Avon Technologies Plc (AVON) Earnings Call Transcript

Well, good afternoon, everybody. It's great to see so many of you here today, especially as at the last Capital Markets Day about 3 years ago, we apparently tried to torture everybody with uncomfortable chairs. Andy Bruff is so scarred by the last Capital Markets Day, he's bought a cushion with him to this one and just do just to make sure he can get through it. In the 3 years since the last Capital Markets Day, we have been very busy. And we've had a lot of fun along the way. We also had some ups, and we have had some downs. I never thought I would spend so much time on the factory floor in Cleveland. It does turn out that trying to triple production and run an ambitious transformation program is quite difficult. Nonetheless, over the last 3 years, we have delivered on all of our targets. In fact, we've exceeded every target that we set at the last Capital Markets Day, most of them by a considerable margin. That, of course, is not due to me. It is due to a fantastic team. That team, we have not got by accident. We've recruited great people. We've promoted great people, and we have developed great people. And now we have an army of amazing people that know how to improve businesses, and they are ambitious to use that skill to take this business even further. And that really is the genesis of the strategy. We can, of course, improve our existing businesses even more. We can grow them, and we have lots of opportunity to do that. But in addition, we do see an opportunity to exercise our capability across a broader platform and compound value for shareholders over the long term. This is the road map for today. First, we're going to talk about how we improve businesses, and we will provide some proof points to demonstrate that our methodology actually works. We will talk about how we're going to grow our existing businesses. They have resilient cause, but they also have some interesting step change opportunities that could grow them even faster. And we will talk about how we will exercise our capability to create value across a broader platform if we see opportunities to buy and improve other companies. But we are mindful that we are trying to create value for shareholders. So we are very keen both on EPS growth and on returns on capital, and we see those as our 2 critical metrics. Rich has drummed into me return on capital is all that matters over the last 3 years. So we will keep focused on that. The agenda follows the improved grow compound structure. Then Rich will come and talk about the numbers, which is the bit all the analysts are going to be interested in, then we will have Q&A, and we will have the technology showcase. The team has done a great job on the technology showcase. So please do stay and have a drink afterwards and chat to the guys about the technology. If you are in a difficult situation and you want gear that will protect your lives, argue is the best you can buy in my view. This is -- these are your presenters for today, Rich you all know, I think. He has added very strong financial discipline to the group over the next 3 years, and will keep us on track going forward. Steve Elwell has led the improvement and then the growth of Avon Protection with great success. Casey Galligan, you won't necessarily know. He owns Avon Protection's relationship with our biggest customer, the Department of War as an ex special forces Green Beret, he talks the language of the customer. He hangs out with the users and he brings the voice of the customer into the company to enable us to develop the technology that they want. Vasilios has recently taken over as the leader of Team Wendy. He is a polymath. He's good at pretty much everything. But perhaps the most important thing is that he, along with our Head of R&D, Vinny, pretty much invented the modern polyethylene helmet. They pretty much invented the entire ballistic helmet category at the moment, and they are very, very well placed to lead us in the next stage of Team Wendy's growth. And Enrique has been instrumental in the tripling of production in Cleveland, but it has been more than that. We have also gained credibility with the customer and our increasing standing with the customer has led to more orders during the second half. So the first step of this presentation, I'm going to talk about how we improve businesses. We have much, much better businesses than we had in the past. And we have a proven system. Interestingly, as we have improved our businesses, we have also codified how we improve businesses so that we have a repeatable model that we can do again and again. Just to take a step back in time to 3 years ago. At that point, revenue in the group was declining. Adjusted EBIT and adjusted EPS were also declining. Margin was only 8.7% and [indiscernible] return on capital was the same number. Cash conversion that year was only 7%, and the balance sheet was stretched. It was not an auspicious place to start. But we saw potential in these businesses, and we thought we could improve them. There was quite a lot of heavy lifting to do. We had to get the right organizational structure we had to get the right strategy. We had to get a team that could execute. This is actually a slide from the last Capital Markets Day 3 years ago. The point we were making and we still believe in this philosophic play, is that a business will not change direction if you don't do something different to it. We set out then to do something radically different. But having a vision of change is one thing, making the change happen is another humans are incredibly adverse to change. As many of you will know, there's a bot called change or die, and it shows that 90% of people that have heart bypass surgery or a heart attack do not change their lifestyle going forward. So literally, if you have to change to avoid dying, 90% of people do not change. That is how hard it is to change a business. It does start with having a clear strategy. Your employees need to know which hell they are going to take. We came up with STAR, most of you are going to be very familiar with this. So I'm not going to go through it. Now perhaps what's more interesting is what we learned from it. We did learn that it is common for businesses to be underinvested and to have obvious opportunities for improvement that they probably deep down, now exist, but they haven't gone after them perhaps because it's all a bit hard. We tackle that through a suite of transformation programs. We do have a set of levers we pull to improve business performance, but the exact recipe does depend a bit. on what we find in the businesses. Where we are different, I think, is that in parallel to a transformation program, we also build a culture and a capability of continuous improvement. The idea here is that as the transformation programs go up and then start coming down in their intensity in our case, ending now, continuous improvement comes up and increasingly improves the business not just for this year, but forever into the future. We did wonder whether it'd be possible to run a transformation program and continuous improvement in parallel. It did seem quite ambitious. But I think one of the interesting things we found is that the more obvious it is that a business has to change radically, the easier it is for the business to change because the employees are kind of resigned to the fact that everything is going to change. In our case, that is what we did. We also learned that continuous improvement is not just a tactical tool. It is a strategic tool in the sense that if you deliver high-quality product on time to your customer, the customer is likely to order more of it from you. And we have seen that very recently in both of our divisions. In Avon Protection, they recently won 100% of the DWS filter requirements. And in Team Wendy, we recently had major orders on both of our programs with them. That is because we deliver reliably on time with great quality to our customers, and they have faith in us, and not all of our competitors can do that. We also learned the defense cycle is long. If a business is to sustain growth in the long term, it has to invest early. We have invested a lot of money into R&D and sales and marketing over the last 3 years. And many of those programs are now nearing a point where we hope that they will generate good revenue growth for us, and you will hear that later. This is the results of our efforts. We improved -- we increased revenue by over $100 million. And on EPS, ROIC and EBIT, we tripled all of them more greater. These are the targets we set out for 2027 at the Capital Markets Day that Andy remembers so well. we have delivered every single one of these targets or exceeded them and we have done it a year earlier than we originally anticipated. But I'm not saying this because we want to take credit for what happened in the past. The important thing to take away is that we believe we have an improvement system that works and the numbers tell us that, that is the case. And that is why we have confidence that going forward, this is a methodology that is repeatable and can work again. This is our business improvement system. We have covered a lot of this in the past. But to recap, we start with a philosophical view that if a business is to own its strategy and be accountable for delivering it, then it should control all the resources it needs to deliver that strategy. We do have a slight out unless there is a compelling reason to do something different. The only thing we have in that category is we do have a shared U.S. sales team because the customer buys helmets and mass together. We then like to work with our businesses to help them develop their strategy. But we do not use consultants to set strategy. It still amuses me that when we launched STAR, someone said, oh, a consultant must have come up with that, but we do not use consultants to tell us what strategy is. In fact, our philosophy is the opposite. Our philosophy is if the businesses develop their own strategies, they are much more likely to do their strategies. It might not be quite as good as if McKinsey had done it. But that isn't really the point because we think that most businesses fall down because they don't deliver their strategies. In our case, we want the businesses to own their strategies, create their strategies and deliver their strategy. We do also have a cadence where every year and every quarter, we look at what's worked in the strategy, and we course correct. We nudged the tiller a bit here and there because we effectively have a continuous improvement approach to strategy we learn as we go along. Transformation is about creating a set of time-bounded projects we actually regard this as catching up with the sins of the past in most businesses. If the business has continuous improvement, it really has it, not just talks about it, a business shouldn't need a suite of transformation programs. But we find often that, that is not the case, and we need to kind of catch up and invest some money. We look for a 3-year payback. We normally model a 50% attrition rate between the initial business case and what actually hits the P&L, and I would say we're roughly right on that in our experience. Continuous improvement is an extremely powerful way of ensuring that a business improves all the time. but it's also a powerful way of delivering to the customer on time and with the right quality. When we started this journey, we asked every plant to have a 1-week kaizen every month, and they all look at me like I was absolutely mad. Basically, we can't do that. We don't have the resources. With less resource now, every plant has improvement projects every single week. So as time goes on, these businesses learn how to improve and they learn how to do it faster and faster. But the business is about process and it is about people. To get all this to work, we need people that can teach this system, coach others on this system and make this system happen. So we spend a lot of time developing our people. And of course, in our case, our people have just implemented this methodology over the last 3 years. So we think we have an edge over private equity because we've got 1,000 people, and they all know how the system works. How does this all translate into actual money? Well, we actually focus on the inputs rather than the outputs. We focus on improving safety, quality, delivery, inventory turns and productivity. We call those our skew at metrics, and you would see them on every single line in every single one of our factories. By improving quality and improving quality, improves margin and it improves cash flow, improving inventory turns also drives your cash flow forward. Productivity drops through to margin. And all of this creates financial firepower and human capital that we can then reinvest into the front end of the business. We reinvest into sales and marketing, and we reinvest into product development. And we've invested heavily in those areas in the last 3 years across both our businesses. We see this as 2 sides of the same coin. In order to grow a business, we have to improve a business because it's the improvement there that frees up the money, and the people in order to drive the front end of the business. You can't really do one without the other, without tanking your margins. What this has led to is growth in sales and it has led to a more diversified customer base and a more diversified portfolio, which helps create resilience in the businesses. I just wanted to demonstrate that this isn't just a PowerPoint thing. A lot of people can talk about an improvement methodology. What is much harder to replicate is how deep ours goes. For example, our strengthened system is a set of principles, methods and tools. It builds out as you go down. And all of that helps us to remove waste from our businesses, we level load production, which drive efficiency. We have one piece flow, which removes work in progress from the lines, but it also enables us to deliver just in time to our customers with less stock. We work hard on making sure our machines are reliable, which reduces CapEx requirements. It also means that our lines stop less often, and we get improved productivity, and we build quality into our processes, reducing scrap rates, increasing right first time, improving margins. We train every single employee in the entire organization on the strengthen system. I would love to talk to you about this all day, and we could do that. But just to say me doing that, we do have copies of our strengthened system here. This is the basis of the manual we use to train our owner employees. It is free to anybody because we don't mind teaching our competitors, our strengthened system because the tricky bit is actually implementing it. This relates to the people side. It's all very well having an improvement methodology and a strengthened system, but we need people to deliver it. When I arrived at Avon, we did not have any development courses aligned to our strategy. In fact, there was only one development, of course, in the whole organization. Since then, we have built courses that go all the way from the shop floor to senior leaders, and we've built courses that teach everyone the strengthened system, and we take our senior team to Japan to show them what excellence looks like. We also have a program management teaching that teaches our people to manage complicated programs and how to reduce risk on those programs. Enrique has been a large part of that, but also Gary Turner originally helped us set that up 3 years ago. The important thing here, though, is that our development programs are linked to our strategy. They teach our people to implement our business improvement system. This does mean that they cannot the cannot be outsourced. We wrote all of these courses. I personally wrote a lot of these courses, and I teach several of them. All of our leadership team is involved in training our people and creating this content. We do not aggregate responsibility for developing our own people. Now I am going to switch tack slightly. Moving on from improvement, we're now going to talk about our businesses. They do, of course, have further room for improvement. We actually love opportunities for improvement, and there is more to come. They have resilient cause and we can maximize that over the next chapter of their progress. But we also have a suite or a program of opportunities that we call our step change opportunities. We actually have quite a number of these, not all of them are going to work out, but we hope quite a lot of them will work out, and many of them are very big and could be transformational in themselves. And then I'm going to come back and talk a bit more about how we're going to compound growth over the long term. So I'm now going to hand over to Rich, and he is going to set the scene for the businesses by talking about our markets and what we see there.

Thank you, Jos. Good afternoon, everyone. Nice to be back and not doing results. So as you've just heard, Avon is a much stronger business now than it was a few years ago. And our business improvement system is working. So the next part of the plan is grow. And our organic plan starts with attractive markets. They're well aligned to our vision, which is helping our hero survive and thrive. But market growth alone is not the investment case here. What really matters is that we've got leading positions. We've got installed base. We've got customer trust, and we've got innovative technology, which will help us capture more than the average share available in the market. We'll look at the structural trends that are shaping demand overall. And then Steve and Vasilios will come and stand up and talk about the fairly unique opportunities that those guys see in front of them. And then, the objective is to distinguish between the resilient core and these focused and in many cases, very sizable opportunities to grow above our trend rate. So let's start with the overall backdrop. I mean the overall market demand environment has changed pretty significantly over the last few years. Most of you will be aware why, but some of the flash points on the map on this chart go some way to help explain it anyway. Governments are rebuilding readiness. They are replacing aging equipment, and they're dealing with pretty complex threats. And in the background, for the first time in a very long time, NATO troop numbers are growing. First responder numbers are growing. And one thing we have learned about drone warfare is that it is now easier than ever before. to drop gas and grenade. And that's the sort of stuff that our products are protected against. So there's a huge amount of opportunity just looking at the backdrop. Our story isn't just about higher defense markets -- higher defense budgets, although they do help in fairness. But it's about the type and the urgency of procurement. Customers need equipment on the shelf. They need systems that work together, and they need to be able to protect their users without compromising mobility or mission performance. So these trends do point customers again and again, back to established suppliers with qualified products with a strong level of customer trust and the ability to deliver at scale fast. They also support demand in the sort of spares replacement, sustainment replenishment cycle. So the relevant market for Avon extends way beyond just gas masks and helmets. The way we define critical protection technology markets is essentially the equipment systems and spares and accessories that protect military and first respond to personnel as they operate in hazardous environments. Our current core markets are already pretty sizable, $5 billion, $10 billion, and that covers the sort of products that we sell today plus the sorts of products that we're working towards actively developing right now. But interestingly, when you add close adjacencies, and there's a number of them listed on the slide that I won't go through, but that market opportunity can very easily double. There are a number of characteristics that make this market attractive to us. I'll just pick out 3. Number one, qualification, performance and customer trust build a competitive moat. Number two, long program life cycles support demand for spares, sustainment and replacement. And number three, the supplier base is, in many cases, highly fragmented, which gives us opportunity for organic growth, but it also gives opportunity over time for selective acquisitions. The total addressable market, therefore, is useful context. But our approach is really to focus on the areas where we like to have or can build a credible advantage. Internal and external analysis supports that there is growth in our core selected markets of respiratory protection and head protection. And the rates do vary by product type. They vary by geography. But the overall message is pretty consistent. And that is these markets are growing. And when I look at areas like, for example, military and commercial helmets, you can see that those growth rates are actually pretty compelling. Importantly, though, Avon doesn't just need -- or doesn't need market growth in order to grow. In several areas, notably in Avon section, our market share is very high and supports a very durable core. And in other areas like commercial and international helmets, our current share supports ample headroom for further growth. So that combination gives us a pretty balanced plan. We've got a large amount of the portfolio where the priority is to defend and extend. And then we've got a whole load of areas which are frankly underpenetrated by us, where we can go and grow faster than the market. So to put it more simply, we're very strong where we lie, and we have loads of headroom for growth in areas where we haven't historically played. We have a durable competitive advantage, and it's not really built on 1 or 2 product features, although they are important. It comes from a number of interrelated and mutually enforcing strengths. So number one, work really closely with our customers. This customer intimacy, and that's quite often before the new requirements of a new product are defined. So that level of customer intimacy helps to inform the intellectual property that we develop. Then there is rigorous testing, certification, production readiness. These approvals are quite hard to achieve. And once we've jumped through the turtle, we create fairly high switching costs, which is obviously a good place to be. Meanwhile, the long program life cycles keep on with the spares, sustainment replacement demand. And operational capability then completes the system. We must be able to manufacture a pretty complex and diverse portfolio of products reliably at scale efficiently and with as little working capital as possible. So these advantages result in durable positions that make the new product introductions and installed bases that we have today economically valuable for many years. And then just before I hand over, a number of you will remember that when we stood up 2.5 years ago at our last Capital Markets Day, we highlighted that a large amount of our business benefits from a very stable and predictable recurring revenue stream. I just wanted to show you how that has progressed over the last couple of years because it's an interesting story. The first takeaway is that the recurring revenue element has indeed remained very resilient, which I guess shouldn't be a surprise, but it's gratifying to see it. The other story which kind of jumps off this chart is that the overall business has benefited from a huge amount of new program growth over the last couple of years. That's come in the form of ACA and HEPS for the team won business. It's come in the form of a NSDA tasks and a range of other things for the open protection business. But the point is new program growth today will generate recurring revenue in the form of spares, sustainment replenishment replacement for many, many years to come. So the key message is that a large and highly profitable part of our business is very stable, very repeatable and very predictable. And with that said, I'll now hand over to Steve to talk about the resilience of his business and the sizable opportunities you've got come in his way.

Thanks, Rich. Okay. So well, good afternoon, everybody. I think I recognize quite a lot of people in the room. But for those of you I guess I haven't met yet, I'm Steve Elwell, and I run our own protection business. So we've now completed the transition of Avon Protection. And the result of that is a much more resilient and a much stronger business with a very, very consistent performance outlook. From there, we build into our growth strategy, and that's a pretty straightforward growth strategy. So first and foremost, we maximize what is a very high-quality respiratory core business that we have. And then second to that, we concentrate our investment into a small number of high-growth programs that we'll touch on over the next few slides. But before we really dive into the strategy, I just want to show you a little video that maybe brings to life some of what we do and why we do what we do. [Presentation]

Sure you can imagine, I've been that video quite a lot over the last few days. But one thing that hits me every time I watch that is it doesn't matter who you are. We could definitely make you look really cool. So we love what we do. So this slide here shows you our scalable respiratory platform. And we just have -- we have a single scalable respirator platform that we serve our users with. Now respiratory protection is a concentrate off for our users between the level of protection they need and the burden that equipment places on them versus the duration of that mission they need to be on. But there's one thing that's absolutely dead certain. And that's if -- whatever operation you're on if you can't breathe, you simply cannot operate. And that's why the respirator always goes on first with any of our users. This platform allows us to tailor what we do to our users. So if you start on the left here for reading operations, products like our MITR half mask, you can see that outside today. This is used in things like weapons training where extended exposure in a Shute House will have downstream health consequences for users. And so this is just a very, very lightweight basic respiratory protection system. You skip right over on to the far right-hand side of this, you get into our combination system. This is for very high threat, very physically demanding missions. So in this environment, you'd carry a mask, you'd be wearing a mask, You'd also have powered systems. You have supply there. That's for things like subterranean warfare or tunnel warfare, as you may know it better, where a user may be physically exerting themselves quite a lot and then suddenly face an environment where there is no oxygen. And if there's no oxygen in the atmosphere, it doesn't matter how much filtration we give you, you can't filter oxygen into somebody's mask. You have to then carry the equipment with you. So because you can tailor our equipment in this way to the mission, essentially, what we do is we reduce the overall risk for any of our users. That means we can solve more missions. That means that we capture a higher value per user, and that means it's very, very hard for users to then switch from us once they become part of the Avon family. Our competitors are not able to offer that same breadth of end-to-end proven capability that this company can provide. The overall result of that is that Avon Protection is the global leader in respiratory protection in the CBRN markets. But by that, I'm talking more than just simply market share. We actively support over 4 million users in over 75 countries worldwide to date. We have very deep relationships with the U.S. military with NATO and with Five Eyes allied nations around the world. And our customers buy proven performance. You have to do in this market. You have to trust your equipment. You don't get a second chance to put that equipment on if it fails you. That trust that we build and [indiscernible] is built over decades of working with them. They need to be confident in the products that they're carrying, confidence in the certification of those products, confident in the supply chain and confident in the support that we put behind it. That also means for us, that we have very long product life cycles. It means we create a lot of recurring revenue in the form of pull-through of filters, spares, accessories, outsets and replacement masks. When you combine all of that together, it means our core is extremely resilient and it's very, very strategically valuable to us makes it very difficult for the competition to displace us. So over the last few years, I think probably 3 years ago, I spoke at the Capital Markets Day, we touched on trying to diversify this business, but it was where we were heading at the time. So over the last 3 years, we have been extending and we have been successful in going into adjacent markets that are still close to our core, but nevertheless, do broaden our market access. Here, we have the same types of technology, the same user groups the same qualification barriers, similar routes to market that really give us that advantage that we carry. On the left of the chart, integrated CBRN, that takes us from the respirator into suit boots, gloves, and more importantly, all of those things being designed to work together. In this space, it's the interface with the respirator that gives us the credibility to go into that market as well as our access to NATO user community that gives us very, very established routes to adoption. Underwater in respiratory protection, you have heard me talked before at our underwater rebreather our MCM100. That's now widely deployed across NATO and across Five Eyes users. That means we have a strong platform for further international and U.S. growth. The result of that is our portfolio is now broader than it was 3 years ago. It's deeper, it's more integrated, and we're starting to win in these markets as well. Now Rich touched a little bit on the market, if I dive just a little bit deeper into some of what's going on. So global demand for respiratory and CBRN protection gear is higher than our historical norms. So geopolitical instability, conflict and increases in the CBRN threat landscape are all driving new investment in this space. The left-hand side of this chart, shows an independent survey that governments are increasingly worried about being involved in ARM conflict, but they're also increasingly worried of the use of chemical and biological agents in those conflicts. The real message for us in our market, however, is not simply that the world is spending more on defense and defense equipment is that a greater share of that defense investment is going into chemical biological protection and into the modernization of that gear. So for us, that gives us basically a double tailwind in our market. The changes apply equally across military and law enforcement markets. Users are out looking for lightweight, better integrated systems that protect them against that broader threat landscape without compromising their ability to operate in a combat environment and their overall mobility. These shifts play directly to our strengths where we are. So after talking about the use, I am briefly now going to hand over to Lieutenant Colonel, Casey Galligan, who will take you through how we engage with users and why that's meaningful. Casey?

Thanks, Steve. So I use Avon's gear most of my military career. So when Steve asked me to join, there was no hesitation. The reason I say most of my military career is because despite the young look here, I actually joined the military 5 years before Avon won the M50 contract for the U.S. DoW. But I can assure you after that point, anytime I was visiting great tourist destinations such as Afghanistan, the jungles of South America. I always had my even respirator with me. So joining the company that makes and sells the best protection gear was an easy decision. Now working with the Kings English, CBRN has always been a specialized market, but the customer expectations are changing. They are no longer looking for stand-alone respirator filters or protective equipment. They are looking for integrated systems that improve your survivability, readiness and combat effectiveness. So if you see here on this chart next to me, about a year ago, the DoW conjunction with us and submarines, we went out there and ran these guys through a gauntlet of test wearing all our gear that you can see here. So what does this really mean? I want you to understand that, a, from a commander on the ground, I can have the highest levels of protection or I have this fleet of respirators to choose from. And if you look at the MITR, the MITR have actually almost performed the same as your combat effectiveness with wearing nothing, right? So Steve mentioned that earlier, but that shift to these integrated systems that play directly into our strengths. For years, we have invested in a complete protection ecosystem because we recognized early that protection is not a collection of individual products. It is an integrated system where your respiratory protection, your protective equipment, communications, anything a soldier must carry must all work together. So you may also have seen in my attempts to be linked and famous. I spend pretty much all my time in the field with the operators the requirements, professionals as well as the acquisition of writers. So we can be at the forefront of these discussions. Honestly, it is why I love my job. You can see here, we are at the best range of competition, putting our MITR on the lane. And you should know a ranger has the most incredible ability to give you the most brutal honest feedback you will get. And it is actually very helpful. It is these engagements with the soldiers, with these special operations units while we're working on future concepts, is for you to know that, again, we are not on the sidelines. We are not watching these requirements emerge. We are standing there with these guys shaping them. And that proximity to these operators matters because, again, operators does -- they don't care who makes their equipment or the name on it. They care that your equipment solves their problems. Our job, as I like to say, is to make their life suck less in the worst environments in the world. If they ever have to fight dirty, they need equipment that works and allows them to win. And like Steve said earlier, if you can't win, you cannot breathe. The mask will always go on first, and it's not a catch phrase that is the standard operating procedure. Ukraine has proven to be a modern day example. Delivery mechanisms may change, but the requirement to protect the war fighter as long as there's not. Whether that Chembio threat arrives in an artillery shell, a rocket or a $20 drone, that soldier needs their mask. And that math needs to work because in our world, the CBRN, you do not get second chances. That trust is why Avon will have a seat at the table and continue to work on these future requirements as they develop. In many cases, we are not responding to these requirements. We are helping to find them and demonstrating prototype solutions that can be evaluated by the customer. At the same time, CBRN protection is expanding beyond traditional CBR protection. Customers are increasingly focused on occupational health and the cumulative exposure they face. The conversation is now shifting from surviving that single event to preserving a career and lifetime of service. That's why programs like the MITR are gaining traction, and that is why we will continue to lead in this area. The bottom line is simple. Avon wins because we are trusted by the customer, we make the best gear, we understand their mission, and we are delivering integrated solutions for tomorrow's requirements, not just today's fight. Now let's talk more about the MITR. So for decades, respiratory protection has existed between these 2 extremes. On your left, you had your disposable respirator. On the far right, you had our full-face respirator. What was missing was that solution to protect the operators from the threats they encounter every single day. And that gap is why we created the meter. Now for me, this was personal. You heard my background, it was 2012. I was sitting there in Fort Bragg, North Carolina, and we are monitoring the lead bubbles and those guys that lived in the shoe houses, lived on the ranges and did the breaching operations. Their blood levels were off the charts, okay? So here we are thinking when I go down range, I'm sure I'm going to encounter stuff. There's going to be contaminates on the battlefield. There's burn pits. But what we found out, when you were a home for that 3-year assignment and supposed to go home every night to your wife and children, that is actually when you were doing the most long-term health. And I sat there back then and I said, wow, we got to do better. Here we are a decade plus, working at Avon Protection, and we are. And MITR is part of that answer. And I take a lot of pride and sleep really well at night knowing that we're making a difference. Respiratory protection is following the same path that hearing protection did 20 years ago. There was a time when you're hearing protection was just considered an acceptable loss in part of the job. Now every soldier is issued here in protection, it's mandated because we understand the long-term consequences. Respiratory protection is approaching that same inflection point and awareness of that occupational exposure, cumulative health effects, force readiness and then really the elevated cancer risk within these high exposure communities like SOCOM is changing how they are thinking about their protection. That is also why companies like HunterSeven have chosen to partner with us. HunterSeven is a phenomenal nonprofit organization dedicated to early veteran screening and cancer detection. They have a laundry list of statistics that really make the case why might or should be part of your daily protection. There's firearms residue, aesthetic opioids, fentanyl, ride agents, particulates, smoke, reaching, something as simple as an airborne operation, where we're sitting out there on a tarmac or flight line for 3 hours and hailing that jet fuel. These are just some examples of the hazards that make the case that they get into the lungs and they will impact the soldier's long-term health. MITR can prevent that from happening. And the simplest way to think about it is this, if the M50 was focused on surviving the worst day of your career, the MITR is focused on protecting you throughout your career. My good friend, Chachi, that is his name. He's a retired Air Force pair rescue jumper that works for 1007 and a phenomenal human being. But nobody said better. Every soldier is going to walk out there and look at you in the eye and say, yes, I am absolutely willing to dive from my family. The question we pose now is what are you willing to do to live for? If that doesn't resonate, what does, right? And operators understand this because they are concerned about their long-term health and their life after service, and this is our contribution to protecting those that serve us. So with that, I'll hand it back to Steve and discuss how we are converting this user engagement and momentum into continued growth for our business.

So I'll come in to anybody as well if you're trying to deliver a change program, having a Green Beret in your camp, really useful. Thank you, Casey, brilliant. So our job is now to really convert that user engagement and customer understanding into valuable and repeatable growth inside this organization. You can see on the chart here, we have 3 deliberate strands to our plan. And the first is we keep strengthening our organization through continuous improvement, that's delivering the margin expansion. It's creating capacity. It's freeing up cash, whilst it's maintaining the operating discipline that we've worked very hard to build over the past 3 years or so. Continuous improvement in this organization is, without a doubt, a strategic and competitive advantage for us that underpins everything that we do and is the bedrock of our strategy as we build it. Secondly, we maximize that core business, and we'll dive deeper into that core business in a moment and what that means. But that's really about further extending our leadership in the U.S. DoW and across those NATO nations. Here, we are expecting to grow ahead of the market, increasing further the value that installed base that we have, whilst we sustain strong margin and cash generation. And then third, will really accelerate our growth by selectively investing behind a small number but a very large programs that are capable of materially transforming the scale of this business. Now each part in this strategy here reinforces the next. It's continuous improvement that funds our growth. It's our core that gives us credibility. It gives us scale and it gives us customer access, and it's a selective program investment that really creates the opportunity for step change growth in this organization. So this slide here, this shows how our strengthened system has given us repeatable and driven repeatable excellent performance inside this organization better flow, better planning, better problem-solving has measurably reduced scrap and inventory. And as you can see, it's increased our productivity, enabling us now to produce more from the existing footprint that we have. all the time we've been doing that. You can see on the right-hand side of this chart, we've improved our customer service and our delivery out to our customers. The financial impact of this, I expect for you all is pretty straightforward, but costs are lower more cash is generated. We have more capacity to support growth in the future. And because that CI system is so well embedded inside our workforce and across our organization, it is a repeatable system that we have and it will continue to keep delivering for us. This is not the end of this. This is ultimately what fuels the growth engine inside this business. So this slide shows you where our core business is heading. And this is really where our market leadership and our large installed base is the underlying basis of our growth plan. You can see we split it here between U.S. and the broader Americas market, and European NATO and international markets. Now we're going to a second into -- there are some regional differences between those 2 markets. But ultimately, there are common strengths that we have across both of them. These are we have very long-standing customer relationships. We have very high qualification barriers. We have well-established contracting mechanisms and long-term contracting mechanisms and we have very strong replacement or recurring demand in all of those markets. That ultimately means we have very predictable revenues and that we have a credible growth story inside of our core. So if we drop into each of these now, I'll start with the U.S. So in the U.S., military installed base today, we have 1.8 million M50 respirators in use across the U.S. military. We are the sole source supplier, and we know that mask will remain in service for the foreseeable future. So we will see as a stand-alone in that, we will see long-term demand for filters, accessories and replacement masks. However, perhaps more tellingly, Today, around 150,000 of those masks reach 20 years old every year. A similar situation exists for us in terms of filter restocking where we already have started the restocking program there, and you can see that in record order backlogs, we have across all of our filter lines. So perhaps with the mask, it gives you a sense of the size of the restocking opportunity we see ahead of us going forward. Now earlier, Casey did touch on the growing understanding of respiratory health impacts in the military. So it's against that backdrop, the fantastic news that we are able to now announce U.S. SOCOM, the special forces, the Tier 1 users in the U.S. have selected MITR, full MITR system, the half mask and the goggle to be rolled out across all of their Tier 1 users. Now that in itself is absolutely incredible news for us. It makes the U.S. the third Five Eyes nation to fully select MITR for their specialties community. There's 2 of them are going to catch up. They know who they are. And -- but for us, adoption within special forces is not just the program itself. It's a very, very powerful validation of that capability. for broader military and law enforcement adoption of a capability. And we started now to see with users like SOCOM adopting it, those broader market opportunities opening up for MITR across generalist user base. And so while MITR is not yet equivalent at all to the recurring base that we see from our installed CBRN respirators, it's that same customer trust and qualification pedigree that will give us that broader market adoption. The overall result of this is we have strong confidence in the long-term demand outlook for our U.S. business. If I now just quickly dive into Europe. So European sales for us have grown 90% over the last 3 years. And that statistic alone is substantially ahead of the growth in defense spending over that same period. Short I need to tell you that we now have more than 0.5 million respirators in circulation in Europe, and we have a multiyear backlog of our Boots & Gloves products having won the NATO contract. All of our products are NATO-qualified. We've got well-established long-term routes to market. both through an SPA and also through direct contracting mechanisms into a number of European nations. So with the rise in European defense spending and the increasing CBRN threat that's seen there, we know we've got the right products the cost of credibility and the market access to capture that next phase of European chemical biological modernization. We are starting to build some more localized partnerships in Europe. There are some programs out there where perhaps we do need a different footprint in Europe, and we started to build that through partnerships. And also on top of that, as I just said in the U.S., MITR adoption of the half mask in the goggle in the same way as it's been driven in the U.S. we're seeing that same trend across Europe. If you take that together, the European market momentum, the established access that we've got, the changing customer need, all of that means that our core business in Europe will remain a credible growth engine for this organization. So that's the core that gives us predictable and sustainable organic growth. However, there is additional upside in this business that potentially comes from a number of small well-qualified programs. We call them step change programs internally, and you can see them listed on the chart here behind me. Any one of these programs could add meaningful scale to this organization. Now I should say these aren't speculative ideas. These are all very well-qualified opportunities. There's clarity of customer demand. There's clarity of funding that's in place. And in each case, Avon has a very strong to compete and to potentially win these programs. So what I'm trying to do is dive into each of these over the next few slides. So the first opportunity is around U.S. suits, but before I just touch on that opportunity, I'd like to give you a little understanding of why our products are suits are so well placed in a program like this. We've touched on some of this already, but just to remind you, modern forces. They do need to be protected. But of course, they also need to stay mobile and combat effective in a contaminated environment. Now one of the hardest challenges in CBRN protection is getting the interface between the respirator and the herd, which is on a suit, getting that interface right. It's at that interface where a CBRN system works or CBRN system fails. Because we live in the respirator space, we have very deep user insight into that, and we can optimize that critical interface in a way that any stand-alone moment supplier just simply can't. Of course, I'm sure you're all still aware, we do still lead the U.S. DOW's hood mask interface program. We have done for a number of years now. We've learned a lot through that program. It's where product designs and it's [indiscernible] building a new bank of intellectual property in the suit and in the integration space. The result of that is our range of suits that we've launched on the market delivers lower burden protection for those modern missions that we talked about. So user feedback on this is repeatedly highlighting the exceptional, what they would call breathability of a suit and comfort that those suits have compared with any other suits. What that means for an operator is it means it reduces their combat stress when they're in an operational environment. We've undertaken a lot of independent testing, particularly around that hood mask interface that I touched on, and we're able to objectively demonstrate and independently demonstrate significant improvements in that interface as well between the suit and between the mask. So we've got a strong product, very strong installed base. very strong understanding of the integration space and knowledge of how to manage large-scale government CBRN programs. So that gives us a strong capability that stand-alone competitors would find very, very hard to build from scratch. So if I touch on the suit opportunity itself a little bit. This program is a very significant near-term opportunity to establish an accelerator our ensemble position into a market that's worth around $800 million a year. The program itself is stepping through a phased competitive process. You can see that on the slide here. We've successfully moved from the very early stages where we provided small quantities of suits. And then very recently, we were -- it was announced the was successful in entering as listed here, which is Phase 3 of the program where we're now manufacturing a larger number of suits that go into some advanced trials programs. Every stage of every phase of this program narrows the competitive field down. It builds evidence around the technical progress, technical performance, user acceptance and overall supply chain readiness. Our focus here is pretty simple. We're performing the current evaluation, we derisk our supply chain and our manufacturing plants, and we use that evidence to strengthen that position larger follow-on program. We expect we'll know the decision of final down select during fiscal '27 for us. The second opportunity we touched on in our step change programs was related to rebreathers. So I'm sure many of you see in the newspapers in the media, subsea security, we haven't really touched on today is getting more attention. Navy is around the world. They're investing in mine warfare and in critical national infrastructure protection. At the same time, emissions thereon are becoming much more complex and many legacy naval rebreather fleets are at or beyond replacement age. Avon's rebreather; the MCM100, seen on this slide, it is differentiated from the competition. It's safer, it's faster to deploy, it's easier to operate and is purpose built for the military diving community. Basically, the system allows the diver to focus on their mission whilst the system looks after them. Traditional rebreathers require divers to calibrate and interpret the system, therefore, creating a system that's not as safe, therefore, taking the diver away from the mission that they happen to be on. That differentiation we have is well protected in a very broad intellectual property bank sitting around the MCM. Today, our system is very widely deployed. It's different from 3 years ago. It's widely deployed across NATO. It's widely deployed across the Five Eyes community. So we've also got interoperability between allied forces and commonality in logistics and supply chains, very, very pertinent to the U.S. Navy. We do continue to invest in the system. We do continue to upgrade the system. So it remains today as the most capable deep sea rebreather on the market. So the U.S. rebreather opportunity is roughly about 1/4 of the total deep sea rebreathe market, around the world will be accessible market. It's a live program. It's a competitive program with the U.S. Navy, but MCM has been formally down selected to be included in that competitive evaluation process. the next stage for us will be diver valuation trials followed by down select process. And if it's successful through that, we then enter into low rate and then full rate production, in line roughly with the time scale that's on this chart. In parallel to this, we're also investing in building U.S.-based production and support capability whilst we're upgrading the MCM itself. So our aim here is not just to try and to sell at MCM as it stands, is to create a U.S.-specific version for the U.S. Navy, giving the customer a system that's tailored to their requirements. But this is a safety critical piece of kit that we've proven in deployment with NATO and Five Eyes users, it's different to the kit that's out there. And it's supported by a much more resilient supply chain providing economic benefits in the U.S., creating jobs in the U.S. We believe together, that gives us a strong position in this program and a right to play. The third opportunity was on that slide was called NATO Combination Systems. I just step back a second. I'm sure you're all very aware. We're now 6 years into a 10-year program with NATO through the NSPA organization, where we supply our FM50 masks, filters, accessories, and so on. So far, 16 nations have bought from us under that contract. And without a doubt, that has undoubtedly been a major growth driver for us and the 90% growth we touched on across Europe earlier. The result of all that is significant installed base in Europe, well-established route to market, trust in the products we supply and a well-trodden through life support model. Feedback from that user community is exceptional in the products that we provide. They're very, very satisfied with what we deliver, very, very satisfied with the capability that it provides them. And the combination systems program is also through NSPA, what that would do is it would extend that relationship we have with NATO into the powered and supply their capability that we showed on the earlier chart on the product life cycle, and it would move up that product value chain compared to where we are today. So that gives those users a very clear upgrade path to the full respiratory portfolio that we're able to provide support in the European defense modernization, some of those changes in the European market that we touched on. Ahead of the program. We've gone out and we've secured independent CE certification for our latest systems, giving them the independent credibility they would need. And we've got very strong support from our European user community and in particular, the 16 nations that buy from us. They all see very clear benefits of staying with the same product architecture to upgrade their capability. Clearly, for us, that would give us sales of higher value systems as well as a very long tail of recurring demand as we've come to see and expect from our mass programs itself. Of course, it would also substantially extend the sole-source relationship we have with NATO and NSPA. Given that established European position, very clear synergies that the users see in sticking with the same kit and adopting the full respiratory portfolio from Avon gain, we feel we're in a very strong position to go and win this program. Now the fourth of those opportunities is a little different to be fair to the others. So this is about the next generation of U.S. respiratory protection. So this is a long-term program, and the requirements are still being shaped, but that's basically why we're engaged very early in that process. We are working very closely with the U.S. customer here in understanding what any future system would need to deliver. It's a combination of this program of customer funding and Avon funding, where we're rapidly testing out new ideas, new concepts and starting to define and provide evidence that any future procurement decision would likely require. We're not claiming we've won a future mass contract or a production contract here, but we are helping to define the problem. And we're positioning our technology for that downstream competition rather than waiting for any finished specification that's likely to come out. At the same time, we're doing what we always do. We're building a broad bank of intellectual property behind us. where we expect the market to go and that supports that long-term value creation for us. We're expecting a ramp-up in customer funding in the near term with low rate production probably towards the end of our planning period assumptions. The objective, of course, here is to turn decades of respiratory leadership into leadership of the next technology cycle with the U.S. And in order to win these programs, we've introduced a campaign led model inside of our organization in order to give them greater focus and discipline. Now it's a big strength of Avon to be able to bring together well led cross-functional teams around demanding objectives. So this slide just really tries to show a little bit of detail on how we do that. So it's that reach and credibility that we have in our core business means we can shape an opportunity early. We can do that through customer and user engagement. We then bring together technology, partners, users, as Casey touched on. So we're able to quickly learn what does and what doesn't work and we can take full concepts and not concepts out. From there, we build out our wind strategy. and that's backed by very strong commercial discipline and very strong internal decision gates. And finally, we can deliver on our customer commitments and the returns we promised through the strength of the operating model and the continuous improvement culture that we've built. We dedicate resources to our campaigns. It's not an add-on on top of somebody else's job. So every single 1 of those 4 programs you just saw, they all have an executive sponsor from my leadership team that executive sponsor is able to knock down internal barriers quickly. And every single one of them has a dedicated program lead who has the ability to pull resources as and when needed. So we put the right focus on the right programs early, and we keep the organization focused on winning. It's that focus that really differentiates us. So bringing together technical, commercial, operational and leadership skills across the business and focusing on the opportunities that matter most to us. So if I try and look to summarize around Avon. Avon Protection is the market leader in its category. So customer position that's been built over decades, remains exceptionally difficult for anybody to challenge this. Our product platform, sorry, is fully interoperable. It's scalable, provides customers with a very trusted product place, and it provides them as a low-risk partner for their complete mission portfolio moving forward. We're operating in a market that is undoubtedly growing, and we have a very resilient recurring core base with very strong visibility and attractive economics. We've successfully expanded the business over the last few years into some of those selected adjacent markets. We touched on at the start. And we're seeing that we are winning in those markets. And now we're starting to concentrate our investment on to those small opportunities, small number of opportunities where we can see a genuine right to win and where we can materially increase the scale on this business going forward. So I think the way to think about Avon is pretty simple. It's a very high-quality business. It's got a very resilient core. We're operating in a growing market, and we have meaningful upside opportunity going forward. That gives us confidence in our ability to deliver sustainable growth and long-term value creation. So thank you for listening to me. Thank you for your time. I think we're going to have a short 10-minute break now, and then I'll hand over to Vasilios, who will talk to you more about things that go on your head. Thank you. [Break]

Well, welcome back, everyone, and thank you for coming back. I'll take that as a good sign. Thank you also to Steve and Casey, an amazing job talking about the business there. in a minute, the legend that is for Vasilios Brachos is going to come and talk about Team Wendy. But before that, we are going to have a short video just to showcase what they do. [Presentation]

Well, hello, everyone. Thank you, Josh, for that incredible introduction. I hope you enjoyed the short video that showed who Team Wendy is, and what makes us unique in the marketplace. I'll talk a little bit more about some of the things you saw splash through the screen a little bit later in the presentation. But first, let me introduce myself. I am the -- you guy on the block here. So my name is Vasilios Brachos. And as you heard from Josh, I've been recently trusted with the Team Wendy business ran by the group. I've been with the company 22 years, majority of that time we spend developing and fielding lifesaving protective gear. And I can tell you, there's nothing more rewarding than going home at night after a long day's work, knowing that a soldier or a police officer or an emergency responder could go home to their family that night because they were wearing a helmet that we developed, protected their life. It is definitely a very fulfilling part of the job, and I've enjoyed it for all the years in my career with the company. Of course, I've done a little bit more than development. I've touched on business development and operations throughout the years that have been with the company. So I feel really ready for this next challenge and also excited to lead Team Wendy into the next part of the growth. So having said that, I'm also very likely to have an incredible team around me, across commercial, operational, business development, finance and R&D, including Enrique, who's here with me today, is our new COO; as well as Win Barbon, who though he's not here today, has definitely been instrumental in developing a lot of these technologies we'll talk about and the position we're in now throughout the years and has recently rejoined us to lead the development efforts moving forward. Over the past few years, Team Wendy has transformed from a narrow and operationally constrained business to a strong platform for growth. You've heard a lot of what has happened across the business altogether. And Enrique will talk more about that part of it. But our objective now is to continue improving operationally. It is -- and while maintaining our very strong foundation of DoW business that we've built throughout the years, we are going to try to develop and expand our portfolio effectively to enable us to grow more in other markets such as the U.S. commercial and international markets. This diversification will make the biggest -- the business larger, more resilient and will have us not needing to depend on single programs in the future. Of course, the starting point of all this is a differentiated combination of ballistic and impact technologies that you saw a little bit spas in the video, but I want to talk about more right now. And I don't have a lot of jokes, but I do have a prop. So this is a ballistic helmet, this is one of our newest developments, the endurance helmet and bringing together the Ceradyne ballistic expertise with the Team Wendy impact performance capabilities has created a combination of capabilities and technologies for our company that our competitors cannot easily replicate, okay? These are basically anchored by our seamless shell technology, which is a technology of how we actually form a multi-shell that maintains the fiber continuity throughout the shell and that allows us to maximize the ballistic resistance for as minimum weight as possible. The next one is the no through hole design. That maintains the ballistic coverage integrity throughout the surface of the helmet while still allowing us to have very secure attachment of external components such as these rails NVG's routes. And finally, we have the Zorbium foam, where helps us make all these complicated pad systems here that are also allows us to tailor our fit, our comfort and our impact protection for the user. These, of course, are coupled with some proprietary in-house tooling capability that allows us to be very flexible in design and accelerate the design to scale up cycle of any new product. And all these together have created some first for the U.S. military. And we've been doing this for the U.S. military for the past 15 years, and we are proud to say that we -- these kind of technologies created the first ever rifle protective helmet for the U.S. military back 15 years ago. And beyond that, created the first ever rifle protective helmet with no through hole capability for the U.S. military. And finally, we also were able, together with the Zorbium foam create the first-ever helmet to meet 14 feet per second impact protection. The standard right now is 10. You say that 10, 14 is not a big difference. But the difference in velocity is double the energy that we have to absorb during an impact. So that's a significant improvement in protecting the wear of the helmet. So this technology will allow us to tailor protection, wait and comfort and cost for different user needs. And together, they will underpin our capability for future helmet development and product development. The technology loan, of course, are not valuable if there is no market for it. As you've heard multiple times already today, the global market is growing. The unrest around the world and from places in dots that Steve showed or I think Rich showed in the world, they are driving sales up across the world. And at the same time, the users are -- the requirements by the users are changing across military, law enforcement and the emergency responder community. The military users, for example, are seeking more and more fragmentation and rifle protection capability without unwanted weight increase. That is key because their ballistic threats keep growing and the ability of drones to deliver fragments from the air is making everybody's life a lot more miserable. They need more protection while they're out there. At the same time, military users are also very -- their need is revolves around compatibility with communication systems, other sensors and overall soldier systems that they also need to put on their heads. The law enforcement community is responding more and more to active shooter situations as well as to public unrest requirements. And at the same time, I talked about [indiscernible] protection before, traumatic brain injury is becoming more and more a concern across all these communities. So it's very important that we need to now pay more attention to blast and impact protection capabilities. The opportunities also vary by regions. In the United States, the local production requirement is very strong. And of course, the integration capability with different things is also very important. In Europe and Allied forces, procurement is increasing, but also local content is becoming more and more important for them as well. Finally, in many other different areas of the world, there are different needs for tailored performance, weight and cost requirement with some local access capability. Team Wendy's technology base will help us expand our portfolio and serve more of these needs. Provided, we, of course, match the right capability to the right market REITs so that we can tailor our capability and our product for the right customer. This strategy trend of these trends translate into a strategy with 3 steps. Three key priorities, which Enrique will talk about next.

Thank you, Vasilios. Good afternoon, and welcome, everyone. Thank you for joining us. So my name is Enrique Carers as Vasilios mentioned, and I'm the Chief Operating Officer at Team Wendy. So today, I'm going to be talking about our strategy and how operations is going to be an enabler of that strategy. We will continue to apply the strengthen system to drive improvements in our safety, quality, delivery, inventory turns and productivity. This will make us more efficient and cash generative while also creating the capacity to scale. At the same time, we're going to maximize the core by extending our DoW programs, expanding across military services and shaping the next-generation military portfolio. Lastly, we will accelerate our growth by developing and tailoring new products on a common platform that will allow us to expand our North American and federal sales, scale internationally and enter selected adjacencies. This will result in a broader revenue base built on a common technology platform that will improve cash generation and returns. If you go back 3 years, Team Wendy was under significant strain. Since then, we've delivered a successful transformation where we've closed the Irvine plant, consolidated production into our Salem and Cleveland facilities, and dramatically increased our volumes. You can see how that volume increase has impacted and improved our results across various financial metrics, more than doubling revenue and moving us into profitability. Quite amazingly, from just first quarter of this year to the last quarter of this year, we've increased our volume output by more than 50%. In the first quarter, we were averaging approximately 13,000 helmets a month. And in this last quarter, that increased to over 20,000 helments a month with almost 22,000 helmets in September. We've built and trained a workforce and implemented a production system that drives accountability improve slow, and it makes our opportunities very visible. These results are evidence that the operating model is working. The next phase now is to make those results more efficient and cash generative. While we've created scale, the production ramp has exposed our next set of opportunities. Now that we've stabilized production, we've seen that despite a massive ramp up, our average inventory turns have remained stable. Now actually, I think that's quite impressive, but it's really not where we want them to be. This will be a priority for us. However, we also think there's opportunities across our scrap, productivity and our delivery. This makes the capability that we've built in Team Wendy in terms of continuous improvement, critical to our future. We view operational excellence as core to our business model. and we will continue to apply the strengthen system to make improvements across all of these areas. As we improve quality on the line, you'll see improvements in rework and scrap and this will make our business more productive and more profitable. Furthermore, now that we've stabilized our production, we've strengthened our SIOP program, and that will allow us to work on decreasing our raw material and WIP levels, improve our inventory turns, and release cash that will support the business. This will provide us with a robust operating base that will support our strategy. Now the beauty of flow manufacturing that it makes our opportunity is very visible. In batch manufacturing, the high inventory levels create a buffer that masks the system -- the symptoms. Each station just carries on producing. In a flowed line, when something goes wrong, it stops the line. In theory, this forces you to address the root cause of the problem and find a permanent corrective action. However, this is particularly challenging when you're trying to ramp up production as we were in Team Wendy. We learned that it's very difficult to hire, train and retain a workforce when you stop the line. Lean manufacturing is challenging. It is challenging. However, it's even more challenging when you have a new workforce. We needed to build and train this workforce first, to help us sustain the improvements that we were making every day on the line. Now I'm certainly not saying that we're anywhere near the final product. But we really feel that now that our opportunities are visible, we know exactly where we need to go to get after them. With stable production, we can turn our attention back to improving our inventory turns, minimizing our WIP and minimizing our inventory. This will make our product move through the system much faster. Every improvement we make in quality will reduce our rework and reduce our scrap, which will in turn improve our productivity metrics. Lastly, the closer that we get to one piece flow the closer that we tie our production floor to our customers. This will make us much more responsive to customer demand, and it will make our lead time shorter. We view this as a competitive advantage. Operations is the foundation that will enable us to win in new markets. And so now I'm going to turn it back to Vasilios who's going to talk about those new markets and how we will grow in them.

Thank you, Enrique, and actually a shout out to the whole team and Team Wendy for embedding the strengthen system into our DNA now. This is going to be a key part of our growth strategy moving forward. We cannot stress that enough. But I'm now going to talk to you about the second part of our 3-step strategy, which is to maintain and maximize our core. We have been in a very lucky position to have some pretty big programs with the U.S. DoW. And the business has not only helped us increase grow quite a bit in the last few years, but we intend to maintain that as a key foundation of our future business growth. We will do that by continuing to maximize existing contracts. This is trying to get from the customers, the maximum delivery orders that can award us throughout every year. that's how typically they give us the orders every -- annually. They look at our capabilities. They review again, everything that we can show them and they give us a delivery order. I can say that we have been very lucky at maximizing those this past year. And the route cost behind that is a lot of the improvements that we have shown in our business and demonstrated to the customer that not only do we have a good product, but we're able to produce it effectively and at scale. But we will also continue to try and to update our product as well as develop new products so that we can position ourselves as best as possible for the follow-on opportunities to these programs, such as there is going to be a new ACH Gen 2 sustainment program that's going to come from DLA at the end of this current program. And of course, the follow-on potential NG-IHPS program, which most likely will be a high-cut helmet. The objective here is to use our technology, our performance and our credibility with the customer that we have built by delivering these products so far to win more broadly with the DoW. So the strength of the DoW is not just the revenue that we received from these big contracts right now. This comes from our customer access and understanding as well as the technology gradability we've built with them, with our products, something that we have done exceptionally well over the last 15 years with core DoW customers such as the U.S. Army, this is a business that our TWC affiliate continues to manage and expand. At the same time, the evidence that we can deliver critical programs to scale that we have now started to demonstrate repeatedly to the customer. We couple we take all this, and we add on top of that our differentiated technology that we've delivered developed throughout the years and will continue to develop. And those will be using to try to win through 3 different ways. One is win from existing positions, which is follow-on programs, as I mentioned earlier, as well as sustainment through pads and other accessories of the helmets, expand across other military services by using our proven technology to existing customers to go into adjacent military requirements. And finally, by shaping the next portfolio, that is critical. We have always been ahead of the competition in understanding the customer need, working with them to develop their next the next-generation capabilities. So this is not just generating product variance of what we currently bring to the table, but also generating the next threat protection capabilities for the customer. All these actions together will help us keep the DoW business strong in the future. But that's not the only part of our strategy. The third part of the strategy, the third step is to accelerate growth. And we can do that on top of the DoW foundation by using these 2 growth engines to expand our revenue base. First, internationally, where NATO and like forces, as I said, continue to increase spending and other opportunities are arising all over the world as global unrest continues to increase. We will approach that with new products, pricing and partnership tailored to local requirements. On the other growth opportunity, the growth engine, which is the North American commercial engine, that for us includes a local and federal law enforcement markets as well as the emergency response markets, such as certain rescue and fire response markets. These we will support with better partner covers and also had strong product demonstrations that allow us to convert sales opportunities faster. I want to take a moment here to talk about these demonstrations. It's probably the first time you heard that term, but head strong demonstrations are actually live shooting demonstrations in front of a customer, which have become a pretty powerful sales tool for us. They really are the customer. They are -- I don't think any of our competitors has the confidence to go in front of the customer and shoot the helmet repeatedly. So those we're going to continue to increase not only in North America but also internationally. Now if you want to watch a little bit of that, I think there is a small portion of a head strong demonstration embedded in the video that's running outside in the product showcase. So internationally, as we said repeatedly today, the demand is growing. Now we have been underrepresenting, Team Wendy has been underrepresented internationally historically. Now the constraint for that has not been product quality. I mean we have been very successful in selling our premium product line into several elite forces and top-tier militaries across the world. But in order for us to grow substantially into this market, we need to work on a better fit between our portfolio and the market that has different price, performance, tender requirements and local access expectations in different areas of the world. We will address this through 3 levers: first, by developing additional product, including a variety of low-cost and specialist variants that are built from a common platform. You'll hear that term a lot today, and it's critical to our success in this last part of our growth strategy. Second, we will address that with right price, which means market and volume specific pricing supported by design to cost. And third, by local access, which means credible partners that will provide for us customer access and relationship, product content locally as well as service follow-on service throughout the life cycle of the product. Well, of course, as we've said repeatedly, the international market is large, but requires a dedicated commercial model. In North America on the other side, we have a strong brand. and pretty strong market presence. But our coverage and penetration in this market varies is very uneven across different market segments. Examples of that are the fact that more than 50% of our law enforcement sales comes from only 5 states. Also, in the fire response market, we have a very small portion of that. And finally, even in the search and rescue market where we have a very good product, a SAR tactical, we could grow more into that market as well. The plan here is straightforward. We need to reach more customers through stronger geographic and federal coverage. That means more partners, better positioned to get us more business in those areas. We need to convert more opportunities through demonstrations, partner capability and knowledge and finally, with sales follow-up. Finally, we need to increase customer life cycle value through accessories, complete system configurations, refurbishments, refresh, everything that will take every sale we make into a start of a customer life cycle rather than the end of a transaction. Our technology platform gives us ways to basically execute this expansion. But we have distinct strengths and ballistic capability. We've talked about it already. Our technology gives us the ability to tailor performance weight and cost trade-offs for different needs and budgets. And all those are coupled with our unique tooling and molding technologies that allow us to be flexible and fast, bringing a new product to the market. And these unique strengths are going to drive growth by basically expanding the portfolio through tailored design to cost products through local partnerships and disciplined route to market and also using shared technology, we will launch faster and compete across more market segments. We're also going to work very hard on expanding our accessory capability like mandibles advisers, which complete a helmet system for a lot -- in a lot of customers' eyes and build recurring revenue generations through these components as well as other replacement revenues such as accessories, pads for the helmet. The common ballistic platform is central to doing all that without adding excessive complexity. So this is a market framing graph we put together to kind of show you how the market -- the ballistic -- we view the ballistic market. The vertical axis shows a combination of price of performance against the addressable market size on the horizontal axis. And we also have on the chart, 3 volume representative bubbles that basically represent different unique market segments. You have your international military generalists and U.S. law enforcement market, which is a huge market. You have the elite forces and top-tier militaries and of course, best-in-class, which is mostly an extension of that. If we position our current portfolio into this graph, you'll see that we have -- we're really strong at the premium end of the ballistic market. and particularly on the elite users and top-tier militaries. And of course, that's highlighted by our rifle tech helmet, which is the highest performing ballistic helmet to weight in the industry as well as some very successful top-tier military helmets as the expel ballistic. On the much larger pool of the market, our EPYC family has been very successful at the top end of that market. But in order for us to have a broader reach into that market segment, we need a different approach. That can be accomplished with a common helmet platform that will allow us to address this larger market with clear performance and cost tiers that will reuse architecture, components and manufacturing capability. So as we expand our portfolio, our premium product will retain their best-in-class protection and low weight combination, while now our entry and midrange products on the bottom right of the graph, will provide a more competitive performance to cost proposition for law enforce -- U.S. law enforcement as well as general military and international tenders. The benefit to this is not just adding more products, we will provide a coherent family of products to the market that we compete across more of the market. They respond more quickly to a number of different tenders based on the combination of cost and performance and will direct customers to the right combination of protection, weight and affordability through that capability. The architecture here, this common architecture must remain disciplined so that it does not create unmanageable complexity. That is why the common platform design and our flow-based manufacturing will actually are going to be very critical to our strategy. So what really is the barrier for us in the market who actually have been extremely successful in winning on protection, on comfort and on user experience. Anecdotally, we compete in a lot of tenders internationally. And part of these tenders, a lot of times, they require samples to be evaluated by the users as part of their method of choosing the right product. Of course, in many of these cases, they provide feedback back to us. I can tell you that the majority of the cases, the feedback back to us is that we far exceed any other competitor in user evaluation. However, we do lose a lot of these tenders despite how much the user loves us on price. So price premium price points does become a barrier to the market for expanding internationally. I respond to this now is this sheered helmet architecture with common design principle, common components, common sourcing and clear performance in cost tiers. That is what our new portfolio will be able to provide. The approach will reduce our unit cost. We'll simplify configuration, will allow a broader portfolio without the proportionate overhead and inventory requirements. The strategic objective here is to expand the addressable market while maintaining margins, inventory turns and short lead times. Common platform approach will enable this for us. We'll apply a similar portfolio logic to our bump helmets. Now in the above market, again, our brand is strong, and it's usually associated with comfort, great comfort, great fit and excellent experience. We will use these strengths to broaden the customer base by entering new applications. One of them could be the right helmet application that will give us access to new customers with the idea that we'll follow up with sales of our core product to these new customers. We will also use new products such as this recon that's depicted here to expand into adjacent markets. And finally, even in this particular segment, we plan to increase the value per customer by tailoring configurations, accessories and replacement refurbishment opportunities. The objective in the up market again is to serve more users, sell more relevant capability to more to each customer and participate in a large share of the addressable market. Another chart here that shows you how we view the bump market. This market is a little bit more segmented than the ballistic helmet market. It spans many different applications with different requirements and specifications, but we identified 3 distinct groups in this market. One is the search and rescue segment that is driven mainly by the mountaineering and military impact standards. Second is the tactical bump market. that is on the upper part of the market and a big portion of it is driven by the military impact standards, but there is quite a bit of market on the lower end of that, that does not have any standards associated with it. And finally, the fire responders in roadside assistant responder teams, this is a new development market that is driven mainly by NFPA and ASTM standards. Each triangle shape, by the way, is unique because we would like to represent with it. The range of price on the height of the triangle as well as the potential volume at the base of the triangle. When we populate this map with our product, our statical is our flagship helmet in the search and rescue market. We have our EXFIL carbon, which is the top-of-the-line product that we offer in the military tactical bump market. And of course, a big seller for us has been the EXFIL LTP, which is a purpose-built for a wide range of bump capabilities. But at this point, it does not meet the military impact standards. When we add the new products, we -- RECON brings into the industry leading protection, quality, versatility into this tactical bump market with a more accessible price point and gives us opportunity to, as I said, use it into adjacent markets as well. We also plan to introduce a roadside safety product to start accessing that untapped market for us in the fire responder and roadside safety segment. The updated portfolio will give more entry points for customers, more opportunities to build relationship across accessories, replacements and also adjacent products. And as with the ballistic helmets, it's key to broaden this reach without losing clarity, quality or operating discipline. So after all this, bringing back this updated product portfolio, our new market reach as well as the operating improvements that Enrique covered earlier, Team Wendy will become an even strong platform for growth moving forward. To summarize, our growth will be fueled by 5 key drivers. First of all, our strong DoW business foundation; second, differentiate technologies that will give us the ability to strengthen and strength for future product development; a tailored portfolio approach that will expand our opportunities across more markets; a U.S. market that has clearly identified opportunities for expansion; and an international market that, as we said, has immense headroom for us, and we plan to explore it through a blend of targeted product and market reach. All these are underpinned by our continuous improvement focus and also by this common product architecture, a common product platform that is going to be the core in our development efforts moving forward to -- and at the same time, all these are aligned with our 3-step strategy of improving the business, maximizing the DoW core and accelerate growth through the U.S. commercial and international markets. By executing this strategy, we will ensure that Team Wendy grows into a more profitable and cash-generative business while maintaining high levels of protection, quality and customer focus. And with that, I will pass it back to Jos, who will explain how we can apply these capabilities broader and also compound value in the future.

Thank you very much, Vasilios. Great job. As I hope you've heard, we have 2 wonderful businesses. And actually, those businesses on their own will deliver very strong EPS growth of 10% or more, depending on how the step change programs go. They also generate very strong returns on capital now. So we could stop there, but our ambition is bigger than that. What we want to do is build a leading technology platform over the next decade and beyond. This involves 3 simple steps or simple to explain, at least, but maybe trickier to execute. The first is to acquire selectively. The next step is to improve the businesses that we acquire using our business improvement system. And then after that, as we gain momentum on this strategy and as we build financial firepower and people capability, we would like to accelerate and compound even faster. I am well placed to lead the first part of this strategy. I spent 15 years buying and selling companies and over that time, led billions of dollars worth of deals. So I feel that I'm well placed to do this. And then more recently, I are focused on improving companies Hopefully, now I can bring these 2 skills together for the first time, and we can create value for shareholders going forward. We are going to focus on our core protection markets. We see these as fragmented markets, and we see lots of opportunity in them. In core respiratory, we see other respiratory protection companies that we can invest in, and there are lots of other helmet companies that we can invest in, particularly internationally. In CBRN ensemble, we are still quite small, although we have big opportunities ahead of us, but there are other companies that we could acquire and improve. And underwater systems, we have a leading product but it is pretty fragmented in the underwater space, and there are broader opportunities for us. There are some technologies which we would love to buy to accelerate the business' strategies particularly in power and data, we are increasingly seeing power and data flow through the helmet and through the rails. And we're very interested in performance textiles because our CBRN suits require very high-end textiles that are difficult to get hold of. In close adjacencies, there are a number of areas where we already play, but which we would love to have much greater scale. For example, in eye and face protection, we already have outsets for our mass. We already make the MITR goggle. We also already made advisers for our helmets. However, we are still quite small in this area, and it is a big category. We would love to gain greater scale there. Similarly, we do already work in the communication area. We've actually just developed a brand new VPU for our masks. And I think it's going to sell extremely well. We're seeing a lot of customer interest, and it does interface with their communication systems. However, again, we could gain significantly more scale here, and we could offer our helmet as a system with hearing protection. That would expand our offering, and it would enable us to put more through our very strong channel to market. We are still interested in body armor, and we do already make components for bond protective suits, but we would love to expand in that area more. And we're interested in CBRN detection systems, an area we don't play in at the moment, but it is a common customer base. So we've built an investable universe of companies. There are over 100 of them in our investable universe, but of course, they won't all come for sale at the same time. There are about 3 of them for sale right now. We're interested in them, but that does not mean necessarily that we will buy any of them. We are very focused on whether or not we can create returns for shareholders, and we have time. We are not in a hurry. You shouldn't necessarily expect to see anything exciting happening imminently. We have developed some acquisition criteria. These are as much about what not to do as what to do. Firstly, we're interested in companies in the protective equipment space. I've just talked about that. We want businesses with similar attributes to our existing businesses. We do want to see underlying quality in the businesses in the form of customer relationships technology, maybe route to market, patterns. We like that type of competitive moats, but we don't necessarily need businesses that are performing well. In fact, what we really love is businesses that aren't being run very well that we can improve. And that leads us on to the third bit of our acquisition criteria. When we started 3 years ago, we created a transformation program, and we know roughly what continuous improvement can do for us, even more now over the last 3 years. And we modeled that and we were pretty much right. That's how we created the target for the Capital Markets Day. When we look at acquisition opportunities, we apply the same methodology. We look at -- well, if we introduce our business improvement system to this scenario, what value do we think we can create and that tells us whether or not we can generate returns on capital well above our cost of capital within 3 to 4 years. And that is our hurdle. As a reminder, we are unusual in many ways, probably. But as a leadership team, we have a considerable amount of stock invested in this company. And much of it we bought with our own money. So we are as interested in you in generating positive returns on capital through acquisitions. And the way we think we can do that is through the application of our business improvement system. This is our acquisition process. We have our investable universe. We will select companies where we think we can create value from them. Then we go into our business improvement system. We start by enabling them to succeed. We work with them on what their strategy is. We work with them on getting the right organizational structure in the business, and we work with them on ensuring they have the right people to enable them to deliver perhaps we go external, perhaps we work with what we've got, but we will always coach and help and train the people in a business to deliver our business improvement system. And then we start implementing our business improvement system. We may well have a suite of transformation programs. We will definitely introduce our strengthened system. We will always move factories from batch manufacturing to flow to just in time as it's sometimes called. And as our businesses generate cash and we develop more and more people, we will look to reinvest and grow faster and faster. This is a multi-decade strategy, it's a multiyear strategy. This is our vision of compounding. We would like to get to about $600 million of revenue in 5 years. But my aspiration does go a lot further than that. I wanted to give a 10-year aspiration but all the advisers said that's a really bad idea. So I'm not going to be, but we do want to go further we do see the ability to take this model a long way and beyond me being here because our whole reason to be is to develop people that can deliver this model. So this will survive and go on for decades to come if we get it right. We have 2 very strong businesses. They're going to generate a lot of cash over the next 5 years. They're going to do that because the transformation stage of the journey has ended for those businesses. We invested $30 million over the last 3 years. So it was a drag on cash, partly offset by inventory turns improvement. And going forward, we're not going to have that investment. So those businesses will generate a lot of money for us. That enables us to acquire selectively if we can find the right opportunities. As we do that, we will apply our business improvement system, and we will raise the performance of what we buy, and this leads to 2 forms of compounding. Firstly, it creates more and more cash that we can use to invest in further opportunities if we find them. But secondly, as we buy businesses, we will start developing the people in those businesses on how to apply our business improvement system. So we get more and more people that know how to improve businesses and have recently practiced it, which, over time, we think, will enable us to buy and improve with an increasing velocity. Now Rich is going to talk to us about what does all this mean in terms of financial performance.

Thank you, Jos. You all should feel very lucky. You've got the finance guy twice. So Jos has described the strategic cycle. From a financial perspective, the most important thing to understand about the strategic cycle is that every step in the cycle should strengthen the next. Further progress in operational execution will drive improve cash flow, it will drive increased turns. And you'll see that starting to come through in cash conversion. And on top of that, a bit of organic growth. And so you get further incremental cash generation. Clearly, more cash generation equals more opportunity to invest in disciplined sensible, high-return investments. If we acquire businesses, the same discipline applies. So anything we acquire must have a credible route to returns higher than our cost of capital within a sensible time frame. And it must not only generate cash, which is a given, but it must also, as Jos has highlighted, generate organizational capability. This thing has got to be able to replicate and replicate. This means that compounding isn't just about adding revenue. It's about improving returns. It's about improving visibility. It's about improving cash generation and returns well -- all the while actually retaining the capacity to make the next rational capital allocation decision. So let's have a look at what we expect the plan to deliver. As Jos has kind of flagged already, we do expect free cash flow to increase over the next 3 years. So that's good. Actually, it's going to increase to quite a big number. There are 3 drivers behind this. Number one, growth. There's quite a lot of growth in the plan. We'll cover that off in just a moment. Number two, the exceptional demands of cash through transformation that Josh highlighted $30 million over the last 3 years, that's a big number that isn't going to repeat. So that elimination adds to cash. And then thirdly, the release of further cash on the balance sheet through higher inventory turns. Even after we continue to grow our investment in the core business, we would expect all of this to tot up to over $175 million in 3 years. That cash is strategically important because it creates choices. I'll go through the capital allocation policy in just a moment, but at the risk of stating the obvious, if you generate more cash today, that gives you more cash in your pocket to make value-added investments tomorrow. Just to try and frame this for you. This level of cash generation, assuming a sensible level of gearing equates to over $250 million of incremental investment capital. So this is a simplistic and stylized view of how we think this organic growth plan is going to pan out. So Mr. Page, don't get your ruler out if it's diagramatic. But on the left, you've got the expected FY '26 outturn. You might have noticed we put out a trading update this morning. So most people are fairly clear on roughly, roughly what that's going to be. Then the green bar, what's in the green bar. This is our organic growth opportunity. There's a bit of market growth in there. There's a little bit of market share gain in there. And then there are the step change opportunities that you've just heard, Steve and Vasilios talking about. They're all in that green bar. So add it all together, that's a very, very big number. We do suspect that we might not win everything. We might, but we might not. And we're certainly not going to tell you we're going to it until we have. So we're going to sensitize that down just a little bit. And we actually think that a sensible threshold growth rate for this business is around 5%, which gives us that 2030 organic target. And over and above that, we do expect to do some level of M&A, which then, of course, gives us a pretty high degree of confidence but we can achieve a rate of revenue growth well above that threshold 5% rate. So on to capital allocation. Our first priority remains funding organic investment opportunities. It's by far and away, the lowest investment -- lowest risk investment we're going to make. It's a market we understand well. And again, as you've heard from Vasilios and Steve, there are tremendous opportunities to build products and capabilities within markets and for customers that we completely understand. So loads and loads of opportunity to invest there. We also want to maintain a progressive dividend. Now beyond that, disciplined M&A and capital returns to shareholders are perfectly legitimate uses of excess cash generation. The decision will depend, of course, on the prospective returns we're going to get from our organic investment, and they're going to depend on the price availability and quality of the M&A pipeline. And as we stack all of that sort of staff up as we go through this process, it will define how that cash ultimately gets allocated. But we will retain financial discipline throughout. So we're going to target to do all of this while maintaining a sensible view of leverage with 2 turns or less of debt. What we want this to do is allow us to invest in -- make sensible investments that generate good returns, but without compromising resilience. This resilience supports our ambitious but grounded set of financial plans. So the boxes on the left show how we expect these businesses to perform organically. 5% revenue growth at least, 16% to 18% operating profit margin, which is pretty enviable for a business operating in the space that we operate in. And if we achieve that, all of that will drop through to around 10%-ish. 10 percentage points improvement in EPS every year. As I've mentioned, strong cash generation driven by elimination of transformation plus freeing up of cash on the balance sheet through increased inventory turns, $175 million. That gives us a lot of money to invest in sensible value creative and maybe even inorganic investments. which means that we end up with a view where we have a clear path to generating in excess of $600 million of revenue annually, 5 years from now. The point around maintaining capital discipline is that ROIC point. We're not going to drop below 18%. And in fact, until such time as we see sensible investment -- sensible acquisitions come our way, we're going to materially above that. And of course, if we deliver this plan, what that will drop through to is EPS growth well in excess of the 10% contemplated by the organic plan. So these targets are ambitious, but they are grounded in the businesses we have today and the opportunities we see in front of us. And with that, I'll hand over to Jos to summarize the investment case.

Excellent. It's good. I think we're going to deliver the CMD presentations just in time for drinks at 5:00. So our strategy is improve, grow and compound. That's the strategy, and it is the investment case. We're going to improve our existing businesses. We're going to grow the existing businesses. And then we're going to apply both of those skills to potentially acquire and improve other businesses. Our overall vision is to compound EPS growth somewhere in the teens, and I'm sure our Chairman will be aligning our incentives to that ambition, and our ambition is to keep ROIC at a strong level. We see those 2 metrics as synergistic and important to us. And we have the team that can do this. We spent 3 years improving businesses, and we spent 3 years codifying our improvement system. So we have literally hundreds of people that understand how to do this, and we're going to leverage that to help us accelerate. We have 2 fantastic businesses already. Avon Protection is the global leader in its field and Team Wendy, amazingly actually, has gone from really quite a small player to probably the joint #1, certainly in the top 2 in the U.S. ballistics market. Now it needs to repeat that trick internationally. And the markets we play in are very supportive. We're swimming with the current, which is certainly better than swimming against it. Our businesses have durable competitive advantage. Rich has gone through that, but we do see resilience in our market positions. And we think we can grow above our markets because we've got a suite of opportunities, many of which are very material. Not all of them will work out. But we think there's enough opportunity there that there's a good chance we can grow these businesses above 5% a year. And the businesses are going to be very cash generative. We've got the strengthened system already working to improve inventory turns and the transformation investment in those businesses is now over. As they grow, they are going to generate a lot of cash. In this business, there is no contract accounting for the analysts in the room. So profit and cash are very similar in this business. We are going to use that cash to reinvest in a discipline to if we can see opportunities to buy and improve other businesses. And our ambition is to keep compounding value over the years and decades to come for our shareholders. So with that, I will open it up to Q&A. I will ask my colleagues to join me on the stage that they can fill any difficult questions.

And we're super excited to talk about the strategy today. We're slightly less excited to talk about FY '26 numbers. We've given you a clear about what they are. That's about as much as we know. So if we stick to strategy questions, please.

It's Henry Carver from Singer. Just one around capital allocation, innovation spend, CapEx spend I mean it feels like still very much all the spend is linked to specific opportunities that you see. I mean, you could say sort of reactive in terms of what's coming down the pipe. But I sort of had the impression that maybe you were going to start spending more on things that perhaps weren't out there yet that you could take to customers like the DoW and others. And just can you give us a feel for kind of -- I mean, probably 9 percentage chance, but just roughly how that split between the sort of product and reactive.

Do you want to start on that?

I think you go for that, it sounds complicated.

I mean the point I made, we're not standing up here just a few moments ago, investing in the organic business is by far and away the lowest risk investment we can make. We want to do more of it. There is a lot of it contemplated in our plan already. So if you look at those step change opportunities that Vasilios and Steve were talking about, those are all funded to some degree already in our plan. We know we're not going to win them all or we don't know. We're not going to win them all actually, but we suspect we might not. And so we're disciplined in the way we sort of let the rope out on funding those programs. But the suit is a classic example. This was a relatively new opportunity only 12 months ago. In the spirit of U.S. government procurement, we would expect that to arrive at a purchasing decision sometime in the mid-2030s. That's not what's going to happen on this program. It's considerably accelerated. And so we're accelerating our commitment to it at the same time. So organic investment, there's a lot of it assumed in the plan. So in other words, at a higher rate.

Quite a lot of it is customer funded. Some have both divisions have a lot of customer funding, probably, the biggest is actually Vasilios' next-generation helmets or the new threat that we're working towards, which is to stop -- I'm not allowed to say to [indiscernible] allowed to know it, but it's a much more difficult bullet to stop and Vasilios is working on developing the technology that can do that. But it's funded by the customer. You did talk about CapEx, by the way, we don't see the need for a lot of CapEx. We find that if we maintain machines well and if we reduce the tool change over time, and if we reduce the cycle times, then all of that increases capacity without needing a lot of new kit. So I think CapEx will sort of stay broadly in line with depreciation probably.

Using Wisdom before money.

Yes, that's the Mandarin Time.

It's Richard Paige from Deutsche Numis. I think I've got 3. I'll work my way through to see how well you answer on each First off, the margin guide. So if we go back to the CMD in 2024, I think you gave yourself quite a bit of wiggle room, which has proven to be very conservative. What are you thinking in terms of the 16%, 18% because that is quite high as a largely defense supplier. What's the customer equation in that.

A lot of our sales are actually commercial. So -- and all of our military contracts are what they call bidding contracts. So they're not cost plus and therefore, we're not constrained by government accounting. We think we are the most efficient manufacturing. So therefore, we would expect to generate a greater margin. And our philosophy is that we set our pricing at the market price, whatever that may be, we obviously try and win, but we try and get as close to the market price as we can. And then we work super hard to make sure that our cost base is such that we make very good margins on the products. And our view is the customer should want us to make good margins because enables us to invest in the future and makes us a strong supply. But we're not pushing them beyond 18%, though because there is a point where they might start going a bit unhappy.

And to Henry's point, we do want to keep investment in the business. And we don't capitalize a lot of that investment. In fact, we've capitalized a very, very small amount of it, is a drag on earnings.

And I think in the helmet side, there is at least one contract you inherited, it's got repricing opportunity.

There is, definitely. There's a big gap. So the ACH program has 2 competitors and our price is significantly less than the other competitor. And then actually interesting made a small award to a third helmet company has subsequently been canceled, but it was at $700 a helmet. So substantially above our price is actually double our price almost. So we think there's probably room to increase the price in the next round and still win the biggest share, but we'll see when we go there. I mean our job is just to make sure we are super efficient manufacturing and then enable us to win.

Next question probably go to Steve. In terms of the M50 mask, I had -- I did a double-take up 20 years in service because it reminds me how old I am. But if I recall, the replacement demand hasn't been as strong view the products, obviously being very good in the field. Is the 20-year top line natural essentially one of the replacement demand at the moment for that?

Yes. that's that 150,000 a year statistic I threw up. So 20 years is about the useful life of the rest operator. There's some mix in there. Some of those 1.8 perhaps haven't been deployed as effectively. So don't take -- we're going to see at least 150,000 a year. Don't take that as read. But certainly, we're expecting that to increase compared to where it has been. And as I said before, the other competitive parts are in there, we remain sole-sourced that mask is going nowhere certainly in the near term. So yes, we do see a ramp-up in replacement demand.

And then last one on the acquisition side. You're clearly showing you're performing very well for a key customer, DoW. You've obviously got a range of areas, it's quite fragmented there. Is there any push one way or other from the key customers for you to do these acquisitions?

No, they don't really look at the industry. like that. I mean, conceivably, if someone was struggling, they might say, could you buy them and help them, but we're not seeing that.

It's Afonso Osorio from Barclays. I have the first question on the free cash flow. Once you get to your inventory turns targets, what's the structural free cash flow conversion in the long term? Because I obviously have these tailwinds now coming for you, but longer term, what's the actual structural cash conversion? Because Jos, I think you touched on is point I don't think you're similar to all the defense names in Europe to the extent that they need contract prepayments, justify that free cash flow generation. So I was just curious to see longer term, what sort of free cash flow conversion you have for the [indiscernible]?

You've given us a bit of a gimme there to answer a question that helps us. So I'll let Rich do the detail. But on your big picture point, which we're very supportive of, we hardly have any prepayments. So we're not like a normal defense company that gets a big prefilment at the beginning of the program, and then they do a lot of work and they effectively burn it down. We make product, we ship it, we get paid. That, that is as simple as that. The DoW pays very quickly. Some other militaries who mentioned pay a bit slower. But generally, there's a pretty quick time between shipping and payment. And there's no contract accounting, there's very little prepayments. It's -- this is a very simple business. revenue translates to profit and then it drops through to cash in a straightforward way.

Yes. Profit minus cash profit equals cash minus timing, basically. So super straightforward. That step from 3 turns to 5% would drop through about $45 million. So it's not an -- it's not nothing at. And we tell you 5. As you know, we set somewhat different targets internally. We're not aiming for 5 internally.

Right. And maybe one for Steve, if I can. Like in terms of your U.S. opportunity in market, you're the sole supply in a lot of these opportunities in markets. You just said that you don't see any strong competition coming through in the short term. But longer term, how do you see the market evolving over the next 5 to 10 years in the U.S.?

I think in the U.S., the big program for us is that next-gen respirator depends why we're involved early in that, and we're using that relationship as Casey talked about with the user to make sure we're well placed for it. But I think, yes, we've been very successful in the near term sole source on the MAX, as you rightly say, Jos mentioned, we previously would have been 60-40 split on filters. We've made some good moves there. We won the last filter orders 100% order to us. 0 went to our competition. We're not guaranteed that we're going to maintain that, but we're certainly going to do our best to try and maintain that on filters as well. So I don't see M50 or the M60 being displaced anytime soon. You can disagree with that, but I don't think that's going to happen. Longer term, yes, it's important for us that we secure our position in that next-generation respirator program.

Joe Edward with Fidelity. It's a question for Vasilios on your platform in a Team Wendy peace, which is it looks great in the presentation, and you've got pictures of the helmets, but like how far advanced is the program of making each of these different ones for the different segments? Are they already fully designed and ready? Are there -- or is it like more there's a couple and in principle, it should be okay? And yes, the development of them?

Yes. the development has started. I would say that one of the variance was driven by an international tender is much further along than the other variants that we're designing for. But because they're common, we have to bring all of them along to a certain stage because we need to commonize all the components that we're going to use, tooling, things like that. So we're -- I want to say that we're probably very close to having enough information across all the variants to lock down the commonality of the platform.

Toby Thorrington from Equity Development. One for Rich and one related, I think, for the 2 divisional heads. So just on the 175 cumulative free cash generation. Just to be clear, from the slide, that's after tax, right?

Yes. It is. Yes, tax is on the slide. It is on the slide, yes.

So that's -- if you assume that receivables, payables days stay about the same, which doesn't seem unreasonable, that suggests that inventory has got quite a bit of heavy lifting to do to get to that number?

We haven't assumed the full 45, but if you look at the size of that working capital bar, it's not nothing.