Slide 1: 2022 half year results presentation
2022 half year results presentation 17 August 2022 Image: HS2 Long Itchington Wood Tunnel, Warwickshire, UK
Slide 2: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive Image: Hinkley Point C, Somerset, UK
Slide 3: Strengthened Group
Strengthened Group Strong financial performance with increase in underlying profit from operations High quality, de-risked order book at £17.7 billion provides clear visibility of future returns Unique Group capability aligned to decade of infrastructure growth Attractive Investments portfolio and s
Slide 4: Strong operational performance
Strong operational performance Construction Services Support Services Infrastructure Investments Fort Meade, US London Underground Purdue University, US US Construction secured over Continued strong performance Directors’ valuation increased to $1 billion of Federal orders in road, rail and power £1
Slide 5: Group net cash
Group net cash £1,000m £671m* £811m* £800m £611m* £527m* (HY21) £600m £325m* £47m share Group net cash £194m* buyback £400m £42m* £180m £200m share buyback & dividend £0m £(200)m £(400)m FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 HY 2022 * average monthly net cash 4 Strong cash performance underpins fu
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer Image: Harkers Island Bridge Replacement, North Carolina, US
Slide 7: Headline numbers
Headline numbers £m (unless otherwise stated) HY2022 HY2021 Variance Group revenue* 4,147 4,154 - Profit from earnings-based businesses* 85 60 42% Profit from operations* 85 60 42% Profit for the period* 80 51 57% Basic earnings per share* 12.9p 7.7p 68% Dividends per share 3.5p 3.0p 17% HY2022 FY20
Slide 8: Construction Services
Construction Services £m HY2022* HY2021* Revenue PFO PFO % Revenue PFO PFO % ● UK Construction profitability at 1.5%; UK 1,237 18 1.5% 1,262 (23) (1.8)% 2-3% industry standard margin for US 1,766 21 1.2% 1,697 20 1.2% full year Gammon 411 10 2.4% 377 9 2.4% ● US and Gammon slightly ahead of the prio
Slide 9: UK Construction order book evolution
UK Construction order book evolution HY 2018 HY 2022 Fixed – Two Stage Fixed – One Stage Fixed – Two Stage 5% 12% 7% Cost Plus 28% 16% 46% £2.7bn 50% £5.8bn 22% 4% 72% Target Cost Cost Plus Fixed – One Stage Target Cost 92% of order book from public and regulated clients 8 Larger, lower risk, higher
Slide 10: Support Services
Support Services £m HY2022 HY2021 Revenue ● Profitable recurring revenues Utilities 187 258 underpinned by long term frameworks Transportation 312 297 ● Targeting industry standard margin Total 499 555 of 6-8% (HY22: 7.2%) ● Underlying PFO £2 million higher than prior period when adjusted for Profit
Slide 11: Infrastructure Investments
Infrastructure Investments £m HY2022 HY2021 Pre-disposals operating profit* 10 8 ● PFO increased due to higher returns Gain on disposals 7 7 on projects as income increases Investments profit* 17 15 with inflation Sub-ordinated debt interest receivable^ 10 8 ● Invested £17 million in new and existin
Slide 12: Track record of disposals above Directors’ valuation
Track record of disposals above Directors’ valuation 6 5 End to end multiple* 4 3 2 1 0 2016 2017 2018 2019 2020 2021 HY22 2022 Directors’ valuation £1.2bn £1.2bn £1.2bn £1.2bn £1.1bn £1.1bn £1.3bn £30m+ * calculated as the sales proceeds plus distributions received over time divided by the original
Slide 13: Directors’ valuation of Investments portfolio
Directors’ valuation of Investments portfolio £52m £41m £86m £17m £42m £(36)m £(12)m £1,296m £1,106m FY 2021 Equity Distributions Sales Unwind of Foreign Inflation Revaluation HY 2022 invested received proceeds discount exchange / other* * revaluation / other includes the revaluation of the Purdue U
Slide 14: Inflation
Inflation Infrastructure Construction Services Investments & Support Services Inflation protection Inflation management ● In an inflationary market asset values increase ● Contractual protection > UK portfolio positively correlated with inflation ● Early buyout to lock in costs > US portfolio positi
Slide 15: Cash flow
Cash flow £100m £33m £(5)m £(45)m £(29)m £(29)m £(13)m £(47)m £(13)m £790m £742m Net cash Operating Working Dividends Net Pension Lease Capital Share Other Net cash FY 2021 cash flows capital from JVAs disposal deficit payments expenditure buybacks HY 2022 cash flows proceeds^ payments* ^ includes £
Slide 16: Capital allocation framework
Capital allocation framework Continued Active Strong Sustainable Additional investment in realisation of but efficient ordinary dividend cash returns organic growth the Investments balance (target 40% via share opportunities portfolio sheet payout ratio^) buybacks Significant opportunities Transacti
Slide 17: Full year guidance
Full year guidance UK Construction within 2-3% industry standard margin target range US Construction and Gammon expectations remain unchanged Support Services upgraded to top end of 6-8% industry standard margin target range Full year profit on Investments’ disposals in range of £55 - £65 million 20
Slide 18: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive Image: Hinkley Point C Connection Project, UK
Slide 19: Highly differentiated infrastructure capability
Highly differentiated infrastructure capability Hong Kong Airport Hinkley Point C, UK Green Line Extension, Boston, US HS2, UK 18 Portfolio aligned to large infrastructure markets
Slide 20: Strong UK infrastructure market
Strong UK infrastructure market 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Net Zero Teesside & Offshore wind Hydrogen to Humber Hinkley Point C Energy transition & hydrogen Significant transformational infrastructure schemes Sizewell C Modular nuclear HS2 – Area North & Old Oak Comm
Slide 21: UK Energy Security & Net Zero
UK Energy Security & Net Zero Commercial Design & Ground Civil & rail Mechanical & Power & technical planning engineering engineering electrical transmission & distribution Existing projects Future pipeline Offshore wind ElecLink Littlebrook Net Zero Teesside Sizewell C connection and Hinkley Point
Slide 22: US Construction
US Construction Washington / Oregon Mid Atlantic Existing project Existing project Springs at Waterfront - $158m East Campus Building #4 - Assisted living facility $698m Pipeline Federal sector - US Army $2.4bn Pipeline including office, healthcare and mission critical sectors $3.7bn including Feder
Slide 23: Gammon
Gammon Order book Future pipeline 30% Private buildings 37% HK$100 billion Hong Kong Airport Northern Metropolis HK$92 billion MTR extension projects £3.2bn* 6% West Kowloon Cultural District 27% HK$300 billion Other 2nd Hospital ten year development plan infrastructure c.11% increase in infrastruct
Slide 24: Support Services
Support Services Contracts Pipeline Central Rail Systems Alliance • CP7 (2024-2029): £40 billion for track, signalling and electrification Rail £1.5 billion* for the delivery of track renewals for Network Rail • £96 billion Integrated Rail Plan for the North and Midlands maintenance • Significant pi
Slide 25: Infrastructure Investments pipeline
Infrastructure Investments pipeline Key Estimated transaction Capex size P3 Civic Centre, UF Central Prince city hall P3 bridge North Utility Plant, George’s P3 civic Carolina, P3 Florida, P3 County Public centre Schools II, P3 road £500m+ Maryland P3 P3 rail Town P3 court Hall, house Florida, Willi
Slide 26: Building New Futures
Building New Futures Environment Materials Communities 2040 Beyond Net 2040 Generate 2040 Positively Impact Ambitions Zero Carbon Ambitions Zero Waste Ambitions More than 1 Million People Achieve 2030 2030 2030 40% reduction £3 billion social value science-based carbon generated Targets reduction ta
Slide 27: Strong outlook
Strong outlook Upgrade to full year profit underpinned by strong first half financial performance Unique Group capability aligned to decade of infrastructure growth High quality, de-risked order book Attractive Investments portfolio and strong pipeline Multi-year capital allocation framework 26 Conf
Slide 28: Appendix
Appendix Image: The Eastern, North Carolina, US
Slide 29: Disclaimer & important information
Disclaimer & important information This presentation, including information incorporated by reference in it, contains statements that are or may be forward-looking statements which are prospective in nature with respect to Balfour Beatty’s business, financial condition and operations. These forward-
Slide 30: Order book by phase
Order book by phase Total HY 2022 £17.7bn Total HY 2021 £16.1bn £5.5bn £4.9bn £4.6bn £4.7bn £3.9bn £3.7bn £3.6bn £2.9bn HY 2021 HY 2022 HY 2021 HY 2022 HY 2021 HY 2022 HY 2021 HY 2022 0-6 months 7-18 months 19-30 months 31+ months UK Construction US Construction Gammon Support Services Construction
Slide 31: Underlying profit from operations
Underlying profit from operations £m HY 2022* HY 2021* UK Construction 18 (23) US Construction 21 20 Gammon 10 9 Construction Services 49 6 Support Services 36 54 Earnings-based businesses 85 60 Infrastructure Investments Pre-disposals operating profit 10 8 Gain on disposals 7 7 Corporate activities
Slide 32: Group balance sheet
Group balance sheet £m HY 2022 HY 2021 Goodwill and intangible assets 1,175 1,109 Current working capital (1,136) (1,023) Net cash (excluding infrastructure concessions) 742 625 Investments in joint ventures and associates 493 541 PPP financial assets 28 149 Infrastructure concessions – non-recourse
Slide 33: Cash flow
Cash flow £m HY 2022 HY 2021 £m HY 2022 HY 2021 Operating cash flows 100 64 Working capital flows^ Working capital (outflow)/inflow (45) 123 Inventories (5) 11 Pension deficit payments≠ (29) (29) Net contract assets (4) 113 Cash from operations 26 158 Trade and other receivables 32 6 Dividends from
Slide 34: Working capital – Group
Working capital – Group £0m 0 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Jun 22 Jun 22 £(200)m (4)% £(400)m (10.3)% (9.9)% (8)% £(600)m (12.1)% (12.8)% (12.9)% (12)% £(800)m (15.6)% (15.8)% (16)% £(1,000)m £(1,200)m (20)% Period end working capital Period end working capital as % revenue Debtor days*
Slide 35: Working capital – Construction Services
Working capital – Construction Services £0m 0 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Jun 22 Jun 22 £(200)m (4)% £(400)m (8)% £(600)m (12)% £(800)m (10.6)% (11.8)% (13.4)% (16)% £(1,000)m (14.4)% (14.7)% (16.9)% (16.4)% £(1,200)m (20)% Period end working capital Period end working capital as % rev
Slide 36: Net finance costs
Net finance costs £m HY 2022 HY 2021 Subordinated debt interest receivable 12 Interest on PPP financial assets 1 Interest on non-recourse borrowings 1 14 9 Net finance income – pension schemes 2 1 Other interest receivable 5 Other interest payable (5) – 2 US private placement (6) (5) Interest on lea
Slide 37: Pensions – balance sheet movement
Pensions – balance sheet movement £101m £29m £361m £133m £231m £89m £32m £54m £(128)m £(146)m £(231)m 2014 2015 2016 2017 2018 2019 2020 2021 Employer Net HY 2022 contributions actuarial gains & other 36
Slide 38: Borrowing repayment profile
Borrowing repayment profile £200m £160m £120m 174 £80m £40m 67 42 36 28 £0m 2022 2023 2024 2025 2027 2029 2032 US Private Placement notes The Group has a £375m committed bank facility extending through to October 2024, which was undrawn at 1 July 2022 37