Interim Results
Babcock International Group PLC
25 November 2004
Thursday 25 November 2004
BABCOCK INTERNATIONAL GROUP PLC
2004/5 INTERIM RESULTS
Babcock International Group PLC, the Support Services company, announces its
results for the half year ending 30 September 2004:
First Half First Half % Change
2004/5 2003/4
Sales - Existing £243m £215m +13
Sales - Acquisitions £96m -
Sales Continuing (1) £339m £215m +58
Operating profit - Existing £15.4m £12.3m +25
Operating profit - Acquisitions £4.9m -
Operating profit - Continuing (2) £20.3m £12.3m +65
Profit before tax £16.6m £9.4m +77
Adjusted profit before tax (3) £17.8m £11.1m +60
Earnings per share 7.72p 5.50p +40
Adjusted earnings per share (3) 7.73p 6.69p +16
Dividend 1.35p 1.25p +8
(1) Before discontinued operations (2005: £Nil, 2004: £10.2m), (2) Before
goodwill amortisation (2005: £2.7m, 2004: £1.6m), discontinued operations losses
(2005: £Nil, 2004: £0.2m), and operating exceptional profit (2005: £3.1m, 2004
£Nil), (3) Before total exceptional items (2005: £1.5m profit, 2004: £(0.1)m)
and goodwill amortisation.
Business Highlights:
• Continuing Sales - growth of 58% including acquisitions (13% excluding
acquisitions)
• Adjusted Profit before tax, goodwill and exceptional items up 60% to
£17.8m
• Adjusted Earnings per share up 16% to 7.73p per share
• Interim dividend up by 8% to 1.35p per share
• Peterhouse acquisition completed and integration going well
• Turner and Partners acquisition strengthens position in telecoms
• Networks to benefit from 3G launch
• Good start to South West Prime and to RAF Valley
• Rail volumes increasing
Commenting, Peter Rogers, Chief Executive, said:
The operating management of both Babcock and the former Peterhouse business
deserve credit for delivering a strong result despite the considerable
distractions of the bid. Looking ahead, the integration process is going well,
and the projected synergies are on course to be achieved or exceeded. We expect
contract activity at the Ministry of Defence to pick up again in the medium
term. The markets served by both our Rail and Networks businesses are entering
a period of growth, and we are optimistic about the prospects for these former
Peterhouse operations. Overall, we view the future of the enlarged Babcock with
confidence.
Contact: Peter Rogers, Chief Executive
Bill Tame, Finance Director
Babcock International Group PLC
Telephone: 020 7269 7291; 020 7291 5000
Andrew Lorenz
Richard Mountain
Financial Dynamics
Telephone: 020 7269 7291
BABCOCK INTERNATIONAL GROUP PLC
2004/5 INTERIM RESULTS
OPERATING AND FINANCIAL REVIEW
Introduction
Clearly the most significant event in the half-year has been the acquisition of
Peterhouse and the consequent integration effort. I am pleased to report that
the progress made so far has been excellent helped by the considerable
contribution of Alan Robertson and Janette Anderson, two directors of the
Peterhouse Group.
The synergy benefits we identified at the time of the acquisition are on course
to be achieved or exceeded; in particular the Peterhouse head office has been
exited some six months earlier than originally forecast, the financial synergies
are in place and the other synergy streams are progressing satisfactorily. Some
additional areas of benefit have been identified and are being pursued. An
assessment of the opportunities for the disposal of some of the smaller non-core
businesses is underway. The successful start to the South West Prime and RAF
Valley contracts, increasing rail replacement volumes, the launch of 3G cellular
telephone technology and increasing spend on reinforcement of the high voltage
power transmission system are all positive developments for Babcock.
The Group has adopted a new segmental reporting structure, which is explained in
detail later in this report. The performance of these segments is outlined in
the Operational Review.
Financial Review
Acquisition of Peterhouse Group PLC
The group declared the offer for Peterhouse Group PLC unconditional in all
respects on the 14th June 2004 and subsequently acquired 100% of the ordinary
share capital for a total consideration of £99.1 million. The results of the
Peterhouse subsidiaries have therefore been fully consolidated from that date.
The consideration for the share capital was met from the issue of 56.3 million
new ordinary shares in Babcock International Group PLC and cash consideration of
£31.7 million. The Group agreed a new £140 million acquisition and working
capital revolving credit facility with its banking partners in order to finance
the offer. The value of net assets acquired after making provisional fair value
adjustments was £32.8 million. Goodwill arising on acquisition was £66.3
million.
New segmental structure
As a consequence of the acquisition of the Peterhouse businesses and in order to
prepare for the implementation of International Financial Reporting Standards,
the Group's segmental reporting structure has been refined.
Training and Support has been replaced by two new segments; Defence Services
combines the services supplied to the UK Ministry of Defence by Babcock
Infrastructure Services, Babcock Naval Services and Babcock Defence Services.
Engineering and Plant Services combines the Group's civil operations in Africa
with the pipeline installation activity, Babcock Eagleton, based in Texas.
The Technical Services segment has been retained and now represents all the
activities undertaken at Rosyth and, until its cessation in May 2004, the
dockyard operation based in New Zealand.
Three new segments have been created for the businesses acquired with
Peterhouse; Networks combines the activities of the power transmission,
telecommunications and site access businesses operating under the Eve brand.
Rail covers both the track renewals and rail projects activities of First
Engineering whilst the IETG environmental services operations and ESS, the
safety training organisation are combined within Health, Safety and
Environmental (H,S&E).
Financial performance
At the operating level, Group operating profit pre exceptional items and
goodwill was £20.3 million, up from £12.1 million last time. Acquisitions
contributed £4.9 million leaving like-for-like operating profit pre goodwill and
exceptional items from existing operations of £15.4 million against £12.3
million last year, an increase of 25%. The underlying margin on existing
operations increased to 6.3% from 5.7%.
The core Peterhouse businesses acquired in mid-June made a strong start.
Networks turnover of £28.7 million generated operating profits of £3.0 million
whilst Rail turnover was £62.4 million in the same period with operating profit
of £2.9million. Prospects for both sectors remain strong. The remaining H,S&E
businesses, which are non-core to Babcock, turned over £4.7 million, losing £0.6
million at the operating level.
Group profit before tax after goodwill and exceptional items for the six months
to 30 September 2004 was £16.6 million, up from £9.4 million in the same period
last year. Turnover, before discontinued businesses, was £339.2 million, an
increase of 58% from £214.9 million in 2003, of which £95.8 million came from
the former Peterhouse businesses acquired in June 2004. Net debt increased to
£71.1 million through a combination of additional bank borrowings taken on to
fund the acquisition of Peterhouse (£31.7 million) and the debt assumed on
acquisition. Cash flow from operating activities was £25.3 million, after
excluding operating exceptionals this translated to a conversion rate of 84% on
Group operating profit. Cash flows include the receipt of £20.6 million from
Network Rail which included compensation for the early termination of three
track maintenance contracts in June 2004.
Profit on ordinary activities after taxation was £13.5 million up from £8.0
million last year. Earnings per share was 7.72p (2003: 5.50p). Before goodwill
and exceptional items, earnings per share was 7.73p against 6.69p last year, up
16%.
Goodwill and exceptional items
A number of operating and non-operating exceptional items are reported in the
first six months. These are summarised below:
Cash Non cash Total
£m £m £m
Re-organisation of marine design and (0.8) (4.6) (5.4)
goodwill impairment
Exceptional gain on termination of rail 10.0 - 10.0
maintenance contracts
Peterhouse rationalisation costs (1.5) - (1.5)
Disposals - non operating (1.2) (0.4) (1.6)
6.5 (5.0) 1.5
The standard goodwill amortisation charge was £2.7 million of which £1.0 million
relates to the newly acquired Peterhouse businesses.
Financial items
Net interest payable increased to £2.7 million from £1.0 million
(pre-exceptional) last year following the increase in net debt arising from the
acquisition of Peterhouse.
Tax is charged at 24% of profits, which is expected to be the relevant rate for
the 2004/2005 financial year. The group benefits from a tax rate lower than the
standard UK corporation tax rate of 30% as a result of differential overseas tax
rates applied to certain earnings and the utilisation of prior year's tax
losses.
Dividends
The directors have declared an interim dividend of 1.35p per ordinary share, an
increase of 8% from last year.
The final dividend for the year ended 31 March 2004 exceeded the amount accrued
by £1.2 million as a result of the additional shares issued in connection with
the acquisition of Peterhouse Group PLC. This amount is reflected in this year's
Profit and Loss account.
OPERATIONAL REVIEW
Defence Services (Turnover £107.9 million)
A very satisfactory first half for our Defence Services businesses with sales up
by 30% and operating profit (pre-goodwill) increasing by 70% compared with the
same period last year. The highlights of the first half were the start of the
Regional Prime South West and RAF Valley contracts. Both activities have
performed well in the initial period with our customers expressing satisfaction
on service delivery. In both cases our preparatory work was of a high standard
and we have therefore had no surprises on going live.
Naval services also performed well in the first half, gaining some additions to
the initial contract and improving margins as we became increasingly confident
that we will achieve better than contracted savings over the lifetime of the
contract.
Progress on bids for the Ministry of Defence remains difficult as the Ministry
comes to terms with its budget problems, however there does appear to be some
progress on the Royal School of Military Engineering which now has an agreed
timetable to approval and contract award. The withdrawal by the Ministry of the
Airfield Support Project after 4 years of bidding activity was disappointing.
We will continue to be selective in deploying company resource only on bids
where we believe our chances of contract award are good.
Technical Services (Turnover £82.8 million)
The programme at Rosyth was, in the first half year, driven by work on the refit
of HMS Illustrious. This £100 million programme is on time and under budget and
the customer has expressed great satisfaction with the partnering arrangements
and the quality of the work. We have won a number of refit contracts in
competition in the last few months the most important of which were HMS
Edinburgh and HMS Northumberland. The refit market will continue to be
challenging over the next two years and we will be bidding aggressively to
secure further contracts. Terminal 5 work is building up quickly and will
continue to increase until the First Quarter of 2005. Further contracts for
modules on Terminal 5 remain to be let and we are hopeful of success on a number
of these. If successful these would provide significant work through to the end
of next year. Supply Chain Services, the business created two years ago,
continued to grow profitably while Design and Technology and MEF both increased
profits during the period.
A restructuring at Rosyth was carried out to reorganise its division into
separate business lines. This resulted in the loss of some 325 jobs.
A detailed review of our two marine design businesses FBM and ATA was carried
out during the period. As a result of the review both were downsized
significantly and the resultant goodwill write-off and restructuring costs of
£5.4 million are included in the results.
As we have previously stated, Babcock is participating in discussion with the
government and other key players in UK shipbuilding and repair on the future of
the industry. We will evaluate any proposals that may emerge from discussions,
in the light of their ability to generate shareholder value.
Engineering and Plant Services (Turnover £52.7 million)
A good half-year for Engineering and Plant Services as a result of continued
progress in our African business. Sales increased by 13% and operating profits
(pre-goodwill) rose by more than 25%. Contracts for power station refurbishment
in Libya helped the results as did a continuing gain in Volvo market share in
Southern Africa. A number of significant contracts are currently being bid.
Eagleton, the oil pipeline business, continued to suffer from a very slow market
and appropriate steps have been taken to downsize the business.
Networks (Turnover £28.7 million in 3.5 months)
The Eve networks business has progressed well since acquisition. The
transmission business in particular has delivered excellent performance - it has
continued to perform above our initial expectations and a number of substantial
tenders have been issued by National Grid Transco in recent weeks. The telecoms
business performed steadily and there are now clear signs that the network
operators are gearing up for the expected expansion following launch of 3G
technology. Since the acquisition of Turner and Partners a number of acquire
design and build contracts have been won. Our range of services in the cellular
market now allows us to promote a comprehensive range of services which none of
our competitors provide. Trakway had a reasonable summer period but activity
over the traditionally slow autumn and winter period will determine the outcome
for the year- wet weather is a significant help to this business. We continue
to review our options for Trakway.
Rail (Turnover £62.4 million in 3.5 months)
The rail business has performed in line with our expectations at the time of
acquisition with activity now beginning to build. The contracts for 'plain
line' renewals are functioning well, although activity in the signalling and
communications areas remain slow as Network Rail prioritises its requirements.
We expect activities in these areas to increase in the next year. The contract
win for high output track renewal (a technology which enables new track to be
laid much more quickly than traditional methods) will ensure that we are in a
leading position in the drive for increased productivity in this area. The
maintenance contracts and the associated people were successfully transferred to
Network Rail at the end of June and there was an initial restructuring of the
business to address the need to reduce costs following the transfer.
Summary and Prospects
The operating management of both Babcock and the former Peterhouse business
deserve credit for delivering a strong result despite the considerable
distractions of the bid. Looking ahead, the integration process is going well,
and the projected synergies are on course to be achieved or exceeded. We expect
contract activity at the Ministry of Defence to pick up again in the medium
term. The markets served by both our Rail and Networks businesses are entering
a period of growth, and we are optimistic about the prospects for these former
Peterhouse operations. Overall, we view the future of the enlarged Babcock with
confidence.
BABCOCK INTERNATIONAL GROUP PLC
SUMMARISED GROUP PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2004
Six months ended 30 September 2004 Six months ended 30 September 2003
Year Before
ended Before Goodwill goodwill Goodwill
31 March goodwill and and and and
2004 exceptional exceptional exceptional exceptional
Total items items Total items items Total
£m (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Note £m £m £m £m £m £m
Group turnover
438.0 Existing operations 243.4 - 243.4 214.9 - 214.9
- Acquisitions 95.8 95.8 - -
438.0 Continuing operations 339.2 339.2 214.9 214.9
14.0 Discontinued operations - - - 10.2 - 10.2
452.0 3 339.2 - 339.2 225.1 - 225.1
Group operating profit/
(loss)
22.2 Existing operations 15.4 (7.1) 8.3 12.3 (1.6) 10.7
- Acquisitions 4.9 7.5 12.4 - - -
22.2 Continuing operations 20.3 0.4 20.7 12.3 (1.6) 10.7
(0.3) Discontinued operations - - - (0.2) - (0.2)
21.9 3 20.3 0.4 20.7 12.1 (1.6) 10.5
Share of operating
profit of joint
ventures and
0.1 associates 0.2 - 0.2 - - -
Provision for loss on sale of
(1.7) operations 5 - (1.6) (1.6) - (1.8) (1.8)
Profit/(loss) on ordinary
activities before interest
20.3 20.5 (1.2) 19.3 12.1 (3.4) 8.7
Net interest and similar
(0.5) charges (2.7) - (2.7) (1.0) 1.7 0.7
Profit/(loss) on ordinary
activities before taxation
19.8 17.8 (1.2) 16.6 11.1 (1.7) 9.4
Tax on profit/(loss) on
(3.4) ordinary activities 6 (3.1) (1.4)
Profit on ordinary
16.4 activities after taxation 13.5 8.0
Dividends paid and
(4.9) proposed 8 (3.9) (1.8)
Retained profit for the
11.5 financial period 9.6 6.2
Earnings per share 7
11.31p - Basic 7.72p 5.50p
11.28p - Diluted 7.70p 5.47p
Earnings per share
before exceptional
items and goodwill 7
13.60p - Basic 7.73p 6.69p
13.57p - Diluted 7.72p 6.66p
BABCOCK INTERNATIONAL GROUP PLC
GROUP BALANCE SHEET
AS AT 30 SEPTEMBER 2004
As at
Year As at 30 September
ended 30 September 2003
31 March 2004 2004 (unaudited)
(as restated) (unaudited) (as restated)
£m £m £m
Note
Fixed assets
Intangible assets
0.7 Development costs - 0.8
Goodwill
81.5 - Goodwill 144.2 83.6
(4.7) - Negative goodwill (3.8) (5.6)
76.8 140.4 78.0
77.5 140.4 78.8
12.2 Tangible assets 38.7 15.0
Investments
Investments in joint ventures
2.4 - Share of gross assets 1.7 2.1
(2.7) - Share of gross liabilities (1.3) (2.6)
0.9 - Loans to joint ventures 0.1 1.1
0.6 0.5 0.6
0.1 Other investments 5.2 0.1
0.7 5.7 0.7
90.4 184.8 94.5
Current assets
29.7 Stocks 23.8 28.0
75.2 Debtors - due within one year 178.3 92.1
64.0 Debtors - due after more than one year 105.1 65.4
139.2 283.4 157.5
17.5 Cash and bank balances 11 39.1 14.0
186.4 346.3 199.5
Creditors - amounts due within one year
(17.2) - Borrowings 11 (103.1) (24.8)
(117.5) - Other (199.4) (132.2)
(134.7) (302.5) (157.0)
51.7 Net current assets 43.8 42.5
142.1 Total assets less current liabilities 228.6 137.0
Creditors - amounts due after more than one year
(15.7) - Borrowings (7.1) (15.8)
11
(0.3) - Other - (0.1)
(16.0) (7.1) (15.9)
(29.0) Provisions for liabilities and charges (50.5) (31.1)
97.1 Net assets 171.0 90.0
Capital and reserves
90.1 Called up share capital 124.6 89.2
38.6 Share premium account 69.0 38.2
30.6 Capital redemption reserve 30.6 30.6
(62.2) Profit and loss account (53.2) (68.1)
97.1 Shareholders' funds 171.0 89.9
- - Equity minority interests - 0.1
97.1 171.0 90.0
BABCOCK INTERNATIONAL GROUP PLC
SUMMARISED GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
Six months Six months ended
ended 30 September
Year ended 30 September 2003
31 March 2004 (unaudited)
2004 (unaudited) (as restated)
(as restated) Note £m £m
£m
28.0 Cash inflow from operating activities 9 25.3 13.4
(0.4) Returns on investments and servicing of finance (2.4) 0.8
(1.6) Taxation (2.5) (0.7)
(1.8) Net capital expenditure and financial investment 0.4 (0.8)
1.4 Acquisitions and disposals (24.7) 1.1
(4.5) Equity dividends paid (4.3) (2.7)
Cash (outflow)/inflow before management of liquid
21.1 resources and financing (8.2) 11.1
0.2 Management of liquid resources 0.9 0.2
(19.2) Financing 34.2 (5.9)
2.1 Increase in cash in the period 11 26.9 5.4
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
Year ended Six months Six months ended
31 March ended 30 September
2004 30 September 2003
2004 (unaudited)
(unaudited) £m
£m £m
16.4 Profit for the financial period 13.5 8.0
Currency translation differences on foreign currency net
0.6 investments and related loans - 0.7
17.0 Total recognised gains and losses relating to the period 13.5 8.7
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
Year ended
31 March Six months Six months
2004 ended ended
(as restated) 30 September 30 September
£m 2004 2003
(unaudited) (unaudited)
£m (as restated)
£m
Shareholders' funds at start of period, as
87.3 previously reported 101.1 87.3
(3.9) Prior year adjustment 12 (4.0) (3.9)
Shareholders' funds at start of period, as
83.4 restated 97.1 83.4
1.7 Shares issued in the period 64.8 0.5
Total recognised gains and losses relating
17.0 to the period 13.5 8.7
(4.9) Dividends (3.9) (1.8)
Movement on Employee Share Ownership
(0.1) Plan (0.5) (0.9)
13.7 Net movement in shareholders' funds 73.9 6.5
97.1 Shareholders' funds at end of period 171.0 89.9
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
1 Accounting policies
The interim financial statements have been prepared in accordance with the
accounting policies adopted in the preparation of the financial statements for
the year ended 31 March 2004, as set out in the annual report for that year
except the adoption of UITF 38: Accounting for ESOP trusts. The cumulative
effect of this change in accounting policy has been recognised as a prior year
adjustment and comparative figures have been restated. The effect on the
financial statements is set out in note 12.
2 Basis of preparation
The comparative figures for the year ended 31 March 2004 and the other financial
information contained in this interim report do not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
financial information in the interim report is unaudited.
Statutory accounts for the year ended 31 March 2004 have been delivered to the
Registrar of Companies. The auditors have reported on those accounts, their
report was not qualified and did not contain a statement under section 273(2) or
(3) of the Companies Act 1985.
The interim report for the six months ended 30 September 2004 was approved by
the Directors on 24 November 2004.
3 Segmental analysis
Six months ended 30 September 2004 Six months ended 30 September 2003
Group
Group operating
operating Goodwill profit
profit and before Goodwill
before operating Group goodwill and Group
Group goodwill and excep- operating Group and operating operating
turnover exceptionals tionals profit turnover exceptionals exceptionals profit
£m £m £m £m £m £m £m £m
Existing operations
Defence Services 107.9 8.5 - 8.5 82.6 5.0 - 5.0
Technical Services 82.8 6.7 (5.4) 1.3 85.8 7.2 - 7.2
Engineering & Plant
Services 52.7 2.8 - 2.8 46.5 2.2 - 2.2
Unallocated costs, other
income and goodwill - (2.6) (1.7) (4.3) - (2.1) (1.6) (3.7)
243.4 15.4 (7.1) 8.3 214.9 12.3 (1.6) 10.7
Acquisitions
Networks 28.7 3.0 - 3.0 - - - -
Rail 62.4 2.9 10.0 12.9 - - - -
HS&E 4.7 (0.6) - (0.6) - - - -
Unallocated costs, other
income and goodwill - (0.4) (2.5) (2.9) - - - -
95.8 4.9 7.5 12.4 - - - -
Total continuing
operations 339.2 20.3 0.4 20.7 214.9 12.3 (1.6) 10.7
Discontinued operations - - - - 10.2 (0.2) - (0.2)
Group total 339.2 20.3 0.4 20.7 225.1 12.1 (1.6) 10.5
Goodwill charge on continuing business for the six months to 30 September
2004 was £1.7m (2003: £1.6m), and on acquisitions was £1.0m (2003: nil).
The results of the Peterhouse business included above, are consolidated
from the effective date of acquisition - 14 June 2004.
4 Operating exceptional items
Within continuing businesses an operating exceptional loss of £5.4m (2003: nil)
was realised representing £0.8m of restructuring costs and £4.6m of goodwill
write-off on the downsizing of the Group's marine design subsidiaries. Within
acquired businesses an operating exceptional profit of £10.0m reflects income
from the transfer of rail maintenance contracts back to Network Rail offset by
costs of the transfer and restructuring costs within the Rail business. There
is also £1.5m of operating exceptional costs for the closure of the Peterhouse
head office.
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
5 Non operating exceptional items
The non operating exceptional loss of £1.6m (2003: £1.8m) was made up of the
following; a loss of £1.2m provided in the period for disposal costs of
previously disposed of businesses, a loss of £0.4m was recognised on the sale of
CMR Consultants Limited and a write down of the carrying value of the joint
venture of FBMA which was sold on 10 October 2004.
6 Taxation
The charge for taxation has been based on the estimated effective tax rate for
the year ended 31 March 2005. The tax effect in respect of operating
exceptional items and goodwill is a £1.2m credit (2003: nil). There is no tax
effect on the non operating exceptional items.
7 Earnings per share
The basic earnings per share has been calculated on the profit for the period of
£13.5m (2003: profit of £8.0m) and the weighted average number of ordinary
shares in issue throughout the period of 174,971,031 (2003: 144,696,659).
The diluted earnings per share has been calculated after taking account of
1,794,503 dilutive share options where the exercise price is less than the
average market price of the company's own shares during the period.
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 £2.7m (2003:
£1.6m), the loss on the sale of operations of £1.6m (2003: £1.8m) and operating
exceptional items of £3.1m (2003: nil) and also adjusting for the tax effect
(credit £1.2m) on exceptionals. The 2003 number also included an adjustment for
the exceptional interest income of £1.7m.
8 Dividends
An interim dividend of 1.35p per 60p ordinary share (2003: 1.25p per 60p
ordinary share) will be paid on 21 January 2005 to shareholders registered on 17
December 2004. The final dividend for the year ended 31 March 2004 exceeded the
amount accrued by £1.2m as a result of the additional shares issued following
the acquisition of Peterhouse Group PLC.
9 Reconciliation of operating profit to cash flow from operating
activities
Six months ended Six months ended
30 September 2004 30 September
Year ended (unaudited) 2003
31 March £m (unaudited)
2004 £m
£m
21.9 Group operating profit 20.7 10.5
4.7 Depreciation 3.3 2.4
0.2 Amortisation and impairment of development costs 0.7 0.1
3.3 Amortisation of goodwill 2.7 1.6
- Impairment of goodwill 4.7 -
(2.0) Movement on working capital (7.4) (1.2)
(0.1) Other items 0.6 -
28.0 Cash inflow from operating activities 25.3 13.4
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
10 Movement in net debt
Six months Six months
ended ended
Year ended 30 September 30 September
31 March 2004 2003
2004 (unaudited) (unaudited)
£m £m £m
2.1 Increase in cash in the period 26.9 5.4
(0.2) Decrease in liquid resources in the year (0.9) (0.2)
20.5 Cash flow from the (increase) / decrease in debt and (34.6) 5.4
lease financing
22.4 Change in net debt resulting from cash flows (8.6) 10.6
- Loans and finance leases acquired with subsidiaries (47.1) -
(0.1) New finance leases - -
(0.5) Foreign currency translation differences - (0.1)
21.8 Movement in net debt in the period (55.7) 10.5
(37.2) Net debt at the start of the period (15.4) (37.2)
(15.4) Net debt at the end of the period (71.1) (26.7)
11 Changes in net debt
At Acquisitions Exchange and At
1 April and other 30 September
2004 Cash flow disposals non-cash 2004
£m £m £m changes £m
£m
Cash and bank balances 14.6 (5.4) 27.9 - 37.1
Bank overdrafts (11.3) 15.3 (10.9) - (6.9)
3.3 9.9 17.0 - 30.2
Debt (20.5) (35.7) (37.3) - (93.5)
Finance leases (1.1) 1.1 (9.8) - (9.8)
(21.6) (34.6) (47.1) - (103.3)
Liquid resources 2.9 (0.9) - - 2.0
Total (15.4) (25.6) (30.1) - (71.1)
12 Prior year adjustment
The results for the six months to 30 September 2003 and year end to 31 March
2004 have been restated following the adoption of UITF Abstract 38 'Accounting
for ESOP Trusts'. Shares held by the Babcock International Group PLC ESOP Trust,
previously shown in the balance sheet as fixed asset investments, are now
required to be shown as a deduction from Shareholders' Funds.
The impact of the treatment above is to reduce investments by £4.8m as at 30
September 2003 and by £4.0m at 31 March 2004.
The consolidated cash flow statement has been restated to reflect the
reallocation of the cash payments to the purchase of shares from 'Capital
expenditure and financial investment' to 'Financing'. There is no material
impact on profit before tax in either current or prior periods.
BABCOCK INTERNATIONAL GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
13 Acquisitions and disposals
On 14 June 2004 Babcock acquired Peterhouse Group PLC, the following is a
summary of the provisional acquisition balance sheet;
Provisional Fair
Value
Peterhouse Book Adjustments Provisional Fair
Value Value
Tangible Fixed Assets 37.8 (6.8) 31.0
Investments 5.1 - 5.1
Total Fixed Assets 42.9 (6.8) 36.1
Stocks 5.2 1.6 6.8
Debtors 104.8 32.5 137.3
Cash 27.8 - 27.8
Creditors (92.1) (3.2) (95.3)
Finance Leases (9.9) - (9.9)
Borrowings (48.2) - (48.2)
Provisions for liabilities and charges (14.8) (7.0) (21.8)
Net Current Assets (27.2) 23.9 (3.3)
Net Assets Acquired 15.7 17.1 32.8
Fair value consideration
Cash 31.7
Shares 64.7
Costs 2.7
Goodwill arising 66.3
On 14 June 2004 the percentage of acceptances received was 55.7% with the
remaining acceptances received over the following months. The change in
percentage ownership in this period did not materially affect the fair value of
assets acquired or the resultant goodwill reflected above.
During the six months to 30 September 2004 the Group also acquired Turner &
Partners (10 September 2004) and sold CMR Consultants Limited (13 July 2004).
14 Distribution
Copies of this interim report will be distributed to all holders of the
company's ordinary shares. 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
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