Babcock International Group PLC · LSE:BAB
Babcock International — Investor Day (March 2010)
79 slides from Babcock International's investor day presentation, Mar 31, 2010
Slide 1: Analyst and investor seminar
Analyst and investor seminar Royal School of Military Engineering Wednesday 31 March 2010 1
Slide 2: Agenda
Agenda • Defence outsourcing Kevin Thomas • Infrastructure Mike Fellowes • Equipment support David Ruff Coffee break • Delivering at RSME Tim Redfern • Summary Kevin Thomas • Site tour Lunch and depart 2
Slide 3: Defence outsourcing
Defence outsourcing Kevin Thomas – Chief Executive Support Services Division 3
Slide 4: Babcock International Group
Babcock International Group Our customers – are government departments, public bodies or private companies operating in highly regulated environments – operate strategically important assets which require long-term maintenance and upgrade where spend is non-discretionary – seek innovative, cost effe
Slide 5: Our business model
Our business model Integrating Delivering engineering value for skills In money for complex challenging Outcomes Babcock technical + regulated + Reliably = trusted to programmes environments Cost - deliver and vital effectively services On time Safely 5
Slide 6: The UK defence market
The UK defence market • MoD’s current annual spend is £38 billion* • Top priority remains equipment and support for Afghanistan • Whilst ensuring Armed Forces are fit for the “challenges of tomorrow” • New Strategic Defence Review to begin post election • Government Defence Green paper published cov
Slide 7: The budget challenge facing the MoD
The budget challenge facing the MoD • The MoD has some difficult challenges ahead – cost savings in both revenue and capital budgets – the release of resources for the front line • They will be keen to ensure that cost reductions do not reduce levels of service, equipment or facilities. In short, th
Slide 8: Revenue split
Revenue split Group Defence Defence division revenue split revenue split revenue split* Non- Defence Defence 35% 65% * Excluding Airports revenue which is also reported as part of Defence division revenue 8
Slide 9: Babcock and the MoD: highlights
Babcock and the MoD: highlights Babcock is currently one of the top 6 providers to MoD • Sole provider of support for the Royal Navy’s submarine fleet • 75% of surface ship refit work • Integrator for two new aircraft carriers (CVFs) • Managing two of the Royal Navy’s three naval bases – includes fl
Slide 10: Today we will cover…
Today we will cover… Babcock is currently one of the top 6 providers to MoD • Sole provider of support for the Royal Navy’s submarine fleet • 75% of surface ship refit work • Integrator for two new aircraft carriers (CVFs) • Managing two of the Royal Navy’s three naval bases – includes fleet time ma
Slide 11: Questions?
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Slide 12: Infrastructure
Infrastructure Mike Fellowes- Managing Director Infrastructure 12
Slide 13: Infrastructure
Infrastructure babcock trusted to deliver™ Training 18% Infrastructure 12% Equipment Support 10% Babcock International Group Pic www.babcock.co.uk 13
Slide 14: Infrastructure
Infrastructure • Build, maintain and operate the infrastructure for a range of customers • Employ some 1,660 employees across the UK with a major presence in the South West and East of England • Strong position and reputation on key contracts – track record of delivering significantly improved servi
Slide 15: Infrastructure overview – what we do
Infrastructure overview – what we do • Manage total spend for life cycle maintenance over seven years within a contracted target cost • Build detailed asset register to four levels 120 bases 10,000 22,000 150,000 buildings primary components systems 15
Slide 16: Contracting environment
Contracting environment Two key measures to be balanced • Condition based output • KPIs for response times measurement and failure rate – grading system and – fix components within regular surveys defined times – set targets for hand back – regular failure financially penalised 16
Slide 17: Infrastructure – how we do it
Infrastructure – how we do it • Technical support centre and ICT hub – records all information and activity – c 40 people – 365/24/7 • Maintenance team – site based surveyors, engineers and technicians – planned preventative maintenance (ppm) – reactive repairs – c 30 people per major site • Upgrade
Slide 18: Regional Prime contract market
Regional Prime contract market • Outsourced primes represent approximately £1.5 billion out of Defence Estates budget of £4 billion • Babcock – two regional – one functional prime • Trends – significant budget issues – estate size reducing – further outsourcing opportunities 18
Slide 19: Defence Estates – Prime contracts
Defence Estates – Prime contracts Five regional prime contracts – South West Babcock/Bovis JV – East Babcock/DynCorp JV – Central Carillion JV – South East Interserve JV – Scotland Turner FM Three functional prime contracts – Single Living Accommodation Babcock/Bovis JV (SLAM) – Married quarters Car
Slide 20: Benefits of Regional Prime contracting
Benefits of Regional Prime contracting • Prime contracting aims to achieve long-term value – improved management information – incentivised payment mechanisms – lifecycle management of estate – economies of scale = reduced overheads – same for less • Approximately 30% cost saving at award – + 2% sav
Slide 21: South West Regional Prime
South West Regional Prime • Contract term - 7 years + 3 year extension • JV with Bovis Lend Lease – Babcock delivers all asset management – Bovis delivers major new build • Current value - £682 million • Scope – mechanical and electrical – building and civil engineering – grounds maintenance – soft
Slide 22: South West Regional Prime
South West Regional Prime • 73 sites, 5,000 buildings, 12,000 pieces of primary equipment • Operating bases include – RM Poole – home to Special Boat Squadron – RMB Chivenor – Air Sea Rescue – RAF Lyneham – repatriation ceremonies 22
Slide 23: East Regional Prime
East Regional Prime • Contract term - 7 years + 3 year option to extend • Current value - £438 million • JV with DynCorp • Scope – mechanical and electrical – building and civil engineering – grounds maintenance – major projects • c 600 staff • Increase in scope – DISC Chicksands – Rock Barracks – D
Slide 24: East Regional Prime
East Regional Prime • 47 sites, 4,000 buildings, 10,000 pieces of primary equipment • Maintain majority of RAF airfields • Operating bases include: – RAF Scampton – home to Red Arrows – MCTC Colchester – Military Correction Centre – Defence Animal Centre – training for search dogs and household cava
Slide 25: Project SLAM (Single Living Accommodation Modernisation)
Project SLAM (Single Living Accommodation Modernisation) • Functional Prime contract – to construct and maintain new en-suite single living accommodation – Phase 1 – 5 year £450 million programme 9,000 units – Phase 2 – 5 year £600 million programme 10,000 units • Delivered by JV with Bovis Lend Lea
Slide 26: The Oil and Pipelines Agency (OPA)
The Oil and Pipelines Agency (OPA) • Operation of the fuel storage depots that form part of the Government Pipeline and Storage Systems • Receiving and pumping aviation fuel • 800 km of pipeline • Visual inspection by helicopter every 14 days • 4.5 million litres ‘product’ stored at key hubs • All o
Slide 27: Outlook and key opportunities
Outlook and key opportunities • Defence Estates continues to pursue outsourcing programmes • Key opportunities – Next Generation Estates – Defence Estates (International) – Germany – Cyprus – Gibraltar – residual UK estate – Clyde Future Nuclear Facilities – US visiting forces – UAE - Tatweer 27
Slide 28: In conclusion
In conclusion • Established market position • Excellent reputation for delivery of savings and efficiencies • Track record for managing large complex estates • Increased scope since award • Market provides opportunities for growth 28
Slide 29: Questions?
babcock trusted to deliver™ ternat 4) Group Pic www.babcock.co.uk 29
Slide 30: Equipment support
Equipment support David Ruff – Managing Director Defence 30
Slide 31: Equipment support
Equipment support Babcock International Group Plc www.babcock.co.uk Training 18% Infrastructure 72% Equipment Support 10% babcock trusted to deliver™ 31
Slide 32: Equipment support
Equipment support • Delivering complex through-life engineering support services to the UK Defence Air sector • Excellent reputation for managing and integrating critical assets, infrastructure and services – significant increase in availability delivered – significant reductions in operating costs
Slide 33: Market factors
Market factors • Afghanistan remains the key priority • Short to medium term pressure on budgets for new equipment • Postponement or cancellation of new platforms will lead to life extensions of current equipment • New platforms will be contracted on a through-life, capability basis • The key issue
Slide 34: Military air equipment support market
Military air equipment support market • MoD and OEM self performance >80% Estimated market size c £900 million • Babcock share <5% 18% • Opportunity to reduce 35% costs 14% • Opportunity to provide integrated base and 33% equipment support Jets Rotor wing Transport Other • Opportunity for growth 34
Slide 35: Our role on Hawk fast jet trainers
Our role on Hawk fast jet trainers Airframe – BAE Systems Flight line maintenance, scheduled Adour Engine – Rolls-Royce maintenance, repair, overhaul and Maintenance, repair, test overhaul, test Training Weapons Ejection Seat – Martin Baker Configuration, loading, Maintenance, repair, overhaul, test
Slide 36: Rolls-Royce Adour engine support
Rolls-Royce Adour engine support • Rolls-Royce Mission Ready Management Solution • Asset availability Adour engine fleet (Hawk TMk1) including – engine test – repair – maintenance • Risk transfer – full spectrum component analysis and management – fully managed supply chain • Enhanced ‘clean enginee
Slide 37: Hawk Integrated Operational Support (IOS)
Hawk Integrated Operational Support (IOS) • Asset availability of UK MoD’s Hawk TMk1 and TMk2 fleet in support of UK fast jet pilot raining – RAF Valley – RAF Leeming – RNAS Culdrose • £17 million in-contract savings • 30% fleet reduction • 20,000 flying hours pa • 373 engineers and technicians • Av
Slide 38: Commodity Availability Procurement Strategy (CAPS)
Commodity Availability Procurement Strategy (CAPS) Wheels, Tyres and Brakes • Repair, refurbishment, overhaul of undercarriage sub-assemblies for – Harrier – Nimrod – VC10 – Hawk • Babcock-owned facility Newark • Organic growth opportunities – Typhoon – Tornado 38
Slide 39: Integrating capabilities at RAF Valley
Integrating capabilities at RAF Valley • Complex • Complex operational mix contracting structures • Complex inter- dependencies • Inter- – DE&S dependent supply chains – RAF – OEMs Base Operations • Contracting – Babcock for availability Engine Rolls- availability Royce Airframe availability BAE Sys
Slide 40: Our services to the trainee pilots
Our services to the trainee pilots Babcock manages and delivers • Motor transport • Flight clothing (incl maintenance) • Aircraft availability – engineer operations, forward and depth repair – aircraft handover/ takeover certification – aircraft configuration and readiness • Flightline operations –
Slide 41: Opportunities
Opportunities • Strategic Defence Review opportunity – through-life support solutions for new platforms – life extension/upgrade solutions for legacy systems • Integration capability key discriminator in contracting for availability and through-life capability management (TLCM) • We provide pivotal
Slide 42: In conclusion
In conclusion • Established market position • Excellent reputation for delivery of availability and efficiencies • Highly skilled work force • Track record for successful integration of MoD, OEMs and supply chain • Experienced in complex contracting models • Excellent opportunities for growth 42
Slide 43: Questions?
babcock trusted to deliver™ ternat 4) Group Pic www.babcock.co.uk 43
Slide 44: Defence training
Defence training David Ruff 44
Slide 45: Defence training
Defence training Babcock International Group Plc www.babcock.co.uk Infrastructure 72% Training 18% Equipment Support 10% babcock trusted to deliver™ 45
Slide 46: Outsourcing defence training
Outsourcing defence training • MoD seeking to increase outsourcing in training market – cost savings a key driver – release of personnel for operational duties • MoD recognises that training transformation will not happen without industry involvement – partnering approach – transfer of training risk
Slide 47: Defence training current opportunities
Defence training current opportunities • Royal Navy training – 6 year contract with options to extend – teamed with Raytheon – total value c £200 million, work share to be determined – expected contract start 2011 • Defence Training Review Package 2 – existing programme currently under review – oppo
Slide 48: Capability before RSME
Capability before RSME Training programme design, development and upgrade Hands on training of Provision individuals Training and support or groups management of training and equipment administration 48
Slide 49: Capability today ……. integration
Capability today ……. integration Training programme design, development and upgrade Hands on training of Provision individuals Training and support or groups management of training and equipment administration 49
Slide 50: Royal School of Military Engineering
Royal School of Military Engineering • Achieved financial close September 2008, commenced January 2009 – contract value £2.9 billion (£1.5 billion to Babcock) for 30 years • First PPP to deliver training support for the Army – skill and craft training from NVQ to foundation degree • Significant inve
Slide 51: Questions?
babcock trusted to deliver™ ternat 4) Group Pic www.babcock.co.uk 51
Slide 52: Delivering at RSME
Delivering at RSME Tim Redfern - Managing Director Holdfast Training Services 52
Slide 53: Royal School of Military Engineering
Royal School of Military Engineering Mission To deliver trained and motivated Military Engineers and trained Military Working Animals (MWA) and personnel trained in their use and husbandry in order to meet the operational requirements of Defence 53
Slide 54: Holdfast Training Services Limited
Holdfast Training Services Limited Babcock – 76% Carillion Defence – 24% (RSME Contract) (RSME Contract) 54
Slide 55: Service delivery
Service delivery Management and Administration Training IT Security Equipment support Engineering Transport resources Catering, retail & leisure 55
Slide 56: The RSME PPP Project
The RSME PPP Project Holdfast Training Services (SPV) • Training and training support services • Design, construction and refurbishment • Hard and soft FM services • Largest residential construction training college in Europe Per year • 675 courses (195 different types) • 315,500 man training days •
Slide 57: The RSME PPP Project – key facts
The RSME PPP Project – key facts • Total contract value of approximately £2.9 billion • MoD funded (not PFI) – through revenue (RDEL) and capital (CDEL) budgets • Determines monthly Unitary Charge • Complex payment mechanism • Deductions for performance failures • Babcock targeted with delivering £1
Slide 58: Training progression – adult recruits
Training progression – adult recruits RSME Training ATR Phase 2a Phase 2b Field Army Bassingbourne Basic Recruit Combat Trade training Posted to first Training Engineering unit • 14 weeks • 10 weeks • Driver / • Phase 3 Resources training Specialist / GEO • Up to 53 weeks 58
Slide 59: RSME locations
RSME locations Bicester Melton Mowbray Move of Defence Explosives, Munitions and Search Defence Animal Centre School (South) – 2012 Military working animals and personnel trained in their husbandry and use, Holdfast (Carillion and Babcock) including military working dogs for Build programme arms/exp
Slide 60: Performance management
Performance management Centralised information management system • Monitored daily • Call centre key to project – 32,000 calls received in first 12 months Weekly joint performance progress meetings • Progress measured against 156 key performance indicators • Agreed governance structure • Delivering
Slide 61: Delivering world class facilities
Delivering world class facilities 61
Slide 62: Medway
Medway • Wainscott training area/building • Upper Upnor training buildings • New combined messes • New community centre • 2 new single living accommodation blocks 62
Slide 63: Minley
Minley • En-Suite accommodation • Fitness centre • Reception and guardhouse • Boat maintenance and dive store • New classrooms • New Officers’ and Sergeants’ Messes 63
Slide 64: PPP – declared benefits
PPP – declared benefits • Handback of military posts to the Field Army • Reduced soldiers not under training • Reduced tri-service student hotel accommodation • Differential inflation on civilian staff costs • Reduced travel and accommodation costs • Delivering financial and operational benefits to
Slide 65: Qualitative benefits
Qualitative benefits RSME morale and motivation • More motivated trainees • Improved military staff morale • Improved estate quality • Better learning experience RSME efficiency • Reduced soldier churn • Easements to unit under-manning (shorter Phase 2) • Defence Explosives, Munitions and Search Sch
Slide 66: Embedded training
Embedded training Babcock International Group Pic www.babcock.co.uk 66
Slide 67: Virtual training
Virtual training Plant Sergeants’ Course You must complete the Pre Course Study Pack and submit it 2 weeks prior to the start of ‘Sun Mon Tue Wed Thu Fri Sat the course. 5 Fa a ir Ba 6 8 9 10 11 12 13°14 «15 «16 «17 18 19 op Aw B ww 27 28 29 30 31 Download Events Key @ cic08 Assignment Recent Activi
Slide 68: Trade training
Trade training Babcock International Group Pic
Slide 69: Preparing for operations
Preparing for operations trusted to deliver™ 69
Slide 70: Collective training
babcock Collective training trusted to deliver™ Babcock International Group Pic www.babcock.co.uk 70
Slide 71: Equipment support
Equipment support trusted to deliver™ 71 www.babcock.co.uk
Slide 72: Infrastructure support
Infrastructure support 72
Slide 73: Infrastructure support
Infrastructure Support babcock OO =. Babcock International Group Pic
Slide 74: The result – Military Engineers
The result – Military Engineers 74
Slide 75: Questions?
babcock trusted to deliver™ ternat 4) Group Pic www.babcock.co.uk 75
Slide 76: Summary
babcock Kevin Thomas Babcock International Group Pic 76 www.babcock.co.uk
Slide 77: In summary
In summary • Established market positions • Excellent reputation for delivery of savings and efficiencies • Highly technical engineering skills, knowledge and experience • Track record of complex project management and integration capability • Experienced in complex contracting models • Long-term re
Slide 78: Questions?
babcock trusted to deliver™ ternat 4) Group Pic www.babcock.co.uk 78
Slide 79: babcock
babcock trusted to deliver™ Babcock International Group Pic www.babcock.co,uk
Babcock International Group — Investor Day (March 2010) on 6ix