Babcock International Group PLC · LSE:BAB
Babcock International — H1 2012/13 Earnings Presentation
36 slides from Babcock International's earnings presentation, Nov 6, 2012
Slide 1: Half Year Results
Half Year Results for the six months ended 30 September 2012 6 November 2012 1
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 half year results announcement in respect of the half year ended 30 September 2012. For the purposes of this notice, the presentation that f
Slide 3: Agenda
Agenda • Introduction Peter Rogers • Financial and operational review Bill Tame • Looking forward Peter Rogers – building long-term growth • Questions Peter Rogers Bill Tame Archie Bethel John Davies Kevin Thomas 3 Half year results for six months ended 30 September 2012
Slide 4: Continuing to deliver
Continuing to deliver Our strategy • Strong first half results Market leading positions • Successful focus on our strategy – creating opportunities for long-term Preferred customer characteristics growth Customer focused and • Continuing track record of growth long-term relationships – + 6% revenue
Slide 5: Financial and operational review
Financial and operational review Bill Tame Group Finance Director 5
Slide 6: Financial highlights
Financial highlights • Organic growth in top and bottom line H1 12/13 H1 11/12 Change £m £m % • Margins enhanced by JV income and International division Revenue 1,556.7 1,472.0 + 6% Operating profit 174.0 155.2 + 12% • Group finance cost down c £4m Operating margin 11.2% 10.5% • JV finance cost incr
Slide 7: Revenue growth
Revenue growth* 1650 1600 8% 18% 12.2 1,556.7 1550 (23.0) 5% 6% £m 1500 (0.2) 69.0 26.7 1450 1400 1,472.0 1,472.0 1350 1300 HY 11 Marine and Defence and Support Services International FX HY 12 Technology Security * Underlying – see Appendix 1 7 Half year results for six months ended 30 September 201
Slide 8: Operating profit growth
Operating profit growth* 190 180 40% 174.0 11% 1.9 (1.6) 170 12% 3.6 4.2 12% 8% £m 160 5.6 5.1 150 140 155.2 155.2 130 120 HY 11 Marine and Defence and Support Services International Unallocated FX impact HY 12 Technology Security * Underlying – see Appendix 1 8 Half year results for six months ende
Slide 9: Marine and Technology
Marine and Technology • Good revenue growth H1 12/13 H1 11/12 Change £m £m % – 5% organic in line with expectations Revenue 564.3 538.0 + 5% • International revenue expanding – good performance in home and export markets Operating 72.5 67.4 + 8% profit – c 19% of division – well placed for emerging
Slide 10: Defence and Security
Defence and Security • Now includes Defence Infrastructure H1 12/13 H1 11/12 Change £m £m * % • Revenue broadly flat Revenue 395.4 397.3 - – scope increases within regional primes and increased volumes in vehicle fleet contracts Operating 51.4 45.8 + 12% profit – some reductions in naval training co
Slide 11: Support Services
Support Services • 18% organic revenue growth H1 12/13 H1 11/12 Change £m £m * % – start up of contracts won in H2 last year – Dounreay, Devon schools, London Fire Brigade Revenue 453.9 385.2 + 18% – strong growth in Mobile Asset business (+65%) – construction milestones reached in BSF JVs Operating
Slide 12: International
International • 8% organic revenue growth excluding FX impact H1 12/13 H1 11/12 Change – record sales of Volvo equipment £m £m % – strong demand for crane hire Revenue 143.1 151.5 - 6% – held back by power generation support deferral Operating 11.1 9.1 + 22% • Strong growth in operating profit and m
Slide 13: Cash flow
Cash flow • Cash conversion 113% H1 12/13 H1 11/12 FY 12 £m £m £m • Working capital outflow Operating profit 143.8 137.7 290.2 – advance payment unwind and pension Non-cash items/ payments 24.9 23.5 47.1 exceptionals Working capital (26.6) (3.5) (76.6) • Capital spending Cash from – IT project ongoi
Slide 14: Deleveraging
Deleveraging • Net debt closed at £581.1m down from £641.1m Cash conversion (KPI) ‒ net debt/ EBITDA 1.7 x 200 150 • Strong cash conversion at 113% % 100 • Expect debt to be approaching 1.5 x net debt/ 50 EBITDA by March 2013 0 FY 09 FY 10 FY 11 FY 12 H1 12/13 Net debt/ EBITDA (KPI) Total net debt 3
Slide 15: Pensions summary
Pensions summary • Asset returns barely positive H1 12/13 FY 12 H1 11/12 Balance sheet £m £m £m • Bond yields declined further to 4.43% Assets 2,876.9 2,782.7 2,472.8 – March 2012: 4.85% Liabilities (3,194.8) (3,048.6) (2,790.2) • Deficit back to September 2011 levels Deficit (317.9) (265.9) (317.4)
Slide 16: Pro-forma impact of IAS19 revision
Pro-forma impact of IAS19 revision A reminder • Effective FY14 Income statement FY 12 FY 13 Current New Δ Current New Δ • No balance sheet impact Current service cost 44 44 Nil 46 46 Nil • No cash impact Interest on obligation 146 137 – a permanent timing difference between profit Return on investme
Slide 17: Pro-forma impact of IAS19 revision
Pro-forma impact of IAS19 revision Divisional margins Operating profit / operating margin Sept 2012 Sept 2012 Mar 2012 Mar 2012 Reported Restated Reported Restated Marine and Technology 72.5 / 12.8% 62.4 / 11.1% 135.1 / 12.5% 122.3 / 11.3% £m / % Defence and Security 51.4 / 13.0% 50.4 / 12.7% 98.3 /
Slide 18: Order book
Order book Order book growth • Order book c £12.5bn 15 12 • c 90% revenue coverage for FY 13 ‒ 9 £bn >50% revenue visibility for FY 14 ‒ excludes Marine and Technology forward 6 programmes and South Africa 3 0 • Regular flow of “book and burn” contracts into order FY 09 FY 10 FY 11 FY 12 H1 book 12/
Slide 19: Continuing to deliver
Continuing to deliver • Good organic growth in revenue and earnings • Strong cash flow and debt reduction • Solid order book • For FY 13 – some enhancement to H1 margin – revenue growth similar to H1 19 Half year results for six months ended 30 September 2012
Slide 20: Looking forward
Looking forward Building long-term growth Peter Rogers Chief Executive 20
Slide 21: Positive trading environment
Positive trading environment • No change to economic pressures or financial constraints being experienced by a number of our customers • UK MoD achieved a ‘balanced budget’ – focus on building platform for Future Force 2020 – whilst meeting current operational requirements • UK civil customers – see
Slide 22: Supporting long-term growth
Supporting long-term growth • Established and recognised market leading positions – essential for supporting long-term growth plans – built through a series of well-executed acquisitions and significant contract wins over the past 10 years • Unrivalled skills, knowledge and experience across the Gro
Slide 23: Building a nuclear business
Building a nuclear business 2006 - today • Six acquisitions 2006 – 2010 – to create the largest specialist nuclear services business in the UK – unrivalled experience as site licensee and operator – significant contracts and involvement on major programmes • Nuclear workforce of 5,700 skilled employ
Slide 24: Nuclear new build - UK
Nuclear new build - UK Supporting Hitachi • MoUs announced 30 October 2012 – exploring how we can support Hitachi plan and deliver the programme – sites at Wylfa and Oldbury – first reactors expected in the first half of 2020s • Babcock expertise – knowledge of regulatory environment – modular build
Slide 25: Nuclear decommissioning
Nuclear decommissioning Magnox and Research • Established position at Sellafield and Dounreay • Extended bidding programmes required for high value, complex programme solution • Bidding in partnership with Fluor – proven expertise in US decommissioning • Building on experience of Dounreay bid Source
Slide 26: Major defence outsourcing opportunities
Major defence outsourcing opportunities Making progress • £billions opportunities currently being progressed by DIO and DE&S • Timetables have slipped – progress is being made • New opportunities now coming into bid pipeline 26 Half year results for six months ended 30 September 2012
Slide 27: Building an international presence
Building an international presence Canada • Economically stable, National Shipbuilding Procurement Strategy – threat from increasing Middle East sea borders, C$140bn investment in mining • Arab Spring driving requirement for non oil- industry over next 5 years based economy and youth training Babcoc
Slide 28: Bid pipeline - first half
Bid pipeline - first half • Some movement during H1 as bidding programmes Bid pipeline by division delayed – NGEC – Sellafield decommissioning 15% Marine and Technology Defence and • Bids won include 51% +£13bn Security – Strategic Weapons System support - Coulport 34% Support – Scottish Power - Bea
Slide 29: Bid pipeline
Bid pipeline • Bid pipeline in excess of £13bn Pipeline by period – increased from £9.5bn during H1 8 – new bids = 78% of pipeline 6 – bids over £100m = 67% of pipeline £bn 4 • £2.3bn to be announced during H2 2 0 H2 12/13 FY 13/14 FY 14/15 FY15/16 thereafter • Significant opportunities further out
Slide 30: A strong platform for the future
A strong platform for the future • Current market continues to create medium and long-term opportunities – UK and overseas • We have the right business model to benefit in this environment – strong market positions – depth and breadth of skills and capabilities – long-term relationships with our cus
Slide 31: Questions?
www.babcock.co.uk
Slide 32: Appendix
Appendix 32
Slide 33: Statutory to underlying reconciliation
Appendix 1 Statutory to underlying reconciliation JV and associates Continuing Continuing Amortisation operations operations – Revenue and Finance IFRIC 12 of acquired Change in Exception – statutory operating costs Tax income intangibles UK tax rate al items underlying £m profit £m £m £m £m £m £m £
Slide 34: Segmental analysis
Appendix 2 Segmental analysis Revenue Operating profit Operating margin H1 12/13 H1 11/12 H1 12/13 H1 11/12 H1 12/13 H1 11/12 £m £m £m £m % % Marine and Technology 564.3 538.0 72.5 67.4 12.8% 12.5% Defence and Security group 339.9 338.6 29.2 33.4 8.6% 9.9% JV 55.5 58.7 22.2 12.4 40.0% 21.1% total 39
Slide 35: Defined benefit pensions - triennial valuations
Appendix 3 Defined benefit pensions - triennial valuations Devonport Rosyth BIG Others Last valuation date 31 March 2011 31 March 2009 31 March 2010 Various Next valuation date 31 March 2014 31 March 2012 31 March 2013 Various Surplus/(deficit) £m (108.0) (37.0) (44.0) (28.0) Level of funding 90% 90
Slide 36: babcock
www.babcock.co.uk babcock trusted to deliver ™ 36
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