Final Results
Babcock International Group PLC
20 May 2004
Thursday 20 May 2004
BABCOCK INTERNATIONAL GROUP PLC
2003/4 PRELIMINARY RESULTS
Babcock International Group PLC, the Support Services company, announces its
preliminary results for the year ended 31 March 2004:
2003/4 2002/3 % Change
Sales (1) £438.0m £377.9m +16
Operating profit (2) £25.5m £23.0m +11
Profit before tax (underlying) (3) £23.1m £18.0m +28
Profit before tax £19.8m £13.4m +48
Earnings per share
- basic 11.31p 5.72p +98
- adjusted (3) 13.60p 8.91p +53
Dividend per share 3.35p 3.0p +11.7
Net debt £15.4m £37.2m
(1) Before discontinued operations (2004: £14.0 million, 2003: £45.6 million),
(2) Before goodwill amortisation (2004: £3.3 million, 2003: £1.9 million) and
discontinued operations losses (2004: £0.3 million, 2003: £2.2 million),
(3) Before exceptional items (2004 : £Nil, 2003 £2.7 million) and goodwill
amortisation.
Business Highlights:
• Growth in support services businesses continues with sales from continuing
businesses up 16%
• Profit before tax, goodwill and exceptional items up 28% to £23.1 million
• Contract wins increase order book from £0.6 billion to £1.0 billion
• Earnings per share up 53% to 13.60p, and dividend increased by 11.7%
to 3.35p
• Operating cash flow to operating profit conversion rate of 121% reduces net
debt to £15.4 million from £37.2 million last year
• Rosyth participation in CVF programme confirmed by MoD
• Peterhouse acceptances at first close 41.8%
Commenting, Peter Rogers, Chief Executive, said:
The last year was a good one for Babcock, margins in continuing businesses
remained above our target level and cash control was excellent; resulting in a
further strengthened balance sheet. We have a healthy bid pipeline and as a
result of some significant contract wins our order book has now reached £1.0
billion. The acquisition of Peterhouse will bring further benefits and widen
our customer base.
Contact: Peter Rogers, Chief Executive
Bill Tame, Finance Director
Babcock International Group PLC
Telephone: 020 7269 7291 (am); 020 7291 5000 (after 3pm)
Andrew Lorenz
Richard Mountain
Financial Dynamics
Telephone: 020 7269 7291
Chairman's statement
The year ending March 2004 marked the completion of the first phase of Babcock's
strategic transformation. Profit before tax increased by 48% and the operating
profit of the Training and Support sector rose by 52% exceeding that of
Technical Services for the first time.
These results amply vindicate the decision taken three years ago to transform
Babcock from an engineering conglomerate to a support services business, with
organic growth in these new businesses driving an increase in turnover of 16% in
the continuing businesses and with the Training and Support sector growing by
41%, more than offsetting the decline in turnover at Rosyth. Ministry of
Defence (MoD) contracts already won should enable growth to continue and we have
good hopes of further contract wins to sustain this momentum.
We are now embarking on the second phase of the Babcock transformation, with our
plans to expand into the civil support sector. We announced in March 2004 a
recommended offer for Peterhouse Group plc. This business has similar
characteristics to that of Babcock, in that it provides project management
services to its customers, in operations which have a high technical content.
It has, however, a different customer base to that of Babcock and as such the
combined group would have a more balanced portfolio of customers. The offer,
which comprised approximately 70% in Babcock equity and 30% in cash, would
increase issued share capital by some 38%. Your directors believe that this
acquisition would be earnings enhancing pre-goodwill and exceptional items in
the first full year following completion (*).
The MoD is a valued customer of Babcock and we have had notable successes in the
last year in concluding contracts for South West Regional Prime and RAF Valley.
We have also seen growth in the Single Living Accommodation Modernisation
contract and the contract to manage Her Majesty's Naval Bases on the Clyde.
These have more than offset the decline in turnover in Babcock Defence Services,
as a consequence of the British Army's scale back in Kosovo. However, delays in
converting the Royal School of Military Engineering contract from sole bidder to
financial close and the lack of progress on the Armoured Vehicle Training System
and Airside Support Project highlighted the frustrations experienced in
concluding MoD contracts, and reinforce the benefits of a broader customer base.
Equally, the delays in finalising the contract structure and the build programme
on the new aircraft carrier project show how difficult long term planning can be
in the Defence sector. Discussions are continuing with the MoD on the extent of
our participation in the new aircraft carrier programme and on the workload at
Rosyth in the period to project start. We are optimistic as to the outcome of
these discussions, which are likely to continue for some time.
Earnings per share before goodwill and exceptional items in the year to 31 March
2004 increased by 53% to 13.60p per share and net debt was reduced from £37.2
million to £15.4 million. The directors are recommending a final dividend of
2.1p per share giving a total dividend for the year of 3.35p per share an
increase of 11.7% on the previous year. This final dividend would also be
payable on the new equity issued to Peterhouse shareholders provided that the
offer becomes unconditional before the record date for the final dividend.
The Report and Accounts will show a high level of compliance with the Combined
Code, which has of course been revised following the Higgs Report of last year.
The revised code does not apply to our reporting year under review in the Report
and Accounts and we will be considering carefully during the course of the
current financial year the few areas in which we are not yet compliant.
I said at the beginning of this report that the performance of Babcock justifies
the strategy laid out three years ago. However, a strategy is only as good as
its implementation and the implementation is a function of the quality and
dedication of our employees. The year ending 31 March 2004 has perhaps been
more stable than the immediate previous years for Babcock, and we have seen the
benefits of a consistent strategy and organic growth. Nevertheless this growth
comes as a consequence of the hard work of everyone involved and I would like to
thank all the Babcock people.
The successful implementation of a consistent strategy has produced an increase
in shareholder value. Babcock's shares have out performed the FTSE All-Share
Index by 77% over the five years to 31 March 2004. We are committed to
continued shareholder value creation and believe the prospective acquisition of
Peterhouse would represent an important step in this direction.
Gordon Campbell
(*) The statement that the acquisition will be earnings enhancing, pre-goodwill
and exceptional items, in the first full financial year following completion
does not constitute a profit forecast and should not be interpreted to mean that
the earnings per share in the first full financial year following the
acquisition, or in any subsequent period, would necessarily match or be greater
than those for the relevant preceding financial period.
Chief Executive's operating statement
The past year has been a highly satisfactory one for Babcock. Sales in
continuing businesses rose by 16% and continuing operating profit before
goodwill and exceptional items by 11%. The last Materials Handling businesses
were sold and we have secured a number of significant contract wins. The order
book at 31 March 2004 stood at £1.0 billion (excluding Single Living
Accommodation Modernisation - SLAM) compared to £0.6 billion at the end of the
last financial year. The integration of the two businesses acquired last year
(SGI and MEF) has been completed and both are exceeding our expectations.
The progress made can probably best be judged by looking back two years to 2001/
02 when Training and Support sales were £98.7 million and operating profit
before goodwill and exceptionals was £6.1 million. The combination of organic
growth and acquisitions has resulted in sales for the current year of £252.9
million and operating profit before goodwill and exceptionals of £15.4 million,
increases of 156% and 152% respectively. Further contract wins will continue to
boost turnover and profits.
The decision to re-brand all the constituent parts of our support services
businesses under the 'Babcock' name is paying real dividends with the MoD where
recognition of the Babcock name is now significantly improved compared with the
position of a year ago. This approach to branding has enabled us to build a
common culture across our businesses, thus providing a platform to blend the
skills and talents of our people with the corporate aim of delivering high
quality service to our customers.
We continue to invest significant sums in pursuing contracts, particularly with
the MoD. This is partly as a result of the complexity of the contracts for
which we are bidding and partly a function of the time taken from initial
discussions to award. It is essential that we continue to monitor carefully the
expenditure required to achieve significant contract wins as the process can
generally be measured in years rather than months.
We have also invested considerable effort during the year in building alliances
to strengthen our total offering. We have formal alliance or partnership
agreements with (amongst others) AT&T, Bovis Lend Lease, DynCorp International,
Lockheed Martin and Thales.
Training and Support
Babcock Naval Systems (BNS) is included for a full year in the results, the
start of the contract being in September 2002. The progress made is extremely
encouraging. All key performance indicators which were in operation during the
year were met or exceeded and cost savings are being achieved that are in line
with those for which we are contracted over the initial five year period. There
is still a significant management task ahead but the road map is clear and the
customer is delighted with the progress. The success of the partnering concept
and implementation was recognised by the winning of the Insider Magazine / Bank
of Scotland Public Private Partnership of the Year award.
Babcock Infrastructure Services (BIS) has had an excellent year with the major
contract win being South West Regional Prime (SWRP) which will lead to Babcock
maintaining and upgrading a significant element of the Ministry Estate in the
south west of England for the next seven years. This is the second of the
regional primes to be let and there are three more to be awarded over the next
two years. SLAM has had a somewhat slower start than we anticipated, but the
programme for the 2004/5 year should accelerate the number of units being built.
In addition to the SWRP win BIS also won a contract for the maintenance
management of the Metropolitan Police Estate in London and secured a two year
extension to the contract to provide project management and design services to
the London Borough of Ealing.
Babcock Defence Services (BDS), the business that largely provides operational
support to the Armed Forces, declined in turnover and profit, as anticipated,
with the withdrawal of the British Army from Kosovo. Our people based in the
Balkans and Afghanistan have, however, done an excellent job in developing new
business streams with NATO, the US military and the UN as well as the Ministry
of Defence Estates. A small contract for aircraft technician training in the
Gulf was secured during the year and is now being successfully operated.
The high point for BDS was the win of RAF Valley; a multi-activity contract
which results in Babcock now being responsible for the operational maintenance
of virtually all of the RAF Hawk Fast Jets - a position on which we will seek to
build. Bids are under evaluation for the Armoured Vehicle Training System and
the Airside Support Project - both have been significantly delayed. There has
been gradual forward movement on the Royal School of Military Engineering (where
a Babcock led consortium is sole bidder) during the year. A Babcock led
consortium has been selected as one of the three bidders to submit formal bids
on the core element of the Defence Training Review - a project which is
currently valued at a sum of £5 billion over 25 years.
Babcock Africa had another successful year with significant growth in the
construction equipment sales division and in the support business for energy
generation. Volvo Construction Equipment awarded the 'Dealer of the Year'
trophy to Babcock Africa in recognition of their continuing sales growth.
Eskom, the South African power utility, as forecast, are planning to bring back
on stream significant generation capacity and it is expected that a proportion
of the work involved will be captured by Babcock Africa. In addition the
successful completion of contracts in Libya should lead to further contract wins
and the 'Mondi' co-generation project is moving towards contract.
Technical Services
The turnover of the Technical Services Division declined by 7% during the year
as a result of a decline in the volume of Naval refit work and continuing
difficulty in the fast ferry market. This was partially compensated by new
business won by Babcock Design and Technology and the new Supply Chain Services
business based at Rosyth. Nevertheless profitability, pre-pension costs, has
been maintained during the year. Notable wins during the year included the
manufacture of steel modules for Heathrow's Terminal 5, the MoD 'Design
Alliance' contract won by Babcock Design and Technology and a further Non
Project Procurement Organisation (NPPO) contract won by Supply Chain Services.
The 'SMIT' training boat contract was completed in the first half of the year,
and the programme for the 16 landing craft for the MoD was completed on time in
the second half of the year. These vessels are now in service with the Royal
Marines. The customer has expressed a high level of satisfaction with the
quality and performance of the product.
During the period a total of six naval vessels have completed their refits at
Rosyth to time and to budget. We have received a number of compliments from the
MoD about the quality of the work during the year and in particular in relation
to the partnership ethos at Rosyth: which brings together customer and the
supplier at all levels in an alliance to ensure successful refits. Following
the refit of HMS ARK ROYAL and HMS INVINCIBLE, the third aircraft carrier HMS
ILLUSTRIOUS is now well into its refit and is currently ahead of time and under
budget. A number of minor war vessel refitting contracts were competitively
secured, including HMS CATTISTOCK, GRIMSBY and RAMSAY.
Rosyth is the nominated site for the assembly and integration of the new
carriers and is also expecting to participate extensively in the modular
fabrication programme. However, the construction programme is unlikely to start
before 2007/8. Discussions continue with the MoD as to the best solution for
filling the work gap between the end of the allocated programme of naval refits
during next year and the start of construction of the aircraft carriers. We are
optimistic as to a successful outcome to these discussions.
The two smaller businesses in Technical Services both had difficult years with
New Zealand failing to secure an extension to the current contract and the lack
of activity in the US pipeline market resulting in Eagleton making a small loss
for the year.
Summary & Prospects
The transformation of Babcock into a support services business is now complete.
We have built an effective relationship with the MoD and other public bodies,
which was highlighted by the award of significant contracts. As the public
sector budget issues are resolved, further contracts will be awarded and Babcock
is well-placed to win additional business.
Peter Rogers
Financial review
Overview
I am pleased to report on the conclusion of another successful financial year,
which saw group turnover increase by 7% to £452.0 million and profits before tax
(before goodwill amortisation and exceptional items) by 28% to £23.1 million.
Basic earnings per share (before exceptional items and goodwill) at 13.60p, was
up 53% from 8.91p in the year 2002/03. After goodwill and exceptionals,
earnings per share grew from 5.72p to 11.31p. The group's cash flow performance
was particularly strong, with group net debt ending the year at £15.4 million,
down from £37.2 million at the end of the previous year. On the strength of this
performance the directors recommend a final dividend of 2.1p per share, making a
total dividend payment for the year of 3.35p per share, an increase of 11.7%
over 2002/03.
Trading
Continuing businesses
Turnover from continuing business increased by 16% to £438.0 million and
generated operating profits before goodwill of £25.5 million, an increase of 11%
from 2002/03. A number of milestone events in the year to 31 March 2004
contributed to the continuing financial progress of the group.
In Training and Support, the Babcock Naval Services (BNS) business saw the first
full year of trading from the HM Naval Base Clyde contract and contributed
turnover of £87.6 million and operating profit of £5.3 million (2002/03 £48.7
million, £1.2 million). Similarly, Babcock Infrastructure Services (acquired as
SGI in 2002) completed its first full year in the group with turnover of £24.3
million and operating profit of £1.0 million (2002/03 £16.5 million and £0.9
million respectively).
Babcock Defence Services (BDS), which contributed turnover of £59.5 million and
operating profits (including share of JV's) of £5.6 million (2002/03, £63.7
million, £6.7 million), were successful in their bid for a five year
multi-activity contract at RAF Valley, expected to be worth £65.0 million over
five years, and this will contribute to turnover from April 2004.
Technical Services, with turnover of £185.1 million and operating profit of
£14.5 million, completed the refit of the second aircraft carrier, HMS
INVINCIBLE and commenced work on the refit of the third carrier, HMS
ILLUSTRIOUS, which is due to complete in November 2004.
Babcock Africa made significant progress in increasing its share of the heavy
earth moving equipment market in South Africa through its Volvo franchise and
also secured significant engineering contracts with Eskom and AECI. Babcock
Africa increased turnover by 63% to £81.5 million and operating profit by 207%
to £3.8 million.
Discontinued businesses
The last remaining Materials Handling businesses were disposed of during the
year, giving rise to a net exceptional loss on disposal of £2.5 million. These
businesses, up to the date of disposal, generated turnover of £14.0 million and
operating losses of £0.3 million.
Cash flow and net borrowings
Cash flow from operating activities was £28.0 million (2002/03 £11.3 million).
Working capital increased by only £2.1 million in the year and a reduced
requirement for net fixed capital investment, which was £1.6 million (2002/03
£2.8 million) yielded an operating profit conversion rate after net capital
expenditure of 121% compared to 45% last year. As a consequence, net borrowings
decreased to £15.4 million from £37.2 million at the end of last year.
A major source of cash from operations remains the MoD and the size of
individual cash receipts under these contracts can be very significant. As such,
depending upon the timing of receipt relative to period ends, they may have a
material effect on the reported working capital and cash position.
Last year I referred to certain contracts undertaken in the Rosyth dockyard
containing profit sharing clauses. In the year under review, contrary to
expectation, no material payments were made to the MoD under the shareline
clauses applying to these contracts and it is now anticipated that these
payments, which have been fully provided for in calculating the declared profits
for the years in which they arose, will be made during 2004/05.
After taking into account payments for taxation of £1.6 million (2002/03 £3.0
million), interest on debt £0.4 million (2002/03 £2.5 million) and dividend
payments of £4.5 million (2002/03 £4.2 million) as well as the net cash inflow
from acquisitions and disposals totalling £1.4 million (2002/03 outflow £26.8
million) the net cash generated, before financing and management of liquid
resources, in the twelve months to 31 March 2004 was £20.7 million compared to a
net outflow in 2002/03 of £28.2 million. This outturn was the consequence of
careful attention to the management of working and fixed capital investment as
well as the strong operating result achieved in the year.
Financial items
Interest
The group net interest charge, before exceptional items, at £2.2 million was
£0.4 million below the charge in 2002/03 as a result of a lower average cost of
funds at 7.5% against 7.8% last year and lower monthly average net debt.
In addition the group disposed of an off-balance sheet financial asset during
the year giving rise to an exceptional gain of £1.7 million, which is recorded
on the interest and similar income line in the group's Profit and Loss
statement.
Tax
The group again benefited from the differential tax rates as between that of the
UK and those of overseas jurisdictions as well as tax benefits arising on the
utilisation of prior years' tax losses. As such, the underlying tax rate before
goodwill and exceptionals for the group in 2003/04 was 15.7% (2002/03 26.0%).
The underlying rate next year is expected to be approximately 24.0%.
Returns to shareholders
During the year Babcock's mid-market share price moved from a low of 88 pence to
a high of 138.5 pence and ended the year at 116.5 pence. Compared to the FTSE
All-Share index, this represented an out-performance of 3.5%.
Fully diluted earnings per share were 11.28p, an increase of 98% from 2002/03.
Based on basic earnings pre-goodwill amortisation and exceptional items,
earnings per share were 13.60p compared to 8.91p in 2002/03, an increase of
53%. The bases for the calculation of these statistics are set out in note 7.
The recommended final dividend of 2.1p per share, would make a total for the
year of 3.35p per share, representing a net yield of 2.9% based on the
mid-market price at the close of business on 31 March 2004.
Consolidated shareholders funds stood at £101.1 million, an increase of £13.7
million since last year end.
Acquisitions and disposals
As noted above, the group completed the programme of disposals of the Materials
Handling businesses in November 2003 with the sale of the BMH Marine and related
business assets. Proceeds received were £2.0 million and the loss on disposal
was £2.5 million. This was partially offset by a profit of £0.8 million,
realised on the sale of a non-trading subsidiary.
On the 22 March Babcock announced a recommended offer for Peterhouse Group Plc.
At year end the group held £2.5 million of costs on its balance sheet, in
debtors, representing costs incurred as at 31 March 2004 from the prospective
acquisition. In the event of the acquisition failing, this value and further
costs incurred post 31 March 2004 would be written off through the profit and
loss account. In the event of the offer not being successful approximately £1.0
million of costs may be recoverable from Peterhouse Group Plc depending on the
reasons for such failure.
Pensions
The group maintains two principal defined benefit pension schemes as well as
several money purchase schemes. In calculating the accounting entries for its
defined benefit pension funds the group applies SSAP24 in its consolidated
accounts, using the latest actuarial valuation of the schemes. Since last year
end, the valuation of the Rosyth Royal Dockyard defined benefit scheme, one of
the two principal schemes, as at 31 March 2003 was completed. This showed an
actuarial surplus of scheme assets over scheme liabilities. The SSAP24 surplus
before deferred tax at 31 March 2004 based upon this and the latest valuation of
the other schemes was £67.2 million (2002/03 £69.1 million). The net charge in
the group profit and loss account in respect of all defined benefit schemes was
£2.5 million (2002/03 £0.1 million).
The group applies the transitional rules of FRS17 in disclosing information on
its defined benefit schemes as a note to the accounts. Under this standard, the
net pension surplus of assets over liabilities before deferred tax was £2.0
million compared to a net surplus of £2.3 million last year end and the charge
to profit and loss account would have been £7.6 million against a net credit of
£8.3 million last year.
Bill Tame
BABCOCK INTERNATIONAL GROUP PLC
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2004
Year ended 31 March 2004 Year ended 31 March 2003
Before Before
goodwill Goodwill Goodwill Goodwill
and and and and
exceptional exceptional exceptional exceptional
items items Total items items Total
£m £m £m £m £m £m
Note
Group turnover
Continuing 438.0 - 438.0 377.9 - 377.9
operations
Discontinued 4 14.0 - 14.0 45.6 - 45.6
operations
3 452.0 - 452.0 423.5 - 423.5
Cost of Sales (385.0) - (385.0) (357.8) - (357.8)
Gross Profit 67.0 - 67.0 65.7 - 65.7
Net Operating expenses (41.8) (3.3) (45.1) (44.9) (1.9) (46.8)
Continuing
operations 25.5 (3.3) 22.2 23.0 (1.9) 21.1
Discontinued
operations 4 (0.3) - (0.3) (2.2) - (2.2)
Group operating
profit 3 25.2 (3.3) 21.9 20.8 (1.9) 18.9
Share of operating profit/
(loss) of joint ventures
and associates 0.1 - 0.1 (0.2) - (0.2)
Loss on sale of operations - (1.7) (1.7) - (2.7) (2.7)
Profit or (loss) on ordinary
activities before interest 25.3 (5.0) 20.3 20.6 (4.6) 16.0
Net interest and similar
(charges)/income (2.2) 1.7 (0.5) (2.6) - (2.6)
Profit or (loss) on
ordinary activities before
taxation 23.1 (3.3) 19.8 18.0 (4.6) 13.4
Tax on profit on
ordinary activities 6 (3.4) (5.1)
Profit for the financial
year 16.4 8.3
Dividends paid and
proposed 8 (4.9) (4.4)
Retained profit for the
financial year 11.5 3.9
Earnings per share
7
- Basic 11.31p 5.72p
- Diluted 11.28p 5.69p
Earnings per share before
exceptional items and
goodwill 7
- Basic 13.60p 8.91p
- Diluted 13.57p 8.87p
BABCOCK INTERNATIONAL GROUP PLC
GROUP BALANCE SHEET
FOR THE YEAR ENDED 31 MARCH 2004
As at As at
31 March 2004 31 March 2003
£m £m
Note
Fixed assets
Intangible assets
Development costs 0.7 1.0
Goodwill
- Goodwill 81.5 84.0
- Negative goodwill (4.7) (6.5)
76.8 77.5
77.5 78.5
Tangible assets 12.2 16.5
Investments
Investments in joint ventures
- Share of gross assets 2.4 1.4
- Share of gross liabilities (2.7) (1.8)
- Loans to joint ventures 0.9 0.8
0.6 0.4
Other investments 4.1 3.9
4.7 4.3
94.4 99.3
Current assets
Stocks 29.7 23.4
Debtors - due within one year 75.2 88.7
Debtors - due after more than one year 64.0 69.6
139.2 158.3
Cash and bank balances 11 17.5 12.7
186.4 194.4
Creditors - amounts due within one year (134.7) (159.9)
Net current assets 51.7 34.5
Total assets less current liabilities 146.1 133.8
Creditors - amounts due after more than one year (16.0) (19.0)
Provisions for liabilities and charges (29.0) (27.4)
Net assets 101.1 87.4
Capital and reserves
Called up share capital 90.1 88.9
Share premium account 38.6 38.1
Capital redemption reserve 30.6 30.6
Profit and loss account (58.2) (70.3)
Equity interests 101.1 87.3
Non-equity interests - -
Minority interests - 0.1
101.1 87.4
BABCOCK INTERNATIONAL GROUP PLC
SUMMARISED GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2004
Year ended Year ended
31 March 31 March
2004 2003
Note £m £m
Cash inflow from operating 9 28.0 11.3
activities
Returns on investments and servicing of finance (0.4) (2.5)
Taxation (1.6) (3.0)
Capital expenditure and financial investment (2.2) (3.0)
Acquisitions and disposals 1.4 (26.8)
Equity dividends paid (4.5) (4.2)
Cash inflow/(outflow) before financing 20.7 (28.2)
Management of liquid resources 0.2 (0.2)
Financing (18.8) 20.7
Increase/(decrease) in cash in the year 10 2.1 (7.7)
BABCOCK INTERNATIONAL GROUP PLC
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 MARCH 2004
Year ended Year ended
31 March 31 March
2004 2003
£m £m
Group profit for the financial year 16.4 8.5
Profit/(loss) on joint ventures - (0.2)
Profit for the financial year 16.4 8.3
Currency translation differences on foreign currency net
investments and related loans
0.6 2.0
Total recognised gains and losses relating to the year 17.0 10.3
BABCOCK INTERNATIONAL GROUP PLC
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 MARCH 2004
Year ended Year ended
31 March 31 March
2004 2003
£m £m
Shareholders' funds at start of year 87.3 80.9
Ordinary Shares issued in the year 1.7 0.5
Total recognised gains and losses relating to the year 17.0 10.3
Dividends (4.9) (4.4)
Net movement in shareholders' funds 13.8 6.4
Shareholders' funds at the end of year 101.1 87.3
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2004
1 Basis of Preparation
The financial information set out above does not comprise the company's
statutory accounts. Statutory accounts for the previous financial year
ended 31 March 2003 have been delivered to the Registrar of Companies. The
auditors' report on those accounts was unqualified and did not contain any
statement under section 237(2) and (3) of the Companies Act 1985. The
accounting policies have all been applied consistently throughout the year
and the preceding year.
2 Board Approval
The Board approved the Annual Report on the 19 May 2004. The auditors have
given an unqualified opinion on the accounts for the year ended 31 March
2004, which will be delivered to the Registrar following the Annual General
Meeting.
3 Segmental analysis
Year ended 31 March 2004 Year ended 31 March 2003
Group Group
operating operating
profit Group profit Group
Group before operating Group before Goodwill operating
turnover goodwill Goodwill profit turnover goodwill £m profit
£m £m £m £m £m £m £m
Continuing operations
Technical Services 185.1 14.5 - 14.5 199.1 16.3 - 16.3
Training and Support 252.9 15.4 - 15.4 178.8 10.1 - 10.1
Unallocated costs and
other income - (4.4) - (4.4) - (3.4) - (3.4)
438.0 25.5 - 25.5 377.9 23.0 - 23.0
Goodwill amortisation - - (3.3) (3.3) - - (1.9) (1.9)
Total continuing
operations 438.0 25.5 (3.3) 22.2 377.9 23.0 (1.9) 21.1
Discontinued 14.0 (0.3) - (0.3) 45.6 (2.2) - (2.2)
operations
Group total 452.0 25.2 (3.3) 21.9 423.5 20.8 (1.9) 18.9
The turnover, not included above, relating to joint ventures was £3.5
million (2003: £0.6 million). The share of operating profit of £0.1
million (2003: loss £0.2 million) from joint ventures represents a loss of
£0.1 million with the Technical Services segment (2003: loss £0.2 million)
and a profit with the Training and Support segment of £0.2 million (2003:
nil). The inter segment sales in 2004 and 2003 were not material.
4 Discontinued operations
Discontinued operations comprise the Swedish Materials Handling businesses
which were sold on 30 November 2003.
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2004
5 Exceptional items
In 2004 there were no operating exceptional items (2003: nil).
In 2004 the non-operating exceptional charge of £1.7 million is made up of
a loss on sale of Swedish Materials Handling businesses of £2.5 million,
offset by a profit on the sale of a non-trading subsidiary of £0.8 million.
Net interest and similar income/(charges) includes an exceptional gain of
£1.7 million arising on the disposal of a financial asset.
In 2003 the non-operating exceptional charge of £2.7 million for the loss
on sale of operations represents the loss on disposal of the BMH Chronos
Richardson Group.
6 Taxation
The effective rate of tax in respect of continuing profits before goodwill
exceptional items and discontinued activities is approximately 15.7%. This
is lower than the statutory 30% rate due to the net effect of prior year
items, utilisation of tax losses for which no deferred tax asset has been
recognised and the difference between the UK rate and the effective
overseas rate.
7 Earnings per share
The basic earnings per share has been calculated on the profit for the year
of £16.4 million (2003: profit of £8.3 million) and the weighted average
number of ordinary shares in issue throughout the year of 145,022,090
(2003: 144,812,194).
The diluted earnings per share has been calculated after taking account of
353,923 dilutive share options where the exercise price is less than the
average market price of the company's own shares during the year.
The basic and diluted earnings per share before exceptional items and
goodwill have been calculated using the same weighted average number of
ordinary shares in issue as above and after adjusting for goodwill
amortisation of £3.3 million (2003: £1.9 million), the loss on the sale of
operations of £1.7 million (2003: £2.7 million), and the exceptional
interest income of £1.7 million.
The weighted average number of shares excludes the weighted average shares
held in the Babcock Employee Share Trust.
8 Dividends
A dividend of 2.1p per 60p ordinary share (2003: 1.85p per 60p ordinary
share) will be paid, subject to shareholders' approval, on 9 August 2004 to
shareholders registered on 9 July 2004 or, in relation to ordinary shares
of 60p issued after that date as consideration to shareholders in
Peterhouse Group Plc who accept the offer made by Credit Suisse First
Boston (Europe) Limited on behalf of the company to acquire the entire
issued or to be issued share capital of Peterhouse Group Plc or whose
shares are acquired after that date pursuant to the company's rights under
section 428 to 430F (inclusive) of the Companies Act 1985 (as amended),
such later date as such ordinary shares of 60p are issued from time to time
(in which case payment of the dividend to those shareholders will follow
issue). An interim dividend of 1.25 per 60p ordinary share (2003: 1.15p
per ordinary share) was paid on 23 January 2004.
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2004
9 Reconciliation of operating profit to cash flow from operating activities
Year ended Year ended
31 March 31 March
2004 2003
£m £m
Group operating profit 21.9 18.9
Depreciation and amortisation charges 8.2 11.0
Increase in stocks (8.5) (8.8)
Decrease/(increase) in debtors 13.7 (20.3)
(Decrease)/increase in creditors (7.1) 9.4
(Decrease)/increase in provisions (0.1) 1.1
Other items (0.1) -
Cash inflow from operating activities 28.0 11.3
10 Movement in net debt
Year ended Year ended
31 March 31 March
2004 2003
£m £m
Increase/(decrease) in cash in the year 2.1 (7.7)
(Decrease)/Increase in liquid resources in the year (0.2) 0.2
Cash flow from the decrease/(increase) in debt and lease 20.5 (20.2)
financing
Change in net funds resulting from cash flows 22.4 (27.7)
Loans and finance leases acquired with subsidiaries - (0.1)
New finance leases (0.1) (0.7)
Translation differences (0.5) (0.3)
Movement in net debt in the year 21.8 (28.8)
Net debt at 1 April (37.2) (8.4)
Net debt at 31 March (15.4) (37.2)
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 31 MARCH 2004
11 Changes in net debt
At At
1 April New Finance Acquisitions Exchange 31 March
2003 Cash flow Leases and disposals movement 2004
£m £m £m £m £m £m
Cash and bank balances 9.6 5.4 - - (0.4) 14.6
Bank overdrafts (7.9) (3.3) - - (0.1) (11.3)
1.7 2.1 - - (0.5) 3.3
Debt (40.7) 20.1 - - 0.1 (20.5)
Finance leases (1.3) 0.4 (0.1) - (0.1) (1.1)
(42.0) 20.5 (0.1) - - (21.6)
Liquid resources 3.1 (0.2) - - - 2.9
Total (37.2) 22.4 (0.1) - (0.5) (15.4)
12 AGM
The Annual General Meeting will be held at The Berkeley Hotel, Wilton
Place, Knightsbridge, London, SW1X 7RL, on Friday 16 July 2004, at
11.30 am.
Copies of the 2004 Annual Report and Accounts will be distributed to all holders
of the company's ordinary shares on or before 17 June 2004. Copies will also be
available at the company's registered office: 2 Cavendish Square, London W1G
0PX. In addition, this report will be available on the company's website:
www.babcock.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
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