QinetiQ Group plc · LSE:QQ.
QinetiQ — FY2013 Earnings Presentation
42 slides from QinetiQ's earnings presentation, May 23, 2013
Slide 1: Committed to delivering value
Draft Committed to delivering value QinetiQ Group plc Preliminary Annual Results for the year ended 31 March 2013 23 May 2013 1
Slide 2: Agenda
Draft Agenda 1. Headlines 2. Financial overview 3. Business overview 4. Q&A 2
Slide 3: Headlines
Headlines • Robust overall Group performance in tough markets − Excellent performance in UK Services − Initiating strategic review of US Services − Global Products pipeline – material progress • Net cash position achieved through strong cash generation • 31% increase in full year dividend to 3.8p (F
Slide 4: Financial overview
Draft Financial overview David Mellors Chief Financial Officer 4
Slide 5: Summary financial headlines
Summary financial headlines FY12 FY13 (restated^) £m £m Change Revenue 1,327.8 1,469.6 (10)% Operating profit* 168.7 159.6 6% Operating margin* 12.7% 10.9% Profit before tax* 152.1 110.2 38% Earnings per share* (pence) 18.9 13.6 39% Net cash from operations (post capex)* 175.9 235.4 Cash conversion
Slide 6: Revenue bridge
Revenue bridge 1,469.6 (2.4) 6.2 (12.2) (64.1) (69.3) 1,327.8 £ million FY12 Disposals FX UK US Global FY13 Services Services Products 6
Slide 7: Segmental analysis of profit and margin
Segmental analysis of profit and margin Operating profit* FY13 FY12^ £m £m UK Services 85.8 61.3 US Services 21.9 32.1 Global Products 61.0 66.2 Group 168.7 159.6 Margin % FY13 14.4% UK Services FY12 10.0% 4.6% US Services 6.0% 23.9% Global Products 20.4% * Underlying performance as defined at appen
Slide 8: Earnings Per Share (pence)
Earnings Per Share* (pence) 14.6 (1.0) 13.6 1.1 4.1 0.1 18.9 pence FY12 IAS19 FY12 restated Operating Finance Effective FY13 restatement & profit expense tax rate finance expense reclassification * Underlying performance as defined at appendix ^ IAS 19 (revised) ‘Employee benefits’ has been adopted
Slide 9: Specific adjusting items
Specific adjusting items* FY12 FY13 (restated^) £m £m Non-cash items Impairment of goodwill (255.8) - Amortisation of acquired intangibles (14.0) (20.3) Pension net finance expense (1.3) (7.2) Unrealised impairment of investments (0.6) - Impairment of property (4.0) (1.9) Pension past service credit
Slide 10: Further strengthening of the balance sheet
Further strengthening of the balance sheet FY09 FY10 FY11 FY12 FY13 200 £ million - (200) (400) (600) FY09 FY10 FY11 FY12 FY13 £m £m £m £m £m Working capital 154.0 107.2 (30.7) (62.7) (148.3) Retirement benefit obligation (pre-tax) (105.2) (147.3) (124.6) (31.5) (54.1) Net (debt) / cash (537.9) (457
Slide 11: Movements in net (debt) / cash
Movements in net (debt) / cash (122.2) 63.1 194.4 (18.5) (14.3) (1.6) (20.1) (6.8) 74.0 £ million Net debt Net Cash flow Net capex Net interest† Tax Dividends FX/Other Net cash 31 Mar 12 restructuring from 31 Mar 13 recovery operations †Net interest excludes £20.7m accelerated interest payments in r
Slide 12: IAS 19 – restatement of FY12
IAS 19 – restatement of FY12 Underlying Reclassification Change in Reclassify Underlying reported of admin investment pension net restated FY12 costs return finance expense FY12 calculation to middle column £m £m £m £m £m Revenue 1,469.6 - - - 1,469.6 Operating profit 161.3 (1.7) - - 159.6 Net finan
Slide 13: IAS 19 – accounting summary
IAS 19 – accounting summary FY12 FY13 (restated^) £m £m Underlying* operating profit Current service cost and administration expenses (20.7) (22.5) Specific adjusting item Net pension interest expense (1.3) (7.2) Statement of comprehensive income Actuarial movements on assets/liabilities (42.1) (102
Slide 14: Business overview
Draft Business overview Leo Quinn Chief Executive Officer 14
Slide 15: Markets
Markets • US: visibility well below normal levels − Departments working through impact of sequestration − Drawdown effect − Competitive trading environment • UK: fiscally challenged − Budgets moved to frontline commands − DE&S – GoCo proposal in consultation phase 15
Slide 16: Transforming QinetiQ
Transforming QinetiQ • Organic-Plus: repositioning the portfolio around growth − ‘Core’ – win market share − ‘Explore’ – identify significant growth engines − ‘Test for Value’ – manage rigorously • Maintaining the disciplines of self-help − Focus – where we deliver sustainable value for customers −
Slide 17: Organic-Plus – growing and diversifying the 'Core'
Organic-Plus – growing and diversifying the ‘Core’ Core Explore Test for Value Maximise Scale Maintain the rigour c90% of revenue c8% of revenue c2% of revenue Cyveillance® ALARMTM MEWSTM International Ranges Integrated WarriorTM E-X-Drive® OptaSense® Power Line Sensors GAJTTM Close Training & Simul
Slide 18: Portfolio roles
Portfolio roles Training & Air Maritime C4ISR UK Simulation Services Acquisition Weapons Australia Services Security Lifecycle Solutions Software & Systems Engineering US Services Aerospace Operations Mission Solutions Cyveillance® & Systems Unmanned Space OptaSense® Systems Global Products IP & New
Slide 19: UK Services – performance in year
UK Services – performance in year FY13 FY12^ • Stand-out performance £m £m − More competitive cost base Orders† 414.6 450.3 − Better project execution Revenue 597.3 610.1 − Higher utilisation Underlying Operating Profit* 85.8 61.3 Underlying Operating Profit Margin* 14.4% 10.0% Book to Bill Ratio† 1
Slide 20: UK Services – opportunities
UK Services – opportunities Air Weapons Maritime Australia • De-risks complex • Provides technical • Enables the frontline • Impartial advice Overview aviation programmes assurance to deliver cost including military effective capability release-into-service • Combines world-leading expertise with un
Slide 21: UK Services – opportunities
UK Services – opportunities Acquisition Training & Security C4ISR Services Simulation • Cyber security • Advice on • Market-leading • COTS technology to Overview protection procurement of position in C4ISR reduce the cost of complex systems research and advice training • Market leader in shorter-cyc
Slide 22: US Services – performance in year
US Services – performance in year FY13 FY12 • Tough markets – lack of visibility £m £m • On-going restructuring to stay Orders 461.9 530.3 competitive Revenue 475.6 534.5 • Strong capabilities and market Underlying Operating Profit* 21.9 32.1 positions but decline in performance Underlying Operating
Slide 23: US Services – opportunities
US Services – opportunities Mission Aerospace Lifecycle Software & Solutions Operations Solutions Systems • Cyber security • Support space • Engineering services • C4ISR for Navy and Overview • Enterprise IT and missions from design • Fleet and logistics Marine Corps software to launch under long- •
Slide 24: Global Products – performance in year
Global Products – performance in year FY13 FY12 • Strong Q-Net® revenue £m £m • Softening demand for conflict products Orders 200.3 245.7 • Good performance in OptaSense® and Revenue 254.9 325.0 Space Underlying Operating Profit* 61.0 66.2 • Some triage of portfolio Underlying Operating Profit Margi
Slide 25: Global products – broadening the portfolio
Global products – broadening the portfolio Core LAST® Armour SWATS® PADS® TALON® Q-Net® Global Products Power Lines Dragon Sensors RunnerTM 10 Test for Explore Value Integrated Warrior OptaSense® SystemTM ALARMTM Space technology …and increased focus on non-conflict markets 25
Slide 26: Global Products – opportunities
Global Products – opportunities Survivability Unmanned OptaSense® Space Systems • Protects people and • World-leading • Fibre-optic sensing • Space technology Overview assets to save lives provider of military for real-time including mini robots decision-making satellites and ion propulsion • Cuttin
Slide 27: Outlook for FY14
Outlook for FY14 • UK Services − Expected to remain steady • US Services − Heightened uncertainty around US federal services spending is causing low levels of visibility • Global Products − As anticipated, budgetary pressures and the drawdown effect seen towards the end of last year are continuing t
Slide 28: Reshaping the portfolio to deliver sustainable growth
Reshaping the portfolio to deliver sustainable growth • UK Services − Performing strongly, potential for mid-term growth − Underpinned by 5-year, £998m re-pricing of LTPA • US Services − Good assets; under-performing − Initiating strategic review to identify route to maximum value • Global Products
Slide 29: Questions
Draft Questions Download our iPad app from the App Store 29
Slide 30: Appendices
Draft Appendices 30
Slide 31: Definitions
Definitions • Underlying performance is stated before − Amortisation of intangibles arising from acquisitions; − Pension curtailment gains/losses & past service credits/costs; − Pension net finance expense; − Gains/losses on business divestments, and disposal and impairment of investments; − Restruc
Slide 32: Detailed income statement
Detailed income statement FY12 FY13 (restated^) £m £m Revenue 1,327.8 1,469.6 Underlying operating profit* 168.7 159.6 Net finance expense (16.6) (49.4) Underlying profit before tax* 152.1 110.2 Impairment of goodwill (255.8) - Impairment of property (4.0) (1.9) Amortisation and impairment of acquis
Slide 33: Revenue by sector and customer
Revenue by sector and customer Revenue by sector (%) Revenue by customer (%) MOD 19% 21% DoD 35% UK Services DHS FY13 45% FY13 US Services 6% £1,327.8m £1,327.8m NASA Global Products 10% Commercial Defence 36% 2% Civil/Other 26% Government agencies MOD 22% 19% 31% DoD 42% UK Services DHS FY12 7% FY1
Slide 34: Taxation
Taxation FY12 FY13 (restated^) £m £m Underlying tax charge* (29.2) (21.5) Tax on non-recurring items 33.0 (48.5) Headline tax charge 3.8 (70.0) Underlying tax rate* 19.2% 19.5% * Underlying performance as defined at appendix ^ IAS 19 (revised) ‘Employee benefits’ been adopted for FY13 and the FY12 c
Slide 35: Balance sheet
Balance sheet FY13 FY12 £m £m Goodwill 290.4 519.3 Intangible assets 57.8 71.8 Property, plant and equipment 241.4 246.6 Working capital (148.3) (62.7) Retirement benefit obligation (net of tax) (40.4) (18.2) Other assets and liabilities (36.4) (35.2) Net cash/(debt) 74.0 (122.2) Net assets 438.5 59
Slide 36: Cash conversion
Cash conversion FY12 FY13 (restated^) £m £m Underlying operating profit* 168.7 159.6 Share of JVs & associates (0.1) (0.1) Operating profit before JVs & associates* 168.6 159.5 Cash flow from operations* 194.4 250.8 Net capex (18.5) (15.4) Net cash flow from operations post capex 175.9 235.4 Cash co
Slide 37: Movements in net cash / (debt)
Movements in net cash / (debt) FY13 FY12 £m £m Free cash flow 139.3 173.6 Net restructuring inflow/(outflow) 63.1 (8.9) Acquisitions and investments - (0.9) Divestments and sale of investments 3.8 14.8 Dividends (20.1) (16.4) Purchase of own shares (0.4) (12.0) Other 18.6 (9.8) Change in net debt be
Slide 38: Defined benefit pension scheme – IAS 19 balance sheet position
Defined benefit pension scheme – IAS 19 balance sheet position FY13 FY12 £m £m Market value of assets 1,256.5 1,107.9 Present value of scheme liabilities (1,310.6) (1,139.4) Net pension liability before deferred tax (54.1) (31.5) Deferred tax asset 13.7 13.3 Net pension liability (40.4) (18.2) FY13
Slide 39: Three year record for the years ended 31 March
Three year record for the years ended 31 March As reported 2013 2012 2011 Underlying operating profit £m 168.7 161.3 145.4 Underlying profit before tax £m 152.1 118.3 114.6 (Loss)/profit before tax £m (137.0) 331.6 26.6 (Loss)/profit after tax £m (133.2) 257.9 5.0 Underlying basic EPS pence 18.9 14.
Slide 40: Credit and debt facilities
Credit and debt facilities Value Value Maturity date Denomination in denomination £m Revolving Credit Facility February 2016 £m 118.0 118.0 Revolving Credit Facility February 2016 $m 250.0 164.8 Private Placement February 2016 $m 43.0 28.3 Private Placement December 2016 $m 48.0 31.6 Private Placeme
Slide 41: Employee numbers
Employee numbers FY13 FY12 UK Services 5,145 5,157 US Services 3,350 3,940 Global Products 1,003 1,083 Total 9,498 10,180 41
Slide 42: Disclaimer
Disclaimer This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Actual results, levels of activity, performance, achievements and events are most likely to vary materially from t