Babcock International Group Plc · LSE:BAB
Babcock International — H1 2011/12 Earnings Presentation
38 slides from Babcock International's earnings presentation, Nov 8, 2011
Slide 1: Half Year Results
Half Year Results for the six months ended 30 September 2011 8 November 2011 1 Half year results for six months ended 30 September 2011
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 2011. For the purposes of this notice, the presentation that f
Slide 3: Agenda
Agenda • First half highlights Peter Rogers • Financial review Bill Tame • Divisional outlook Peter Rogers • Questions Peter Rogers Bill Tame Archie Bethel John Davies Kevin Thomas 3 Half year results for six months ended 30 September 2011
Slide 4: First half highlights
First half highlights • Continuing our track record of delivering strong financial results • Good organic growth as well as impact of VT acquisition – revenue £1.6bn + 30% - organic growth + 5% – operating profit £161.7m + 42% - organic growth + 15% – profit before tax £132.8m + 46% – eps 29.79p + 2
Slide 5: Supporting future growth
Supporting future growth • 2010/11 created a strong platform for growth • Continued to build on this success during first half 2011/12 • Economic environment continues to create opportunities – customers need to find improved delivery methods – bid pipeline doubled in 12 months – currently tracking
Slide 6: Financial review
Financial review Bill Tame Group Finance Director 6 Half year results for six months ended 30 September 2011
Slide 7: Income statement
Income statement* H1 2011/12 H1 2010/11 Change £m £m % Revenue 1,587.9 1,221.2 +30 Operating profit 161.7 113.7 +42 Operating margin 10.2% 9.3% Net finance cost group (18.4) (18.3) jv (10.5) (4.5) (28.9) (22.8) Profit before tax 132.8 90.9 +46 Tax (25.3) (18.6) Effective rate 19.0% 20.5% Profit afte
Slide 8: Revenue bridging analysis
Bridging analysis Revenue* 1,700 1,600 29.9 1,587.9 (1.7) 5% 1,500 8.8 68.4 16.9 1,400 89.5 £m 1,300 25.7 120.6 1,200 8.6 1,100 1,221.2 1,221.2 1,000 FX 2010 Services 2011 Defence and International Technology Marine and Support Security * Underlying – see Appendix 1 Acquisition Organic 8 Half year r
Slide 9: Operating profit bridging analysis
Bridging analysis Operating profit* 170 1.4 161.7 4.4 160 19.2 15% 150 140 15.2 £m 130 7.8 120 110 113.7 113.7 100 2010 2011 Services Unallocated Defence and International Technology Marine and Support Security * Underlying – see Appendix 1 Acquisition Synergy Organic 9 Half year results for six mon
Slide 10: Marine and Technology
Marine and Technology • Revenue growth strong H1 H1 Change – 5% organic 2011/12 2010/11 % £m £m – strong growth in core businesses: Submarines, Warships, Naval Bases and Technology Revenue 538.0 502.4 +7 • Warship Support and aircraft carrier programmes Operating 67.4 59.6 + 13 progressing well prof
Slide 11: Defence and Security
Defence and Security • 6% organic revenue growth H1 H1 Change – volume growth in RSME, ALC and White Fleet 2011/12 2010/11 % £m £m • Short-term benefit from training contract extensions Revenue 292.4 154.9 + 89 Operating 38.8 23.6 + 64 • Awarded Naval Training (FOAP) rebid profit – operational 01.01
Slide 12: Support Services
Support Services • c 2% organic revenue growth H1 H1 Change – delays to start dates on nuclear contracts 2011/12 2010/11 % £m £m – UK Infrastructure Primes‟ volume stable – Rail up 10% Revenue 490.1 391.7 + 25 Operating • Growth rate expected to pick up in H2 44.9 25.7 + 75 profit – British Forces‟
Slide 13: International
International • 12% organic revenue growth H1 H1 Change 2011/12 2010/11 % £m £m • South African revenue up 34% to £142m – Equipment market significantly better than 2010 but Revenue 267.4 172.2 + 55 still some uncertainty Operating – Power market also growing and H2 expected to be 14.2 9.8 + 45 prof
Slide 14: Acquisition of VT: Cost synergies on track
Acquisition of VT Cost synergies on track Commitment • Achieved to date 50 < for 31.03.13 – £13m synergies in H1 result – £26m annualised run rate achieved – £35m run-rate target by 31.03.12 40 • IT and procurement projects progressing Target by 30 < well and set to deliver target savings < 31.03.12
Slide 15: Cash flow
Cash flow • Cash conversion 117% H1 H1 FY – maintained > 100% track record 2011/12 2010/11 2010/11 £m £m £m Operating profit 101.6 75.7 178.2 • Major capital programmes in IT and Non-cash items/ Marine and Technology driving higher 59.6 29.3 103.5 exceptionals spend Working capital (3.5) 38.3 26.8 –
Slide 16: Deleveraging
Deleveraging Total net debt • Total net debt closed at £679m down from 1000 ‒ c £890m pro forma at 31.03.10 750 ‒ £796m at 30.09.10 £m ‒ £729m at 31.03.11 500 250 • Net debt/ EBITDA 2.0x PF HY 11 FY 11 HY 12 31.03.10 ‒ tracking to below 2.0x by 31.03.12 as previously indicated Net debt/ EBITDA (KPI)
Slide 17: Interest and refinancing
Interest and refinancing Net debt profile • Completion of revolving credit facility 26% • £500m committed facility Bank Bond • Duration of 5 years 3 months 74% agreed June 2011 Interest profile • Completes refinancing of £1bn main corporate facility following acquisition of VT Group plc Fixed 50% 50
Slide 18: Pensions summary
Pensions summary • Decline in AA bond yields increased liabilities Balance HY FY HY 2011/12 2010/11 2010/11 sheet £m £m £m • Negative asset returns Assets 2,472.8 2,579.9 2,471.6 • Deficit up from £225m to £317m Liabilities (2,790.2) (2,805.0) (2,828.0) but still below 30.09.10 level Deficit (317.4)
Slide 19: Order book
Order book Order book growth • Order book c £12bn at 30.09.11 15 12 • Revenue coverage for 2011/12 is 92% 9 £bn we have visibility of >70% revenue 2012/13 excludes Marine and Technology forward 6 programmes, „IDIQ‟ contracts and South Africa 3 0 • Regular flow of “book and burn” contracts into order
Slide 20: Sustained track record of growth
Sustained track record of growth Revenue Operating profit and margin 4000 350 12% 300 5% 10% 3000 5% 250 8% FY 200 HY 16% 0% £m FY £m 2000 9% 15% 6% HY 20% Op 5% 150 margin 10% % Organic 24% % Organic growth 4% growth 100 1000 2% 50 0 0 0% FY 08 FY 09 FY 10 FY 11 HY 12 FY 08 FY 09 FY 10 FY 11 HY 12
Slide 21: Well positioned to deliver
Well positioned to deliver • Earnings growth • Debt reduction • Credit facilities and financing in place • Pensions managed • Order book stable 21 Half year results for six months ended 30 September 2011
Slide 22: Divisional outlook
Divisional outlook Peter Rogers Chief Executive 22
Slide 23: Well positioned for growth
Well positioned for growth • The UK's leading engineering support services Our customers company MoD – our objective is to grow from this position in both the UK DoD and overseas 12% Mobile Asset Mgt 11% • We have the right business model for our preferred 4% 52% International customers 12% Local Au
Slide 24: Positive trading environment
Positive trading environment • No change to financial constraints being Customers‟ economic environment ‒ financially constrained experienced by our customers ‒ cost reductions required • Long-term relationships are of fundamental importance in this economic environment need to understand customers‟
Slide 25: Marine and Technology
Marine and Technology Building on long-term relationships, knowledge and experience DE&S spend on defence • Ongoing, long-term programmes and agreements services – opportunities to expand role and scope of involvement – Aircraft Carrier Alliance – developed major role in project; opportunities to To
Slide 26: Defence and Security
Defence and Security Helping to shape future solutions • Military Training DE&S spend on defence – well positioned to secure future tri-service training and services support opportunities given our proven capability – RSME, REME, Armour Centre, Flagship and UKMFTS Total market – further extensions t
Slide 27: Support Services
Support Services Current contracts Using success of current operations to demonstrate benefits of outsourced operations in the UK and overseas • Focusing on delivering complex and critical support to the Criticality high value end of the market Criticality – nuclear decommissioning; imperative uncha
Slide 28: International
International • South Africa • Middle East – critical shortage of power ongoing – currently establishing our position in attractive – demand for equipment strong markets ideally suited to our business model – highly competitive market – rising education spend across region – margins maintained – cre
Slide 29: Bid pipeline
Bid pipeline • Current bid pipeline (PQQ and later) stands at £10bn – in line with forecast – reflects positive environment for increased outsourcing Pipeline by division • New bids make up 68% of the pipeline • Currently 23 bids > £100m Marine and 15% 18% Technology – comprising 66% of our pipeline
Slide 30: Forthcoming contract awards
Forthcoming contract awards Contract Award date No. of competitors Length of contract Dounreay PBO Q4 2011 1 > 10 yrs London Fire Brigade Training Q4 2011 1 25 yrs Devon County Council School Q4 2011 1 7 yrs Improvement Sellafield Apprentice Training Q4 2011 2 4 + 4 yrs BBC World Service Q4 2011 0 1
Slide 31: A strong platform for the future
A strong platform for the future • Current market continues to create opportunities • 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 customers – we understand their operationa
Slide 32: Questions?
Questions? 32 Half year results for six months ended 30 September 2011
Slide 33: Appendix
Appendix 33 Half year results for six months ended 30 September 2011
Slide 34: Statutory to underlying reconciliation
Appendix 1 Statutory to underlying reconciliation Revenue Operating Interest Exceptional Statutory Tax IFRIC 12 Amortisation Underlying from jvs Profit cost Items £m £m Income £m £m £m £m £m £m £m 30 September 2011 Revenue 1,499.8 88.1 1,587.9 Operating profit 96.7 4.6 12.9 42.6 4.9 161.7 Share of p
Slide 35: Segmental analysis
Appendix 2 Segmental analysis Revenue Operating profit Operating margin HY 2011/12 HY 2010/11 HY 2011/12 HY 2010/11 HY 2011/12 HY 2010/11 £m £m £m £m % % Marine and 538.0 502.4 67.4 59.6 12.5 11.9 Technology Defence and Security group 233.7 130.1 26.4 18.1 11.3 13.9 jv 58.7 24.8 12.4 5.5 21.1 22.2 t
Slide 36: Defined benefit pensions
Defined benefit pensions Triennial valuations Devonport BIG Rosyth VT SIPS Others 31 March 31 March 31 March Last valuation date 31 March 2008 Various 2010 2009 2010 31 March 31 March 31 March Next valuation date 31 March 2011 Various 2013 2012 2013 Surplus/(deficit) £m (43.0) (44.0) (37.0) (86.0) (
Slide 37: Defined benefit pensions IAS 19 sensitivities
Defined benefit pensions IAS 19 sensitivities Balance sheet Income statement £m £m Discount rate (43) (1.4) 0.1% decrease RPI (40) (3.2) 0.1% increase Life expectancy (32) (2.1) 1/2 year increase Real salaries (34) (3.3) 0.25% increase 37 Half year results for six months ended 30 September 2011
Slide 38: trusted to deliver
www.babcock.co.uk trusted to deliver ™ 38
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