BAE Systems plc (BA) Earnings Call Transcript & Summary

Well, good afternoon, everyone. Fantastic to see so many of you here in person. This is our first hybrid event. So let's see how it goes, but it's great to see so many people here and welcome to everyone dialing in online as well. This is the BAE Systems ESG and Digital Intelligence overview. Just a little bit of housekeeping. Obviously, no fire drills planned and please keep and make sure your phones are on silent. It's all possible. This is a bit of context then following last year's deep dive and laying out on ESG and laying out many of our targets, policies and procedures, then the aim very much for today is to provide an update on the progress in the last 12 months and also to try and bring ESG agenda to life a little bit, some case studies. Tom is going to dial in from the U.S. covering electrification and our technology advantages there, which is a real focus. And a few videos, it wouldn't be a BAE systems event without a few videos. So hopefully, they will go smoothly. Just for everyone, I mean, you've all got printed packs, the packs are online as well. And there's a lot of detailed information in the backup. And actually, we've increased our disclosure year-on-year. Just as regards to Q&A, we'll obviously take Q&A in the room, and we'll also have the ability to do Q&A online through the usual operator format and we've allowed a little bit of time at the end of each presentation to do so. I would say that today, if we could keep the questions to ESG and to Digital Intelligence only, please, Brad will say a few statements at the start of the second part of the presentation, about how the business is placed and a few updates, but we'll be giving a fuller trading update on the 15th of November. We would aim to finish about 3:30 and will flex the timings as appropriate. And with that, I'm delighted to hand over to our Chairman, Sir Roger Carr.

Well, thanks very much, Martin, and a warm welcome to everybody in the room and indeed, those that are joining us live either. I think as Martin said, we really hope this is going to be a sort of interesting and an informative session, which is about really our commitment and engagement to the whole delivery of the ESG agenda and the Digital session quite separate, but something equally important to follow. We've assembled, I think, a really good team today. We've got, obviously, Charles as the CEO here. Tom Arseneault is on the line, and he will be there for the whole of the event. Dr. Jane Griffiths is joining as Non-Executive Director. And of course, she is Chair of the ESG Committee and Karin Hoeing here, who is responsible for actually making the ESG agenda happen. So no pressure. For my part, I wanted to cover in about 15 minutes or so, what I really do believe is an important case for value of the Defence industry in general and of course, BAE systems in particular. And also to give you, I think, some insight into our Board, the way it currently functions and indeed will evolve over the next 12 months or so. Now there's no doubt that as an investment proposition, support for defense, ebbs and flows according to the assessment of National Risk and indeed, the moral judgment of society on the industry itself. Clearly, in recent times, the conflict in the Ukraine has thrown the need for defense and security into a much sharper focus and the public perception to a much more supportive position. Now I've been fortunate to be Chairman of this great company for the last -- just over the last 9 years. And I believe today what I felt when I first accepted the position, it is an industry that is sometimes misunderstood, but fundamentally, a force for good. It helps governments deliver their prime responsibility in providing security and safety for their citizens while simultaneously underpinning the prosperity agenda of nations with high-quality, well-paid sustainable employment. Naturally, not everyone shares this perspective. There are some that have a deep and passionate belief that all arms manufacturing is wrong. The defense contractors encourage conflict, not prevented and that irrespective of the economic benefit, there is a moral dimension, that overcomes all favorable arguments. And as I say, frankly, at all AGMs, their views are to be respected, if not always accepted. In recent times, however, as you know, the case against defense has drifted into a wider group in the investment community, whose agenda is to measure and judge the environmental, the social and the governance qualities of all companies. But on occasion, they have failed to adequately distinguish between the contribution of highly regulated, ethically led and government-backed defense contractors to that of the independent and free-wheeling arms dealers. It is a confusion that is dangerous and damaging to the reputation of some of the finest companies in the United Kingdom and ultimately, to their cost of capital, their ability to invest and to attract the fine lines that are required to preserve the cutting-edge capabilities that are vital to the countries in which they operate. It's taken the war in Ukraine to recalibrate investor views on defense to show that hoping for peace is not a strategy. The geopolitical complacency is a dangerous mindset. And that ultimately, it is only by having a strong defense capability that deters well-armed aggressors from initiating conflict. To those that believe the removal of the nuclear arsenal is a step in the right direction. I think the war in Ukraine has shown that the sacrifice of the nuclear deterrent exposes the country and empowers the nuclear aggressor. And without doubt, it underpins for the case for the U.K.'s continuous at sea deterrent. It's there to keep our foes in check. It also shouldn't take a water wake up the west to the risks of complacency or to turbocharge the demands that NATO members must invest at least 2% of their GDP in their protection rather than rely on the United States as a low-cost insurance policy. It shouldn't take it, but it did. And it shouldn't take a war for the investment community to revalue BAE shares by around 50%. But clearly, it has. It is vital that we remember PEACE is best preserved as President Roosevelt said, by those that speak softly but carry a big stick. And the case for Defense & Security is not simply to be armed for the rainy day, it is to invest in the industrial umbrella that will build skills, secure employment and provide prosperity while peace prevails. And if I may, just a few facts and figures that demonstrate how significant the contribution that BAE systems makes to both the prosperity and what used to be called the leveling up agenda in the United Kingdom and indeed elsewhere in the world. In 2020, according to Oxford Economics, we contributed over GBP 10 billion to U.K. GDP and around GBP 4 billion to exports as well as supporting a total tax contribution approaching GBP 3 billion. We support 143,000 full-time jobs across the U.K. through a supply chain of about 5,000 companies and invest more than GBP 1 billion in technology and R&D. And this includes naturally our own capital as well as that of our customers and partners. And we're committed to supporting young people, recruiting around 1,100 apprentices in the U.K. this year alone. It's a record for us and making some significant headway in recruiting more women to make our company much more diverse. We provide considerable in-kind support working with local enterprise partnerships across the U.K. to develop the left behind communities and mentoring small businesses to help improve those that are far behind in productivity. So we have a direct impact on the communities in which we operate, indeed because traditionally, military equipment sites were located out of cities and major towns. Some 40% of our employees are directly employed in the U.K. in the most deprived regions. We make an important economics and societal contribution wherever we are active in the U.S., the Gulf and Australia. Added to this, we're making real progress against our 2030 net zero carbon targets across our operations and developing some exciting sustainable technologies to support our route to net zero. So as a Board, our focus is not simply how much money we make, but indeed how we make money. And the Board has been developed to ensure we do have the right combination of skill set. And I think most importantly, mindset to discharge our obligations to all our stakeholders. From a governance perspective, we continue to meet best practice expectations with regard to gender and ethnic diversity. Let me emphasize, all selected on merit rather than simply box-ticking. We meet in person at least 5 times a year and electronically at least 3 times. Our Board committees for remuneration, audit and nomination are appropriately populated and rigorously managed. We organize regular site visits, town halls, breakfast and dinners with high-potential executives. And our ESG Committee has been active in overseeing that our connection with our employees is both in deed and word. I think COVID has taught us to communicate much more regularly and indeed more informally. And we've used frequent video links to good effect. From a business perspective, we have remixed the Board skills that we need in keeping with the shape and the focus of the business. In this respect, we've added to the core experience of members with international industrial and financial backgrounds, but specializing now with capabilities in Science, Technology and Digital Intelligence. We've strengthened our committees through the formation of the Innovation and Technology Committee led by Dr. Ewan Kirk, who is a world authority on AI and reinforce the strength and depth of our ESG Committee under the very passionate leadership of Dr. Jane Griffiths who you'll hear from a little later. Looking to the future, my own term as Chairman of this remarkable company I have to say sadly for my part, comes to an end after a little over 9 years in May 2023. Succession planning under the leadership of Chris Grigg, a Senior Independent Director, has secured an excellent replacement Cressida Hogg, who will join the Board to participate in the strategy meeting in November. And that will be in parallel with Lord Mark Sedwill, who brings with him a wealth of international and government experience as the ex-head of U.K. National Security and of course, the cabinet office. From May next year, we are on track to meet the new FCA Board diversity targets, including a female chair, a 40% gender mix with one member from an ethnic minority background. Additionally, in keeping with U.K. government requirements, we have a British CEO, former Charles, and more than 50% of the Board are British citizens and that's something we must have. Together, with an outstanding executive leadership led by Charles, I am absolutely confident that this Board will continue to be in excellent shape for the future. Additionally, given the unique and very special agreement we have with the United States, which enables us to own U.S. businesses, which are engaged in the most highly classified projects, we benefit from the advice, guidance and oversight of the ink board, comprising members who have served at the highest levels in the U.S. government and military. And I would add that over and above all the strict legal rules, the regulations and codes under which we operate, there is a human dimension whereby directors exercise personal judgment in decision making as to what is morally acceptable and enable each to have secured a sound night sleep in the knowledge that the right things are being done because they are the right things to do. In conclusion, I feel that our government structures, our environmental commitments and our societal engagements have been thoughtfully developed. They are strictly observed and rigorously pleased. In the final analysis, I feel that only by government, industry and the community and the investors being in single-minded lockstep on the value and values of the Defence industry, can we hope to maintain the capability, underpin the prosperity and preserve the peace that we all desire. And with that general outline of our view and our principles in the way we run the business, I'll now hand over to Dr. Jane Griffiths, who's going to talk about the ESG side. Thank you.

Thank you very much, Sir Roger. Good afternoon, everyone. I'm delighted to be here, and I'd like to brief you on the key activities of the ESG Committee and what we've overseen over the last 12 months. Let me just recap first on who's on the committee. We have a really experienced group of nonexecs. We've got Nick Anderson, Crystal Ashby and Nicole Piasecki. Chris Grigg was also a member until recently, but he's now stepping down because he's got other commitments for BAE Board. So we do reflecting the diverse picture on the Board itself also have a wealth of diversity on the ESG Committee, both through sector experience, also gender, and ethnicity. And it's been really great to have Crystal Ashby joining the ESG Committee. She's an African-American, and she brings obviously a unique perspective with her, which is really beneficial in terms of driving our asset diversity agenda within the company. When we have our meetings, obviously, the ESG members attend, but also to Sir Roger attends, Charles also attends, Brad is also there and a number of other senior executives. And I think that really reflects the interest and commitment to ESG that this company has. So if I move on to the role of the committee. Obviously, the primary role of the committee is to provide oversight, challenge and assurance of the company's ESG agenda and also the progress that we're making. At our meetings, we hear from senior management, obviously, content experts and also external speakers come to educate both the ESG Committee and also the Board at times. And as Sir Roger said, we also use site visits and virtual meetings to engage directly with employees to hear their views, not only on topics around ESG, but topics that really impact their engagement within the company. Importantly, we approved the ESG-related objectives and targets, which form part of the executive incentives. For example, in 2022, both safety and diversity was set as underpins or qualifies to the overall award of the nonfinancial elements of the executive bonus. That is good performance in both of these areas is expected rather than rewarded. And I think over the last year, what we've also done is establish a nice cadence of the company is proposing what goals is wanting to achieve or driving to achieve, we discussed it at the ESG Committee. It then goes to the Audit Committee to make sure that what we are deciding upon can be measured and is auditable before it goes to the Remco. So that sort of good cadence has been established. The other element, obviously, for the remuneration plan are covering the company's net zero plan, driving an inclusive culture and maintaining and improving our reputation and rating of key stakeholders, such as yourselves in the audience and online. The key areas of focus of the committee during 2022 are shown on the slide. And also our committee agenda is provided in the annex to this pack. So you can see what we're getting up to throughout the year. So a recap of the key activity this year, if I take the ESG titles one by one. For the environment, obviously, the main focus has been on the net zero program and its overview. And I think it's now very nicely established within the strategy of the company, but also embedded within financial planning overseen by Brad here and also relating to TCFD and climate risk reporting. We've also had external briefings on -- for the full Board from PwC on climate. And I think that will be an ongoing picture within this committee that we continually have external people coming to speak and educating the committee on various aspects of the ESG. If I move on to social, it's a very broad area. And the company is focusing on certain aspects that it considers to be important within the company. And those areas of diversity and inclusion, safety and well-being, employee engagement and community impact. So if I take each one of those, safety is definitely improving. It's something we continually need to keep a focus on. And we were particularly pleased as a committee to see that there's a focus on well-being and mental health as well in the company. And I think Karin may touch on that in her presentation. And I think that's particularly important given the environment at the moment and the stress is on employees, not just in the workplace, but also in the private lives, particularly as the economy the way it is. Also, I have had direct engagement with the safety teams in Australia and Saudi Arabia. And it was -- it's always very interesting to do that. We were very positive, very engaged, and it gives them an opportunity to provide us with information and hints of how they would like things to improve. So very beneficial. Diversity, a topic close to my heart is hugely important to the company. And we recognize the challenges of an engineering company can sometimes make it difficult to achieve the particularly gender diversity figures that we would like to. The progress continues to be made, and I know that Charles will talk about that. And what we want to see is more focused maybe next year on ethnic diversity as well. And as I said before, having Crystal, on the ESG committee will really help us with that. In terms of governance, robust standards of governance are truly upheld by this company. It's essential in any industry and particularly so in Defence. We regularly oversee the anti-bribery and corruption program. We see presentations from the company on that and the full Board recently received an overview of the ethics program and helpline. And what we heard confirm the fact that employees are really being made aware of the company standards that are also highlighting any issues and feel free to do so, which is good to see. We're also keen to increase the input of external stakeholders' views to the committee. And we monitor ratings, and we received teach-ins, as I said, but it's important to us that we're recognized by the external community for what we do. External assurance is also important for the ESG data. And this year, Deloitte will provide external assurance over our carbon numbers. I think it's important, obviously, if we're disclosing these numbers that they're assured externally. So in summary for that part, BAE maintains robust standards of governance and is making good progress across the environmental and social aspects of ESG. Employee engagement is a delegated role on behalf of the Board, and it's our job to oversee employee engagement in line with the corporate governance code. And never -- I think one of the most interesting and enjoyable things that we do is having the opportunity to meet employees out at the sites. And I have to say that Charles is really great that opening up any door that any of the ESG or anyone else wants to go to on the Board to meet with employees and listen to what they have to say. And the most recent one was great. We were at a Board in the U.S. Meeting Inc and revisited electronic solutions in Nashua and New Hampshire and met with a lot of the staff there from the shop floor right up to senior execs. It was great to meet with them. And I think one of the things that I see when I go out to these site visit, the staff in BAE are truly engaged in what they do. And we really feel that in all the sites that you go to. I also, as I said before, I've had direct engagement on safety and diversity. Diversity is an important topic. We're working on that and safety is as ever, a really huge focus from the company. So -- it's important for any company to address each of those aspects of ESG, not only for the company's point of view, but for the environment in general, and I've personally championed, there is not only obviously on the Board in BAE, but also in my career with Johnson & Johnson. And what I see in BAE is that it's really on the right path. And what the committee has a role to do is check that it's doing what it said it's set out to do, to have some good challenge, but also to have some good debate as we move forward on each of the topics of ESG. And actually, I feel really privileged to chair this committee. It's incredibly interesting. It's an important topic that we oversee and it's a wonderful company to work with. That's not to say that we don't continue to put Charles under a lot of pressure in the committee and hold into account and the company in the aspects that they're working on and areas that they need to improve. So you'll continue to hear me banging on about diversity in the net zero trial. So I'm grateful to be on this committee, and I'm going to pass over to Charles now, who will give you a lot more detail and so will Karin about what we're doing in BAE on the ESG.

Thanks so much, Jane. Good afternoon, good morning, everyone. So -- this second part of the presentation gives me and a number of the executive team the opportunity to build on some of the topics covered by the Chairman and Jane, but with an executive lens on the delivery of the strategy and the value our operations bring from an ESG perspective. I first wanted to play you a short video, which we played at my recent leadership event to reflect how we see ESG and how we explain it and what is important to us and how we can embed that to deliver a better long-term business. [Presentation]

Hopefully, that drew out how sustainability is integrated throughout our business from the operating frameworks to our integrated business planning process and business review cycles and incorporated within our objectives. Well understood and clear communication from the boardroom to the shop floor is critical as we progress on our targets and look to retain and recruit the very best talent to drive strong operational performance and value for our customers and shareholders. It is also important that is led from the top team, hence my appointment of Karin here as group ESG Director on our Executive Committee. We all recognize the ESG agenda is broad with many criteria and changing priorities. What is important for us is that through engagement with our stakeholders, we focus on the areas which are most material to our sector, our communities and our business. We then apply a collective focus in addressing and managing the material risks with our customers and supply chains. From this framework, we look across each of the elements of ESG and last year, we laid out our key targets and commitments as detailed here. I'll now provide a brief update on our progress in each area. We set our net zero ambition for our Scope 1 and 2 operations by 2030 and those of our products and supply chains by 2050. And we've already made progress towards our 2030 target primarily through greening of our energy sources and improved monitoring and measurement. As Jane referenced, we recently undertook a detailed evaluation of our carbon reduction plans as part of the IBP process or Integrated Business Plan. Our sectors will be pursuing a range of measurements, including power purchase agreements, reductions in energy consumption and more efficient energy use. We will also look to collaborate with our customers, peers and suppliers to advance technology solutions. We recognize and welcome the level of interest that our employees have in this area. Our early careers Sustainability Group organized our annual sustainability week in June, which had over 3,000 attendees. And we used last year's COP26 event to launch a number of initiatives to further employee engagement on climate and environment as well as promoting hybrid drive technology by offering a bus as a green transport option around Glasgow. The safety and well-being of our employees is a huge priority. We operate a range of industrial sites, which come with an inherent risk. A strong safety culture has many different facets, but the dominant one is commitment of leadership and the tone from the top. Early last year, we saw that the safety performance had deteriorated at some of our sites. But I'm pleased to say that through significant effort and investment, we have reversed that trend, and we'll redouble our efforts to ensure we continue to improve. Mental health and well-being received necessary focus during the pandemic. And again, I'm pleased to say that we continue to strengthen our efforts in supporting employees on these issues. We provide employee assistance programs and promote discussion and awareness on some tough topics, including family loss, stress and depression. Diversity, equity and inclusion are key enablers to both recruiting the best talent, driving innovation and creating a workplace environment where employees are valued for all that they bring. We are making steady progress on gender diversity, and I'm pleased that we now have 3 women on the Executive Committee, strengthening my leadership team and have also increased ethnic minority representation at this level. We recognize the challenges of the engineering sector, but through our schools and early careers program, we are proactively increasing diversity in our pipeline and seeking opportunities to bring in talent from a wider segment of society. Resourcing, talent development and succession planning remain key for us across all markets. As you all know, we're a large employer and a significant presence in many of our local communities. We also recognize our responsibilities in respect of national and governance initiatives. We contributed more than GBP 11 million in 2021 across a range of courses, but it is less about the amount than the value we create. While we contributed almost GBP 4 million to skills education, that doesn't include our investment in apprenticeships and graduates, where we continue to increase our intakes to build capability for the future. I am particularly proud of the effort and willingness of our employees to support local courses and we are looking at how we can facilitate a greater range of opportunities, recognizing the strong employee engagement this fosters. Strong governance is at our cornerstone. We remain strong. We maintain strong and robust policies and processes with rigorous assurance provided by both the internal audit function and external assurance. Our key policies are in the back of material, along with all our product trading principles. Our code of conduct provides employees and contractors working on our sites with clarity on the standards we expect but also how to seek advice or guidance or raise an issue if they have concerns. Context to our ethics helpline have returned to pre-pandemic levels and I'm pleased to note that more than 50% are people seeking advice or guidance rather than actually having an issue to raise. We rolled out our annual all-employee training in June. This is a series of scenarios depicting typical nuanced situations in the workplace. These scenarios form the basis of a team discussion where they considered similar issues they might have encountered and what the appropriate course of action should be. The scenarios always prompt much animated discussion and debate. As you know, we confirmed last year that we are intending to exit the production of the smoke screen shell containing white phosphorus and we have formally notified the U.K. MoD of our position, and we'll continue to work with the customer to help them find an alternative effective smoke screen. Wages and compensation are obviously a key issue for us all. We signed up for the Real Living Wage Foundation last year and continue to progress this with our key contractors. We've been making good progress against our commitments and remain focused on doing what is right for our business and stakeholders. These stakeholders have many challenges that we recognize. We continue to look to give increased clarity and disclosure to help you in what we recognize remains an investing universe with increased legislation and requirements, coupled with often inconsistent and confusing data sources. And whilst we don't go specifically chasing rating agency improvements, we do use their scores and feedback to reflect on our own internal programs and use as a means to identify improvements. We retained our AA rating with MSCI. And those of you who use sustained analytics will be aware they place a high-risk weighting on certain aspects of defense, hence, our lowest score there. This is an area that Karin is driving hard, and I will now hand over to her to expand on our ESG agenda. Over to you, Karin.

Thank you, Charles. So good morning, good afternoon. We have heard themselves that we have made great progress on our ES&G agenda. And we have done this across all the markets and all different areas. We also now have a much clearer agenda. And if I can get the next slide, please? Thank you. So this doesn't mean we are done. We can do a lot more and a lot more means how can we do this? We can do [Audio Gap] considering views of all the different stakeholders. And last but not least, leverage the enthusiasm our employees have, which is great. So this chart here shows you a little bit on how we build on our core foundations, which you see all across the bottom of this chart, and how we then picked out 4 key themes we would like to amplify, build on and get better at much more. So this is to deliver sustainability and growth in BAE system. So if I focus just one second on the core foundations. Most of them, Charles has just explained to everybody around safety where we got better out of the last 9 months alone. Health and well-being, mental health was a big topic during COVID time. Not only did they look at mental health for our own employees, but also included families, children and the broader surrounding of our employees, which was a very, very big topic and a huge uptake and all kinds of training learning ups, et cetera, what we've rolled out globally. Diversity and inclusion, Charles talked about it. We have set ambitions globally, enterprise-wide and we're going after it. We're getting better, focusing secondary now on ethnic minorities, people of color in the U.S. And again, it's milestones we have set enterprise mindset, a lot of collaboration, a lot of lessons learned from all different places and sites around the globe. And so last year, I think we talked a lot around product trading, quality and safety. So I won't repeat it again. Accountability, transparency, early carriers, I will briefly talk about in a minute. But if I look now at the 4 key themes we point out on the right side of the slides, the reason being these are areas where we can show our strength and capabilities even more on. We have on the top addressing climate risks. Charles mentioned around the progress we have made on Scope 1 and 2 meaning what are things we can impact ourselves on our own operations on emissions. We're now also assessing our supply chain and the footprint of our own products. So these things are ongoing, and we're making great progress and we will be in a much better position in Q1 to have a great baseline and have a roadmap and understand what is it that we need to do for Scope 3, which is the massive undertaking for our end giving the footprint and giving the supply chain we are having. Secondly, we're also looking at TCFD. So what are climate influences and climate risks that actually impact our own operations and how do we go about it? Certainly an area of interest to us and certainly an area where we have a lot of focus on as we speak. The second role is innovation, technology and ideas, really a core strength of BAE system and something we are very proud of. If we're looking at how can we actually support our customers better, looking at green technologies, having deeper dives and technologies we are doing, taking a green lens and all the technologies we are having, what can we improve, what can we do differently? And how can we leverage the massive talent we have in this organization, bright mindsets and see what is it that we can do in this space here? One example would be the Bohemia acquisition we have recently done in our U.S. business. Instead of live training, we now can actually use simulation. So this is a great improvement, especially given the technology and greener technology we can use with it. Tom will talk about later on about the electrification, and Charles is going to give you an example of our Tempest. Again, great ideas around innovation and technology and what we have done in BAE system, and we'll continue doing going forward. Creating opportunities for people and communities, Charles talked about a couple of examples on what we have done so far, but there's still so much more than we can do. In the current time, we had the big resignation, we now have recessions. We have all kind of challenges, all our employees, all our stakeholders are actually coming to terms. So how can we help them? How do we make sure we still have skill sets for the future? How do we make sure we remain attractive for skill sets of the future and attractive for people to retain and remain in our organization? It means we need to create inclusive workplaces from multigenerational people that work in our organization, all across the globe in different places and also in places where they are maybe not as privileged as in other places. This means we're investing in career-long learning and other parts, I will come back to in just a minute. Last but not least, partnering. Historically, the relationship we had with some of our partners was quite different. We are looking much more at how do we leverage customers, suppliers, trade unions, universities and learn from each other because only together, we have a much stronger voice and can see how we can advance in this important topic of sustainability. So a lot of examples we show later on will be around different models on how we engage and how do we do things differently, which is very important. If we move to the next slide, please? So where do we go from here? What we have developed now is a strong global narrative. This is exactly the same as you have seen on the previous slide, now in a beautiful globe shape with all the different themes at the bottom. What does it do to us? It helps us to engage with a much broader group of people. It helps us to support our purpose and strategy, excites and involve our people. Just 2 weeks ago, we had our CEO leadership event with the Top 100 Leaders of our company together. And we did present ESG sustainability there. And it was quite exciting to see all the questions we got because it means so much to so many different people and seeing the excitement and asking questions on how they can get involved, what do they need to do? Where do we go from here? It was very, very good to see. So it's certainly a bus around in our company around ESG, which really is something we would like to leverage and move forward with our agenda. We also have planned a virtual event for about 2,000 middle-level managers starting in the first week of November. It's a 2-day event which is pretty much global, of course, of time zones, it's quite difficult to juggle. But again, one of the big items on our agenda will be ESG. And I already know now by the questions asked upfront that this is a very exciting topic people would like to get involved in. On top of it, we will have WebExes and roadshows planned from Q1 onwards to as many sites globally as we somehow can get to, to explain to people what does it mean? What does it mean for BAE Systems and how you can get involved regardless of what levels you work in this organization? Which I think is quite exciting and quite a great opportunity for BAE to get a whole organization behind one in the same goal. But not only does this narrative help us to engaged internally, it also helps us a lot more externally with our other stakeholders, customers, suppliers, universities, trade unions, as I mentioned earlier, a lot of engagements we would like to leverage and we like to learn altogether. And also, hopefully, a much stronger and more visible picture towards the case for Defence, as Sir Roger mentioned at the beginning. So as we move to the next slide, please. So looking forward, Charles presented the progress we have made up to now. You have seen a little bit of a clearer picture on where we are going. And what we're trying to achieve here is to show you what's our near-term objectives, where do we go near term? On the environment front, as Charles mentioned, we're working on net zero Scope 1 and 2 specifically. We have now just finished this summer the IBP, our financial 5-year plan, which now underpins how we achieve our Scope 1 and 2 also with what kind of commitments we are going to make when and where. I mentioned a minute ago, we are looking at Scope 3. It's establishing the baseline. It's the big priority and also looking at our products, how do we get there? What's the baseline we need to take? And how do we get the roadmaps in place the Q1 to then drive it forward because 2050 seems around the corner, even though it's far away. It is just around the corner when we look at our supply chain and our own products and what it needs and what it takes to get there. We also started the deep dives and feasibility assessment of green technology. And there is a lot more I could talk about on the environmental side, but if you really have to put it on the 3 main bullets, these would be the ones heeded at this point in time. On the social side, Charles mentioned a couple of things already what has happened. Many, many examples we can talk about. However, one of the things we probably need to get better at to give it in a much wanted global picture for all of you. We probably give you 150 examples every single time, and we can probably give a lot more, but what is it really if I put it into a couple of bullets that make the biggest impact for the societies we work in, for the communities we work in, where we invest in. So how do we create this much more social impact framework to better understand from outside what is really that BAE is driving and why and what's the impact we are seeing? So that's one of the big agenda items we are working on. Jane talked about general diversity, talked about ethnic minorities, and we understand the challenge, and we are going with the challenge. And moving forward with it, very well received and we have, again, lots of roadmaps, we have our ambitions out and we're driving the agenda forward. In times of recession, in times of talent wars, et cetera, ever so often that is -- more than ever, it is important now to define our employee value proposition. Employee value proposition does not mean just salaries and incentives. It means a lot, a lot more than that. It means the benefits, the environment we create, the ways of working we allow people to have. The branding we have, the workplace climate we have, inclusion it's a huge, huge amount of different things that different people would like to see. So how do we make sure that we're driving the agenda forward to be open to anybody that would like to work for us and attract all the skills and capabilities we need to drive our business agenda forward? And then last but not least, we are looking at the governance pieces which are the programs we work to drive disclosure requirements. We talked about Modern Slavery, TCFD, et cetera. So we continuously drive these agenda items forward. We mature our ESG risks and mitigations. In other words, we are not just repeating the same training 5 years in a row. But every year, refresh the training, make it up to date, make it fit for purpose for the right audience at the right time to make sure people really understand why it is important and what we try to achieve with it. And then obviously, the ESG policy changes and involving our policies and embedded in everything we do, everywhere we go, make it part of the culture is quite important with a very solid assurance framework around it and data analytics and reported improvement. So this has been -- this has been a lot of work, a lot of models, a lot of ideas. So to bring this to life a little bit more, we thought we'd give you some case studies. So I'm handing over to Debbie now to start with our Phase first case study. So Debbie leads our climate and environment work, and we'll talk a little bit about what we have done in the Portsmouth Naval Base.

Thanks, Karin. So there's been a number of references to our net zero ambition and what we're trying to achieve with our carbon reduction plans. And at its core, there are 3 basic elements, which is green, the energy we bring in, use less energy and the energy we do use, use more efficiently. But want to try and bring it to life across the scale of our operations, the full breadth of that. And I'm going to start off with a particularly large example and as you can see from the slide behind me. And just to outline it before we introduce it. So going back over 10 years, there were the 2 carriers are being built up there of size. Now when they came -- when they were going to be based at Portsmouth Naval Base 10 years later, there wasn't going to be enough energy around the Portsmouth area to both provide for the ships, which have the energy requirement of a small town as well as the Portsmouth City area. So something needed to be done in order to bring the carriers home. So I would like to play a short video to bring this to life to you. [Presentation]

Hopefully, that gave you a good picture of some of the things we've been doing. There's no one lever we pull. We have to look across the whole gamut of the operations we're doing. This slide is more for reference. It's got some of the key facts we outlined in the video. So I'll just highlight a couple rather than go through each and turn. I guess one of the fun facts in there is the over 27,000 LED light bulbs on Queen Elizabeth alone and that not only provides a lower source of lighting, but also because of the reduced heat element, it also reduces the air conditioning pull across the ship. All of these things have a multiple benefit. And I think the overall point to take from that video is we manage a 40% reduction in carbon emissions while doubling the energy demand across the site. So really great news as to what can be done. Moving to the next slide. I just want to give you some other examples just a very brief overview. And there's plenty more, including more videos on our website. But to demonstrate the breadth of what we're doing. I'll just work around the slide. So up on the top right, Samlesbury, U.K. That solar farm, you can see is the size of 8 football pitches. So we've put in, in 2015 to cope with the refurbishment and upgrade of the Samlesbury site. So we're seizing any opportunity we have. It's on an old airfield. This is land of great opportunity. It now provides energy for the Typhoon program and the F-35 program that are out there, helps with the surge in demand we've had because of those programs it means that we're not increasing energy demand. We save over 500 tonnes of carbon emissions every year because of that through the generation of over 2,000 megawatts of energy just from that solar farm alone. Moving down the slide, the 4 pictures at the bottom, the 4 buildings. That's where we've taken the opportunity in our Electronic Solutions business when we're looking at new facilities to build them state-of-the-art standards, build them to the greatest levels of energy efficiency, assume we've got the metering and monitoring in there, so we can use the buildings effectively. And those other things like the LED light bulbs come out again there as well. So using every opportunity we have, it also makes them really attractive modern facilities that bring the skills and capability into that part of the business. Moving up to the top left, San Diego, California. What you see there is a dry dock called the Pride of California. It's a huge one, 55,000 tonnes, if that means anything. But when that was being put in, in order to bring it across to get it secured in the San Diego Bay, we have to look across the whole environmental piece, not just the design of the dry dock and energy efficiency within that but how it recycles the water. Obviously, a huge amount goes through that and will have to go back into the San Diego Bay and it's Cleanaway that came in, but also marine life. And I think that gets to the broader point of climate. It's not just about carbon, but it's about those broader impacts. And one of the things we will be looking at going forward is a more coherent approach to biodiversity. But many turtles were benefited from all the different measures that were put in place in implementing that dry dock. And things like marine safe paint on the whole of the underneath of the hull, which is no mean measured given the size of it. But wanted to just give you that sense as to what we're doing across things. As you can see from the bullet points that the range of levers we're pulling to deliver on our climate risk addressing the net zero program, while I've covered those that are more within at domain, Scope 1 and 2 operations, there's now going to be some more case studies, which will look particularly so technology. So with that, I'll hand over to Tom on the line to talk about electrification.

Thank you, Debbie, and hello, everyone. On our path to a cleaner energy future, both as a company and for our customers, one of the technologies we are bringing to global markets is electrification, to reduce or eventually even eliminate the use of combustion engines. We're fundamentally changing the way people move, not only making travel more efficient, but also lowering harmful emissions by applying our electric power and propulsion solutions across multiple domains. Our flagship electrification product from our Electronic Systems business is our electric power and propulsion system which is installed on more than 15,000 transit buses around the globe. By switching from traditional combustion engines to low and zero-emission technologies, we're helping to significantly lower CO2 emissions, reduce operator maintenance and improve air quality. And with decades of experience in our leadership position in the urban bus transit market, we're applying that expertise to broader market opportunities across growing land, maritime and air domains. On land, in addition to the more than 15,000 buses equipped with our systems, in May of this year, we introduced our next-generation power and propulsion technology that uses a revolutionary design intended to offer heavy-duty industrial vehicles, a faster and lower installed cost solution for their electric vehicles such as school buses, mining vehicles, sanitation and yard trucks. Moving to the maritime domain. For a number of years, we've been expanding our clean energy footprint to the waterways with electric hybrid, battery electric and hydrogen fuel cell electric propulsion systems. In San Francisco, the first U.S. hydrogen fuel cell electric propulsion system will sail on a vessel named Sea Change in the San Francisco Bay area, transporting hundreds of daily commuters using its all-electric system, which has no harmful emissions. Water is its only exhaust. And in the Air domain, we are uniquely positioned in the air mobility market to leverage our expertise in flight controls, power management and energy storage systems. I'll cover a bit more about this market in a few minutes, where we are partnering to innovate and advance hybrid and all-electric systems for a safe affordable and reliable air transport. As I mentioned on the prior slide, we have 25 years of experience as a global leader in urban transit bus systems. Transit agencies and government customers are addressing their climate agendas by fielding our hybrid near zero offerings shown on the left here and our full electric zero-emission propulsion systems shown on the right of this slide. No matter where transit operators are on their journey to zero, we have the breadth of low or zero-emission solutions to help them make progress. For example, our low and zero-emission systems are operating across Europe, London and Glasgow in the U.K. have been operating zero-emission capability hybrids and full battery electric technology is also operating on buses in Denmark, France, Germany, the Netherlands and Norway with at least 150 vehicles in Paris alone. If you visited us during the Farnborough International Air Show this past summer, you may have seen that we showcased some of the extraordinary possibilities we see for electric aircraft. This is an exciting time in this arena and we're exploring opportunities with several partners. In the Air domain, we have a unique position where we are integrating our expertise in flight controls, power conversion and energy storage to capitalize on this rapidly evolving market. We are already developing operational prototypes to demonstrate reliable performance using systems that are lighter and more compact for smaller-scale aircraft and then leveraging these standardized building blocks to scale the systems across multiple platforms. Aviation electrification is a growing market, driven by the increasing need for greener alternatives and reduced operating costs. One example of our engagement in the U.S. is our partnership with General Electric and Boeing, on the NASA electrified powertrain flight demonstration project. BAE Systems is providing the energy management components, including the energy storage system, cabling and controls to accelerate and introduce electrified aircraft propulsion technologies into the U.S. aviation fleet. Again, we're able to leverage more than 4 decades of flight controls experience and 25 years of expertise with developing hybrid electric propulsion systems in collaboration such as this one, are accelerating our progress toward these next-generation solutions. As we think about electrifying air transport, we have a short video to share about our journey and the outlook for the coming decades. [Presentation]

There is even more we're doing in the U.K. I am pleased to share with you some of the work my colleagues from the air sector are doing to explore, develop and invest in electric product capabilities, which could provide solutions for both military and civilian customers. Recognizing that our customers will need an evolving range of products and services to meet rapidly changing requirements, the teams are working with innovative partners to accelerate sustainable technology. Some of the areas being explored are the increased use of synthetics, electrification and other nonpolluting energy sources. I'll mention just a few examples. We are working with Malloy Aeronautics to develop an all-electric heavy lift uncrewed air system as a potential new solution to deliver cost-effective, sustainable, rapid response capability to military security and civilian customers. At the Farnborough Air Show this summer, we signed a memorandum of understanding with Embraer. This confirmed an intent to create a joint venture to develop a Defence variant of Eve's electrical vertical takeoff and landing vehicle. Teams from both companies will work together to explore how the aircraft designed for the urban mobility market, can provide cost-effective, sustainable and adaptable capability as a defense period. Our aim is to bring vital operational capability to our customers quickly and at a lower cost whilst also supporting environmental and sustainability goals. We also plan to collaborate with Pipastrel aircraft on the development of solutions for the defense and security market, including the application of electric aircraft. While operational capability will always be the priority in Defence, we know that solutions that are sympathetic to the environment are becoming increasingly important. This presents a fantastic opportunity to leverage our joint expertise and we have recently commenced flying our own Velis Electro to learn more about the potential of electric flight. In all of these collaborations, we are bringing our extensive expertise in the design, engineering and systems integration of military aircraft together with industry leaders in electric aircraft, to accelerate the pace of innovation, to meet our customers' ambitions as well as our own. Building on the military aspect of these aircraft programs, we're leveraging our U.S. commercial electrification know-how to support our Defence sector customers. One example in the U.S. is our integration of a hybrid electric drive system by Bradley fighting vehicle. Turning to electrification for Defence. U.S. government and Pentagon leaders are increasingly discussing their net zero objectives, and we have a role to play in supporting their progress. BAE Systems has been awarded a $32 million prototype agreement by the U.S. Army's Rapid Capabilities and Critical Technologies Office to integrate a hybrid electric drive or HED system onto Bradley. This development program is part of the Army's modernization effort for combat vehicles to demonstrate that hybrid electric systems are essential and viable for a modernized combat vehicle fleet that can respond to evolving threats and are capable of conducting multi-domain operations. It's important to note that next-generation combat vehicles must integrate emerging lethality, survivability and mobility features to maintain tactical and operational overmatch on the battlefield and hybrid electric drive technology can be instrumental in supporting these mission objectives. Working with Kinetic, our designs have completed digital engineering and extensive lab tests and the Bradley project featured on this slide is demonstrating that hybrid electric technology has matured to a point where we can modify an existing platform family to increase capabilities and acceleration, range and onboard power while also providing new capabilities like silent watch, all without impacting crew volumes. You see quotes here on this slide from Lieutenant General Neil Thurgood, noting his comments about recent demonstrations that were amazingly quiet, and emphasizing how powerful it is to have the ability to watch silently for hours at a time or move quietly into position to achieve a mission. HED architecture offers these and numerous other military capability and operational benefits. And the best part is, it is technology we have available today, thanks to our decades of investment and industry collaboration to advance hybrid electric drive technology in commercial markets. As we come to the last slide, I believe this case study demonstrates how electrification is contributing to meeting our sustainability goals, our own, those of our customers and those of our global communities. We are leveraging our know-how and collaborating with others to make significant advances across the land, maritime and air domains. Our solutions are platform-agnostic and are supporting our customers' ambitions in both the defense and commercial markets. This is more than a small adjacent opportunity for us. Electrification is a core competency that we can offer to our customers to deliver a more sustainable future for all of us. Thank you for your time today. Now I'll hand things over to Karin for the next case study.

Thank you, Tom. So we have a long and proud heritage of supporting skills and education in the U.K. And we have a whole variety of education programs that help inspiring young people from primary school age to around the age of 18 to consider a career in STEM. We're working with schools, institutions and partners all across the U.K. But we also have to educate not only the pupils, but also teachers and their parents who quite often help to make decisions. So on the second picture here, you see the school roadshow. Since 2005, we're actually running school roadshows together with the RAF and the Royal Navy. This is the U.K.'s longest STEM roadshow existing. We have about 420 schools we visit per year, and we are highly interactive. It's actually very, very interesting to see how we are engaging with almost every single child in the audience and ask them to come on stage being part of an experience to really make it hands on and very, very interactive. It helps to excite our pupils in the STEM subject. Last week was actually a great milestone because we had around 1 million pupils at the Blackburn Central High School that we educated on it, which is fantastic achievement. Coding success. This one came around and about when the pandemic hit us. And because we couldn't do the roadshows anymore, we had to find very quickly an alternative on how do we still engage with pupils and schools around the country. So we developed and launched a virtual program together again with the RAF and the Royal Navy, which basically is like a little robot kit, if you know these little boxes of kits that we can send out and we did that to schools all around the U.K., to schools where we partner with and schools where there are underprivileged neighborhoods, and also schools specifically where a majority of schools that are purely girls schools to also educate much more on this STEM subject. So these kids were helping to learn about coding itself. We send them to more than 600 schools and around 40,000 children by now, and we actually continued this year despite the fact we have the roadshows back up and running and going. So a huge, huge impact on different ages of children that we now have engaged and excited with STEM. And every time we ask for feedback, surveys, et cetera, to ask, how does it land and how is the excitement. So we do see an uptick of more and more children now, again, thankfully excited by the STEM subject, and willing to take a STEM career going forward. So it does resonate very well to the schools we go for. STEM ambassadors. Today, we have around 400 ambassadors. So these are young people in our organization who are role models that go out to the different schools we partner with and are our role models and ambassadors to, again, excite pupils to make sure we recruit bright pupils and laying the foundations and saying BAE Systems or generally the STEM arena is a great place to work, and has actually a future career that's long-lasting and exciting. Work experiences. Today, we have around 600 placements each year we are providing for young people. In previous year, it was purely in place. 2020, we obviously changed it to a virtual environment. To date, this is a hybrid experience. So we are having the opportunity due to that, that we can get people from all over the U.K. excited by it, not only those that live very close to our workplaces. It is something we would like to continue. A slightly different topic is we're helping unemployed young people with -- if you go back to the previous one, please, with something called Movement to Work. So this is a collaboration between The Prince's Trust and U.K. employers. We're offering quality work experience to those not in education, not in employment or in training. So those it's called NEET, N-E-E-T. Earlier this year, we actually received an award for Movement to Work Employer of the Year in social mobility, which we gratefully achieved. End of 2022, we will have had 800 work experiences as part of Movement to Work, which has somewhat phenomenal results given that we only started a few years ago. So going to the next slide. So most of you will have heard about our apprenticeship programs. This is a very -- very much something we are proud of. It's an award-winning, highly rated appetitive schemes that we run in the U.K. It's run for a long time. Today, we have around 3,000 apprentices in training as we speak in the U.K. with record recruitment of 1,100 this year that just started. And most likely, in 2023 onwards, it will even increase from there. So these are really record numbers of intakes. We have achieved an Ofsted outstanding rating. And for those of you that have ever been involved in achieving this, it is a lot of work with a lot of people to make sure we have the highest standard on education and skills that we can offer to get there. 95% of our apprentices complete their course. 30% of them are actually above national average, which I think speaks for itself. We also received The Princess Royal Training and National Apprenticeship award last year, which again, something we're very proud of. We have overall more than 50 apprenticeships program with over 60% of these in engineering and manufacturing and [indiscernible] banking. Last year, we also launched a sustainability apprenticeship program for the first time and it's one of a kind so far in the U.K. with Cranfield University, and we are proud to say that we're going to continue it now as well in the second year with new intake to come in March next year. Not only do we have education and skills program in the U.K., we also leverage our U.K. work and skills and education for other countries. An example would be Australia, which is on the next slide, please. What we have done, especially when we stepped up with the delivery and build of our Hunter-class frigates, we created a digital diploma for our naval shipbuilding workforce, a new digital skill. It only launched in 2019, but we already won an award in 2021. Currently, we are having an initiative launch to increase it with women participation in the course and also, again, more focused on digital skills in the Naval force. System engineering apprenticeship model has been approved at federal and at several state level in Australia, this is the model we took from the U.K., and it took a lot of frustration and discussion with Australia to make sure that the same model would actually work now in Australia as well. So we had a discussion with a couple of universities as we speak. So we are very hopeful that in the next few years, we will have system engineering apprenticeships as offering as well in Australia with universities. We started to work as well on a new software engineering degree apprentice with the University of Australia. Again, this will go live very soon, and we are in the last discussions now to get going with it. These are examples from Australia. Saudi Arabia, again, we shared our approach towards aircraft maintenance apprentices and we do the training in the Kingdom as well as in the U.K. We have built a very successful skilled partnership with SDT, our Saudi Development Training, which actually has a state-of-the-art facility just outside Riyadh, and it's really nice when you -- on a visit, I had the pleasure of recently to do there to see the excitement of the young people there and see the state-of-the-art facility and how they can learn about all these skills. We also created a project management curriculum together in partnership with the Alfaisal University in Saudi Arabia that's still running. It's very much in line with our project management apprenticeship curriculum that we're running in the U.K. In 2021, we took on 58 graduates in Kingdom, and they're part of the broader graduate program we have in place. With that, I hand over to Charles to talk us through the Tempest example.

Thank you, Karin. So pulling this together, a good example of how sustainability runs through our business is the next-generation future combat air system or Tempest as it's more commonly known. This program is continually looking to develop innovative technologies in collaboration with the supply chains, SMEs and academia to value and develop the people, deliver highly skilled jobs around many parts of the country, make a positive social and economic contribution to the community and deliver critical sovereign defense capabilities for our customers and, whilst doing all of that, reduce its environmental impact. And we have a final video to highlight some of those key messages. [Presentation]

And as we announced at Farnborough, we will be flying our first prototype within 5 years. So that program is moving at pace. So in wrapping up, the acute threat environment has clearly shown defense and security is required for a free and prosperous society. And there is a growing global democratic mandate to increase defense spending. The strength and importance of NATO and the nuclear deterrent is, in our view, both evident and critical, and defense and security underpins broader ESG objectives. And for us, our ESG agenda is focused on what we can do and positively influence. So thank you for listening, and we now have some time for questions.

I think timing wise, probably take about 10 minutes of questions in the room, and then we'll have time at the end of Dave's presentation to take some online and a few more questions, if necessary. But I want to try and stick as close to the agenda as we can. So there's a few questions in the room on that presentation, and please put your hands up, please. Charlotte, there should be a mic coming your way.

Charlotte from Barclays. I've got 3 questions, trying to keep them all to ESG. I've been right through the pack and it's perfectly possible I missed it, but I haven't seen anything on the cost plan for achieving net zero in 2030. I wondered if you could comment on that, please. The second one I also saw in the pack you talked about LTIPs -- ESG targets for costs past LTIPs for 2023. Could you comment on the weighting of those and specifically which targets? And then finally, a topic near to my heart as well is diversity. Perhaps you could just comment on recruiting at the sort of junior end is arguably easier to get the balance equal. But I wondered how your attrition rate was tracking at the sort of mid to senior levels for women, and what you're doing to mitigate that or improve it possibly?

Well, I'm just going to say on the cost side of it, a lot of work being done. But Brad, do you want to just bring us up to date on that?

Yes. We've done a sort of bottoms-up approach to the evaluation of opportunities to go to net zero across the pitch. And we've -- of course, as Charles has outlined, the first instance is really about connecting to a renewable energy supply. So the greening of our energy is, I think, a fairly passive approach, but it was -- it's a big part of how we get to net zero. There are some CapEx projects that we're looking at, retrofitted facilities across the board. You have to look in the grand scheme of things, our strategy is not to rely on offsets. But if we work today to rely on offsets, it would be a [ $20 million ] sort of circa investment. So it's not a massive undertaking, but we do see a portfolio of projects that help us get to net zero. We have evaluated those and prioritizing those. But the first instance is really about connecting to that renewable grid -- greening energy and becoming more efficient in what we do.

In terms of the LTIP weighting, well, I probably have a view, but we have to discuss and there is consultation with our shareholders at this point. I think we're probably more aiming for somewhere in that sort of 10% to 15% of the LTIP, but that's still a fair bit of conversation.

It's a work in progress, and you understand that. But I mean it's very much work in progress because we want something that's measurable and something that's meaningful that actually encourages the sort of behavior that you've seen outlined. But it's -- all committees have got their hands in this and Charles is just waiting for the outcome.

Yes.

And on -- I mean, given your last -- prior role as Head of HR, Karin, I mean, on the attrition of women, I think it -- probably your best place to comment on that.

Yes. No, happy to. So it's something we constantly measure and observe roughly as you can imagine. So right now, I'm not sure if it's good or bad news, but the gap between male attrition and female attrition is still there. So we have more men leaving and this is external retirement. So even if I take retirement now, we have women actually retaining much higher in our organization as men, which is, if you like, a positive in that sense. And we have seen attrition going down since 2018. So we lost a lot more women percentage-wise in 2018 than we do today, which is another good thing I would say, especially given recently the pandemic, where a lot of women, as we know, have been under a lot of stress and pressure. It's a stereotype, a little bit. But we do offer -- we're trying to offer much, much more flexibility than we have probably done previously and this might be the result of that as well. Yes. Well, one of the reasons, I would say, is probably the flexibility.

Charles Armitage at Citi. Just sort of 2 ethical questions which are always difficult by definition, I suppose. First of all, with defense, the rights for a country to protect itself, I think, is one of the main points of having a country or being a country. And I think that most -- sort of liberal democracies, most people don't see any problems about exporting to them. But what about exporting to nonliberal democracies? How do you think about that? And I guess the follow-on is, is the democratic -- the defense industry is the most regulated export there are, and that's determined by liberal democracies because we happen to live in supposedly one. Is that enough? Or should more -- or are there other considerations or higher bars than that?

Well, Charles, let me pick up at the high level, really. I mean the first port of call, obviously, is, as far as we are concerned, we only work with countries that are actually allies of the British government or the American government. And therefore, there's a sort of package of these are the areas that contain our area of operation, number one. There is a degree of reliance on what and which governments believe are which allies when we look across the world. So that's the first port of call. I think the second port of call is when you work with countries which do not have precisely the sort of democratic principles that we all aspire to and indeed some of us enjoy. The belief that you have to have is that first, fundamentally, it's the right thing do. But secondly, you can continue to influence positive behavior in those countries in the way you operate within them. And in our own case, we do see the effect of that in parts of the world, Saudi Arabia being the obvious one, where the whole country is moving to a much more liberal environment than one would have believed possibly even 5 years ago. I went, I don't know, 3 or 4 months ago for the first time since COVID, change in that society is staggering, although good. So we are part of that in the way we operate. We encourage very much diversity in the society. We demonstrate it. We work with government in showing how functionally sound our principle is. I think as a result of that, it's positive influence. So government, one; our own judgment, two; and the way we operate, three, to help society develop in the way that we all believe is ultimately the good destination. So that was point 1. Point 2?

I guess you mostly answered it. The question is some countries you operate in, such as Saudi, how do you balance their cultural sensitivities such views on women with your...

I just want to make sure I pick that up. So I hope that's -- it's a broad answer, but it is the one we live by, and as a Board are comfortable with. I mean as I made clear in my own commentary, there is a judgment call here that Board members have to make. And we all need to sleep at night being comfortable that we are doing the right thing because it's the right thing to do. And that's the other part of actually good governance.

Let's have a coffee. Sorry, Chloe. Just in time.

Sorry, one last one on my end. Chloe Lemarie from Jefferies. I just wanted to come back on the electrification of aviation topic. Could you explain to us exactly which technology you want to master in-house and where you would be more comfortable partnering with other companies on this specific topic?

Yes. I mean Tom can come in, but I'm happy to go as well and maybe, Tom, you come in after. But I mean our view is that we have some unique capabilities, as we tried to highlight on the slide there of things like flight management, engine controls, and power systems and power management. And our view right now is rather than try and pick the winners, many of these -- we're talking with the EV top market, there's a lot of SPAC and VC money going into it that our unique capabilities are offering a range of subsystems that -- and we also know how to get these things flight-certified given that we produce the flight controls for almost every Boeing platform, for example. So provide a range of capabilities that others can, in a sense, pick and choose a modular capability from. And we think that, that is a better proven strategy that plays to our strength longer term. Now that's not to say with companies like Embraer and Eve that we may not pick a couple that we're going to choose to work with for defense capabilities, but we think that we're very well positioned. I mean this is -- with all of you in the audience, this is not a market that's going to immediately appear in the next 5 years, but the 5 years after that and certainly into the 2030s, we think it's going to be a significant market, and we are well placed to benefit from it. Tom, is there anything that I've missed there, if you can comment on the line?

No, very thorough, Charles.

Okay. Sorry, Tom, I think you just dropped out there. Is there anything you want to add?