Babcock International Group PLC · LSE:BAB
Babcock International — FY2012 Earnings Presentation
38 slides from Babcock International's earnings presentation, May 15, 2012
Slide 1: Full year results for year ended 31 March 2012
Full year results for year ended 31 March 2012 15 May 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 full year results announcement in respect of the full year ended 31 March 2012. For the purposes of this notice, the presentation that follo
Slide 3: Agenda
Agenda • Introduction – 2012 overview Peter Rogers • Financial review Bill Tame • Looking forward Peter Rogers • Questions Peter Rogers Bill Tame Archie Bethel John Davies Kevin Thomas Full year results for year ended 31 March 2012 3
Slide 4: 2012 – an excellent year
2012 – an excellent year Our objective is to develop from our position as the UK’s leading engineering support services company and grow in both the UK and overseas, so delivering superior and sustainable returns for our shareholders • 2012 results reflect successful delivery of strategy – c 6% orga
Slide 5: Superior and sustainable returns
Superior and sustainable returns 10 years of growth 1,000 Revenue Babcock FTSE 250 3,000 800 2,000 600 £m 400 1,000 200 0 FY FY FY FY FY FY FY FY FY FY FY 0 02 03 04 05 06 07 08 09 10 11 12 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Operating profit 400 TSR TSR TSR 10 years 5 years 1 Year 300 £m 200
Slide 6: Financial review
Financial review Bill Tame Group Finance Director 6
Slide 7: US disposal
US disposal • Deal signed ‒ gross proceeds £61m ‒ awaiting regulatory clearance • Discontinued business line at 31 March 2012 – goodwill impairment £58.5m • FY12 operating profit includes £2.5m release of provision for deferred consideration no longer required • EPS impact – FY12 - 2.86p – FY13E - 2
Slide 8: Income statement - continuing operations
Income statement* - continuing operations • Strong organic revenue and operating profit FY12 FY11 Change growth £m £m % – revenue c 6% Revenue 3070.4 2,703.2 + 14% – operating profit 15% Operating profit 329.0 275.4 + 19% • Improved operating margin Operating margin 10.7% 10.2% – synergy benefits Ne
Slide 9: Bridging analysis: revenue
Bridging analysis Revenue* – continuing operations c 6% 3,100 10% 3,070.4 5% 28.7 (14.7) 3,000 145.8 4% 2,900 144.1 (£m) 2,800 5% 63.3 2,700 2,600 2,703.2 2,703.2 2,500 2011 Marine and Defence and Support Services International FX 2012 Technology Security *underlying see appendix Full year results f
Slide 10: Bridging analysis: operating profit
Bridging analysis Operating profit* - continuing operations 340 15% 1.9 329.0 330 2.4 27.1 320 310 300 6.4 15.8 (£m) 290 280 270 260 275.4 275.4 250 240 2011 Marine and Defence and Support Services International Unallocated 2012 Technology Security *underlying see appendix Full year results for year
Slide 11: Marine and Technology
Marine and Technology • Revenue growth mid-single digit as expected FY12 FY11 Change – organic growth 5.7% £m £m % • Aircraft carrier programme delivered further growth Revenue 1,084.7 1,019.5 + 6% – revenue £156m against £118m last year Operating 135.1 119.3 + 13% profit • Submarine programme activ
Slide 12: Defence and Security
Defence and Security • 4% organic revenue growth FY12 FY11 Change – scope increases and build programme drive strong £m £m % performance in RSME – FSTA first aircraft in to service (ITS) milestone achieved Revenue 613.3 469.2 + 31% • Margins reduced to 13% as expected following Operating 76.9 73.2 +
Slide 13: Support Services
Support Services • Organic growth rate 5.4% FY12 FY11 Change – up from 2% in H1 as expected £m £m % – Nuclear, Infrastructure and Rail showed strong growth Revenue 1,092.4 946.6 + 15% • Further step-up in margin to 9.8% - 8.4% last year and 9.2% in H1 Operating 106.7 79.6 + 34% – strong contract per
Slide 14: International – continuing operations
International – continuing operations • 10% revenue increase excluding effect of foreign FY12* FY11* Change exchange £m £m % – SA equipment up 20% as market continued to improve – power market soft and revenue flat as Eskom Revenue 280.0 267.9 + 5% continued outage deferral Operating 19.3 18.1 + 7%
Slide 15: Acquisition of VT
Acquisition of VT • Cost synergies on track • Achieved to date – £40m annualised run rate – being delivered slightly ahead of schedule – £50m run rate target by mid 2013 • Upside potential of c £3m from procurement and IT projects £26m • Cumulative cost of realisation at March 2012 was £24m – £12.8m
Slide 16: Cash flow
Cash flow FY12 FY11 • Cash conversion 111% – maintained > 100% track record Operating profit 290.2 250.1 Non-cash items/ exceptionals 47.1 31.6 • Working capital movement – unwind of prepayments Working capital (76.6) 26.8 – acceleration of pension contributions Cash from operations 260.7 308.5 – in
Slide 17: Deleveraging
Deleveraging • Total net debt closed at £641.1m down from £729m Cash conversion (KPI) ‒ c £890m pro forma at 31.03.10 200 150 • Net debt/ EBITDA 1.8 times % 100 • Strong cash conversion at 111% 50 0 FY 08 FY 09 FY 10 FY 11 FY 12 Net debt/ EBITDA (KPI) Total net debt 3.0 1000 2.5 2.0 750 £m 1.5 x 500
Slide 18: Pensions summary
Pensions summary • Deficit increased to £265.9m FY12 FY11 Balance sheet − up from £225m FY11 (H1 12 - £317m) £m £m − bond yields down to 4.85% from 5.6% − inflation down to 2.15% from 2.75% Assets 2782.7 2,579.9 Liabilities (3048.6) (2,805.0) • Investment and hedging strategy is paying off both at b
Slide 19: Pro-forma impact of IAS19 revision
Pro-forma impact of IAS19 revision • Effective FY14 Income statement FY12 FY13 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 investments (172) (16
Slide 20: Order book – continuing operations
Order book – continuing operations • Order book £13bn up from £12bn at 27.03.12 trading statement Order book growth 15 12 • 70% revenue coverage FY13 9 £bn – 45% coverage for FY14 6 – excludes Marine and Technology forward 3 programmes 0 FY 08 FY 09 FY 10 FY 11 FY 12 • Regular flow of “book and burn
Slide 21: Continuing to deliver
Continuing to deliver • Strong organic growth in revenue and earnings • Strong cash flow and debt reduction • Order book growth • A focused portfolio • For FY13 – some enhancement to margin – high single digit organic revenue growth Full year results for year ended 31 March 2012 21
Slide 22: Looking forward
Looking forward Peter Rogers Chief Executive 22
Slide 23: Delivering our strategy
Delivering our strategy • By delivering our strategy we have created a Our customers strong underlying business MOD • Balanced customer spilt Mobile asset mangement 16% – UK defence position built on strong, long-term 2% Other international activities customer relationships 5% 54% Regulated bodies –
Slide 24: Marine and Technology
Marine and Technology Building on long-term relationships and strength of UK position to grow international presence • UK market stable • Division ideally positioned to – meet key customer’s requirements - maximum availability and increased financial efficiency • Long-term programmes and agreements
Slide 25: Defence and Security
Defence and Security Helping to shape future solutions • Market stable through last year BUT – increasing pressure on budgets and manpower will drive further outsourcing or short-term contract extensions • Rebids and extensions won during 2012 secure market leading positions in military training and
Slide 26: Support Services
Support Services Demonstrating benefits of outsourced operations in UK and overseas • Success last year moved business to higher value end of market – opportunities in bid pipeline support this model • Developing further opportunities, by combining capabilities across the division to deliver additio
Slide 27: International
International South Africa • General economic environment stable and growth forecast to continue – ZAR 800bn 3 year infrastructure investment programme – increasing global demand for South African commodities • Business restructured and well paced to take full advantage of economic recovery – establ
Slide 28: Building an international presence
Building an international presence International growth will • build on core skills and capabilities within the Group • support existing customers • be into markets with similar characteristics to the UK • be into markets where our skills and capabilities are not available Marine and Technology Curr
Slide 29: Bid pipeline
Bid pipeline Pipeline by division • Current bid pipeline stands at £9.5 billion Marine and – 35% growth over the year, despite c £2bn of contract wins 12% Technology moving into order book 8% Defence and – reflects positive market environment Security 80% Support Services • New bids make up 72% of t
Slide 30: Future prospects
Future prospects Estimated Total value Key contracts timescale (bidding) (bidding and tracking) • HMS Ocean • HMAS Success 1 • BA ground support equipment - Heathrow £1.5bn • Network Rail vehicle fleet management (next 6 months) • Scottish Power Beauly-Denny high voltage power lines • BEPPS Phase 2
Slide 31: A strong platform for the future
A strong platform for the future • Strategy has enabled us to establish a strong underlying business ‒ platform for delivering sustainable growth • Business model a benefit in current market environment – economic climate creating significant growth opportunities in the UK and overseas • Financially
Slide 32: Questions?
www.babcock.co.uk
Slide 33: Appendix
Appendix 33
Slide 34: Statutory to underlying reconciliation
Appendix 1 Statutory to underlying reconciliation JV and associates Continuing Continuing Amortisation operations operations – Revenue and IFRIC 12 of acquired Change in Exception – statutory operating Finance income intangibles UK tax rate al items underlying (£m) profit (£m) costs (£m) Tax (£m) (£
Slide 35: Segmental analysis
Appendix 2 Segmental analysis Revenue Operating profit Operating margin FY12 FY11 FY12 FY11 FY12 FY11 £m £m £m £m % % Marine and Technology 1,084.7 1,019.5 135.1 119.3 12.5% 11.7% Defence and Security group 446.0 381.9 51.7 54.4 11.6% 14.2% JV 167.3 87.3 27.9 18.8 16.7% 21.5% total 613.3 469.2 79.6
Slide 36: Defined benefit pensions - triennial valuations
Appendix 3 Defined benefit pensions - triennial valuations Devonport Rosyth BIG Others Last valuation date 31 March 2008 31 March 2009 31 March 2010 Various Next valuation date 31 March 2011 31 March 2012 31 March 2013 Various Surplus/(deficit) £m (43.0) (37.0) (44.0) (28.0) Level of funding 95% 90%
Slide 37: Defined benefit pensions - IAS 19 sensitivities
Appendix 4 Defined benefit pensions - IAS 19 sensitivities Balance sheet Income statement £m £m Discount rate 47.5 (0.5) 0.1% decrease RPI (33.8) 2.1 0.1% increase Life expectancy (35.6) 2.3 1/2 year increase Real salaries (35.3) 3.0 0.25% increase Full year results for year ended 31 March 2012 37
Slide 38: babcock
www.babcock.co.uk babcock trusted to deliver ™ 38
Babcock International Group — FY2012 Earnings Presentation on 6ix