Babcock Intl Grp Unsp/Adr

So good morning everyone and welcome to the half year results for the period to 30th September 2025. My name is David Lockwood, CEO of Babcock. We've got a very exciting 29 and a half minutes coming and then a super exciting minute after that because apparently there is a fire alarm test which may or may not be cancelled because obviously health and safety comes first in our company. And if it does happen, it will go on for a minute. so you need to pay attention for 29 and a half minutes and then you can do your emails for a minute okay so and if you're online and the fire alarm test happens I hope they're going to mute it for you but if they don't I'm sorry so What to say about this half? It's been a really good half. It's been a good half to be part of, actually, because all of the groundwork we've put in place over the last few years, we're really seeing come to bear. So good momentum across all of the business in the defence area, driving some really strong financial results with year-on-year increases across all of our metrics that David has decided he wants to explain to you, but they are really good. constantly delivering to customers when i come back up i think it's this we always said that the market was there for us what we needed to do was deliver well that would expand margin that would that would then expand the market and that would drive growth and i've got a couple of examples later but we're seeing that happen across across the business um we have some very interesting market dynamics um commitments to budget growth but also um fiscal pressures sort of counteracting that and seeing interesting behaviors in governments but net positive in all of our markets actually and that's left us with a a confident outlook for 26 and also an ability to recommit to our medium-term guidance so before i come back and do all of that color David will put that into a financial context. Thanks very much.

Good morning, everyone. Okay, my main three messages for today are this is a really good set of interim results on all financial measures, number one. Number two, the margin improvement 7.9% is encouraging and gives us confidence in the 8% full year target. And number three, with a good level of full year revenue under contract at H1, we're confident in the full year expectations. Summary numbers first, then. There's some pretty positive numbers on this summary slide, and I'll move through them fairly quickly before we come back to detail. So organic revenue growth was 7%. Operating profit margin increased 90 basis points to 7.9%. These first two delivered an underlying operating profit up 19% to 201 million pounds. All the above led to earnings per share up 21%, enabling a 25% increase in the dividend. Cash conversion was 83%, delivering free cash flow of £141 million. And we've executed £49 million of the share buyback in H1 and will complete the rest over the course of H2. So let's break down the organic revenue growth first. This summarises the 7% organic growth by sector. Three of the four sectors grew in the period led by nuclear, as you can see, but with good performances in marine and aviation. The land sector revenues were lower in the period as a result of the non-defence businesses, and I'll come back to the sector detail in a moment. Next, the summary of profit. In absolute terms, marine, nuclear and aviation drove the profit improvement, resulting in the Group delivering £201 million for the half, a 19% improvement on H1 last year, as I mentioned. The other bit of good news on here is that all four sectors contributed to margin progression in the period, helping the Group to 7.9%. And whilst we're on margin, we set ourselves a target of 8% for this year, as you know, and 9% plus for the medium term. And hopefully this slide will give you some confidence that we're on track. As you can see from the line graph on the left-hand side, we make progress every period and we'll continue to do this. On the right-hand side are the activities that deliver the margin across the group. You've seen these before. There's nothing new here. They're all still relevant. And there's plenty more to do in these areas across the group. So that gives us confidence in the 8% for this year and the 9% plus in the medium term. And one other thing that we noticed when we put this slide together is that we delivered in absolute terms in H1 the same amount of profit that we did in full year 21. And I know full year 21 was a low base for all sorts of reasons, but we have had a few issues to deal with along the way. So doubling in those five years wasn't bad at all. So that's the summary. Onto the sectors, these are the usual busy sector slides with lots of content for reference. So I'll just pick out the key points. It was a good performance in marine with revenue growing 6% organically, profit up 38% and margins moving upwards by 160 basis points. Compared to last year, the performance improvement was largely driven by the LGE business and by the Skynet contract. On LGE, you remember last year that it booked a record order intake of over 400 million pounds, and we knew that was a surge following the sort of new shipbuild market dynamics, and we're delivering that over this period and the start of next. And also the Skynet contract, which successfully mobilised last year. In the period, we had additional services contracted, and that also helped drive revenue and profit growth for marine. And just for reference, the Type 31 revenues that go through here, we did about £100 million in the first half, which is flat on the same period last year. And you know, we booked the revenues at zero margin on Type 31. So on nuclear, nuclear had another strong period with both Cavendish and submarine support activity growing very well and more than offsetting the expected reduction in infrastructure revenues. So I'll just expand on those a little. So Cavendish grew 25%, largely in clean energy with more work at Hinkley Point. The submarine support work grew 31% with activity increases both at Clyde and Devonport benefiting from some of the infrastructure upgrades at Devonport as well as productivity improvements at both locations. Infrastructure or MIP revenues reduced as expected following the opening of nine dock last year and 15 dock nearing completion. And all of the above enabled the profit increase of 18% and the margins to reach 9.1%. So the first sector in the group to hit the 9% mark. Moving to land, revenue decreased 11% organically in the half. Defence revenues in the UK were largely flat, due in part to the mobilisation period of the DSG reframe contract, and we're expecting this to start to grow in the second half. The non-defence revenues that weighed on the sector were the rail business and the South African vehicle business, and we have a cautious view of the rail business revenue, in particular in the second half. But pleasingly, despite the top line, margins still managed to progress 20 basis points, with the overall sector now at 7.9%. Onto aviation, we've been waiting for aviation to take a step forward for some time. And for me, the winning of MENTA 2 in France at the end of last year was the start. So the 26% organic growth was due to three main factors. Firstly, the mobilisation of MENTA 2, as well as increasing aircraft support contracts in France as the defence business takes root. Secondly, scope growth and additional services in the UK defence contracts. And third, the mobilisation of the new Canadian BC HEMS contract. Moving to profit, achieving some sort of scale on the top line has allowed profits and margins to approach a sensible level. This was assisted by some renegotiation of old contracts in the period, allowing margins to rise to 7.2%. Moving to the cash flow, again, this is another detailed slide because you need the detail for reference, but I'll just pick out the key numbers. The most important is the free cash flow number at the bottom, £141 million. This is substantially better than we've ever done in H1 before. This is, of course, partly due to the growth in the profit. But it's also due to the reduction in pension deficit payments following the long term deals we did last year. Only three years ago, the pension cash outflow was 90 million in the half, nine zero. And now, as you can see, it's seven. So much more of the cash that we earn in the operations is now available for the group to invest. Moving back up to the middle of the table, we have operating cash flow of £166 million with a conversion of 83%. Within that, we managed to keep working capital pretty flat. So there was an outflow of £32 million. There's a little bit of inventory increase in there, and then the usual pattern of payments, VAT, and annual licences and what have you. So basically, the rest of working capital was largely flat, which was good. CapEx was £46 million for the half, very similar to the first half of last year. And again, CapEx will be H2 weighted. And lastly, I've put some full year guidance on the slide here. As usual, pensions, interest and tax are H2 weighted. I'll come on to capital allocation in a moment, but you know one of our top priorities is a strong balance sheet, and that's important for customers and other stakeholders given the critical things we do. Getting from a weak balance sheet to a strong one was always essential, but getting there by now was even more critical because all of our debt and bank facilities fall due over the next 18 to 24 months. So to get ahead of this, we've already gone out and refinanced the Revolver in the last couple of months. We now have a new £600 million five-year facility with extension options, and we expect to refinance the first of the bonds in Q4. So on to capital allocation. This is the same capital allocation policy we've been published a few years ago and we keep repeating. The priority order hasn't changed, but I'll just pick out a few status updates. Priority number one, organic investment. We're working on a number of relatively significant investment opportunities to enhance growth, so-called strategic growth capex. The kind of things that we're looking at are facility expansion and build and operate models to enable new work or greater capacity. An example of this would be in Recife, where we're looking at a new build hall and also to upgrade the missile tube facility to allow greater production. The status of priority two and three, the balance sheet, the dividend we've already mentioned. Then on the three capital allocation options on the bottom. On the left, we have a pipeline of potential bolt-on acquisitions that we're tracking and we are working on a couple and we'll keep you posted as they progress. Moving to the middle box, pensions, there's no new news. That's tracking really well, so all going okay. And on the right-hand side, shareholder returns, you know we're executing the £200 million share buyback. And the buyback also serves as an investment return flaw for other options to beat before they get considered. So before I hand back to David, I'll just go back to the summary again. So point one, really strong half on every measure. Two, margin progression, very encouraging. And the 8% margin for the year is in sight. And three, given the revenue cover at the half, we're confident in the full year. And with that, I'll now hand back to David.

I'm not doing my emails, it's just checking for the alarm. Right. Actually, before I go to my slides, when David was going through that, it occurred to me I haven't got a Type 31 slide, which kind of shows that it's become business as usual. But I just thought, because we're bound to get questions, I'd try and not get questions by talking about it quickly here. So I see the next 12 months for Type 31 is important, but then every 12 months is important. And the way we see Type 31 is in two chunks. So chunk one is ship one. We need to finish ship one. which is always going to be the prototype because it's first of class, first of yard. We all knew that. We also knew that a lot of the build was done during lockdown. And we talked before about how we had to adjust our processes. So that's a project. I don't think that's a project to finish at one. And it's really important that gets done in the next 12 months because that's the flagship for all the export orders and the growth. Ships two to five are all about production, production norms and so on. And if we look at ship three, because that's the one that's right down the production curve, that's the one that becomes the reference. And that's going really well. So there's two distinct things driving a production facility, building a pipeline of ships and finishing the prototype. Those two things we'll report on the fall year. They're both where we want them to be at the moment, but there's a lot to do on both of those. So that's kind of how we see it. And that's why there's sort of nothing to talk about. So I'm going to slide because the project on finishing one is the project and then the production build is the production build. So no questions on type 31, please. So David did a couple of history charts. We said five years ago two things. One is that this is a people business. And secondly, that our growth and our margin expansion is delivered by those people working in the best possible way to improve our delivery to customers. There was no lack of market. We just had to perform. And our performance, as you have seen, has improved and improved. And I've just got a couple of examples of how that's worked. So five years ago, the DSG contract was – in a lot of trouble. We'd had external reports and Boatman and all this stuff The first thing we did was fix the delivery. That led to growth through the order we booked for the five-year extension, which is quite a different contract in terms of mindset from the original contract in that it's all about driving output and it's more customer-focused. That's gone really well. That improved performance means we've won the contracts for frontline support in places like Ukraine, where we have people deployed But also that confidence people have in us as an engineering company in the land domain means we've delivered the Jackal program. And what all of that has meant is we are now Toyota's sole partner in Europe for taking the Land Cruiser into a military variant. We call it the GLV, the General Logistics Vehicle. The big program in the UK is the Land Rover Replacement, but there are multiple programs outside the UK as well. Toyota are one of the world's great engineering companies. There is no way they would have agreed to work with us without us solving our engineering pedigree by fixing the past. The same is true with the Common Armour Vehicle Programme in Europe, led by PATRIA, the 6x6 variant, which the UK has just joined, DSEI joined the programme, the technical programme, which is the step towards buying the vehicle, where we are the UK build partner and engineering partner. again couldn't have happened without performance of five years ago now with a natural choice and then finally for the 120 millimeter water program that's singapore technologies it's singaporean engineering world renowned they don't work with companies that aren't don't match their engineering standards so so we've gone from fixing a legacy uk program which the outside world thought was a disaster case through to three really, really major companies, Patria, Toyota, and Singapore Technologies, deciding we are the exclusive partner for the European market because our engineering meets their standards. And that's how delivery doesn't just drive margin and growth in what you do, but it changes your reputation. And the same is true, David talked about expanding missile tubes. Missile tubes, we have 80% of the joint Columbia Dreadnought program. So this is a key component of, in fact, it's central to, literally central, it goes right in the middle of the submarine. It's central to the next generation deterrent submarine for the UK and the US. And we have 80% of the delivery when the program is dominated by Columbia. Obviously, they buy a lot more Columbias than the UK buy Dreadnought. because our engineering is the best in the world at doing these things. And that growth gets driven by our investment in automation, all the things David talked about. But those techniques are the ones that are driving the improvements in Type 31, so that Ship 3 is this real high-value technology. low-cost production build ship, and you can take production norms across because you know you can do complex things well. But also because it's nuclear, it gets us into a whole pile of nuclear build opportunities for radioactive handling because people know we can build nuclear stuff. And then if you look into the opportunities, Rosyth is probably the most capable nuclear facility in the UK for building, supporting the build of AMRs and SMRs, obviously roles of build reactors, but everything that goes around it, which is very significant, it's the most obvious place to build it. And because of our pedigree and because of the lack of build capacity in the world, moving into broader submarine build. Going from an okay high integrity engineering program to being a recognized world class high integrity engineering facility in five years is quite a thing and drives a whole host of opportunities. And there are multiple other areas in the business where we could make the same track through. But it starts with There is no lack of demand, as the next few slides will show. The question is, have you got the pedigree to own that demand? So what is the demand? It's driven, as we said, at the full year by global insecurity and threats. And share prices move around, but is there a peace in Ukraine? Isn't there a peace? Europe will continue to want to strengthen its defences. It may be a few basis points up or down on the high-level statements. The world is materially less secure now than it was five years ago. And for all the reasons I've just outlined in two areas, but we could go across a whole range of things. Babcock is, I think. as well positioned as anyone and better positioned than most to take advantage of that. Because we're now combining, as those who came to DSCI, we're now combining some innovative digital. And in fact, we launched our first AI product at DSCI. We're combining the ability to get the best out of legacy while delivering new at the same time. And I think that's a unique combination. and and across into civil and civil nuclear we are the uk's only significant nationally owned nuclear business at a time when sovereignty and security and energy is at the forefront so whether it's amrs smrs building out large reactors as david said clean energy has driven huge growth this half and will continue to drive it in my mind um the civil nuclear business is we're only just beginning to tap the opportunities. So, so, so I think all of that is really good. And if you look at us in the UK, in UK defense, um, having a resilient industrial base, um, is really important. That's facilities, it's the equipment and infrastructure we have on those facilities, and it's people. We are a people-based business. So David said there's some strategic investment necessary to drive this growth, and it's true. But there's also our commitment to people and investing in skills. So a couple of Couple of things, which I said to the press this morning, I get quite frustrated about because I think this is one of our biggest achievements, people. And I think people pipeline will drive our high quality growth. So just a couple of facts. So we were company of the year for the Association of Black and Minority Ethnic Engineers. Is that a big thing or not? It wasn't Google. It wasn't Oracle. It wasn't people. It wasn't IBM. It wasn't people with big bases here. It was an engineering company working in defence of nuclear that does some quite heavy stuff that operates in some quite difficult to get to facilities. Plymouth is not the easiest place to go. It's not the M4 corridor. It's not that. And we won. I think that's pretty cool from where we came from. We've got a 35% increase in minority representation in our early careers. I think that's pretty cool. And this year, we had our highest intake of early careers. That's apprentices and grads to you and me. Highest intake. And we also had the highest subscription. Not only did we take more but we have more candidates for every post than ever before and for the first year ever our intake was 50-50 gender balanced So from where we were five years ago as an employer We are in just an utterly different place and that pipeline of people is necessary to drive the pipeline of growth So I think I think that's I think that's really cool And then you can see all the other things that that leads to. We spend 550 million with small and medium enterprises, so we drive the economy in the regions we work in. We, as I've just said in the growth thing, we partner with a whole bunch of really high-quality engineering companies who see us as the best of breed in the UK. We contribute 4.3 billion to the UK economy, which is pretty important in the current climate. And you can read the whole slide at your leisure. But we are working with government. I spend a lot of time with government, and I'm a core member of the Defence Industrial Joint Council. There's some permanent and some rotating members. driving how the UK defence does its business differently. So we are right across UK defence from the people, the supply chain and into government. And then nuclear, it's great that nuclear is now cool. I think civil nuclear, there's the big stuff, Hinkley and sizeable sea. There's SMRs, MEHs, Mechanical Electrical Handling, which is, if you like, the mechanical and electrical plumbing of a major nuclear power station, which is quite a complex thing. So we are the lead in the alliance. That's growing dramatically. And we have seen actually real progress more than I would have guessed six months ago. So we know where the first three SMRs are going to go. We did funded work for Centrica and X Energy. We're X Energy's UK partner for AMRs in Hartlepool, which is a massive rollout. So real momentum, more momentum, I would say, in civil nuclear than I was expecting in the last six months. I think that's really positive. And then we all know about defence nuclear. David's touched on the numbers. I will talk about the FMSP follow on. So FMSP is Future Maritime Support Programme. That's how we support the nuclear fleet. There's some surface ship stuff in there, but it's basically the submarine fleet. That contract comes to an end on the 31st of March next year. So we've been busy with funded work to work with the customer on the successor program. If you look at... So five years ago, when we were doing the work, 2020-ish, just as I was coming in... That was pre-forceful invasion, pre the current Chinese activity. FMSP is very much a cost-driven program. The metrics are very cost-driven. The success rate is going to be very output-driven because five years later, what we really need is submarine availability, not cost out. And that's just the changing environment. And so it's not surprising that we in the government are taking a lot of time to make sure that that programme is going to work for us and for them to drive a new set of outcomes. So you should not in any way – in fact, I had a call with government yesterday on this, and we are completely aligned that the job is to get the right contract for both of us, and that the fact it might take us right – we might end up using every minute through to the – Through to midnight on the 31st of March when I should be relaxed and David will be having kittens The that that you shouldn't worry about that. It's it's it's because we are trying to you know, this is genuine transformation and And then AUKUS, H&B Defence, our joint venture with HI, has finally got its first orders. There's a lot of activity now in Australia. I think the Trump, the President Trump review definitely Shone a light on some of the areas where we were moving forward not fast enough as the three nations So I think we'll see a lot more progress on infrastructure training and support in the next 12 to 18 months So all together nuclear looking really positive And where does that lead us then For those of you who came to the Rosyth Capital Markets Day teaching, whatever we called it, you will have seen the scale of our capability, but also the scale of opportunities in Denmark, Sweden, Indonesia, and, and, and, and New Zealand. And there's a lot to be decided in the next 12 to 18 months. I think since we stood up at the full year, all of them have progressed positively from our point of view. Nothing's done till it's done, and these are big governmental decisions. So you've got to win the officials over, and then you've got to win the political debate. So it's not done till it's done, but they're all pointing in the right direction, I think. advanced manufacturing you've seen the journey we've been on that yeah we are we are have a range of really significant opportunities there um also i've just touched on fmsp i've just touched on and the land vehicles went through as an example so we just look across that without even thinking about the fact we've won our first defense order in south africa on submarines or We've won all the stuff, the churning of the engine that generates smaller orders, which is still going really well. I think the growth opportunities are really significant. And the fact that we are now in discussions with Korean companies to do the kind of things we've done with Singaporean and European companies and Japanese companies, it just shows that that we are now firmly established on the international stages as one of the credible partners. Summary, I'll summarise David's summary. By the way, it's 9.32, so no alarm. That was cool. That shows our influence. Strong financial results. Metrics great. I hope you've got a flavour of how delivery is driving this business forward, not just six months to six months, but establishing multi-year relationships with governments and industrial partners that will underpin sustained, consistent growth And that helps us get the best out of the market dynamic But also going back to that kind of fiscal versus defense pressures helps us manage those Which is why we kind of feel confident about this year and beyond so with that We'll go to the appendix no we won't there should have been a question slide we'll have questions instead of going to the appendix and If it's type 31, I probably will get upset. I'm just warning you. I'm just putting it out there.

Thank you. It's a marine question but not a Type 31 question. Good. You specifically referenced this big slug of liquid gas equipment orders that you won last year and are now delivering out. Should we see that as being a bubble or is that now the ongoing run rate of the business? Are you replenishing those orders at broadly that rate so that you can keep up this sort of level of revenues? That's my first question.

So it's definitely a record order intake. If you remember for two or three years we were waiting for them to come and then it all came in a period. So the next 12 months, 18 months or so will be the delivery of those. We are obviously winning new orders but not at that rate and we never expected to because it matches the ship build market.

Thank you. And then an aviation question. BAE, Boeing, Saab announced teaming to offer T7 for the UK. How does that affect your involvement with MFTS? Because they are pitching this as a very, very broad military pilot training contract rather than just supply of aircraft. Where does the replacement of the Hawks fit in with MFTS?

So, as you know, the Hawk is outside the scope of MFTS anyway. So we go up to the Textron aircraft. We go up to the Textron and then we do the maintenance of the legacy Hawk fleet, but BA systems supply it. So it's not a particularly big thing. And there's still a debate about how government will procure the next jet trainer.

But there's always overlap, or rather there's a wavy line in terms of the capabilities of different aircraft types and therefore how much of the syllabus you can do. They'll clearly want to grab more of the syllabus. So...

That's true. If you look at most, so the Germans are now coming out, for example, if you look at most pilot training, the cost per hour in the leading jet is multiple times the cost per hour in the turbo. So I would say on a cost and actually also for those governments who report emissions, from a cost and emissions point of view, you want to maximise simulator, then you want to maximise turboprop and you want to minimise jet for both cost and emissions. Thank you. At the front, on your right.

Thanks. Morning, it's James Beard from Deutsche Bank. Two questions, please. Can you talk through the building blocks from a margin perspective in H2? Obviously, you've done a 90 basis point margin uplift in H1, which, given that you've retained your 8% margin guidance for the full year, implies relatively modest, sort of circa 10 basis point margin uplift in the second half. And then second question, you gave some interesting colour around the people agenda during the presentation. Can you talk about the other side of the funnel in terms of churn rates? And I guess in particular, in the UK nuclear business, one would guess that... demand for labour significantly outstrips supply at the moment. And what you're doing, what initiatives you're taking to sort of combat any unwanted attrition in that side of the business?

I'll do the people one. David can do the number one. So you're right. So our churn rates are significantly down. It is a bit regional. So it's not so much the businesses in, it's the business location. So if you're in civil nuclear in Warrington, we're probably... the highest paying employer. My Warrington colleagues may not agree with that, but we probably are. In Bristol it's quite different because there's a lot of high paying jobs in Bristol. So it's more a regional issue than an activity issue. But we've done a bunch of things from, you'll remember from the full year, we've had our first ever all-employee free share scheme to start anchoring people in. We've historically had very low take-up on a lot of the benefit schemes we've had. And so we've got a Babcock bus, actually, a big blue double-decker bus that is going around all our sites doing open sessions. We've got 10,000, I think, more inquiries in the UK onto all our employee platforms now as a result of that compared with a year ago. So we're taking all of those, and I could go on and on and on. There's a whole bunch of things we're doing to... to make people realise the full benefit of being part of Babcock. And if I look at our global people survey, which we do every year, which finished a month ago, a lot of those measures, which are kind of indicators of attrition, would I recommend the company as a place to work? Do I think I'm going to be here in five? All of those continue in a positive direction. And interestingly, when we did the board presentation two days ago, there were a number of those metrics were against the benchmark. So our partner who does all the independent survey, they give you these benchmarks. In the UK, a number of these engagement scores are going backwards over the last three or four years. Ours are going forward. So we're kind of bucking the trend on engagement. So lots of stuff, actually.

And on the margins, so lots still to do, obviously very encouraging in the first half. The building blocks are largely the same, actually. If you look back, maybe just comparing against first half last year, isn't that helpful? If you look back, the margins really sort of inflected about a year ago. So if you look at the second half of last year, first half of this year, you'll see a trajectory that, you know, 20, 30 basis points for the second half, maybe it would be achievable in some of the sectors. There's no particular building block in the second half that wasn't there in the first. It's the same dynamics, LGU and Skynet and Marine, the businesses going forward in nuclear infrastructure coming off a bit, rail in land, and everything going well in aviation. So we're very confident in the 8%, but I think just comparing against the first half of last year misses the shape of the curve, if you see what I mean.

Hi, thanks, David Farrell from Jefferies. I think I've got three questions. Firstly, in the release, you talk about a £300 million tender related to the SMRs for owner engineering services. Could you explain a little bit more what that entails and then the potential for that to grow into other areas?

Yeah, so that's the customer side work, basically, to support the delivery of the SMR programme. One of the things you may have seen in Great British Nuclear's announcement is a kind of conflict of interest thing that they're managing. So you can't set both sides of the equation. You can't set the question and answer it. So I think that's just for the current rollout. So the opportunity is if you look at the expectation of SMR volumes, you can kind of multiply that by the volume. So it's quite significant.

Okay, thanks. Some of your peers have obviously suffered in the wake of the SDR in the release of contracts from the UK MOD. Just wondering to what degree you've seen kind of any impact there, acknowledging you have slightly different kind of characteristics in your order book.

Yeah, well, I think you've answered the question almost. We have very different characteristics. So the... like some others, we have a framework and then call off. But for us, the framework is the dominant bit and the call off is kind of the icing. Whereas in some other contracts, the framework's a smaller part and therefore the call off is more important. So I think it's just the structure of the contracts, really. We have more resilient contract structures.

Okay. And then probably for the other, David, a question around the bond refinancing. Oh, no, I'd like to answer that. Okay. I wouldn't, I wouldn't, I wouldn't. It is quite simple.

Yeah, thanks. You're saying he can't do simple. No, no, no. He's saying you can't do simple. Probably right.

Do you need to refinance both of them at the same size?

No. So I think size, duration are things that we will work on over the next few months.

Okay, thanks.

Morning, George McGuire from Barenburg. You mentioned about some bolt-on M&A that you have been looking at. Can you just go into a bit more detail about that, please? Firstly, that's the first question.

So, sort of, but we can't obviously any specifics. As David said, there are a couple in process. They're covered by NDAs and confidentialities. We can't be specific except to say When we did the capital markets day 18 months ago, we talked about areas that we wanted to move into. So we've already done, we talked about the need to become more digital. We've talked about the need to have greater access to autonomy and so on. So you could imagine that anything we're looking at is consistent with the strategy we laid out 18 months ago.

Thank you. The second one is on FMSP successor. In terms of the length of the contract and size and the contracting terms that you're looking at, can you just go into a bit of detail about that, please?

Thank you. So what can I say? I haven't already said. So the terms will be, as I've said, output, not will be more heavily weighted towards output rather than cost. Obviously, cost really matters. Government wants to do a lot with its money. It wants to do it efficiently. So I'm not saying cost doesn't matter, but it will be weighted more heavily towards output. I think duration is still unclear about what is optimal. And it kind of depends who does what on investment profile and some of the things that David talked about, about what And there could also be scenarios where you would have things outside, a bit like MIP is outside FMSP and yet it exists as David describes to drive it. There's kind of what's inside and outside the envelope. So that's all the stuff we want to get right so that we don't create, we create a framework that can deal with anything that might happen in the period the contract covers and not suddenly wonder who does what on something.

Morning, Chris Banbury. Three questions, if I may. First, in terms of the pipeline, what are the major decisions you're expecting over the next 12 months?

So we said at the Marine Capital Markets Day that If a number of customers want to hit their in-service dates, they have to make their decisions in the next 12 to 18 months, and that was three months ago. So that's probably still about true, so it's now nine to 15 months. It is a fact of working with all governments that they like to hold the end date, but take longer than they thought to make the decision. So we're encouraging all of those decisions to get made early. And I think because of the situation in the world, whether you're in the South China Sea or whether you're in Europe, there are external pressures encouraging decision-making. So I'm optimistic those decisions will get made in that period and hopefully towards the front end of that period.

Second, you won your first defence contract in South Africa. I was wondering if you could give us a bit more colour in that market and the potential there.

Yes, so I think almost since the Rainbow Nation started, South Africa hasn't really had an identified need for a defence force, so it's kind of gone backwards for a period. And now whether it's pirates moving further and further down the western coast of Africa, whether it's incursions into their territorial waters by other people, there is a bigger and bigger need. So I think Actually for different reasons from some some other markets that there's no recognition that they need to reactivate so We execute this program well, I'm very optimistic for that it's kind of a good market for us because It's big enough to be meaningful But it's not big enough to interest a Lockheed Martin or someone like that. So it's an ideal sort of market for us and

And final question, could you give us perhaps a bit more colour on how DSG's performed under the new contract? Thank you.

Yeah, so far so good, really. There's nothing else to say. It's going well.

I can't think of... It is going well. We're not going to give all the internal KPIs, but yeah, mobilisation is good.

Hitting all the KPIs, etc.

Sorry? Hitting all the KPIs, etc.

No one hits all the KPIs. A reasonable number.

Yeah. If we hit all the KPIs, they would argue they set the wrong KPIs. So you can't hit all the KPIs, but hitting the volume we'd expect to. Thank you. Behind you.

Thanks. Ben Varro from RBC. First one, you've made a point about the CapEx projects here. Can you shed any more light on those at this point?

Yeah, and they're not all in the UK. So if you take Mentor 2, for example, we buy the platforms, and then there's a progressive sort of handover. So that's a good example. If you look at modernisation in... uh new zealand there's a big debate about who funds what um they probably can't fund everything if you look at infrastructure for orcas in australia who funds what so there's just a lot of you know and there's similar in the uk but there's a kind of the whole builder I don't think anyone wants to do a PFI, which is kind of a build and forget, which is just kind of an off-balance sheet financing thing, where the financing is more important than the thing. But I think what people are looking at now is a kind of build and operate, so that you have operate skin in the game for doing the build properly. So that's the direction of travel.

Okay, and also with regard to your, so the two specific ones, obviously with Recife.

Oh, David mentioned those, so you better talk about the Recife expansions.

So the actual CapEx projects that you've mentioned for Recife. Yes. Yeah, can you give any more?

Yeah, so obviously we've got a pipeline of ship build activities that we talked about in the Capital Markets Day. We'll need extra capacity. So we're looking at a new build hall for that. We want to ramp up the missile production volume. Missile tubes, not missiles. That's what we want to ramp up. So we'll be looking to invest in that as well. So this is all stuff to enable greater scale growth and productivity.

I assume you can't say anything on sort of decision points or when you pull the trigger on those.

Well, I mean, it's those two. Well, the first one is our decision. And we've got to make that decision based on what we see in the pipeline and how close it is and how certain we are. So we'll just have to keep you posted on that. The missile tubes, obviously, we will do in tandem with the customer. But again, we're talking the next few months, certainly within the next 12.

Because we built the last build hall so recently, what can cause a delay in a build hall? things like the condition of the ground. You've got to put foundations in and you have to make them stronger because the ground is... But because it will be right next to the existing one, we know everything about that. We know how we build it. We would use the same contractors. So although it will be a big thing, it's relatively quick. So we can align it quite closely to the order intake maturing.

Thanks. And last one, just a bit on visibility. Obviously, in the first half, you've had nuclear, I guess, in particular, come in a bit stronger. So can you chat through just about the visibility on that and how that perhaps comes in a bit quicker, sort of in submarine support and also on the Cavendish side? And I guess the question sort of rolls in, you know, can you maintain those growth rates?

Yeah, so we've got pretty good visibility. I mean, I always look at the revenue under contract for forecasting. But we generally have very good visibility of stuff that isn't under contract yet. So you can't necessarily be absolutely sure of timing, but you've got a pretty good idea. So I start with what's under contract. In terms of visibility in nuclear, it's good. We've got a pretty good idea on both naval and civil what's coming down the track. Timing isn't always precise, but you've got a pretty good idea. They're obviously doing extremely well, but a 14% growth rate is pretty punchy to straight line out into the future. It's definitely all sustainable revenue. There's nothing one-off in there, but it can't keep going at 14. But it is the high performing business and it will continue to be for the near term at least.

Thank you. It's just a follow-up question to the last one on civil nuclear. You've given it a lot of prominence in the presentation. It's only, what, 5% of the group? I think at the teaching you did in May, you talked about sales at least doubling over the medium term. Given how much is going on there and the prominence you've given it today, are you thinking more positively? I mean, can you update on the at least double? Is it now going to be a meaningfully bigger opportunity?

So that was a teaching on Cavendish, which is the nuclear consulting business. So it excluded, we made reference to, but the numbers excluded build opportunities for building elements, SMRs and AMRs. So... And I give an update. I think the risk is on the upside. How about that? Is that enough? Do you want to?

Yeah, look, I don't think we can. We said we'd double the business by 2030, just to be precise. I don't think we're going to change that right now. Everything we've seen in the market is encouraging. And there are some potentially big things there, but I think we have to just wait a little bit longer to see how and when those things crystallise before we start changing numbers.

Just to follow up, I actually didn't know that. I'm not an expert on nuclear engineering, to say the least. So what is... When you talked about the business doubling, I thought it was civil nuclear in its entirety. So just how big is the build-up? And maybe if we look beyond the medium term, because...

might take longer i mean just how big can the civil nuclear holistically get to for you if you include build so one of the interesting things is how we how we choose to report it because typically everything that happens in rosyth gets reported in marine because marine owns rosyth so it would depend how we reported it but If you just look at the Hartlepool six gigawatts of AMRs, if we were a material build partner of that, and we are X Energy's partner in the UK, then we're talking about civil nuclear production would probably become bigger than the engineering consulting business of Cavendish. That's a huge if, but just to give you a scale thing.

Sorry, that's for one of the SMRs, is it? No, this is AMRs.

This is the Hartlepool AMR thing.

So if Hartlepool, AMRs go ahead, SMRs go ahead in the numbers, it's multiples then of Cavendish, is what you're saying?

If we win the build, because we don't build either at the moment. So there's a huge if.

And who else could do the build?

Well, it kind of partly depends whether the UK government decides that UK SMRs and AMRs have to be built in the UK, because if they decided not, which, if there's a change in government, might be the case, and there are places outside the UK you could build them, there's not that much UK competition. Thank you.

Hi, David from Jefferies. A follow-up question, please. Just around the share buyback, we've obviously talked about CapEx potential. You've talked about M&A. Do you think that you could do both of those and still reload the buyback at the end of this year?

Yeah, so the great thing about having cash is that you actually have a capital allocation problem, which is relatively new for this company for a long time. In my mind, the buyback creates the hurdle for all other investments. We know what return the buyback gives shareholders. And therefore, our job as management is to find alternatives to recommend to the board, which we believe provides superior returns to buyback. And if we don't find them, then buyback becomes a likely option. So I think it's hard to say, can you do both? Because it depends how many superior options we come up with. But I think that's out. I think I'm looking at Ruth and she's nodding. It is our job as management to come up with superior options to buy back. That's our job. Thank you. In one minute's time, this will be the longest half-year presentation I've done in 14 years. I just thought I'd let you know that.

I'll drag the question out then. Go on then. Record breaker, you. First of all, continuing on nuclear, I probably may have missed. You said that MIP was basically flat. Did you actually give an absolute number for MIP revenues in the year?

For the half, yes, it's on the slide.

So it's 215.

It was down. It wasn't flat. It was down.

Okay, thank you. And then the other side of David's question about Cavendish, you actually haven't talked very much about the nuclear side of Cavendish in this set of numbers. What's happening at the moment with AWE, and particularly with the two very big AWE capital projects as part of the Fissile Material Campus?

Yeah, so those are still evolving. I think all of our debates with AWE about what our role should be are very positive. Yeah, very, very positive. They've ultimately got to decide how to chunk up those two big programs. I think there's no doubt that AWE wants to be the overall contractor, so it's not going to go to a go-call or anything like it. But the question is then, how do they chunk it up underneath? And I think so far, those are very intelligent and sensible conversations between us and them. I couldn't put a number or a duration on it, but you're right, I didn't mention it, but it's a very positive conversation.

And just to extend that, if you had to estimate whether ultimately that scale of build work is bigger or smaller than the AMRs and SMRs?

Oh, gosh. Go on. That's an impossible question and a very unfair way to finish. And I'm never going to talk to you again. Phew. Great. Well, thank you for your questions. That's an hour up. If you've got any more questions, I'm sure Andrew will answer them. Thank you.