S2 - Episode 4: The Business Case: Interview with Andy Thomis, Chief Executive of Cohort PLC

Join hosts Mark Wharrier and Phil Clark for an insightful conversation with Andrew (Andy) Thomis, Chief Executive of Cohort. In this episode, Andy reflects on the journey of co-founding Cohort and growing it into a leading defence and security technology group, serving customers across the UK and international markets. He discusses the evolving defence landscape, the increasing role of innovation and specialist expertise in national security, and how Cohort has built a portfolio of high-performing businesses through a combination of organic growth and strategic acquisitions. The conversation also explores leadership, long-term value creation, and the opportunities and challenges shaping the future of the defence sector.

Transcript

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Welcome to the business case in partnership with the leading investor presentation hub Engage Investor. This is the podcast where we dive deep into the stories behind the UK's leading companies. I'm Mark Morrier. And I'm Phil Clark. And in each episode, we'll be sitting down with top business leaders to uncover their career journeys, the challenges they faced, and the insights that have shaped their success. We have spent our careers analyzing and investing in UK companies, meeting managements to understand the business case. And now we want to share those insights with you. We will hear about the companies our guests lead and how they are positioned for the future. But we also want to find out what makes these business leaders tick, the highs and the lows that they have experienced, and the lessons of management that might apply to your life. Please remember that this podcast is not investment advice and is for informational and educational purposes only. Well, this is a great conversation with Andy Thomas, co-founder chief executive cohort group, the UK Defence Business. And this is a poster child of what the London Equity Market and AIME can do, given that it's just gone through its 20th anniversary, being a listed business and has performed extremely well. Anyway, lots of insight and tips as to how Andy has achieved that. Hope you enjoy. Well, today we're delighted to welcome Andy Thomas, founder and chief executive of Cohort PLC, the AIM-listed independent defense technology group. Andy co-founded Cohort in 2006 with a simple but powerful idea that small and medium-sized specialist defense businesses could perform better as part of a supportive group than they could alone. So 20 years on, Cohort is a group of seven businesses generating over 270 million pounds in annual revenues with an order book extending into the 2030s and a share price that has more than doubled over the last two years. And yet, as we'll discuss today, the market may still be underestimating what the business can deliver over the longer term. Andy, welcome to the Business Case Podcast. Thank you for having me. Well, for listeners less familiar with cohort, can you give us a snapshot of the group, perhaps touching on some of the activities within the seven businesses and explain the trend that connects them? Yes, of course. So let me first explain that one of the key operating principles of the business is that our seven businesses each remain autonomous to quite a significant degree. So they have very clear financial delegations and they get to make their own decisions within those delegations. And that means that they can respond to customer demands very quickly. And that's a very important thing in our part of the defense sector. In terms of what we do in those businesses, is quite a range. I suppose our center of gravity is in maritime technology, and we do things like weapon launches, torpedo launches, systems for defending surface ships against missile attack, sonars for submarines and surface ships as well. But we also do some important things on land, like systems for detecting and defending against drones, or systems for surveying and detecting potential targets in a land systems environment. So quite a range of things. I should mention satellite communications, that's another very important one as well. The thing that ties them all together, really, is high technology and items of modest size, although high complexity. So we're not involved in making nuclear submarines or fighter jets, but we're involved in making the things that make those platforms work and make them effective. So this is not about consolidating businesses together into verticals, but there's some shared technology, shared capabilities where it makes sense to have these businesses together as a cluster. Yeah, exact exactly so. So the key to our model is combining the responsiveness and innovation of small to medium-sized businesses with the financial strength, stability, and market access that you get as being part of a larger group. So what we provide our businesses with is the ability to invest in facilities and in product development, the ability to manage large working capital swings, which is important in our business as well, as we often have quite large projects. We provide them with, or through our banking relationships, we provide them with the commercial instruments that they need to take on larger contracts, so things like advanced payment guarantees, letters of credit, performance bonds, and so on. We give them much better customer access than they would ever be likely to have as independently managed businesses. And they benefit from being part of a peer group and also the mentoring and support that the headquarters team is able to give them as well. And finally, uh, we give them better visibility and perhaps more influence in the market than they would have as independent businesses by doing things like, ooh, I don't know, podcasts. So look, it's been 20 years now. Um, you know, how how has the model evolved? Um and I suppose have there been any cases where you know the holding structure has been more constraining than enabling, and you've had to pivot or refine the model as you've gone? Well, we do understand uh that giving our businesses a high level of autonomy makes it harder, uh, for example, for us sitting in the center to align them together to meet a particular opportunity in the way that some of our competitors do. Um but we recognize that's the price that we have to pay for that agility and innovation. And very importantly, uh a cost base as a group which isn't inflated by a heavy layer of coordination uh overhead, which is what you need if you want to try and do those things. So thinking about it from a PLC point of view and using that dreaded word synergies, um, are you know over time are there synergies and thinking about sort of you know cross-selling, shared customers, tech transfer, or should should we just not think about synergies in terms of the model? Well, we do see plenty of uh examples of where our businesses actually work together, and I suppose you could class that as a synergy. So, for example, um our business SEA and our business Chess are working together to provide uh a system called Ancilia, which is the system that defends the Royal Navy surface ships from missile attack. Now that's being provided by SEA, but Chess is a very important subcontractor and supplier into them. And similarly, our businesses, Marlborough Communications and Mass, have worked together. Our businesses SEA and our German sonar business, ELAC, have worked together on software projects. But that's not what really fundamentally drives the business model. Um incidentally, we we can and do um make uh synergy-driven acquisitions, uh, but we regard those as sort of bolt-in. So if we see a business that we can integrate with one of our existing portfolio, uh we can and have done that on a number of occasions. And that adds value in a slightly different way. I was listening to your uh half-year results presentation from um late last year, I think it was. And it it sounded like EM Solutions was coming at the group with a bit more of a synergistic opportunity, or maybe I misunderstood that. There's a few good examples there. Um EM Solutions is our provider of naval satellite communications terminals, and um it's a particularly good example of the kind of business that we look to acquire, um, as it's got a significant competitive advantage against the other suppliers in that area, uh, in that it is in that their system is multi-band, multi-orbit, so it'll work with the uh low earth orbit, mid-earth orbit, and geostationary satellites as well. Um, it's certified to be used with the multinational WGS global satellite system. Um, and it's also got much better technology than its competitors, um, being based on a ship which moves around in heavy seas, on being able to lock onto a satellite in those difficult circumstances. So that's enabled them not only to be the primary supplier of satellite communications technology to their domestic customer, the Royal Australian Navy, but also to export into Japan and into Europe. So um Norway, Belgium, Portugal, the Netherlands, uh amongst others. Um and uh being 12,000 miles away, uh it helps a lot uh to have uh sister companies in Europe. One good example, we recently uh brought in an order for about 20 million Australian dollars from Portugal uh to equip some of their ships with our satellite communications hardware. And our business based in Portugal, EID, uh, will provide local support, um, installation and so on for those systems. Great, perfect. Well, I'd like us to maybe take a step up and sort of think about the macro framework and the macro sort of, I think, tailwind that that you're sort of seeing in in defence. I think it will be very difficult for anybody not to appreciate that there's been a sort of fundamental reset in defence spending environment in recent years, um, particularly with with the Trump second administration and and you know a lot of NATO uh members talking about moving to 5% spend on of GDP on defence over the next five to ten years. UK government clearly is is part of that discussion. And you know, I think we're still waiting for the the defence uh investment plan, which which has been delayed uh most recently, but obviously some of the areas that have been highlighted naval systems, electronic warfare, surveillance, comms, all kind of in your sweet spot. But if we sort of step behind the headlines, the 5% obviously is a is a is a very much a sort of sticker headline. How is this translating into sort of the operations of the business for you? Well, we've seen uh, as you say, uh a significant uh change in the demand picture, particularly since 2022 and the Russian invasion of Ukraine, which was a significant catalyst to um uh to defense spend uh expenditure around Europe. Um and as a result of that, um and that's been augmented by the comments made by President Trump uh and um particularly in relation to the Atlantic Alliance and the importance of NATO. And in turn, that's that's pushed um the European NATO countries and Canada as well uh to look at increasing their level of spending, uh, so above and beyond uh what's been driven by Ukraine. Um and for some years before that, uh, we've seen strong demand pattern in the Indo-Pacific region, driven by the investment that China's been making in its armed forces, and in particular its Navy, and the way that it's been using those armed forces in quite an aggressive way uh towards its neighbors, um, both around the South China Sea, um Japan, and all the way down to Australia. So um, yeah, we we see strong demand internationally from all of those regions, and of course, now with uh conflict breaking out in the Middle East, um, that's likely to affect the demand picture as well. Um so uh as you as you rightly say, um uh the demand that that's driving uh is is different, perhaps uh qualitatively to the way that we saw traditional demand patterns uh over the preceding decades. Um we're looking at new technologies, particularly focused on drones and counter drone, autonomy, artificial intelligence, of course, has got a road uh a role to play. Um but it's not just the kind of technology that's being procured that's different. Uh, we also need to think about um versatile defense manufacture that's able to adapt to the rapid pace of battlefield evolution uh that we're seeing and has become particularly uh prominent uh in the Ukraine situation. I mean it's probably a slightly hackney comment, but there's always this idea that the defence sector is is preparing for the last the previous war, not the next war in terms of technology, but field of engagement and so forth. I mean, is that something that you have to navigate and do and deal with as a from a strategic point of view, or is that sort of a little bit of a simplistic, a bit flippant way of thinking about things? I I think I mean I think it certainly has happened, and there's always a risk that it will happen because you have you have to learn from a here and now. Um but uh it's also important to consider how things are changing. And I mean we've got at the moment a ringside seat of of you know really rather terrible events that have been happening in Ukraine. Um but it it helps us understand uh how conflict can evolve uh given uh all of the inputs that we've got in terms of new technologies coming available. And I mean you're a you're a long cycle industry. Uh I mean you you yourself, you've got, as Mark said in his opening comments, you you've got your order book going out to 2035. How how how do you sort of how do you think about translating you know that significant tailwind of growth uh through the business? And I'm uh I again I know you were talking about having to increase your uh revolving credit facility. So I mean, is is the financial strength of the group a really critical part of the order book? And then I guess second question would be how should the how should investors think about the conversion of the order book into translating into actual rev into revenue? Um financial strength is is very important for defence companies. Um frequently uh a lot of our revenue comes from projects which include a significant development element as well as a production element. I mean the most prominent example of that for us at the moment uh is the contract to provide the new sonar systems for uh the fleet of Italian submarines that's being built by Fincantieri. Um and that that's required a significant, a very challenging technical development. Um and when you're being paid on achievement milestones, if there's a delay to those milestones, then that can have quite a big impact on working capital. So um I think um being able to manage those situations uh in our line of business is certainly as important as keeping an efficient balance sheet. Uh so yeah, and it's one of the the good things that we've been able to do by building uh a successful reputation for delivery and growth and delivering value to our investors. Uh and uh that's enabled us to build very good relationships with our banks, which has enabled us um to uh put in place a new facility which is just happening as we speak, in fact. Right. Very good. Um The um in terms of the uh delivery of order book out to 2035, I mean that the duration of the order book has grown quite significantly in recent years, and that's in part because of our increasing maritime exposure. Um and shipbuilding programs and submarine building programs are by their nature very long term, can often last decades from start to finish. So uh in fact, I think um our formal order book actually understates uh the um expectations that we have in terms of future revenue deriving from those because very often uh those programs are contracted perhaps in five or ten year chunks, um, and we know that there will be further ships being purchased either by the same customer or by others, which will require our systems on them as well. That I mean, uh not not wanting to go down a rabbit hole too much, but that that sounds like the sort of the capital intensity of your business is increasing slightly, maybe maybe more working capital requirements. So I mean, are you able are you able to price for that reflect that in contracts as you uh if if you are going if the capital intensity of the business is increasing? Um yeah, well, as you say, it's it's it's working capital intensive. We're not in fact an especially capital intensive business. We have recently invested in a new facility for our our our German sonar business, you like sonar. Um and uh we're we're looking at uh a new facility for one of our other businesses as well. Um but but generally speaking, um uh CapEx is really focused on things like uh information technology. We don't we don't have warehouses full of robots or anything like that. Um and as far as pricing is concerned, well, um uh cash flow is a really important part uh of uh the the bids that we put together. Um yeah uh um margin of course is very, very important as well. Um uh and being competitive is also absolutely necessary. Um but being able yeah, but but being able to uh to finance as we go rather than have to sit on very large uh working capital build is obviously much preferable, and that's something we always try and negotiate with our customers. You uh you were saying earlier there, Andy, about the um investment requirements. A lot of a lot of your costs are actually in the RD side of things as well as production. Again, outside in, it looks like there's there's a lot more innovation that's happening in the private sector at the moment. If we think about space, we think about drone, we think about cyber. Is that something that that you're noticing and as a as a sort of agile, nimble collection of businesses that you are are you able to respond and adapt to that? Is that a benefit for you? Uh I'm very, very, very much so. Um one of the positive things about the uh defence sector generally is that a lot of our RD is actually financed by customers. Um so I I mentioned the uh the sonar systems that we're providing for the Italian Navy. Um, but we're also in investing um uh in significant new technology development. Uh to give you some examples, um, at the moment our German business ELAC has um uh invested in a system called Enlighten, which is designed to protect underwater infrastructure by detecting incursions from uh any kind of uh subsea drone that would be looking to destroy or damage uh internet cables, power cables, oil and gas infrastructure, and so on. Together with a system called Eraser, which is designed uh to actually react against that threat and prevent it from damaging that underwater infrastructure. We've also designed special lightweight sonars, um this is our UK business SEA, which are very well suited for use with autonomous underwater vessels and autonomous surface vessels, and fit very nicely into the concept of Atlantic Bastion, uh, which the first sea lord was just talking about a few days ago. Aaron Ross Powell And just picking up on NABOR, I mean NAVOR I think is just over half of your business today. Has that been a sort of conscientious strategic decision for you? I mean, obviously very topical and relevant to uh given recent events in the in the world, but or has it been a bit more that's where the opportunities have been and you've been able to go after them? Aaron Powell Well, it's more of an outcome of a strategic process, really, because one of the things that we look for in our acquisitions is exposure to growth opportunities. Now, plainly those have been easier to find in our sector since that demand pattern changed a few years ago. Um but still uh there are always areas that are growing faster than others. Um and maritime is a really important area uh worldwide. I mentioned earlier that the um the challenge that's seen across the Indo-Pacific is is first and foremost uh a maritime challenge. Uh and here in the UK, um the UK's NATO role, um, which, you know, as the strategic defence review last year indicated is is primacy, really has primacy, um, is dominated by the North Atlantic um uh and um uh protection against Russian submarines um coming down from the um from the far north, um, as we saw only a few weeks ago. Just thinking about that um sort of RD role, uh I guess historically um RD has been a very top-down process from defense ministries in developed economies, and then you've had these multi-decade programs, whether it's aircraft carriers or fighter jets or whatever. I suppose as the threats become much more granular and volatile and changing, is this sort of turned on its head a little bit? You do you sort of pitch ideas and potential solutions to ministries and customers around the world? Is it much more of a two-way process? Um Yeah, that that's an important part of our overall business development strategy. Um, we look to have a close dialogue with our customers and understand the problems that they're trying to solve and then aim to get ahead by investing in technology which will help them do that. Um and at its best, that enables us to have technology at perhaps prototype level or demonstration level at the time when they're coming to industry and saying, What can you do to help us with this? Yeah. Well, let's talk more broadly about um sort of the UK defense uh sector and I guess the the wider industrial base. Um as Phil said, we've had the strategic defense review, and you know, the government has talked about rebuilding sovereign industrial capability following you know many years of outsourcing and um you know offshoring of capabilities. Uh somebody who has spent a career in UK defence technology, you know, what what's your honest assessment of the health of the UK defence industrial base? Well, I think it remains very strong. Um, uh one of the strongest in Europe, if not the strongest. Um I mean the UK defense industry is a very successful and wide exporter of its technology and products, which I think is a very good yardstick uh to judge it by internationally. Um but ultimately the strength of the industry depends on domestic orders. Um because, apart from anything else, um uh having equipment in the home market is absolutely key to defense exports, and it's very hard to uh Export something that hasn't first been acquired by your domestic customer. And that is something of an issue at the moment. It's becoming more difficult for us to plan and to set our expectations for domestic orders because we don't at the moment have a clear view of exactly what the customer's priorities are and over what period it intends to actually acquire those priority capabilities. So I think that getting that defense investment plan is going to be very important in maintaining the health of the UK defense industry. And it's going to have to adapt in different ways as well. So for example, the focus that we have in peacetime of testing and proving all of our equipment very extensively to ensure that it will be reliable over a very long period of time and that it will stand up to all sorts of challenges. We're going to have to re-evaluate that in the light of the speed of evolution of technology that's needed on the battlefield at the moment. So presumably that that's kind of a function of decades of historical thinking with aircraft carriers and submarines and very different types of projects. And it sounds like a new skill set is required in procurement and that relationship between government and industry. Yes. And of course, none of this is to say that the systems that have been procured historically are no longer needed or out of date or a waste of money. I mean aircraft carriers, frigates, and destroyers for the Navy, nuclear submarines and so on are still of immense value. But what we're seeing is that the pervasiveness of intelligent surveillance reconnaissance assets are such that it's very difficult to keep those assets safe if they come anywhere close to a hostile force. And so augmenting those assets with uncrewed assets as well, so uncrewed underwater vessels, surface vessels, in the current UK concept of the hybrid navy is becoming increasingly important to maintain that capability. And that in turn requires new thinking. We're not talking about building surface ships that might take several years from first weld to first coming out into the water. You're going to have to think in terms of cost very carefully as well. Because if you're making s significant numbers of these autonomous vehicles, then they they can't all be as uh as perfect uh uh as the uh as the man vessels that we've been looking at in the past. Aaron Powell It's quite interesting just looking at this experience of Ukraine over the last few years. You know, necessity is the mother of invention, isn't it? And you know, when there is a crisis, it's amazing how quickly things can happen. Um because it they have to, right? Aaron Ross Powell, Jr. They have to, exactly that. Yeah. Yeah. When you're faced with an existential crisis, um then uh you know that there's no point in sort of worrying about whether you're acting in line with the theology that's been set down from years behind. Yeah. Just thinking to the extent to which um a lot of UK industrial capability has um you know been outsourced over the last few decades. And you know, you can go through industry after industry, whether it's the auto sector, telecom equipment, and you know it it hasn't really impacted the the defense sector in terms of traditional um, you know, long-term programs. But as we're moving to this new world where lots of um new capabilities and requirements, are are there sort of pinch points or you know areas of domestic manufacturing um that we just simply don't have and we need to rebuild as a nation? Um undoubtedly the defense industry does uh have supply chains which rely on imports, um uh, you know, perhaps not at the system or the subsystem level, but once we get down to components and materials, um, you know, it's very, very important to understand what the implications of those import um inputs are. A good example of this uh is in uh permanent magnet motors, which are a very important feature of many defense systems, including our, for instance, our uh optical tracking devices. Um and uh you know for the for those permanent magnet motors you need rare earth elements, and those are mostly supplied from China. Uh and uh China has restricted the export of those um recently in in in response to US tariffs. Um So we need to think about that. Um I think one really important uh lesson that's come out of Ukraine is that industry is an integral part of defense capability. Um of course it's the brave people on the front line who are taking huge personal risks to themselves who are the the cutting edge, the tip of the spear, if you like. But uh unless you've got an industry behind them that's able to resupply and able to develop technology uh in response to the new threats that evolve so quickly in uh in those circumstances, then you're gonna be severely disadvantaged. As you say, it feels like a huge opportunity for the UK, just given the historic strength we've had in defence and in that post-war period where you know several countries were not allowed to be in the sector, and we've built up um the critical mass and capability and skills. But you know, thinking about the next five to ten years, you know, what would you like to see from the government in terms of you know promoting uh the development of Wellcast sovereign defence capability and you know stimulating those export orders that we badly need? Yeah. Well, I I think um the most important thing uh is to have a clear plan as to what is going to be acquired over what period, and ideally to stick to that plan. I think that that is um both necessary and to quite a significant extent sufficient in terms of um ensuring that the industry is there to do what you want it to do. Um there's been a lot of talk about um uh improving the relationship with small to medium-sized uh enterprises uh in government and um uh uh awarding particular contracts to small countr uh small companies uh to benefit from the innovation that they can provide. I I worry that sometimes that this kind of initiative is a little misguided. Um it is very, very difficult for uh very small companies, even with the most innovative ideas, uh, to be able to grow into the kind of business that can actually produce and deliver equipment to the standards required by the armed forces. Um, much better to encourage those businesses to partner with larger businesses that have the experience of dealing with uh the Ministry of Defence or and export customers that understand what's needed and have got the resources and the organization to be able to convert that innovative idea into a real product. Um without wanting to strain the metaphor too hard. I mean, if you put out um uh bird seed in your garden in the winter, uh then you will get a lot of interesting avian friends coming around. But if you forget to fill it and go off for two weeks uh over Christmas and come back, sadly a lot of them won't have made it because they won't have another source uh of nutrients, of sustenance. And if um we uh tell small and medium-sized businesses there's gonna be plenty of money for you here, we're going to award you lots of contracts to develop things, it's all gonna be fantastic, then you'll certainly get lots of takers. Um but when that money goes away again and and the customer says, Well, thank you for all of that, now we're going to think about it and decide what we're going to do, you know, when they come when they come back, they won't be left. You know, they they um they they just don't have the uh financial stability to be able to stand that process. And um and of course there isn't another customer in the UK. Yeah, absolutely. Well, I'd like to think of a nice segue using Bird for Birdseed, but I can't. So I wanted to ask you about uh MA. Um obviously, since you started Cohort back in 06, you know, you you've you've made a a large number of acquisitions. Um obviously we talked about uh EM Solutions being the most recent one uh early last year. What what what is a good target look acquisition target look like for for cohort? Uh it looks like EM solutions. More of those then please. Yes, that'll be great. No, um we we look for um uh clearly businesses that are of the right sort of size um and operating in the right area. So I assume that's not too big and not too small. Yes, that's right. Um yeah, we're not looking for uh we're not looking for startups, um, all although we could consider um those as bolt-in type acquisitions. Right. Um we're looking for businesses that are mature enough to be trading and to be profitable, um, but uh not so large that they need to divisionalize and have complex structures of their own. I mean that that that is really our fundamental operating point. Our businesses have to be fast at making decisions. Um but then as as far as performance criteria are concerned, firstly, as I mentioned before, access to growth opportunities, growth areas in defence, um, both in the domestic um and in international markets. And of course, we're not just a UK-based uh group. I mean, three of our seven businesses are out of the UK. But secondly, some kind of sustainable competitive advantage. So we're not simply competing with uh a number of peers on who's willing to accept the lowest margin. And that could be in terms of technology, that's the one that people would think of mostly, but also it might be in terms of incumbency, uh, relationships, reputation, uh, all of those things can matter as well. And maybe just picking back up on um something Mark asked you earlier about synergies, is is the synergy piece, you know, I don't know whether it's customer adjacency or technology adjacency with existing portfolio is that is that an important consideration for you or is that sort of more secondary? Um Well, we are concerned not to have overlapping businesses uh that are both, you know, go or continually fighting for the same contracts. I mean I don't mind a little bit of competition around the edges. I mean that uh that helps keep people sharp, and it's not not bad to have two horses in the same race occasionally. But if we had sort of converging strategies, then that wouldn't be something I'd want to see. Uh so um where we do see businesses that overlap, we'd be looking more in terms of a bolt-in type acquisition than an addition to the portfolio. And um and and how do you think about price, price discipline? Um, again, you know, the the defect defence industry, I'm sure multiples just like yours has gone up. You know, I'm sure a lot of potential assets for sale, price expectations have been become more elevated the last few years, as lots of people can see these tailwinds that we were talking about earlier in the discussion. How do you how do you keep that discipline? How do you keep the what's the framework that you you think about? Yeah. Um well, as a relatively modestly sized group, we look at each acquisition very much on its own merits, and we price very much on its own merits. So um we're we're not like um some businesses operating in markets where there are a large number of small businesses which can be valued on a sort of slide rule basis. Um we look very hard at growth prospects, um particularly at order book and um uh how close they are to the customer, how certain they they can be in those growth prospects. We look hard at competition as well in the nature of the marketplace. Um and we um uh and of course the usual criteria like um margin and so on, which is a very good proxy for uh for strength in the marketplace. Um and we take all of those things together uh in a valuation um and then negotiate with a seller because ultimately um the right valuation is one agree between winning buyer and well-yeah, winning buyer, willing seller. And if you if you were kind of going to score yourself, um if you were looking back and scoring yourself, um you you can pick the the metric, but or on some of the acquisitions you've made. I mean, are happy with how they performed, you think these are big these these were the right uses of capital, they've delivered on what you were expecting. Well, it's always hard to predict the future when one is doing these things. Um but yes, I am satisfied with the acquisitions that we've made over the years, which is not to say that all of them have always performed um uh to the uh to the um you know the outest extent of our expectations. Um there's there's been ups and downs as there always are in in in businesses. Yeah. Um but um but no, I don't think I've uh that we've ever done one that I've thought, well, this is this is this this was a disaster. Um we have been perfectly prepared to trim the business um where that's appropriate, um really based on changing demand patterns and on um uh our priorities as far as investment is concerned. So, for example, um uh we MBO'd a um an oil and gas business, which was a small part of uh of a business that we acquired some years ago, which I was very pleased with because it went rather well for the uh for the buyers, which was nice, but you know, wasn't something that uh we were particularly interested in. Um and we found a new home uh for our scientific space business uh a f a few years ago as well. Most recently uh we divested a transport business that had been part of uh of SEA for a number of years, as it became clear that uh the nature of that market was changing with the move to smart cities and uh and looking at uh traffic and transport in a holistic way, and that a lot more investment was going to be necessary to stay in that market. So it made sense to find a new hand for it. And in an industry that's sort of almost renowned for keeping a low profile and trying to keep out of the the public eye, how how would you go about sourcing acquisition opportunities? Um yeah, I don't know about low profile. Well you're you're doing the podcast, so we've uh uh we've broken the broken things here. Um Well, we get a pr a steady flow, if not a flood, of uh of opportunities. Drinking from the fire hose. Exactly. Via uh investment banks um uh and uh um boutiques and um uh other intermediaries. Um and indeed sometimes we get contacted by vendors directly. Um but we do take uh a very careful view of what we want to pursue. Um and when we see something that meets the criteria, we will pursue it uh uh aggressively. Um but uh really quite a small proportion of what comes past us uh hits those buttons. Yeah. And I I'm I'm assuming that you're you're open for open for additional opportunities from a uh MA perspective. Certainly, that remains an important part of the strategy, and uh we have grown both organically and by acquisition, really since our inception back in 2006. Um and that's something that we see ourselves as being you know well able to continue to do. And you you were talking earlier to Mark about the um, you know, you you have your you operate your seven businesses quite autonomously, they have, you know, they have their guardrails that they can operate within and that you you like to make them make quick decisions. How how does that, as you've gone out of the UK and you've gone international, now you're all over the globe, as you said, you're in Australia, the opposite side of the world, how how have you been able to sort of maintain cultural cohesion across the group? Um that's an interesting one. I mean, in many respects, um we're very happy to be um multicultural, if that's the right term. If that's the right term. Um so uh, I mean, for example, we've got our our our business Morboro Communications, which is very much focused on building bridges between overseas suppliers and UK end users. Uh, and that requires a really completely different culture to say our business EM Solutions in Australia, which is um engaged in building large and terrifically complicated satellite terminals, or our business Mass, which is engaged in delivering very complicated high-technology services in electronic warfare operational support. So the idea that there should be a single culture throughout all of those businesses uh is one that would be very difficult and probably inappropriate. But we do have central values. Um and I mean it's it's people always switch off when CEOs say, now I'm gonna talk about the company values, but they I I think they actually do really reflect the way that we behave. And our our values are expertise, first and foremost, as we are engineers and we solve people's problems using technology. Practicality, because that's actually got to work, and it hasn't just got to be something that's interesting to um uh uh you know a a very advanced technologist, but actually works in the hands of an end user as well. Um dynamism, because we've got to be energetic, because things are moving fast, and finally responsibility, because um uh ours is an industry which is heavily regulated, uh which um is subject to um a lot of legislation um both in the UK and in markets beyond. And we have to comply with that, and making sure that we do and that we don't let our enthusiasm lead us up against the edges of those compliance requirements is really important too. Well, I I have to say to you, Andy, yeah, Mark and I both actually think values are really important, and it's been a consistent theme on our with our other podcast guests, actually. So uh Henry Engelhart from Admiral Insurance talked a lot about his values, Simon Rogerson from Octopus as well. So um we're full full full subscribers to that. And just finally for me, um, last question on this topic is you you've recently appointed a group COO. How should we read or how should the market read that? Is is this more about more kind of group level operational ambitions? Is it more about just bandwidth of the executive team? What's the sort of driver behind that appointment? Uh two main drivers there. Um one is that um several of our businesses uh are going through an evolution at the moment from being um engineering businesses, project businesses, where they're looking primarily at generating value through solving a difficult problem. And that evolution has now been towards um production, um, partly because budgets and demand is is rising and numbers of things are needed. Um so that involves bringing new skills into our businesses, new capabilities, sometimes new facilities as well. And it also means a bit of a cultural change. So we're moving away from the idea that um uh the engineer and the designer is the absolute king into generating value through production and ensuring high quality and managing supply chains as well. So um we've we've made some management changes in order to uh um uh facilitate this evolution, but we've brought in uh Chris as chief operating officer, Chris Axel. Um, as he's been steeped in this, uh, in volume uh defense electronics production for many years, and he brings a great deal of expertise to the party. Uh, and he will assist our businesses very significantly in making that change. And then the second reason is the one that you lighted upon, which is to bring in additional executive talent to cope with the increasing breadth of the business now that we're up to seven businesses. We need to be able to provide them all with the same level of mentoring and support um that we uh that we've traditionally been able to do so. And so we're gonna need more more resource in the center to do that. Well, let's talk about life as a listed company. Uh cohort is listed on AIM, has been for um 20 years. And look, AIM has a bit of a bad press at the moment in terms of stock market performance, liquidity, research coverage, et cetera. But I would say you're one of you're kind of a poster child of what AIM can do, uh, given the way you've used um you know equity very sensibly over the years and compounded a great return. You know, what do you think AIM is the right long-term home for for Cohold, given the the size of the business that you are now? Well, we'll see. It's something that we keep under review. Um but what I would say is that AIM has been very good for us and is at the moment. Um we raised um we did a place to raise 40 million or just over 40 million pounds uh in late 2024 to do the EM Solutions acquisition, and it was a very smooth process indeed. We got excellent support from our existing and indeed new investors as well. Um and that is fundamentally, you know, one of the most important things that you're on public capital markets for. Um and AIM has got some real advantages compared to uh the main market. I mean, particularly um the uh the code and the concept of uh of the way that a board operates is much more flexible on AIM uh than than is the case on the main market. And our board is made up of real defence experts. Um all of our board members, all of the uh the non-executives as well as the executive directors are um very experienced in our industry and really understand it. And so they bring a lot to the party. I mean, I I rely on their collective and individual wisdom to support me uh in the decisions that I take. Um and that's rather different to uh the concept of a board uh as being essentially risk managers and people who lend their reputations uh to a business and so are very reluctant to support anything that uh that that that might end up with a negative outcome as far as they're concerned. Yeah. So and that's something that we're quite free to do on AIM, that would be harder to do on the main market. I mean, I'd add as well that uh you know, we said on AIM um uh we operate at um uh a reasonably sensible. Price multiple. And we have good liquidity in stock, you know, mil millions of pounds a day. So and and and that's meant that we can uh we can talk to US investors, for example, and investors elsewhere. The liquidity is such that it enables us to do that. So I don't see AIM really restricting us at the moment, but we will obviously have to wait and see how it how it evolves and whether there are further tax changes that undermine it. Absolutely. So as you say, the the the market gives you a reasonable valuation multiple in terms of the group. But I suppose perhaps not yet a um, you know, you're not perceived to be a longer-term compounder with long-term structural uh earnings growth. And I'm just wondering, is there anything that you feel a little bit frustrated by that perhaps uh the market doesn't give you credit for where which perhaps you should? Well, I I'm a firm believer that um uh in the end uh you know value and market capitalization will converge. Uh and there are many things that affect our share price um on a day-to-day basis. Uh and I certainly wouldn't want to sort of you know um flick up the internet and say, well, that's what we're worth now. Um you know, it that's not the way it works. But I think it it will in the long term converge. Um I'm conscious that we are uh for many investors quite a complex story. I think I think our um the majority of our institutional shareholders uh understand us very well and have looked uh you know have researched us over over a long period of time. But uh but that that can make it a harder sell. And we're continuously looking for uh new and better ways to tell the story as well. I think uh that's going to be an important part of it. And um uh Simon, our finance director, and I, you know, spend quite a lot of time talking to shareholders and making sure that we we do get the story out there. Um but also fundamentally, I think you know, we can talk about what we're going to do in the future, we can talk about how we see the opportunity developing, we can talk about how we can improve our operational performance in ways that I've I've talked about a moment or two ago. Um but um you know we've also got to deliver on that, yeah, and that's what really counts in the end. Uh and I'm sure that we will see our share price mirror that delivery. Okay. Great. Well, Andy, um, I have the pleasure of asking you the last question. Um, it's been a great conversation so far. I mean, so you you co-founded the business 20 years ago with a with a clear vision of being a um you know what a modern independent defence technology group could look like. Here we are 20 years on, that the business is generating record profits, record revenue, you've got a 600 million pound order book that takes you out to the sort of mid-2030s, and you seem to be at the sort of epicentre of a lot of the defence trends. If you could if you could sort of help have it listeners think 20 years forward, sort of what what what does cohort look like on a long-term view from here? 20 years is a long time. Make it five if you like. I think um that we can deliver very significant value to our investors and also, very importantly, continue to enhance the security and the deterrence of our customers as well by continuing to pursue the strategy that we have. Uh I think we're pursuing good operational strategies to develop new, good, effective products and supply those at high quality and in numbers. Um and I think we can be a good home for new businesses as well. Um and I I th so I think this current strategy has got quite a lot of mileage in it. Now that's not to say that it can go on infinitely. Um I think there comes a point um building a group like this where it becomes uh uh too large to manage uh uh uh with a s with a single central headquarters team as we do at the moment. I mean, we go a long way. I mean, we can be, I would say, definitely double where we are at the moment without that becoming a problem. But there is at some point, if we're looking 20 years ahead, uh, a moment where we have to think about that. And then um there are various solutions that become available uh to us at uh at that point. Um uh you know, for for for example, um we we could look at divesting certain businesses and maintaining a size that we can continue to sort of deliver organic growth through. Um uh we can look at um uh acquiring, growing, improving, um, and then selling businesses. These but these are concepts that we'd be considering many, many years in advance. I think ploughing the current furrow will keep us going for many years to come. Very exciting, Andy. Thanks very much for coming on the business case. Not at all. Thank you for having me. Well, Mark, that's our first defense company on the podcast. Definitely a uh sector I'm not super familiar with. But um, what did you think of Andy? Yeah, I really uh liked Andy and really admire what he's achieved over the last 20 years. It's amazing. We've had so many guests on the uh podcast uh bemoaning uh the London equity market and uh you know all the challenges and problems that we're all aware of. But here's an example of a company that's you know it's gone up 10, 20 times. Um and not it's not always been a benign um end market. It's been through its its uh its challenges, but it's um it just shows what can be done with you know steady policy, sensible capital allocation, and using the equity market um, you know, when it's needed. Yeah, I mean, uh building on your sort of he he had a very positive view and experience of AIM. It was really nice to hear him being very bullish about the UK industrial base. You know, we again lots of negative stories out there, people are sort of all in a bit of doom, but he he you know he was really robust in actually the infrastructure that supports his business, which was which was great to hear. I mean, big takeaways for me. I mean, I think we all knew that but the tailwind for growth is clearly blowing nicely in their sales, and um, you know, they're clearly taking full advantage of that. It I I quite enjoyed the discussion around sort of this the importance of the strength of the balance sheet. Um that feels like that, you know, harder when you're a small business, but they've now got scale and expertise and and um have built a track record where I'm sure they've got banks begging them to be part of their revolving credit facility. And it was interesting, um, a different approach to how to run the business with a sort of I think you coined the phrase you know, f federation of assets and um you know giving them a lot of odd autonomy, a lot of independence, but that that need for real fast decision making sort of feels like it was a a point of difference. Yeah, and I think you know uh what we need to see is the faster decision-making uh in the UK government. Uh because we've had the strategic revenge defence review, but we have not yet had the um the investment plan. And look, this is one of the you know the big parts of future industrial growth globally, where the UK has a real strength um, you know, over many, many decades, but we just need um to have less bureaucracy and slightly faster decision making. And the multiplier effect of that on UK manufacturing and the wider economy is significant. If I put my investor hat on for uh for one minute and I think about the sort of the drivers of potential share price appreciation, you you've clearly got the conversion of that order book into into revenues, which feels pretty secure. The the new appointment of this COO feels like there's a bit of margin squeeze opportunity. Uh, I mean Andy didn't couch it in those terms per se, but it feels like efficiency supply chain procurement is an opportunity. And then he he was very clear about further MA and he he he didn't quite give himself a sort of A plus for acquisitions, but he was pretty confident on the track record and they've got that inbuilt expertise and know-how to go out and continue to buy assets. So I so it looks it looks like a pretty interesting setup. Yeah, and quite thoughtful um about the longer term. You know, there's no this is not an empire he's trying to build. You know, there may come a point where a different structure is needed, um, and um, you know, they're realistic enough to um to think about that. Great. Well, I think uh we both have thoroughly enjoyed that. It's been another really good discussion here on the business case, and um we've got great uh a number of great guests lined up and uh look forward to any feedback that you guys want to give us.