Babcock International Group PLC · LSE:BAB
Babcock International — HY22 Earnings Presentation
44 slides from Babcock International's earnings presentation, Dec 7, 2021
Slide 1: Half year results for the six months ended 30 September 2021
Half year results for the six months ended 30 September 2021 7 December 2021
Slide 2: Disclaimer
Disclaimer This document has been prepared by Babcock International Group PLC been correct. Forward looking statements in the Presentation regarding (the “Company”) solely for use at a presentation in connection with the past trends or activities should not be taken as a representation that such Com
Slide 3: What we will cover
What we will cover Introduction Financial performance Progress on our strategic priorities 3
Slide 4: Overview
Overview 1 2 3 Good progress Business Macro on strategy development environment • Shape of portfolio agreed • Increasing export orders • COVID-19 • Progress on people and • Progress in defence digital • Inflation pressures ESG strategy • Supply chain pressures • Improving our operating model 4
Slide 5: Financial review
Financial review David Mellors CFO
Slide 6: CPBS recap and HY21 restatements
CPBS recap and HY21 restatements CPBS completed in FY21, recap: CPBS adjustments recognised in • Scope of work targeted by assessment of risk the six months ended 30 Sep 20 − >100 contracts (c.£2.7bn revenue) £885.2m − Balance sheet items reviewed on risk basis • Total adjustments required (c.140) =
Slide 7: Underlying financial results overview
Underlying financial results overview HY21 • Organic revenue +10% HY22 Restated1 − 4ppts COVID-19 recovery from site closures and business interruption in prior period Revenue £2,223m £2,054m − 6ppts increase enhanced by ramp up of existing programmes (Type 31, Operating profit1 £115.3m £84.5m infra
Slide 8: Revenue bridge
Revenue bridge (£m) 155 2,223 2,054 14 2,068 85 (2) (31) ( 52 ) +10% organic HY21 One-off CPBS HY21 FX Disposals CPBS COVID-19 Other HY22 restated adjustment restated estimate recovery trading (excl. one-off changes 1 (estimate) CPBS impacts) 8 1. ‘Changes in estimates’ were made at 31.03.21 (i.e. a
Slide 9: Underlying operating profit bridge
Underlying operating profit bridge 5.2% margin 25 5.1% margin (£m) 115 1 (3) 21 106 4.1% margin (6) (1) 85 (7) HY21 One-off CPBS HY21 FX Disposals CPBS COVID-19 Pension Other HY22 restated adjustment restated estimate recovery charge trading (excl. one-off changes 1 (estimate) increase CPBS impacts)
Slide 10: Marine
Marine HY21 One-off CPBS COVID-19 Pension HY21 Restated Other CPBS FX Disposals estimate recovery charge HY22 Restated Excl. one- trading adjust. changes (estimate) increase off CPBS Contract backlog (£bn) 2.6 2.6 2.6 Revenue (£m) 593 10 603 (0) - (4) (21) - 49 627 Underlying operating profit (£m) 3
Slide 11: Nuclear
Nuclear HY21 One-off CPBS COVID-19 Pension HY21 Restated Other CPBS FX Disposals estimate recovery charge HY22 Restated Excl. one- trading adjust. changes (estimate) increase off CPBS Contract backlog (£bn) 0.4 0.4 3.0 Revenue (£m) 456 2 458 - (1) (8) 11 - 56 516 Underlying operating profit (£m) 34
Slide 12: Land
Land HY21 One-off CPBS COVID-19 Pension HY21 Restated Other CPBS FX Disposals estimate recovery charge HY22 Restated Excl. one- trading adjust. changes (estimate) increase off CPBS Contract backlog (£bn) 3.4 3.4 2.9 Revenue (£m) 564 1 565 8 (18) (30) 72 - 10 607 Underlying operating profit (£m) 16 6
Slide 13: Aviation
Aviation HY21 One-off CPBS COVID-19 Pension HY21 Restated Other CPBS FX Disposals estimate recovery charge HY22 Restated Excl. one- trading adjust. changes (estimate) increase off CPBS Contract backlog (£bn) 3.0 3.0 2.4 Revenue (£m) 441 1 442 (9) (12) (9) 23 - 37 472 Underlying operating profit (£m)
Slide 14: Cash flow and movement in net debt: (1/2)
Cash flow and movement in net debt: (1/2) £m HY21 HY22 restated1 • HY22 comments: Underlying operating profit 115.3 84.5 − High capex due to Type 31 and infrastructure One-off CPBS adj. - 21.4 upgrade Underlying operating profit excl. one-off CPBS adj. 115.3 105.9 − High working capital outflow incl
Slide 15: Cash flow and movement in net debt: (2/2)
Cash flow and movement in net debt: (2/2) £m HY22 HY21 restated1 • HY22 comments: Free cash flow (160.6) (4.4) − £130m of leases transferred with the sale Acquisitions and disposals (incl. JVs) 8.0 84.6 of Oil & Gas Cash outflow from settlement of derivative (5.4) - − Pro forma net debt to EBITDA 2.
Slide 16: Liquidity and debt maturity profile
Liquidity and debt maturity profile Debt maturity profile1 (£m) • Liquidity headroom of £1.4bn at 30 September 2021 Net debt2 at 30 September 2021 £938m • £2.4bn of total available borrowing and facilities Euro bond 20223 €550m HY22 average net debt2 £1,139m RCF 2024 £300m • Extended £730m of £775m
Slide 17: Outlook
Outlook • Full year outlook unchanged: − Our new operating model is on track to deliver savings of approximately £20 million in this financial year − While we have seen a recovery of activity from the heavily COVID-19 impacted prior period, and we have largely been able to recover extra costs, we ar
Slide 18: Progress on our strategic priorities
Progress on our strategic priorities David Lockwood, CEO
Slide 19: Progress on our strategic priorities
Progress on our strategic priorities Strategic priorities • Three disposals: c.£400 million of proceeds expected Align our portfolio • Programme to continue • Continue to expect c.£40 million annualised cost savings Implement our new operating model • New approach to project management and bidding p
Slide 20: Launched our new principles
Launched our new principles 20
Slide 21: Progressing our ESG strategy
Progressing our ESG strategy Environmental Social Governance • Net zero (scope 1 and 2) by 2040 • New Group Principles launched • Improved internal controls • Integrating climate-related risks • Agile working being rolled out • New Delegation of Authority and opportunities into strategic processes •
Slide 22: Building on our defence digital capability
Building on our defence digital capability MEWSIC LE TacCIS Defence HF comms • 13-year UK MOD contract for • Land Environment Tactical • Defence Strategic Radio design, manufacture, delivery Communications and Service in UK and in-service support for the Information Systems • Australia HF comms Mari
Slide 23: Summary
Summary 1 2 3 Good progress Business Macro on strategy development environment • Shape of portfolio agreed • Increasing export orders • COVID-19 • Progress on people and • Progress in defence digital • Inflation pressures ESG strategy • Supply chain pressures • Improving our operating model 23
Slide 24: Q&A
babcock O&A
Slide 25: Appendix
M babcock 2
Slide 26: HY22 results split by sector
HY22 results split by sector Underlying operating Revenue Contract backlog profit 9% 21% 22% 24% 28% 34% 26% £2.2bn £115m £10.9bn 28% 26% 28% 23% 31% Marine Nuclear Land Aviation 26
Slide 27: HY22 results split by market
HY22 results split by market Revenue Contract backlog 30% 43% £2.2bn £10.9bn 57% 70% Defence Non-defence 27
Slide 28: HY22 sector revenue splits
HY22 sector revenue splits Marine Nuclear Land Aviation 15% 21% 26% 42% £0.6bn £0.5bn £0.6bn £0.5bn 58% 74% 79% 85% Defence Non-defence 28
Slide 29: Recap of changes in the presentation of underlying results
Recap of changes in the presentation of underlying results Treatment of JVs and associates: • Single line in income statement (not in underlying operating profit) • Aligns with IFRS IFRIC 12 investment income: • Taken out of underlying operating profit Three column P&L: • Underlying results • Define
Slide 30: HY21 underlying income statement restatement
HY21 underlying income statement restatement Presentation changes HY21 Change to Prior year HY21 • Presentation changes: £m previous Change to JV IFRIC 12 restatements1 Restated reported accounting presentation − JVs & associates share of results and tax shown as one line as per IFRS Underlying reve
Slide 31: HY21 restatement underlying cash flow: (1/2)
HY21 restatement underlying cash flow: (1/2) £m HY21 Prior year Presentation HY21 previously reported restatements changes restated • Presentation changes: Operating profit (excl. JVs) 111.4 (26.9) - 84.5 − Capital elements of lease payments One-off CPBS adjustments - 21.4 - 21.4 within operating ca
Slide 32: HY21 restatement underlying cash flow: (2/2)
HY21 restatement underlying cash flow: (2/2) £m HY21 Prior year Presentation HY21 previously reported restatements changes restated • CPBS restatements: Free cash flow 58.4 12.5 (75.3) (4.4) − Supply chain financing now included Acquisitions and disposals net of cash acquired 84.6 - - 84.6 in debt (
Slide 33: Statutory to underlying reconciliation
Statutory to underlying reconciliation (£m) HY22 HY21 restated Specific Specific Underlying Adjusting Items Statutory Underlying Adjusting Items Statutory Revenue 2,223.0 – 2,223.0 2,053.5 – 2,053.5 Operating (loss)/profit 115.3 (39.9) 75.4 84.5 (869.8) (785.3) Other income 6.2 - 6.2 - - - Share of
Slide 34: CPBS impacts on Income Statement
CPBS impacts on Income Statement £m Six months ended 30 Sep 2020 £m Specific adjusting Underlying Statutory items Revenue (56.1) - (56.1) Operating profit (26.8) (834.9) (861.7) JVs & associates (5.3) - (5.3) PBT (32.1) (834.9) (867.0) Tax adjustments (28.8) 8.1 (20.7) Tax effect 2.5 - 2.5 Loss afte
Slide 35: HY22 underlying EPS calculation
HY22 underlying EPS calculation Underlying Underlying operating profit 115.3 Other income 6.2 Investment income 0.4 Finance costs (32.8) Underlying PBT (excl. JVs) 89.1 Income tax (19.6) Share of JV and associates (net of tax) 9.6 Non controlling interests - Net Income 79.1 Weighted average number o
Slide 36: Pensions
Pensions IAS 19 position Technical provisions position (incl. longevity swap funding gaps) (£m) 30 Sep 2021 31 Mar 2021 September 2021: c.£(400)m deficit Assets 5,010.6 4,745.1 Obligations (5,089.6) (5,078.0) Net deficit (79.0) (332.9) Why different to IAS 19 Why the actuarial deficit position: has
Slide 37: Net debt / EBITDA (covenant basis)
Net debt / EBITDA (covenant basis) 30 September 2021 (£m) 30 September 2020 (£m) (£m) Last 12 months Last 12 months Underlying operating profit excl. one-off CPBS adjustments 232 317 Depreciation and amortisation 99 108 Other covenant adjustments (16) (20) EBITDA 315 405 JV and associate dividends 4
Slide 38: Joint ventures: summary
Joint ventures: summary Babcock JVs Share Country Sector Start End Asset JVs Ascent 50% UK Aviation 2016 2033 • Typically assets and debt • Dividends follow after paying Asset JVs down JV debt AirTanker 15% UK Aviation 2008 2035 • Typically long-term Bernhard Schulte 50% Germany Marine 2017 2027 Ope
Slide 39: Gap between average and year end net debt
Gap between average and year end net debt Net debt excluding operating leases (£m) • Gap between average and closing net debt in Average Net Debt HY22 of c.£200m Period end Net Debt 1,556 1,362 1,302 1,139 1,055 990 938 772 FY20 HY21 FY21 HY22 39
Slide 40: Key contracts: Marine
Key contracts: Marine Contract Customer Start End Country Notes Type 31 UK MOD 2019 2028 UK Design, build and assembly of five general purpose frigates for the Royal Navy Future Maritime Support UK MOD 2021 2026 UK Through-life ship engineering management and support delivery for the Royal Navy Prog
Slide 41: Key contracts: Nuclear
Key contracts: Nuclear Contract Customer Start End Country Notes Future Maritime Support UK MOD 2021 2026 UK Nuclear submarine, infrastructure and license site elements of FMSP for the Royal Navy Programme (FMSP) Programme management and design phase activity for the upgrade works to Devonport Docky
Slide 42: Key contracts: Land
Key contracts: Land Contract Customer Start End Country Notes Maintenance, repair and overhaul to over 35,000 vehicles of the British Army’s A and B DSG - Defence Support Group UK MOD 2015 2025 UK vehicle fleets. Option for five, one-year extensions Fleet management services for the MOD’s c.15,000 v
Slide 43: Key contracts: Aviation
Key contracts: Aviation Contract Customer Start End Country Notes Helicopter Emergency Medical Services (HEMS) contract with six specially configured AW139 Victoria Air Ambulance Victoria Gov 2016 2026 Australia aircraft Spanish Spanish coastguard search and rescue contract, 14 aircraft, 13 bases. O
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