Melrose Industries PLC (MRO) Earnings Call Transcript & Summary

Hello, everyone. Welcome to Melrose Results for the first half of 2024. It's great to see so many of you here with us in London, particularly on what I know is a very busy day for results in our sector. I know we've also got lots of other people joining on the webcast. So good morning, good afternoon, wherever you are in the world, and thanks for joining us. Now these are actually our second set of results as an aerospace-focused Melrose, and it's been certainly a busy period. We've delivered a strong first half performance, which we'll go through in a few moments. But in addition to that, today, we're announcing a new growth strategy and an associated capital allocation framework for the future. So look, let's get straight into the highlights. As I've said, it was a strong first half performance and indeed ahead of expectations with a north of 60% improvement in operating profit and margin expansion of 450 basis points versus the prior year. So clearly, a strong performance and it's been powered by the Engines outperformance in the first half with very strong margins at 29%, powered by, in particular, the aftermarket there. And we've also made good progress in Structures, objectively in terms of margin expansion but also with the many business improvement in projects we have underway there to improve the quality of earnings. Now this performance in the first half gives us real confidence about the full year guidance for 2024, and we're confident in reaffirming that today but also, clearly, it's derisked our targets for 2025 as well. So really positive momentum in the business. The other key message really is about demand and there's lots of talk isn't there in the market at the moment about supply chain issues. But what we must not lose sight of the fact is that demand is strong, it's there and it's underpinned by long order backlogs on the OEM side and clearly reading through also in terms of strong demand for the aftermarket as older Engines fly longer. And clearly, Melrose is exposed to both of those things. Beyond the civil side, we've also got defense with a strong demand there, fueled by the unfortunate challenges geopolitically, but it does read through in terms of a positive defense demand for us and our platforms going forward from here. Now that long-term demand really is the first underpinning of a clear growth strategy. And the growth strategy we're talking about here today, just to be clear goes well beyond the 2025 time frame that we've talked about up until now. Now the first focus for us as a business is to profitably capture the market opportunity that we have in front of us on our established positions with that broad exposure across all the major aircraft that are out there and as OE ramps up and the aftermarket is strong, we capture that and deliver profitable growth and cash from that and that is the primary focus. But beyond that, we have some fantastic opportunities to expand Melrose's business both in terms of its technology but also in terms of the platforms that we sit on. And we're going after that selectively, particularly in Engines where returns are good. And furthermore, in terms of growth, we, of course, need to talk about cash. And that cash mountain is coming ever closer with the RRSPs contributing GBP 5.7 billion in NPV terms in the decades to come. Now talking of cash, we'll go through in a bit of detail our new capital allocation approach, but it's fairly straightforward. The primary use of our cash is to make sure we can deliver against the growth opportunities that we have, both in terms of our established platforms with the capacity ramp-up but also in terms of selective investment in those growth opportunities. Beyond that, we have a commitment and we have the confidence in the balance sheet to continue to generate cash and return to shareholders in the form of both a growing annual dividend but also ongoing share buybacks while keeping our leverage between 1.5x and 2x. Now since the demerger, we've actually given back in various forms, GBP 750 million of cash to our shareholders and we're announcing today a further GBP 250 million buyback program that takes us out to March 2026. Now the final piece here, as I close this opening piece, if you like, is around our EPS growth. Now our EPS growth is clearly strong. We're up 65% in the first half, and it's going to be very strong next year. But looking beyond that, for many, many years to come, we can step forward with confidence and say that we see a path towards double-digit EPS growth and there are a few companies that can do that on an ongoing basis. And the other point about that EPS growth is it's coming from all parts of our business. And that seems like a good point to hand over to Matthew to talk about specifically our first half performance.

Great. Thanks, Peter, and good afternoon, everyone. Great to see you all here today and we're hoping that we've saved the very best until last on what's been a very busy day for you. So I'm going to take you through the key highlights for the first 6 months of the year. As you can see on Slide 6, the business has delivered a very strong performance in the first half, and this is ahead of our expectations. The group has generated 12% revenue growth after excluding sales from disposed businesses with the Engines division driving this strong performance. Group operating profit is up by around 60% to GBP 247 million as a result of this revenue growth and also the benefit of our business improvement programs reading through. At an aerospace level, margins have increased by 420 basis points, reaching 14.9% for the half, with both divisions contributing to the margin improvement. PLC costs are slightly better than guidance, too. Now logically, EPS improves up 65% to 11.9p. So overall, a strong set of results, continuing our relentless progress towards our 2025 targets and beyond. So turning to Slide 7. Now I have got a slide for each division coming up. But at a headline level, you can see that both divisions delivered revenue growth. The overall growth rate of 12% is driven by the strong aftermarket performance of the Engines business, and both divisions also delivered substantial margin growth with Engines reaching 29.4%, up 490 basis points and Structures almost doubling margins to 4.7%, up 220 basis points. And these improvements demonstrate the continued positive effect of operational and commercial improvement and restructuring activity. So let's dig a little deeper into the drivers behind each division, turning to Engines on Slide 8. Revenue growth was strong in the first half despite the continued operational challenges from the supply chain. And aftermarket sales were very strong in the first half, ahead of our expectations at 31% growth. A strong aftermarket is reflective of recent sector performance and the Engines business has outperformed the industry as a result of strong growth in our new Engines repair business as well as strong growth in defense aftermarket, which is specific to our business. Operating profit increased by nearly half and margins increased to 29.4%, up 490 basis points. And this improvement was driven by the mix effect of the more lucrative aftermarket business as well as the impact of business improvement in this division, which is now largely complete. Margins have also benefited from increased volumes working through our factories and better productivity on this throughput. So a strong performance for Engines, which is expected to continue into the second half. Turning to Structures on Slide 9. So the revenue numbers are slightly more complicated this half. You'll recall that we were expecting sales to be flat in Structures as a result of exiting certain business and also destocking at a major customer. Now we've experienced that, but also disposed of 3 Structures businesses during the half, which is great news, and I'll come back to this later. At a headline level, growth was 1%. After excluding the revenue from disposed businesses, revenue growth was 6%, largely in line with our expectations for the half, and this is despite supply chain issues that have persisted during the period. And the growth has been driven by stronger performance from business jets, up 15% as well as the recovery of widebody, up 9%. Defense continues to progress with repricing its contracts, and we are very much on track to deliver our target of 85% of contracts being sustainably priced by the end of 2025. And operating profits grew by 90% in the period and margins grew by 220 basis points to 4.7%. And as such, you can see the impact of pricing improvements and business improvement initiatives dropping through, and this is a good performance. And as we discussed at the year-end, since the Structures business is second half weighted, this will increase again to the end of the year. So positive progress in Structures with revenue, profit and margins all growing in the half. So having talked about the divisions, let's talk about the numbers below operating profit on Slide 10. As ever, we put the details of our adjustments to operating profit in the appendix. Net interest costs were GBP 43 million, which primarily represents interest on our bank loans at 5.6%, and this is better than our plan. And I'm pleased to say that we've been supported by our banks to extend all of our facilities that were due to mature in April 2026. And these were amended to include two 1-year extension options at the company's option. In addition, the U.S. portion of these facilities was increased by $400 million to provide further headroom. The adjusted ETR for the half was 21.6%, and we maintain our ETR guidance for the year at around 21%. Diluted EPS grew by 65% to 11.9p per share. And finally, an interim dividend of 2p per share has been declared, representing a 33% increase versus last year's interim dividend. Having covered off the financial results for the period, I wanted to spend a couple of minutes on Slide 11, showing you some key highlights across the group in the half. And we pulled out a small selection of the numerous commercial successes that the business has won during the half with an example from each part of the business. In Engines, we're celebrating a number of milestones in our repair solutions business. We've added 30 new customers in the first 6 months. We've added leap fan blade repair capability to our portfolio and have also delivered our 10,000th part from our new Malaysian facility. In Civil, we've signed a long-term contract with Airbus to deliver the full A220 wiring package within our industry-leading electrical wiring business. And then in Defense, we're extremely pleased to have been asked to build a new state-of-the-art production line at our facility in Garden Grove to double the capacity for F-35 canopies. Now this will be funded by our customer and is scheduled for completion in 2027. From an operational perspective, we continue to focus on safety and quality with zero lost time accidents in the half, which is an exceptional achievement that we aspire to continue and have reduced quality issues that reached the customer by 1/3. Also, our reinvigorated and simplified lean approach called Brilliant Basics has helped improve productivity by 2 percentage points. Finally, our restructuring and business improvement process continues to progress with the sale of 3 noncore businesses in H1 and the reduction of the manufacturing footprint from 35 sites to 31 sites. On this final point, I wanted to cover the impact of these 3 disposals. The overall net impact of the disposals is a loss of GBP 16 million. The fuel Systems and Orangeburg sales generated a total profit of GBP 49 million, and these businesses are noncore and relatively small. The sale of St. Louis business generated a loss of GBP 65 million, and this reflects handing over the business as a going concern for a token price as well as a total of GBP 39 million still to be paid to the acquirer over the next 2 years. In addition to this, the sale of the St. Louis business resulted in the need to bring an existing U.S. multi-employer pension liability onto the balance sheet valued at GBP 21 million. Now there's no additional cash impact arising from this recognition but it does add to our balance sheet liabilities. And you'll find some more details on this in the appendices. Now while we're talking about operational improvement, it's worth recapping on Slide 12, how we're progressing towards our 2025 margin targets. Looking at Engines first. We said that we'd improve margins from 22% to 28%. And 4% of that increase is coming from the RRSPs and 1% coming from both growth initiatives and business improvements. We discussed at the full year results and again today that the aftermarket is very strong, and this has been driving margins forward. As such, we're delivering ahead of plan. Our parts repair growth initiative is driving forward with the new facilities coming online and an increase in the breadth of our offering and this area is very much on track. And finally, for Engines, business improvement is largely complete and we're seeing productivity and cost improvements reading through ahead of plan. And this gives us a great deal of confidence in this division, breaking through the 28% margin level. From a Structures' perspective, margins were targeted to increase from 3% in 2023 to 9% in 2025. And half of the 6% improvement was expected to be driven by the civil ramp-up with 2% coming from defense repricing and 1% from business improvements. Overall, we're on track with all of our initiatives in this division. The civil ramp-up from 2023 to date has met expectations overall. However, it's clear from recent announcements that the industry is facing operational and supply chain challenges and the ramp-up is under scrutiny. And I'll talk about our guidance in this respect in a couple of slides. Defense repricing is on track, as noted previously, and business improvements are progressing well. U.S. restructuring is largely complete, and the final major project is the integration of 3 businesses into one site in the Netherlands, which we expect to be completed by the end of the year. So overall, positive progress in Structures and our half year margin and guidance reflects this. Moving on to cash flow on Slide 13. The group generated GBP 54 million of operating cash flow before CapEx, 70% ahead of last year. And this included working capital being impacted by revenue growth, supply chain effect on inventory as well as the GTF powder metallurgy costs starting to come through. As expected and guided, CapEx is now starting to increase as we start to prepare for the ramp-up and invest in growth initiatives. Also, as expected, restructuring costs have increased to GBP 85 million, reflecting payments for activities that were accrued last year as guided. As an aside and on this point, at March's result, I guided to around GBP 125 million of restructuring cash costs. And this cash cost is expected to be around GBP 15 million higher than this due to some additional restructuring costs in our Netherlands site consolidation as well as the resolution of certain legacy issues. Now coming back to cash. This leaves a free cash outflow of GBP 145 million slightly above last year, but in line with our expectations since our cash flow is seasonally weighted to the second half. The share buyback program is progressing well with GBP 246 million spent this year alongside ordinary dividends, taking us up to a total of GBP 339 million spent in total, and we remain committed to completing our GBP 500 million share buyback program by the end of September. Net debt at GBP 976 million is better than expectations. Leverage has increased from 1.1x to 1.7x net debt to EBITDA as a result of our share buyback, and it's important to say that around GBP 200 million of tax and national insurance impact of net settling for 2020 LTIP has been paid in July. And our guidance for the full year leverage remains at less than 2x net debt to EBITDA. So let's turn then to guidance on Slide 14. As discussed, the half year performance was strong and gives us confidence that we're on track to achieve our 2024 guidance. Engines continue to perform strongly with the aftermarket more than offsetting the challenges to the OE business. In structures, we continue to grow whilst continuing to work through customer destocking. Now clearly, changes to customer production rates could give some challenges in the second half, but we remain comfortable that the business will contain the effect of this as well as the impact of disposals within the range of our current guidance. Looking forward to 2025, given the challenges in both divisions with respect to OE Engine sales and the civil volume ramp-up plus disposals, this means we've tempered our revenue guidance by around GBP 100 million in each division. And this changes our revenue guidance to GBP 3.8 billion. However, we remain fully committed and confident in each division's ability to hit its operating profit target of GBP 500 million for Engines and GBP 200 million for Structures. And as a result, we're pleased to confirm that the group margin will be greater than 18% in 2025. To close from my side, we've had a strong first half, we're maintaining our guidance for 2024 despite the operational challenges and we're increasing our margin target for 2025 to greater than 18%. So with that, let me hand back to Peter.

Thanks, Matthew. And now let's turn to growth and longer-term growth with our strategy to deliver in many years to come, profitable growth and cash generation. Now this all starts clearly with the market, which is strong. We know with record order backlogs and also a very strong aftermarket. And that demand is structural. We are sat relative to that with great positions in terms of our technology, embedded onto the world's leading aircraft and with opportunities to extend that. And as we think about the growth, there's really 3 waves to it. The first is what is front and center, and what you're hearing from us and have heard, which is around capturing the opportunity profitably from the established positions as the production ramps up and as the aftermarket reads through. That's the first priority and is really embedded in terms of much of the guidance that we've given, and we'll continue to give. And it's not only just meeting that ramp-up, but it's doing so in a way that is productive as I say, driving operational improvements and making sure we're focused in the right areas. The most powerful lever here is the RRSPs. And I'm going to talk a little bit more about that. But in addition to that, we clearly have our growing repair business. Matthew has given you some highlights from that and of course, the ongoing ramp-ups as they come through. And let's be clear, they are coming through. Beyond that, those established positions, we've got the opportunity to expand our business and some really exciting opportunities they are, particularly, I have to say, in Engines where returns are very strong. And most notably on additive fabrication, again, we'll spend a few moments on that in a second. But beyond that, we are expanding our business in China to the indigenous market there with our joint venture with COMAC and expanding the business there. And also our capabilities, these design capabilities are hugely in demand in the eVTOL to market and also with the developing drone and unmanned air vehicle market in defense. And there's a lot of opportunities out there. Typically, we're playing those capital light, but particularly in Engines, though, specifically in Engines, I should say, we are deploying capital because we've got some exciting opportunities to grow and unique opportunities to grow there. Now beyond those, we also will continue to position this business for the longer term and to favorably position for the next generation of aircraft. And that includes, of course, the next generation of single-aisle Engines, but also the airframes when those read through, the 6th gen fighters where we have positions there. And of course, longer term, hydrogen flight, where we have a number of programs all funded in part by the government and in partnership also with other industry players. So 3 waves of growth. I've talked about hydrogen as part of the sort of longer-term piece on sustainability. But underpinning all of this is actually running the business in a way that minimizes its impact on the environment, indeed has been reinforced by our recent SBTI targets. So growth all starts with the market, of course. And as I think we're all aware, demand is strong. On the civil side, we've got flight hours increasing, production which is gated at the moment or paced, should I say, by supply chain issues, but record order backlogs and a strong aftermarket. The civil story, I think, is pretty clear. And on the defense side, geopolitically, we're seeing the drivers on governments having to increase spending as a proportion of GDP, particularly in NATO and in Europe, where we're very well placed. So the demand is there, now the pace of the ramp-up clearly can be debated, but I think it is clear to see that demand is there and will underpin this business and Melrose for many years to come. Our position relative to that is we're focused. We're focused where we can both deliver but also where we can capture most value through our proprietary design. Our business model is about embedding our technology into our customers at the OEMs aircraft. We do that on today's aircraft, and we're also doing it on tomorrow's aircraft. And so we're positioning ourselves as design to spec, designed to build a business. And what that does is it gives you a life of program position, largely, but also, of course, increases the quality of earnings. And this has been the shift that we've been on for the last few years. And again, we've talked about our disposals that don't fit within this framework. Our ability to do this is underpinned by our position in the value chain, which is unique both on the Engines' side and on the Structures side. With Engines we're one of really only a small handful of global partners who have the technology and the longevity to be RRSP partners. And then on the structure side of the business, relative to a very concentrated OEM customer base we're one of the few super Tier 1 companies that can lean in with design to support against the backdrop of a very fragmented supply chain. So overall, we'd like to think like a peer, we act as a partner and deliver as a trusted supplier, but we are deeply embedded with our technology with our customers to make sure that the quality of earnings is there and the growth will read through. So I'm now going to deep dive on a couple of areas around Engines, starting with one of the first wave of things, which is the RRSPs. Now RRSPs, we have a unique portfolio of these life of program contracts, 19 Engines in total. They are coming into the aftermarket sweet spot, if you will, and the aftermarket is particularly favorable at the moment due to scope, price and volume. Specifically and uniquely what GKN does here is it makes structural components for these Engines. So what it means is as an engine gets shipped, the majority of our work is done. And so then the entitlement for the aftermarket profit reads through very nicely in terms of profitability for us and leads to decades long cash, which I'll come back to. So just a moment on this portfolio because it is unique and it's incredibly important to the quality of our business and its earnings, RRSPs are life of program contracts that last for 60 years, and we have 19 RRSPs currently. And if I start on the right-hand side of this chart, with those that are deeply in the aftermarket phase, generating profit and cash and we have our unique position here is that on the legacy narrowbody Engines, which is the CFM56 and the V2500, we're the only RRSP partner on both of those Engines. Similarly, on the widebody side, we have RRSP partnerships on the Gen X and the Rolls-Royce Trent XWB. So collectively, those mature Engines, powering in total, actually around 70% of the world's flights, we have an RRSP exposure to. We should touch on the Engines in the middle, the 2 Engines that are not currently cash positive, the GTF Engines, and to be clear, these Engines were always projected not to be cash positive until 2028, and that's still on track. Clearly, the well-publicized issues around the powder metallurgy and manufacturing issues mean that the cash drag is more than was originally expected. But we're confident that, a, that fleet management plan is on track and fully in line with what we've guided to previously. But perhaps more importantly than that, the GTF is fundamentally a good engine with architecture, which is advantaged, particularly around fuel consumption, which bodes well for the long backlog of A320s that are linked to long-range flights, the 321XLR. So the GTF on track and fundamentally a good engine. And then if you go further to the left here, you can see 2 Engines out there, which are the 2 next-generation single-aisle Engines, not full RRSPs yet, let's be clear, they're development programs. But GKN is the only player that has a position on both of those Engines, the CFM Rise, the open fan rotor and the next generation of GTF. So overall, the portfolio is broad in terms of how it sits relative to the market, but also includes deep relationships with all of the engine OEMs. So let's turn now to talk about how the cash reads through. Now you've seen this cash mountain of many of you before. And indeed, it stays consistent with a net present value worth around GBP 5.7 billion discounted to today. And what's important here is that some of these RRSP contracts, the cash does trail the profit. And the reason for that is, as I've described, the majority of our work is done as an engine gets shipped. And therefore, the accounting requires us to recognize some of the revenue and profit from the aftermarket when we ship that engine. We're extremely conservative about that in terms of our assumptions there, but it does mean that cash lags profit. What is clear is that the cash is coming through and it's starting to come through now. And that cash forecast is based on a range of inputs which are objective and based, frankly, on customer and industry forecast. And these are then, there's 4 of them at the highest level. The first is around the fleet size, the number of Engines and clearly, that's increasing as OEM production does and retirements are held back. Flight hours, with travel demand going up especially in developed markets in the years ahead. Shop visits also increasing as older Engines are flying longer and expanding MRO frequency. And this aftermarket profitability, which is the most powerful thing for our economics overall is particularly favorable because of the increased scope of what's happening in the aftermarket, but also because of a favorable pricing dynamic, both on shop visits and also on spares. So all the trends here are positive and feed into that cash mountain. And just to be clear, that the absolute value of cash coming from this current portfolio of RRSPs is expected to increase in absolute terms every year out to the mid-2050s. So overall, RRSPs are a great foundation for our business growth and for cash generation. And as I've described already, we're also investing in new opportunities, and I'm going to just dive deep on one which is unsurprisingly around Engines, and it's around our additive fabrication and where the majority of our capital is going. So let me be clear about this. This is a unique opportunity that GKN has with huge customer demand from all the engine OEMs. What is it? Well what we do at GKN is we make structural components at the heart of all the world's leading Engines. And additive fabrication is a new way of making those parts through additive technology. And we do it in 2 ways. The first thing is we can do, we can actually print the whole structural component. So using laser wire deposition, it's quite a mouthful. But what it essentially does is it prints relatively swiftly in additive terms, near final form structural components. The other thing we can do is we can build those structural components from smaller components and effectively weld them together so that you end up with a much broader way in which you can build these things without being reliant on particularly large forgings and castings. Why is it valuable? Well, that's the first thing. It's an alternative supply where there are constraints at the moment. The second is it's lower cost, high quality, you can design in new features. And critically, it's also more sustainable because you have less machining and less waste to create these products. The best example of why this is great technology, is because it was the additive fabrication capabilities that we have which was the heart of the GE deal, the $5 billion deal that we announced recently because GE want to get this technology onto their Engines starting with the Gen X. And we do have leadership here. We've been at it for a while. This is not a start-up opportunity. We've been at it for about 20 years and where we are through the research phase and applying this firstly into production applications, but then into the customer applications. We're now into a certification phase. So we're spending money on building factories to produce parts that are already certified and more will come through the pipe. But again, what is our capability here and why the OEM is looking to us? The first is that structural components of what we do. We've been doing it for 80 years. The second thing is we've been after additive fabrication and advanced welding for the last 20 years. The third is that we have system insight here. This is not easy to do. And you can imagine the amount of data, thousands of parameters over thousands of applications here. And perhaps, again, most importantly, we have parts that are flying on Engines today that are made through additive fabrication, and we're the only company in the world that are doing that currently. So that's where we are, it's that unique capability, if you like, like a unique combination of those factors that is the secret sauce here. Now we are investing in this area as we've said, with good returns and perhaps that's a good time to hand back to Matthew to talk about both sources and uses of cash.

Great. Thanks, Peter. So I'm going to talk about our capital allocation policy. But before doing that, I think it is worth looking at, as you say, the source of future cash that we'll be looking to allocate. As we conclude our major business improvement programs, we expect our Structures business and the non-RRSP business in Engines to move towards a more normal 80% to 85% cash conversion. As we continue to grow, working capital will still be required, but we expect to contain this in line with revenue growth. Clearly, there may be the opportunity to optimize inventory as the supply chain issues ease. But at this stage, it's difficult to predict when that will happen, but we will have ongoing free cash flow growth. On top of that, we know that we have the cash mountain coming into view. And as Peter said previously, we have a unique portfolio of RRSP contracts, which give us contractual entitlement to the most lucrative aftermarket cash flows. 17 of our 19 RRSPs are cash generative with the GTF being the exception, which will improve over the coming years. Now we know that the cost of rectifying the powder metal issues is assumed to be around GBP 200 million over the next 3 years. But even without this, the program is still in the final phase of development and will become positive in 2028. Also, the cash from our RRSP portfolio will increase each year going forward until the 2050s. Now this cash mountain is valued at GBP 5.7 billion, net present value, which alongside the ongoing operational cash flow, will provide a substantial source of cash for decades. So with that as context, we now set out our capital allocation policy for the business in line with the business strategy. As we said, the company is an organic growth story with a significant ramp-up in volume required to meet customer demand and orders. We'll invest 1x to 1.2x CapEx to depreciation to maintain the business and position it to deliver the ramp up. And this is what we told you at the Capital Markets Day last year. The new news, however, is that we will target expansion opportunities to leverage our exciting proprietary technology. To this end, over and above the 1x to 1.2x of CapEx we've guided to, we expect to spend around GBP 300 million in additional investment over the next 5 years, and the vast majority of this will be an additive fabrication. Now this is a long-term program and will yield IRR greater than 20%. So it's a very good use of shareholder capital. And I'd reiterate that this is to deliver organic growth and we're not planning any significant M&A in the short term. There is no change to what we said there. So then looking at our balance sheet, we intend to take a disciplined approach to leverage. We intend to maintain leverage between 1.5x to 2x net debt to EBITDA. And this level is in line with the sector, and we also believe that it's right to target investment-grade metrics over time. The range in our leverage policy allows us to have flexibility to exploit additional opportunities that may arise. Now using this framework, we'll then look to return value to shareholders via an ordinary dividend, and we're committed to growing the dividend. And as you've seen, we've announced a dividend of 2p per share, which is up 33% on last year. And finally, we will deliver ongoing buybacks that are aligned with our free cash flow and our leverage targets. This year, we will complete the GBP 500 million buyback in September. And to date, we're announcing a further GBP 250 million buyback continuing through to March 2026, which aligns us to our annual results date. And from that point, we'll announce future buybacks with the annual results as appropriate. So to conclude, we believe that the business will generate growing cash from 2025 onwards, and we'll look to use this cash in a disciplined way. We're excited by the substantial organic investment opportunities ahead of us, particularly in additive fabrication, and we'll target investment in this area to drive growth and returns. We'll maintain discipline over our leverage, targeting investment-grade metrics over time, and we will reward shareholders with ordinary dividends and annual share buybacks that align with our framework, sustaining long-term success and maximizing shareholder returns. And with that, I'll hand back to Peter.

Thanks, Matthew. And putting this all together, we believe there's a clear and compelling equity case, very much built on what we've been talking about together for the last 18 months or so. And it's based fundamentally on an attractive growing market, a unique position on all the world's platforms, but particularly leading platforms, but in particular, this exposure to the Engines aftermarket and we can see a path to continued and sustained profit growth, well on track as we described and ongoing returns for our shareholders.