REG - Babcock Intnl Group - Half-year Report <Origin Href="QuoteRef">BAB.L</Origin> - Part 3

Babcock InternationalAnnouncement

22/11/2016 07:06

- Part 3: For the preceding part double click  ID:nRSV7634Pb 

million
plus acquired loans of £5.2 million giving a total cost of £10.9 million. Heli
Aviation GMBH provides helicopter services in mission critical operations. 
 
Deferred consideration of £7.6 million in respect of the Defence Support Group
and £7.2 million in respect of Scandinavian AirAmbulance AB was paid during
the period. 
 
The goodwill arising on the acquisition derives from the market position of
the entities involved and the value of the workforce acquired. Details of the
provisional fair value of assets acquired and the provisional goodwill are as
follows: 
 
 30 September 2016                                    Heli Aviation GmbH£m  
 Cost of acquisition                                                        
 Cash paid                                            5.7                   
 Fair value of assets acquired (see below)            4.0                   
 Goodwill                                             1.7                   
 
 
Net assets and liabilities arising from the acquisition are as follows: 
 
                                                Heli Aviation GmbH     
 30 September 2016                              Fair value acquired£m  
 Acquired intangibles*                          5.0                    
 Property plant and equipment                   7.0                    
 Deferred tax                                   (1.5)                  
 Income tax                                     (0.1)                  
 Bank Loan                                      (5.2)                  
 Inventory                                      0.8                    
 Current assets                                 2.5                    
 Current and non-current liabilities            (3.3)                  
 Provisions                                     (1.2)                  
 Net assets acquired                            4.0                    
 
 
*                      Acquired intangibles are: customer relationships, both
contracted and non-contracted plus brand valuations. 
 
Cash outflow to acquire businesses net of cash acquired: 
 
 30 September 2016                                 Heli Aviation GmbH£m  Other£m  Total£m  
 Purchase consideration paid in cash               5.7                   --       5.7      
 Deferred consideration paid in cash                                     14.8     14.8     
 Cash, cash equivalents and bank overdrafts        -                     -        -        
 Cash outflow in period                            5.7                   14.8     20.5     
 
 
The revenue and operating profit of acquired businesses since the date of
acquisition and as if they had been acquired on 1 April 2016 are: 
 
                                Heli Aviation GmbH  
 30 September 2016                                    Since date ofacquisition£m  For six monthsended30 September2016£m  
 Group revenue                                        2.9                         3.0                                    
                                                                                                                         
 Group operating loss                                 0.2                         0.4                                    
 Underlying operating loss                            0.2                         0.4                                    
 
 
30 September 2015 
 
There were no acquisitions in the previous period. 
 
The deferred consideration of £1.3 million in respect of S. MacNeillie and Son
Limited was paid during the previous period as well as an additional £0.5
million in respect of Skills2Learn Limited. 
 
13. Disposals 
 
There have been no disposals during the period. 
 
During both the current and the previous period the Group paid certain accrued
costs on previously disposed of businesses. 
 
In the previous period on 17 April 2015 the Group sold its investment in
Lewisham Schools for the Future joint venture for £14.3 million at a profit on
disposal of £7.5 million. 
 
In the previous period on 5 July 2015 the Group disposed of its investment in
Norsk Helikopterservice AS("Norsk") for NOK100. 
 
Details of the final assets disposed of are: 
 
                                                            30 September 2016  30 September 2015                
                                                                               Previouslydisposed ofbusiness£m  Total£m  Lewisham£m  Norsk£m  Previouslydisposed ofbusiness£m  Total£m  
 Investment in and loans to joint ventures and associates                      -                                -        3.3         -        -                                3.3      
 Property plant and equipment                                                  -                                -        -           0.4      -                                0.4      
 Cash, cash equivalents and bank overdraft                                     -                                -        -           1.0      -                                1.0      
 Inventory                                                                     -                                -        -           0.3      -                                0.3      
 Current assets                                                                -                                -        -           1.5      -                                1.5      
 Current and non-current liabilities                                           -                                -        -           (2.5)    -                                (2.5)    
 Provisions                                                                    -                                -        -           (2.1)    -                                (2.1)    
 Deferred tax                                                                  -                                -        -           0.4      -                                0.4      
 Mark to market amortisation recycled from hedging reserve                     -                                -        0.7         -        -                                0.7      
 Net assets disposed                                                           -                                -        4.0         (1.0)    -                                3.0      
 Profit on disposal of joint ventures and associates                           -                                -        7.5         -        -                                7.5      
 Disposal costs/deferred consideration                                         -                                -        2.8         1.0      -                                3.8      
 Sale proceeds                                                                 -                                -        14.3        -        -                                14.3     
 Sale proceeds less cash disposed of                                           -                                -        14.3        (1.0)    -                                13.3     
 Less costs paid in the year                                                   (0.2)                            (0.2)    -           (1.1)    (0.7)                            (1.8)    
 Net cash inflow/(outflow)                                                     (0.2)                            (0.2)    14.3        (2.1)    (0.7)                            11.5     
 
 
15. Related party transactions 
 
Related party transactions in the half year to 30 September 2016 are: sales to
joint ventures and associates of £85.7 million (2015: £91.4 million) and
purchases from joint ventures and associates of £0.9 million (2015: £0.5
million). 
 
16. Financial information 
 
The financial information in this half year report does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 March 2016 were approved by the
Board on 24 May 2016 and delivered to the Registrar of Companies. The report
of the auditors on those accounts was unqualified, did not contain an emphasis
of matter paragraph and did not contain any statement under Section 498 of the
Companies Act 2006. 
 
Risks and uncertainties 
 
The Directors consider that the principal risks and uncertainties affecting
the Group remain unchanged from those described in the 2016 Annual Report, and
are those arising from:  our customer profile (reliance on winning and
retaining large contracts with a relatively limited number of major clients
(particularly the UK MoD) , including clients affected by political and public
spending reviews and decisions, which exposes the Group to political and
public spending risks;  the nature of our contracts, bid processes and our
major markets: bidding is a time consuming and expensive process; public
procurement rules apply in many cases and bring the risk of challenge to award
decisions; large contract opportunities by their nature tend not to arise on a
regular or frequent basis; failure to win rebids of large contracts that we
already hold could represent a major loss of business and the failure to win
new bids for large contract opportunities can represent a major missed
opportunity and either loss can affect our strategic development;  long-term
contracts carry risk-transfer and potential pricing risks for our businesses
and our contracts typically contain strict key performance indicators, failure
to meet them can result in adverse financial consequences or loss of contract;
 reputational risks:  our reputation is a fundamental business asset given the
nature of our business, markets and customers - its loss for any reason (for
example poor contract performance or a high profile safety incident) could
have a major adverse impact as could damage to the reputation of outsourcing
businesses generally (and thus outsourcing itself);  regulatory and compliance
burden: our major businesses depend on being able to meet and continue to
comply with applicable customer or industry specific  requirements and
regulations, wherever we do business, which can change; the cost of compliance
can be high; failure to meet the requirements could result in loss of existing
business or future business opportunities;  health, safety and environmental
risks; some of our businesses entail the potential risk of significant harm to
people, property or the environment if not properly managed and a serious
incident could seriously damage our reputation (which could lead to loss of
existing or future business) as well as expose us to fines and damages claims
not all of which may or can be covered by insurance;  people risks:  the
Group's ability to deliver its existing business, future growth and strategy
is dependent on being able to attract, develop, train and retain experienced
senior management, business development teams and suitably qualified and
skilled employees - the competition for whom is strong;  pension risks: we
have a number  significant defined benefit pension schemes that carry cost and
funding risks and the risk of accounting volatility; IT and Security risks; we
depend heavily on our ability to be able to maintain IT and information
security and assurance to preserve our reputation and the confidentiality of
our customers' and our own valuable information;  currency exchange rates: as
we expand outside the UK we are increasingly exposed to the impact of foreign
currency exchange rates;  acquisitions: we have grown and expect to continue
to grow through acquisitions as well as organically but  the financial
benefits of acquisitions may not be realised as quickly and as efficiently as
expected. 
 
The risks summarised above, and mitigating actions taken in respect of them,
are explained and described in more detail on pages 64 to 74 of the 2016
Annual Report, a copy of which is available at www.babcockinternational.com.
This half year report also includes comments on the outlook for the Group for
the remaining six months of the financial year. 
 
Forward-looking statements 
 
Certain statements in this announcement are forward-looking statements.  Such
statements may relate to Babcock's business, strategy and plans.  Statements
that are not historical facts, including statements about Babcock's or its
management's beliefs and expectations, are forward-looking statements.  Words
such as 'believe', 'anticipate', 'estimates', 'expects', 'intends', 'aims',
'potential', 'will', 'would', 'could', 'considered', 'likely', and variations
of these words and similar future or conditional expressions are intended to
identify forward-looking statements but are not the exclusive means of doing
so.  By their nature, forward-looking statements involve a number of risks,
uncertainties or assumptions, some known and some unknown, many of which are
beyond Babcock's control, that could cause actual results or events to differ
materially from those expressed or implied by the forward-looking statements. 
These risks, uncertainties or assumptions could adversely affect the outcome
and financial effects of the plans and events described herein. 
Forward-looking statements contained in this announcement regarding past
trends or activities should not be taken as a representation that such trends
or activities will continue in the future.  Nor are they indicative of future
performance and Babcock's actual results of operations and financial condition
and the development of the industry and markets in which Babcock operates may
differ materially from those made in or suggested by the forward-looking
statements.  You should not place undue reliance on forward-looking statements
because such statements relate to events and depend on circumstances that may
or may not occur in the future.  Except as required by law, Babcock is under
no obligation to update (and will not) or keep current the forward-looking
statements contained herein or to correct any inaccuracies which may become
apparent in such forward-looking statements. 
 
Forward-looking statements reflect Babcock's judgement at the time of
preparation of this announcement and are not intended to give any assurance as
to future results. 
 
On behalf of the Board 
 
Archie Bethel 
 
Chief Executive 
 
Franco Martinelli 
 
Group Finance Director 
 
21 November 2016 
 
This information is provided by RNS
The company news service from the London Stock Exchange