Babcock International Group Plc · LSE:BAB
Babcock International — H1 FY2025 Earnings Presentation
37 slides from Babcock International's earnings presentation, Nov 13, 2024
Slide 1: Half year results for the six months ended 30 September 2024
Half year results for the six months ended 30 September 2024 13 November 2024 © nzdf.mil.nz
Slide 2: Successfully delivering performance and growth
Successfully delivering performance and growth Improving margins Strongly positioned Sustainable growth and cash flow Focused portfolio: Differentiated 11% organic £9.5bn 7.0% 80% 74% defence proposition revenue growth contract backlog underlying margin cash conversion Medium term guidance Mid-singl
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 at H1 › FY25 expectations unchanged – increasing confidence in medium-term guidance 4 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024 Babcock International Group - Not Su
Slide 5: Underlying financial results overview
Underlying financial results overview HY25 HY24 › Backlog down 1% driven by trading on long-term contracts − Key contracts expected in H2 Backlog £9,517m £9,636m › Revenue growth 11% (at constant FX) Revenue £2,409m £2,177m − Strong performance in Nuclear and Land Underlying operating profit £168.8m
Slide 6: Revenue bridge summary
Revenue bridge summary (£m) Organic growth - at constant FX 6% 22% 9% (4)% 11% 48 155 (7) 2,409 44 2,177 (8) HY24 FX Marine Nuclear Land Aviation HY25 6 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024 Babcock International Group - Not Subject to Expo
Slide 7: Underlying operating profit bridge summary
Underlying operating profit bridge summary (£m) 10% increase (at constant FX) 8 30 (1) 169 154 (1) ( 23 ) HY24 FX Marine Nuclear Land Aviation HY25 7 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024 Babcock International Group - Not Subject to Export
Slide 8: Marine
Marine £m HY25 HY24 Contract backlog up 2% › Record LGE intake offsetting trading of long-term contracts Contract backlog 2,991 2,929 › Additional Missile Tube Assemblies and warship support orders Revenue 789.8 750.1 Revenue up 6% (at constant FX): › Skynet ramp up and LGE volume increase Underlyin
Slide 9: Nuclear
Nuclear £m HY25 HY24 Contract backlog up 3% › Major Infrastructure Programme (MIP) and Civil Nuclear Contract backlog orders offsetting trading on long-term contracts (FMSP) 2,461 2,400 Revenue 865.7 710.8 Revenue up 22% - up 20% excluding MIP (at constant FX): › Around 30% growth in civil: decommis
Slide 10: Land
Land £m HY25 HY24 Contract backlog down 12% › Trading of long-term contracts Contract backlog 2,410 2,734 › DSG options years in negotiation Revenue 591.3 545.6 Revenue up 9% organic (at constant FX): › UK land support activity (DSG), Jackal production ramp up Underlying operating profit 45.4 37.5 ›
Slide 11: Aviation
Aviation £m HY25 HY24 Contract backlog up 5% › UK RAF Hades extension and UK HEMS Contract backlog 1,655 1,573 Revenue down 4% organic (at constant FX): Revenue 162.1 170.5 › Completion of French H160 defence aircraft deliveries in HY24 Underlying operating profit 7.7 8.7 › HEMS contract completions
Slide 12: Free cash flow significantly ahead
Free cash flow significantly ahead £m HY25 HY24 › Working capital: negative working capital and early customer receipts, similar position to FY24 Underlying operating profit 169 154 › Net capex: continued investment across the Group to support Right of use asset depreciation 19 19 programme delivery
Slide 13: Balance sheet much stronger
Balance sheet much stronger £m HY21 FY21 FY22 FY23 FY24 HY25 › Net debt reduced £1.2bn to £(386)m from September 2020 (HY21) – Leverage 0.6x – below target range of 1.0x – 2.0x Net debt (1,609) (1,352) (969) (564) (435) (386) – Ample liquidity headroom, in excess of £1.4bn Net debt to EBITDA (covena
Slide 14: Reducing and de-risking the pensions deficit
Reducing and de-risking the pensions deficit Technical provision deficit - actuarial deficit (aggregated) £m Technical provision deficit – actuarial deficit (aggregated)* (800) › Around £160m aggregated technical provision deficit (HY24: c.£300m) (700) c.£540m › Devonport Royal Dockyard Ltd (DRDL) a
Slide 15: Capital allocation – supporting shareholder value
Capital allocation – supporting shareholder value Priority HY25 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 0.6x 1.0x
Slide 16: Outlook and guidance
Outlook and guidance FY25 outlook unchanged: › Around 90% of FY25 revenue under contract (similar to last year) › FCF significantly H1 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
Pic suggestions? • Skills • People • Nuclear Strong progress towards medium-term guidance David Lockwood CEO
Slide 18: Delivering sustainable growth
Delivering sustainable growth Market Capabilities aligned What we deliver dynamics with customers’ needs Defence budget growth in focus countries Through-life support Greater demand for Availability asset availability Why we grow Requirement for Product and greater value-add development Equipment mo
Slide 19: Driving successful programme delivery
Driving successful programme delivery Major Infrastructure Vehicle support Space - secure comms Energy transition • 9-Dock reopened – critical for V Class • DSG operational performance • Skynet - strong mobilisation • New build: Hinkley Point C ramp up submarine support to enable CASD • New contract
Slide 20: Driving international growth
Driving international growth H&B Defence PGZ SAAB ST Engineering • JV with HII to support AUKUS • Contract extension to support Polish • Design contract for Swedish Navy’s • Partnership to develop a 120mm • Focused on building Australia’s Miecznik frigate programme to 2031 Luleå Class Surface Combat
Slide 21: UK defence environment
UK defence environment › UK autumn budget › Additional £3bn in defence spend next year to £60bn › Re-commitment to defence budget of 2.5% GDP › UK Strategic Defence Review underway › Ongoing consultation with industry › Formal submissions made › MOD reforming approach to procurement › Increased focu
Slide 22: People – key to delivering sustainable growth
People – key to delivering sustainable growth › The Engineer top 10 employers 2024 list › Babcock Engineering & Nuclear Skills building at City College Plymouth opened › Second Skills-based Work Academy Programme hosted in Devonport › Signing of the Nuclear Skills Charter › Largest Babcock early car
Slide 23: On track to achieve medium term guidance
On track to achieve medium term guidance Improving margins Strongly positioned Sustainable growth and cash flow Focused 74% 11% organic £9.5bn 7.0% 80% portfolio defence revenue growth contract backlog underlying margin cash conversion Stronger processes Differentiated proposition Clear growth strat
Slide 24: Babcock International Group – Half year results for the six months ended 30 September
24 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024 Babcock International Group - Not Subject to Export Control
Slide 25: Appendix
Appendix CROWN COPYRIGHT
Slide 26: HY25 results split by sector
HY25 results split by sector Revenue Underlying operating profit Contract backlog 7% 4% 17% 24% 33% 32% 27% 24% £2.4bn £169m £9.5bn 25% 45% 26% 36% Marine Nuclear Land Aviation 26 26 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024 Babcock Internation
Slide 27: HY25 Group splits
HY25 Group splits Defence revenue Geographical revenue Contract backlog 8% 2% 26% 3% 25% 8% £2.4bn 8% £2.4bn £9.5bn 71% 75% 74% Defence UK Aus & NZ Defence Civil South Africa Canada Civil France ROW 27 Babcock International Group – Half year results for the six months ended 30 September 2024 © 2024
Slide 28: Statutory to underlying reconciliation
Statutory to underlying reconciliation HY25 HY24 (£m) Specific Specific Underlying Adjusting Statutory Underlying Adjusting Statutory Items Items Revenue 2,408.9 - 2,408.9 2,177.0 - 2,177.0 Operating profit 168.8 15.0 183.8 154.4 (10.2) 144.2 Share of results of joint ventures and associates 5.1 - 5
Slide 29: Sector detail (full years)
Sector detail (full years) 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
Slide 30: Sector detail (half years)
Sector detail (half years) Revenue Underlying operating profit Underlying margin Contract backlog HY25 HY24 HY23 HY25 HY24 HY23 HY25 HY24 HY23 HY25 HY24 HY23 Marine £789.8m £750.1m £666.4m £40.0m £63.0m £47.3m 5.1% 8.4% 7.1% £2,991m £2,929m £2,426m Nuclear £865.7m £710.8m £558.2m £75.7m £45.2m £30.1
Slide 31: Net debt / EBITDA (covenant basis)
Net debt / EBITDA (covenant basis) HY25 HY24 (£m) (Rolling 12 months) (Rolling 12 months) Underlying operating profit 252.2 210.8 Depreciation and amortisation 71.9 69.3 Other covenant adjustments (1.3) (5.9) EBITDA 322.8 274.2 JV and associate dividends 12.1 10.4 EBITDA + JV and associate dividends
Slide 32: Liquidity and debt maturity profile
Liquidity and debt maturity profile Debt maturity profile1 (£m) RCF 20263 £775m • Exposure to variable debt (85% is fixed rate), 2,000 GBP bond 20264 £300m only £123m drawn debt is variable rate HY25 net debt2 Euro bond 20275 €550m £(146)m • c.£1.6bn of total available borrowings and facilities 1,50
Slide 33: 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 34: 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 35: 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 36: 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 37: Disclaimer
Disclaimer This document has been prepared by Babcock International Group PLC (the By their nature, forward-looking statements involve known and unknown “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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