Babcock International Group Plc · LSE:BAB
Babcock International — FY2024 Earnings Presentation
42 slides from Babcock International's earnings presentation, Jul 26, 2024
Slide 1: Full year results for the year ended 31 March 2024
Full year results for the year ended 31 March 2024 26 July 2024 © nzdf.mil.nz
Slide 2: Strong progress towards our medium-term guidance
Strong progress towards our medium-term guidance Improving margins Strongly positioned Sustainable growth and cash flow Focused portfolio: Differentiated 11% organic £10.3bn 7.0% 98% 74% defence proposition revenue growth contract backlog underlying margin* cash conversion+ Medium term guidance Mid-
Slide 3: Financial review
Financial review David Mellors CFO Financial review David Mellors CFO
Slide 4: Key messages
Key messages › Strong revenue and profit growth, cash flow significantly ahead › Balance sheet further strengthened › FY25 expectations unchanged – confidence in medium-term guidance 4 Babcock International Group – Full year results for year ended 31 March 2024 © 2024 Babcock International Group - N
Slide 5: Underlying financial results overview
Underlying financial results overview FY24 FY23 › Backlog up 9% driven by Marine and Nuclear › Organic revenue growth 11% (at constant FX) Backlog £10.3bn £9.5bn − Driven by Nuclear and Land Revenue £4,390.1m £4,438.6m › Underlying operating profit up 34% Underlying operating profit £237.8m £177.9m
Slide 6: Free cash flow significantly ahead
Free cash flow significantly ahead £m FY24 FY23 › Working capital: good performance enhanced by early customer receipts − Includes Type 31 revenue reversal of £66m Underlying operating profit 238 178 Right of use asset depreciation 40 91 › Net capex: gross capex £142m (FY23: £125m) investment catch
Slide 7: Balance sheet much stronger
Balance sheet much stronger £m HY21 FY21 FY22 FY23 FY24 › Net debt reduced £1.2bn to £435m from September 2020 (HY21): – S&P credit rating upgraded to BBB+ (Dec 2023) Net debt (1,609) (1,352) (969) (564) (435) – Ample liquidity headroom, in excess of £1.4bn Net debt to EBITDA › Pension deficit: 2.5x
Slide 8: Reducing and de-risking the pensions deficit
Reducing and de-risking the pensions deficit Technical provision deficit - actuarial deficit (aggregated) £m (800) Technical provision deficit – actuarial deficit (aggregated)* (700) c.£500m › Around £200m aggregated technical provision deficit (FY23: c.£400m) reduction (600) Funding agreements › Lo
Slide 9: Revenue bridge
Revenue bridge 11% (£m) organic growth at constant FX 449 4,439 4,390 4,017 ( 422 ) ( 76 ) FY23 FY23 Disposals FX Organic FY24 excluding disposals 9 Babcock International Group – Full year results for year ended 31 March 2024 © 2024 Babcock International Group - Not Subject to Export Control
Slide 10: Underlying operating profit bridge
Underlying operating profit bridge (£m) 7.0% 6.6% margin* 17 margin 54 5.4% 328 margin 87 311 4.0% margin 265 (8) ( 90 ) 238 +21% at constant FX 178 FY23 Type 31 loss, FY23 FX Trading FY24 Profit on FY24 Type 31 FY24 one-off credit, (excl. Type 31 loss, (excl. Type 31 loss property (excl. Type 31 lo
Slide 11: Marine
Marine FY24 FY23 Contract backlog +16% Contract backlog £2,993m £2,581m › VISSC extension - submarine support in Canada Revenue £1,429m £1,440m › Liquid Gas (LGE) order increase › Skynet c.£100m booked Underlying operating profit £13m £13m Underlying operating margin 0.9% 0.9% Revenue flat organical
Slide 12: Nuclear
Nuclear FY24 FY23 Contract backlog +27% › MIP Contract backlog £3,105m £2,454m › Submarine support including HMS Victorious (c.£560m) › Civil nuclear Revenue £1,521m £1,179m Revenue +29% organic at constant FX: Underlying operating profit £109m £64m › Major Infrastructure Programme (MIP) £459m (FY23
Slide 13: Land
Land FY23 FY24 excl. disposals* Contract backlog (7)% organically › Revenue traded on long term contracts Contract backlog £2,594m £2,785m Revenue +17% organic at constant FX: Revenue £1,099m £982m › Vehicle engineering volumes (LC300) › South Africa – vehicle sales to mining industry Underlying ope
Slide 14: Aviation
Aviation FY23 FY24 excl. disposals* Contract backlog up 1% › Australia and smaller HEMS awards offsetting revenue traded Contract backlog £1,641m £1,633m Revenue (17)% organic at constant FX: Revenue £342m £416m › French aircraft deliveries in FY23 (Mentor and H160) › Increase in Canadian and Austra
Slide 15: Capital allocation – supporting growth and returns
Capital allocation – supporting growth and returns Priority FY24 progress 1 Organic investment Ongoing investment in business Sustain investment to support business improvement and growth. operations and enhance growth potential Target 2 gearing ratio Financial strength Leverage reduced to 0.8x, pen
Slide 16: Outlook and guidance
Outlook and guidance FY25 outlook: › Expectations unchanged › Around 70% of FY25 revenue under contract (similar to last year) › OCF H2 weighted › Confident of making further progress against our medium-term guidance Medium term guidance: › Average underlying operating cash conversion of at least 80
Slide 17: Strong progress towards medium-term guidance
Strong progress towards medium-term guidance David Lockwood CEO
Slide 18: Strong foundations and continuing momentum
Strong foundations and continuing momentum Revenue 1 Operating profit 2 Margin 2 Backlog 3 + 30% + 61% + 100bp + £4bn to £4.4bn to £311m to 7.0% to £10.3bn Track record of delivery over three years Credit rating Net debt 4 Defence revenue Dividend Upgraded 2x down c.£1bn +18ppt to 74% reinstated to
Slide 19: Type 31 – restructured programme
Type 31 – restructured programme Overview › Signed in 2019 for 5 x Type 31 frigates › Represents c.5% of FY24 Group revenue Actions taken in FY24 › Detailed full review and reassessment of the programme › New management team supported by new Group functions › Initiated operational improvement progra
Slide 20: How we grow
How we grow Market Differentiated Capabilities aligned dynamics proposition with customers’ needs Defence budget growth in focus countries Engineering Customer know-how intimacy Availability Greater demand for asset availability Requirement for greater value-add Affordability Capability Equipment mo
Slide 21: New UK Government – committed to defence
New UK Government – committed to defence › Labour have pledged to “strengthen Britain’s defences” 60% › “Committed to spending to 2.5% on defence as soon as we can” › › “Unshakeable commitment to NATO and triple lock on the nuclear deterrent” “Strategic approach to procurement: boosting British indu
Slide 22: Why ESG matters to Babcock
Why ESG matters to Babcock › Aligns with our Purpose: to create a safe and secure world, together › Babcock’s ESG commitments really matter to our existing workforce, and are an important element of our recruitment strategy › Named 2024 Employer of the Year at British Ex-Forces in Business Awards ›
Slide 23: Enablers of sustainable growth
Enablers of sustainable growth Growth Knowledge Ability People Relationships enablers and expertise to deliver Supportive market dynamics How we are Leverage our Develop our people Build strategic delivering technical capability and capabilities partnerships growth 23 Babcock International Group – F
Slide 24: Increasing, high quality opportunity set
Increasing, high quality opportunity set UK International Optimise Selective new Expansion in Direct Strategic position programmes focus countries exports partnerships Marine Frigate support Skynet Canada/Australia AH140 SAAB Nuclear Submarine support New UK civil Australia / USA Submarines support
Slide 25: UK submarine fleet transition underpins Nuclear growth
UK submarine fleet transition underpins Nuclear growth Deep Maintenance UK submarine long-term in-service and disposal Programmes 2020 2050 2080 Vanguard Class Dreadnought Class Deterrent Future Continuous Submarines at Sea Deterrent Astute Class SSN-AUKUS Future attack (platform numbers TBD) submar
Slide 26: Nuclear opportunities in short, medium and long-term
Nuclear opportunities in short, medium and long-term Macro trends Programmes Opportunities Duration Total value* Status Long term submarine partnership: in-service 2026 - 2050s £30-50bn Incumbent CASD 50+ support for increased UK fleet (11 up to 16 boats) Global years security Naval infrastructure:
Slide 27: Strong progress towards medium term guidance
Strong progress towards medium term guidance Improving margins Strongly positioned Sustainable growth and cash flow Focused 74% 11% organic £10.3bn 7.0% 98% portfolio defence revenue growth contract backlog underlying margin* cash conversion+ Stronger processes Differentiated proposition Clear growt
Slide 28: Babcock International Group – Full year results for year ended 31 March 2024 ©
28 Babcock International Group – Full year results for year ended 31 March 2024 © 2024 Babcock International Group - Not Subject to Export Control
Slide 29: Appendix
Appendix CROWN COPYRIGHT
Slide 30: FY24 results split by sector
FY24 results split by sector Revenue Underlying operating profit* Contract backlog 8% 6% 16% 29% 32% 33% 26% 25% £4.4bn £311m £10.3bn 25% 30% 35% 35% Marine Nuclear Land Aviation 30 * Excluding the Type 31 loss and profit on property disposal 30 Babcock International Group – Full year results for ye
Slide 31: FY24 Group splits
FY24 Group splits Defence revenue Geographical revenue Contract backlog 8% 2% 22% 26% 4% 8% £4.4bn 8% £4.4bn £10.3bn 74% 70% 78% Defence UK Aus & NZ Defence Civil South Africa Canada Civil France ROW 31 Babcock International Group – Full year results for year ended 31 March 2024 © 2024 Babcock Inter
Slide 32: Statutory to underlying reconciliation
Statutory to underlying reconciliation FY24 FY23 (£m) Specific Specific Underlying Adjusting Statutory Underlying Adjusting Statutory Items Items Revenue 4,390.1 - 4,390.1 4,438.6 - 4,438.6 Operating profit / (loss) 237.8 3.8 241.6 177.9 (132.4) 45.5 Share of results of joint ventures and associates
Slide 33: Sector detail – ongoing business
Sector detail – ongoing business Revenue Underlying operating profit Underlying margin Contract backlog FY24 FY23 FY22 FY21 FY24 FY23 FY22 FY21 FY24 FY23 FY22 FY21 FY24 FY23 FY22 FY21 Marine1 £1,495.4m £1,482.2m £1,209.4m £1,277.3m £103.1m £112.8m £90.3m £82.2m 6.9% 7.6% 7.5% 6.4% £2,993m £2,581m £2
Slide 34: Sector detail
Sector detail Revenue Underlying operating profit Underlying margin Contract backlog FY24 FY23 FY22 FY24 FY23 FY22 FY24 FY23 FY22 FY24 FY23 FY22 Marine £1,429.1m £1,439.6m £1,259.3m £13.1m £12.7m £98.0m 0.9% 0.9% 7.8% £2,993m £2,581m £2,492m Nuclear £1,520.9m £1,179.2m £1,009.7m £109.2m £63.5m £62.4
Slide 35: Legacy low to zero margin programme fade
Legacy low to zero margin programme fade Low to zero margin programme fade <6% of FY24 revenue FY24 FY25 FY26 FY27 FY28 FY29 Type 31 revenue Type 31 backlog Other revenue Other backlog 35 Babcock International Group – Full year results for year ended 31 March 2024 © 2024 Babcock International Group
Slide 36: Net debt / EBITDA (covenant basis)
Net debt / EBITDA (covenant basis) FY24 FY23 (£m) (Rolling 12 months) (Rolling 12 months) Underlying operating profit 238 178 Depreciation and amortisation 67 85 Other covenant adjustments (6) (8) EBITDA 299 254 JV and associate dividends 7 9 EBITDA + JV and associate dividends 306 263 Net debt (211
Slide 37: Liquidity and debt maturity profile
Liquidity and debt maturity profile Debt maturity profile1 (£m) RCF 20263 £775m • £300m RCF facility3 terminated in October 2023 2,000 GBP bond 20264 £300m FY24 net debt2 FY24 average net debt2 £(211)m £(388)m Euro bond 20275 €550m • Exposure to variable debt (85% is fixed rate), only £123m drawn de
Slide 38: Key contracts: Marine
Key contracts: Marine Contract Customer Start End Country Notes Type 31 + Capability Insertion Programme UK MOD 2019 2028 UK Design, build and assembly of five general purpose frigates for the Royal Navy Future Maritime Support Programme UK MOD 2021 2026 UK Through-life ship engineering management a
Slide 39: 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) Major Infrastructure Programme Project delivery for the upgrade works to Devonport Dock
Slide 40: Key contracts: Land
Key contracts: Land Contract Customer Start End Country Notes JP9101 – Enhanced Defence High ADF 2023 2033 Australia Operation, support and technology upgrade programme for the Australian Defence Force Frequency Communications Maintenance, repair and overhaul to over 35,000 vehicles of the British A
Slide 41: 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 Provision of engineering services and technical aviation support to 17 air stat
Slide 42: Disclaimer
Disclaimer This document has been prepared by Babcock International Group PLC By their nature, forward-looking statements involve known and unknown (the “Company”) solely for use at a presentation in connection with the risks, uncertainties and other factors, many of which are beyond Babcock’s Compa
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