BAE Systems plc

Good day and thank you for standing by. Welcome to BAE Systems' 2026 half-year results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Paul Checketts, Director of Ambassador Relations. Please go ahead.

Good morning. Welcome to BAE Systems' 2026 Half Year Results. I'm Paul Checketts. and I'm here with Charles Woodburn, our Chief Executive, Brad Greve, our Chief Financial Officer and Tom Arseneault, Chief Executive of our Inc. business. Charles, I'll hand over to you.

Hello everyone and thank you for joining us this morning. Before we begin, I want to thank our employees, trade unions and supply chain partners for the tireless work they do to ensure we deliver on our commitments to our customers. The world has remained highly volatile in 2026 and Delivering Reliably is vitally important given the increased threats to global security. There are three key messages I'd like to leave you with today. First, we've delivered strong results in the first six months with good growth in sales, profit, earnings per share, order intake and cash. This strong performance leads us to upgrade our full year guidance. We now expect earnings per share to grow by 11% to 13% in 2026 and free cash flow to be greater than £2 billion. Second, the breadth of our business across geographies, domains and product types puts us in an exceptionally strong position for both current and future opportunities in defence. And third, we are confident in the future growth we can deliver and the extended duration of that growth. We delivered strong outcomes in the first half of 2026. Sales grew by 9% on a constant currency basis, EBIT by 11% and earnings per share by 13%. Cash generation was strong too, with £1.8 billion of free cash flow in the half. We are experiencing high demand for our products. You can see this in our order intake, with £16 billion of new orders secured in the first six months of the year, taking our order backlog to a new record of £84 billion. Our balance sheet strengthened further in the half. Having such a strong financial position gives us real strategic flexibility. Thank you for watching. Our business has an outstanding geographic footprint and the strategic advantages it provides have been underlined again in 2026. Our established positions in some of the largest defence markets in the world give us an excellent breadth of opportunity and reduce the risk and volatility that comes with being more concentrated. Worldwide, governments are responding to geopolitical tensions with sustained increases in their defence budgets. In each of our markets, The work we've done to invest in and position our business means our existing proven portfolio of products and capabilities aligns well to customer priorities. We'll look at Europe and the US in more detail shortly. The UK's new defence investment plan will see almost £300 billion spent on defence by 2030 and commits to invest in both our long-term programmes and new disruptive technologies including next-generation fighter jets. New autonomous collaborative combat aircraft and other capabilities. The geopolitical situation in the Middle East is likely to drive higher defence spending in the region. Our multi-decade track record of partnership in the Gulf positions us well to support government customers there. Australia is also increasing defence spending. We are already the largest defence contractor in Australia and we expect strong long-term growth driven by the Hunter Class Frigate Programme and SSN AUKUS. where we'll deliver state-of-the-art nuclear-powered submarines. Two countries that are relatively small for us now but where we see great potential are Japan and Canada. Japan is on a path to double its defence spending by 2027. It's a core partner of GCAP and we're exploring how we can support the country in other areas of defence capability. Meanwhile, Canada has committed to NATO's 3.5% target which will drive a large sustained increase in defence investment. We are already working with the Canadian government by providing the warship design for Canada's River-class destroyer and in recent weeks we have reached agreement to support the rapid delivery of an Arctic over-the-horizon radar capability and Canada has now officially joined the Global Combat Air Programme as an observer. Across the globe our growth opportunities are significant and we are focused on consistently executing our long-term strategy to deliver strong top-line growth Margin Expansion and Cash Generation. These growth opportunities are particularly evident in Europe, which I'd like to turn to now. The continent of Europe continues to face an acute and growing threat to its security. As countries look to assume greater responsibility for their own security, most are significantly increasing the amount they spend on defence, underpinned by their commitment to meet NATO's by 2035 of 3.5% of GDP being spent annually on core defence requirements and 5% in total. We are one of the leading defence companies in Europe and our business continues to go from strength to strength. Our equipment and services are integral to the defence of more than 25 countries across the region. We have great capabilities across multiple areas including combat air, land vehicles, missile systems and drone and counter drone technologies. Growth in Europe continues to outpace the group overall. Sales increased by 30% in the first half and Europe now accounts for 33% of our total order backlog compared with just 13% of sales. This provides us with strong visibility of continued growth in the region over an extended period. To support our customers as they look to rebuild defence readiness, we are investing to support increased capacity, efficiencies and enhanced capabilities. An excellent example of our critical role in the defence of Europe, both today and in the future, is NVDA. Since we spoke about NVDA at our full year results in February, its importance to the defence of Europe and allied nations has become increasingly evident. As Europe's leading missile systems company, NVDA combines a broad portfolio with a strong track record of proven products. They are well positioned in the areas where customers are accelerating investment to strengthen defence capabilities and readiness. In air defence they provide capabilities across both land and maritime environments including counter drone systems, short range air defence and medium range solutions capable of addressing ballistic missile threats. In air dominance NBEA supplies weapon systems for more than 10 combat aircraft programs including Typhoon, F-35, Rafale, Gripen and KF-21. The company also offers a comprehensive range of deep strike precision weapons. Taken together, these capabilities position MBDA exceptionally well to benefit from rising defence expenditure as nations increase investment in air defence and seek to replenish and expand their inventories. The strength of demand for MBDA's products is clearly reflected in their order intake. Prior to Russia's invasion of Ukraine, order intake was typically around €4 billion per year. In the first six months of 2026 alone, NVDA secured €6.5 billion of new orders, equivalent to more than two times revenue in the period. As a result, the order backlog increased to €48 billion, representing almost eight times annual revenue. To meet growing customer demand, NVDA is significantly increasing investment. The business now intends to spend €5 billion between 2026 and 2030. This investment will modernise manufacturing sites, accelerate digitalisation, substantially increase production capacity, strengthen the supply chain and support the continued development of next generation products and technologies. The combination of this increased investment, a record order backlog and a portfolio that is highly aligned with evolving customer requirements gives us confidence that NBDA is well positioned to deliver strong revenue growth for many years to come. I'll now hand over to Tom, who will explain why we are confident about the outlook for our business in the U.S.