Babcock International Group Plc · LSE:BAB
Babcock International — FY2002 Earnings Presentation
34 slides from Babcock International's earnings presentation, 2002
Slide 1: Preliminary Results Presentation for Year Ending March 2002
PRELIMINARY RESULTS PRESENTATION FOR YEAR ENDING MARCH 2002 G A Campbell 1
Slide 2: Babcock Strategy
BABCOCK STRATEGY • To enhance shareholder value by transforming itself into a fast growing support services business • To exit the low growth cyclical materials handling business • To grow organically by securing major new defence outsourcing contracts and to be a leading supplier of services to the
Slide 3: End of Year Report
End of Year Report • Integrated the acquisition of Hunting Defence Services which outperformed expectations – strategically and financially • Confirmed the Faslane contract for £350m but which is expected to be extended both in scope and length • Contract renewals at Lyneham, Cranwell, Culdrose and
Slide 4: Financial Review
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Slide 5: Group Operating Result
Group Operating Result £ million 2001/2 2000/01 % change Turnover Continuing operations 358.9 305.7 17.4% Discontinued operations 64.1 135.3 Total 423.0 441.0 -4.1% Operating profit* Continuing operations 15.4 15.8 -2.5% Discontinued operations (0.5) (6.1) Total 14.9 9.7 53.6% Joint ventures & assoc
Slide 6: Continuing Operations
Continuing Operations Turnover Operating profit* 2001/2 2000/01 % change 2001/02 2000/01 % change Technical Services BES 193.0 190.5 1.3% 15.1 13.2 14.4% Babcock Eagleton 15.5 16.0 -3.1% 1.1 4.9 -77.6% Total 208.5 206.5 1.0% 16.2 18.1 -10.5% Training and Support HCS 63.6 3.7 5.7 0.4 Babcock Africa 3
Slide 7: Goodwill and Exceptional charges
Goodwill and Exceptional charges £ million 2001/02 2000/01 Non-core Support Total Non-core Support Total Businesses services Businesses services Goodwill Amortisation (1.1) (1.0) (2.1) (0.8) 2.3 1.5 Impairment review (7.9) (7.9) Total (9.0) (1.0) (10.0) (0.8) 2.3 1.5 Operating exceptional (2.9) (0.6
Slide 8: Tax, EPS & Dividend
Tax, EPS & Dividend £ million 2001/2 2000/01 % change Profit before tax* 13.4 13.2 Goodwill and Exceptionals (27.3) (20.5) Loss before Tax (13.9) (7.3) Tax (3.1) (1.2) Loss after Tax (17.0) (8.5) Effective tax rate % 25.8% 49.6% Basic EPS on post tax profit** 4.51 (0.35) Dividend per share (pence) 2
Slide 9: Cash Flow (1)
Cash Flow (1) 2001/02 2000/01 Group operating profit/(loss)* 1.4 (4.7) Non-cash items Depreciation and amortisation 12.9 10.9 Impairment of goodwill 7.9 20.8 10.9 Increase in working capital (2.4) (17.2) Capital expenditure – net (7.2) (6.0) Operating cash flow 12.6 (17.0) *Before non-operating exce
Slide 10: Cash Flow (2)
Cash Flow (2) 2001/02 2000/01 Operating Cash Flow 12.6 (17.0) Acquisitions and Disposals Acquisitions (9.5) (65.9) Disposals – net (4.3) 5.0 Total (13.8) (60.9) Movement in Share Capital 2.7 (25.5) Interest (1.0) 3.9 Tax (3.4) (0.7) Dividends (3.9) (5.7) Translation differences (0.3) 0.7 Movement in
Slide 11: Group Balance Sheet
Group Balance Sheet £ million 2001/2 2000/01 Fixed assets Tangible 22.4 37.2 Intangible 58.5 74.9 80.9 112.1 Investments 4.2 2.6 Working Capital (32.4) (37.6) Pension pre-payments 70.5 79.2 Corporation Tax (4.5) (6.6) Dividends payable (2.5) (2.3) Provisions (26.8) (37.2) Net assets 89.4 110.2 Finan
Slide 12: FRS 17 - Balance sheet impact
FRS 17 - Balance sheet impact £ million SSAP 24 FRS17 2001/2 2000/01 2001/02 Total pension fund surplus 130.8 141.0 136.1 Off-balance sheet surplus 60.3 61.8 2.3 Balance sheet surplus – pre-tax 70.5 79.2 133.8 Related tax liability (21.1) (23.5) (41.0) Balance sheet provision (4.3) (8.6) - Balance s
Slide 13: FRS 17 - Profit and loss account impact
FRS 17- Profit and loss account impact £ million SSAP 24 FRS17 2001/2 2000/01 2002/03 (projected) Charged in arriving at Operating profit Service cost 5.6 3.8 10.1 Interest on surpluses (6.0) (3.8) Net charge (0.4) - 10.1 Credited to Other finance income Net return on scheme net assets 0.0 0.0 (10.4
Slide 14: FRS 17 - Cash flow effect
FRS 17- Cash flow effect ………. ……..Nil - Neither SSAP 24 nor FRS 17 are relevant in assessing funding requirement. - MFR basis shows funding level well in excess of 100% but to be replaced by an as yet undefined, scheme specific basis that should yield as favourable a result. - Actuarial valuation ba
Slide 15: Operations Review 2002: Technical Services
OPERATIONS REVIEW 2002 Technical Services Turnover (£m) Operating Profit Pre-goodwill & Exceptionals (£m) Total 209 (207) 16.2 (18.1) BES 193 (191) 15.1 (13.2) Eagleton 16 ( 16) 1.1 ( 4.9) • BES ahead of previous year due to completion of HMS Ark Royal • Eagleton down on previous outstanding year •
Slide 16: Babcock Naval Services
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Slide 17: Background
Background What is the Faslane / Coulport Contract? Provision of a wide range of support services through a Partnering Arrangement from one of the UK’s most secure nuclear sites What is Partnering? “A process that attempts to establish working relationships through mutual trust and teamwork.” 17
Slide 18: Scope of Contract
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Slide 19: Faslane
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Slide 20: Faslane
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Slide 21: Coulport
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Slide 22: Scope - Naval Base Outputs (pre-contract)
Scope - Naval Base Outputs (pre-contract) Logistics Estate SWS Mgt Office Coulport Services Services Motor Security Transport Commercial Engineering /Finance Services Berthing & Assurance Docking IT Hotel Human Services Compliance Resources 22
Slide 23: Scope - Partnered Outputs (post contract)
Scope - Partnered Outputs (post contract) Logistics Estate SWS Mgt Office Coulport Services Services Motor Security Transport Commercial Engineering /Finance Services Berthing & Assurance Docking IT BNS Hotel Human Services Services Compliance Resources MoD 23 Services
Slide 24: Scope
Scope • Engineering Support Services – management of maintenance programme for base ported ships and submarines including:- • nuclear engineering • tactical weapons engineering • combat system integration – support to visiting ships & submarines • Waterfront Support Services – berthing services for
Slide 25: Scope
Scope • Provision of Logistics Service – warehousing and storage of circa £200million stockholding – provision of a laundry service • Estate Management Services – management of buildings and infrastructure – waste management (inc. radioactive) – design authority – diving service – space management –
Slide 26: Scope of Contract
Scope of Contract • Office Services – document production – reprographics – mail services • Compliance – Health & Safety, Quality, Nuclear Site Management • Coulport – strategic and non-strategic calibration services – maintenance of Explosives Handling Jetty • Hotel Services – provision of accommod
Slide 27: Contract Structure
Contract Structure • Partnering Agreement not a Term Contract – based on agreed Partnering Principles • Initial Contract Term - 5 years + option for further 5yrs • Value for Money Review at end of Year 3 : – forecast savings having been delivered – performance standards having been achieved • TUPE t
Slide 28: Contract Structure
Contract Structure • Contract based on “outputs” – MoD determines “what and when” – BNS decide “how and who” • Pricing based on “inputs” • Performance governed by Key Performance Indicators • Gainshare mechanism (profit based on savings) • Redundancy / Pensions funded by MoD • Concept of “historic n
Slide 29: Current Status
Current Status Scope Agreed Headcount Agreed Contract Complete Transition Activity On Time Regulatory Approvals In Work TUPE Consultation Commenced 30/5 Workforce Briefings Commencing 18/6 29
Slide 30: Strategy
Strategy • Key strategic challenges are:- – deliver the contracted outputs – meet or exceed the stated savings profile – become the MoD benchmark for Partnering and service provision • In addition we will seek to: – extend the Contract to 10 or 15 years – increase the existing contract scope – seek
Slide 31: Operations Review: Training & Support
Operations Review Training & Support Turnover (£m) Operating Profit Pre-goodwill & Exceptionals (£m) Total 99 (35) 6.1 (0.8) HCS 64 5.7 Africa 35 (31) 0.4 (0.6) • Contract renewals 100% successful Babcock Total • Bids submitted for: RSME £1.0bn £2.0bn (Atkins/Mowlem) AVTS £0.3bn £0.6bn (Thales) ASSP
Slide 32: SGI
SGI • Facility and Property management business for MoD, Local & Central Government & Private Sectors • Major term contracts with Defence Estates for MoD South West and South East Regions • Well placed for: – DE regional Prime Contracts - £250m to £300m each over 7 years – Single Living Accomodation
Slide 33: Operations Review: Materials Handling and Railcare
Operations Review Materials Handling and Railcare Turnover (£m) Operating Profit Pre-goodwill & Exceptionals (£m) BMH 52 ( 64) (4.2) (1.0) Discontinued 64 (135) (0.5) (6.1) • BMH now comprises Marine and Chronos Richardson • Marine had very difficult year and lost all of the above. Aggressive downsi
Slide 34: Summary
Summary • Transformation virtually complete • Acquisition of Hunting Defence Services a success both strategically and financially • Faslane secured • Disposals nearly completed • SGI marks entry to civil market • Target now organic and profitable growth and further improved shareholder value 34
Babcock International Group — FY2002 Earnings Presentation on 6ix