AWE NUCLEAR SECURITY TECHNOLOGIES AWE PLC Annual Report and Accounts 31 March 2024 Registered number 02763902 October 2024 CP 1165 AWE NUCLEAR SECURITY TECHNOLOGIES AWE PLC Annual Report and Accounts 31 March 2024 Presented to Parliament by the Secretary of State for Defence by Command of His Majesty October 2024 CP 1165 © Crown copyright 2024 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3. Where we have identified any third-party copyright information you will need to obtain permission from the copyright holders concerned. This publication is available at www.gov.uk/official-documents. Any enquiries regarding this publication should be sent to us at: Room 20 Building F161.2 Atomic Weapons Establishment Aldermaston Reading England RG7 4PR [email protected] ISBN 978-1-5286-5184-9 E03112842 08/24 Printed on paper containing 40% recycled fibre content minimum. Printed in the UK by HH Associates Ltd. on behalf of the Controller of His Majesty’s Stationery Office. Table of Contents Strategic Report (Page 4) - Chair’s Statement (Page 5) - Chief Executive’s Statement (Page 7) - AWE and our Mission (Page 9) - AWE Strategic Imperative (Page 11) - Financial Review (Page 12) - Performance and KPIs (Page 14) - Principal Risks (Page 18) - Environmental Sustainability Report (Page 25) - Section 172(1) Statement (Page 48) Corporate Governance Report (Page 51) - Directors’ Report (Page 52) - Statement of Directors’ Responsibilities (Page 57) - Governance Statement (Page 59) - Remuneration Report (Page 78) - People Report (Page 83) Independent Auditor’s Report to the Members of AWE plc (Page 93) Financial Statements (Page 100) - Income Statement (Page 100) - Statement of Other Comprehensive Income (Page 101) - Balance Sheet (Page 102) - Statement of Changes in Shareholder’s Equity (Page 104) - Cash Flow Statement (Page 105) - Notes to the Financial Statements (Page 106) Glossary of Terms and Abbreviations (Page 143) I am pleased to introduce the AWE plc Annual Report & Accounts for the year ended 31 March 2024. In the context of current geopolitical and geoeconomic shifts, the UK’s nuclear deterrent is more important than ever. At AWE, our contribution is crucial in ensuring the Continuous at Sea Deterrent remains effective – protecting our country and our allies. We are immensely proud to play our part in supporting national security by developing, manufacturing, and maintaining the warheads for the nuclear deterrent, as well as providing unique skills and expertise to the UK’s counter terrorism and Nuclear Threat Reduction activities. We are embarking on the next generation of production to design and deliver a Replacement Warhead that will help secure the future of the Continuous at Sea Deterrent for decades to come. To deliver this programme, while concurrently manufacturing and maintaining the in-service warhead, and providing Nuclear Threat Reduction for the UK, AWE must continue to transform. We need to continue to build capability, attracting and retaining the right nuclear skills. We need to recapitalise our estate and grow our supply chains to ensure our plans are resilient and deliverable. Last year, I said that a positive and decisive step forward had been taken along the transformation pathway of AWE. In the past financial year, momentum has been maintained and increased. We have a unified purpose and an integrated delivery plan. We have continued to invest in our sites, our leadership, and our talent. We are shifting the dial on AWE’s transformation to ensure we can deliver our commitments to the Government, working collaboratively with our partners across the Defence Nuclear Enterprise. I must also reflect on the incident that occurred in July 2023, in which a Balfour Beatty employee lost his life on one of our construction enclaves. We have learnt from this event and continue to do so, to ensure that the safety and security of our people, our communities, and our sites remain a top priority. Our thoughts remain with the family, friends and colleagues of the man who tragically lost his life. I thank Iain Stevenson for his leadership of AWE at that difficult time. The board and I also thank Iain for his energy, focus, and skill during his 10 months as AWE’s Interim Chief Executive Officer. Iain has accelerated the company’s transformation and put AWE on track for future success. I would like to welcome Nick Elliott, AWE’s new permanent Chief Executive Officer. Nick joined the business on 4 March 2024, with Iain moving on to take up a new role outside AWE at the end of July. The board will continue to offer its strongest support to Nick, the Executive Committee, our people and partners in support of our mission. Sir John Manzoni, Chair It is a great privilege to lead AWE plc as CEO. I am extremely proud to have joined the company at such an important stage of its history as we deliver a transformational level of investment in both people and infrastructure. Our purpose, to protect the UK through nuclear science and technology, has never been more important. The investment into our business will ensure that we continue to help deliver the UK’s nuclear deterrent, both now and in the future, becoming a world-leader in new nuclear technologies. This multi-billion-pound programme will renew existing facilities for the manufacture and storage of nuclear materials, improve science and analysis capabilities, and invest in renewed capability for material recovery. We will reinforce our own highly skilled workforce by contributing to the UK’s skills development as well as investing significantly in the wider industrial base creating jobs across the UK. This is both an exciting and challenging programme of work, and to achieve it we are undergoing a major transformation programme. We have made significant progress improving our operational performance, delivering key programme milestones, and driving efficiency. We have invested in our workforce recruiting circa. 1,600 external hires last year, including 278 apprenticeships, 127 graduates, and sponsoring 32 PhDs – with another 67 to start in October 2024. Diversity at AWE is also improving, particularly gender. Female hires reached 34% in FY23, that’s compared to a national average of 22% female in the nuclear sector. We are also an integral member of the National Nuclear Skills Task Force (NSTF) and will play our part in ensuring the UK has the right skills across the nuclear sector. We have welcomed new capability into the business with the transfer of the Defence Radiation Protection Services (DRPS) from the Defence Science Technology Laboratory (Dstl). This has incorporated the people, equipment, and processes of the Radiation Sciences Capability (RSC) Group located in Alverstoke. This will provide AWE with a strong radiological sciences capability that will further enhance AWE’s mission. We’ve done all this while maintaining our status as one of Britain’s top 25 big companies to work for. We have built stronger relationships with our Defence customer and have been supported by a committed workforce in delivering these improvements. I look forward to continuing this progress over the next year and to building even stronger relationships, especially with our unions Unite and Prospect, as they support us in delivering our mission. As a safety critical nuclear business, we must maintain our existing world class levels of safety. The tragic fatality of a construction worker on site last year has reinforced our commitment to all aspects of workforce safety, not only within our nuclear facilities but on our expanding construction sites. We have worked closely with our regulators in the Office for Nuclear Regulation, the Defence Nuclear Safety Regulator, and the Environment Agency to ensure that we effectively manage and reduce our risks. Last year, the site where we assemble and disassemble warheads was recategorized as requiring the lowest level of regulatory attention. Our commitment to environmental sustainability is also crucial to both our employees and stakeholders. We are holding ourselves accountable to deliver against targets which are amongst the most challenging across government. I would like to thank everyone who has supported the impressive progress that has been made over the last year and I look forward to building on this momentum over the next year. Nick Elliott, Chief Executive Officer AWE Purpose and Mission AWE’s purpose is to ‘Protect the UK through nuclear science and technology’. AWE’s mission is ‘To design and manufacture warheads and provide nuclear services to meet the needs of defence’. The purpose and mission are underpinned by the six commitments we have made to defence, which align to the DNO Warhead Group Strategic Objectives. These commitments are: 1. Provide enough warheads 2. Possess the science and technology to maintain and design warheads 3. Support counter terrorism and non-proliferation 4. Build and maintain fit for purpose infrastructure 5. Enable our people and transform AWE 6. Support the DNO’s Strategic Warhead Plan AWE’s commitments enable the Warhead Group to fulfil their targets and provide an integrated stockpile for Operation RELENTLESS. These commitments are AWE’s unique offering to defence, including the Warhead Group, and are the organisation’s reason for existence. AWE has moved into the next generation of warhead production and must deliver these commitments to ensure we capitalise on this endeavour. We will ensure stability, consistency and discipline across the portfolio; invest heavily into the future of our people, plants and processes; and commit to a cultural and operational transformation that ensures we are a world class, modern business. AWE Business Model & Organisational Structure The MOD owns the AWE sites. AWE is responsible under a contract with the MOD for operating the sites safely and securely as well as delivering a safe, effective, and efficient nuclear warhead programme. AWE employs the workforce, holds the nuclear site licences, environmental permits, and other regulatory permissions. The Non-Departmental Public Body (NDPB) structure was selected by the Government to strengthen alignment, simplify the relationship with AWE, and improve value for money. Our strategic imperative is to deliver on time, securely, safely, and sustainably. Trust and transparency are critical to achieving these because success relies on the effective and efficient collaboration and alignment across the Defence Nuclear Enterprise (DNE), from requirement setting to funding decision-making through to delivering output. AWE’s reputation as an employer of choice, particularly in science, engineering and programme management, will ensure that we continue to attract the most highly skilled employees. Our Business Plan outlines the transformative actions we must undertake to ensure that we continue to maintain the trust of our customers, stakeholders and the wider UK economy. As we make tangible progress on these actions, the nature, needs and priorities of our continuing and development activities will continue to evolve. We will complete 5 strategic actions by 2025: 1. Modernise delivery – Reduce end-to-end production span times, increase consistency of product configuration and traceability, rationalise design processes and improve assessment capability. 2. Partner with the wider UK economy – Optimise the use of supply chain in production, improve infrastructure delivery and decommissioning, invest to regenerate national capacity, and partner with the UK and US National Labs Alliance. 3. Attract, grow, and retain the best people – Continue to improve workforce agility, provide an attractive employee value proposition, increase outreach to the national talent pool through our apprentice and graduate schemes, be known for our contribution to UK nuclear security and as a great place to work. 4. Recapitalise and consolidate our estate – Deliver the estates master plan that encompasses Environmental, Social and Governance (ESG) principles and drive forward our strategic partnerships achieving early contract engagement and solutions to accelerate projects. 5. Support DNE alignment – Clarify ways of working, improve alignment of teams, governance, and decision-making, as well as product approvals and technical assurance, and develop and implement an approach to real-time international collaboration. Company financial performance for the year ended 31 March 2024 The financial statements for the year ended 31 March 2024 show the following: • Revenue of £1,818.2 million (31 March 2023: £1,476.7 million). • Gross loss of £33.0 million (31 March 2023: gross loss of £21.4 million). • Net loss for the year of £11.0 million (31 March 2023: net profit of £3.9 million). • Net liabilities of £201.1 million (31 March 2023: net liabilities of £234.1 million). • Capital contribution of £30 million (31 March 2023: £nil) received in relation to an equity contribution from the owner of the Company equal to the amounts paid by the Company to the pension scheme in respect of the deficit funding of the scheme). Revenues mainly arise from work undertaken in relation to AWE’s principal activity. This accounts for 99% of revenue (31 March 2023: 98%). The growth in revenue reflects the increased level of activity in the year compared to the prior period. This is primarily due to greater investment in the infrastructure in connection with current and future facilities for the nuclear warhead programme. Revenues arising from the principal activity, being the performance of the Management & Operations (M&O) contract to operate the AWE sites owned by the MOD and deliver the nuclear warhead programme, mainly reflect the re-imbursement of costs with fee for expenditure in meeting the Trident and replacement warhead commitments, and the delivery of the critical infrastructure projects required to meet these commitments. The costs include those associated with maintaining and operating the site and the costs of the workforce involved in delivering these commitments at Aldermaston, Burghfield and Blacknest, together with the costs of the infrastructure projects. The infrastructure is owned by the MOD, not AWE plc, and accordingly the investment in infrastructure is not capitalised, but expensed as a programme cost. The performance of the M&O contract is addressed in summary in the Performance and Key Performance Indicators section. The gross loss for the year ended 31 March 2024 arises as a result of the fee earned on the M&O and other contracts of £2.5 million (31 March 2023: £1.3 million) offset by the Research and Development Expenditure Credit (RDEC) returned to the MOD under contract of £20.6 million (31 March 2023: £18.4 million), where the RDEC received from the HMRC is recognised in Other operating income, and the net current service and interest costs arising in relation to the defined benefit pension scheme included in cost of sales of £15.0 million (31 March 2023: £4.0 million). The net loss for the year ended 31 March 2024 arises principally as a result of the gross loss, as explained above, being offset by Research and Development Expenditure Credit (RDEC) income of £20.6 million (31 March 2023: £18.4 million) included in Other operating income, and Administration expenses, Finance expenses and the charge for corporation tax. Net liabilities principally arise as a result of the net liability in respect of the defined benefit pension scheme. The net liability of the defined pension scheme has decreased to £209 million (31 March 2023: £238 million). This included the £30 million deficit repair payment referred to above. Further details are provided in note 15 in the financial statements. A detailed account of AWE’s finances is provided in the financial statements (pages 100 to 105). The land and properties utilised by AWE for the performance of their activities are owned by the MOD and are therefore not included in AWE’s financial statements. Going concern The financial statements are prepared on the basis that the Company continues as a going concern. Further details regarding this assessment are set out in the Directors’ Report on page 55. Overview of KPIs The KPIs set out below, which incorporate performance against milestones, are those top tier KPIs that the AWE board judge the most effective in assessing progress against objectives or strategy, monitoring principal risks, or are otherwise utilised to measure the development, performance, or position of the entity. The KPIs and milestones therein, are broadly split between delivery outputs, as a measure of delivery performance, and those activities and benefits that are ‘making the business better’. This report addresses the top tier of KPIs reported to the board on a regular basis. The KPIs are set out in four sections, addressing our key principles of performance as follows: • Are we Safe and Secure? • Are we Performing? • Are we in Control? • Are we Mobilised? Performance Summary: - Are we Safe and Secure? The KPI target has been met, and while Occupational Safety and Health Administration (OSHA) and Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) rates have been met, and remain at world class levels, they have risen compared to last year. On 6 July 2023, an incident occurred in which a Balfour Beatty employee tragically lost his life on one of our construction enclaves. The event has been subject to detailed investigation by AWE, the contractor and the relevant authorities. AWE remains wholly committed to the safety of its people and operations. For Security, AWE was within target <1.5 (as measured as incidents per 100,000 worked hours) on a 12 months rolling basis through to 31 March 2024. - Are we Performing? In FY24, 53 (85%) of the Business Plan milestones were delivered, with 48 (77%) delivered either on time or early compared to plan. Technology Centre milestone delivery performance had been on track for most of the year with 98% of the plan delivered within the year (1,434 out of 1,457 milestones). Quality performance fluctuated just below the 95% target throughout most of the year, ending in line with the target. The Strategy House efficiency programme delivered all planned milestones either early or on time. Strategy House Hours Harvested was 88% of plan in March 2024. - Are we in Control? The financial target for expenditure (Actual vs Budget) was not achieved due to lower spend in infrastructure; a revised forecast agreed with DNO in September 2023 was delivered within 1%. Financial efficiencies against target reached 124%. - Are we Mobilised? Completed 1,414 external hires (84% increase vs FY23). Female hires reached 34.2% against a 35% target. KPI Performance Table: [Are we Safe and Secure?] - Occupational Safety and Health Administration (OSHA) Rate: Target < 0.3 | Outturn: 0.287 | Comment: Target achieved. However, the number of incidents and overall OSHA rate has increased on previous year's performance. A fatality occurred on one of our construction sites. - Security Incidents per 100,000 hours (12 months rolling average): Target < 1.5 | Outturn: 1.425 | Comment: Target achieved. - Mandatory Training Compliance: Target >95% | Outturn: 98.4% | Comment: Target achieved. Compliance remains high with an average of 98.9% through FY24. [Are we Performing?] - Total Number of Business Plan Milestones Delivered: Target: 62 | Outturn: 53 | Comment: Target not achieved. 85% delivered. 9 milestones moved into FY25. 48 (91%) delivered within time, of which 16 were delivered early. - Technology Centre Delivery against Business Plan: Target >90% | Outturn: 98% | Comment: Target achieved. 1,434 out of 1,457 individual Technology Centre items delivered. - Right First Time: Target >95% | Outturn: 95% | Comment: Target achieved. - Delivery of Strategy House Business Plan Milestones: Target: 7 | Outturn: 7 | Comment: Target achieved. All delivered in year in time. [Are we in Control?] - Expenditure – Actual v Budget: Target <+/-1% | Outturn: -4.8% | Comment: Target not achieved. Spend was below budget throughout the year within the infrastructure programme. - Financial Efficiencies: Target >95% | Outturn: 124% | Comment: Target achieved. Exceeded target. - Spend under Category Management: Target >50% | Outturn: 70.7% | Comment: Target achieved. 20.7% above target. [Are we Mobilised?] - Variance between FTE Demand and Supply: Target <+/-10% | Outturn: -3.8% | Comment: Target achieved. - Female Hires: Target >35% | Outturn: 34.2% | Comment: Target not achieved; however, an improving position (FY23: 29.9%, FY22: 24.5%). - Female Headcount: Target >30% | Outturn: 26.7% | Comment: Target not achieved. Improving female hires position. - Employee Net Promoter Score: Target >10 | Outturn: -18 | Comment: Target not achieved. First year of baseline insight; impacted by 2023 pay negotiations. Principal Business Risks and Mitigations: 1. AWE Current Capabilities (Owner: COO) - Risk: Unavailability of current plant, facilities and enabling infrastructure to support the programme due to ageing plant and obsolescence. - Potential Impact: Delays to operations, resource inefficiencies, increase in ESH&Q events, increased maintenance costs. - Mitigating Actions: Re-kit programmes, Estates strategy and asset management plans, through-life management, single point of failure investment, on-site emergency response. 2. AWE Sites (Owner: Executive Director Liabilities) - Risk: Impediment to the use of AWE sites to allow operations to continue (pandemic, environmental, protestor action, force majeure). - Potential Impact: Delays/restrictions to operations, increased costs from recovery/delays. - Mitigating Actions: Business resilience and continuity plans/exercising, physical and personnel security controls, emergency response capability. 3. AWE Future Capabilities (Owner: COO) - Risk: Unavailability of future plant, facilities and critical infrastructure to support long-term programmes. - Potential Impact: Delays to operations, increase in ESH&Q events, financial penalties/costs. - Mitigating Actions: Capital builds and re-kit programmes, Estates Strategy and Master Plan, asset management, utilities investment. 4. Supply Chain (Owner: CFO) - Risk: Insufficient capability and capacity within the supply chain to fully support complexity and risk. - Potential Impact: Reduced long-term agreements, unavailability of critical goods/services, cost increases, damaged supplier relationships. - Mitigating Actions: Demand plan and procurement pipeline, long-term strategic relationships with critical suppliers, delivery-focused contract management. 5. People (Owner: Chief People Officer) - Risk: Inability to attract and/or retain the right number of people with the right skills at the right time. - Potential Impact: Adverse delivery impact, brand damage, compliance issues from SQEP shortage, wellbeing/absence issues, higher recruitment costs. - Mitigating Actions: Strategic Workforce Planning, Location Strategy, reward framework, inclusive culture, leadership/SQEP training, wellbeing support. 6. Funding (Owner: CFO) - Risk: Insufficient funding available from MOD or inability to persuade MOD/government of funding requirements. - Potential Impact: Inability to invest in people/capability, cessation of operations, difficulty conducting business, loss of stakeholder confidence. - Mitigating Actions: Improved long-term planning, Business Case Assurance reviews, strong MOD/government relationships and governance. 7. Environment, Safety & Health (Owner: Director ESH&Q) - Risk: Failure to maintain safe and sustainable operational environment and prevent a major incident. - Potential Impact: Restriction to operations, worker fatality, serious injury or environmental release, fines/prosecution. - Mitigating Actions: Licence to operate controls, business continuity/emergency response, Periodic Review of Safety (PRS), decommissioning and replacement. 8. Quality (Owner: Director ESH&Q) - Risk: Failure to establish, manage and monitor adequate quality management systems. - Potential Impact: Quality assurance failures, delays, increased scrap/rework costs, erosion of MOD confidence. - Mitigating Actions: Quality Improvement Plans, digitisation, Quality training, inspections, escape investigations. 9. Employee Relations (Owner: Chief People Officer) - Risk: Deteriorating industrial relations leading to formal industrial action. - Potential Impact: Operational suspensions, delivery delays, reputation damage. - Mitigating Actions: Positive engagement with trade unions, fair reward framework, operational resilience strategies. 10. Cyber Security and Data Loss (Owner: Executive Director Security) - Risk: Exposure to cyber-attack leading to denial of IS services and loss of data. - Potential Impact: IT security breach, data escape, ICO financial penalties. - Mitigating Actions: Continual technology upgrade programme, robust IT/cyber/data management controls. 11. External Environmental Shock (Owner: Executive Director Assurance) - Risk: Uncertainties from sudden political change, serious accidents or changing global nuclear regulations. - Potential Impact: Significant change to funding, schedule, scope, increased regulatory burden. - Mitigating Actions: Geopolitical risk assessments, crisis-response capabilities, PR and government relations. 12. Contract Management (Owner: CFO) - Risk: Failure to manage contracts with suppliers leading to inefficient delivery. - Potential Impact: Financial/schedule target failure, losses on contracts, breach of contract litigation, negative public opinion. - Mitigating Actions: Senior Responsible Officers allocated, handover plans, internal controls, regular review, training. 13. Project and Programme Baseline Management (Owner: COO) - Risk: Failure to maintain programme control across large and diverse portfolio. - Potential Impact: Cost/schedule overruns, poor performance data, impaired decision-making. - Mitigating Actions: Enterprise Portfolio Management Office (PMO) governance, integrated schedule of work. 14. Environmental Sustainability and Climate Change (Owner: Director ESH&Q) - Risk: Failure to deal with transition to lower-carbon economy and physical impacts of climate change. - Potential Impact: High adaptation costs, extreme weather operational disruption, regulatory non-compliance. - Mitigating Actions: Carbon management strategy, CIRAM climate risk assessments, heating decarbonisation, sustainable procurement. Environmental Sustainability Strategy (ESS) focuses on: reducing carbon, implementing the circular economy, and enhancing biodiversity, aligned with UN SDGs 12, 13, and 15. TCFD Disclosure: - Governance: Board oversight via SESH&Q Committee and ARAC; management oversight via ESH&Q Committee and Environmental Sustainability Steering Group. - Strategy & Scenario Analysis: Assessed physical and transition risks using Met Office UKCP18 datasets under RCP2.6 (<2°C) and RCP8.5 (~4.3°C warming by 2100). - Risk Management: Embedded into Enterprise Risk Management (ARM tool), categorized as a Strategic Risk. - Targets: Net Zero across value chain by 2050; Net Zero for Scope 1 and 2 by 2040 (28% reduction achieved to date vs FY18 baseline of 25% target). Greening Government Commitments (GGC) & SECR Metrics: - Scope 1 Direct Emissions (FY24): 32,871 tCO2e (Natural gas: 30,911; Other fuels: 1,655; Fugitive emissions: 305) [FY23: 32,727 tCO2e] - Scope 2 Indirect (Location-based): 27,081 tCO2e [FY23: 26,357 tCO2e] - Scope 2 Indirect (Market-based): 6 tCO2e [FY23: 5 tCO2e] (Renewable Backed Supply via REGOs) - Total Scope 1 & 2 (Location-based): 59,952 tCO2e [FY23: 59,084 tCO2e] - Energy Consumption: Natural Gas 168,978k kWh; Purchased Electricity 130,780k kWh; Gross Energy Expenditure £36.003m. - Business Travel Emissions (Gross Expenditure): £11.775m total. - Waste Management: Controlled waste generated: 1,689 tonnes (15% reduction against baseline achieved); Diversion from landfill: 99%; Reuse & recycle rate: 72%. - Water Consumption: Total water consumption: 762,175 m³ (19% reduction vs baseline); Gross expenditure £193k. - Paper Usage: Total A4 paper: 8,658 reams; A3 paper: 444 reams (50% overall print reduction since 2017/18). - Biodiversity & Nature Recovery: Over 170,000 m² grassland un-mowed for pollinators; 2.5-hectare orchard planting underway; 3:1 tree replanting ratio. Statement of how directors have had regard to matters in s172(1)(a)–(f) of the Companies Act 2006: - Long term consequences: Ensuring long-term alignment with MOD requirements and nuclear deterrent planning. - Employee interests: Ongoing dialogue with trade unions, safety/wellbeing programmes, anti-harassment training. - Relationships with suppliers and customers: Close liaison with MOD, strategic suppliers, and SMEs. - Community and environment: Regular executive-led community engagement, biodiversity initiatives, environmental compliance. - High standards of business conduct: Public accountability, adherence to Managing Public Money standards. - Acting fairly between members: AWE is wholly owned by the Secretary of State for Defence. Board Members during 2023–24: - Sir John Manzoni (Chairman) - Alison Atkinson (CEO – resigned 17 April 2023) - Nick Elliott CB MBE (CEO – appointed 20 March 2024) - Richard Elsy CBE (Non-Executive Director) - Claire Flint (Senior Independent NED) - Barry Hunter (Chief Financial Officer) - Dame Sue Ion GBE (NED) - Richard Keys (NED) - Henry Lloyd (MOD-appointed NED) - Andrew McNaughton (Executive Director – resigned 13 December 2023) - Bridget Rosewell CBE (NED – appointed 13 December 2023) - Iain Stevenson (Deputy CEO / Interim CEO – appointed 7 June 2023, resigned 27 July 2024) - Dr J Stephen Rottler (NED) Audit & Governance Details: - Internal Control: Transitioned from SOX framework to MOD Internal Control Assurance Framework (ICAF). Head of Internal Audit gave a Limited Assurance opinion. - External Auditor: Comptroller and Auditor General (NAO). - Defined Benefit Pension Scheme deficit at 31 March 2024: £209m (2023: £238m), supported by MOD Crown Guarantee. - Dividends: £nil declared. Directors' Remuneration (Year ended 31 March 2024): - Sir John Manzoni: Fees & salary £150,000; Total £150,000 (2022-23: £150,000) - Nick Elliott (CEO from 4 March 2024): Fees & salary £34,022 (annualised £452,000, includes £52k in lieu of pension); Total £34,022 - Alison Atkinson (stepped down 17 April 2023): Fees & salary £33,947 (annualised £407,365); Total £33,947 (2022-23 Total: £580,615 including £173,250 bonus) - Iain Stevenson (Interim CEO): Fees & salary £339,400 (annualised £408,667); Pension benefits £25,300 (annualised £31,625); Total £364,700 (annualised £440,292) - Barry Hunter (CFO): Fees & salary £292,409; Annual bonus £86,520; Benefits in kind £2,520; Pension £11,158; Total £392,607 (2022-23 Total: £293,495) - Andrew McNaughton (ED): Fees & salary £296,625 (annualised £395,500); Total £296,625 - Non-Executive Directors (Richard Elsy, Claire Flint, Dame Sue Ion, Richard Keys, Dr J Stephen Rottler): £29,995 each - Bridget Rosewell (from 13 Dec 2023): £10,248 (annualised £29,995) - Henry Lloyd (MOD/UKGI): £nil Pay Ratios vs Highest Paid Director: - 25th percentile: 11:1 (Pay: £40,030) - Median: 9:1 (Pay: £51,524) - 75th percentile: 7:1 (Pay: £67,123) Key People Metrics & Information: - Engagement: 'Best Companies' score 666.3 ('One Star'), ranked in Top 25 Best Big Companies to Work For. - Headcount: Average FTE 7,751 (Permanent: 7,439; Agency: 236; Secondees: 76) compared to 6,690 in FY23. - Staff Composition: 26.7% female representation across the workforce (Executive Directors: 16.7% female; Senior Managers: 24.2% female). - Total Pay Bill: £411,497k (Facility time spend: £648,323, 0.16% of pay bill). - Staff Turnover: March 2024 attrition rate was 6.30%. - Sickness Absence: Between 2.75% and 3.35%. - Total Exit Packages: 24 packages totalling £1,393,874 (including one between £350k–£400k approved by HM Treasury). The Comptroller and Auditor General issued an unqualified audit opinion on the financial statements of AWE plc for the year ended 31 March 2024, confirming that they give a true and fair view of the state of affairs and loss, have been properly prepared in accordance with UK-adopted IFRS and the Companies Act 2006, and that going concern assumptions remain appropriate. Income Statement for Year Ended 31 March 2024: - Revenue: £1,818,236k (2023: £1,476,666k) - Cost of sales: (£1,851,260k) (2023: (£1,498,112k)) - Gross loss: (£33,024k) (2023: (£21,446k)) - Other operating income (RDEC): £20,596k (2023: £18,405k) - Administrative expenses: (£1,157k) (2023: £1,316k) - Operating loss: (£13,585k) (2023: (£1,725k)) - Net financing expenses: (£33k) (2023: £91k) - Loss before tax: (£13,618k) (2023: (£1,634k)) - Taxation credit: £2,571k (2023: £5,543k) - (Loss)/Profit for the year: (£11,047k) (2023: £3,909k) Statement of Other Comprehensive Income for Year Ended 31 March 2024: - (Loss)/Profit for the year: (£11,047k) (2023: £3,909k) - Actuarial movement in relation to pension fund: £14,000k (2023: (£181,000k)) - Total comprehensive income/(loss) for the year: £2,953k (2023: (£177,091k)) Balance Sheet as at 31 March 2024: Non-Current Assets: - Investments in group companies: £1k (2023: £1k) - Other financial assets: £nil (2023: £4k) - Deferred tax assets: £8,475k (2023: £5,161k) - Right-of-use assets: £1,504k (2023: £1,635k) - Total Non-Current Assets: £9,980k (2023: £6,801k) Current Assets: - Contract assets: £130,334k (2023: £107,093k) - Other financial assets: £3k (2023: £19k) - Trade and other receivables: £95,273k (2023: £76,353k) - Cash and cash equivalents: £107,782k (2023: £123,371k) - Total Current Assets: £333,392k (2023: £306,836k) Total Assets: £343,372k (2023: £313,637k) Current Liabilities: - Lease liabilities: £660k (2023: £542k) - Trade and other payables: £317,393k (2023: £289,013k) - Contract liabilities: £14,735k (2023: £16,404k) - Provisions: £279k (2023: £800k) - Other financial liabilities: £nil (2023: £7k) - Total Current Liabilities: £333,067k (2023: £306,766k) Non-Current Liabilities: - Lease liabilities: £832k (2023: £1,051k) - Trade and other payables: £1,508k (2023: £1,515k) - Employee benefits (Pension deficit): £209,000k (2023: £238,000k) - Provisions: £83k (2023: £376k) - Total Non-Current Liabilities: £211,423k (2023: £240,942k) Total Liabilities: £544,490k (2023: £547,708k) Net Liabilities: (£201,118k) (2023: (£234,071k)) Equity: - Share capital: £50k (2023: £50k) - Retained earnings: (£294,168k) (2023: (£297,121k)) - Capital reserves: £93,000k (2023: £63,000k) - Total Equity: (£201,118k) (2023: (£234,071k)) Statement of Changes in Equity: - Total equity at 1 April 2023: (£234,071k) - Loss for the year: (£11,047k) - Other comprehensive income (pension actuarial gain): £14,000k - Capital contributions (MOD pension deficit funding): £30,000k - Total equity at 31 March 2024: (£201,118k) Cash Flow Statement: - Net cash used in operating activities: (£44,957k) (2023: cash generated £49,566k) - Net cash from financing activities: £29,368k (2023: used (£1,063k)) - Net decrease in cash and cash equivalents: (£15,589k) (2023: increase £48,503k) - Cash and cash equivalents at 31 March 2024: £107,782k (2023: £123,371k) - Note 1 Accounting Policies: IFRS compliance, NDPB/FReM adoption, historical cost, going concern basis. - Note 2 Segmental Analysis: M&O revenue broken down into Mission Delivery (£250.1m), Operations (£115.3m), Infrastructure Programme Delivery (£921.4m), Enabling and Corporate Functions (£468.3m); Non-M&O includes Pension (£43.2m), OGDs (£22.4m), Coulport (£15.7m), Other (£2.4m), and RDEC deduction ((£20.6m)). - Note 3 Revenue: MOD £1,795.9m, Non-MOD £22.4m. - Note 4 Other Operating Income: RDEC £20.6m. - Note 5 Expenses & Auditor Remuneration: External audit fee £215k. - Note 6 Staff Numbers and Costs: Aggregate payroll costs £507.7m; average staff 7,196. - Note 7 Directors' Remuneration: Total £1,396k. - Note 8 Finance Expenses: Net loss on FX forward contracts £13k; lease interest £20k. - Note 9 Taxation: Total tax credit £2.571m. - Note 10 Subsidiary: AWE Pension Trustees Limited (dormant, 100% owned). - Note 11 Deferred Tax Assets: £8,475k. - Note 12 Trade and other receivables: £95,273k. - Note 13 Cash and cash equivalents: £107,782k held in Government Banking. - Note 14 Trade and other payables: £317,393k current, £1,508k non-current. - Note 15 Employee Benefits (Defined Benefit Pension): Obligation £1,504m, Assets £1,295m, Deficit £209m. - Note 16 Provisions: ACP provision £362k. - Note 17 Capital and Reserves: 50,001 ordinary £1 shares; capital contribution £30m in year (£93m cumulative). - Note 18 Financial Instruments: Level 1 fair value measurement; forward currency contracts held. - Note 19 Leases: Right-of-use assets £1,504k; lease liabilities £1,492k. - Note 20 Contingencies: None. - Note 21 Losses and Special Payments: 9 special severance payments totaling £873k. - Note 22 Related Parties: Significant transactions with MOD (sales £2,138.0m, receivables £0.4m), SFEL, Mace, ONR. - Note 23 Ultimate Parent: Ministry of Defence (MOD). - Note 24 Events after Reporting Period: Transfer of Radiation Sciences Group (RSG) on 1 April 2024 from DSTL for nil consideration. Glossary entries include: AASH - Annual Assessment of Stockpile Health ACP - Annual Compensation Payment AO - Accounting Officer BAT - Best Available Technique BEIS - Department for Business, Energy, and Industrial Strategy BNG - Biodiversity Net Gain CAL - Corporate Assurance and Legal CASD - Continuous at sea deterrent CEO - Chief Executive Officer CFO - Chief Financial Officer DESA - Defence Equipment Sales Authority DNE - Defence Nuclear Enterprise DNIC - Defence Nuclear Investment Committee DNO - Defence Nuclear Organisation DREAM - Defence Related Environmental Assessment Methodology DSTL - Defence Science and Technology Laboratory ECL - Expected credit losses ENEI - Employers Network for Equality & Inclusion ESH&Q - Environment, Safety, Health & Quality ESS - Environmental Sustainability Strategy ETS - Emissions Trading Scheme FReM - Government Financial Reporting Manual FTE - Full-time equivalent FVTPL - Fair value through profit or loss GAAP - Generally accepted accounting principles GBS - Government Banking Service GGC - Greening Government Commitments GHG - Greenhouse Gas HMG - His Majesty’s Government HPC - High Performance Computing IAC - Investment Approvals Committee IBP - Integrated Business Plan IBR - Incremental borrowing rate ICO - Information Commissioner’s Office ICT - Information Communication Technology IFRS - International Financial Reporting Standards IR35 - Employment legislation ISO - International Organisation for Standardisation LPG - Liquefied petroleum gas M&O - Management and operations MOD - Ministry of Defence NAO - National Audit Office NDPB - Non-department public body NNC - Non-Nuclear Components ONR - Office for Nuclear Regulation OSHA - Occupational Safety and Health Administration PMO - Portfolio Management Office PMS - Programme Master Schedule PRS - Periodic Reviews of Safety RBG - Responsible Business Group RDEC - Research and Development Expenditure Credit REGO - Renewable Energy Guarantees of Origin RIDDOR - Reporting of Injuries, Diseases and Dangerous Occurrences Regulations RSG - Radiation Science Group SDS - Sustainable Development Goals SECR - Streamlined Energy and Carbon Reporting SESH&Q - Security, Environment, Safety, Health, and Quality SET - Science, and technical support SoS - Secretary of State SOX - Sarbanes Oxley SQEP - Suitably Qualified and Experienced Personnel SRO - Senior Responsible Officer STAR - Sustainable Technology Advice and Reporting STEM - Science, technology, engineering, and mathematics TCFD - Task Force on Climate Related Financial Disclosures TOR - Terms of Reference TU - Trade Union ULEV - Ultra-Low Emission Vehicles