Good morning, everyone. It's Stuart Ford from Serco speaking, and thank you for joining the call. Just before we start proceedings, let me remind you that there are forward-looking statements that may be made during this call. These are based on information that is currently available and are subject to change due to a variety of factors. For more detail and the full disclaimer, including restrictions on participation in the placing, please refer to our stock exchange announcement, as well as to slide two and to slide three in the presentation pack. With that, let me hand over to Rupert.
Okay. Good morning, everybody. We want to talk to you this morning about our acquisition of the Naval Systems Business Unit of Alion. This is a business that has world-class capability in ship and submarine design, production, engineering, and in-service support, and it complements Serco's existing U.S. Navy shipboard and shore-based modernization, installation, and systems integration business. Just to give you a bit of background to this, as you know, over the last five years, we've been going through a process of stabilizing the business, transforming it, and now we are in a growth phase, and we expect profits between 2017 and 2019 to grow by a CAGR of 20% and for our free cash flow to turn positive this year. For some years now, we have been looking at the U.S. Navy as a target for investment.
We already do $300 million of revenue with them, and we've been doing business with them for over 30 years. We do overall $453 million of revenue in defense in the U.S. The consideration is $225 million on a cash-free, debt-free basis. It's going to be financed by an equity placing that we expect to raise gross around GBP 130 million, together with a new committed debt facility of up to GBP 75 million. The acquisition is expected to contribute in 2020, revenue of approximately $370 million and EBITDA of $28 million and UTP of $27 million after $3 million-$4 million of synergies. The implied multiples of 0.6, 8.1, and 8.3 times respectively, and we expect it to give us underlying EPS accretion beyond the current consensus forecast for 2020 of between 7% and 9%. The financing structure being part debt, part equity, does two things.
First of all, it enables us to keep a balance sheet that is well within our comfort level of one to two times. We expect pro forma 1.5 times. It also enables us to retain some capacity to do acquisitions if we believe them to be appropriate. Going over to the next slide five, I want to talk to you a little bit about why this market, the U.S. Navy, is so attractive for us. It is because the U.S. Navy plans to embark on one of the largest fleet expansions ever seen. It's going to increase the fleet from 280 ships to 355 by 2034, and that number has been significantly increased this year and is backed up by the plans that they have submitted to Congress. The goal of a 355-ship Navy cannot be achieved merely by building new ships.
They have also got to extend the life of their existing platforms. Just to name two, the Arleigh Burke-class Aegis air defense missile destroyers, of which there are 66 in the U.S. Navy, are to have their class life extended between 5 and 10 years, and the Los Angeles-class subs from 33 years to 43 years. With these life extensions comes a great deal of work upgrading and modernizing the existing platforms. Why are they doing this? If we go to slide six, it is simply this, that the Chinese in particular have been vastly and rapidly expanding their own navy, to have worldwide reach. Over the last decade, they have built over 100 ships and submarines, and they now have a navy that is larger than the U.S., with over 317 warships and submarines.
This is something that the U.S., which has had dominance of the sea around the world, is looking to correct. Also at the bottom left of that corner of the photograph, you will see an Akula-class submarine from the Russians. They are now much more active. Moving on to slide seven, what does the NSBU do? Well, it has world-class naval systems engineering and design capability. It has some 1,000 people involved in every major U.S. Navy ship class. If I can just draw a picture for you of the life of a ship class in the U.S., it starts with an outline specification from the Navy, the customer, that says that they would like a ship with these characteristics, say 8 to 10,000 tons displacement, a certain level of armaments and range, and number of people.
That then needs to be translated into a detailed specification of many thousands of pages long and a drawing package, which is then handed over to the shipyards to quote for build. NSBU can do that work for the U.S. Navy, the vessel and systems design and engineering work, and they do it not only for ships, they do it for submarines. They also, and excitedly, do it for unmanned underwater vehicles. Those are underwater drones, which are seen by many as being a fundamental game changer in the world of naval warfare. Having made these design packages, it then gets handed over to the shipyards to build, and the Navy then needs a, as it were, a buyer's representative, and this is a role that, again, NSBU performs. They are in the shipyards. They're crawling over ships. They're supervising the work as it's done.
They're doing all the testing and the certification as the ship or submarine is built. It then goes out to sea trials and testing, and again, they monitor those and report on those, and they do the regulatory body coordination and certification. Finally, when the ship goes into service, they then go and provide in-life and lifecycle support, which is typically around modification and upgrades. Interestingly, for every dollar that the U.S. Navy spends on building a ship, they spend $2.3 going and maintaining it, upgrading and sustaining its capability through its life. How does this fit with Serco's business? Serco has a large U.S. Navy business. As I said, revenues of about $300 million.
If you imagine that if NSBU do the design and the engineering around modifications and upgrades and new fits, when the actual ship comes into port, Serco, who go on board the ship and actually go and do the rewiring, the recabling, they take the old equipment off, they install the new equipment, they do the integration on board ship. It's the integration of these two capabilities. On the one hand, the shipboard and shore- based modification design, which is highly skilled but is a manual task on each individual ship, and the design and engineering capability of NSBU that we think is going to be attractive. It's also going to make us a top-tier supplier to the U.S. Navy in terms of, as I say, both engineering and installation capability. Moving over to slide eight. The Serco business in the U.S.
At the moment, actually, the defense business only has a very thin order book because it tends to be made up of task orders. There's framework contracts for doing ship modification, and when the ship comes in, we get issued with a task order to go and do it. The contracts for the design and engineering tends to work differently. They work on a five-year cycle. A business will be given a contract to provide engineering support services for a five-year period over the life of a ship class, which might, as we said, be 40 years. There might be seven or eight times during the life of the ship class that these will be let. They actually have an order book. They have got an order book of about two years worth of revenue, about $600 million, and a new business pipeline of $2 billion.
Their key customers are the U.S. Navy, the U.S. Army, Coast Guard, and the Royal Canadian Navy, but they also do a small amount of business in other territories as well. Listed there on the slide are the top seven contracts, and you'll see halfway down the Amphibious Warfare program, which is for amphibious assault fleets, the team submarine that handles the Los Angeles-class, Virginia-class submarines, the DDG 51, which is the Aegis class destroyers, and below that LCU 2000, which is the landing craft for the Army, where they have a contract to go and upgrade the landing craft that belong to the U.S. Army. The JSS, Joint Support Ship, that's a contract with the Royal Canadian Navy to provide design and sustainment services for support vessels.
You go then onto the next slide, the strategic fit and rationale, this acquisition is an important one for our business. It adds scale to our U.S. defense business. It increases it by about 70%, but it also adds scale to our overall defense business around the world. It adds capability. It adds world-class ship engineering design and sustainment capability, which we think is going to be very important. It gives us access to cost synergies through overhead recovery on fixed price contracts. The way, broadly speaking, that works is that we believe that this is a carve-out. We will be taking the operational people from this business and leaving behind their HR and IT and support services and integrating those into what is a pretty highly efficient central services operation in Serco in North America.
That will generate savings of about $17 million a year on the overhead structure. Most of those savings will get recycled through to being able to provide lower prices to the cost-plus contracts. 80% of the revenue in this business is cost-plus. We will be able to provide lower rates to our customers, which should make us more competitive. We expect to get $3 million-$4 million of cost advantage in the better overhead recoveries on firm fixed price contracts, and across the Serco Group business as a whole, is about 50% of the business is firm fixed price.
We expect to get synergies of $3 million-$4 million. It increases our presence and gives us a position at the top table in what is a very important and growing, looks like a sustainably growing, market in the U.S. Navy, but also an opportunity, none of which has been costed in or modeled into our acquisition models to deploy these skills to markets where we are already present, specifically the U.K. and Australia, where we have good maritime businesses, and we also have a nascent defense business in Canada. In terms of people, there are about 1,000 of them. They are long tenure people, over 30% with more than 10 years' experience, 65% with more than three years' experience. Culturally, we feel that this is going to be a good fit. These are people, many of whom have served in the Navy themselves, which is similar to our personnel.
A lot of them have served the flag in the U.S. themselves. The senior management team and all the operational staff are going to transfer to Serco Group, and we will be making appropriate arrangements around transition and retention. Moving on to the next slide 10, strategic fit and rationale. Improving the mix of our business, it's going to take our U.S. business from 20%-26% of the business. That will give it revenues of about GBP 1.2 billion a year. In terms of our defense business, sorry, $1.2 billion a year, the U.S. business will be. In terms of our defense business, it's going to go from 30%-35% of our revenues, with revenues of about GBP 1.2 billion worldwide. At which point, I'm going to hand over to Angus.
Thanks, Rupert. Slide 11. In terms of financial performance, the last reported financial year for Alion was the year end of 30th September 2018. Revenue was $336 million for NSBU, and we expect that to grow to $370 million in 2020, our first full year of ownership to 31 December 2020. This forecast growth, a chunk of it's already contracted in the order book, and on a standalone basis, we expect to be able to grow this business at 5% compound. We do see revenue synergy potential. We can sell into the platform that they have. They can sell into our platform in the States. We also see potential in the longer term for the U.K. and Australia. None of these revenue synergies have been built into the model.
In terms of underlying trading profit, for the year end of September 30, 2018, there were $20.2 million, about GBP 15 million. By FY 2020, we expect that to grow to $27 million or GBP 20 million. That includes, as Rupert said, $3 million-$4 million from the cost efficiencies and the rest of it largely being the flow-through from the revenue increase. In terms of margin, 6% has been around the margin that NSBU has achieved in previous years, and we see the potential to expand that through operational leverage, mix, and efficiency. We would see somewhere about 7% in 2020.
From a risk perspective with accounting, given the fact that 82% of this business is cost-plus, like we have in the U.S. where we have a team of government auditors occupy part of our office and spend their whole year auditing our costs, they've got exactly the same. From that perspective, they're up to date and they seem to be very clean. We also had Ernst & Young come in and do a full financial due diligence on the business, and nothing material coming out of either of these.
The net finance cost we expect to increase by GBP 2 million-GBP 3 million, which reflects the increase in net debt, and the effect of IFRS 16, which we're working through, which we think UPAT will probably benefit by about GBP 700,000, which is part of the guidance for 2020, and net financial costs will go up by about GBP 1.2 million. These numbers we'll confirm once we've got the details of all the leases. In terms of tax rate, 21% federal, 4% state. We think this will then have a significant goodwill amortization adjustment, probably tax rate on this about somewhere between 10%-15% going forward. In terms of earnings accretion, we expect that to be 7%-9% in 2020, our first full year of ownership.
That's with the acquisition increasing profit after tax by about GBP 15 million to get from the GBP 20 million of trading profit down to the GBP 15 million, broadly GBP 2.5 million of net finance cost, GBP 2.5 million of tax. The equity placing will increase the fully diluted share count for EPS purposes from 1,145 to somewhere about 1,256. The current analyst UPAT, underlying profit after tax consensus, for FY 2020 is about GBP 81 million, and the underlying EPS consensus is about GBP 0.071. The acquisition adds a growing revenue base for us at good margins, accretive to the group average, and we believe with potential for future enhancement. Combined with the transaction funding, it results in a first-year result, which will be materially accretive to earnings. Clicking on to slide 12.
The cost of NSBU is $225 million on a cash-free, debt-free basis, that's going to be financed by the combination of an equity placing, that is this morning, expected to raise gross proceeds somewhere around GBP 130 million, together with a new committed debt facility of up to £75 million. The equity placing is for cash up to 111.2 million shares, representing up to 100% of the existing share capital. A new committed three-year term loan of GBP 75 million. We're really pleased to have got this. As you're all aware, and we've talked about, the challenge of getting the refi done in Q4 was significant, the fact that four banks have been willing to step up to support us in the acquisition, I think demonstrates where we are and the fact that we're moving through our previous woes and very much now into the growth phase of the strategy.
The other thing is that on a fully drawn basis, this new debt is only five basis points more expensive than our previous debt. The interest cost somewhere £2 to 3 million, depending on the leverage. Net debt guidance, as you're aware, was GBP 200 million for the end of 2019. With the acquisition, that'll increase to somewhere around GBP 250 million. The leverage, guidance-wise, was 1.3 times net debt EBITDA, we're moving now to about 1.5 times at the end of 2019, midway in our range between one and two times. As you'd expect, there's certain regulatory approvals we have to get, we've got to get Hart-Scott-Rodino in terms of competition, then CFIUS, which is the Committee on Foreign Investment in the United States.
We got this recently for our BTP acquisition, we see no reasons why we won't get it, but it will take a number of months. It's very hard to project when this will close. Our belief is it'll be during the second half. The equity placing is not conditional on the completion of the acquisition. That will be done this morning. Financing acquisition through this mix of debt and equity allows us to maintain the strong balance sheet, leverage right in the middle of our one to two times target range, delivering a transaction that Rupert describes as strategically compelling, but also financially attractive. Rupert.
In summary, as Angus says, this is a strategically compelling acquisition. It's an important acquisition for us. It moves the dial. The U.S. Navy is one of the most attractive segments of our portfolio, combining long-term sustainable growth with balanced risk and reward. It's a very good fit for our business, both culturally and in terms of our position with the customer. It's a significant step up in our engineering capability across the business, it's got opportunities for upside across Serco's international footprint, it improves our sector and geographic mix of the business. The financing structure is prudent and leaves us with a sensible level of net debt to EBITDA and also some dry powder if we need it, whilst producing very attractive financial returns.
On which basis, we will hand over to Q&A, and I think we'll take Q&A from the phones first, then we'll take questions from the typed into the webcast as they come in. Questions from the phone, please.
Thank you. Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star 1 if you wish to ask a question. The first question is coming from the line of Rory Mackenzie. Please go ahead.
Morning, all. Two from me, please. Firstly, on the contracting, I guess these kind of contracts are typically kind of 5 years or longer. Does the only 2 years’ worth of revenue in the order book, I mean, there are some rebids coming up quite soon? Is that why you're assuming that the GBP 17 million of synergies gets kind of reinvested in price for the client? Secondly, on the overlap of activities, it doesn't sound like there's much overlap with what you do today. Can you talk about how the new size and breadth of Serco U.S. defense will change how you go to market and your kind of future ambitions in the wider defense industry? Thank you.
If I can just talk about the order book. Actually, to have about an order book of just over 2 years-- well, around 2 years worth is I think that would be about normal. There is what you would expect. There's probably about a quarter of the current book of contracts, which are up for rebid in any one year, would be a rough rule of thumb. We don't see anything unusual in that, we would just note that over the last 5 years, they've had a win rate of about 90% on renewals. In terms of their approach to the customer, there are essentially 2 buying agencies for the U.S. Navy.
There's NAVSEA, which does the platforms, that's the hulls, the propulsion, gets you a ship that floats and goes to sea, and there's SPAWAR, which purchases all the sensors, the weapon systems, everything that makes the ship a fighting entity. Serco existing has a very strong position with SPAWAR. We do a lot of prime contracting work for them. NSBU have a very strong position with NAVSEA. Eventually, they all come up to be part of U.S. Navy. The other thing that is attractive from this point of view is that a lot of naval work is procured locally. NSBU are present in shipyards where we are not present on the East Coast. We are very present in the really big ones like Norfolk, Virginia, and over in San Diego. They are also present in other places, which will give us extra reach for our business.
There's actually little overlap in customer capabilities. They're more complementary than anything else. I think that it's when you get up to U.S. Navy up in the Pentagon that the ability to be able to offer both is going to be appreciated. There is also a very specific thing, is that the Navy is a very, I would say, prudent buyer. They are not willing to give contracts to people who have not done this sort of work before. We in the current Serco business have something sort of hit a glass ceiling because we can do all the installation work, but we've bid several times for large contracts that have a greater degree of engineering work, and whilst we've been very competitive on price, the Navy has not bought from us on the basis we don't have the engineering capability.
We have that engineering capability, we think that it's going to allow us to reach up into what you might call the middle ground between the NSBU area and the current Serco business. Does that answer that first part of the question?
Yes, that's very helpful.
The second part of the question, clearly we will be reaching out in the next 24 hours to senior authorities in the Navy, both in the U.K. and Australia, to bring them the welcome news that one of their largest contractors now has a significant world-class design and engineering capability based out of probably the most advanced navy in the world. We think that that might be attractive to them. We haven't priced it in. These things will take a long time, I think it is going to be seen by them as a useful and important move within their supply chain.
Yeah, that's very helpful. Maybe just one follow-up. Is there any history of joint contracts across NAVSEA and SPAWAR, or is that just more about the access and how you open up the broader?
I'm going to hand that to Tom Watson, who's head of our federal services business, who's here. Tom, do you want to answer that question?
Yeah. There is a history of it. There are a few companies that are able to compete across both of those commands. The principal competitors in this space will be CACI, who also acquired a company recently, last year, that was a carve-out from General Dynamics, and previously CSRA. CACI, SAIC, Booz Allen Hamilton, and AECOM are principally the competitors in the NAVSEA and SPAWAR customers.
In talking about competitors and the business that CACI acquired last year, if I can just give a little bit of background to the transaction. We actually bid and lost to CACI to buy a smaller operation with revenues of about $80 million almost exactly a year ago. We've been active in trying to acquire something in this area quite some time. It was a result of that process that an enterprising investment bank went to Alion and said, "You might like to talk to Serco. They might be interested." In August of last year, we started the conversations with Alion. We've been doing this for nearly nine months, and it has been an exclusive process where we have had exclusivity for a considerable period of time. We've had time to do proper DD on it, which obviously gives us more comfort.
That's great. Thank you very much.
Next question.
Thank you. The next question is coming from the line of Kane Marden. Please go ahead.
Morning, gents. I just wanted to start off initially with questions on margin. If we look at the capability of NSBU, and also the fact that it's been [private equity]-owned and presumably sweated over the last two years as well, I'm wondering why the EBIT margin of 6% is not a little bit higher, particularly relative to the sort of margins that your Americas division generates at the moment. Secondly, has it been well invested under [private equity] ownership? If there's any catch-up that's required in terms of CapEx or elsewhere. Thirdly, if you can shed some light on some of the free cash flow characteristics of the business as well. Obviously you've kindly given us EBITDA and EBIT, but any insight into working capital and CapEx would help us just work out the cash implications of the transaction as well. Thanks.
Okay. From a free cash flow perspective, it's got strong characteristics. The U.S. Navy, in our experience, pays 30 days net. There'll be a small piece of working capital because the main cost in the business is labor. There's relatively little CapEx. There's about just over GBP 1 million of D&A in it, and that would indicate low CapEx. To your question on private equity ownership, yeah, we're under no illusions. We suspect we'll have to invest a bit of money in new PCs and new laptops and some new software packages, et cetera. It may have been undervested, but we don't think it's bad, and it's certainly not going to be an enormous cost as we take it on. We would expect an uplift initially in terms of that.
In terms of margin, you've got to bear in mind, our business is 50/50 cost-plus versus firm fixed price. This business is 82% cost-plus, for us to earn a 6%-7% margin on a cost-plus business, that is hugely attractive from our perspective. It is accretive to group margin of 3.3%-3.5%. We do see the margin characteristics as attractive, particularly when you put them in the context of the lower risk cost-plus nature of it.
Great. Thank you very much.
Thank you. The next question is coming from the line of Joe Brent. Please go ahead.
Good morning, gentlemen.
Morning, Joe.
Two questions, if I may.
Yes.
Firstly, you talk about being a tier 1 supplier, and I do understand that that has benefits over being tier 2 and beyond. Could you elaborate on what those benefits might be? Secondly, really for Rupert, you've talked historically about sort of searching through the rubble. I'm a little bit surprised by this acquisition, which seems to be the other end of the spectrum. It's not so much rubble as a high-quality asset with high margins, high cash flow, good visibility in a growth market with a reasonably not rubble valuation. Could you address that, please?
Joe, thank you for that. Taking the last question first, I think that clearly in the context of the U.K. market, we were on the lookout for opportunities that might arise, following on from our acquisition of the healthcare business. I would point out that this should not have been entirely unexpected. We bought a company called BTP Systems last year for $20 million that does secure communications in the naval space. We've never made any secret of our willingness to treat each opportunity and each margin by its own merits. Yes, the short-term opportunities that may have come out of what I call rubble watch in the U.K., we've so far got one, but we will have to see. That is essentially opportunistic as it arises.
That didn't mean to say that we weren't looking for opportunities and continue to look for opportunities in Australia, in the Middle East, and the U.S. As I say, we haven't been advertising the fact that the U.S. Navy was attractive, but you could have seen, as I said, that we did an acquisition in there last year. Sorry, what was your first question?
The first question was about the benefits of being a tier 1 supplier.
The benefits of being a tier 1. I'm going to ask Tom to talk about that.
Yeah. Scale matters in this market. They are a leading provider at NAVSEA, and Serco today is a current leading provider at SPAWAR. Serco has had ambition to be able to move into different elements of the market in the past. Quite frankly, the Navy, as Rupert alluded to before, They make their acquisition decisions on corporate experience and past performance and reputation. Serco has had worked on opportunities in the past to be able to move into the engineering and design side of the business, but it's very, very difficult to move in those markets because you can tend to get put into a particular box of capabilities. This acquisition, what that does is it greatly expands our capabilities so we can serve a greater breadth of the Navy market.
It gives us that end-to-end life cycle support capability from upfront design, engineering, installation, integration, and support. It greatly expands the breadth of capabilities that we can provide for our customers, as well as depth within the major acquisitions commands within the Navy. I'd go a step further to suggest that because it broadens the capabilities of the corporation, it gives us opportunity to leverage those internationally.
Joe, does that do it for you?
Yeah. My understanding was tier 1 suppliers tend to be more at the top table in discussions rather than just a sort of price taker. That the margins tend to be better. Is that right?
Well, I think it depends very much on the nature. They have one large fixed price contract, which is the landing craft for the U.S. Army. Who knows? They may do more. The essential thing about being the Navy's friend, the Navy's advisor, vendor agnostic, trusted advisor to them, the structure of the USA market in terms of doing this cost-plus work is very highly regulated. We have, I don't know, five or six government auditors sitting in our office supervising the billing of the cost-plus work. They will have the same. The margins are kind of all much of a muchness in the cost-plus space because they are largely regulated. The question is the risk/reward balance right? With cost-plus comes very little risk.
You have a reputational risk if you go and give them bad service. Actually a risk of cost overruns and stuff like this does not exist. When we go and compare 6%-7% margins in the U.S. for actually very little financial risk, for seeing the risks that you have to run very often in the U.K. to generate those sorts of margins, we think that this is attractive. We're very comfortable with it. It's got good returns on capital because there is very little capital employed in it. We don't see there might be a point of margin accretion. There might be some extra leverage we can get dealing overseas, but this is the nature of this beast.
We think it's going to grow by about 5% compound a year, generating margins of 6%-7%. That we think is, we're very content with that.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. The next question is coming from the line of Allen Wells. Please go ahead.
Hey, good morning, gentlemen. Alan from Exane. Just a couple from me. You touched on a couple of times the low capital intensity of this business. Obviously, it feels like a dockyard is needed to do a bunch of this work. Could you maybe talk a little bit about how the work is allocated out, where the work is undertaken, what facilities? And then also maybe just thinking about the revenue synergy opportunities, potentially on the international side, would you need to invest anything, CapEx-wise, to build out capabilities? Or can you use all your existing infrastructure and just roll this know-how on top of it in those markets? Thank you.
Tom, will you handle the U.S. footprint?
The locations of this business are where the customer is. They are mission-aligned, engineering support, acquisition support services business. They are where their customers are. As you would expect, the largest location is right next to the Washington Navy Yard, and in Washington, D.C. Other major locations are the major shipyards, Pascagoula, Mississippi, Bath, Maine, where they build the DDGs and the amphibious ships down in Pascagoula, Mississippi. Beyond that, they are located in all of the major fleet concentration areas where the U.S. Navy is located, principally San Diego and Virginia Beach. Beyond that, they're spread across other locations throughout the U.S. and internationally.
In terms of the growth of the international business, they already do some. They do work for the Australian Institute of Marine Science. They do work in Taiwan and the Republic of Korea Navy, but it's been pretty low intensity stuff in terms of the efforts they've been able to deploy to do that. We already have very strong Navy businesses in both the U.K. and Australia. I don't see so much CapEx issue expense. There may be some P&L expense as we go and invest in sales capability in these markets. I have to say that neither the revenue upside from these nor the costs of expanding are in our modeling. We wait to see whether we can go and explain these capabilities very easily to our customers. If they're interested, we will see where that takes us.
I personally think that both in the U.K. and in Australia, there will be an appreciation of one of their trusted suppliers getting access to becoming world-class naval architecture, ship, and systems design and integration capability. Notably, the U.S., of course, already had significant interest with both those navies, so there shouldn't be barriers to that. All these markets are looking for new entrants and a stronger supply chain. We'll see whether we can make any progress with that as we go. The other thing say, it is also a platform for more acquisitions like the BTP one that we've done, where that has given us very specific niche capability in the maintenance of comms equipment. That then goes and feeds through to the rest of our business. Again, that might be internationally applicable. Does that help, Alan?
Thank you very much, Rupert.
Thank you. Once again, if you wish to ask a question, please press star and one on your telephone. There are no further questions at this time. Please continue.
Okay. Well, listen, I think that we've done that. Thank you very much for your attention. As I say, we think that this is an acquisition that does move the dial for us. It's strategically important. It's financially compelling and leaves us with a strong balance sheet. Look forward to talking to you all on and off over the next few days. Thank you and goodbye