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VT Group plc (VTG)

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Tuesday 13 May, 2008

VT Group plc

VT Group plc : Preliminary Announcement of Resu...

LONDON, May 13 /PRNewswire/ --     VT Group plc, the defence and support 
services company, today
announces its preliminary results for the year ended 31 March 2008. These
results are prepared under International Financial Reporting Standards.

Results Summary - Continuing Operations:

                                            2008            2007     Change
    Turnover*                         GBP1,201.0 m    GBP1,004.6 m   + 20 %
    Revenue Excluding Joint Ventures  GBP1,020.0 m      GBP852.5 m   + 20 %
    Underlying Profit Before             GBP89.1 m       GBP74.2 m   + 20 %
    Profit Before Taxation               GBP71.3 m       GBP53.8 m   + 33 %
    Adjusted Earnings Per Share             35.5 p          30.9 p   + 15 %
    Basic Earnings Per Share                32.2 p          25.4 p   + 27 %
    Full Year Dividend Per Share (p)        13.1 p          11.9 p   + 11 %

    * Includes share of revenue from equity accounted joint ventures and

    ** Excludes intangible amortisation arising from business combinations
(GBP9.9m; 2007: GBP7.7m), share of joint venture taxation (GBP7.9m; 2007:
GBP6.7m) and non-recurring charges in respect of exiting businesses (GBPnil;
2007: GBP6m)

    *** Before intangible amortisation arising from business combinations and
non-recurring charges in respect of exiting businesses

These definitions apply throughout this statement


    Financial -

    - Turnover up by 20 per cent and underlying profit up by 20 per cent
    - Closing order book GBP4.9 billion (up 32 per cent from last year)

    Strategic -

    - Continuing organic growth of the business
    - Expansion into new areas of engineering support services: nuclear and
    - Framework agreement signed for shipbuilding and naval support Joint

    Operational -

    - Contract signed for Future Strategic Tanker Aircraft (FSTA) programme -
    - UK Military Flying Training System (MFTS) contract expected shortly
    - Lewisham BSF contract signed, worth up to GBP325 million
    - Good operating cash conversion


    VT Group Chairman Michael Jeffries said: "The Group continues
to make excellent progress with strong results shown by all our divisions.

    "Our strategy of focusing on developing engineering support
businesses has seen us move into new sectors of high growth activity through
nuclear services and waste management.

    "We continue to grow the order book and we have achieved
significant milestones in aviation support with the signing of the Future
Strategic Tanker Aircraft (FSTA) programme and the Military Flying Training
System expected shortly.

    "BVT Surface Fleet Limited, our Joint Venture in shipbuilding
and naval support with BAE Systems, is ready to be implemented as soon as the
Government confirms the placement of the manufacturing contract for the Royal
Navy's new aircraft carriers (CVF).

    We have a well planned strategy to grow our engineering
support services activities and we are also in a good position to benefit
from excellent visibility of earnings, strong operating cash flow and good
order pipeline. The Board remains confident for the current year and beyond."


Chairman's Statement

    This has been another successful year for the Group. We have
enhanced the long-term visibility of our business and expanded the range of
our engineering support services into new high growth sectors.

    Turnover increased by 20 per cent to GBP1,201 million (2007:
GBP1,005m). Underlying profit before taxation improved by 20 per cent to
GBP89.1 million (2007: GBP74.2m) with the corresponding adjusted earnings per
share improving by 15 per cent to 35.5p (2007: 30.9p). Operating cash
conversion during the period was 81 per cent. This performance has enabled
the Board to recommend a final dividend of 9.55 pence, giving a total
dividend for the year of 13.1p pence per share, an increase of 11 per cent
over last year.

    It is pleasing to note that of the 20 per cent increase in
turnover achieved across all our divisions, over half was attributable to
organic growth.

    We continue to be encouraged by the performance of the Group,
the dedication and capability of its employees and the strong culture of
working together that prevails across the Group and with our key customers.
These are important strengths as we become involved in larger programmes and
engage with new customers.

    Our strategy will continue to concentrate upon
engineering-based support services which utilise our technical and project
management skills. Our focus on higher value services will remain an
important driver as we continue to grow our existing business organically and
identify further suitable acquisition targets.

    All our divisions have made significant progress over the past
year and we have plans to increase our presence in areas such as nuclear
services and waste management.

    The Group has won important roles in some of the largest
defence Private Finance Initiative (PFI) and support services programmes
placed by the Ministry of Defence, namely the Future Strategic Tanker
Aircraft (FSTA) and UK Military Flying Training System (MFTS). We expect the
latter to reach contract close shortly.

    Our emphasis on engineering support services will increase
when we form the shipbuilding and naval support Joint Venture with BAE
Systems (BVT Surface Fleet Limited). We have been reassured by the recent
statements from HM Government and comments from the Prime Minister that the
aircraft carrier project will go ahead. It has also been positive to see
significant long lead forward orders being placed for equipment and steel for
the ships. We understand that the Ministry of Defence is now in the final
stages of its spending decision planning and we are optimistic that an
announcement will be made shortly.

    The formation of BVT will create a world class company that
will serve the interests of the UK market and will successfully address
overseas markets, securing the future for the industry and benefiting the UK.
VT and BAE Systems are ready to implement the joint venture once approval is
given for the CVF manufacturing programme.

    Our shipbuilding business continues to perform well. We will
complete our contribution to the Type 45 destroyer programme on time by the
end of this year and the export orders for Oman and Trinidad and Tobago
provide us with a workload until 2011. We also have encouraging further
export prospects.

    Our support services businesses have all contributed to the
progress of the Group with VT Communications maintaining good profit margins;
VT Education and Skills showing marked improvement in underlying operating
profit and margins; VT Support Services strengthening its position in key
markets; and in the US we grew margins by developing higher value technical

Board and People

    In November last year, we were delighted to welcome Philip
Harrison to the Board as Group Financial Director. Phil took over the
financial reins from Chris Cundy, who had been temporarily fulfilling the
role of Finance and Commercial Director. His arrival means that Chris is now
free to concentrate on his commercial role which has become increasingly
important to the Group as we become involved in larger programmes.

    This month's Board meeting also saw David Thorpe step down as
a non-executive director after five years serving VT Group. David has been a
valued member of the board and we thank him for his important contribution to
VT's progress.

    In his place we welcome Balfour Beatty Chief Executive Officer
Ian Tyler. Ian joined Balfour Beatty as Finance Director in 1996. He
subsequently became Chief Operating Officer and took over as CEO in 2005.
Ian's business knowledge and experience, especially in Balfour Beatty's
development as a major services provider, will be of great benefit as we
continue to implement the Group strategy.

    Peter McIntosh has rejoined VT after a two-year spell on
secondment as Chief Executive of the Aircraft Carrier Alliance. Peter has
returned to the Board and is responsible both for our shipbuilding business
and for our new activities in the nuclear and waste sectors.

    The continuing success of our business can only be achieved
through our people: their drive and enthusiasm is fundamental to our unique
VT culture. In our management teams, we have the experience and expertise to
pursue our corporate strategy and to drive the business forward.


    The progress of the Group and the growth of our order book to
GBP4.9 billion reflect the continuing successful implementation of our
corporate strategy. We intend to concentrate on the organic development of
new business in engineering support services whilst maintaining a well
planned acquisition policy.

    The formation of BVT will provide us with a further
opportunity to take the Group forward. Our continuing development into a
broader based support services group will capitalise on the engineering-based
heritage that has been the foundation for VT's success. We will continue to
apply this expertise to markets which are critical to the success of our
customers, primarily in Government sectors. This model has been evident in
our two most recent acquisitions, VT Aepco in the United States and VT
Nuclear Services.

    The Future Strategic Tanker Aircraft (FSTA) and the
forthcoming Military Flying Training System (MFTS) projects are good examples
of our ability to augment our organic business by securing long-term
programmes which provide excellent visibility of earnings. As pressure mounts
on defence and other UK Government budgets, we believe that our position as a
leading support services company will be enhanced as HM Government looks
increasingly to the private sector to provide efficient, cost-effective
support activities.

    In the immediate future, we are competing for further
programmes including Whole Fleet Management (WFM), New Dimensions and Search
and Rescue (Helicopter) where our capability means that we are well placed to
provide the solution which the customer is seeking.

    Customer requirements for more efficient, more affordable
support also place us in a good position to expand our role in new markets,
including nuclear services and waste management. The GBP75 billion budget for
decommissioning nuclear facilities that is projected until 2035 was an
important factor in our acquisition of VT Nuclear Services, formerly British
Nuclear Group Project Services, and this move has been further highlighted by
the Government identifying nuclear power as a fundamental part of future
energy requirements in the UK.

    Having achieved preferred bidder status in the competition to
provide a Private Finance Initiative (PFI) waste management and recycling
facility in the Metropolitan Borough of Wakefield, Yorkshire, several other
opportunities have now emerged as local authorities look to reduce their
dependence on landfill schemes to meet EU regulatory requirements.

    Environmental services businesses offer a considerable
opportunity as we move towards becoming a broadly based engineering support
services business.

    VT Communications will benefit from providing information,
communications and technology services to both the FSTA and MFTS programmes
and the business continues to strengthen its position in the provision of new
media distribution and digital transmission. It has also secured business in
relation to the television switchover from analogue to digital signalling.
VTC's organic growth is expected to be strengthened by the extension of its
Government contract.

    VT Education and Skills (VTE&S) has shown an improvement in
profit. The division has expanded its work in providing education services
and has also exploited an opportunity to strengthen its position in supplying
engineering training for the automotive industry. Further potential exists to
improve our market share in this sector. VTE&S continues to address new
Building Schools for the Future opportunities, concentrating on its role as a
specialist provider of education services.

    Education and skills remains a challenging market but we
believe that VT is now recognised as a significant player in the sector and
can leverage this position to further develop the business. The planned
acquisition of the rest of Flagship Training, through the BVT JV agreement,
will make VTE&S the UK's biggest education and training provider.

    The acquisition of VT Aepco in the US has strengthened our
links with the US Army and the US Government. We have already seen the
benefits of the acquisition through the continued improvement in margins of
the US business and this strategy to increase returns from the activities of
VT Services Inc. will continue.

    VT Support Services continues to make good progress and the
addition of FSTA and MFTS will provide further long-term organic growth. With
several major prospects, the division is set to maintain its role as a
leading provider of support services in the defence, emergency services and
commercial markets.

    VT Shipbuilding continues to develop prospects for work
overseas. We are working closely with our Greek partners, Elefsis
Shipbuilding, to secure a further order from the Hellenic Navy for fast
attack craft and prospects in Saudi Arabia and Libya are progressing.

Operating and Financial Review


                                  31 March
                             2008          2007
                             GBPm          GBPm

    Turnover          GBP 107.2 m     GBP 99.2m
    Underlying         GBP 17.7 m     GBP 15.7m
    Operating profit
    Margin                 16.5 %        15.8 %


    - New business won for FSTA
    - Defence High Frequency Communications Service (DHFCS) delivered six
      months ahead of schedule
    - Potential extension to a Government contract
    - Delivery for Arqiva of UK digital switch-over

    VT Communications (VTC) has again achieved double digit growth
in profits and also good progress on margins. The order book has good
visibility through the business' ICT (Information Communications Technology)
involvement in the FSTA and forthcoming MFTS programmes. FSTA is valued at
over GBP100 million to VTC.

    Further business is expected following an invitation to
discuss extending VTC's Government contract. A five-year extension to the
existing agreement is expected to be finalised by the end of the financial

    In Defence and Security, in-service date for the MoD's DHFCS
contract has been achieved six months early. The 15-year, GBP220 million
Public Private Partnership (PPP) contract, has seen VTC combine all the UK's
existing fixed military high frequency systems worldwide into a single,
integrated pan-defence network, while continuing to provide day-to-day
operational services.

    DHFCS has delivered substantial benefits to the MoD including
a significant increase in system availability and quality of service. The
project has epitomised the partnering relationship between VTC, MoD and other
suppliers, enabling key milestones to be brought forward and operational
capabilities to be delivered early.

    VTC's Broadcast business has leveraged its expertise in
wireless infrastructure, engineering and programme management to secure a
multi-million pound contract from Arqiva to source, deploy and commission low
power Digital Terrestrial TV (DTTV) transmitter cabins at television relay
sites as part of the UK programme to deliver Digital Switchover (DSO).

    The Media Management Centre (MMC), the control centre for
VTC's Global Media Network which delivers broadcast and media content
globally across multiple platforms, is now operational in VTC's new
headquarters on London's Southbank. The MMC will further enhance our
potential to attract commercial broadcast business.


                                 31 March
                             2008          2007
                             GBPm          GBPm

    Turnover          GBP 124.9 m    GBP 112.1m
    Underlying          GBP 5.6 m      GBP 3.8m
    Operating profit
    Margin                  4.5 %         3.4 %


    - Expanded market share in engineering training
    - Education services contract win in Waltham Forest
    - Good progress in Lewisham BSF scheme

    Following the integration of the vocational training
businesses acquired in 2006, the resulting reduction in cost base has helped
VT Education and Skills (VTE&S) to produce growth in profit and margin.

    While offering potential for our support model, the education
and skills sector remains challenging. However, VTE&S has taken advantage of
an opportunity to strengthen its engineering vocational training business by
securing contracts to provide the Apprentice Learning Programme for
Volkswagen Group and Subaru UK.

    Good progress has been made on the Building Schools for the
Future (BSF) programme in Lewisham where VTE&S is teamed with Costain in the
Learning21 consortium. Construction of the first two schools, Catford High
and Sedgehill, is well underway and they are scheduled to open early in 2009.
Construction of the third school is due to start in the Autumn. VTE&S is
already providing ICT support to five schools in the Borough of Lewisham,
with up to six further schools also set to come on stream.

    In Greenwich, where VT is a Strategic Partner Organisation
(SPO) with the Borough Council, negotiations with a construction company
continue with a view to construction on the first batch of schools starting
by the end of the year.

    Our future BSF strategy will be to concentrate on providing
education services to a prime contractor or as part of a consortium. Using
this model, we are part of a consortium which is one of two remaining bidders
for the programme in the Borough of Luton.

    In addition, VTE&S extended its education services from 1
April by delivering school improvement services to the London Borough of
Waltham Forest similar to those already provided to schools in Surrey and
Reading. The contract is worth approximately GBP30 million over four years.

    Careers Guidance Services are undergoing significant changes
with several Connexions Partnerships being brought in-house under the control
of local authorities, often without a competitive bidding process. This trend
has led to VTE&S ceasing to provide careers guidance activities in three
major locations but we have secured new business in East Sussex and also
secured longer term agreements with other local authorities. We remain one of
the country's leading providers of careers guidance services.


                                  31 March
                             2008          2007
                             GBPm          GBPm

    Turnover          GBP 241.4 m   GBP 193.2 m
    Underlying          GBP 9.2 m     GBP 5.9 m
    Operating profit
    Margin                  3.8 %         3.1 %


    - Profits and margins continue to improve
    - VT Aepco providing higher value technical services

    Following the acquisition at the beginning of this calendar
year, the military aviation support specialists Advanced Engineering and
Planning Corporation Inc. (AEPCO) have been successfully integrated into the
VT Services organisation. This acquisition has further contributed to the
growth in margins in our US business.

    We expect margins to improve further during the current year
as we concentrate on offering higher-value technical services such as those
provided by VT Aepco, through its management of helicopter support
programmes, and VT Milcom, through its Command, Control, Communications,
Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) installation
and integration services.

    The mobilisation of US Forces deploying to Afghanistan and
Iraq continues to sustain a high demand for VT Griffin's base operations
services in the US. Should these overseas operations scale down, we are
likely to see continuing high level of demand for our services as the US
military resettles its assets into its home bases.

    Certain of our low-margin base operations contracts are no
longer available to us under the US Government policy of set-aside where work
is reserved for categories of small business. We are therefore changing the
position of our business to focus on larger opportunities that embrace more
diverse requirements and greater scale. As a result of not renewing set aside
contracts, turnover reduced in VT Griffin by approximately GBP20 m.


                                   31 March
                             2008          2007
                             GBPm          GBPm
    Turnover          GBP 483.8 m   GBP 436.1 m
    Underlying         GBP 50.2 m    GBP 44.0 m
    Operating profit
    Margin                 10.4 %        10.1 %


    - Double digit growth in profits
    - FSTA contract finalised and MFTS reaching contract close
    - New helicopter support and Army training contracts implemented
    - Environmental services activities provide excellent opportunities

    Following contract award for FSTA, VT Support Services (VTSS)
is on site at RAF Brize Norton, Oxfordshire to manage development of the FSTA
facilities to support the fleet of Airbus A-330 aircraft. Construction of a
new hanger and administration complex will commence this summer and VTSS will
provide ground support once the fleet is operational.

    Through a combination of its shareholding in the operating
company, AirTanker Services Limited, and direct sub-contracts with Group
business units, VT expects to benefit from business in excess of GBP1 billion
during the 27-year lifespan of the programme.

    Through Ascent, the Joint Venture between VT Group and
Lockheed Martin UK, VTSS will provide military flying training to the UK
Armed Forces for the next 25 years under MFTS. We expect this contract to be
signed shortly.

    The total programme cost is estimated at up to GBP6 billion
and will commence with initial service provision to support Advanced Jet
Training operations. Thereafter, other training capabilities will be subsumed
incrementally until full service provision is achieved.

    In addition to UKMFTS, a bid has been submitted for the
follow-on to the Light Aircraft Flying Task (LAFT), which we already provide.
In future, this will be expanded to include both University Air Squadron
support and Elementary Flying Training with a combined value in excess of
GBP130 million.

    VTSS is in the process of implementing the GBP40 million
contract with Agusta Westland to provide maintenance support to Sea King
helicopters (SKIOS) used by the RAF and Royal Navy for Search and Rescue
(SAR) duties around the UK Coast and Falkland Islands. This activity has seen
the successful recruitment of over 200 technical support personnel.

    April also saw the start of our GBP32 million five-year
contract to provide Training, Maintenance and Support Services (TMASS) to the
British Army at Bovington Garrison, Dorset. In naval support, we have started
delivering support for the Trinidad and Tobago Coastguard, linked to our
shipbuilding contract.

    VT Critical Services has achieved a successful transition to a
new support facility at Heathrow's Terminal 5 in its role of enabling
availability of the British Airways fleet of 4,000 ground support vehicles at
Heathrow. This has included procuring over GBP30 million worth of new support
equipment for BA, delivered on time and within budget. Our contract to
maintain the Metropolitan Police's vehicle fleet also had a successful first
12 months.

    Later this year, we expect to hear the result of a tender to
provide logistics support, maintenance and management of the New Dimensions
fleet of emergency response vehicles and specialist equipment. These vehicles
are used by the Fire Authorities in the event of disasters and emergencies.

    We also await the result of a down select in the competition
to provide a harmonised Search and Rescue helicopter service around the UK
Coast. We are teamed with Lockheed Martin and British International
Helicopters in the AirKnight consortium for this programme.

    Future opportunities for major MoD programmes include Whole
Fleet Management, where we are one of four potential providers of long-term
support for the MoD's substantial vehicle fleet.

    Integration of the nuclear services business, formerly known
as British Nuclear Group Project Services and now re-named VT Nuclear
Services, is underway. The business is positioning itself for the nuclear
power new build and de-commissioning programmes to which the UK Government is
now committed.

    Discussions continue in Wakefield with a view to finalising a
contract by the end of the calendar year to design, build, finance and
operate waste management and recycling facilities.

    Flagship Training has added to its apprentice training
programme for Network Rail by securing a similar agreement with British
Energy Generation to train its annual intake of engineering apprentices
utilising Royal Navy facilities near Fareham. The five-year contract will be
worth nearly GBP10 million. Flagship has also expanded its customer base for
facilities management work after being appointed preferred bidder by the
Department for Communities and Local Government to provide management
services at nine new Regional Fire Control Centres. The work is worth nearly
GBP30 million over seven years.

    Our Fleet Support Limited (FSL) joint venture continues to
enjoy a busy workload. Having completed the refit of the frigate HMS Iron
Duke, work has started on refitting the destroyer HMS York. The Surface Ship
Support (SSS) Alliance, the initiative with other UK Naval Bases that agrees
the distribution of available work, continues to operate well.


                                  31 March
                             2008          2007
                             GBPm          GBPm

    Turnover          GBP 243.7 m   GBP 164.0 m
    Underlying         GBP 16.3 m    GBP 13.1 m
    Operating profit
    Margin                  6.7 %         8.0 %


    - Work started on Oman and Trinidad and Tobago contracts
    - Good progress on Type 45 project
    - Assembly hall extension completed
    - Prospects in Greece, Saudi Arabia and Libya

    Production has started on the First of Class ships for the
programmes to build Ocean Patrol Vessels for the Royal Navy of Oman and
Offshore Patrol Vessels for the Government of Trinidad and Tobago.
Manufacture of the subsequent ships will start later this year. These
contracts provide VT Shipbuilding (VTS) with an order book of six ships
extending to 2011.

    To facilitate this work and the future construction of the
Royal Navy's CVF aircraft carriers, a 70-metre extension to the existing main
ship assembly hall has been completed and is now in operation.

    Productivity improvements continue in the manufacture of the
Type 45 destroyer. The bow section for ship five has left the assembly hall
and will be shipped to BAE Systems' facilities at Glasgow in June. Ship set
six is also nearing completion and will be delivered in late 2008. VTS has
improved productivity, measured from ship set one to ship set six, by over 30
per cent and delivery of the final ship set later this year will mean that
our part of the programme will have been completed on time.

    The current phase of work on our Technology Transfer programme
in Greece for five fast attack craft is progressing well, with three ships in
service. We are now working with Elefsis Shipyard to secure a contract
extension for an additional two fast attack craft, which would be worth over
GBP100 million.

    We believe that discussions on UK defence spending plans are
close to resolution and will lead to the Government's commitment to the start
of manufacturing on the Royal Navy aircraft carrier (CVF) programme, which
would provide a considerable boost to our shipbuilding order book.

    At VT Halmatic, the composites division has seen a major
restructure and re-focus of the business, including closure of parts of the
site and integration with the shipbuilding business.


    For the year ended 31 March 2008

                                                Before Non-recurring
                                         non-recurring      costs of
                                              costs of       exiting
                                               exiting      business
                            Notes    2008         2007        2007       2007
                                     GBPm         GBPm        GBPm       GBPm
    Combined turnover of
    group and share of
    equity accounted          2   1,201.0      1,004.6           -    1,004.6
    Less: adjustment for      2   (181.0)      (152.1)           -    (152.1)
    share of equity
    accounted investments
    Revenue - continuing          1,020.0        852.5           -      852.5
    Cost of sales                 (856.2)      (706.1)       (5.0)    (711.1)
    Gross profit -                  163.8        146.4       (5.0)      141.4
    continuing operations 
    Administrative expenses       (100.7)       (93.8)       (1.0)     (94.8)
    Group operating profit    2      63.1         52.7       (6.0)       46.6
    -continuing operations
    Share of results of              18.1         15.5           -       15.5
    equity accounted
    Operating profit before
    amortisation of
    intangible assets
    arising from business
    combinations and                 99.0         82.5       (6.0)       76.5
    taxation expense of
    equity accounted
    Amortisation of
    intangible assets
    arising from business           (9.9)        (7.7)           -      (7.7)
    Taxation expense of             (7.9)        (6.7)           -      (6.7)
    equity accounted
    Operating profit -        2      81.2         68.1       (6.0)       62.1
    continuing operations
    Finance income                    6.1          4.8           -        4.8
    Finance expenses               (16.0)       (13.1)           -     (13.1)
    Net financing costs             (9.9)        (8.3)           -      (8.3)
    Profit from continuing           71.3         59.8       (6.0)       53.8
    operations before
    Income tax expense        3    (13.3)        (9.5)         1.8      (7.7)
    Profit for the year              58.0         50.3       (4.2)       46.1
    Attributable to:
    Equity holders of the            56.8         48.6       (4.2)       44.4
    Minority interest                 1.2          1.7           -        1.7
                                     58.0         50.3       (4.2)       46.1
    Basic earnings per        4     32.2p                               25.4p
    Diluted earnings per      4     31.4p                               24.8p

Notes to Editors

    1) VT Group is a major defence and support services company
    which aims to become the number one international government services
    group. Customers also include government agencies and businesses
    worldwide. VT Group employs over 14,000 people and has its Headquarters
    in Southampton, UK. It comprises five divisions, with its support
    businesses operating from various locations primarily in the UK, USA and
    Middle East, and shipbuilding operating principally from new facilities
    in Portsmouth, UK.

    2) For the year ended 31 March 2007 VT Group reported turnover
    of GBP1,005 million (2006:GBP847 million) and Group Underlying Profit
    Before Tax of GBP74.2 million (2006:GBP61.5 million). The order book was
    around GBP3.7 billion as of the end of March 2007.

    3) VT Group's support businesses consist of four divisions: VT
    Communications, VT Education & Skills, VT Support Services and VT
    Services Inc. Communications supplies critical communication and
    broadcast services to commercial and military customers; Education and
    Skills provides services to the education sector in the UK, careers
    guidance and vocational training; Services Inc. carries out facilities
    management for the US military and other customers; Support Services'
    activities include technical services, logistics, training and asset
    provision for all three Armed Services in the UK and for Armed Forces
    around the world. For the year ended March 2007, VT's support businesses
    accounted for GBP841 million of the Group's turnover, representing some
    84% of sales.

    4) VT Group's shipbuilding operations comprise Warships and
    Marine Products, including small craft. VT is a leading exporter of
    warships and an established Prime Contractor for the design and
    construction of vessels ranging from frigates, corvettes and offshore
    patrol vessels to pilot boats and rigid inflatables. Specialist equipment
    for the marine and offshore industries is also manufactured. For the year
    ended March 2007, Shipbuilding accounted for GBP164 million of the
    Group's turnover, representing some 16% of sales

    5) Further information about VT Group, its services and
    products can be found at

    Paul Lester, Chief Executive Tel:            +44(0)7785-388664

    Phil Rood, Media Relations Tel:              +44(0)7941-164756

    Ginny Pulbrook, CDR Tel:                     +44(0)20-7282-2945

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