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Half Year Results

Half Year Results. Introduction. Michael Jeffries. Agenda . Highlights Operational Review Financial Review Strategy Summary. Highlights Continuing Operations. * Includes share of turnover from equity accounted JVs ** Excludes intangible amortisation, exceptional items & MTM

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Half Year Results

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  1. Half Year Results

  2. Introduction Michael Jeffries

  3. Agenda • Highlights • Operational Review • Financial Review • Strategy • Summary

  4. HighlightsContinuing Operations * Includes share of turnover from equity accounted JVs ** Excludes intangible amortisation, exceptional items & MTM *** Compared to Mar 09

  5. Key Messages • Support Services business • Sector re-classification • Pressure on Government budgets will drive outsourcing • VT well placed for future opportunities

  6. Operational Review Paul Lester

  7. Structure Defence Government & Critical Services VT Group US Air Land Sea Education Environment Integrated Solutions Technical Services Training Critical Assets Shared services and corporate functions

  8. Restructure • Customer focus • Efficiency gains through standardisation of processes • Move towards shared service model for back office functions • On target to achieve £7m pa net savings

  9. Defence • Future Strategic Tanker Aircraft (FSTA) • New facilities on schedule • Delivery of first aircraft due 2011 • Military Flying Training Systems (MFTS) • Milestones met on new facilities in line with contract • Rear Crew Stage One training – £57m total • Urgent Operational Requirements • Army mechanical training supporting Afghanistan • MOD ‘C’ vehicles engineering & training • Naval Training - £80m • Contract awarded in the Middle East • Royal Navy training and FM extensions

  10. Defence Bids • SAR(H) 50/50 Lockheed Martin £5-7bn • Cyprus £200m • Brize Norton Multi Activity Contract £50m Pipeline • Army recruitment £750m • JMATS up to £1bn

  11. Government & Critical Services • Education • Closed PFI for third Lewisham school - £20m • First 2 Greenwich BSF schools commenced • Advanced Teachers and Higher Level Assistants - £7m • Highest GCSE results in Waltham Forest for 10 years • Training • Training delivered to 20,000 people • LSC annual contract increased by 14% to £42m • Contract wins in automotive apprenticeship training - £10m • New clients Jaguar Land Rover, Kawasaki & Euro Parts • 2 year extension VW

  12. Government & Critical Services • Critical Assets - £200m • Government agency renewal • New Dimensions contract extended to Wales • London Ambulance Service contract • Environment • Extensions at Sellafield – £30m • Decommissioning in Eastern Europe • Autoclave due for commission in March

  13. Government & Critical Services Bids • Financial Close on Wakefield expected end of FY £750m • Highways Agency £20m • Nuclear waste storage £100m Pipeline • Waste £4bn+ • BSF ICT/FM projects £180m+ • Nuclear £200m+ • Fleet Management & Asset projects £50m+

  14. VT Group Inc • Renewal for CH-47 logistics support - $29m • Contract extensions - $15m • Contract for NASA facility at Wallops Island - $10m • Refocused on 2 Service Streams: Integrated Solutions • Systems Engineering • C4IT Comms Infrastructure Technical Services • Ranges & Base Operations • Training & Logistics

  15. VT Group Inc Bids • Integrated Solutions bids submitted – $100m • Technical Services bids submitted – $200m Pipeline • Integrated Solutions - $1bn+ • Technical Services - $300m+

  16. Financial Review Philip Harrison

  17. Income Statement *Excluding mark to market derivative movement

  18. Income Statement

  19. Segmental Reporting - Continuing Operations

  20. Segmental ReportingTurnover Growth Analysis- Continuing Operations £m 27.1 43.1 601.1 17.2 8.4% 513.7

  21. Segmental ReportingUnderlying Operating Profit Growth Analysis- Continuing Operations £m 1.4 1.9 5.7 51.2 13.5% 42.2

  22. Investment Income & Finance Costs

  23. Balance Sheet

  24. Cash Generated from Operations

  25. NetDebt

  26. Order Profile - Continuing Operations • Total order book £4.4 billion • £2.5 billion of order book beyond 3 years • Strong visibility of earnings

  27. Strategy Paul Lester

  28. Long term partner • Higher added value • Critical to success • Managed service • Arms length subcontractor • Short term • Prescriptive Business Model Capability Customer engagement

  29. BBC UKMFTS FSTA New Dimension Met Police Sellafield Nuclear (Europe) BSF Flagship Severn Park Cardiff Gate AMCOM Express SPAWAR SKIOS US Base Ops Careers Business Model Capability Customer engagement

  30. Customer Profile UK Public Sector 29% MOD 40% Other 4% DoD & US Gov 27%

  31. Geography Other 3% United Kingdom 70% North America 27%

  32. UK Background • Forthcoming election • Political battleground drawn over plans for economic recovery • Uncertainty over specific plans • Short term delay to decision making • Opportunity to communicate business model • Economic pressures 4 ‘levers to pull’ • Sell assets • Raise taxation • Increase GDP • Reduce Government budgets • Opportunities and Threats

  33. Defence • UK MOD budgetary pressures • Equipment cuts drive support for existing platforms • Drives further outsourcing • Margin pressure • 86,000 Civil Servants: 196,000 Armed Forces personnel • Gray Report (October 2009)* • Budget overspend and programmes overrun - £35bn • Poor acquisition process, new ways of working required • Outsourcing of Procurement function • Post Election • Strategic Defence Review *A Review of Acquisition for the Secretary of State for Defence (Bernard Gray October 2009)

  34. Government & Critical Services • Budgetary pressures • Efficiencies in Central and Local Government • Additional outsourcing opportunities • Margin pressure • Post Election • Prospect of decision making devolved to Local Authorities • Greater need to work with Private sector • Julius Report (July 2008)* • Competition for outsourced contracts brings benefits • Significant cost savings (10-30%) • No adverse effect on quality *Public Services Industry Review (Dr DeAnne Julius CBE July 2008)

  35. Total c£620bn Outsourced c£80bn* UK Government Expenditure Source: HM Treasury Public Expenditure Statistical Analysis 2009 *Source: Julius Report 2008

  36. UK Government Expenditure Local Government c£164bn Outsourced c£20bn (estimated)* Source: HM Treasury Public Expenditure Statistical Analysis 2009 *Source: VT estimate based on Julius Report 2008

  37. UK Opportunity for VT • Strong position in existing markets • Proven track record in service delivery • High customer rating • Strong reputation for delivering in partnership • Focused on Opex not Capex • Potential to broaden footprint & capability • Acquisitions and joint ventures

  38. US Background • Defence Budget • New administration committed to maintaining current level of spend • Equipment cuts create service opportunity • Afghanistan strategy and Defence Review drive priorities • Capitalise on OEM’s Conflict of Interest • In-sourcing

  39. US Opportunity • Increased focus on higher end Range service work • Transition from low margin Base Ops • Leverage UK capability • Adjacent market expansion

  40. Summary • Continuing good momentum in the business • Broaden UK capability & customer base • Continue investment in Nuclear and Waste • Maximise anticipated growth in outsourcing • Focus US on higher margins & achieve critical mass

  41. Appendix 1 Additional Financial Information

  42. Summarised Cashflow

  43. Pensions Charge

  44. Pension Deficit £m (13.8) 19.3 1.3 6.4 73.8 60.5

  45. Earnings per Share/Dividends

  46. Appendix 2 Contract Portfolio

  47. Contract Portfolio - DefenceValues over £50m Contract Preferred bidder Year LAFT TTSP MFTS FSTA Sea King Maintenance Allenby Connaught Whitefleet ALC (C Vehicles) Arborfield Bordon TMASS ESTSTO ASTUTE Fitzroy VLF DHFCS Firefighting Training 10 12 14 16 18 20 22 24 26 28 2035 2037 2030

  48. Contract Portfolio – G&CSValues over £50m Year Metropolitan Police British Airways Cardiff Gate Severn Park Firefighting Training Surrey County Council Greenwich Lewisham BBC Government Agency Wakefield New Dimensions 10 12 14 16 18 20 22 24 26 28 2030 2032 2036

  49. Contract Portfolio – VT Group IncValues over £50m Year 10 12 14 16 18 20 22 24 26 28 NASA Camp Le Jeune Kings Bay SPAWAR AMCOM Express Rolling renewal

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