Babcock International Group PLC · LSE:BAB
Babcock International — FY2013 Earnings Presentation
34 slides from Babcock International's earnings presentation, May 14, 2013
Slide 1: Full year results for year ended 31 March 2013
Full year results for year ended 31 March 2013 14 May 2013 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 year ended 31 March 2013. For the purposes of this notice, the presentation that follows (t
Slide 3: Agenda
Agenda • Introduction Peter Rogers • Financial and operational review Bill Tame • Building long-term growth Peter Rogers • Questions Peter Rogers Bill Tame Archie Bethel John Davies Kevin Thomas 3 Full year results for the year ended 31 March 2013
Slide 4: 2013 – another excellent year
2013 – another 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 • 2013 results reflect successful delivery of strategy – + 6%
Slide 5: Financial and operational review
Financial and operational review Bill Tame Group Finance Director 5
Slide 6: Overview
Overview • Revenue up 6% FY 13 FY 12 Change – despite FX headwinds and lumpiness of PFI £m £m % revenue Revenue 3,243.5 3,070.4 + 6% Operating profit 376.6 329.0 + 14% • Operating profit up 14% – margin at 11.6% enhanced by JV income, Operating margin 11.6% 10.7% International and Marine and Technol
Slide 7: Revenue growth
Revenue growth* 3,300 3,250 3,243.5 32.2 (36.4) 3,200 £m 6% 3,150 3,100 (78.7) 139.5 116.5 3,050 3,070.4 3,070.4 3,000 2012 Marine and Defence and Support International FX 2013 Technology Security Services * Underlying – see Appendix 1 7 Full year results for the year ended 31 March 2013
Slide 8: Operating profit growth
Operating profit growth* 390 376.6 3.2 (3.2) 370 8.4 3.2 350 14% 14.0 £m 330 21.9 310 329.0 329.0 290 270 2012 Marine and Defence and Support International Unallocated FX 2013 Technology Security Services * Underlying – see Appendix 1 8 Full year results for the year ended 31 March 2013
Slide 9: Marine and Technology
Marine and Technology • Revenue growth of 11% FY 13 FY 12 Change £m £m % – high activity on submarine refit and fleet time support – step up in QEC carrier volume plus HMS Ocean refit Revenue 1,201.6 1,084.7 + 11% – £10m contribution from LGE – international ‘home’ markets Canada and Australia Opera
Slide 10: Defence and Security
Defence and Security • Revenue reduction (as expected) 9% FY 13 FY 12 Change £m £m % − Airtanker JV down c £40m ‒ major milestones achieved in prior year Revenue 820.2 901.1 - 9% − Navy training down c £20m ‒ lower support activities − RSME down c £20m ‒ construction milestones in prior Operating ye
Slide 11: Support Services
Support Services • 17% revenue growth FY 13 FY 12 Change £m £m % – as at H1 – Dounreay, Devon Schools, London Fire Brigade training all major contributors Revenue 943.7 804.6 + 17% – Rail up over 10% – renewals, signalling, overhead lines – Mobile Assets up 60% – Lafarge, London Fire Brigade Operati
Slide 12: International
International • Revenue flat in Sterling terms but up c 17% FY 13 FY 12 Change excluding FX effect £m £m % – equipment sales remained strong Revenue 278.0 280.0 - 1% – Target Cranes acquired in June 12 and crane hire business at capacity Operating 24.7 19.3 + 28% – Eskom power station outage increas
Slide 13: Cash flow
Cash flow FY 13 FY 12 • Cash conversion 117% Operating profit 315.2 290.2 • Working capital movement Non-cash items/ exceptionals 38.5 47.1 – activity levels c £10m Working capital (60.3) (76.6) – pension payments c £50m Cash from operations 293.4 260.7 • Capital expenditure Cash conversion 117% 111
Slide 14: Deleveraging
Deleveraging • Net debt closed at £550.6m down from £641.1m Cash conversion (KPI) ‒ net debt:ebitda 1.5x 200 150 • Strong cash conversion at 117% % 100 • Expect net debt:ebitda to be c 1.3x by March 14 50 0 • No refinancing due until 2017 FY09 FY 10 FY 11 FY 12 FY 13 Net debt/ ebitda (KPI) Total net
Slide 15: Pensions summary
Pensions summary • Strong assets and liabilities Balance sheet FY 13 FY 12 £m £m management reduced deficit despite – bond yields declining Assets 3,204.8 2,782.7 – inflation forecasts increasing Liabilities (3,465.9) (3,048.6) • Actions taken during year to mitigate Deficit (261.1) (265.9) volatili
Slide 16: Impact of IAS 19 revision
Impact of IAS 19 revision Income statement Income statement Actual FY 13 Estimate FY 14 (£m) Reported Restated IAS19(R) Current service cost 44.8 44.8 50.5 Interest on obligation 137.3 Return on investments based on portfolio (168.3) Operating profit 13.8 44.8 50.5 Interest on net deficit - 11.8 10.
Slide 17: Impact of IAS19 revision
Impact of IAS19 revision Divisional margins Operating margin March 2013 March 2013 March 2012 March 2012 Reported Restated Reported Restated Marine and Technology 13.1% 11.4% 12.5% 11.3% Defence and Security 13.7% 13.4% 10.9% 10.6% Support Services 9.7% 8.8% 10.9% 9.6% International 8.9% 8.9% 6.9% 6
Slide 18: Order book
Order book • Order book £12bn ─ excludes recent Airports wins Order book progression 15 • c 70% revenue coverage for FY 14 12 ‒ excludes Marine and Technology forward 9 £bn programmes and South Africa 6 • Positive discussions with the MoD on MSDF ‒ > £2bn into the order book on signing 3 0 • Regular
Slide 19: Another good year
Another good year • Strong revenue and earnings growth • Continued debt reduction • Order book stable • Excellent forward visibility – outlook positive • For FY 14 – high single digit revenue growth – margin post IAS19(R)* in 10 ‒ 11% range – eps growth low double digit * see slide 17 Impact of IAS1
Slide 20: Building long-term growth
Building long-term growth Peter Rogers Chief Executive 20
Slide 21: Strong and growing business
Strong and growing business • Another strong year Revenue and operating profit 4,000 420 – continuing track record of Revenue 360 excellent financial results 3,000 Operating 300 £m £m Profit 240 2,000 180 • Reflects strength and 1,000 120 management depth of business 60 0 0 units FY FY FY FY FY FY F
Slide 22: Positive trading environment
Positive trading environment • Market factors continue to drive further growth opportunities • Babcock working to ensure optimum positioning Current markets, customers and contracts – continued austerity driving focus on cost of delivering key services BBC domestic radio services – re-positioning of
Slide 23: Ideally positioned for growth
Ideally positioned for growth Consistent strategy and business model • When looking at opportunities our priorities remain the same – supporting or creating market leading positions – requiring significant technical skills, knowledge and experience – focusing on long-term support for complex program
Slide 24: Developing an international presence
Developing an international presence • Significant increase in overseas activities – overseas revenues have doubled since 2010 to 16% of total revenue in 2013 • Organic growth is likely to follow similar pattern to Babcock in Australia 24 Full year results for the year ended 31 March 2013
Slide 25: Bid pipeline reflects positive market
Bid pipeline reflects positive market • Continuing opportunities coming to market Pipeline anticipated award dates 8 – defence opportunities moving into bidding as anticipated £bn LCST a major component of opportunities 4 flagged at H1 results 0 • Bid pipeline FY 13/14 FY 14/15 FY15/16 thereafter –
Slide 26: Growth opportunities increasing
Growth opportunities increasing Bid pipeline by division • Even split of defence and civil opportunities 12% Marine and Technology – building on current market leading positions 51% Defence and 37% Security Support Services • 74% of pipeline over £100m total contract value – demonstrates focus on la
Slide 27: A strong platform
A strong platform • Continuing to focus on attractive markets • All with requirements for long-term outsourcing programmes – spread across markets and geographies • Strong operational businesses building on proven capabilities – unrivalled depth of knowledge and experience – track record of deliveri
Slide 28: Questions?
Questions? 28
Slide 29: Appendix
Appendix 29
Slide 30: 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 31: Segmental analysis
Appendix 2 Segmental analysis Revenue Operating profit Operating margin FY 13 FY 12 FY 13 FY 12 FY 13 FY 12 £m £m £m £m % % Marine and Technology group 1,193.8 1,084.7 156.3 135.1 13.1% 12.5% JV 7.8 - 0.6 - 7.7% - total 1,201.6 1,084.7 156.9 135.1 13.1% 12.5% Defence and Security group 709.4 733.8 6
Slide 32: Impact of IAS19 revision
Appendix 3 Impact of IAS19 revision Divisional operating profit and margins Operating profit / operating margin March 2013 March 2013 March 2012 March 2012 Reported Restated Reported Restated Marine and Technology 156.9 / 13.1% 136.6 / 11.4% 135.1 / 12.5% 122.3 / 11.3% £m / % Defence and Security 11
Slide 33: Defined benefit pensions - triennial valuations
Appendix 4 Defined benefit pensions - triennial valuations Devonport Rosyth BIG Others Total Last valuation date 31 March 2011 31 March 2009 31 March 2010 Various Next valuation date 31 March 2014 31 March 2012 31 March 2013 Various Deficit £m (98.0) (34.0) (40.0) (28.0) Level of funding 90% 90% 92%
Slide 34: Babcock
www.babcockinternational.com babcock trusted to deliver ™ 34
Babcock International Group — FY2013 Earnings Presentation on 6ix