Chemring Group PLC

Good morning, and welcome to the presentation of Chemring's interim results for the 6 months to the 30th of April 2025. I am, as usual, joined by our CFO, James Mortensen.

I'll briefly cover some of the group highlights from our first half before handing over to James, who will take you through our financial and operational performance. I'll then comment on the general market environment and the progress we are making in delivering our incremental growth strategy, which is underpinned by our values of safety, excellence and innovation.

We'll then take questions. Our momentum from 2024 has been maintained into this year with the continued delivery of our long-stated goal of balancing near-term performance with longer-term growth and value creation.

Across the first half, our operational and trading performance has been robust and in line with the expectations we set out in December, continuing to demonstrate the resilience and quality of the group. Our record order book and associated trading visibility underpins our growth ambitions, as we build towards our goal of increasing annual revenue to GBP 1 billion by 2030.

And be assured, we will continue to closely manage operational and financial risk during this period of organic and inorganic growth. In summary, the Board's expectations for the full year are unchanged.

Clearly, none of this is possible without the commitment and dedication of my colleagues across the group, and I want to take this opportunity to acknowledge and thank them all for their unrelenting professionalism and hard work. Turning to the headline numbers.

For me, the standout is our record GBP 488 million of order intake, which is a 42% increase from last year and the resulting GBP 1.3 billion order book, which is the highest in the company's history. Operationally, our revenue was up 5%, driven by a strong performance across Countermeasures & Energetics.

Operating profit was up 8%, resulting in earnings per share being up 3%. You hear me say at all these presentations that safety is one of our core values.

And I highlight on this slide that we have reduced our total recordable injury frequency rate to 0.63, which underpins our journey to a proactive safety culture and a zero harm ambition. I will now hand over to James.

Thanks, Mick. We are pleased to report results in line with expectations, and we deliver the plan.

Here are the highlights. A new record order book for the group at GBP 1.3 billion, up 25%.

Revenue up 5%, showing continued strong momentum. Operating profit was up 8% with improved operational execution in Countermeasures & Energetics.

Group operating margin improving to 11.6%. EPS was up 3%, and we had strong cash conversion at 80%.

And so the Board has declared an interim dividend of 2.7p, up 4%. So turning next to our segmental performance.

Countermeasures & Energetics revenue grew 20%, as we saw strong operational execution. So operating profit was up 73% and margin increased to 14.4%.

It was a weaker period in Sensors & Information as expected and previously highlighted. This was because the prior year benefited from JBTDS LRIP and there were delays to U.K.

government spending, which meant revenue was down 12% and operating profit down 26%. You will see we booked a small exceptional charge in the year relating to Roke, which Mick will talk about later.

There was a small FX headwind in the period. On a constant currency basis, group revenue would have increased by 6% and operating profit by 10%.

Turning to the cash flow. We kept a strong focus on cash generation with cash conversion of 80%.

We have continued to invest in our operations with GBP 46 million of CapEx spent in the period. Of this, GBP 35 million was spent on Energetics expansion projects, and this was offset by GBP 13 million of grant funding.

This brings the total spent on Energetics expansion projects to GBP 70 million, offset by total grants of GBP 24 million. In the period, we returned GBP 17 million to shareholders, GBP 14 million through our dividend and GBP 3 million through the share buyback.

We also purchased some shares to satisfy acquisition consideration and employee share options. We've refinanced our RCF in April.

We've increased it from GBP 150 million to GBP 180 million. It will run until December 2028 and can be extended a further 3 years and is on attractive pricing.

In addition, we also have a USD 20 million overdraft and a UKEF loan of GBP 80 million. So we have good immediately available liquidity with facilities up to GBP 275 million available.

We had closing net debt of GBP 93 million, less than 1x leverage, and we expect to end the year only slightly higher. There's no change in relation to our capital allocation policy.

Overall, we want to maintain a resilient balance sheet, and we'll target leverage of less than 1.5x. We'll continue to execute that policy through the 4 pillars of investing in the business, focused M&A and returning capital to shareholders through the dividend and surplus capital through the share buyback.

I would just highlight that in May, after the period end, we completed the disposal of the explosive hazard detection business, which we sold for USD 9 million in cash. We regularly review our portfolio and we'll take action to change it, if necessary.

We'll remain disciplined, but we also have a very attractive pipeline of opportunity in Roke, where we remain most active, and we continue to develop our pipeline in space and missiles. Next, I'll cover our longer-term and then shorter-term guidance.

First, longer-term. Our ambition is the same, GBP 1 billion in revenue by FY '30, and we remain on track.

Within Energetics, we see enduring demand for our products for which we are installing capacity as evidenced by the long-term agreements entered into with the likes of Diehl, SAAB and Northrop Grumman. Whilst Roke's growth has slowed this year, longer term, we still see Roke growing at a high to mid-single-digit CAGR to GBP 250 million in FY '28 and then beyond.

I've already talked about our disciplined approach to M&A, and so I would also highlight the potential further expansion projects that Mick will cover later in Norway, Germany and the U.K. as ways to supplement our ambition organically.

On margins, we have guided to mid-teens in the medium term, but you can imagine we'll add some significant revenue in our high-margin businesses, and so you'd expect some operational leverage in the longer term. This guidance is getting nearer since we first publicly committed to it, so too is the significant growth in the next couple of years, which is included in existing analyst forecasts.

Short term, for FY '25, our overall guidance is unchanged, supported by 85% of expected revenue having been delivered or in the order book. In Countermeasures & Energetics, we are still targeting low double-digit growth, supported by order cover of 96% this year.

In Sensors & Information, we are targeting flat. In just the time since the half year-end, order cover has risen to 73%.

Growth in Roke will offset the decline in U.S. sensors, as JBTDS has now completed low rate initial production, and we await the full rate production award expected in FY '26.

We are still targeting mid-teens margin in the medium term, but unlikely to hit that in '25. And we expect H1, H2 phasing of operating profit to be similar to last year.

On U.S. tariffs, we expect the impact to be negligible.

The majority of our sales in the U.S. are supplied by our U.S.

operations under our contracts. Sales from outside the U.S.

are largely exempt from tariffs. As usual, I want to flag there are some external factors, which could impact us in the near term.

There could still be budget timing disruption in the U.S. and from the SDR in the U.K.

and obviously, any significant movements in FX. So now for innovation, an area where Chemring excels and one of our core values.

The war in Ukraine has reinforced the importance of advanced electronic warfare technologies. The return of a European peer threat has highlighted the underinvestment many countries have made in their capabilities over the last 10 years.

There is now a drive to rebuild those capabilities in this highly contested environment. That means we are seeing a pipeline of more than GBP 300 million of potential opportunity for our electronic warfare products.

There have been 2 key learnings from the war in Ukraine. First, technologies are evolving rapidly.

Systems have to evolve quickly to address new threats with open architectures enabling faster development. Second, survivability.

Large exquisite systems were quickly disabled on the battlefield. Smaller, highly mobile systems are required.

Roke have used their deep understanding of electronic warfare and real-world experience to develop this next-generation system, Deceive. It has a number of attractive features.

It's multifunctional and has a software-defined radio at its core, so you can reconfigure it to address the full spectrum of electronic warfare effects, including electronic attack and counter drone operations. It's sovereign, U.K.

designed and built, and it uses open architecture, meaning it could rapidly evolve to counter new threats, so it's ready for the future now. What you should take away is that we have and will maintain investment in Roke and the next generation of products we need and so that gives us confidence in the growth outlook for the business.

Deceive was launched last month, and we're already seeing international interest from more than 15 countries. Thank you.

That brings me to the end of my section. Back to Mick for the market update and outlook.

Thanks, James. Turning now to our market environment.

Global attention on defense spending remains high, fueled by uncertainty regarding U.S. support for NATO, the ongoing events in Ukraine and the enduring tensions in the Asia Pacific region.

These geopolitical dynamics underpin a positive outlook for defense and security spending for the foreseeable future. With the Ukraine war now in its fourth year, defense spending is rising across Europe, along with an increasing trend for developing sovereign capabilities and supply chains.

Here in the U.K., recently announced -- sorry, here in the U.K., the government recently announced the largest sustained increase in defense spending since the cold war with budgets set to rise to 2.5% of GDP by 2027 and to 3% in the following parliament. Delivering on NATO commitments and ensuring a resilient nuclear deterrents are among the core priorities for this spend.

Industrially, this is expected to be accompanied by capability reshoring, stockpile production to build national resilience. The U.K.

Strategic Defense review, which was published yesterday, defines the long-term strategic direction of U.K. defense policy, ensuring the nation is equipped to address the emerging threats, global security challenges and technological advancements, whilst also seeking to reinforce resilience and sovereign capability.

The group is well placed to benefit from many aspects of the SDR, but I'll highlight just 2. The first is the establishment of the new Cyber and Electromagnetics Command to oversee the U.K.'

s defensive and active cyber activities alongside electronic warfare efforts, and they should create significant opportunities for Roke. And the second is the commitment to invest GBP 1.5 billion in an always-on pipeline for munitions, building at least 6 new facilities in the U.K.

to produce munitions and energetics and also the commitment to build up to 7,000 U.K.-built long-range weapons to strengthen Britain's armed forces. And in the U.S., the Trump administration is focusing on deterring adversaries by maintaining overwhelming military superiority.

In its recent budget proposal, the White House is requesting a total of $1 trillion in national defense spending for FY '26. The expected capability focus for this budget will be on countering the threats posed by China's large missile inventories, a rapidly growing naval force and sophisticated cyber capabilities.

These also represent a growing opportunity for the group. You may remember me putting up this chart in December to illustrate our drivers of opportunity and growth.

And this time, we have tweaked the order of the slide, as we believe Europe will be at the foremost driver of growth in the medium term. The U.S.

has linked its continued support for NATO to greater European burden sharing, pushing for higher defense spending by allies. This has already resulted in European countries committing to increase their defense budgets.

The European defense industrial strategy sets out a long-term vision to achieve defense industrial readiness across the European Union with the Readiness 2030 initiative aiming to increase defense investment and defense capabilities. Whilst the detail is still to be confirmed, the recent EU-U.K.

Summit established a Defense and Security pack, which the government says will pave the way for U.K. businesses to access EU re-armament funds.

And we are currently working with stakeholders to identify opportunities where Chemring can address both product demand and further grant funding opportunities through initiatives such as the European Defense Industrial program. We believe the increased demand for our products is long term, which underpins our decision to invest in increasing the capacity of our 3 Energetics businesses.

I'm pleased to report that we continue to make good progress across our organic growth projects with GBP 35 million of CapEx spent on these projects during the first half. In Scotland, where we are building an advanced extruded double-based propellants manufacturing facility, the project is on schedule and on budget.

Construction of the new buildings is now complete. Equipment has been installed and the commissioning, licensing and qualification processes are well underway and live production is scheduled to commence in early 2027.

In parallel to this project, the team in Scotland have delivered a feasibility study to the U.K. MOD setting out options to establish the manufacturing of military high explosives at our Ardeer site, and we stand ready to work with the MOD and industry partners to establish this sovereign capability.

Our Norwegian military explosives business is a significant growth opportunity, as it responds to the unprecedented market demand to supply missiles ammunition programs. The substantial capacity expansion programs we are building at our Saetre site remain on track.

And in parallel to the expansion at Saetre, we continue to work closely with the Norwegian government to explore options to build a second manufacturing plant, which will greatly increase the supply of military high explosives to NATO. Outside of Norway, the business is pursuing several international opportunities, of which Germany is progressing at pace.

As part of the 12-year framework agreement that was signed in November with Diehl Defence, we are establishing in Germany the necessary facilities to perform the blending stage of the manufacturing processes. We are also seeking -- sorry, we are also exploring far broader opportunities to establish further manufacturing facilities in Germany to build a sovereign supply chain for military high explosives.

You'll note, I have not mentioned our capacity expansion activities in Chicago, as they are now complete. During the period, our Chicago business won significant order intake, which included an order valued at $106 million for the delivery of critical components for use in an undisclosed U.S.

missile program. Deliveries under this contract, which will be over a 5-year period, commenced in 2026 with continuous flow manufacturing made possible by the additional 45,000 square foot facility that commenced operations last year.

As a reminder, once complete, the 3 capacity expansion projects will deliver incremental revenue of GBP 100 million per annum and incremental operating profit of GBP 30 million per annum by 2028. Now turning to Roke.

Pleasingly, the business continues to make significant progress across several programs, which underpin its long-term growth plan. In January, Roke signed a multiyear strategic agreement with the U.S.

-- with a major U.S. prime contractor for the supply of its high-speed Miniature Radar Altimeter.

This highlighted Roke's expertise in the field of electromagnetics and demonstrates that the critical role Chemring plays in multiple space and missiles programs is not confined to just our Energetics businesses. In April, it was announced that Roke in partnership with the United Kingdom's Missile Defense Center, will lead a U.K.

sovereign industry collaborative effort to provide security to the U.K. and its allies by countering current and future threats, including ballistic and hypersonic missiles.

Valued at GBP 251 million over 6 years, the STORM framework will see Roke enhance its role as a trusted partner to the U.K. MOD at the heart of U.K.

missile defense ecosystems with what is a pivotal time for national defense and security. Roke's storm work will inform critical U.K.

defense decision-making and will play a key role in developing next-generation missile defense capabilities. Alongside these wins, Roke continues to focus on growing all business areas and in parallel, delivering industry-leading research and development, drawing on its world-class people and technologies.

New product launches and strategic partnerships form an integral part of this work. In the period, Roke launched EM-Vis Deceive, its new EW system that James has already spoken about.

And it also signed a strategic partnership agreement with the Kagai Corporation to deliver advanced technologies into the Japanese defense and security markets. During the first half, Roke has seen softness of U.K.

order intake across defense, national security and science and technology, which we believe is linked to the customers' workload associated with the SDR. Importantly, though, we have not seen Roke lose any significant contracts or programs, but we have seen several delays and extensions.

We anticipated these near-term headwinds. So in January, we took action to match Roke's cost base with forecast demand.

Having taken this action and with the SDR now published, Roke is well positioned to capitalize upon the expected upturn in demand during the second half. We will also explore further acquisitions that can accelerate our growth strategy for Roke, and we are working a strong pipeline of opportunities across defense and national security.

So with incumbency in markets with high barriers to entry, we remain on track to organically grow Roke's revenues to greater than GBP 250 million by 2028, whilst maintaining strong margin performance. So to summarize, we've had a good first half as we continue to build resilience and grow our high-quality company.

We have continued the momentum from last year, resulting in a record order book of GBP 1.3 billion, which provides 85% cover for in-year revenues. And against this robust backdrop, the Board's expectations for the full year are unchanged.

We are committed to our incremental growth strategy to achieve GBP 1 billion of annual revenues by 2030, which will require delivery of organic and inorganic opportunities. But as we do this, we will continue to operate with a laser focus on managing operational and financial risks and opportunities.

So with our company underpinned by our values of safety, excellence and innovation, the outlook is increasingly robust. With market-leading innovative products, technologies and services that are critical to our customers and with a strong balance sheet, I am very confident that we will deliver our strategy and goals.

That concludes this morning's presentation. If anyone has any questions, we'll be happy to take them now.

Could I please ask that you state your name and organization before asking your question.

Sash Tusa from Agency Partners. A couple of questions.

First of all, in terms of cash flow, it looks as if you are getting probably slightly better working capital terms as well as managing the working capital that you've got from your customers better. Is that a function of the fact that the markets are so much stronger that you have a better negotiating position with some of your customers, particularly if they want long-term commitments to capacity?

Yes, that's right. We're getting good commercial terms at the moment, both through pricing and then also through, yes, better cash terms, both in terms of prepayments for long lead time items and things like that.

So yes, that's what we're seeing at the moment.

I think you see across the Energetics businesses, customers recognize the fundamental shortage of some of the materials that we manufacture, and they want to secure their position from a long-term basis in our production schedules, which is why they're paying upfront terms to be able to secure those positions, not just in the immediate years, but in the outer years as well.

Okay. And then I've got a follow-on on Project STORM, but also ZODIAC, which you won, I think, about 3 years ago.

Is it right to be thinking that Roke is developing a slightly larger proportion of multiyear contracting than it would have had in the past because these are 2 triple-digit programs. And within that, STORM, you specifically say, has got quite a high proportion of subcontractor work in it.

So should we expect a higher level of pass-through revenues in the coming years?

So yes, absolutely. So part of Roke's strategy is that it has been targeting priming larger contracts and framework contracts with the U.K.

MOD and more broadly so ZODIAC, great win. It's going to be at the heart of the Army's digitization program, and you read about that in deep -- digital targeting webs, et cetera, in the SDR yesterday.

And STORM is a massive win for Roke, right at the center of the U.K. missile defense ecosystem at a time, which again, a critical capability called out in yesterday's SDR.

So yes, I think you should start to look from a Roke perspective for us in some of these larger frameworks that they are operating more at a prime level, and therefore, you will see a larger -- in those specific frameworks, you'll see more pass-through. And that's a good thing.

I mean I think it's a very good thing from a strategic development of Roke.

Okay. And then just one final one.

Your customer at SAAB last week spoke very complementary terms about you and specifically said, not about you but there's a European-wide shortage of triple-based propellant, which is something that concerns them. What's triple-based propellant used for?

Can you make any of it?

So -- do you want me to do that or you want to do?

Yes, go ahead and do that.

So we manufacture double-based propellant, which is obviously sort of like 2 active ingredients and modifiers. And that's what we manufacture in Scotland, and that's what we're building the brand-new facility for because there's an extensive growth in demand for those materials, which normally go into propellant devices, rocket motors, et cetera.

Triple-based, which is as a name state, has got an extra active ingredient. And normally, they are used in larger caliber munitions for the propellant charges.

We don't manufacture triple-base. We know that there's -- it's an area of the market where there's a significant shortage, as there is across the market in all energetic and propellant materials of all types.

It's not an area such that we've operated, and I don't think the U.K. has manufactured triple-based propellant since back of the days of Royal Ordnance.

That's quite a while ago. And it's not something that's currently on our strategic road map.

But clearly, we explore all opportunities in the market. But triple-base currently isn't on our road map at the moment because we think double-base has got so much opportunity ahead of it.

But I think the comment is just very indicative of what you're seeing across so many areas in Europe where there's a fundamental shortage of energetic materials and propellant materials, whether that's for artillery, whether it's for rocket artillery, whether it's for missiles, whether it's for other energetic systems such as bombs or sea mines or whatever. So that's the rationale for why we've invested so heavily in our energetics businesses, and we see a lot more opportunity ahead of us to do that.

David Farrell from Jefferies. I've got a ton of questions, but I'll start with 3.

Two on Roke. Firstly, can you just talk to where the headcount reductions have been made and then also the strategic rationale of moving Roke Futures under the defense team?

So within Roke -- so that's right. Lots of -- the majority of the headcount reductions were in the Futures side of the business.

So -- and we're pulling under defense, I think, because we were seeing lots of opportunity within that business and so as to make sure that all those people were fully utilized and there was lots of work for them within that part of it.

I think the key thing, David, is that for me, obviously, there's been a little bit of softness from a Roke perspective. The key bit to that was is that we were ahead of the curve.

So we saw that coming. We've seen these movies before.

So we acted early. So in January, I think before anybody else was doing anything in this area, we acted.

We -- Paul and the team at Roke did a great job of doing the strategic assessment, looking at where do they see the real areas of growth and redeploying resource into those areas. And then obviously, areas where we saw less robust demand that we took the appropriate action.

So obviously, downsizing, letting some -- making some roles redundant, we never want to do that. But getting ahead of the curve and doing it early is really important for us.

With regards to Futures, I mean, I don't think you should read too much into that other than the demand in -- especially in the military and defense side of the business is so large that we've made the decision that we're going to deploy far more resource into that area than in the Futures area.

Okay. A follow-up to kind of Sash's question around STORM.

When we think about the GBP 250 million revenue target for Roke in 2028, how much of that STORM framework agreement -- does that -- is contributed by STORM framework agreement? Are you going to just be booking your revenue share through the P&L?

Or are you going to be taking everyone else's?

No, when we set that revenue target, we did that before we were aware of STORM. And so what we'd always said within that was about 20% to 30% was going to be pass-through revenue, which is what it has been historically.

Sash is right, to the extent that, that revenue starts coming through, that will probably increase that proportion. And so I think underlying, we've still got the same target for the Roke business.

Okay. Then final question on Energetics.

It's a question I frequently get asked by investors. Can you just talk us through kind of the broader supply chain?

From Chemring Nobel in Norway, are you supplying into the U.S.? Or is it just armament customers in Europe?

And how much of the HMX, RDX can be manufactured internally by the likes of Rheinmetall and BAE Systems versus having to buy off third parties?

It's a good question. How -- do you want -- should we start on the base raw materials supply chain?

May as well.

So broadly, I think about 50% of Nobel's output goes to the U.S. So broadly, about 50% goes to the U.S.

into prime contractors on that side of the Atlantic and about say, big handful, about 50% of it goes into Europe. We don't supply the likes of BAE Systems or Rheinmetall.

They run their own supply -- sorry, their supply chains either internally or they run it with other suppliers themselves. The companies that we supply directly into do not manufacture energetic material and have no intention to broaden out into that.

They're signing very long-term strategic supply agreements with ourselves so that we can supply the HMX and RDX and MCX that's required in their missile and munition systems. So we don't see that as a particular threat to us.

In fact, when you look at the length of the contracts that we're signing, some of these long-term strategic supply agreements go out to 2041, I think, demonstrates that just as we're being very disciplined with our strategy and being very clear in the things that we're going to invest in and what we're going to be excellent in excel in, many of the prime contractors themselves. If you're a missile house, you want to be world-class at manufacturing missiles, you don't necessarily want to be vertically integrating to manufacture raw materials such as HMX and RDX.

Richard Paige from Deutsche Numis. I'll ask 3 as well, if I can, please.

So on -- my first one is on the U.S. Sensors business, opportunities beyond JBTDS and EMBD program, please?

So yes, so EMBD out there today on U.S. Navy warships, protecting their sailors.

We see spiral development of that program ongoing and the team in Charlotte are talking to an international customer potentially about that system. I don't think we're at liberty to talk about who that customer is at the moment.

And with JBTDS, as James said, we expect that we'll go into full rate production on that program of record in 2026 I think is when...

Yes, '26 -- award in '26...

When they're scheduling that. We think our primary focus on JBTDS is obviously to go up the FRP curve for the U.S.

customer. But in parallel, the team are very active at -- looking at export sales for the JBTDS system itself.

We believe that it's got the opportunity to become the system of -- the reference system across the whole of Europe, especially with European NATO nations, where there is a significant shortage or complete absence in some areas of military-grade biological agent detectors. We think JBTDS is very well placed for that.

Beyond that -- and I think maybe your question touched on around the next-generation sensors. So we invest significant R&D in the business in Charlotte, looking at those next generation of detectors that could potentially have utility both in the military capability, but also increasingly in some civilian applications as well.

But the primary focus, I think, Paige, would be very much around maintaining EMBD deliveries. We haven't missed a beat on that program.

And then once we get the FRP award for JBTDS in 2026, then executing incredibly well to go up that FRP curve.

And then jumping back to the main one. Everyone is asking about Energetics.

The dual mixing potential or the mixing in Germany plus what you're doing from the U.K. side, a, what additional capacity might that provide if you can do those things?

What CapEx and what time line, I guess...

So -- I mean that's such a big question, isn't it? So one of the key things that we are seeing across the whole market are that NATO nations want to increase their defense industrial base so that they can not only contribute to the overall NATO defense industrial base, but everyone or a lot of nations want to establish a sovereign capability for national resilience.

Hence, the reason why we've completed feasibility studies of how we do that here in the U.K., how we -- we're working with the government in Norway about establishing a second manufacturing site in Norway, which could be of significant size. And then in Germany, the German government absolutely recognize that they want to establish a sovereign defense industrial base for the manufacturing of high explosives -- military high explosives.

So yes, so we're working very closely with Diehl Defence. And where if you go to the site in Germany now, you'll see us start construction on that blending facility.

I expect that we'll build a lot more infrastructure and facilities in Germany off the back of that. With regards to sizing and scaling, I think it's probably a little bit too early at the moment to that, but I would say a big handful is the options that we're looking at in Norway, for instance.

I think the smaller sized facility that we're looking at would be at least the same size as our fully expanded Saetre site. So these are very substantial capacities because of the fundamental undersizing of the defense industrial base, especially in a lot of these high explosive areas.

The only other thing I'd add is that we're looking at a similar commercial model to what we saw in Norway in terms of there we got about 70% grant funding.

Yes, that's important.

And sorry, just to add, the lead time to do something like the mixing piece is that quicker than...

Yes, that's a -- yes, so we'll -- I think the guy starts like breaking ground on that specific facility this summer. And then I think they've got something like 12 months and then they're producing the first batches that will go into analysis.

So that's a different proposition to say, if you're building a crystallization plant, which takes probably twice as long.

And then moving to Roke. Obviously, in the SER, electronic warfare and cyber being combined, all has Roke's name all over it.

But do you think that might delay the sort of contract flow in the near term as to how they -- if they're reorganizing that side? Is that...

I suppose it's got the risk to do that. I suppose you look at the other side of the coin and look at a lot of what was announced yesterday in the SDR where there's the defense reform program.

One of the fundamentals of that is significantly speeding up and simplifying the contracting and procurement processes. So I don't know maybe one way cancel out the other.

I think net positive, though, Paige, would be is that I think that, obviously, what we -- what you see every day in Ukraine has graphically illustrated the essentiality of having dominance in the cyber and electromagnetic world and hence, the reason for establishing a CMA command, which yes, you're absolutely right, is completely in Roke's wheelhouse, decades and decades of experience in leading technology in those areas. The Deceive product that James identified, fantastic product, got the counter drone capability, electronic attack capability based fully on software-defined radios, completely reconfigurable and whatever.

And I think we've got -- I think you mentioned 15...

15 international.

15 international customers already wanting to talk to Roke about that product. I think that demonstrates how important this whole CEMA area is going to become for us.

And sorry, if I couldn't attach into that leads into the last bit. On that Roke GBP 250 million revenue, when it was set the mix between products and your core capabilities, U.K.

versus international, has that changed as to how you would look at it today?

To be honest, I can't remember what the mix was when we announced it. But I think the forward growth of Roke is that we expect the defense side of the business probably to grow -- well, it will grow more quickly than the national security side.

I think national security side will continue to grow. But just because of what you're seeing with regards to defense recapitalization across Europe and beyond and the international footprint that Roke has, I think you're going to see the military side of the business grow more rapidly, and that is a product -- predominantly a products-based business.

George Mcwhirter from Berenberg. Just 2, please.

Firstly, the SDR. So it's positive it's been released yesterday.

It looks like there will be an equipment plan released at the end of the year. How do you think that would drive order intake?

Would you expect orders to flow immediately? Or should we wait until the equipment plan is published towards the end of the year?

That's the first one.

Okay. That's a good question.

So I think my understanding is that the next steps are really important building block of delivering the SDR is the defense industrial strategy. And I believe that we're going to see that published in the next month or so.

I think that is a -- that will set out, as I say, the industrial road map of how the goals of the SDR will be developed. We are looking forward to working very closely with the MOD and U.K.

government to deliver the goals of the industrial strategy. And then I think the equipment plan is now renamed, I think, the defense investment plan, where I think Secretary State said that, that was going to come out in the autumn.

And again, we'll be working closely with the customer for that. Whether -- I think the question of do we think that we're going to see slowdown between now and then, I think it's a pretty difficult one to call.

I think now that we have got SDR over the line, I think we'll probably see a recovery in more normal order cadence, but it's a bit of a how long is a piece of string kind of question.

Yes. Okay.

And the second one was just on Roke, just a clarification. The GBP 250 million target by FY '28, is that about 20% to 30% pass-through included in that?

Yes. So I think historically, that's roughly what we run at, about 20% pass-through -- 20% to 30%.

And I think that was what was included in that target originally.

Any more questions? Rupert?

Sash at the front?

Just a follow-up on George's question and particularly the defense industrial strategy. Is that where you would expect some sort of detail on the -- at least 6 munitions factories that was announced yesterday?

Do you have any feeling from your briefings yet as to the mix of those factories between upstream propellants and explosives and downstream product manufacturer?

I think I'm hopeful that the defense industrial strategy will give us greater insight into where that balance of investment is going to fall. And 6 new facilities, 6 new factories or 6 new production lines, I think they're kind of somewhat interchangeable.

I think you'll probably -- it will be very likely, Sash, to see a combination of all of those things. I would be very surprised if you don't see new missile final assembly facility, especially given the 7,000 commitment that was talked to yesterday.

But also, I do think that you're going to see investment in raw materials, so energetic material and propellant manufacturing facilities. So I think it's going to be a combination of all those.

Sorry, I can have a follow-up as well. Just on Countermeasures in the U.S., can you give an update as where we are in terms of kind of the new automated line, whether that's kind of now operating as expected?

And then kind of associated with that, what your plans are for the old line? Because I think at one stage you thought about decommissioning it.

Probably -- seems like there's probably potential for increased demand over the medium term.

Yes. Good question.

So yes, so the new facility is up and online. So we didn't mention it because it's just day job now.

So it's been a bit of a -- as you know, it's been a bit of a painful journey for us to get there. We took a huge automation technology step when we introduced a fully robotic assembly line there by the team of -- fair play to them.

They've kind of -- looks like they've cracked it. So they're coming up that curve.

So not an area of concern for us. With regards to the legacy line, our intention is that we still will decommission that, primarily because it comes to the -- in our assessment comes to the end of its safe economic life.

So that's the extrusion line that the new facility replaces. One of the things, David, that we're never going to compromise on, and you hear me banging on about it all the time, is that we're never going to compromise on safety.

And we're not going to operate a facility where we don't believe it is in the -- if we extended its life out for another few years, whether we'd be able to operate it as safe as reasonably practical to the level of safety standards that we operate across the group. So I don't think we'll be reversing that decision.

And -- but just to be clear, that we haven't announced that. That's not something that we're planning at the moment.

And so it could be something that happens at some point in the future.

Any more questions? No?

Okay. I think that draws the proceedings to a close.

So thank you very much for attending today, and we look forward to presenting our FY '25 results to you all in December. Thank you.

Thank you.