Half year results for the six months ended 30 September 2018 21 November 2018 Marine Land Aviation Nuclear Disclaimer This document has been prepared by Babcock International Group PLC (the “Company”) solely for use at a presentation in connection with the Company's half year results announcement for the half year ended 30 September 2018. For the purposes of this notice, the presentation that follows (the “Presentation”) shall mean and include the slides that follow, the oral presentation of the slides by the Company, the question and answer session that follows that oral presentation, hard copies of this document and any materials distributed at, or in connection with, that presentation. The Presentation does not constitute or form part of and should not be construed as, an offer to sell or issue, or the solicitation of an offer to buy or acquire, securities of the Company in any jurisdiction or an inducement to enter into investment activity. No part of this Presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. Statements in this Presentation, including those regarding the possible or assumed future or other performance of the Company or its industry or other trend projections, as well as statements about Babcock’s or management’s beliefs or expectations, may constitute forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond Babcock’s control. These risks, uncertainties and factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no assurance is given that such forward-looking statements will prove to have been correct. Forward looking statements in the Presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. They speak only as at the date of this Presentation and the Company undertakes no obligation to update these forward-looking statements. The information and opinions contained in this Presentation do not purport to be comprehensive, are provided as at the date of the Presentation and are subject to change without notice. The Company is not under any obligation to update or keep current the information contained herein. 2 Marine Land Aviation Nuclear Introduction Archie Bethel, Chief Executive Marine Land Aviation Nuclear Taking actions to further strengthen Babcock Full year Underlying De-gearing Interim dividend guidance results in line on track up 3.6% confirmed Exceptional costs (mostly non-cash) as we take action to further strengthen Babcock 4 Marine Land Aviation Nuclear Agreement for consistent and enduring relationship with UK Government • UK Government Strategic Partner Programme • MOD Strategic Supplier Management Programme • Cabinet Office, MOD and Babcock signed ‘Joint Ways of Working’ Charter 5 Marine Land Aviation Nuclear Taking action: addressing Oil and Gas Our Oil and Gas business Tough markets conditions • Two main geographies: UK North Sea and Australia • Platform crew shift patterns reduced • Around 50 helicopters (c.10% of total Aviation fleet) • Exploration and new platforms on hold • Includes 13 EC225s • EC225 taken out of North Sea operations Oil price drops: EC225 EC225 $114 to $46 grounded cleared to fly 2014 2015 2016 2017 2018 2019 Business Oil price CHC into Bristow & Columbia acquired drops: $30 Chapter 11 merge + impair EC225s 6 Marine Land Aviation Nuclear Reshaping our Oil and Gas business Focus on UK North Sea and Australia Maintain revenue levels Refocus cost base and rightsize the fleet Sell surplus helicopters / repurpose some for firefighting 7 Marine Land Aviation Nuclear Magnox update Magnox JV contract Future • Decommissioning 10 reactor sites and two test sites • NDA to repackage into smaller contracts • c.£3.8bn, 14-year contract now ending in Aug 2019 • Expect similar approach to Sellafield supply chain model Termination • More prudent scenario in revenue step down • Early termination a result of flawed procurement process assumptions • No reflection on performance (confirmed by NDA) • Cavendish Nuclear will compete for future packages • Committed to achieving a smooth transition back to NDA • Significant medium term opportunities remain Bid Additional scope NDA decide NDA announce Holliday report Award Consolidation period starts required to terminate subsidiary model findings 2012 2014 2015 2016 2017 2018 2019 High court rule NDA under Our contract Energy Solutions claim begins Holliday report begins against NDA review terminates 8 Marine Land Aviation Nuclear Operational highlights for the half year Marine Land Aviation Cavendish Nuclear • Type 23 frigate life extension: • c.500 vehicles deployed to • HADES (17 RAF bases) fully • Dounreay fast reactor now HMS Northumberland, HMS Oman for British Army operational 20% defueled Kent • Progressing with DSG • FOMEDEC planes and • Wylfa reactors now • HMS Monmouth and HMS transformation simulators delivered 75% defueled Albion deployment support • Mobilised Hinkley • Mobilising air ambulance • Bradwell entered care and • First delivery of Dreadnought Point C training contracts in Sweden, Finland maintenance submarine missile launch tube contract for EDF and Norway to USA • Office opened in Japan • Mobilised new rail contract • Renewed search and rescue • Babcock-Schulte Kairos LNG Northern Ireland contract in Spain service vessel 9 Marine Land Aviation Nuclear Our strategy focuses on three markets Emergency Defence Nuclear Services Delivered across our four sectors: Marine Land Aviation Nuclear With international a key growth driver 10 Marine Land Aviation Nuclear Actions to sharpen our strategic focus Exits and Restructure disposals and reshaping • Media services • Oil and Gas business • Renewables • Appledore shipyard • North America mining and • Rosyth, QEC construction support • Magnox ahead of contract end • Powerlines (South Africa) 11 Marine Land Aviation Nuclear Strong order book and bid pipeline Order book - £18bn Pipeline - £14bn 7% 13% 10% Defence Emergency Services1 18% 16% Nuclear 63% 67% Other 6% • £2.6 billion order intake in period, • £1 billion increase since March 2018 £0.9 billion of which not through pipeline • £3.7 billion of opportunities added2 • 92% of FY19 revenue secured, • Group win rates maintained 60% of FY20 • 87% contracts > £25 million • 88% contracts > £25 million 1. Emergency Services contracts typically have shorter bid periods and as such are underrepresented in our pipeline 2. Includes: Marine training, UK defence fleet vehicles, Eskom boiler maintenance (South Africa) and aerial emergency services in Canada 12 Marine Land Aviation Nuclear Financial review Franco Martinelli, Group Finance Director Marine Land Aviation Nuclear Maintaining underlying performance Underlying Taking action Cash Returns performance FCF2: increasing to £140m Revenue: £2,577m, £120m exceptional Underlying EPS: down 1.1%1 charges Cash conversion3: up 3.1% 120% pre capex Operating profit: Net cash costs 82% post capex Interim dividend: £280m, up 2.4%1 only c.£10m up 3.6% Net debt: £159m down year on year 1. Organic growth at constant rates 2. Before pension payments in excess of income statement 3. Defined as underlying operating cash flow over underlying operating profit 14 Marine Land Aviation Nuclear Underlying results in line Organic • Organic revenue growth -1.1%1, HY19 (£m) HY18 (£m) Change 1 growth +0.5% adjusting for exits Total revenue 2,577 2,639 -2.3% -1.1% • Organic operating profit growth Operating profit 280 276 +1.4% +2.4% +2.4%1 Operating margin 10.9% 10.5% • Margin supported by exits from Profit before tax 246 240 +2.5% low margin businesses EPS 39.9p 38.7p +3.1% • Underlying results exclude Interim dividend 7.10p 6.85p +3.6% £120 million of exceptional charges All results throughout this presentation are shown on an underlying basis unless otherwise stated and all percentages are calculated on non-rounded figures 1. At constant exchange rates 15 Marine Land Aviation Nuclear £2,700 £2,698£2,699£2,700 £2,695£2,696£2,697 £2,693£2,694£2,695 £2,690£2,691£2,692 £2,688£2,689£2,690 £2,685£2,686£2,687 £2,683£2,684£2,685 £2,680£2,681£2,682Revenue impacted by exits and disposals £2,678£2,679£2,680 £2,675£2,676£2,677 £2,673£2,674£2,675 £2,670£2,671£2,672 £2,668£2,669£2,670 £2,665£2,666£2,667 £2,663£2,664£2,665 £2,660£2,661£2,662 £2,658£2,659£2,660 £2,655£2,656£2,657 £2,653£2,654£2,655 £2,650£2,651£2,652 £2,648£2,649£2,650 £2,645£2,646£2,647 £2,643£2,644£2,645 Organic growth - 1.1% £2,640£2,641£2,642 £2,638£2,639£2,640 £2,636£2,637£2,635 £2,633£2,634£2,635 £2,639m - £17m £2,630£2,631£2,632 £2,628£2,629£2,630 £2,625£2,626£2,627 £2,623£2,624£2,625 £2,620£2,621£2,622 £2,618£2,619£2,620 £2,615£2,616£2,617 - £15m 1 £2,613£2,614£2,615 Excl. exits £2,610£2,611£2,612 + 0.5% £2,608£2,609£2,610 £2,605£2,606£2,607 £2,603£2,604£2,605 - £16.9m £2,600£2,601£2,602 £2,598£2,599£2,600 £2,607m - £42m £2,595£2,596£2,597 £2,593£2,594£2,595 £2,590£2,591£2,592 £2,588£2,589£2,590 £2,585£2,586£2,587 £2,583£2,584£2,585 £2,580£2,581£2,582 £2,578£2,579£2,580 £2,575£2,576£2,577 £2,573£2,574£2,575 £2,570£2,571£2,572 + £12m £2,568£2,569£2,570 £2,577m £2,565£2,566£2,567 £2,563£2,564£2,565 £2,560£2,561£2,562 £2,558£2,559£2,560 £2,565m £2,555£2,556£2,557 £2,553£2,554£2,555 £2,550£2,551£2,552 £2,548£2,549£2,550 £2,545£2,546£2,547 + £60m £2,543£2,544£2,545 £2,541£2,542£2,540 £2,538£2,539£2,540 £2,535£2,536£2,537 £2,533£2,534£2,535 £2,530£2,531£2,532 £2,528£2,529£2,530 £2,525£2,526£2,527 £2,523£2,524£2,525 £2,520£2,521£2,522 £2,518£2,519£2,520 £2,515£2,516£2,517 £2,513£2,514£2,515 £2,510£2,511£2,512 £2,508£2,509£2,510 £2,505£2,506£2,507 £2,503£2,504£2,505 £2,500£2,501£2,502 HY18 FX Disposals HY18 rebased Exits2 HY18 continuing Growth3 HY19 1.