QinetiQ Group plc (QQ) Earnings Call Transcript & Summary

Good afternoon, and welcome to our seminar delivering our global ambition. It's great to see so many of you here in person this lovely venue in London, and we are also joined online by our colleagues on the webcast. I hope you enjoy seeing some of our products and meeting some of the team, and there will be time to do so afterwards as well. For those of you that I haven't met, my name is John Haworth. I'm Head of Investor Relations for QinetiQ. Just a few bits of logistics before we get started. We have a full presentation today with a number of speakers, as you can see. We will stop for questions at the end of each of the main sections of the presentation and a final round of plenary Q&A at the end of the seminar. We will start with questions in the room here first, followed by questions from those online. For those in the room, can you please use the microphone provided. For those of you watching online, in order to ask a question, please, can you dial in using the phone line provided. Please can you introduce yourself and the company name. We will now play a video, after which you'll hear from our Chief Executive, Steve Wadey. Thank you. [Presentation]

[Audio Gap] seminar today, really pleased to share that we delivered strong operational performance and expect our full year [Audio Gap] long-term global ambition with a specific focus on Australia and the U.S. because they represent more than 50% of our future growth. Let me start by giving you the headlines from today's seminar. The Defense & Security context is heightening offerings. We have increased the scale of our ambition to grow the company to more than GBP 2.3 billion of revenue over the next 5 years. Our strategy is increasingly relevant to respond to businesses. And finally, we have a clear financial strategy and compelling investment case. By building our company globally [Audio Gap]. I'll provide a short introduction, we'll then go through our heightened global [Audio Gap] in Australia and the U.S. and [Audio Gap] So next [Audio Gap] recent world events have reinforced the long-term needs of our customers, requiring capabilities utilizing differentiated technology test and training solutions [Audio Gap] solutions in high priority growth segments. The major focus for growth is in our 3 home countries: The United Kingdom, the United States and Australia, where we are pursuing similar opportunities to support the shared defense and security mission of those customers. The formation of the AUKUS alliance between these nations reinforces our multi-domestic strategy, and makes us increasingly relevant. Building on our track record of growing the company by more than 75% in the last 6 years, we have chosen to increase the scale of ambition to grow by another 75% over the next 5 years to more than GBP 2.3 billion of revenue. Within our latest strategic business plan, we see 30% of our future growth coming from the U.K. market. And this plan is enabled by our strong balance sheet and continued investment in our global strategy through both organic opportunities and strategy-led acquisitions. Now our strategy is increasingly relevant and provides focus for our business decisions and our investment choices. We're a company with a clear purpose, vision and customer value proposition called mission-led innovation, cocreating cost-effective solutions to meet our customers' needs at pace as reinforced by the current conflict in Ukraine. Our strategy is a multi-domestic strategy with a clear focus on the where, the what and the how we deliver value for our customers. Where: Building an integrated defense and security company through global leverage of our unique capabilities into each of those home countries. What: Sharpening our focus on co-creating and delivering distinctive offerings that add value to our customers, differentiated from our competitors and How: Applying disruptive innovation that accelerate solutions for our customers with greater agility and pace. Let me bring this to life with an example of how our multi-domestic strategy is creating value across the U.K., U.S. and Australia. In the U.K., we committed GBP 400 million of capital investment to modernize the key test and evaluation capabilities of the long-term partner agreement, which has driven growth from both our U.K. customers and international customer usage. Our Australian business has leveraged this position to establish sovereign test and evaluation capabilities through the design, build and operation of a new flight test range in Queensland. Based on the success -- this success and their growing customer relationship, the team is now investing in building sovereign capability in robotics and autonomous systems by leveraging our strength in the U.S. to drive even further growth. Underpinning this strategy, we take our ESG responsibility seriously, with one example being the launch of our Net Zero Plan at the end of March. We also continue to focus on developing a culture, which provides a safe and secure environment to enable our people to thrive and deliver benefit for all our stakeholders. To successfully deliver the next phase of sustainable profitable growth, I've recently augmented the QinetiQ leadership team to ensure that we have all the necessary skills and experience in each of our key markets through a combination of internal promotions and significant external hires. Whilst today's focus is on growth in Australia and the U.S., we have all the other members of the team here to answer any questions that you may have, either during or after the seminar. We have Neville Salkeld, our Chief Strategy Officer, and he'll be pleased to answer any questions on the next phase of growth. We have Mike Sewart, our Chief Technology Officer, on advanced technology and disruptive innovation. Vicky Weise, our Chief Enterprise Services Officer, on transformation. And then Nic Anderson and James Willis, our Chief Execs for U.K. Defense and Intelligence on our U.K. customer relationship and growth strategy. So now let me introduce the 3 main speakers for today who will be leading the presentations. First, we have Sam Lewis, who joined QinetiQ in June 2021. Sam is the Chief Growth Officer for the group, driving our pipeline of new business opportunities, including leadership of our campaigns globally. We then have Greg Barsby, who joined QinetiQ in 2014. Greg is the Managing Director of our Australian business, which under his leadership has more than tripled its size over the last 7 years. And we also have Shawn Purvis, who joined QinetiQ in February this year. Shawn previously was a member of the executive leadership team and Corporate Vice President at Northrop Grumman. As President and CEO of our U.S. business, Shawn has a mandate to deliver our short-term operational performance and realize our long-term ambition to more than double the size of the business. And then finally, Carol Borg, who joined QinetiQ at the end of last year from Lightsource BP. Carol is the group CFO and also leads our overall group-wide ESG agenda. And Carol will lead us through our financial strategy at the end of the presentation. This is a really excellent team to talk to you today about delivering our global ambition. I hope you enjoy the question and look forward to some good questions as we go through. So with that, I'll hand over to Sam to say a few words to introduce himself and talk about the global market opportunity. Sam?

Yes. Thank you very much, Steve. I appreciate the warm welcome and really grateful to be here. As Steve mentioned, I joined QinetiQ almost a year ago. And I joined because of these distinctive offerings and the path at which we take to go to market and deliver those distinctive offerings. And that remains true today than it was a year ago, and that's very exciting for me. By way of background, I served in the United States Navy. I've spent most of my career in defense and intelligence. I've worked in global companies with U.S. subsidiaries that are security clearance. I've got about a decade of experience in that, which I think makes me uniquely qualified to work with Shawn and her role as the leader of the U.S. business. And I recently served in global P&L role as the CEO and also then as a small and medium enterprise CEO in the autonomy sector. So I bring all those things to bear here at QinetiQ. And fortunately, they're all relevant because we do have such a broad breadth of capability and distinctive offerings that we'll spend a little bit more time talking about. If we go on to the charts. The first one really aspires to reinforce that our pathway to deliver the growth ambition for our company is really underpinned by the significant addressable market. After 6 years of consistent and solid growth, the company has taken those lessons learned and is reprioritizing and doubling down, if you will, on our 3 home countries. And Steve mentioned the AUKUS relationship, Australia, U.K. and U.S. We have priority countries as well, but we are focusing most of our efforts from a growth perspective on those 3 home countries. And the reason is, is because those countries have shared values. They have a common set of challenges and threats in the environment. And those 3 countries, in particular, have worked closely to cohere their defense strategies. And what that creates for a company like QinetiQ is an opportunity to serve each of those countries from our distinctive offerings and approach them very similarly and take the efficiency that is gained out of that. One example that Steve mentioned, of course, was AUKUS. And AUKUS is a really unique and new partnership. Some people are calling it a radically different cooperation agreement. And although it's perhaps not radically different, it really aspires to go beyond ensuring that militaries are interoperable or that one country can sell a bit of kit in another country. It really goes to cohere the defense strategies and then thereby maximize the interleaving defense spend that supports those capabilities to deliver more timely, right? We're in an environment where the threat is rapidly changing, more timely and joined up capabilities. And that serving as a tailwind for our growth and underpinning our multi-domestic strategy, is giving us an opportunity that really is an inflection point for our company. So we're very excited about that relationship. It supports our view and reinforces our view that this indeed is a GBP 20 billion market opportunity annually. You might have caught me saying dollar and rehearse like said dollar a couple of times, you might recognize my accent as U.S. But I think that's a hat tip to our multi-domestic strategy that this team is filled with both U.S. and Australian nationals as well. And as we look to grow globally, we believe that there is significant market opportunity not only in the U.K., where we will derive 30% of our future growth in the next 5 years, but also in particular in the U.S. and Australia, which is the reason we've chosen to focus that. In particular, in the U.S., we have a very, very small market share. So in addition to it being a large market, if we can truly harness those distinctive offerings and capabilities and bring them to the U.S. in addition to what the U.S. already has to offer organically. And then what we do inorganically, we do have a significant opportunity to grow in the U.S., and we're very excited about that. With respect to the overall market, events like Ukraine, whilst they certainly have some short-term impacts and the security landscape is changing dramatically in Europe and strategies are changing dramatically with -- in the alliances like NATO, we think that the longer-term impacts won't be known. But what it really has done for us this year and as we look into next year is ensure us and give us more confidence that the things we're doing are, in fact, aligned to future needs of our customers and that we expect to actually grow a little bit more because of that, not necessarily some expanded market opportunity. And that's reflected in what Steve briefed earlier, an aspiration to grow the group -- aspiration from GBP 2 billion to GBP 2.3 billion. And what is supporting that view? What's supporting that view is an increase in our pipeline, a significant increase in our pipeline this year. Last year, we talked about greater than 6 billion qualified pipeline. We've added more than 15% of that, right? So we're growing the pipeline coincident to the growth in our markets and also to our aspirations. More importantly than the growth of the pipeline is the quality of the pipeline. Over the last year alone, we've seen the size of average deals go up. If you measure the deals that are above GBP 5 million, that's gone from about 45% of our opportunity landscape to over 50% of our opportunity landscape. And that's really an indication that we're qualifying and pursuing larger and more complex deals that will then turn into backlog with longer term and more value creation for the customers. So we're very excited about that metric. And then when you look at the total qualified pipeline and you start to measure the product of the customers' likelihood to contract an outcome and our likelihood to win, we believe that confidence, we believe that we're going to win those and that our confidence is up from about the mid-30s to the mid-40s, right? So that's to say that with our qualified pipeline, 4 in 10 or hopefully slightly more than 4 in 10 of those deals will actually come to fruition and then turn into backlog us delivering mission capabilities to our customers. So all of those are healthy metrics that have enabled the team to say we can regenerate global aspiration. And all of those are strong indicators to you, our partners in industry, our partners, our analysts and our shareholders that we are on, indeed, a growth trajectory that we can meet your expectations and our expectations, if you will. So shifting now to the -- all of the reasons we think that creates this multi-domestic engine for global growth is really about what we talked about, right? It's about the investment in the campaigns. It's about early engagement with our customers and clients. It's about shaping our internal resources and research and development money towards the future needs of the customer. And of course, it's about building out those distinctive offerings that we talked about in the video and we'll talk about it a little bit more as we go forward. So in the video, we talked about our distinctive offerings. Steve mentioned our distinctive offerings. I won't spend a lot of time on this chart because we've talked about it, but I do want to reiterate that all of our investment decisions, really first pass the test of a distinctive offering. Is it something where QinetiQ can differentiate itself from its competitors. And more importantly, is it something where QinetiQ can provide innovation -- mission-led innovation and real value to our customers. If it doesn't pass that test, it doesn't receive investment. It doesn't receive our focus. All 6 of these are core capabilities for our company and all of them are things that we're investing in to drive future opportunities and growth in our markets. If we start in the upper left-hand corner, we already talked about experimentation and technology, but that really is creating something new responding to a problem that hasn't been solved before. We showed the hybrid electric drives and the wheel drives on the video. Those are the kinds of capabilities that come out of that. Things like advanced radars as well. When we go to information and sensing, we've all heard about the huge amount of data that is created. Well, that is true in Defense & Security context as well. And in information and sensing, not only do we create sensors that gather and collect information and exquisite sensors for that, we're a sensor provider to the U.S. Army, for example. We then take that data, do the analytics, do the processing, apply artificial intelligence, apply cyber in order to deliver an outcome to a customer that -- it gives them advantage, what we call an information advantage, which you'll note later ties to one of our campaigns. In test and evaluation, we talked about this being a core capability of the company, and it will be and continue to be a core focus of the company. What I want to point out in test and evaluation is the digital nexus to that -- that box right below training and mission rehearsal. We fully embrace and we are driving digital transformation with our customers. And we believe that a growth lever for us in the future is that connection between digitally testing and evaluating and assuring products and platforms. And then providing them to the users to use via training and using that same digital framework. We think that's a distinctive offering for us and a distinctive capability. As I round out the chart, engineering support another core business for the company, we do have expertise -- deep expertise dating back to our initial creation as QinetiQ out of MOD that does, in fact, both drive systems engineering, but also help create and shape the requirements for our customers. And we do that in the U.S., in the U.K. and Australia. So that's a core capability across all of our sectors. Finally, we talked about autonomous systems and robotics. You hopefully got to see some of the robots around outside. In addition to the robotics market being very important to future security and defense forces, we do have a very unique offering in the automatization and autonomy for vehicles. And we also have a very unique offering and very robust small robot. We've got the largest deployment of small robots around the world when we talk about Talon and Spur, our offerings to the U.S. Army, as well as our offerings in Australia where they are operating, and we're competing for an additional opportunity for those. How do we wrap it all together. So we've talked about the global market. The global market is there to help us meet our expectations that we set. The offerings underpinning that are there. And we continue to invest in those, refine those, continue to work with the customers to create the future opportunities are there, right? And as I mentioned before, we do align our research and development to those distinctive offerings. We then take those distinctive offerings, and we supercharge our business development machine with these campaigns, which not only seek to win opportunities in the here and now, but more importantly seek to drive outcomes long term with the customer. We sense where the customer is going and we respond by working with that customer to create the offering where they needed to be when they need to buy it. So there's an analogy in the United States about skating to where the puck is. It's a hockey reference, right? Going to the place on the pitch where the ball is going to be, not where the ball is, and that's really what we are undertaking in the campaigns, shaping the market with our best instincts and intellect in cooperation with our customers. And finally, the third lever that we use to get this global leverage, if you will, is the single routes to market. And it's an ideology and less importantly, a governance structure. But what it really says is that in a home country or in a priority country, that country will not only be responsible for developing the market relationship and building the business development capability, but will also be responsible for delivering, right? And that ensures that they never lose contact with the customer and the customer gets the outcome they want. And this has underpinned what -- with what Steve mentioned about our sovereign capability investment. So like in Australia, where we're embedding capability and learnings from the U.K. into support training test and evaluations in Australia. That is fundamental to our growth strategy, fundamental to our global strategy to go multi-domestic, and we look forward to demonstrating just as we have on the right side of that chart, with those 3 examples. One is a target system that was born in Canada and sold into the United States, using this single route-to-market approach. The E-X-Drive, which is born in the U.K. and is now being prototyped for combat vehicles in the United States, using this single route-to-market approach and extending on top of the campaigns and then the robots in the bottom as we talked about as well, Spur and Talon are already operating in Australia, built on the backbone of a tremendous legacy in the United States, and we're now competing for a significant award down there as well. So with that, I will pause and be glad to take a few questions.

Yes. Great update about the market. I thought that before we get into the specifics of Australia and the U.S., it would be good to get a global market view of where the growth will be coming. So as Sam said, we'll take 5, 6 questions before we move specifically to Australia or the U.S. We've got a couple of hands up.

It's Richard Paige from Numis. This might be slightly unfair in the context of focus on Australia and U.S., but the rest of the world segment in terms of the growth opportunities. I think previously, we've seen that pie sliced a little more clearly around some other countries in Europe and so forth. Could you just discuss the sort of thing in there, is that amalgamation just because of today? Or is what the opportunities in other territories?

Would you like to take?

Yes. Sure. Absolutely. I would say that all of our all of our customers are important customers. And we are quite opportunistic when it comes to other geographies that need our capabilities. I think what we're trying to articulate today is a focus on the 3 home countries. And the reason is, of course, we all know from lessons across our lives and careers that we'd rather do fewer things with vigor and really well than spread too thinly. And those 3 countries have tremendous markets that we have access to. We have tremendous capabilities that those markets are buying and we still have significant growth opportunity there. So I wouldn't say that we've excluded rest of world. We're really just focused today on doubling down on those priorities.

Yes, I'd build upon that, Sam. I mean those 6 countries, we have -- we always declared in our strategy 3 home countries, which was our dominant focus where we had large industrial capability and indigenous relationship with those countries, customers. And we also have 3 priority countries, which were smaller and were part of long-term growth. I think what you see, for instance, on my chart, Richard, which has got the GBP 2.3 billion opportunity, the level of growth that we see in those 3 home countries is really significant. And they are major drivers based on our relationship with the customer. They are major drivers seeking these 6 distinctive offerings. And I think Sam articulated it well. The sort of underpinning shared defense and security mission as exemplified by the AUKUS alliance means that opportunity to share technology, share experience, share skills as a vector for further growth is really quite significant. And Sam used the word, and I would use the word, one of the things I think we've really learned well in our strategy as we've matured in the last 5 or 6 years is the word focus. And I think that things sometimes go wrong if you're not focused, whereas our strategy now has got real clarity, real focus, and we know where our core growth is coming from. I think those are the sort of real nuances behind that presentation that you're asking about.

So one follow-up, if I may. Just in terms of the shared technology and the single route to market, the hurdles that you encounter from a customer perspective and both from an internal perspective, QinetiQ being able to share technologies across territories and how you drive that from an organization perspective?

Yes. I think the barriers are coming down, right? And it's about this renewed collaboration. That's not to say there aren't barriers and there's not say that there's not a governance around that, but I think there is an impetus to do more of that because we do have shared responsibility to deliver things more quickly across national borders, right? So that's -- it will always be the case where you might not have access to certain things, you might not be able to sell certain things. But in general, the vector is very positive on that. I don't know if you want to add.

I agree. You just need to look at world events and how nations are collaborating and sharing and maybe doing things in unprecedented levels. And I think it illustrates. And we've said our strategy is reinforced by these events. And then the alignment between, let's just take the 3 countries that we're talking about today, there is a real shared mission. And I probably wouldn't use the word barrier to more it's a topic that needs management. And with the right management, those exchanges can certainly be achieved, whether it's about intellectual property, whether it's about skills, whether it's about technology or even product or service. And one of the things I apologize is going to be a little bit of maybe Greg's sandwiches, I was really pleased on Friday last week. We just approved the next phase of what we call a sovereign skills program. And the sovereign skills program is all about investing in the next generation of skills, so that Greg in Australia can build an indigenous, as an example, T&E capability by leveraging experience in the U.K. And that will be about bringing Australian nationals under an agreement between the Australian and U.K. governments to work on our test ranges in the U.K. to build real experience and then go back and help the Australian customer, but also support our growth. And I think those type of examples illustrate that if you really think these things through, when there's a shared mandate or need between these customers, you can manage them. We don't need to think of them as pure barriers. And I think that the fact that the strategy built through those 3 countries where there's such an alignment, it bodes very well for the growth strategy.

Sash Tusa from Agency Partners. I'll try not to preempt what Shawn is going to say, but you mentioned a very large home market where you have a very low market share. Do you see and has your experience been in similar situations that it's a low market share because other companies are already doing what you would like to be doing or because that work is not being done by corporates yet, and you're just not there either, but therefore, you're winning through a process of outsourcing from the customer?

Yes. Sure. So it's a little bit of both, right? The defense industrial complex and the number of companies that are performing services for the United States Department of Defense is significant, right? So there is significant competition. I would, however, say that like anywhere, you have customer relationships that you build and you shape and you grow, and we're working on that, and we're doing that. You have distinctive capabilities, which may be better in certain areas, maybe equal in other areas, and you tend to focus your growth efforts on the things that you are truly distinctive where you have a customer relationship. So I think it's a little bit of both, and that's kind of a mealy-mouthed answer. But the reality is, it is a competitive market, we do have to be price competitive. And a lot of the things that Shawn is putting in place are things that will continue to keep us price competitive as we bring these distinctive offerings. There are some things that are very bespoke. For example, we talked about hybrid electrification. That is something that we think we have a market leadership position on both here and in the United States, for example, right, well around the world for that matter. So that's a great example of technology where we believe we are significantly ahead of competition.

The other thing I would add, Sam, is that I'll come back to strategy. A lot of this comes from clear strategy. And I hope that over recent years, the understanding of our strategy has really grown in our investor base because we have a really clear strategy about understanding the need of the customer, determining our offerings where we think we can add value to the customer, the countries that we are focused on and then our investment decisions and our actions to pursue growth. And I think that whilst you've given some of the answers to why we are where we are in terms of where we're going, it's really about real discipline and execution and keeping to that focus of the strategy. And that's what, over time, you'll see that growth through come through from what Shawn and her team are doing in terms of following that strategy. And I've described it and I will reinforce it, it's a multi-domestic strategy. And that strategy, it's a single group-wide strategy but we're really understanding the local context, and how we bring that strategy to life in that local country, which maximizes value creation in the country. And internally as a team, we're focused on maximum efficiency and maximum leverage so that we really do grow value in the most efficient way. Hopefully, that answers the question.

I think we need to move on. Am I getting the queue? Yes, sorry. Right. Thank you, Sam. So that's the global market opportunity. We're now going to go South. We're going to Australia and over to Greg Barsby. Greg, if you want to say a few words to introduce yourself and then we'll go through your strategy and plan.

Thanks, Steve. I'm losing my voice before I've even started. Greg Barsby, I've been with the business for about 7.5 years or so. Lucky enough to have what I think is the best job in QinetiQ, which is getting to run the QinetiQ in Australia. And I think we've got a really exciting story. I'm really looking forward to sharing that with you all today. Indo-pacific region is really the front line of strategic competition between some major world powers at the moment. And the Chinese communist party is really ramping up pressure on Australia and on our neighbors. Obviously, given the close ties between Russia and China, we're all watching Russia and Ukraine events closely at the moment. The Australian government sees alliances and relationships as a key component of our national security strategy, and it's really active in all the relevant forums, and it's investing heavily to ensure adequate support for our neighboring countries. We've had the AUKUS announcement that Sam mentioned earlier, that really created some additional tensions in our region, but it's of huge strategic importance to Australia. And along the lines of what Sam said, probably represents one of the largest shifts in defense acquisition strategy that we've seen. It's really about information and technology sharing. The Australian government is absolutely committed to a significant capability spend with the defense budget increasing to 2.2% of GDP, and likely to move beyond that. We've had supply chain vulnerabilities highlighted through COVID across areas like fuel supply and critical infrastructure. And that really must be addressed. Our government's moved quite quickly with policies to support supply chain resilience and Australian industry content has been mandated as part of that. And areas of critical industrial capability have been identified in 14 government sovereign industrial capability priorities. So these are critical capabilities, where the Australian government has said, we will invest to support the development of sovereign capability in Australia in these areas so that we've got reliability of supply. That's quite powerful, and it's having quite an impact on the market. And 2 of the areas that have come up time and time again already in this presentation, test and evaluation and robotics and autonomous systems are 2 of those 14 sovereign capabilities. So 2 areas that we're looking to grow bang on with what our customer is looking for. You'd be aware that we've got a federal election coming in Australia. And depending on what [indiscernible] read, a potential change of government. I think it's very unlikely that change of government will mean a change to these commitments or any change to the kind of public position that government has already taken. So the Australian business, we've grown really, really strongly over the last 7 years or so, as Steve highlighted earlier, and we've grown to have a significant Australia-wide footprint with major centers in Melbourne, Canberra and Adelaide, and we've got over 650 employees now. Our Business Advisory -- our advisory business line now turns over $100 million per year, and we've got deep capabilities across program management, acquisition and sustainment support, integrated logistics support and General Business Advisory. Our engineering business grew over 40% last financial year, and again, deep capabilities spanning structure integrity, explosive ordinance, design and prototype engineering and software design and development. In the experimentation and technology domain, we've grown our portfolio of customer-funded R&D projects, and we've got a focus there on developing unique power and energy products with some academic partners. Over the past couple of years, we've been developing positions in test and evaluation and training mission rehearsal and autonomous systems and robotics. These areas are directly consistent with those sovereign industrial capability priorities that our government has defined. And of course, they allow us to leverage absolute core group capabilities back into Australia. In general, these will be longer-term capability-based contracts that combine the deep technical expertise resident in our business with operating infrastructure on behalf of our customers, and I'll provide a couple of examples of programs like that later in the presentation. So our foundations and strategy for growth. The business in Australia has had a really stable leadership team with 2/3 of the team having been with us for more than 5 years now. Business is very mature in its operations. We know what we're doing, and we know where we're going. We are in the process of expanding the team to bring in some additional leadership capacity to support further growth. We have delivered significant growth in advisory services, particularly through what's called the major service provider contract, or MSP, where we are 1 of 4 consortium contracted to provide acquisition and sustainment procurement services at scale to our capability acquisition and support group, which is very similar to your defense equipment and support. About 5 years ago, we acquired an integrated logistics support and project management business called RubiKon. And through that acquisition, we acquired a contract, providing acquisition and sustainment support to a project called AIR 7000, which was about airborne intelligence, surveillance and reconnaissance. That project was transitioned into MSP and has continued to grow for us now 5 years later. Similarly, through Rubicon, we acquired a very small presence within Land Systems division, supporting land acquisition programs. I think it was about 6 people. And that has now grown into an 80-person integrated work program within MSP. So that's a great example of being able to leverage an acquisition and use that to grow our positions in core business. We've also leveraged the MSP kind of commercial construct and being providing teams into acquisition programs within adjacent customers, such as joint capabilities division, or the Bureau of Meteorology, so very similar offering into a similar customer. Within our Engineering & Technical Services business, we've got a really great track record of winning new contracts and then growing them. The picture on the right of that screen is our team that runs engineering design and prototype workshops for the Defense Science and Technology Group. After 10 years of running that, the contract had to be recompeted under our procurement rules. We won that. I think we announced that about a year and a bit ago. And since then, we've expanded the scope of that contract to include at least 3 additional sites and delivery of test and trials activities for that customer, and there's more to come there. Again, we have leveraged that kind of model into other customers, such as the University of Melbourne, where we help design and now operate their student design and prototype workshop, which they call creative space, and we're in the process of doing a very similar thing for Army currently, which they call MakerSpace. In general, these engineering services programs utilize our engineering expertise in an operational contract, they're longer term, higher value and offer us great opportunities to develop deep customer intimacy, develop our own capability and then grow the contract further. Our engineering capability is an ideal base for us from which to develop the capability to support our target growth areas of autonomous systems and robotics, test evaluation and training and mission rehearsal. I'm going to talk through a couple of projects now which should really bring all of that stuff to life with some kind of real examples. The mine warfare maintenance facility. We won an initial contract in 2017 to develop sovereign mine warfare training and threat representation capability. We provide sustainment services for the sensitive and inert exercise mine shapes, including the Stonefish exercise mine. Our services include laying and recovery of mine shapes, in support of training and trials, and we've developed our own version, which we call [QSense] which is a sensor training mine prototype. And with further potential to support future maritime T&E and training activities through some big programs that are coming, SEA 1905, which is maritime mine countermeasures, SEA 2000, which is Maritime Mines and SEA 1439, which is Collins Mine Obstacle and Avoidance System. Very recently, we were awarded a 5-year contract extension by our customer. Now the customer could have done it 1 year at a time, but they elected to award all 5 years, which I think demonstrates incredible trust in the relationship that we've got with the customer. But importantly, it enables us to work with our customer to further enhance what we're doing in mine warfare training capabilities and we'll design and develop new types of training mines that will have data recording and things like that, a really exciting opportunity for us. Queensland flight test range, which Steve mentioned a little bit earlier. Queensland government had the vision to be a world leader in unmanned aerial system technology and its application. And they commissioned us to design, build and operate their test range because of our unique heritage in test and evaluation. This is probably a great answer to your question, I think it was Sash, yes. We had Queensland government visit the test range, [indiscernible]. We hosted them here at Farnborough. We had some world experts help us present to, from QinetiQ, to help us present to Queensland government when we're in the kind of bidding stage. The range is located at Cloncurry Airport, which is in Central Queensland. And you can see the picture there, the nice red dirt. There's nice red dirt everywhere there. That's a very long way from anywhere, Cloncurry. It's a unique range. The capability is quite unique in the region. It's got the essential infrastructure to support beyond line of sight testing in a safe and controlled environment. We've equipped it with proven operational safety systems, range control system, probably radar, et cetera. There's a 2,000-meter commercial-grade runway, secure hangarage and large, large areas of unpopulated land, which makes an ideal base for our Unmanned Aerial Systems Test. It currently provides a pretty base level of T&E capability though. And we're working with Queensland government to implement incremental capability upgrades, including things like electrooptic tracking, air ground interaction and some representative range targets, et cetera, to enable a much more sophisticated T&E capability, to help us attract larger and more complex test programs to the range. I think this example, Queensland government's flight test range is a fantastic example of our ability to leverage core unique capability that QinetiQ has in T&E and know-how, et cetera, and bring that from across QinetiQ Group to Australia to meet a local customer need. Moving on to our Systems & Robotics. I think Sam mentioned that we've just recently bid a program called LAN 154 Phase 4, which is counter IED, counter improvised explosive device fleet replacement. It's based on Spur and Talon, 2 of our land robot platforms developed by our business in the U.S. Both platforms do have some incumbency with the customer in Australia. I think this is -- it's certainly the first time while I've been with the business that QinetiQ has the ability to deliver those platforms as a fully integrated capability in Australia, we will be able to sustain them, upgrade them, customize them to meet end-user requirements. I think that's another great example of us collaborating globally within our business to meet local customer needs. It's a single route to market in action. Our ambition for growth. It's a great picture of more Cloncurry red dirt on the bottom right there. Our growth road map in test and evaluation and training and mission rehearsal is really strong. We're building upon the successful delivery of the Queensland flight test range and a number of other test and evaluation programs for customers like defense, science and technology, to build a great pipeline of opportunities that include things like AIR 6500, which is joint air battle space management, where we are positioned as the independent T&E partner with Lockheed Martin and Lockheed, one of the final two primes in that competition. And we're supporting them through the competitive evaluation process. Similarly, we're partnered with a local Australian munitions provider called Nioa in the guide of Weapons and Explosive Ordinance Enterprise, again, as the independent T&E provider. We're also positioning as the independent T&E provider in a program called SEA 5012, which is persistent undersea surveillance. That's a massive program and some other broader maritime T&E opportunities. All of this is leading towards a strategic T&E partner to defense in Australia. And our customer is currently seeking via request for information, input into commercial models for that kind of strategic partner arrangement. That's potentially a broad LPTA style T&E contract in Australia. All of our responses to these opportunities will leverage our unique sophisticated T&E capabilities into Australia. They support the development of sovereign T&E for Australia. Our road map for autonomy and robotic systems is currently focused on land robots and starts with Land 154. Through this program, we would establish local land robot maintenance, repair and overhaul capabilities along with integration, experimentation and test capabilities. And this would then position us for further opportunities, leveraging QinetiQ platforms and designs, finishing with a large program called Land 125, and it's north of AUD 300 million arm ground vehicle build program. By that program, our customers are really looking to expedite the use of robotics and autonomous systems technology in land operations. We're already shaping customer thinking with a view to winning a position to lead LAN 125 in Australia. We're investing now to build the required capability to support our T&E and robotics opportunity robots. We're investing about $10 million to develop our own technology and engineering center to deliver digitally enabled engineering and assurance capabilities, and support the development of sovereign capabilities in robots and autonomous systems. And we signed a lease on that facility about 1.5 months ago, and we'll take possession of it next month. The facility is located at Fisherman's Bend in Melbourne, capitalizing on the relationships we've got with defense science and technology there and other institutions like the University of Melbourne. As Steve mentioned, we've also established our test and evaluation sovereign skills program. Steve said that was approved on Friday. I might get myself in trouble here, but I've already approved the offers to go to 8 candidates to join that program, which is fantastic. That's a formal program, consisting of training, mentoring and really importantly, site-specific work experience. So we're going to take people who are appropriately qualified with systems engineering or something like that from Australia, put them through a training program, bring them over here and get them to work on some of the fantastic facilities and capabilities that we've got here and then bringing them back to Australia to use in some of those big T&E programs that I mentioned earlier. A great thing to be doing, fantastic for what we need to do in Australia. And I think there's really very few businesses in the world that have the capability to do things like that. And finally, clearly, we're aspiring to accelerate our strategic progress or capability development through acquisitions where appropriate. We've made fantastic progress in Australia over the past few years. And despite the fact that I've been here for 7 years, I've never been more excited about what we've got ahead of us in the future. Enough for me. Keen to hear from you and welcome any questions you've got. So I'll pass back to Steve to lead us through any Q&A.

Great. Thank you, Greg. Well, a lot happening in Australia, and a lot has happened over the last 7 years. So questions about Australia. Okay. And John, you're going to feed us any [indiscernible] the Internet.

Sash Tusa again from Agency Partners. Queensland Flight Test Center. It sounds as if it's almost private venture development by the Queensland government. Where was such work done in Australia previously? Or was it done in Australia previously? And is there any formal relationship with DST in terms of directing business there? Or is it build it, and they will come?

There's no formal relationship with DST in terms of the range. We are in discussions with DST about using it. It is quite unique in that it is probably the largest -- well, certainly the largest nondefense range in Australia. You could probably even go broader than that, quite unique in the way they they've established it. Queensland government did have a relationship with Boeing around the testing of Loyal Wingman very early, which embarrassingly, we've renamed the Ghost Bat, I don't know whether you've seen that over here. And yes, we -- part of our role there is to engage with the market and bring people to use the range, sell with the spare capacity. And we've got a couple of commercial users signed up, and we're working to locking the test states with them now.

George Mcwhirter from Berenberg. You talked about AUKUS as being a key pillar of your growth strategy. Can you just talk about some specific areas where you see potential for growth for QinetiQ just regarding AUKUS?

Do you want to start.

Yes. I wouldn't say I framed it as a key pillar to the growth strategy. I think it just enhances what we're already doing. I think it will kind of help solve some of the issues around data and information and technology sharing over time. I think there will be things come out of it well beyond the submarines that will be great areas of opportunity with us, and the obvious things will be hypersonics and counter hypersonics, directed energy, et cetera. We, in Australia, we were already working in the submarine program. We're already working in the Collins-type extension. I think those roles will grow for us over time. That's quite an Australian perspective on it.

So no, I think you're right, I would call it, it's more about an enablement. But just step back, you got 3 nations that have signed up to an agreement where they see a shared mission and a shared need. And therefore, they'll be looking at sharing experience about the threat environment, around technology, concepts of operations and how they can respond to that. And I think that creates a context and in the environment for us to focus the delivery of our strategy. And Greg is right. I mean there have been 2, I think, main public announcements around AUKUS. And the first one was around the submarine program between the 3 countries. And then there was one a couple of weeks ago, which then talked about other disruptive technologies such as counter hypersonics. So I think it's more about the context, the enabling environment and then our responsibility as a company is to understand the needs of those 3 customers. They're very aligned with the type of distinctive offerings that we're focusing on, and then really trying to create value to them as customers, which then obviously creates value to us as a company and you as shareholders. One more at the back.

[Operator Instructions]

It's Aymeric Poulain from Kepler Cheuvreux. The question is on the economics because the demand clearly is robust and you will capitalize on it as you can. But the supply side is always where we see the bottlenecks and the difficulties right now. So what's the economics of the growth strategy? And do you see some issues regarding recruitment on the cost side of the equation?

In Australia?

Yes. Absolutely, absolutely. On one of the slides, you would have seen -- I think it had about 98% of our business is focused around services. So we really are a people business. So part of what we're doing, and I talked about the longer-term operational contracts where we combine our people expertise with operating infrastructure for our customers. Those kind of contracts give us the ability to develop our own capability. The advisory side, you tend to have people working in customer sites, et cetera, working on programs. Whereas with the larger, longer-term operational contracts, what you do with your people is far more within our control. And that gives us the ability to bring people in and train them up. some of the kind of classic pyramid model approach. The other thing I'd say is if we are successful with something like Land 125, if you want to work in defense, robotics in Australia, where are you going to go? It will lead to us. So I think there are some things within our strategy, which will help solve those problems, but you've hit a challenge on the head in terms of recruitment. I think we recruited over 150 people in the last year into the business. So -- and it was hard work. It was every day out there looking. So recruitment and retention, big issue for us. We're very conscious of this and really working on the whole employee value proposition to help solve the problem and very focused on ensuring we get the best return from a strategic and financial perspective on the people that we've got.

And if I think -- if I add to that, Greg, I mean, the dynamic around people is important to us across the entire group. Greg used the phrase, we are a people business. Yes, we have technology. Yes, we provide services, but it's all about our people. And you would have heard, I use the phrase, creating a safe and secure environment for our people to thrive. And that's a very deliberate thought through phrase that we know is certainly leaders of the organization, we have to create an environment where people are attracted, they love and enjoy the work they do, their passion about our customers' mission, and they have fulfilling careers and they feel that they're adding value not just locally, but in the world. So we spend an awful lot of time on the sort of background to your question, making sure that the environment in QinetiQ is very distinct, very different and people are attracted and stay with us to support and fuel our growth. So it's not an Australian-specific issue. That's something that we work very hard. And I think we're doing very well on as a whole group.

Okay. I've had the signal we need to move on. So thank you, Greg. That's Australia. And very pleased to introduce Shawn. Shawn, if you'd like to say a few words about yourself, maybe why you joined such a wonderful company and tell us about our plans for growth.

Excellent. Thanks, Steve. Thanks, everyone. I am excited to be here. As Steve said, my name is Shawn Purvis, and I'm going to talk to you a bit about the U.S. team, where we are and where we're going. I've worked in the United States as a United States Defense contractor for over 25 years, mainly in the areas of intelligence, surveillance, reconnaissance and always in support of the Warfighter. I joined QinetiQ a whole 2 months ago. So I'm an expert, ready for all your questions today, but I'm really excited to be here. I'm excited about the opportunity to transform our company and build upon the core technology and intimate customer access that we have with a pivot for our own sustained profitable growth. I'm going to take you a bit through our current position. I'm going to take you a bit through where I see us moving forward. And I hope I can answer there was someone who asked me earlier, why QinetiQ, I hope you understand why I'm excited about this market, about this company and its portfolio, and more importantly, about the team that I get the lead and the team I get to partner with. So first, let's talk a bit about the defense market. And so for the United States, while the continuing resolution created a bit of uncertainty for us in the first half of the calendar year, the United States defense budget was passed with increased spending projections in support of our mission and support of our allies. The 2022 fiscal year budget was passed with over $782 billion for defense, which is $50 billion higher than projected. $13.1 billion of that was in support to Ukraine. The defense budget had growth in almost all of the portfolio. And so while we know it's a large portfolio. There are a couple of pieces of that portfolio that are really unique and keen to us in areas that we want to grow in. Specifically around $270 million in artificial intelligence, cyber and data analytics, $1.4 billion in INDOPACOM and $124 million in supply chain improvements and industrial base and information technology. We also expect the future budget to be hold strong and it continues to grow amplified by the very recent events that we saw. Next year's budget is expected to be up to $813 billion in defense and national security spending, and core themes that are, again, important to us, will be areas of deterrence, counter persistent threat, advances in U.S. cybersecurity, defense, research and development spending and strengthening in the United States supply chain, industrial base and information technology. The current and future defense budget provides confidence for us in our investments that we are making in our R&D that's driving innovation from our concepts to our programs of records in support of the Warfighter. Our heritage and technical advances in robotics and autonomy, sensing, protection systems and electrification are aligned to our customer and our mission. And in partnership with our industry peers, we will provide a strong platform for organic growth augmented with the right acquisition to accelerate and increase our growth rate. We believe that our investments in defense and security are highly relevant to a number of modernization activities that are designed to address the emerging threat of our near-peer adversaries and in support of our allies. So let me talk a little bit about QinetiQ U.S. at a glance. QinetiQ U.S. is a solid company. It's a phenomenal organization, built on over 20 years of innovation, investment and extreme customer intimacy that's allowed us to continue to maintain and grow that portfolio. We primarily sell high-value services and products to United States Department of Defense and our national security agencies. We're positioned to enhance our offerings to United States defense and modernization programs and platforms, a few of which I'll talk about in just a minute. And the core of our family is our robotics, as you've heard throughout the presentation today. It's an area that is consistently evolving as we move from larger -- as we're moving from small form factors to larger form factors, some of which you've seen in our demonstration before and as well as the integration of autonomous systems, sensors and protection capability. In robotics, our core customers continue to be the United States Army, Combat and Command, Ground Vehicle Systems Center and the Marine Corps Warfighting Laboratory. We also have a significant amount of technology services and our engineering services expand across the DoD customer, our intelligence customer and as well as partnership with our industry peers. In these areas, we provide support in areas of communication, sensor integration, research and development, survivability and unmanned ground combating systems. We have a solid established base, strong engineering organization, systems engineers, technologists, mechanical engineers, software developers, over 600 employees deployed near our Washington, D.C., Boston and Pittsburgh area. And in the U.S. market, we have good depth in 4 of the 6 unique global capabilities that have been mentioned by Sam previously, mainly in experimentation and technology engineering and support, autonomous systems and robotics and information advantage and sensing. We continue to develop the next generation of offerings and posting for a multidomain solutions. And this can be seen from the revenue graph, we have grown. We continue to grow. We are focused on sustained profitable growth. And we expect that as the budget continues to grow in the areas that we are focused on our investment on, that we'll have the opportunity to capitalize on those unique markets as well. We're continuing to look at the balance of our portfolio between products and services, making sure that reflecting to deliver the right solutions to our customers as we move from experimentation and single product deployment into a larger market of battle space multi-domain solutions. And as you expect, our United States Department of Defense, the intelligence community and the associated agencies are our current and will be our future primary customers as well as our industry partners that we've currently partnered with and we're looking to expand those relationships across that portfolio. Holistically, I start -- as I started, we have a solid foundation of which we're building upon. The areas where we're strong, we're looking to move and work with these customers, these areas of capability that we've got single point of focus we're looking to move to those adjacent markets. And we're focused on our people, our processes and our tools, and we're looking to build a leadership team and invest in a strong pipeline that drives that sustainable growth and project trajectory. So let's talk a little bit about our strategy. So our strategy looks to expand across the customer base in the DoD, intelligence, cyber and IT markets, as I alluded to. And as we discussed in the market dynamics, they continue to be strong for defense contractors across the United States. As Sam alluded to you, there's a tremendous amount of competition, but it also creates a tremendous amount of opportunity when you're able to bring your expertise, your right investment and the right partnership to go after the market. Our U.S. customers continue to respond to the current and emerging threat, there is -- and there is a high demand for both products but also services and the integration of those products and services and a multi-domain threat environment. It creates, what we call, effectively a joint all-domain combat and command control capability. And essentially, what that really means is that you're not going to have just one sensor or one platform. You're not going to have one comm system or one vendor. You're going to have a multi-environment where you have one to many, many to many sensor and capability environment. The United States also recognize is most recently by General Austin's comments, Secretary of Defense, that with any threat that we face, we're going to face that in a joint environment, right? So our organizations and our systems have to have interoperability across the board with our allies. And all of that creates opportunity for us as we think globally across the whole of the portfolio. In particular, we have 3 core areas today that we're continuing to expand in. Those are land, air and maritime. And I'll tell you just a little bit about where we are in each of those markets and how we think we can continue to grow. In land, we continue to see growth in both the United States and international market for our robotics with greater levels of operational deployment, domestic and internationally. The robotic market is [Audio Gap] Globally, the robotic market is estimated to be over $15 billion for 2022 with a 9.5% year-over-year growth throughout the calendar year and over into 2023. In the U.S., that market is roughly $5.7 billion for 2022, which represents about 38% of the global market and expected to grow. In particular, what we see is the integration of autonomy, sensors and protection capabilities into the robotics market and the defense robotics market is inclusive of all and have been deployed approximately around 90 countries to date, many of which we continue to serve both where we have today and where we're pivoting to go in the future. So our future growth is projected in part by the advancements of the integration of those technologies, the integration of our capabilities and the interoperability and commonality across the board in the market. We believe that to continue to be a strong focus and a strong market for us across the board. In Air, the United States Air market represents over $16.8 billion for aircraft and related systems. In addition to that, there's additional $46 billion-or-so market growth capability for mission support and for C4I. So again, go back to that integrated communications, integrated platform, sensor-to-senor capabilities that is driven by the air domain. We see an opportunity to continue to play a greater role in autonomy here and the integration of our sensors as the platforms start to fly in a multi-domain, multi-platform sensor capability. And the adjacent markets include for us are sensors, communications, collision avoidance and object detection and classification. In maritime, there's around $5.2 billion in shipbuilding and maritime systems. You'll also see us talk a bit about large unmanned surface vehicle, medium unmanned surface vehicle and large unmanned undersea vehicle capability. Our current programs are in the Ford-class carriers and Virginia-class submarines, and they give us a great opportunity to expand our capabilities into the operation and modernization, chip surface modernization, electronic grounding of units and logistics and sustainment. There's potential expansion also to take some of those capabilities into the international aircraft capability. From a market positioning aspect, we see the opportunity to grow from that unique service provider, some of those unique products that you see in our exhibit today, to being a mid-tier systems platform integrator across that multi-domain battle space. For a great example of that, if you go back and take a look at the joint unmanned systems road map, they talk not just about products going into the battle space or going into an area of responsibility, they talk about interoperability, common architectures, compliance, test and evaluation, verification and validation. They talk about autonomy, artificial intelligence, machine learning, increased efficiency and effectiveness. They talk about security, secure comms, secure network, cyber operations and information assurance. And I talk about human-machine collaboration with human-machine interfaces, machine teaching, machine learning, virtual reality and augmented training. All are areas that we see as opportunities for QinetiQ U.S. to continue to both play in, partner in and continue to grow. We're targeting our investments and partnerships to enable that platform-to-platform integration to deliver the multi-domain services and products. And we're expanding our role as a systems integrator with particular focus in autonomy and robotics capability in those specific domains. When we think about the heritage that we have, our organic growth in those markets are actually pretty strong. When fused with the right capability from strategically selected acquisitions and industry partners, we believe it makes us a great platform systems integrator in the United States defense market. We're also looking to expand our business relationships. So those areas where we've provided fantastic products and fantastic capability, we're looking to expand across that value chain from the engineering and design to the systems integration, to the deployment and integration of multiple systems, to the test and evaluation and finally to the O&M as sustainment component, which has a modernization component to any one of the programs that we're talking about. And all of these improvements for us add up to a progression in our current strategy. We're migrating from that product developer and intimate service provider to that multi-domain, mission-led innovation partner. From a foundational perspective and to underpin all of what I've talked about, we have 3 primary core areas to our business. But first, we're adapting our leadership team to align to our next growth phase. It provides us with a better structure, our capability to drive both organic and acquisition-based growth strategy. In addition to investing in our leadership team, we're investing in our engineering and our technology team. We're making vital investments to improve that they have the skills, the training required to be able to do some of the high-end technology integration that we just talked about. We're also ensuring that we have an integrated strategy and road map that focuses both on internal research and development, but also customer research and development, which we call CRADA. Both of those are important to be able to take the initial concept, work with our user community, flourish out those ideas and bring them to life, ultimately into a program of record. Second, we're upgrading and transforming our environment to be digital engineering enabled. We're supporting our systems to enable to stay ahead of that competition. So when you think about digital engineering and digital transformation, it's not just technology. It's a way to design your systems that bring down costs, bring down risk, but allow you to get to market faster and in a way that a customer can consume. It also helps our customers maintain and reduce their logistics and sustainment that we call it the back end of the program of record and it allows us to train the Warfighter in a way that's more agile and quickly as the systems continue to morph and modernize across the portfolio. So in addition to increasing our productivity, the digital engineering environment that we're investing in, it provides that innovation and collaborative development environment that allows us really to go to market in a different way than they seem QinetiQ U.S. before. And last, but certainly not least, building upon what Sam talked about a bit earlier, we continue to ramp up our leverage of global capability by now utilizing our terminology called Single Route to Market. We believe that this gives us the ability to generate and sustain a more intimate relationship with our customers by making sure that we're bringing great technology developed in one country and meeting the need that we may have in the [indiscernible] United States, America. For that, our pipeline and our captures are really focused on, as Steve alluded to, a stronger strategy, qualified pipeline and ensuring that we're bringing the right capability to the right technology to the customer with the voice that speaks to their mission. Overall, what I'm most excited about is that we're building a sound capability base, one that is positioned to become a primary innovation partner to the defense customer in the United States market. So I want to talk a little bit about what does that mean and how do we start to move across that value chain. I have for you just 3 great examples that start leveraging the investments that we had in the portfolio. And in some cases, many of these started with capability still exists today that capability is going very strong. What we've taken a look at is how can we take that capability with some significant focused investment and move them into a larger part of the portfolio or an adjacent market. I'll start first with experimentation and technology. So you know we're well known for our robotic products in the market, as we've talked a bit about, but we've also been well known for our protection systems or survivability. In particular, we've invested in our refined armor technology and it built upon our existing position has generated a lightweight detachable armor capability for use in multiple types of aircraft for the United States Air Force. The high performance and ease of fitting our armored solutions provide a real-time capability in our current fleet of C-130. The investment that we've made was to make that current capability lighter and more usable. So not only are we able to take that going back into the C-130 retrofit, which allows them to save on space and weight and gas, but it's also now a key technology that we're leasing to use their future opportunities and future vertical lift, which needs that lighter weight capability, but still needs the full force of survivability. Future vertical lift for us is a game changer for us to be able to go into a program of record with capability that was created with 1 program, invested and now mature and moving up the value chain in the market. We've talked a bit about our autonomous systems and robotics. And again, as you've seen, we've had some fantastic capabilities in the back. You're likely aware that, as I've mentioned, we have over 20-plus years of experience in building robots. Everything from our -- I wish I think is a very cute spur, a system in the back, to our more integrated system of our talent organization. But what you should know is that we're now integrating our autonomy capabilities, our sensing capabilities, our engineering capabilities. And what we see now is the next generation of robotic combat vehicles, RCV, is now in procurement where we've delivered 8 of those units going through tests and we see that continuing to move down a procurement training to go into a program of record over the next 2 years. That's a great opportunity where we started with one form factor. We continue to grow and enhance that capability. We're now moving into -- from the individual product unit sale of one-off robots or robots into certain specific mission, into a broader mission and a program of record that will span multiple years, multiple domains for our customers. And then information advantage in sensing. We've talked a bit about our electrical, optical and infrared or EO/IR sensor capability. What you see now across the United States Air Force market, in particular in low-cost attributables, are those planes that fly without a manned entity in the head. They look for sensors that do more than one platform or more than one play load. So we've looked at how can we integrate our sensor capability, our hyperspectral sensor, our EO/IR sensors that allow those planes to fly with multiple missions. It allows the United States government to take more use of what they currently have, be able to go into different contested aerospace and environment. And for us, this is an area where we've taken an investment that was built for one mission, and we're now helping our government customers see how it can serve multiple missions and multiple domains across the whole AOR. So our ambition for growth in the United States remains strong. We're continuing to focus on our reforming our U.S. business. We've carefully aligned our programs to where our U.S. customers will seek to sustain and upgrade capability. We want to continue to leverage our research and development position for new programs of record. And from a scale perspective, we're integrating our U.S. defense and security business across the board, continuing to leverage our global capability. We continue to want to grow in the U.S. market over the next 5 years, both organically and inorganically with really deliberate strategic acquisitions to enhance our capability. We want to leverage the capabilities aligned with the modernization agenda. So when you think about where the government is now moving towards needing to have systems and integration platforms across the whole of the domain, we believe that our market position there as a systems integrator for platform for platforms is a great opportunity for us to go into those opportunities. And in our market opportunities, we're especially focused on cultivating the right relationships with our customers and expanding our relationships with our industry partners, being clear on our role and how we can provide value across the whole. So we see opportunities in land, air, maritime, but we also see opportunities in artificial intelligence, cyber and information technology, which are new markets to us, but certainly markets that support the whole of the mission of our customers that we currently support. I'd like to close by thinking a little bit about why QinetiQ was for me. I worked with QinetiQ back when I was at my previous company, SAIC. I remember how they showed up. I remember the partnership that I had with them. And most importantly, I remember the phenomenal technology and capability of the men and women who supported me on that particular effort. The opportunity to come to an organization that have a solid foundation and apply our strategic strategy and pivot towards really truly profitable growth was an opportunity for me to really come in and bring and be part of an exciting journey that's just in the beginning, but has much more to come. With that, I'll take your questions.

Great. Thank you, Shawn. Charlotte was up in the nanosecond for a question. One here...

Charlotte from Barclays. I'm just picking up on your comments around multi-domain solutions, joint environment and interoperability between platforms. It feels very much like your ambition is to sort of move up the value chain. And I have overlaid that with the comments that Sam made earlier around, the quality of the pipeline improving. So the sort of value and duration of bid opportunities is on the up. How do you -- I mean by moving up the value chain, inherently, there's a different risk profile to that as well. I just wondered if you could comment around the sort of contractual and operational mitigations as you take on more work, higher value and more complexity ultimately?

So it's a great question. When I think about one, absolutely trying to move up the value chain. In general, what we're trying to look at is not move into customer domains that we don't have customer intimacy or we don't understand the mission. So I think maintaining our mission-led innovation is a really key point to how we do that. The relationships that we have with the customers, we understand how they're using the product or understand how they're facing the adversary in these contested environments. But what we want to be able to do is also help them with the intelligence component that starts in the beginning as well as the integration of the data that gets collected in theater. So many times that data through our robots and our sensors is not brought back and then informed back to the next Intel mission. So we see it as a natural component of the entire part of the intelligence life cycle of the processing, exploitation and dissemination component, right, of the mission of the customers. So for us, we think we're buying down risk by being able to do that going into a market where we already have that customer intimacy. It also, though, requires us to have investment in our people, as I mentioned, and in our technology. I think those 2 are really core. Digital engineering allows you to have repeatable processes, repeatable systems, that allows you to burn down risk on your test and evaluation. But for us, partnered with, for example, Mike Stewart, our CTO, we're creating commonality around our engineering platforms, our engineering processes. We're having centers of excellence of our software development, partnered centers of excellence with our hardware and electrical development. And then we're giving training to our people to be able to really buy into that and live into that. And so people, processes and tools are a core part of the investment this year to be able to supplement those programs and efforts that we're going after.

Is that something you feel is actually missing in the market in the U.S. at the moment? Is that a niche opportunity for you to bring these different products and services together?

So I can't speak to prior areas, but I would tell you that it is harder in general for legacy companies to pivot. And the ability for us to have the agility to bring that into where we want to go now, I think, is an absolute right opportunity for where we are in the market.

And if I can add, Charlotte, I think if you connect what Sam talked about in terms of pipeline and the opportunity, you're right, more generally, the company is going up the value chain. And we've talked about winning larger, longer-term opportunities. You just talked about that. And I think it's been very important for us to understand risk as we go up that value chain and make sure exactly, as Shawn is saying, we continue to invest in the right people, processes and governance actually to make sure that we can manage and execute our strategy and deliverability of the various programs that we win. And that's absolutely the transition that Shawn is now leading in the U.S. So there's plenty of opportunity. It's about focus. It's about discipline of execution to yield. You heard it from her as well a sustainable profitable growth.

David Farrell from Jefferies. In the last year, the U.S. has moved from operating under a proxy agreement to a special security agreement. Can you explain kind of what impact that might have in terms of how the U.S. business grows going forward, please?

So I wasn't here for the last year, but I can talk to the last 8 weeks. How about that? And then...

Why don't we let Neville say a few words on the prior period, and then you can talk about the 8 weeks. Neville, do you want to talk... Neville and I worked many years to transition from a proxy to an SSA. So...

We've had a necessity for a couple of years now, which was enabled by the acquisition of MTech. In the previous expansion in the U.S., we were operating under a proxy agreement, which is more restrictive than SSA. And a particular feature in SSA is you can get your exact directors. So in this case, Steve and Carol with oversight on the board in the minority, but on the board of the SSA company, and therefore, they get much greater transparency and engagement with the way the company develops. So that's a really important point on that and it's working pretty well, frankly.

Yes. Thanks. So from my view, I think it allows us to shift from proxy to SSA to expand the partnership and relationship. The specifics around SSA as well as a proxy is that from United States' perspective, we can't reveal United States classified information, which you can't reveal in the United States anyway. There's certain data and certain components to the kind of work and what we're doing, specifically for whom we're doing it for, that we have to maintain. But if you take that for a side for a second, the way we design, the engineering that we were doing, the test and evaluation, the capabilities and how we go to market, they're consistent. My ability to partner with my peers, for example, with James on cyber, on Intel, those are consistent. And in particular, in the United States and the United Kingdom, those relationships are connected throughout all of the agency, both in the DoD, MoD and the Intel space in cyber. So I see it as an opportunity to truly leverage a global company. That's the way I view it. That's the way our leadership team is viewing it. The ability, as Greg alluded to, talking about Land 154, that technology was grown and developed in the United States. The requirements and the customer intimacy are absolutely, right, with Greg and his team. The ability to combine those 2 are where we get a leap up there. We have those opportunities in the United Kingdom with robotics and another opportunity, for example, called [ Dart Rose ]. We also have the opportunity, as was mentioned before, to take capability that was developed here and bring it forward. So the electrification in the hybrid drive that you see were developed in the United Kingdom with our team. They're now being produced and sold down into a key prime customer for a U.S. vehicle on the ground. I think for us, at least the way that we've approached it, we've approached it with the level of collaboration, a level of deliberateness and the ability where we've got great capability to bring that capability to market globally within collaboration with each other.

Great. Thank you.

Absolutely.

Yes. And I just sort of bill, you used the word collaboration, the other word I would bring out is skills. So it was a huge piece of work to lead to that transition. I know it was a really important foundation to shift the U.S. growth strategy. And one of the messages I'm trying to convey today is we have an array of global skills. One of the questions that we've had is, can we grow in the U.S. and Australia with Brits from London? Well, you'll see a lot of non-Brits that don't live in London. And the SSA transition, clearly, we have to respect the U.S. national security. That's what it's there for. It's primary purpose. We have a gold star with the U.S. government. But we also built a board with the right skills and knowledge that have local experience to support Shawn and the leadership team and exactly, as Shawn said, are collaborative. We also have seen an evolution to our PLC board structure. So one of the PLC non-execs is now very rich experienced individual from the U.S. defense and Intel. So we've been investing in the right skills and the right mechanisms to support this long-term global ambition. So it's a good question because it is a fundamental enabler for what Shawn and the team are now embarking on. Thanks.

It's Joseph Ayoola from Morgan Stanley. Can I just come back to test and evaluation because if I remember right, last year, you were a bit more explicit and that your addressable market in the U.S. Could you maybe give an update on the opportunity there and how you're thinking about that, potentially organic and inorganically as well and potential time frames, too?

I think we were -- I'm checking what you're referring to. I think we were talking about the RDT&E budget, which is a large collective segment in the United States budget, the way it's aggregated, covering research, development, test and evaluation. And I think everything that Shawn has really been describing falls within that remit. So I think you've heard about the organic and acquisitive growth strategy through what we've been through.

If I could just build on that, Joseph, one of the areas that we do see is an ability to leverage our core capability that is not resonant today in the U.S. market, but bringing forward that past performance into U.S. capabilities. And in general, in program of record in the U.S. market, the O&M component, we call it the sustainment component, is what we try to drive down. It's the long tail that happens once the program goes into a program of record, once you get through the prototype, once you deploy right, it's that O&M sustainment that really is the longevity of the program. And the government customer is consistently looking for ways to bring costs out of that sustained component. So we have a combination of 2 components that I think is a market for us to be able to go into. The first is leveraging the past performance and the lessons learned from everyone that you've heard to date, being able to bid those opportunities in a way that we'll be able to do different if you're just trying to do it without a people person, people base. The second is the technology investments that we're talking about because digital engineering truly goes after the logistics sustainment. So think about the way you can reduce the amount of spares you need, your depot becomes digital and the training that you need as you have Warfighter, soldiers coming in and coming back through and as the systems get modernized and have to get continue to [indiscernible]. And in addition to that, our overall rate structure is extremely attractive for that component in the U.S. market, in particular. So we see that as an area of opportunity that with that kind of strategic lens of past performance, the right systems and the right cost factors that we'll be able to go in a partner. That's an area where we want to continue to partner with some of our industry peers where we're very strong on the front end engineering design and delivery, but we haven't pulled the relationship all way through to the sustainment component.

Other questions?

Thank you, Shawn. Thank you. Okay. And we'll move to our last item. So Carol Borg. Carol, if you'd like to say a few words to remind everyone who you are and a bit about our financial strategy.

Yes. Fantastic. Well, lovely to meet a lot of you for the first time in person here today. So that's been brilliant. And for those on the phone, hopefully, to meet you in person shortly. Yes, I'm Carol Borg. I'm the Group Chief Financial Officer. I took over from David Smith from the 1st of December 2022. You might have seen me a couple of weeks before because I was doing a bit of a transition. And I think I told you about myself at one of our last sessions where just in a nutshell, I don't come from the defense sector, I don't come from London, so I'm kind of unique. I come from the renewable and natural resources sector, having worked within wind and solar for much of my career, Australian, so I have Greg's accent as well and actually outnumbering the Brits that we have on stage today. So yes, sorry about that, Steve. So what I'd like to do today in this section of the presentation, and I appreciate you've been sitting patiently for about 2 hours. So this is the last of the presentations. I'd like to outline our key financial characteristics of QinetiQ and how the presentations you've heard so far from Greg, Sam and Shawn come together into a financial framework of the group, and how we think about and govern our investment decisions to support our future growth. I'll then close with a summary of the equity investment case. And I'll set out why you should continue to invest or, in some cases, make the decision to invest further. It's great to see some shareholders here today in the audience as well. So firstly, our key financial characteristics. The unfortunate and horrific events in the Ukraine have driven a heightened demand for our differentiated capabilities. This chart demonstrates the success that we have had over the last 6 years, particularly driven by the strong growth, concentration and focus in our 3 home countries. Since financial year '16, we have delivered 75% revenue growth equivalent to a 10% compound annual growth rate. Our cash-generative business model sets us up to invest to drive future growth. Our niche capabilities and skills sets us apart from others in our sector, affording us margins at the upper end of our industry. Since financial year '16, we have continued to deliver under our 6 distinctive offerings. And as we transition to longer, larger longer-term contracts such as the long-term partnering agreement, this provides us with greater revenue visibility and margin stability. We are maintaining our long-term guidance of 12% to 13% operating margin, although as we have said before and also iterated by Shawn in her presentation, we do anticipate margins being circa 100 basis points lower due to the investment we are making for future growth into customer-facing capabilities, people, infrastructure and tools. Our asset-light business model has resulted in impressive levels of return on capital, significantly above many of our peers with a return on capital employed of 28% in financial year '21. We've also delivered a total shareholder return ahead of our FTSE 350 Aerospace & Defense peers on both the 3- and 5-year review. We continue to ensure that we efficiently and effectively utilize our capital structure, deploying our balance sheet to support overall growth of the group through investment in both our existing business as well as through considered and targeted acquisitions. The strength of our balance sheet positions us well to consider such opportunities, consistent with our capital allocation policy, which I'll go through in the next slide. So in summary, QinetiQ has a deliberate focus on sustainable performance and has ambitious plans. I think we've heard that today. We are targeting strong revenue growth at stable margins to deliver good returns to our shareholders and we will continue to ensure efficient and effective use of our capital structure. So secondly, on to our financial framework. Some of you will be familiar with the elements of this slide, which I've refreshed to incorporate my views. This sets out our clear and considered capital allocation policy, which remains central to the QinetiQ investment case. Firstly, we look to invest in our business to support the long-term growth of the group. We do this through 2 lenses: supporting organic growth and targeting acquisitions that are strategically aligned with our overall growth ambition. On the next slide, I'll talk about our rigorous approach to the investment appraisal process that we go through. Next -- or secondly, we look to retain a strong balance sheet and to optimize our capital structure. At present, we have a net cash position, but in future, we would consider taking on leverage to fund strategically aligned acquisitions, consistent with our financial and operating policies. Our business would be comfortable in a sustainable leverage position of circa 2x net debt to EBITDA and for the right strategic acquisition, we could potentially go higher for a short duration returning to below 2x leverage within 24 months. We also have a disciplined approach to portfolio management as demonstrated by the 3 disposals that were completed last year that were no longer aligned with our strategic objectives. Thirdly, we look to retain a progressive dividend to shareholders. In financial year '21, the full year dividend was 6.9p per share. We will announce our financial year '22 full year dividend at our preliminary results presentation on the 19th of May. And finally is our commitment to return excess cash to our shareholders. Whilst we have had a material cash balance for a few years, we have maintained that we are still exploring Priorities 1, 2 and 3 as we are confident of our strategy and the scale of our growth ambition. So now on to our rigorous investment appraisal process. So this is a comprehensive slide, which again I've refreshed and I don't intend to go into detail. The purpose of showing it today is to demonstrate our rigorous appraisal process for investments across the group. We consider organic and inorganic investment opportunities with the same rigor and approach. We consider market dynamics, various delivery and cash flow risks, the investment needs required and overall returns. And this culminates into 3 important evaluation gates. Firstly, and most importantly, and again, as highlighted by Sam, we consider strategic alignment. Does the project capability or acquisition fit neatly into our core strategy, geographical focus or our 6 distinctive offerings? We need to fully understand what we are investing in, the associated risks and cash flows and that it will fit well within the QinetiQ portfolio. Should we pass this first gate, we then move on to the second, which is economics. Does the project capability or acquisition target deliver the right financial returns? The middle section of this chart shows the metrics that we consider based on our view of the risk-adjusted cash flows of the opportunity. The most important metric is simply whether our risk-adjusted view of the target cash flows deliver a return on invested capital in excess of our weighted average cost of capital over the medium term. Our final investment appraisal gate is deliverability. And again, Greg mentioned this through the RubiKon acquisition. Can this project or capability be delivered? Are we the right owner of this asset? And can we integrate this business into QinetiQ in a sensitive and commercial way? This third step is not often widely referenced by companies, but for us is an important part of our acquisition strategy. We have a flexible integration model and take a thoughtful approach to evaluating and understanding the best integration model for each project, capability or acquisition target. As some will appreciate, QinetiQ has conducted 7 acquisitions over the past 6 years, each of which having passed through this process. Organically, an example that showcases this process is the Long Term Partnering Agreement, one that Steve mentioned earlier in his opening address. Just to reinforce, under this agreement, we committed 400 million of capital investment to modernize our core contract and leverage our capabilities globally. I'm pleased to share that to date, under this agreement, we have strengthened customer relationships, leveraged our capabilities in global test and evaluation market. I think we've heard a lot about that through Queensland today. We've increased international usage of our U.K. ranges. Again, I think we've heard a bit about that. But another example is our contract with the U.S. Air Force in Europe. We've assisted our customers in their pursuit of decarbonization, continuing to contribute to their ESG commitments. And of course, we have continued to deliver against our financial returns. So I will close on this slide that summarizes the 4 pillars of the QinetiQ equity investment case from left to right. Firstly, the defense and security markets in which QinetiQ operate are going through a reset of needs and spending. We've certainly heard that through the -- all the presentations today. We are well placed to capitalize on that market opportunity. Due to our heritage history and clarity of strategy, QinetiQ has a privileged and unique position in the defense ecosystem with highly relevant offerings for the emerging and future threat. We have a strong business model underpinned with long-term contracts generating good revenue -- good revenue visibility, attractive margins, good cash generation and appropriate returns. And all of this is underpinned by favorable ESG stance, a proactive and positive leader in the defense industry with a clear narrative and opportunity to help our customers and partners on their ESG journey. I think we can all appreciate that there's been a change in the sentiment of the role of defense, particularly with respect to the social aspects of the ESG agenda. And with that, I'll hand back to Steve.

Great. Thank you, Carol. So I really hope that you found today's session really useful, but we have covered a lot of ground over the last 2 hours. So let me just recap the headlines are the main takeaways from the seminar. The defense and security context is heightening the market needs for our 6 distinctive offerings. As a result of that, we have chosen to increase the scale of ambition to grow the company to more than GBP 2.3 billion of revenue over the next 5 years. Our strategy is clear and is increasingly relevant to respond to both the short- and long-term market dynamics, and we have the leadership team with the right skills and the right experience to successfully execute this growth. We're really well positioned to more than double our businesses in both Australia and the United States. And finally, as you've just heard from Carol, we do have a clear financial strategy and a really compelling investment case. So with that, we have about 10 minutes before our time is up to have any plenary questions on anything that you've heard from the main speakers or remind you we've also got the team on the front row, if you want to ask anything about U.K., innovation, strategy or transformation.

It's David Perry from JPMorgan. I've got 2, please. So last year's guidance was 5% organic growth. We've had Russia, Ukraine, all these new opportunities, but the guidance is still 5% organic growth. So was last year too optimistic? Or is this year too conservative? And the second question is, I just want to make sure I understand your messaging on potential M&A. I think the 2x net debt-to-EBITDA is new, apologies if it's not, and I missed that. Are you signaling a willingness to do one quite large acquisition at some point soon?

Okay. Carol, do you want to start off?

Yes. I can take both of them.

Yes. Go ahead.

Yes. Thank you. Thank you, David. So I think we've guided at a trading update -- at our trading update -- Q4 trading update, circa 5% organic growth. And we maintain that for future guidance. So I don't think we were overly conservative this year. We've had some tailwind -- some headwinds are actually through some performance shock in FY '22 that we've had to deal with. So delivering a circa 5% organic growth, I think, is quite a good achievement given what we've had to face this year. That would be my first question -- answer. And then in terms of M&A, the 2x leverage is a new piece of information, yes. Are we in the market for a large acquisition? I think if you would have seen our last year's -- the half year results, you would have seen a write-off of a strategic opportunity that we pursued but unfortunately failed to deliver. So yes, the inorganic growth is part of our strategy to achieve our growth agenda.

And if I may add, Carol, I mean I think on the organic growth guidance, I think Carol is spot on, I think we're clearly prudent, but we're just making sure that we're giving the right guidance from a long-term perspective. On M&A, if I just sort of step back, you say, well, what is the M&A message, I mean the strategy has always been a strategy that is based on organic growth complemented by strategic acquisitions. And we've said very clearly through several results updates and seminars that as part of that strategy, which you've heard the focus today, we want to do multi-hundred million dollar acquisitions. As long as it meets exactly the criteria, that Carol has been saying, strategy-led, economics number two, deliverability number three. I think one of the reasons why that new information is in today's update, is we've had lots of questions about the net surplus cash on the balance sheet and how far would we be prepared to go. And as Carol said, yes, last year, we were engaged in a significant transaction, which we chose not to proceed with. So we're just trying to give a little bit more color and understanding about where we think we might go, whether that's one or several, clearly, that will be determined by the strategy, availability and meeting all the relevant criteria.

Let me try a follow-up if I can. So was that significant deal that didn't happen? Was it sort of $500 million to $1 billion of revenue?

It was large, David, but I probably wouldn't guide on a specific range. But you can -- I mean, the figure that was in the results last year that we had to write off, you can work back from that to determine the type of scale.

It's Sash Tusa from Agency Partners. You report with 2 specific divisions, are you presented this afternoon in on a country basis. There's clearly a relatively good mapping of 1 answer or the other, but it's not perfect. Is -- Are you managing the business on the divisional basis or is actually managing the group on a country basis far more appropriate given how you're trying to deepen your relationships in each country?

Okay. Do you want to pick up first, Carol, again. Q&A session for Carol.

And just be clear, I really don't want a divisional restatement. I apologize to any other analyst here for even raising the issue.

As we've had this chat before, have we about our divisions. QinetiQ in the past has reported on EMEA Services and Global Products. As you would have seen today, there is kind of an interesting mapping, a lot of what we do is even in Global Products business is services associated with the products as well. Internally, you have met the team. We are structured internally more geographically with our U.K. defense intelligence, Australia and our international business. So that's the segmentation that we've chosen and I've inherited, Sash, careful what you wish for, maybe...

And the other thing that I would just add is, it's actually a live debate. Let's be straightforward. And I think if you look at how the company has evolved over the last 5 to 6 years, I think good company strategy and the way that you evolve the company, you follow strategy, you follow a structure, you follow skills. And it goes back to the question that David said, as we execute our strategy and as the scale of that strategy, which has got clear structure aligned, and it's a multi-domestic strategy aligned with those markets, that might lead us to have to change our reporting structure. But I think we're live to it. We're following it. But now it's right, and we'll see whether it evolves as we progress through the strategy over the coming years. One on the front row. Sorry, second row.

It's Esther Baroudy from State Street Global Advisors. Now this is more about the longer term. And when you talked about focus, I can see 1 million applications here for climate as well in terms of what you're doing in AI and so on and helping government there. And I was just wondering if since you're doing so much and you've come from renewables and so on, if eventually, this year, next year, but you might consider helping with that effort as well because it's going to boom and there's going to be a lot of government money coming in there, too.

Yes. I mean, -- so I think it's a great question. And I guess the answer for me is dependent on the time horizon. Certainly, as I reflect on joining the business 5 or 6 years ago, to me, it didn't feel focused. The company was trying to do so many different things in a relatively disparate manner, it didn't achieve the growth that you'll have seen over the last 6 years. Do we want to box ourselves into that on a 10- or 20-year or beyond perspective? Maybe we can expand countries. We could expand sectors. I think right now, with this strategic plan and our focus to make a difference in the world around the defense and security mission, we've got the right perimeter. And I would also say it's not to a total exclusion. We do, do things in other sectors, but it tends to be where it's got a real strong adjacency to what we do around our core and we can add value as opposed to a sort of a primary driver of our focus of growth, which is in the defense and security market. But great question, one over a dinner table that we often debate when we evolve the strategy for 10 and 20 years. Thank you. Any other questions? It feels like the moment then to wrap. So thank you for joining. I hope you found it -- so please do give us your feedback as you've heard, with a very clear strategy, very clear ambition, and we look forward to delivering new sustainable, profitable growth. And we'll all be around for about an hour now. So if anybody wants to come on talk to any of the team on anything you've heard or anything else there, please do engage us. Thank you.