Transcript Slide 1
Half Year Results
Introduction
Michael Jeffries
Agenda
Highlights
Operational Review
Financial Review
Strategy
Summary
3
Highlights
Continuing Operations
Group turnover*
£601.1m
17%
Underlying PBT**
£44.6m
16%
PBT
£32.8m
53%
Underlying EPS
17.6p
16%
Interim dividend
4.3p
10%
£4.4bn
2%
Closing order book***
Cash conversion
88%
* Includes share of turnover from equity accounted JVs
** Excludes intangible amortisation, exceptional items & MTM
*** Compared to Mar 09
4
Key Messages
Support Services business
Sector re-classification
Pressure on Government budgets will drive outsourcing
VT well placed for future opportunities
5
Operational Review
Paul Lester
Structure
Technical Services
Integrated Solutions
VT Group US
Environment
Critical Assets
Training
Government &
Critical Services
Education
Sea
Land
Air
Defence
Shared services and corporate functions
7
Restructure
Customer focus
Efficiency gains through standardisation of processes
Move towards shared service model for back office functions
On target to achieve £7m pa net savings
8
Defence
Future Strategic Tanker Aircraft (FSTA)
New facilities on schedule
Delivery of first aircraft due 2011
Military Flying Training Systems (MFTS)
Milestones met on new facilities in line with contract
Rear Crew Stage One training – £57m total
Urgent Operational Requirements
Army mechanical training supporting Afghanistan
MOD ‘C’ vehicles engineering & training
Naval Training - £80m
Contract awarded in the Middle East
Royal Navy training and FM extensions
9
Defence
Bids
SAR(H) 50/50 Lockheed Martin £5-7bn
Cyprus £200m
Brize Norton Multi Activity Contract £50m
Pipeline
Army recruitment £750m
JMATS up to £1bn
10
Government & Critical Services
Education
Closed PFI for third Lewisham school - £20m
First 2 Greenwich BSF schools commenced
Advanced Teachers and Higher Level Assistants - £7m
Highest GCSE results in Waltham Forest for 10 years
Training
Training delivered to 20,000 people
LSC annual contract increased by 14% to £42m
Contract wins in automotive apprenticeship training - £10m
New clients Jaguar Land Rover, Kawasaki & Euro Parts
2 year extension VW
11
Government & Critical Services
Critical Assets - £200m
Government agency renewal
New Dimensions contract extended to Wales
London Ambulance Service contract
Environment
Extensions at Sellafield – £30m
Decommissioning in Eastern Europe
Autoclave due for commission in March
12
Government & Critical Services
Bids
Financial Close on Wakefield expected end of FY £750m
Highways Agency £20m
Nuclear waste storage £100m
Pipeline
Waste £4bn+
BSF ICT/FM projects £180m+
Nuclear £200m+
Fleet Management & Asset projects £50m+
13
VT Group Inc
Renewal for CH-47 logistics support - $29m
Contract extensions - $15m
Contract for NASA facility at Wallops Island - $10m
Refocused on 2 Service Streams:
Integrated Solutions
Systems Engineering
C4IT Comms Infrastructure
Technical Services
Ranges & Base Operations
Training & Logistics
14
VT Group Inc
Bids
Integrated Solutions bids submitted – $100m
Technical Services bids submitted – $200m
Pipeline
Integrated Solutions - $1bn+
Technical Services - $300m+
15
Financial Review
Philip Harrison
Income Statement
30 September
2009
£m
30 September
2008
£m
%
Increase
601.1
513.7
17.0%
Underlying operating profit
51.2
42.2
21.3%
Net finance costs*
(6.6)
(3.9)
Underlying PBT
44.6
38.3
16.4%
Underlying EPS
17.6p
15.2p
15.8%
Turnover (incl JVs)
*Excluding mark to market derivative movement
17
Income Statement
30 September
2009
£m
30 September
2008
£m
%
Increase
51.2
42.2
21.3%
0.4
-
-
(5.4)
(11.8)
(10.1)
Fair value movements on derivatives
(0.2)
-
JV tax
(0.1)
(1.3)
Net finance costs
(6.7)
(3.9)
Profit before tax (continuing operations)
32.8
21.5
Taxation
(9.2)
(5.5)
Discontinued operations
(5.1)
109.0
Net Result for the Period
18.5
125.0
Underlying operating profit
Pension curtailment credit
Exceptional items
Amortisation of intangibles
52.6%
18
Segmental Reporting
- Continuing Operations
30 September 2009
£m
Turnover Underlying
Operating
Profit
Margin
%
30 September 2008
£m
Turnover Underlying
Operating
Profit
Margin
%
Profit %
increase
Defence
251.4
28.7
11.4%
194.6
23.8
12.2%
20.6%
Govt & Critical Services
187.2
13.7
7.3%
182.3
11.7
6.4%
17.1%
VT Group Inc
162.5
8.8
5.4%
136.8
6.7
4.9%
31.3%
601.1
51.2
8.5%
513.7
42.2
8.2%
21.3%
19
Segmental Reporting
Turnover Growth Analysis
- Continuing Operations
£m
27.1
43.1
601.1
17.2
8.4%
513.7
Sep-08
Acquisitions
Organic
FX
Sep-09
20
Segmental Reporting
Underlying Operating Profit Growth Analysis
- Continuing Operations
£m
1.4
1.9
5.7
51.2
13.5%
42.2
Sep-08
Acquisitions
Organic
FX
Sep-09
21
Investment Income & Finance Costs
30 September 2009
£m
30 September 2008
£m
Investment Income from PFI Projects
1.6
1.7
Other Interest receivable
2.0
3.9
-
1.5
PFI interest on bank loans / overdrafts
(0.7)
(0.7)
Other bank loans/overdrafts
(2.7)
(8.0)
Net finance costs – pensions
(1.3)
0.0
Deferred consideration
(2.0)
(1.0)
Provision discounting
(0.7)
-
Other
(1.3)
0.4
Net Finance Costs
(6.7)
(3.9)
Investment Income & finance costs
(5.1)
(2.2)
Net investment income - pensions
22
Balance Sheet
30 September 2009
£m
443
31 March
2009
£m
464
Tangible assets
70
58
Equity accounted investments
11
13
116
120
44
44
(33)
(36)
(191)
(186)
(74)
(60)
6
9
Net deferred tax
(24)
(33)
Provisions
(56)
(69)
Shareholders funds
312
324
Goodwill & intangible assets
Assets held for sale
Other non-current assets
Working capital
Net debt
Employee pensions
Tax
23
Cash Generated from Operations
30 September 2009
£m
30 September 2008
£m
51.2
42.2
Depreciation & amortisation
5.0
5.2
Other items
1.6
(8.7)
(7.4)
(6.5)
(14.0)
16.2
2.7
1.9
39.1
50.3
Exceptional reorganisation expenditure
4.2
0.8
Investment Income from PFI contracts
1.6
1.7
Underlying operating cashflow
44.9
52.8
Operating Cashflow %
88%
125%
Underlying operating profit
Pension paid in excess of P&L
Working capital (increase) / decrease
Dividends from JVs
Cash generated from operations
24
Net Debt
30 September
2009
Post BVT
Proforma £m
200.2
30 September
2009
£m
31 March
2009
£m
75.5
51.5
Bank loans and overdrafts
(64.5)
(159.7)
(129.9)
Asset finance
(20.8)
(20.8)
(20.8)
3.3
3.3
1.1
Recourse net debt
118.2
(101.7)
(98.1)
Non recourse debt
(19.5)
(19.5)
(20.2)
Deferred consideration
-
(70.1)
(68.1)
Total net funds/(debt)
98.7
(191.3)
(186.4)
Cash balance
Loan notes & other borrowings
25
Order Profile
- Continuing Operations
Total order book £4.4 billion
£2.5 billion of order book beyond 3 years
Strong visibility of earnings
2010
2011
2012
0
250
Turnover
Order book
500
£'m
750
Rebids & renewals
1000
1250
Preferred bidder
26
Strategy
Paul Lester
Business Model
Long term partner
Higher added value
Critical to success
Managed service
Capability
Arms length
subcontractor
Short term
Prescriptive
Customer engagement
28
Business Model
BBC
UKMFTS
FSTA
New Dimension
Capability
Met Police
Nuclear
(Europe)
Sellafield
Severn Park
Cardiff Gate
Flagship
SPAWAR
AMCOM
Express
BSF
SKIOS
Careers
US Base Ops
Customer engagement
29
Customer Profile
UK Public Sector
29%
MOD
40%
Other
4%
DoD & US Gov
27%
30
Geography
Other
3%
United Kingdom
70%
North America
27%
31
UK Background
Forthcoming election
Political battleground drawn over plans for economic recovery
Uncertainty over specific plans
Short term delay to decision making
Opportunity to communicate business model
Economic pressures
4 ‘levers to pull’
Sell assets
Raise taxation
Increase GDP
Reduce Government budgets
Opportunities and Threats
32
Defence
UK MOD budgetary pressures
Equipment cuts drive support for existing platforms
Drives further outsourcing
Margin pressure
86,000 Civil Servants: 196,000 Armed Forces personnel
Gray Report (October 2009)*
Budget overspend and programmes overrun - £35bn
Poor acquisition process, new ways of working required
Outsourcing of Procurement function
Post Election
Strategic Defence Review
*A Review of Acquisition for the Secretary of State for Defence (Bernard Gray October 2009)
33
Government & Critical Services
Budgetary pressures
Efficiencies in Central and Local Government
Additional outsourcing opportunities
Margin pressure
Post Election
Prospect of decision making devolved to Local Authorities
Greater need to work with Private sector
Julius Report (July 2008)*
Competition for outsourced contracts brings benefits
Significant cost savings (10-30%)
No adverse effect on quality
*Public Services Industry Review (Dr DeAnne Julius CBE July 2008)
34
UK Government Expenditure
Total c£620bn
Outsourced c£80bn*
4%
20%
Business, Innovation & Skills
4%
Childrens. Schools & Families
Health
Defence
2%
18%
Home & Foreign Office
Local Government
Energy & Environment
Other
Transport
15%
Work & Pensions
7%
1%
4%
25%
Source: HM Treasury Public Expenditure Statistical Analysis 2009
*Source: Julius Report 2008
35
UK Government Expenditure
Local Government c£164bn
Outsourced c£20bn (estimated)*
Education
17%
Social Care
31%
4%
Transport
Housing
Public Order & Safety
Environment
11%
Other
4%
6%
27%
Source: HM Treasury Public Expenditure Statistical Analysis 2009
*Source: VT estimate based on Julius Report 2008
36
UK Opportunity for VT
Strong position in existing markets
Proven track record in service delivery
High customer rating
Strong reputation for delivering in partnership
Focused on Opex not Capex
Potential to broaden footprint & capability
Acquisitions and joint ventures
37
US Background
Defence Budget
New administration committed to maintaining current level of spend
Equipment cuts create service opportunity
Afghanistan strategy and Defence Review drive priorities
Capitalise on OEM’s Conflict of Interest
In-sourcing
38
US Opportunity
Increased focus on higher end Range service work
Transition from low margin Base Ops
Leverage UK capability
Adjacent market expansion
39
Summary
Continuing good momentum in the business
Broaden UK capability & customer base
Continue investment in Nuclear and Waste
Maximise anticipated growth in outsourcing
Focus US on higher margins & achieve critical mass
40
Appendix 1
Additional Financial Information
Summarised Cashflow
Underlying Operating cashflow
Reorganisation Costs
Business Acquisitions
Fixed Asset (Purchases)/Disposals
Repayment of PFI Financial Assets
Interest and Tax
Dividends paid
Shares issued/(purchased)
Discontinued Operations
Net cashflow movement
Opening net debt
Arising on acquisition
Exchange gains & non cash movements
Closing net debt
30 September
2009
£m
44.9
(4.2)
(3.1)
(16.8)
1.3
(9.6)
12.5
(19.0)
0.7
(2.0)
(7.8)
30 September 2008
£m
(186.4)
2.9
(191.3)
(144.9)
(51.8)
(5.8)
(186.3)
52.8
(0.8)
19.1
5.2
1.8
(13.3)
64.8
(17.6)
(2.0)
(29.0)
16.2
42
Pensions Charge
30 September
2009
£m
30 September
2008
£m
6.8
6.7
(0.4)
-
6.4
6.7
(10.8)
(12.9)
Interest on Scheme Liabilities
12.1
11.4
Net Finance Charge/(Credit)
1.3
(1.5)
Net Pension Charge
7.7
5.2
Defined benefit schemes:
P&L Charge – current service cost
Curtailment Credit
Operating Profit Charge
Expected Return on Assets
43
Pension Deficit
£m
19.3
(13.8)
1.3
6.4
73.8
60.5
Mar-09
Services
Cost
Interest
Cost
Actuarial
Paid
Sep-09
44
Earnings per Share/Dividends
30 September 30 September
2009
2008
Underlying EPS - continuing
17.6p
15.2p
15.8%
Basic EPS - continuing
13.0p
8.7p
49.4%
Diluted EPS - continuing
12.8p
8.5p
50.6%
4.3p
3.9p
10.3%
Interim dividend per share
45
Appendix 2
Contract Portfolio
Contract Portfolio - Defence
Values over £50m
Contract
Preferred bidder
LAFT
TTSP
MFTS
FSTA
Sea King Maintenance
Allenby Connaught
Whitefleet
ALC (C Vehicles)
Arborfield
Bordon
TMASS
ESTSTO
ASTUTE
Fitzroy
VLF
DHFCS
Firefighting Training
Year
10
12
14
16
18
20
22
24
26
28
2035
2037
2030
47
Contract Portfolio – G&CS
Values over £50m
Year
10
Metropolitan Police
British Airways
Cardiff Gate
Severn Park
Firefighting Training
Surrey County Council
Greenwich
Lewisham
BBC
Government Agency
Wakefield
New Dimensions
12
14
16
18
20
22
24
26
28
2030
2032
2036
48
Contract Portfolio – VT Group Inc
Values over £50m
Year
10
NASA
Camp Le Jeune
Kings Bay
SPAWAR
AMCOM Express
12
14
16
18
20
22
24
26
28
Rolling renewal
49