Petards Group Reports Strong Revenue Growth and Major Defence Contracts in FY2025

FY2025 results: revenue up 24% and margins higher

Petards Group plc has posted a much-improved FY2025. Revenue jumped 24% to £14.9 million, gross margin stepped up to 49.7%, and adjusted EBITDA more than doubled to £1.0 million. The Group still reported a statutory operating loss, but it narrowed sharply to £435,000, with losses after tax cut to £406,000.

Cash generation was the quiet star: net cash inflow from operating activities rose to £1.384 million, helping nudge net debt (before lease liabilities) down to £1.339 million despite ongoing investment. The year closed with a larger order book of £9.2 million, of which £7.7 million is slated for delivery in 2026.

Key metric	2025	2024
Revenue	£14,947,000	£12,016,000
Gross profit margin	49.7%	45.3%
Adjusted EBITDA	£1,002,000	£410,000
Operating loss (statutory)	£435,000	£1,265,000
Loss after tax	£406,000	£1,127,000
Basic and diluted loss per share	0.67p	1.91p
Net cash inflow from operating activities	£1,384,000	£194,000
Net debt (before lease liabilities)	£1,339,000	£1,535,000
Order book at year end	£9,200,000	£7,100,000
Of which scheduled for 2026	£7,700,000	Not disclosed
Recurring services revenue	£4,486,000	£2,804,000

Note: 2024 operating loss includes exceptional costs of £491,000.

What drove the improvement: Affini and Rail did the heavy lifting

The first full year of Affini inside the Group contributed solidly, with higher installation and engineering services lifting gross margin. Crucially, Affini brings sticky, recurring income – the multi-year renewal of a key managed services framework is extended until at least the end of 2029 and is anticipated to generate annual revenues of over £1 million.

Petards Rail also moved forward. eyeTrain services, spares and repairs held steady, while retrofit systems orders increased, boosting revenue and margins. Across the Group, over 50% of revenue now comes from service, engineering support, spares, repairs and managed services – the kind of income that smooths the cycles and supports cash generation.

Defence contract wins: Challenger 3 and key support work

Defence had a strong second half, with three notable wins totalling £3.5 million in the final two months of the year. The headline award was £2.2 million from Rheinmetall BAE Systems Land for initial electrical engineering design and obsolescence management on the Challenger 3 Upgrade Programme. The main deliverables are scheduled for 2026, and Petards believes it is well placed to extend involvement into the manufacturing phase.

Two further contracts add breadth: a three-year extension by the MOD for continued support of RAF communication infrastructure with a core contracted value of £0.65 million (potentially over £1 million with supplementary supplies), and a £0.65 million order from BAE Systems for Petards’ Mk6 electrical safety assurance products for aerospace applications.

Why this matters: these aren’t just one-offs; they signal re-acceleration of Defence order intake and provide near-term revenue cover.

QRO: slower finish, but groundwork for a rebound

QRO, the ANPR and speed enforcement arm, had a softer Q4 as some expected orders slipped beyond year end. Management has invested to build overseas channels, launched the Harrier Mini ANPR camera (first deliveries in Q2 2025), and moved QRO into larger leased premises in early 2026 to support growth.

Encouragingly, several delayed orders have landed post year end, including QRO’s first significant export order since specifically targeting overseas markets. The Board expects revenues to regain momentum over 2026, supported by framework wins and international prospects. Execution here will be a key swing factor for Group growth.

Cash, balance sheet and R&D: more resilient footing

Operating cash flow stepped up to £1.384 million, enabling modest deleveraging despite ongoing investment in development and equipment. Net debt (before leases) closed at £1.339 million, with IFRS 16 lease liabilities at £1.061 million (boosted by the new QRO premises). The Group retains a £2.5 million overdraft facility on an evergreen basis.

R&D spend totalled £309,000, with £271,000 capitalised. Around 64% went into ANPR camera products and software, with the balance into Rail products. Net financial expenses rose to £242,000, reflecting a full year of borrowing costs following the Affini acquisition.

Order book and 2026 outlook: decent cover, timing still a watch-out

The closing order book of £9.2 million is the largest for several years, with £7.7 million scheduled for delivery in 2026. Management says Q1 2026 earnings were in line with Board expectations, and the opening order book provides encouraging revenue coverage.

There is caution on two fronts: customer decision-making remains slow, and current events in the Middle East could affect supply chains and customer plans if the situation persists. Even so, the Board is confident Petards is well placed to deliver a continued improvement in trading performance this year.

Why this update matters (and my take)

Three things stand out. First, quality of revenue is improving – over half of Group revenue is now services and managed support, which typically carries better margin and visibility. Second, Defence – after a lean patch, the Challenger 3 award and support contracts signal a healthier pipeline and underpin 2026. Third, cash – despite losses, the business generated £1.4 million from operations and trimmed net debt.

On the flip side, profitability still isn’t across the line, and QRO’s late-order slippage shows timing risk remains real. Overheads are higher with Affini consolidated, so growth needs to convert to profit. The prize for shareholders is a path to sustained operating profit and free cash flow – and the ingredients are starting to line up.

Key risks to keep front of mind

• Timing of customer orders – slippage can move revenue and profit between periods.
• Public sector exposure – Rail and Defence depend on government and prime contractors’ budgets.
• Supply chain disruption – management flags potential impacts from events in the Middle East.
• Concentration in the UK – FY2025 revenue was overwhelmingly domestic; export growth is early-stage.
• Leverage and financing costs – net debt relies on an overdraft facility; interest costs rose to £242,000.

What to watch next in 2026

• Conversion of the £7.7 million scheduled order book into revenue – and additions to the backlog through H1/H2.
• QRO momentum – size and cadence of UK frameworks and overseas orders following the first export win.
• Challenger 3 delivery – and signs of Petards extending into the manufacturing phase.
• Rail retrofit wins and service activity under the evolving GB Railways environment.
• Affini managed services growth and operational efficiencies post year end.
• Cash flow discipline – maintaining positive operating cash while investing in R&D (£271,000 capitalised in 2025).

Final word: steadying the ship, setting up for better

Petards exits FY2025 in better shape: higher revenue, fatter margins, stronger cash generation and a beefier order book. It is not mission accomplished yet – the Group remains loss-making and dependent on timely order flow – but the direction of travel is positive.

If Defence delivers as planned, QRO rebuilds momentum, and services continue to scale, FY2026 could mark the turn from recovery to growth. For now, this is a constructive update with tangible operational progress and a clearer runway into the year ahead.