Wednesday, July 23, 2008

VT Group AGM and Interim Management Statement

VT Group AGM and Interim Management Statement
23 July 2008

Defence and support services company VT Group issues the following Interim Management Statement, covering the Group’s performance for the period since March 31, 2008, ahead of today’s Annual General Meeting.
The Group continues to trade in line with the Board’s expectations. With a growing order book and strong financial position, it is well placed for the future.

Notable highlights include:
Record Order Book
The order book has increased since the end of March and is now approaching £5 billion (rising to more than £6 billion including order book attributable to BVT Surface Fleet Limited (BVT)). This increase follows contract signature for the UK Military Flying Training System (UKMFTS); the formation, with BAE Systems, of the shipbuilding and naval support Joint Venture ; and the subsequent placing of the manufacturing contract for the Royal Navy’s new aircraft carriers (CVF).

Major Developments
VT has increased its focus on the development of its engineering-based support services. Notable milestones since March have been:
Starting work on the FSTA (Future Strategic Tanker Aircraft) and UKMFTS (UK Military Flying Training System) programmes within both our Communications and Support Services divisions. The initial value of UKMFTS, which was contracted in early June, is around £600 million to Ascent, the Joint Venture between VT and Lockheed Martin. The total programme value is estimated to be worth up to £6 billion over 25 years.
In addition to UKMFTS, being named preferred bidder to renew and expand our work in initial flying training for all three Armed Forces, valued at up to £150 million over 10 years.
Being named selected bidder for long-term capability management for the New Dimension fleet of emergency vehicles and equipment modules that is deployed by the Fire and Rescue Services to attend major incidents. Contract value in excess of £100 million is anticipated over its 16-year term.
Extending our engineering vocational training contract for the British Army’s Royal Electrical and Mechanical Engineers by one year, with the option for a further year. This is valued at more than £20 million.
Progressing the integration of VT Flagship with the VT Education and Skills business to create the biggest education services and training organisation in the UK, with some 4,000 employees and turnover in excess of £250 million.

Financial Position
There has been no material change in the financial position of the Group since VT last reported.
The formation of BVT involves VT contributing the assets of its shipbuilding and naval support businesses in exchange for receiving 45 per cent of the equity in the joint venture. A comprehensive review of the fair value of the assets contributed by both partners is in progress to finalise the initial carrying value of our investment in BVT, as well as an exercise to harmonize the application of accounting policies of the contributed businesses.
In parallel with the formation of BVT, VT has acquired from BAE Systems the remaining 50 per cent shareholding in Flagship Training, in future to be known as VT Flagship . An initial consideration of £16.5 million was paid at completion of the transaction with a fixed deferred consideration element of £65 million. An existing loan of £7.3 million from BAE Systems to Flagship Training was repaid at completion.
VT Group Chairman Mike Jeffries commented: “I would like to thank all our colleagues for their hard work and commitment, which is demonstrated in these successes. BVT has started well, our business continues to make good progress and the Board remains confident for the full year.”

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