Babcock International Group PLC · LSE:BAB
Babcock International — Investor Day (January 2006)
94 slides from Babcock International's investor day presentation, Jan 24, 2006
Slide 1: Babcock International Group PLC Analyst & Investor Seminar
Babcock International Group PLC Analyst & Investor Seminar 24th January 2006 1
Slide 2: Table of Contents
Table of Contents 1. Babcock Africa – Roger O’Callaghan 2. CVF Project – Archie Bethel, Babcock Engineering Services 3. Rail – Janette Anderson, First Engineering 4. Networks – Bob Whiley, Eve Group 5. Infrastructure Services – Kevin Thomas/Vice Admiral Peter Dunt 2
Slide 3: Babcock Africa: Investment in South Africa
Babcock Africa Investment in South Africa • South Africa is the power house of economic development in Sub Saharan Africa • South Africa has a time zone close to that of the UK and English is the language of commerce – this reduces operational management challenges • Europe is our largest trading pa
Slide 4: Investment in South Africa: Macro economic growth forecasts
Investment in South Africa Macro economic growth forecasts 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 World GDP Growth (% p.a.) UK GDP Growth (% p.a.) SA GDP Growth (% p.a.) SA Govt Target (6% by 2009) 4
Slide 5: South Africa
South Africa • GDP - real growth rate: 4,0% (2005 est.) • GDP - per capita: purchasing power parity - $8,700 (2005 est.) • Inflation rate (consumer prices) – 3.9% (2005 est.) • Prime Bank Rate: 10,5% • Land area - 1,219,912 sq km – slightly less than twice the size of Texas • Natural resources – Gol
Slide 6: Babcock Africa
Babcock Africa • Babcock Africa Services… Providing training, engineering and technology support to the aviation, energy and process industries. Sole distributor of leading brands in construction and industrial equipment throughout South Africa • Core Values – Integrity – Customer Driven – Motivated
Slide 7: Ownership
Ownership Babcock International Group plc Babcock Africa Services (Pty) Ltd Babcock Technology Babcock Brands Babcock Babcock Babcock Babcock Babcock Babcock Babcock Ntuthuko Fabrication Engineering Aviation Equipment Rental Welding Sphere Holdings 25% 75% Babcock Africa (Pty)Ltd 7
Slide 8: Financials
Financials £’000’s 6 months Year End to Sept 2005 March 2005 • Group Turnover 65 305 109 069 • Operating Profit 3 832 5 547 • Operating Cash Flow* 2 888 4 165 • Total Employees at period end 727 642 • Total Average Employees 697 637 * Operating cash flow is cash generated from operations after capit
Slide 9: Broad Based Black Economic Empowerment
Broad Based Black Economic Empowerment • Black empowerment codes of practice were developed to allow meaningful participation of previously disadvantaged people in South Africa’s economy • Currently the code is practiced by all organs of state and public entities and when gazetted the codes will be
Slide 10: Locations
NDOLA ZAMBIA Locations GABORONE BOTSWANA WINDHOEK NAMIBIA PIETERSBURG NELSPRUIT RUSTENBURG MIDDELBURG JOHANNESBURG NIGEL MBABANE SWAZILAND WOLMARANSTAD SECUNDA KIMBERLEY RICHARDS BAY BLOEMFONTEIN DURBAN BRANCHES EAST LONDON GEORGE AGENTS CAPE TOWN PORT ELIZABETH 10
Slide 11: Integrated Risk Management
Integrated Risk Management • The business is committed to adhere to the national standards that govern the management of occupational safety, health, environment, risk assessments and quality • The successful management of Health and Safety is a key management objective. We strive to provide safe an
Slide 12: Africa Divisional Financials
Africa Divisional Financials • Currently split into two operational divisions • The current contribution of each division is as follows: TECHNOLOGY BRANDS TURNOVER 21% 79% OPERATING PROFIT 27% 73% AVERAGE GROSS MARGIN 21.6% 12.3% ROS 8.4% 6% AVERAGE EMPLOYEES 222 478 12
Slide 13: Babcock Technology
Babcock Technology • Babcock Engineering – Specialize in the provision of capital plant including steam generators to the energy sector. Services include turnkey construction management and operations, repair and maintenance, spare parts and technical support for Babcock Engineering installed plant
Slide 14: Babcock Brands
Babcock Brands • Babcock Equipment – Specialize in the sales and support of Earthmoving Machinery – Sole distributors of Volvo, Bomag, Winget & Sullair products • Babcock Plant – Specialize in the hire of equipment into the Mechanical Construction Industry – i.e. Cranes, Welding Machines, Mechanical
Slide 15: Overall Market Share – Equipment
Overall Market Share – Equipment Total Market 2001 – Nov 2005 45.0% 40.0% 35.0% 30.0% 25.0% 22.9 20.0% 17.7 16.7 15.0% 12.5 10.0% 8.2 7.3 5.0% 5.2 4.9 3.3 1.3 0.0% 2001 2002 2003 2004 Jan - Nov 2005 Bell Equipment Barlow orld Equipment Komatsu SA Liebherr SA Daew oo SA Babcock Bateman Equipment Hita
Slide 16: Future Opportunities
Future Opportunities • Most of our future opportunities are focussed on prospective government outsourcing plans – Increased maintenance of new and refurbished power stations ₤20m pa – Facilities maintenance within various government and public enterprise departments ₤200m pa – Elementary flying tra
Slide 17: Future Aircraft Carrier Project (CVF) Strategic Context
Future Aircraft Carrier Project (CVF) Strategic Context “ The 2004 Defence White Paper emphasised the importance of versatile maritime expeditionary forces to project power across the globe in support of British interests and delivering effect on to land at a time and place of our choosing“ “ The tw
Slide 18: Project Scope
Project Scope • Build 2 New CVF Class Aircraft Carriers to Replace the Existing 3x CVS Invincible Class Carriers; • Project Cost c. £3.5bn; • Weight = 60,000 Tonne Length = 280m; • Preliminary In Service Date Targets – CVF 01 Queen Elizabeth 2012 – CVF 02 Prince of Wales 2015 18
Slide 19: Procurement Strategy: MoD / Industry Alliance
Procurement Strategy Ministry of Defence / Industry Alliance • The Aircraft Carrier Alliance (ACA) has been established to design and build the two warships • Industry Alliance Partners – Babcock Group – BAE Systems – Halliburton KBR – Thales – VT Group • The ACA is based on best practice models dev
Slide 20: Benefits of Alliance approach
Benefits of Alliance approach • Recognises that there is no single location in UK capable of building two Carriers • Utilises facilities and skills from around the country • Minimises requirement to ramp up workforce at a single location followed by major downsizing • Optimises the level of new capi
Slide 21: Roles and Responsibilities
Roles and Responsibilities • Babcock : – Block 1 Construction, – Whole Ship Assembly and Integration (Hook Up). • BAE Systems : – Integration of Design, Build, Commissioning, – Mission Systems, – Leadership of Engineering Team, – Construction of lower Block 3 and 4. • KBR : – Programme Management, I
Slide 22: Build Strategy
Build Strategy Ramp UB09 UB05 UBLMC UBFGP Upper Blocks all Competed Upper Blocks all Competed Lower Block 4 Lower Block 3 Lower Block 2 LB01 BAE Clyde BAE Barrow VT Group BES UB20 UB15 UB11 UB08 UB05 UBRTP UBNQP UBLMP UBHKP UBFGP 23 11 Lower 18 Block 4 14 07 Lower Block 10 3 06 UB22 UBUXP UB03 25 UB
Slide 23: ACA Commercial Model
ACA Commercial Model • Alliancing is underpinned by the creation of a common culture focused on best for project decision making • Underlying feature is the principle of Risk Sharing as opposed to Risk Transfer whereby risk lies with the partner most suited to managing the risk • Commercial model in
Slide 24: Babcock Rosyth Alliance Role
Babcock Rosyth Alliance Role • Representation on the Alliance Management Board • Provision of Facilities and Services at Rosyth to Support Whole Ship Assembly • Construct Front Block of Ship • Participate in Joint Alliance Teams: – Procurement – Stage 3 Design – Whole ship Testing and Commissioning
Slide 25: 60 Acre Basin, Non-Tidal, Sheltered
60 Acre Basin (24.28 hectares) Non- Tidal, Sheltered Basin Characteristics • Capable of Storing Hull Blocks • Testing and Commissioning Location • Trials in non-tidal environment 457M M • Accommodates both Future512 Aircraft Carriers simultaneously Depth = 13 m 25
Slide 26: CVF Construction and Assembly Sequence
CVF Construction and Assembly Sequence 2008Time Lines 2009 2010 2011 2012 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 00 17 38 42 48 57 61 Start Start S
Slide 27: Additional Opportunities
Additional Opportunities • In addition to the work allocated to Babcock through membership of the Alliance we also intend competing for additional work packages including : – Whole Ship Dimensional Control, – Construction of Block bottoms, – Competition for Upper blocks, – Support to major equipment
Slide 28: Summary
Summary • Involvement in ACA represents a major commercial opportunity for Babcock • Revenue flow from the project will commence in 2006 through involvement in areas such as design and programme planning • Construction activity at Rosyth will commence in 2008 and continue through 2013 • Hook Up , As
Slide 29: First Engineering
First Engineering Janette Anderson Chief Executive Analyst & Investor Seminar 24 January 2006
Slide 30: Content
CONTENT 1. Overview of our business 2. Key customers 3. Our competitors 4. Current challenges 5. Our growth strategy 30
Slide 31: Overview of our Business
Overview of our Business • Re-invention from maintenance based business to project led business • 3 Business Units - £200m turnover – Track – Signalling & Technology – Power,Civils & Facilities • Vision is to double the size of the business in 5 years 31
Slide 32: UK Wide Business
UK Wide Business Where we are 1 Glasgow 11 Croydon 2: (Perth 12 London 7 ee 13 Romford 5 Edinburgh 14 ‘Derby 6 Manchester 15 Crewe 7 Birmingham 16 Middlesborough 8 York 17 Liverpool 9 Leeds 18 Swindon LO: Wigan 19 Reading
Slide 33: Track Group
Track Group • Plain Line Track Renewals • High Output Track Renewals • Plant • Consultancy 33
Slide 34: Track Group: Plain Line Track Renewals
Track Group : Plain Line Track Renewals • Plain line Track Renewals - £72m • Renewal of rail, sleepers, ballast & ancillaries • Scotland & NW 5+5 framework contracts for NR • Double digit growth in 05/06 and similar level projected for 06/07 • Key component for Multi-disciplinary works 34
Slide 35: Track Group: High Output
Track Group: High Output • Highly mechanised entire track renewals - £23m business • JV with European No.1 H/O specialist • System 2 – 2 yr contract now extended to 5 yrs until March 2009 • System 3 - contract awarded June 2005, until March 2009 • JV offers European opportunities 35
Slide 36: Track Group: Plant
Track Group : Plant Net £7m turnover business 36
Slide 37: Track Group: Consultancy
Track Group : Consultancy • Circa £12m turnover business • Range of professional rail focused services • Drives business innovation & improvement • Framework contracts and early access to clients • Utilises partnerships / JVs in target areas • Integrating component of multi-disciplinary projects 37
Slide 38: Signalling & Technology: Signalling
Signalling & Technology Signalling - circa £37m business (6% of UK market) • Design, installation, test and commission • UK wide projects –WCRM, SAK, Caerphilly • 1st Tier supplier to NR • Scotland & NW 5yr framework contracts for NR • Key component for multi-disciplinary works • Key partner for pro
Slide 39: Signalling & Technology: Technology
Signalling & Technology Technology (£10m) • Design, installation, maintenance of control, information & telecommunication systems • 1st Tier supplier to Network Rail • Projects / framework contracts in Scotland, NE & NW • Customer base – – Network Rail – Train Operating Companies • Future : non-rail
Slide 40: Power, Civils & Facilities
Power, Civils & Facilities Power (£13m) • Turnkey Rail projects – electrification & power supply • Growth opportunities – targeting additional project work from £200m+ pa market – utilities and industrial markets – distribution market – railway Overhead Line (short term) Civils (£22m) • Light civils
Slide 41: Power, Civils & Facilities: Facilities Management
Power, Civils & Facilities Facilities Management (£12m) • Property and M&E maintenance and response • Upgrade Projects • 1st Tier supplier to NR • Projects / framework contracts in Sc, NE, Midlands and London • Customer base – – Network Rail – Train Operating Companies 41
Slide 42: Key Customers & Targets
Key Customers & Targets • Network Rail • Train Operating Companies, eg ScotRail, Virgin, GNER • Scottish Executive • EWS (English, Welsh & Scottish Railways) • Welsh Assembly • Transport for London • Docklands Light Railway 42
Slide 43: Network Rail's Challenges
Network Rail’s Challenges • Spend £26bn budget over 5 years • Improve performance by 30% • Implement the renewals programme ~ £2.5bn/year • Safe, efficient and effective delivery essential 43
Slide 44: Network Rail's £26bn budget
Network Rail’s £26bn budget • Opex £ 5.4bn • Maintenance £ 5.3bn • Non WCRM Renewals £10.3bn • WCRM Renewals £ 2.9bn • ORR funded enhancements £ 1.5bn • Other funded enhancements £ 0.7bn • TOTAL £26.1bn 44
Slide 45: Network Rail's Plan
Network Rail’s Plan • Smarter long term commercial arrangements • Integrated teams • Fit for purpose… and on budget • Targeted efficiency plans by renewal type 45
Slide 46: Our Competitors
Our Competitors Who are they ? COMPETENCIES Track High Facilities Competitors Renewals Output Signalling Technology Power Civils Management First Engineering 9 9 9 9 9 9 9 Carillion 9 9 9 9 9 Balfour Beatty 9 9 9 9 9 Amec Spie 9 9 9 9 9 Amey 9 9 9 9 9 Grant Rail 9 9 9 Jarvis 9 9 9 9 9 Serco 9 9 West
Slide 47: Current Challenges
Current Challenges • Cost Base – Overheads reduction plan • Systems – IFS implementation 2005/06 • Innovation – Non intrusive cross-over • Project work - margins • Culture change 47
Slide 48: Our Strategy for Growth
Our Strategy for Growth • Organic - partnerships / JVs • New geographies – York, Midlands, London, Ireland • New Customers 48
Slide 49: An Overview of Eve Group's Services & Markets
An Overview of Eve Group’s Services & Markets 49
Slide 50: Group
Group Transmission / Telecom Telecom / Consultancy Services Asset Management Telecom Network Maintenance 50
Slide 51: Contribution Towards Company Turnover 2005 - 2006
Contribution Towards Company Turnover 2005 - 2006 51% 49% £38m turnover £36m turnover Telecom Transmission £3.9m operating £2.2m operating profit profit 51
Slide 52: Communications Services
Communications Services Mobile Telecom Broadcast 52
Slide 53: Telecom Clients
Telecom Clients = orange” vodafone ONNECTING PEOPLE SIEMENS NEC P u ; . 2 ae O, ERICSSON 2 -++-f. -VMobiles NORTEL y —— yy ss
Slide 54: Telecom Services
Telecom Services Antenna, Feeder Network & Steelwork Optimisation Installation Microwave Inspection & Dishes & Maintenance of Waveguides Antennas, Feeders & Structures Tower & Structure Design, Analysis Storage, Logistics Supply & Erection & Material Supply Site Construction, Civils Works BTS/Node B
Slide 55: Telecom Market Share
Telecom Market Share 15% 21% Eve Eve Other Other companies companies Acquisition, Design & Rigging & Optimisation Construction 6% 16% 14% Eve Eve In-house Other companies Other 80% companies Installation & Maintenance Commissioning 55
Slide 56: Network Care: Market Position
Market Position 1st Line Network Care 2nd Line Service Centre NOC Equipment I&C Antennas Construct A,D&C Design Acquire Infratec Galliford TCI Alan ICEE DMN NTL THUS NG WirelessEve Campbell 56
Slide 57: Telecom Services: Maintenance and Construction
Telecom Services Acquisition la de D ep ra ce es R pg ig U n Operations & Maintenance Telecom Construction Services I,C y pl & up I S er w To Rigging 57
Slide 58: Past & Current Telecom Contracts
Past & Current Telecom Contracts • Roll-out and upgrade of 2G & 3G networks for UK mobile network operators (ca £140m over last 5 years – ongoing contracts) • First UK supplier to provide I&C services direct to a mobile network operator, T-Mobile (ca £1.2m/yr) • ADC contract secured with T-Mobile fo
Slide 59: Broadcast Clients
Broadcast Clients argiva nationalgrid Wireless Global force in communications
Slide 60: Broadcast Services
Broadcast Services • Site design • Tower & mast design, supply and erection • Antenna supply • Antenna alignment • Installation • Testing • Commissioning 60
Slide 61: Broadcast: Digital Switchover Project
Broadcast: Digital Switchover Project • EU directive • Project scope: modification of 1100+ transmitter stations • £50m bids submitted • £10m to be submitted • Project duration 2006 – 2012 • Contract framework to be negotiated Q1 & Q2 2006 61
Slide 62: Past & Current Broadcast Contracts
Past & Current Broadcast Contracts • Alexandra Palace BBC Transmitter – construction and on- going maintenance (1936 to present day) • Bilsdale TV mast • UHF re-engineering (£3m) • Roll-out of Channel Five (£750k) • Naval submarine communications mast (£18.7m) 62
Slide 63: Key Market Opportunities
Key Market Opportunities • 3G mobile network build (£1.2bn over 5 yrs) • Mobile network maintenance (£70m over 5 years) • Upgrades on 2G mobile network • Switchover to digital TV (£100m) 63
Slide 64: Transmission Services
Transmission Services 64
Slide 65: Transmission Clients
Transmission Clients baboodk “ ; ScottishPower AN gas and electricity Scottish and Southern ‘ Energy plc % National Grid WESTERN POWER == DISTRIBUTION Serving the South West and Wales CE Electric UK NED Northern ji - et —9)//5 Boctrictty al EDFENERGY “a
Slide 66: Transmission Services
Transmission Services Earth wire Conductor Insulators Tower steelwork Foundations 66
Slide 67: Transmission Market Share
Transmission Market Share 2% 17% Eve 38% Balfour Beatty AMEC Others 45% 67
Slide 68: Transmission Services
Transmission Services • Overhead power line design • New build power transmission lines, including tower supply, erection and restringing • Refurbishment of power transmission lines • Installation of optical fibre communications on power transmission lines • Asset management 68
Slide 69: Transmission Services: Maintenance and Construction
Planning & Engineering D es al en t R sse ew ig n A Maintenance Transmission Construction Services M .A. on R. C ito E. ec er n rin tio Er ow g T Stringing 69
Slide 70: Transmission Innovation & Design
Transmission Innovation & Design • CARE Degradation modelling software programme • SkySafe™ Scaffoldless re-conductoring system • CTC Composite core conductor 70
Slide 71: London – Mill Hill Route
London — Mill Hill Route babcock
Slide 72: Complex challenges
Complex challenges Stable crossing M1 motorway crossing 72
Slide 73: Stable Crossing
Stable Crossing [Aerial Photo 1:25k - Til = Microsoft Photo Eto ox 28 File Edit View Image Effects Tools Window Help . B| x| 0 x
Slide 74: M1 Motorway Crossing
M1 Motorway Crossing ( Aerial Photo 1:25k - Tiles TE
Slide 75: Past & Current Transmission Contracts
Past & Current Transmission Contracts • Construction of UK’s first power transmission networks • Severn river crossing • Construction of UK’s first 400kV transmission line • Highest transmission line in UK – Corrieyairak Pass • Longest temporary 400kV line diversion in UK • Introduction of GAP condu
Slide 76: Key Market Opportunities
Key Market Opportunities • RETS – construction of new transmission lines from coastal and remote areas to main centres of population (£2.5bn) • Refurbishment of UK power transmission network infrastructure • Refurbishment of networks for Scottish & Southern and Scottish Power • Distribution Network
Slide 77: 77
77
Slide 78: Prime Contracting – Babcock Infrastructure Services
PRIME CONTRACTING Kevin Thomas Managing Director Babcock Infrastructure Services Analyst presentation 24th January 2006 78
Slide 79: Babcock Infrastructure Services
Babcock Infrastructure Services • Formed by Babcock in 2002 by merging newly acquired SGI with three small FM businesses (SGI acquired in June 2002 for £26m) • BIS business represented 6% of Group turnover in 2002/3 which will increase to 17% in 2006/7 • MoD Prime Contracts represent 90%+ of BIS tur
Slide 80: Introduction to Prime Contracting
Introduction to Prime Contracting The MoD owns one of the largest property estates in the UK Regional Prime Contracts replaced plethora of small advisory, audit and works management contracts used to maintain the estate 5 regional contracts covering all maintenance and works have now been let 2 func
Slide 81: Examples of facilities maintained for MoD
Examples of facilities maintained for MoD Living accommodation Fuel installations Operational airfields Historic buildings 81
Slide 82: Prime Contracting: Key contract features
Prime Contracting Key contract features • UK divided into 5 regions • Duration 7 years extendable to 10 • Core Services (OPEX) • Core Works (CAPEX) • Output Specification • Maximum Price Target Cost ¾ Pain / Gain Share • Open book accounting • TUPE 82
Slide 83: Prime Contracting: Scope of work
Prime Contracting Key contract features Scope of work: • Help Desk 1 • Reactive maintenance • M&E Servicing • Planned maintenance • Management of information – Develop and maintain asset register – Condition surveys – Statutory inspections – Health and Safety 4 • Energy and utility management 5 • Gr
Slide 84: Regional Prime Contract Scotland
1 Regional Prime Contract Scotland 1 – Contractor: Amec Turner – Assets: 9,000 – Value: £460 million – Start date: March 2003 84
Slide 85: Regional Prime Contract South West
2 Regional Prime Contract South West – Contractor: Babcock & Bovis – Assets: 7,222 – Value: £500 million – Start date: June 04 2 85
Slide 86: Regional Prime Contract South East
3 Regional Prime Contract South East –Contractor: Interserve & SEC –Assets: 5,695 –Value: £400 million –Start date: November 2004 3 86
Slide 87: Regional Prime Contract Central
4 Regional Prime Contract Central – Contractor: Carillion- Enterprise – Assets: 7,250 – Value: £550 million – Start date: November 20005 4 87
Slide 88: Regional Prime Contract East
5 Regional Prime Contract East – Contractor: Babcock DynCorp – Assets: 4,368 – Value: £500 million – Start date: 7 March 06 5 88
Slide 89: Single Living Accommodation Modernisation
Single Living Accommodation Modernisation UK wide – Contractor: Babcock Bovis – Assets: 9,000 new bedspaces – Value: £460 million – Start date: October 2002 89
Slide 90: Defence Housing Executive - Married Quarters
Defence Housing Executive - Married Quarters UK wide – Contractor: Carillion – Assets: 43,000 Properties – Value: £551m – Start date: 14 November 2005 90
Slide 91: MPTC formula
MPTC formula A = al Profit Target Profit Share Line \ Share Line 0/100 ye Target Cost Maximum Price = ! = Cost I £M | 91
Slide 92: Maximum Price Target Cost Formula
Maximum Price Target Cost Formula • If actual spend is below target cost: ¾ Contractor gets TC profit level plus 30% of saving ¾ DE gets 70% of saving • If actual spend is above target cost: ¾ Contractor gets TC profit level but bears 30% of cost overrun ¾ DE pays 70% of cost overrun • If actual spe
Slide 93: Performance measurement and VFM
Performance measurement and VFM • Prime Contracting has revolutionised the management of one of the largest property estates in the UK • The total financial savings are in excess of 30% • Comprehensive MI systems inform better estate planning • Administrative costs have halved • Maintenance performa
Slide 94: Other Prime Contracting Opportunities
Other Prime Contracting Opportunities Education Services: Local Authority Schools DfES Building Schools for the Future Programme Judicial Services: Courts and Police 94
Babcock International Group — Investor Day (January 2006) on 6ix