Committed to delivering value

Transcription

1 Draft Committed to delivering value QinetiQ Group plc Preliminary Annual Results for the year ended 31 March May

2 Draft Agenda 1. Headlines 2. Financial overview 3. Business overview 4. Q&A 2

3 Headlines Robust overall Group performance in tough markets Excellent performance in UK Services Initiating strategic review of US Services Global Products pipeline material progress Net cash position achieved through strong cash generation 31% increase in full year dividend to 3.8p (FY12: 2.9p) reflecting 39% increase in EPS* in the year Confidence in Organic-Plus Commitment to delivering value * Underlying performance as defined at appendix 3

4 Draft Financial overview David Mellors Chief Financial Officer 4

5 Summary financial headlines FY12 FY13 (restated^) m m Change Revenue 1, ,469.6 (10)% Operating profit* % Operating margin* 12.7% 10.9% Profit before tax* % Earnings per share* (pence) % Net cash from operations (post capex)* Cash conversion (post capex)* 104% 148% Net cash/(debt) 74.0 (122.2) Dividend (pence) % * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 5

6 Revenue bridge 1,469.6 (2.4) 6.2 (12.2) (64.1) (69.3) 1,327.8 million FY12 Disposals FX UK Services US Services Global Products FY13 6

7 Segmental analysis of profit and margin Operating profit* FY13 FY12^ m m UK Services US Services Global Products Group Margin % FY13 UK Services 10.0% 14.4% FY12 US Services 4.6% 6.0% Global Products 20.4% 23.9% * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 7

8 Earnings Per Share * (pence) 14.6 (1.0) pence FY12 IAS19 restatement & finance expense reclassification FY12 restated Operating profit Finance expense Effective tax rate FY13 * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 8

9 Specific adjusting items * FY12 FY13 (restated^) m m Non-cash items Impairment of goodwill (255.8) - Amortisation of acquired intangibles (14.0) (20.3) Pension net finance expense (1.3) (7.2) Unrealised impairment of investments (0.6) - Impairment of property (4.0) (1.9) Pension past service credit DTR inventory recovery Items with cash impact Net restructuring (charges) / credits (16.3) 69.4 Gain on business divestments and disposal of investments Gain on disposal of property Total specific adjusting items (pre-tax) (289.1) * Specific items adjusted in arriving at underlying performance as defined in appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 9

10 Further strengthening of the balance sheet 200 FY09 FY10 FY11 FY12 FY13 million - (200) (400) (600) FY09 FY10 FY11 FY12 FY13 m m m m m Working capital (30.7) (62.7) (148.3) Retirement benefit obligation (pre-tax) (105.2) (147.3) (124.6) (31.5) (54.1) Net (debt) / cash (537.9) (457.4) (260.9) (122.2)

11 Movements in net (debt) / cash (122.2) (18.5) (14.3) (1.6) (20.1) (6.8) 74.0 million Net debt 31 Mar 12 Net restructuring recovery Cash flow from operations Net capex Net interest Tax Dividends FX/Other Net cash 31 Mar 13 Net interest excludes 20.7m accelerated interest payments in respect of repayment of US private placement debt 11

12 IAS 19 restatement of FY12 Underlying Reclassification Change in Reclassify Underlying reported of admin investment pension net restated FY12 costs return finance expense FY12 calculation to middle column m m m m m Revenue 1, ,469.6 Operating profit (1.7) Net finance expense (43.0) 1.7 (15.3) 7.2 (49.4) Profit before tax (15.3) Tax (23.5) (1.7) (21.5) Earnings (11.6) EPS 14.6 p - (1.8) p 0.8 p 13.6 p Net pension deficit (pre tax) - 31 Mar 12 (31.5) (31.5) 12

13 IAS 19 accounting summary Underlying* operating profit FY12 FY13 (restated^) m m Current service cost and administration expenses (20.7) (22.5) Specific adjusting item Net pension interest expense (1.3) (7.2) Statement of comprehensive income Actuarial movements on assets/liabilities (42.1) (102.9) * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 13

14 Draft Business overview Leo Quinn Chief Executive Officer 14

15 Markets US: visibility well below normal levels Departments working through impact of sequestration Drawdown effect Competitive trading environment UK: fiscally challenged Budgets moved to frontline commands DE&S GoCo proposal in consultation phase 15

16 Transforming QinetiQ Organic-Plus: repositioning the portfolio around growth Core win market share Explore identify significant growth engines Test for Value manage rigorously Maintaining the disciplines of self-help Focus where we deliver sustainable value for customers Cultural transformation building confidence Balance sheet strength paid down 500m+ debt in 3 years Earnings benefit from self-help and Organic-Plus 16

17 Organic-Plus growing and diversifying the Core Core Maximise c90% of revenue Explore Scale c8% of revenue Test for Value Maintain the rigour c2% of revenue UK Services Close US Services Cyveillance International Ranges OptaSense Training & Simulation (+CueSim) Protective monitoring Robotic applique kits and controllers UAS Services Space ALARM TM Integrated Warrior TM Power Line Sensors Invest Trade-Through MEWS TM E-X-Drive GAJT TM Divest Close Global Products (partial) Goal: high quality cash returns 17

18 Portfolio roles UK Services Air Weapons Maritime Australia Training & Simulation Acquisition Services C4ISR Security US Services Lifecycle Solutions Aerospace Operations & Systems Mission Solutions Software & Systems Engineering Cyveillance Global Products Space IP & New Technologies OptaSense Survivability Unmanned Systems Maritime & Transportation Committed to delivering value 18

19 UK Services performance in year FY13 FY12^ m m Orders Revenue Underlying Operating Profit* Underlying Operating Profit Margin* 14.4% 10.0% Book to Bill Ratio 1.0x 1.1x Funded Backlog Stand-out performance More competitive cost base Better project execution Higher utilisation Agreed 5-year, 998m re-pricing of LTPA Top 3 customer satisfaction for MOD LTPA renewal underpins core UK business Strong foundation; focus now on growth * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly Excludes the third term 998m renewal of the LTPA contract. Book to Bill ratio is orders won divided by revenue recognised excluding the LTPA contract 19

20 UK Services opportunities Air Weapons Maritime Australia Overview De-risks complex aviation programmes Provides technical assurance Enables the frontline to deliver cost effective capability Impartial advice including military release-into-service Strengths Combines world-leading expertise with unique facilities Independence Long-term managed services contracts Strong predictable cashflows Opportunities New integrated contracts UAS Services (eg UN) International (eg India) Munitions end-toend supply chain International ranges UK outsourcing Technical advice and support to Australian naval programmes Federal election likely to create opportunities Defensible niche capabilities positioned for growth 20

21 UK Services opportunities Security Acquisition Services C4ISR Training & Simulation Overview Cyber security protection Advice on procurement of complex systems Market-leading position in C4ISR research and advice COTS technology to reduce the cost of training Strengths Market leader in shorter-cycle research and advice Breadth and depth of technical expertise Engaged at all parts of the lifecycle Enduring markets resilient to events Grown UK business Foothold in US Opportunities Cabinet Office accreditation for Protective Monitoring solution Opportunities from DE&S GoCo model International and non-defence demand (eg rail) Strong demand for highly differentiated offerings International (eg Middle East) Invest to exploit $2bn addressable market in US New Orlando office Defensible niche capabilities positioned for growth 21

22 US Services performance in year FY13 FY12 m m Orders Revenue Underlying Operating Profit* Underlying Operating Profit Margin* 4.6% 6.0% Book to Bill Ratio 1.0x 1.0x Funded Backlog Tough markets lack of visibility On-going restructuring to stay competitive Strong capabilities and market positions but decline in performance Initiating strategic review Resilient NASA revenue Copyright NASA Initiating strategic review to determine path to maximum value * Underlying performance as defined at appendix 22

23 US Services opportunities Mission Solutions Aerospace Operations Lifecycle Solutions Software & Systems Overview Cyber security Enterprise IT and software Support space missions from design to launch under longterm contracts Engineering services Fleet and logistics C4ISR for Navy and Marine Corps Procurement advice Strengths Broad customer base both within and beyond defence Skilled employees with high levels of security clearance Long-standing customer relationships Longer-term contract vehicles Opportunities Cyveillance Data centre consolidation moving to Cloudbased solutions Leverage for USAF Commercial space Condition-based maintenance Proprietary software Defense Solutions Capitalise on Pacific Pivot increased SPAWAR and naval research budgets Niche capabilities with customer base beyond defence 23

24 Global Products performance in year FY13 FY12 m m Orders Revenue Underlying Operating Profit* Underlying Operating Profit Margin* 23.9% 20.4% Book to Bill Ratio 0.8x 0.8x Funded Backlog Strong Q-Net revenue Softening demand for conflict products Good performance in OptaSense and Space Some triage of portfolio Material progress in developing pipeline $120m sales for Q-Net Lumpy revenue profile * Underlying performance as defined at appendix 24

25 Global products broadening the portfolio Core LAST Armour SWATS TALON PADS Q-Net Global Products Power Lines Sensors Dragon Runner TM 10 Test for Value Integrated Warrior System TM ALARM TM Space technology and increased focus on non-conflict markets OptaSense Explore 25

26 Global Products opportunities Survivability Unmanned Systems OptaSense Space Overview Protects people and assets to save lives World-leading provider of military robots Fibre-optic sensing for real-time decision-making Space technology including mini satellites and ion propulsion Strengths Cutting-edge technology Intimate understanding of customer problems Platform technology / multiple markets ESA Proba V satellite launched Ion engines proven on GOCE spacecraft Opportunities Developing international market Upgrades to extend the life of existing platforms (eg Q-Net ) Developing international market Robotic applique kits Tactical robotic controllers DR10 New linear asset apps Follow-on 10m Shell deal; end of exclusivity Starting to contract with other oil and gas companies Growing UK national Space budget Commercial satellite opportunities for ion engines Build diversified portfolio to reduce volatility 26

27 Outlook for FY14 UK Services Expected to remain steady US Services Heightened uncertainty around US federal services spending is causing low levels of visibility Global Products As anticipated, budgetary pressures and the drawdown effect seen towards the end of last year are continuing to affect timing and quantity of sales While the range of possible outcomes is wider than usual at this stage in the year and the full impact of sequestration remains unclear, the Board is maintaining its expectations for overall Group performance in the current year absent any material changes in customer requirements 27

28 Reshaping the portfolio to deliver sustainable growth UK Services Performing strongly, potential for mid-term growth Underpinned by 5-year, 998m re-pricing of LTPA US Services Good assets; under-performing Initiating strategic review to identify route to maximum value Global Products Expanding portfolio potential beyond defence Building out non-conflict product portfolio Explore businesses showing early growth profitable Committed to taking actions to deliver value 28

29 Draft Questions Download our ipad app from the App Store 29

30 Draft Appendices 30

31 Definitions Underlying performance is stated before Amortisation of intangibles arising from acquisitions; Pension curtailment gains/losses & past service credits/costs; Pension net finance expense; Gains/losses on business divestments, and disposal and impairment of investments; Restructuring costs; Gains/losses on disposal of property; Impairment of property; Impairment of intangible assets; Net gain in respect of previously capitalised DTR-programme bid costs; and Tax effect of the above Organic growth Is calculated at constant foreign exchange rates, adjusting the comparatives to incorporate the results of acquired entities and excluding the results for any disposals for the same duration of ownership as the current period. 31

32 Detailed income statement FY12 FY13 (restated^) m m Revenue 1, ,469.6 Underlying operating profit* Net finance expense (16.6) (49.4) Underlying profit before tax* Impairment of goodwill (255.8) - Impairment of property (4.0) (1.9) Amortisation and impairment of acquisition-related intangibles (14.0) (20.3) Pension net finance expense (1.3) (7.2) Gain on business divestments and impairment of investments DTR inventory recovery Gain on disposal of property Restructuring (16.3) 69.4 Statutory (loss)/profit before tax (137.0) Taxation 3.8 (70.0) Statutory (loss)/profit after tax attributable to equity shareholders (133.2) * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 32

33 Revenue by sector and customer Revenue by sector (%) Revenue by customer (%) 19% FY13 1,327.8m 45% UK Services US Services Global Products 6% 10% 21% FY13 1,327.8m 35% MOD DoD DHS NASA Commercial Defence 36% 2% 26% Civil/Other Government agencies 22% 19% 31% MOD DoD FY12 1,469.6m 42% UK Services US Services Global Products 7% 9% FY12 1,469.6m DHS NASA Commercial Defence 36% 5% 29% Civil/Other Government agencies 33

34 Taxation FY12 FY13 (restated^) m m Underlying tax charge* (29.2) (21.5) Tax on non-recurring items 33.0 (48.5) Headline tax charge 3.8 (70.0) Underlying tax rate* 19.2% 19.5% * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits been adopted for FY13 and the FY12 comparatives have been restated accordingly 34

35 Balance sheet FY13 FY12 m m Goodwill Intangible assets Property, plant and equipment Working capital (148.3) (62.7) Retirement benefit obligation (net of tax) (40.4) (18.2) Other assets and liabilities (36.4) (35.2) Net cash/(debt) 74.0 (122.2) Net assets

36 Cash conversion FY12 FY13 (restated^) m m Underlying operating profit* Share of JVs & associates (0.1) (0.1) Operating profit before JVs & associates* Cash flow from operations* Net capex (18.5) (15.4) Net cash flow from operations post capex Cash conversion %* 104% 148% Net interest paid Taxation (35.0) (38.5) (1.6) (23.3) Free cash flow* * Underlying performance as defined at appendix ^ IAS 19 (revised) Employee benefits has been adopted for FY13 and the FY12 comparatives have been restated accordingly 36

37 Movements in net cash / (debt) FY13 FY12 m m Free cash flow Net restructuring inflow/(outflow) 63.1 (8.9) Acquisitions and investments - (0.9) Divestments and sale of investments Dividends (20.1) (16.4) Purchase of own shares (0.4) (12.0) Other 18.6 (9.8) Change in net debt before FX FX translation impact (8.1) (1.7) Change in net debt Opening net debt (122.2) (260.9) Closing net cash/(debt) 74.0 (122.2) 37

38 Defined benefit pension scheme IAS 19 balance sheet position FY13 FY12 m m Market value of assets 1, ,107.9 Present value of scheme liabilities (1,310.6) (1,139.4) Net pension liability before deferred tax (54.1) (31.5) Deferred tax asset Net pension liability (40.4) (18.2) FY13 FY12 Assumptions % % Discount rate 4.4% 4.8% Inflation (CPI) 2.7% 2.6% Sensitivity of deficit to main assumptions: Assumption Change in assumption Sensitivity Discount rate Increase / decrease by 0.1% Decrease / increase by 25m Inflation Increase / decrease by 0.1% Increase / decrease by 26m Life expectancy Increase by 1 year Increase by 28m 38

39 Three year record for the years ended 31 March As reported Underlying operating profit m Underlying profit before tax m (Loss)/profit before tax m (137.0) (Loss)/profit after tax m (133.2) Underlying basic EPS pence Basic EPS pence (20.5) Diluted EPS pence (20.5) Restated for adoption of IAS19 (revised) (unaudited) (unaudited) Underlying operating profit m Underlying profit before tax m (Loss)/profit before tax m (137.0) (Loss)/profit after tax m (133.2) (8.8) Underlying basic EPS pence Basic EPS pence (20.5) 37.9 (1.3) Diluted EPS pence (20.5) 37.6 (1.3) 39

40 Credit and debt facilities Value Value Maturity date Denomination in denomination m Revolving Credit Facility February 2016 m Revolving Credit Facility February 2016 $m Private Placement February 2016 $m Private Placement December 2016 $m Private Placement February 2019 $m Total Committed Facilities

41 Employee numbers UK Services 5,145 5,157 US Services 3,350 3,940 Global Products 1,003 1,083 Total 9,498 10,180 FY13 FY12 41

42 Disclaimer This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Actual results, levels of activity, performance, achievements and events are most likely to vary materially from those implied by the forward-looking statements. The forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words 'believes',' expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets, goals, due, could, may,'should, and similar expressions. These forward-looking statements include, without limitation, statements regarding the Company's future financial position, income growth, impairment charges, business strategy, projected levels of growth in the relevant markets, projected costs, estimates of capital expenditures, and plans and objectives for future operations. Nothing in this document should be regarded as a profit forecast. The forward-looking statements, including assumptions, opinions and views of the Company or cited from third party sources, contained in this Results Announcement are solely opinions and forecasts which are uncertain and subject to risks. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Actual results may differ materially from those expressed or implied by these forward-looking statements. A number of factors could cause actual events to differ significantly. These factors include, but are not limited to: Defence budgets which are subject to review and change from time to time and the level of available funding open to private contractors in the United Kingdom and United States; The winning of new business or retention of previous business through a competitive bidding process; The level of pension liability the Company accrues, given market conditions and actuarial factors; Material adverse changes in economic conditions in the markets served by the Company; and Future regulatory actions and conditions in the Company's operating areas, including competition from others. Most of these factors are difficult to predict accurately and are generally beyond the control of the Company. Any forward-looking statements made by, or on behalf of the Company, speak only as of the date they are made. Save as required by law, the Company will not publicly release the results of any revisions to any forward-looking statements in this document that may occur due to any change in the Directors expectations or to reflect events or circumstances after the date of this document. 42