Slide 1: 2018 half-year results presentation
2018 half-year results presentation 15 August 2018
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’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-lo
Slide 3: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 4: Balfour Beatty highlights
Balfour Beatty highlights Order book up 11% Average net cash to £12.6bn £161m UK Construction margin Dividend increase 2.1% 33% excluding AWPR On track for industry standard margins in the second half of 2018 3
Slide 5: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 6: Headline numbers
Headline numbers HY 2018 HY 2017 Revenue* £3,836m £4,191m Profit from operations* £66m £39m Pre-tax profit* £56m £22m Profit for the period* £52m £23m Total underlying EPS* 7.5p 3.2p Dividends per share 1.6p 1.2p HY 2018 FY 2017 Order book* £12.6bn £11.4bn Directors’ valuation £1,185m £1,244m Year e
Slide 7: Underlying profit from operations
Underlying profit from operations £m HY 2018* HY 2017* US Construction 17 17 UK Construction 5 2 Gammon 10 5 Construction Services 32 24 Support Services 17 16 Infrastructure Investments 33 15 Corporate activities (16) (16) Total 66 39 * from continuing operations, before non-underlying items Improv
Slide 8: Order book
Order book £bn HY 2018 FY 2017 HY 2017 £bn HY 2018 HY 2017 Construction Services 0-6 months 3.5 3.7 US 5.4 4.3 4.7 6-18 months 4.2 3.5 UK 2.7 2.7 2.2 18-30 months 2.5 2.1 30 months+ 2.4 2.1 Gammon 1.4 1.3 1.2 Total 12.6 11.4 9.5 8.3 8.1 Support Services Performance Utilities 1.2 1.3 1.5 • 11% increa
Slide 9: Construction Services
Construction Services £m HY 2018* HY 2017* Revenue PFO PFO % Revenue PFO PFO % US 1,577 17 1.1% 1,952 17 0.9% UK 947 5 0.5% 975 2 0.2% Gammon 451 10 2.2% 481 5 1.0% Total 2,975 32 3,408 24 * from continuing operations, before non-underlying items Performance • All geographies capable of delivering i
Slide 10: Aberdeen Western Peripheral Route (AWPR)
Aberdeen Western Peripheral Route (AWPR) Road partially opened to the public Final structure, Don Crossing, expected to complete in autumn 2018 Balfour Beatty 2018 expected cash outflow now £135m Underlying charge in the period of £15m, non-underlying charge £8m Working with Transport Scot
Slide 11: Support Services
Support Services £m HY 2018* HY 2017* Performance Revenue • 5% higher revenue Utilities 308 299 • PFO and margin percentage stable Transportation 235 220 • Power: continued restructure and cost removal Total 543 519 • Gas and Water: focus on AMP7 contract terms • Highways: stable markets working for
Slide 12: Infrastructure Investments
Infrastructure Investments £m HY 2018 HY 2017 Performance Pre-disposals operating profit* 11 15 • Increased profit driven by gain on partial disposal of Connect Plus M25 Profit on disposals 22 - – 2018 profit and cash: 5% sale for £22m profit Investments underlying operating profit* 33 15 on disposa
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £38m £48m £2m £(39)m £(108)m £1,244m £1,244 £1,243 £1,135 £1,135 £1,183 £1,185m FY 2017 Equity invested Distributions Sales Unwind of Other* HY 2018 received proceeds discount * Other includes movements in operational performance and foreign exchange Dir
Slide 14: Half-year cash flow
Half-year cash flow £m HY 2018 HY 2017 £m HY 2018 HY 2017 Operating cash flows 44 26 Working capital Working capital outflow (66) (9) Inventories - (1) Pension deficit payments (14) (10) Net contract balances - (9) Cash (used in)/generated from operations (36) 7 Trade & other payables 52 49 Infrastr
Slide 15: Group balance sheet
Group balance sheet £m HY 2018 FY 2017 HY 2017 Goodwill and intangible assets 1,191 1,155 1,178 Working capital (877) (888) (924) Net cash (excluding infrastructure concessions) 366 335 161 Investments in joint ventures and associates 522 531 630 PPP financial assets 159 163 159 Infrastructure conce
Slide 16: Build to Last outlook
Build to Last outlook Phase One (2015-16) Targets achieved: solid foundations for sustainable, 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 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 18: Build to Last
Build to Last Foundation which underpins future profitable growth 17
Slide 19: De-risking Balfour Beatty to improve returns
De-risking Balfour Beatty to improve returns GEOGRAPHIC COMMERCIAL OPERATIONAL FINANCIAL Simplified and refocused Selective bidding for Upgraded leadership and Strong balance sheet; on growing markets in UK contracts best aligned governance running business with & Ireland, US and with Group’s averag
Slide 20: Benefits of Build to Last
Benefits of Build to Last Order book (£bn) Group six month average net cash (£m) 15 200 10 100 5 0 -100 0 H2 16 H1 17 H2 17 H1 18 H1 16 H2 16 H1 17 H2 17 H1 18 Earnings based businesses PFO (£m) Safe: Lost Time Injury Rate˄ 70 0.4 10 0.3 -50 0.2 -110 -170 0.1 -230 0 H1 15 H2 15 H1 16 H2 16 H1 17 H2
Slide 21: Key infrastructure projects
Key infrastructure projects Project Value* 2018 2019 2020 2021 2022 2023 2024 2025 Caltrain $697m US Southern Gateway $625m US Green Line $1.08bn US LAX $1.95bn US HS2 £2.5bn UK A14 £1.5bn^ UK M4/M5/M6 Smart Motorways £600m UK Hinkley Point C Undisclosed UK Thames Tideway £416m UK Central Kowloon Hi
Slide 22: Positive infrastructure markets
Positive infrastructure markets Construction Services US UK Far East Positive infrastructure Positive infrastructure Positive infrastructure revenue by geography & buildings market market market Fixing America’s Surface 10 year hospital Transportation (FAST) Act HS2 development plan US UK US$305bn £
Slide 23: Expert capabilities
Expert capabilities Expert: Employee engagement rate 65% 60% Creating a great place to work Recruit, train, retain highest calibre workforce 55% FY 2015 FY 2016 FY 2017 HY 2018 Investing in capabilities Expert: UK voluntary attrition – Digitising construction (moving annual average) – Site of
Slide 24: Infrastructure Investments model
Infrastructure Investments model Infrastructure Investments value crystallised £700m Over £500m net cash distribution since 2015 £600m Cycle mature assets to maximise value £500m DV remains stable at £1.2bn £400m Continue to invest with focus towards £300m US opportunities £200m – US: PPP pr
Slide 25: Infrastructure Investments portfolio by sector
Infrastructure Investments portfolio by sector Directors’ valuation Directors’ valuation by sector (£m) HY 2018 FY 2017 by geography Roads 210 290 Healthcare 144 136 Student accommodation 66 64 Other 136 146 UK total^ 556 636 US military housing 512 497 Student accommodation 49 49 US other 68 62 Nor
Slide 26: Balfour Beatty today
Balfour Beatty today Expert Growing capabilities infrastructure markets Strong Attractive balance Investments sheet portfolio Industry leading brand Market leader positioned to deliver market leading performance 25
Slide 27: Appendix
Appendix Balfour Beatty
Slide 28: Order book position compared with prior year
Order book position compared with prior year Total at HY 2018 £12.6bn £4.2bn Total at HY 2017 £11.4bn £3.7bn £3.5bn £3.5bn £2.5bn £2.1bn £2.1bn £2.4bn HY 2017 HY 2018 HY 2017 HY 2018 HY 2017 HY 2018 HY 2017 HY 2018 0-6 months 6-18 months 18-30 months 30 months+ Construction Services - UK Constructio
Slide 29: Pensions – balance sheet movement
Pensions – balance sheet movement £138m £184m £32m £14m £(128)m £(146)m £(231)m 2014 2015 2016 2017 Employer Net actuarial gain HY 2018 contributions 0.65% 0.7% (0.7)% (0.6)% Real discount rate (0.25)% 28
Slide 30: Working capital – Group
Working capital – Group 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 £(200)m (4)% £(400)m £(600)m (8)% £(800)m (12)% (9.9)% £(1,000)m (12.8)% (13.2)% (12.9)% (13.1)% (12.8)% (13.9)% (13.6)% £(1,200)m (16)% Period end working capital Period end working capital as % revenue Debtor days¹
Slide 31: Working capital – Construction Services
Working capital – Construction Services 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 £(200)m (4)% £(400)m (8)% £(600)m (12)% £(800)m (12.2)% (14.4)% (14.2)% (14.2)% (16)% £(1,000)m (14.7)% (16.8)% (16.6)% £(1,200)m (18.2)% (20)% Period end working capital Period end working capital as
Slide 32: Net interest cost
Net interest cost £m HY 2018 HY 2017 Subordinated debt interest receivable 13 Interest on PPP financial assets 4 Interest on non-recourse borrowings (7) 10 11 Net finance income/(cost) – pension schemes 1 (3) Other interest receivable 2 Other interest payable (6) FX losses on US deposits - (4) (6) U
Slide 33: Non-underlying items
Non-underlying items £m HY 2018 HY 2017 Trading - Rail Germany 1 - Impairment and amortisation - Amortisation of acquired intangibles (4) (5) Restructuring and reorganisation - Build to Last transformation costs (5) (5) Other - Additional loss on the AWPR contract as a result of Carillion’s liquidat
Slide 34: Build to Last – LEAN
Build to Last – LEAN Cumulative annual cash flow (£m) 200m 2017 100m - 2018 2016 (100m) 2015 (200m) (300m) (400m) 2014* (500m) (600m) (700m) Dec Mar Jun Sept Dec * Adjusting for the sale of Parsons Brinckerhoff Includes all other disposals 33
Slide 35: Debt repayment profile
Debt repayment profile £250m £200m £150m £100m 214 112 158 £50m 35 38 £0m (18) (21) (32) £(50)m 2017 2018 2019 2020 2023 2025 Convertible bond US Private placement Preference shares Convertible bond repaid US Private placement repaid The Group has a committed revolving credit facility of £400 millio
Slide 36: Balfour Beatty: leading the conversation
Balfour Beatty: leading the conversation 35
Slide 37: US Construction
US Construction Our Buildings presence Our capabilities Buildings Civils Commercial Education Roads Rail Hospitality Residential Water Healthcare Our markets Buildings* Civils 2018 opportunities $365bn $86bn Sources: Dodge *In states in which Balfour Beatty operates 36
Slide 38: Financial history
Financial history £12bn £400m 450% £10bn Increase in revenue £300m £8bn £6bn £200m 45 £4bn Acquisitions £100m £2bn £0bn £0m £94m -£2bn Average ordinary dividend -£100m (2011-2014) -£4bn -£6bn -£200m £10m 2000 2002 2004 2006 2008 2010 2012 2014 2016 Average ordinary dividend Revenue (LHS) Profit from