Hello, I'm Andy Thomis, Chief Executive at Cohort plc. I'm here with Simon Walther, Cohort's Finance Director, to take you through our interim results for the financial year ending in April 2023. We've refreshed the presentational structure a little. For those who've attended one of these before, what follows will be very familiar. I will begin with an overview of the financial and operational highlights. Simon will then give more detail on the performance of our six businesses. We'll take you through the cash flow. I will round off with some comments about the outlook and our expectations for the full year. Let me begin with the financial highlights. The big picture is that we've seen a very substantial improvement in performance compared to the same period last year. Revenue and profit were both up very strongly.
Revenue was up by almost a third to GBP 77 million. Adjusted operating profit and adjusted earnings per share both grew by a factor of around three to GBP 5 million, and just over GBP 0.10 per share, respectively. It was also a strong period for new orders. The group's total order book grew to over GBP 304 million with order intake of GBP 88.6 million. That is slightly behind the GBP 105.3 million we achieved in the first half last year, but that included a single order of almost GBP 50 million. At around 95%, revenue cover for the second half is the strongest we have seen. We now have orders that will generate revenue for a full decade out to 2032.
Following these strong results, the board has continued our progressive dividend policy with a 10% increase in the interim dividend to GBP 0.0425 per share. The cash position at the period end had moved to a small net debt. Simon will say more about the specific circumstances around this, but I'm pleased to say that by early December, we were in a strong positive cash position once more. Simon will give a more detailed breakdown of the performance of our divisions, but this slide shows the main factors behind the group's performance improvement. Starting at the top right, we've seen an especially pleasing result at Marlborough Communications. One important factor has been several U.K. hearing protection programs all running in parallel. We've also seen strong sales of drones and electronic warfare equipment.
The result has been a profit in the first half that almost matches the full year performance last year. Moving on, performance of Chess has been much better in this period, with improved revenue and profit after a disappointing loss in the first half last year. It still hasn't reached the level of performance we would like to see, but it is very much on an upward trend. At SEA, we've seen steady profit performance, but a very strong order intake that leaves them set well for the full year. These strong performances have been offset to some extent by EID, where revenue and profit have been poor. Moving to the final point, the underlying picture has been one of strong demand from both domestic and export customers. That has contributed to the good performance in terms of revenue, profit, and orders.
Boiling those points down to their essentials, across the group, we saw three major factors that contributed to the positive outcome. Firstly, sales to the U.K. Ministry of Defence were much stronger than in the first half last year. That was particularly true at Marlborough Communications, where we saw very strong demand for equipment such as hearing protection systems and drones. To a lesser extent, we saw increased U.K. sales of Chess, ELAC, and MASS. Taken together, that increase accounted for almost half of the revenue improvement. Equally importantly, the action we took to improve operational performance last year has continued to bear fruit. That has been particularly visible at Chess, where we've turned around some problem projects, and we've taken action to avoid future repeats.
Some changes that we've made at SEA and EID aren't yet visible in their numbers, but we are confident that they will be in future reporting periods. Finally, the market dynamics are complex, but overall, they've resulted in an increase in demand. For instance, the conflict in Eastern Europe has created both barriers and opportunities, and is likely to do so for some time to come. The net result, in terms of both revenue and order intake, has been positive. That has led to our record order book, and it has also resulted in a good set of opportunities for future orders in the coming months. That is the story of the first half in broad brush strokes.
I'd like to ask Simon now to provide a more detailed breakdown of how our subsidiary business has performed and to highlight one or two other financial details of the statement.
Thank you, Andy. Hello to you all. I'm Simon Walther, the Group Finance Director of Cohort plc. I'm now going to take you through the financial results in a little bit more detail. On this slide and the next one, you will see a summary table for each business. The tables present the revenue, adjusted operating profit, and order book in white, with the comparative figure for the first half of last year in blue. Full details are shown in the appendix of the presentation that is available on our website. Starting with Chess. We have seen a welcome return to profitability here. This followed some changes to the management and controls of the business last year. The improved revenue was driven by increased export orders and delivering more efficiently on its order book.
The mix of work did lead to weaker net margins. As Andy stated, we continue to work on turning around some problem projects. As Chess enters the second half with 95% of its revenue on order, we expect them to have a much stronger year end. Its medium-term prospects for Naval systems are good. ELAC, our German-based business, had a weaker first half than last year due to revenue mix. The first half deliveries dominated by work on its long-term Italian sonar contract, where we have been cautious in recognizing margin. Sales of its higher margin spares and support business, especially of legacy products, were lower, in part due to delays in German government export license approval. The government is finalizing new export legislation. That has taken resource away from processing the backlog of license applications.
We do expect to see some easing of these delays in the coming year. Like Chess, ELAC is well underpinned, and we expect them to deliver a stronger second half. Its overall performance for the year will be lower than last year. SEA produced a solid first-half performance. Their order intake was very strong, securing a record value support order for the Royal Navy, as we previously announced. The pipeline for further naval system orders in the coming year is very good, both in export and domestic markets. SEA is also well underpinned for the second half at around 90%, and we expect them to deliver a stronger performance than last year. Turning to the other three divisions. Marlborough Communications had a very strong first half, delivering trading profit at almost the same level as the whole of last year.
As Andy mentioned, increased activity with the U.K. MoD was a large contributor. Marlborough Communications enters the second half with most of its revenue expectation on order and with good opportunities for further wins in the coming months. We expect them to deliver a much stronger result for the full year than we saw last year, and to lay a good foundation for the next financial year. EID, our Portuguese business, had a weak first half on much lower revenue. This was a result of continued order delays, but EID has also suffered more from supply delays, in turn impacting its own deliveries to customers. We do expect a stronger second half from EID, as much of its revenue is on order. Overall, the performance for this year will be lower than last year.
Looking forward, the pipeline is good. We expect some of the delayed orders to be secured in the coming calendar year. For EID to recover in 2023, 2024. MASS remains our highest contributing subsidiary. Despite slightly lower revenue, it had a stronger trading profit due to the mix of work. MASS is nearly 90% underpinned for the second half. Overall, we expect it to deliver a result in line with last year's. Turning to the group cash flow. This declined in the first half following a large working capital build in the period. This was particularly visible at Marlborough Communications, where the receivables were much higher due to its higher revenue. Also, at ELAC and EID, where we saw higher stock levels put in place to cover supply issues. That resulted in higher supplier payments.
Partly offsetting these developments, it was pleasing to see the cash performance at Chess improve markedly. The timing of receivables reversed shortly after the first half period end, and we have seen in early December the group's small net debt returning to net funds of over GBP 7 million. We still expect the year-end to be around GBP 4 million-GBP 5 million in net funds as we build stock and work in progress in the second half, particularly at ELAC. Finally, I'm happy to say we completed the acquisition of the minority of Chess at the end of November for GBP 1 million in cash. This will have a positive impact on the earnings per share in the second half of the year when we expect Chess's profitability to be much stronger.
Thank you for your time, and I'll now hand you back to Andy to take you through the group's outlook.
Thank you, Simon. In this final section, I'm gonna talk about the outlook for the second half and beyond, both in general terms and looking at the breakdown of our order book. Let's start with the main forces driving demand. One clear and unavoidable ongoing event affecting our markets is the situation in Ukraine. It has had a galvanizing impact on security policies worldwide. It has succeeded in unifying and revitalizing the NATO alliance that some had declared moribund. It has kept defense and international security a high priority in Europe despite the economic crisis following the COVID epidemic. It has led to transfers of defense equipment to Ukraine that have depleted stocks and generated demand for replenishment. All of these factors have tended to generate increased demand. At the same time, the rapid change in priorities has disrupted some existing programs.
Short notice overseas deployments have made it difficult for us to deliver to our customers in some cases. Customer countries are reevaluating their priorities. That is something we need to track carefully. The other major driving force is the tension in the Asia-Pacific region. That is being driven by the Chinese investment in its armed forces, especially its navy, and its increasingly aggressive posture towards its ASEAN neighbors in Taiwan. At the Chinese Communist Party Congress in October, the National Charter was amended, if I can quote, "To resolutely oppose and contain Taiwan independence." The recent increase in internal opposition might make a special military operation look like an attractive option to President Xi, recent events in Ukraine notwithstanding. These may seem like quite abstract and distant considerations. They have a tangible impact on Western defense businesses like Cohort.
Looking at our domestic markets, the U.K. has launched a review of the integrated defense and security strategy it adopted in 2021. That will report in the early part of 2023. It wouldn't be surprising if this resulted in an increased focus on the risk of a European land conflict. The concern about the potential international impact of Chinese naval expansion is unlikely to be reduced. In Portugal, we see an increasing list of domestic opportunities for EID, partly a result of an increased focus on defense. In Germany, ELAC has seen a boost in domestic orders and opportunities, offsetting some of the difficulties it's faced with export controls. In our export markets, most NATO countries have pledged to increase defense spending since February this year. We've seen a direct impact in some of our markets, with new opportunities emerging and existing orders increased in scope.
Further east, we see strong demand in the Asia-Pacific region. Australia has continued to commit to strong growth in defense spending under the Albanese government. Japan has just announced a doubling of its defense spending as a share of GDP by 2027. It's also joining the Anglo-Italian next generation combat aircraft project. Elsewhere in the region, spending has grown strongly, notably in the Philippines and Taiwan. NATO and Asia-Pacific are the regions we supply most. It's also worth mentioning that some of the factors that held us back last year, notably COVID restrictions and supply chain tightness, have diminished even though they haven't disappeared completely. Overall, the demand picture of Cohort is positive. This slide shows the tangible results of that demand picture. At over GBP 304 million, Cohort's order book is the strongest we have ever announced.
It's also the most long-term and will generate revenue for a full decade out to 2032. In terms of size, SEA now has the largest order book at almost GBP 100 million. MASS and ELAC aren't far behind at around GBP 60 million each. All six subsidiaries have order books valued at over GBP 20 million. A very unusual position for MCL in particular. In terms of order book duration, SEA is also the strongest with contracts for long-term supply and support of naval systems. ELAC and MASS also have long-term revenue baked in. In the shorter term, we can see over GBP 82 million on order for the second half of the year and almost GBP 80 million on order already for next year. We expect to see that number grow considerably in the coming months.
Here you can see the first two columns of the chart I've just shown in numbers, together with a comparison against the same position last year. The two shaded columns show the revenue already on order for the second half of the year compared to the same position in 2021. One point that stands out is the much improved position of Marlborough Communications, where we have over GBP 18 million for delivery in the second half compared to around GBP 12 million last year. That's a very strong position to be in, and MCL is capable of winning and delivering more revenue before the year end. Together with other improvements, that more than outweighs a weaker position at MASS and Chess compared to last year. At Chess, that weaker position in part reflects the greater level of revenue achievement in the first half.
Overall, we now have 95% coverage of the consensus external revenue forecast for the full year on order. Of course, the GBP 82.5 million of revenue isn't guaranteed. Although it's on order, it could be delayed by supply chain issues, customer availability or various other factors. Nevertheless, it's a strong position to be in at this time of year. I can also say that we see some very good prospects for further large orders. That brings me almost to the end of our presentation and a summary of the main points I wanted to make. The first half of this year has been a significant improvement compared to last year. That's down to a combination of greater demand, especially from the U.K., and better efficiency.
It's reflected in strong revenue growth and quite striking growth in profit and earnings per share. As a result of that performance, the board has felt confident to increase the interim dividend by 10%. We have grown the dividend every year since our IPO in 2006. As well as strong revenue and profit delivery, we've also seen strong order intake in the first half. That gives very good order cover for the full year and beyond. There are still risks, as always. We remain confident that we can return to growth this year in line with the expectations we shared in July and again in September. Our record order book doesn't just cover the second half. It now provides solid revenue out to 2032. That reflects the positive developments in demand patterns we've seen, especially in the course of 2022.
Those demand patterns, and in particular, the set of opportunities that we're currently working on, gives us the potential to accelerate our growth next year and beyond. In closing, I want to take the opportunity to thank our management teams and employees for their continued hard work. Let me leave you with this snapshot of how we see ourselves developing in future years. We've made considerable progress towards this vision from our earliest days on the market back in 2006. Our strategy continues to be to generate growth, both organically and through acquisitions, while paying a dividend that reflects our successful financial performance. We believe this offers the best long-term returns for investors while creating high-value employment and enhancing the security of the U.K. and its allies. Thank you for your attention.
Ladies and gentlemen, if you've dialed in and you wish to ask a question, please press star one on your double keypads. Today's first question is coming from Mr. Ben Bourne, calling from Investec. Please go ahead, sir. Your line is open.
Good morning, gents. Well done with those results.
Thank you, Ben.
I have a few questions. Andy, where more specifically do you see the elevated levels of demand post Ukraine enduring for the medium term? Is it gonna be in MCL, MASS, Chess or elsewhere?
I'd hesitate to jump the gun on the U.K.'s review of the Integrated Defense and Security Strategy, Ben. I think the Ukraine conflict is certainly asking questions about the strategy that NATO countries have had for land defense and air defense in particular. I expect to see new demand generated in those areas. I think a particularly important is, if I can use the acronym ISTAR, Intelligence, Surveillance, Target Acquisition and Reconnaissance. I think together with communications as well. I think some of the events in Ukraine have shown just how important those capabilities are. You know, certainly equally as important as the kinetic capabilities of artillery, missiles and so on.
I would expect to see more demand generation in those respects as well. Those are areas that several of our businesses have got quite a lot to offer. MASS in terms of the electronic warfare operational support piece. Chess very strongly in terms of battlefield ISTAR, EID in terms of battlefield communications, and certainly MCL across a whole range of capabilities. I do expect to see opportunities coming from that, but we'll have to wait and see for the sort of cogitations of the U.K. and other countries to decide exactly how they want to respond to it.
I think I'll add as well that the in contrast to that the driving force that's coming from Asia is primarily maritime-based, because I mean, the Chinese are investing very strongly at naval capabilities of blue water, surface navy, and many submarines, a very large submarine fleet. Those are creating challenges right around that region, from Australia to Japan to the ASEAN countries. Of course, we have a strong naval systems capability relevant for both surface ships, and submarines as well. Those are the reasons that I think we're quite well-placed in terms of the demand patterns at the moment.
Perfect. Thank you. All well understood. To what extent are we or can we benefit from element of urgent operational requirement pricing at the moment? I'm just thinking that you mentioned we're offsetting quite a lot of macro challenges at the moment, and you do mention that supply chain constraints have been easing somewhat, but I'm of the belief that there are still challenges out there. Just a little bit around pricing, please.
We've obviously seen the effects of inflation and we've also seen effects from supply chain constraints which have increased delivery times and product prices as well. That has to be reflected in our pricing. What I would say more generally about pricing, Ben, is that we don't compete with our rivals on the basis of who's willing to accept the lowest margin. We've got some structural cost advantages against the large defense primes in terms of our overhead and in terms of our innovation which enable us to be very competitive in those markets in which we're active. You know, we price a level we think the market can stand.
Of course, in our markets, the customer is constrained as well, so there isn't sort of unlimited opportunities to as what price they're buying is, we don't do that. We aim to achieve a reasonable margin. We don't tend to price, I put this in very inverted commas, strategically, which usually means too low. We have certain strategic cost advantages. Simon, anything more to add to that?
No, I don't think so. I mean, one thing is you highlight is the customer is somewhat limited then in who he can go to to some of these technology solutions in this market. There are not defense showrooms all over the high street, I'm afraid.
Yeah. No, it's not. That's a big capability. Our sort of structural cost advantages.
Showrooms, three hours flight east of here. Perfect. Thank you. Price maker rather than taker. Lastly, Andy, you mentioned the prospects of further large orders in the pipeline. Could you just tell us in what areas, please?
I can't be too specific on these sort of matters. I mean, they're commercially sensitive. I made some general comments about demand patterns. I can say that we do see prospects both domestically and further afield as well. I think it's probably worth me mentioning that there are particularly good set of prospects at EID. EID's had a rather unhappy first half of this year rather as last year, not looking great for them. I'm really quite optimistic about their prospects in the medium term. Not only have they got some good domestic prospects, but they are building relationships which have led to some very good export prospects as well.
I'm thinking both for their naval communication systems and also for soldier systems and land communications too.
Thanks, gents.
Okay.
Thank you much, sir.
We'll now take questions from [Annabel Houston] calling from Stifel. Please go ahead.
Morning, guys. Hope all well. Thanks for taking my questions. I've got two, please, if I may. The first would just be on cash, and I appreciate the working capital build in the first half. We've seen that sort of reverse since we started H2. More in terms of, you know, your cash terms within contracting. Is there anything we can do there to help that process a bit or maybe seek greater customer advances on some of the larger projects coming through? Second one is more, just more broadly on M&A in terms of, you know, what you're seeing, what you're sensing in terms of, you know, how, what the kind of the deals are sort of coming across your desk at the moment, please.
Okay. Annabel, I'll take the cash question. Obviously, we have agreed terms with our customers, as you know, our major customer is the U.K. MoD, who I have to say are a very good payer. Provided you get your administration in order, you will be paid normally within 14 working days. The particular case in question this half year was that MCL, as you can see, has had a very busy first half and a particularly busy last couple of months of the period. You know, it's just being able to get the stuff out the door and then get the MoD paid. It was actually an administrative blip at the MoD themselves, where they were placing orders sort of quicker than they could load them onto their system to get paid.
I'm pleased to say that all of the MCL debt was paid after the shortly after the half year point. In terms of other customers, generally on our export customers, we take obviously a more prudent approach with using sort of protective measures and that, like letters of credit and advances. No, generally all of our customers pay to terms provided we do what we require. It was just simply timing at the half year. As I said, we've moved strongly into net funds already in the first few months of the second half.
Annabel, good morning, by the way. I'll take the question on M&A. It won't surprise you, it's gonna be a slightly general answer. I can confirm that we do continue to have a strategy of growing both organically and by acquisition. I can tell you that we do continue to get quite a stream of opportunities, certainly coming over my desk. We also continue to be quite selective. We see both U.K. opportunities and overseas opportunities to add businesses to the group, either as bolt-ins to our existing portfolio, or as separate and new members to the group.
When we find one that we can do the right deal with at the right price, then we'll go ahead and do it. I can't make any commitments in terms of particular timing or size of deal or nature of deal or anything of that sort of nature, as you would expect. Sorry. I'm sorry, Annabel.
No, no, no. Gosh, no, you can't be. Just to sort of follow on from that, I suppose it's in terms of sort of sellers expectations around evaluations. Are they sort of getting back to sort of more realistic territory or perhaps are we still seeing something of a premium in there?
I would say that We do occasionally see opportunities which are plainly priced at a multiple that we don't think is realistic. For the most part, when we're talking to organizations that actually want to do a deal, we're at a sensible place. It's more a question of the quality of business and the predictability of earnings and the prospects for growth. If we can agree on those things, then generally speaking, we'll be able to find a mechanism which bridges any pricing gap.
That's very clear. Thank you, both.
That's okay.
Thank you very much, ma'am. Ladies and gentlemen, once again, if you've dialed in and you wish to ask a question, please press star one at this time to ask a question. The next question is coming from Robin Speakman, calling from Shore Capital Markets. Please go ahead, sir.
Good morning, all, and congratulations again, gentlemen, on a strong first half performance. I've got three sort of questions. Just following on from questions on the sort of working capital cycle. Just for my knowledge, really. Is there any sort of seasonality through the group? Where might you expect, if you like, the sort of working capital to peak during the year? Secondly, just again on acquisitions, just noting the geopolitical situation, has that impacted the acquisition prospect pipeline at all? Has it impacted prices? Thirdly, just on the supply chain issues, messaging on improvement is noted, but I just wondered how that has sort of impacted the order book.
Has supply chain frustration extended the order book at all, given rising costs may impact the margin delivery from the order book? If so, how long do you expect that to clear? Thank you.
Okay. Well, I'll ask Simon to cover the point about working capital and seasonality first, and then I'll pick up.
Yeah. No, absolutely. Good morning, Robin. Seasonality, well, there is a bit, again, because of the dominance of the MoD, we see often a quite high spend by the MoD generally in our second half. Again, it comes down because their year end is March, provided we can get things done, we can usually get the cash in the right side of, or I should say the left side of April the thirtieth. To be honest, obviously, a lot of our work is longer term projects, and it depends upon the timing of how those projects, you know, first set up and how we deliver against them. I wouldn't...
I would say there probably is a little bit of underlying seasonality in that I would expect normally a bit of a peak of working capital around our year end. Then it sort of flows into cash during the summer. Then you see another sort of peaking as we see now. Then again, it flows sort of from November, December onwards and then starts to peak again in the February time. As I think we grow more of our export business, and I suppose over the longer term, the MoD's, if not, as a percentage, will reduce, we probably will see that seasonality phase out. I would expect our cash flows to be much more linked to larger single projects that may occur in the group, and what happens with those.
I'll hand back to Andy on that.
Yeah. Yeah. M&A and the geopolitical situation. We haven't done one since February this year, so I can't give you an absolutely clear answer on pricing. I think, if anything, what it's done is to prompt some founders or owners of smaller businesses to think, you know, this is a good period for us. It might be a good moment to think about finding a new owner. I haven't quantified this, but I suspect that at least some of the ones that we see coming across our desk are sort of for that reason.
I'm not sure I could put a give you much more detail than that at this stage or even a really sort of statistically meaningful number that I can revert to you on there. Sorry, what was your final question again, Robin?
Supply chain.
Supply chain.
Yeah.
Supply chain and impact on order book. Well, we're very used to taking long-term orders here at Cohort. I mean, you can see that, as I mentioned, you know, the current order book goes out to 2032. When you do that, you've obviously got to take note of the prospects of inflation. With the very long-term contracts, we will either use an index or a sort of publicly available index from, you know, the U.K. Office for National Statistics, or we will build in an expectation of inflation over a period of time. You know, for orders that we're taking now, they're taking account of the current environment. I see from the figures published today that U.K. inflation seems to have peaked.
Let's hope that's true. We, because these contracts are so long term, we have to be aware of the inflationary environment and, you know, price mechanisms are in there to make sure that we take account of that. Has it affected our ability to take in orders? I would say not. I mean, you've seen that we've had another very strong half for order intake. We've got a record order book in total.
Um, what it, what it has affected, uh, in previous periods, and to some extent in the half that we're reporting on now, is our ability to deliver because i t can delay, um, um, manufacture when we get… You know, we've seen some extraordinary increases in lead times, you know, sort of from twenty weeks to ninety weeks for certain electronic components. Um, we've had to manage that. We've had to manage customer expectations. Uh, and in some cases, we've managed it by finding alternative suppliers of alternative parts. B ut I would say that that influence is now very much on the wane, although we do still see, um, some impact from it. I hope that covers what you wanted to, um, to understand.
Okay. Thank you very much. Thank you.
Thank you, sir. As we have no further audio questions at this time, let's now call over to Ms. Lucy Venables. Please go ahead, ma'am.
We have a question from Andy Chambers at Edison Investment Research. Do you expect the increase in spending levels globally to accelerate naval program schedules, particularly in Europe? Do you think the focus for new funding will be more land and air-based?
Well, that really goes back to Ben's question. And I think there are two separate sets of drivers here. You know, I, I wouldn't want to sort of jump the gun, as I said, on the various reviews of requirements and priorities that are going on as a result of the Ukraine invasion, but I would expect those to focus on matters like information, communications, intelligence gathering, target acquisition and so on, as well as sort of harder kinetic capabilities, but land-based, and very much air defense. And the opposite of that, of course, drones, which we're only seeing, you know, a very strong impact from both sides in the Ukraine campaign.
At the same time, I think the forces from Asia-Pacific and the fact that those could have a truly global impact mean that Europe, and especially the U.K., has to focus on that region, too. There we're talking primarily about naval capabilities because that's how you project power over such a long distance. The answer is both, Andy, I think.
There's a follow-up question from Andy. Are there any major long-term contract renewals pending at SEA or MASS?
Not in the next 12 months, I would convey is the answer.
There's a question from Julian Nettlefold at BATTLESPACE. Can you tell us more about the Counter-UAS opportunities at Chess?
Yes, Julian, I can. Sorry. Chess has got a very capable Counter-UAS system. It's very much at the upper end of capabilities. That's why it's been used by some of the world's most capable armed forces in dealing with very challenging threats. It isn't likely to be competitive with the sort of lower end of UAS detection systems. It's not a high volume system, and we don't expect to see high volumes.
What I would say, though, about demand for Chess is that ground-based air defense generally, in particular close range air defense, is something that's gonna see, I'm thinking much greater priority in coming years because of the experience that, I mean, we've seen it on the news this morning, of loitering munitions and so on, and cruise missiles, that are such a significant threat to infrastructure. Chess has very strong capabilities in those areas as well, both in terms of end user systems that it provides and systems that it provides into other prime contractors. I see that as being a demand force that's likely to be positive for Chess.
There's a question from John Warren at Tellworth Investments. With the strong order book and pipeline, are there any capacity constraints within any of the businesses, and what are the CapEx plans going forward?
Well, in terms of capacity constraints, we are growing the size of the organization in terms of people, and recruitment has certainly been a challenge. I'm happy to say that it's a challenge we've largely been meeting, and we have successfully grown the size of the organization quite significantly over the last 6 months and over the last year. That continues. I mean, we are fundamentally a people business. We're more people-intensive than we are capital-intensive. That is certainly a constraint, but it's one at the moment that we're rather successfully dealing with.
I think we can offer interesting careers to capable people and perhaps more so than they would have, in some of the larger, defense businesses where they might be sort of pigeonholed a little more. Whereas in our world, they get a more interesting level of interface with the customer and operations as well as technology. Capital expenditure, we do have some plans which, we've commented on in our annual report. I'll invite Simon to say a word or two about that.
The comment I'd make is obviously most of our businesses, as Andrew said, are primarily people businesses. Although we will spend a regular amount of capital expenditure on particularly IT equipment, so replenishment, replacement, upgrade, we're not into large machinery and plant. There is a bit of investment to come in Germany over the next few years, primarily in a new facility, but also in some plant to support their, the Italian project particularly. That will see some CapEx over the next few years. Don't see that being particularly. The issue there more is about timing linked to the project rather than any constraints that we have. I'd say more that it is people are our main resource.
Okay. A final question from Peter Ashworth at Shore Capital. Are there acquisition opportunities given the increased demand?
Hello, Peter. I think we've tackled that one, already. The short answer is, yes, there continues to be plenty of acquisition opportunities. As I've said, we do want to be rather selective, that doesn't necessarily translate into a constant stream of acquisitions.
There are no further questions.
Okay. Well, I'd just like to say, thank you all very much for your attendance, and interest, and for your interesting questions. I hope it's been a helpful morning for you.