Archie Bethel - Chief Executive Franco Martinelli - Group Finance Director

Robert Plant - JP Morgan Kean Marden - Jefferies Sylvia Barker - Deutsche Bank Ed Steele - Citi

Good morning. Thank you for joining us. My apologies for being such an early hour start, but we're trying to avoid some conflicts this morning. So the format today, as is usual, so I'll give a short introduction, taking you through the highlights both operationally and financially for the first half of the year. Then I will hold over to Franco, who will go through the half year results in -- more detail. And then, importantly, -- then, I'll come back and say a bit more about the longer term outlook for the group, and following that we will leave plenty of time for questions. So, let us get started. I think, overall, we've had a good half year -- very busy indeed, and we made good progress across all of our four sectors both internationally as well as here in the U.K. Importantly, for a company that looks after nuclear submarines and power plants, aircraft carriers, helicopters, fire engines and fighter jets, amongst other things, we once again achieved improvements in our health and safety performance with our Home Safe Every Day program continuing to engage our entire workforce. The sector realignment went very smoothly and we recently completed a thorough strategy review process, which has identified a number of opportunities going forward and more of that later. Across the group, our teams have stayed focused on delivering services that add real value and really do have a major impact on our customers' critical operations. And now we are more so than our aerial firefighting teams working alongside the other emergency services to bring under control some of the most devastating fires ever experienced in Portugal, Italy, and Spain. We proudly watched HMS Queen Elizabeth sail from our Rosyth facility and arrive at her new home in Portsmouth, and on December the 7th, the Aircraft Carrier Alliance, in the presence of the Queen, will formally hand the carrier over to the Royal Navy, and I'm looking forward to seeing her fly the White Ensign for the first time. We began mobilizing on two exciting new international projects, our FOMEDEC pilot training contract in France and on -- recently won air ambulance contract in Norway. And we finalized arrangements for handing back the Magnox contract to the NDA by the end of August in 2019. And finally, last week, we were delighted to announce that we had been selected as a successful bidder for all three RAF Technical Support Services Provision contracts. We experienced strong continued growth in the first half of the year with underlying revenue growing by 6% and profits before tax by 5%. Strong order intake saw our combined order book and pipeline remain stable at £31 billion and our order book cover at this point is 92% for the current year and 59% for next year, continuing to provide short-term visibility, and importantly, certainty. Cash Management was strong and EPS grew by 4% in the period, and we have increased the interim dividend by 5.4%. So in terms of financial performance, it was another good period for the group, and setting us up to meet our expectations for the full year. By the way the macro environment is challenging, and so we have been working even more closely with our customers to ensure we understand their priorities and provide them with the support they need to achieve their aims. And in doing that, we've been able to maintain a steady stream of contract wins with a total order intake of over 2 billion in the fast half of the year. More opportunities are coming to the market and we have seen our bidding and tracking pipeline grow strongly. As I said earlier, we are delighted to have been chosen to provide technical and engineering support to the Royal Air Force at 17 bases across the UK, significantly increasing the presence. This is an important key long-term engineering aim for us as we aim to be the support partner for the RAF as we are for the Royal Navy and for the British Army. And I think also this contract shows that long-term defense contracts are still being placed. At the end of this summer, the MoD issued its new national shipbuilding strategy confirming that five new Type 31e light frigates and two FSS support ships will be ordered over the next two years or so. It's worth mentioning that the national strategy draws on the success of the aircraft carrier project which involved the supply chain across the country. We are currently assessing how we can best position ourselves to participate in the provision and sustainment of these new platforms. Our business model, developed around providing engineering support to our customer's critical assets, whether they be in the defense, nuclear or emergency services market, has proven itself to be robust and sustainable through difficult economic periods. Across our four key markets we continue to benefit from the long-term nature of our business model. We support the services of our mostly government customers that they have to provide rain or shine. And often when new platform and equipment procurements are delayed it leads to higher levels of spend on extending the useful life of existing assets and insertion of new capabilities and further technical training. The technical services that we provide including project and program management IT, design, development, procurement, logistics, manufacture, assembly, integration, test and commissioning are critical to the safe and efficient operation of our customer's assets. In good times or bad these services have to be delivered and we make that possible. And delivering in these highly complex markets requires deep skills and specialist disciplines including nuclear engineering, avionics, naval architecture, automotive engineering in addition to the broad skills in mechanical, electrical, aerospace, marine and materials engineering, and a specialist capability in cyber intelligence and security. But we have the highest possible levels of security clearance is making an increasingly important contribution to our critical asset management model. Our apprentice, graduate, and management recruitment and development programs are bringing fresh talent into the company all around the world and our collaborations with universities and research bodies ensure we have access to emerging technologies and new products. And it is a investment in skills, capabilities and critical infrastructure that has a allowed us to prosper and grow organically through the economic cycle. Our business model is firmly focused on adding value by reducing cost and improving availability, reliability and capability of the complex, expensive, capital assets and the infrastructure which keeps countries and communities safe. And this makes our engineering services particularly relevant and valuable in tougher times. So, let me now hand over to Franco who will take you through the finances.

Good morning. And let's go straight into the income statements. Revenue growth is 6% was much as expected in the first half. Operating profit increased by 2% in the period with margins at 10.5%. The margins were adversely affected by provision charges mainly for contract cost and restructuring around £7 million by a £5 million increase year-on-year on pension costs. And by some of the revenue growth being a lower margin end. Profit before tax benefited from a reduction in group interest after the pay down of expensive finance leases whilst the guided step up in the tax rate to 18% moderates EPS growth to 4%. As Archie has said the dividend increased by 5.4% as we move towards the middle of our 2.5 to 3 times cover dividend cover range. Looking into the second half, a higher than previously expected QEC step down will reduce revenue growth by about 1% although with little or no profit effect. No further net provision charges are expected in the second half and lower margin revenue such as QEC will decline. The effect of this is that the margin should improve in the second half and we will end the year closer to last year's level and in line with guidance. Finally, the auditors has completed the April 17 IFRS 15 opening balance sheet review, which is required for next year's adoption and no changes were highlighted. This means that the numbers will therefore not change for IFRS 15. We go to Marine, as we said in the September trading statement, Marine growth excluding QEC was lower than initially expected mainly because of the phasing of equipment support contracts and commercial marine. However, our U.K. marine defense business excluding QEC actually grew by more than 5% in the period. QEC stepped down in H1 was £29 million, and this is expected to increase to a total of £140 million for the full year. This is £40 million more than previously advised and this is expected to be largely offset by increases across the Marine business. Next year, the QEC step down is expected to be a further £80 million, however, this should be accommodated within our mid single-digit revenue growth expectations for the sector. Continued contract performance is driving the margin uptick along with the step down in the lower margin QEC work. A good first half of DSG procurement in South Africa is reflected in good revenue growth. However, also in the lower group margins, margins have been helped again by step up of the Holdfast land JV margin in its 10th year of operation. We expect this DSG procurement in Rail to slow in the second half which due to mix will improve margins at the full year to last year's full year levels. U.K. defense large land programs are being delayed by the current defense review, the NCSR, which will make revenue in financial year '19 flat for land. A strong firefighting season combined with the start of the new UK flight training contracts has driven growth at both subsidiary and JV level within aviation. UK military air profits last year benefited from contract end out performance, which compares to this year's contract start prudence. In addition, oil and gas continues to be difficult with even less spot business and retender pressures continuing. Margins are expected to continue below last year's levels in the second half. Good expectations for revenue growth in financial year '18, '19 including from the TSSP win announced earlier. The FOMEDEC growth will be initially at low margins, but the project is very much on track and growing. The margin in Magnox is now stable. On the basis of the contract change, we have now agreed. Last year's margin included a cumulative pick up, but was at a lower base level than now being recognized. The projects business started the year slowly, but has caught up in the second quarter and is positioned well for the second half. Just to remind everyone, Magnox will step down around £60 million next year. Half year cash conversion including the FOMEDEC effect of £44 million was 70% pre-CapEx and 40% post-CapEx. If we exclude FOMEDEC, then the conversion was 89% pre-CapEx and 60% post-CapEx. The working capital underperformance in the first half of the year was due to a stock build in a booming South African equipment business, and some advance payment unwinds in aviation and marine creditors specific to three contracts. These events are not expected to repeat in the second half and cash conversion will be at the previously guided levels. When viewed on a last 12 months' basis, cash flow conversion is in line with our medium term targets of over 100% pre-CapEx and circa 80% post-CapEx once we exclude the previously guided FOMEDEC effect. The full year FOMEDEC effect is still expected to be an amount further around £70 million, which will reverse out next year. Net CapEx depreciation for the period is at 1.2 times and it is expected to stay at that level for the full year. Last 12 months free cash flow excluding FOMEDEC was £280 million compared to £320 million for the period to March. This is due to the stock build and advance payments I've already talked about. Pension contributions in excess of income statement will be circa £45 million for the full year as previously guided, although phasing has seen some payments in the first half. Dividends from JVs this year are expected to be at around £35 million with a step up starting to come through in this first half. The net debt on current GAAP we expect to delever down to 1.7 times net debt-to-EBITDA for the financial year '18, and down to 1.3 times for the financial year '19 absent any bolt-on acquisitions. This of course excludes the IFRS 16 effect as detailed on the slide. I now have the first of three accounting and control slides, the provisions slide is in the appendix as it was in the last full year. I will start with pensions. The deficit is broadly stable with results protected by interest rate and inflation hedging. The service costs, as previously signposted, has risen by £5 million at the half year. This is partially offset by a £2 million decrease in interest. Further actions we have taken include an increase in employee contributions with a phased implementation for the Rosyth and Babcock group schemes started in October and the launch of an educational toolkit to promote greater awareness of the freedom to opt out from DB Schemes. This was started in November and this should reduce the gross balances and enhance the risks within the schemes. Joint ventures represent a significant part of the group at 12% in revenue and 19% of profit, this hasn't changed significantly from last year. There are 2 types of JVs as you know, the asset JVs with borrowing and delayed dividends and the operational partnership JVs without borrowing and with quicker access to dividends. You can see that the operational JVs are where the dividends are increasing although AirTanker, an asset JV, will pay its first dividend in April '18. The total distributable reserves in our JV is currently GBR 120 million. This represents future dividends earned to-date. The expectation for JV dividends is £35 million for this year, £40 million for next year and £60 million for the financial year '20. I thought it would be useful to revisit why we are confident of delivering consistent outcomes and returns from our contracts Firstly, we enjoy know-how and infrastructure barriers to entry which allow us to focus on what we know. We enjoy long-term repeatable contracts and rarely lose a rebid. Our good win rates for new work again reflect that we are bidding in areas we understand and where we add value. We aim to have contract structures where we share risk and behaviors with our customers. Our tender reviews focus on both cash and P&L to ensure gaps are minimized and as far as possible cash follows profit. And of course, we have a comprehensive governance process with multiple layers of review and prudent accounting policies as evidenced by the IFRS 15 outcome. In summary, revenue growth at 6% in the first half is expected to moderate in the second half due to the increase in QEC step down with little profit effect, operating margins at 10.5% in the first half are expected to improve in the second half to guided levels. The combined order book and pipeline is close to record levels with good bidding activity and excellent win rates giving us 92% visibility for the rest of this year. Cash conversion excluding FOMEDEC in the last 12 months was at the group target levels, although affected by payables and inventory in the first half. Our net debt-to-EBITDA ratio fell back in part due to FX, but is expected to be around 1.7x for the year end and by 1.3x next year when the FOMEDEC effect reverses. EPS growth is as expected, with a dividend step up towards the middle of our 2.5x to 3x cover range. And with that I will hand you back to Archie.

Okay, thank you, Franco. Okay, so let me now look forward and share some of my thoughts in how we see the business developing over the remainder of this year and beyond into next year. As I said earlier, we had a long-term business and that's how we continue to view the business even if we have to negotiate a challenging environment in the short-term. Performance in the first half has set us up well to deliver our forecast result for the year and we enter the second half of the year with a solid order book and bidding pipeline and a growing range of opportunities ahead of us. Our order book and pipeline sits at £31 billion. And the order book at 18.5 billion is to be compared with last year's 19 billion at this point is after removing £1 billion from the order book as a result of the Magnox situation. The bid pipeline at 12.2 billion has increased by £1.7 billion, and we expect to be pretty busy bidding on new projects across our four business sectors in the second half of the year. Overall, we added a further £3.5 billion of new opportunities to our bidding pipeline. And I just remind you that the bidding pipeline only includes bids, which have actually come to market and are underway. So we now have 92% of this year's sales in our order book and 59% of next year's, providing us with a high level of visibility and confidence. And our win rates continue to run at over 40% for new bids and 90% for rebids and our recent success rates have been running well above our 40% and 90% targets. So let me now look at the market trends picked up in our recent strategy review for our four key sectors. Our Marine sector business continues to have a healthy outlook both in the UK and internationally. In the UK Naval new platform programs, particularly Astute and Dreadnought, the nuclear submarine classes, Type 45 and Type 26 combat warship programs are providing opportunities throughout the bell cycle and then of course into the long 30 to 40-year sustainment phase beyond. Older platforms, including Trafalgar and Vanguard class nuclear submarines and Type 23 frigates are undergoing major life extension upgrades and capability insertions at the moment. And through our long-term MSDF contract, we continue to deliver ongoing efficiency savings across the Devonport and Clyde naval bases. The innovative introduction of new technologies across the fleet is increasingly making a significant contribution to achieving cost savings and increasing overall capability. And in Australia and Canada, we continue to participate in the major investments being made in developing their naval fleets. And then Oman, our joint venture at Duqm recently completed packages of engineering work on two U.S. Navy support ships. These projects were completed successfully, and we are confident of winning further work in the region for the next year. In Land, we have seen major vehicle upgrade programs like Warrior shift to the rate from FY '19 into FY '20. But we expect this to lead to additional sustainment work being carried out on a number of these vehicles to safeguard the Army's capability. And generally, across the DSG estate, we continue to implement transformation plans that help our efficiencies and cost savings. And we're seeing increased demand for technical training across both our defense and non-defense vehicle fleets. We also see significant opportunities ahead in the Rail and Power Networks as further investment is made by Network Rail and National Grid driven by safety and operational improvements. In South Africa, there are new opportunities being pursued by our vehicle business and our Eskom power engineering business. And in Australia, our Qantas airport technical support partner contract is now up and running and we expect further expansion over the coming year. Our U.K. military Air business continues to experience strong growth and beyond the RAF TSSP contract, we expect to be bidding for further significant packages. And over the coming months including, the aggressor air ASDOT opportunity which was announced yesterday. The TSSP contracts replaced a number of multi-activity contracts that majored on facilities and the state management. These services were separated out and hived off in 7 regional packages through Project HESTIA run by the DIO and covering Soft FM services across the defense estate. TSSP brought together the higher value technical support elements across 3 groups totaling 17 air bases. And in competition we won the contract for all 17 locations. In Europe, our French military air contract Helidax and FOMEDEC are progressing well, and we are currently developing proposals for air force pilot training support for 2 other European countries. Across the majority of the developed countries demand for helicopter emergency medical services is growing steadily. And increasingly, the service is being provided by private companies. Babcock has significant market share in Spain, Portugal, Italy, France and the U.K., and we are currently pursuing new opportunities in Scandinavia and Australia. We are already one of the world's leading providers of aerial firefighting services, and again we see a number of short to medium term opportunities for growing this area of the business particularly given the increasing demand for technology and innovation. And we aim to build on our search and rescue position in Spain and in the North Sea by pursuing upcoming SAR opportunities in other European, parts of Europe. The oil and gas helicopter market however remains flat with overcapacity still suppressing prices. We are only a 4% player in this market, and we are not pursuing opportunities at this point than beyond North Sea. We now have 1 H225 flying in Spain and our assumption is that our H225 helicopters will be flying in FY '19. Decommissioning of redundant nuclear plant will continue for many, many years around the U.K. as we address the backlog of old facilities that need to be swiftly dealt with. Our major contract at Dounreay is one of the most complex decommissioning projects being undertaken anywhere in the world today, and we are making good progress. And we believe that there will be further growth opportunities for us as the project progresses. The Magnox contract is progressing well and by the end date of August 2019 we will hand back the 12 sites with full end of life and decommissioning plans. These will form the basis of future decommissioning, and we fully expect to be integrally involved in whatever approach is taken going forward. But there is still a great deal of uncertainty around the future of the NDA and until that is settled we will not know what approach is likely to be taken on Magnox or the timing of the next stage. We continue to be involved in multiple contracts at Sellafield, and we are in the early stages of bidding for a major package of decommissioning work, which will be decided on by late 2018. Our deep long-term relationship with EDF supporting the active fleet of AGRs continues to develop and in the future we see major decommissioning opportunities as the life of these reactors come to an end in the next decade. And our contract on the new build at Hinkley Point continues to develop and grow and again we expect further significant opportunities as this mammoth project develops. Before summing up and moving to questions let me say a few more words on the growing importance of technology and providing superior services to our customers. As I mentioned earlier, one of our key drivers for adding value is the innovative use of technology, and this is playing an increasing role in improving capability and reducing through life operating costs. By inserting a range of commercially available technologies into the Type 23 frigates for instance as part of their life extension program we are reducing running and maintenance costs and enabling the ability to support the vessels during operations around the globe. And the application of technology to improve performance and reduce costs doesn't just apply to naval vessels. We've also identified technology applications that improve the performance of our complex vehicle fleets and further applications that enhance our aerial firefighting capability. Our central role as an integrator of OEM systems and equipment and to complex platforms puts us in an ideal position to identify how technologies inserted at the interfaces can significantly improve overall system and platform performance. Growth in profits and cash continues to be a major focus across all four sectors in the UK and increasingly internationally. And it is our intention to continue investing in our business to meet our growth ambitions. So let me finish by saying a few words about our approach to allocating capital. On this slide I am illustrating how we prioritize our use of capital. Investing in growth opportunities remains an important aim, but all growth investments must meet strict targets in terms of returns and cash flows. And that growth will come from the four sectors where we have established competitive advantages. Maintaining a strong balance sheet is crucially important and we plan on continuing to reduce net debt particularly during this period of political and economic uncertainty. Our share price performance has been disappointing, but we believe that through sustained strong cash generation and consistent improvement in ROIC we will see our share price return to levels that reflect the true underlying value of the business. And as we have indicated we are increasing our dividend payout ratio moving progressively to the lower end of 2.5 to three times dividend coverage. So in summary, our financial priority is to continue protecting margins, improving returns and delivering strong cash flow. We'll continue to utilize our deep expertise and unique critical infrastructure to protect and grow our business. We have long-term visibility and certainty of order book and opportunity pipelines, and we can see good future opportunities across all four of our sectors, both in the UK and internationally. We continue to build and deepen our long-term relationships with our customers protecting our new business win rates and focusing on longer term contracts. And we expect our full year results to be in line with expectations. So thank you. And I'll now hand over to you for questions. Q - Robert Plant: Thanks, it's Robert Plant at JP Morgan. Franco, could you give us a bit more detail, please, on the payment changes that you talked about in terms of working capital, whether that's pressure from customers or unwinding of positions?

Well, there's two parts to it, one was the stock build in South Africa; that's really in advance of a very strong order book in South Africa the second half equipment sales. So that was a casualty of success if I can put it that way. The other three -- but really about three largish contracts were because of project changes; the milestones and the cash payments got a little bit out of line. That will reverse. And it just happens at the timing of the yearend is at -- large significant contracts is in aviation marine. And yes it will reverse. So it's just a characteristic of the business, it's not anything that comes from specific government pressure is what I would say.

Morning, it's Kean Marden from Jefferies. Can we just explore the main swing factors in the bid pipeline movement since the last time you updated? So I'm presuming that the Type 31e has probably moved in, has ASDOT moved in, because the process started yesterday as well or is that still outside?

I'm not that sure, is --

No, I suppose it's not in.

It's outside -- guys that was in the tracker, Type 31's in the pipeline now.

Okay, so what else moved in? So I think Type 31's probably about £1 billion and £1.5 billion, I believe you've got a bit of a burden there…

Yes, the Type 31 -- we do a factoring process. So it's worth about -- I think it's five ships at £250 million as stated and so £1.25 billion, we will factor that a bit and put in, but well if it's -- generally some other and in the aviation helicopter emergency services area, there's been a few significant contracts added to the pipeline. In DSG we have an upstep and -- that we're bidding for, and that is added to the pipeline. These are probably the biggest things, but generally we've had a kind of healthy increase even in the smaller contract level coming through into the pipeline.

Yes, I suppose the perception is the bid pipeline should shrink because budgets are under pressure and sort of that's the narrative basically around in the defense sector at the moment. I suppose with that in mind if you look at your comment regarding the outlook for the land division in fiscal '19, are there any other parts of the business that you feel might be vulnerable to changing budgets or changing policy or what are the catalyst goods maybe to [indiscernible] some of the revenues that you've referred to in land as well?

Yes, we do have the -- many SDSR the national security review. And I'm not anticipating any major disruptions coming out of that. In the defense side, the major programs are already underway, particularly in our naval side. And I think as you have seen still on the Air side, the TSSP contract going ahead ASDOT's been announced, there are further contracts. I've not seen any signs in that. In land too it's still pretty strong, there are two big programs we run both Warrior and Challenger. The Air is much linked to technical maturity as they are just about the budget. So the phasing [ph] with the contracts which is not uncommon, they've still got to make final decision to run about what the final shape of these life extension programs will be. Well, I would say from our point of view, and I can always say that when equipment program shifted the rate, we always see a kick-up on the support for the existing platforms. And if you look at -- I think I showed it in Marine, if you look at the major contracts that are running at the moment, long-term contracts, Type 23 life extension, Vanguard class life extension, these are happening, because projects have slipped to the rate, so we do get the double benefit of slips to the rate, we get additional work than initially had been planned, and then we also then get the new platforms as they come in as well. I think that's likely to be the way, that's the way it's always been, and that's way it progresses, unless you actually get to the stage where you got to tie up ships and submarines, drown the aircraft, mothball armored vehicles and tanks and all that, unless you get into that stage which I don't believe we're anywhere near then Babcock will still be in some ways protected.

And a last quick one for Franco. Can you share what the DSG revenue is currently?

We don't tend to want to give contract level revenue, but it's between 200 million and 300 million.

Thank you, Sylvia Barker from Deutsche Bank. Three quick ones. So, firstly, on margins. I was just looking at the margin, the gross margin actually excluding JVs -- sorry, this is for Franco. So that's down 90 basis points, but then your admin expenses are down as well by 80 [indiscernible] can you just walk us through kind of which divisions in particular are seeing the gross margin pressure and then where you're seeing the admin expenses improve? And then secondly on CapEx, so obviously you are spending more on technology and that is part of the narrative, so do we expect the 1.2 times CapEx to depreciation to increase again in the next year? And then finally, just on net-debt in general, so it's helpful that you've provided the impact from IFRS 16 already, can you just check if the credit agencies have updated their calculations, because I think you've raised a new bond, obviously recently, but I didn't see any reports?

I'll try and do it in reverse order and you might have to remind me what the three questions are, but I'll start with the back one, first. Yes, the credit agencies have always included the operating lease effect within their numbers and they also adjust for pensions as you would expect. So yes, that's there that's not news to them so the credit rating agencies have taken that into account. Going back to the first question which I remember very well, DSG is relatively -- procurement phase is relatively low margin. So that does come through -- that's in the subsidiaries, it's subsidiary business, also as I said if you saw in land, the land subsidiary businesses as you call it has had a lot of volume going through with South Africa and I also said DSG, so that's down a little bit there. Nuclear has increased because the project's business is doing well. Marine has done well in terms of margin, in gross margin. And aviation has come down as we said. So the aviation margin has come down because of the factors that we said previously with the oil and gas being a major part of it. So that's where the subsidiary margins -- what the factors are. So when we guided that the margins would be down a little bit, most of those were in the subsidiary type items. So it's the oil and gas in aviation et cetera. And sorry, Sylvia what was the second question again?

It was on CapEx so that's a bit lower this…

Yes, the CapEx 1.2 times depreciation. Yes, we do need to keep investing in technology and IT, absolutely. But, I think the 1.2 covers that. I think the 1.2 is our new standard of CapEx to depreciation that my Chief Executive may say a bit lower than that but I say 1.2 is about right I think.

And sorry, can I just take one last one, on the pensions increase in Marine how much of that has come through in the first half, what's your thought?

There's a £5 million increase in the first half and most of that is in Marine.

Thank you.

Good morning Ed Steele, from Citi. Couple of questions, please. First of all, looking to 2019 obviously you've given us a range of moving parts across the divisions. I understand that the guidance for the group is at the low end for organic growth of your mid single-digit range, but with margins stable, within that what are you expecting for FOMEDEC, please?

At FOMEDEC, there is an equipment supply element of it, which will be next year which will be about probably next year of the order of €150 maybe in next year. Against that, in terms of guidance you've got the step down in QEC of £80 million, you've got the Magnox step down of £60 million, and in the backdrop we have said that there will be some -- because of the delay in the land programs that that land will be flattish. So those were the sort of big, big items that relate to the revenue, yes, those are the big factors.

Great, thank you. And the land program delays, are you quantifying that or

Well, what we've said is that overall the effect should be that the land will be flattish is what we said.

Okay, and then in this set, in the first half margin in the land JVs there's quite a big step up in profit, is that again to do with the mechanical engineers I charter that contract, that JV or

Correct, the Holdfast JV which is now in its 10th year, any sort of increase in the profit take has a 10-year catch-up effect in it. We had some catch-up last year and we've got some catch-up this year.

And is that a sustainable catch-up, so it will repeat year after year or

I think it's probably sustainable for another couple of years is what I would say.

And then it reverts back to sort of just a de minimis number.

And then we will have to review the contract again.

Okay, because it was doing £1 million a year for 5 years and then it went up to £13 million last year I think.

I think the answer to the question is what I've said, sorry, it is that. This contract is a long-term contract, we have to reassess it, there are some big moving parts and we'd reassess it. So that's where we are.

Okay. Thanks very much.

Any others? Okay. Well, if there is no further questions, let me thank you for coming along here this morning. Thank you.