Babcock International Group PLC · LSE:BAB
Babcock International — Investor Day (March 2015)
102 slides from Babcock International's investor day presentation, Mar 30, 2015
Slide 1: Mission Critical Services Analyst and Investor Seminar
Mission Critical Services Analyst and Investor Seminar 30 March 2015
Slide 2: Disclaimer
Disclaimer This document has been prepared by Babcock International Group PLC (the “Company”) solely for use at a presentation in connection with the Company's Mission Critical Services analyst and investor seminar. For the purposes of this notice, the presentation that follows (the “Presentation”)
Slide 3: Welcome and introduction
Welcome and introduction Peter Rogers – Group Chief Executive
Slide 4: The UK's leading engineering support services company
The UK’s leading engineering support services company A consistent strategy for more than 10 years has created and continues to strengthen the business we are today Market leading positions built on expertise and a deep understanding of our customers’ needs Ability to deliver highly complex and tech
Slide 5: The acquisition - a year on
The acquisition - a year on Ownership has confirmed Board’s expectations Now fully integrated as Babcock Mission Critical Services (MCS) • MCS is an excellent strategic fit and fully aligned with Babcock’s business model • MCS already benefiting from Babcock scale and capabilities Bill Tame appointe
Slide 6: Looking forward to another strong year of growth
Looking forward to another strong year of growth After an excellent first half the Group has continued to make strong progress in the second half • continued strong demand for our services across all divisions • bidding activities remain buoyant For the full year expect • order book stable at c £20
Slide 7: Mission Critical Services Overview
Mission Critical Services Overview Bill Tame – Chief Executive 7
Slide 8: Agenda
Agenda Welcome and strategic rationale Peter Rogers MCS overview Bill Tame MCS market overview Baba Devani Italy Andrea Stolfa United Kingdom and Ireland Richard Mintern Scandinavia Baba Devani Q&A Session Tea/coffee break Australia John Boag Western Europe Manuel López France Frédéric Goig MCS fina
Slide 9: MCS - its place within the Group
MCS - its place within the Group Babcock International Group PLC Chief Executive – Peter Rogers Marine and Technology Defence and Security Support Services International Archie Bethel John Davies Kevin Thomas Bill Tame Half year 2014/15 revenue International Division 7% Marine and Technology 12% 34%
Slide 10: Mission Critical Services
Mission Critical Services An integral part of the Babcock Group – delivering complex and critical services Fully aligned with existing Group strategies • market leading positions • similar customer characteristics - central, local government and blue chip companies • customer focused, long-term rela
Slide 11: MCS - an experienced management team
MCS - an experienced management team Bill Tame Chief Executive Officer Andrea Cicero Baba Devani Financial Director Business Development Director Andrea Stolfa Richard Mintern John Boag Manuel López CEO Italy CEO UK & Ireland MD Australia CEO Western Europe Frédéric Goig MD France Bond Bond Air Bond
Slide 12: Integration progressing well
Integration progressing well Mission Critical Services working well within broader Babcock • initial focus on delivery of management plan, integration largely complete • processes and reporting aligned, and Babcock policies adopted • Avincis renamed Mission Critical Services (MCS), now a standalone
Slide 13: MCS – a Babcock business with scale, wide capability and long experience
MCS – a Babcock business with scale, wide capability and long experience One of the world’s top 3 providers Around 3,000 of mission-critical operations 5,400 employees fire fighting Revenue operations in Over 175 bases in 10 More than Spain, Italy, (2013 full year) countries and 15 61,400 Portugal a
Slide 14: …which is 'trusted to deliver'
…which is ‘trusted to deliver’ Critical, complex and bespoke services • customised turnkey services designed to meet customers’ long-term needs • seamlessly integrated with public emergency services • vital helicopter transport for offshore oil and gas industry In extreme environments • Arctic regio
Slide 15: Safety
Safety At the heart of everything we do In line with the Babcock ethos and in an inherently higher risk environment Performance We are committed to the highest standards of Management Detection and notification safety We seek to set the standards for safety We operate a world leading integrated safe
Slide 16: Trusted to deliver
Trusted to deliver A fully integrated support solution State-of-the-art aircraft • 334 helicopters and 51 fixed wing • agile fleet of helicopters and growing pipeline of new aircraft Integrated operations and engineering support • 24/7 co-ordination centres, proprietary real-time flight tracking sys
Slide 17: Lines of business – split of revenue
Lines of business – split of revenue Three core market areas providing critical support Revenue by lines of business to customers across Europe and Australia 4% Emergency Services (ES) ■ ES 31% ■ O&G Maintenance, Repair and Overhaul (MRO) 65% ■ MRO Oil & Gas (O&G) Revenue by geography 6% ■ UK 10% 33
Slide 18: Where we operate
Where we operate Multiple mission types in multiple locations Western Italy UK & Ireland Scandinavia Australia Europe Emergency Medical Emergency Medical Emergency Medical Emergency Medical Emergency Medical Services Services Services Services Services –––––––––––––––––––– –––––––––––––––––– –––––––
Slide 19: Requiring a versatile fleet of aircraft
Requiring a versatile fleet of aircraft 385 aircraft in March 2015 • 51 fixed-wing (FW) • 334 rotary-wing (RW) − 190 light single/double, 102 medium twins, 42 heavy twins 38 different aircraft types • RW – 13 light, 10 medium, 7 large • FW – 8 13 original equipment manufacturers Operated fleet 13% O
Slide 20: Our plan for growth
Our plan for growth Realising growth potential in existing markets • deepening customer relationships − global oil and gas companies − regional and local health authorities, regional civil protection agencies • retaining industry-leading, emergency, medical and firefighting expertise − predictive an
Slide 21: Babcock Group growth opportunities
Babcock Group growth opportunities Building on MCS’ core European presence • initial focus on Spain, Italy and France • local Business Development Directors recruited Developing plan of action • investigating markets and customers where Babcock can add value • using Inaer brand presence to initiate
Slide 22: MCS – a Babcock business
MCS – a Babcock business MCS provides: • Market leading positions • A compelling service offering to existing and new customers • Technological differentiation • Growth opportunities across all its markets • With safety remaining at the forefront of everything we do... … and MCS at the forefront of
Slide 23: Our markets - overview
Our markets - overview Baba Devani – Business Development Director
Slide 24: Delivering complex, mission critical support services
Delivering complex, mission critical support services Highly-trained Managing Critical Delivering Complex Professionals Assets Services 24 Mission Critical Services analyst and investor seminar 30.03.15 www.babcockinternational.com
Slide 25: Our customers
Our customers Emergency Services • national governments • regional administrations • hospitals • charities • state agencies Oil and Gas • international oil companies • national oil companies • independents MRO • national governments • state agencies • military 25 Mission Critical Services analyst an
Slide 26: Market landscape
Market landscape Emergency Services Oil and Gas • 450 operators, many with fleets of less • Bristow and CHC - 2 major global than 10 aircraft operators • not-for-profit operators in Norway, • regional operators in mature markets Germany, Austria eg PHI, ERA, OMNI, NHV • single-engine “pay-per-call”
Slide 27: Lines of business
Lines of business EMERGENCY SEARCH & FIRE FIGHTING CIVIL MEDICAL SERVICES RESCUE PROTECTION Cyprus, Spain, UK, France, Australia, Italy, Portugal, Sweden, Finland, Ireland SURVEILLANCE OIL & GAS MRO DESIGN & COMPLETION 27 Mission Critical Services analyst and investor seminar 30.03.15 www.babcockint
Slide 28: Providing an integrated service
Providing an integrated service EMS SAR FF CP O&G Pilots Engineers Medical / rescue crews Specialised training Clinical governance/ medical care Operations co-ordination “Owned” fleet Operation of customer fleet Fixed wing operations Config
Slide 29: Creating competitive advantage
Creating competitive advantage Customer focus Operational Scale benefits capability Excellent OEM relationships Deep understanding of Highly experienced crews and based on fleet size and customer requirements and specialised training knowledge objectives Local decision making Ongoing investment in s
Slide 30: Delivering opportunities for growth
Delivering opportunities for growth • Equipment upgrades due to OEM product development Upgrades to current • New complementary technologies to improve value proposition contracts • Service extensions as scope of operations grows • Win rates in line with Babcock rates Market share gains • Implementa
Slide 31: Innovation underpinning future growth
Innovation underpinning future growth Partnering with European agencies and industrials RAPSODY EINFOREX Integration of sensors Intelligence into unmanned aircraft Surveillance to automatically detect Reconnaissance oil pollution caused by System ships illegally cleaning fuel tanks into the Now in o
Slide 32: EINFOREX case study
EINFOREX case study Aircraft flies over emergency situation Gathers information with several sensors, creating 3D map, circling the fire perimeter and automatically detecting hot-spots Sends in real-time to integrated Command and Control Centres Improves decision making and enhances safety for firef
Slide 33: Structured for growth
Structured for growth We are the market leader in the provision of integrated services that are complex, critical and bespoke Opportunities for growth across all emergency services sectors • will represent the largest sector of the MCS business Oil and gas growth expected to recover as customers loo
Slide 34: Italy
Italy Andrea Stolfa – Chief Executive
Slide 35: Overview of Italy
Overview of Italy Key statistics Emergency Services Market positions Bases 41 Operated aircraft 65 • Emergency Medical 1st 31 Jan 2015 Services (EMS) Revenue £114m 92% FY 2013 • Firefighting (FF) 1st Contract renewal rate >95% 31 Jan 2015 Revenue Oil and Gas 32% Inaer Italy • Oil and Gas (O&G) 1st r
Slide 36: Where we operate
Where we operate Highlights Length of service HEMS Sicily 17 years • response time of 5 mins • covers area of 25,711 km2 (including islands) • operates from 6 bases • fully qualified and certified pilots and engineers • accreditations and certifications: AOC and CAMO quality certificates, Part145 ce
Slide 37: Market analysis
Market analysis Customers Competitive landscape Market characteristics HEMS HEMS HEMS • HEMS is contracted by • strong Inaer brand due to • market is mature and a small individual regions across Italy expertise, service delivery, number of new bases are • each region has its own scale, customer focu
Slide 38: Market analysis
Market analysis Customers Competitive landscape Market characteristics • mix of local, international and • strong Inaer brand due to • limited scope in Italian national oil companies, eg service delivery, availability, market; however good Eni, Edison, Adriatic LNG- scale and capital, customer custo
Slide 39: Contracts and customers
Contracts and customers Trusted to deliver Typical characteristics across all lines of business Average contract length Revenue 7 Contract length 2 years – 9 years 6 13% Emergency Contract value £3m – £220m 5 Services Years Oil & Gas 4 Fixed / variable revenues 80% / 20% 3 2 1 0 2014 2008 2009 2010
Slide 40: Emilia Romagna Region: HEMS
Emilia Romagna Region: HEMS 2,600 missions 1,500 flight annually with an hours annually emergency covering response time 22,500 km2 under 5 minutes Specialist staff integrated with customer using proprietary R&D technology 4 specially 20 year configured aircraft relationship on 4 permanent with cust
Slide 41: Key pipeline activities
Key pipeline activities Total pipeline 2015 - 2019 = c £750m* Pipeline by stage Pipeline by line of business 19% 23% Bidding 18% Tracking Emergency Services Projected Oil and Gas Renewals 76% 82% 58% New bids 24% Key future opportunities • Emergency Services − Firefighting: key fixed-wing renewal fo
Slide 42: Babcock growth opportunities
Babcock growth opportunities New Babcock Business Development Director in place • Italian national • energy and support services expertise (19 years’ experience) Key characteristics of Italian market • public sector bodies increasingly looking to improve the quality of spending, to drive increased o
Slide 43: United Kingdom and Ireland
United Kingdom and Ireland Richard Mintern – Chief Executive
Slide 44: Overview of UK and Ireland
Overview of UK and Ireland Key statistics Emergency Services Market positions Bases 25 • Helicopter Emergency 1st Medical Services (HEMS) Operated aircraft 50 Revenue £149m 28% • Search and Rescue (SAR) 2nd FY 2013 Contract renewal rate 80% • Firefighting (FF) 31 Jan 2015 • Civil Protection (CP) 1st
Slide 45: Where we operate
Where we operate Highlights Length of service Emergency Services East Anglian HEMS: 24/7 operation 5 years • rotor-wing response time of 15 mins • 1,700 missions per annum • provision of aircraft, pilots and engineers BP Search & Rescue 9 years • rotor-wing response times vary from 10 mins, (10 mins
Slide 46: Market analysis
Market analysis Customers Competitive landscape Market characteristics HEMS HEMS HEMS • independent English • Bond Air Services (BAS) has • growth driven by upgrade of charities, limited co- strong brand, experience, services and equipment ordination delivery and scale • new technologies will drive
Slide 47: Market analysis
Market analysis Customers Competitive landscape Market characteristics • mix of international, • Bond Offshore Helicopters • market consolidated due to independent, and national (BOH) has strong brand, capital requirements companies experience, delivery, scale • transportation and logistics • custom
Slide 48: Contracts and customers
Contracts and customers Trusted to deliver Typical characteristics across all lines of business Average contract length Revenue 8 Contract length 3 years – 10 years Emergency 7 Services 10% Oil & Gas Contract value £8m – £90m 6 Years 5 Fixed / variable revenues 70% / 30% 4 3 2 1 0 2014 2011 2012 201
Slide 49: Jigsaw – Search and Rescue
Jigsaw – Search and Rescue 460 missions to Specialist staff date with a including pilots, response time of engineers and under 10 medically trained minutes winch crew New 5 year contract awarded, starting April 2015 2 specially 1,500 flight 9-year relationship configured hours annually with customer
Slide 50: Key pipeline activities
Key pipeline activities Total pipeline 2015 - 2019 = c £1,500m* Pipeline by stage Pipeline by line of business 8% 13% Bidding 20% Tracking Emergency Services Projected Oil and Gas Renewals 26% 80% 79% New bids 74% Key future opportunities Emergency Services • HEMS: Essex and Herts new contracts, sho
Slide 51: In summary
In summary FY16 revenue • 80% of revenue already captured, 70% is fixed • Oil and Gas contracts predominantly servicing production facilities – more stable Barriers to market entry high • high level of investment required • highly regulated environment • pre-requisite experience levels Diverse custo
Slide 52: Scandinavia
Scandinavia Baba Devani – Business Development Director
Slide 53: Overview of Scandinavia
Overview of Scandinavia Key statistics Emergency Services Market positions Bases 13 Sweden Finland Operated aircraft 21 31 Jan 2015 Rotary-wing / HEMS 1st 1st Revenue £49m* 68% Primary and secondary FY 2013 transport of patients to Contract renewal rate >95% hospital 31 Jan 2015 Revenue by geography
Slide 54: Where we operate
Where we operate Highlights Length of service Emergency Services FinnHEMS 4 years • response time of 15 minutes • 238,000 square miles area coverage • despatched from the national 112 system • fully qualified and certified pilots and engineers Northern regions EMS 7 years • fixed-wing secondary tran
Slide 55: Market analysis
Market analysis Customers Competitive landscape Market characteristics HEMS HEMS HEMS • contracted by regional public • Scandinavian Air Ambulance • mature HEMS markets authorities (SAA) has strong brand, • complex operations and high • decision making driven by experience, delivery and technology r
Slide 56: Market analysis
Market analysis Customers Competitive landscape Market characteristics EMS EMS EMS • contracted by public • number 1 operator in • markets yet to be fully authorities Sweden developed • decision making: “one-phone • competitors: consolidated • operations are critical due to call” service is top prio
Slide 57: Contracts and customers
Contracts and customers Trusted to deliver Typical characteristics across all lines of business Average contract length Fleet profile 12 Contract length 5 years – 10 years 10 Contract value £12m – £84m 8 Years Fixed / variable revenues 79% / 21% 6 8 rotary-wing 4 Fixed / variable revenues 58% / 42%
Slide 58: Norrlandstingens Regionforbund
Norrlandstingens Regionforbund 24/7 service delivery Contract with a response covers area time under 60 of minutes 42,500 km2 Specialist medical staff, half employed by SAA - integrated with customer who employs other 50% Specially configured Relationship aircraft transferring with customer over 1,8
Slide 59: Key pipeline activities
Key pipeline activities Total pipeline 2015 - 2019 = c £500m* Pipeline by stage Pipeline by country 9% 7% Bidding 9% Tracking 14% Norway Projected Sweden Renewals 13% Denmark 77% 84% New bids 87% Key future opportunities Emergency Medical Services • opportunities to gain market share in upcoming fix
Slide 60: In summary
In summary Scandinavian Air Ambulance is market leader in Scandinavia Significant opportunities for growth • upcoming tenders and market share gains in Norway • development in adjacent markets expected to lead growth − growth scope in Finland − development in the Baltic region Expertise in fixed win
Slide 61: Australia
Australia John Boag – Managing Director
Slide 62: Overview of Australia
Overview of Australia Key statistics Emergency Services Market positions Bases 8 • Emergency Medical 1st Operated aircraft 24 Services (EMS) Revenue £33m 59% FY 2013 • Surveillance 1st Contract renewal rate >95% 31 Jan 2015 • Marine Pilot Transfer 2nd Oil and Gas • Oil and Gas (O&G) 3rd crew-change
Slide 63: Where we operate
Where we operate Highlights Length of service Emergency Services Ambulance Victoria 24/7 HEMS 6 years • rotary response time of 10 mins • qualified and certified pilots and engineers • government-provided infrastructure • NVG capability • accreditation and certification: AOC, CAR 30, Part 142, Part
Slide 64: Market analysis
Market analysis Customers Competitive landscape Market characteristics HEMS HEMS HEMS • state governments with • Australian Helicopters • complex operations due to varying individual needs (AHPL): strong brand, geography and diverse SAR/Marine Pilot Transfer experience, delivery and requirements at
Slide 65: Market analysis
Market analysis Customers Competitive landscape Market characteristics • major international and • Bond Helicopters Australia • continued demand for new national oil companies, (BHA) growing brand technology driven by focus ConocoPhillips, PTTEP, Eni recognition on passenger safety • key selection c
Slide 66: Contracts and customers
Contracts and customers Trusted to deliver Typical characteristics across all lines of business Average contract length Revenue 8 Contract length 3 years – 12 years Emergency 7 Services PF Ambulance Victoria Oil & Gas Contract value £1m – £61m 6 Years 5 15% Fixed / variable revenues 71% / 29% 4 3 2
Slide 67: Ambulance Victoria - HEMS
Ambulance Victoria - HEMS 330 missions 1,200 flight annually with a hours annually response time covering under 10 250,000 km2 minutes 6 year relationship with customer, ‘trusted to deliver’ Specialist 2 specially staff configured aircraft integrated on 2 permanent with base customer 67 Mission Crit
Slide 68: Key pipeline activities
Key pipeline activities Total pipeline 2015 - 2019 = c £900m* Pipeline by stage Pipeline by line of business 11% Bidding 34% Emergency Services Tracking 66% Oil and Gas Renewals 17% 89% New bids 83% Key future opportunities Emergency Services • large South Australia renewal submitted and pending dec
Slide 69: In summary
In summary The Australian market covers a vast and remote area in demanding and complex environments Significant changes within the Australian regulatory environment provide a market entry hurdle for new market entrants Solid contracts with state and federal governments and major corporate clients L
Slide 70: Western Europe
Western Europe Manuel López – Chief Executive
Slide 71: Overview of Western Europe
Overview of Western Europe Key statistics Emergency Services Market positions Spain France Portugal Bases 90 - 70 • Emergency Medical 1st 1st 1st permanent - seasonal Services (EMS) Operated aircraft 125 - 70 83% • Search and Rescue (SAR) 1st permanent - seasonal • Firefighting (FF) 1st 2nd Revenue
Slide 72: Where we operate
Where we operate Highlights Length of service Emergency Services National 24/7 HEMS 25 years • rotary response time of 15 mins • operates across Spain • fully qualified and certified pilots and engineers Spanish Coastguard SAR 25 years • rotary response time of 15 mins • fixed-wing response time of
Slide 73: Market analysis
Market analysis Customers Competitive landscape Market characteristics HEMS HEMS HEMS • large number of HEMS • Inaer brand strong: • consolidation in France due contracts, managed by expertise, availability, scale to shift from local to regional regions or hospitals and relationships contracts • req
Slide 74: Market analysis
Market analysis Customers Competitive landscape Market characteristics • current customers are • strong Inaer brand • further exploration expected Repsol and Enagas • no international competitors in Canary Islands and North • key selection criteria: trusted in Spain or Portugal Spain Oil & Gas to de
Slide 75: Contracts and customers
Contracts and customers Trusted to deliver Typical characteristics across all lines of business Average contract length Revenue 7 Contract length 2 years – 6 years Emergency Services 3% 6 Oil & Gas Contract value £1m – £190m 5 Years 4 Fixed / variable revenues 73% / 27% 3 2 1 0 2013 2008 2009 2010 2
Slide 76: SASEMAR - Search and Rescue
SASEMAR - Search and Rescue 25 year 5,800 relationship flight hours with customer, in 2014 trusted to deliver ~300 specialist staff integrated with customer, proprietary R&D technology 1,250 missions 14 specially annually with a configured aircraft response time on 13 bases under 10 minutes 76 Missi
Slide 77: Key pipeline activities
Key pipeline activities Total Pipeline 2015 - 2019 = c £1,650m* Pipeline by stage Pipeline by line of business Pipeline by geography 4% Bidding 28% 33% 33% 37% Tracking ES Spain Projected France MRO 67% 63% Portugal Renewals 47% 35% New bids 53% Key future opportunities Emergency Services • around 2
Slide 78: Babcock growth opportunities - Spain
Babcock growth opportunities - Spain New Babcock Business Development Director in place • Spanish national • energy expertise, aeronautical engineering background Key characteristics of Spanish market • challenging economic situation in recent years has put significant pressure on budgets, leading t
Slide 79: France
France Frédéric Goig – Managing Director
Slide 80: French HEMS market
French HEMS market Complex • national network that was fragmented and is consolidating Resilient Matches government directive: • 35% missions to accident sites no person being more than • 65% inter hospital transportation 30mins from hospital Robust • long-term/public – strong relationships • 75% fi
Slide 81: Inaer France: HEMS activities
Inaer France: HEMS activities The output from our efforts – a growing business We are the leading market player - over last 24 months • bases + 14 operating bases Market share by awarded contracts • HEMS revenue + 78% • order book + 255% 23 contracts awarded 18 bases already in operation, + 2 in Jun
Slide 82: Inaer France: Hélidax
Inaer France: Hélidax Most successful PPP contract for the French Army, • providing flying hours for army pilot training • recognised in parliamentary audits commission Partnership with Défense Conseil International • DCI - 49% owned by Ministry of Defence Contract details • purchase, upgrade and fu
Slide 83: Pelican Project
Pelican Project French State tender (Securite Civil – Homeland Ministry) • maintenance for 26 firefighting aircraft • contract value >€420m over 12 years Competing against Sabena, Technics, Airbus and Conair in a complex tender Inaer highly experienced - already maintaining: • 19 x CL415 in Italy, 4
Slide 84: Fennec Project
Fennec Project Defence Ministry contract, generated by SIMMAD for French Air Force and French Army (ALAT) • contract value c €85m over 5 years • output to maintain 58 AS555 aircraft ALAT – operational customer to Helidax • already has strong relationship Competing against HU, Sabena, Airbus Helicopt
Slide 85: Babcock growth opportunities
Babcock growth opportunities Babcock Business Development Directors in place • French nationals • private sector director - energy, environmental and automotive expertise (15 years’ experience) • public/defence sector director - security, transport, government ministry expertise (16 years’ experienc
Slide 86: Financial overview
Financial overview Franco Martinelli – Group Finance Director Andrea Cicero – MCS Finance Director
Slide 87: MCS – a Babcock business
MCS – a Babcock business A long-term project and contract management business • not an asset rental business Operationally and financially aligned • metrics consistent with broader Babcock Group KPIs Balancing risk and reward • long-term contracts with good revenue visibility • balanced fleet of own
Slide 88: Balancing risk and reward
Balancing risk and reward Contract structures Long-term contracts provide excellent visibility • average contract length c 6 years • > 75% of FY16 revenue in the order book - additional 10% from renewals – win rate >90% • c £2bn order book at record level Contract structures provide certainty of rev
Slide 89: Balancing risk and reward
Balancing risk and reward Matching contracts and leases Average operating lease matched to average contract length Example £100 contract Charge Years Total (£) (£) Revenue 20 5 100 Costs (12) 5 (60) Operating lease (4) 5 (20) Operating profit 20 No helicopter capex required upfront for £20 return 89
Slide 90: Creating a more balanced fleet
Creating a more balanced fleet Leased vs owned c 13% of operated aircraft are customer owned Nearly all aircraft contracted on a fixed and long-term basis • only 7 helicopters, c 2% of the entire fleet, are used for ad-hoc work Operating lease mix increasing from 25% of total operated fleet in March
Slide 91: Creating a more balanced fleet
Creating a more balanced fleet Benefits of operating leases Pros Cons Matched to customer contract duration Marginally more expensive to operate Cash certainty Lower return on revenue No residual value risk Residual value upside No capital required Market may move/need to monitor Increased flexibili
Slide 92: Creating a more balanced fleet: Leased vs owned – the economics
Creating a more balanced fleet Leased vs owned – the economics Decisions vary by helicopter Averaged contract Indicative 5 year contract model for contract fleet weight-groups blended 7 year contract model/size contract length Rebased to £100 pa Op lease On BS Op lease On BS Leases provide considera
Slide 93: Creating a more balanced fleet
Creating a more balanced fleet Aircraft types March 2015 • 385 aircraft • 38 different aircraft types • 13 original equipment manufacturers Fleet built up through acquisitions Significant opportunities for cost savings through rationalisation of fleet • improved training efficiencies – pilots and en
Slide 94: Order book and pipeline
Order book and pipeline Supporting growth Order book breakdown c £2bn order book at January 2015 • excellent visibility ES £4.4bn total pipeline (bidding and tracking) O&G at January 2015 Currently bidding on contracts valued at c £1bn • significantly shorter bidding timetables than traditional Babc
Slide 95: Driving enhanced returns
Driving enhanced returns On track to achieve expectations set out at time of acquisition Return on investment above current cost of capital from second full financial year following acquisition (2016/2017) • on a stand alone basis, MCS already producing acceptable returns on capital • expected to in
Slide 96: Driving enhanced returns
Driving enhanced returns Driving improvements through inclusion in broader Group initiatives • Procurement efficiencies, eg dedicated procurement function and new supplier management approach Operating costs • Fleet rationalisation • New engineering, maintenance and logistics system (RAMCO) Growth d
Slide 97: Cash conversion targets
Cash conversion targets Group cash conversion targets unchanged • > 100% (pre-capex) • > 80% (post-capex) MCS cash conversion • dependent on rate of growth • new contract start-up requires cash for mobilisation, working capital and some capex By using operating leases for the majority of new contrac
Slide 98: Financing
Financing MCS debt refinanced as planned Net debt/EBITDA • two high yield bonds repaid - €470m 3 and £260m 2.5 • RCFs cancelled - €145m and £25m 2 • main credit groups collapsed 1.5 • interest cost reduction of £35 million per year achieved 1 0.5 Eurobond issued September 2014 raised €550m at 1.8% 0
Slide 99: In conclusion
In conclusion Long-term contracting business • excellent visibility and certainty of revenue On track to achieve financial expectations at time of acquisition • improving operating margin • increasing return on investment Maintaining focus on cash • Group cash conversion targets unchanged • steady p
Slide 100: Mission Critical Services
Mission Critical Services Bill Tame - Chief Executive
Slide 101: MCS – a platform for international growth
MCS – a platform for international growth A market leader in complex, critical and bespoke services with strong brands and customer relationships • regionally and globally A highly experienced management team A standard setter with a track record of technological development Significant growth oppor
Slide 102: Mission Critical Services analyst and investor seminar 30.03.15 www.babcockinternational.com
102 Mission Critical Services analyst and investor seminar 30.03.15 www.babcockinternational.com
Babcock International Group — Investor Day (March 2015) on 6ix