Balfour Beatty Plc · LSE:BBY
Balfour Beatty — H1 2016 Earnings Presentation
37 slides from Balfour Beatty's earnings presentation, Aug 17, 2016
Slide 1: 2016 half-year results presentation
2016 half-year results presentation 17th August 2016
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: Agenda
Agenda Summary and Financial Build to Last operational report update overview Leo Quinn Phil Harrison Leo Quinn 3
Slide 5: Build to Last: Financial Highlights
Build to Last: Financial Highlights Order book £12.4bn, up 7% at constant exchange rates – maintaining disciplined bidding practices Underlying revenue £4,024m Underlying profit before tax £7m (2015: £130m loss) Net cash £115m, following continued working capital discipline New pension def
Slide 6: Build to Last: Programme Highlights
Build to Last: Programme Highlights On track to achieve £200m cash in : £100m cost out Continued simplification of Group Further action to upgrade leadership New process and systems landscape delivering benefits Cultural change gathering momentum – building on Zero Harm Delivering directio
Slide 7: Phil Harrison, Group Chief Financial Officer
Phil Harrison Group Chief Financial Officer
Slide 8: Headline numbers
Headline numbers HY 2016 HY 2015 FY 2015 Revenue* £4,024m £4,085m £8,235m Profit / (loss) from operations* £5m £(120)m £(106)m Pre-tax profit / (loss) – underlying* £7m £(130)m £(123)m Pre-tax loss – total continuing £(21)m £(150)m £(199)m Underlying EPS* 2.0p (19.4)p (19.7)p Dividends per share 0.9
Slide 9: Order book
Order book £bn HY 2016 FY 2015 HY 2015 £bn HY 2016 HY 2015 Construction Services 0-6 months 3.3 3.3 US 4.7 4.1 3.8 6-18 months 4.8 4.1 UK 2.1 1.9 2.0 18-30 months 2.0 1.3 Rail 0.2 0.2 0.2 30 months+ 2.3 2.6 Far East 1.6 1.2 1.3 Total 12.4 11.3 Middle East 0.5 0.5 0.4 Group order book grew by 13% (7%
Slide 10: Construction Services
Construction Services £m HY 2016 HY 2015 FY 2015 Performance Revenue PFO Revenue PFO Revenue PFO Revenue US 1,632 12 1,483 (41) 3,097 (22) Construction revenues flat (-5% at CER). UK 862 (66) 1,117 (145) 2,024 (187) US revenue increase driven by Rail 129 (3) 104 (4) 274 (5) FX movements (+1% at CER)
Slide 11: UK historical contracts impacting profit and cash
UK historical contracts impacting profit and cash HY 2016: 81% of projects at practical or financial completion FY 2015: 60% of projects at practical or financial completion HY 2015: 31% of projects at practical or financial completion Historical contracts as at HY 2016 FY 2015 HY 2015 Expected Cont
Slide 12: Support Services
Support Services £m HY 2016 HY 2015 FY 2015 Performance Revenue Revenue Transportation 257 314 628 Revenue declined as expected, due to contract phasing and Utilities 291 301 631 regulatory cycles. 548 615 1,259 Transportation: lower volumes in Highways. Utilities: decline in Power largely Profit fr
Slide 13: Infrastructure Investments
Infrastructure Investments £m HY 2016 HY 2015 FY 2015 Performance UK† 9 15 33 Business significantly simplified: North America 14 12 25 • disposal of BBIP for £48m Infrastructure Fund - 1 3 • exited Australia with Wollongong disposal. Bidding costs and overheads (5) (14) (24) Pre-disposals operating
Slide 14: Infrastructure Investments
Infrastructure Investments Successful period for wins FY 2015 New wins in Projects HY 2016 Projects projects period sold projects not yet closed University / student accommodation 11 10 OFTO 3 3 Healthcare 6 6 Military housing 21 21 Transport 13 13 Housing 5 7 Energy 4 4 Schools 7 - Other 3 4 Total
Slide 15: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £m HY 2016 FY 2015 Opening valuation 1,244 1,300 Cash invested incl. BBIP investment 45 Cash received – distributions (43) – disposals (82) (125) Net cash received (80) (125) New project wins 2 45 Disposal gains against Directors’ valuation 2 - Unwind of
Slide 16: Non-underlying items
Non-underlying items £m Continuing Trading - ES (4) - Rail Germany 1 (3) Impairment & amortisation - Amortisation of acquired intangibles (4) - Land impairment relating to Blackpool Airport (2) (6) Restructuring & reorganisation - Build to Last transformation costs (9) (9) Disposals & other - Gains
Slide 17: Half-year cash flow
Half-year cash flow £m HY 2016 FY 2015 £m HY 2016 FY 2015 Operating cash flows† (71) (247) Working capital Working capital 1 178 Inventory & WIP 14 27 Infrastructure Investments Construction contract balances# 22 313 - disposal proceeds 82 145 Trade & other payables (25) (236) - new investments (45)
Slide 18: Group balance sheet
Group balance sheet £m HY 2016 FY 2015 HY 2015 Goodwill and intangible assets 1,122 1,066 1,059 Working capital* (879) (890) (965) Net cash (excluding infrastructure concessions)† 115 163 260 Investments in joint ventures and associates 583 671 699 PPP financial assets 432 402 365 Infrastructure con
Slide 19: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 20: Build to Last: Phase One
Build to Last: Phase One Laying the foundation for future, managed growth Simplifying the business Streamlining structures Strengthening leadership Clear direction Improving governance and processes Short interval control Changing the culture Measurement and transparency 18 months into 24-month self
Slide 21: Build to Last – LEAN
Build to Last – LEAN Phase One target: £200m cash in: £100m cost out Cumulative annual cash flow 100 Cash is our Compass: - £250m cash flow improvement versus 2014 2015 (100) 2016 Operating losses substantially reduced £250m (200) Established working disciplines maintained (300) Leveraging i
Slide 22: Build to Last – LEAN
Build to Last – LEAN Phase One target: £200m cash in: £100m cost out £88m annualised savings since 2014 £100m Continued simplification of the business £90m – US Construction under single leader; unifying the £80m US back office functions £70m – divested BBIP and exited Australia £60m – 952 indirec
Slide 23: Build to Last – EXPERT
Build to Last – EXPERT Recruit Relentlessly upgrading leadership Maintaining The 5% Club strategy: investing in the next generation Train Started journey to build world-class project management capability Leadership forums across Balfour Beatty: project management, commercial, engineering
Slide 24: Build to Last – TRUSTED
Build to Last – TRUSTED Disciplined, business-like contracting provides oversight and governance 81% of legacy contracts at practical or financial completion Gated lifecycle embedded across the business – more selective UK regional construction: c.250 live projects (2015: c.450) New process an
Slide 25: Build to Last – SAFE for all: always our Number 1 priority
Build to Last – SAFE for all: always our Number 1 priority Group Lost Time Injury Rate* vs UK Observations Leading indicators trending in a positive, upwards 2500 0.35 direction 0.30 – Lost Time Injury Rate* improved to 0.21 2000 (FY 2015: 0.24) 0.25 Group-wide behavioural safety best practice 1
Slide 26: Market outlook
Market outlook MARKET UK CONSTRUCTION US CONSTRUCTION INTERNATIONAL JVs SUPPORT SERVICES INVESTMENTS ~£60bn market ~£80bn market ~£13bn market ~£20bn market ~£6bn market GROWTH Strong pipeline of New transportation Strong residential Pick-up in medium Pipeline of major projects bill in Inf
Slide 27: Infrastructure outlook
Infrastructure outlook Demand driven opportunity 26
Slide 28: The Build to Last journey
The Build to Last journey Phase One (2015-16) - Laying the foundation for future, managed growth Phase Two (2017-18) - Industry-standard margins Phase Three (2019+) - Market-leading strengths and performance Transformation through steady and consistent progress 27
Slide 29: Appendix
Appendix Balfour Beatty
Slide 30: Order book phasing compared with a year ago
Order book phasing compared with a year ago Total at HY 2016 £12.4bn £4.8bn Total at HY 2015 £11.3bn £4.1bn £3.3bn £3.3bn £2.6bn £2.3bn £2.0bn £1.3bn 0-6 months 6-18 months 18-30 months 30 months+ Construction Services - UK (incl Rail) Construction Services - US Construction Services - ROW Support S
Slide 31: Pension obligations – balance sheet movement
Pension obligations – balance sheet movement £538m £(560)m £441m £434m £333m £3m £275m £128m £146m £(30)m £(1)m £96m Dec Dec Dec Dec Dec Dec Service Employer Actuarial Actuarial Other Jun 2010 2011 2012 2013* 2014* 2015 cost contributions loss gain movements 2016 liabilities assets 2.05% 1.9% 1.5% 1
Slide 32: Working capital – Group
Working capital – Group 0 0 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 £(200)m (4)% £(400)m £(600)m (8)% (7.8)% £(800)m (8.5)% (9.5)% (9.5)% (10.0)% (9.9)% (12)% £(1,000)m (11.9)% (12.8)% (13.2)% £(1,200)m (13.9)% (16)% Period end working capital Period end working capital
Slide 33: Working capital – Construction Services
Working capital – Construction Services 0 0 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 £(200)m (4)% £(400)m (8)% £(600)m (9.7)% (9.2)% (12)% (10.5)% (11.1)% (10.8)% £(800)m (12.2)% (13.4)% (16)% £(1,000)m (16.8)% (16.6)% £(1,200)m (18.2)% (20)% Period end working capital P
Slide 34: Net interest cost
Net interest cost £m HY 2016 HY 2015 Subordinated debt interest receivable 15 Interest on PPP financial assets 12 Interest on non-recourse borrowings (12) 15 16 Net finance costs – pension schemes (2) (2) Other interest receivable 1 Other interest payable (5) FX gain on US deposits 12 8 (6) US priva
Slide 35: Build to Last
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: Build to Last
Build to Last Standardised project reports NOT A REAL PROJECT (CRLR0032) Gate: 6 (Execution) Risk Value: £7.7m (69%) Risk Score: 13 Report generated @ 14:25 on Sun, 06 Mar 2016 by Jam es Veitch Identified Risks Percentage Completion Test Explanation Risk Factor Risk Value % of NSV Missed Completion
Slide 37: Balfour Beatty
Balfour Beatty