Upload
collin-peters
View
216
Download
2
Tags:
Embed Size (px)
Citation preview
Analyst Briefing 201524th June 2015
© 2015 Ultra Electronics: Proprietary Data
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 2
© 2015 Ultra Electronics: Proprietary Data
Ultra’s Market Facing SegmentsMark Anderson
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 3
© 2015 Ultra Electronics: Proprietary Data
What have we done?
We have:• Segmented our capability portfolio to better reflect the markets that we address,
consistent with being an outward facing organisation
• Re-organised the business reporting lines consistent with the market facing segment – authority, accountability and responsibility remain aligned in autonomous businesses
Why now?• Evolution – right time now
• Complexity - >30% inter-divisional sales
• Coherency – many businesses overlap
• Minimal cost of implementation
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 4
© 2015 Ultra Electronics: Proprietary Data
The 8 market segments
Communications and SecurityMike Baptist
Aerospace & InfrastructureGraeme Stacey
Maritime & LandBill Terry
Underwater warfare
MaritimeAerospace C2ISRComms LandNuclearInfrastruct
ure
Cyber
Rob McDonald
16.4%
Chris Binsley8.2%
Chris Binsley5.7%
Brian Bates
15.3%
Brian Bates
22.6%
Rusty Kollmorge
n19.6%
Rusty Kollmorge
n9.6%
Mike Clayton
2.6%
Lead
2014 revenue
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 5
© 2015 Ultra Electronics: Proprietary Data
The reporting change
Aircraft & Vehicle Systems
Information & Power Systems
Tactical & Sonar Systems
Before After
Communications & Security
Maritime & Land
Aerospace & InfrastructureRevenue £140.3m
Profit £24.6m
Order book £160.2m
Operating margin
17.5%
Revenue £204.0m
Profit £29.2m
Order book £175.9m
Operating margin
14.3%
Revenue £369.4m
Profit £64.3m
Order book £451.2m
Operating margin
17.4%
Revenue £224.4m
Profit £37.0m
Order book £214.5m
Operating margin
16.5%
Revenue £198.6m
Profit £29.6m
Order book £253.0m
Operating margin
14.9%
Revenue £290.7m
Profit £51.5m
Order book £319.8m
Operating margin
17.7%
% of Group revenue before
% of Group revenue after
Maritime & Land
Communications& Security
Aerospace &Infrastructure
Aircraft & Vehicle
Information& Power
Tactical & Sonar
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 6
© 2015 Ultra Electronics: Proprietary Data
Market segment operating principles
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 7
© 2015 Ultra Electronics: Proprietary Data
Internal benefits
• Market segment strategies aligned with business operations– reduces inter-division revenue to <10% of total
• Collaboration to rationalise the segment’s portfolio of capability• Grow market share with affordable, scalable, modular, reliable
systems – more comprehensive offerings
• Select and grow new market capabilities in growth sectors through acquisition and development– consideration at a segment rather than individual business level
• Improved market analysis – better, shared understanding
• Improved customer recognition of the wide portfolio of capabilities available from Ultra – improved brand awareness
• Improved internal processes– talent recognition & development
– deployment of specialist resources
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 8
© 2015 Ultra Electronics: Proprietary Data
External benefits
• Customer-focused market segment strategies replace Divisional strategies
• Presents a ‘joined-up’ Ultra to our customers– allows Ultra to offer more competitive and broader offerings
• Clearer external presentation– easier to compare to market parameters– new divisional financial data from H1 2015– revenues by market segment from FY2014
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 9
© 2015 Ultra Electronics: Proprietary Data
Introducing 3 of our segments
Underwater warfare Rusty Kollmorgen
C2ISRBrian Bates
Infrastructure Chris Binsley
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 10
© 2015 Ultra Electronics: Proprietary Data
Market Segment Strategies – Underwater Warfare
Rusty Kollmorgen
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 11
© 2015 Ultra Electronics: Proprietary Data
Underwater Warfare
• Actionable intelligence provided to independent or networked platforms (aircraft, ship, submarine) through– sensor detection of energy anomalies in the water (data)– software processing and fusing of the data (information)– presentation of information through specific human-machine
displays (knowledge)
• Core capabilities– acoustic expertise – the physics of sound propagation in water– mechanical properties of sound producing materials– hydrodynamics of sensors on moving and deep hull forms– packaging of sensitive sensor suites in demanding environments– real-time digital processing – manufacturing processes for throughputs of tens of thousands of
units– human factors as it applies to optimised display of information
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 12
© 2015 Ultra Electronics: Proprietary Data
Underwater WarfareMarket segment characteristics
• Market– growing at a projected 6.2% CAGR (segment is 19.6% of Ultra revenue)
• Customer requirements – cost effective– modular architecture that allow scalable functionality for tailored solutions– human machine interfaces that minimise unique training
• SSTD – a case study in collaboration and market approach (2002-2014)– Surface Ship Torpedo Defence (S2170) grows and wins multiple international awards– three Ultra businesses collaborate to capture Australia’s AWD ISS– incumbent unseated on S2050
• Positioning & growth– established offerings enhance Pwin for India Navy pursuits– investing in thinner, single tow solutions – accelerating leadership in multi-static processing
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 13
© 2015 Ultra Electronics: Proprietary Data
Market Segment Strategies – C2ISRBrian Bates
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 14
© 2015 Ultra Electronics: Proprietary Data
C2ISR
• Enabling security and mission effectiveness through solutions that turn data into actionable information– connecting different sensors and systems (collect)– processing and fusing data (process)– presenting timely information though specialist
visualisation systems (disseminate)
• Core capabilities– command and control– surveillance and security– communications surveillance– covert reconnaissance – airborne surveillance– electronic warfare– identity security– forensic analysis
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 15
© 2015 Ultra Electronics: Proprietary Data
C2ISRMarket segment characteristics
• Market – large, diverse and competitive market that is forecast to grow at around 4.5% CAGR– C2ISR segment represented 22.6% of Ultra’s 2014 revenue
• Customer requirements
– rise in asymmetric warfare and the need for advanced sensors and networked capabilities
– growing requirement for integrated solutions and interoperability– increasing need for connectivity to aid situational awareness
• Positioning & growth– acquisition of Herley Industries – investing in integrated surveillance systems for Middle East, Far East and South America – law enforcement market channels being used to cross market legal intercept
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 16
© 2015 Ultra Electronics: Proprietary Data
Market Segment Strategies – InfrastructureChris Binsley
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 17
© 2015 Ultra Electronics: Proprietary Data
Infrastructure
• Integrated infrastructure solutions through secure operational software, control systems and power management– domain expertise spanning airport & airline operational
performance systems, rail transit power and energy sectors (efficiency & resilience)
• Core capabilities– integrated information management systems– power management & energy storage– secure localised network communications for measurement and
control– protection of critical energy & transport information systems – energy management & control– smart infrastructure
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 18
© 2015 Ultra Electronics: Proprietary Data
InfrastructureMarket segment characteristics
• Market – overall growth forecast 6.5% CAGR (airports 4.5%, rail
3.9%)– infrastructure segment 8.2% of Ultra revenue
• Customer requirements – increasingly driven by global commoditised infrastructure
programmes – focus on value-add in smart, resilient infrastructure which
plays to core strengths– prudent approach to growth whilst realigning into market
segments
• Positioning & growth– targeting of longer term strategic opportunities within
energy networks and transportation hubs – underpinned by refreshed shorter term offerings in
packaged airport systems, export rail and stand-alone smart grid
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 19
© 2015 Ultra Electronics: Proprietary Data
Standardisation and Shared ServicesMary Waldner and Graeme Stacey
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 20
© 2015 Ultra Electronics: Proprietary Data
S3 - Evolution not step change
• Highly autonomous businesses
• LEAP
• Predominently tier 3/4
• Singular markets
• Individual businesses
• Collaborative Autonomy
• LAUNCH
• Demanding tier 2 activities
• Increased diversity
• Divisional management
• Market segments
• Segment behaviours
• Centres of excellence
• More comprehensive offerings
• Divisional & segment structures
We have been steadily developing and evolving the structure of the Group as we have increased the scope, diversity and complexity of our portfolio of capabilities
Strongly acquisitive with high levels of internal investment
Aligned authority, responsibility & accountability
Strong financial accountability
S3
Analyst Briefing 2015 SLIDE 21
© 2015 Ultra Electronics: Proprietary Data
What is S3?
• A Group-wide initiative to standardise non-differentiating processes and systems
• Standardisation will allow businesses to share resources in the following back-office functions– Finance– Commercial
• Procurement• Legal risk management
– Human Resources– Facilities and – Information & Communications Technologies
• S3 will deliver a scaleable, sustainable operating model to support the future growth of the Group
Analyst Briefing 2015 SLIDE 22
© 2015 Ultra Electronics: Proprietary Data
S3 – Impact on culture
Business Autonomy Retained S3 Scope
Competitive business strategies
Property strategy & site rationalisation
Financial insight & accountability for business performance
Financial transaction processing
Engineering & technology design & specification
High value procurement sourcing
Talent selection, engagement & development
Transactional HR processing
Negotiation of commercial contract terms
Legal risk management
Management of information security risk
ICT service delivery
Analyst Briefing 2015 SLIDE 23
© 2015 Ultra Electronics: Proprietary Data
S3 – Indicative timescale
2015 2016 2017 2018
Strategy & business case
Organisation & systems requirements
Transition lead businesses
Transition of the Group to shared services
Systems build, test & integration
Lead business systems implementation
Procurement & facilities
Analyst Briefing 2015 SLIDE 24
© 2015 Ultra Electronics: Proprietary Data
Investment case
• Estimated project costs of £30m over three years – ERP systems– programme management– restructuring – cost of site closures
• Initial one off non-underlying cost of £5m (£2m cash) in 2015 to cover programme set up
• Project self-funds during 2016 as efficiency savings cover project costs
• Estimated enduring efficiency savings of £20m will be deployed to:– fund programme from 2016 - 2018– increase investment in R&D– increase competitiveness – improve profits
Analyst Briefing 2015 SLIDE 25
© 2015 Ultra Electronics: Proprietary Data
Programme benefits
• Improved controls through standardisation and governance
• Working capital optimisation
• Standard and timely data to support decision making
• Businesses freed up to focus on value-add
• Enables retention of talent through extended career paths and global mobility
• Scaleability – increased synergies from future acquisitions
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 26
© 2015 Ultra Electronics: Proprietary Data
EPD Acquisition Rakesh Sharma
May 2015
PROJECT JUPITER: Market Due Diligence
NON-RELIANCE PROVISION
27
The Recipient understands and agrees that neither Fairmont Consulting Group LLC or any of their respective Representatives:
(a) have made or make any representation or warranty hereunder, expressed or implied, as to the accuracy or completeness of the following analysis, OR
(b) shall have any liability hereunder to the Recipient or its Representatives relating to or resulting from the use of the analysis or any errors therein or omissions therefrom.
June 2015
PROJECT JUPITER: Market Due Diligence
COMPANY OVERVIEW
Defense Primes Generate Over Half Of EPD Revenues
Northrop Grumman accounts for over 25% of the three years of revenues and has experienced a slight decline since 2012
● Revenues primarily driven by EA-18 Growler platform deliveries
Lockheed Martin sales accounts for 13% of revenues
Raytheon accounts for 5% of revenues
Boeing and DLA Defense Supply Center Columbus (DSCC) each generate an additional 3%
No single “Other” customer represents more than 2% of total revenues
28
2012A 2013A 2014A$0
$20
$40
$60
$80
$100
$120
$140
OTHER OTHER OTHER
EWST EWST EWST
NORTHROP GRUMMAN NORTHROP GRUMMAN NORTHROP GRUMMAN
LOCKHEED MARTIN
LOCKHEED MARTIN LOCKHEED MARTIN
RAYTHEON
RAYTHEON RAYTHEON
BOEING
BOEING BOEING
DSCCDSCC DSCC
$123.0$116.8 $118.0
EPD Revenues By Major Customer2012A-2014A; $ Millions
June 2015
PROJECT JUPITER: Market Due Diligence
12-14 Win-Loss 12-14 Win-Unit 12-14 Prime-Sub$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Won158.277
Lost5.76
CTI$1
Lancaster $91
New England $66
Prime5.1
Sub153.2
COMPANY OVERVIEW
Win/Loss Record Shows Great Success Retaining Work; Varying Messages Regarding Pursuit Of New Business
EPD pursued a total of $304M in business over the 2012-2014 period; the company won $234M of that value, and lost $70M
● Among business classified as new (not recompete) EPD won $76M out of $140M in total bids (54% win rate)● Within that $76M in new business wins, $64M came from CTI/EWST, $10M from Lancaster, and $2M from New England● Among business classified as recompete, EPD won $158M out of $164M in total bids (96% win rate)
29
12-14 Unit 12-14 Rec-New 12-14 Win-Loss$0
$50
$100
$150
$200
$250
$300
$350
Lancaster131.406381
CTI104.2197
New England68.211906
Reco
mpe
te$1
64New$140
Won233.783828
Lost70.054159
12-14 Win-Loss 12-14 Win-Unit 12-14 Prime-Sub$0
$20
$40
$60
$80
$100
$120
$140
$160
Won75.50687
Lost64.294299
CTI$64
Lancaster $10
New England $2
Prime42.1626
Sub33.34427
EPD: TOTAL COMPANY-WIDE WIN-LOSS PERFORMANCE
$303M $140M
$76M
EPD: NEW BUSINESS ONLY
$76M
EPD: RECOMPETES ONLY$164M
$158M $158M
The win/loss data for EPD allows the following observations1. The company is VERY successful at retaining
existing business, with a 96% recompete win rate on a value basis
2. The company’s success in pursuit of new business varies widely by business unit
1. CTI pursued $102M in new business and won 63%
2. Lancaster pursued $35M and won $10M (29%); $9M of this value was won as a sub-contractor
3. New England pursued only $2M, and won $1.6M
May 2015
PROJECT JUPITER: Market Due Diligence
MARKET POSITIONING
Electronic Warfare Is Segmented Into Three Distinct Missions; Mission Lines Are Blurring
Mission: Protect EM systems against interference sourced from both friendly and enemy EW activities
Example Missions And Programs:
● ALQ-165 airborne self protect jammer (ASPJ) multiple platforms including the F-18
● B-52 self protect jammer● Havequick frequency-hopping
system
30
Electronic Attack (EA) Mission: Tactical sensing for
real-time response including: intercept, identify, and locate sources of intentional and unintentional radiated EM leading to threat avoidance, targeting, homing, and intelligence collection
Example Missions And Programs:
● SEWIP Block II antennas and receivers
● F-16 Scalable Agile Beam Radar (SABR) fire control radar
Electronic Warfare (EW) is a broad term, pertaining to any military action involving the use of the electromagnetic (EM) or directed energy to control the EM spectrum or to attack/disrupt the enemy’s use of the spectrum
However, EW is not a monolithic mission set – capabilities and programs broadly align with three distinct areas
Mission: Degrade, neutralize, or destroy enemy combat capability through EM, directed energy, or anti-radiation weapons
Example Missions And Programs:
● Jamming and EM deception are examples of preventing or reducing an enemy's effective use of EM spectrum
Next Generation Jammer (NGJ)
● Lasers, radio frequency weapons, particle beams are examples of weapons that use either EM or directed energy as their primary destructive mechanism
Advanced Test High ENergy Asset (ATHENA)
Electronic Surveillance (ES)
Electronic Protection (EP)
Technology advancements and integration of systems have led to the blurring of EW missions
May 2015
PROJECT JUPITER: Market Due Diligence
MARKET POSITIONING
DoD Emphasis On Electronic Warfare Has Continued To Grow And Is Expected To Continue To Be An Area Of Focus
DoD unclassified EW budget is expected to grow from $7.0B in FY15 to $8.4B in FY20 representing a 4.0% CAGR
● Fairmont estimates total DoD unclassified EW budget, Procurement and RDT&E, will grow at a 4.7% CAGR FY15-FY20
MarketsandMarkets estimates the worldwide EW budget will grow from $17.7B in 2014 to $24.3B in 2020 (5.4% CAGR), driven by stealth aircraft and ships
The EW budget contained in this study was created by reviewing unclassified budget line items currently of interest to EPD as well as similar programs where EPD components and integrated assemblies could be used
EW will continue to be a portion of new platforms across the services and as technology advances, the lines between EP, EA, and ES will continue to blur
31
FY2014A FY2015E FY2016R FY2017P FY2018P FY2019P FY2020P$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
Electronic Surveillance
ESES
ES ES ES ES
EP
EP
EP EP EP EPElectronic AttackEA
EA
EA EA EAEA
$6.9 $7.0
$8.6
$7.8 $7.9 $8.1
$8.5
Electronic Protection
DoD Electronic Warfare Unclassified Procurement Budget2014A-2020P; $ Billions
P-8A Poseidon increased due 14 full rate production aircraft and CFE equipment
reassigned to GFE procurement
4.0% CAGRFY15-FY20
May 2015
PROJECT JUPITER: Market Due Diligence
MARKET POSITIONING
DoD Has Increased Focus On Entire Electromagnetic Spectrum and Regaining EW Competitive Edge
32
● BBP conversations have focused on taking a step back and rethinking the concept of programs like F-35, tightly integrated complex capabilities crammed into one single military platform, which cost billions of dollars to upgrade and limit the ability to modernize subsystems at the same pace technology advances
● Modular designs with common architectures will be required to achieve advanced military applications and shorter implementation cycles
Future EW capabilities will focus on collaborative work between platforms, leveraging manned and unmanned technology together to control the battlefield; specific capabilities under development include:
● Unmanned aircraft EW and ISR capabilities to provide manned system alternatives● Modular systems, common interfaces, and software driven platforms (i.e. Angry Kitten) ● Interoperability with technology spanning the electromagnetic spectrum (i.e. DARPA’s Arrays at Commercial Time-scales (ACT))● Battle field management and increased system correlation (i.e. System of Systems Integration Technology and Experimentation
(SoSITE)● Cyber attack/protection technology (i.e. CHAMP – ability to shut down rooms full of computers using an electromagnetic pulse)
EW developments today involve the successful management of the electromagnetic spectrum in order to control all aspects of the battlefield either with a single system or a system of systems
BBP 3.0 focuses on breaking down barriers to entry for commercial firms and increasing technology integration in order to maintain the EW technological superiority the U.S. had entering the Cold War
The Undersecretary of Defense for Acquisition, Frank Kendall, plans to collaborate with industry to receive concept definition input prior to issuing finalized requirements
● Increasing R&D spending in key areas of technology while leveraging industry IR&D, commercial focus will leverage investments similar to system-on-chip technology which has made wideband digital elemental AESAs feasible
The DoD procurement process hopes to leverage lessons learned from past programs and products
Electromagnetic Spectrum and UsesSource: Association of Old Crows
DoD future programs will have an increased focus on commercial technology, modular systems, common interfaces, software driven – reprogrammable systems which
support an EW ecosystem
May 2015
PROJECT JUPITER: Market Due Diligence
COMPETITIVE ASSESSMENT
Electronic Warfare Supply Chain Tiers
Tier 1: Platforms and Systems● The major defense primes have absorbed some Tier II capabilities in order
to maintain unique selling positions while continuing to lowering the overhead cost base
● Most of the Tier I firms have acquired technology and capability to pursue the high-margin work associated with “cutting edge” technology such as Electronic Attack
33
EPD’s direct competitors are looking to move up the value chain, beginning to compete with their historical buyers – creating opportunities within the systems and integrated components
segment of the market
Tier III: Components and Integrated Components● Maintain high volume production/manufacturing capability
● Many Tier III companies maintain both build-to-print capability and are able to engineer integrated components
● Larger Tier III firms maintain both custom build and build-to-print capability with extensive inventories and broad COTS-based product offerings
Tier II: Sub-Systems● Producing both custom and commoditized sub-systems such as RF
Switches, Filters, and Receivers
● Many of the companies currently making sub-systems for major platforms and defense primes have aspirations to move up the value chain, producing complete systems such as EW stimulators and EW pods
May 2015
PROJECT JUPITER: Market Due Diligence
Market Positioning: Key Takeaways
34
The EW Market Is Growing US DoD and foreign governments understand the importance of EW and budgets
dedicated to this mission will continue to grow even amidst ongoing fiscal pressures
Radar, missile, and tactical communications budgets are all expected to grow over the forecasted period
The applications of technologies included in the EW spectrum are merging and lines between communication, cyber, ISR and many others are blurring
EPD Understands Place Within EW Supply Chain EPD’s current technology focuses on Radar and Electronic Surveillance receive
functions Programs included in management’s forecasted pipeline, with the exception of SEWIP
BLK III, include opportunities within EPD’s current technological capabilities SEWIP BLK III will provide EPD an opportunity to develop and compete for a new
capability within the EW marketplace
DoD Acquisition Has Increased Focused On EW Technology Requirements and product development will focus on modular, reprogrammable
solutions with common interfaces Commercial technology will be leveraged in order to quicken the pace of DoD
technology development and maintain superiority relative to a quickly evolving threat environment
A system of systems will be used for battlefield management across the EW spectrum New systems will include technology spanning the spectrum, including communication,
cyber-security, surveillance, detection, tracking all working simultaneously together
Analyst Briefing 2015 SLIDE 35
© 2015 Ultra Electronics: Proprietary Data
Questions
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 36
© 2015 Ultra Electronics: Proprietary Data
Appendices
Presentation to Investors and s Analyst Briefing 2015 Investors and Analysts SLIDE 37
© 2015 Ultra Electronics: Proprietary Data
Market positioning
Analyst Briefing 2015 SLIDE 38
© 2015 Ultra Electronics: Proprietary Data
Old divisions
Infrastructure & Power
Secure Intelligence Systems
Information & Power Systems Aircraft & Vehicle
Command & Control
Avalon Systems
Sonar Systems
Advanced Tactical Systems
Airport Systems
TCS
Controls
Precision Air & Land Systems
EMS
Nuclear Control SystemsNuclear
Sensors & Process
Instrumentation
PMES
ProLogic/SOTECH
Naval Systems Aircraft & Vehicle
Systems
Tactical Systems
Tactical & Sonar Systems
3 Phoenix
Maritime Systems
Ocean Systems
Flightline
3eTI
USSI
Communication & Integrated
Systems
GigaSat
ID
Forensic Technology
CEMS
Analyst Briefing 2015 SLIDE 39
© 2015 Ultra Electronics: Proprietary Data
New divisions
Maritime & Land
Advanced Tactical Systems
Airport Systems
Controls
Precision Air & Land Systems
EMS
Nuclear Control SystemsNuclear
Sensors & Process
Instrumentation
PMESProLogic/SOTECH
Communications & Security
Aerospace & Infrastructure
3 Phoenix
Command & Control
Maritime Systems
Sonar Systems
Ocean Systems
Flightline
3eTI
USSI
Communication & Integrated
Systems
TCS
Forensic Technology
Avalon Systems
GigaSat
ID