QinetiQ Group plc · LSE:QQ.
QinetiQ — H1 FY2014 Earnings Presentation
33 slides from QinetiQ's earnings presentation, Nov 21, 2013
Slide 1: QinetiQ Group plc Interim Results for half year ended 30 September 2013
Draft QinetiQ Group plc Interim Results for half year ended 30 September 2013 21 November 2013 1
Slide 2: Agenda
Draft Agenda 1. Headlines 2. Financial overview 3. Business overview 4. Q&A 2
Slide 3: Headlines
Headlines • Overall mixed performance with many encouraging elements against a very strong comparator period - Robust performance in EMEA Services; encouraging orders with growing international element - US Services stabilising post restructuring; strategic review underway including market testing e
Slide 4: Financial overview
Draft Financial overview David Mellors Chief Financial Officer 4
Slide 5: Summary financial headlines
Summary financial headlines FY14 H1 FY13 H1 £m £m Revenue 599.6 685.5 Operating profit* 59.2 95.3 Operating margin* 9.9% 13.9% Profit before tax* 52.3 85.8 Earnings per share* (pence) 7.0 10.5 Statutory earnings per share (pence) 9.5 9.9 Net cash from operations (post capex)* 69.6 95.7 Cash conversi
Slide 6: Revenue bridge
Revenue bridge 685.5 1.0 (17.7) (74.9) 5.7 599.6 £ million FY13 H1 EMEA Services US Global Products FX FY14 H1 Services 6
Slide 7: Segmental analysis of profit and margin
Segmental analysis of profit and margin Operating profit* FY14 H1 FY13 H2 FY13 H1 £m £m £m EMEA Services 40.3 47.5 38.3 US Services 9.4 8.5 13.4 Global Products 9.5 17.4 43.6 Group 59.2 73.4 95.3 Margin % FY14 H1 13.9% FY13 H2 EMEA Services 15.4% FY13 H1 13.2% 4.1% US Services 3.6% 5.5% 11.7% Global
Slide 8: Specific adjusting items
Specific adjusting items* FY14 H1 FY13 H1 £m £m Non-cash items Amortisation of acquired intangibles (5.6) (7.5) Pension net finance expense (1.2) (0.8) Items with cash impact Reduction in DB pension scheme liability 31.1 - Pension mitigation costs (4.0) - Gain on disposal of investment - 2.5 Total s
Slide 9: Movements in net cash
Movements in net cash 74.0 77.7 (8.1) (6.2) 1.2 (7.7) (17.6) 7.2 120.5 £ million 118% cash conversion Net cash Cash flow Net capex Net interest Tax Restructuring Dividends FX/Other Net cash 31 Mar 13 from cost 30 Sept 13 operations 9
Slide 10: Strong balance sheet achieved
Strong balance sheet achieved FY09 FY10 FY11 FY12 FY13 200 £ million - (200) (400) (600) FY09 FY10 FY11 FY12 FY13 FY14 H1 £m £m £m £m £m £m Working capital 154.0 107.2 (30.7) (62.7) (148.3) (151.5) Retirement benefit obligation (pre-tax) (105.2) (147.3) (124.6) (31.5) (54.1) (24.8) Net (debt) / cash
Slide 11: Business overview
Draft Business overview Leo Quinn Chief Executive Officer 11
Slide 12: Portfolio roles
Portfolio roles • Highly differentiated; high barriers to entry EMEA • IP generation Services • Long-term contracts • Cash generation underpins progressive dividend policy • Performance stabilising post restructuring US • Strong capabilities and market positions Services • Good range of contract veh
Slide 13: Market environment
Market environment US • Delays and indecision • October shutdown – further interruptions • Drawdown post Afghanistan and “pacific pivot” • Defence budget will re-base over time with focus on protecting the war-fighter UK • Focus on financial stability • Defence transformation a priority • Responsibi
Slide 14: Organic-Plus – growing and diversifying the 'Core'
Organic-Plus – growing and diversifying the ‘Core’ Is it real, can we win, is it worth it? Core Explore Test for Value Maximise Scale Maintain the rigour c90% of revenue c8% of revenue c2% of revenue EMEA Services: Weapons, • International ranges • International Air, Maritime, C4ISR, • Protective mo
Slide 15: EMEA Services – progress in period
EMEA Services – progress in period FY14 H1 FY13 H1 • Robust performance £m £m • 8% increase in orders; strong pipeline Orders† 217.5 201.2 • De-layered to increase accountability Revenue 289.9 289.6 and agility; reduces costs Underlying Operating Profit* 40.3 38.3 • Support to defence transformation
Slide 16: EMEA Services – international demand
EMEA Services – international demand Canada: South Korea: • Procurement advice • Weapons test and evaluation • Support to naval programmes • Support to naval programmes Scandinavia: Australia: • Test and evaluation • Opportunities post federal elections Middle East: • Support to naval programmes • S
Slide 17: US Services – progress in period
US Services – progress in period FY14 H1 FY13 H1 • Tough markets – lack of visibility £m £m • Stabilising performance post restructuring Orders 247.7 283.5 • Circa $1bn bid pipeline Revenue 228.7 241.6 • Strong capabilities and market positions: Underlying Operating Profit* 9.4 13.4 - NASA opportuni
Slide 18: Global Products – progress in period
Global Products – progress in period FY14 H1 FY13 H1 • Lumpy revenue profile £m £m • $18m Q-Net® order Orders 68.5 120.5 • New international markets, Revenue 81.0 154.3 eg $28m TALON® to Iraq and Pakistan Underlying Operating Profit* 9.5 43.6 • Growing contribution from new products, Underlying Oper
Slide 19: Outlook for FY14
Outlook for FY14 • Although the short-term range of possible outcomes remains wider than usual, particularly in Global Products, the Board is maintaining its expectations for overall Group performance in the current year absent any material changes in customer requirements. • Over the medium term, o
Slide 20: Organic-Plus – reshaping QinetiQ
Organic-Plus – reshaping QinetiQ • Mixed performance with many encouraging elements • Strong EMEA core business • Organic-Plus programme developing momentum • Balance sheet strength achieved Committed to actions which drive value 20
Slide 21: Questions
Draft Questions Download our iPad app from the App Store or scan the QR code 21
Slide 22: Appendices
Draft Appendices 22
Slide 23: Definitions
Definitions • Underlying performance is stated before − Amortisation of intangibles arising from acquisitions; − Reduction in liability arising on pension scheme closure; − Pension scheme closure costs; − Pension net finance expense; − Gains on disposal of investments; − Restructuring costs; and − T
Slide 24: Detailed income statement
Detailed income statement FY14 H1 FY13 H1 £m £m Revenue 599.6 685.5 Underlying operating profit* 59.2 95.3 Net finance expense (6.9) (9.5) Underlying profit before tax* - 52.3 85.8 Amortisation and impairment of acquisition-related intangibles (5.6) (7.5) Pension net finance expense (1.2) (0.8) Gain
Slide 25: Revenue by sector and customer
Revenue by sector and customer Revenue by sector (%) Revenue by customer (%) 14% MOD 20% DoD 39% DHS EMEA Services FY14 H1 5% FY14 H1 48% US Services £599.6m £599.6m NASA Global Products 38% 14% Commercial Defence 2% Civil/Other 20% Government agencies MOD 23% 19% DoD 32% 42% EMEA Services DHS 6% FY
Slide 26: Taxation
Taxation FY14 H1 FY13 H1 £m £m Underlying tax charge* (6.7) (17.4) Tax on non-recurring items (3.8) 1.9 Headline tax charge (10.5) (15.5) Underlying tax rate* 12.8% 20.3% * Underlying performance as defined at appendix 26
Slide 27: Balance sheet
Balance sheet 30 September 2013 31 March 2013 £m £m Goodwill 274.1 290.4 Intangible assets 50.0 57.8 Property, plant and equipment 233.6 241.4 Working capital (151.5) (148.3) Retirement benefit obligation (net of tax) (20.3) (40.4) Other assets and liabilities (32.7) (36.4) Net cash 120.5 74.0 Net a
Slide 28: Cash conversion
Cash conversion FY14 H1 FY13 H1 £m £m Underlying operating profit* 59.2 95.3 Share of JVs & associates - (0.1) Operating profit before JVs & associates* 59.2 95.2 Cash flow from operations* 77.7 106.1 Net capex (8.1) (10.4) Net cash flow from operations post capex 69.6 95.7 Cash conversion %* 118% 1
Slide 29: Movements in net cash / (debt)
Movements in net cash / (debt) FY14 H1 FY13 H1 £m £m Free cash flow 64.6 68.4 Net restructuring (outflow)/inflow (7.7) 64.9 Sale of investment - 3.4 Dividends (17.6) (13.0) Purchase of own shares (0.2) (0.2) Other 0.1 19.3 Change in net cash/debt before FX 39.2 142.8 FX translation impact 7.3 0.9 Ch
Slide 30: Defined benefit pension scheme – IAS 19 balance sheet position
Defined benefit pension scheme – IAS 19 balance sheet position FY14 H1 FY13 £m £m Market value of assets 1,261.7 1,256.5 Present value of scheme liabilities (1,286.5) (1,310.6) Net pension liability before deferred tax (24.8) (54.1) Deferred tax asset 4.5 13.7 Net pension liability (20.3) (40.4) FY1
Slide 31: Credit and debt facilities
Credit and debt facilities Value Value Maturity date Denomination in denomination £m Revolving Credit Facility February 2016 £m 118.0 118.0 Revolving Credit Facility February 2016 $m 250.0 154.5 Private Placement February 2016 $m 43.0 26.6 Private Placement December 2016 $m 48.0 29.7 Private Placeme
Slide 32: Employee numbers
Employee numbers 30 September 2013 31 March 2013 EMEA Services 5,296 5,145 US Services 3,021 3,350 Global Products 793 1,003 Total 9,110 9,498 32
Slide 33: Disclaimer
Disclaimer This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Actual results, levels of activity, performance, achievements and events are most likely to vary materially from t