Thank you very much, and, good afternoon, good morning to all of you joining us today. I hope you're well, and, let's hope we are getting nearer to doing some of these events in person soon. As today is virtual, we've tried to make this engaging, informative, and varied with some video content for you also to bring to life some of the words and slides. Running through the agenda, Brad will pull out the key points from our trading update issued this morning. Charles will then cover group technology themes and where we're looking to focus our increased investment in r and d.
Tom will then cover the ink portfolio with a particular focus on electronic systems and the discriminating capabilities we have that positions us well for the next cycle. To manage timings, we'd expect the presentations to take just under an hour, and then we will allow the remaining time for Q and A in the usual operator led manner. Should for any reasons that not work, please feel free to email myself or on the online facility, We'll try and get your questions addressed. We hope to wrap up no later than 03:30 UK time. With that, over to you, Brett.
Thanks, Martin. I'm sure many of you will have gone through the update today, so I'll just pull out some of the key messages. First, I'd like to thank our teams worldwide for their commitment, dedication and resilience during these very challenging times. Regarding financial performance, we continue to drive strong operational execution as this is the number one driver behind improving our margins and generating higher cash conversion on a consistent basis. We've been pleased with our operational performance so far in 2021, and this really underlines our confidence in our program execution capabilities.
In terms terms of the market environment, demand outlook remains solid and our portfolio is well positioned to deliver continued growth. We're making progress with the ambitious sustainability agenda that we outlined in February and we were pleased with the recent reassertion of our MSCI AA ESG rating. The good start to the year means we are confirming guidance on a constant currency basis. And as you know, we are focused on delivering top line growth, expanding margins and improving long term cash generation. Later, Tom will give you some insights into how our Electronic Systems business, in particular, will be an essential part of these ambitions.
So a bit more color behind some of these points. Many of you will have heard me talk about the three Ps that we need to get right to drive value creation: performance, portfolio and pension risk retirement. On performance, I'm pleased to report that through April, we're doing well operationally. The sectors are delivering in line with expectations, underlining our confidence in the guidance for growth, margin expansion and our three year cash guide. Clearly, the current pound dollar exchange rate is higher than when we guided, but operationally, our business units are delivering in line with expectations on a constant currency basis.
The two businesses who needed to advance the most this year over last year were Applied Intelligence and P and S. Tom will provide more color on P and S, but to summarize, we are on track to deliver an improved performance with combat vehicle deliveries ramping up in line with customer requirements. Applied Intelligence is benefiting from the restructuring plan and is currently tracking ahead of expectations. So we're seeing promising momentum and margin expansion in these businesses. On performance and sustainability, I'm pleased by the increased tempo across the group and across the key dimensions of ESG.
We are progressing on a number of fronts from our 2030 Net Zero program, strengthening our commitments on gender diversity within year and long term targets and growing our numerous investments in our communities. As for pensions, we have completed all of our scheduled UK deficit funding payments and our assumptions on asset returns and mortality are prudent. While bond yields have moved around significantly in the last year, the current upward movement and higher asset values led to a material reduction in both the funding and accounting deficits since last year end. Moving to portfolio, we recently made a nice tech bolt on here in The UK, enhancing our data and digital capabilities. And we sold a small electronics business to Elbit as we continue to constructively evolve the portfolio for value creation.
So I wanted to finish on the demand outlook for the portfolio. As we outlined last November and this February, our geographically diverse portfolio is exceptionally well positioned through both backlog and program and competencies, which will drive growth in the coming years. We're seeing a post pandemic cycle where many of the countries where we operate in are increasing their defense spending. Tom will spend some time in a few minutes to discuss how our U. S.
Business is well positioned. In The UK, the Defense Command paper was positive for the group with a number of new program opportunities, strong support for exports, and commitment to our long term contracts on the key sovereign capabilities. Many nations in Europe and Asia Pacific are stepping up spending in response to the threat environment. Our footprint, relationships, and capabilities position us well to help our existing customers respond to these ever increasing needs, and we continue to build new relationships as we access and develop new markets. To date, we have seen good order flow across the entire portfolio, and we are ahead of our expectations to date at a group level, emphasizing the continued strong demand in the market.
So to summarize, the growth foundations are strong, the business is evolving positively, and the portfolio is well positioned for top line growth, margin expansion and cash delivery. With that, I'll hand it over to Charles, and I look forward to speaking to you all at the half year. Charles?
Thank you, Brad. And good to be speaking with you all today off the back of a positive start to the year. For context, back in November, we wanted to start to lay out a refreshed equity story highlighting our key competitive advantages and why we feel so excited about the positive evolution of the business. In November, we gave enhanced disclosure about our backlog and program positions with a focus on longevity of our key programs, unmatched diversity of the portfolio both in terms of geographic and capability terms and how it positions us for future growth. In February, we set out what the business is today and where we want to take it in the coming years with a strong focus on cash generation, margin expansion, investments in high end technology and driving our sustainability agenda.
All of that will position us to deliver enhanced performance for all our stakeholders. Today, we want to give greater detail around where we want to focus our technology investments to drive the future growth and give enhanced disclosure around electronic systems, a great sector for us and one we expect to be a continued growth engine in the future and really supports all those focus areas I just outlined. So moving on to the technology roadmap. You'll recall at the full year results, we highlighted our technology differentiators. We have fantastic incumbent positions.
We're a world leader in electronic warfare. We have the capability to lead the development of a next generation combat air system and one of the broadest capabilities in the underwater battlespace. And finally, we're a trusted partner to key global customers in cyber warfare. We're positioning the group towards a future growth aligned to our customer priorities, increasing self funded R and D to achieve this. We're maximizing opportunities to invest in our capabilities building on existing world leading technologies and programs.
Priority areas include big data, multi domain networks, autonomy, space and sustainability driven technology developments. So moving on to the threat environment. As many of you know, conflict is now much more than what's obvious on the battlefield. Grey zone attacks threaten democracies, economies, and represent an escalating threat. UK and its allies have clearly expressed their need to adapt in order to defend against and deter those who persistently try to undermine us in the gray zone.
We're also facing increasing physical threats from autonomy, hypersonics and space militarization. Clearly, need to defend against these growing physical threats from autonomous assets, the development of hypersonic weapons and other new military technologies and these are reflected in the defense priorities of The UK, The US and Australia. Gray zone and physical threats both rely on a data advantage. They're critically dependent on the ability to integrate, control and analyze data and to do this securely and rapidly. It's fair to say that if the enemy has the data advantage, then you won't be able to use your physical assets effectively.
And equally, if you lack the ability to take physical action, then battlefield, on your data advantage is negated. So So it's the combination that really counts. Our strength is in having the broadest portfolio of products, technologies and services of any defense company combined with our powerful and secure data capabilities. As per the UK MOD's Integrated Operating Concept 2025, we can help integrate the domains of space, cyber, maritime, air, and land in a truly multi domain network. I would suggest that no one else has the capability to build the most advanced submarines, develop a next generation combat air system, and design and build such a range of ships armored vehicles, and then securely link them together in a multi domain network.
We have expertise gained from working with governments to help gather, process, connect, and analyze their data securely. A good example of which is the automatic number plate recognition from Applied Intelligence, joining together 36 systems into a UK wide national database, the first of its kind in the world. It processes more photos in one hour than Instagram does worldwide in an entire day. This is part of The UK's critical national infrastructure. And with our help, this dynamic system now gives access now gives instance access to linked vehicles, crimes, and locations.
It gives police and security forces access to advanced analytics and live alerts. We have a strong track record in through life support activities, which are underpinned by our data capabilities. A couple of examples are as follows: In The UK, for the Royal Air Force, we're reducing the cost of Typhoon maintenance by almost 40% over the ten year Titan contract. And on the Queen Elizabeth class aircraft carriers, we're building an end to end logistics application that can help commanders deploy faster, considering everything from crew experience to material, spare parts to maintenance schedules. We bolstered our capabilities with last year's acquisition of Techmodal, a specialized data analytics company.
It brought us further capabilities in specialized military asset management and performance monitoring. A strong track record such as the Army's Veritas system, a data driven activity planning and forecasting application, has delivered cost savings of more than £60,000,000 to date. Using AI to integrate logistics with geospatial information helps commanders plan overseas deployments and ensure lines of communication can keep them supplied and mission ready. We are working closely with The UK's aircraft carriers to exploit data from their various systems. The combination of our domain knowledge and specific data capabilities gives us future opportunities in intelligence support contracts and multi domain networking.
It's worth saying that military and security data needs are different from the commercial world. Our track record in collating, processing and analyzing vast quantities of data securely is what sets us apart. Using our decades of experience in battlefield management systems, where we make sure the decision makers see the information that they need to see rather than overloading them with unnecessary extra details. The difference here is the ability to collate, process and analyze vast quantities of data securely and that's where our expertise lies. Moving now onto multi domain.
Increasing multi domain capabilities are the ambition of The UK, The US and other allies. In terms of recent public references we have The UK's Chief of the Defence Staff speech on the integrated operating concept, the DoD stating that The U. S. Must be prepared for multi domain operations and the Australian Defence Force's concept for multi domain strike. We are helping to solve these challenges.
As customers look to combine autonomous and crude assets, there's an increasing need for secure and resilient multi domain networks to link sensors and maintain command and control at all times. The networks that we build will share information from sensor feeds such as radar, infrared, visual and satellite imagery, while also providing command and control. Our experience gives us an advantage in integrating assets into a single multi domain network. We have deployed battlefield networks such as Falcon in use by the RAF and the UK Army. There is a vital need to grow these networks and cover greater areas involving space assets as well as the ability to continue operating in satellite denied environments, essentially creating a military mesh network.
We need to move on from joint networks where domains are just able to talk to each other to a true multi domain network giving you one view of the battlespace. Volumes of data will grow exponentially as we collate sensor information and other inputs, which drives a secondary requirement to provide trusted decision support with AI and machine learning. We have the expertise to do this, gathering diverse data from a range of sources, providing battlefield advantage using trusted AI to help commanders make well informed decisions. Some of the key platforms that we're developing now, such as Tempest and the Global Combat Ship, are being designed to be part of this multi domain future from the outset. They will be vital nodes in the data network providing data gathering and analysis capabilities as well as communication support.
Moving on to space. Space is another domain of growing importance which is being increasingly militarized and we have relevant capabilities to draw on. It's worth noting that if GPS satellites were disabled for just five days, the cost of The UK economy alone could be as much as £5,000,000,000. Applied intelligence built software defined radios for the European Space Agency, which could be deployed on a constellation of satellites, helping provide for secure and resilient space communication as well as positioning. This would form part of the multi domain network powering our forces with Information Advantage.
Applied Intelligence also runs a large part of the space procurement framework for the UK MOD, helping bring forward SMEs to the market. We have extensive capabilities in our electronic systems business as well, including radiation hardened electronics, which Tom will say more about in a few minutes. Moving on to unmanned and autonomous systems. Combining manned assets and autonomous systems will give our customers both the data and the physical advantage. We're doing this already with our existing manned platforms, combining sensor data and monitoring both internal systems and external surveillance.
Once combined with autonomous systems, this seamless data connection will give both a data and a physical advantage. And we're developing autonomous vehicles, several of which are in active trials with our customers already. For example, our P24 autonomous seaboat is already in trials with the Royal Navy. We're working closely with the Australian Army on its concept for future robotics and the autonomous systems program. And we've already successfully trialed autonomous vehicles with the Australian Army using a platform agnostic autonomy module that we're also developing for use in aircraft, including the solar powered Phaser 35 and also into Boeing's Loyal Wingman program in Australia.
We have further autonomous programs in The U. S. And of course Tempest. We're accelerating the development of further autonomous platforms such as our Riptide family of autonomous unmanned undersea vehicles. Unmanned components of the Tempest Combat Air System alongside our customers, we see this as essential to maintaining a credible defense.
With other militaries deploying unmanned assets as we speak, we have no choice in this regard. And in the future we see autonomous vehicles needing to perform a range of missions, complementing humans and taking on some of the most dangerous combat roles. I should make it absolutely clear that it's our strongly held position, in line with our customers, that there should always be human oversight in the use of force, but equally we must create a credible deterrent for those who would seek to harm us. Moving on to sustainability driven product innovation. We announced earlier this year our target of net zero across our operations by 02/1930.
Our customers are adopting similarly strong positions, and we're looking to help them with product innovations. For over twenty years, our ink business has been working on hybrid drive systems, which are now in use around the world in transit buses and in maritime, and now includes hydrogen fuel cell options. There are also opportunities to take more of this hybrid technology into the defense world, where key advantages include silent maneuvering and the ability to supply bursts of high power for emerging defensive and offensive capabilities. We're supporting customer ambitions such as the RAF's net zero bases by 2040 and supplying synthetic training to replace flying hours. And on that point, here in The UK, replacing flying hours with ground based synthetic training saved around 184,000 tons of CO2 being emitted into the atmosphere in just 2020 alone.
Furthermore, we're working with Williams Advanced Engineering to exploit electric motorsport battery technology on the Tempest program, using motorsport technologies to provide durable, fast charging capability. We're using similar electric technologies for some of our underwater assets to improve performance and efficiency. Not only is this more sustainable, but it may also give our customers a military advantage with potentially greater speed and flexibility. Looking at options for electric flight and in our US business where we're teaming with others to explore new developments for urban air mobility. We're accelerating the adoption of lighter weight materials for use in air platforms to reduce fuel consumption and by creating next generation sensors that give us more performance data.
Some of these sensors are already in use on the Phaser 35, the solar powered drone successfully flown in Australia. We'll be able to stay airborne in the stratosphere for up to a year at a time performing military reconnaissance or acting as part of a data network powered only by the sun. We're taking a rapid approach to developing technology with seed corn funding, including recovering waste energy in maritime platforms. Finally, through the use of advanced technology and innovation, we believe our sustainability objectives can go hand in hand with better performance. I have a short video here just to bring to light some of the key themes I've just outlined.
Conflict today is about much more than the battlefield. We need to defend against increasingly high-tech threats, both in the gray zone and physical conflict. The ability to integrate, control, and analyze data is critical. We're bringing our data analytics capability to current and future military platforms and helping governments and organizations to secure, integrate, and exploit their information. With a broad portfolio across every domain, we're helping our customers to develop next generation military assets and securely integrate them in a multi domain network.
The ships, submarines, and combat aircraft we're developing now will be vital nodes in this data network, helping gather and analyze vast amounts of data to deliver information advantage. We're investing in autonomous systems to take on a range of missions and help keep operators safe. Like many of our customers, we know the sustainability of our products is vitally important. We're actively looking at how we can reduce emissions from our products. We have set ourselves the target of reaching net zero greenhouse gas emissions across our operations by 2030 because we believe sustainability goes hand in hand with better performance.
Thank you. And I hope that gives you a feel for the high end technology positions we have and we're looking to further enhance and why we're so excited about the opportunities and evolving market for our capabilities. I'll now hand over to Tom to take you through why our ink portfolio is well placed for the post pandemic cycle with a particular focus on electronic systems. Over to you, Tom.
Thank you, Charles. Good morning from The U. S, and thanks again to everyone for joining us today. As Charles and Brad shared, today we will primarily focus on our electronic systems, or ES, business. But before we dive into ES, let me provide a brief high level overview of our U.
S.-based operations, which we refer to as BA Systems, Inc. This will include a quick look at our Platforms and Services and Intelligence and Security sector. Everything starts with our mission. We protect those who protect us. This mission inspires us each and every day.
Responsibility and privilege of supporting our brave men and women on the battlefield is felt deeply by our people, and this mission serves as the bedrock for our culture. It comes to life in our service to our customers. And with this mission driving us, we come into 2021 building on a strong performance last year. While we all know 2020 came with its share of difficult obstacles, I could not be prouder of how our team rose to the challenge. We kept the health and safety of our employees as our top priority.
We adapted and found new ways to work so that we could continue meeting our commitments to our customers. Through it all, our team remained focused and delivered positive results across our portfolio while successfully executing two large acquisitions and reaching record backlog levels. Earlier, Charles spoke about the transformational aspects of technology. At Inc, our teams have earned long standing leadership positions in a number of important areas that have helped us to build our franchise businesses and will continue to shape our future. Technology and innovation run through our culture, illustrated by the many patents we hold and by our investments in R and D.
These technologies and investments will continue to produce discriminating capabilities across the focus areas you see here, all of which align well with the priorities reflected in The U. S. National Defense Strategy. While our R and D investments are important, we sustain our leadership through collaboration with educational institutions and in partnership with defense laboratories and research institutions like DARPA, the Air Force Research Laboratory and the Office of Naval Research. And we also accelerate the pace and reach of our innovation by collaborating across our global enterprise.
Let me share one notable example of this. We are adapting proven technology originally created for commercial aircraft, and we're applying it to the Dreadnought submarine program in The UK. For decades, we have held a leadership position in state of the art flight control systems. Now we are applying our fly by wire avionics to, in effect, fly a Dreadnought submarine. If you think of how a submarine moves through the water, you might recognize that their control characteristics are very similar to an aircraft.
It's all about fluid dynamics. And now we're seeing how all those years of high integrity control systems expertise in the air can be translated underwater. I see this as an exciting way we're using our technology and leading edge capabilities to innovate, and we're taking this kind of collaborative approach across our diverse portfolio. BA Systems, Inc. Is a diverse business comprising three sectors: Electronic Systems, Platforms and Services and intelligence and security.
These, in turn, comprise a total of 17 business areas providing products and services from the depths of the ocean to the far reaches of space. We have maintained a diverse portfolio and are not reliant on any one program or military service. And we have aggressive customers, which provides us stability and diversity that benefits both our company and our investors. Over time, and as we have discussed before, we have very intentionally been working to align our portfolio to The U. S.
National defense strategy. Even in an environment where defense spending may be flattening, The U. S. Is still the largest defense market in the world with enduring support for these priorities no matter which political party is in the majority. We've visually shown on this slide how our business sectors align with our customers' requirements across all domains and service Speaking of customers, you'll see on the left side of this chart that our U.
S. Government business accounted for a little more than 80% of our total sales in 2020. Another 11% of revenue was international, primarily through foreign military sales via government to government agreements. The remaining third segment in yellow represents our commercial sales, was down to 7% in 2020, primarily due to the pandemic's effect on commercial aviation. But we expect to return to more normal levels in this important commercial segment as air traffic eventually returns pre pandemic volumes.
Now taking this a step further, we've broken out the 82% of U. S. Government sales over on the right hand side of the chart. Here you see we have a good mix of revenues across our Department of Defense military customers, the intelligence community and other defense and federal or civilian agencies, with a strong backlog in place across the board. Now let's take a closer look at the 11% international portfolio.
We currently export a variety of core franchise products ranging from combat vehicles and aircraft equipment to naval guns and communications hardware. We have strong relationships with our international customers that support existing and follow on exports, but this is another area of our diverse portfolio with significant opportunities to drive future growth. Across all of these international relationships, we remain focused on developing our technology capabilities, performing for our customers and growing our top line. Now let's take a quick look at Platforms and Services, or P and S. Here, you see the P and S sector highlighted in the graphic with a mix of businesses spanning both the land and maritime domain.
With a significant order backlog and strong incumbency positions, we have a diverse customer base and an extensive operational network of facilities with capacity to deliver on our commitments and match our customers' demands for readiness and modernization priorities. While last year was a tough one for P and S largely due to pandemic induced supply chain disruptions, we started this year running at pace, and the team is on track to deliver our 2021 plan. A substantial driver of this plan includes our strong portfolio of combat vehicles, both here in The U. S. And internationally.
Our major combat vehicle programs are captured here from our U. S.-based combat mission systems business and from our Haglund business in Sweden. Despite pandemic headwinds, last year, we transitioned to full rate production on the M109A7 and Amphibious Combat Vehicle or ACV. And we also began LRIP deliveries across the five Armored Multipurpose Vehicle or AMPV variant. To give you an idea of our improvement in performance, we delivered more than 40 combat vehicles out of our U.
S. Business in March compared to just 14 in the same month last year. Of course, it's also important to note that not all of our combat vehicle awards are U. S. Programs.
We've likely seen a number of significant recent awards for CV90 and BBS10 vehicle upgrades as well as some for new production out of our Haglans business region. In total, we have about 1,200 combat vehicles in our order backlog, and I'm pleased with our recent performance delivering these capable vehicles to our customers. Meanwhile, we are well positioned to compete on other emerging next generation program opportunities as well. As we look ahead for P and S, I want to reinforce that we remain focused on operational excellence. This is vital to our success since we recognize we will win and grow in the future based on our performance today.
With this firmly in mind, we have been notching up production rates and employing innovative robotic welding and manufacturing techniques never before used for building combat vehicles. We're applying virtual design techniques through modeling and simulation tools, which are paying dividends through increased efficiency and reduced costs. We're delivering not only across the combat vehicle programs we just covered, but also across our naval gun and weapon systems programs, such as the Virginia payload module tools for the U. S. Navy's Block V Virginia class submarine.
The healthy backlog we have in our P and S business, coupled with our consistent progress on meeting customers' requirements, expanding our core franchise positions, all give us confidence in our position for future growth. Now I'll spend just a few minutes on our Intelligence and Security business. While our I and S business is the smallest part of our portfolio, the team works on some of the most sensitive and critical national security missions across the government, and we continue to seek growth in this sector. Much of the time, INS employees work alongside our customers at their sites across The United States. And over the past several years, the sector has been growing its position as a systems integrator to expand into larger and more complex opportunities.
As we grow, we are very well positioned with our customers' priorities. The INS business portfolio spans platform readiness and modernization, C5ISR system engineering and integration, digital systems integration for IT, secure cloud and cyber solutions and space solutions for radars, radar ranges and launch infrastructure. And all of these market positions are aligned to the National Defense Strategy we reviewed earlier. Underlying these strong positions are our leading capabilities and technology discriminators, which provide a competitive advantage as we maintain an enviable bid pipeline to recompete on existing contracts and secure new awards. Now that we've briefly covered the P and S and I and S sectors, let's take a deeper look at our electronic systems sector.
In 2020, the electronic systems sector represented nearly half of our sales Systems Inc. Across a blend of U. S. Military, international defense and commercial sales. And as you can see in the chart on the left, the business was remarkably resilient during the pandemic despite the market downturn in Commercial Aviation.
Looking forward, we have a positive outlook for growth this year per our guidance. When we think about the ES market space, we think about it in terms of the defense and commercial markets. On the defense side, we've just talked about how well the ES portfolio is aligned to the national defense strategy, and in particular, positioned to counter evolving threats from countries like China and Russia. As a world leader in electronic warfare capabilities, we continue to grow this area of the business to address emerging requirements, and this includes developing the ability for our military services to interoperate in the joint environment across all domains. In The U.
S, this is increasingly referred to as joint all domain operations or JDO. Charles mentioned this focus on joint operations earlier, and it's becoming a critical element of program requirements and force modernization. On the commercial side, we have adjusted the size of the business to address COVID related challenges and headwinds, and we remain well positioned here for the eventual recovery. Meanwhile, we're continuing to invest in electrification and hybrid solutions for both transit bus and aviation markets. These rapidly developing markets are showing increasing demand as BA systems in the countries where we operate commit to addressing climate change.
As mentioned earlier, our technology leadership underpins our objectives for growth, and we must sustain those leading edge positions and expand them. The engine that fuels our trajectory is our FAST Labs organization, where we develop new technologies that align with future customer requirements. This innovation hub for our business brings together a number of stakeholders to invest in and advance these technologies, creating an innovation ecosystem that fosters and cultivates scientific research and discovery. As you can see, the FAST Labs innovation model brings our internal R and D teams and technology scouting function, together with partnerships we've built with defense laboratories, universities, other companies and venture capital groups, all working to identify and develop differentiated technology across our focus areas. Of course, we must sustain our R and D investments to ensure we maintain our technological edge and then remain agile and adapt to reinvent ourselves based on our technology discoveries and our ability to predict which technologies will matter most to our customers over time.
We accelerate our progress on this front when we're working with DARPA to gain insights, tour scientific breakthroughs, and then apply these new technologies on future customer programs. Let's take the last focus area here as an example of where we are advancing what state of the art means in quantum sensing, which is one area of research that presents significant potential impact. FAST Labs is developing new sensing science and technology for detecting radio frequency fields. These new capabilities could break the paradigm of traditional antennas by decoupling the antenna size from the frequency it's trying to sense. Currently, fairly large antennas are needed to sense low frequency radio signals, but our quantum sensing technology represents a shift away from metallic antennas and introduces the concept of an excited gas becoming the sensing mechanism, meaning the antenna could stay small no matter what frequency it needs to sense.
Imagine antennas that would otherwise be several feet long suddenly fitting into one square inch in the palm of your hand. That is where this technology could take us, and it could fundamentally change how our military customers can harness the power of the electromagnetic spectrum to detect threats. Let's pause here and watch a brief video to give you a glimpse of how the team at FAST Lab thinks about innovation that will shape the future of our industry.
Evolution shapes our reality, driven by space and time, exploring, searching, always looking for what's next, transforming change with a plan that keeps us a we're what fearless innovation. We are FAST Labs.
As you can see, we're working to attract extraordinary talent to our Bath Lab team, people who can see our world differently and build on our foundation of transformational technology. We mature the differentiated technologies we develop in Fast Labs for application on our programs across our ES business portfolio of products, services and capabilities, spanning the six business areas shown here and supported by Fast Labs as our technology and innovation hub. Overall, ES is where much of our high end technology comes to market, both in the unclassified and classified domains. And again, the range of products and capabilities delivered by these businesses are well aligned to our customers' needs. You can see this alignment to the National Defense Strategy where we've bolded those priorities.
I'm not going to spend a lot of time on the details here, but I wanted to give you a brief look at each business area and have an idea of which programs are covered by each ES business. Now let's focus a bit more on these US defense priorities. With The U. S. Defense market representing nearly three quarters of our 2020 revenues, let's take a closer look at the defense side of the ES portfolio.
This slide further illustrates the joint all domain operations requirements we've mentioned and how our products, services and technologies are supporting our customers' current and future requirements. This JADO capability, sometimes also referred to as JADC2, which stands for Joint All Domain Command and Control, is critically important to us because our customers are increasingly addressing threats across all of these domains during a single operation or while addressing a single challenge. And as you can see, we're well aligned to this evolving priority. And one of the ways we will remain in the forefront here is by continuing to develop new differentiated technology. On the next several slides, I'll walk through some of our primary capabilities within the ES portfolio.
One of our capability focus areas is autonomy, a capability important to several of our ES businesses to include those identified in the boxes across the top of the slide. Our customers are focusing on autonomy and autonomous systems, particularly in the area of mannedunmanned teaming, or MUMT. Across multiple domains, the ability to send unmanned systems ahead of or alongside a manned platform is a fundamental game changer. And the real discriminator here is the ability to fuse data through multiple sensors and across multiple platforms to have a full three sixty degree view of the battle space without putting our people in harm's way. For the US Army, this priority is captured in its a team program or advanced teaming demonstration designed to progress the capabilities that are expected to become critical components of the Army's future vertical lift program.
For the Air Force, it's the Skyborg program, which aims to create a low cost autonomous UAV that will partner with manned aircraft to serve as the eyes and ears for pilots and increase battlespace awareness. Our decades of expertise in advanced real time mission management provide a competitive advantage as we look to capture opportunities in this area on JADC2 or JADO, requirements and programs where we can leverage our artificial intelligence and machine learning enabled tools. Turning to electronic warfare, or AW, I'm going to be a little bold here and say that this is really the area where we're most well known. For us, this capability is key to both our countermeasure and electromagnetic attack and electronic combat systems businesses, where we have six decades of proven experience in this area. In fact, our EW systems are repeatedly selected to be on the most advanced platforms in the world.
And as a result, we're on more than a 120 different platform types, including fifth generation fighter aircraft such as the s 35. Our electronic warfare portfolio includes our EPOS system on F-fifteen aircraft, a platform which has regained prominence in the U. S. Air Force plans for the future. Earlier this year, they issued the first low rate initial production or LRIP contract to enable ten years of production options and establish another franchise program in the electronic system sector.
And we're not just sitting still here. Our work with the F-fifteen EPOS program is a step on the journey to full spectrum electronic warfare we are implementing across the sector. We have a three pronged strategy that will help maintain our industry leadership in electronic warfare and deliver the next generation of electromagnetic defense across our core franchise positions on EW programs. This next video touches on some of those initiatives and what we're doing to ensure mission success.
For decades, we've stayed ahead of our adversaries because of the innovative minds who came before us, renowned for targeting the next challenges facing our servicemen and women and producing the most advanced electronic warfare systems. The world is changing. The future is interconnected from the sea to the stars. Enabling us to always be ahead of the next evolution of threats. We have a plan for next generation advantages to detect, identify, locate, and eliminate evolving threats of the future, where our diverse and inclusive pool of talent utilizes the most advanced design and manufacturing approaches.
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next generation technology and processes into every phase of production. We are shaping the future of full spectrum electronic warfare capabilities for both defense and attack applications through 2040 and beyond by implementing agile engineering, advanced manufacturing, and sustainment solutions. VAE Systems will create the market's fastest pathway from the lab to the field. Together with the U. S.
Armed Forces and our allies, we are defending democracy around the globe.
Our customers are really excited about these future levels of capability across both offensive and defensive systems, leveraging our differentiated technology in this area. Next up is our communications, navigation and identification capabilities, or C and I, which is also a growth area for us. As many of you know, last year, despite an ongoing pandemic, we completed two significant acquisitions of the airborne tactical radios and military GPS businesses, and both of these businesses helped to strengthen and redefine our C and I offerings. I'm really excited about the expansion of this part of ES, and I'm very pleased with the progress we're making on the integration of these two businesses to augment our growth trajectory in this area and enhance long standing capabilities where we already held distinct positions in mission critical secure communications and IFF or Identification Friend or Foe Systems. Our Link 16 and other tactical data links, our airborne tactical radios, military GPS and other products are providing discriminating technologies in this important C and I capability area.
And speaking of our growth trajectory in this area, just yesterday, we announced a new $325,000,000 contract to provide M Code, our military code GPS modules, to the Department of Defense, and this particular contract runs through 02/1930. This is a healthy addition to our already strong order backlog where we are supporting multi domain operations. Turning to space. It's no secret this is a big growth market. And for almost every piece of hardware that is launched into space, our radiation hardened electronics are needed to run that software that's behind the hardware.
In fact, we have components on more than 1,000 computers over 300 satellites. Earlier this year, it was a real thrill to see our RAD750 processors helping to power and control the Mars Perseverance rover. While much of our work in space is classified, our focus remains to capture new business in this growing market and address emerging requirements for space security. In this next capability area, we have more than four decades of proven technology experience in precision guided munitions. Our systems enable precision fires in contested environments often at very long distances and with the key capabilities listed here.
For example, we continue to produce the sensor technology for the long range anti ship missile, or LARASM, which is a great example of a technology born in FAST Labs that was matured and is now integral to this important program. Looking to the future, we're aligning our focus on the evolving and persistent threat environment with advancements on some of the more prominent programs to include the next generation of APKWS and SAS. Turning to our unmanned systems in the undersea environment, we acquired Riptide in 2019 to bring some advanced capabilities into the company. We also stood up a production and prototype site to increase our capacity in this area, and this has made it possible for us to continue developing the RipType family of vehicles that span the micro and small form factors. With the addition of the UUV-twelve, we are expanding the portfolio into the medium sized UUV segment, sometimes called MUUV.
We're currently awaiting the Navy's decision on its MUUV program, and I believe this is a market where we have potential for growth. In addition to entering that medium sized category, we're also leveraging our highly flexible small UUV platforms to compete for and perform current and emerging commercial and military missions. In our final capability area, we take a look at our electrification technology. I believe this area has significant growth potential while advancing our commitment to environmental sustainability. As a global leader in electric drive propulsion for transit buses, we've delivered more than 13,000 systems.
And these systems, assuming normal duty cycles, can save over 28,000,000 gallons of fuel and prevent more than 313,000 tonnes of carbon dioxide gases from entering the Earth's atmosphere each year. Here's a look at how our electric drive propulsion systems are helping our customers around the world get to zero carbon emissions.
Zero. Zero is a binary figure. It is commonly known as an absence of any quantity. But of a new tomorrow. As the world strives to improve air quality for future generations and works to create a sustainable environment, BAE Systems is at the forefront, developing innovative electric technology that helps our customers reach their clean air goals and get to zero emissions.
BAE Systems has over two decades experience in designing, integrating, and supporting electric drive solutions. Our expertise provides the leadership needed to fulfill our customers' needs. Built on the same proven technology as our leading electric hybrid BAE Systems' all electric options provide the same reliable experiences operators around the world expect. We know not every customer is at the same point on this journey. Some are closer to zero emissions than others.
Our flexible lineup of solutions means you can take a customized journey towards getting to zero, whether in increments or one giant leap. The first step or the last. Our mission is to work with governments, municipalities, and companies around the world to achieve one goal, get to zero.
So as we take aim at getting to zero and addressing climate change, we're working on our next generation Gen three electric drive system, as well as air mobility and hybrid engine technology. We're also well positioned in the commercial air mobility market as we look to pair our expertise in flight controls with our aircraft power management and energy systems. Here, we have one last video that highlights what we are bringing to the future of green powered flight. All right. We're very proud of this amazing technology and how it supports our customers' environmental sustainability goals as well as our own.
Overall, I feel our Electronic Systems sector is well positioned for growth through our alignment to the National Defense Strategy and the mix of our portfolio. We're maintaining a clear focus on cutting edge technology, including emerging ESG related technology. And the resiliency, flexibility and diversity of our employees are an invaluable strength as we turn the corner to emerge from the pandemic. Across the EF portfolio of business, we have strong positions today, and we see an extensive range of growth opportunities for us to seize going forward in the defense and commercial electronics markets. So as I think about where we've been and where we're going as a company, my team and I are focused on a few key pillars to drive our success: strong financial and program performance, technology leadership, aligning to our customers' needs, investing in our portfolio and ensuring we maintain the best workforce and culture to deliver successful outcomes.
All of this together will position us to continue our growth trajectory, expanding our margins in the process and creating even more value for our shareholders. I'll end where I began. Our mission inspires and guides us in everything we do every day. I'm optimistic and excited about our future. And now I'll turn it back over to Charles.
Thank you very much, Tom. So in summary, we've had a good start to the year and I hope today has highlighted many of the great capabilities we have and are developing for the future and why I am so excited about the opportunities ahead given our many unique capabilities. So just to end on this slide we presented in February to summarize where we are. Our large order backlog, incumbent program positions, pipeline of opportunities, together with our focus on program execution, positions us to grow our sales profitably and increase cash conversion in the coming years. We are evolving this business to have an appropriate sustainability agenda embedded at its core with a constant focus on consistent operational performance and value creation.
Generation of higher cash gives us increased strategic flexibility focused on technology aligned to our customers' priorities, many of which you may you will have heard about today, and we are well placed to deliver appropriate shareholder returns. Thank you all for listening. I look forward to speaking with you and hopefully seeing many of you in the not too distant future. With that, we shall turn it over to questions. Thank you.
Your first question today comes from the line of Robert Stellard from Vertical Research.
Thanks so much, and good afternoon.
Hi, Rob.
I've got a couple of questions for you. I think one for Charles perhaps and then one for Brad. It might be Brad, but we'll see. Anyway, first of Charles, you mentioned on that last slide about capital allocation. I was wondering when you might be in a position to announce some some more on this and perhaps, you know, when we might see perhaps a share buyback starting.
And then secondly, you mentioned a lot of the ESG related technology you have in the portfolio. I was wondering if there are any opportunities to essentially monetize some of this activity or have you looked into forming joint ventures or other structures to help you selling some of this technology into commercial markets? Thank you.
Yes. Maybe I'll just tackle the last one first, and then you want to say a little bit on the buyback question. So on ESG, I mean, I think the point of the presentation is it's not new to us. It's something we've been doing for a very long time. And I think that we are with respect to sort of air mobility, looking at various partnerships.
There's a couple we've announced already such as Jaunt, but there are others that we're looking at as we speak. And I think in that area in particular, it will be through joint ventures and the work that we already have often with some of our existing strong partners. So I think there are real opportunities for us there. But as I said, it's not something that's new in our portfolio. But obviously, with the sort of societal demands, we do see that as a huge opportunity for us going forward.
And we've got some real technology leadership positions within the space. You want to say a little bit about capital allocation, Brad?
Yes. Hi, Rob. Well, as we said back a couple of months ago, first of all, we are very pleased that the business is growing as it is, and we've got confidence in that continued trajectory, and that gives us a lot of flexibility with margins expanding and free cash flow building. And we did say that share buybacks would be we wanted to be an important part of our capital allocation going forward. I'm not going to be drawn on timing, but I think what we said still remains the case.
Your next question comes from the line of George Lowe from Bernstein.
Hi. Yes. Good afternoon. Good morning. Maybe for Tom here, how should we think about investing investing maybe for all the higher growth business that that he talks about?
You know, can you simultaneously, you know, grow the business through the investments, but also, you know, expand margins? I think in the past, you know, you've talked about the segment commanding a volume portion of the company's self funded r and d. And, you know, we've seen the kind of the segment margins kind of hover between the 1515.5% over the past few years. So I guess how do you think about growing the margins organically while you invest for, you know, these areas?
Sure, George. And you can you can imagine that's a that's a natural conflict in the those two directions over time. And this this is something that we have done now for decades, and that is, you know, find find ways to invest in these key critical technologies internally, but by leveraging outside connections and outside investment as well. I mean, we we do several $100,000,000 a year worth of business with DARPA, for example. And if you step step back and look at our total r and d investment, that which comes from within and that which comes from without, through our customers in the form of CRAD and other development sources, we leverage for every dollar of internal investment, we get about 14 from other sources.
So that leverage, that 14 to one leverage, kinda underlies and and fuels our ability to to focus on expanding margins while continuing the level of investment that we've traditionally done. And so every year, it's about where are we gonna steer these dollars, you know, where how how are these investments gonna be best applied. And through that network of of partners that I I mentioned during the brief, you know, we work to to pool our resources in a way that ensures that we're moving technology forward at a a reasonable expense. And that gives us the opportunity, particularly on our larger production programs, to focus in fuel margin expansion over time. I hope that's helpful.
Got it. And then on the, you know, the alignment to the different different priorities that you walked through, you know, is is there any color you can provide on how much exposure, you know, the portfolio today has in terms of revenue and the opportunity there?
Yeah. George, that's a great question. I think what we we what we try to do is understand, you know, supply into the services at multiple levels. Right? Sometimes we're a platform provider.
Sometimes we're a systems provider, component provider, multiple tiers. And so we're working up through the tiers to understand that alignment. It's very difficult to put a number on how much of the portfolio is exactly aligned with those requirements. But everything we do as we discuss this with our customers, as we look at where they're putting their bets and where their money is ending up their budgets, we feel really good about our alignment. It's all sort of manifesting customer pull, and we see that in our orders backlog.
Again, step back and looking at it big picture, I think our portfolio is very well aligned for the future.
Great. Thanks.
Thank you, George.
Your next question comes from the line of Christophe Renard from Deutsche Bank.
Yes, good afternoon. Thank you for taking my question. I had a first question on The U. S. Combat vehicle view that you presented in this presentation.
Is it challenged by the current U. S. Budget discussions? Second question is how the great capabilities that you've presented in this presentation, are they all transferable to The UK or other countries? I mean, I get that ES is very well exposed, but it it's obviously well, it's obviously a US entity.
And lastly, just a question on the people. Software engineer seems to be in demand for all the capabilities you're trying to develop. Are you planning to hire more of the software engineers, or do you already have a favorable, I would say, mix in your in your workforce? Workforce.
You, Christophe. Great question. Sorry,
Tom. You go ahead on the combo vehicles in particular.
All right. Very good. So Christophe, as you know, we don't expect to see the details of the budget until it's formally released sometime, I guess, now later this month, maybe early next. You know, there has been some speculation around how the various services would fare that the army budget might see some pressure and that more funding might be available to the Air Force and Navy. And this remains to be seen, but we have been hearing about that, and you've probably read about that in the press.
You know, I think, again, as we step back, given our alignment to the defense strategy priorities, we'd expect any of upside and downside across these various service budgets to net out across the portfolio. You saw on the one chart that we're pretty well spread around the services, and much of the work that we've done in those capability areas you know, sort of aligns in across those services with no one being prominent. And so we'd expect that to to net out. You know, I mean, if we look at and the combat vehicles in particular, you know, the amphibious combat vehicle, for example, is our is a navy program and is already well supported, and we expect that to continue for sure. And we also keep in mind that the f y twenty two budget about to be announced, that's not gonna ripple through to the production lines for a couple of years.
And we've got something like 1,200 combat vehicles, as I mentioned, already contracted and funded ahead of us. And so, you know, we do predict that there will be some budget adjustments on programs, you know, like AMPV, for example, where it's just to reflect the alignment of the funding to the agreed COVID adjusted production schedules as happened last year. Of course, that's already reflected in all of our plans and guidance. I just say on our in our conversations with our customers and what we're seeing publicly, the army continues to reiterate its commitment to modernization and to the priority of these next generation combat vehicles like AMPV. And our performance has been good and improving across the board.
We also mentioned the international upside opportunities, as discussed. And so all in all, I feel really good about our portfolio and its resilience looking forward into the budget environment we face. I hope that's helpful.
Thank you, Tom. And I think maybe on the transfer of technology, I mean, you see a lot of common ground between the multi domain and my piece and, for example, Tom's piece. And in terms of trying to it's fair to say that across our portfolio, I think we're getting better every year at finding opportunities to collaborate across. And not surprisingly, amongst the Five Eyes nations, interoperability is absolutely key. So I think much of the direction of travel that, for example, Tom talked about in ES is something that we obviously look to bring across into The UK business and into the Australian business as far as you possibly can recognizing national security constraints.
I don't know, Tom, if you want to elaborate a bit more on some of the collaboration efforts that we're looking at there, like Skype or Skype
work for you. Yes. I think as we pointed out, I mean, this our global footprint makes us And while there are regulations in place that put some constraints on what we can share and what we can't, there are processes by which we can get approval to make to sort of work this technology export. And we're getting very good at that. And so in the areas where it's possible, we're seeing a really good progress.
We talked about the Dreadnought submarine example for as one. You know, the phase of 35, and Charles might have mentioned this, but, I mean, we are we're it's here in The US. The prototype has flown. We have some customer interest in that platform, and we expect to see some trials and demonstrations coming up soon. And so there's an example of UK product coming this way.
And so this this is an area where I think there's more leverage to come. It's just a matter of making sure we're following all the appropriate procedures with respect to ITAR, etcetera. But I think good potential there.
Yes. Very good. And the last question I think Christophe had was on software engineers and the growing importance across the whole portfolio in all of our markets. And I think it's fair to say that we've been successful at attracting and retaining. It is a hot market, but we have long standing internship programs and development programs for that group of employees.
And I think we've been pretty successful at attracting some really outstanding talent in that. I don't know, Tom, if you want to say a bit from the portfolio software engineers.
Thank you, Charles. I'd echo that and also say one thing about software engineering is that it really is conducive to remote operations. Right? As we head into a more hybrid environment that we expect as the pandemic lifts, there'll be significant flexibility for those who are able to operate in a more remote environment. I think that's gonna drive those companies who have that kind of open mind into a better place.
And so we're expecting to leverage that. As Charles points out, it is a hot market. Engineering schools, though, are cranking out software engineers in number, and we've been pretty competitive in bringing those resources in house. And we expect to continue to be competitive. Thank you very much.
I was going to just take a question that's coming online. And the question, I'll just read out the question. So there's a lot of focus on organic investment. Can we talk about M and A? And where will you be directing focus?
How should we think about metrics when you're investigating tech bolt ons? So it's fair to say there has been a there's a fair focus in this presentation on organic investments simply because we do see real opportunities for that. And the areas that we've historically spoken about for increasing that self funded R and D are also the areas naturally that we're looking at from a tech bolt on perspective, I mean naturally around electronic systems and also around the air sector in The UK, around things like Team Tempest. So I think those are the sort of areas. And certainly on ES, I think Tom has already given us a very good canter around that business And as mentioned, some of the bolt ons that we've already done.
And needless to say, around that space, we're still interested, we're still looking. Those are active areas where if we can find the right opportunities, we'll certainly be pursuing them. From a sort of a financial evaluation that Brad, do you want to say a little bit on that?
Yes. Mean, look at a lot of different metrics on evaluating investment projects. I mean, net present value is the critical one and making sure that we get sustainable returns on capital employed above our cost of capital and NPVs that are positive. So that's the primary metric we look at. We also wanna make sure there's a really strong strategic fit where we can really have a sustainable competitive advantage.
Those are the basic criteria we look at for M and A decisions. And I think our balance sheet is in very good shape, and I think we have flexibility to do what we need to do to broaden our portfolio if that opportunity comes up. But we've done the bolt ons recently and we'll continue to fill in sort of technology gaps with bolt ons and continue to look at M and A opportunities.
Yes. And we'd love to find more opportunities like the two that we did year. I don't know Tom mentioned it already, but do you want to say a little bit about how those are going, Tom?
Yes. As I said, Charles, I couldn't be more pleased with how well these businesses have integrated. The cultures have meshed perfectly. They are already prolific contributing members of the VA Systems family here. You know, continuing as the teams have been able to get together more here as COVID starts to lift, driving for opportunities, synergistic opportunities, and some of that tied back to the the CNI capability area I mentioned during the brief, a big piece of what will be the multi domain operations focus going forward.
And so we see we're really pleased with those, and we see that continuing.
Thank you, Tom. So we'd take another question online if there are more questions.
Thank you. The next question comes from the line of Nick Cunningham from Agency Partners.
Thank you. Good afternoon and good morning, gentlemen. Christophe asked me by JIT and ITAR questions, so I'll have to move on to the nerdy, techy ones. Charles mentioned, the possible use of software defined radios, I think, on low Earth orbit satellite constellations. And interestingly, you said secure comms and positioning.
So am I right in thinking that we're talking here about potential affordable, satnav system, presumably UK sovereign controlled satnav systems? So that that's question one. Then question two, there's a lot of talk about sort of loyal wingman type, systems. The question there that that that sort rises in my mind is, how do you manage the workload of a single pilot, when given the limits of applying AI? So there's a doctrinal limit, if you like, of applying AI to lethal systems?
Or do we need to seize aircraft? Thank you.
I think on the latter one, it is careful and considered use of AI to make sure that the pilot in a modern combat environment is managing the mission as much as he's flying the aircraft. And it's something that we've worked over decades to improve and make sure that the pilot gets the information no more and no less than he needs to properly execute the mission. And it's something that we work very carefully with our customers On the first question, I probably won't be drawing too much on the specifics around it other than we've got a number of space capabilities already within the portfolio. And I think that we're working now to make sure that we knit those together in a very cohesive way in the context of things like Tempest, which is very much a systems of systems program. So I think there will be more to say on that.
And you will have seen, of course, here in The UK, the integrated review speaks fairly extensively about space capabilities. And obviously, we're keen to make sure that our strategy in that part of the market is well coordinated with the UK government's ambitions. That's about all I can really say on it.
No. Thank you very much.
Thank you, Nick.
Your final question at this time on the telephone line is from Charlotte Kirros from Barclays.
For taking my questions. I've got three. First one's on cyber. Clearly, we're going focus on interoperability and multi domain, we've seen and this is that we started in the integrated review of The UK. So now you're realizing cost benefit in AI.
Could you comment on growth expectations for the business in the medium term? And then in The US, do you feel you've now got the right portfolio in place for C and I, or are there any gaps remaining? Second question on Maritime. Just in relation to the SMST follow on contract that you received in The UK recently. Given the MAD is getting more output focused, I just wonder whether the delivery terms are more onerous versus the prior MSCF contract.
I'm I'm just looking in the context of what was a very strong operational performance last year at the divisional level. And then finally, on on the pension, you mentioned that IAS 19 and actuarial assets have appeared lower. Just wondering if you could put some numbers around that or or quantify the change that's pretty bad. Thank you.
Very good. I'll probably work in reverse order through that. On pension, I'll hand that over to you, Brad, in usual fashion.
Yes. Hi, Charlotte. Yeah. We've, of course, seen some significant moves in in bond yields, you know, which which does, you know, diminish the liabilities, and we've had good asset performance on the back of that. So, we've moved down probably 40% in excess of that in terms of where we started the year with.
So the deficit has lowered by in excess of 40%. Of course, it is subject to little bit of volatility with bond yields, but that's where we're at today.
On FMSP, I think we're very pleased with the outcome there. And in fact, the parts of the sort of waterfront or landscape that we actually won within that, and I think we're confident that we can maintain our traditional margins there. So pleased with the outcome there. On cyber, I'll let Tom say a bit about our his view of our portfolio in I and S. I think on Applied Intelligence, my view is you'll have seen in the integrated review that, I mean, cyber is getting significantly increased attention from the UK government.
We've yet to see exactly how the budgets for that roll through. But my expectation for that business is certainly a high single digit growth rate for that business. And I think given the support that it's getting in government products at this point, I think that is something that we can achieve. On the INS portfolio, Tom, do you want to just comment on your feelings around the strengths of the INS portfolio?
Yes. Thank you, Charles. And hi, Charlotte. We talked about this a little bit in the in the brief, but I mean, the the team has done well to position themselves in what I consider very appropriate niche places across their market, you know, working on very sensitive programs. And, you know, their their growth strategy has worked in the last few years.
In fact, they've shown a a a book to bill greater than one now, three years running, which is a reversal of the trend in years before that. And so they're focusing on the right parts of the pipeline. You know, with respect to cyber, I think what we're seeing there, and and certainly with the events around the world here in recent months, not the least of which was the recent pipeline hack, you know, more and more attention to vulnerabilities. And so I think that brings opportunity across the board. I think we're hearing about cyber, you know, less as a thing unto itself and more as something that it just sort of runs through almost everything we do.
And so anywhere where we're involved in networks or, you know, cloud interface, etcetera, we have to be be able to bring a cyber perspective to that. And so that kind of expertise is there. Again, not be and and so we wouldn't sell cyber as its own thing, but cyber is part of much of the services that we already perform. And so that between the between what we feel has I mean, potential for increasing demand and that kind of approach to being cyber in everything we do, we see good continued opportunity for INF. I hope that's helpful.
Yeah. That's very helpful. Thank you.
Thank you, Charlotte. I think we've got another question coming from, I think David, you may have a question, David Perry.
We certainly do. Thank you. Your line is open.
Yes. Hi, gents. Thanks for taking the call. I had just two questions, please. One was, you had the little accounting reset.
And so the margin last year, it was 9.8% on a new basis. I just wonder how much upside do you think there is over the coming years from that base. I mean, is 11 a pipe dream, or is is that something realistic? And then the second one was, UK tax. There's quite a big increase potentially coming in in a couple of years, but I think with the caveat that there's significant deductions for companies that have high investments.
And I just wondered whether your advisers on tax have given you any thoughts on how that might may play out for BAE, please. Thank you.
Thank you, David, for the questions. Maybe over to you, Brad, on those two.
Yes. Hi, David. Yes, we do see real good opportunities for margin expansion, and we're really pushing across the sectors to identify those opportunities and realize them. And I think in the short term, in 2021, Electronic Systems and Platforms and Services will be two sectors that really will be driving margins pretty significantly. Of course, P and S had some COVID impacts in 2020, which are receding fortunately for those businesses.
So there will be good margin expansion coming from P and S. And Electronic Systems will have a full year of the acquisitions in 2021, and so that obviously drives margins higher for ES. The other things that we're looking at are all about efficiency of operations and really looking at where across the entire portfolio we can improve our resource efficiency, our utilization and our administrative costs to push margins higher. And I've talked about analytics and what role that's playing in it. We're really driving where we can.
I think there is a path to progressive margin expansion. I won't call the ceiling on that, but certainly, we see a good movement in 2021 versus 2020, and there's room to grow from there. So I think we're on a really good path, I do see progress that we're realizing right now.
And on UK tax? Yeah. UK tax, you know, of course,
those don't really kick in until 2023. So we'll, you know, we'll have to see how that moves. I think there'll be a lot of changes there. And as you said, there's gonna be some credits that that will, you know, be there for incentives for for different activities. So it's kind of hard to make a call right now on where that all winds up.
I do think directionally though, over the medium term, you are gonna see increasing ETRs, you know, from a combination of what we're seeing in The UK and, of course, what likely happened in The US. So I think for your models, you can, you know, you can probably just assume that those are directionally up. Thank you.
Thank you very much.
Do you have any other questions, sir, if you have time?
Very good. Yeah. I think we've got time for one more.
And it comes from the line of Andrew Gollum from Berenberg.
Yeah. Hi, everyone. Thanks for taking my question or questions. I'll squeeze a couple more in.
So
the first one is around all this need for or a need for data and information security within the offering. So my question is is does the business model change, or how does the business model change from a you know, BA is historically a it's a program led business. So is there anything that we should see gradually shifting in in terms of business model? That's the first one. Second one is is for for Tom really.
So the desire to kind of to to be more multi domain. When I look at electronic systems, around 90% of that business, I think, is is is in the air. I mean so and I think everything's growing quite nicely in that respect as you've laid out clearly today. So so what do what should we expect in terms of opportunities of shifting that ratio more more aligned with the group, I suppose, so in terms of land and maritime opportunities? And then the last one, again, for Tom, it's a question on The US land side.
So the Bradley replacement opportunity, so can you just clarify what drove the decision to rebid or what changed in the requirements? And when we look at your competition, so I think we have seen a bit with Elbit, I believe. There's pretty stiff competition from GD and YMittal with the new links and that consortium. So so what what is your real confidence there the next couple of years?
Andrew, if I may, the second question, could you just repeat that? I've I've you dropped out well, maybe it was just on my line, but I dropped out a little bit on the second question. And then Brad Brad, Tom can be thinking of his answer for your third question, and I'll circle back at the end on the first one.
Could you just repeat the second question, Yes.
Okay. Okay. And we talked a lot today about becoming more multi domain. And historically, BA is kind of dominated by air. When we look at the electronic systems business, that is certainly dominated by air.
I think I think it's about 90%. So, within that business, within Tom's business, do we see much higher growth potential in land and maritime as as multi domain capabilities sort of fold themselves into the business.
Okay. Thank you, Andrew. So Tom, you've got those two questions. One on the Bradley replacement or OMFE and the second was ES, are there potential outside of the air sector or other domains.
Yes. I can take those, Charles. So to sum up the first one, mean, terms of multi domain operations, I mean, just just in the title, multi domain kind of infers that it it is about more than just air. And so while, you know, certainly, the air force will play a a a critical role, you know, with their you know, the the sort of coverage the geographic coverage of of the air force, The multi domain in its in its, you know, sort of essence is about the air force being able to interoperate with the army, being able to interoperate with the navy in order to bring that combined force to bear on the threat. And so bearing lies the challenge, by the way, across the services.
It's it's a joint effort across all three of the domains in order to be able to work and interoperate better so that the ground takes advantage of insight from the air, you know, ditto in in maritime based on the on the scenario. And so each of the services have a program in its in their own right that are part of this overall joint all domain operation. So the army has what they call project convergence, which is their approach to and their contribution to this all domain operation environment. And so they've been there's a series of demos and trials that have been going on. We've been bringing products to that as well.
And so I I think you can think of JDoe or or join all domain by whatever name it it's going these days. All of the services will will play a role. And so, yes, you know, as you point out, we'll certainly take leverage their largely air position, but we'll also have offerings in the ground domain and at sea. And so we we think we're well positioned there. I don't think there'll be a one service versus the other outcome.
By the way, space is is a piece of that as well. So I hope that's helpful, and and we we expect to plan all of those domains. As to OMFD, I mean, we we as I said before, you know, we've been preparing for this Bradley replacement for something like twenty years, and so we got lots of thoughts and strategies around how to come at this. You know, you asked why why why bid this second time around. Well, you know, I think in in their first attempt, you know, the army had a had a very specific set of aggressive requirements and a schedule that was aggressive in its own right as well.
And so what what as they've as they've come back and and brought it back out for for bid, they're taking a more measured approach and allowing for a bit more of, the requirements to be a bit broader and then necking down over time through a series of down selects. And so we like the timeline around that. We think the requirements are, as stated, are achievable. And we think all of our history and background in infantry fighting vehicles, all these decades of Bradley experience, will sort of position us well to understand that environment, understand the customer needs and bring a very competitive offering to the table. And so we we understand there there is a competition.
We like competition, and we we think we'll set ourselves up well. And that'll play out over years now as it makes its way through down select. And over that period of time, you know, we're focusing on, you know, our experience leveraging, that into these customer requirements.
Yes. And then on the use of data, and I'm mindful of the fact that we're just running over time here, so I'll keep it very brief. I mean data and data analytics is at the heart of some parts of our business already. For example, the availability, the pricing models that we offer on fast jet availability. And I think that the more pervasive use of data and data analytics within the business will take us into new markets.
For example, the global support, I think, like Global Combat Ship, that Techmodal acquisition. So it will open doors and new markets for us, taking some of those capabilities and also will enable us to improve efficiency within the business. I mean so for example, in our global procurement function, the use of data there and the data analytics that we have will enable us to be more efficient and will be one of the many factors in that margin improvement trajectory that we're all working towards. So I think it will help us in a number of ways, and I'll probably just leave it at that there. And we've gone slightly over the half hour, so I'll thank you all for joining.
And as I said, look forward to hopefully seeing many of you now, hopefully, next time we do one of these face to face. And thank you for joining us this afternoon and this morning. Thank you.
Thank you. That does conclude your call for today. Thank you all for participating, and you may now disconnect.