Good afternoon and welcome to Amcomri's investor presentation. Today, I'm joined by Hugh Whitcomb, Chief Executive Officer, Siobhán Tyrrell, CFO, Mark O'Neill, Investment Director. Questions are encouraged throughout this webinar and can be submitted via the Q&A box situated in the panel on the right-hand side of your screen. Now, I'll hand over to Hugh to begin the presentation. Hugh, over to you.
Thank you, Scott, and good afternoon, everyone. My name is Hugh Whitcomb, as Scott has said. I'm the Chief Executive and Co-founder of Amcomri. This afternoon, I'm joined by Siobhán Tyrrell, our Chief Financial Officer, on my left, and Mark O'Neill, our Investment Director, on the right. I'm very pleased today to be able to present to you what we think are a very good set of first results we've had on the market since we came to the market in December. I think what I'd like to do first, before I get into the detail of those results with the team, is to just recap on the model that we use in Amcomri and how we've evolved that model to deliver the results that we're able to present today.
Then I'll just run through a headline of the results, and we'll show you a short video that helps explain how we operate, how our model works, and show you some of the teams that we have in our business. Firstly, the first slide then just covers a brief introduction into how we have evolved our model, how it works, and how we leverage the skills and capabilities we've got in our markets. On the left-hand side of the slide, you'll see three circles. These really capture the core skills that we brought together in Amcomri over the last few years, and particularly highlight to you the financial processes, the financial performance element of our model. Secondly, we apply then intensive industrial experience that we have within our teams and have accumulated in our respective careers.
Thirdly, the third overlay is around transactional experience and acquisition experience. The management team that we've put together, which I think is an exceptional team now, have brought together these skills, and we then deploy those skills in a very process-led model. We call it our buy, improve, build model, and we apply that to a very specific sector of U.K. industrial and engineering markets, the SME sector, with a particular emphasis on high performance, proven industry or businesses within the industrial sector that we acquire and look to acquire out of often retirement situations. That there's a particularly interesting niche that we're in. We think it's an undervalued sector, and I think the results that we're generating prove that we can make a difference to the companies that we buy using the model.
Against that background, what I'd like to just show you is the highlights of our performance over 2024 that we're going to go through today. High level, our revenue has increased over 23%, up to GBP 58.1 million. Our gross margin percentage has also improved over the period, up just over 4% to 36.4%. Our adjusted EBITDA has also risen over 33% to GBP 7.7 million. As you probably can see from the improvement in our balance sheet, the benefit of the IPO, we've had a significant improvement in our net asset position. What we think is a very strong performance. I'd like to think we did what we said on the tin at the IPO, delivered exactly what we said, we've made a confident start to 2025 on the back of these results we're talking about today.
Having given you those highlights, what I'd like to now do is just show you a short video that captures what we do in Amcomri, the processes, the culture that we've got, and introduce you to some of the wider team. Thank you.
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, then taking those businesses 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, in terms of EBITDA, anything from half a million up to GBP 3 million, ideally with a strong track record in profitability and positive cash generation. Having done 17 of these acquisitions now to date, 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, also into the wider group 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, also have the industrial knowledge across the sectors that we operate in to give us that competitive advantage. 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. Hopefully that gives you a good insight into the way that we operate our model and the teams and some of the activities we undertake and some of the markets we're involved with.
What I'd just like to talk to now is a little bit more detail about our model before we get into our results in more detail, and also just cover a little bit more information on the markets, and the businesses that we have in those markets. Just referring to this slide here, an important element of our model is the selection on the input side, our acquisition target selection, and the characteristics of the targets that we're seeking to acquire and some of the logic behind our reasoning for looking at those companies. What we're particularly looking for, and we've had considerable success with, is identifying businesses that have a particular niche technical product or service, that the ownership structure is often an owner/manager. The owner/manager may have been in, or managers may have been in position for many tens of years.
They're coming towards the end of their career. They're looking to capitalize on the work that they've done, but they may not have a succession route that's obvious. Maybe their offspring are not interested in moving into an engineering or industrial area. They've got good businesses with very strong customer relationship, proven earnings, with a particular specialism that is of interest to us. If we can identify those targets, which we've successfully managed to do to date, and there is a substantial pool of these we have identified. What we can then do is operate to acquire those businesses, sometimes at a discount because of the potential risk that is perceived to exist in the management transition that we have now got robust processes to deal with. We acquire those businesses.
We seek to start an improvement process, the stage 1 of which is the ownership transition and successfully de-risking that ownership position. Once we've got that, we start to identify how we can break the plateau that these SMEs often get to where the owners get into a comfortable position that they don't really want to push the business to the next level, even though it may have a latent capability to do that, and that's when we get into our build phase. We've now done 17 acquisitions, and we've refined this model, improved it, and we believe that we've got a very robust platform, and a proven methodology that hopefully starting to show through in our financial outcomes. Just moving to our divisions and our end markets to give you an understanding before we get into the numbers about the areas we're operating in.
We've evolved into two divisions. On the left-hand side of the slide, we've embedded engineering. Embedded engineering, the concept here is we are embedded in the customer's operation, to an extensive degree. We're providing technical services, and support to them to help them get the best from their high-value capital assets, and that could be assets such as oil refineries, energy infrastructure, gas. It can be the electrical grid system or rail infrastructure. Basically, we're operating on other people's critical assets, characterized by having quite high health and safety standards or mission-critical activities on large, complex pieces of equipment or processes. On the right-hand side, our second division is B2B manufacturing. In B2B manufacturing, different concept, as it said in the video where Mark was talking to the processes. We are manufacturing a product or a component for use in another part of industry.
In this business, there are less synergies that we have between the operating companies, but our point of entry is finding businesses where we can really make a difference to the performance of those manufacturing businesses using the skills that I described to you at the beginning of the presentation. How that rolls out then in terms of end markets, you can see across the bottom of the slide there, a selection of the key markets that we're involved with. They're generally characterized by being relatively stable, relatively predictable. In the world we're in at the moment, they're probably less susceptible to impact of tariffs, for example, than many other businesses. We've tried to create a stable, resilient, product and market portfolio and service portfolio that gives a sustainable, dependable result. Hopefully, you'll see in a minute that we've managed to do that this year.
At that point, probably just hand over to Siobhán to take you through the financial performance.
Great. Thank you, Hugh. Earlier in the presentation, Hugh had highlighted some of the key financial highlights. Over the course of the next couple of slides, I'm going to take you through that in a bit more detail. This section will provide a clear view of how our strategic decisions have translated into financial outcomes, demonstrating our growth over the period. You can see our revenue is up to over GBP 58.1 million at the end of 2024, and this is a GBP 11 million increase on the prior year. Over the period from 2021 to 2024, we have a compound annual growth rate of nearly 40%. This revenue growth has been achieved both from within the operating companies and also through the new acquisitions we've done over this period. Our gross profit margin up over 4% on the same period last year at 36.4%.
This really reflects our attention on earnings to enhance focus on higher-margin revenue streams, efficient cost management, and targeted operational improvements. You can also see an increase in our operating expenses. This rise is primarily due to the increase in our group overheads and also operating expenses from the acquisitions of new businesses in the year, both of which are expected to drive that future growth. Our adjusted EBITDA is up 33% since 2023, which really demonstrates our group's ability to unlock that latent profitability that we discussed earlier in the presentation. Also alongside this, although our operating expenses have increased, our adjusted EBITDA growth demonstrates the underlying strength of our core operations and our ability to generate those sustainable earnings. Lastly, just to touch upon our exceptionals. These include our one-off IPO-related professional expenses that we incurred in 2024.
Alongside this, we have some non-trading expenses and acquisition costs. What's really pleasing to note is that our net profit after tax is up over 40% on the same period last year when you add back these exceptionals. In summary, really pleased to present a very strong financial performance during the period, and this really reflects a strategic balance between our growth and investment. We've delivered strong revenue growth, enhanced profitability, and strategically invest in our future through the IPO and the acquisitions. On the next slide, just pulling out a bit more detail, in terms of where our growth is coming from. At Amcomri, we're very much focused on earnings. In the past year, our organic earnings growth is over 11.3% since 2023. Where is that coming from?
If you look at this across each of our individual divisions, within Embedded Engineering, typically, these are higher-margin businesses by their nature. We've seen higher demand for our services across a number of our operating companies, where we've been really able to grow those businesses. On the B2B manufacturing side, we have higher profitability coming through from those targeted initiatives, where we've unlocked that latent profitability through optimizing the portfolio, those targeted pricing models, and also operational performance improvements. In terms of earnings from our acquisitions in the year, the earnings growth is coming from those strategic acquisitions we've done in the past 18 months. We have the full benefit of a full year's trading coming through from WJ Projects. We acquired this company in October 2023.
We also have eight months' earnings coming through from the acquisitions we've done in Drury's and Claro, which Mark will go through a little bit later. In line with this growth, we've also made a significant investment in our group overhead to support and sustain this expansion. We'll see this in a bit more detail on the next slide. In terms of the financial position, Amcomri maintains a very strong balance sheet, which is underpinned by a very robust liquidity position. At the end of the last reporting period, we have a substantial cash balance, which is primarily related to proceeds from the recent IPO. This provides the company with additional financial flexibility for growth and new acquisitions. Fixed assets have increased by GBP 3 million and over GBP 1.8 million relates to assets on acquisitions during 2024 coming onto the balance sheet.
Similarly, you can see a rise in our inventory, GBP 1.7 million of this increase relates to those two acquisitions. The intangible assets comprise goodwill and identified intangible assets from our acquisitions. We would expect this balance to increase in the first half of 2025, primarily related to the nature of the asset composition of our new acquisition, EMC, which is within the Embedded Engineering division. Our net debt is GBP 6.1 million. We define our net debt as total debt plus fair consideration, less cash. The profile of our debt is strategically diversified across multiple financial institutions. These include our Bothar, Shawbrook, HSBC. This approach to our structure minimizes counterparty risk, optimizes borrowing costs, and also provides enhanced financial flexibility for the group. None of our debt is cross-collateralized. Lastly, just to touch upon the deferred consideration, our balance sheet includes deferred consideration.
Since the year-end, we have paid down over GBP 1.5 million of this obligation and successfully acquired the minority interest in J A Harrison, which really consolidates our ownership and enhances the group earnings. In summary, a very strong balance sheet, a well-balanced capital structure, disciplined financial management, continued investment in growth opportunities. The company remains well-positioned to drive that sustainable value for our shareholders. The last slide I'm going to take you through is our cash flow. As evidenced on the previous slide, the group ended the year-end with a very strong cash balance of over GBP 12 million. We go through the key movements now in terms of operating, investing, and financing activities. The cash inflow from operating activities of GBP 6.9 million, of which GBP 2.5 million relates to working capital movement. We also see an outflow in exceptionals there related to those IPO costs and one-off non-trading expenses.
Our strong cash inflow from operating activities demonstrates our effective revenue conversion, supported by disciplined working capital management and robust operational performance. The cash outflows from investing activities of GBP 2.6 million reflect our commitment to growth, with over GBP 1.1 million invested in capital projects during the year. We also have the acquisition of Drury's and Claro's in March 2024. In addition, we had the bolt-on of Supreme Tapes to Premier Limpet. Lastly, we have net cash inflows from financing activities of GBP 3.8 million. Net proceeds from our capital raise, GBP 10.8 million. We also have amortized debt of over GBP 3.1 million in the year. Lastly, we have interest paid there of GBP 2.1 million. The increase in our interest paid here largely reflects the financing we've done on WJ Projects in October 2023.
In summary, our cash flow management reflects our very disciplined approach to cash management, strong cash generation, targeted growth investments, prudent capital management. We are really well-positioned now to support our strategic objectives and deliver that value to our key shareholders. Mark's now going to take us through some of our most recent acquisitions.
Thanks, Siobhán. Okay, Mark-
Yeah.
Would you like to take us through those?
Yes. Thanks, Siobhán, and good afternoon, everyone. The first acquisition I'd like to go through is EMC, Elite Engineering Services. This is our first acquisition since the IPO. We completed on the 31st of March this year. Great to get it over the line, and one we're particularly excited about. EMC is essentially a mechanical and electrical engineering service provider to the power generation process and aggregate industries, and more recently has got involved in renewable energy storage systems. It has a distributed customer base and works predominantly in regulatory-driven markets. To give you an example, some of its customers would include the likes of Heidelberg Materials, LondonEnergy, Statera Energy, and Procter & Gamble.
The enterprise value for this business was GBP 4 million on a cash-free, debt-free basis, of which GBP two and a half million was paid up front and GBP one and a half million on a deferred basis over the next 3 years. In addition to that, we've entered into an earn-out agreement with the vendors, whereby they participate in 25% of any profits generated over and above a normalized EBITDA of GBP 880K. In terms of the rationale for this acquisition, clearly, it's a very good fit for our embedded engineering division. It enhances and expands our service offering. It has a very strong management team who we've developed a very good relationship on the lead-up into the transaction, and also subsequently, who've been working very well with our operational team.
Also, due to the services that EMC provides in terms of equipment maintenance, equipment upgrades for planned outages, the demand for these EMC services is driven by regulatory requirements. There is an element of recurring revenue within this business. There's also a lot of synergy potential across our other group companies within our embedded engineering division. A good example of this is WJ Project Services, which is our HV electrical infrastructure business, is currently providing capacity to EMC in a couple of projects they're involved with at the moment, particularly in relation to the renewable energy storage space. Finally, a key part of our investment criteria is having strong and positive cash generation and profitability, which EMC clearly had. We only owned this business a number of weeks. The ownership transition went across very smoothly.
Our operational team have been providing support to the management team on a couple of key projects. Our finance team are also providing support. This is light touch, we're implementing our usual processes, controls, and reporting. However, EMC have a very strong finance function in place already, so we haven't had to do too much. The final point I'd really make on this acquisition was this was an off-market opportunity in that it didn't come into us through the traditional route of a corporate finance sales process. This was introduced to us from another group company within our group, which made it a less competitive process and has a number of other advantages as well. Of the 17 acquisitions we've now done to date, this is the sixth business which has come through an off-market opportunity. It's clearly an area we want to develop further.
Really, in summary, a very good strategic acquisition for us. One we see a lot of upside in and a lot of growth potential in. Just moving on to Drury's and Claro. This is a slightly different proposition. These are two precision engineering companies, which we acquired in March last year through an accelerated process. These businesses operate predominantly in the aerospace, subsea, and defense sector. With regards to Drury's, they tend to have long-term supply agreements with their tier 1 customers in the aerospace and defense sectors, such as GKN, Ultra Electronics, and Blighter. They would order up to 18 months in advance and would have long lead times and long order books. As opposed to Claro, who offer quick turnaround, a faster service, but have order books of lead times of eight weeks.
They'd also have tier 1 customers in the likes of Blueprint and Tritech. The rationale for this one was slightly different. The businesses are very good businesses, good, profitable, reputable businesses. We've been tracking them for some time. They had strong management teams, good customer base, as I mentioned, but also good end markets in defense and aerospace particularly. These businesses were part of a wider group that were going through financial difficulties. When we became aware that the group was going to be broke up on a piecemeal basis, we identified that these two businesses were the best two businesses that were in the group.
We moved quickly, mobilized a team, got comfortable with the distressed nature of the acquisition, and ultimately put forward an offer to acquire the assets out of these two businesses at a discounted entry point out of a pre-pack administration process. On completion, and just to give you a feel for time, from introduction to completion took just under four weeks. We implemented a 90-day turnaround plan with the management team. We stabilized the position by putting in place a short-term working capital facility to ensure we continued to supply with the stretched creditor position and bring the customer performance back to the required standards. We ensured the employees all transferred across to NewCo smoothly and also had a transitional services arrangement with the administrator for any shared services that the business was dependent on.
Pleasing to say, within two to three months, the businesses were stabilized, the customer confidence came back in terms of restoration, the order book started filling up. Much so that we invested in CapEx in our Claro business the back end of 2024 to support this capacity. As you can see from the bottom of the slides for the financial performance, we contributed just under GBP 1 million EBITDA for the eight months of this year. Given the end markets that these businesses are operating in, they've carried forward this momentum into 2025, the business have started trading extremely well this year. The final point I'd make on these acquisitions was, this is a slightly different proposition to what you might associate Amcomri with, as we're probably best known for retirement-type acquisitions. This was a purchase out of a distressed group via pre-pack administration process.
Based on our past experience, we got comfortable with this proposition quite quickly. We moved and mobilized the team and ended up buying two very good businesses, at a discounted entry point over a very short timeframe. Just to briefly summarize 2024 and looking ahead into 2025 then. Firstly, in terms of 2024, as Siobhán has taken us through the financials, we're very pleased with the progress we've seen. All the key financial metrics have shown significant growth. In parallel to this, we've managed to acquire Drury's and Claro, as we've just gone through. We're really starting to see the benefits of those two businesses this year. In addition to Claro and Drury's, we also added in a synergistic bolt-on in Supreme Tapes. This provides us a new product offering in our Premier Limpet's adhesive tapes business, which continues to trade very well.
We've also added to our team, which enables us to continue scaling up as we roll out our model, we managed to do all of this whilst a lot of us were flat out on the IPO process for the last six months of last year. That was obviously a key milestone for us. We've a much more recapitalized balance sheet on the back of that, it left us in a very strong position coming into 2025. In terms of 2025, firstly, we started the year well. We're trading in line with our expectations. Despite the economic uncertainty, we're benefiting from having good market positioning and a diversified service offering. We've got a number of very exciting organic growth initiatives which we're working on across our operating companies at the moment.
We've landed EMC, which I think we're particularly excited about, we see a lot of growth potential with that one. We've also got a number of other exciting opportunities which we're looking at, we've got a very active pipeline, which we add to on a weekly basis. In terms of deal flow and deal source, we get a lot of our deal flow through regional corporate finance firms, as I mentioned, we're starting to get a lot of off-market opportunities, too. Since we've been on the market, there's more opportunities coming directly into us, which is also very helpful.
Finally, really, we believe we've a very capable team at a group level, but also at an operating team level as well, to take advantage of these opportunities and really capitalize on being on the AIM market, in an effort to accelerate and roll out the model of our buy, improve, build strategy. I'll now pass you back to Hugh, who's just going to wrap up before we take any questions anyone may have.
Okay. Thanks, Mark. Well, hopefully from that you can see we're very pleased with the results that we've been able to present today for 2024. We have a good start and a confident start to 2025. As Mark said, we believe we've now managed to assemble an exceptional team. The model is clearly, in our view, working well and has scalability. We have multiple opportunities both within the organic growth of our existing operations and the ability for us to scale those, and secondly, on the acquisition side, on the input side to our business and our model. We're very pleased to be able to present the results. I hope you've enjoyed hearing our story and how we've done it. Probably at this point, we've got to the point where we can take some questions.
Superb. Thank you, Hugh, and the team. Thank you, everybody, for the questions that have been submitted. We've had quite a few that have been submitted pre and also submitted live. Just as a reminder, if you'd like to ask your questions, please do type them into the box situated on the right-hand side of your screen. Let's start with the first question that's been submitted here. How does Amcomri ensure continuity of leadership and staff retention during the transition period of acquiring a new business?
Okay. Thanks, Scott. Probably pass that one to Mark to.
Yep
respond to.
Well, I think a key part of our investment criteria is actually, as well as the financial parts of the criteria, is understanding exactly what vendors want to achieve from the transaction. The financial outcome is very important, but we spend a lot of time at the outset of any deal process understanding what their personal ambitions and objectives are, so then we can then build and tailor a flexible deal structure around that. Very often that involves building a transition plan and a retirement plan for the vendors so they can actually achieve those ambitions over time. In parallel to that, we'd also bring in a new management team alongside that, too.
Superb. Thank you for that. What is the anticipated impact on tariffs on Amcomri?
Okay, thanks. I'll probably talk to that one. If you look at the tariff as this has emerged over the last few months, I think the first things that we've probably all learned is firstly, it's an unpredictable situation, and secondly, it's difficult to use history as to what is to guide the future performance because it's quite unpredictable in terms of how it all evolves. If we then boil that down to Amcomri's situation, Amcomri's position, we're relatively fortunate that by design, the markets and the services and the products that we are either providing or manufacturing are not substantially, so far anyway, affected by the impacts of tariffs.
To give you an example, if you look at our embedded engineering businesses where we have a significant presence in infrastructure in terms of energy production with oil and gas or rail infrastructure or power, it's relatively unaffected by the wider tariff challenges that have emerged over the last few months. I think if you look at the manufacturing side, there's potentially more sensitivity to those tariffs there, but what we've seen so far is very little impact on any of our operations in manufacturing as a result of the changes in tariffs. The one thing, of course, you have to say is things change quickly.
For those of you that have sort of linked to or know about the energy industry, the bioethanol industry, which two or three weeks ago was completely unaffected by tariffs, has suddenly been affected by tariffs as a result of some of the changes that have come through. It still is a moving landscape, but I think at this point where we're at, we're pretty comfortable that we haven't seen a significant impact from tariffs on the business.
Thank you for that, Hugh. Next question is, how is Amcomri positioning itself amid rising costs in raw materials and skilled labor shortages in the U.K.?
Okay, I'll probably take that as well. I think to consider the impact on our business you probably just need to separate the business into its constituent parts. If you look at the embedded engineering business, slightly different dynamic there to manufacturing. If we look at the consumption of raw materials in embedded engineering, it is a lower component or low component of our activities. Movements in raw materials or components in the embedded engineering area has a far less leverage on the outcome of the performance of the business. Virtually or probably half of our business is not susceptible to raw material movement, price movement for that reason.
If you look at the manufacturing side of the business where our input side requires us to purchase materials or components and then operate on them, there's a higher risk there of raw material price escalation impacting on the business. We then mitigate that through two specific processes. Firstly, the types of businesses that we buy, we make sure generally that we're not buying in a commodity environment. We select those businesses in our acquisition criteria to ensure that we have got protection from big movement on raw materials. That's one of our selection criteria for acquisition. We try and avoid that situation in the first place. If we do have a business that has a sensitivity to raw materials, we then have a series of mitigations that we will apply to make sure that that doesn't significantly impact the outcome.
That would be things like, for example, having very robust cost models so that we can see early movement of raw materials. Our contracts and supply position would aim to de-risk it with competitive tension in there to avoid price escalation. Thirdly, we make a specific conscious effort to avoid any contracts that don't allow us to pass on the implications of any incoming raw material price increases. We generally have escalation clauses that allow us to mitigate any input side changes. In terms of the labor shortage, that is a challenge for a lot of industry and engineering businesses. It's a constant work in progress for us in terms of replenishing the aging profile that may exist in our workforces.
We have apprentice programs, and we also have a very good record in attracting the right talent into our business to allow us to both replace resources or people that are looking to retire, or secondly, to support expansion in our businesses where that opportunity exists.
Excellent. As per the admission document, the board hold 48.1% of equity and the free float is 25.3%. Do the board see-
I think that was your question. Graham, would you like me to-
Yeah, if you don't mind. Sorry, that just disappeared from me.
I think the sensitivity in the question is, there's potentially a dominant group. We're a newly listed company, and we'd recognize there's a lot of sensitivity around that, Scott. I think the way that we approach that is in terms of our governance, which Siobhán has touched on in her presentation. We've got a very strong approach to our governance. We've been very careful as we approached and went through the IPO to select experienced NEDs who can help us with any potential tension that could exist there. I think it's fair to say we've experienced no issues on the journey so far. We're very sensitive to it, and I think we recognize that it could be an issue, but we're working hard to make sure it doesn't become one.
Superb. Thank you. You answered the question beautifully there, so thank you for- saving me-
It's hard what it was.
on that. What are the top strategic priorities for the next 12-24 months as a newly listed company?
Mark, do you want to?
Yeah. I think.
touch on that?
Sure. I think, Scott, probably if you break this into 2 sections. Firstly, in terms of the organic growth, secondly, on the acquisition growth in terms over the next 12-24 months. As I mentioned, there is a number of exciting organic growth opportunities that we are looking at the moment. This could involve some potential CapEx investment in some of our precision engineering companies to meet the demand due to the end markets that they are servicing at the moment. It could involve synergistic bolt-ons, as we have shown already in previous businesses. Looking at the acquisition side, I think at the time of the IPO, we said if you look back over the last 4 years since we rolled out our model to a larger scale, we have added in 13 acquisitions over that period.
Going forward, I believe we can continue to do at least 2-3 acquisitions per year. Over the few months that we have been on the market, that strategy has not changed. We believe that over the next 12-24 months, really, a lot of exciting organic growth opportunities across our group, but also continue the roll-out of our acquisition model too.
I think this is probably a good follow-on question from that, but how do you balance financial discipline with growth ambition, particularly in a higher interest rate environment?
That's probably one for Siobhán.
Yeah. We'll take Siobhán.
Yeah.
Would you like to answer that?
In terms of our financial discipline, we have a very strong financial reporting system in place. We're consistently monitoring our budgets and forecasts with very robust internal controls, approvals, very clear financial policies, procedures in place. We've very clear cash flow management procedures. I outlined them a little bit earlier. We're constantly monitoring our debt management, ensuring all our covenants are met, and aligning that financial structure with long-term objectives, really.
Superb. Thanks, Siobhán. Next question is, can you describe the governance structure and how retail shareholders are represented in key decisions?
Would you like to take that?
Yeah, I might take that one as well. We have a very clear governance structure in place at the top co level. We have a board that's made up of the exec team that you can see here. That's supported by a very capable non-exec team that we brought on board at the time of the IPO. This is underpinned by new committees that we've put in place in terms of we have an audit and risk committee, a nominations committee, a remuneration committee. Multiple committees now to help us balance that governance structure. Underlining that as well, we have monthly board meetings at an operational company level. Very strong governance structure in place, I think will really alleviate any fears that retail shareholders would have.
Thank you, Siobhán. Next question is, do you centralize any services across your portfolio to increase efficiency or cost savings? How quickly is that implemented post-acquisition?
I'll pick that up. One of the fundamentals of our model is that we don't create a conglomerate where as we scale up and get larger, the central overhead rises linearly with the size of our group. We're very keen to ensure that we coach and train autonomous high-performance teams, such that as we scale and grow, there's a favorable disconnect between the size of the group and the size of the enterprise that we have. That requires us to coach and implement processes and procedures and basic platforms in our operating companies to enable them to do that, and then coach the teams to gradually and progressively improve their performance, and build their competency so they can build their business.
The second thing that we're keen to do is to not link the businesses in a way that restricts them from their own organic growth opportunities and their own development. That comes with a slight potential downside of duplicating costs, but what we find is the freedom of action, the freedom of management with the correct strategy, processes, and plans around them far outweighs that. It also gives us flexibility in terms of our longer-term options with respective companies if we were to choose, in the longer term, to make a divestment. It doesn't cause a difficulty disconnecting that from the group if we so choose to do that as we develop.
Do you foresee moving to larger scale acquisitions, so maybe GBP 10 million plus? If so, when might that be?
Mark, would you like to take that?
I'll take that one, Scott. Firstly, I think going back to our original investment criteria, we want to maintain the disciplined approach of acquiring businesses at what we call the low end of the mid-market. The reason for that is because we don't see a huge amount of competition in that market. Also, there's a perceived transition risk associated with losing key dependencies through a transaction process that might put some of our competitors off. We will maintain staying within that bracket in terms of businesses up to about GBP 3 million in EBITDA. That said, we're on the market now. There are a lot of opportunities coming into us directly, and if good compelling propositions come into us, which are slightly higher, we will absolutely look at those opportunities, too.
You may have answered some elements of this in that question there, Mark, with the buy and build strategy, do the owners sometimes find it difficult to remove themselves? How do you manage the relationships that they have personally?
Shall I take that?
Yep.
It's an interesting question, actually, because owners often approach the sale of their company with a very clear ambition that they want to extract themselves from the company. Many of these ladies or gents over the years have made it their lives. When we come and we reach an agreement, we're very careful to make sure we align the personal objectives with the objectives that we're seeking to achieve, as well as the financial ones. What that often does is give the owners a runway that is interesting for them to maybe detach from a full-time activity and move more to a part-time activity. We also construct the transaction to de-risk that process financially, so it would comprise of deferred elements, for example, to make sure we have got ownership lock-in.
What we find generally is a lot of owners get to a position where they actually quite enjoy maintaining a technical element, a technical role in the business, and that works to our advantage. If we've got a good relationship with them, they can support the business on a part-time basis and help us then continue to develop the good business that they started and take it to the next phase, to the point where some of the owners that we've acquired from, where we expected them to depart under the terms of the acquisition after two years, after three or four years, they're still working with us and still enjoying it. We have that as a positive outcome for both parties, really.
Why would a seller choose to sell to you instead of a PE house or another acquirer?
Mark, would you like to take that?
Yeah. I think there's a few reasons, Scott. I think predominantly because of the industrial experience and the industrial expertise that we have. As I mentioned, we come across a lot of our competitors. They tend to be either trade buyers or financial investors. I think in the opening slide, which Hugh took us through, in terms of having not just the transaction experience, the financial overlay, but having the industrial expertise as well. When we attend management meetings and Hugh and his operational team very quickly get up to speed with the business, it gives us that differentiating factor, which I think is a key reason that we end up winning a lot of our deals.
Do you use any internal KPI metrics related with management of working capital?
Yeah. Siobhán, do you wish to pick that up?
Yeah, I can do. We have multiple KPIs that we keep a track of. If we look at it from a P&L perspective and work down, we're always focused on gross margin, trading EBITDA, adjusted EBITDA margins. From a balance sheet perspective, looking at our inventory, our receivables, our payables, keeping an eye on those things. That obviously tracks directly through to efficient working capital management. I know I'm repeating myself, but we're very much focused on cash flow management as well. The minute we go into a company, we roll out a 13-week cash flow with each of our management teams, so everyone's very aligned on those KPIs. Then we have multiple operational KPIs that you might have seen at the beginning of the slide. Steve and Mark very much focus at operational level on those KPIs. Weekly KPIs are sent out to all of the team.
We have many metrics that we're tracking.
Thank you, Siobhán. What would you say are your major competitors on M&A?
Mark, would you like to touch on that?
Yeah, sure. I think the space is definitely growing, Scott. Four or five years ago when we set out and started doing a number of acquisitions, we probably didn't come up across too many competitors, but there are some now. There's the sort of what we'd say smaller financial investors, which wouldn't have the depth of experience or as wide a team as we'd have. There's also trade buyers as well that we come across, albeit they would tend to be at a slightly higher end of the market than ourselves. Then there are some other buy and build models in the U.K. and outside of the U.K. that are starting to look at our opportunities as well.
Thank you. Historically, how cycle resilient would you say your subsidiaries have been?
I'll take that. As you can see, Scott, from the presentation we've given, we are distributed over quite a number of diverse markets, and the services that we provide to those markets are diverse, as are the products. That sort of gives us a natural inbuilt resilience. I think historically, if you break that down, certainly a lot of the infrastructure activities that we're undertaking are naturally resilient because there is a constant demand for energy or power, for example, or gas. There are one or two areas of infrastructure which more recently have sort of changed their behaviors slightly. I'm sure many of you will have read about the CP7 rail investment infrastructure and the temporary slowing of that program. That is probably an example of an infrastructure that has been historically resilient but has moved around a little bit recently.
We've managed that situation well, I think. If you look at our manufacturing businesses, again, multiple different products into different markets. More recently, we've seen some positive headwinds coming into some of those markets, particularly the defense sector, where we're providing precision engineering services through two of our companies to defense. Generally speaking, by design, we have selected companies that have got resilient positions, and they don't respond immediately to the industrial cycle. They're not hardwired connected to the industrial cycle. There's an element of disconnect there, and that's by selection that we've acquired those companies.
Thank you, Hugh. Are there other publicly traded companies that you seek to emulate, such as Melrose or Avingtrans? How are you seeking to differentiate yourself from them?
I think if I probably just summarize that, we're not trying to copy anyone. What we are doing is looking at some of the companies you've mentioned, Avingtrans, Melrose, Halma, even Bunzl is an interesting model. We're looking at what they do and selecting ideas and processes from them that we can see are appropriate to our model. We're definitely not trying to copy anyone. What we're trying to do is create our own identity with a particular niche. That niche, you've seen from the beginning at the presentation that I've given, comprises those sort of key skills that we're deploying to a particular market sector that we think is undervalued. In doing that, we do look at other people that have gone on a buy and build route before us and selectively use some of their ideas, but we're not trying to particularly emulate them.
I think our model is good, so we don't need to copy anyone.
Great. Which areas of the business do you see as the most potential for growth?
Well, if we look at organic growth, then Mark can talk about the acquisitional piece in a second. The organic growth, I would say in the short to medium term, there is a lot of activity in manufacturing around the windup of defense activities, with machining associated with that and the services applied to the defense sector that we're associated with. We are benefiting from that. As Mark has mentioned, we've invested twice now in the last 12 months for capacity to service that increasing demand, and that's a very good outcome for us.
I think if we look at the infrastructural area, clearly the decarbonization agenda and the transition of the grid system and the power generation realignment associated with that is a superb opportunity for us, and one that we continue to keep investing in the capability to deliver, most recently with EMC, as we've talked about. That also provides us with lots of opportunities for synergies between our companies in those sectors. I think we're quite well-positioned across both our divisions, and we will continue to invest to service that organic growth, which might be where Mark just wants to add something on the acquisitional side.
Yeah, sure. I think the journey we've been on, I think looking back in the proof of concept stage between 2016 and 2020, we are doing GBP 6 million turnover in 2020, and now GBP 58 million the last year just gone through a combination of organic and acquisitions. I think looking ahead, obviously Hugh talked about a number of these exciting organic opportunities. On the acquisition front, we absolutely maintain we can continue to roll out, as I mentioned earlier, at least two to three acquisitions per year. Also, there is going to be additional bolt-on acquisitions through platforms with our own businesses as well. Depending if we target more on the embedded side or the B2B side. We have a model, albeit we want to maintain an opportunistic approach to how we source deal flow as well.
As I mentioned, that could be through other deal sources or as, and a good example of Drury's and Claro, which were not our typical type of acquisitions. We were opportunistic at that time, so there could be more of those types of acquisitions, too.
Since you started the company, what has the historical return on invested capital on acquisitions post-deal been, in brackets here, once the acquired company has integrated?
Siobhán, are you able to give some flavor to that?
I can do. We very much focus on return on invested capital. If you look at the end of 2024, it's around 18%. That is alongside the investment that we've done in our group overhead, which obviously would naturally reduce that. Our targeted level is to improve that over the next year or two, probably somewhere between 20% and 25%.
Thank you. Is there a timeline or financial threshold at which you'd consider initiating a dividend?
I think at this stage, bearing in mind that we have spent two or three years accreting scale to get onto the market, that was our first goal. We've successfully done that. We've now delivered a set of results that I think are quite pleasing, and we're certainly pleased with them, that demonstrate that now we're on the public market, we can continue to scale. We see, I think, the next period will be one of reinvestment and actually building rather than considering a dividend. I would say that's something that we're not going to say no to in the future, but at this stage, our absolute goal is to continue to scale the model that we've got, and I think we've got such good opportunity to reinvest to do that. That's a good outcome for our shareholders following that route in the foreseeable future.
Great. Have you ever sold an acquisition? Is that part of the strategy, or is it more of a hold forever type of strategy?
Mark, do you want to answer that?
Yeah, sure. No, we haven't sold any acquisitions as of yet, is the short answer. No to the second question as well, Scott. No, we are absolutely, as Hugh said, we've been looking for scale as we've been growing over the last number of years. We got onto the A market. We're looking to continue to add to that. However, there are some businesses within the group, which as we have evolved and become more defined into the two divisions, they may become non-core at some point, and there may be an opportunity as we've rolled out our buy, improve, build strategy to get the businesses to a place where actually a capital event might be the right outcome for them. None as of yet, but certainly something we'll consider in due course.
Thanks, Mark. Please discuss the organic versus acquired revenue growth, as well as return on capital employed. What's the average EBITDA acquisition multiple?
Mark, would you like to touch on that?
Yep, sure. Starting with the second question, Scott, the average acquisition multiple, typically, over the last number of years, we've targeted three to four times EBITDA. However, we have gone quite considerably below that on a number of occasions and also gone slightly higher than that as well, depending on a number of factors on in terms of how compelling a proposition is. Generally, between three to five times would be our target. In terms of the split between the revenue and the earnings growth, as Siobhán took us through the slides earlier on, we focus on earnings growth in terms of EBITDA. I think last year we had 11% organic earnings growth.
Superb. Thank you. How much capacity have you got for future acquisitions?
Yep. Do you want to take that?
Mark?
Yeah, sure. Take that. That would be good.
At the outset of the time we did the IPO, Scott, we said that we were comfortable getting to a net debt to EBITDA of between 1.5-2 times. As at the end of 2024, as shown in the accounts, that ratio was just under one time. It was 0.8 times. We've obviously added in EMC now, we hope to complete at least one more acquisition towards the end or during this year, if not more. That would get us to a ratio of 1.2, 1.3 times. Based on rolling out another 3-4 similar acquisitions over the next 18 months, we'd have sufficient debt capacity within those acceptable limits of 1.5-2 times over that period.
That's great. I'm pretty sure we're getting sort of towards the hour mark, I appreciate you guys have got other meetings to go to, we'll maybe squeeze in one last one, which I'm sure a lot of investors are interested in, and that is, what does the acquisition pipeline look like?
Mark?
Yep.
Have a go at that.
As I mentioned earlier, Scott, the acquisition pipeline, it's very active. It gets added to on a weekly basis. I think we had a number of exciting opportunities that were included in the admission document back before Christmas. The first acquisition on that pipeline was EMC, so we're glad to firstly get that one over the line. There are a number of other good opportunities split between the embedded division and also the B2B division. As I mentioned, now that we've extended our sources of how these deals come into us, there's a number of good opportunities, both divisions and ranging in sizes, we look forward to progressing those over the next number of months.
That's great. That's all we've got time for at the moment. Hugh, maybe I could ask, give back to yourself for maybe some closing remarks.
Yep. Thank you, Scott. First of all, thank you for everyone for taking the time to dial in. Hopefully, you can see, I think we've managed to do what we said that we'd do at the IPO. We've had a, for us, a very pleasing set of results. We've made a very confident start to 2025. I think we've got good prospects, as Mark's explained, both on the acquisitional side and some excellent organic earnings opportunities, both by improving the businesses we've got and linking them and gaining synergies between the businesses, most recently with the addition of EMC. We very much look forward to talking to you in September with our interim results.