Slide 1: 2016 full-year results presentation
2016 full-year results presentation 16th March 2017
Slide 2: Forward-looking statements
Forward-looking statements This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to Balfour Beatty plc’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forwar
Slide 3: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 4: Build to Last: Programme Highlights
Build to Last: Programme Highlights Significantly exceeded Phase One targets – £439m cash in : £123m cost out Continued to simplify the Group; exiting non-core assets Upgraded leadership and de-layered management in UK and US Improving risk management and order book from strengthened governa
Slide 5: Build to Last: Financial Highlights
Build to Last: Financial Highlights Order book £12.7bn, up 15% (up 4% at CER) Underlying revenue £8.5bn, up 4% (down 3% at CER) Group returned to profit following two years of losses; underlying profit from operations £67m In the second half of 2016 UK Construction returned to underlying pro
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 7: Headline numbers
Headline numbers 2016 2015 Revenue* £8,530m £8,235m Profit (loss) from operations* £67m £(106)m Pre-tax profit (loss)* £60m £(123)m Post-tax profit (loss)* £48m £(134)m Underlying EPS* 7.0p (19.8)p Dividends per share 2.7p - Order book* £12.7bn £11.0bn Directors’ valuation £1,220m £1,244m Net cash≠
Slide 8: Order book
Order book £bn 2016 2015 £bn 2016 2015 Construction Services 0-12 months 6.2 5.6 US 5.5 4.1 12-24 months 3.4 2.5 UK 2.1 1.9 24 months+ 3.1 2.9 Rail 0.2 0.2 Total 12.7 11.0 Far East 1.5 1.2 Middle East 0.3 0.5 Order book increased 15% (4% at CER) 9.6 7.9 Support Services Continued disciplined and sel
Slide 9: Construction Services
Construction Services £m 2016 2015 Performance Revenue* PFO* PFO* % Revenue* PFO* PFO*% Revenue US 3,427 33 1.0% 3,097 (22) (0.7)% Underlying revenue up 7% UK 1,894 (64) (3.4)% 2,024 (187) (9.2)% with 11% increase in US partly offset by 6% Rail 249 (1) (0.4)% 274 (5) (1.8)% decrease in UK Overseas j
Slide 10: UK historical contracts
UK historical contracts Year end 2016: 90% of projects at practical or financial completion Historic contracts as at 2016 2015 Continuing 9 36 Remaining nine projects expected Practical completion 16 24 to reach practical 90% completion in Financial completion 64 29 2017 or 2018 Total 89 89 Achieved
Slide 11: Support Services
Support Services £m 2016 2015 Performance Revenue* Revenue Utilities 590 631 12% decrease due to phasing of contracts and regulatory cycles Transportation 513 628 Transport: lower volumes from local 1,103 1,259 authorities Profit from operations Profit from operations* 34 24 Support Services already
Slide 12: Infrastructure Investments
Infrastructure Investments £m 2016 2015 Performance UK* 20 33 Simplified business; exiting BBIP and North America 29 25 Australia Infrastructure Fund - 3 In total, 16 complete or part disposals Bidding costs and overheads (25) (24) Asset sales generated £189m with disposal profits of £65m Pre-dispos
Slide 13: Infrastructure Investments
Infrastructure Investments 2015 New wins in Projects sold 2016 projects period projects University/student accommodation 11 10 OFTO 3 3 Healthcare 6 6 Military housing 21 21 Transport 13 13 Housing 5 8 Energy 4 4 Schools 7 - Other 3 4 Total 73* 4 8 69 ≠ * Two projects that were at preferred bidder s
Slide 14: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £m 2016 2015 Opening valuation 1,244 1,300 Cash invested inc. BBIP investment 65 Cash received – distributions (64) – disposals (189) → (253) Net cash received (188) (125) New project wins 6 45 Disposal gains against Directors’ valuation 7 - Unwind of di
Slide 15: Cash flow
Cash flow £m 2016 2015 £m 2016 2015 Operating cash flows* (58) (247) Working capital Working capital (48) 178 Inventory & WIP 42 27 Infrastructure Investments Construction contract balances 36 308 Disposal proceeds 189 145 Trade & other payables (60) (236) New investments (65) (102) Trade & other re
Slide 16: Group balance sheet
Group balance sheet £m 2016 2015 Goodwill and intangible assets 1,162 1,066 Working capital (894) (890) Net cash (excluding infrastructure concessions) 173 163 Investments in joint ventures and associates 628 671 PPP financial assets 163 402 Infrastructure concessions – non-recourse net debt (233) (
Slide 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 18: Build to Last
Build to Last Simplifying the business Streamlining structures Strengthening leadership Clear direction Improving governance and processes Short interval control Transforming the culture Measurement and transparency Foundations laid for future profitable growth 17
Slide 19: Build to Last – LEAN
Build to Last – LEAN Phase One targets achieved: £200m cash in : £100m cost out Cumulative annual cash flow 100 Cash is our Compass 2015 2016 - £439m cash flow improvement versus 2014 (100) Cumulative cash flow improvements (200) £439m – improved operating cash flow and working capital (300) – i
Slide 20: Build to Last – LEAN
Build to Last – LEAN Phase One targets achieved: £200m cash in : £100m cost out £123m annualised savings since 2014 140 Early, bold decisions delivering efficiencies 120 – Centralised support functions; UK followed by US – My Contribution: over 3,000 ideas delivering c. £19m savings 100 – Establis
Slide 21: Build to Last – EXPERT
Build to Last – EXPERT Project management competency development Upgrading leadership Portfolio Director Project Director Competencies measured Programme Manager Contract Manager Optimised resource allocation Senior Project Project Manager Improved retention rates Manager Assistant Project Project M
Slide 22: Build to Last – TRUSTED
Build to Last – TRUSTED Project on a Page Gated Lifecycle Digital Briefcase Site Mobilisation Hub One Business Management System Relentless collaboration Strong balance sheet Doing what we say we will do 21
Slide 23: Build to Last – SAFE
Build to Last – SAFE Group Lost Time Injury Rate* vs UK observations 16,000 0.35 Improving LTIR 14,000 0.30 Growth in observations 12,000 0.25 10,000 0.20 Safety by design 8,000 0.15 6,000 Making safety personal 0.10 4,000 2,000 0.05 Review and learn 0 0.00 Jul-15 Jul-16 Jan-15 Jun-15 Jan-16 Jun-16
Slide 24: Core markets
Core markets SUPPORT SERVICES REVENUE BY GEOGRAPHY INVESTMENTS Medium term UK and US pick-up as regulatory Investments Governments seeking periods reset to reinvigorate Private (Rail, Gas, Finance market Water, Power) 3% 4% (PF2, US tax credits) US CONSTRUCTION Power cabling UK CONSTRUCTION Strong p
Slide 25: Build to Last outlook
Build to Last outlook Phase One (2015-16) Targets achieved: laying the foundations for future, profitable growth Phase Two (2017-18) Earnings-based businesses: reach industry-standard margins – UK Construction: 2%-3% – US Construction: 1%-2% – Support Services: 3%-5% Asset-based business: port
Slide 26: Appendix
Appendix Balfour Beatty
Slide 27: Order book position FY16 v FY15
Order book position FY16 v FY15 £6.2bn £5.6bn Total at FY 2016 £12.7bn Total at FY 2015 £11.0bn £3.4bn £3.1bn £2.9bn £2.5bn 0-12 months 13-24 months 24 months+ Construction Services - UK (incl Rail) Construction Services - US Construction Services - ROW Support Services 26
Slide 28: Pensions – balance sheet movement
Pensions – balance sheet movement £7m £434m £121m £43m £229m £231m £128m £146m £103m £103m Employer Net actuarial Other 2013 2014 2015 contributions loss movements 2016 1.05% 0.65% 0.7% Real discount rate (0.7)% 27
Slide 29: Working capital – Group
Working capital – Group 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 £(200)m (4)% £(400)m £(600)m (8)% £(800)m (12)% £(1,000)m (9.9)% (12.8)% (13.2)% (13.1)% £(1,200)m (13.9)% (16)% Period end working capital Period end working capital as % revenue Debtor days* 59 42 49 48 Creditor days* 100 91 99 97 Debt
Slide 30: Working capital – Construction Services
Working capital – Construction Services 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 £(200)m (4)% £(400)m (8)% £(600)m (12)% £(800)m (12.2) (16)% £(1,000)m (14.4) (16.8) (16.6) £(1,200)m (18.2) (20)% Period end working capital Period end working capital as % revenue From continuing operations including no
Slide 31: Net interest cost
Net interest cost £m 2016 2015 Subordinated debt interest receivable 29 Interest on PPP financial assets 21 Interest on non-recourse borrowings (24) 26 29 Net finance costs – pension schemes (4) (3) Other interest receivable 6 Other interest payable (15) FX gains on US deposits 19 10 (8) US private
Slide 32: Non-underlying items
Non-underlying items £m Continuing Trading - ES (6) - Rail Germany 1 (5) Impairment & amortisation - Amortisation of acquired intangibles (9) - Land impairment relating to Blackpool Airport (3) (12) Restructuring & reorganisation - Build to Last transformation costs (14) (14) Disposals & other - Rel
Slide 33: Construction Services trajectory
Construction Services trajectory £m PFO Operating margin % Performance H1 H2 FY 2016 H1 H2 FY 2016 PFO US 12 21 33 0.7% 1.2% 1.0% In H2 all geographies returned to positive PFO UK (66) 2 (64) (7.7)% 0.2% (3.4)% UK returned to profit following Rail (3) 2 (1) (2.3)% 1.7% (0.4)% material losses over pr
Slide 34: UK Regional Construction – tighter control
UK Regional Construction – tighter control Graph shows distribution of gross 2014 and before margin percentage delivered to date 2016 across UK regional contracts, based on year of commencement Frequency For completed contracts, “to date” represents the final position; for ongoing projects, it refle
Slide 35: Build to Last: gated business lifecycle
Build to Last Gated business lifecycle More selective Project approval gates Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Gate 6 Gate 7 Gate 8 bidding process Initial Tender Tender Contract Pre- Monitoring Project End of “Go/no GO” “Go/no GO” submission signing commencement and control completion defects appr
Slide 36: Financial history
Financial history £12bn £400m £10bn 450% £8bn £300m increase in £200m revenue £6bn £100m £4bn 45 £2bn £0m acquisitions since 2000 £0bn £(100)m 2 2 3 3 7 4 1 0 1 -£2bn 3 1 2 9 4 4 0 0 £(200)m 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenue (£bn, LHS) Profi
Slide 37: Balfour Beatty
Balfour Beatty