Slide 1: 2015 half-year results presentation
2015 half-year results presentation 12 August 2015
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 plc9s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forwar
Slide 3: Agenda
Agenda Summary and Financial Build to Last operational report update overview Leo Quinn Phil Harrison Leo Quinn 2
Slide 4: Encouraging progress
Encouraging progress Revenue/order book stable – landmark contract wins First half losses reflect historic challenges – as per July update Build to Last gaining momentum – net cash £260m One of sector9s strongest balance sheets – anchored by £1.25bn Investments portfolio Favourable market
Slide 5: Operational update – Construction Services
Operational update – Construction Services HY 2015 HY 2014 FY 2014 Performance Order book (£bn) 7.7 7.6 7.9 Order book stable – UK reduction with more selective Revenue (£m) 3,177 3,186 6,597 bidding; offset by US & Middle East Revenues steady – declines of 2% in UK and 1% in US Loss from operat
Slide 6: Operational update – Support Services
Operational update – Support Services HY 2015 HY 2014 FY 2014 Performance Order book (£bn) 3.6 4.0 3.5 Order book grew 2% in first half, due to growth Revenue (£m) 615 615 1,273 in Water Revenue stable at £615m – growth in Power offset by Profit from operations (£m) 4 22 50 decline in Water Pr
Slide 7: Operational update – Infrastructure Investments
Operational update – Infrastructure Investments HY 2015 HY 2014 FY 2014 Performance Pre-disposal operating profit (£m) 14 21 34 Continuing to invest, £64m invested in first half; Gain on disposals (£m) 84 51 93 including Gwynt y Môr OFTO, Welland waste wood and Profit from operations (£m) 98 72 12
Slide 8: Phil Harrison, Chief Financial Officer
PHIL HARRISON Chief Financial Officer
Slide 9: Headline numbers
Headline numbers HY 2015 HY 2014^¹ FY 2014 Order book* £11.3bn £11.6bn £11.4bn Revenue* £4,085m £4,072m £8,440m (Loss)/profit from operations* £(120)m £29m £(58)m Pre-tax (loss)/profit – underlying* £(130)m £15m £(80)m Pre-tax (loss)/profit – total continuing £(150)m £(58)m £(304)m Underlying EPS* (
Slide 10: Order book
Order book £bn HY 2015 FY 2014 HY 2014 Order book visibility - £bn HY 2015 HY 2014 Construction Services 0-6 months 3.3 3.1 US 3.8 3.7 3.5 6-18 months 4.1 3.5 UK 2.0 2.3 2.0 18-30 months 1.3 2.0 Rail 0.2 0.3 0.3 30 months+ 2.6 3.0 Middle East 0.4 0.3 0.3 Total 11.3 11.6 Far East 1.3 1.3 1.5 7.7 7.9
Slide 11: Construction Services segment
Construction Services segment £m HY 2015 HY 2014 Revenue ● Flat versus HY 2014 Revenue PFO Revenue PFO ● Declines of 2% in UK and 1% in US 1,483 (41) 1,498 12 US offset by a 37% increase in UK 1,117 (145) 1,136 (59) Far East ● In UK, growth in Major Projects Rail UK & International 104 (4) 185 (7)
Slide 12: Support Services segment
Support Services segment £m HY 2015 HY 2014 FY 2014 Revenue Revenue ● Revenue flat versus HY 2014 Transport 314 314 655 ● Strong growth in Power offset by an expected decline in Water Power 254 234 465 ● Power benefited from increased volumes for Water 47 67 153 National Grid 615 615 1,273 ● Water
Slide 13: Infrastructure Investments
Infrastructure Investments £m HY 2015 HY 2014 Profit From Operations JVs & JVs & ● Pre-disposals operating Group assoc∞ Total Group assoc∞ Total profit fell by £7m UK† 1 14 15 1 29 30 – 2014 included £15m gain from movements in the North America 8 4 12 7 3 10 fair value of PPP financial Infrastruc
Slide 14: Directors' valuation of Investments portfolio
Directors9 valuation of Investments portfolio £m HY 2015 FY 2014 Opening valuation 1,300 766 Cash invested incl. BBIP investment 64 Cash received – distributions (37) – disposals (112) (149) Net cash received (85) (178) New project wins 28 26 Disposal gains against Directors9 valuation - 58 Changes
Slide 15: Non-underlying items
Non-underlying items £m Continuing Trading - ES (1) - Rail Germany (2) (3) Amortisation - Amortisation of acquired intangibles (5) (5) Restructuring & reorganisation - Build to Last transformation costs (12) - Shared service centre (5) - Other (11) (28) Disposals & other - Gain on disposal of SSL 15
Slide 16: Construction profit impacts
Construction profit impacts £m HY 2015 UK construction Project-specific provisions due to schedule slippages and operational (100) deterioration on a number of historic contracts, and risk-based provisions across the entire UK portfolio US construction Project-specific provisions against a number of
Slide 17: UK historic contracts impacting profit and cash
UK historic contracts impacting profit and cash Expected practical or financial completion Historic contracts as at June 2015 Total By end of 2016 2017+ Continuing 61 Practical completion 18 >90% <10% Financial completion 10 89 31% of projects already at practical or financial completion, as at Ju
Slide 18: Half-year cash flow
Half-year cash flow £31m HY 2015: £41m inflow HY 2014: £321m outflow £168m £211m £42m £(30)m = £362m improvement Trade & other Trade & other IAS11 contract Other Working capital receivables payables balances & WIP £29m £(64)m £112m £219m £(247)m £260m £211m Investments Opening Operating Working
Slide 19: Group balance sheet
Group balance sheet £m HY 2015 FY 2014 HY 2014 Goodwill and intangible assets 1,059 1,042 1,213 Working capital (965) (731) (362) Net cash/(debt) (excluding infrastructure concessions) 260 219 (387) PPP financial assets 365 559 287 Infrastructure concessions – non-recourse net debt (327) (445) (224)
Slide 20: Leo Quinn, Group Chief Executive
LEO QUINN Group Chief Executive
Slide 21: Build to Last – key metrics
Build to Last – key metrics Cash & EBIT Employee engagement & retention Customer satisfaction Zero Harm Restoring Balfour Beatty to strength 20
Slide 22: Build to Last – LEAN – £200m cash in: £100m cost out
Build to Last – LEAN – £200m cash in: £100m cost out Phase One target: £200m cash in Phase One target: £100m cost out 8Cash is our Compass9 campaign Group-wide £25m annualised savings realised to date £41m cash inflow (H1 2014: £321m Frontline capability preserved cash outflow) - £362m impro
Slide 23: Build to Last – EXPERT
Build to Last – EXPERT Upgrading leadership and organisational structure ● 5 new Board members in 2015 – including construction experience ● Executive management upgraded – sector experience safeguarded Investment to upskill our people ● Investing in engineering and project management capability
Slide 24: Build to Last – EXPERT
Build to Last – EXPERT Group Chief Executive UK Regional 6 International US US UK Major Gas & UK & Group/UK Investments Power Rail Infrastructure Building Projects Water Rail Engineering enabling Services functions >80% NEW OR NO CHANGE NO CHANGE NO CHANGE NO CHANGE PROMOTED PROMOTED PROMOTED PROMOT
Slide 25: Build to Last – TRUSTED
Build to Last – TRUSTED One of sector9s strongest balance sheets and brands Maintaining customer confidence Continuing to win landmark contracts Robust financial systems and processes Keeping our promises - doing what we say we will do (DWWSWWD) Disciplined business like contracting <A c
Slide 26: Build to Last – TRUSTED gated business lifecycle
Build to Last – TRUSTED 8 GATED BUSINESS LIFECYCLE Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Gate 6 Gate 7 Gate 8 Initial Tender Tender Contract Pre- Monitoring Project End of defects <Go/No GO= <Go/No GO= submission award commencement and control completion liability period commencement approval Project I
Slide 27: Build to Last – SAFE
Build to Last – SAFE New Board Committee for 8Group Safety and Sustainability9 New UK-wide Health & Safety director appointed Safety 8observations9 increased by 100% across UK construction sites (indicator of staff engagement) LTIR showing early signs of improvement but still work in progres
Slide 28: Build to Last – short interval control
Build to Last – short interval control Weekly Build to Last updates JV Board My 8Pulse9 leadership calls Meetings Contribution Full year Leadership Tender Committee risk review Conference Build to Build to Last Deep Last Deep Dive Dive Monthly Financial reviews Dec Jan Contract reviews My Contributi
Slide 29: Clear momentum
Clear momentum Revenue/order book stable – landmark contract wins First-half losses reflect historic challenges – as per July update Build to Last already delivering – net cash £260m One of sector9s strongest balance sheets – anchored by £1.25bn Investments portfolio, in which we continue to
Slide 30: Appendix
APPENDIX Balfour Beatty
Slide 31: Order book position compared with a year ago
Order book position compared with a year ago £4.1bn Total at HY 2015 £11.3bn Total at HY 2014 £11.6bn £3.5bn £0.7bn £3.3bn £3.1bn £3.0bn £0.5bn £0.7bn £0.8bn £2.6bn £0.5bn £0.5bn £0.7bn £0.4bn £2.0bn £1.7bn £0.5bn £2.3bn £1.0bn £1.2bn £2.0bn £1.3bn £1.3bn £0.4bn £0.4bn £0.2bn £1.2bn £1.1bn £0.9bn £0
Slide 32: Infrastructure Investments
Infrastructure Investments Successful period for closes and preferred bidders Achieved Appointed Remain financial preferred preferred HY 2015 close bidder Total bidder projects University/student accommodation 3 8 OFTO 1 3 Healthcare 1 6 Military housing - 21 Transport - 13 Housing 3 5 Energy 1 4 Sc
Slide 33: Cash used in operating activities
Cash used in operating activities £m HY 2015 HY 2014¹ Loss from operations (139) (42) Share of JV profit (8) (41) Depreciation 17 23 Pension deficit payments (28) (25) Gain on disposal of infrastructure concessions (84) (51) Working capital 211 (195) Other (5) 45 Cash used in operating activities (3
Slide 34: Pensions – balance sheet movement
Pensions – balance sheet movement £586m £80m £441m £434m £53m £(4)m £333m £4m £275m £231m £128m £(30)m Dec Dec Dec Dec Dec Dec Service Company Actuarial Actuarial Other June 2009 2010 2011 2012 2013 2014* cost* contributions loss loss movements 2015* liabilities assets 2.15% 2.05% 1.9% 1.5% 1.05% 0.
Slide 35: Net interest cost
Net interest cost £m HY 2015 HY 2014 Subordinated debt interest receivable 13 13 Interest on PPP financial assets 12 Interest on non-recourse borrowings (9) 3 3 Net finance costs – pension schemes (2) (8) Other interest receivable 1 Other interest payable (7) (6) (6) US private placement (6) (5) Con
Slide 36: Underlying effective tax rate
Underlying effective tax rate FY 2014 HY 2015 HY 2014 Tax rate Tax rate Tax rate (%) £m PBT Tax PAT (%) PBT Tax PAT (%) 1% Group, excluding JVs & associates (138) (4) (142) (3)% (27) 7 (20) 26% 21% JVs & associates 13 (5) 8 38% 52 (10) 42 19% (20)% Aggregate (125) (9) (134) (7)% 25 (3) 22 12% Less J