Good afternoon, everyone, and welcome to Porvair's first capital markets event. For those I haven't met, I'm Hooman Javvi, serving the company as the CEO. We are really glad to have so many of you here, and thank you for joining us to hear more about Porvair. Today is all about the next very exciting phase of our journey. We're going to show you why we are excited about the future. You will hear this at group level. You will see how it comes to life across our portfolio, and you will meet more of the talented team leading our businesses. You will have seen that we released a trading update this morning, which demonstrate continued momentum in the business and our improved performance. Today's presentation will focus on Porvair's opportunities for long-term value creation. Before we start, a brief piece of housekeeping.
I would ask you to take a moment to review the disclaimer on this slide. With that, I would like to begin by playing a short video introducing Porvair.
[Presentation]
Now, let me give you an overview of what we will cover. We have structured today to take you from the group story into the businesses, then bring everything back to how that translates into stronger financial performance and increasing long-term value creation. I will begin by explaining why we believe Porvair is an attractive business, why this is an important point in our journey, and how we intend to accelerate growth and improve performance. You will then hear directly from the leaders of our divisions and businesses, who will bring that strategy to life through market opportunities, customer applications, and growth initiatives. After that, I will update on how we are sharpening our M&A approach before James brings everything together through the CFO perspective. We will then open up for questions.
By the end of today, we hope you leave with a much clearer understanding of what makes Porvair attractive, where we are heading, and why we believe we can continue creating value over the long term. There are three key messages I would like you to take away from today. First, Porvair has a solid foundation and a strong track record of consistent compounding over the last two decades. Second, we believe the group is at an inflection point. The group is now growing at a faster rate. We are very clear on what we need to do, and we are building the capabilities and enhancing execution. The third is that we see a significant runway ahead. We have opportunities to accelerate both organic and inorganic growth with a consistent focus on margin, cash, and returns. To underpin this, we have introduced a new financial framework.
A lot of work has gone into it, and James will come back to that later in the presentation. There is a great deal happening across the group, and today, you will hear how we are turning those opportunities into long-term value creation. Now, our starting point is really good. The business has a solid foundation. We typically present our performance based on a five, 10, 15, or 20-year CAGR. We think this is the right way to assess our business, as any single year can be uneven, but over longer periods, the underlying pattern is clear. As you can see here, over the last two decades, the group has been remarkably consistent and continued to compound. We have increased revenue from GBP 45 million to nearly GBP 200 million, while improving operating margins from 7% to 13.5%. EPS has increased from GBP 0.386 to GBP 0.423.
Ultimately, all of this is reflected in the total shareholder return presented here. Now, I have seen a wide range of different businesses, and this consistency of performance is really quite special. I think this provides the platform for the next stage of profitable growth. That is the central theme of the next section. When I joined Porvair, I saw a business with strong foundations, specialist businesses operating in attractive niches, a strong entrepreneurial spirit within a decentralized organization, and more importantly, I saw a business with significant potential. It was a great business then, which is why I was excited to join. Having been in the role for 18 months now, spent time with the organization, and seen what we have achieved together, I am even more excited about the future. Our opportunity is to build on our strength with sharper focus, stronger execution, and disciplined capital allocation.
That is what we mean by focus, deliver, and compound. Focus on the most attractive opportunities, deliver through clear accountability and stronger execution, and compound value consistently over time. To understand how we will do that, let me start with the fundamentals of our business model. Porvair is a high-quality industrial business built to deliver consistency of earnings growth. That consistency of earnings growth is how we measure success. These six characteristics have enabled that consistency. First, by design, we operate in attractive and diversified end markets with leading positions in specialist defensible niches supported by long-term structural growth drivers. Second, we provide mission-critical solutions. Our highly engineered products are embedded in customer processes, often protecting valuable downstream assets, leading to high customer retention. Third, technical differentiation is a key feature. We have engineered design, application knowledge, patents, IP, and quality accreditations that create real barriers to entry.
Fourth, this all means that a high proportion of our revenue is recurring, supported by consumables, maintenance schedules, replacement cycles, and regulation. In a typical year, we say that broadly 70%-80% of what we do, we have done before. Then fifth, we operate a decentralized model with a portfolio of specialist businesses. This model combines the entrepreneurial spirit of accountable businesses with decision-making close to customer and agile customer-led new product development as a key feature across the group. Finally, our strong cash generation and balance sheet strength allows us to reinvest capital in attractive organic opportunities and disciplined acquisitions. We are built to compound through structural demand, recurring revenue, strong cash, and disciplined reinvestment. Together, these characteristics support resilience and consistency of earnings growth. Let us look at this across the group. Porvair is a decentralized portfolio of specialist filtration, laboratory, and environmental technology businesses.
We are organized across three divisions, each consisting of specialist businesses operating in niche applications across diverse end markets. Aerospace and Industrial provides highly engineered specialist filtration solutions across aerospace, general industrial, and energy applications. Laboratory provides filters, instruments, and high-value consumables with strong capabilities in water analysis, diagnostics, sample prep, and lab automation. Metal Melt Quality provides world-leading solutions in the filtration of molten metal, primarily aluminum and superalloys. We combine the entrepreneurial focus of specialist businesses with the reach, resilience, and resources of a diversified group. That diversification is even clearer when we look at where we sell, the markets we serve, and our broad customer base. Our portfolio has been intentionally built to avoid excessive dependence on any one geography, end market, or few customers. We sell globally across a broad range of end markets and applications with high levels of recurring revenue.
That diversification matters because it creates resilience. Different end markets move at different times, different geographies face different economic conditions, and different customers have different investment cycles. At the same time, our footprint allows us to stay close to customers and respond quickly to their needs. Together, this diverse end market exposure and low customer concentration supports consistent performance over time. The markets we serve benefit from several powerful long-term trends: resource efficiency and decarbonization, tightening regulation and environmental protection, aging population and increasing healthcare demand, and the growth of the middle class and urbanization. These global trends underpin structural long-term demand across our end markets. Those translate directly into demand drivers for our end markets, and attractive opportunities across aerospace, industrial, life sciences, environmental testing, and aluminum. Many of these demand drivers are linked. Customers are seeking cleaner, safer, more efficient, and more sustainable processes.
That matters because it increasingly shapes the challenges our customers are trying to solve. Which takes me to the next slide. Given what we do, the solutions we provide, sustainability is both a purpose and a growth enabler for us. Many of our products help customer contain emissions, clean up processes, reduce waste, increase process efficiency, and comply with environmental standards. The structural growth drivers we have discussed today directly translates into demand for Porvair's products and technologies. Whether that's helping improve water quality, supporting lightweight, sustainable metals, enabling cleaner industrial processes, or protecting critical systems in aerospace, energy, and industry, we are helping customers solve these important challenges. Sustainability is increasingly a source of demand, innovation, and long-term growth for us. Now, let me tell you why we win in these markets. We win through three reinforcing advantages. The first is technical expertise.
We use deep application knowledge with the ability to engineer bespoke solutions for specialist applications. The second is reliability. Our products frequently protect mission-critical downstream systems. They may be small in cost, but they're critical in function and have been proven in demanding environment. The third is our decentralized operating model. It provides agility and speed, keeps decision close to customers, and supports customer-led product development. Together, these strengths allow us to solve difficult customer problems, earn trust, and build long-term relationships. They also enable a steady flow of new product development with around 40 product launches across the group in a typical year. This adds up to something quite powerful, with each innovation adding another incremental step forward. The opportunity now is to further enhance execution, build the capabilities we need, and create an even more customer-focused and scalable model.
Let me explain why now is an exciting time in our journey. From now on, I will talk you through some of the changes we have made. During 2025, we built the foundations. We established a new ExCo and completed a full strategy review, creating greater focus, clarity on strategic priorities, and stronger alignment of management incentives with shareholder value creation. We increased the emphasis on customer proximity, value selling, performance management, and operational excellence. We also established greater central focus and capability around M&A, including a clearer framework and approach to capital allocation. During 2026, we are accelerating execution by strengthening the team and capabilities, creating a more customer-focused and scalable organization. We have established clear and transparent strategic mandate framework for growth and margin improvement, and developed a more repeatable approach to acquisitions with a disciplined integration approach.
With all of this, we are enhancing the model, retaining entrepreneurial ownership, while adding greater focus, capability, and accountability across the group. To understand how we are doing this, let me explain how our decentralized operating model is fundamental to how we do things. Operating companies have the autonomy to grow their businesses. They retain entrepreneurial culture and full P&L ownership. Decisions are made close to customers, allowing speed and agility in specialist niches. But autonomy is earned through accountability and performance. It operates within a clear strategic mandate and a transparent performance framework. The center executes the group's strategy, capital allocation, and M&A, and sets expectations for a high-performing culture. There's a healthy competition for capital and visibility of returns profiles across the group. The center also enables collaboration and the sharing of expertise and best practices across the portfolio.
The objective is a stronger form of decentralization with clear accountability and more effective support from the center. With this combination, our operating model drives profitable growth while we continue to strengthen accountability across the business. That also gives us a more effective platform for addressing margin opportunity across the portfolio. One of the opportunities we see is closing the performance gap across the portfolio. Let me draw your attention to the bubble chart. This shows that businesses in our portfolio all begin from different positions in terms of scale, growth, and margin, and that some part of the business weren't in the right place. We have a strategic mandate framework with clear priorities, disciplined performance management, operational excellence, and capital allocation to unlock the potential of each business.
We are clear about each side's contributions to the group overall return, so that businesses know how to best contribute to the overall success. We've made strong progress during 2025 and 2026, but there is more potential to capture. We already increased operating margin by 80 basis point from 12.7% to 13.5% in 2025. As James will show you later, we see a pathway to 16%-18% as per the financial framework. The principal levers include active portfolio management, commercial excellence, operational improvement, and ensuring that each business has the right organizational structure to be successful. What I mean by active portfolio management is having a tailored approach for each business in the portfolio. Margin improvement won't come from a single action. It will come from consistent execution across multiple businesses and levers.
That's why we introduced a clear and transparent strategic mandate for every part of the portfolio. We made a significant shift in portfolio mix during 2025 through sharper focus and disciplined execution, supported by this framework. This slide shows the relentless focus we have on margin. We don't manage every business in the portfolio in the same way. Businesses are categorized in three buckets based on margin profile, with a clear strategic mandate: stabilize, improve, and grow. Margin is a key measure, but we also consider growth potential and cash profile. The impact is already visible. In the space of a year, as you can see here, revenue in the growth category increased from 38% to 54% of group turnover. The stabilized category reduced from 18% to just 4%. That's direct result of stronger execution, active portfolio management, and disciplined capital allocation.
We will continue improved performance through this mandate framework, but to deliver those opportunities at greater scale, we also need the right organizational structure. What we are doing is building a more customer-focused and scalable model. As Porvair continues to grow, the structure that served us well historically needs to evolve. Over time, more businesses have been added, resulting in many relatively small sites reporting directly to divisional leaders. In some example with 14 + direct reports. We are now moving towards larger customer-focused operating companies where that makes strategic sense. Life Sciences is one example. European Filtration is another. These are just two examples, not the endpoint, and you will hear more about this from Emrah and Mark during the afternoon. Importantly, this isn't about centralization. It's about creating stronger customer proposition, clearer accountability, and more scalable platforms for growth.
It also creates capacity at ExCo level to focus on growth, capability building, and M&A. Ultimately, this makes both organic growth and acquisition more repeatable. Structure only creates value if it makes us more valuable to customers, which brings me to the direction of our customer approach. The group has always had strong product expertise. The next step is becoming even more focused on customers' underlying needs. It means understanding what really drives customer performance and aligning product, services, and expertise around those needs. It means developing clearer customer segmentation, distinctive value propositions, and appropriate sales channel for each customer segment. Meaning that we are intentional about where our own resources add the most value, focusing them where customer recognize that differentiation while using other sales channel where they are the better route to market.
By partnering and building trust through mutual benefit, we can become more deeply integrated with our customers. Ultimately, the closer we get to customers' real performance challenges, the more relevant, differentiated, and valuable our offering becomes. That strengthens customer relationship, increases opportunities for growth, and supports long-term competitive advantage. You will hear examples of this throughout the afternoon. What I've described over the last few slides is the business we are building, a business that is closer to customers, stronger operationally, and more scalable as it grows. Let me finish by bringing everything together. These five strategic priorities capture how we intend to create value. They provide the framework for accelerating growth, improving margin, and increasing returns. Throughout the rest of the afternoon, you will hear how these priorities come to life across the business. The next sessions are proof points behind our confidence in the opportunities ahead.
With that, let me hand over to Emrah. Emrah will begin with aerospace and industrial, and in many respects, illustrate many of the things we have talked about, mission-critical and highly engineered solutions that are embedded in customer processes, generating high recurring revenue and a clear runway for future growth. Emrah, over to you.
Thank you, Hooman. Hello, everyone. Welcome to the aerospace and industrial section of today. As Hooman said earlier, we are a leading provider of mission-critical, highly engineered filtration solutions across the aerospace and industrial markets. My name is Emrah Gozturk, and I've been leading the aerospace and industrial division since early June this year. I come from a mechanical engineering background. Throughout my career, I had international leadership roles within industrial technology businesses. Previously, I was with a listed group in Germany focusing on food and beverage, energy, and process markets, delivering high-tech applications for a global customer base. Prior to joining Porvair, I completed a value cycle as CEO of a PE-backed engineering business, serving demanding applications with a blue-chip customer base in the energy, defense, renewable, and industrials markets. I'm very excited to be part of Porvair.
In this section, I am going to show you the A&I division through a value creation lens, discuss the structural growth in our markets, how we successfully built great long-term positions that create very high-quality recurring revenues, how we deploy capital, and how we are going to scale further. Let's start. The A&I division delivered revenues of just under GBP 84 million in financial year 2025. We serve a broad range of customers across diverse end markets. About half of our revenues come from Europe in a typical year, and the rest will be split between North America and the rest of the world. We are a leading provider of mission-critical filtration solutions across aerospace and industrial markets. We operate exceptionally well within high-demanding applications with high entry barriers where our embedded products protect high-value assets, generate recurring revenues, and solve critical problems.
I will be talking about some of these examples today, later in the presentation. We hold leading positions in selected niches and are trusted by our customers for our high quality, our excellent track record, our reliable fail-safe engineering, and deep application expertise. This drives a very close relationship with customers who are leaders in their space, as you can see here. We co-innovate with them and solve their filtration challenges. Our setup is our core strength. We have a focused approach that gives us the ability to have the right expertise at the right place and maintain customer intimacy while being supported by the wider capabilities within Porvair. In addition, it helps us to balance the ups and downs of our diverse markets. Our setup has a broad reach with sites in the U.S., U.K., EU, and one in India.
The locations specialize in selective niches, spanning ultra-high purity filtration packages that are used in semiconductor manufacturing, aerospace filters and components that are embedded in major civil and defense aerospace applications across the world and also engineering and manufacturing capabilities of critical specialist filtration for demanding environments across the industry. The latest addition to our portfolio is GV Filtri, located in Turin, Italy, which we acquired September this year. We will be discussing about GV Filtri in more detail shortly. I will also cover how we are positioning our division for better growth. The key point is that this setup gives us a broad reach across geographies and markets and enables us to serve our global customer base. If we look deeper into the markets our OpCos are serving, we see clear and positive trends.
A&I OpCos deliver recurring revenues from markets with structural long-term growth, high technical complexity, and high entry barriers. In aerospace, the growing population and global megatrends drive passenger demand. We all fly more, and there are more of us on the planet. The passenger miles metric grows about 4% year over year. According to Boeing, to keep up with this demand, the global fleet of civil aircraft will grow by 80%, from about 28,000 airplanes today to more than 50,000 planes in the next two decades. Including replacement of aging aircraft, this means nearly 44,000 new aircraft are expected to be built in this period. That is 1.6 x the number of all aircraft we have today. Combined with the recurring replacement demand for our products, we expect that the current demand increase we see in our aerospace business will continue long into the future.
In chemical process, petrochem, and gasification, we expect the market to grow above GDP. The megatrends driving the demand growth continue to operate. Impacts of high energy costs in Europe meant reduction of capacity, while emerging markets, especially in Asia, have been developing solidly. We will look at these verticals in detail shortly. In nuclear energy, we see a significant development driven by growing electricity demand and energy security. We have strong niche positions in nuclear waste management, a highly regulated market. We will speak about the world's largest nuclear waste management operation and how we work within that process shortly. Lastly, in our other markets, we see the same long-term trends, like pharmaceutical production, microelectronics, food and beverage. The common thread we see across all these markets is structural long-term growth.
We operate in niches requiring high technical complexity, which gives us defensible leadership positions, plus recurring revenues with high entry barriers. Let's go into more detail around chemical process. The chemical process market gives us a good and balanced mix of opportunities where we can see three distinct verticals: petrochemicals, gasification, and chemical process. In petrochemicals, we see headwinds in Europe, which results in a subdued market. But we maintain a healthy global pipeline that is helping our operating companies to deliver into other geographies, leveraging A&I's core strength, its setup, as we spoke about earlier. The recent geopolitical uncertainties, fluctuating oil prices, energy security, all play a role on how this vertical will shape up in the future. In gasification this year, we successfully delivered a project for a renowned customer in Asia.
We have a healthy pipeline in the vertical, and the complex, heavy-duty, and highly technical application suits our capabilities well. We are confident that we have the best technical solution in the market. Our track record is growing across continents, and we are starting to see recurring revenues. We are combining our in-house expertise with the customer proximity of our local sales teams to deliver into the vertical. Multiple operating companies in the division serve chemical process with established products, which are delivering recurring revenues year on year. Our customers are driven by tighter regulation and value our reliable offering. We have the right mix of customer intimacy, application knowledge, and we are established in the space with long-term supply contracts, which are driving that drumbeat of regular sales.
While we watch the market development in these verticals closely, we are well-positioned to capture the opportunities and maintain long-term recurring revenues. Now, let's have a look at how we create these strong positions and drive value from them. Our value creation model, engineered with the customer, built to perform, and embedded for decades, is at the heart of what we do. We lead in the niches we operate by collaboratively engineering a solution that delivers the best performance to our customers' challenges. We are then typically qualified following an extensive process where our products are tested and certified and built to perform. This creates embedded products with long recurring revenues that can go into decades. Operating at a wide scale, this model creates very defensible niche positions and long-term relationships with customers. It helps us to deliver reliable recurring growth over long time horizons.
Let's bring it further to life looking at some examples. I believe many of you may have flown to get to this event today. Most probably, you have supported our revenues by doing so. So, thank you. Every second, a plane takes off somewhere in the world with Porvair components on board. Every second. During the presentation today, there will be about 10,000 flights taking off with our products on board. Some of them will have up to 300 components and filters. They are embedded in aircraft engines, fuel systems, hydraulic systems with small but critical functions. We have displays outside with these products, and our expert, Andy Cowan here, is here today. He has huge experience in aerospace and will bring to life how special our products are.
Please approach him later and he can explain all the detail on the products, where they go, and how the unique engineering collaboration works. I hope this gives the scale of how integrated we are into the aerospace market. We engineer these products to solve mission-critical applications, test them extensively and qualify them, and deliver them reliably over the life of an aircraft program. Let's have a look at an example. One of our customers came to us with a mission-critical and high-consequence challenge: to eliminate the flammable fuel vapors in the fuel tank. This is a highly critical application and is directly impacting safety in an airplane. The solution had to be compact and lightweight. The challenge was complex because it needed to integrate into new and existing aircraft. In addition, some systems needed to separate ozone from the airstream.
The solution we came up with was an integrated filtration and separation kit. With these two functions working together, we saved weight, which is a significant driver for reducing costs in aerospace. Our design extended the element's operating life, which reduced the maintenance costs. As we engineered the product in partnership with the OEMs, we managed the complex integration requirements and got product qualified into all major aerospace programs. This creates a growing installed base with every new aircraft being built and recurring cartridge demand with every passenger mile flown. Again, thank you to all of you who are frequent flyers. Currently, we estimate about two-thirds of the civil aircraft fleet worldwide is fitted with this solution, including almost all Boeing, Airbus, and COMAC airplanes. They are giving us a great drumbeat of new-build demand, plus significant recurring revenue.
Let's look at another example, in action, this time from a completely different industry. The challenge this time is in nuclear waste management at the Hanford Site in the State of Washington, U.S. This site has been in operation since the 1940s, the early days of nuclear industry. It has served as a nuclear enrichment plant right to the end of Cold War. With increasing environmental regulations and development of treatment technologies, U.S. government has taken on one of the largest nuclear waste cleaning activities on the planet to treat and remove 56 million gallons of liquid radioactive waste from aging underground storage tanks. The process converts the waste to glass, which makes it stable and able to be stored for a very long period. Our engineers have been working with the U.S. Department of Energy scientists to build a safe filtration system to avoid any contamination escaping the process.
After a decade of development work, we certified and patented the system. With the treatment plant commissioned in 2025, we started to deliver the filters from our dedicated production line in Ashland, Virginia. This is a product embedded into a process that will operate on this site for approximately 50 years and will be a perfect example of a recurring revenue business for a highly demanding process in a critical industry. This creates a great base for us to generate further capital and to deploy and grow our business. As I mentioned earlier, a very recent addition to our portfolio is the GV Filtri in Italy. In September this year, we welcomed the fantastic GV Filtri team to our Porvair family. The business delivered about EUR 5 million revenues last year and specializes in engineering and manufacturing of industrial filters and filtration systems.
It serves various industrial applications and end markets such as energy, power generation, chemical, oil and gas, and water treatment. They typically work with their customers on repeatable filter solutions and have expertise in working with exotic alloys that are required for high temperature, high pressure applications. With great in-house engineering capabilities and customers across Europe, Middle East, and U.S., they are positioned strongly to grow. We will leverage their capabilities as a great hub for Southern Europe, and we will support them for their growth into broader geographies. They are a strong fit with our portfolio with their in-house manufacturing capabilities. We are using a solid integration plan to realize already identified synergies and get our new colleagues accustomed to operating within Porvair. A high-quality business adding value to our portfolio, benefiting from the A&I setup, all leading to a scalable platform and enabling future growth.
As Hooman mentioned earlier, we are improving the scalability of our business while strengthening our customer proposition. An example of this is where we are combining two businesses together. They were operating with similar business models, with separate business processes, in somewhat overlapping verticals, located about 50 km apart from each other, with separate management structures and separate brands. Both sides, with an average revenue of about EUR 10 million, are now combined into one operating company. In this case, we saw this as an excellent opportunity to streamline their leadership and processes and develop into a scalable European filtration platform with stronger customer proposition. This customer-focused, scalable organization helps improve operating profits while also creating strategic options for bolt-on acquisitions and expanding into new territories.
In summary, you can see that A&I has strong geographical presence that gives us the capability to have the right experts at the right place. This setup helps us to hold strong positions in niches, diversify, and serve broad markets. Our markets have very positive structural growth drivers, and the niches have technical complexity, recurring demand, and high customer stickiness. You can see this in aerospace, where we are embedded across all major platforms and our critical products with recurring demand are protecting valuable assets. This is the heart of our value creation model. Engineered with the customer, built to perform, and embedded for decades. The same value creation model applies to multiple industries, such as nuclear, where exceptionally engineered and patented filters are giving us recurring revenue well into the future. You see our compounding model in action, where the value we create turns into capital.
We use this to develop our business with selected investments, helping us to grow further and improve our operating margins. I am excited to be part of this excellent team with such a clear operating model, and I am looking forward to continuing to drive the business to a great place. Thank you. Now I am very pleased to hand over to Mark Osborne to kick off the section covering the lab division.
Thank you, Emrah. Good afternoon, everybody. I am Mark Osborne. I look after the laboratory division, and I have done so for the last six years. Prior to that, I spent 15 years at Halma plc in various managing director and divisional roles across all three of its sectors: environmental, safety, and medical. You are going to hear in the next few minutes about how the laboratory division works and how it delivers results. You will hear about our track record of acquisition and investment and about our focus on niche applications where we can be the market leader. You will hear from two of our senior leaders, Lalicia Potter and Lindsay Parkes, about the detail of how we win in our main markets, and how all that has delivered impressive growth since the division formally came together.
Lastly, you will hear how we are leveraging collaboration amongst our operating companies to accelerate that performance going forward. The division's operating companies supply automation equipment and specialist consumables to laboratory applications. At a high level, our two markets are life sciences and environmental. You can see on the chart more detail of the diversity within those markets. Each of our operating companies supplies to one or other of those two markets, and we consider ourselves to be niche suppliers into those markets. Niche means we choose very specific applications aligned to our technical expertise where we can be a leading supplier. For example, SEAL Analytical is the leading manufacturer of clean water auto analyzers for environmental applications. On the right-hand side of the chart, you can see how we win and grow. It is that combination of areas of focus that has allowed us to be successful.
While the formula for success is true for all of our operating companies, it looks different in environmental and life sciences. My colleagues, Lalicia and Lindsay, will bring this to life for you in a moment. We have a strong geographic presence across our major territories with sites in the U.K., Europe, and the United States. We also have one site in Shanghai supporting the significant and growing Chinese environmental market. Our 10 sites are split between those two markets, and of them, eight are involved in development and manufacturing of parts of our product range, which are then sold through our worldwide commercial team and distribution network.
Across our environmental businesses, we are increasingly developing the capability to manufacture any of our products, both in Europe and the United States, which is advantageous from a lead time and tariff perspective, making sure we are competitive in each local market. Our markets are attractive in terms of scale and growth potential. The mega-trend that underpins the laboratory markets is global population growth, forecast to increase by nearly 1.5 billion people in less than the next 25 years. That population growth will drive greater need for clean water, food supply, and healthcare, supported by increasing environmental monitoring, tightening regulation, and increasing disease screening. That combination of growth drivers means our markets have very attractive long-term potential.
The opportunity for us is in further automating laboratory processes and increasing testing volumes, producing analytical methods with lower detection limits, and supplying new specialized consumables to support life science research. We access our customers through a combination of direct sales to end users, a worldwide distribution network, and through key partnerships with laboratory groups and leading life science companies. I would like to hand over to Lalicia and then Lindsay, who will in turn introduce themselves and speak to the detail of how we work in environmental and life sciences, respectively.
Thank you, Mark. Good afternoon, everybody. My name is Lalicia Potter , and as Mark mentioned, I am the President of SEAL Analytical, the environmental side of the Porvair Laboratory division. I am a chemist by background, and I joined SEAL almost straight from university as a technical support chemist in Sydney. I have now worked in SEAL across the world in many roles, including Australia, the United Kingdom, and the United States. This gives me a deep and unique perspective and understanding of the environmental market and the SEAL business. Over the next few minutes, I will explain SEAL's great position in the environmental market, the expertise of our teams, how we have a very solid customer base and large installed base that generates recurring revenues, and how we are on a positive growth path. We are a market leader in our field with almost 70 years of industry experience.
We manufacture instruments that measure quality parameters, nutrients or contaminants, depending on your industry, such as ammonia, phosphate, nitrate in waters and soils. As well as our product instrument portfolio, we offer technical services, including technical support, trainings, software development, and consumable sales. Our global SEAL team sells directly to end users, and we have an extensive and highly specialized distribution network. We work very closely with our distributors, ensuring the same ethos of customer service and support as we have at SEAL. This gives us a truly global presence. Our technical support is at the heart of what we do. Our tagline, "Designed by chemists for chemists," sums that up in a simple phrase. All of our technical sales and support staff are chemists, including me. This means we are uniquely positioned to understand the needs of our customer. That is the SEAL difference.
When a customer needs help, they speak directly to a chemist who understands their needs, and this builds trust and loyalty. As Mark referenced earlier, the water and agricultural markets are growing strongly. The question begs, why is this? The short answer is regulations. Water safety parameters are tightening in all areas, meaning regulated detection limits are becoming lower, and more advanced technology is required. Developing economies are introducing regulations, and increasing populations worldwide means more agricultural needs, which in turn means more soil testing is required. What does that mean for SEAL? More testing requirements ultimately means more instruments are needed with higher throughput. This, in turn, drives the technological shifts because more automation is needed. Highly automated systems that are fast, robust, and reliable. More laboratories, more instruments, more consumables, more SEAL. Why work with SEAL?
SEAL combines expertise in technical sales, support, manufacturing, software development, and design into a coordinated, global, customer-centered organization. Our customer-facing team are qualified in the same disciplines as the people who use our instrumentation, and in fact, are often from the laboratories themselves. This gives SEAL a unique perspective, and we are seen as the trustworthy experts. This gives us credible technical engagement as our technical sales chemists communicate directly with the lab managers throughout the whole sales process and form long-term customer relationships. Ongoing training aligns employees and our partners around products, applications, and customer needs. For example, our monthly webinars, which keep SEAL teams, distributors, and end users current on methods and instrument capabilities. This keeps SEAL in the minds of our client base. As well as quality instruments, laboratories want to work with people they can relate to and trust.
To them, the after-sales support and the relationship is actually more important than the instrument itself. With SEAL, they have direct access to the experts, and they know they will get help fast when they need it. SEAL's expertise spans over 65 years, and it has been a journey, a journey of firsts. It was in the 1950s that the first auto analyzer was invented. Then in the 1970s, SEAL, or Technicon as we were then, commercialized the first auto analyzer, and it was used in all industries, all markets, clinical, industrial, and environmental, and this was before computers. As markets' needs changed, SEAL continued innovating. Each generation of product increasing automation and speed. SEAL joined Porvair in 2008, and with their support, innovation continued at a faster pace. Our expertise and customer-centric approach generated customer loyalty over decades.
The timeline shows we have longevity and experience, which is a huge benefit in the environmental market. It also highlights our impressive installed base and how it continues to grow. It is this large installed base of instruments that brings recurring revenue from consumable and service sales. As part of our customer-centric philosophy, our R&D process centers around the needs of our customers. By collaborating closely, we develop solutions that fit real workflows and meet customer pain points. One such example is the AQ700 discrete analyzer, shown here in the video. A large global laboratory group needed an instrument. They needed an instrument to be able to achieve higher technical specifications for low-level sample analysis across many demanding applications. They needed to have longer walk-away time for the lab staff, and they wanted unattended overnight operation.
This was to improve capacity, improve productivity, and of course, in turn, reduce labor costs. This was a capability unavailable elsewhere in the market. SEAL combined expertise in our chemistry analysis and optics with our robotic capabilities to develop the AQ700. In the video, you see the system executing complex liquid handling unattended. The smart robotics maximize sample throughput and minimizes hands-on time. The results? The lab group has standardized on the SEAL AQ700 in the United States and in Australasia. They increased sample throughput and productivity by an impressive 400%, and they reduced labor costs. Because of this success, we are now expanding the sales of the AQ700 to more laboratory groups, increasing awareness and sales opportunities. The other benefit this project generates is the recurring revenue.
Each unit sells for the equivalent of $100,000, but through proprietary consumable sales, trainings, and support contracts, we generate a continued revenue stream. This collaboration creates long-term customer relationships and opportunities for expansion, replacement, as well as new projects. You may have noticed when you walked in today that we actually have one of these systems in our product demonstration area. Please stop by in the break if you would like to see it. The future for SEAL is very positive. Our growth has been strong, especially over the past five years. Laboratories are looking for more automation. The fully automated laboratory is coming. SEAL is uniquely positioned through our expert teams, innovation, and customer-centric approach to meet these needs. Our solid customer base and large installed network generates recurring revenue through consumable and support sales.
In fact, our latest acquisition in the U.K. of Carekem, a dedicated support service team, illustrates to the market that commitment. To summarize, from our Designed by chemists for chemists philosophy, we get customer collaboration and loyalty, which drives specification. Specification drives installed base growth, and the installed base generates increasing recurring revenue. Thank you. I would now like to introduce you to Dr. Lindsay Parkes from the life sciences side of the lab division.
Thank you, Lalicia. Hi, I am Lindsay. I am the Research and Development Manager for Porvair Sciences. I am a molecular biologist by background. I did my initial study on microbiology and biochemistry and my PhD in genetics. That was followed by 15 years in academic research in cancer and natural drug discovery. For the last 13 years, I have worked in new product development and now head up a very talented multidisciplinary team of scientists and engineers working on our product development pipeline. What I want to show you now is how our key strengths, our cutting-edge developments, and our dynamic development pipeline, along with our great position with our customers and long-term supplier status, make us confident that our solutions can help us to grow and win in our markets.
As a Life Sciences group, we design, develop, and manufacture market-leading instruments and specialist consumables for the life science and biotech markets, which have complex technical requirements, regulatory criteria, and performance specifications. The majority of our products are highly specialized consumables with regular replacement cycles that are designed into products or processes. What I mean by that is that these are component parts which are bespoke to our customers' products or processes, providing high barriers to supplier change. The high quality of our products, our technical expertise, and deep understanding of their applications is what really matters to our customers. We sell into the high-value life sciences market, where rising healthcare demands from aging populations and increasing adoption of artificial intelligence into drug discovery workflows drive continuous high budget spending on new medical tools and research.
Our porous plastic capability delivers highly technical filtration solutions into life science applications, where we can add further value by adding active filtration media to produce high-quality composite sample preparation filters. Providing specialized laboratory instrumentation supported by complementary consumables allows for recurring revenues and gets us closer to our customers. That is important in building trust and strong relationships, but also for being at the cutting edge of developments in the industry. Life Sciences Group customers in this sector are international pharma companies and global scientific lab suppliers. Our routes to market are a combination of direct to customer, where relationships are key, such as major biopharma R&D, OEM, and a specialist network of technical distributors. Lab division businesses operate in markets where customers are solving complex technical set challenges.
As a Life Sciences group, we have a full set of capabilities to develop and supply a comprehensive suite of products with a site footprint to serve local markets. Providing a central hub for our customers to obtain their lab solutions ensures we remain a key full-service partner for major laboratory suppliers and global pharma companies. With an extensive range of processes, equipment, and diverse talent, we work to develop turnkey solutions for life science customers. Each of our sites has a long history of serving customers in our markets. We have expertise in design and software engineering in Kbiosystems, molding and glass engineering in JG Finneran, injection molding and tooling expertise in Ratiolab, and scientific and material engineering expertise in Porvair Sciences.
The communities comprising the workforces and customers of the group provides access to faster feedback loops, geographically, market-wise, and from a product portfolio perspective, which is a force multiplier for innovation. Porvair's Life Sciences Group are perfectly positioned to provide solutions for the challenges of our customers. We are always developing new products. We have a consistent, well-structured pipeline process to bring new products to market, with more than 30 products moving through these phases at any one time. Our project teams are led by experienced scientists and engineers that speak our customers' language and truly understand their technical requirements, providing confidence, building trust, and ongoing relationships. Our focus is on the new to the world category, where we strive for innovative, high-margin products. I will now give you a great example of just one of these products in that new to the world category. It is close to launch.
Starting by setting out the market opportunity. Biologics or biological pharmaceuticals accounted for just over 30% of FDA-approved drugs in 2025. They are the fastest growing class of therapeutic, reaching parity in the global pipeline. Biologics now represent over 50% of active global R&D programs. The largest class of biologics, monoclonal antibodies, are key to recent advances in cancer treatment. The key difference with biologics is that they are made by living cells, contrasting to traditional pharmaceuticals, which are made by chemical synthesis. This presents several challenges for biopharma companies in their development and manufacture, and as a result, opportunities for innovation and product pipeline development for us as suppliers. More than $500 billion in projected annual drug sales is at risk due to patent expirations in the coming years. This is known as the patent cliff in the industry.
It is accelerating the requirement for faster drug discovery and driving the move to automation, an area where consumable development has not kept pace with automation equipment development. The Clara products are one example of our new product developments. They are a range of innovative solutions that we are developing for that high growth biologics market. These products are for the R&D phase of biologics development. This is attractive as pharma spends between 16% and 19% of its revenue on R&D. Workflow program scale is key for the Clara products. They are fulfilling an unmet need in scale-up for the production processes for biologics development. As that process progresses, the scale needs to increase in volume and decrease in quantity, and the consumables need to scale in line.
The Clara 6 Well system provides automation compatible consumables that support 100x faster sample processing for the mid-scale phase of biologics development, enabling accelerated drug timelines. Scale is the key for this range. Getting to market faster is key in the drug development space with first to market and patent coverage, a multimillion-dollar advantage over the patent lifetime of an effective pharmaceutical. In addition, with the incorporation of AI into drug development pipelines driving the need to generate vast data sets to give the engines data to work with, the number of molecules being processed at a single R&D site each week is into the thousands. With our expertise in bespoke design and manufacture of mold tools and biological filtration media, coupled with a deep understanding of the scientific application, we are uniquely placed to develop optimal solutions for this market.
Our molecular biologists understand the workflow and the cell line requirements, and our material scientists understand the nature of the filter media required to meet the specific scale needs. Filtration engineers understand the challenges, providing technical solutions, and our injection molding design and production engineers provide rapid prototyping and optimal product manufacture. Our close connections with customers at the cutting edge of developments in the life science and biotechnology space will enable us to continue to provide unique, high-performance consumables for the increasing push for automation that is driving growth in these markets. Our dynamic product development pipeline will ensure a healthy product portfolio, access to new customers and new markets. We are well-positioned, through the strength of our relationships with biopharma customers, to grow as that market grows. Our agility and expertise position us as development partners of choice for our customers.
High quality, specialized consumables that are designed into customer products and processes, that are often highly engineered and shows long-term supplier status through high barriers to product replacement. As you can see, future growth of the group will continue to be driven by our commitment to high-quality technical solutions and innovation for the high-growth life science and biotechnology markets. Thank you. I will hand back to Mark.
Thank you, Lindsay. The Laboratory division was created in its current form in 2017 and was initially only two businesses. Since then, as well as organically growing each business, we have focused on acquisition and investment. Over the last 10 years, we have acquired five businesses, all of which bring new products, specialized manufacturing capabilities, and geographic reach to the division across both our markets. At the same time, we have also invested across the division, including five separate investments of GBP 500,000 or more, all of which have increased capacity and enhanced capability in our manufacturing operations. These acquisitions and investments have driven revenue, and they have also increased margins. As Hooman mentioned earlier, the latest change to our organization in the division is the creation of the Porvair Life Sciences operating company.
This brings together four distinct businesses as one company, allowing them all to benefit from the unique value that each brings. Previously, we had four separate businesses with four management teams, product lines, and geographic territories operating from five separate sites. Now, we have one operating company comprising five sites under the leadership of one strong Managing Director who has extensive experience in leading multi-site operations. We are already starting to see better coordination amongst the commercial teams, and going forward, we expect to see a stronger and more effective product roadmap, a consistent offering of product across all our territories, and most importantly, a more customer-focused company. This is not an experiment. It is repeating the process we have been through with our environmental businesses. Now all part of SEAL Analytical under the leadership of Lalicia Potter, who you heard from a few minutes ago.
In summary, you can see how the division works and how we have delivered impressive growth in each of our two main markets, and you have seen the key growth actions for each of those markets. We will continue with our model of acquisition and investment, and we will continue to focus on niche applications in our new product development. That combination of productivity investments and ongoing refreshing of our product portfolio will keep driving margins up. In environmental, our next major project is currently in customer testing in the United States and is showing great promise. We launched two further products at our global distributors meeting in the Netherlands last month, and we have already received our first orders for those products.
In Life Sciences, you've seen examples of our approach to the new product development roadmap, and as you've seen, collaboration will increase with our new organizational model and drive further success for the future. Thank you, and back to Hooman.
Thank you, Mark. We will now take a short break, so please take the opportunity to visit our teams. They will be demonstrating products and innovations from across the group. This is a good opportunity for you to see our capabilities firsthand and speak with our experts. We will then reconvene 10 past three. Thank you.
Welcome back, everyone. My name's Watt Jackson. I've been the Managing Director of the Metal Melt Quality Division since 2018, but I've been with the business unit since 2004, with initial responsibility for sales and marketing and the launch and management of our business in China. I can tell you that in my 20+ years here, I've never been more optimistic and excited about our business than right now. We are in a truly transformational time for us, and 2026 marks an inflection point. I hope over the next 20 minutes, I can help you to see why. Let's start first with a quick overview of our division, which I'll refer to as MMQ for Metal Melt Quality.
Very simply, we're in the business of enabling producers of advanced metal components to meet the ever-increasing demands for higher quality and performance in products that are essential to all of our daily lives. We do this by offering systems and consumables for removing unwanted inclusions from molten metal via filtration. Inclusions are non-metallic particles trapped inside molten metal that can create performance issues, safety issues, and cosmetic issues in the final end-use products. You may not realize that aluminum beverage can wall thicknesses are now approaching the diameter of a human hair. Industrial aluminum foil thickness is 10 x thinner than a human hair, and aircraft turbine blades operate at temperature above the metal's melting point. Don't panic on your flight home. We're professionals. You can imagine the problems that an inclusion could create in such applications.
My point in these examples is that end markets continue to push technology boundaries, and filtration is absolutely key to achieving these advances. The origins of MMQ go back 50 years to Consolidated Aluminum's research lab in St. Louis, Missouri, U.S.A. We invented the single-use ceramic foam filtration technology and introduced it about 45 years ago under the SELEE brand. Drache, who recently joined the division, was founded 35 years ago with a similar technical approach to the metal filtration market. We collectively have 80 years of experience in aluminum filtration. Our core business is aluminum, superalloys, and copper filtration across a wide variety of applications. Today, I want to focus on aluminum, which represents a dominant part of our division, but I will occasionally mention superalloys and copper as well. You can see a list of sample customers across the bottom of this slide.
Some may be recognizable to you, but all are major global players. With regards to operational platforms, we have a global presence. We cover the Americas, Europe, Middle East, and Asia, which gives us supply flexibility and the ability to serve global customers as they expand outside their home regions, and I'm going to give you two examples shortly. Now, let's take a look at some of the dynamics driving demand for aluminum filtration. Aluminum is sometimes referred to as the miracle metal based on its infinite recyclability and its high strength-to-weight ratio. It's estimated that 75% of all aluminum ever made is still in use. I'm going to repeat that. 75% of all aluminum ever made is still in use. It's just continually recycled. An aluminum beverage container can go from the recycle bin back to the shelf in 60 days.
We're excited because aluminum holds a relatively small market share of the beverage can market and is gaining rapidly, so we have a high ceiling. The environmental benefit is powerful versus the challenges of recycling plastic and glass. Aluminum's high strength-to-weight ratio is desirable in any mobility application due to fuel and battery efficiencies. Obviously, lighter weight requires less energy to move, hence aerospace and electric vehicles markets. New aircraft projections are strong, which will benefit aluminum in such areas as wing spars, landing gear supports, and cabin structures, as well as superalloy turbine blade filtration with our foam tundish and 3D-printed filters. Vehicles powered by internal combustion engines have been moving to aluminum over the past years for fuel efficiency. But electric vehicles represent a step change in aluminum content, using 40% more on average with specific use in battery pack enclosures, motor housing, and frame.
As an aside, the associated build-out of the EV charging grid will also benefit our copper wire filtration product line. Over the next few minutes, I'll walk you through an explanation of how the energy market is impacting aluminum and then ultimately driving filtration needs. Stay with me on this one. I would imagine most of you are aware of the electrification of the global energy grid to support rising industrial uses, and especially EV grids and the advent of artificial intelligence data centers, and the resulting huge need for electricity. Electricity demand is escalating worldwide. This has a positive impact on our superalloy filter demand for blade production driven by industrial gas turbines. But it also has an impact on aluminum, which I'm going to be outlining next.
Now, sources of aluminum are either 99.7% pure prime, produced from bauxite mining to alumina refining to aluminum smelting, or recycled aluminum, also called secondary aluminum. The major difference between prime and secondary is energy. Aluminum smelters require securing energy contracts for enormous volumes. A typical smelter can consume as much electricity in a year as all of Greater Manchester. Obviously, AI data centers can outprice an aluminum smelter when competing for electricity. Just to give you a sense, smelters typically pay around $40 per megawatt hour under these long-term contracts. While tech firms are willing to pay close to 3x that, or $115 per megawatt hour for electricity. Recycling, or secondary, on the other hand, requires 95% less energy than prime production. Remember that aluminum is infinitely recyclable. Some consumer product companies, like Apple, are demanding low-carbon or recycled materials from their suppliers.
In 2024, it was reported that over 70% of Apple's products used recycled aluminum. There is also a degree of a pull-through demand from applications wanting carbon reduction benefits in addition to the cost drivers from a casthouse perspective. Just as a little bit of an explanation, prime aluminum from a smelter is 99.7% minimum pure. It would need no filtration. However, in its pure form, it is too soft for most applications, so its composition must be adjusted with alloys to arrive at suitable properties depending on the end market. This happens at a casthouse, and I promise I will show you a picture of a casthouse shortly. Therefore, what we are filtering is either alloyed prime aluminum or alloyed secondary or recycled aluminum. Then exactly how does recycled aluminum impact filtration? Aluminum casthouses are the center of the MMQ universe. This is our pitch, if you will.
This is where we compete. They need sources of aluminum for melting and casting slabs for rolling mills, or billets for extrusion mills, which are then moved downstream to fabricate the products that I mentioned earlier. They need either prime or scrap as melting feedstock. Prime is more expensive, can be more difficult to source given tariffs, conflicts, and proximity. If you take the U.S. market, for example, there are only four smelters remaining. This is why recycled or secondary aluminum makes up more than 80% of U.S. production, and they are a net importer of prime. Secondary, on the other hand, can be locally sourced at discounts to prime, the degree depending on degree of recycling. The use of recycled aluminum is projected to grow at 5x the rate of prime. The mix would go from 30% scrap to 40% scrap in 10 years.
The world's largest premium aluminum producer, Emirates Global Aluminum, expects this to go further to 50% in 15 years. Accelerating. Here is the point. Use of higher concentration of secondary or recycled aluminum in casthouses means higher inclusion loading in the metal. Therefore, this requires greater filtration capacity to remove high concentrations of inclusions, specifically more filters or larger filters, and with careful selection of pore sizes. In addition, this will require upgrades to filtration equipment. An aborted cast due to filters with excessive inclusion loading, or also called plugging of filters, can cost the casthouse substantial productivity loss of up to two to five hours depending on when the abort occurred. One hour of casthouse downtime can represent $100,000 of lost revenue.
Therefore, not only do we have growing demand from end use applications, but we have a magnifying effect on filtration needs being driven by the use of more recycled feedstock due to energy costs. Here is another filter. We have been seeing strong growth developing both end markets and recycled aluminum filtration dynamics for some time now. In order to best position ourselves to take advantage of this future growth opportunity, Porvair recognized the potential of teaming SELEE with Drache, another technically oriented filtration specialist serving the aluminum industry. Drache's 2025 revenues were EUR 20 million, so a sizable addition to our division. This acquisition was finalized in January of this year, and we are off to a strong start. The acquisition of Drache brought both similarities and differences.
Similar in the technical approach to the market and a cultural sense of responsibility, but the differences between Drache and SELEE are what brings us significant value together. Each fills a need of the other, and together we have the whole package. We now have a more balanced geographic revenue base, broader and deeper product portfolio, and a 65% larger customer base from which to offer each other's products and services. In addition, we can operationally benefit one another in areas such as raw material sourcing, sharing of operational best practices, and access to more internal technical resources. It is all about making us collectively better. I have been saying the name, so here is a picture of an aluminum casthouse, and from the perspective of our division, that is hallowed ground right there. That is a beautiful site.
Now, the unenlightened might think this looks industrial, but it is a highly complex process, and there are so many variables that all must be designed and operating correctly for this to work. Any single one that is off will cause a failed or aborted cast. You have the holding furnace at the top with molten aluminum, prime or secondary or some combination, alloyed for the particular end-use application. The casting table is at the end of the line. In this case, it is a billet table, so that is probably a 6000 series alloy that is being blended in the holding furnace. While each casthouse is generally similar in the process, they are quite customized or bespoke in the details. No two casthouses are exactly alike. This is important when engineering and designing equipment for them, as well as helping them to troubleshoot operational issues.
Another point is that once you are designed in, it tends to be a sticky business, generating recurring revenue streams of consumables. Between the furnace and the casting table is where we operate. I wanted you to see what an actual casting line looks like before we move to something a little easier to visualize, which will effectively be that section between the furnace and the casting table. This is simply a schematic showing that same line between the furnace and the casting table from right to left with just some of the products that we supply. A couple important points to make. You remember that I said the use of more recycled aluminum will increase inclusion loading and therefore larger or more filters.
A change in the size or number of the filters will require a change in the filter bowl, which you can see, which almost certainly will also require a change in the preheat lid as well. This means new engineering services and a major upgrade of the equipment. Secondly, you can see that the last step before the casting table's filtration. When issues occur upstream, they often show up in the filtration process. Our metallurgical services can aid in analyzing the spent filters for clues as to the root cause of these operational and quality issues. This represents how SELEE and Drache product lines combine to offer a complete range of products and services for an aluminum casthouse customer. Drache is strong on the equipment side. This includes engineering design for casthouse equipment, upgrades, expansions, as well as new casthouses. Once installed, again, these bespoke systems drive recurring consumable sales.
For example, filter bowl refractories are replaced every three to nine months. Refractory coatings are applied daily, and filters are replaced every two hours. The acquisition significantly increases our capital equipment offering, enhances our consumables portfolio, and augments our services capability. I also mentioned the acquisition's impact on our geographic revenue base. You can see how SELEE was stronger in the Americas, Drache stronger in Europe, Middle East, and Africa, and both with similar levels in Asia. The graph on the right illustrates how the two of us together offer a very balanced geographic portfolio. In addition, we now have production assets in all major regions to support those global customers that I outlined at the start. To summarize, this acquisition brings us scale.
Scale in the sense of expanded product lines and potential services, scale represented by a larger sales and support network, and scale in terms of a larger installed global customer base. A real opportunity that we're pursuing is leveraging our technical expertise in the form of services for casthouse customers. This could take the form of new system engineering support, operator training, equipment servicing, operational troubleshooting, and metallurgical consulting, utilizing our lab and database of over 45 years of defect and spent filter analyses spanning hundreds of casthouses and applications. Now, I'd like to show you a couple of tangible examples of how these benefits are manifested. First is Emirates Global Aluminum, or EGA, with massive operations in smelting, recycling, and casting in Abu Dhabi and Dubai.
As you can see along the bottom, we supply a very broad range of products from four different production facilities in the U.S., Germany, UAE, and China. EGA utilizes three different filter compositions. Drache Middle East serves as a local producer of replacement refractories, including installation services, and as a logistical base for products coming from our other locations. So you can see a blend of equipment, consumables, and services. I'll let you read Mr. Rahmani's quote, which is a very nice testament to the value our division is bringing to EGA. Incidentally, EGA is partnering with Century Aluminum, another MMQ customer, to build a major aluminum project in the U.S. So another example of how customers are expanding geographically, and Porvair having a global presence is an advantage to us both. The second example is Nanshan Aluminum in Shandong Province, China, with annual revenues of $5 billion.
They supply aluminum into aviation, electric vehicles, beverage packaging, as well as marine applications. Our relationship goes back 20 years, and most of their casthouse filtration equipment was designed and supplied from MMQ in the U.S. The filter supply moved from the U.S. to our Xiaogan facility when tariff and supply chain issues arose. This shows the beauty of a regional presence. in 2012, Nanshan decided to build an aluminum extrusion plant in the U.S. Naturally, this long relationship has given us a strong position as their filter supplier. The short video that you are about to see will give you a glimpse of the size of Nanshan and the value that we are bringing to Nanshan America.
[Presentation]
When Tyson said their understanding of aluminum casting as well as our own operation makes them a valuable partner, he is making an important point. MMQ has extremely broad experience across the industry. We have seen a lot of different applications, operations, and situations. When we combine this extensive experience with intimate knowledge of a given customer's specific operations, we can really help them achieve their quality and production goals. Another significant investment is a GBP 5 million CapEx in the U.S. to upgrade and expand our casthouse filter production line. We added 50% more firing capacity to support future market growth, as well as adding operational benefits, which you can see outlined in the middle. The new kiln came on stream earlier this year, on time and on budget. Incidentally, we are already implementing an automation project that was enabled by the kiln upgrade, which will generate additional operational savings.
Finally, here we are, late 2026, with powerful and sustainable end market demand, leveraging the properties of the miracle metal, aluminum. Compounding this demand for filtration is the escalating aluminum recycling loop. We have a team in place that has been growing operating profit organically at an annual rate of 19% over the past five years. We have now joined this team with our industry soulmates, Drache, and retooled our collective sales with a complete casthouse product line and services, a global industrial footprint, and an immediate 65% expansion in customer locations. 65% more existing accounts to leverage the best products and services in the industry. We have had a very strong run over the past years, but now we are at a new inflection point with tremendous upside ahead and momentum building. As I said in my introduction, this is a transformational time for us.
I sincerely hope that I was able to help you see that, because it's real. It's all about execution now, or as we like to say, it's hammer down time. Thank you very much. I'm going to hand it back over to Hooman to talk about M&A.
Thank you, Watt. Everything you have heard today reinforces the quality of the business. Organic growth remains fundamental to our strategy, but disciplined M&A gives us another route to strengthen the portfolio, add capabilities, and accelerate value creation. Let me start with our proven track record of acquiring specialist businesses. Since 2012, we have deployed approximately GBP 90 million across 18 acquisitions, with 11 completed since 2017, which are shown here. These acquisitions have consistently strengthened the group's capabilities, market positions, and growth opportunities. The common thread is specialist businesses that fit the Porvair model and become stronger as part of the group. Many of these opportunities originate from relationship with business owners built over long periods of time. That leads to an important point of our competitive position in M&A, why business owners choose Porvair. The businesses we seek to acquire are specialist companies, often privately owned.
For those owners, the decision is rarely about price alone. They care about what happens to their business, employees, location, and brand after a transaction. We offer a differentiated proposition for these business owners. We're a long-term owner. We respect what has made a business successful. We preserve entrepreneurial culture, management team, brand identity, and operating location where that makes strategic sense. At the same time, we provide capital, expertise, wider customer access, and international reach. The quotes on this slide matter because they are directly from owners who sold their business to Porvair. Both Drache and GV Filtri were businesses we had known for years, and that reduces execution risk and helps set the foundation for long-term value creation. I first met Drache's former owners very early in 2025, and it took most part of that year and into 2026 to complete the deal.
That time was essential to building trust and demonstrating our intentions for the business after acquisition. It was a similar story with Marco at GV Filtri. Over nearly 18 months before completion, we built a relationship, developed the trust, and established a shared vision for how the business could grow. I'm delighted that Marco continues to lead the business as part of Porvair. We also have Frank Egas with us here in the audience today. Where are you, Frank? Stand up. Perfect. Frank was the former owner of Royal Dahlman and sold the business to Porvair in 2019. If you do get a chance, please feel free to speak to him as well. M&A in these markets is based on trust, transparency, and relationships. Ultimately, people sell to people. We believe our reputation as a responsible long-term owner is a genuine advantage in M&A.
It helps us when assessing opportunities, whether sourced privately or through formal sales processes. But acquiring a good business is only the first step. The value is created through what we do with it after acquisition. We buy good businesses and make them better. Porvair adds value in four connected ways. First, we provide capital to support growth through investment in people, capacity, automation, new product development, or selective bolt-on acquisitions. Second, businesses gain access to group expertise, best practices, financial discipline, leadership support, and a proven operating model. Third, we preserve the entrepreneurial spirit that made the business attractive in the first place while establishing clear performance expectations. And fourth, we create commercial opportunity through cross-selling, international reach, collaboration across the group, and the development of broader, higher-value offerings. Our role is therefore to provide the support, commercial rigor, and investment that unlocks the full potential of acquired businesses.
Our acquisition pace has accelerated. During 2025 and 2026, we have strengthened our M&A capability. We sharpened ExCo focus and established a clear framework for evaluating opportunities. We added central M&A capability and strengthened our sourcing activity across the group. We have also strengthened our integration approach, making execution more repeatable. The combination of focus, capability, discipline, and a scalable operating model has supported a higher level of activity. As you can see on the slide, during 2026, we deployed GBP 25 million across three deals, compared with a long-term average of around GBP 5 million and one deal per year. But increased pace is not the objective. Success will be measured by the quality of businesses acquired, their strategic contribution, and the returns delivered over time. Maintaining that discipline is key to us.
We have increased our capacity to execute M&A, but we will not lower our standards to maintain a particular deal cadence. This slide illustrates the scale of opportunity available to us. It isn't intended to suggest that every white space is a target. Rather, it highlights the scale of opportunity across markets, technologies, applications, and geographies. We can strengthen existing position through bolt-on acquisitions. We can add complementary technologies or capabilities. We can expand into adjacent applications or customer segments, and we can extend our geographic reach. We will focus on areas where we understand the customer and technology, where the market has attractive long-term prospects, and where we have a credible plan to create value. As you would expect, our M&A pipeline remains active and dynamic, with opportunities progressing throughout different stages of evaluation.
We have sourced more than 250 opportunities so far, but the vast majority of these are clearly not up for sale, and we are highly selective. We routinely turn down opportunities. In fact, in the last 18 months, we have already declined over 70 opportunities in various stages of the process that didn't meet our strategic or financial criteria, reflecting our disciplined approach. And when we do transact, the strategic rationale and the value creation potential has to be clear, as demonstrated by Drache and GV Filtri that you have heard about today. The fragmented landscape gives us a long runway, but our advantage will come from being disciplined, using sector knowledge, and the ability to integrate acquisitions into a scalable platform. This is supported by a clear M&A framework. Let me finish by bringing our M&A approach together. Every acquisition is assessed through three lenses. First, strategic fit.
Does the business belong within Porvair? We look for specialist businesses operating in attractive niches with technologies, capabilities, and customer relationships that strengthen the group. Second, financial quality. The business must have attractive growth, recurring characteristics, strong cash generation, and the ability to earn attractive returns over time. Third, the opportunity to improve. We need a clear plan for how the business becomes stronger under Porvair ownership through investment, commercial opportunity, customer access, operating discipline, or collaboration across the group. Our approach is simple. It is discipline by design. We buy quality businesses. We make them better, which in turn makes the group better. We are ambitious on value, but we remain disciplined on price. M&A should contribute to long-term compounding by adding attractive niche businesses at sensible prices, improving them under our ownership, and generating strong returns over time.
As you have seen, there are some important points on M&A. First, we have a proven track record and a reputation that makes us an attractive home for specialist businesses. We have strengthened our M&A capability, capacity, and integration approach, making acquisition execution more repeatable. The opportunity is significant, but our approach will remain disciplined and return-focused. So far, we have talked about the quality of the portfolio, the levers for organic growth, the opportunity to improve margin, and the role of disciplined M&A. James will now bring those elements together and explain what they mean for growth, margin, cash, capital allocation, and returns. James, over to you.
Thanks, Hooman, and good afternoon, everyone. I am James Mills, Porvair's Group CFO, and as many of you know, I have been CFO for the last five years or so. You have heard Hooman describe at the start the strong track record of the business over this five-year period, where revenue has grown from GBP 135 million to GBP 194 million, delivering an 8% CAGR. Operating profit margins have progressed from 10.1% to 13.5%. The adjusted EPS CAGR has been 14%, so earnings almost doubling over this five-year period. What I am going to do now is bring together all that you have heard over the last couple of hours and show how this now translates into stronger medium-term financial performance and increasing long-term value creation.
So far today, you have heard about a group that has niche positions in attractive end markets, which typically do not move in the same direction at the same time and have high barriers to entry and high recurring revenue streams. Ultimately, a group that is diversified and resilient and built on strong foundations. It is these inherent qualities and attractive business characteristics which underpin the group's financial performance and which are an important factor as to why Porvair has delivered remarkably consistent and respectable CAGR performance over five, 10, 15, and 20 years. You can decide for yourselves how you rate the group's historical financial performance. The main aim for today is to look to the future.
And with the group's strong foundations, together with the initiatives driving the business over the last 18 months, we find ourselves at what we consider to be an inflection point, as Hooman mentioned at the very beginning of today's session. We believe the group is positioned to step up its performance. Let me give you some further insight as to why. The Porvair model is a compound model with a portfolio of businesses within a coherent group strategy. A diversified and resilient group, as I've just mentioned, with consistency of performance being everything. We generate cash, which we selectively deploy for value creation, which in turn supports the growth of the group together with margin expansion over time.
Put simply, we generate cash, we reinvest that cash, tuck those investments into the group, turn the handle, and away we go again within a virtuous self-sustaining business model where the compounding flywheel generates increased momentum over time. Today, I'm going to talk you through these three components on the financial model on the right-hand side that continue to drive the group's financial performance. Margin expansion, cash generation, and capital allocation, all within a new financial framework. This is how we see our performance evolving over the medium term. The framework is a first for Porvair, as many of you know, and a refinement of the group's existing KPIs. Built from within the group and owned by the businesses, these are the KPIs against which we will manage the group and against which we will report performance going forwards.
Just to ground ourselves on this slide, we've included the KPI on the left-hand side, the performance over the last five years as a reference point, together with the performance for the last financial year being FY 2025. You will note this morning's trading update, and we are pleased to report the momentum continues with Q4 of FY 2026 starting positively and trading once again, moving slightly ahead of market expectations. That's a good segue to the medium-term framework, which you can see on the right. To note, this framework is not a forecast, but it is what we think good looks like and what we believe the group is capable of delivering over the medium term. So taking each KPI in turn. Total reported revenue growth, including organic growth and also value-enhancing acquisitions.
The group has delivered 8% CAGR growth over the last five years, with 1% in FY 2025 and no acquisitions in this year. In the medium term, the group is capable of delivering double-digit revenue CAGR of 10%+. Organic revenue growth stated at constant currency. We've delivered 5% on average over the last five years, with 2% in FY 2025. In the medium term, we believe the group can continue to deliver mid-single digit growth, noting the portfolio effect within the group with a mix of end markets that do not typically all move in the same direction in any one year. Adjusted OP margin. The group has delivered 12.4% on average over the last five years with a step up in FY 2025 to 13.5%. So it is important to note that we have a recent track record of driving margin progress, and we are not done yet.
The message for today is that we see further progress ahead with the group delivering within a range of 16%-18% in the medium term. Put simply, in FY 2031, we aim to be in that 16%-18% range, and I would explain more on the reasons as to why we're confident in doing so in just a moment. Adjusted EPS growth. The group delivered 14% CAGR over the last five years, with 10% double-digit EPS growth in FY 2025. Over the medium term, this group can deliver at least double-digit EPS CAGR within the 10%-20% range. Operating cash flow conversion. This is an inherently cash generative business, and the group has delivered 90% + conversion over the last five years.
For the framework, the group can deliver at least 85% through the medium term, noting that we intend for a slight uptick in CapEx, which I will cover in just a moment. Return on invested capital, a slightly refined KPI from that historically reported with this now a pre-tax number to better reflect our underlying trading performance and return performance. The group has delivered 18% returns in recent years, and we expect to continue delivering attractive returns over the medium term. We aim to keep leverage under 1.5x. However, historically, we have said that we are tolerant of debt up to 2x EBITDA, so we would go to 2x should there be a compelling strategic rationale for doing so with a view to quickly deleveraging thereafter. Before I leave this slide, I wanted to emphasize that some years will inevitably be stronger than others.
However, this is not about the performance in any one year. It's about performance over time, with variations normalizing to deliver sustainable growth. Now, let me give you some further insight into the line items, starting with margin progression. The framework has adjusted operating margins increasing to within a range of 16%-18% in the medium term. Already in the last five years, margins have progressed from 10.1% to 13.5% in FY 2025, a total improvement of 340 basis points with a particular improvement in FY 2025, with margins progressing 80 basis points. The group has a recent track record of driving and delivering margin progress, and we see further scope for progression. To note, there is no single factor that drives margins in this group.
It is a combination of various drivers and management actions captured within these four building blocks from which we expect to continue delivering margin progression, all within the customer-focused, scalable business model that Hooman and the team have described. Let me talk you through each, starting with market growth and operating leverage. We operate in growth markets, as you've heard today, and we generally have the capacity to support top-line growth with incremental revenue dropping through to the bottom line at an increasing rate. Growth markets enable us to leverage the existing cost base, including our central costs. Second are value-add offerings. We supply into niche positions with high-value products supported by customer-led product development. And you've heard examples today from each division where they are increasingly moving towards providing higher value solutions and services.
We have become and continue to get better at pricing the products and services for the value that they add to the customer rather than on a contribution basis. We do not gouge on price and simply seek to price at an acceptable level, which reflects the value that we offer, where the mission-critical filter or piece of kit that we are supplying simply has to work. Third up, portfolio management. Today, you have heard how the businesses are shifting towards higher margin products and services, and you have heard Hooman describe the positive shift in the business portfolio within the strategic mandate of stabilize, improve, and grow. There is more work for us to do in this area. Finally, operational excellence.
We continue to increase the commercial rigor and discipline, driving performance and accountability across the group, whilst also driving growth CapEx to support margin progression, which I will come onto in a moment. Before we move on, important to note that we do not expect progress to be linear over the medium term. Progress in some years will inevitably be stronger than others. We will continue to invest in people, products, services, and capacity, which may impact the short term. But the key point is that we have delivered margin progress in recent years, and we are not done yet. You can see what this means for each of the three divisions on this chart. At the very bottom is the average margin performance over the last five years, followed by the latest margin in FY 2025.
We have then included the latest guidance for each division in the short term, noting that the Metal Melt Quality margin guidance is at 14%-16%, an increase on the 10%-12% that we have guided on in recent times. At the very top of each bar, these are the margins we expect each division to deliver consistent with the 16%-18% range within the group framework. There is a lot of detail on this chart, as we are just trying to lay this out as clearly as possible for you. But the key point is that margin progress is being delivered across the group, with the three divisions becoming increasingly aligned in recent years. Turning to cash and the balance sheet. This is a business that typically generates remarkably consistent levels of cash, with operating cash flow conversion being over 90% in each of the last five years.
The group's cash performance is underpinned by disciplined working capital management, with net working capital running within a range of around 15%-20% of group revenue. This all comes together to generate free cash flow, which as you can see on the right, continues to increase in year. Over the last five years, the group generated around GBP 85 million of free cash flow before investing GBP 55 million in acquisitions and CapEx and distributing GBP 13 million in dividends. Having done so, it still created around GBP 17 million in surplus cash. The key point is that with the levels of surplus cash generation combined with a strong balance sheet and capacity for debt, the group has the financial firepower to step up its capital allocation strategy over the coming years. Let me explain how we plan to deploy future cash. Turning then to our capital allocation strategy.
Important to note, this is a central strategy in our decentralized group. First up, no surprise that organic growth is our number one clear priority. We constantly reinvest in the businesses, including those businesses recently acquired. We invest in our people, products, and services, and we also invest in CapEx, which I will come to in a moment, all of which helps drive sustainable, high quality growth. Second, acquisitions. We supplement investment in organic growth with targeted acquisitions aligned with the M&A framework that Hooman has just talked to. We acquire selectively and not simply for the sake of adding revenue or earnings, and this approach takes discipline. Third, dividends. The group has delivered 20 consecutive years plus of paying a progressive dividend. We see this as an important discipline to maintain and a consistent and preferred way to return cash to shareholders. Finally, additional returns.
The group will only consider additional returns, such as a special dividend or share buyback, where there is consistent surplus cash, the circumstances are conducive to doing so, and where the opportunities to grow the business through priorities one and two have been delivered. Let me provide further insight into those two priorities, including the returns profile for each. The Porvair business model is capital light. CapEx has averaged around 3% of group revenue over the last five years. Our sites are well invested, with sustaining maintenance type CapEx typically being, in a normal year, under 1%. Growth CapEx has typically been around 2%. Whilst Porvair is a capital light model, we continue to see opportunities for selective value-enhancing investment where we can achieve best bang for our buck, with some returns being over 40%, hence it being priority number one in our allocation framework.
When considering strategic investment in automation, capacity, and other margin-enhancing activities, it is this pre-tax hurdle rate against which growth CapExes are assessed. Payback is typically within two to four years, sometimes sooner. Again, the strategic mandate Hooman outlined earlier drives CapEx priorities across the group. We expect to see a slight uptick in growth CapEx going forward with healthy competition for capital around the executive table, given the returns we can achieve where we operate a light governance framework for pre- and post-investment reviews. Let me give you a few brief examples of our growth investments in action from across the group. Starting on the left, as some of you have seen firsthand, we invested in a five-axis milling machine in our U.K. aerospace business shortly after COVID.
The machine is around GBP 600,000 and has delivered returns from vertically integrating activities, de-risking the supply chain, running 24/7, and bringing margin in-house that was previously lost through bought-in products. With the initial investment returning over 40% and with growing aerospace demand, we recently added a second machine in the same business. The middle example is in Ratiolab, Hungary, where post-acquisition, we invested in a clean room together with molding machines for around GBP 500,000 . This investment, combined with the toolmaking expertise of local management, also enabled us to produce in-house some of what we were previously buying in. We are now producing around 2 million of divisional sales per annum, previously outsourced. Last but no means least, on the right, is a great example of getting a bang for our buck.
This investment being for a production line connector in our recently acquired Drache business within Metal Melt. The CapEx is currently in progress, and for around GBP 100,000 we expect to deliver a return of over 100% per annum simply by automating part of the existing production line, and this will pay back in year one. Turning to targeted acquisitions, priority number two within the capital allocation strategy. We supplement organic investment with targeted acquisitions aligned with the M&A framework that Hooman talked to earlier. We seek to deliver returns above our cost of capital with the objective not to maximize returns in any one year, but to compound value over time. Let me give you some examples of our most recent larger acquisitions and why we expect these investments to deliver compounding value for shareholders. Starting on the left with European Filter Corporation.
EFC was acquired at the very start of FY 2024. Based in Belgium, this business brought a range of benefits to the group with new filtration technology and complementary products, cross-selling opportunities, and a clear route to market. We paid around GBP 10 million net in consideration, and this business has delivered returns in excess of 15% in its first year with the group, whilst also enhancing the divisional operating profit margin in A&I. This is a great business and a great addition to the group. Moving across to Drache. My good colleague, Watt Jackson, has already talked to the rationale for the deal and why we are excited about this opportunity. Let me give you a few numbers. We acquired Drache in January of this year for net consideration of around GBP 17 million.
We previously disclosed that in the year before acquisition, Drache delivered revenue of around GBP 17 million or EUR 20 million. As I just mentioned, our objective is to compound value over time, and this is a great example of us buying a good business with clear opportunities to make it better. Drache also offered a compelling global strategic rationale, as Watt described. To deliver returns in line with our expectations and to bring the business into the margin corridor for Metal Melt, we knew we needed to deliver GBP 1 million plus of synergies in the first 24 to 36 months of our ownership from combined actions across both Drache and SELEE in commercial sales, purchasing, and operations. As signaled throughout this year, integration is running ahead of our expectations and the team is making really great progress.
We're excited about what's in front of us for all the reasons you've heard today. Last but no means least, GV Filtri, an industrial filtration business based in Italy, which has only just completed, as Emrah mentioned earlier. Similar to EFC, this is an industrial filtration business which brings various benefits to the group with new filtration technology and complementary products, cross-selling opportunities, and again, a clear route to market. We paid around GBP 5.5 million net in consideration, and as with EFC, we expect GV to deliver returns of over 15% quite early on with the group, whilst also enhancing A&I's divisional operating profit margin. Bringing this all together and to sum up, we are at an important point in the journey, an inflection point, as Hooman said at the very beginning. I've shown you how what you've heard from the team translates into stronger medium-term financial performance.
This is a portfolio of businesses built on strong foundations and delivering consistent performance. A compounding flywheel which combines strong cash generation, sustainable organic growth, and targeted disciplined acquisitions to deliver attractive long-term returns, all within a new financial framework. That is all from me for now. Thank you, and I will pass you back to Hooman for the wrap-up before we move on to Q&A.
Thank you, James. Before opening up for Q&As, let me finish by summarizing today's messages. The first message is that we start from a position of strength. We have built a portfolio of specialist businesses with attractive market positions, technical differentiation, recurring revenue characteristics, and a long track record of consistent compounding. The second message is that we are not standing still. As you have seen today, there is a great deal happening across the group. We have strengthened the organization, clarified our priorities, enhanced execution, and created a more scalable operating model. The objective is to improve the quality and performance of the portfolio while staying true to what made the business successful in the first place. The third message is that we see a long runway ahead. We operate in attractive markets supported by long-term structural growth drivers. We have multiple opportunities to accelerate organic growth.
We see meaningful opportunities to improve margins and returns, and we have the balance sheet, capability, and discipline to supplement that growth through targeted acquisitions. Ultimately, we are focused on building a stronger and more scalable Porvair, a business that grows faster, generates more cash, delivers higher returns, and compounds value consistently over time. That is the opportunity we see, and that is what management is focused on delivering. Thank you for joining us today. We appreciate you spending the afternoon with us. We hope you come away with a clear understanding of our business, our strategy, and the long-term opportunity ahead.