Senior Aktie

Welcome to Senior plc's 2025 Full Year Results Presentation. And thank you for making the effort to get here. And thanks also go to Deutsche Numis for hosting us here at their facility. And a warm welcome to you for those of you joining remotely.

Before we present our results, can I just address the elephant in the room. I'm sure that everyone saw our announcement last Friday regarding discussions with potential offerors. As you will appreciate, it is not appropriate to comment further here other than to remind everyone that there can be no certainty that any offer will be made nor as to the terms on which any firm offer might be made.

Please refer to the full statement issued on Friday and restrain yourselves when we get to the Q&A from asking questions that you know we will not be able to answer. In terms of our agenda this morning, I will briefly cover the highlights. Alpna will run through and comment on the results, and then I will give an update on markets, investment proposition and outlook.

2025 was a pivotal year for Senior. We successfully completed the sale of our Aerostructures business to Sullivan Street Partners on the 31st of December 2025, a crucial element in delivering on our strategy to be a market-leading fluid conveyance and thermal management company supplying highly engineered products and systems.

As Alpna will show in a few minutes, we had a strong financial performance with both divisions contributing well and our balance sheet is in great shape. That has allowed us to increase our total dividend to 3p per share, an increase of 25% compared to 2024. Trading in the first 2 months of 2026 has started well, and the Board's expectations are unchanged for 2026. And looking ahead, we are on track to achieve the medium-term targets we set out last year, which again, Alpna will demonstrate.

So before I talk about markets and outlook, I'll hand over to Alpna to take us through the financial results.

Thank you, David, and good morning, everyone. I'm pleased to take you through Senior's financial results for the 2025 financial year. It has been a year of strong financial performance across the group with continued momentum in both divisions and meaningful progress towards our medium-term financial targets.

With that, turning to some of the key financial highlights. Revenue increased to GBP 738 million, up 6% at constant currency. Adjusted operating profit rose 22% at constant FX to GBP 63.6 million and adjusted operating profit margin expanded by 110 basis points to 8.6% reflecting pricing, volume, increased commercial activity and operational improvements. Adjusted profit before tax was GBP 51.2 million, up 24% at constant currency, and adjusted EPS grew 9% to 9.65p, demonstrating strong underlying earnings momentum.

I'm pleased to say return on capital employed increased 140 basis points to 13.1%, reflecting higher earnings. We also achieved cash conversion of 90%, up 400 basis points on the prior year. We have proposed a total dividend of 3p per share for 2025, an increase of 25% year-on-year.

So this slide covers the revenue bridge. On a reported basis, revenue grew 4% to GBP 738 million with currency headwinds of roughly GBP 10 million. On a constant currency basis, revenue was up 6%. Looking at divisional performance at constant FX. Aerospace revenue increased 10% to GBP 426 million. Civil aerospace revenue increased 9% year-over-year, largely driven by positive pricing and volume. Defense also had strong growth, up 12% as we continue to see increased volumes for the F-35, the C-130 and other military programs and higher pricing.

Revenue from adjusted markets increased 14%, largely driven by demand from the semiconductor equipment market. And in Flexonics, revenue was broadly flat at constant FX. 2025 saw a softening in the North American and European heavy-duty truck market. But despite this, our land vehicle revenue increased 1.6% with the ramp-up of new programs. David will expand on this later. Revenue from power and energy markets decreased by 2%. Higher demand in our downstream oil and gas and nuclear business was offset by lower revenue in upstream oil and gas and other industrial sectors.

Moving to the adjusted operating profit bridge. Adjusted operating profit increased 20% despite a modest GBP 1 million FX headwind. Starting with 2024 on the left-hand side of GBP 53 million, Aerospace delivered the largest uplift of GBP 12 million, benefiting from increased pricing, volume drop-through, mix and commercial settlements as well as strong operational execution.

Flexonics also contributed positively, supported by strong aftermarket sales in our downstream oil and gas and nuclear business as well as restructuring initiatives. In addition, the contribution from our China joint venture was significantly higher year-over-year. Lastly, performance-related incentives associated with the group's improved results were charged through central costs, largely driving the increase there. We ended 2025 with adjusted operating profit of GBP 63.6 million, an increase of 22% on a constant FX basis.

So turning to divisional performance. Aerospace had an excellent year. Book-to-bill increased from 1.17 to 1.21, driven by increasing demand and build rates. At constant FX, revenue was up 10.4%, adjusted operating profit increased 32.5%, resulting in margin expansion of 190 basis points, reaching 11.4%.

The Aerospace division delivered on a number of fronts, including positive price increases, closing out a number of commercial settlements as well as achieving operational efficiencies. Demand was strong across civil defense and adjacent markets with Spencer, our U.S. hydraulic fluid fittings business, delivering outstanding growth of 32% year-over-year, further demonstrating our ability to integrate value-enhancing bolt-on acquisitions. During the year, the Aerospace division was awarded new contracts as well as extensions of existing contracts.

For example, we secured a multiyear contract for highly engineered aerospace standard parts from Airbus to be manufactured in Europe, and we were also awarded a 3-year contract from an industry-leading distributor for high-pressure hydraulic fittings.

Now on to Flexonics, where we delivered a resilient result in softer end market conditions. Book-to-bill went from 1.01 to 0.93, given softer conditions in the heavy-duty truck market, but also due to higher prior year comparative where we had a large project for expansion joints related to a new CATOFIN plant in India. In addition, our aftermarket business in downstream oil and gas tends to have relatively short lead times, and therefore, order flow can be lumpy.

At constant FX, revenue increased marginally and adjusted operating margins rose to 11.2% and to 12.1% when including the contribution from our China JV. We benefited from favorable aftermarket mix, particularly in our Pathway business as well as successful execution of restructuring in selected operations across North America and Europe.

The China JV performed especially well with our share of profit rising to GBP 3 million from GBP 1.2 million last year. The Flexonics division was awarded a number of important contracts this year. We were awarded the supply of fluid conveyance assemblies for multiple light vehicles across diesel, gasoline and hybrid platforms by a global supplier. In addition, Flexonics was awarded exhaust gas recirculation, coolers on a new engine type to be used on multiple platforms by a leading global manufacturer of heavy-duty trucks.

Slide 10 shows the reconciliation of adjusted operating profit to the statutory reported profit for the period for the continuing business. It also highlights our interest and tax charges. Net finance costs increased by GBP 1.3 million due to high interest rates on variable rate debt and higher average net debt in comparison to the prior year. IFRS 16 interest charge on lease liabilities increased by GBP 0.4 million, and we had net finance income from our pension plans of GBP 2.1 million.

A tax charge of GBP 11.3 million was recognized on our adjusted profit before tax. We expect the effective tax rate of 20%, 22% for the full year 2025. In terms of reconciling adjusted profit to statutory profit, we had just under GBP 1.6 million of amortization, which was noncash related to acquisitions, site relocation costs of GBP 2.4 million for the transfer of manufacturing from the -- from our U.S. to our cost-competitive facility in Mexico as well as costs related to the relocation of our U.K. innovation center in Wales.

We had GBP 7.3 million of pension benefit clarifications. These relate to the U.K. defined benefit pension scheme buy-in which took place in September 2025. As part of the due diligence work undertaken for the buy-in, some historical benefit clarifications were identified. Most of these have already been funded through the pension buy-in process. The remainder will be funded from the GBP 23 million actuarial surplus. We had GBP 5 million of restructuring initiatives, largely related to head count reductions in Flexonics across North America and Europe as well as a result of softer end market conditions in the heavy-duty truck market.

We had GBP 0.8 million related to the fair value change on contingent consideration and other related costs for the Spencer acquisition and a GBP 4.5 million tax benefit on adjusting items. After these adjustments, reported profit for the year was GBP 27.3 million.

Moving to cash flow generation. Free cash flow increased 37% year-over-year to GBP 36 million. We can see the key drivers here of adjusted operating profit to free cash flow. Starting from the left, we have our adjusted operating profit of GBP 64 million. Add back of depreciation and amortization of GBP 29 million and just over GBP 6 million of other items.

Working capital outflow was GBP 8 million, of which GBP 5 million related to inventory build to support customer demand and the balance being a movement in receivables of GBP 14 million and payables of GBP 10 million. Working capital was circa 14% of sales in 2025, partly driven by the timing of customer collections at the year-end. For 2026, we currently expect it to be 18% of sales to support customer demand, predominantly in aerospace.

CapEx of GBP 32 million equates to 1.5x depreciation excluding the impact of IFRS 16 depreciation. For 2026, CapEx is expected to be lower at 1.3x as we continue to support growth in both divisions. Operating cash flow amounted to GBP 57 million. We paid interest of GBP 14 million and tax of GBP 7.5 million, giving us GBP 36 million of free cash flow. Our 2025 performance reflects higher profits, strong working capital discipline and CapEx investment to support growth.

We remain focused on maintaining excellent cash generation as a core enabler of investment, shareholder returns and balance sheet strength. So what does that mean in terms of net debt? While net debt, including IFRS 16 leases, reduced significantly to GBP 117 million at the year-end, a reduction of over GBP 110 million. Strong free cash flow proceeds from the Aerostructures disposal and disciplined capital allocation contributed to this outcome.

You see the opening net debt balance of GBP 230 million on the left-hand side, the free cash flow I talked about of GBP 36 million. We then see GBP 3 million of free cash outflow for discontinued operations, dividends paid of GBP 10 million, share purchases for the employee benefit trust of GBP 7.4 million, joint venture dividends received of GBP 1 million, proceeds from the disposal of Aerostructures and Spencer Aerospace contingent consideration of GBP 108 million as well as other items of GBP 12 million, predominantly leases. And finally, FX giving us our closing position of GBP 117 million. Leverage ended the year at 0.9x, placing us in a strong financial position as we moved into 2026.

Moving on to our financing position, which remains strong. We had GBP 294 million of committed facilities diversified across U.S. private placement notes and bank credit facilities during the year. We issued a new private placement note of USD 40 million. We repaid U.S. private placement maturities totaling USD 60 million and GBP 27 million. And in January 2026, we've repaid the GBP 30 million term loan used as a bridge to the Aerostructures disposal. Our balance sheet is strong, liquid and well structured with ample headroom to support growth and disciplined capital deployment.

So our 2025 performance demonstrates clear progress towards our medium-term financial targets, across margin, cash conversion and return on capital employed. Group operating profit margin of 8.6% continues to trend upwards. Aerospace margin reached 11.4%, progressing towards our mid-teens target. Flexonics margin of 11.2%, excluding the JV, sits well within our expected 10% to 12% range. We said we would achieve at least 10% even in a down year and 2025 was a test for this given the softer conditions in the heavy-duty truck market. If we include the JV, the margin was 12.1%, which exceeds the range.

Return on capital employed of 13.1%, steadily advancing towards a 15% to 20%. Cash conversion exceeded the 85% target, delivering 90% in 2025. As you can see, we remain firmly on track to deliver against these targets. We underpin the targets with a strong balance sheet. We were comfortably within our target leverage of 0.5x to 1.5x. Our leverage was at 0.9x at the year-end of 2025. Revenue growth of 6% at constant FX in 2025 was in line with our expectation of mid-single digit organic revenue growth through the cycle.

Now turning to Slide 15, capital allocation. Our capital allocation framework remains unchanged, disciplined, returns-focused and aligned with shareholder value creation. In 2025, we invested GBP 32.6 million in CapEx to support business growth. This equated to 1.5x. We expect this to trend down to 1.3x in 2026, and our medium-term expectation continues to be 1.1x. We invested 2.1% of revenue in research and development in 2025, consistent with our 2% to 3% of revenue target. Dividends of GBP 12.3 million reflects our progressive dividend policy.

We are proposing a total dividend of 3p per share in 2025, which is a 25% increase on the prior year and equates to an earnings cover of 3.2x. As stated previously, leverage remains comfortably within our target range. We continue to explore value-accretive bolt-on M&A aligned with our core capabilities. Finally, in view of Rule 2.4 announcement last week, we have postponed the staff, the GBP 40 million share buyback program, which had been due to commence following publication of the full year results. This will be kept under review, and we will make a further announcement as necessary.

And with that, I will hand back to David, who will take us through the markets and strategy section.

Thank you, Alpna. So let's turn our attention to markets. So in 2025, Aerospace represented 58% of the group's revenues and Flexonics was 42%. And as Alpna has mentioned, Aerospace division sales grew 10% on a constant currency basis, and Flexonics grew marginally despite softer land vehicle markets. Aerospace and defense is now 48% of the group, with civil aerospace being around 2/3 of that and defense 1/3, which represents a good growth opportunity.

Sales to adjacent markets from our aerospace business was 10% in the full year, with revenues from semiconductor equipment customers increasing. Our business is facing into land vehicle at 25% of group revenues and power and energy 17%, continued to perform well against a mixed market backdrop. Similarly, aerospace was 32% of group's revenue in 2025. This includes both large commercial, regional and business jet sectors.

Growth in the end market measured in revenue passenger kilometers or RPKs was healthy at around 5%. And we expect long-term civil aerospace market growth of 3% to 4%, driven by the growing middle classes in Asia as well as fleet modernization and aircraft replacement. We have very good positions on all single-aisle and wide-body platforms as well as most regional and large business jet programs.

In 2025, our civil aerospace sales grew 10% at constant FX, driven by improved pricing and higher build rates. Both Airbus and Boeing have record order books with single-aisle and wide-body rates set to increase further this year and beyond, which will drive further growth for Senior. You'll be aware that many countries are committing to higher defense spending. Senior has good content on key U.S. and European military aircraft platforms. In 2025, our defense sales grew strongly 12% year-on-year, and that was driven by higher sales to C-130, F-35 and strong military aftermarket demand.

Turning now to Flexonics. We had a strong performance in 2025 relative to end markets. In land vehicles, the new contracts we have won over the last couple of years reached a peak production, which is why our passenger vehicle sales growth is 31% year-over-year compared to market growth of just 1%. And while truck markets were slower in 2025 compared to 2024, particularly in the second half of the year, we did outperform the market in North America, with our sales down 18%, while the market declined 25%.

Our European truck sales reduced by 1%, in line with the market. ACT Research are expecting truck markets to continue to be weak in the first half of '26 before starting to recover in the second half of the year. In power and energy, a really strong performance at our Pathway business in Texas led to strong downstream oil and gas and nuclear sales. While upstream oil and gas sales continued to be subdued as we continue to reduce our exposure to commoditized products.

At last year's Capital Markets event in March and at our half year results presentation in August we went through our fluid conveyance and thermal management strategy in detail. I won't repeat everything we discussed then, but we have included relevant material in the appendices to enable more detailed discussions on a one-to-one basis. We believe we have a compelling investment proposition. With a century of relevant experience, we can genuinely claim to be experts in fluid conveyance and thermal management.

We have truly differentiated products with rich background and foreground intellectual property, coupled with expert design and manufacturing know-how. We operate in attractive and structurally resilient end markets and are well positioned to take advantage of that over the medium term. And we have long-lasting relationships with our customers and are trusted by them to deliver excellent products and to respond with agility when they need our support.

Our senior operating system is driving operational excellence and efficiency across the group. And our global footprint with a strong presence in our home markets and world-class facilities in cost-competitive countries is a real advantage. And finally, as these 2025 results have demonstrated, our financial strength with improved performance, strong cash flow generation and low leverage supports investment and shareholder returns.

So let me finish by talking about the outlook for Senior. Trading in the first 2 months of 2026 has started well, and the Board's expectations are unchanged for 2026. In aerospace, growth in civil aircraft build rates and increased demand across its other markets is expected to drive further good progress in 2026 and beyond. Flexonics expectations for 2026 are unchanged with robust double-digit margins being maintained when including the JV, notwithstanding the softer conditions in certain end markets.

Looking ahead, we are confident of delivering enhanced shareholder value as we execute on our strategy and continue to strengthen our financial performance in line with our medium-term financial targets.

So with that, we'll open the floor for any questions, which Alpna and I will be delighted to answer. Any questions? Yes, Tom?

Thomas Rands from Berenberg. Just 2 questions, if I may. First one, on the Flexonics head count reductions. I think you said that was relating to mainly the Class 8 heavy truck activities. As and when that activity picks up again, how much of that head count do you think will come back in? How much is temporary versus permanent kind of takeout? And then the second one is just on M&A pipeline. How active, what sort of valuations are you seeing? Anything interesting in the...

I'll take the first one. Thanks for that, Tom. In terms of Flexonics headcount, so what we've said is that we took GBP 5 million of cost out in 2025. It predominantly related to Flexonics. In terms of savings, we have about GBP 4 million of savings in 2026. And it really depends on if and when that market comes back as in terms of timing, as to how much of that cost comes back, but some of it was structural costs that was taken out, and some of it was temporary costs that was taken out. So it was a bit of both.

Yes. And I think on the M&A side, look, we've got -- I got Nigel Major, our VP of Strategy, here with us today. So Michael -- sorry, Nigel, not Michael. Nigel maintains a really good and healthy pipeline. We've been quite focused on that for some time. And when you went through our capital allocation policy, which looks at both returning cash to shareholders when it's sensible to do so, but also looking at bolt-on accretive M&A. So I think in the appendix, you'll see our acquisition heat map where we lay out those areas that we're most interested in.

But I think the Spencer acquisition has been a great success. There's a lot of growth yet to come from that acquisition and everything else that sort of encouraged within the business such as working with our colleagues in Ermeto in France to develop their range of products with help from Spencer. So that's kind of a typical type of acquisition we do, really looking at products in aerospace or industrial markets that are bespoke. They have got high design content and have decent margins, good returns on capital and really facing into sort of the attractive markets we're currently facing into. So think of it as bolt-on accretive M&A that we'd be most interested in. Not rushing out to do anything. But certainly, we maintain an active pipeline.

It's Richard Paige from Deutsche Numis. Just 3 from me, please. Just on aerospace. Obviously, really strong margin performance in 2025. I think back to the Capital Markets Day, you spoke about pricing being obviously half of that and 80% covered with long-term agreements at that point. Has that progressed at all on that side?

On the second one, strong performance in the joint venture in China. Is there anything exceptional in that, that we should be aware of? And then just on the third point, semicon, obviously, a very strong outlook and strong performance you've had this year. Could you just remind us of the lead times in that business for you, please?

Yes. So on the pricing side, yes, those -- well, remember, Richard, there's 3 elements to the margin progression up to the mid-teens where roughly half of it come in pricing, a quarter from operational efficiency and a quarter from volume. We made good price -- good progress on pricing last year. Some of the pricing we'd already done cut in last year, some of it cuts in next year as well. So we've got one big negotiation left to do that we're in the midst of, and we would anticipate that concluding this year, and that's the bulk of the long-term agreements.

We've got a lot of purchase order business, spot business. So that gets priced as it goes along. And then on an ongoing basis, we'll have contracts coming up for renewal. So -- but we've got a very good approach to pricing now. Look, it's fair we always look for win-win solutions with our customers, but we're absolutely on track to achieve our objectives from a pricing perspective and that gives us half of that margin improvement. So it's in a good place.

On the JV in China, yes, it's a good fun business. And the -- our joint venture partner, PPM, works very closely with us. They're primarily focused on the land vehicle business, a lot of it is passenger vehicle, but they also do truck business. Cummins were in China almost before any other Western company, and they asked us to set up this facility long before I joined the company. And it's kind of been bubbling under, but it's really now holding its own. So some fantastic products.

One of the products they made last year that helped. I didn't know, but in the steering column, you have a little bellow. So if you hit the steering wheel in the crash, the bellows absorbs the impact and allows it to fold. So we won all of that business because the previous supplier for our customer wasn't performing very well. And our team in China developed prototypes qualified in record time and that led to all of the business being awarded to us. So that was one of the reasons why we did really well last year, and we'll continue to do so. But that's just one example.

And in fact, this particular customer now wants us to build the same product in the joint venture facility in Mexico for all the North American business. So a really good example of how we've been able to progress our business there. So there are good cost competitive location, but really great at engineering as well. I'll keep going. Semiconductor -- yes, semiconductor, strong demand. Our main customer is Lam Research. Out of our Meta Bellows facility, Lam has been doing well. We've been doing well.

The product -- from a standing start, it's probably 4 to 6 months. But because we've got ongoing forecast orders, the actual cycle time through the factory is nearer 6 weeks. So we got pretty good forecasts from Lam. We monitor what's happening in the industry more generally. So we can respond quite quickly if the demand goes up if that was where your question was going. Yes.

It's Andrew Humphrey at Peel Hunt. Just a couple, if I may. One to follow up on Richard's question on the aerospace. You've obviously highlighted pricing, volume, mix, commercial settlements all been pretty strong positive drivers in '25, contributing to that result. Pricing, you've obviously talked about the agreements continuing to come through there this year and next. Volume, it feels like it's in a pretty good place, given the reporting that we're seeing everywhere.

I wanted to ask commercial settlements, I guess, can't model those, but I wanted to ask about mix in the light of your comment on spot business rather than contract business. It does feel like kind of volumes have picked up maybe a little bit ahead of what we were expecting. Does that mean sort of more spot business for you? And does that tend to be positive for margin? And yes, let me pause there. I have a couple of more.

Yes. I think from a volume perspective. So worth reminding what I said in the presentation there. If you look at our aerospace business now that we have sold structures, we're about 1/3 large commercial aircraft, 1/3 regional and biz jet and a 1/3 defense. So slightly different growth characteristics in those 3 sectors, but they were all strong last year. In fact, we did see good military aftermarket business last year, and we see that sort of continuing at the moment. So that's one of the things that helps. Otherwise, I think our growth was where we thought it would be coming through on the civil side with those rate increases, we'd expect that to continue. So far, the demand signals we're seeing from Boeing and Airbus are what we would expect.

Great. Maybe on Flexonics then as well. A couple of things there. Obviously, we had the ACT numbers back around Q3, indicating like challenges ahead for '26. I think you talked a lot about that. I wonder we're now sort of nearly 6 months down the road from there, I wonder how the early signs that you're seeing with customers compare that view from back in October, November time. And then also on Flexonics on the oil and gas side, clearly, it's kind of early days given events over the weekend, but it also feels like a few parts of the market have been positioning for disruption in the Middle East for a few weeks now. I wonder what early indications you're seeing from customers there.

Okay. So on the heavy-duty truck side, first of all. So ACT are currently predicting a 3% growth in 2026, but that's really a game of 2 halves there. If you look at year-on-year, it's significantly down in the first half of the year with the recovery starting in the second half of the year. So we'd like to be a bit further into the year before we call it what we really think is going to happen, that would be great. If we do get that strong recovery come in the second half of the year, but it's off a pretty low comparator remember.

So far, our expectations are unchanged, but we're monitoring that very carefully for anything that might change. So first half down, and we're expecting the second half to be up a bit. Let's hope it improves, it might improve. We'll see. And then oil and gas, gosh, it really is a bit early to be answering that one about the disruption by current events. I think for us, what's important is more downstream oil and gas.

We've really moved away from -- we had one business that supplied parts that used to sit on top of drill bits for downhole drilling, and we've really moved away from that because the product was quite commoditized. A lot of it have been offshored. It's not that important to us now. So what is important is industrial process control, downstream oil and gas, the huge expansion joints that go into refineries and so on. That's predominantly all aftermarket business. So as long as people are running CATOFIN plants, refining, running nuclear plants and in power and energy, then we'll continue to get good aftermarket from that.

What we don't have this year is the big anchor project we had in the '24, start of '25 for the Government Authority of India Limited, which was our new CATOFIN plant. So this year, it's really all that repairs, spares, emergency callouts, et cetera. So it's quite a short cycle business so far, so good.

And maybe finally on FX. I think [ 131 ] to FY '25, clearly kind of more of a headwind this year. Any additional actions that we're taking to accommodate that?

In terms of FX, I mean, if I look at where our earnings are at, I mean, 2/3 our business is in the U.S. And so yes, there would potentially be an FX headwind in 2026. And yes, so I mean we are looking to make sure that's baked into our pricing, that we are taking the right actions locally to do that. I mean -- and it's mainly a translation risk in terms of how we transact with our -- in our businesses. It tends to be local for local.

Any more questions? Alex, no questions today?

Can I ask a couple of?

Yes. I can see them on the top of your tongue.

Good to put me on the spot. Alex O'Hanlon, Panmure Liberum. If I ask a couple of quick questions. Firstly, on the working capital absorption out, you showed that there was good progress there to 13.5% and indicated we should see that going back up to 18% in FY '26. How should we think about the range for the medium term? Where should that sit?

So I mean it will probably be somewhere in between, Alex. So in terms of '25, the working capital was impacted by some -- by collectibles that happened at the year-end in terms of customer receipts. At the moment, we think it will be about 18% for FY '26. We hope we'll come in better than that, but that's where it's standing today. And then in terms of the medium term, we hope to get that down over the 3 years. We're making good progress against that. But at the same time, we are seeing that demand come through in aerospace. So we will need to support to ramp that -- support that ramp up.

Alpna drives the business very hard on their inventory as you can imagine.

No, definitely. And then just one other question. In terms of aerospace, I mean, we've kind of picked apart the margin and the benefits there already in a lot of detail. But is there any further information you can give us on how much the benefit from contract settlements was in FY '25, when we're thinking FY '26, it could be a headwind if there's a non-repeat?

Yes, there was a few million there. I think what we talked about was an insurance settlement in the first half year, that was GBP 3 million. I think we said that. So -- but I will say there's always one-offs.

Yes. I mean we do push the businesses at the year-end in terms of closing out any customer negotiations and getting things settled as does any business. And the team did a great job in 2025 of doing that. And as David said, there's always that you have that every year in any business. So it's -- we don't disclose the exact amount, but it was -- yes, it was a good number.

And that's baked into our guidance as well, aren't those...

Yes, that's baked in.

Okay. Any last questions? Yes, Tom.

Thomas Rands again from Berenberg. Just one follow-up just on your comment around military aftermarket being strong. We always think of Senior as an OE, kind of not an aftermarket kind of play. What was driving that within military? And are there any other opportunities elsewhere? I was always thinking no, but these things [ possibly happening ] now again.

Yes. So as a percentage now it's slightly higher because the aftermarket we do have is within our fluid conveyance businesses. So business like SSP in California, Metal Bellows in Boston have decent military aftermarket, C-130, for example. Think how many C-130s are flying there. And we do get aftermarket associated with that for our international customers as well as our sort of U.S. domestic customers. So that -- there's always an ongoing level. And at the moment, that was increasing last year, and we see that continuing to be strong.

Are there opportunities elsewhere?

Yes. I think we're always pursuing more opportunities to increase that aftermarket as part of our growth strategy for sure.

Okay. Thank you very much, everybody. I really appreciate you taking the time to come this morning. Look forward to following up with you.

Thank you.

Good morning. Welcome to Senior plc's 2025 Half Year Results Presentation. Thank you for making the effort to get here, and thanks also go to Deutsche Numis for hosting us here at their auditorium. And a warm welcome to -- for those of you joining remotely.

In terms of our agenda this morning, I will briefly cover the highlights, Alpna will run through and comment on the results, and then I will give an update on markets, strategy and outlook.

Senior has performed strongly in the first half of 2025. In July, we announced that we've reached a binding agreement to sell our Aerostructures business to Sullivan Street Partners for an enterprise value of up to GBP 200 million. We expect to complete by the end of this year. We will use initial proceeds to reduce net debt and to launch a GBP 40 million share buyback program. With the sale likely to be completed by the end of this year, our Aerostructures business is now classified as discontinued.

Our trading performance in our continuing business has been strong, in line with our expectations. And in a few minutes, Alpna will describe the increases in revenue and profit, so I won't go through the detail on that just now. However, I did just want to highlight the performance of Spencer Aerospace, which we've now owned for 2.5 years. Its sales grew very strongly, again, 66% year-over-year, delivering double-digit operating profit, and there is still much more to come.

We have a robust balance sheet, and that will become even stronger when we pay down some debt after completion of Aerostructures this year. And given our financial performance and future prospects, the Board is pleased to have approved an increase to our interim dividend of 13% compared to last year's to 0.85p per share.

Sustainability is a central theme of our purpose, our strategy and, indeed, our technology road map. And as I've said before, increasingly, it is a key decision-making criteria, which our customers take into account when awarding new business. Importantly, therefore, we're making great progress as an organization in terms of our own sustainability actions.

Earlier this year, we announced that for the third year running, we were delighted to have been awarded the prestigious A rating from CDP for our climate disclosure and actions. Since then, we've also been awarded an A rating from CDP for our supplier engagement. We will continue to focus on remaining best-in-class in this area.

For the full year, the Board's expectations for the continuing group and the discontinued business are unchanged at constant currency. I'll say more about the different elements of that when I cover outlook at the end of this presentation, and we will also run through a quick reminder of the medium-term financial targets, which we set out at our investor event in March.

But before I talk about markets, strategy and outlook, I will hand over to Alpna to take us through the financial results.

Thanks a lot, David. Good morning, everyone, and thank you for joining us today. I'm Alpna Amar. I'm delighted and honored to be here as the Chief Financial Officer at Senior at this key inflection point for the company.

Before we go through the financial results, I thought I would take a moment to share my initial reflections, having taken up the CFO role at Senior on May 16. Since joining and visiting our sites, I've been deeply impressed by the group's strength. We have built a strong reputation over our 90-year history, delivering engineered components across a number of sectors including defense, aerospace, land vehicles and energy. The company has an experienced and dedicated team. The half year 2025 results reflect both the resilience and positive momentum in the business.

One of the reasons that I joined Senior is because I believe it is well positioned for success. We are financially robust and strategically positioned to capitalize on opportunities in our end markets. Our end markets are expected to grow in the medium term, and we are seeing increased demand for our products. There is a significant opportunity to realize the benefits of operating leverage as volumes increase over the medium term.

In terms of focus areas as well as driving margin improvement, the priority will be to maintain balance sheet strength, improve cash generation and continue allocating capital to maximize shareholder returns.

With that, let's go to the half year financial results. Here we set out the group results for the first half of 2025. Those that have had a chance to look at the release will have noticed the changes in our accounts, reflecting the Aerostructures business sale. Aerostructures is shown as being held for sale, and our go-forward pure-play fluid conveyance and thermal management business is our continuing business. So for our continuing business, the first half of 2025 can be summarized in one in which we delivered strong -- strongly across the business with revenue, profitability and cash conversion growing period-over-period.

Now let's look at the results in more detail. Now this slide and the next one are a bit technical, but I do want to take you through the accounting changes before I come back to the business performance.

Let's take Aerostructures first. As David mentioned, we agreed a sale of the Aerostructures business to Sullivan Street on July 18. The accounting reflects our position at June 30, when it became highly probable that the sale would be complete within 12 months. So for the income statement and the cash flow, we have separated out Aerostructures into discontinued operations. Not only do we have separate continuing and discontinued for the current accounting period, but we also do so for the prior period and hence restate those prior year numbers.

Discontinued operations are shown as a one-liner post tax in the income statement. The balance sheet shows Aerostructures in 2 lines: assets held for sale and liabilities held for sale. However, under the accounting standards, you do not restate the balance sheet for prior periods.

So that's enough about the accounting transitions. With the exception of net debt and leverage, everything I'm going to talk about from Slide 8 onwards relates to continuing operations only, and I'm pleased we are showing margin expansion and delivering strong results.

So this slide sets out the continuing group's performance, excluding Aerostructures. We delivered revenue of GBP 371 million, up 5%, and adjusted operating profit up 14% at constant currency. Adjusted operating profit margin increased 60 basis points to 8.4%. After taking account of FX, adjusted profit before tax increased 10% to GBP 25.3 million and adjusted earnings per share increased 8% to 5.07p per share.

I'm pleased to say we generated free cash flow of GBP 10.6 million, a 43% increase on the prior period, and our return on capital employed was 11.9%, reflecting the higher earnings and lower capital base of the continuing business.

Moving to the financial results slide. This sets out the results for the total group including Aerostructures. So this simulates the old basis, if you like, but not numbers that you will see in the primary accounts, and I will walk you through these.

After the impact of FX, revenue increased 4% to GBP 519 million, and adjusted operating profit increased 26% to GBP 32 million. Adjusted items amounted to GBP 46 million, of which GBP 40 million was an impairment related to Aerostructures held-for-sale assets. This was noncash. We also had GBP 4 million of disposal costs in the first half of the year. I will go through net debt and leverage in more detail later.

So this slide sets out the revenue bridge. Group revenue increased by 3%, or GBP 10 million, from GBP 362 million to GBP 371 million,, despite an adverse impact of GBP 9 million. On a constant currency basis, revenue was up 5%.

Looking at divisional performance. Again, on a constant currency basis, Aerospace revenue increased by 7% to GBP 209 million. Civil aerospace was up 2%. In the first half, we saw civil OEM production rates increasing, although there continues to be some rebalancing of inventory across the supply chain. We also saw sales in Spencer Aerospace, our acquisition in 2023, grow strongly, up 66% on the prior period. David will talk through this in more detail in the market section.

Defense had the strongest growth, up 14%, as we continue to see increased sales for the F-35 program and other military programs. Revenue from adjacent markets increased by 17%, largely driven by demand from the semiconductor equipment market.

In Flexonics, revenue at constant currency was up 2% to GBP 163 million. In the first half of the year, there was a softening in the North American and European heavy truck market. But despite this, our land vehicle revenues increased 5% with the ramp-up of new programs. Again, David will expand on this later.

Revenue from power and energy markets decreased by 2%. Higher demand in our downstream oil and gas and nuclear business was offset by lower revenue in upstream oil and gas and other industrial sectors.

Moving forward to the adjusted operating profit bridge, starting with half year 2024 on the left-hand side of GBP 28 million. We had an adverse FX impact of just under GBP 1 million. Aerospace increased by GBP 2.5 million and Flexonics by GBP 1.1 million. I will go into more detail on the next slide. In addition, our joint venture in China performed strongly in the period with an increase of GBP 1.1 million.

Central costs were up by GBP 0.9 million in the first half, primarily due to the increase in national insurance contribution costs in the U.K. And these strong results increased the management incentive plan accrual. We ended the first half with adjusted operating profit of GBP 31 million, an increase of 10% compared to the prior period.

Turning to divisional performance. In Aerospace, book-to-bill increased from 1.03 to 1.05, driven by increasing build rates. Adjusted operating profit increased 13% at constant currency to GBP 21 million. And the adjusted operating margin increased 50 basis points to 10.3%, reflecting increased pricing and higher volumes. Overall, the division continued to make good progress strategically and operationally.

In Flexonics, book-to-bill was 0.94, reflecting the end market dynamics in land vehicles and more lumpy order flow in the energy market that we talked through earlier. Adjusted operating profit increased 6% at constant currency to GBP 18 million, and the adjusted operating margin increased 40 basis points to 11.3% benefiting from favorable mix and performance, particularly from our downstream oil and gas business.

Now this slide shows the reconciliation of adjusted operating profit to the statutory reporting profit for the period for the continuing business. It also highlights our interest and tax charges. Net finance costs increased by GBP 0.6 million due to higher interest rates on variable rate debt and high average net debt in comparison to last year. IFRS 16 interest charge on lease liabilities increased by GBP 0.3 million, and we had net finance income from our pension plans of GBP 1 million.

A tax charge of GBP 4.3 million was recognized in our adjusted profit before tax related to the continuing business. We currently expect an effective tax rate of 23% for the full year 2025.

In terms of reconciling adjusted profit to statutory profit, we had just under GBP 1 million of amortization, which was noncash related to acquisitions, site relocation costs of GBP 1.4 million for the transfer of manufacturing from the U.S. to our cost-competitive facility in Mexico as well as costs related to the relocation of our U.K. innovation center in Wales and a new site in India. We had GBP 0.3 million related to the fair value change on contingent consideration for the Spencer acquisition and a GBP 2.5 million tax benefit on adjusting items.

Moving to cash flow generation for continued operations. We can really see the key drivers here. Starting from the left, we have our adjusted operating profit of GBP 31 million. We add back depreciation and amortization of GBP 14 million and just under GBP 3 million of other items.

Working capital outflow was GBP 13 million, of which GBP 9 million related to inventory build to support customer demand and the balance being from receivables of GBP 16 million and payables of GBP 12 million. Working capital was 16% of sales in the first half. For the full year, we expect it to be slightly higher at 17% to 18% of sales to support the customer demand in Aerospace.

CapEx of GBP 14 million relates to 1.3x depreciation, excluding the impact of IFRS 16 depreciation. For the full year, CapEx is expected to be slightly higher at 1.5x to support growth in both divisions, where we have secured contracts and where we are opening new facilities, notably a higher capacity site in India and the U.K. innovation center, which I just referenced.

Operating cash flow amounted to GBP 21 million. We paid interest of GBP 6.5 million and tax of GBP 3.6 million, giving us GBP 10.6 million of free cash flow.

So what does that mean in terms of net debt for the group, including Aerostructures? You see the opening net balance of GBP 230 million on the left-hand side, the free cash flow I talked about of GBP 10.6 million, we then have GBP 12 million of free cash outflow for discontinued operations, dividends paid of GBP 7 million, share purchases the Employee Benefit Trust of GBP 1.6 million, joint venture dividends received of GBP 1 million and other items of GBP 3.5 million, predominantly FX, giving us our closing balance of GBP 235 million.

In terms of balance sheet structure, where are we? Net debt of GBP 162 million, if we exclude GBP 73 million of IFRS 16 leases. That equates to net debt to EBITDA of 1.9x at June 30. In the first half of the year, we issued USD 40 million of private placement notes carrying interest of 5.46% maturing in 2029, and we extended the maturity of our USD 50 million revolving credit facility out to June 2027.

The weighted average maturity of the group's facilities was 2.5x at the end of June. In July, we issued a GBP 30 million term loan for 6 months carrying a rate of SONIA plus 1.75%. This increases the group's headroom until we complete on the disposal of the Aerostructures business.

Turning to Slide 15 on capital allocation. Again, as a reminder, this is for the continued operations. We aim to deploy capital to enhance shareholder returns. Well, what does that mean? We plan to continue supporting organic growth given increasing volumes. Over the medium term, we expect to invest 2% to 3% of revenue in R&D.

In terms of CapEx, this is expected to be 1.1x depreciation. We continue to follow a progressive dividend policy, maintaining earnings cover of 2.5x to 3.5x. We plan to maintain a strong balance sheet by targeting net debt to EBITDA of 0.5 to 1.5x. This leaves us with optionality to return cash to shareholders and to invest in value-accretive bolt-on acquisitions.

In recognition of our balance sheet and the confidence in the group, in July, we announced our intention to return GBP 40 million of net cash proceeds from the sale of Aerostructures to shareholders by way of a share buyback program. The program will commence once the sale is completes. The remainder of the initial cash proceeds will be used to reduce net debt. A decision on the earn-out cash will be made when the quantum is known.

And with that, I will hand back to David.

Thank you, Alpna.

So let's turn our attention to markets. In H1 2025, Aerospace represented 57% of the group's continuing operations revenues, and Flexonics was 43%. As Alpna has mentioned, Aerospace division sales grew 7% on a constant currency basis and Flexonics grew 2%. Aerospace and defense is now 48% of the group, with civil aerospace being around 66% of that and defense 34%. And both these represent good growth opportunities.

Sales to adjacent markets from our Aerospace businesses was 9% in the first half of the year, with revenues from semiconductor equipment customers increasing. Our business is facing into land vehicle at 27% of continuing operations revenues, and power and energy, 16%, continued to perform well against a mixed market backdrop.

Civil aerospace was 32% of the group's continuing operations revenue in H1 2025. So this includes large commercial, regional and business jet sectors. Growth in the end market measured in revenue passenger kilometers, or RPKs, was healthy at just over 5%. We expect long-term growth of 3% to 4% in this end market, driven by the growing middle classes in Asia as well as fleet modernization and aircraft replacement.

We have very good positions on all single-aisle and wide-body platforms as well as most regional and large business jet programs. We expect this market will continue to grow strongly as long-haul travel and short-haul travel demand levels continue to increase.

In the first half of 2025, our civil aerospace sales grew 2%, a bit lower than market, which was expected given the rebalancing of inventory across the supply chain we previously discussed. And for those of you who followed the Airbus and Boeing results calls, you would have heard them describing remaining supply chain hotspots. As inventory normalizes and rates increase, Senior will benefit from higher sales levels.

You will be aware that many countries are committing to higher defense spending. Senior has good content on key U.S. and European military aircraft platforms. In H1, our defense sales grew strongly, 14% year-on-year. That was driven by higher sales to C-130, F-35, typhoon and military aftermarket.

Turning now to Flexonics. We've had a strong performance in H1 relative to end markets. In land vehicles, the new contracts we have won over the last couple of years are now reaching peak production, which is why our passenger vehicle sales growth is 42% year-over-year compared to market growth of 5%.

We knew coming into the year that truck markets would be slower, and that has proven to be the case. Nonetheless, our European truck sales still grew 1% in H1 2025 compared to a market decline of 15%, and our North American heavy-duty truck sales declined 13% compared to a market reduction of 19%. ACT Research are expecting truck markets to continue to be weak in the second half of this year before stabilizing and then starting to grow next year.

In power & energy, a strong performance at our Pathway business in Texas led to strong downstream oil and gas and nuclear sales, while upstream oil and gas sales continued to be subdued.

Moving on to strategy. So on July 18, Senior announced it has reached a binding agreement to sell its Aerostructures business to Sullivan Street Partners, a U.K.-based mid-market private equity investor for a total enterprise value of up to GBP 200 million. This represents 13.1x EBITDA. Initial net cash proceeds are expected to be approximately GBP 100 million before transaction costs of approximately GBP 12 million. An additional consideration of up to a maximum of GBP 50 million will be payable in H1 2026, contingent on the 2025 EBITDA performance of Aerostructures, and completion is expected by the end of 2025.

With almost a century of relevant experience, we can genuinely claim to be experts in fluid conveyance and thermal management, or FCTM. FCTM is very relevant for our customers as our components and systems contribute to fuel efficiency and emissions reductions in aircraft and vehicles, as the world continues to transition to a low-carbon economy.

We intend to capitalize on that expertise to deliver value for our shareholders. We have truly differentiated products with rich background and foreground intellectual property, coupled with expert design and manufacturing know-how. We have a good track record of outgrowing the structurally resilient end markets in which we operate, so we are well positioned for sustained profitable growth over the medium term.

Margins have been improving in recent years. And indeed, they have again in the first half of this year, but as I've said previously, there is so much more to come. That will be driven by better pricing and a relentless focus on improving operational efficiency. We've always been a cash generator business. As a pure-play FCTM business, cash conversion is expected to be even stronger, which in turn supports investment in growth and shareholder returns.

I previously described the markets in which we operate. Our aim is to outgrow these end markets by 50% through the cycle by taking market share and with new product introductions and innovation. Based on that, our expectation for mid-single-digit organic revenue growth through the cycle. That revenue growth supports these medium-term financial targets, which we set out at the investor event in March.

Group operating margins are expected to expand from under 5% in 2024 to at least double digit in the medium term, with Aerospace margins increasing to at least mid-teens and Flexonics margins in the 10% to 12% range. Senior's business model is intrinsically cash generative, and we expect our operating cash conversion to be greater than 85% through the cycle. And our target return for capital employed, ROCE, is now 15% to 20% in the medium term. These targets are underpinned by maintaining a strong balance sheet. Our leverage target remains unchanged, aiming to keep net debt to EBITDA between 0.5 and 1.5x. Achievement of these financial targets will deliver consistent value creation for all our stakeholders.

So let me finish by talking about the outlook for Senior. For our continuing business, our Aerospace division sales and profitability have grown with good performance in the first half of the year. Our outlook for the full year is unchanged. Flexonics delivered a strong set of results in H1, outperforming end markets. And for the full year, we continue to expect performance to be broadly similar to 2024. Overall, on a constant currency basis, the Board's expectations for the continuing group for the full year are unchanged.

Aerostructures delivered an improved performance in the first half of 2025 compared to H1 2024. We continue to expect Aerostructures' operating profit in the range of GBP 9 million to GBP 11 million for the full year at constant currency.

Looking ahead, we're delivering on our strategy, which gives us confidence in our ability to achieve these medium-term financial targets.

So with that, we'll open the floor for any questions, which Alpna and I will be delighted to answer.

Straight in there, Andy.

It's Andy from Jefferies. I've got 3 questions, and I'll come back for a second go. Can we start please with Spencer? 66% growth in the period is fantastic. Can we just make sure that we are seeing a nice improvement in profitability? And can you just talk about the opportunities in Europe and where we are with there? Because that's still something that we've cracked, hopefully, over the next kind of few years, because there's a big upside there.

And the second question is on pricing. I just want to make sure that you're happy with how the pricing improvements have come through in the period, and we're set for '26 and '27 to see improvements as well. Can you just remind us where you are on the negotiations for that -- for those 2 increases?

And then one for Alpna. You talked about working capital to sales nudging up a little bit to fund the growth, which we all understood. Can you just talk about kind of maybe the medium-term opportunity for getting that working capital sales ratio down a little bit and just let us know kind of wait your thoughts there, please?

Okay. Thanks, Andy. So I'll start with the Spencer, yes, 66% growth. So we bought this business November '22, and we've grown very strongly each time. And what's the reasons for that? I think I've described to some of you that it's almost like a conveyor belt of products that we have coming off there.

It takes 2.5 to 3 years to qualify every one of these highly engineered hydraulic fittings. But as they are qualified, they're added on to our Boeing LTA. And as they're added on to Boeing LTA, everybody through the Boeing ecosystem can buy those products. So we knew this when we bought the business, and it's fantastic to see that being borne out. We're also winning new customers.

Yes, profitability is continuously improving. It's comfortably in double digit now and will continue to go up as volumes come through. We're confident of that as well. So pleased with the profit performance, not just the sales performance.

And yes, you asked a great question. You remember quite rightly that part of the business case was to open European markets to Spencer both directly, but also by Spencer helping our metal business in France to expand their range of fittings and sell both -- sell those into Europe as well. Both of those are working out very well. We have a big European OEM working with us to qualify the Spencer product for their ecosystem. So we didn't anticipate any sales synergies until the end of this year, and we're on track for that. So that will open up a whole new market for Spencer. So very pleased with the performance of that company.

And the other reason, I should say, the team there are doing a brilliant job in terms of on-time delivery, quality, responsiveness, and that sets them out from the competition and why we're taking market share. So all good on that front.

On the pricing side, yes, pleased to report we are exactly in line with the progress we anticipated making. You may remember at the investor event in March, I think Bindi set out, in Aerospace, in particular, how we move from the margins we're at, at that time to the at least mid-teens, and half of that was coming from pricing.

And I think at the time we said for the long term agreement element of that 80% of that pricing was done, that's still the case. We've got 2 additional large contracts that we're in the middle of completing. And that's going fine, amicable discussions. So yes, by the end of this year, we'll be in very good shape for that.

Now the price increases don't all cut in immediately. Some of those were at the start of this year. Some now, second half of this year, some at the start at '26, and some of that at start at '27. So we'll see that gradually improving. And then we do have a chunk where we -- it's order to order. So those are spot priced, and we're taking the appropriate actions there as well in terms of market-based pricing.

So yes, very happy with the contribution that pricing is making, but we're also making good progress on the operational efficiencies, which is an important element, too.

And then, Andy, just on your question regarding working capital. So if I look at working capital, it was about 16% for the half year. We are guiding to 17% to 18% for the full year. And we do have a bit of inventory build in certain parts of our business, particularly in North America. So it's not across the entire company. It's just a certain number of plants. And we're very much focused on it. We have a plan in place to bring that inventory down, and that should bring that working capital percentage down over the medium term.

Yes, Rich?

It's Richard Paige from Deutsche Numis, and the mandatory 3 questions from me as well, please. On the Aerospace, obviously, you mentioned supply chain disruption continuing in there. But have you got a sort of time line as to when you think that will start easing and helping out, given particularly OEM build rates ambitions for this year?

Back at the CMD, you mentioned there were 2 businesses at sub-double-digit margins. You obviously achieved double-digit margins in the first half in Aerospace. Are we still on the time line for the turnaround of those 2 businesses, please?

And then, obviously, a standout is the land vehicle performance. Could you just give a bit more detail behind that? And also what sort of additional maybe new contracts might be kicking in the second half to keep that dynamic going for the rest of the year, please?

Yes. Okay. So firstly, on the supply chain situation, I mean, firstly, it's a lot better than it was a couple of years ago. And if you've cast your mind back, it was a nightmare, and it's -- but improving. So raw material supply is improving. The issues we had, getting things like flanges and so forth, improved dramatically, partly because we're making our own. But there are still some hotspots.

To get right back up to the top of the supply chain, you heard [indiscernible] the CEO of [indiscernible], "We need engines, engines, engines." They've got 60 gliders, CFM International, and Pratt & Whitney working very hard to deliver enough engines into the program. And there's some confidence that will happen in the second half of the year.

And what that meant was that other parts have got slightly ahead of where the engines were. We talked about this last October, and we talked about it again at our full year results. So notably, we supply a lot of stuff into the wings, and the wings were ahead of the engine. So I think the OEMs just taking the opportunity just to rebalance that inventory.

And then that flows through the supply chain. I think by the end of this year, that will be pretty much normalized. So it'll be a bit better in the second half of the year, I think. So we expect to see our civil aerospace growth rates probably a bit higher in the second half of the year than the first half of the year. And then once we get into next year, I would -- look, you're always going to hear about the odd hotspot, but I think it will be much more normal. So -- but this is unexpected. I think it's where we thought we'd be.

The second point, yes, the 2 businesses are both improving. I think one of the larger ones, we didn't say it was or the trajectory, but one of the reasons that we're -- we've always said it will take the medium term to get to those target margins was because of that. So look, all the great actions there in terms of pricing, operational efficiency, volume are starting to bear fruit, and it's starting to improve, but more work to do.

And in land vehicle, yes, so our humble land vehicle business has performed really well in the first half of the year. Firstly, on the truck side, we've done better than market. And you'll all be aware of -- well, you may or may not be aware of what's happening with the potential emissions regulation change in North America. So if you go back a year, there was anticipated emissions regulation change in '27, which had been a big prebuy because the engines are cheaper at the end of this year and into next year. That's probably not going to happen. So that's why we're not seeing that prebuy this year.

We kind of thought that was the case. Coming to the year, we guided North American heavy-duty truck to be down, and it is. But what it does mean is it will probably stabilize, and we won't have the big coming off a cliff and then growing again. So ACT Research, who we tend to listen to, are saying big fall on demand in North America this year, sort of flat next year and then picking up. So by the second half of next year, we should see it start to pick up.

We've outperformed because we've got good market share, because we've won new contracts. But the standout was actually passenger vehicle. And remember, we don't go chasing the highest volume, low profit passenger vehicle business. We go after specific niches that are profitable.

We won new contracts for our businesses in the Czech Republic, our businesses in India,and supported by our business in Cape Town. And as well as the joint venture, which Alpna mentioned, which is its best performance ever, and that's really passenger vehicle business as well.

So we are demonstrating operational performance, quality levels, responsiveness that perhaps our competitors have not been able to do. And because we're able to offer both parts for internal combustion engines as well as hybrid vehicles and electrical vehicles, our customers really seem to like that. So that's why we have taken market share. That's why passenger vehicle business grew 42% in the first half of this year compared to market of 5%. It's those new programs, and it's also where CapEx is a bit higher. We had to naturally invest to meet that demand. So those are the principal reasons.

Thomas Rands from Berenberg. Three questions, again, if I may. The first two are slightly linked. So just on the profitability of Aerostructures, you mentioned GBP 9 million to GBP 11 million for this year is kind of the guide. Is that enough to get the -- for the full payout on the earn-out of GBP 50 million, just as a sort of a modeling point of view?

Second question, given how well Spencer's done, what's the M&A pipeline like? We'd like some more -- the more kind of Spencers out there that you would love to acquire, even if the timing is slightly unpredictable.

And then the third one is slightly different, but land vehicles opportunities within EVs for the kind of the cooling elements and how you can kind of move along with the transition for light passenger vehicles or even heavy as well if there are applications on the kind of cooling of batteries, please.

Thank you. I know you're not expecting a direct answer to your first question. Look, we hit the GBP 9 million to GBP 11 million at constant currency. Yes, of course, that puts us in the earn-out range, but it's a bit commercially sensitive to say exactly where that would put us and what the bottom and top end are. I think I've said before, we'll look at the threshold level sensible and the top end, as you would imagine, from a Sullivan Street perspective is appropriately stretching. So -- but that would have us in the range, but I'm not going to say how much.

Yes, I think the M&A pipeline, and Alpna's got a lot of M&A experience as well working with Nigel, who's over here, our EVP of Strategy. And look, I think it's an important part of our go-forward strategy as our returning capital to shareholders. Spencer was quite a unique -- well, it was a unique deal, too unique and quite unique and not unique. It was a unique deal in the way that we structured it with the $30 million day 1, $30 million after 12 months and then up to $40 million of -- based on the growth.

Now I've just described the growth that's been there, and we knew that was coming. So that's why -- so don't necessarily expect us to see the same structure of the deal. But we have got a strong M&A pipeline with some nice targets right on our sweet spot.

I'm not saying we're about to rush out and do an acquisition. We're very measured in our assessment of these opportunities. We've done 2 in the time I've been here. That probably shows you how measured that we are. But if we can find the right business at the right price with the right returns, then, yes, I think that can help us with our strategy moving forward.

I don't know if you want to comment on that one as well.

No. I mean, completely support what you've said there, David.

Yes. And then yes, land vehicles, so there's got so much noise about land vehicles. And I think if you go -- I mean, reran all our presentations over the past few years. We always said we don't know the pace of the transition. We have a rough idea, depending on which sector it's going to be, whether it was passenger vehicle or heavy-duty truck or commercial vehicles.

And we said we had to be ready. The winners would be the people that can be flexible in that transition. And we set out to be able to -- continue to be able to supply products to our internal combustion engine customers knowing that these reduce nitrous oxide, the most harmful greenhouse gas, more harmful than CO2. So we're very happy to keep selling those at the same time as winning new business on electrification front.

So hopefully, when we can take you to our new innovation center in Wales, which we can't call Senior Flexonics and it's not Crumlin anymore because it's moving to Oakdale, the next village, but actually, the innovation center is a much better name for it, and you'll see some of the great work we're doing in electrification for truck, for commercial vehicles. And you'll actually see them manufacturing battery cooling for the Italian-marked sports car that we described the win for last year. So we're actually building that in Crumlin.

So look, these are sort of niche applications that are important to us. We're not chasing millions and millions of passenger vehicles because that's not us. And then just -- although the -- maybe the penetration of EVs is not quite as high as some people thought it would be because of all the regulatory changes, every period, it goes up. So the penetration of hybrid plus electric is still going up. The path is an extra bit clear, in my view, and we'll be able to respond to whatever that curve looks like.

I don't know if that answers your question, Tom, but, yes.

It's Andrew Humphrey at Peel Hunt. Also 3, I'm afraid. First one, just coming back to Rich's question on civil build rates. Can I clarify the indication you gave there for the full year? Are we then expecting sort of Senior civil growth for full year '25 below industry build rates? And does that, therefore, then kind of improve from '26? Or are we kind of -- is that longer processed than that in your view? I appreciate it's difficult to say given everything that's going on with engines.

Secondly, in the Aerospace adjacent markets, you called out particular strength in semiconductor. That's an end market that, I think, has been very mixed across results season. We've clearly seen very variable performances. Just interested in a bit more in what you're seeing there and what's driving that and how sustainable it might be.

And finally, free cash flow, I think it was GBP 12 million outflow on structures for the first half. Is there an incentive to try and get some of that back before the deal closes? Or kind of are we basically kind of funding a bit of working capital there to kind of get that through to completion?

Okay. I'm sure Alpna will answer the third one. Just on the first one, so first half year, really strong defense and not bad civil. I think second half of the year, we'll see strong civil, and we had some good defense aftermarket in the first half that might not repeat. So you might see a bit of a swing in growth in Aerospace to civil from defense. I think we'll have a good second half of the year in civil.

So just, again, bringing it right back up to that top level. What did Airbus say? Airbus say they're on track to 75 single-aisle aircraft by '27 and kind of doubling the number of A350s. The surprise, the pleasant surprise for us was going from 4 to 5 on A330. So that's great. We've got some good content on A330. And A220 is also going to be increasing.

So -- and then -- but they did draw attention to some of these hotspots in the supply chain. As that stabilizes, we'll be back at the normal rate. So we've got parts of our business that are already delivering at the rates that Airbus are at the moment. Others are just winding a little bit of inventory out of our immediate customers. It's not necessarily Airbus. It could be an intermediary or it could be an engine guy.

And then on Boeing, what did Boeing say? So Boeing said they're at rate 38, which is fantastic. So hopefully, we'll be having a discussion with the FAA relatively soon to help bring that cap up to a higher level. They didn't say when, but I think it's in the transcript, hopefully, by the end of the year, I think they said. And then they also said they're now at rate 7 on the 787, up from 5. And they're aiming to increase both of those platforms considerably.

Boeing had built up a lot of stock, they said that in their earnings call as well. So that just needs to come out. So for some of our businesses, notably the structures ones, actually, we said we'd agreed steady-state run rate for some of the big programs. It's not the case with all our businesses.

So we just need to -- they just need to get through some of the inventory, which I think will be in the second half of this year. So a bit of a mixed bag. But overall, the direction of travel will be higher civil in the second half of the year, decent defense, perhaps not quite as stellar as the first half, but overall, still making good progress.

Semiconductor markets, yes, I think that has been a little bit different depending on who the key customers are. Our customer happens to be Lam Research, and we've had very good orders for them into our metal bellows business in the U.S. up there in Boston. So it's kind of a leading indicator in the semiconductor equipment side. So hopefully, we'll see that continuing. I know that some other larger customers have perhaps not been as strong. But for us, that was a really good half of the year.

I mean, long term, the semiconductor market has grew through the cycle. I know it's a bit more cyclical. But you see the huge investment going into the states. Ultimately, we benefit from Lam if they buy more equipment. So, yes, it's a good adjacent market to be in, in our core market.

Do you want to comment on the free cash flow?

And then just on free cash flow, I mean, one of the reasons why we are selling the structures business is not just because of the earnings impact, but also the working capital and the CapEx that it takes up. So yes, you saw that GBP 12 million outflow in the first half. I mean, we all look to do a working capital true-up at the point that we complete on the transaction. And so there is a mechanism to do that as part of the agreement for the sale process.

Alex O'Hanlon from Panmure Liberum. Just a couple, if I may. Starting with Flexonics, obviously, the margins remain quite strong and you've had a strong first half performance. I was wondering if you could give us a bit more color as to why the medium-term target of 10% to 12% is the right number and whether there could be scope for that to go up in the future.

And the second point is just on tariffs. Obviously, there's been a lot of noise with tariffs moving around all the time this year. Can you just give us some more color as to how you're kind of managing that situation at Senior?

Yes. So on the Flexonics margin, look, I think these are sensible targets, 10% to 12%. And some people have been saying the 10% in the down cycle is perhaps even more ambitious than the 12% on an upcycle. If you look historically, when there's been a downturn in the North American heavy-duty truck, Flexonics' margin fall to mid-single digits.

So this is quite bold for us saying 10%, but it's with reason. We've learned a lot in recent years. We've got a much more flexible cost base now. We have diversified away from North America to Europe and other markets. And we've got some really good niche positions and particular vehicle classes that help us to ride that out.

So I think 10% on the downturn is a good target and the 12% at the top is sensible. Would we like that to be higher? Of course. But let's get there first and then we can -- once we get there, then we can look at reset. Believe me, Alpna coming in with a fresh pair of eyes has been a lot of pressure on us and Mike Sheppard who runs the division to do even better. But I think at the moment, these are sensible targets, aren't they?

Yes.

Tariffs, yes, I think we -- the statement we used back on April 29, our trading update around the AGM, was the effect is limited and manageable. And the limited part of that is because of our global footprint. So what we build in the U.S. tends to stay in the U.S. What we build in Europe tends to stay in Europe. And what we build in Asia, whether it's India, China or even South Africa, tends to come back to Europe or -- including the U.K.

So that's why it's limited. We really don't have a lot of sales -- export sales into the U.S. from other countries. And the manageable bit is in the small number of cases where we might import a part that attracts some level of tariff, there's a mechanism to pass it on through tariff surcharges. But just to emphasize, that's pretty low. So for us, it's not a big impact. The bigger impact would be what happens to end markets, and we're all watching that, of course.

Any more questions? Okay. Well, thank you very much, everybody. We appreciate making the time to get to you. And of course, if you've got any follow-up questions, don't hesitate to ask. Thank you very much.