on SATCOM renewals. And as the focus on cybersecurity increases, MASS has seen an increase in training and electronic warfare exercises for the U.K. and coalition defense customers.

MCL continues to work as a trusted partner to the U.K. Ministry of Defense and is progressing with order opportunities for electronic warfare and uncrewed systems. Chess is seeing an increase in demand for its ground-based drone defense systems. ELAC continues to support the Italian Navy program as well as programs for NATO and Asia. And finally, we're seeing significant growth in opportunities for KraitSense and KraitArray, towed array sonar products at SEA.

So all of these things are prospects rather than orders. So the value and the timing of these -- of converting these into contracts is uncertain and the probability of winning them varies. But I hope that, that helps to paint a picture of the strong demand and the kind of opportunities that we see for the group.

Now as the group has developed, our international presence has widened, and we've seen several examples of that in the first half. And that global expansion reflects our commitments to being closer to our customers and to developing defense technology solutions that will support their future needs. In our previous financial presentations, you'll have heard updates on ELAC's new facility in Kiel, Germany. And we're pleased to confirm that following our GBP 21 million investment and lots of hard work from their team, that facility is now operational, and we look forward to sharing more details during our official launch early next year.

The Italian Navy submarine program has been and continues to be an important focus for our ELAC team and opening an office in La Spezia in Italy is a key step in strengthening our support for the Italian Navy enabling closer collaboration, faster response times and sustained value for this important customer. I was present at the launch event and the enthusiasm from the Italian team for ELAC's contribution to their capability was unmistakable.

SEA has also expanded its geographical footprint with the opening of a state-of-the-art manufacturing site in Ottawa in Canada. And our vision is that the new facility will be the main manufacturing site for SEA's Torpedo Launcher System for customers in Canada and worldwide. And as well as delivering profitable revenue, these strategic investments support our business development activities in important international programs and long-term growth.

Now another excellent example of our global expansion is the memorandum of understanding that I signed with the major Korean shipbuilder, Hanwha Ocean at the Defense and Security Exhibition in Thailand last month. Now this agreement signals our ambition jointly to deliver defense technologies to address the needs and requirements of the Royal Thai Navy second phase frigate acquisition program. And the MOU will provide opportunities for businesses across the Cohort Group to come together and provide a package of defense technology solutions, potentially including sonar systems, Torpedo Launcher Systems and communications management. And that agreement marks a key milestone in our growing relationship with Hanwha Ocean and an important step in strengthening Cohort's international partnerships.

By combining the expertise and technology from across the Cohort Group with Hanwha Ocean's, we can deliver naval platforms that enhance operational effectiveness and through unique modular and open architecture design, future-proof vessels to support long-term capability and security. We're excited to be exploring new opportunities alongside Hanwha Ocean and delivering the Cohort Group's market-leading maritime capabilities to the Royal Thai Navy.

Now as you know, in January this year, we acquired the Australian Satellite Communications specialist, EM Solutions, expanding our naval defense offering and reinforcing the group's presence in Australasia. Now led by joint Managing Directors, Georgios Makris and John Logan, the business develops innovative naval satellite terminals that deliver high-speed communications worldwide. And EM Solutions is now fully integrated as the group's seventh business. And following that successful integration, they've strengthened our performance in the first half, making the largest contribution to group profit of all of our businesses as well as a AUD 28.6 million order intake. And we see much more opportunity ahead for the business in the coming months.

Their team made an important contribution to Cohort's presence at the large DSEI exhibition in London earlier this year. And that event was valuable for discussions with EM Solutions customers for long-term prospects in Europe and Australia and Japan. And it also provided an excellent opportunity to discuss partnering with EID to provide and support satellite terminals in Portugal. Overall, it's been a very encouraging start for EM Solutions as part of the Cohort Group, and they'll continue to work with our other businesses to gather intelligence on opportunities and to promote their Cobra product family.

So I've explained the key factors driving demand for our defense technology products and services, and this slide shows how that demand is translating into orders for the group. The group's order intake in the period was GBP 122.3 million, delivering a closing order book of GBP 604.5 million, just below the year-end record of GBP 616 million. And our on-contract revenue stretches out to the mid-2030s with particularly good order intake from MASS and EM Solutions within Communications and Intelligence and at Chess and SEA in Sensors and Effectors. And our full year expectations for order intake remain unchanged. And we continue to see a positive outlook for organic growth in the medium term, underpinned, as I said, by the healthy demand in our core defense markets.

And that brings me almost to the end of the presentation and a summary of the main points that I wanted to make. It's been another strong interim results period for the Cohort Group. And in part, that reflects the growing demand picture that I've talked about. But importantly, it's also a result of the agility and innovation that our business model is designed to optimize and our experienced and entrepreneurial leaders. We have an active acquisition strategy, and we look for businesses that will complement our product portfolio and provide opportunities to enter new markets or to strengthen relationships with existing customers. And the contribution of EM Solutions in this latest results round is a good demonstration of how that strategy actually works in practice.

Our financial strength and our public listing underpin customer confidence and enable future investment in acquisitions and in product development. We've sustained our strong order book. And looking forward, we have an exciting pipeline of further opportunities. And finally, as a result of our performance and our prospects, the Board has again felt confident to increase the dividend by 10%.

Now before closing, I want to take the opportunity to mention the great contribution to our success made by our management teams and employees. In the first half, we welcomed some new members to our leadership team. Andy Smith took over as Managing Director of Chess following a successful career to date at Leonardo and Marshall's. And Michael Flowers, whom some of you might remember from his Chemring days and Clint Thomas joined us as Non Executive Directors at EM Solutions, and we look forward to working with them to build on the success of the group. Within our subsidiaries, our reputation as a leading mid-tier defense technology group continues to attract new talent. And it's the expertise, dynamism, practicality and integrity of our people that will help secure future business success.

We believe that our strategy for organic and acquisition-driven growth will offer our investors high-quality long-term returns. And we'll do that while creating employment, driving innovation and enhancing the security of the U.K. and its allies.

Thank you very much for your attention. Any questions would now be very welcome, and we'll do our best to answer.

Thanks very much. That was a presentation from Andy and Simon, which was recorded at the -- just prior to the year. And we're now going to move on to questions with Andy and Simon are here with us today. And we have a number of questions that have been pre-submitted and also submitted live. [Operator Instructions]

Andy and Simon, first question that we have today. Order intake in H1 was lower than in the same period last year despite the overall order book remaining strong. Does management see this as a temporary timing issue or a signal of changing demand?

The answer is very much the former. Orders in our business are quite lumpy, if I can put it that way. I mean, a significant proportion, very high proportion actually of our revenue comes from orders of the order of GBP 10 million, plus or minus, even though the large majority of our orders are actually much smaller than that. So you can see from that, that a relatively small number of orders of substantial size has quite a big impact.

As I explained in the presentation earlier, I mean, the fact is we see a very strong set of opportunities. I would say the opportunities that we see are as strong as I've known them since being at Cohort. So no, I would say we're definitely not seeing a tailing off in demand. The drivers are still very much there, and those are resulting in a lot of opportunity.

Thanks, Andy. And what assumptions underpin the outlook for improved margins from this order book, particularly given lower margin projects in some divisions?

I'm going to invite Simon to comment on that.

Thank you, Andy. Well, what drives it is the fact that in the Communications and Intelligence division, we have 2 high-margin businesses in EM Solutions and MASS that we expect to continue to drive high margin. And at EID, the improved volume will improve operational leverage and that will improve its net margin. MCL is a more erratic business. But overall for that division, we do expect the net margins to improve from the current sort of 17% upwards over the next few years, probably getting closer to sort of north of 18% towards 19%.

Sensors and Effectors is the one where the net margins have been lower. Again, the order book is there. It's over 400 million for that division. And we expect that a combination of improved delivery at Chess, ELAC getting through the development on the Italian submarine program and moving into production, and SEA has had one project that's been particularly low margin that will clear from the business in the early part of '26, '27, plus more of a focus on defense. I mean, SEA also sold its Transport division in the first half, which was relatively high margin. But those 3 factors will look to improve the net margin at Sensors and Effectors to 10% overall for the coming -- for this financial year and moving onwards from there towards mid-teens, I think, in the next 2 to 3 years for the division.

Thanks, Simon. Next question is, net debt has increased compared with last year due to working capital and CapEx build. How does management prioritize investment versus debt reduction?

Again, Simon, I'll invite you to comment on that, although I'll happily add a word at the end, if you like.

Okay. What we do is we put in place the suitable facilities to enable us to execute the strategies of the business, one of which is to acquire more businesses through M&A, obviously, to invest in our businesses through R&D and CapEx to make sure that operationally, they continue to improve, grow and deliver. But really, it's more what we do -- as cash comes spare, we then look at whether we would pay down debt. But ultimately, the priority remains in the group to drive the top line and the bottom line to generate more cash to enable us to execute our strategies, at which point the debt positions will be adjusted accordingly.

We are currently in discussions with all of our banks at the moment, and we will be adding new banks to increase the facility, which was put in place almost 10 years ago now in its original form. And the group then today is heading towards GBP 300 million. It was GBP 100 million then. So it gives you an idea of the scale of what we're looking at for the new facility to enable us to enact our strategy.

Yes, thanks. I mean I'll just add to that, that it's a natural part of a business like ours where we're operating some large contracts of multiyear duration that working capital is going to build at some point. And we have to take account of that when we're negotiating bank facilities, as Simon is doing at the moment. So I wouldn't look at -- I mean, I wouldn't look at our balance sheet at the moment and say, well, that looks jolly efficient because you've got net debt of GBP 30 million or whatever. That isn't the way we view it. We view it as managing working capital and being able to follow the strategy, as Simon has said, and that's what we need the funds for. But we are not a believer in high leverage, and we'll aim to keep that down to a sensible multiple of EBIT.

Thanks, Andy. Next question. Order book is good. The geopolitical tensions are high and the management team seems strong. Can you please give us a view on the share price?

Thank you. Thank you for your kind comments, whoever raised that question. Well, I think that question may have been posed a few days ago. We have seen -- or we did see quite a substantial decline in the share price, driven by technical factors. I think I can say now that we had -- because it's a matter of public record on the shareholder register, we have one particular shareholder who made a strategic decision that now was the time for them to depart, and they didn't perhaps manage that in such an orderly way as they might have done.

And so we did see a rather puzzling decline in the share price at a time when the business is still doing pretty well. But you can quite easily track the point at which the disposal activity ceased because that was the point at which the share price started to tick up again. But if you're asking me about it as it is now, it's a bargain.

Thank you, Andy. Interim dividend was increased by 10% to 5.8p per share. How confident is the Board in sustaining dividend growth if profits remain flat or decline?

Well, that's a very hypothetical question because we're not expecting profits to remain flat or decline. We -- I mean, we have, as you'll have seen, increased the dividend annually every year since we floated back in 2006. And in most of those years, profit has increased as well. It's worth saying. And even when it didn't, we were very confident that it would in the future. But that is something that we're going to consider in relation to our dividend policy and whether it makes sense. So that's something that we may communicate further on later in the year.

Simon, anything to add to that?

No, not particularly. I mean, you're absolutely right, Andy. We are looking at the policy and whether -- and linking more the dividend to earnings. But I remain reasonably confident that we can continue to increase the dividend as shown in our external analyst forecast.

Thanks, Simon. And what risk do you see from geopolitical tensions, international export controls or compliance frameworks?

Well, there we go. I hope this isn't going to sound overly negative if I'm being asked about risks because -- I mean, overall, I'm very optimistic. Well, geopolitical tensions, there are risks arising from geopolitical tensions. Is very much more of an opportunity because at times of geopolitical tension, countries recognize that they face genuine threats, and they need to invest in defense and security equipment to deter potential hostilities, interventions from elsewhere and if necessary, to defend themselves against it. So that's a substantial demand driver. There are risks associated with it, of course, and hybrid warfare, cyber attacks and so on.

And the defense industry is likely to be an attractor for those sort of things. We look very carefully at those risks, and we aim to ensure that we're as well defended as we possibly can be. In relation to international export controls, well, I don't really see that as a risk because we only export to our nation's allies. We're a multinational business with operations in 4 different countries. And those countries are themselves close allies, either in NATO or in the Five Eyes community. And we've never had a desire to export to anybody that they wouldn't want us to export to, let me simply put it that way.

In relation to compliance frameworks, very important in our sector. I mean it is a really core part of our operational strategy that we comply with the legislative and regulatory requirements that surround our business, as you would expect, that surround any business involved in defense equipment in all of the countries in which we operate. And it could be a significant risk if we fail to do that, both reputationally and in terms of sanctions that could be meted out as a result. So that certainly is an important priority as it is for all responsible businesses in our sector.

Thank you. With autonomous subsidiaries, how do you ensure consistency and synergy across the group?

Consistency, not so much really. I mean we -- each of our businesses has their own culture, their own offerings, their own way of doing business. And I consider it a strength of our group that we don't attempt to impose a monoculture across all of the ways that our businesses operate. Now we do aim to ensure that they aren't fighting against each other and that they're not -- that their strategies are not heading into convergence and competition. And we do that through an annual strategy review process, which we're just embarking on actually in the next few months at the moment. And if it does appear that we've got 2 or more of our businesses heading very much into the same area, then that's something that we will observe and head off at the past. But no, I think it's really part of our strategy that our businesses operate with a significant degree of autonomy.

In terms of synergy, we have monthly meetings -- sorry, quarterly meetings of all of the managing directors and one coming up later this month. When all of them present what it is they're doing, what the opportunities are that they're seeing, where they have issues or problems. And that provides a perfect opportunity for them to identify areas where they can work together. Now that's not something that we ever impose. It's got to be the choice of the businesses concerned that they partner with each other as opposed to partnering outside.

And my view is that you should always choose the best partner, whether that is inside or outside the group. But it turns out that because they know each other well, because they're used to working with each other, it's often the case that it's a smooth process to do that. And we have quite a few good examples across the group, perhaps the most prominent one being the design and production of the Ancilia missile defense system for the Royal Navy surface ships, which is led by our business SEA, but with our business Chess in a very important supporting role. So yes, we do support that.

Thank you, Andy. Next question is, is there a risk Cohort becomes too complicated for investors to understand compared with simpler defense peers?

I hope not. I don't think we're that difficult to understand. I think if you look at us as a group, we are developing and supplying a range of different defense equipment. Now if you wanted to sort of look at it at an atomic level and consider every single different piece of equipment that we supply to every single customer, well, then it would be quite complicated. But that's my job, not and Simon's job. That's not the job of investors.

I think if you look at it through the lens of what is happening to demand and how does that match what our offerings are and also how effective is our model, the model that I described in the presentation as compared to that, say, of our large integrated prime peers like BAE Systems or Thales or whoever, then that's the way to look at us. And I don't think it's overcomplicated at all.

[Operator Instructions] Next question is, which of your businesses is the strongest performer and which is the most challenging?

That's like asking a mother to choose between her children. And it varies very much from time to time. It's one of the benefits of having a diverse group in that if we do get a falloff in performance in one area, it's often compensated for by another. But I mean I think I'd direct you to a few different areas as to some of the most exciting businesses that we have. Our new business, EM Solutions, has become, for the first time, the largest contributor to group profit in the first half of the year, overtaking the previous incumbent in that role, MASS, which has been so for many years. And that's exciting for us. They've got plenty of good prospects as well.

I think SEA has got some really excellent products, which are very well aligned with the way demand is evolving like the Krait towed array sonar for uncrewed vessels and the Ancilia missile protection system that I mentioned a moment ago. One of our most exciting businesses is Chess. Chess hasn't been the easiest of our portfolio over the last few years. But their product portfolio is extremely well aligned to demand at the moment for particularly counter drone systems and systems that will track and localize drones with great accuracy, but also for battlefield surveillance and targeting and maritime surveillance and targeting more generally. So I mean, I could go on because they've all got some real excitement about them. I would expect to see some great order intake very soon from EID, for example. But yes, I think we're in an exciting time. So pretty much all of our businesses, things are looking up.

Thank you, Andy. Sorry, I've just lost the next question that's there. Sorry, here we go. Global expansion is very impressive, but how difficult is it to embed a company that is on the other side of the world is the question.

Yes. Well, that's a very good question and one we gave quite a bit of thought to in the process of acquisition when we were looking at EM Solutions. And it is an awfully long way away. And Simon and I have spent more time than an ideal, you might, sitting in metal tubes in the air as a result of that. But one particular approach that we thought was really important because there's a big time difference. I mean, I was up very early this morning having a monthly meeting with the guys from Brisbane, is that we have brought in 2 local nonexecutive directors. I say local, actually, one from Melbourne and the others from Canberra and our businesses in Brisbane, but quite a lot more local than Reading. And those -- they are very experienced guys.

Michael Flowers is the former Chief Executive of Chemring plc, and we knew him from his time in that role as well as a former Australian Army Officer. Clint Thomas is a very distinguished retired Admiral, who is also the Managing Director of Serco in Australia as well. So very experienced, both businessmen and very experienced and knowledgeable and with very strong contacts in the defense and particularly the Navy organization. And they provide very strong support for Simon and myself and the Cohort headquarters working closely with our colleagues in Brisbane.

Thank you, Andy. Some investors avoid defense stocks, does that limit your shareholder base or access to capital?

Well, I think it's fair to say it certainly hasn't done. We last did a fundraising in November 2024 in advance of the acquisition of EM Solutions, and it was just about 3x oversubscribed, and that was for some GBP 40 million. So -- and I mean, I think it's fair to say that investors have had a bit of a rethink about defense since 2022, and Vladimir Putin's invasion of Ukraine, recognizing just how vital defense is to the U.K. and its allies and what a good investment that is, both from a financial point of view and indeed from a social point of view. So no, that hasn't affected us.

Simon, do you want to say a word about provision of debt? That's had a similar impact.

Well, quite incredible. In fact, just before this call, I've just come off meeting another new bank. As said, we are in facility renewal discussions at the moment. We have 3 existing banks. We will add a fourth bank. We already said, yes, they'll take part for Australia, but we are looking at adding 2 possibly more banks, and there are a lot of banks. There are banks now who are looking at the defense industry who 5 years ago were not. It's quite remarkable the change in the banking market with its attitude to defense.

Yes. Interesting. Next question is interesting article in The Times yesterday about Westland Military helicopter factory being weeks from closure. Are you finding government defense contracts hard to predict and manage also?

It was an interesting article actually. It was the CEO of Leonardo getting a bit aggressive with the U.K. government about the contract for the new helicopter. The -- are we finding government defense contracts hard to predict and manage? Well, the timing of government contracts and when there's competition, which sometimes is, whether or not we're going to win it are often difficult to predict.

But overall, we generally managed to aim off enough and have got enough experience of operating in this sector that we can make reasonable judgments about them, I would say. I can understand -- I mean, I don't share the approach that Leonardo is taking over this one, I have to say. But I mean, I can understand the frustration because what we saw early last year in the U.K. was a strategic defense review, which I think was an extremely high-quality document, very articulate and very well argued.

And we simply haven't seen the implementation of that yet, either in practical terms in terms of actual contracts being awarded or in terms of the follow-on document, which was supposed to say exactly how this new investment in defense is going to take place. And we don't, at this stage, know when that's going to happen. I mean there was a strong indication that it was going to happen by the end of last year, but that in the end did not occur. So I can understand why people might be frustrated in the U.K. And it's -- we're a very international business and now less than half of our output goes to the U.K. But I'm very optimistic that those promises that were made in the strategic defense review will be acted upon. We're just seeing a little bit of temporary dysfunction here.

Thanks, Andy. Next question is, how large is the execution risk for your larger contracts over the next 18 months?

Where we have large contracts that are complicated to deliver, we take a cautious approach to recognizing revenue and margin. The strongest example of that is ELAC sonars contract to supply the complete sonar system for 4 new Italian submarines that are being built in La Spezia by Fincantieri. It's a very complicated contract. It's a complex supply chain, which adds risk. And it's also technically extremely demanding, I think possibly the most technically demanding contract that we've ever executed as a group.

And it is very substantial, over EUR 100 million now with the various additions that have been made since the contract was originally awarded. So -- but ultimately, that is our bread and butter. That is what we do for a living. It's managing and developing and delivering technology, complex technology in many cases, to customers that actually deals with some very significant issues that are out there. So we do our very best using the knowledge that we've got, the experience that we've got and taking into account the potential risks to make sure that we don't overtrade.

And that's one of the reasons that ELAC has seen a relatively low margin in the first half in quite a high proportion of its revenue was derived from that Italian contract, which is to say we're trading at low margin. And as and when we see us getting past important risk stages in that program, then we will consider releasing some of that provision.

Simon, do you want to add a word about the approach that we're taking on that or to higher-risk contracts generally?

No, I think what you said, Andy, is spot on. The one thing I'd add on the Italian program is that we've actually -- because of the risk, we actually put in an Advisory Committee to sit over and above the actual project committee as it's run with some extremely eminent and knowledgeable people on that to assist the Germans to deliver it. But no, the approach we take across the group with these -- with all of our projects is the same. It's just the bigger projects obviously have potentially bigger swings in them.

We don't -- whether it's EUR 100 million or EUR 1 million, the approach is taken is the same. They all have an element of risk. It's just obviously the risk in the bigger ones is bigger naturally. No, not always. Some of that big contracts, actually, particularly the service ones don't have a great deal of deliverable risk. They have other types of risk, but not delivery risk.

Yes. No, I mean, Simon makes a good point about the Project Advisory Committee. That involves the former head of BAE's submarine business and the former Chief Technologist of Thales' underwater business are providing review and advice on that project. So we've got some very expert people involved.

Thank you, Andy. Next question is, how do you compete with larger defense companies like BAE, QinetiQ, et cetera? And who do you see as your main competitors?

Well, BAE is at times a competitor or actually more frequently, it's a customer. It's, in fact, one of our largest customers. In relation to submarines, for example, BAE is our main customer. So -- and that is often the case actually that we both -- in many cases, in fact, the same business is a competitor, a customer and indeed a supplier. That would certainly be the case in relation to Leonardo, for example. So -- but that's just the nature of the defense world.

How do we compete with them? Well, plainly, we're not going to be competing with BAE to produce the next British nuclear submarine. I mean they have a capability that we couldn't conceivably match there. But equally, we are very well aligned with the -- our capability is very strong in terms of providing systems like Torpedo Launchers, intelligence gathering systems, communication systems, sensors of various kinds, the sort of stuff that we supply.

And the kind of engineers and the kind of technical professionals that we have and the culture of the businesses and the procedures that we operate with, and also the cost structure of the business as a whole, where unlike BAE, we don't have a large sort of coordination layer sitting between the operational leaders of the business and Simon and myself in the headquarters. All of those give us an execution advantage and I would say, a cost advantage. So that's why we're able to access these programs very effectively.

What percentage of revenue is from NATO countries? And where is future growth likely to come from?

Simon, do you want to comment on the revenue breakdown?

No, I can't precisely answer the percentage that comes from NATO countries. But I can tell you that currently, around 40% is coming from U.K. MOD and around about 7% from Portugal and Germany, which obviously NATO, that's 47%. And I can tell you there are other elements of the export. I would have thought NATO is probably for us at the order now of around about 60%, maybe a bit more. So maybe 2/3 of the group's revenue is NATO. And that -- remember, that would include Canada as well.

Yes. And in terms of future growth, I think the 2 big drivers, of course, are Ukraine on the one hand and Chinese investment in its armed forces and its aggressive behavior with them on the other. So they're coming in those 2 areas, one European NATO, the other Indo-Pacific. And in the Indo-Pacific, we operate in Australia, and we also see interestingly, an increase in demand from Japan, where defense spending is growing rapidly. We see an increase in cooperative relationships actually in South Korea. And you'll have seen from the earlier presentation that we're developing our relationship with Hanwha.

And in Europe, obviously, U.K. is a home market as are Germany and Portugal, but also we see strong demand coming from the Nordic countries, the Baltics, Poland. And potentially Germany as well. So yes, those are the drivers of demand. I should add that apart from most, we've also seen quite a surprisingly high level of demand from South America. I was puzzled about that until a few days ago, and perhaps I realized they were seeing something I didn't. But yes, I mean, actually not Venezuela to be fair, but -- or indeed Colombia, but more sort of allied countries in Chile and Brazil have been significant customers.

Thank you, Andy. In light of the current defense company valuation environment, how is Cohort considering its acquisition strategy? Would you be considering acquisitions in Continental Europe to further expand positive spending growth?

Certainly. I don't consider us especially geographically restricted. We would consider acquiring good companies in Europe, in the U.K. in -- or indeed in Australasia or in Canada for that matter. I mean there are some quite significant barriers to acquiring businesses in the U.S. But if we found the right one, then we'd consider doing that as well. It's more about finding businesses that have got access to growth opportunities and also some kind of sustainable competitive advantage so that we're not just competing with a bunch of peers on who's prepared to accept the lowest margin.

And in terms of valuation, well, valuations have generally gone up. But that's not -- there's not a sort of mystery in that. It's generally because when you're in a period of high demand, businesses are better quality, and we're seeing businesses with longer order books and with better sets of opportunities at the moment.

I should say that -- I should caveat all of that by saying, on the one hand, acquisitions remain an important part of our growth strategy. But on the other hand, we're not sort of tied into doing a certain number per year. We are -- we do tend to be very choosy and careful about our acquisition targets.

That's super. Well, that is just about all we have time for at the moment. So Simon, Andy, thanks very much for your time. Andy, maybe I could hand back to you for any closing remarks.

Yes, I'd just like to say thanks -- say thank you very much to everybody for joining us. It's been a pleasure to talk to you and to answer your interesting questions as ever. And just to leave you with the thought that defense is an exciting and important area to be in at the moment. And it's certainly been an exciting and interesting time for us. And Cohort shares are a good way to gain exposure to that important and exciting market at the moment. And with that, I wish you a very good afternoon.

Thank you to Andy and Simon today, and thank you all for joining us. And that concludes the Cohort investor presentation. Please take a moment to complete a short survey following this event. The record of this presentation will be available to you on Engage Investor, and I hope you enjoyed today's webinar. Thank you.

All right. Well, good morning to anyone I haven't said good morning to already. Let's make a start. Well, thank you very much for joining us this morning. For anyone who doesn't know, I'm Andy Thomis. I'm the Chief Executive at Cohort plc. I'm here with Simon Walther, Cohort's Finance Director, to take you through our results for the 6-month period ended 31st of October this year.

By way of background, Cohort is a group of 7 businesses, providing technology-based defense products and services to the U.K. and to its allies around the world. Our business model aims to maximize the autonomy and independence of our businesses consistent with good financial and regulatory governance. And that means that decisions are taken quickly and close to the customer. It maximizes agility and innovation while supporting our businesses with a strong balance sheet and market reach that we have as a group.

So today, I'm going to start by giving you the highlights from the first 6 months of the year. Simon will then provide more detail, including a divisional breakdown. And then finally, I'll share my thoughts on the demand picture and on our future prospects. And of course, there will be an opportunity for questions at the end.

In essence, it's been a robust first half. Revenue is up. We have a strong order book and prospects that provide the basis to accelerate the full year performance and beyond. And our full year expectations remain unchanged. So let's take a look at the numbers.

So revenues continued to increase to a record GBP 128.8 million for the first half, and our profit is in line with expectations. So following a record performance in the prior period, we experienced a small decline in adjusted operating profit, which now sits at GBP 9.7 million. It was another good period for new orders, which are, of course, the best leading indicator of future growth. The order intake of GBP 122.3 million in the first half has kept our order book close to April's record level at GBP 604.5 million.

As at early December, that covered some 96% of external revenue forecasts for the year and will be generating revenue for us well into the 2030s. Adjusted earnings per share for the 6 months ended 31st of October decreased to 16.16p. The effective tax rate was 15.5%. The operating cash outflow of GBP 27.9 million was as expected, reflected a build in working capital ahead of second half deliveries as well as payments in respect of dividends, capital expenditure. And that resulted in a net debt position as at 31st October of GBP 32.5 million. The capital expenditure included GBP 7 million on ELAC's new facility, which was completed on time. And we expect our net funds at the year-end to be in line with previous expectations.

We declared an interim dividend of 5.8p, once again representing an increase of 10% on last year's, and that reflects the Board's confidence in the group's prospects. So Simon will now talk you through our financial review of the first half of the year. Simon?

Thank you, Andy, and good morning to you all. As Andy has already said, and I will reiterate, another growth in revenue for the group with contribution from our latest acquisition, EM Solutions, offsetting an expected drop in the revenue at MCL. The drop at MCL, along with the mix in Sensors and Effectors accounts for the lower margin -- for the marginally lower trading performance of the group, again, in line with expectation.

As we indicated at the year-end, we expected the revenue from U.K. MOD to fall back from its high level and as a share of the group's overall revenue to fall below 50%. The growth in our overseas domestic and export markets will see the U.K. MOD activity probably remain below 50% going forward for the foreseeable future.

Our expectations for the second half are a much stronger performance with 96% of our revenue now on order or delivered and producing a full year net margin of around 12%.

Starting with Sensors and Effectors. The change in mix in this division despite higher revenue was the cause of the group's overall lower first half trading performance when compared with last year. We saw good order intake at Chess and a return to profitability. We expect this improvement to continue. And under new management, we are looking for Chess to drive more sustainable growth, especially on the back of demand for counter drone systems and to achieve net -- mid-teen net margins by 2027, '28.

At ELAC, the first half saw the relocation of production to the newly completed purpose-built facility in Kiel. Increased contribution from the Italian contract, which is still being prudently traded ahead of second half deliveries has suppressed ELAC's trading margin in the first half. We are on course to deliver the first boat set on this program in the first half of 2026 calendar year when we will review the project's contingency levels.

SEA, following the sale of its transport business at the end of June, delivered less revenue. Overall net margin for SEA reduced against prior year as lower margin work formed a greater proportion of mix in the first half, especially for delivery to an overseas customer, a project which we will complete in the early part of '26, '27. The order cover for this division is 98%, and we expect a much stronger second half, delivering a net margin of around 10% for the full year. The order book of more than 2x annual revenue gives confidence for future growth.

Turning then to Communications and Intelligence division. It also reported increased revenue at GBP 62.5 million, up 13%. The maiden first half contribution from EM Solutions in line with our expectations, offset the fall in MCL's revenue from the exceptional level it achieved last year. Underlying improvements at both EID and MASS further drove the higher revenue for the division. The adjusted operating profit of GBP 10.4 million for the 6 months to 31st of October 2025 was 23% higher, delivering an adjusted operating profit margin of 16.8%.

A major factor in the improved net margin was the contribution of EM Solutions. EID's loss for the first half was less than last year's equivalent. The order book at EID continues to strengthen, and we expect significant orders in the second half from the Portuguese Navy. EID will return to profitability for the year, and our net margin target of mid-teens is likely to be achieved in the next 3 years.

MASS saw good performance from its high-margin EWOS operations, electronic warfare operational support, and we expect MASS to perform strongly in the second half. This division's order book increased to GBP 203.6 million, and its revenue cover is now 87%. This is typically lower than Sensors and Effectors with the short-term nature of some of the work at MASS and most notably MCL. EID infill is linked to the domestic orders, which are in progress. The net margin for this division is expected to be over 17% for the full year.

This slide shows the factors behind the net funds movement in the period. The first half performance has been driven by 2 primary outflows. Firstly, the expected CapEx spend on ELAC's new facility, which completed on time in September, and we will see the final outflows in the second half. Secondly, a return to historic trading patterns as the first half saw significant working capital outflows, building for a marked increase in second half deliveries. As usual, the nature of our receipts and payments, a total of probably around GBP 600 million for the year, some of which can be many millions of pounds in size, makes it hard to predict in the short term, but the group remains highly cash generative.

Our expectations for the second half are a much stronger performance, as I've already said, with 96% of our revenue now on order or delivered and producing a full year margin of around 12%. Our expectations of closing net funds remain unchanged at GBP 10 million to GBP 15 million for the year-end. With that, I'll hand back to Andy.

Thank you, Simon. So looking towards the mid and longer term, we see a number of opportunities for the group. And I'd like to show you some of the key factors that are driving those opportunities.

So we continue to see a strong demand picture in response to the deteriorating security environments and ongoing conflicts that we see across the world. None of us should welcome that and the risks that we now see are real and a matter of concern. In regions where threats are more immediate, governments are under pressure to upgrade and modernize their defense capabilities at speed. And that is where mid-tier businesses like those within the Cohort Group have got the agility and the expertise to provide innovative solutions to those defense challenges.

The main catalysts of demand for defense equipment continue to be the conflict in Ukraine, coupled with the rising tensions between China and its neighbors. Research from SIPRI shows the biggest defense spenders include China at a remarkable $313.7 billion last year and Russia with $149 billion. And those persistent geopolitical forces are driving long-term demand for defense capability upgrades. A further catalyst is the arrival of new technology, allowing artificial intelligence-enabled and autonomous systems to be integrated into defense forces. And a good example of that is the U.K.'s recently announced Atlantic Bastion program.

These drivers are pushing increased defense spending in Europe, in North America and parts of Asia Pacific. As we've seen, the NATO countries have agreed to raise their defense-related spending to 5% of gross domestic product by 2035. And many European countries, particularly those in the North and East, are already increasing their defense spending significantly.

The U.K. remains committed to increasing its defense expenditure to 3.5% of GDP by 2035 with a further 1.5% of GDP on security-related investment. And the imminently expected and awaited defense investment plan in the U.K. is expected to outline where investment will be prioritized.

Now the need to increase defense spending to meet growing threats has been recognized well beyond the immediate vicinity of Russia and China. Modern conflicts demand systems that can adapt quickly and operate autonomously. And the Cohort Group is well placed to meet that need and has responded with investment in R&D and future technologies. We continue to see the increased focus on protecting underwater infrastructure, providing opportunities for ELAC and SEA. The need to protect our forces from both cyber and kinetic threats, including missiles and drones, generating opportunities for MASS, for Chess and SEA. The growth in manned and unmanned submarine and surface ship programs worldwide, providing opportunities for SEA, for ELAC, for EM Solutions and for EID.

The need for secure digital communications for multinational forces, driving demand for systems like EID's TDCIS and MASS' JEFNet; and the need for electronic warfare, drones, counter drone and communications for the U.K. and its allies at short notice, driving demand for MCL's products. And so the practical results of these geopolitical developments is a sustained higher level of demand for our equipment and services.

To share some examples of that demand, EID is focused on providing communication and network systems for new Portuguese Navy vessels as well as multiple communication systems opportunities for NATO and Asia Pacific customers. EM Solutions is also pursuing opportunities with the Portuguese Navy alongside fleet installation opportunities for New Zealand and Australia. Their work on the Japanese Maritime Defense Force trials is ongoing, and EM Solutions is also working with the Royal Navy here on SATCOM renewals. And as the focus on cybersecurity increases, MASS has seen an increase in training and electronic warfare exercises for the U.K. and coalition defense customers.

MCL continues to work as a trusted partner to the U.K. Ministry of Defense and is progressing with order opportunities for electronic warfare and uncrewed systems. Chess is seeing an increase in demand for its ground-based drone defense systems. ELAC continues to support the Italian Navy program as well as programs for NATO and Asia. And finally, we're seeing significant growth in opportunities for KraitSense and KraitArray, towed array sonar products at SEA.

So all of these things are prospects rather than orders. So the value and the timing of these -- of converting these into contracts is uncertain and the probability of winning them varies. But I hope that, that helps to paint a picture of the strong demand and the kind of opportunities that we see for the group.

Now as the group has developed, our international presence has widened, and we've seen several examples of that in the first half. And that global expansion reflects our commitments to being closer to our customers and to developing defense technology solutions that will support their future needs. In our previous financial presentations, you'll have heard updates on ELAC's new facility in Kiel, Germany. And we're pleased to confirm that following our GBP 21 million investment and lots of hard work from their team, that facility is now operational, and we look forward to sharing more details during our official launch early next year.

The Italian Navy submarine program has been and continues to be an important focus for our ELAC team and opening an office in La Spezia in Italy is a key step in strengthening our support for the Italian Navy enabling closer collaboration, faster response times and sustained value for this important customer. I was present at the launch event and the enthusiasm from the Italian team for ELAC's contribution to their capability was unmistakable.

SEA has also expanded its geographical footprint with the opening of a state-of-the-art manufacturing site in Ottawa in Canada. And our vision is that the new facility will be the main manufacturing site for SEA's torpedo launcher system for customers in Canada and worldwide. And as well as delivering profitable revenue, these strategic investments support our business development activities in important international programs and long-term growth.

Now another excellent example of our global expansion is the memorandum of understanding that I signed with the major Korean shipbuilder, Hanwha Ocean at the Defense and Security Exhibition in Thailand last month. Now this agreement signals our ambition jointly to deliver defense technologies to address the needs and requirements of the Royal Thai Navy second phase frigate acquisition program. And the MOU will provide opportunities for businesses across the Cohort Group to come together and provide a package of defense technology solutions, potentially including sonar systems, torpedo launcher systems and communications management. And that agreement marks a key milestone in our growing relationship with Hanwha Ocean and an important step in strengthening Cohort's international partnerships.

By combining the expertise and technology from across the Cohort Group with Hanwha Oceans, we can deliver naval platforms that enhance operational effectiveness and through unique modular and open architecture design, future-proof vessels to support long-term capability and security. We're excited to be exploring new opportunities alongside Hanwha Ocean and delivering the Cohort Group's market-leading maritime capabilities to the Royal Thai Navy.

Now as you know, in January this year, we acquired the Australian Satellite Communications specialist, EM Solutions, expanding our naval defense offering and reinforcing the group's presence in Australasia. Now led by joint Managing Directors, Georgios Makris and John Logan, the business develops innovative naval satellite terminals that deliver high-speed communications worldwide. And EM Solutions is now fully integrated as the group's seventh business. And following that successful integration, they've strengthened our performance in the first half, making the largest contribution to group profit of all of our businesses as well as a AUD 28.6 million order intake. And we see much more opportunity ahead for the business in the coming months.

Their team made an important contribution to Cohort's presence at the large DSEI exhibition in London earlier this year. And that event was valuable for discussions with EM Solutions customers for long-term prospects in Europe and Australia and Japan. And it also provided an excellent opportunity to discuss partnering with EID to provide and support satellite terminals in Portugal. Overall, it's been a very encouraging start for EM Solutions as part of the Cohort Group, and they'll continue to work with our other businesses to gather intelligence on opportunities and to promote their Cobra product family.

So I've explained the key factors driving demand for our defense technology products and services, and this slide shows how that demand is translating into orders for the group. The group's order intake in the period was GBP 122.3 million, delivering a closing order book of GBP 604.5 million, just below the year-end record of GBP 616 million. And our on-contract revenue stretches out to the mid-2030s with particularly good order intake from MASS and EM Solutions within Communications and Intelligence and at Chess and SEA in Sensors and defectors. And our full year expectations for order intake remain unchanged. And we continue to see a positive outlook for organic growth in the medium term, underpinned, as I said, by the healthy demand in our core defense markets.

And that brings me almost to the end of the presentation and a summary of the main points that I wanted to make. It's been another strong interim results period for the Cohort Group. And in part, that reflects the growing demand picture that I've talked about. But importantly, it's also a result of the agility and innovation that our business model is designed to optimize and our experienced and entrepreneurial leaders. We have an active acquisition strategy, and we look for businesses that will complement our product portfolio and provide opportunities to enter new markets or to strengthen relationships with existing customers. And the contribution of EM Solutions in this latest results round is a good demonstration of how that strategy actually works in practice.

Our financial strength and our public listing underpin customer confidence and enable future investment in acquisitions and in product development. We've sustained our strong order book. And looking forward, we have an exciting pipeline of further opportunities. And finally, as a result of our performance and our prospects, the Board has again felt confident to increase the dividend by 10%.

Now before closing, I want to take the opportunity to mention the great contribution to our success made by our management teams and employees. In the first half, we welcomed some new members to our leadership team. Andy Smith took over as Managing Director of Chess following a successful career to date at Leonardo and Marshalls. And Michael Flowers, whom some of you might remember from his Chemring days and Clint Thomas joined us as Nonexecutive Directors at EM Solutions, and we look forward to working with them to build on the success of the group. Within our subsidiaries, our reputation as a leading mid-tier defense technology group continues to attract new talent. And it's the expertise, dynamism, practicality and integrity of our people that will help secure future business success.

We believe that our strategy for organic and acquisition-driven growth will offer our investors high-quality long-term returns. And we'll do that while creating employment, driving innovation and enhancing the security of the U.K. and its allies.

Thank you very much for your attention. Any questions would now be very welcome, and we'll do our best to answer. Yes, please.

Ben Varrow from RBC. I'll do 3 to start, please. Maybe kicking off with -- I'll do it one by one. Just on Chess in terms of delivery, so sort of 5% margin in the first half. Is that where you expected it to be? Obviously, you've done the management change now. Is it sort of heading the right way in terms of delivery? How should we think about that path to the mid-teens margin there?

We are looking for that margin to grow. As I've mentioned, we have made an important management change at Chess. But Simon, would you like to say a bit more about margin?

I mean I expect that margin to be -- to double for the whole year. So we'll get back to a sort of double-digit margin for Chess in the full year. But as Andy said, the aim, as I've sort of said, is for a more sustainable growth of Chess. It's got the order book. It's got the demand. We just need to deliver and deliver well. And there's no reason why that business can't be delivering very well and into mid-teens margin. I mean I've indicated when, but I think it could go quicker. There is good demand for what it does.

That's good segue. My next one, which is on the opportunity with Rheinmetall Sky Ranger system, obviously, that can be quite significant there. Can you just shed a bit of light on perhaps who else is supplying into that system and the opportunity that you see from that?

Well, of the group companies, it's chess. So none of our other...

As in competition as in rival into Rheinmetall system? Or is it still from Chess?

There's a very strong relationship between Chess and Rheinmetall at the moment, we're their sole supplier. Now plainly, they'll want to make sure that they get the very best supplier for their system. I wouldn't rule out the possibility of long-term competition. But at the moment, the relationship is strong. And that's despite, as people are aware, the -- some of the difficulties in delivery in the first half and in prior years. But essentially, they've got a product that Rheinmetall know is the best that's available at a very good price point. We just agreed new pricing with them. So I'm confident that, that's a really stable long-term relationship.

And it's my last question is sort of similar as well, but in terms of capacity, sort of how much scale do you think you could take on at Chess and then broadly for the rest of the group as well. Obviously, you've done the investment now in Kiel. Is that it now in terms of capacity expansion?

Well, Chess' lease will come to an end on its current facility in the next few years. And so we're already looking at what the next step should be. And certainly, we'll be looking at expanded capacity there, whether it's on the current site or a new one. So there will be a further increase there.

Elsewhere, as you've mentioned, we've already got considerably greater production capacity at Kiel than we had. At SEA, we've made considerable efforts to reorganize the large facility that we have down at Barnstaple to optimize and improve production capacity there for Ancilla and for Krait, both of which will be increasing in volume. And we have our new facility in Ottawa, where we'll be doing the torpedo launcher systems. So yes, I mean, those are some good examples of how we've increased capacity. We'll obviously be responding to future demand and future contracts. But at the moment, I think we have -- we'll be able to meet the demand that we see. You can have another one, if you like, Ben.

SAAB and Poland, I understand you're part of that system. Can you maybe chat through that opportunity to the extent that you can and perhaps the other opportunities that ELAC has in the submarine sonar space?

Yes. So I mean, nothing is done until it's done. And I don't think it's a done deal that we'll be providing the sonar systems for Poland. But we do have a very close relationship with SAAB and we were delighted to see them win. So I see that as a good opportunity looking forward. The elsewhere, yes, we see opportunities. The Canadian submarine program, for example, is a potential opportunity. It's a very large opportunity, and there are others around the world as well.

ELAC is also has good opportunity on surface ships, and we see particularly the Italian Navy, where we've already got a really strong relationship, providing the submarine sonar as being a good opportunity there. We have good relationships with Fincantieri who's likely to be building those. And beyond that, I think some of the new technology that ELAC is working on has some really good applications in protection of underwater infrastructure, which, as we know, is so important, both underwater cables and underwater pipelines. And they're developing technology not only to detect threats, to underwater infrastructure, but also to deal with them with a new effector system, which they will launch next year.

Last one. ELAC's provision, obviously, that could unwind this year. Can you just chat through the steps in that? So you've got the factory acceptance test. And then how should we think about the provisioning on the sort of next 3 boats as you go?

I'll say a quick word, which is that we'll be releasing that as we gain confidence in the risk reduction. I mean that's the primary and important point. And the key steps in that will be the factory acceptance test, the harbor acceptance test when the submarine is in the water and alongside, and that will obviously require the system to be fully fitted to the submarine. And eventually -- and the final and most important one is the sea trials where the submarine is actually out at sea tracking surface ships and submarines using the sonar system. And it's only really when the first shipset has reached that point that we'll be able to iron out all the risk in the program. But Simon, do you want to talk about the steps in that?

I mean, Andy has highlighted them. I mean what we've done, we've obviously linked the provision to particular milestones. The timing -- the fact timing for acceptance test is a bit more in our control. And I talked about the first shipset delivery in the first half of 2026. So that's the thing. Sadly, the harbor acceptance and sea acceptance are more in the hands of the shipbuilder. And my experience of many years in defense suggests that most ships programs tend to slip a bit to the right. So we can't be certain on the timing of those. But we will continue to monitor it closely. Obviously, once we're through the first shipset, the risks for 2, 3 and 4 hopefully will be considerably less.

That’ is what’ is good about the thing. The -- not that I ever expected this to happen, but the kind of catastrophic risk where you put the first one together and think, crikey, this doesn't work, that hasn't happened. The thing is in pretty good shape.

I've seen all frank arrays, all 104 of them in the factory, all wired up and be factory acting as a son, obviously not on the ship, but they are all there. It's quite impressive.

I'm giving Ben a rest now. [ Andy Edmond ], Equity Development. Simon, in terms of the work to be done in producing or satisfying orders in the second half, which you obviously budgeted for, any issues in terms of logistics and supply of critical materials that you've had to deal with? Or you're quite happy with situation at the moment?

Fine. We've got -- as I said, the infill is actually relatively small. If you look at it as a percentage on consensus revenue, it's around about GBP 12 million. So it's not -- there's no one item. It's a bit of a till roll and across various businesses. MCL has the biggest risk. In terms of underlying supplier issues, I mean, again, Chess has faced some challenges in that respect more than our other businesses. The other businesses -- I mean, the German business pretty much sources, I think, 90% of its equipment from within sort of an hour's drive of Kiel. So it's quite remarkable. The German industrial base is quite remarkable. The U.K. is pretty good. I'd say, Chess has got some reliance on particularly with the motors and some elements of the systems with obviously rare earth metals. So we have to keep an eye on those things. Generally, though, things are not as bad as they were a few years ago, but we do get the odd issue.

And in terms of covered capacity or infrastructure or material capacity. What about human capacity? Is it still easy to find the right quality of engineers and technicians at sensible prices?

Yes. I mean we've continued to grow. The -- we're up, what, nearly 1,700 now -- 1,600 -- after shedding quite a few with the transport sale. And I think the huge draw of the fangs a few years ago has lightened up quite a bit. We are -- and we can offer really interesting careers to people. I mean I think there are sort of engineers with PhDs around who want to spend their careers working in the cubicle, getting better and better at the same problem. But for people who want to interact with the customer and solve real practical problems quickly, which, to my mind, are the best kind of engineers, we can offer them a really interesting life.

I mean we've seen the focus sort of shift a bit, particularly at Chess, ELAC, EM Solutions and SEA to more production engineering and sort of they are moving into those phases of hence the working capital build. It's about delivery and production engineers are absolutely vital to that. So we will -- over time, we are seeing a bit of a shift, but we're not having a problem recruiting people at the moment.

And then just lastly, Andy, I know the answer to this, but I'm sure you'd like to give it. There is obviously an increasing chance of some sort of Ukraine peace deal being brokered by the President. I would assume for all the reasons that you know very well that you're not seeing any of interest from other neighboring states around Russia or Central European again, strengthening their own defenses?

No. I was at the First Sea Lord Sea Power Conference on Monday, actually. And the comments made were sort of Chatham House Rules and unattributable, but by senior officials in the Ministry of Defense, the comment was, and this is perfectly believable, that almost the worst outcome for Europe would be a settlement favorable to Vladimir Putin in Ukraine, which is what Donald Trump is pushing at the moment. You've got a Russian economy, which is addicted to war and feeding itself on war and you would then give Vladimir Putin a reward for the huge gamble that he took in invading Ukraine in the first place. And it's not really difficult to see. He would have both push and pull in moving on to the next stage. And you've only got to look at a map to see how vulnerable the eastern parts of NATO are and Kaliningrad the potential for a corridor there.

The Russian economy, there was an article in BBC today, is producing 150 tanks and 550 infantry fighting vehicles a month, a month. Now 550 infantry fighting vehicles is just a little less than the Ajax program for infantry fighting vehicles that the U.K. embarked on in 2014 and has just realized that it hasn't successfully delivered. So I mean, that gives you an idea of the strength of Russia of what we face. And that just can't switch itself off overnight. So I'm sorry to say that a settlement in Ukraine would be bad news for Europe, not good news if it favors Vladimir Putin, and we would face an enhanced risk.

I would add, I mean, that's an article by Frank Gardner on how long would Britain last in a war. So it's a bit solitary, but read it. The other thing I would add is basically in Europe, the further north the further east you are, the spend levels are quite remarkable. And you cannot miss what Norway has been doing. Sweden, Finland, Poland, the Baltics, Germany, the Netherlands, Denmark, I mean it's quite remarkable.

Following the SDR in this country, pretty good at having reviews and making plans with the defense investment plan coming up. First, what would you look for? And second, when would you look for it?

Yes. Well, I think we had a peak at that on Monday with the announcements about Atlantic Bastion, which incidentally is something that's very important to SEA. We would see the KraitArray having a significant role to play in that as well as some other sensors that SEA produces. So yes, we'd be looking for priorities really on -- in terms of investment and timing of investment on the things that were announced in the strategic defense review.

What I'd hope to see would be early investment in naval capability. We'd like -- we'd obviously be keen to see, and I think, it's very important, an upgrade in the Navy's satellite communications capability. That's something I believe that we can deliver and upgrade in terms of speed in delivering the new submarines, the AUKUS submarines, I think that's vitally important for us and for Australia as well. And I would want to see an emphasis on air defense, drone defense in particular. I think that's vitally important, something that was perhaps treated a little bit lightly in the strategic review.

So there's a lot of priorities that we can see. And I think the strategic defense review, which I outlined what those priorities are. They were very, very well aligned with the group's capability. In terms of timing, could we have it 3 months ago, please? I think I said at the time that these things are not necessarily quickly translated from words into action. But especially given that the content of the SDR focused so much on the urgency of these and the time scale and the need rapidly to move to a posture where we can credibly provide some kind of deterrence against the Russian threat. I'm afraid I don't think we've moved fast enough.

Tom Rands from Berenberg. Just 2 questions, if I may. Given the success of EM Solutions, how does the M&A pipeline look at the moment? Has there been any kind of material change in kind of sellers' expectations valuation-wise or any new opportunities that have come across your desk that look quite interesting?

We're always getting a constant stream of opportunities. And a proportion of those we take seriously enough to have a good look at. And there's never a time when we haven't got a few coming across our desk, but we are quite choosy. We're keen only to find businesses where both there is an opportunity to get access to a growth sector of the market, not as difficult to find as they used to be, but still not all of them, but also where there is an opportunity to gain some sustainable competitive advantage. And that's much harder with barriers to entry to a lot of things being relatively low at the moment. So yes, I mean, we are always on the lookout. And as soon as we see something that meets our criteria that will really enable us to develop the business, then we'll take action accordingly, and we'll pursue it energetically.

In terms of valuations, well, valuations of all businesses go up when revenue, profit, order book and long-term prospects go up, and they have recently. So I would expect that to be the case, but I mean, first thing I would say is that EM Solutions is by no means the highest multiple we paid, which actually goes back to MASS in 2006. And things are different at our end of the market to the large packs of data, which our respected investment banking friends like to provide us with that talk about sort of bulge bracket deals and things. We're dealing with a smaller level of the market. We're dealing with agile, small and medium-sized businesses and those. So changes in the macro picture don't necessarily flow down to that level.

Very clear answer. Second question, more for Simon. On the working cap, how do you see the phasing of that unwind in the second half of the year?

The strong delivery point for us will be both January to March. That will be -- is typically what happens. I mean MOD is obviously a big customer of ours, but also the other programs that are driving the working capital, particularly the Italian program, one in Portugal and one in Australia have all got strong deliveries to take place in Jan to March. By April, normally, things generally quiet down a bit, but normally, there will be something slips over from March into April. But that is the real, real busy period for us. That first calendar quarter will be very busy. So that's when we'll see the working capital start to flow back.

We have one question from the webcast from [ John Good ]. He's saying, Chemring have come out and said they are seeing setbacks in their divisions, particularly in sensors due to delay in government spending. Are Cohort currently seeing or expecting similar delays?

Well, I would say that we have seen some -- how to put it. I mean the U.K. MOD has not been as active and as quick as it's always been. And that's perhaps in the run-up to the release of the defense investment plan. But what I would say is that it hasn't had a material effect on us, and it doesn't flow into these results at all. Our major U.K. programs are in flight, so to speak. So we're not really waiting for orders in the same way.

Brilliant. Thank you. That's all from the webcast. So back to you for some closing remarks.

Well, thank you all very much indeed for your attention. I mean, just to summarize, I think it's been a strong first half. I think we're back to our more traditional H1, H2 split after an exceptional year last year when MCL made almost all of its profit in the first half. But our expectations for the full year, which means for continued growth are unchanged. And we're looking forward to continuing in what is -- I mean, as you all have heard this morning, a worrying time in many respects, but also for a business like ours where we're contributing to the security and deterrence of the U.K. and its allies an exciting time. So thank you very much.