Half Year Results

IntroductionMichael 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

Group turnover* £601.1m 17%

Underlying PBT** £44.6m 16%

PBT £32.8m 53%

Underlying EPS 17.6p 16%

Interim dividend 4.3p 10%

Closing order book*** £4.4bn 2%

Cash conversion 88%

5

Key Messages

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

Operational ReviewPaul Lester

7

Structure

Defence Government & Critical Services VT Group US

Air

Lan

d

Sea

Edu

catio

n

Tra

inin

g

Crit

ical

Ass

ets

Env

iron

men

t

Tec

hnic

al S

ervi

ces

Inte

grat

ed S

olu

tion

s

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+

Financial ReviewPhilip Harrison

17

Income Statement

30 September 2009

£m

30 September 2008

£m

% Increase

Turnover (incl JVs) 601.1 513.7 17.0%

Underlying operating profit 51.2 42.2 21.3%

Net finance costs* (6.6) (3.9)

Underlying PBT 44.6 38.3 16.4%

Underlying EPS 17.6p 15.2p 15.8%

*Excluding mark to market derivative movement

18

Income Statement30 September

2009

£m

30 September 2008

£m

% Increase

Underlying operating profit 51.2 42.2 21.3%

Pension curtailment credit 0.4 -

Exceptional items - (5.4)

Amortisation of intangibles (11.8) (10.1)

Fair value movements on derivatives (0.2) -

JV tax (0.1) (1.3)

Net finance costs (6.7) (3.9)

Profit before tax (continuing operations) 32.8 21.5 52.6%

Taxation (9.2) (5.5)

Discontinued operations (5.1) 109.0

Net Result for the Period 18.5 125.0

19

Segmental Reporting - Continuing Operations

30 September 2009

£m

30 September 2008

£m

Turnover Underlying Operating

Profit

Margin %

Turnover Underlying Operating

Profit

Margin %

Profit % increase

Defence 251.4 28.7 11.4% 194.6 23.8 12.2% 20.6%

Govt & Critical Services 187.2 13.7 7.3% 182.3 11.7 6.4% 17.1%

VT Group Inc 162.5 8.8 5.4% 136.8 6.7 4.9% 31.3%

601.1 51.2 8.5% 513.7 42.2 8.2% 21.3%

20

Sep-08 Acquisitions Organic FX Sep-09

Segmental ReportingTurnover Growth Analysis- Continuing Operations

£m

513.7

17.2

601.143.1

27.1

8.4%

21

Segmental ReportingUnderlying Operating Profit Growth Analysis- Continuing Operations

Sep-08 Acquisitions Organic FX Sep-09

42.2

51.2

1.9 5.7

£m

1.4

13.5%

22

Investment Income & Finance Costs30 September 2009

£m

30 September 2008

£m

Investment Income from PFI Projects 1.6 1.7

Other Interest receivable 2.0 3.9

Net investment income - pensions - 1.5

PFI interest on bank loans / overdrafts (0.7) (0.7)

Other bank loans/overdrafts (2.7) (8.0)

Net finance costs – pensions (1.3) 0.0

Deferred consideration (2.0) (1.0)

Provision discounting (0.7) -

Other (1.3) 0.4

Net Finance Costs (6.7) (3.9)

Investment Income & finance costs (5.1) (2.2)

23

Balance Sheet30 September 2009

£m

31 March

2009

£m

Goodwill & intangible assets 443 464

Tangible assets 70 58

Equity accounted investments 11 13

Assets held for sale 116 120

Other non-current assets 44 44

Working capital (33) (36)

Net debt (191) (186)

Employee pensions (74) (60)

Tax 6 9

Net deferred tax (24) (33)

Provisions (56) (69)

Shareholders funds 312 324

24

Cash Generated from Operations

30 September 2009

£m

30 September 2008

£m

Underlying operating profit 51.2 42.2

Depreciation & amortisation 5.0 5.2

Other items 1.6 (8.7)

Pension paid in excess of P&L (7.4) (6.5)

Working capital (increase) / decrease (14.0) 16.2

Dividends from JVs 2.7 1.9

Cash generated from operations 39.1 50.3

Exceptional reorganisation expenditure 4.2 0.8

Investment Income from PFI contracts 1.6 1.7

Underlying operating cashflow 44.9 52.8

Operating Cashflow % 88% 125%

25

Net Debt

30 September 2009

Post BVT

Proforma £m

30 September 2009

£m

31 March

2009

£m

Cash balance 200.2 75.5 51.5

Bank loans and overdrafts (64.5) (159.7) (129.9)

Asset finance (20.8) (20.8) (20.8)

Loan notes & other borrowings 3.3 3.3 1.1

Recourse net debt 118.2 (101.7) (98.1)

Non recourse debt (19.5) (19.5) (20.2)

Deferred consideration - (70.1) (68.1)

Total net funds/(debt) 98.7 (191.3) (186.4)

26

Order Profile - Continuing Operations

Total order book £4.4 billion £2.5 billion of order book beyond 3 years Strong visibility of earnings

0 250 500 750 1000 1250

2012

2011

2010

£'m

Turnover Order book Rebids & renewals Preferred bidder

StrategyPaul Lester

28

Business Model

Customer engagement

Arms length subcontractor

Short term Prescriptive

Long term partner Higher added value Critical to success Managed service

Cap

abil

ity

29

Business Model

Customer engagement

Cap

abil

ity

UKMFTS

FSTA

SKIOS

Met Police

Severn ParkCardiff Gate

Careers

US Base Ops

Sellafield

Flagship

SPAWAR

New Dimension

BSFAMCOMExpress

Nuclear(Europe)

BBC

30

Customer Profile

Other4%

MOD40%

DoD & US Gov27%

UK Public Sector29%

31

Geography

United Kingdom70%

North America27%

Other3%

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 pressures4 ‘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

4%4%

18%

7%

4%

25%

1%

15%

2%

20% Business, Innovation & Skills

Childrens. Schools & Families

Health

Defence

Home & Foreign Office

Local Government

Energy & Environment

Other

Transport

Work & Pensions

UK Government Expenditure

Source: HM Treasury Public Expenditure Statistical Analysis 2009

*Source: Julius Report 2008

Total c£620bnOutsourced c£80bn*

36

31%

27%

6%

4%

11%

4%

17%Education

Social Care

Transport

Housing

Public Order & Safety

Environment

Other

UK Government ExpenditureLocal Government c£164bnOutsourced 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

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

US Background

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

Additional Financial Information

Appendix 1

42

Summarised Cashflow 30 September

2009

£m

30 September 2008

£m

Underlying Operating cashflow 44.9 52.8

Reorganisation Costs (4.2) (0.8)

Business Acquisitions (3.1) 19.1

Fixed Asset (Purchases)/Disposals (16.8) 5.2

Repayment of PFI Financial Assets 1.3 1.8

Interest and Tax (9.6) (13.3)

12.5 64.8

Dividends paid (19.0) (17.6)

Shares issued/(purchased) 0.7 (2.0)

Discontinued Operations (2.0) (29.0)

Net cashflow movement (7.8) 16.2

Opening net debt

Arising on acquisition

(186.4)

-

(144.9)

(51.8)

Exchange gains & non cash movements 2.9 (5.8)

Closing net debt (191.3) (186.3)

43

Pensions Charge

30 September 2009

£m

30 September 2008

£m

Defined benefit schemes:

P&L Charge – current service cost 6.8 6.7

Curtailment Credit (0.4) -

Operating Profit Charge 6.4 6.7

Expected Return on Assets (10.8) (12.9)

Interest on Scheme Liabilities 12.1 11.4

Net Finance Charge/(Credit) 1.3 (1.5)

Net Pension Charge 7.7 5.2

44

Mar-09 ServicesCost

InterestCost

Actuarial Paid Sep-09

Pension Deficit£m

60.5

6.4

73.8

1.319.3 (13.8)

45

Earnings per Share/Dividends

30 September 2009

30 September 2008

Underlying EPS - continuing 17.6p 15.2p 15.8%

Basic EPS - continuing 13.0p 8.7p 49.4%

Diluted EPS - continuing 12.8p 8.5p 50.6%

Interim dividend per share 4.3p 3.9p 10.3%

Appendix 2Contract Portfolio

47

Contract Portfolio - DefenceValues over £50m

LAFTTTSPMFTSFSTASea King MaintenanceAllenby ConnaughtWhitefleetALC (C Vehicles)ArborfieldBordonTMASSESTSTOASTUTEFitzroyVLFDHFCSFirefighting Training

10 12 14 16 18 20 22 24 26 28

2037

Year

2035

ContractPreferred bidder

2030

48

Contract Portfolio – G&CSValues over £50m

Year

Metropolitan PoliceBritish AirwaysCardiff GateSevern ParkFirefighting TrainingSurrey County CouncilGreenwichLewishamBBCGovernment AgencyWakefieldNew Dimensions

2030

10 12 14 16 18 20 22 24 26 28

2036

2032

49

Contract Portfolio – VT Group IncValues over £50m

NASACamp Le JeuneKings BaySPAWARAMCOM Express

10 12 14 16 18 20 22 24 26 28Year

Rolling renewal