Solid State plc (OUY.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Solid State results presentation. Before we begin, we would like to submit the following poll, which you will see on your screens. [Operator Instructions] The company may not be able to answer every question it receives today; however, it will review all questions submitted and publish responses where appropriate. These will then be available via your Investor Meet Company dashboard. Finally, we would like to remind you that today's presentation is being recorded. I would now like to hand you over to Interim Chief Executive, John Macmichael; Chief Financial Officer, Peter James; and Managing Director of the Systems Division, Matthew Richards. Gentlemen?

Thank you. Thank you for joining us today, folks. We're going to take you through the agenda just very briefly, so you can see what we'll be covering in the presentation. We're going to look at the key drivers and what that means for Solid State. We'll then move on to the financials, which Pete James will take you through in some detail; and then we'll give a brief review of the 3 divisions of the group, that's Components, Power and Systems; and we'll close with the outlook just to give you a flavor of the strong prospects that we see for the group. However, before we get into the detail, I would just like to mention Gary Marsh. Just a few words about our former CEO, as many will have heard of his untimely death. First of all, many thanks. We've had many messages of condolence. They are very much appreciated. And it is good to know that Gary was held in such high esteem. Gary will be very much missed. He was a particularly safe pair of hands. He brought transparency to our dealings with investors, whilst allowing our customers to have multiple high-level touch points, particularly with the Managing Directors as the primary focus. It was Gary that established a culture that we now call our people-first culture. He managed whilst transforming the business from a family business to maintain the family attitudes that we still enjoy today. In fact, it's testament to Gary's legacy that he had put in place a very strong business continuity plan such that his death is not the problem that it might have been without his leadership and foresight. Thank you. Okay. In light of those comments, I just want to touch on the leadership of the group. I've stepped in as Interim Chief Executive, supported by a very strong and stable executive team right across the group. And at Solsta, Jon Baxter has stepped up, enabling me to dedicate the required time and the -- for this additional responsibility. You may also have seen the announcement yesterday that Victor Chavez CBE, the former CEO of Thales, is joining the group Board as Deputy Chair, and this is as part of our proactive succession planning. We are exceptionally pleased at Victor's appointment. It forms part of what is a wider-ranging succession plan, and that's been underway for some time now. But under this plan, Victor is expected to step into the Chair role during a 12-month transitional arrangement throughout 2026. Nigel has indicated his willingness to remain as Non-Executive Director. And again, we're very grateful, and he will help the transition of Victor throughout that period. In the circumstances, it also seems appropriate to look a little deeper than the Board itself. So I just want to emphasize the strength and depth of the management team that we have in the group-wide business. It's an area that we focused on for several years. And as we plan for growth, we strengthened our senior leadership team. We've developed a depth that goes well beyond the faces that you see here. And indeed, many of you may already have met the Tier below this group at the various open days that we hold. Talent development is one of the 4 pillars of our strategy. And during the last couple of years, this team has been given invaluable experience in the city, presenting at investor conferences and leading a Capital Markets Day in the city. So who we are? When people ask us for that one-line explanation of what the business is and what it provides, then the quote at the top of the slide really does encapsulate who we are. We provide trusted technology for demanding applications. And as you will see, those of you who are familiar with us will see that we've now split out the Power business to form a separate division. And that Power business includes our U.S.A. and our U.K. operations, giving us the 3 divisions that we'll be reporting on as we go forward. This has 2 advantages. It gives us much greater focus for the business. And I'm personally a great believer in what gets measured gets done. So this really does provide visibility not only for the business but also for our investors. And if we look at where we're successful as a business, it really boils down to 2 things: It's our know-how and our capabilities. The know-how of our people to work hand-in-hand with our customers so that they become an extension of the customers' engineering team designing in the right technology for the given application. And our capabilities, which are the result of decades of investing in our production and test capabilities. Year-by-year, we continue to develop our infrastructure, and that's evidenced by the addition of the facility at Ashchurch, more on that later. Today, there are very few, if any, independent businesses that have the breadth of infrastructure that we now offer. Collectively, our know-how and capabilities help us to create the real stickiness between us and our clients. And this has really created an agile business of ever-increasing scale and resilience for the shared benefit of all our stakeholders. Up on the screen now, you can see very briefly how we're organized. I'm not going to dwell on this slide, but I mentioned the strength and depth of leadership earlier, and it really stems from our use of an Executive Board underneath the Group Board. The illustration on the left shows how the group leadership and Board lead and execute on the group's ambition and strategy, whilst the illustration on the right sets out how the group goes to market, its business model and how it adds value to its customers. So getting into the substance of the meeting today. We just want to look at some of the key drivers. I'm only going to look at a few of the key drivers, and Pete will take you through in more detail, but these are some of the quick highlights. On that first graph top left, what we're looking at is the H1 billings with the NATO business, which we call our project business, broken out for transparency. That's the pink box that you can see on top of the blue. That gives us just over GBP 85 million of revenue to the half year. And essentially, that left us GBP 60 million to do in the second half to meet consensus. The September open order book was at GBP 87.3 million, of which approximately 60% or around about GBP 52 million is actually deliverable in H2. And that requires and left us with a white space of GBP 7.5 million to book and ship. The good news is that positively at the end of November, the open order book has strengthened to GBP 97 million, meaning that we now have the orders to meet the FY expectations. Therefore, the challenge now is to ensure that we're able to secure the product and deliver. And as a result of that, we feel that the risk continues to reduce and the balance of risk is actually on the upside. Just looking at the picture on the bottom left there. You may have seen the recent RNS statement where we secured an initial order for USD 10.8 million for a new user group under Project CAIN. Again, you'll be hearing more on this later from Matthew. It's fantastic news. It reflects many years of hard work to get the British Army user group to adopt the technology. And it provides a platform for future demand for products and the associated services and training for this user group in future periods. Top center, that chart is illustrating with market data, that's not our data, it's market data from the IDEA organization. And it's showing the electronics market headwinds, which all in the sector have faced over the last 18 months. The brown bars show the booking numbers; the blue, the billing; and the green line represents the book-to-bill ratio. The data actually indicates that the book-to-bill is now at 1:1, and that suggests that the market is now stable. Recent data from our own industry organization in the U.K. shows that in the U.K., the book-to-bill ratio has now raised to slightly over 1:1, suggesting that we're returning to small growth. In the bottom center, we can see that with lead times returning to the norms of 12 to 16 weeks, we're seeing customers' order schedules shortening, which, of course, adversely impacts the absolute value of the open order book. However, we're very pleased to be able to report that our absolute open order book for the non-project business, that's a bit represented by the blue area, has continued to build both solidly and steadily. And this is actually augmented by the pink project-based business, which we intend to grow and extend over the coming years. It's worth noting that the nature of the project business is such that it has an upfront revenue element for the hardware, followed by the provision of training, ongoing support and replacement business. It's separated out because the timing of the upfront hardware purchase is more difficult to predict. On the right-hand side, as we enter Q4, the commercial focus now is really to look to secure orders to position the business in a stronger position for FY '26 and '27. And alongside that, we're investing in enhancing our operational capabilities to accelerate the growth in some of the world-class antenna and computing systems capabilities at our Leominster and Ashchurch facilities. It is absolutely part of our strategy to see the quality of earnings improve and grow. And we're using the project revenue and profits to underpin the investment in our high-valued capabilities, such as that Ashchurch facility, seen at the bottom right there on your screen. Just a very quick look at the financial highlights before Pete gets into the detail. What you're looking at is the typical KPIs, the financial KPIs that we run the business according to. The real one that I want to draw your attention to is that GBP 4.9 million of adjusted profit before tax. And just to highlight that, that GBP 4.9 million is actually comparable with the full year adjusted PBT for FY '24 and '25. And also just to note in the bottom right there that, that net debt, which we came into the year with at GBP 7.1 million has fallen from the year-end and continues to fall in Q3, and Pete has a bridge that will help us understand that. So a strong start, and it positions us well to meet or exceed our full year consensus. I'm going to hand you to Pete now just to go through this financial review.

Thank you, John. So I'll try not to cover things that John has already covered off, but hopefully, I'll be able to bring to life the performance in the first half, prospects for the second half and a little bit beyond. So in terms of the underlying order book, we can see, by November, that strengthened to GBP 97 million. And that's in part benefited from the Project CAIN order that we announced on the RNS Reach that Matthew will talk to a little bit more on some later slides, but also the RNS Reach we did in respect to the Power division, where a lot of hard work has been put in to really focus on high value-add business where our engineering expertise is valued by customers. So I'm really pleased to see the successes there for the team, both in the U.K. and the U.S. in our Power division. In terms of revenues. Revenues are up close to 40% compared to this time last year. And that's in a large part driven by the delivery of the GBP 23.3 million of comms order that was delayed out of the last financial year into the first half of this one. If we normalize for that and the FX headwinds, underlying revenues are up close to 4% year-on-year. And with that strong order book, we're on track to meet the full year expectations that John talked to. In terms of margins, our gross margins are stable at 31%. And pleasingly, with the strong revenue in the first half, that means our operating gross margins -- our operating margins are recovering, and we're benefiting from the operational gearing. We continue to invest, and that's about investing to drive our mid- and longer-term growth, which I'll show and illustrate on some of the later slides. So how does that translate in terms of PBT and EPS? As John noted, we've pretty much done in EPS terms a little bit more than we did in the full year in the first half of this. So 6.5p EPS level, and that reflects the benefit of that operational gearing and strong delivery in the first half. We have continued to invest in overheads, GBP 2.5 million in the first half on enhancing our capability, which is a real foundation for our midterm growth. This improvement in profitability means we're absolutely on track to meet consensus, but also we're building the foundations for our midterm goals. Dividend. The dividend, we've increased the guidance on that with these results, 0.92p. We typically did split that dividend between interim and final 1/3, 2/3. So the full year guidance has gone up to 2.75p, and that's going to be 3.5x covered. Cash generation is really a critical metric for us. And as John said, net debt has continued to fall. Operating cash conversion just over 100%. And whilst the net debt has fallen, we have seen a working capital timing build, and I'll bring that to life on a later slide with bridges. So a picture speaks a thousand words. Here, we can see the revenue bridge and really pleasingly, the growth in systems revenue driven by those shipments to the NSPA, but most pleasingly is the growth in Power and Components as well, more than offsetting the FX headwind we've had with the dollar movement. In terms of how we're going to get to the full year consensus. As John mentioned, just over GBP 50 million of our September order book is deliverable in the second half, and we had book and ship of GBP 7 million to find. Pleasingly, in the first couple of months of the second half, we've secured those orders. So it's all about execution now. And as a result, yes, the balance of risk, as John said, is on the upside. So how does that translate in terms of bridging profitability? You can really see the benefit of the operational gearing here and the volume that we've delivered in the first half. The margin percentage is stable, so minimal impact. And then we've got the 2 investments. We've got the variable overhead related to the additional volume that we've delivered and performance-related pay and commissions. And then we've got the investment, the GBP 2.5 million. That investment is in sort of 3 key areas: our new facility in Ashchurch. We've continued to invest in our capability for antennas that Matthew will talk to on some of the later slides. And we've also invested in our sales team in the U.S. with our sales verticals. Net debt. So here, we can see we started the financial year with net debt of GBP 7.4 million. We've had strong cash generation, albeit it's been depressed a little by GBP 1.6 million working capital outflow with the timing of those significant shipments towards the end of the half. Pleasingly, that's unwound in Q3. How have we spent that cash? We've made payments on account to the Taxmann. We've invested in CapEx. The big spends in this period have been the finalization of the investment on the facility in Ashchurch and also consolidating our active silicon business into 1 site from 2. In the second half, we've got some investment into our facility in Leominster coming as well that Matthew will talk to. And then we've got our final dividend and our financing activities. Financing activities reflect interest payment on the debt and payments for right-of-use lease assets. And that results in net debt of GBP 7.1 million at the half year. Net assets. Net assets are up just shy of GBP 1 million on the year-end, reflecting strong profit, retained profits. Going the other way, we've got the dividend and then the impact of FX revaluing our U.S. dollar asset base. I will hand back to John and Matthew to take you through some of the divisional reviews.

That's great. So just looking at the Components division. Our franchise distribution business focuses on world-class manufacturers, and it puts the group in front of the U.K.'s leading electronics companies. It's very important to understand that our ability to attract world-leading component suppliers really sets us apart in the industry. Also very important to note that our Waymouth optoelectronic manufacturing facility is itself world-class. Its expertise in optoelectronics is now starting to be recognized by some of the U.K.'s largest defense primes as well as some of the leading medical companies that we've been successfully targeting. Recent simplifications of the business have resulted in much greater focus on higher-value and higher-margin products, including our own Durakool brand. And albeit with relatively low revenues, the acquisition of Gateway a year ago is now achieving gross margins of circa 40% to 43%, that's versus an industry norm of around about 25% to 27%. The business as a whole achieves a stock turn of greater than 4.5. And when we look at our industry association reported norms, the norm is 1, actually 1.1. Operational gearing is a critical factor in driving the operating margins in this business. We have chosen to retain talent despite facing market headwinds in recent periods, which, of course, have adversely impacted the operating margins. However, we are laser-focused on our target markets where we can realize growth to secure the operational gearing benefits. We've seen increased opportunities such as the recent follow-on orders in the U.S.A., where we've been able to add tangible value, which has been recognized by our customers. And this type of value-add business is critical to securing the growth in revenues and margins. In fact, securing this growth, combined with the simplification, is the key to ensuring that we return the operating margins toward the previously achieved 7.5%, which would, of course, put a step function in the business. Just looking at Solsta Embedded. This is a newly formed group, and it's delivering integrated solutions that really solve customer problems beyond the traditional buy and resell relationship, much more towards consultative solution-based partnerships. So the group combines the embedded processing products from Solsta with the computing skills and expertise of Steatite. It allows Steatite to focus on the higher-end integrated systems at the new Ashchurch facility, while Solsta focuses on maximizing and increasing the revenues and margin from the Embedded customer base. This combining of synergies puts the business in a unique position within the industry. It takes it well beyond the capabilities of our traditional competitors by maximizing the customer spend, locking the customer in and filling the factories. I'd just like to hand over to Matthew now to give you a review of some of the Systems divisions.

Thanks, John. So I'll give some color on Systems and then Power division, some application detail, some products and services and some of our growth plans, investment plans. So starting with Integrated Systems. The business is now leveraging the skills, experience, resource and production capacity of both Redditch and Ashchurch to provide turnkey complex systems, really looking through the lens of the customer. We're now able to take the line replaceable computer units designed and built in Redditch and integrate those into larger subsystems in Ashchurch. We're broadening our skills and experience to secure greater work share on large programs, increasing added value work and providing longer-term annuity revenue streams, again, that common theme of through life support that you'll hear more of on a later slide. We've won a prestigious contract from the Defense Science Technology Laboratories, the STL, for a series of large and complex computer cabinets. The subassemblies will be built in Redditch and then integrated into the large cabinets themselves in Ashchurch. It was a first for me in my career, which is very long, that we achieved a technical score of 80 out of 80 in the evaluation. And bearing in mind that, that was from a U.K. leading R&D establishment that really is a great testament to our engineering team. We're further developing our relationship with BAE, as they look to establish a strong supply chain, particularly for the surface and subsea domains. I really do see an increased sense of urgency across all our defense offerings, reflecting the geopolitical events we're now all contending with. We continue to invest in talent and have just recruited a new Business Development Director and are proactively targeting adjacent highly regulated markets, the likes of transport and air traffic control. Moving on, John and Pete talked to the communications project that we delivered in H1. That was a contract secured through NATO and NSPA being their procurement vehicle, but the user is the U.K. Royal Marines Commando Force, who adopted the Steatite solution and will continue to invest in hardware, training and support services. The new award that will be delivered in 2026 is for an initial contract with the MOD under the Project CAIN. The user is the 16 Air Assault, which is a brigade of the British Army that has held a very high readiness to respond to global crisis. So it's not just the Parachute Regiment, it's actually the largest brigade in the British Army with over 6,000 personnel. And we've secured that initial contract at GBP 10.8 million and are now working with the user on future phases and critically the support and training elements over the coming years. And it's a direct quote, you don't often get these, but it's in the public domain from the MOD that said as follows: It says this system will let soldiers on the front line talk and share information securely with commanders even thousands of miles away. It will make the brigade more lethal by improving situational awareness. So as a provision beyond just our through-life support and training, we are offering wider services, situational awareness solutions, antenna offerings and other capability. And we're looking at third-party relationships, software relationships and partnering and potentially acquisition opportunities, too. Moving on to our antenna business. Well, we are busy, fulfilling existing contracts, responding to a growing demand for advanced electronic intelligence gathering antenna systems. These are complex high-value products, class-leading and indeed world-class, and the applications are land-based and maritime. There's been quite a bit in the press recently about a certain surveillance ship in U.K. waters. So it's rather topical. This image here top left is of the signal intelligence ship that's being supplied by our customer, Saab and incorporating Steatite antennas, so a critical component, that listening capability. The ship, it's actually 1 of 2 being supplied, will see service in the Baltic. And so demand, yes, it's coming from far and wide domestically, from our European partners, from Asia and a growing interest from the U.S. where we're now considering opportunities for a production hub. We have existing facilities, considering new build, acquisition or a combination of. Meanwhile, we are continuing to invest in the U.K. with new test chambers, additional test equipment and people. We've near doubled the workforce already, but we continue to invest as we look to develop the business to industrialize these solutions to deliver on that unmet need. We have to remain agile if we consider ourselves world-class and innovative, we have to keep ahead of the game. So we've dedicated one of our engineering team to look at next-generation and disruptive technologies. And we've continue to broaden the portfolio, communications antennas and other opportunities potentially that we can manufacture in other group sites. Moving on then to Power. As we said, we're reporting now for the first time as a third division of the business. Some 18 months ago, we rebranded the group as Custom Power, bringing together the 2 U.K. facilities and our U.S. operation under that common brand. I'm very pleased to report that the combined Power business has had an excellent first half of the year. Pete touched on it. Revenues are up well over 20% on the comparable period. Order book is up following the recently announced contract wins; and opportunities are up, too. So we're really excited about the future. We've appointed Dave Crossman in 2024 as the General Manager for the U.K. And in April of this year, he took on responsibility for our U.S. facility. He's really focusing on roles, responsibilities, standardizing procedures, processes and he's really making a demonstrable and positive difference to the business. We're focusing on good business where we can derive improved margin from our engineering services, product quality and reliability and moved away from the lower-margin commodity-type work, allowing us to focus on where we can add value. Dave has a strong commercial awareness and has engaged directly with existing and prospective customers seeking longer-term framework contracts that have justified investment in hardware and personnel. And investing we are, investing in cobot technology, automation, welding technology and software tools, really driving efficiency improvements and a safety-first culture is keeping the business constantly investing in monitoring and hardware software systems. In the period, we're continuing to invest also in the U.S., and we'll be looking to replicate some of the progress we've made in the U.K., as we look to keep winning these important Tier 1 customers that we've mentioned in those recent announcements. Last slide for me, and then I'll hand back to John, who will sum up. There's an ever-increasing demand for portable power as this world moves from a corded to a cordless world, be that medical devices, autonomous technologies, subsea, land or drones or in the air. If you overlay that with autonomy, the push for onshore solutions, it's not surprising to us at all that we're seeing significant new opportunities. And while we are immediately responding to defense demands for UAB technologies, we're equally seeing significant growth in nondefense applications. Last mile delivery, for example, bottom left there, you can see that logo, DoorDash, who bought Deliveroo in the U.K., a very significant customer opportunity for us. We're moving closer to the day that drones will be delivered -- delivering scalable, reliable option for everyday local commerce. And delivering beyond line of sight, particularly in urban environments requires safety and reliability were absolutely core strengths of Custom Power. So whilst we're proud to be working in Defense Solutions, it's pleasing to see the wider market opportunities. And indeed, the markets are consistent with those that the group are targeting, providing that potential for added customer value. Over to John. Thank you.

Thanks, Matthew. I just wanted to leave you with a flavor of the excitement that we feel within the group. Our strategic priorities are clear. We're growing the business, we need to enhance our operational capabilities and we are advancing the quality of earnings. So let me just summarize the tremendous opportunities and work within each of these business units because this team really does believe that we can significantly grow the business. So in our Integrated Systems division, we've established capacity and capability for growth with the available excess capacity of, we believe, around circa GBP 15 million and operating margins circa 10% over our full strategy horizon. That's in our new Ashchurch facility. And the focus there is on business development activity to put a step function into that business unit. In our Antennas business unit, this is our highest margin business and truly has world-class products. The RF products, that Matthew has just described to you, are amongst the best in the world. We have significant identified customer opportunities. So we're now working to meet the challenges of scaling the business operationally to take advantage of those opportunities and again, to put a step function in the business. In the Comms business unit, this is a core part of our business with some tremendous successes. We've seen the adoption of the radio technology by new user groups. This not only generates the sale of the hardware, but critically, it generates more training and support whilst contributing to recurring low overhead business. Opportunities there are often difficult to forecast, but they do present tremendous upside as they occur. And as previously mentioned, we intend to extend and normalize this type of business over the coming years. In Components, we're seeing operating margin improvements through the simplification combined with that sustainable growth. This and our world-class component manufacturing has the potential to provide significantly improved operational gearing and the consequent PBT. In Power, we've created a differentiated capability to secure higher-margin business, and we're seeing the results of this as evidenced by the recent RNS Reach announcements. This can also give a step function in performance, driving improved operational gearing and consequent PBT, again. And the new opportunities here in the autonomous deliveries give us a real optimism for our future order book. So all of this, when combined with our acquisition strategy, really gives us a real sense of optimism for the future. Thank you, folks. We'll now open it for questions. Tom?

Now if we turn to the questions, we've had a number of questions that were submitted ahead of the presentation, but please do continue to submit your questions via the Q&A tab. A quick question for you, John, on the Components business. [ Andrew ] asks, to understand the competitive dynamic and advantages of the Components business, why is it difficult to obtain world-class component suppliers, and therefore, this sets you apart from the competitors? Why would they not supply you or another competitor?

Yes. Well, good question, [ Andrew ]. We operate in a competitive environment, and that's not just about the customer base, that's about attracting the suppliers as well. World-class manufacturers want to know that their products are being represented technically with a very high level of understanding. They're trusting us with their reputation, and it really does require an investment in time and people. We provide engineers that talk to engineers. Our engineers understand critically both the product and the application and it's that ability, which gives us the competitive edge in the market, it's that ability that gives us the opportunity to sell our services to those suppliers. And frankly, we create demand for them. And what they want is demand creation.

A couple of financial questions. So one for you, Pete. [ James ] asked, a lot of H1 revenue came from the MSPA communications program. How sustainable is this revenue profile? And what proportion of future growth depends on large irregular contracts versus recurring repeatable business?

Thanks, Tom. So I think, yes, we've tried to highlight on the opening slides that John presented the sort of the projects, the kitting up orders that we've had in recent periods and the initial order that we've just secured in relation to Project CAIN and the adoption by that new user group. So as we get adoptions, there is an initial kitting up, which does give us larger projects and larger pieces of revenue. But actually, I think as John and Matthew both mentioned, there is ongoing support, training, replacement that underpins it as a core business activity for us as well. So yes, we benefit from both, and it absolutely is core to what we do.

Okay. And another question. Does the working capital requirements of the larger communications contracts put cash flow pressure on other parts of the business?

It certainly does create working capital demands. The strength of the group's balance sheet is very powerful at that point. So we're in a strong position. We've got good facilities with our bankers. So we've got a GBP 15 million RCF facility, and that gives us good commercial advantage, not just on the big projects with people like NSPA, but also in the Components business, where we leverage that to get the best possible pricing.

Okay. So [ Matt ] has asked a question, which is related, and I think probably overlap somewhat. But what drove the decline in operating cash flow? And should investors expect higher working capital requirements as a result of multiyear defense program scale?

The working capital in the first half was the timing of the shipments of that contract. So we had a working capital investment in Q2, which has unwind in Q3. So we do get those variabilities, and you'll see them if you look back in history as well. In terms of the underlying business, the working capital requirements are pretty normal, and I don't anticipate significant working capital requirements from other parts of the business that are unusual. It's more the kitting orders that generate spikes.

Great. Super. A quick one on the U.S. then. What is your experience of living with Trump's new tariffs?

I'll take that. So complication is our experience of living with Trump's new tariffs and a degree of not instability, but complication. But the reality is that they're not impacting our business. Our business continues. It's an administrative function that we have to deal with. It certainly creates a cash flow issue because we're paying those tariffs upfront at the point of import of product, particularly where we're importing product from China. But the reality is that we pass those tariffs on. In fact, those tariffs are passed on with consequent administration charges and so on as well. It's not something we make high profit margins on. We wouldn't expect to. But there is an element of administration cost that is passed on. So to really summarize a long-winded answer, it's a complication. It's not impacting or damaging our business.

Great. Super. And last question, which is an interesting one given your presenting at DSEI. Are you seeing a release of defense spend post the SDR?

Well, the short answer is yes, at least from our perspective, and Project CAIN was a good example of that. But I think we would be wary to comment too much more widely on that. U.K. have committed to this 2.5% of GDP by 2027. I think 2.7% or 3% by -- in the course of the next parliament, but how they're going to pay for it, that's another matter. So if you compare and contrast to other countries, Poland, it's well over 4%. And I'm very glad that we are able to operate in those arenas that are not just constrained to the U.K. But all up, short answer, yes. And we're seeing it come through on some of the contracts we've won.

Perfect. Super. All right. Well, thank you, John, Peter, Matthew, for updating investors today. Could I ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback. If anyone has any further questions or would like additional information on Solid State, please do get in touch via [email protected]. Thank you all for attending today's presentation.