Good morning, everyone. I'm very pleased today to introduce to you the H1 results for Amcomri Group. A record set of results that we're pleased to go through. If I just show you the agenda we're going to go through this morning. First, a few words from me on the introduction. We'll get into the highlights and the summary. Highlights, double-digit earnings growth, double-digit revenue growth. We've made two excellent acquisitions in the period, EMC and Electronix, that we'll take you through. Hopefully, again, you'll see from as we go through, very much done what we've said we would do at the IPO and in the subsequent communications we've had. Looking forward, we've got some really good prospects that we're quite encouraged and pleased about, both organic development projects and also our acquisition pipeline is still very strong.
Our model, in somewhat difficult economic and political times, has continued to show resilience. We're very pleased with the way it's been constructed and that situation is de-risked. It really does reinforce the Buy, Improve, Build model that we've put together. Very keen to show you how that is rolling out. For some of you that have not seen the basis of it, we're just going to quickly recap with the video after I've introduced the team. For those of you that have not had the presentation before, the team, myself, I'm the Chief Executive. Siobhán, on my left here, Chief Finance Officer. Mark, our Investment Director, and then the other two key members of the senior team, Steve Jones and Mark Mullen on the screen there, who head up our industrial divisions.
For some of you who may have not seen the model before, we're just going to quickly talk through that, and I'd like to just show you a short video that captures many of the key points of Amcomri's model. Amcomri, our whole model and strategy is around buying, improving, and building niche industrial or engineering businesses, starting with good, mature businesses that have got proven earnings, proven capability, proven customer delivery, and then taking those businesses and working and coaching the teams to build those businesses into something progressively more substantial than that which we acquired. It's a Buy, Improve, Build model.
A key differentiator for us has been firstly able to identify and secondly acquire these quality engineering and manufacturing businesses, often which are being sold on a retirement type basis when there's little succession planning in place and the owner managers are looking for some sort of transition solution. In terms of turnover and size, from GBP 2.5 million up to GBP 15 million, and in terms of EBITDA, anything from GBP 0.5 million up to GBP 3 million, and ideally with a strong track record in profitability and positive cash generation. Having done 17 of these acquisitions now to date, and 13 in the last four years, we developed a strong track record and a successful approach in de-risking this ownership transition.
The Amcomri model is built on some core elements. One of those is having a strong, disciplined cash flow management structure in place. We work very closely with our operating companies to ensure that they are building strong, sustainable cash flows that allows for both reinvestment in the individual operating company, but also into the wider group and protecting all of the key stakeholders in that process. We have a very robust, disciplined approach to financial reporting. We have key controls in place to allow our information to be delivered accurately and in a timely manner to make sure that we're actually able to operate within the reporting frameworks as a group.
Amcomri is split into two divisions, business-to-business manufacturing and embedded engineering. I focus on the embedded engineering group of where we have eight operating companies that offer a service to the client. Those services are managing the client's assets, critical assets, their safety assets, and then embedding themselves into the client's process to deliver the value that they require.
Currently in the B2B manufacturing sector, we have five different businesses with seven sites currently. B2B is very diverse in the markets that we work in. We can start from something like adhesive tapes through to gasketry, all the way through to high-end aerospace and defense applications. It can be anything of a part that we manufacture something that has an end user or an end product that goes into an end product to a customer. We don't offer a service, we offer a component.
We believe we've a differentiated model with proven delivery capability and a strong track record. We've a substantial acquisition pipeline and strong transaction experience to take advantage of that, but also have the industrial knowledge across the sectors that we operate in to give us that competitive advantage, and we're just getting going.
We're in a very good space. We're operating in stable, progressive end markets that aren't prone to large disturbance. The power, the energy side, the renewable energies coming through. We've got very good positions with them, with proven businesses that have been there in some cases for many years, providing that service that we've acquired. The team that we've created and the capability that they've got to operate in these niche markets and get superior financial outcomes, I think is outstanding. Thank you, hopefully that was useful for those of you who've not seen the model in practice before.
For those of you that have seen this graphic that captures the basic principle, I just want to recap on it slightly because I think it'd be useful to just give you a bit of insight as to, in the last six months, how we've continued to roll this model and refine the processes that we've established over the last few years. At the front end of the model, as the video explains, what we're about doing is looking for businesses that have proven positions, long-term positions with clients, proven services, specialist, and in many cases, we're looking for companies that the owners are looking to retire, and we transition that ownership, acquire the business, the position with the client and the services it provides, and then look to break the plateau of the SME, as we've explained before.
Over the period that we've been through, at the front end of our process, we've brought in two new acquisitions that we're going to talk about, EMC and Electronix. We've continued to develop our talent in our improvement processes. We've recruited new individuals to drive the performance improvement in our existing businesses, and we've got some really good organic growth opportunities that we've been working on that are starting to come through, across both B2B and embedded engineering. In terms of breaking the plateau and how we actually drive those businesses to a new level of performance once we've stabilized them post-transition, we've got some good examples for you today of, particularly in our precision engineering businesses, where over the last six months, we've seen significant improvements in performance that we've driven.
Also in embedded engineering, particularly with our new acquisition, EMC, where we've got a significant new contract that's, again, breaking that plateau of the SME business that we acquired. Very much keen to show how it's worked, continues to work, and how we're going to build on that going forward. A quick look at the markets then, just to recap on the markets that we're in, and as we had a number of questions talking about what's going on in markets, just to cover those again. Across the bottom of this slide, you can see the core sectors that we're in. The model by design is diverse and in order to manage the risk profile of movements in end markets. Our end markets are generally very stable anyway. That compound benefit of stable markets and diversification, we're continuing to leverage.
If you look across the page, the challenging market that we have, that we're starting to see some good recovery indicators in, is the rail infrastructure market, which particularly is driven by the CP7 infrastructure cycle. We've seen, and many others in the sector have seen, the same challenge of that being slow. What we're beginning to see now in our sector, and we'll talk about this a little bit further on, is the beginning of design activity coming back in the particular sectors that we're involved with. We're confident we're going to see a progressive recovery of the CP7 investment cycle in rail infrastructure. Having said that, we had challenges there across the rest of the rail sector with electronics refurbishment, in rolling stock, and associated equipment.
We've still got a very strong pipeline, and we've got a very strong demand for our services that we're continuing to work. Across the other markets on the page there that you can see, generally speaking, all of those markets are very positive for us with the positions that we have in them. That's defense, subsea, aerospace, civil aerospace. The marine and subsea businesses activities we've got are going well, and our power, petrochemical, and electrification activities are very strong with the market drivers that we've got at the moment. We're very positive about those end market positions. Overall, we're in a good position with resilient factors in them. I think if we look at then the highlights of our performance against that background as we go into 2025 H2 . Our H1 results, very pleased with the outcome of that.
As you can see from the graphic there, our revenue is up just over 16% to GBP 32 million. Our adjusted earnings are up to GBP 4.3 million. Our margins are stable, and that includes the variation that we've seen across our markets driving different margin behaviors. For example, the higher margin rail business has been down slightly as I've explained, but we get the benefit on the upside with some of our electrification projects, which gives us a balance, and allowed us to maintain our margins despite some movements in our end market. Key drivers that we're seeing as we go forward, the power, electrification, energy sectors, very, very strong. Defense, again, is clearly at the moment, a very sort of growing and focused market.
We're seeing underneath that, a lot of activity, particularly in the electronic sector, in terms of purchase of capital equipment to support defense projects, is positively impacting on our business like Blundell, where we service that market. I think into H2, we're very confident with the position that we've got looking towards the year end and looking into 2026. We've got good sight of our process industry shutdowns, which drive an element of our revenue, and we've got good sight with our project work that's going on in that sector. Also a strong forward order book across our manufacturing businesses, particularly precision engineering, where, as I've said, with defense and subsea, we've got a very strong demand profile at the moment. The high level then, I've covered, I think, a number of those points there.
We're pretty confident across the general landscape that we're involved with. We're not seeing any dramatic changes in any of our markets that concern us. Likewise, we can see good upside. They're conservative markets. They take time to adopt new principles and new technology. That's good for us because once we're in with those sorts of customers, then we generally retain them to a very strong degree, and I think we're very well positioned in them. I think it's reinforcing the benefit of our model as we're going forward. We're particularly enthusiastic about the new contract that we've got with our new EMC business.
I think it's a really good example of how we can break the plateau with an SME and get a step change in performance, and that puts us firmly in the sector of renewable energy backup systems that we can see a good roll-on prospect for into 2026. It complements the work we're doing with thermal energy in the other parts of our business with gas-fired power stations and nuclear power stations. I think in terms of our Buy, Improve, Build, Mark will talk in a few minutes about Drurys and Claro and what we've done there. We'll give you a case study on what we've done with that EMC project in a little bit more detail.
The really good news is we can see a number of significant organic growth opportunities, both project-based and incrementally, that we're continuing to work on and develop over the next six months and into 2026. We're pretty positive and upbeat about how we can land those projects and continue the progressive journey that we're on and continue to do what we've said we would do in terms of our targets. Against that background, I'll hand over to Siobhán to start taking us through the detailed financials, and then we'll move to a couple of case studies.
Great. Thank you, Hugh. Good morning, everyone. I'm very pleased to be able to present the H1-year results for the Amcomri Group, which shows both positive revenue and earnings growth over the same period for 2024. From a revenue perspective, we've seen positive increases across each of our divisions. From a group perspective, we're up over 17% on the same period last year, and this is split between over 3.4% organic revenue growth and 13% related to new acquisitions. On the embedded engineering side, we've seen growth has been driven largely from the acquisition of EMC in March of this year. On the B2B manufacturing side, we've seen full-period revenue contribution coming through from our two precision engineering companies, which joined the group in March in 2024.
Our gross profit is up GBP 1.7 million on the same period last year. Alongside this, we have maintained our margin at over 38%. If we move down then through the P&L, you can see our operating expenses are up, and this is really coming from additional scale coming through from those acquisitions that we've done in 2024 and 2025. Alongside this, we have invested in our group overhead. Our costs here are up over GBP 400K, and these are largely coming from the cost of being a listed entity. Our Adjusted EBITDA is up to GBP 4.3 million, which is nearly up 15% on the same period in 2024. Alongside this, we have maintained our trading EBITDA margin at over 12%. This is despite the increase in operating expenses, which I think really reflects our investment in growth and also embedding those new acquisitions into the group.
Lastly, just to touch upon our exceptional and financing costs. Within our exceptional costs here, we include our share-based expenses and some one-off redundancy and PILON payments. If you look at the same line for the prior year, we've got our gain on bargain purchase for Drurys and Claro in March 2024. Lastly, within our financing costs, we include here both the interest on our external debt, which is approximately GBP 800,000, and then we also have GBP 200,000 relating to our IFRS lease interest expense. This has reduced in the same period last year, and this is related to both a reduction coming through from the drop in the interest rates when we paid down debt, but also this benefit has been slightly offset by additional amounts we've drawn down for funding in new acquisitions.
We've also seen an increase in that lease interest expense for assets acquired for growth investment. In summary, a very strong H1 results. The group is scaling effectively through its Buy, Improve model. Our revenue growth is both organic and acquisitive. This is underpinned by diversification, and we have margin stability that really demonstrates our strong operational control. If we move then on to the balance sheet, you can see here our balance sheet has strengthened into the H1 of 2025. Our total assets are up to over GBP 62.6 million, and this is reflecting both our organic investment and the acquisition of EMC. Our intangibles rose due to acquisition-related goodwill, while fixed assets and our right-of-use assets have also expanded following new machinery purchases in Drurys and Premier Limpet.
That was really to support those end markets and the rapidly rising customer demand within those operating companies. Again, if you move down through the balance sheet, you can see our receivables is up by GBP 3.3 million to GBP 14.9 million, and this movement includes GBP 1.5 million due to EMC, while the remaining increase since year-end reflects timing and customer payment terms, which we have seen unwinding in quarter three. With net debt of GBP 11 million, it's worth noting that we do include our deferred consideration of GBP 3.6 million within this balance. We have facilities across a number of financial institutions. We use property and cash flow loans, and we also use invoice discounting facilities. None of our debt is cross-collateralized in any way, and this is very much in line with our funding strategy.
The movement here on year-end will be related to key movements on cash, which we'll go through on the next slide. The paydown and issuance of debt in the period, and also the movement on our deferred consideration. The movement here on our deferred consideration from the end of December will be related to, we paid in over GBP 1.8 million of existing deferred consideration, largely related to prior acquisitions. Alongside this, we recognized new obligations in relation to EMC, which has resulted in our net deferred consideration balance of GBP 3.6 million. This pattern is consistent with our acquisition model. We use structured consideration to provide flexibility in how we deploy that capital and also helps us maintain that balance sheet strength. In summary, the balance sheet is in a strong position to support expansion.
We, as a group, have maintained prudent gearing while investing in growth, and we can see the movements in our working capital normalizing in Q3 . In terms of our cash flow, the key movements within our operating activities, we've delivered over GBP 1.1 million of net cash inflows from operating activities. The key movement here will be in relation to our working capital outflow of GBP 2.5 million, the majority of which has been driven by that higher receivable balance, which I went through on the balance sheet. This reflects timing more so than any structural change, and we've already begun to see that unwind into Q3 .
An element of this outflow will also be related to the necessary working capital requirement we've had to deliver our key material contract that we won at the end of June. Also worth noting, we had a key movement on our other creditors.
We paid down nearly GBP 1 million of IPO-related costs, which we had accrued at year-end. Within our net cash outflows from investing activities, we've outflows of over GBP 3.3 million, which comprise GBP 800,000 relating to growth directed to CapEx. We've also had GBP 2.5 million outflows relating to the acquisition of EMC. This continues our strategy of reinvesting cash into capacity to support the rising demand in our key end markets. Lastly, just to touch upon our financing activities. We've a net outflow of GBP 2.1 million, GBP 1.8 million relating to the deferred consideration, which I touched upon earlier. We've interest costs of over GBP 1 million. This is partially offset by GBP 1.1 million inflow from our debt issuance and repayments, leaving us with a net cash balance of almost GBP 8 million at the end of June.
Overall, the H1 of 2025 demonstrates record interim performance results with both positive revenue and EBITDA growth and strong margin stability. Our balance sheet has strengthened, and we have refinancing in place to fund future growth. Lastly there, I've shown you the cash outflows are driven by investment in acquisition and capacity, positioning us for long-term growth. The group is clearly delivering on its Buy, Improve, Build model, and we have that resilience across diversified end markets. Mark is now going to take us through some of our most recent acquisitions.
Thanks, Siobhán, good morning, everyone. Over the course of the next few slides, we'd like to just go through a few key business improvement updates across some of our existing businesses and then go through Electronix Services, which is our latest acquisition, which we completed on the 31st July. Starting with Drurys and Claro, these are our two precision engineering businesses, which we acquired through an accelerated process in March 2024. We discussed these at our last results presentation back in May and talked through the comprehensive plan we put in place alongside the management team at the time to restore customer confidence, ensure continued supply with key suppliers, and stabilize the position post-completion of the transactions. Just to recap, these businesses focus predominantly on the defense, aerospace, and subsea engineering markets.
Because of the position of these end markets at the moment, which Hugh discussed in his introduction, both businesses continue to see strong and rising demands from both new and existing customers. Because of the quality of this customer base and having long-standing customer relationships and indeed long forward order positions with these customers, we've continued to invest in capacity to support and meet this demand. Starting with Drurys. Drurys has won two significant contracts this year, up to the total value of GBP 3.3 million, with two different defense customers. One to be delivered this year and one to be delivered over the course of the next two years. As can be seen from the third bullet point there, Drurys order book is at an all-time high of GBP 8.7 million as at the end of June.
Just to give a feel for the financial performance of Drurys. Drurys achieved a trading EBITDA of GBP 550,000 for the first six months of the year, compared to GBP 170,000 in the period last year. That's not like for like, as we only acquired Drurys and Claro halfway through March 2024, still showing significant growth nonetheless. With regards to Claro. Claro has also experienced an increasing demand from both new and existing customers, and this has been driven largely from an increase in the subsea sector. Similar to Drurys, Claro's demand has outstripped its capacity, and this has been compounded recently by taking on board a new customer involved in underwater robotics in the subsea sector.
In case you're wondering what you're looking at on the right-hand side, they're called manipulators or underwater robots, and essentially, we're manufacturing the parts that go into the arms and the joints of those underwater robots. Just in terms of financials for Claro. Claro achieved GBP 370,000 trading EBITDA for the period this year, compared to GBP 200,000 in the period last year. The final couple of points I'd make really on this slide are, I guess, based on these end markets and the growth trajectory of defense especially, also subsea, and also the long forward order positions with these customers. We've continued to invest in CapEx and machinery to support this capacity and ensure we meet this demand. Pleasingly, both these businesses continue to trade very well, and they've carried forward that momentum into the H2 of the year.
I'll just pass you on to Hugh, who's going to give a brief update on our latest contract win that we had with EMC.
Thanks, Mark. EMC then, as you may be aware, we acquired in Q1. This business we targeted over some months to give us a complementary set of services to the energy businesses that we currently have. Where it fits into our portfolio is it has a very strong competency in low voltage, medium voltage, and lower-end high voltage applications and industrial services. Also, it gives us a good footprint on rotating equipment in the power industry, particularly thermal power generation with turbines, gas turbines, and what called peaker diesel gas engines. Very keen and very pleased to welcome David Lewis, Jamie, and the team into Amcomri. What we observed with the business was a good opportunity to also leverage their skills into renewable power sector when we first saw the business.
As a result of the acquisition, I think it gives us a really good example of how we can add a very technically competent business and then start to work with the business to break the plateau that the business has had in terms of its revenue and its scale, working with the Amcomri team to come in and assist the business to get that step change in growth. In this particular instance, after the acquisition, we worked with the team in EMC to work up a proposal for a significant client who's working in the renewable energy sector with backup energy supplies. The backup energy market is rapidly growing in the U.K. as part of the decarbonization and move to renewables.
In simple terms, what that facility provides is intermittent renewable generation as it comes off generating from maybe the wind falling off or the solar generation declining as the sun goes down. This backup capacity provides resilience and protection for the grid, for those variances. A very good example is what happened in Spain a few months ago, where one of the contributory factors to their grid system crashing for a number of days was intermittent renewable energy coming off the grid very quickly and insufficient backup generation to cover that gap. This is what we're working on now with our client and with National Grid, who are their client, to deliver a solution for. This project, the company rapidly scaled up to be able to, first of all, tender and achieve it.
Once we achieve the project sign-off, what we've been doing is working with the company. We've had a team in to help the company that we recently acquired to scale up to this size to be able to confidently deliver the results for the client. It's a considerable scale-up. If you come back to the principle of breaking the plateau in an SME, this business had traditionally traded at GBP 4 million or GBP 5 million a year, and within three months, we've introduced a contract that over 12-18 months will be more than GBP 12.9 million. It's definitely been a challenge, but one that we've responded to really well. I'm really pleased with the way the teams worked together with the incumbent team in EMC, to move the project forward.
From the point of view of where this positions us, it gives us a really good footprint in the renewables to balance our thermal energy interests. Secondly, there are a significant number of these new projects in renewable backup that are coming on stream and also in the planning process, and we'd like to be part of that roll-on process in 2026 and beyond. I think this project gives us a really good ability to start to work to that objective. We're very positive about it, and I think we'll see some good results coming from the project, both this year and into 2026 and with the follow-ons. Just pass to Mark to discuss and go through our second acquisition of Electronix Services that we acquired in July 2025.
Yeah. Thanks, Hugh. Just moving on to Electronix Services, which as Hugh said, we acquired in July. This business is based in Dublin. It's now part of our Embedded Engineering Division. Essentially, electronics are repairs and refurbished services for electronic units and systems used across a number of different industries, so transportation, pharmaceutical, and medical. To give you an example of some of the customer base in Ireland would include the likes of Iarnród Éireann, but also a lot of the multinationals based in Ireland in the pharmaceutical industry, such as Seagate, Boston Scientific, and Uniphar. This is what we'd consider a classic retirement type acquisition. Husband and wife, Maurice and Rina, built up a very successful business. They were looking for a transition and a retirement solution.
Maurice has agreed to stay on with the business for two years on a fixed-term basis while we transition in a new general manager who we're recruiting for at the moment, and Rina will transition out and wind down on a more gradual basis. In terms of the consideration for this business on an enterprise value, cash free, debt free, it was EUR 3.5 million, of which EUR 2 million was paid upfront, and the balance will be paid on a deferred basis through the usual earn-out mechanisms. In terms of the acquisition rationale for this business, clearly it's a very good fit for our Embedded Engineering Division.
Based on the success we've had with TP Matrix and eTrac, our other two electronics businesses, it was a natural and logical acquisition for us. It was a logical extension into our growing group of electronics businesses. It's got a lot of technical expertise.
It's got a strong management team and a skilled workforce run by Maurice. On a financial standing also, it's high margin, it's cash generative, it's capital light. On a standalone base, it's very successful. However, we see a lot of opportunity to drive synergies with this business as well. A couple of good examples with that relate to TP Matrix. TP Matrix previously has had capacity constraints with some of the services it provides in its facility in Manchester. Having a facility in Dublin, which could potentially be utilized if this was to occur again, would absolutely be helpful. Also, TP Matrix has had to turn down work before from customers in the EU, in France and Spain, on the base of not actually having an EU presence. Again, having a facility in Dublin will certainly be helpful in those conversations again.
The final couple of points I'd make really on this slide, obviously, we've only had the business a number of months. Our investment team and our operational team are working with Maurice and his team to implement a 180-day standard transition plan. Business is trading well. It's great to get our first acquisition outside of the U.K. It opens up a new market to us in Ireland, gives us exposure to industries such as electrical infrastructure and pharmaceuticals in Ireland. Also for Electronix, it gives them a market extension opportunity to look at opportunities outside of Ireland as well, and working with the likes of TP Matrix and eTrac. I think, as Hugh talked about the significant success we've had with EMC and the large contract we've won there, it was important to back that up with another good acquisition, this year, of which Electronix definitely is.
Just to summarize briefly, the first six months of the year and looking into the H2 of the year and beyond, I think firstly, we're very pleased with the progress we've made, as we found our feet in the market over the last six months. As Siobhán has taken us through, all the key financials and metrics are showing growth in all the key areas. Hugh has talked about how we're benefiting from having a diversified service offering and having a diversified end market exposure. That's by design and really focusing on those areas which have got a positive growth trajectory, such as defense and subsea. We've landed two great acquisitions in EMC and Electronix, and also a significant milestone win with the large contract with EMC.
Behind the scenes and against that, we're implementing a lot of operational improvements and initiatives across our other businesses within our group. Just looking then ahead into the H2 of the year and beyond, firstly, we're trading well. We're trading in line with our expectations. We remain confident on the delivery of our year-end numbers. At this stage of the year, we've got good visibility on that. We've good visibility over some key projects, which Hugh has mentioned already, also some potential prospects looking into the start of next year. Against that background, we've continued to add and invest in our team, and we've in fact taken on two new investment analysts onto our investment team over the summer. They'll help us drive and potentially accelerate our acquisition strategy as well. The final point there really is our acquisition pipeline. That remains strong.
It's busy. It's buoyant. We've got a good range of opportunities on that across both divisions, but also different sizes and different types of acquisitions, not just on the retirement type deals as well. At that point, I'll just pass you back to Hugh. He may have a few closing comments, hopefully we've got some time for some questions.
Okay. Thanks, Mark. In summary, the world over the last six months hasn't given us a lot of advantages in terms of the economic, political, and some of the technical challenges that are there. I think hopefully you can see from what we've talked through today that we've got a good model. The team is very fired up, very energized, and we've got some great people in that team that are driving the business forward. I think hopefully, again, you can see we've delivered what we said we would deliver at the IPO, and probably equally importantly, looking forward, we've got some really good prospects. The projects that we've described to you and some of the markets that we're working in now have got some really good positive momentum. We're very confident with where we're going to get to at the year-end and also looking into 2026.
I think we've got a very positive outlook to how that will roll out for us. Look forward to telling you about that in the next update, and I think we've got plenty of time for some questions as well, that we've had already in and also maybe on the screen coming up. Over to you, Scott.
Thanks very much, Hugh, and thank you for the presentation today. We've had a number of questions that have been pre-submitted and submitted live. Just a reminder, if you'd like to ask a question, please do type them into the Q&A box situated on the right-hand side of your screen. First question that we're going to just now is, gross margin is constant, do you see ways of improving?
I think if I take it to start with, then maybe Mark, you can jump in on a bit more detail of it. I think if we look at the business and the way it's constructed, and the way that we've split it out in terms of embedded engineering and B2B manufacturing, I think if we look at embedded engineering, what we're providing in embedded engineering is a highly technical service in most cases to our customers. Our customers value the technical service, and often we're working on mission-critical activities that the customer has a very tight time component on. If we're working a power plant or a shutdown, loss of production time for our clients is critically important and very expensive. Price is not always the first point of the discussion that we have.
It's an important part of it, the quality, the delivery, and the confidence in the service is a primary factor in the discussion. In those circumstances, we have probably more capability to lift margins than we may have in our B2B manufacturing businesses, where we have a slightly more competitive tension that exists, and unit price is a more important factor. Service technical is still a barrier to entry that we have to overcome, but I think there's more elasticity in the margins in our embedded businesses. For that reason, as we continue to develop that sector and continue to grow it, as Mark's discussed and I've talked through with EMC, I think there is some scope to continue to develop the margin base, particularly in embedded engineering. Hopefully, that gives you the overview. Mark, have you got anything you want to add to that?
Yeah, I think just to elaborate briefly on that, Scott. I think if you look at the 38% we achieved for the first six months against last year, it is annoying, but we're actually okay with that because we see some potential to improve that over the H2 of the year. If you break that 38% down, actually, that's split between 46% within the embedded engineering and 32% within B2B manufacturing. Within the embedded, that would have actually been higher, albeit as Hugh has alluded to on the rail infrastructure spending, we've had a higher element of direct labor costs as a percentage of sales within our WJ Projects business. That's a timing issue, which will come back in the H2 of the year. In parallel to that, we've added in EMC.
That's a higher margin business, we've also added in Electronix on the end of July. We should see the margin mix improvement come through in the H2 of the year and beyond. I think one other point I'd just make on the EBITDA margin as well, which we're pleased with, that's maintained levels at 12%. When Siobhán went through her presentation earlier, she discussed how we've added in GBP 400,000 of additional overhead costs associated with being on the AIM listing PLC costs, which they will typically be absorbed as we scale up. We'd hope to see improvements at an EBITDA margin level as we move forward as well.
I've got a further question around margin. In tough times, how margin sensitive are the differing operating companies?
Mark you want to take that.
Yeah, sure. Not overly sensitive, Scott. I think probably just going back to the last question, as I mentioned, WJ Projects, that has seen a reduced margin in the H1 of the year as a consequence of sales have come off, we've had to maintain our level of direct labor to ensure we don't lose them. Actually, when the work and the projects do come back, which we're seeing strong indications for now, that margin will improve as the sales increase as well. Against the other opcos, Scott, there's been a little bit of up and down, they don't tend to change significantly, albeit there is always opportunity to improve them.
I think I'd just add to that, Scott, that in the case of a B2B manufacturing business, the margin could decay if demand falls and there's too much capacity in the market that's fighting for a smaller share. What that could do is drive margins down in an economic downturn or if the industrial cycle went down and there's too much capacity in the market. There is some risk of that happening in tough times, we're not significantly exposed to that. We do have some exposure in our printing businesses, potentially to it. If you look at the embedded engineering businesses and the point that I made about the critical service, that critical service standard is maintained, and the demand for that continues. You don't have, for example, power stations reducing their service intervals when the industrial cycle goes down.
They have a statutory safety integrity requirement that needs to be maintained irrespective of movements in the industrial cycle. That doesn't tend to impact on the margins in the embedded business for that reason. I think we're not immune from it, but we've got good resilience from it, would be a high-level view on it.
Thank you. Further question around margins again. You've added acquisitions in this period. To what extent do their margins differ to the group's average?
You can deal with that one, Mark.
Yeah, sure. As Hugh said at the outset, the embedded engineering, the margins typically tend to be higher, and as I mentioned, they were 46% for the H1 of the year. To give you a feel for EMC and Electronix, EMC is trading at about 44%. We've only had one month's trading for Electronix, and that's 57%, so there is a significant uplift there. Our Electronix businesses, including TP Matrix and eTrac, they tend to be higher margin businesses, so they can be in the regions of from 55%-65% as well. There is a higher mix element there. Again, depending on the type of acquisitions that we do, if they are embedded engineering on the higher margin, we will get that improved mix benefit moving forward.
Do you have a maximum target debt to EBITDA ratio?
Mark, do you want to pick it?
Yep, sure. I think going back to the criteria we set out at the time we did the IPO, back before Christmas last year, we said we were comfortable getting to 1.5x-2x leverage. If you look at where we were last year at the end of 2024, we were just under 1x, so we're at 8.8x . As Siobhán was taking us through, we have increased our net debt to the period, but we've added in, obviously, one acquisition in June, a second acquisition post period, where we include all our deferred consideration. We've invested in CapEx to support growth in end markets.
I think, moving forward, Scott, if you were to assume that we continue to add in two acquisitions the size of, say, an EMC and Electronix over the course of the two years, we would stay well within those acceptable limits of 1.5x-2x leverage.
Next question we have is what would be a reasonable assumption for medium-term EBITDA to free cash flow conversion for the business? In addition to tax, interest expense, and CapEx are all quite sizable compared to EBITDA. Any reason for the current figures, or any reason the current figures might be misleading? Apologies.
Sure. Why don't you answer that?
Okay. I'll break that down into two parts, I guess. We expect our free cash flow conversion to be about 50%, which will be in line with historical years. We have invested in growth opportunities across the operating companies this year, that might be slightly lighter. In terms of the second part of that question, our interest costs, we would expect to remain pretty stable over the next couple of years. As Mark mentioned, we have debt capacity, if we use that, obviously our interest costs will be slightly higher, but that would really be to fund some future acquisitions. Again, that would generate free cash flow.
Sure. Thank you. Cash balance is reducing. Would you consider selling or spinning off non-core assets or divisions to free up some cash?
Firstly, we are ultimately not wedded to the businesses that we have acquired. However, one of our ambitions is to accrete scale, and that's been something that we said from the start. I think at the point that we're at, we would continue to look to accrete that scale. I would say we're generating options that could lead to potentially a divestment. We're not at that point yet, I don't see any reason why we couldn't consider it at an appropriate point in the future. I think in the short term to medium term, what we're looking to is build on what we have actually acquired. We can see quite a lot of organic growth opportunity in many of those businesses that we haven't fully exploited yet. We've given you a couple of examples of where we've done that.
At this point, we will carry on with that model. Definitely, as we scale and the business grows, then that could be an opportunity that we choose to take advantage of.
Thank you. Would you consider to make acquisitions at this pace if you started to see any slowdown in your core business?
I think at the high level, as we've tried to explain, the core business, as would classically be defined in a business that had got a single concentration in the market, what we've done is diversify across a number of markets and a number of sectors with individual autonomous businesses that service those markets with different products and services. What that does is it de-risks a wholesale downturn in the group, we think, quite considerably, and I think we're seeing the benefit of that now. If you think, for example, the situation that Jaguar Land Rover supply chain is in at the moment is very weak, that concentration in a certain area, we have less exposure to that sort of risk because of the construct of the business.
I think the likelihood is, the scenario that could exist is one or two of our businesses may be more connected to the industrial index. We could see some downturn in those, but their overall leverage on the outcome of the group, I don't think would deviate us from our course of action in continuing acquisitions. It wouldn't be sufficiently serious. That might be a remark I live to regret, but I think that model, as by design, worked quite well, and it would be one that we would continue. It's probably unlikely that we would dial off our acquisition strategy unless there was some significant wider event that impacted multiple markets and multiple businesses.
Can you explain the geographic spread of your business? Are you mainly focused on the U.K., or do you have businesses overseas through Europe?
Do you want to cover that?
Yeah, sure. I think it's a simple one, Scott. At the moment, it's predominantly the U.K. We've had a lot of success throughout the U.K. Obviously, we've just acquired Electronix in Dublin a couple of months ago, potentially that is an opportunity to expand that market as well, not just within the industries that Electronix works in, but the wider SMEs market as well. Potentially Ireland as well, we'll consider looking at now too.
You mentioned deferred consideration in some deals. How are you protected on the downside?
Do you want to cover that as one more?
Yeah, sure. Just going back to in terms of how we try and structure our transactions, it's always minimizing our downside risks. To date, we've used upfront consideration. We try and pay typically 50%-60% and then pay the balance through deferred consideration through standard earn-out mechanisms over either a two-to-three-year period. That ensures that 30%-40% of the actual acquisition price is self-funding and paid from the operating cash flow of the businesses, that's essentially a way how we try and de-risk our opening position.
What is your expectation for future investment in the rail sector, given the recent hiatus?
If I had a magic wand that we could look into, that would be very helpful. I think the question is directed at where do we see that investment cycle going externally. Our take on it is that there's clearly a significant consumption of resource on HS2 project that seems to be absorbing the investment capacity of the rail industry on a practical basis. It's a very large project, and it's got some challenges, as we know. That seems to be impacting on the ability to spend on the wider network. From a personal point of view, and we've thought about it and looked at the evidence that's available, the recovery of that rapidly I think is probably unrealistic until clarity on HS2 and the spend and the outcome of that is known.
What we see in the sector that we're in, bearing in mind that we're one tier down from the major contracting operations with our WJ business, for example, is that some of the peripheral projects, which are relatively low expenditure in HS2 terms, but have quite a big impact, maybe commissioning of mothballed substations on the West Coast Main Line, for example. They're smaller projects. They're quicker to execute. They have more of a benefit to the network quite quickly. We see quite an opportunity for those starting to come back, and as I mentioned at the beginning, I think we're seeing design work start on some of those smaller projects, which we will benefit from, I'm confident. That may take six, nine months to come through, but we're beginning to see those lead indicators of activity.
The other thing that I would just touch on is we, in our business, are not just focusing on U.K. rail network with its challenges in CP7. What we've started to do is target other rail network opportunities, particularly Ireland, where there's a significant opportunity to electrify the network in Ireland, which currently is only 4% or 5% electrified. The Irish government have laid out a European-funded program to electrify that area over an extended period, and we're starting to have activity associated with that. We're trying to diversify our interests in rail geography, as well as take advantage of these smaller, quicker projects that are starting to emerge from the slowdown in CP7.
Do you integrate the businesses you acquire or leave them as standalone businesses?
Mark, do you want to touch on that?
Yeah, sure. No, typically we don't. We ensure that they are standalone, autonomous businesses. I think we've discussed before how we try and mentor and coach management teams so that they're not integrated at a head office level. I think Siobhán's team on the finance side do have an element of integration in that a number of our FDs work across a few of our different opcos and have standardized reporting systems. Outside of that, each business is very much on a standalone, autonomous basis.
The add to that is that what we find is, in our experience of this over many years, if you look at our team now, we've probably got 130 years experience across the piece of distressed and industrial management. What we found is integration clearly provides sometimes efficiency savings and cost savings and benefits. However, there's a cap on those that you can realistically achieve. We find on the top side, the autonomous coaching the team to have that entrepreneurial freedom, actually outweighs the savings that could be made on limited integration on smaller businesses. Therefore, we coach our teams on that top side benefit, what they can actually lead and bring to the business, growing the business, and giving them that freedom within suitable constraints, of course, and controls.
That actually gives us more leverage than trying to integrate, and make savings just on efficiencies and costs. Secondly, what we are passionate about not being is a conglomerate where our group cost rises linearly with the size of the organization. We are absolutely making the disconnect, where we don't have a rising group cost that scales with the size of the business as we grow it, and that's a key part of our model.
Thank you. It could be a big question here or a small question, depends how you want to do it, but what lessons have you learned from previous acquisitions?
We were thinking about this the other day, actually. We've looked at, particularly Mark and I and Steve and Mark in the team, and to a lesser extent, Siobhán. In our experience in distressed investment and buying distressed businesses before we came up with the concept of Amcomri, and latterly, since we've done Amcomri, we've probably looked at over 2,000 companies over 30 years and either been involved with the assessment of them or maybe investing in them. We've picked out multiple learning points from those experiences, good and bad. We've personally had bad ones, and we've had good ones over the 30 years. What we've tried to do is capture those learning points in our model. I think in the appendix to our presentation, it will be available after the talk we've done today.
There is a triangle at the back of the model, at the back of the presentation rather. It shows the foundations that we put in place to make sure that we've captured all of those learning experience. That's things like financial integrity, correct management of people, health, safety, and environment, commercial functionality. All of those basics are captured on a model. We work up our model, you'll see it in the triangle, to train our teams to build on that. Our whole approach is to coach and train our teams on processes and points that we've learned actually work and avoid the bad ones. We've got a lot of emphasis on capturing those corporate learning points and making sure that we roll them forward in our business.
Does your acquisition strategy lead you into new sectors or more of the same?
Mark, do you want to take that?
Yeah, sure. I think, short answer to that potentially is yes, Scott. If you look at EMC, and we've moved quickly into the renewable energy space there, as Hugh talked us through on the contract. I think the same could potentially be said of Electronix and opening up new markets that TP Matrix and eTrac serve in the U.K. It is one of the considerations that when we're looking at businesses through our investment criteria. Our acquisition criteria and our strategy, it has become more defined and evolved as we've come through over the last few years. Typically, we always have looked at industrial SME businesses operating in the mature market within the U.K., but they range in different sizes. We've paid typical multiples can be in the range of three to 4x for some businesses. Some businesses we've bought at net asset value.
Some businesses we've bought for GBP 1. As we've actually grown and got on the market, we're getting more of a profile. The types of businesses coming into us invariably are higher as well. Our acquisition strategy, whilst we want to maintain the disciplined approach that has served us well in getting to the scale that we've gotten to right now, going back to your original question, I think we remain to be selective and identify those quality businesses that could potentially open doors into new markets such as the renewables and EMC.
What is the size and quality of the forward order book?
I think high-level, if I start, Mark can comment on some of the detail of it. We need to split the business into the two divisions that we've got. We've got, obviously, our Embedded Engineering and our B2B Manufacturing. Classically, forward order commitment would be a term that you would associate more with the B2B Manufacturing, where somebody's buying a product or an item, and they're looking for forward order commitment on the item. If you take that breakdown and consider the two divisions that we've got, in our B2B Manufacturing business, we have good forward order commitment, and Mark will touch on the detail of it in a minute. In our Drurys and our Claro business, where people are looking for extended order coverage on defense items or subsea items or aerospace items, we'll touch on the detail of that in a second.
We do have a good long-term commitment there. Some of our other manufacturing businesses, our printing businesses, they're more classically short-order cycle. It's the relationship you've got with the customer over a longer period, but they don't tend to always give long-term order commitment, but they maintain the relationship. If the order's there, you'll get it, but they don't tend to run out over a two-year cycle because of the technology involved. If we look at Embedded Engineering, they're more characterized by long-term technical relationships, and they don't have the same classic order cycle as if you're buying a component.
What they do is have a very high recurring revenue prevalence for things like shutdowns, where they keep coming back to the same providers every year, or a long-term service agreement for maintenance, such as we have with major oil refineries, where it may be a five-year rolling contract or something like that. It's a different characteristic, but overall, we see high levels of recurring revenue and, in some cases, strong long-term forward order books. Maybe you can just comment on Claro and Drurys in that sense.
I think just referring back to Claro and Drurys, the two precision engineering businesses, as we mentioned when we went through the presentation, the forward order book there is at an all-time high of GBP 8.7 million at the end of June. Typically, historically, that had been in the region of GBP 5.5 million-GBP 6 million, and that's spread over 18-24 months. You've obviously got a long forward order position on lead time there. Claro is much shorter, more 8-12 weeks, but they've just won a significant new order as well, as I mentioned, in the subsea sector. We do have good visibility. We have looked at recurring revenue across the group as well, and we do have strong elements across both the Embedded Division and on the B2B side too.
Thank you. Management previously mentioned that organic earnings growth in excess of 4% is achievable. Is this rate of growth what you see and expect in mature opcos that are post the initial improvement stage?
Again, I think we would split our business into two. We would have embedded and B2B. If you look at the entry point for many of our acquisitions, what we're looking for is that latent opportunity. As you said, Scott, what we do is that initial improvement phase, break the plateau, then take the business forward. Many of the opportunities that I think we can see are taking the technical service that we have in a particular business or the product and extending the geographical coverage of that because our SME acquisitions quite often are limited in their geographical coverage, largely because the owners may not want to expand into a new geographical area because they're at a point in their life where that step change in their business is not something they particularly want to take on.
A very good example of that would be TP Matrix, where it was operating in a very limited area, with the new management team that came in post-transaction. With the support of the previous owner, we've managed to expand the geographical coverage of the service that we provide. I do think that still we have good opportunities to progressively and steadily improve the earnings of mature businesses through selective extension of the market geography, also extending the services that we offer and building on the technical capabilities they've got. It won't be stellar and step change, there are progressive, good opportunities at good margin to do that in the sectors in which we operate.
Thank you. Just a reminder to people, if they'd like to ask a question, please do type it in at the bottom of your screen. The OECD came out today with the U.K. having the highest inflation of the G7 across 2025. What is the risk of inflation or supply chain disruptions, especially for specialist electronic components?
I think there's two. Separate the question into two. So in the point of view of inflation, we're relatively fortunate in our embedded engineering business, as a result of the positioning technically that I've talked about, that the service is critical, and we have an ability to a degree to pass on inflationary price rises within reason, and our clients are generally accepting of it. We have some kickback, but they see the benefit of the technical service, and if there's an inflationary pressure, they're cognizant of it. I think in B2B Manufacturing, it can be a bit more difficult because of the pricing structures, and the tendering processes tend to make that slightly more challenging. Overall, we've managed to accommodate that inflationary pressure reasonably well, as you can see in our margins and the preservation of our margins, as Siobhán has explained.
I think in terms of electronic supply chain, if we look at the work that we're undertaking in the electronic sector, which is really repair, obsolescence management of aging components. We're not in the core area of purchasing bulk commodity electronic components. Our business is very much buying smaller volumes of older components, that we've got a very good sourcing model that's globally based, where we look for exactly the same component that may be 10 years old, and we're buying batches of those at very low cost generally. But we have to source them technically, and that's the challenge we've got, because our clients won't let us substitute components without design change qualification, which can take months to achieve. So we're not too exposed to commodity electronics, in terms of pricing change.
It's more a technical challenge to find the right components, relatively small quantities rather than large bulk electronic component quantities. I think we're reasonably buffered from it. Not completely, but it's not something that worries us extensively in terms of the impact on the financial performance of the business.
Thank you. Now, if you remove the H1 results from the B2B division, the division's gross profit margin was 28.6% in H2 2024. This improved to 32% in H1 2025. Was this entirely driven by Drurys and Claro?
Sorry. Within that division, we've had a decrease in some of the sales in one or two companies, whereby we've maintained a margin. For example, if we take JA Harrison, that particular market, the gasket market, has decreased in H1, we have seen a decrease in sales there, but we have maintained a margin, so that will be contributing to some of the dip there. Going into H2, we would hope to increase the margin within the B2B Manufacturing division. December does tend to be, within the manufacturing market itself, a poorer month. I think given some of the organic projects that we've mentioned earlier, we would hope to increase that margin into H2 2025.
Thank you. Do you see opportunities to develop export markets for the business that Amcomri owns to diversify its currency exposure? I understand that this will be more of a slow burn.
I think probably I would agree it would be a slow burn. I think selectively would be the answer that we would provide to that. Mark's touched on already, in TP Matrix, for example, we work with the major rail rolling stock operators in Europe. We have had quite a lot of interest from them in providing our services beyond the U.K. rolling stock fleets. Also not just in trains, but also light transit railways such as trams, for example. We've had some challenges in meeting the needs of those customers because of our geographical positioning in the U.K. In simple terms, what that means is if we're transiting components or boards across the border, because of the time critical nature of the service that we provide, we might need to do a turnaround in seven days, for example, of a critical component board.
If it gets stuck in customs or something like that, it causes a service disturbance for the client. I think selectively working with the customers that we've got and targeting certain operations that they have in Europe across the power sector and the transport sector would be our first direction on that. Secondly, as Mark's talked about, with the acquisition of Electronix, that gives us access to customers in Europe that our other businesses can benefit from. Classically, Electronix has a series of customers in the pharmaceutical intermediates business in Ireland. We know that those businesses have a high utilization of certain gasket materials, and those gasket materials we make, and we're a premier supplier of those in the U.K. through Harrison, so we would look to cross over.
I think it's more about generating the synergies of the existing businesses we've got, leveraging those on an organic basis, and developing that as the first stage of an extending footprint into Europe. That will be a relatively slow selective burn to make sure we get the right financial outcome and keep low risk on it.
Superb. Thank you. That is all we've got time for with regards to the questions at the moment. Hugh, maybe I can hand back to you for any closing remarks.
First of all, thanks for giving us the opportunity to go through the results. Hopefully that you can see, as we've talked about, just recapping on the results. We've had a record performance. We've got two new good acquisitions that we're really pleased have a lot of potential, as we've talked about, both in renewables and electronic refurbishment, and also good synergies across our other businesses. I think as we look forward into H2, we're very confident as we head towards the year-end of our continued ability to deliver and positive for the reasons that we've explained going into the next year with good forward order coverage and good transparency of our commitments with our clients on embedded engineering. We'd be very pleased to share with you those results when we meet again, after the end of the year in December.