Half Year Results for the Six Months Ended 30 September 2009
By Vt Group Plc, PRNEMonday, November 16, 2009
VT Group plc, the support services company, today announces its half year results for the six months ended 30 September 2009.
LONDON, November 17 - Financial highlights - continuing operations
2009 2008 Change
GBPm GBPm
Revenue (excluding Joint
Ventures) 574.1 456.5 +26%
Group Turnover* 601.1 513.7 +17%
Underlying Profit Before 44.6 38.3 +16%
Taxation**
Profit Before Taxation 32.8 21.5 +53%
Underlying Earnings Per Share(p)*** 17.6 15.2 +16%
Cash Conversion**** 88% 125%
Basic Earnings Per Share (p) 13.0 8.7 +49%
Interim Dividend Per Share (p) 4.3 3.9 +10%
* Includes share of turnover from equity accounted joint ventures and
associates.
**Underlying profit before taxation (and underlying operating profit also
referred to in this statement) excludes amortisation of intangibles arising
from business combinations (GBP11.8m; 2008: GBP10.1m), share of joint venture
taxation (GBP0.2m; 2008: GBP1.3m), fair value movements arising from
derivatives (GBP0.2m; 2008: nil) and exceptional items and other one off
charges (GBP0.4m gain; 2008: GBP5.4m charge).
***Before exceptional items, fair value movements arising from
derivatives and intangible amortisation arising from business combinations
**** Underlying operating cash as a percentage of underlying operating
profit.
2008 figures have been restated as detailed in note 1.
The above definitions apply throughout this document.
Operational highlights
- Good order book visibility of GBP4.4bn and significant bids and
pipeline of GBP8bn
- Continuing good organic growth with the business well positioned to
take advantage of increased Government outsourcing
- Strong cash conversion together with cash proceeds from BVT leaves the
Group with balance sheet strength from which to drive further growth
- Reorganisation programme well underway and on track to deliver the
expected cost savings of GBP7m net per annum
- Move to FTSE Business Support Services sub-sector in December 2009
Outlook
VT Group CEO Paul Lester said: "Our strong first half performance and our
focus as a support services business puts the Group on the threshold of an
exciting new era as we prepare to celebrate our 150th anniversary in 2010.
With greater pressure on Government budgets, we believe that
opportunities in outsourcing will increase. We are well placed to take
advantage of this by maintaining our success in existing markets and by
broadening our service offering to our current customer base. In addition,
the cash from the sale of our shareholding in BVT Surface Fleet provides us
with the financial resources to acquire further support services businesses.
The combination of these opportunities and the visibility of our future
order book, means that the Board remains confident about VT's short and
longer-term prospects.
Notes to Editors
1. VT Group is an engineering-based support services company providing
services to Central and Local Government. The Group employs over 12,000
people and has its Headquarters in Southampton, UK, with operations from
various locations, primarily in the UK and USA.
2. For the year ended 31 March 2009 VT Group reported turnover for its
continuing operations of GBP1,096 million (2008: GBP845 million) and Group
Underlying Profit Before Tax of GBP86.6 million (2008: GBP61.6 million). The
order book for continuing operations was around GBP4.5 billion as of the end
of March 2009.
3. VT operates in a wide range of markets including defence, education,
secure communications, waste and nuclear services, providing services focused
on:
- Critical asset management
- Facilities management
- Logistics of people and equipment
- Education and training
- Design, procure and build
4. Going forward, VT Group's services businesses will consist of three
operating segments - Defence, Government and Critical Services in the UK and
VT Group Inc in the US. The operations of these segments will be as follows:
5.
a. Defence will be responsible for managing and strengthening our
relationship with the UK MoD
b. Government and Critical Services will manage and develop our
non-defence Central and Local Government relationships.
c. VT Group Inc. will concentrate on growing our work with the US
Department of Defense (DoD).
6. Further information about VT Group, its services and products can be
found at www.vtplc.com.
Interim Management Report
VT Group manages assets and provides services that our customers consider
critical to their own activities. We use our people, skills and experience to
deliver solutions to our customers as effectively and efficiently as
possible.
Overview
The first half of 2009 was another period of growth for the Group with
our businesses performing strongly, despite the challenging economic
conditions. With our transition to a support services business now complete,
we have the opportunity to grow further, both organically and through
acquisition.
The disposal of our shareholding in BVT Surface Fleet Limited (BVT) was
completed on 30 October. As a result, we now have considerable financial
resources to increase our capability by adding support services businesses
which offer a good strategic fit and enhance shareholder value. In
particular, we will look at businesses that extend our capability in either
existing or adjacent markets.
Future organic growth will be based on broadening the range of services
to our existing customers, adding value by using our relationship management
and proven track record to expand our activities into adjacent sectors, and
by increasing our footprint in existing markets. Areas such as Local
Government, nuclear and waste-to-energy offer particularly good
opportunities.
We will also be well placed to benefit from pressure on the spending
profiles of sectors such as defence. Delays or reductions to capital
expenditure, both in the UK and US, are likely to result in existing
equipment requiring additional support to extend its service life.
VT has established a strong position in its existing markets with a
record of providing innovative solutions to improve services and create
improved value-for-money. This pedigree will enable us to take advantage of
the expected growth in outsourcing as budgetary pressures increase at Central
and Local Government levels and result in a further drive for greater
efficiency and reduced costs. Currently only GBP80bn of the current UK public
expenditure of GBP620bn is outsourced. Whilst we believe that opportunities
will increase, budgetary constraints will also result in continuing margin
pressures. Our 'One VT' reorganisation programme leaves us well placed to
respond to this challenge.
Our order book continues to show good visibility and stands at GBP4.4bn,
marginally below the level at year end (GBP4.5bn). We are working on a number
of significant opportunities to add to our order book, including the UK's
Search and Rescue helicopter (SAR-H) programme, various waste-to-energy
projects, the outsourcing of Army recruitment and the Joint Military Air
Traffic Services (JMATS) programme, together valued at over GBP8bn.
As part of our transition to a support services company, we announced in
May our intention to restructure the Group into three business streams
aligned to the customers we serve. These streams are Defence, Government and
Critical Services (both in the UK) and VT Group Inc (in the US).
Concentrating our business in these areas will strengthen our capability as a
support services company offering higher value services, an important
differentiator in the services sector.
Our 'One VT' programme is progressing well and we are on track to deliver
the planned net savings of GBP7m per year that we have targeted through
implementing operational efficiencies.
Following the exit from BVT, VT Group will move to the Business Support
Services sub-sector of the FTSE classifications with effect from 21 December
2009.
Half Year Results
Half year results - continuing operations
Group turnover for the period increased by 17% to GBP601.1m (2008:
GBP513.7m). Excluding the impact of acquisitions and foreign exchange,
organic turnover growth amounted to 8%.
Reported profit before tax increased by 53% to GBP32.8m (2008: GBP21.5m),
although the prior year included net exceptional charges of GBP5.4m in
relation to group reorganisation, industrial injury provision and sale of
non-core properties.
The higher net finance charges incurred in the period are due to
financing charges associated with defined benefit pension schemes, which
reflect the volatility in financial markets. Underlying profit
The Group uses underlying profit before taxation as a key measure of
performance, defined as follows:
As restated
30 30 31
September September March
2009 2008 2009
GBPm GBPm GBPm
Profit before tax 32.8 21.5 29.6
Amortisation of intangible assets* 11.8 10.1 23.0
Exceptional items*** - 5.4 28.3
Other non-recurring items*** (0.4) - -
Market value movements in respect
of derivatives** 0.2 - 0.8
Joint Venture taxation 0.2 1.3 1.6
Underlying profit before tax 44.6 38.3 83.3
* arising from business combinations
** including in respect of Joint Ventures
*** details regarding exceptional and non-recurring items can be found in
note 4.
Underlying profit achieved for the period of GBP44.6m (2008: GBP38.3m)
represents a 16% increase over the prior year. Organic growth in underlying
operating profit (excluding the impact of acquisitions and foreign exchange)
was 13.5%.
Prior year restatement
Due to the adoption of IFRIC 12 and the finalisation of provisional fair
values for a prior year acquisition, comparative profit has been restated.
The impact is to reduce reported profit after tax by GBP0.2m for the
comparative six month period. Full details of this restatement are included
in note 1.
Reorganisation
The reorganisation programme announced in March 2009 is well underway and
to date expenditure of GBP4.2m has been incurred and set against the
provision created in the March 2009 accounts. Further expenditure will be
incurred during the second half of the year.
Cash and net debt
The Group continues to generate strong cash conversion against underlying
operating profits, achieving an 88% conversion rate for the six month period
to 30 September 2009 (30 September 2008: 125%). Significant advanced payments
in respect of FSTA subcontracts had an impact on the prior period.
The Group's net debt increased slightly to GBP191m (March 2009: GBP186m).
A large reduction of net debt has occurred since the period end following
completion of the BVT exit on 30 October. The Group received net cash
proceeds of GBP299m in respect of the exit and settled deferred consideration
for the purchase of VT Flagship of GBP70m.
Pensions
The Group's pension deficit in respect of defined benefit pension schemes
increased to GBP53m net of deferred tax (March 2009: GBP43.6m). This increase
arose largely as a result of market movements in bond yields used to value
future pension benefits under IAS 19.
Taxation
The underlying effective tax rate increased to 28.6% (September 2008:
28%) principally as a result of changes in the mix of UK and overseas profits
generated within the Group.
Dividend
Based upon the continuing financial strength of the Group, the Board has
recommended the payment of an interim dividend of 4.3p per share, an increase
of 10%.
Business Stream Performance
Defence
Turnover increased in the period by 29% to GBP251.4m (2008: GBP194.6m)
driven by increased activity on the major PFI programmes (20%) and the impact
of acquisitions (9%). Underlying operating profit of GBP28.7m (2008:
GBP23.8m) grew by 21%, with organic growth of 13% in the period.
In Air, good progress continues to be made on our Future Strategic Tanker
Aircraft (FSTA) and UK Military Flying Training System (UKMFTS) programmes.
VT, as part of the AirTanker consortium, is constructing new facilities
at RAF Brize Norton where the new A-330 tanker/transport aircraft will be
based. In addition, the first two aircraft have been delivered to Airbus
Military (a division of EADS) for military modifications with delivery of the
first aircraft to the customer scheduled for late 2011.
Ascent, the joint venture between VT and Lockheed Martin, has achieved
several milestones in the first full year of the UKMFTS programme, including
good progress at RAF Valley to provide new facilities for the Hawk T-2
trainer and the signing of a contract for the delivery of Rear Crew Stage One
training. As part of this contract, VT will deliver infrastructure upgrades
at RAF Barkston Heath and RNAS Culdrose, and will provide the supporting ICT
structure at both locations. The overall contract is worth GBP57m to Ascent,
with the sub-contracts to VT for the infrastructure upgrades worth GBP10m
over five years.
We are also implementing the expanded initial flying training contract,
which started in April and now includes Elementary Flying Training,
University Air Squadron and Air Experience Flights. This programme is valued
at up to GBP160m and to cater for this growth we have ordered a further 23
Grob Tutor aircraft to supplement our existing fleet of more than 90.
In Sea, our naval training business has secured a training contract for
the delivery of UK based training for a Middle East navy. It has also
extended its training and soft facilities management support agreements with
the Royal Navy from June 2011 to December 2011 and April 2013 respectively.
Together, these additions are valued at nearly GBP80m.
Our Land business has delivered a series of Urgent Operational
Requirements in the form of training activities and engineering support
through our ALC joint venture.
Government and Critical Services
Turnover increased in the period by 3% to GBP187.2m (2008: GBP182.3m).
2008 contained significantly higher turnover in respect of construction
activities on the Lewisham Building Schools for the Future (BSF) programme.
Underlying operating profit increased by 17% to GBP13.7m (2008: GBP11.7m) as
the training and nuclear service streams benefited from higher activity and
prior year cost control measures.
Our Training business has strengthened its market leading position with a
number of contract wins including our new annual contract with the Learning
and Skills Council (which has increased by 14% to GBP42m) as we delivered
additional volumes of training, particularly in the engineering and services
sectors.
In the automotive sector we have expanded our operations with leading
manufacturers and independent outlets. We recently secured new contracts with
Jaguar Land Rover, Kawasaki and Euro Parts which together cover technical
apprenticeships, sales training and body and paint training. We have secured
a two year extension of our apprenticeship training contract with VW Group
(VW) until 2015. We have also been selected to run VW's technical services
centre, which provides the UK franchised network with specialist expertise.
These new contracts are worth GBP10m in total.
In Education, Learning21, our joint venture with Costain plc has started
construction work on Northbrook School, the third BSF school in Lewisham. VT
will provide Information Communication Technology (ICT) and Facilities
Management services, with a total value of over GBP20m. The successful
implementation of new ICT at Lewisham's Forest Hill School has seen us win
the British Council for School Environments annual ICT industry award.
Construction has also started on the first two BSF schools in Greenwich. BSF
remains a key growth area for our education business and we are currently
pursuing targeted opportunities worth over GBP180m.
In addition, we have been named preferred supplier for a new three-year
contract to assess Higher Learning Teaching Assistants in London and the
South East from January 2010. We are also preferred bidder for a further
three-year extension to the national programme for assessing Advanced
Skills/Excellent Teachers. These contracts are valued at over GBP7m in total.
In Critical Assets, we have extended our capability management service
for the New Dimension fleet of emergency vehicles and equipment modules to
include Wales. This extension will cover the same 16-year period as our
existing work for the fleet in England. We have also added the Greater London
Ambulance Service and Belmarsh Prison to our vehicle repair and maintenance
services. Our secure communications business has agreed a five year extension
of our communications and engineering work for a Government agency. The total
value of these contracts is approximately GBP200m.
In Environment, our nuclear services business has benefited from a number
of contract awards, together valued at over GBP30m. We have secured an
extension to the B29 Project at Sellafield to take it through to completion.
This project is to process radioactive waste material and demonstrates
multi-discipline engineering capability coupled with proven procurement,
construction and commissioning skills. We have also achieved one-year
extensions to our laboratory and radiological detection and measuring
contracts at Sellafield.
We continue to see demand for our decommissioning skills overseas. We
have been selected by the European Bank for Reconstruction and Development as
preferred bidder for a contract valued at EUR4m, to carry out decommissioning
work on reactor buildings at a plant in Eastern Europe.
Progress on the design, build and operation of waste facilities in
Wakefield under a GBP750m programme is ongoing and we now expect financial
closure by the end of the financial year. A pipeline of other similar
opportunities is also being addressed, worth around GBP4bn.
VT Group Inc.
Turnover for the period increased to GBP162.5m (2008: GBP136.8m) largely
as a result of foreign exchange fluctuations. Underlying profit of GBP8.8m
(2008: GBP6.7m) is an increase of 31.3% on the comparative six month period.
Excluding the effect of currency movements, organic growth of 10% was
achieved due in particular to a good performance in the logistics support
business formerly known as VT Aepco.
Our US operations have been reorganised into two service streams;
Integrated Solutions, which will address systems engineering and
communications infrastructure under the US Department of Defense's C4IT
programmes and Technical Services, which will concentrate on ranges,
facilities, training and logistics.
We are in a good position to expand our naval expertise into other areas
of the US military's C4IT programmes and to export our successful UK
contracting for availability model as pressures on the US defence budget
increase.
The training market presents good opportunities in the US where we will
build upon our current capability and utilise the experience and expertise
that we have gained in the UK. In particular, we are looking at opportunities
in manned and unmanned aerial systems and with potential civilian agency
customers including the Federal Aviation Administration (FAA).
Under our existing agreement with the Army Aviation and Missile Command
(AMCOM), we have been awarded a task order to provide logistics analyses,
maintain and update logistics information management systems and supply
logistics support for the CH-47 Chinook cargo helicopter. The contract has a
value of around $29m over five years.
We have also been appointed by NASA as prime contractor for the
construction of a new hall for rocket assembly at the Wallops Island launch
site on the US East Coast. The work is valued at $10m to VT over the next
year.
Base operations work presents limited margin growth opportunities in the
medium-term but over time we intend to transition to military range work
where we can utilise our higher level technical capability, which is rewarded
with higher margins.
Our current bidding pipeline sees us awaiting decisions on submitted bids
totalling around $300m. In addition, our existing Space and Naval Warfare
Systems Command (SPAWAR) contract has potential for more work on the East and
West Coasts under the forthcoming rebid which will be valued at up to $900m.
Outlook
Our strong first half performance and our focus as a support services
business puts the Group on the threshold of an exciting new era as we prepare
to celebrate our 150th anniversary in 2010.
With greater pressure on Government budgets, we believe that
opportunities in outsourcing will increase. We are well placed to take
advantage of this by maintaining our success in existing markets and by
broadening our service offering to our current customer base. In addition,
the cash from the sale of our shareholding in BVT Surface Fleet provides us
with the financial resources to acquire further support services businesses.
The combination of these opportunities and the visibility of our future
order book, means that the Board remains confident about VT's short and
longer-term prospects.
Condensed Consolidated Statement of Financial Performance for the six
months ended 30 September 2009
6 months 6 months
ended 30 September ended 30 September
2009 2008
(as restated)
Note Result Exceptional Total Result Exceptional Total
before items GBPm before items GBPm
exceptional (note 4) exceptional (note 4)
items items
GBPm GBPm GBPm GBPm
Combined sales
of Group and
equity
accounted
investments 601.1 - 601.1 513.7 - 513.7
Less: share of
equity
accounted
investments (27.0) - (27.0) (57.2) - (57.2)
Revenue 2 574.1 - 574.1 456.5 - 456.5
Cost of sales (476.9) - (476.9) (375.0) - (375.0)
Gross profit 97.2 - 97.2 81.5 - 81.5
Administrative
expenses (59.3) (59.3) (57.0) (9.9) (66.9)
Profit arising
from disposal
of properties - - - - 4.5 4.5
Group
operating
profit 37.9 - 37.9 24.5 (5.4) 19.1
Share of
results of
equity
accounted
investments - - - 4.6 - 4.6
Operating
profit 2 37.9 - 37.9 29.1 (5.4) 23.7
Financial
income 5 14.4 - 14.4 19.6 - 19.6
Financial
expense 6 (19.5) - (19.5) (21.8) - (21.8)
Profit before
tax from
continuing
operations 2 32.8 - 32.8 26.9 (5.4) 21.5
Income tax
expense 7 (9.2) - (9.2) (6.6) 1.1 (5.5)
Profit after
tax from
continuing
operations 23.6 - 23.6 20.3 (4.3) 16.0
Net result for
the period
from
discontinued
operations 3 (5.1) 109.0
Net result for
the period 18.5 125.0
Attributable
to:
Equity holders
of
the parent 18.1 124.4
Minority
interest 0.4 0.6
Earnings per
share (p)
Continuing
operations
Basic earnings
per share 13.0p 8.7p
Diluted earnings per
share 12.8p 8.5p
Discontinued
operations
Basic earnings (2.8)p 61.5p
per share
Diluted earnings per
share (2.8)p 60.0p
Total
Basic earnings
per share 10.2p 70.2p
Diluted earnings per
share 10.0p 68.5p
Table continued below…
Year ended
31 March
2009
(as
restated)
Result Exceptional Total
before items GBPm
exceptional (note 4)
items
GBPm GBPm
Combined sales
of Group and
equity
accounted
investments 1,106.9 - 1,106.9
Less: share of
equity
accounted
investments (90.6) - (90.6)
Revenue 1,016.3 - 1,016.3
Cost of sales (835.7) - (835.7)
Gross profit 180.6 - 180.6
Administrative
expenses (124.3) (32.8) (157.1)
Profit arising
from disposal
of properties - 4.5 4.5
Group
operating
profit 56.3 (28.3) 28.0
Share of
results of
equity
accounted
investments 5.1 - 5.1
Operating
profit 61.4 (28.3) 33.1
Financial
income 40.6 - 40.6
Financial
expense (44.1) - (44.1)
Profit before
tax from
continuing
operations 57.9 (28.3) 29.6
Income tax
expense (14.9) 7.6 (7.3)
Profit after
tax from
continuing
operations 43.0 (20.7) 22.3
Net result for
the period
from
discontinued
operations 83.5
Net result for
the period 105.8
Attributable
to:
Equity holders
of
the parent 105.0
Minority
interest 0.8
Earnings per
share (p)
Continuing
operations
Basic earnings
per share 12.1p
Diluted
earnings per
share 11.9p
Discontinued
operations
Basic earnings
per share 47.1p
Diluted
earnings per
share 46.1p
Total
Basic earnings
per share 59.2p
Diluted
earnings per
share 58.0p
Contact:
Phil Rood
Head of Media Relations
phil.rood@vtplc.com
+44(0)7941-164756
Enquiries:
Paul Lester, Chief Executive +44(0)7785-388664
Phil Rood, Media Relations Tel: +44(0)1489-775213 or +44(0)7941-164756
Contact: Phil Rood, Head of Media Relations, phil.rood at vtplc.com, +44(0)7941-164756. Enquiries: Paul Lester, Chief Executive +44(0)7785-388664, Phil Rood, Media Relations Tel: +44(0)1489-775213 or +44(0)7941-164756.
Tags: London, United Kingdom, VT Group plc
