TIDMBAB
RNS Number : 9742T
Babcock International Group PLC
20 November 2019
20 November 2019
Babcock International Group PLC
Half year results for the period ended 30 September 2019
Delivering against expectations and confirming full year
guidance
Financial results Underlying Statutory
--------------- ------------
30 September 30 September
30 September 2018 30 September 2018
2019 Pre-IFRS 2019 Pre-IFRS
IFRS 16 basis* 16 basis* IFRS 16 basis* 16 basis*
----------------------------------- --------------- ------------- --------------- ------------
Revenue(1) GBP2,457.8m GBP2,576.9m GBP2,194.8m GBP2,254.8m
=================================== =============== ============= =============== ============
Revenue excl. step downs** GBP2,457.8m GBP2,457.5m
=================================== =============== ============= =============== ============
Operating profit(2) GBP250.6m GBP279.6m GBP168.7m GBP49.3m
=================================== =============== ============= =============== ============
Operating profit pre-IFRS 16
and excl. step downs** GBP237.9m GBP242.6m
=================================== =============== ============= =============== ============
Profit before tax(3) GBP202.5m GBP245.5m GBP152.5m GBP65.1m
=================================== =============== ============= =============== ============
Basic earnings per share(4) 32.5p 39.9p 25.6p 11.5p
=================================== =============== ============= --------------- ------------
Operating cash flow (post net
capex) GBP77.8m GBP180.2m
=================================== =============== =============
Free cash flow (post pension
payments)(5) GBP6.8m GBP118.8m
=================================== =============== =============
Net debt (excl. IFRS 16 debt
of GBP616.2m at 30 Sept 2019) GBP(1,138.0)m GBP(1,131.9)m
=================================== =============== =============
Net debt/EBITDA (covenant basis(6)
) 1.9x 1.8x
=================================== =============== =============
Interim dividend 7.2p 7.1p
----------------------------------- --------------- -------------
* Results for this half year are reported under IFRS 16 (Leases)
without prior year restatement. The adoption of IFRS 16 increases
operating profit by GBP12.7 million. The impact on other metrics in
this table is not material.
** Results for this half year include the impact of previously
communicated step downs(7) . The revenue step down in the first
half was GBP119 million and the operating profit step down was
GBP37 million. To aid understanding, the impact of these step downs
has been included in the table above as an adjustment to the prior
period. Details by sector are included on page 10.
Financial highlights
-- Results in line with our expectations for the phasing of this financial year
-- Underlying revenue of GBP2,458 million is flat after the impact of the step downs
-- Underlying operating profit of GBP251 million on the new IFRS
16 basis. On a pre-IFRS 16 basis underlying operating profit
was
GBP238 million, reflecting the phasing of the step downs
-- Statutory revenue down 2.7%. Statutory operating profit of
GBP168.7 million is higher than last year which included GBP120
million of exceptional charges
-- Underlying basic EPS of 32.5p
-- Free cash flow of GBP6.8 million reflects the expected
phasing of operating cash flow. The reduction in free cash flow
compared to last year mostly relates to the benefit of Fomedec
working capital in the prior year
-- Net debt (pre-IFRS 16 basis) of GBP1,138 million; net debt
(IFRS 16 basis) of GBP1,754 million
-- Interim dividend increased to 7.2p
Operational highlights
-- Combined order book and pipeline up 10% since March 2019 at
GBP34 billion, its highest ever level
-- Order book of GBP18 billion as of 20 November (March 2019:
GBP17 billion) following the signing of the Type 31 contract
-- Pipeline of GBP16 billion as of 20 November (March 2019:
GBP14 billion) with significant new Defence opportunities added in
both UK and international markets
-- Contract wins c.GBP3.5 billion including Type 31 frigate programme
-- New c.GBP300m contract for Met Police training announced today
-- Increasing international presence: Aviation operations started in Norway and Canada
-- Refinanced Group's borrowings
Outlook for the year ending 31 March 2020 unchanged
-- Our outlook for the year is unchanged:
o We expect underlying revenue to be around GBP4.9 billion
o We expect underlying operating profit (on an IFRS 16 basis) to
be in the range of GBP540 million to GBP560 million, consistent
with the previously communicated range of GBP515 million to GBP535
million which was on a pre-IFRS 16 basis
o Our margin expectations remain unchanged except for the effect
of the adoption of IFRS 16
o We expect free cash flow (post pension payments) to be over
GBP250 million and expect to continue to reduce net debt
-- Outlooks by sector are included in this report. Stronger than
expected trading in our Marine and Land sectors is expected to
offset weaker than expected trading in our Aviation sector
Chief Executive Archie Bethel said:
"Today's results show we are doing what we said we would do. Our
delivery in the first half is in line with our expectations, with
good performance across most of the Group. In particular, strong
performance from our Marine business has offset some weakness in
the Aviation sector.
"If we exclude the step downs resulting from big projects like
the aircraft carriers coming to an end, and from the impact of
procuring planes last year for the French Fomedec contract, our
underlying revenue grew by 3.6%. This momentum, combined with the
second half phasing of margin and cash flow that we expect, means I
am pleased to confirm that the full year guidance we gave in May
remains unchanged.
"Our strategy is delivering - we have increased our order book
to over GBP18 billion as a result of significant contract wins in
our core markets, including building the Type 31 warship for the
UK's Royal Navy and providing training to London's Metropolitan
Police Service. We have continued to expand our international
footprint, with new Aviation operations in Norway and Canada and
the start of our support of the Australian Navy's amphibious
assault ships. And our pipeline of opportunities has increased to
GBP16 billion as a result of increased bidding activity across our
markets. Our combined order book and pipeline of over GBP34 billion
is at its highest level ever.
"I am pleased with the progress we've made so far this year and
we look forward to continuing to deliver our strategy through this
year and over the medium term."
Archie Bethel
Chief Executive CBE
Contact:
Babcock International Group PLC
Simon McGough Kate Hill
Director of Investor Relations Group Director of
Communications
Tel: +44 (0) 203 823 5592 Tel: +44 (0) 207 355 5312
FTI Consulting
Andrew Lorenz / Nick Hasell / Alex Le May
Tel: +44 (0) 203 727 1340
Analysts and investors:
A meeting for investors and analysts will be held on 20 November
2019 at 9.00 am at FTI Consulting, London.
The presentation will be webcast live at
www.babcockinternational.com/Investors and subsequently will be
available on demand at
www.babcockinternational.com/Investors/Results-and-Presentations. A
transcript of the presentation and Q&A will also be made
available on our website.
Notes
The adjustments described below, collectively, are made to
derive the underlying results of the Group. The underlying figures
provide a consistent measure of business performance year-to-year,
thereby enabling comparison and understanding of Group financial
performance. A reconciliation from statutory to underlying is
provided within the financial review on page 9.
1. Underlying revenue includes the Group's share of joint ventures and associates revenues.
2. Underlying operating profit includes IFRIC 12 investment
income and joint ventures' and associates' operating profit but is
before amortisation of acquired intangibles and exceptional
items.
3. Underlying profit before tax is inclusive of pre-tax joint
ventures and associates income but before amortisation of acquired
intangibles and exceptional items.
4. Underlying basic earnings per share is before amortisation of
acquired intangibles, and exceptional items, before the related tax
effects and before the effect of corporate tax rate changes.
5. Includes pension payments in excess of income statement of GBP37 million.
6. Group net debt (excluding non-recourse JV debt and IFRS 16
leases) divided by underlying Group EBITDA (pre-IFRS 16) and JV
dividends received.
7. For the full year, step downs are expected to be around
GBP390 million for revenue and around GBP63 million for operating
profit.
Overview
Our strategy
We outlined our strategy at our Capital Markets Day in June
2019. Our leadership positions in our focus markets of Defence,
Emergency Services and Civil Nuclear are built on our core
strengths: our technology and expertise, owned infrastructure and
assets and a successful operating model. Our strategy is to build
on these positions to deliver for our customers, employees and
shareholders over the medium term.
We will:
-- Focus on three markets with strong leadership positions:
Defence, Emergency Services and Civil Nuclear
-- Grow revenue from these markets from around 75% of Group revenue today to over 85%
-- Develop and operate our adjacent businesses for value
-- Grow international revenue from 30% of Group revenue today to over 40%
-- Develop multi-sector, multi-market opportunities in Australia, Canada, France and Spain
-- Embed technology as a core growth driver across all four sectors
-- Maintain our historical business win rates
This will deliver our medium term financial targets:
-- Earnings growth of 3% to 4% CAGR
-- Sustain margins at around 11%
-- Increase cash flows each year in line with earnings
-- Generate around GBP1.4 billion of free cash flow over the next five years
-- Continue to reduce net debt and increase flexibility
-- Improve ROIC from FY20
-- Sustainable dividend
Progress on our strategy
We are making good progress in delivering this strategy,
supporting the delivery of our medium term targets:
-- Significant contract wins in our focus markets including the
build of Type 31 frigates in Defence, Met Police training in
Emergency Services and the MEH Alliance for new build in
Nuclear
-- A growing order book and pipeline with increased bidding activity across sectors
-- Progress in running adjacent markets for value with revenue
growth in our Marine and Land adjacent markets
-- Increasing international presence: operations started in
Norway, aerial emergency services in Canada. International markets
represented 31% of underlying revenue in the first half
-- Progress in expanding multi-sector opportunities in our
target countries including a growing pipeline
-- Technology leading higher growth in Marine and crucial in winning the Type 31 frigate bid
-- Business win rates in line with historical levels
Our focus markets
We operate across our focus markets of Defence, Emergency
Services and Civil Nuclear as well as a range of adjacent
markets.
UK Defence: the market has been busy in the period and we
continue to work closely with our customers as part of the
Strategic Partnering Programme to continue to deliver on some of
the most critical programmes for the Ministry of Defence. Activity
levels have increased across surface ship and submarine support as
we help with the increasing needs of the Royal Navy, and in the
period we were selected to build five new Type 31 frigates. In
Land, we are working with the customer on a programme of Warrior
vehicle overhauls over the next four to five years which are
scheduled to start in 2020. In Aviation, we are working with the
customer on the next stages of pilot training.
International Defence: the market opportunity remains
significant for the Group in expanding our offerings to new
countries. In the period we started to maintain Australia's fleet
of amphibious landing ships and in France our Fomedec flying
training contract is performing well. The pipeline of Group bids
includes many opportunities across defence in Australia, Canada,
France and South Korea.
Emergency Services: the market for aerial emergency services
across Southern Europe has been challenging in the period with some
contract delays in Italy and Spain and lower levels of firefighting
activity. However, demand for increasingly complex and technical
services continues to grow across the world and our level of
bidding activity has increased further. In the period we started
Aviation operations in Norway and Canada. In Land, we won a
c.GBP300 million contract to provide training for the Metropolitan
Police Service in London.
Civil Nuclear: the market in the UK continues to see lower
levels of customer spending. The long term growth opportunities
remain significant as ageing power stations come offline and new
power stations are built. During the period we won a significant
piece of work on Hinkley Point C as part of the MEH Alliance.
Highlights across our adjacent markets included improvements in
trading conditions in our South African business and the successful
start of our CP6/7 contract in Rail.
Order book and pipeline
Our business is supported by a significant order book, based on
signed contracts for work. This order book provides a base level of
revenue for the years ahead which is then added to with new
business wins, contract growth and short cycle work. The Group's
order book was GBP17 billion as at 30 September 2019 (March 2019:
GBP17 billion) with an order book intake of GBP2.5 billion in the
period replenishing GBP2.5 billion of revenue. The order book has
since increased to over GBP18 billion following the signing of the
Type 31 contract in November 2019.
The Group's pipeline represents those bids formally in process,
following our rigorous governance process. The Group's pipeline
increased to
GBP17 billion as at 30 September 2019 (March 2019: GBP14
billion) following large additions from Defence opportunities in
the UK and internationally as well as an increase to recognise the
full value of the Type 31 opportunity. The pipeline has since
decreased to GBP16 billion as the Type 31 contract transferred to
our order book.
Refinancing
During the period, both Standard & Poor's and DBRS confirmed
the Group's credit rating of BBB following their annual credit
reviews. We renewed our five-year revolving credit facility of up
to GBP775 million and issued EUR550 million (c.GBP500 million) of
eight-year bonds expiring in 2027 which, after being swapped into
sterling, have an effective interest rate of around 3%.
Capital allocation
We have redefined our net debt to EBITDA measure to the covenant
basis, used for our refinanced credit facilities. This gearing
measure compares net debt to Group EBITDA (excluding our share of
JV's EBITDA) plus joint venture dividends. We do not include our
proportion of net debt held in joint ventures of GBP282 million (31
March 2019: GBP311 million) as this is non-recourse to the Group.
Around 85% of JV net debt relates to the AirTanker joint venture,
which is performing very well. This PFI contract has five
shareholders and multiple layers of protection over financing
risk.
We target a net debt to EBITDA range of 1.0 times to 1.5 times.
This enables us to organically invest in the business, fund our
pension schemes and continue our sustainable ordinary dividend
while providing scope for additional opportunities as we continue
to de-gear. Our gearing at
30 September was 1.9 times and is expected to be around 1.6
times by the end of the year and lower in the next financial
year.
Financial performance
30 September
30 September 2018
2019 pre-IFRS 16
IFRS 16 basis* basis*
-------------------- ------ --------------- ------------
Group GBP2,194.8m GBP2,254.8m
====== =============== ============
JV GBP263.0m GBP322.1m
------ --------------- ------------
Underlying
revenue** Total GBP2,457.8m GBP2,576.9m
------ --------------- ------------
Group GBP209.6m GBP220.4m
====== =============== ============
Underlying
operating profit** JV GBP41.0m GBP59.2m
------ --------------- ------------
Total GBP250.6m GBP279.6m
-------------------- ------ --------------- ------------
Group 9.5 % 9.8 %
=========================== =============== ============
Underlying
operating margin** JV 15.6 % 18.4 %
------ --------------- ------------
Total 10.2 % 10.9 %
--------------------------- --------------- ------------
* The adoption of IFRS 16 increases Group operating profit by GBP12.7 million in the period.
** Results for this half year include the impact of previously
communicated step downs. The revenue step down in the first half
was GBP119 million and the operating profit step down was GBP37
million.
Underlying revenue of GBP2,458 million was broadly flat after
including the impact of GBP119 million of step downs related to the
end of our QEC and Magnox contracts and exits and disposals of
businesses made last year. Last year benefited from around GBP90
million of revenue from asset sales on our Fomedec contract in
Aviation. Excluding this and the step downs, revenue for the Group
this year grew by 3.6%. This growth is expected to continue and
strengthen in the second half.
Our underlying operating profit of GBP250.6 million includes a
GBP12.7 million benefit from the adoption of IFRS 16. Excluding
this, underlying operating profit was GBP237.9 million, down
GBP41.7 million on last year. This reduction includes a GBP37
million impact of step downs related to the end of our QEC and
Magnox contract, the impact of exits and disposals, Brexit-related
costs in Aviation and the normalisation of profits in our Holdfast
(RSME) joint venture. Excluding these step downs and the impact of
IFRS 16, underlying operating profit was down by 1.9%, mainly
reflecting the profit contribution of the Fomedec asset sales last
year.
Margin of 10.2% was broadly flat excluding the impact of IFRS
16, which had a positive 0.5 percentage point impact, and step
downs, which had a negative 1.0 percentage point impact. Margin is
expected to increase in the second half given business mix and a
broadly neutral impact of step downs.
As expected, cash generation in the period was not as strong as
last year which included a significant contribution of over GBP50
million of working capital inflows related to our Fomedec contract.
Working capital inflows for the Group are typically weighted to the
second half as contract receivables are reduced over the financial
year and trade payables are seasonally higher at the end of the
year. In addition to this usual phasing, working capital this half
year has been impacted by higher inventory balances due to further
Brexit preparations, increased activity in our South Africa
business and the start-up of Aviation operations in Norway, Canada
and France. In addition, we saw higher contract balances from the
start of new contracts in Norway and Canada.
Excluding IFRS 16, net capital expenditure was GBP71.1 million
in the period (2018: GBP83.9 million) comprised of gross capital
expenditure of GBP95.5 million (2018: GBP103.2 million) and asset
disposals, mainly related to the sale and leaseback of new
aircraft, of GBP24.4 million (2018: GBP19.3 million). As expected,
net capital expenditure was lower in the period but it remained at
1.4 times depreciation. This will be lower in the second half and
net capital expenditure for the full year is expected to be around
1.0 times depreciation. In addition, the Group entered into GBP52.7
million of additional operating leases in the period.
Underlying free cash flow was GBP7 million (2018: GBP119
million) after pension payments in excess of the income statement
of GBP37 million (2018: GBP21 million) and including dividends from
joint ventures of GBP37 million (2018: GBP20 million). The
reduction compared to last year mainly reflects last year's benefit
of over GBP50 million of working capital inflows related to our
Fomedec contract. The period end receivables and payables are
similar to the last year and a second half improvement is expected
as in previous years.
The net cash out flow in the period was GBP144 million,
reflecting the free cash flow, dividends paid of GBP116 million and
GBP31 million of exceptional cash costs related to the exceptional
costs incurred in the last financial year. Net debt (pre-IFRS 16)
of GBP1,138 million also includes a negative impact of GBP18
million from foreign exchange translation against March 2019.
Marine
30 September 30 September
2019 2018
IFRS 16 pre-IFRS
basis* 16 basis*
------------------ ------- ------------ ------------
Group GBP546.0m GBP515.4m
------- ------------ ------------
JV GBP18.4m GBP10.5m
------- ------------ ------------
Underlying
revenue Total GBP564.4m GBP525.9m
------- ------------ ------------
Group* GBP70.5m GBP73.4m
------------------ ======= ============ ============
JV GBP2.0m GBP2.7m
------- ------------ ------------
Underlying
operating profit Total* GBP72.5m GBP76.1m
------------------ ------- ------------ ------------
Group 12.9 % 14.2 %
========================== ============ ============
JV 10.9 % 25.7 %
-------------------------- ------------ ------------
Underlying
operating margin Total 12.8 % 14.5 %
------------------ ------- ------------ ------------
* The adoption of IFRS 16 increases operating profit by GBP0.6
million in the period
JV revenue is after deducting an appropriate portion of JV
revenue to reflect revenue already included in Group revenue
Financial review
The Marine sector's underlying revenue grew despite a GBP9
million step down in revenue from the QEC programme. This strong
revenue growth was led by increased activity across our UK warship
support business and strong orders across our technology
businesses. Our International markets also contributed with
Australia benefiting from the start of our LHD support
contract.
Underlying operating profit of GBP72.5 million includes a small
benefit from the adoption of IFRS 16. Excluding this, operating
profit declined by GBP4.2 million. This reflects the expected
phasing of profit in the year and comparison to some contract
outperformances last year.
Operational review
UK Defence
Revenue related to serving the UK defence market was higher in
the period with growth in UK warship support and our technology
businesses offsetting the impact of the QEC step down and the end
of our Irish OPV contract, which was completed a year ago.
The Queen Elizabeth Class (QEC) programme is nearing completion
with HMS Prince of Wales leaving Rosyth for sea trials in the
period. In addition to this, HMS Queen Elizabeth completed her
first docking period in May with all contracted work completed at
our Rosyth facility.
The Type 23 frigate life-extension programme at our Devonport
facilities continues at pace with multiple ships undergoing deep
maintenance and structural upgrading work. In the period, our Type
23 iFrigate connected platform was trialled successfully on HMS
Sutherland.
We saw strong revenue growth across our defence technology
businesses with increased activity on weapons handling systems and
higher volumes on our MSSP contract after last year's slow
start.
The US/UK Common Missile Compartment programme has continued
well and in the period additional orders were received to take our
total contract to supply missile launch tube assemblies to over
GBP230 million with further orders expected over the next twelve
months.
In the period, we were awarded the contract for the Type 31
general-purpose frigate programme, which will provide the UK with a
fleet of five new warships. The ships will be assembled at
Babcock's Rosyth facility, and involve supply chains throughout the
UK. Work started immediately following contract award with
manufacturing commencing in 2021 and the programme concluding in
2028.
International Defence
We continued to make good progress on our submarine and surface
ship sustainment programmes in Australia and Canada and completed a
package of work for the US Navy in Oman alongside our first UK
Royal Navy ship.
In Australia, our Naval Ship Management joint venture started
work in July on the contract to sustain and support the largest
vessels in the Royal Australian Navy: two flagship Canberra Class
Landing Helicopter Docks (LHD) and their 12 associated amphibious
landing craft.
Our weapons handling systems business continued to progress on
supplying the UK Astute and Dreadnought classes plus the Jangbogo
III Class in South Korea. In addition to this, we are well
positioned to provide our weapons handling systems for the new
Attack-class submarine for the Australian Navy, work we expect to
be worth around GBP1 billion over the lifetime of the
programme.
Adjacent markets: Energy and Marine
Revenue growth was strong across our Energy and Marine
businesses led by higher sales of our ecoSMRT gas handling system.
The order book for our LPG and ecoSMRT systems now exceeds GBP100
million. In April, our jointly owned ship MV Kairos (the world's
largest LNG bunker supply vessel) conducted its first ship-to-ship
transfer.
Outlook for the year ending 31 March 2020
Revenue growth is expected to be stronger than originally
expected for the sector. We expect strong underlying revenue growth
excluding the impact of the end of the QEC contract (expected to be
around GBP80 million). Our outlook for margin remains unchanged,
with a slightly lower margin than last year reflecting contract mix
and phasing.
Nuclear
30 September 30 September
2019 2018
IFRS 16 pre-IFRS
basis* 16 basis*
------------------ ------- ------------ ------------
Group GBP419.8m GBP405.8m
======= ============ ============
Underlying
revenue JV GBP168.2m GBP231.3m
------- ------------ ------------
Total GBP588.0m GBP637.1m
------------------ ------- ------------ ------------
Group* GBP50.2m GBP44.1m
======= ============ ============
Underlying
operating profit JV GBP7.4m GBP18.0m
------- ------------ ------------
Total* GBP57.6m GBP62.1m
------------------ ------- ------------ ------------
Group 12.0 % 10.9 %
========================== ============ ============
Underlying
operating margin JV 4.4 % 7.8 %
------- ------------ ------------
Total 9.8 % 9.7 %
-------------------------- ------------ ------------
* The adoption of IFRS 16 increases operating profit by GBP0.5
million in the period
JV revenue is after deducting an appropriate portion of JV
revenue to reflect revenue already included in Group revenue
Financial review
Underlying revenue was down on last year given the GBP56 million
revenue step down in Magnox. Excluding this, revenue grew by 1.1%
with good growth across the UK defence business offsetting a small
decline in Civil Nuclear.
Underlying operating profit of GBP57.6 million includes a small
uplift from the adoption of IFRS 16. Excluding this, underlying
operating profit was GBP5.0 million lower than last year, with a
GBP10 million step down in Magnox offset by a strong performance in
Defence.
Operational review
Defence
Revenue grew across our UK defence business reflecting higher
levels of activity in submarine support and design for new
submarine infrastructure in Devonport.
Our performance on our key contract, the Maritime Support
Delivery Framework (MSDF) remains in line with expectations, with
efficiencies and cost reductions being delivered. During the
period, our customer confirmed the agreement will now continue
until the replacement Future Maritime Support Programme (FMSP)
contract is developed and implemented. Both the continuation of
MSDF and FMSP will be within our Terms of Business Agreement (TOBA)
that runs to 2025.
We support the UK's submarine fleet at both HMNB Clyde and HMNB
Devonport. Activity levels in Clyde have been higher in the period
as we work closely with the customer across three submarine
classes. In Devonport, we continue to work on the Revalidation
Assisted Maintenance Period (RAMP) programmes for the Trafalgar
Class and the first life extension of the Vanguard Class.
Work has started on the infrastructure design for the deep
maintenance of the Astute Class of submarines in Devonport in the
mid-2020s and we are engaging with the customer on infrastructure
upgrades at HMNB Clyde.
Civil Nuclear
Excluding Magnox, revenue was slightly lower reflecting lower
levels of customer activity, including unplanned outages with one
of our customers.
In decommissioning, all Magnox sites were handed back to the
customer as planned at the end of August while work at Dounreay
continues to deliver on its revised scope.
We saw lower levels of activity in our nuclear services business
in the period with lower levels of customer funding and some
project delays at Sellafield. The last half year also benefited
from projects completing.
Work on new build nuclear power stations continues to be a small
but strategically significant part of our business. In August, the
MEH Alliance (a joint venture with three other operators) was
launched. This alliance will work across the Hinkley Point C site
to integrate and coordinate the delivery of all the main MEH
(Mechanical, Electrical and HVAC) activity. Our share of this work
will be around GBP300 million over a five to six year period
starting in 2022.
We continue to explore and develop international markets for
Civil Nuclear. We have won our first small orders in Canada for
consultancy work for nuclear waste management and decommissioning
and are exploring opportunities to expand this further.
Developments in Japan, where we opened an office last year,
continue but progress is slower than expected with customer project
delays.
Outlook for the year ending 31 March 2020
We continue to expect slight underlying revenue growth excluding
the impact of the end of the Magnox contract (now expected to be
around GBP240 million). Our outlook for margin remains unchanged,
adjusting for the sector realignment announced in June 2019. We
expect the underlying margin to be similar to last year. The
operating profit step down for Magnox is expected to be around
GBP25 million.
Land
30 September 30 September
2019 2018
IFRS 16 pre-IFRS
basis* 16 basis*
------------------ ------- ------------ ------------
Group GBP781.2m GBP782.6m
======= ============ ============
JV GBP9.2m GBP15.5m
------- ------------ ------------
Underlying
revenue Total GBP790.4m GBP798.1m
------- ------------ ------------
Group* GBP50.5m GBP46.8m
======= ============ ============
Underlying
operating profit JV GBP7.3m GBP16.5m
------- ------------ ------------
Total* GBP57.8m GBP63.3m
------------------ ------- ------------ ------------
Group 6.5 % 6.0 %
========================== ============ ============
Underlying
operating margin JV 79.3 % 106.5 %
------- ------------ ------------
Total 7.3 % 7.9 %
-------------------------- ------------ ------------
* The adoption of IFRS 16 increases operating profit by GBP2.2
million in the period
JV revenue is after deducting an appropriate portion of JV
revenue to reflect revenue already included in Group revenue. The
effect of this is that there is no revenue recognised in relation
to our Holdfast (RSME) JV
Financial review
Underlying revenue was slightly lower in the period due the
impact of exits and disposals and a lower contribution from joint
ventures following the end of our ABC joint venture. Excluding
exits and disposals, underlying revenue grew by 6.3% with stronger
trading in South Africa and higher defence procurement
revenues.
Underlying operating profit of GBP57.8 million includes a small
uplift from the adoption of IFRS 16. Excluding this, underlying
operating profit was GBP7.7 million lower than last year. This is
ahead of our expectations as business growth and performance
partially offset the impact of exits and disposals and a GBP13
million step down in profit contribution from our Holdfast (RSME)
joint venture.
Operational review
Defence
Revenue related to UK defence was higher in the period, mainly
reflecting higher levels of procurement spend.
We have been working closely with the customer to refocus the
Defence Support Group (DSG) Inventory and Repair Management service
which provides around 285,000 lines of spares in support of the
British Army's vehicle fleet and we are investing in a new ERP
system to drive further efficiencies in our vehicle maintenance and
spares procurement activities. We are also working with the
customer on a programme of Warrior vehicle overhauls over the next
four to five years which are scheduled to start in 2020.
Our ALC JV continues to perform well. Phoenix II, the contract
to deliver over 16,000 administrative vehicles to the MOD, is
performing well with significant reductions in vehicle numbers
achieved through efficiency measures including increased use of
telematics.
Across defence training we support the British Army in
delivering training to around 20,000 service personnel. In the
period we were awarded a three-year extension worth around GBP30
million for the Training Maintenance and Support Services contract.
Our Holdfast (RSME) joint venture, which provides training to the
Royal School of Military Engineering, continues to drive savings
programmes. We are engaging closely with our customer as they
develop their Collective Training Transformation Programme.
Emergency Services
Trading across our Emergency Services businesses was solid in
the period on all our contracts across the Metropolitan Police
Service and London Fire Brigade.
During the period we won a new contract worth around GBP300
million to act as the Met Police's learning partner. The
partnership to support the UK's largest police service with its new
training recruits will last at least eight years and will start in
the next financial year.
Adjacent markets
The Land sector operates a range of contracts across markets
adjacent to our key markets, all benefiting from our engineering
capabilities.
In Rail, we successfully completed the transition to the new
10-year CP6/7 contract for track works in Scotland worth up to GBP1
billion over the contract life which is now fully operational. We
were also awarded a signals and telecoms contract by Network Rail
worth GBP65 million over the next 5 years.
We made good progress across our Airports business with growth
in existing contracts and we successfully rebid our Schiphol
baggage maintenance contract for another five years.
As expected, we have also seen an improvement in our South
African business with strong revenue growth helped by scheduled
power outages at Eskom.
Outlook for the year ending 31 March 2020
We now expect underlying revenue growth excluding the c.GBP60
million impact of exits and disposals. Underlying margin is still
expected to be maintained excluding the normalisation of the
Holdfast (RSME) joint venture profit contribution.
Aviation
30 September 30 September
2019 2018
IFRS 16 pre-IFRS
basis* 16 basis*
------------------ ------- ------------ ------------
Group GBP447.8m GBP551.0m
======= ============ ============
Underlying
revenue JV GBP67.2m GBP64.8m
------- ------------ ------------
Total GBP515.0m GBP615.8m
------------------ ------- ------------ ------------
Group* GBP41.7m GBP59.6m
======= ============ ============
Underlying
operating profit JV GBP24.3m GBP22.0m
------- ------------ ------------
Total* GBP66.0m GBP81.6m
------------------ ------- ------------ ------------
Group 9.3 % 10.8 %
========================== ============ ============
Underlying
operating margin JV 36.2 % 34.0 %
------- ------------ ------------
Total 12.8 % 13.3 %
-------------------------- ------------ ------------
* The adoption of IFRS 16 increases operating profit by GBP9.2
million in the period
JV revenue is after deducting an appropriate portion of JV
revenue to reflect revenue already included in Group revenue
Financial review
Underlying revenue of GBP515 million was GBP101 million lower
than last year, which included around GBP90 million of assets sales
in our Fomedec contract, plus revenue from the Helidax joint
venture which was disposed of in March 2019. Excluding Fomedec and
Helidax, revenue for the sector was slightly lower despite
contributions from new operations in Norway and Canada.
Underlying operating profit of GBP66.0 million includes a GBP9.2
million benefit from the adoption of IFRS 16. Excluding this,
operating profit is
GBP24.8 million lower than last year. The lower operating profit
and margin reflects the lower revenue, the c.GBP5 million impact of
Brexit-related costs flagged last year and the comparison to some
contract outperformances last year. Furthermore, we have seen some
contract award delays in aerial emergency services in Italy and
Spain as well as ongoing pressures in oil and gas. The profit
contribution from joint ventures was slightly higher with improved
contract performances in AirTanker and Ascent offsetting the end of
contributions from Helidax.
Operational review
Defence
As expected, revenue in our Defence business was down on last
year given the impact of Fomedec equipment sales last year.
We have made continued progress across our military businesses.
Our HADES contract, which provides technical support at 17 RAF air
bases, has now been fully operational for a year. Our Ascent joint
venture performed well in the period with key milestones met.
In France, our Fomedec contract is fully operational with 17
PC-21 aircraft available on the flight line for Armée de l'Air
Française. All associated infrastructure and maintenance facilities
are in place as this contract has moved to full scale
operations.
Expanding our services across international defence markets
remains a key part of our strategy and reflects a significant part
of our pipeline, including defence flying training opportunities in
Canada and France.
Aerial Emergency Services
Revenue grew across aerial emergency services with the start of
operations in Norway and Canada, combined with higher flying hours
in Italy emergency services, offsetting lower activity in Spain and
lower than expected activity in our firefighting operations across
Europe.
We have seen some delays in the award of new contracts,
particularly in Italy and Spain. These delays were a mix of rebids
and new regions and were caused by customer decisions and appeals
from other bidders. The first of these, a c.GBP50 million Italian
emergency services contract, has now been re-won.
We entered two new countries in the period. The Norwegian fixed
wing contract began operations in July with 11 aircraft providing
aerial medical emergency services. Operations in Manitoba, Canada
started in April. We manage, maintain and operate Manitoba's fleet
of seven firefighting amphibious aircraft and provide three of our
own aircraft.
We expect to make progress in the second half with our fleet
optimisation programme in order to maximise cash returns.
Adjacent markets: Oil and Gas
Our Oil and Gas business continues to face challenging market
conditions. Revenue was slightly lower in the period reflecting the
loss of two contracts on price competition at the end of the last
financial year.
Outlook for the year ending 31 March 2020
With the delays to bids in aerial emergency services and market
conditions in Oil and Gas, we now expect revenue for the Aviation
sector to be lower for the full year. The pressures identified
above on operating profit are expected to continue and we expect
the underlying margin to be flat compared to last year, including
the impact of the adoption of IFRS 16.
Financial review
Headline underlying results:
30 September 30 September
2019 2018
IFRS 16 pre-IFRS
basis* 16 basis*
----------------------------------------------------- ------------ ------------
Group underlying revenue GBP2,194.8m GBP2,254.8m
===================================================== ============ ============
Joint venture underlying revenue GBP263.0m GBP322.1m
----------------------------------------------------- ------------ ------------
Total underlying revenue GBP2,457.8m GBP2,576.9m
===================================================== ============ ============
Underlying revenue excl. step downs** GBP2,457.8m GBP2,457.5m
----------------------------------------------------- ------------ ------------
Group underlying operating profit GBP209.6m GBP220.4m
===================================================== ============ ============
Joint venture underlying operating profit GBP41.0m GBP59.2m
----------------------------------------------------- ------------ ------------
Total underlying operating profit GBP250.6m GBP279.6m
===================================================== ============ ============
Underlying operating profit pre-IFRS 16 excl. step
downs** GBP237.9m GBP242.6m
===================================================== ============ ============
Net finance cost - Group GBP(36.3)m GBP(22.5)m
Net finance cost - JV GBP(11.7)m GBP(11.8)m
IAS 19 pension credit/(charge) GBP(0.1)m GBP0.2m
----------------------------------------------------- ------------ ------------
Total net interest GBP(48.1)m GBP(34.1)m
----------------------------------------------------- ------------ ------------
Underlying profit before tax GBP202.5m GBP245.5m
Tax GBP(36.4)m GBP(44.2)m
----------------------------------------------------- ------------ ------------
Underlying profit after tax GBP166.1m GBP201.3m
Minorities GBP(1.7)m -
----------------------------------------------------- ------------ ------------
Underlying basic EPS 32.5p 39.9p
----------------------------------------------------- ------------ ------------
* Results for this half year are reported under IFRS 16 (Leases)
without prior year restatement. The adoption of IFRS 16 increases
operating profit by GBP12.7 million.
** Results for this half year include the impact of previously
communicated step downs. The revenue step down in the first half
was GBP119 million and the operating profit step down was GBP37
million. The impact of these has been included in the table above
to aid understanding.
Statutory to underlying reconciliation
Joint ventures and
associates
------------------------------
Revenue IFRIC Amortisation
and operating Finance 12 of acquired Exceptional
Statutory profit costs Tax income intangibles items Underlying
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
30 September 2019
================== ========= ============== ======= ===== ======= ============ =========== ==========
Revenue 2,194.8 263.0 2,457.8
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Operating profit 168.7 27.9 13.7 40.3 250.6
================== ========= ============== ======= ===== ======= ============ =========== ==========
Share of profit
from JV 19.6 (27.9) 11.7 6.8 (13.1) 2.9 -
================== ========= ============== ======= ===== ======= ============ =========== ==========
Investment income 0.6 (0.6) -
================== ========= ============== ======= ===== ======= ============ =========== ==========
Net finance costs (36.4) (11.7) (48.1)
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Profit before tax 152.5 - - 6.8 - 43.2 - 202.5
================== ========= ============== ======= ===== ======= ============ =========== ==========
Tax (21.4) (6.8) (8.2) (36.4)
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Profit after tax 131.1 - - - - 35.0 - 166.1
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Return on revenue 7.7% 10.2%
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
30 September 2018
================== ========= ============== ======= ===== ======= ============ =========== ==========
Revenue 2,254.8 322.1 2,576.9
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Operating profit 49.3 45.1 14.8 50.0 120.4 279.6
================== ========= ============== ======= ===== ======= ============ =========== ==========
Share of profit
from JV 37.4 (45.1) 11.8 7.1 (14.1) 2.9 -
================== ========= ============== ======= ===== ======= ============ =========== ==========
Investment income 0.7 (0.7) -
================== ========= ============== ======= ===== ======= ============ =========== ==========
Net finance costs (22.3) (11.8) (34.1)
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Profit before tax 65.1 - - 7.1 - 52.9 120.4 245.5
================== ========= ============== ======= ===== ======= ============ =========== ==========
Tax (6.9) (7.1) (10.4) (19.8) (44.2)
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Profit after tax 58.2 - - - - 42.5 100.6 201.3
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Return on revenue 2.2% 10.9%
------------------ --------- -------------- ------- ----- ------- ------------ ----------- ----------
Income statement
Statutory performance
Statutory revenue was GBP2,194.8 million (2018: GBP2,254.8
million) and reflects the step downs in our QEC contract as well
the impact of exits and disposals in the last financial year. There
was a statutory operating profit of GBP168.7 million (2018: GBP49.3
million) and a statutory profit before tax of GBP152.5 million
(2018: GBP65.1 million), with the increase primarily reflecting the
exceptional charges in the prior year of GBP120.4 million. Basic
earnings per share, as defined by IAS 33, was 25.6 pence (2018:
11.5 pence) per share.
Underlying revenue performance
Underlying revenue for the first half was GBP2,457.8 million
(2018: GBP2,576.9 million), down GBP119.1 million. This reduction
mainly reflects the impact of GBP119 million of step downs related
to the end of our QEC and Magnox contracts and exits and disposals
of businesses made last year. Excluding these, revenue was flat
year on year. Last year benefited from around GBP90 million of
revenue from asset sales on our Fomedec contract in Aviation.
Excluding this and step downs, revenue for the group grew by
3.6%.
Underlying operating profit performance
Underlying operating profit includes a GBP12.7 million benefit
from the adoption of IFRS 16. Excluding this, underlying operating
profit of
GBP237.9 million is down GBP41.7 million on last year. This
reduction includes a GBP37 million impact of step downs related to
the end of our QEC and Magnox contract, the impact of exits and
disposals, Brexit-related costs in Aviation and the normalisation
of profits in our Holdfast (RSME) joint venture. Excluding these
step downs, underlying operating profit was down by 1.6% at
constant exchange rates (pre-IFRS 16), mainly reflecting the
comparison to the profit contribution of the Fomedec asset sales
last year.
Underlying organic growth
Marine Nuclear Land Aviation Unallocated Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------ ------- ------ ------------- ----------- -------
Underlying revenue
--------------------------------- ------ ------- ------ ------------- ----------- -------
30 September 2018 525.9 637.1 798.1 615.8 - 2,576.9
================================= ====== ======= ====== ============= =========== =======
Exchange adjustment 2.4 - (7.9) - - (5.5)
================================= ====== ======= ====== ============= =========== =======
Disposals - - (30.9) (4.3) - (35.2)
================================= ====== ======= ====== ============= =========== =======
Step downs excl. disposals (9.1) (56.0) (19.1) - - (84.2)
================================= ====== ======= ====== ============= =========== =======
Organic growth excl. step downs 45.2 6.9 50.2 (96.5) - 5.8
================================= ====== ======= ====== ============= =========== =======
30 September 2019 564.4 588.0 790.4 515.0 - 2,457.8
--------------------------------- ------ ------- ------ ------------- ----------- -------
- 7.7 - 1.0 - 4.6
Reported revenue growth 7.3 % % % * 16.4 % - %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Organic growth at constant - 7.7 - 15.7 - 3.0
exchange rates 6.9 % % 3.9 % % %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Organic growth excl. step downs - 15.7
at constant exchange rates 8.6 % 1.1 % 6.3 % % 0.2 %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Underlying operating profit
================================= ====== ======= ====== ============= =========== =======
30 September 2018 76.1 62.1 63.3 81.6 (3.5) 279.6
================================= ====== ======= ====== ============= =========== =======
IFRS 16 impact 0.6 0.5 2.2 9.2 0.2 12.7
================================= ====== ======= ====== ============= =========== =======
Exchange adjustment 0.2 - (0.5) 0.1 - (0.2)
================================= ====== ======= ====== ============= =========== =======
Disposals - - (5.1) (1.5) - (6.6)
================================= ====== ======= ====== ============= =========== =======
Step downs excl. disposals (1.0) (9.9) (14.5) (5.0) - (30.4)
--------------------------------- ------ ------- ------ ------------- ----------- -------
Organic growth excl. step downs (3.4) 4.9 12.4 (18.4) - (4.5)
--------------------------------- ------ ------- ------ ------------- ----------- -------
30 September 2019 72.5 57.6 57.8 66.0 (3.3) 250.6
--------------------------------- ------ ------- ------ ------------- ----------- -------
Reported operating profit growth - 5.5 - 8.1 - 12.2 - 30.4 - 14.9
(pre-IFRS 16) % % % % %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Organic growth at constant - 5.8 - 8.1 - 3.3 - 28.7 - 12.5
exchange rates (pre-IFRS 16) % % % % %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Organic growth excl. step downs
at constant exchange rates - 4.5 - 22.5 - 1.6
(pre-IFRS 16) % 7.9 % 19.6 % % %
--------------------------------- ------ ------- ------ ------------- ----------- -------
Finance costs
Total net finance costs increased to GBP48.1 million (2018:
GBP34.1 million), mainly reflecting the impact of the adoption of
IFRS 16. Excluding this, net finance costs are slightly higher,
reflecting around one month's impact of our refinanced borrowings,
a higher UK base interest rate in the period and lower interest
income in our South Africa business.
The Group net finance costs increased to GBP36.4 million (2018:
GBP22.3 million). The Group's share of joint venture net interest
expense remained flat at GBP11.7 million (2018: GBP11.8 million) as
increased activity in Ascent offset the sale of Helidax. The IAS 19
pension finance charge was
GBP0.1 million (2018: GBP0.2 million credit).
Underlying profit before tax
Underlying profit before tax decreased to GBP202.5 million
(2018: GBP245.5 million), primarily reflecting the underlying
operating profit step downs.
Tax charge
The underlying tax charge, including the Group's share of joint
venture tax of GBP6.8 million (2018: GBP7.1 million), totalled
GBP36.3 million (2018: GBP44.2 million), representing an effective
underlying rate of tax of 18.0% (2018: 18.0%). The effective tax
rate is calculated by using the Group's underlying profit before
tax and therefore excludes the tax effect of amortisation of
acquired intangibles, together with the tax credit in respect of
exceptional items. The underlying effective rate is based on the
estimated effective rate of tax of 18.0% for the full year ended 31
March 2020.
Amortisation of acquired intangibles
Amortisation of acquired intangibles was GBP40.3 million (2018:
GBP50.0 million). This represents the amortisation of the value
attributed on business acquisitions to customer relationships (both
contractual and non-contractual) and acquired brands.
Exchange rates
The impact of foreign currency movements over the year resulted
in a decrease in underlying revenue of GBP5.5 million and a
corresponding GBP0.2 million decrease in underlying operating
profit. The main currencies that impact our results are the Euro,
the South African Rand and the Canadian Dollar:
-- A 10% movement in the Euro against Sterling would affect half
year underlying revenue by around GBP22 million and underlying
operating profit by around GBP3 million
-- A 10% movement in the South African Rand against Sterling
would affect half year underlying revenue by around GBP17 million
and underlying operating profit by around GBP2 million
-- A 10% movement in the Canadian Dollar against Sterling would
affect half year revenue by around GBP7 million and operating
profit by around GBP1 million
Earnings per share
Underlying earnings per share for the period was 32.5 pence
(2018: 39.9 pence), reflecting the step downs in operating profit.
Basic continuing earnings per share, as defined by IAS 33, was 25.6
pence (2018: 11.5 pence).
Cash flow and net debt
2019 2018
---------- ----------- --------- ----------
Exceptional
Underlying items Statutory Underlying
GBPm GBPm GBPm GBPm
------------------------------------------------- ---------- ----------- --------- ----------
Operating profit before amortisation of acquired
intangibles 209.0 - 209.0 219.7
================================================= ========== =========== ========= ==========
Amortisation, depreciation and impairments 51.4 - 51.4 52.9
================================================= ========== =========== ========= ==========
Depreciation of right of use asset - IFRS
16 59.4 - 59.4 -
================================================= ========== =========== ========= ==========
Other non-cash items 2.8 - 2.8 2.0
================================================= ========== =========== ========= ==========
Working capital (excluding excess retirement
benefits) (106.9) (0.1) (107.0) 10.4
================================================= ========== =========== ========= ==========
Provisions (14.1) (10.3) (24.4) (20.9)
------------------------------------------------- ---------- ----------- --------- ----------
Operating cash flow 201.6 (10.4) 191.2 264.1
------------------------------------------------- ---------- ----------- --------- ----------
Cash conversion % 96 % - 91 % 120 %
================================================= ========== =========== ========= ==========
Capital expenditure (net) (71.1) - (71.1) (83.9)
================================================= ========== =========== ========= ==========
Capital expenditure - IFRS 16 (52.7) (7.3) (60.0) -
------------------------------------------------- ---------- ----------- --------- ----------
Operating cash flow after capital expenditure 77.8 (17.7) 60.1 180.2
------------------------------------------------- ---------- ----------- --------- ----------
Cash conversion % - after capital expenditure 37 % - 29 % 82%
================================================= ========== =========== ========= ==========
Interest paid (net) (15.5) - (15.5) (14.0)
================================================= ========== =========== ========= ==========
Interest paid - IFRS 16 (12.4) - (12.4) -
================================================= ========== =========== ========= ==========
Taxation (43.0) (9.8) (52.8) (46.7)
================================================= ========== =========== ========= ==========
Dividends from joint ventures 37.3 - 37.3 20.0
------------------------------------------------- ---------- ----------- --------- ----------
Free cash flow before pension contribution
in excess of income statement 44.2 (27.5) 16.7 139.5
------------------------------------------------- ---------- ----------- --------- ----------
Retirement benefit contributions in excess
of income statement (37.4) (3.3) (40.7) (20.7)
------------------------------------------------- ---------- ----------- --------- ----------
Free cash flow after pension contribution
in excess of income statement 6.8 (30.8) (24.0) 118.8
------------------------------------------------- ---------- ----------- --------- ----------
Acquisitions and disposals net of cash/debt
acquired (0.3) - (0.3) (0.6)
================================================= ========== =========== ========= ==========
Investments in joint ventures (0.2) - (0.2) -
================================================= ========== =========== ========= ==========
Movement in own shares (2.9) - (2.9) -
================================================= ========== =========== ========= ==========
Dividends paid (116.3) - (116.3) (115.5)
================================================= ========== =========== ========= ==========
Other 0.2 - 0.2 1.8
================================================= ========== =========== ========= ==========
Exceptional cash movement (30.8) 30.8 - (5.3)
================================================= ========== =========== ========= ==========
Net cash outflow (143.5) - (143.5) (0.8)
------------------------------------------------- ---------- ----------- --------- ----------
Net debt reconciliation
------------------------------------------------- ---------- ----------- --------- ----------
Opening net debt (957.7) (1,115.0)
================================================= ========== =========== ========= ==========
IFRS 16 transition (617.5) -
================================================= ========== =========== ========= ==========
Net cash outflow (143.5) (0.8)
================================================= ========== =========== ========= ==========
Exchange difference (35.5) (16.1)
------------------------------------------------- ---------- ----------- --------- ----------
Closing net debt (1,754.2) (1,131.9)
------------------------------------------------- ---------- ----------- --------- ----------
The table below provides the reconciliation between the
statutory cash flow and trading cash flow table above.
2019 2018
---------- ----------- --------- ----------
Exceptional
Underlying items Statutory Underlying
GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ----------- --------- ----------
Cash generated from operations 164.2 (13.7) 150.5 243.4
=========================================== ========== =========== ========= ==========
Retirement benefit contributions in excess
of income statement 37.4 3.3 40.7 20.7
=========================================== ========== =========== ========= ==========
Operating cash flow 201.6 (10.4) 191.2 264.1
------------------------------------------- ---------- ----------- --------- ----------
IFRS 16 impact
The main impact on the cash flow of IFRS 16 was an additional
GBP12.7m of operating profit, a GBP59.4 million depreciation charge
of the right of use assets, GBP52.7 million additional capital
expenditure relating to additional operating leases in the period,
and GBP12.4 million interest on the lease liabilities. The total
IFRS 16 impact was an additional GBP7 million to free cash flow
(post-pensions).
Operating cash flow
Underlying operating cash flow in the period was GBP201.6
million, compared to GBP264.1 million last year which included a
significant contribution from working capital inflows related to
our Fomedec contract of over GBP50 million.
Working capital
Total working capital cash outflows for the period, excluding
excess retirement benefits, were GBP106.9 million compared to a
GBP10.4 million inflow in the first half of last year, which
benefited from the Fomedec working capital unwind.
Working capital for the Group is typically weighted to the
second half as contract receivables are reduced over the financial
year and trade payables are seasonally higher at the end of the
year. In addition to this usual phasing, working capital this half
year has been impacted by higher inventory balances due to further
Brexit preparations, increased activity in our South Africa
business and the start-up of Aviation operations in Norway, Canada
and France. In addition, we saw higher contract balances from the
start of new contracts in Norway and Canada. Working capital for
the Group is at a similar level to last September with the
exception of inventory and we expect an improvement in the second
half, consistent with the typical phasing for the Group within
financial years.
The Group factors trade receivables in its Southern European
Aviation operations. The level of factoring is typically higher in
September than in March reflecting the customer payment profile. At
30 September 2019, the level of receivables factoring was around
GBP100 million, broadly in line with the level at September
2018.
Provisions
The cash outflow includes GBP14.1 million of underlying
provision movements (2018: GBP20.9 million) relating to contracts,
onerous leases, personnel (taxation and reorganisation) and
property. During the period GBP0.4 million of provisions were
charged to the income statement.
Capital expenditure
Excluding IFRS 16, net capital expenditure was GBP71.1 million
in the period (2018: GBP83.9 million) comprised of gross capital
expenditure of GBP95.5 million (2018: GBP103.2 million) and asset
disposals, mainly related to the sale and leaseback of new
aircraft, of GBP24.4 million (2018: GBP19.3 million).
As expected, net capital expenditure was lower in the period but
it remained at 1.4 times depreciation. This will be lower in the
second half and net capital expenditure for the full year is
expected to be around 1.0 times depreciation.
In addition, the Group entered into GBP52.7 million of
additional operating leases in the period. These IFRS 16 additions
are shown as additional capital spend in the period, making the
total net capital spend GBP123.8 million.
Cash interest paid
Net Group cash interest paid, excluding that paid by joint
ventures, was GBP27.9 million (2018: GBP14.0 million), with GBP12.4
million of the increase due to IFRS 16.
Taxation
Underlying cash taxation payments of GBP43.0 million (2018:
GBP46.7 million) decreased due to lower operating profit.
Pensions
Pension cash outflows in excess of income statement charge were
GBP37.4 million (2018: GBP20.7 million). We expect to pay the
funding deficit of around GBP400 million over the next six years.
The phasing of these payments may not be evenly spread.
Dividends
During the period the Group received GBP37.3 million in
dividends from its joint ventures (2018: GBP20.0 million). Cash
dividends (including to minorities of GBP0.6 million) paid out in
the year totalled GBP116.3 million (2018: GBP115.5 million). The
Group expects dividends from its joint ventures to remain stable at
around GBP45 million in 2019/20 and for the next two years before
stepping down.
Free cash flow
Underlying free cash flow post pension payments was GBP6.8
million (2018: GBP118.8 million) with the reduction on last year
mainly due to Fomedec working capital.
Full year expectations
We expect underlying free cash flow post pension payments for
the full year to be over GBP250 million. Cash generation in the
second half will be helped by the expected working capital inflow,
lower net capital expenditure and lower second half pension and
provision outflows than last year. We expect cash conversion for
underlying operating cash flow post capital expenditure for the
full year to be around 90%, in line with our target.
Exceptional cash movement
There was a cash outflow of GBP30.8 million in the year related
to exceptional charges in the prior year with some acceleration of
lease payments into the first half as assets are returned.
Net debt
The Group's net cash outflow was GBP143.5 million (2018: GBP0.8
million). Net debt at 30 September 2019 was GBP1,754.2 million,
including GBP616.2 million of IFRS 16 leases. The movement in
exchange rates in the period added GBP36 million to net debt
compared to March 2019. The net debt to EBITDA ratio on the
covenant basis was 1.9 times (2018: 1.8 times).
Net debt to EBITDA
We have redefined our net debt to EBITDA measure to the covenant
basis, used for our refinanced credit facilities. This gearing
measure compares net debt to Group EBITDA (excluding our share of
JV's EBITDA) plus joint venture dividends.
Pre IFRS 16:
30 September 30 September
2019 2018
Last 12 months Last 12 months
GBPm GBPm
----------------------------------------- --------------- ---------------
Underlying operating profit excl. JVs
(pre-IFRS 16) 429.1 467.1
------------------------------------------ --------------- ---------------
Depreciation (pre-IFRS 16) 91.8 92.2
========================================== =============== ===============
Amortisation of software and development
costs 15.3 14.4
========================================== =============== ===============
Non-controlling interests (2.1) (0.1)
========================================== =============== ===============
Group IFRIC 12 income 1.2 1.6
========================================== =============== ===============
EBITDA* 535.3 575.2
------------------------------------------ --------------- ---------------
JV dividends 61.9 47.8
------------------------------------------ --------------- ---------------
EBITDA + JV dividends 597.2 623.0
------------------------------------------ --------------- ---------------
Net debt 1,138.0 1,131.9
------------------------------------------ --------------- ---------------
Net debt / EBITDA 1.9x 1.8x
------------------------------------------ --------------- ---------------
*EBITDA in H1 '20 of GBP246.6 million and H2 '19 of GBP288.7
million
Post-IFRS 16:
30 September
2019 Last
12 months
GBPm
------------------------------------- ------------
EBITDA + JV dividends (pre-IFRS 16) 597.2
-------------------------------------- ------------
IFRS 16 EBITDA adjustment 157.8
====================================== ============
EBITDA + JV dividends (post-IFRS 16) 755.0
====================================== ============
Net debt (pre-IFRS 16) 1,138.0
-------------------------------------- ------------
IFRS 16 lease liabilities 616.2
-------------------------------------- ------------
Net debt (post-IFRS 16) 1,754.2
-------------------------------------- ------------
Net debt / EBITDA 2.3x
-------------------------------------- ------------
Pensions
The IAS 19 valuation for accounting purposes showed a market
value of assets of GBP4,907.2 million in comparison to a valuation
of the liabilities based on AA corporate bond yields of GBP4,922.6
million. The total accounting deficit, pre-tax, of the Group's
combined defined benefit pension schemes was GBP15.4 million (30
September 2018: GBP26.3 million surplus). As at 30 September 2019,
the key assumptions used in valuing pension liabilities were:
Discount rate 1.8% (30 September 2018: 2.7%)
Inflation rate (RPI) 3.0% (30 September 2018: 3.2%)
Contingent liabilities
The Group's contingent liabilities are set out in Note 19.
In February 2019, the Italian Competition Authority (the ICA)
notified Babcock Mission Critical Services Italia SpA (BMCS Italia)
of its decision to fine a number of companies for anti-trust
violations. These companies provide helicopter services in Italy
and are members of the Italian Helicopter Association (the
Association). The ICA found that a number of companies, but not
BMCS Italia, had engaged in bid-rigging activities in the aerial
rotary wing fire-fighting sector, a sector in which BMCS Italia
does not operate. At the same time, the ICA, after investigation,
found that there was no bid-rigging in the helicopter emergency
medical services sector, the sector in which BMCS Italia does
operate. However, during the course of its investigation, the ICA
became aware of a publicly available "tariff list" produced by the
Association since 2001 and, on the basis of the list, decided to
fine the members of the Association, including BMCS Italia. The
fine for BMCS Italia was EUR51 million.
BMCS Italia has appealed the ICA's decision and has reasonable
grounds to believe the court will either overturn the fine all
together or substantially reduce it. Accordingly, no provision for
settlement has been made as 30 September 2019 as the directors do
not believe any settlement will be material. This is consistent
with the position adopted at 31 March 2019.
Group income statement
Six months ended Six months ended
30 September 30 September
2019 2018
---------- ----------------------------------------- ---- ------------------ ------------------
Year ended
31 March
2019 Total Total
GBPm Note GBPm GBPm GBPm GBPm
---------- ----------------------------------------- ---- ------- --------- ------- ---------
4,474.8 Revenue(1) 2 2,194.8 2,254.8
========== ========================================= ==== ======= ========= ======= =========
(3,928.3) Cost of revenue (1,889.3) (2,015.0)
========== ========================================= ==== ======= --------- ======= ---------
546.5 Gross profit 305.5 239.8
========== ========================================= ==== ======= ========= ======= =========
(11.9) Distribution expenses (5.0) (5.8)
========== ========================================= ==== ======= ========= ======= =========
(338.1) Administration expenses (131.8) (184.7)
========== ========================================= ==== ======= ========= ======= =========
Operating profit before share of
196.5 results of joint ventures and associates 2 168.7 49.3
========== ========================================= ==== ======= ========= ======= =========
Share of results of joint ventures 2,
83.8 and associates 8 19.6 37.4
========== ========================================= ==== ======= --------- ======= ---------
Group and joint ventures and associates
========== ========================================= ==== ------- ========= ------- =========
Operating profit before amortisation
559.3 of acquired intangibles 236.9 264.8
========================================= ==== ======= ========= ======= =========
29.1 Investment income 13.7 14.8
========================================= ==== ------- ========= ------- =========
588.4 Underlying operating profit(2) 2 250.6 279.6
========================================= ==== ======= ========= ======= =========
(101.0) Amortisation of acquired intangibles 3 (43.2) (52.9)
========================================= ==== ======= ========= ======= =========
(160.8) Exceptional items 3 - (120.4)
========================================= ==== ======= ========= ======= =========
(1.3) Group investment income (0.6) (0.7)
========================================= ==== ======= ========= ======= =========
Joint ventures and associates finance
(24.1) costs (11.7) (11.8)
========================================= ==== ======= ========= ======= =========
Joint ventures and associates income
(20.9) tax expense (6.8) (7.1)
========================================= ==== ------- --------- ------- ---------
280.3 Operating profit 188.3 86.7
========== ========================================= ==== ======= ========= ======= =========
Finance costs
========== ========================================= ==== ------- ========= ------- =========
1.3 Investment income 0.6 0.7
========================================= ==== ======= ========= ======= =========
0.3 Retirement benefit interest 15 (0.1) 0.2
========================================= ==== ======= ========= ======= =========
(62.7) Finance costs 4 (42.4) (30.4)
========================================= ==== ======= ========= ======= =========
16.0 Finance income 4 6.1 7.9
========================================= ==== ------- ========= ------- =========
(45.1) (35.8) (21.6)
========== ========================================= ==== ======= --------- ======= ---------
235.2 Profit before tax 2 152.5 65.1
========== ========================================= ==== ======= ========= ======= =========
(35.4) Income tax expense 5 (21.4) (6.9)
---------- ----------------------------------------- ---- ------- --------- ------- ---------
199.8 Profit for the year 131.1 58.2
---------- ----------------------------------------- ---- ------- --------- ------- ---------
Attributable to:
========== ========================================= ==== ======= ========= ======= =========
199.4 Owners of the parent 129.4 58.2
========== ========================================= ==== ======= ========= ======= =========
0.4 Non-controlling interest 1.7 -
========== ========================================= ==== ======= --------- ======= ---------
199.8 131.1 58.2
========== ========================================= ==== ======= --------- ======= ---------
Earnings per share 6
========== ========================================= ==== ======= ========= ======= =========
39.5p Basic 25.6p 11.5p
========== ========================================= ==== ======= ========= ======= =========
39.4p Diluted 25.6p 11.5p
========== ========================================= ==== ======= ========= ======= =========
1. Revenue does not include the Group's share of revenue from
joint ventures and associates of GBP263.0 million (2018: GBP322.1
million and 31 March 2019: GBP685.8 million).
2. Including IFRIC 12 investment income but before exceptional
items and amortisation of acquired intangibles.
Group statement of comprehensive income
Six months Six month
Year ended ended ended
31 March 30 September 30 September
2019 2019 2018
GBPm Note GBPm GBPm
---------- ------------------------------------------------------ ---- ------------- -------------
199.8 Profit for the year 131.1 58.2
========== ====================================================== ==== ============= =============
Other comprehensive income
========== ====================================================== ==== ============= =============
Items that may be subsequently reclassified
to income statement
========== ====================================================== ==== ============= =============
(31.0) Currency translation differences 25.1 0.1
========== ====================================================== ==== ============= =============
Fair value adjustment of interest rate and foreign
(0.5) exchange hedges (13.6) 4.6
========== ====================================================== ==== ============= =============
Tax on fair value adjustment of interest rate
0.4 and foreign exchange hedges 2.6 (0.9)
========== ====================================================== ==== ============= =============
(1.3) Hedging gains reclassified to profit or loss - -
========== ====================================================== ==== ============= =============
Fair value adjustment of joint ventures and
1.8 associates derivatives 8 (20.0) (0.7)
========== ====================================================== ==== ============= =============
Tax, including rate change impact, on fair value
adjustment of joint ventures and associates
(0.3) derivatives 8 3.1 0.1
========== ====================================================== ==== ============= =============
Items that will not be subsequently reclassified
to income statement
========== ====================================================== ==== ============= =============
(58.4) Remeasurement of retirement benefit obligations (28.0) 10.6
========== ====================================================== ==== ============= =============
10.4 Tax on remeasurement of retirement benefit obligations 4.5 (2.2)
========== ====================================================== ==== ============= =============
(0.4) Impact of change in UK tax rates - 0.7
---------- ------------------------------------------------------ ---- ------------- -------------
(79.3) Other comprehensive income, net of tax (26.3) 12.3
---------- ------------------------------------------------------ ---- ------------- -------------
120.5 Total comprehensive income 104.8 70.5
---------- ------------------------------------------------------ ---- ------------- -------------
Total comprehensive income attributable to:
========== ====================================================== ==== ============= =============
122.3 Owners of the parent 102.9 72.4
========== ====================================================== ==== ============= =============
(1.8) Non-controlling interest 1.9 (1.9)
---------- ------------------------------------------------------ ---- ------------- -------------
120.5 Total comprehensive income 104.8 70.5
---------- ------------------------------------------------------ ---- ------------- -------------
Group statement of changes in equity
Owners
Share Share Other Capital Retained Hedging Translation of the Non-controlling Total
capital premium reserve redemption earnings reserve reserve parent interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- ------- ---------- -------- ------- ----------- ------- --------------- -------
At 1 April 2018 303.4 873.0 768.8 30.6 994.9 (74.5) (3.3) 2,892.9 18.1 2,911.0
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Total
comprehensive
income/(loss) - - - - 67.2 3.1 2.1 72.4 (1.9) 70.5
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Dividends - - - - (114.4) - - (114.4) (1.1) (115.5)
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Share-based
payments - - - - 2.9 - - 2.9 - 2.9
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Tax on
shared-based
payments - - - - 3.5 - - 3.5 - 3.5
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Transactions
with
non-controlling
interests - - - - (0.2) - - (0.2) 2.1 1.9
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Net movement in
equity - - - - (41.0) 3.1 2.1 (35.8) (0.9) (36.7)
---------------- ------- ------- ------- ---------- -------- ------- ----------- ------- --------------- -------
At 30 September
2018 303.4 873.0 768.8 30.6 953.9 (71.4) (1.2) 2,857.1 17.2 2,874.3
---------------- ------- ------- ------- ---------- -------- ------- ----------- ------- --------------- -------
At 1 April 2019 303.4 873.0 768.8 30.6 998.2 (74.4) (32.1) 2,867.5 17.4 2,884.9
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Total
comprehensive
income/(loss) - - - - 105.9 (27.9) 24.9 102.9 1.9 104.8
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Dividends - - - - (115.7) - - (115.7) (0.6) (116.3)
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Share-based
payments - - - - 1.9 - - 1.9 - 1.9
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Tax on
shared-based
payments - - - - 2.1 - - 2.1 - 2.1
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Own shares - - - - (2.9) - - (2.9) - (2.9)
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Transition to
IFRS
16 - - - - (19.6) - - (19.6) - (19.6)
================ ======= ======= ======= ========== ======== ======= =========== ======= =============== =======
Net movement in
equity - - - - (28.3) (27.9) 24.9 (31.3) 1.3 (30.0)
---------------- ------- ------- ------- ---------- -------- ------- ----------- ------- --------------- -------
At 30 September
2019 303.4 873.0 768.8 30.6 969.9 (102.3) (7.2) 2,836.2 18.7 2,854.9
---------------- ------- ------- ------- ---------- -------- ------- ----------- ------- --------------- -------
The other reserve relates to the rights issue of new ordinary
shares on 7 May 2014 and the capital redemption reserve relates to
the issue and redemption of redeemable "B" preference shares in
2001.
Group balance sheet
As at
31 As at As At
March 30 September 30 September
2019 2019 2018
GBPm Note GBPm GBPm
------- ------------------------------------------- ---- ------------- -------------
Assets
======= =========================================== ==== ============= =============
Non-current assets
======= =========================================== ==== ============= =============
2,584.2 Goodwill 2,601.3 2,604.1
======= =========================================== ==== ============= =============
448.9 Other intangible assets 420.3 494.0
======= =========================================== ==== ============= =============
1,014.3 Property, plant and equipment 1,035.2 1,024.7
======= =========================================== ==== ============= =============
- Right of use assets 16 578.5 -
======= =========================================== ==== ============= =============
153.2 Investment in joint ventures and associates 8 119.0 136.6
======= =========================================== ==== ============= =============
8,
42.5 Loan to joint ventures and associates 14 51.4 32.1
======= =========================================== ==== ============= =============
226.9 Retirement benefits 15 256.1 231.8
======= =========================================== ==== ============= =============
9.3 Trade and other receivables 9 8.8 7.1
======= =========================================== ==== ============= =============
15.5 IFRIC 12 financial assets 14.2 17.3
======= =========================================== ==== ============= =============
93.8 Other financial assets 11 139.4 92.6
======= =========================================== ==== ============= =============
150.9 Deferred tax asset 154.1 125.0
------- ------------------------------------------- ---- ------------- -------------
4,739.5 5,378.3 4,765.3
------- ------------------------------------------- ---- ------------- -------------
Current assets
======= =========================================== ==== ============= =============
196.5 Inventories 211.4 167.6
======= =========================================== ==== ============= =============
907.8 Trade and other receivables 9 963.0 976.3
======= =========================================== ==== ============= =============
11.1 Income tax recoverable 22.5 12.2
======= =========================================== ==== ============= =============
48.0 Other financial assets 11 36.7 222.6
======= =========================================== ==== ============= =============
275.2 Cash and cash equivalents 14 458.6 247.1
------- ------------------------------------------- ---- ------------- -------------
1,438.6 1,692.2 1,625.8
------- ------------------------------------------- ---- ------------- -------------
6,178.1 Total assets 7,070.5 6,391.1
------- ------------------------------------------- ---- ------------- -------------
Equity and liabilities
======= =========================================== ==== ============= =============
Equity attributable to owners of the parent
======= =========================================== ==== ============= =============
303.4 Share capital 303.4 303.4
======= =========================================== ==== ============= =============
873.0 Share premium 873.0 873.0
======= =========================================== ==== ============= =============
692.9 Capital redemption and other reserves 689.9 726.8
======= =========================================== ==== ============= =============
998.2 Retained earnings 969.9 953.9
------- ------------------------------------------- ---- ------------- -------------
2,867.5 2,836.2 2,857.1
======= =========================================== ==== ============= =============
17.4 Non-controlling interest 18.7 17.2
------- ------------------------------------------- ---- ------------- -------------
2,884.9 Total equity 2,854.9 2,874.3
------- ------------------------------------------- ---- ------------- -------------
Non-current liabilities
======= =========================================== ==== ============= =============
1,357.6 Bank and other borrowings 14 1,739.8 1,636.3
======= =========================================== ==== ============= =============
- IFRS 16 lease liabilities 16 465.2 -
======= =========================================== ==== ============= =============
2.0 Trade and other payables 10 2.0 2.1
======= =========================================== ==== ============= =============
103.2 Deferred tax liabilities 93.3 106.0
======= =========================================== ==== ============= =============
9.3 Other financial liabilities 11 34.6 4.9
======= =========================================== ==== ============= =============
254.9 Retirement liabilities 15 271.5 205.5
======= =========================================== ==== ============= =============
40.5 Provisions for other liabilities 12 28.7 70.5
------- ------------------------------------------- ---- ------------- -------------
1,767.5 2,635.1 2,025.3
------- ------------------------------------------- ---- ------------- -------------
Current liabilities
======= =========================================== ==== ============= =============
53.9 Bank and other borrowings 14 53.1 38.8
======= =========================================== ==== ============= =============
- IFRS 16 lease liabilities 16 151.0 -
======= =========================================== ==== ============= =============
1,381.4 Trade and other payables 10 1,337.9 1,338.4
======= =========================================== ==== ============= =============
22.1 Income tax payable 1.5 6.0
======= =========================================== ==== ============= =============
4.9 Other financial liabilities 11 7.1 48.5
======= =========================================== ==== ============= =============
63.4 Provisions for other liabilities 12 29.9 59.8
------- ------------------------------------------- ---- ------------- -------------
1,525.7 1,580.5 1,491.5
------- ------------------------------------------- ---- ------------- -------------
3,293.2 Total liabilities 4,215.6 3,516.8
------- ------------------------------------------- ---- ------------- -------------
6,178.1 Total equity and liabilities 7,070.5 6,391.1
------- ------------------------------------------- ---- ------------- -------------
Group cash flow statement
Six months Six month
Year ended ended ended
31 March 30 September 30 September
2019 2019 2018
GBPm Note GBPm GBPm
---------- --------------------------------------------------- ---- ------------- -------------
Cash flows from operating activities
========== =================================================== ==== ============= =============
Operating profit before amortisation of acquired
452.5 intangible and exceptional items 209.0 219.7
========== =================================================== ==== ============= =============
Amortisation of acquired intangible and exceptional
(256.0) items 3 (40.3) (170.4)
---------- --------------------------------------------------- ---- ------------- -------------
Operating profit before share of results of
196.5 joint ventures and associates 2 168.7 49.3
========== =================================================== ==== ============= =============
Depreciation and impairment of property, plant
123.1 and equipment 43.9 73.9
========== =================================================== ==== ============= =============
- Depreciation of right of use assets 59.4 -
========== =================================================== ==== ============= =============
110.0 Amortisation of intangible assets 47.8 57.0
========== =================================================== ==== ============= =============
1.3 Investment income 2 0.6 0.7
========== =================================================== ==== ============= =============
2.4 Equity share-based payments 1.9 2.9
========== =================================================== ==== ============= =============
Profit on disposal of subsidiaries, businesses
(14.8) and joint ventures and associates 17 - (15.2)
========== =================================================== ==== ============= =============
Loss/(profit) on disposal of property, plant
(5.4) and equipment 0.3 (1.6)
========== =================================================== ==== ============= =============
0.3 Loss on disposal of intangible assets - -
---------- --------------------------------------------------- ---- ------------- -------------
Cash generated from operations before movement
413.4 in working capital 322.6 167.0
========== =================================================== ==== ============= =============
(34.0) Increase in inventories (12.5) (1.0)
========== =================================================== ==== ============= =============
138.8 (Increase)/decrease in receivables (39.6) 77.3
========== =================================================== ==== ============= =============
4.1 (Decrease)/increase in payables (54.9) (46.4)
========== =================================================== ==== ============= =============
10.7 (Decrease)/increase/ in provisions (24.4) 35.8
========== =================================================== ==== ============= =============
Retirement benefit payments in excess of income
(25.1) statement (40.7) (20.7)
---------- --------------------------------------------------- ---- ------------- -------------
507.9 Cash generated from operations 150.5 212.0
========== =================================================== ==== ============= =============
(74.0) Income tax paid (52.8) (46.7)
========== =================================================== ==== ============= =============
(63.1) Interest paid (34.5) (22.1)
========== =================================================== ==== ============= =============
15.6 Interest received 6.6 8.1
---------- --------------------------------------------------- ---- ------------- -------------
386.4 Net cash flows from operating activities 69.8 151.3
---------- --------------------------------------------------- ---- ------------- -------------
Cash flows from investing activities
========== =================================================== ==== ============= =============
Disposal of subsidiaries and joint ventures
29.5 and associates, net of cash disposed 17 (0.3) 25.5
========== =================================================== ==== ============= =============
Dividends received from joint ventures and
44.6 associates 37.3 20.0
========== =================================================== ==== ============= =============
Proceeds on disposal of property, plant and
78.5 equipment 24.4 19.3
========== =================================================== ==== ============= =============
(194.3) Purchases of property, plant and equipment (79.8) (84.0)
========== =================================================== ==== ============= =============
(32.7) Purchases of intangible assets (15.8) (19.2)
========== =================================================== ==== ============= =============
Investment in, loans to and interest received
(14.6) from joint ventures and associates 8 (9.1) (4.3)
========== =================================================== ==== ============= =============
(89.0) Net cash flows from investing activities (43.3) (42.7)
---------- --------------------------------------------------- ---- ------------- -------------
Cash flows from financing activities
========== =================================================== ==== ============= =============
(150.5) Dividends paid (115.7) (114.4)
========== =================================================== ==== ============= =============
(26.4) Finance lease principal payments (5.9) (10.5)
========== =================================================== ==== ============= =============
- IFRS 16 lease payments (78.7) -
========== =================================================== ==== ============= =============
(19.4) Finance lease assets repaid 10.6 8.7
========== =================================================== ==== ============= =============
(103.4) Bank loans repaid (139.8) (30.2)
========== =================================================== ==== ============= =============
- Loans raised 487.8 -
========== =================================================== ==== ============= =============
(2.8) Dividends paid to non-controlling interest (0.6) (1.1)
========== =================================================== ==== ============= =============
(0.5) Transactions with non-controlling interests - 1.9
========== =================================================== ==== ============= =============
- Movement on own shares (2.9) -
---------- --------------------------------------------------- ---- ------------- -------------
(303.0) Net cash flows from financing activities 154.8 (145.6)
---------- --------------------------------------------------- ---- ------------- -------------
Net increase/(decrease) in cash, cash equivalents
(5.6) and bank overdrafts 14 181.3 (37.0)
========== =================================================== ==== ============= =============
Cash, cash equivalents and bank overdrafts
286.3 at beginning of year 275.2 286.3
========== =================================================== ==== ============= =============
(5.5) Effects of exchange rate fluctuations 2.1 (2.2)
---------- --------------------------------------------------- ---- ------------- -------------
Cash, cash equivalents and bank overdrafts
275.2 at end of year 14 458.6 247.1
---------- --------------------------------------------------- ---- ------------- -------------
Notes to the consolidated financial statements
1. Basis of preparation and significant accounting policies
The consolidated half year financial statements have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Services Authority, the Listing Rules and IAS 34,
'Interim financial reporting' as adopted by the European Union
(EU). They should be read in conjunction with the Annual Report for
the year ended 31 March 2019 (the 'Annual Report'), which has been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union. The accounting policies
used and presentation of these consolidated half year financial
statements are consistent with those in the Annual Report except as
noted below and to comply with amendments to IFRS.
Standards and interpretations that have been adopted by the
Group and had a material impact on the half year report:
-- IFRS 16, 'Leases', effective from 1 January 2019 and endorsed
by the EU. Operating leases have now been recognised on the balance
sheet; the impact of this standard has been to recognise a lease
liability and right of use asset on the Group's balance sheet in
relation to almost all leases formerly classified as operating
leases. The change has resulted in an improvement in operating
profit, with the depreciation of the right of use asset being less
than the operating lease charge under IAS 17. This has however been
offset by an increase in interest charge with an immaterial net
impact on profit before tax resulting from the Group's maturity of
leases on adoption. Please refer to Note 16 and below for further
details.
Standards and interpretations that have been adopted by the
Group but had no material impact on the half year report:
-- IAS 19, 'Employee Benefits', amended effective from 1 January
2019. The amendment related to treatment of plan amendments,
curtailments and settlements.
-- Annual improvement 2015-2017 Cycle, effective from 1 January
2019. This included clarifications on IFRS 3, IFRS 11, IAS 12 and
IAS 23.
-- IFRS 9, 'Financial Instruments', amended effective from 1 January 2019.
Standards, amendments and interpretations that are not yet
effective and where the impact on the Group's operations is not
expected to be material.
-- IFRS 3, 'Business Combinations', amended effective from 1
January 2020. The amendment related to the definition of a business
on a combination.
-- IAS 1, 'Presentation of Financial Statements', and IAS 8,
'Accounting Policies, Changes in Accounting Estimates and Errors',
amended effective from 1 January 2020 related to the definition of
material.
-- IFRS 17, 'Insurance Contracts', effective 1 January 2021.
IFRS 16, 'Leases'
IFRS 16 has become effective from 1 January 2019 and replaces
IAS 17, 'Leases' as the definitive accounting standard for the
recognition, measurement and disclosure of leases. The Group has
adopted the standard from 1 April 2019.
Under the new standard, the Group has now recognised almost all
leases, where the Group is a lessee, on the balance sheet as the
distinction between finance leases and operating leases has been
removed. Both short-term leases and low-value leases are exempt
from IFRS 16, and instead their lease payments continue to be
recognised as expenses on a straight-line basis. The approach for
lessors has remained largely unchanged.
Transition
The Group has adopted the modified retrospective transition
approach, with the right-of-use assets measured at the amount of
the lease liability on the date of transition for the majority of
leases. The lease liability was calculated as the present value of
the minimum lease payments on the date of transition. For a number
of high value property and aircraft leases however, the
right-of-use assets have been calculated as if the leases had
always existed and their value on the date of transition is
measured as the present value of the minimum lease payments at the
inception date less accrued depreciation and any impairments. The
difference between the right-of-use assets and lease liabilities on
the date of transition is taken to retained earnings. Comparative
figures have not been restated for the six months ended 30
September 2018.
The following practical expedients have been adopted on
transition:
-- Single discount rates have been applied to portfolios of leases with similar characteristics
-- IFRS 16 has only been applied to contracts that were previously classified as leases
-- For leases with onerous lease provisions recognised against
them immediately prior to the date of transition, the provisions
have been utilised and offset against the right-of-use assets on
the date of transition
-- Initial direct costs have been excluded from the measurement
of right-of-use assets on the date of transition
-- The lease term has been determined with the use of hindsight
where the contract contains options to extend the lease
Subsequent measurement
Right-of-use asset are held at cost less accumulated
depreciation and impairment. Any impairments are determined in line
with IAS 36, "Impairment of Assets". Depreciation is charged on a
straight-line basis over the full length of the lease.
Lease liabilities decrease over time by the net of lease
payments made and the interest accrued. Interest is charged to the
income statement as the effect of discounting the future lease
payments is unwound.
The Directors consider it appropriate to adopt the going concern
basis of accounting in preparing the interim financial
information.
The half year report for the six months ended 30 September 2019
was approved by the Directors on 19 November 2019. The half year
report has not been audited or reviewed by auditors.
2. Segmental information
The Group has four reporting segments, determined by reference
to the goods and services they provide and the markets they
serve.
Marine - through life support of naval ships and infrastructure
in the UK and internationally.
Nuclear - through life support of submarines and complex
engineering services in support of major decommissioning programmes
and projects, training and operation support, new build programme
management and design and installation in the UK and, increasingly,
internationally.
Land - large scale critical vehicle fleet management, equipment
support and training for military and civil customers
worldwide.
Aviation - critical engineering services to defence and civil
customers worldwide, including pilot training, equipment support,
airbase management and operation of aviation fleets delivering
emergency and offshore services.
The Group chief executive, the chief operating decision maker as
defined by IAS 8, monitors the results of these reporting segments
and makes decisions about the allocation of resources. The Group's
business in South Africa meets the definition of an operating
segment, as defined by
IAS 8. However the business represents less than 10% of the
Group's revenues, profits and assets and, as permitted by IAS 8,
the Group includes the business in the Land sector reporting
segment on the basis that they have similar economic
characteristics (assessed with reference to their operating profit
margins) and that the nature of the services provided, the type of
customer and the methods used to deliver services are similar to
those in the Land sector.
On 1 April 2019 a single Nuclear segment was created by
combining our Civil Nuclear and UK Naval Nuclear businesses. The
results for 30 September 2018 have been restated accordingly.
Marine Nuclear Land Aviation Unallocated Total
30 September 2019 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------ ------- ------ -------- ----------- -------
Revenue including joint
ventures and associates 564.4 588.0 790.4 515.0 - 2,457.8
================================== ====== ======= ====== ======== =========== =======
Less: joint ventures and
associates revenue 18.4 168.2 9.2 67.2 - 263.0
---------------------------------- ------ ------- ------ -------- ----------- -------
Revenue 546.0 419.8 781.2 447.8 - 2,194.8
---------------------------------- ------ ------- ------ -------- ----------- -------
Operating profit/(loss)
before share of results
of joint ventures and associates 68.2 50.0 32.3 21.5 (3.3) 168.7
================================== ====== ======= ====== ======== =========== =======
Acquired intangible amortisation 2.2 0.2 17.7 20.2 - 40.3
---------------------------------- ------ ------- ------ -------- ----------- -------
Operating profit* 70.4 50.2 50.0 41.7 (3.3) 209.0
================================== ====== ======= ====== ======== =========== =======
IFRIC 12 investment income
- Group 0.1 - 0.5 - - 0.6
================================== ====== ======= ====== ======== =========== =======
Share of operating profit
- joint ventures and associates 2.0 7.4 6.6 11.9 - 27.9
================================== ====== ======= ====== ======== =========== =======
Share of IFRIC 12 investment
income - joint ventures
and associates - - 0.7 12.4 - 13.1
---------------------------------- ------ ------- ------ -------- ----------- -------
Underlying operating profit 72.5 57.6 57.8 66.0 (3.3) 250.6
================================== ====== ======= ====== ======== =========== =======
Share of finance costs -
joint ventures and associates (0.2) - 0.1 (11.6) - (11.7)
================================== ====== ======= ====== ======== =========== =======
Share of tax - joint ventures
and associates (0.5) (1.8) (2.1) (2.4) - (6.8)
================================== ====== ======= ====== ======== =========== =======
Acquired intangible amortisation
- Group (2.2) (0.2) (17.7) (20.2) - (40.3)
================================== ====== ======= ====== ======== =========== =======
Share of acquired intangible
amortisation - joint ventures
and associates - - (1.0) (1.9) - (2.9)
================================== ====== ======= ====== ======== =========== =======
Net finance costs - Group - - - - (36.4) (36.4)
================================== ====== ======= ====== ======== =========== =======
Profit before tax 69.6 55.6 37.1 29.9 (39.7) 152.5
---------------------------------- ------ ------- ------ -------- ----------- -------
* Before amortisation of acquired intangibles.
Marine Nuclear
(restated) (restated) Land Aviation Unallocated Total
30 September 2018 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Revenue including joint
ventures and associates 525.9 637.1 798.1 615.8 - 2,576.9
================================== =========== =========== ====== ======== =========== =======
Less: joint venture and
associate revenue 10.5 231.3 15.5 64.8 - 322.1
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Revenue 515.4 405.8 782.6 551.0 - 2,254.8
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Operating profit/(loss)
before share of results
of joint ventures and associates 53.6 38.2 15.3 (51.9) (5.9) 49.3
================================== =========== =========== ====== ======== =========== =======
Exceptional items 17.4 5.4 7.1 88.1 2.4 120.4
================================== =========== =========== ====== ======== =========== =======
Acquired intangible amortisation 2.2 0.5 23.9 23.4 - 50.0
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Operating profit* 73.2 44.1 46.3 59.6 (3.5) 219.7
================================== =========== =========== ====== ======== =========== =======
IFRIC 12 investment income
- Group 0.2 - 0.5 - - 0.7
================================== =========== =========== ====== ======== =========== =======
Share of operating profit
- joint ventures and associates 2.7 18.0 15.8 8.6 - 45.1
================================== =========== =========== ====== ======== =========== =======
Share of IFRIC 12 investment
income - joint ventures
and associates - - 0.7 13.4 - 14.1
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Underlying operating profit 76.1 62.1 63.3 81.6 (3.5) 279.6
================================== =========== =========== ====== ======== =========== =======
Share of finance costs -
joint ventures and associates - - (0.3) (11.5) - (11.8)
================================== =========== =========== ====== ======== =========== =======
Share of tax - joint ventures
and associates (0.9) (3.4) (1.2) (1.6) - (7.1)
================================== =========== =========== ====== ======== =========== =======
Acquired intangible amortisation
- Group (2.3) (0.4) (23.9) (23.4) - (50.0)
================================== =========== =========== ====== ======== =========== =======
Share of acquired intangible
amortisation - joint ventures
and associates - - (1.0) (1.9) - (2.9)
================================== =========== =========== ====== ======== =========== =======
Net finance costs - Group - - - - (22.3) (22.3)
================================== =========== =========== ====== ======== =========== =======
Exceptional items (17.4) (5.4) (7.1) (88.1) (2.4) (120.4)
---------------------------------- ----------- ----------- ------ -------- ----------- -------
Profit before tax 55.5 52.9 29.8 (44.9) (28.2) 65.1
---------------------------------- ----------- ----------- ------ -------- ----------- -------
* Before amortisation of acquired intangibles and exceptional items.
The analysis of revenue for the six months ended 30 September
2019 is as follows:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
----------------------------------------------- ------------- -------------
Sale of goods - transferred at a point in time 290.8 269.5
=============================================== ============= =============
Sale of goods - transferred over time 44.9 29.5
----------------------------------------------- ------------- -------------
Sale of Goods 335.7 299.0
=============================================== ============= =============
Provision of services - transferred over time 1,854.8 1,951.5
=============================================== ============= =============
Rental income 4.3 4.3
----------------------------------------------- ------------- -------------
Revenue 2,194.8 2,254.8
----------------------------------------------- ------------- -------------
The sale of goods at a point in time is mainly in the Land
sector. This includes revenue subject to judgement as to whether
the Group operates as principal or agent. The sale of goods over
time is in the Marine sector. Provision of services over time is
across all sectors.
The geographic analysis of revenue by origin of customer for the
six months ended 30 September 2019 and at 30 September 2018 is as
follows:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
--------------- ------------- -------------
United Kingdom 1,454.5 1,445.2
=============== ============= =============
Rest of Europe 277.3 373.2
=============== ============= =============
Africa 187.5 176.3
=============== ============= =============
North America 88.9 92.1
=============== ============= =============
Australasia 101.7 97.8
=============== ============= =============
Rest of World 84.9 70.2
--------------- ------------- -------------
Revenue 2,194.8 2,254.8
--------------- ------------- -------------
3. Exceptional items and acquired intangible amortisation
Joint ventures
Group and associates Total
---------------------------- ---------------------------- ----------------------------
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
30 September 30 September 30 September 30 September 30 September 30 September
2019 2018 2019 2018 2019 2018
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Oil and Gas(1)
============================ ============= ============= ============= ============= ============= =============
- Asset impairment - 38.2 - - - 38.2
============================ ============= ============= ============= ============= ============= =============
- Onerous lease provisions - 42.1 - - - 42.1
============================ ============= ============= ============= ============= ============= =============
Oil and Gas - total - 80.3 - - - 80.3
============================ ============= ============= ============= ============= ============= =============
Capacity restructuring(2) - 39.6 - - - 39.6
============================ ============= ============= ============= ============= ============= =============
Exit(3) - 15.7 - - - 15.7
============================ ============= ============= ============= ============= ============= =============
Profit on disposal of
subsidiaries
and businesses (note 17) - (15.2) - - - (15.2)
============================ ============= ============= ============= ============= ============= =============
Exceptional items(4) - 120.4 - - - 120.4
============================ ============= ============= ============= ============= ============= =============
Exceptional tax items and
tax
on exceptional items - (19.8) - - - (19.8)
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Exceptional items - net of
tax - 100.6 - - - 100.6
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Acquired intangible
amortisation 40.3 50.0 2.9 2.9 43.2 52.9
============================ ============= ============= ============= ============= ============= =============
Tax on acquired intangibles
amortisation (7.6) (9.8) (0.6) (0.6) (8.2) (10.4)
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Acquired intangible
amortisation
- net of tax 32.7 40.2 2.3 2.3 35.0 42.5
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Exceptional items are those items which are exceptional in
nature or size.
There were no exceptional items during the current period, but
during the prior period the following exceptional items were
recorded:
1. During the prior period the Oil and Gas business was reshaped
to reflect the current market and to allow for the resultant
business to optimise future cashflows. Assets and leases were
marked to current market value to allow for sale, sub lease or
alternate use. The total exceptional charge was GBP80.3 million and
the cash costs are expected to be offset by tax effects and
proceeds from the disposal of assets.
2. Capacity reduction and restructuring costs reflect the
rightsizing, restructuring and closure of businesses across the
Sectors including Appledore, Rail and Magnox.
3. The Group continued with its strategy of exiting small low
margin businesses. The costs of exiting renewables, North American
mining and construction, scaling down powerlines (South Africa),
mobile telecoms, infrastructure and cabling are reflected within
exit costs. Refer to note 9 for related asset write downs.
4. In the prior period GBP81.3 million of the exceptional charge
was charged through cost of revenue and the balance of GBP39.1
million through administration expenses.
4. Net finance costs
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
------------------------------------------------------ ------------- -------------
Finance costs
====================================================== ============= =============
Loans, overdrafts and associated interest rate hedges 22.6 21.3
====================================================== ============= =============
IFRS 16 lease interest 12.4 -
====================================================== ============= =============
Finance leases 2.2 2.5
====================================================== ============= =============
Amortisation of issue costs of bank loan 0.9 0.7
====================================================== ============= =============
Other 4.3 5.9
====================================================== ============= =============
Total finance costs 42.4 30.4
====================================================== ============= =============
Finance income
====================================================== ============= =============
Bank deposits, loans and finance leases 6.1 7.9
====================================================== ============= =============
Total finance income 6.1 7.9
====================================================== ============= =============
Net finance costs 36.3 22.5
====================================================== ============= =============
5. Income tax expense
The charge for taxation is after a tax credit of GBPnil million
(2018: GBP19.8 million) relating to exceptional items, a tax credit
of GBP8.2 million (2018: GBP10.4 million) relating to acquired
intangible amortisation, of which GBP0.6 million (2018: GBP0.6
million) is included in share of profits from joint ventures and
associates. The charge for taxation gives an underlying effective
rate of 18.0% (2018: 18.0%), which is based on the estimated
effective rate of tax for the full year ended 31 March 2020, and
before the credits in respect of exceptionals and amortisation of
acquired intangibles. The Group is monitoring ongoing developments
following the European Commission's decision on UK Finance Company
Partial Exemption rules, from which the Group has benefited. The
Group does not expect that there will be any material impact on it
arising from this decision.
6. Earnings per share
The calculation of the basic and diluted EPS is based on the
following data:
Six months Six months
ended ended
30 September 30 September
2019 2018
Number Number
----------------------------------------------- ------------- -------------
Number of shares
=============================================== ============= =============
Weighted average number of ordinary shares for
the purpose of basic EPS 505,227,109 504,994,752
=============================================== ============= =============
Effect of dilutive potential ordinary shares:
share options 986,826 694,830
----------------------------------------------- ------------- -------------
Weighted average number of ordinary shares for
the purpose of diluted EPS 506,213,935 505,689,582
----------------------------------------------- ------------- -------------
Earnings
Six months ended Six months ended
30 September 2019 30 September 2018
-------------------------------- --------------------------------
Basic Diluted Basic Diluted
Earnings per share per share Earnings per share per share
GBPm Pence Pence GBPm Pence Pence
------------------------------------ -------- ---------- ---------- -------- ---------- ----------
Earnings from continuing operations 129.4 25.6 25.6 58.2 11.5 11.5
==================================== ======== ========== ========== ======== ========== ==========
Add back:
==================================== ======== ========== ========== ======== ========== ==========
Amortisation of acquired intangible
assets, net of tax 35.0 6.9 6.9 42.5 8.4 8.4
==================================== ======== ========== ========== ======== ========== ==========
Exceptional items, net of tax - - - 100.6 20.0 19.9
==================================== ======== ========== ========== ======== ========== ==========
Earnings before amortisation,
exceptional items and other 164.4 32.5 32.5 201.3 39.9 39.8
------------------------------------ -------- ---------- ---------- -------- ---------- ----------
7. Dividends
An interim dividend of 7.2p per 60p ordinary share (2018: 7.1p
per 60p ordinary share) was declared after the balance sheet date
and it will be paid on 17 January 2020 to shareholders registered
on 6 December 2019.
8. Investment in and loans to joint ventures and associates
Investment in Loans to joint
joint ventures ventures
and associates and associates Total
---------------------------- ---------------------------- ----------------------------
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
30 September 30 September 30 September 30 September 30 September 30 September
2019 2018 2019 2018 2019 2018
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
At 1 April 153.2 119.3 42.5 27.8 195.7 147.1
============================ ============= ============= ============= ============= ============= =============
Investment in joint ventures
and associates 0.2 - - - 0.2 -
============================ ============= ============= ============= ============= ============= =============
Share of profits 19.6 37.4 - - 19.6 37.4
============================ ============= ============= ============= ============= ============= =============
Amounts capitalised - - 10.0 4.6 10.0 4.6
============================ ============= ============= ============= ============= ============= =============
Interest received - - (1.1) (0.3) (1.1) (0.3)
============================ ============= ============= ============= ============= ============= =============
Dividends received (37.3) (20.0) - - (37.3) (20.0)
============================ ============= ============= ============= ============= ============= =============
Fair value adjustment of
derivatives (20.0) (0.7) - - (20.0) (0.7)
============================ ============= ============= ============= ============= ============= =============
Tax on fair value adjustment
of derivatives 3.1 0.1 - - 3.1 0.1
============================ ============= ============= ============= ============= ============= =============
Foreign exchange 0.2 0.5 - - 0.2 0.5
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
At 31 March 119.0 136.6 51.4 32.1 170.4 168.7
---------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Included within investment in joint ventures and associates is
goodwill of GBP1.2 million (2018: GBP1.2 million).
The total investment in and loans to joint ventures and
associates is attributable to the following segments:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
--------------- ------------- -------------
Marine 6.6 6.4
=============== ============= =============
Nuclear 23.8 34.1
=============== ============= =============
Land 82.0 59.0
=============== ============= =============
Aviation 58.0 69.2
=============== ============= =============
Net book value 170.4 168.7
=============== ============= =============
9. Trade and other receivables
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
========================================== ============= =============
Current assets
========================================== ============= =============
Trade receivables 247.8 225.7
========================================== ============= =============
Contract assets 485.6 551.8
========================================== ============= =============
Other debtors 229.6 198.8
========================================== ============= =============
Total current trade and other receivables 963.0 976.3
========================================== ============= =============
Non-current assets
========================================== ============= =============
Non-current trade and other receivables 8.8 7.1
========================================== ============= =============
Trade and other receivables are stated at amortised cost.
Significant changes in contract assets during the year are as
follows:
30 September 30 September
2019 2018
GBPm GBPm
============================================= ============ ============
31 March 462.1 581.3
=============================================== ============ ============
Transfers from contract assets recognised
at the beginning of the year to receivables (317.2) (375.3)
=============================================== ============ ============
Increase due to work done not transferred
from contract assets 323.6 353.3
=============================================== ============ ============
Amounts capitalised 20.0 9.7
=============================================== ============ ============
Amortisation of contract assets (6.5) (4.2)
=============================================== ============ ============
Write down of contract assets* - (15.6)
=============================================== ============ ============
Exchange adjustment 3.6 2.6
=============================================== ============ ============
30 September 485.6 551.8
=============================================== ============ ============
*As discussed in note 3, in the previous period, amounts due
from customer were written down in relation to the exit of small
low margin businesses and capitalised contract costs were written
down as a result of the reshaping of our Oil and Gas business.
Further to this, minor amounts in other debtors were written down
in relation to both the reshaping of our Oil and Gas business and
the exit of small low margin businesses.
10. Trade and other payables
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
======================================= ============= =============
Current liabilities
======================================= ============= =============
Trade creditors 460.9 475.9
======================================= ============= =============
Contract liabilities 419.0 421.8
======================================= ============= =============
Other creditors 458.0 440.7
======================================= ============= =============
Total current trade and other payables 1,337.9 1,338.4
======================================= ============= =============
Non-current liabilities
======================================= ============= =============
Other trade and other payables 2.0 2.1
======================================= ============= =============
Included in creditors is GBP12.5 million (2018: GBP10.8 million
and 31 March 2019: GBP19.5 million) relating to capital expenditure
which has therefore not been included in working capital movements
within the cashflow.
Significant changes in contract liabilities during the year are
as follows:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
========================================= ============= =============
31 March 421.3 413.3
=========================================== ============= =============
Revenue recognised that was included in
the contract liability balance at the
beginning of the year (134.3) (139.1)
=========================================== ============= =============
Increase due to cash received, excluding
amounts recognised as revenue 133.5 140.6
=========================================== ============= =============
Amounts accrued 142.8 157.0
=========================================== ============= =============
Amounts utilised (146.0) (140.2)
=========================================== ============= =============
Disposals - (8.1)
=========================================== ============= =============
Exchange adjustment 1.7 (1.7)
=========================================== ============= =============
30 September 419.0 421.8
=========================================== ============= =============
11. Other financial assets and liabilities
Fair value
--------------------------------------------- ----------------------------------------------------------
Assets Liabilities
---------------------------- ----------------------------
Six months Six months Six months Six months
ended ended ended ended
30 September 30 September 30 September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
--------------------------------------------- ------------- ------------- ------------- -------------
Non-current
============================================= ============= ============= ============= =============
US private placement - currency and interest
rate swaps 107.5 72.0 - -
============================================= ============= ============= ============= =============
Eurobond - currency and interest rate
swaps - - 19.9 -
============================================= ============= ============= ============= =============
Interest rate hedge - 2.7 0.9 1.0
============================================= ============= ============= ============= =============
Other currency hedges 12.4 2.4 13.8 3.9
--------------------------------------------- ------------- ------------- ------------- -------------
Financial derivatives 119.9 77.1 34.6 4.9
============================================= ============= ============= ============= =============
Finance leases granted 19.5 15.5 - -
--------------------------------------------- ------------- ------------- ------------- -------------
Total non-current other financial assets
and liabilities 139.4 92.6 34.6 4.9
--------------------------------------------- ------------- ------------- ------------- -------------
Current
============================================= ============= ============= ============= =============
Interest rate hedge - - 0.1 0.2
============================================= ============= ============= ============= =============
Finance instruments - 42.1 - 42.1
============================================= ============= ============= ============= =============
Other currency hedge 4.2 4.0 7.0 6.2
--------------------------------------------- ------------- ------------- ------------- -------------
Financial derivatives 4.2 46.1 7.1 48.5
============================================= ============= ============= ============= =============
Finance leases granted 32.5 176.5 - -
--------------------------------------------- ------------- ------------- ------------- -------------
Total current other financial assets
and liabilities 36.7 222.6 7.1 48.5
--------------------------------------------- ------------- ------------- ------------- -------------
The Group enters into forward foreign currency contracts to
hedge the currency exposures that arise on sales, purchases,
deposits and borrowings denominated in foreign currencies, as the
transactions occur. There is no material ineffectiveness on any of
the Group's hedging activities.
The Group enters into interest rate hedges against interest rate
exposure and to create a balance between fixed and floating
interest rates.
The fair values of the financial instruments are based on
valuation techniques (level 2) using underlying market data and
discounted
cash flows.
12. Provisions for other liabilities
Employee
benefits
and business
Insurance Contract/ reorganisation Property Expected
provisions warranty costs and other credit Total
(a) (b) (c) (d) losses provisions
GBPm GBPm GBPm GBPm GBPm GBPm
============================= =========== ========= =============== ========== ======== ===========
At 1 April 2019 0.5 8.8 65.3 29.0 0.3 103.9
============================= =========== ========= =============== ========== ======== ===========
IFRS 16 transition - - (17.2) (4.2) - (21.4)
============================= =========== ========= =============== ========== ======== ===========
(Released)/charged to income
statement - 0.2 (1.5) 1.3 0.4 0.4
============================= =========== ========= =============== ========== ======== ===========
Utilised in year 0.1 (0.5) (23.1) (1.4) - (24.9)
============================= =========== ========= =============== ========== ======== ===========
Foreign exchange - - 0.3 0.3 - 0.6
============================= =========== ========= =============== ========== ======== ===========
At 30 September 2019 0.6 8.5 23.8 25.0 0.7 58.6
============================= =========== ========= =============== ========== ======== ===========
Provisions have been analysed between current and non-current as
follows:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
============ ============= =============
Current 29.9 59.8
============ ============= =============
Non-current 28.7 70.5
============ ============= =============
58.6 130.3
============ ============= =============
(a) The insurance provisions arise in the Group's captive insurance companies.
(b) The contract/warranty provisions relate to onerous contracts
and warranty obligations on completed contracts and disposals.
(c) The employee benefits and reorganisation costs arise mainly
in relation to acquired businesses, personnel related costs and
payroll taxes.
(d) Property and other in the main relate to provisions for
dilapidation costs and contractual obligations in respect of
infrastructure. Onerous lease provisions have been moved to right
of use assets as part of the IFRS 16 transition (refer to note
16).
Included within provisions is GBP5 million expected to be
utilised over approximately ten years. Other than these provisions
the Group's non-current provisions are expected to be utilised
within two to five years.
13. Movement in net debt
Six months Six months
Year ended ended ended
31 March 30 September 30 September
2019 2019 2018
GBPm GBPm GBPm
---------- ----------------------------------------------- ------------- -------------
(5.6) Increase /(decrease) in cash in the period 181.3 (37.0)
========== =============================================== ============= =============
Cash flow from the increase in debt and lease
(27.4) financing (297.9) (124.8)
---------- ----------------------------------------------- ------------- -------------
(33.0) Change in net funds resulting from cash flows (116.6) (161.8)
========== =============================================== ============= =============
- Additional lease obligations (60.0) -
========== =============================================== ============= =============
176.6 Finance leases - granted 24.2 156.7
========== =============================================== ============= =============
14.7 Movement in joint ventures and associates loans 8.9 4.3
========== =============================================== ============= =============
(1.0) Foreign currency translation differences (35.5) (16.1)
========== =============================================== ============= =============
- Transition to IFRS 16 (617.5) -
---------- ----------------------------------------------- ------------- -------------
157.3 Movement in net debt in the period (796.5) (16.9)
========== =============================================== ============= =============
(1,115.0) Net debt at the beginning of the period (957.7) (1,115.0)
---------- ----------------------------------------------- ------------- -------------
(957.7) Net debt at the end of the period (1,754.2) (1,131.9)
---------- ----------------------------------------------- ------------- -------------
14. Changes in net debt
Transition
31 March Disposal Additional to IFRS Exchange 30 September
2019 Cash flow of subsidiaries leases 16 movement 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Cash and bank balances 275.2 181.6 (0.3) - - 2.1 458.6
============================= ========= ========= ================ ========== ========== ========= ============
Bank overdrafts - - - - - - -
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Cash, cash equivalents
and bank overdrafts 275.2 181.6 (0.3) - - 2.1 458.6
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Debt (1,345.7) (348.0) - - - (37.8) (1,731.5)
============================= ========= ========= ================ ========== ========== ========= ============
Leases - received (65.8) 84.9 - (60.0) (617.5) (19.2) (677.6)
============================= ========= ========= ================ ========== ========== ========= ============
Finance leases - granted 60.9 (34.8) - 24.2 - 1.7 52.0
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
(1,350.6) (297.9) - (35.8) (617.5) (55.3) (2,357.1)
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Net debt before derivatives
and joint ventures and
associates loans (1,075.4) (116.3) (0.3) (35.8) (617.5) (53.2) (1,898.5)
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Net debt derivative 75.2 - - - - 17.7 92.9
============================= ========= ========= ================ ========== ========== ========= ============
Joint ventures and associates
loans 42.5 8.9 - - - - 51.4
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
Net debt (957.7) (107.4) (0.3) (35.8) (617.5) (35.5) (1,754.2)
----------------------------- --------- --------- ---------------- ---------- ---------- --------- ------------
15. Retirement benefits and liabilities
Analysis of movement in the Group balance sheet
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
----------------------------------------------------------- ------------- -------------
Fair value of plan assets (including reimbursement rights)
=========================================================== ============= =============
At 1 April 4,582.2 4,734.9
=========================================================== ============= =============
Interest on assets 52.4 57.8
=========================================================== ============= =============
Actuarial gain on assets 437.0 85.1
=========================================================== ============= =============
Employer contributions 60.5 41.8
=========================================================== ============= =============
Employee contributions 0.1 0.3
=========================================================== ============= =============
Benefits paid (144.7) (193.7)
=========================================================== ============= =============
Settlements (80.3) (73.7)
----------------------------------------------------------- ------------- -------------
At 30 September 4,907.2 4,652.5
----------------------------------------------------------- ------------- -------------
Present value of benefit obligations
=========================================================== ============= =============
At 1 April 4,610.2 4,739.7
=========================================================== ============= =============
Service cost 18.0 20.7
=========================================================== ============= =============
Incurred expenses 1.9 1.9
=========================================================== ============= =============
Interest cost 52.6 57.6
=========================================================== ============= =============
Employee contributions 0.1 0.3
=========================================================== ============= =============
Experience losses 3.5 29.5
=========================================================== ============= =============
Actuarial gain - demographics - -
=========================================================== ============= =============
Actuarial loss - financial 461.3 43.7
=========================================================== ============= =============
Benefits paid (including transfers) (144.7) (193.7)
=========================================================== ============= =============
Settlements (80.3) (73.7)
----------------------------------------------------------- ------------- -------------
At 30 September 4,922.6 4,626.0
=========================================================== ============= =============
Present value of unfunded obligations - (0.2)
----------------------------------------------------------- ------------- -------------
Net (deficit)/surplus at 30 September (15.4) 26.3
----------------------------------------------------------- ------------- -------------
The amounts recognised in the Group income statement are as
follows:
Six months Six months
ended ended
30 September 30 September
2019 2018
GBPm GBPm
--------------------------------------- ------------- -------------
Current service cost 18.0 20.7
======================================= ============= =============
Incurred expenses 1.9 1.9
======================================= ============= =============
Total included within operating profit 19.9 22.6
======================================= ============= =============
Net interest cost/(credit) 0.1 (0.2)
======================================= ============= =============
Total included within income statement 20.0 22.4
--------------------------------------- ------------- -------------
As at 30 September 2019 the key assumptions used in valuing
pension liabilities were:
Discount rate 1.8% (30 September 2018: 2.7%)
Inflation rate
(RPI) 3.0% (30 September 2018: 3.2%)
16. IFRS 16, 'Leases'
IFRS 16, 'Leases' became effective from 1 January 2019 and replaced
IAS 17, 'Leases' as the definitive accounting standard for the recognition,
measurement and disclosure of leases. The Group has adopted the standard
from 1 April 2019.
Under the new standard, lessees recognise almost all leases on the
balance sheet as the distinction between finance leases and operating
leases is removed. Both short-term leases and low-value leases are
exempt from IFRS 16, and instead their lease payments can be recognised
as expenses on a straight-line basis. The approach for lessors remains
largely unchanged.
The Group adopted the modified retrospective transition approach,
with the right-of-use assets measured at the amount of the lease
liability on the date of transition for the majority of leases. The
lease liability was calculated as the present value of the minimum
lease payments on the date of transition. For a number of high value
property and aircraft leases however, the right-of-use assets have
been calculated as if the leases had always existed and their value
on the date of transition was measured as the present value of the
minimum lease payments at the inception date less accrued depreciation
and any impairments. The difference between the right-of-use assets
and lease liabilities on the date of transition was taken to retained
earnings. Comparative figures have not been restated for the six
months ended 30 September 2018.
The adoption of IFRS 16, 'Leases' does not impact the covenants of
the Group's existing borrowing facilities as they are all based on
IAS17, 'Leases'. The impact on the Group balance sheet at 1 April
2019 and 30 September 2019 is reflected below:
As at As At
30 September 1 April
2019 2019
GBPm GBPm
===================================================== =============== =========
Assets
Non-current assets
===================================================== =============== =========
Right-of-use assets 578.5 571.5
====================================================== =============== =========
Deferred tax asset 5.0 5.0
====================================================== =============== =========
583.5 576.5
===================================================== =============== =========
Current assets
===================================================== =============== =========
Trade and other receivables (11.5) -
====================================================== =============== =========
Total assets 572.0 576.5
====================================================== =============== =========
Equity and liabilities
Equity attributable to owners of the parent
===================================================== =============== =========
Retained earnings (19.6) (19.6)
====================================================== =============== =========
Capital redemption and other reserves (10.9) -
====================================================== =============== =========
Total equity (30.5) (19.6)
====================================================== =============== =========
Non-current liabilities
===================================================== =============== =========
Lease liabilities 465.2 510.4
====================================================== =============== =========
Provisions (6.3) (6.7)
====================================================== =============== =========
Total non-current liabilities 458.9 503.7
====================================================== =============== =========
Current liabilities
Lease liabilities 151.0 107.1
====================================================== =============== =========
Provisions (7.4) (14.7)
====================================================== =============== =========
Total current liabilities 143.6 92.4
====================================================== =============== =========
Total equity and liabilities 572.0 576.5
====================================================== =============== =========
Following a detailed review of the new IFRS 16 transition
balances an adjustment has been made to both right-of-use assets
and lease liabilities to the balances previously disclosed.
17 Disposals of subsidiaries, businesses and joint ventures and
associates
During the previous period the Group disposed of its media
business for GBP29.5 million, which resulted in a profit of GBP15.2
million. Final completion accounts adjusted these amounts to
GBP28.7 million and GBP14.0 million respectively during the second
half of last year.
During both the current and the previous period the Group paid
certain accrued costs on previously disposed of businesses of
GBP0.3 million (2018: GBP0.6 million).
2019 2018
-------------------------- ------------ ----- --------- ------------ -----
Previously Babcock Previously
disposed Media disposed
of business Total Services of business Total
GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ----- --------- ------------ -----
Goodwill - - 7.1 - 7.1
============================== ============ ===== ========= ============ =====
Property, plant and
equipment - - 1.4 - 1.4
============================== ============ ===== ========= ============ =====
Inventory - - 7.4 - 7.4
============================== ============ ===== ========= ============ =====
Current assets - - 4.0 - 4.0
============================== ============ ===== ========= ============ =====
Cash, cash equivalents
and bank overdrafts - - 2.6 - 2.6
============================== ============ ===== ========= ============ =====
Current liabilities - - (9.6) - (9.6)
============================== ============ ===== ========= ============ =====
Net assets disposed - - 12.9 - 12.9
============================== ============ ===== ========= ============ =====
Disposal costs - - 1.4 - 1.4
============================== ============ ===== ========= ============ =====
Profit on disposal of
subsidiary - - 15.2 - 15.2
------------------------------ ------------ ----- --------- ------------ -----
Sale proceeds - - 29.5 - 29.5
------------------------------ ------------ ----- --------- ------------ -----
Sale proceeds less cash
disposed of - - 26.9 - 26.9
============================== ============ ===== ========= ============ =====
Less costs paid in the
period (0.3) (0.3) (0.8) (0.6) (1.4)
------------------------------ ------------ ----- --------- ------------ -----
Net cash inflow/(outflow) (0.3) (0.3) 26.1 (0.6) 25.5
------------------------------ ------------ ----- --------- ------------ -----
18. Related party transactions
Related party transactions for the six months to 30 September
2019 are: sales to joint ventures and associates of GBP70.6 million
(2018: GBP104.4 million) and purchases from joint ventures and
associates of GBP0.1 million (2018: GBP0.2 million).
For annualised key management compensation, please refer to note
7 and the Remuneration Report in the Annual Report for the year
ended
31 March 2019.
For transactions with Group defined benefit pension schemes,
please refer to note 15 above and note 25 in the Annual Report for
the year ended 31 March 2019.
19. Contingent liabilities
In the normal course of business the Group is subject to certain
claims and litigation against it. Other than elsewhere disclosed,
as at 30 September 2019, the Group is not subject to any litigation
that the directors believe may result in a material loss. Certain
aspects of specific issues are set out below:
(a) In February 2019, the Italian Competition Authority (the
ICA) notified Babcock Mission Critical Services Italia SpA (BMCS
Italia) of its decision to fine a number of companies for
anti-trust violations. These companies provide helicopter services
in Italy and are members of the Italian Helicopter Association (the
Association).
The ICA found that a number of companies, but not BMCS Italia,
had engaged in bid-rigging activities in the aerial rotary wing
fire-fighting sector, a sector in which BMCS Italia does not
operate. At the same time, the ICA, after investigation, found that
there was no bid-rigging in the helicopter emergency medical
services sector, the sector in which BMCS Italia does operate.
However, during the course of its investigation, the ICA became
aware of a publicly available "tariff list" produced by the
Association since 2001 and, on the basis of the list, decided to
fine the members of the Association, including BMCS Italia. The
fine for BMCS Italia was
EUR51 million.
BMCS Italia has appealed the ICA's decision and has reasonable
grounds to believe the court will either overturn the fine
altogether or substantially reduce it. Accordingly, no provision
for settlement has been made as at 30 September 2019 as the
directors do not believe any likely settlement will be material.
This is consistent with the position adopted at 31 March 2019.
(b) Pursuant to the Rosyth Dockyard privatisation agreement, the
MOD will share in the net proceeds of sale or development of the
dockyard following planning enhancement, on terms set out in the
asset purchase agreement between the RRDL and the MOD dated 30
January 1997. By way of security for the MOD's rights to such
share, the Company has granted a fixed charge (standard security)
over the dockyard in favour of the Authority.
(c) The Group has given certain indemnities and warranties in
the course of disposing of businesses and companies and in
completing contracts. The Group believes that any liability in
respect of these is unlikely to have a material effect on the
Group's financial position.
(d) The Group is involved in disputes and litigation which have
arisen in the course of normal trading. The Directors do not
believe that
the outcome of these matters will result in any material adverse
change in the Group's financial position.
(e) As part of its role in the Submarine Enterprise Performance
Program, the Group has provided a GBP9 million financial guarantee
for a supplier to ensure continuity of supply.
20. Financial information
The financial information in this half year report does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the year ending 31
March 2019 were approved by the Board on 21 May 2019 and have been
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section
498(2) or (3) of the Companies Act 2006.
Risks and uncertainties
The Directors consider that the principal risks and
uncertainties affecting the Group remain unchanged from those
described in the 2019 Annual Report, and are those arising from:
our customer profile: reliance on winning and retaining large
contracts with a relatively limited number of major clients
(particularly the UK MOD), including clients affected by political
and public spending reviews and decisions, which exposes the Group
to political and public spending risks and which could be impacted
by Brexit; the nature of our contracts, bid processes and our
markets: bidding is a time consuming and expensive process; public
procurement rules apply in many cases and bring the risk of
challenge to award decisions; large contract opportunities by their
nature tend not to arise on a regular or frequent basis; failure to
win rebids of large contracts that we already hold could represent
a major loss of business and the failure to win new bids for large
contract opportunities can represent a major missed opportunity and
either loss can affect our strategic development; long-term
contracts carry risk- transfer and potential pricing risks for our
businesses and our contracts typically contain strict key
performance indicators, failure to meet them can result in adverse
financial consequences or loss of contract; reputational risks: our
reputation is a fundamental business asset given the nature of our
business, markets and customers - its loss for any reason (for
example, poor contract performance or a high profile safety
incident) could have a major adverse impact as could damage the
reputation of outsourcing businesses generally (and thus
outsourcing itself); regulatory and compliance burden: our major
businesses depend on being able to meet and continue to comply with
applicable customer or industry specific requirements and
regulations, wherever we do business, which can change; compliance
with some regulatory requirements is a pre-condition to being able
to carry on a business activity at all (for example, parts of our
Aviation business are subject to ownership and control requirements
in the EU); the cost of compliance can be high; failure to meet the
requirements could result in loss of existing business or future
business opportunities; health, safety and environmental risks;
some of our businesses entail the potential risk of significant
harm to people, property or the environment if not properly managed
and a serious incident could seriously damage our reputation (which
could lead to loss of existing or future business) as well as
expose us to fines and damages claims not all of which may or can
be covered by insurance; people risks: the Group's ability to
deliver its existing business, future growth and strategy is
dependent on being able to attract, develop, train and retain
experienced senior management, business development teams and
suitably qualified and skilled employees - the competition for whom
is strong; pension risks: we have a number of significant defined
benefit pension schemes that carry cost and funding risks and the
risk of accounting volatility; IT and security risks: we depend
heavily on our ability to be able to maintain IT and information
security and assurance to preserve our reputation and the
confidentiality of our customers' and our own valuable information;
currency exchange rates: as we expand outside the UK we are
increasingly exposed to the impact of foreign currency exchange
rates; acquisitions: we have grown and expect to continue to grow
through acquisitions as well as organically but the financial
benefits of acquisitions may not be realised as quickly and as
efficiently as expected.
The risks summarised above, and mitigating actions taken in
respect of them, are explained and described in more detail on
pages 70 to 81 of the 2019 Annual Report, a copy of which is
available at www.babcockinternational.com. This half year report
also includes comments on the outlook for the Group for the
remaining six months of the financial year.
Forward-looking statements
Certain statements in this announcement are forward-looking
statements. Such statements may relate to Babcock's business,
strategy and plans. Statements that are not historical facts,
including statements about Babcock's or its management's beliefs
and expectations, are forward-looking statements. Words such as
'believe', 'anticipate', 'estimates', 'expects', 'intends', 'aims',
'potential', 'will', 'would', 'could', 'considered', 'likely', and
variations of these words and similar future or conditional
expressions are intended to identify forward-looking statements but
are not the exclusive means of doing so. By their nature,
forward-looking statements involve a number of risks, uncertainties
or assumptions, some known and some unknown, many of which are
beyond Babcock's control, that could cause actual results or events
to differ materially from those expressed or implied by the
forward-looking statements. These risks, uncertainties or
assumptions could adversely affect the outcome and financial
effects of the plans and events described herein. Forward-looking
statements contained in this announcement regarding past trends or
activities should not be taken as a representation that such trends
or activities will continue in the future. Nor are they indicative
of future performance and Babcock's actual results of operations
and financial condition and the development of the industry and
markets in which Babcock operates may differ materially from those
made in or suggested by the forward-looking statements. You should
not place undue reliance on forward-looking statements because such
statements relate to events and depend on circumstances that may or
may not occur in the future. Except as required by law, Babcock is
under no obligation to update (and will not) or keep current the
forward-looking statements contained herein or to correct any
inaccuracies which may become apparent in such forward-looking
statements.
Forward-looking statements reflect Babcock's judgement at the
time of preparation of this announcement and are not intended to
give any assurance as to future results.
Statement of Directors' responsibilities
This half year report is the responsibility of the Directors who
each confirms that, to the best of their knowledge:
-- this condensed set of financial statements has been prepared
in accordance with IAS 34 (Interim Financial Reporting) as adopted
by the European Union; and
-- the interim management report herein includes a fair review of the information required by:
-- Rule 4.2.7 of the Disclosure & Transparency Rules
(indication of the important events during the first six months,
and their impact on the condensed set of financial statements, and
a description of principal risks and uncertainties for the
remaining six months of the year); and
-- Rule 4.2.8. of the Disclosure & Transparency Rules
(disclosure of related parties' transactions that have taken place
in the first six months of the current financial year and that have
materially affected the financial position or the performance of
the entity during that period; and any changes in the related
parties transactions described in the last annual report that could
have a material effect on the financial position or performance of
the enterprise in the first six months of the current financial
year).
The names and functions of each of the Directors of Babcock
International Group PLC are as listed in its 2019 Annual Report. A
copy of the Annual Report can be found, and a list of current
Directors is maintained, on the Group's website
www.babcockinternational.com.
Approved by the Board and signed on behalf of the Directors
by:
Archie Bethel
Chief Executive
Franco Martinelli
Group Finance Director
19 November 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BKLLFKFFFFBQ
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November 20, 2019 02:00 ET (07:00 GMT)
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