Good morning, everyone. I'm Chloé Lemarié from the Aerospace and Defence, Equity Research team at Jefferies, and I'm delighted to be hosting Tufan Erginbilgiç, CEO at Rolls-Royce. Good morning, Tufan. Good morning. Just to start, obviously when you joined Rolls-Royce, still faced concern on viability as a business. It's been an incredible fast journey to return the group to close to best in class margins. Now that this has been unlocked, what motivates you in a business where everything seems to be going well, and what would you want to be remembered as your legacy from the industry and from the investing community? Well, it's a big question. Let me answer those questions in reverse order, if it makes sense. Okay. I think, what was the plan? Actually, what did we look to achieve? Because legacy has something to do with it, that's why. I think we were very clear at the beginning this wasn't going to be restructuring, because everybody asked me, "Rolls-Royce restructured many times. Why do you think it is different?" My answer to that, I'm not actually intending to restructure, I'm intending to transform. What is the difference, for me at least? I think transformation, really taking a company from point A holistically, I'll talk about that, to point B. At point B, that company can do stuff that it cannot do at point A. Because it is new capability, new culture, new mindset, new financial strength. When you do that, it opens up more growth opportunities. Actually, this is very relevant for the point Rolls-Royce is in. What was point B vision? I think it got two strands. We actually kept using one of it more regularly than the other one, but they actually reinforce each other. We talk about high-performing, competitive, resilient, and growing business on the one hand. Actually, we wanted to describe the business elements on the other hand because they reinforce. We wanted safety excellence, we wanted operational excellence, and therefore, best customer service, best products and technologies with a distinctive performance culture. If you look at our progress on that, safety was strong in Rolls-Royce. We made it culturally even stronger. Operationally, we are the only company who can actually say we don't have any AOGs at this point in time. We eliminated all the AOGs. We meet all the requirements of any OE out there. That brings lots of credibility, but also best-in-class customer service because you are not disrupting anybody, right? If you actually think about it, in very short period of time, we got all our products to their best-in-class level of durability and reliability. So this scorecard is looking good, although what we are doing is point B keeps improving itself, right? Sort of Raising the Bar on point B. I actually tell the team in 2023 was point B I described here. Right now, it's not good enough. On this scorecard, I think by doing this, we created a lot more competitive, more resilient company than any other competitor in the market. I think if anybody has a question on that to take me up on that, I'm happy to go there. I won't right now, but by doing all that, we created a growth potential in the company is unmatched. If you actually think about in existing businesses, how we lined up the company against the demand growth of the world. We can talk about it if you want to explore, and then we created optionality with SMR and narrow body. No other company actually has this kind of growth prospect and opportunity going forward. So we created more resilient than anybody else company, but that didn't come at the expense of growth. We actually created more growth potential than anybody can talk about in the industry. By doing that, we holistically moved the company's culture, how we run the business, the mindset, the culture, all change. Coming to legacy, I think I want a legacy which says, actually, this creates sustainable growth going forward rather than a Rolls-Royce two years good, then fall apart, restructure itself, then another two years good, fall apart in the first crisis. That will be a great legacy, and then that will capture that enormous growth potential. What motivates me Moving the holistic organizational capability in that direction. This is a holistic picture. Then capture that growth potential. All right, thank you. Great picture. I won't be asking what the latest point B is. I guess that's a question for- It will keep moving. Because our last conference sort of brand name was Raising the Bar. That should answer your question. Very good. Moving on to the divisions and starting with Civil. Maybe one question driven by news flow. GE Aerospace obviously announced the potential acquisition of CPP, looking for vertical integration in its supply chain. Does this affect you in any way, and would this be a move that you would consider for yourself as well? I'm surprised by the question, by the way. Oh, really? Nobody asked me yesterday, so it only showed up in every meeting. I think a couple of things, I will say. I think whether it is a good acquisition or bad, you should ask that to Larry. I won't comment on that. I would say a couple of things. First of all, many of that capability turbine and the blade production, we had it in-house already, right? We don't actually, unlike GE or any other competitor, we didn't outsource that. Not because of supply chain problems, because when that decision was made, frankly, supply chain was not that bad. Rolls-Royce always thought, and I agree with that, as a differentiation opportunity, as a capability. If you look at time on wing improvements we made, they have a lot to do with turbine and blade improvements. That will bring home differentiated sort of capability there. I think what it will do probably, it will impact rather than us, because our Civil Aerospace business, because of what I said, we don't actually do much with Consolidated Precision Products. Our Defence business has some work with Consolidated Precision Products, but not Civil Aerospace business. I think what it will probably do, sort of change the dynamics in casting and forging, which may be actually good. Because that industry, that part of value chain, I should say, needs to add capacity. Whether they were doing that at pace- frankly, was a concern for me. I'm sure after this, it will change those dynamics because GE is not buying it to cash cow that business. They're just buying it. For this business case to work, you need a different strategy, different investment, different yield, et cetera. That's how I would hold it at this point. Your question, we have been working on other options, because frankly, my criteria for M&A is pretty tight. It needs to create value. It needs to have good synergies with our current business, but also the business we buy standalone, it needs to have good investment proposition, right? This is bad sort of acquisition, but it will help my current business sooner or later, that may actually dilute your overall business model. Therefore, yes, I like synergies, but I like also the business standalone. Yeah, this is investable business type of characteristic. The price you pay obviously is important in that equation. Understood. Talking still about Civil Aerospace and the next generation narrow body. Airbus has signaled, obviously, an ambition to capture more of the aftermarket revenue stream, move towards a different maybe airframe engine integration model. How do you approach this discussion, especially in relation to the heavy investment that's needed in engines, and would you be willing to open your TotalCare model, protect or evolve it in any way for the next generation narrow body? First thing I will say, therefore that opening remarks were important. We have so much growth opportunity. I'm not going to do narrow body if it is not going to create value because I'm not actually losing sleep around how am I going to grow this company? We just announced results, almost 50% year-over-year profit improvement. No other competitor can talk about it, frankly, not even close numbers. That's growth, because I don't actually measure the growth, how many volumes I sell, et cetera. That's a mean rather than an end, frankly. Therefore, I think value creation needs to be there. Going to your question in that context. Here's the dynamics in the industry. Frankly, when I first showed up, I said, "Wow, this industry got it wrong," because one of the key engine manufacturers almost bankrupt, frankly. The other one is almost bankrupt. Would have been if standalone company, with all due respect, frankly. How come this is right? How come this is right? I think there is both sides of the story which will play out, because some of the programs, I won't name them, but if you know the industry, you know what's going on. You invest in those programs however many years, and then with a promise that maybe in 30 years I will make profit. Then suddenly, a significant event happens, and one of our competitors is actually suffering from that right now, and then all bets are off because it's not going to pay off anymore. Right? Therefore, this part of the equation will come into play as well, equally powerfully. What is the conversation we are having with airframers? We are not having any of this conversation. We are actually having, because that's the right conversation. How do we create. Because this ends up being who's going to win, who's going to lose. It's never good conversation dynamics. I'd rather go to a place. Guys, can we actually work differently from the past? That's the conversation I'm having at the highest level, which will produce a product which is superior. Because in the past, frankly, either airframers kept changing their mind on thrust, or even in best case, even if they do not change their mind on thrust, frankly, it was a little bit like, these are the specs of the product. Can you please throw it over the fence? Then I'm going to do what I do. In that, you do not actually optimize integration. You do not. Because integration comes at the end of the conversation. Can we do the product development, do not change your thrust, and I told all the airframers, I'm not going ahead of you. You tell me where you want to go, I'm not going ahead of you. Because I gave them few examples why it caused some problems. Second thing is, we are actually working with them to say, can we get involved in integration early enough that product is really for that plane? So that will actually improve the pie rather than who's winning, who's losing. But at this point, I think conversation's really not on commercial. It is really not in commercial. Both parties declaring their hands on commercial, I just told you. But not beyond that. There is no sort of, okay, therefore this means that. But the big conversation on the products, and we are actually working really well with Boeing and Airbus. Really well. It's very close dialogue on the next generation. If you can add to that, have there been any kind of evolution in discussion in terms of the right technology for the next generation? When do you see an actual decision on the type of engine that will be needed? I think your question is probably, is it open rotor versus Yeah. Okay. I think Boeing made that decision. It's very clear, and you know what it is. Everybody knows what it is. I can spell it if you want, but that is the decision. I think Airbus will see. I am not going to sit here and speculate. But I will say this, we are working very closely with Airbus, and they want to work with us. Because we created a credibility in the industry, given our operations, given us meeting our commitments, and given our technology and engineering expertise. So I think it is going well at this point. When that decision will take place, I cannot answer that question, because it's not my decision when it is going to happen. But actually, I will say, RISE, for all practical purposes, is like an UltraFan in a way. It's a technology program. UltraFan was. Therefore, many time on wing improvements, we actually benefited from UltraFan learnings. Fair enough. If you can move on to pricing. There's been some concern in the market that pricing may have reached the points that airlines may no longer see as acceptable, especially in the context of high fuel price and their bottom line being affected. So at what point does pricing become a genuine risk in your renegotiation as you renew your LTSA contracts? I think in a way, we are signing LTSA contracts every day, right? That's not new dynamics therefore, if you think about it that way. I will say this. Yes, did we create in 2023 a new deal framework? Absolutely. It was a bankrupt company, and pricing had something to do with it, frankly. I just talked about how much investment goes into this and the risks you take. LTSA contracts take all the risk. Does that make sense? Yes. If I am a central planner, I want engine makers to take that risk because they have the capability to manage that better than anybody else. Right? It makes sense, but you need to price it for the investments you make and the risks you take. Since then, did we increase pricing? Yes, because there is still significant product cost inflation in the market. I'll give you examples. It's not generic and very related to what's happening in the world, right? Elemental cost went up significantly. Why? Two things. Export controls from some countries and suddenly elemental are used in missile production. Demand went up. I don't need to tell you why demand went up. Demand went up. Rare earth. Export control from one country suddenly limited that. Rare earth prices went up. World geopolitics right now impacting business significantly, more than it has ever. How do you protect yourself? You need to make sure, and we have the process and transparency, you need to make sure those things don't dilute your business model. You need to take the right actions, whatever it is, for that not to happen, and that's exactly what we are doing. Moving to Defence. First of all, in the Defence division in the 2023 CMD, you were targeting just growth above the market, which was supposed to be pretty tepid, 0%-2%. You've posted a 9% CAGR. Was that always the plan? What were the opportunities that you were able to build on to really seize that growth? I think Defence at that time, and it is still true to some extent, I'll tell you more, but at that time, we were effectively looking at what are the big programs which will go into production, right? I'll come back to that because actually that creates great growth prospect. We didn't see any program, actually any major program, starting before 2028. The targets at that time was 2027 targets, then things changed. I think here's what happened. I think self-help wise, we made enormous improvement in that business, including first half results, by the way. I can talk about that. There is a significant sustainable self-help in first half results, and that will continue because it wasn't one-off, as I said. We will keep building on it. I think second thing happened is in legacy programs, because of the world events, we are getting more orders than we expected, like Eurofighter program. I didn't have visibility all the way to 2030s in terms of order book. Now I do. A330 MRTT, I didn't have any view of where that will go. Now more orders are coming. Legacy programs are helping, and then the self-help helping. The big growth will start 2028 onwards because ME75 is a huge program. It's OE as well as aftermarket. We are not allowed to say more than that, so I will leave at that, but it is what it is. B-52 re-engining will be following that pretty closely. At the same time, GCAP is scaling up in the U.K. AUKUS is scaling up. Then additional things came in, frankly, we didn't expect, especially around autonomous. I think I'm going to stay in autonomous 2 minutes because I'm not sure world appreciates we are now market leader in autonomous. Let me describe that to you. By the way, when I say autonomous, I'm not talking about cheap and cheerful sort of electricity based, sort of diesel based, what happens in some of the conflicts in Europe. I'm not talking about that. That's low end of the market. We wouldn't play there, frankly. There is no margin to capture. I'm talking about gas turbine-based autonomous. There is a big range. MQ-25, we always have capability. Frankly, we did 3 reviews, strategic reviews on autonomous. Why did you do that, Tufan? I knew my capability. I didn't know where market was going to go. Now I know, because some countries move forward together with us. MQ-25, it is actually large autonomous. We have been given that and successfully flight tested it and so on and so forth. It will start production. We have been given that because of our capability, by the way. Then Germany and U.K. came with CCA, I would call it mediums, gas turbine-based. Now we have those contract, those things. Those are all fully funded programs. At the smaller end of stuff, we now agreed a joint venture partnership with a company. At the right time, I can spell it. That will do the smaller bit, more like effectors, et cetera. Suddenly, no other company can actually talk about autonomous for the full range of development committed by some key countries, right? U.S., Germany, U.K. That joint venture will ensure few other big countries. That, frankly, we never expected it was going to come. We knew our capability. I think they will start first funded programs, but then move to production and so on and so forth. I think that will be interesting add to our Defence business. Very clear. You touched on this, but can we unpick a little bit more the margin performance in H1 in Defence, so 21%? You talked about sustainable efficiency improvements. Can you just talk a little bit? Yeah. I said it in the call. Everybody is asking me, is 21% sustainable? No. Because I think aftermarket OE mix was sort of in favor of aftermarket when that happens. But our sort of ops margin targets, all sustainable targets. Sometimes people ask me, "But in this quarter, GE delivered this margin. Can you deliver that margin?" If I don't sell any OE, I can deliver 50%. What am I going to tell you? It is sustainable, guys. Get on with it. I think look at more sustainable sort of thing. I think 21% has that. Given earlier sort of dialogue I gave you, we actually made a project out of aftermarket, and we found good self-help improvement, including shop visit quotes and other things. That underlying performance improvement benefited first half, but it will continue to benefit. That will stay. Therefore, my characterization, our margins will be higher than before, but lower than 21%. I gave you good range there. We'll work off that. Just to cover all the businesses, you're moving on to Power Systems. You're now targeting a 25% CAGR by 2030 in power gen. Yeah. What gives you that sort of visibility? What gave you the confidence to kind of push out the whole time horizon on that target? Two things, really. I think one is prime power orders came in for our gas engines. Gas engines, less than 10% of our business in power gen, frankly, because there is zero data center in it. It is other off-grid applications and so on and so forth. Suddenly, data center demand came in with some visibility. Although percentage is less than 10%, but demand growth is so good that that percentage will move, even if we will improve backup engines growth, that will move to 15%-20% in 2030, right? So that visibility created additional growth. Then with hyperscalers, the deals we make right now, we are actually taking orders for 2028, but deals go all the way to 2030 with some penalties. So combination of those two things gave us the visibility and confidence to say that's the growth. Building on that, on the obviously data centers that are obviously driving 80% of the power gen business now, don't you worry this creates a little bit too much dependency on a limited subset of customer with hyperscalers? It's a good question. No, for the following reasons. Let me give you sort of I think first of all, it is a good business. So if you are picturing hyperscalers will actually dilute their business model, no. Do you know why? Because we do more content for hyperscalers than any other customer in data center space. Our competitors cannot say that because of their dealer agreements. Ask that question to them. But we not only do standalone engines, but gen sets, we also do enclosures, i.e. containers, et cetera. All of it has a margin profile on it. So we don't actually do enclosures for other data centers because our distributors do it there. But hyperscalers, we actually manage them globally with a global account and so on and so forth, because our dealer contracts or distributor contracts don't stop us from doing that, I think. It is good business. Second thing, what I would like to do with some of them, at least, create strategic partnerships. Let me give you. We have a big digitization agenda, and they can, some of them are already playing, they can bring lots of capability to that. We already supply them, obviously, increasingly so on data centers, et cetera. But thinking about that plus Long-Term Service Agreements, we are learning from Civil Aerospace business in that business, frankly. Then the third strategic partnership, they help us implement digitization with their capability. We obviously help them with data centers and maintenance, et cetera. Suddenly, we are going to have these conversations at CEO level, frankly, to create those strategic partnerships. That will make that business more sustainable and actually it will add more value. But one other data I will give you about Power Systems business, 50% of the profit comes from services, and in it, very little income from data services, industrial services. I am not saying tomorrow, but sooner or later. I need to create service growth which it goes double digit. That is what we were able to do last two years, including this year. When that happens, then I variabilize some costs, and I move more of my business supply chain purposes to low-cost countries, suddenly I am actually creating a system a lot more robust. Okay? That is the strategy. Very clear. We are in the last minute. In the interest of time, let us just have one concluding remark. Everything seems to be going very well for the group. Is there anything that keeps you up at night? Yes. Given my past, I got more than fair share of my 3:00 A.M. calls, frankly. Safety always worries me. That is healthy. I learned in my career that is actually a healthy thing to do, because you do not do any complacency. Then execution. Do you know why execution? Because, I think what we delivered was mostly our execution and self-help. If you actually look at it, flying hours is hardly where it is under 13, 14, whatever the number is. In other divisions, obviously, there is no flying hours, et cetera. If that is true, and it is true, therefore, we need to continue to execute really well. Then the third thing is organizational progress. That is the mindset, that is the culture, that is the performance culture. I think those things, frankly, I keep reflecting on it. I think keep worrying will be too strong, but I am on it every day so that we continue to progress. Thank you so much. Thank you.