Slide 1: 2018 full year results presentation
2018 full year results presentation 13 March 2019 Caltrain project: US$697 million contract for the electrification of the 52-mile rail corridor between San Francisco and San Jose
Slide 2: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 3: 2018 Build to Last highlights
2018 Build to Last highlights Delivered industry Gross debt reduced by 40%; standard margins paid down convertible bonds Order book up 11% Construction Services profit to £12.6 billion from operations up 32% Value being created through Build to Last 2
Slide 4: Build to Last goals
Build to Last goals 200 Lean 2018 Expert 66 0 64 Cumulative annual (200) Employee 62 cash flow^ Over £500m 2014* engagement index 60 (£m) (400) reduction (%) 58 (600) 56 (800) 54 Dec Mar Jun Sept Dec 2015 2016 2017 2018 ^ includes other disposals * adjusting for sale of Parsons Brinckerhoff. Include
Slide 5: Wider benefits of Build to Last
Wider benefits of Build to Last Average net cash/(debt) Earnings based businesses profit/(loss) from operations* £m £m (371) (46) 194 (144) 13 141 2014 2016 2018 2014 2016 2018 Other net operating expenses* UK voluntary attrition: moving annual average £m % 459 333 284 16% 14% 12% 2014^ 2016^ 2018 2
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 7: Headline numbers
Headline numbers £m (unless otherwise stated) 2018 2017 Revenue* 7,802 8,234 Profit from operations* 205 196 Pre-tax profit* 181 165 Profit for the year* 179 143 Basic earnings per share* 26.3p 20.9p Dividends per share 4.8p 3.6p Order book* £12.6bn £11.4bn Directors’ valuation of Investments portfo
Slide 8: Underlying profit from operations
Underlying profit from operations £m 2018* 2017* Change UK Construction 28 16 75% US Construction 44 41 7% Gammon 23 15 53% Construction Services 95 72 32% Support Services 46 41 12% Earnings based businesses 141 113 25% Infrastructure Investments 97 116 (16)% Corporate activities (33) (33) - Total
Slide 9: Order book
Order book ● Maintained Group’s disciplined bidding strategy 1.9 ● Increased bid margin 3.0 1.8 thresholds, lower risk 2.7 contract portfolio 0.9 ● 11% increase (8% at 1.6 12.6 1.3 11.4 CER) driven by US bookings 1.3 ● £3.5bn* HS2 Lots N1 & N2 & Old Oak Common not included 5.2 4.3 2018 2017 £bn £bn
Slide 10: Construction Services
Construction Services H1 2018* H2 2018* FY 2018* FY 2017* £m Revenue PFO PFO% Revenue PFO PFO% Revenue PFO PFO% Revenue PFO PFO% UK 947 5 0.5% 953 23 2.4% 1,900 28 1.5% 1,998 16 0.8% US 1,577 17 1.1% 1,752 27 1.5% 3,329 44 1.3% 3,634 41 1.1% Gammon 451 10 2.2% 447 13 2.9% 898 23 2.6% 1,017 15 1.5% T
Slide 11: Support Services
Support Services ● H2 2018 PFO margin at 5.2%, above 3-5% £m H1 2018 H2 2018 FY 2018 FY 2017 industry standard margin range Revenue ● Power: continued Utilities 308 343 651 608 restructure; focus on Transportation 235 218 453 453 core markets Total 543 561 1,104 1,061 ● Gas and Water: focus on AMP7
Slide 12: Infrastructure Investments
Infrastructure Investments ● Following significant disposals in 2017, £m 2018 2017 operating profit decreased Pre-disposals operating profit* 17 30 Profit on disposals* 80 86 ● In 2017 sold 20% interest in M25; in 2018 Investments profit* 97 116 sold additional 5%; Subordinated debt interest receiva
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £58m £96m £29m £(89)m £(187)m £1,244m £1,151m 2017 Equity Distributions Sales Unwind of Other* 2018 invested received proceeds discount * other includes foreign exchange £36m, movements in operational performance (£18m), new project wins £7m and gain on
Slide 14: Cash flow
Cash flow £m 2018 2017 £m 2018 2017 Operating cash flows 124 39 Working capital Working capital (outflow)/inflow (229) 27 Inventories (16) (12) Pension deficit payments (27) (25) Net contract assets 51 7 Cash (used in)/from operations (132) 41 Trade & other payables (196) (92) Infrastructure Investm
Slide 15: Financing and tax
Financing and tax Over 40% gross debt reduction in 2018; Gross debt expect lower interest charge in 2019 Revolving credit facilities £400 million committed bank facilities maintained and undrawn throughout 2018 Immaterial scheme (£200k at end 2017); Supply chain financing officially closed in Decemb
Slide 16: Capital priorities
Capital priorities Invest in opportunities to c.£440 million invested in capex, capability 1 strengthen market leadership & equity assets to date through Build to Last Over 40% gross debt reduction in year; 2 Pay down borrowings next material repayment £112 million preference shares in July 2020 Div
Slide 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 18: Platform for profitable managed growth
Platform for profitable managed growth Creating long term value 17
Slide 19: Strong chosen markets
Strong chosen markets Construction Services US UK HK Positive infrastructure Positive infrastructure Positive infrastructure revenue by geography market market market Fixing America’s Surface HS2 10 year hospital Transportation (FAST) Act development plan £56bn US$305bn HK$200bn Nationwide Heathrow
Slide 20: Managed growth
Managed growth 2018 order book Circles of risk £bn 1.9 3.0 0.9 1.6 12.6 Geography Contract Customer Team Project 5.2 UK Construction US Construction Gammon Support Services: Utilities Support Services: Transportation Embedding a culture of active risk management 19
Slide 21: Market leading engineering expertise
Market leading engineering expertise Dorenell Hinkley Wind Farm Point C Installed 148 Marine tunnels, composite poles M&E, cabling & overhead lines Eleclink AWPR Two 50km cables 58km dual through Channel carriageway with Tunnel 72 structures Expertly positioned to lead the market 20
Slide 22: Strong market pipeline
Strong market pipeline TOTAL OPPORTUNITY HS2 RIIO CP6 Rail GD2 Heathrow HS2: Systems A303 M25 UK Lots Heathrow Expansion Lower >£10bn N1 & N2 RIS 2 Thames HS2: Old Third Western Crossing Midland AMP7 Oak Runway Rail Met. Common Link The Disney – Block Wharf River 216 Country CA High US Speed Texas W
Slide 23: Actively managed Investments portfolio
Actively managed Investments portfolio Infrastructure Investments value crystallised (£m) 800 ● Enhanced returns when Investments, 700 Construction and Services deliver as one 600 ● Access construction opportunities with an equity investment versus bidding to 500 third parties ● Around £650m net cas
Slide 24: Infrastructure Investments – a transformed portfolio
Infrastructure Investments – a transformed portfolio Directors’ valuation by sector (£m) 2018 2014* Roads 205 467 Directors’ valuation Healthcare 109 225 by geography Other PFI 18 116 Non-PFI 159 135 UK total^ 491 943 US military housing 532 322 US+ UK^ North America other 128 15 57% 43% US total≠ T
Slide 25: Build to Last scalable platform
Build to Last scalable platform Common Efficient Streamlined Leaned out platforms and systems back office supply chain support functions Number of Group employees UK cost per payslip UK supply chain partners Annual IT costs on R12/JD Edwards 2015 c.6,500 2015 £6.21 2015 c.37,000 2015 £78m 2018 c.13,
Slide 26: Continuous improvement
Continuous improvement 200 Lean 2018 66 0 Expert 64 Cumulative annual (200) 62 cash flow^ 2014* Employee 60 (£m) (400) engagement index (%) 58 (600) 56 (800) 54 Dec Mar Jun Sept Dec 2015 2016 2017 2018 ^ includes other disposals * adjusting for sale of Parsons Brinckerhoff. Includes all other dispos
Slide 27: Profitable managed growth
Profitable managed growth Well positioned to capitalise on pipeline Increasing revenue of opportunities Improving margins Embedding a culture of active risk management Reducing overheads A competitive platform for scalable growth Balance sheet strength provides Strong balance sheet competitive advan
Slide 28: Appendix
Appendix Balfour Beatty
Slide 29: Forward-looking statements
Forward-looking statements Disclaimer Cautionary 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
Slide 30: Order book position compared with prior year
Order book position compared with prior year 2018 total £12.6bn £5.7bn 2017 total £11.4bn £4.9bn £3.8bn £3.3bn £3.1bn £3.2bn 2017 2018 2017 2018 2017 2018 0-12 months 13-24 months 25 months+ Construction Services - UK Construction Services - US Construction Services - Gammon Support Services 29
Slide 31: Pensions – balance sheet movement
Pensions – balance sheet movement £22m £30m £32m £(28)m £54m £(2)m £(128)m £(146)m £(231)m 2014 2015 2016 2017 Employer Net actuarial GMP Other 2018 contributions gains equalisation 0.65% 0.7% (0.7)% (0.6)% Real discount rate (0.4)% 30
Slide 32: Working capital – Group
Working capital – Group £0m 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 £(200)m (4)% £(400)m £(600)m (8)% £(800)m (10.3)% (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 % rev
Slide 33: Working capital – Construction Services
Working capital – Construction Services £0m 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 £(200)m (4)% -618 -707 -717 £(400)m -825 -824 -909 -889 -939 -881 (8)% £(600)m (12)% £(800)m (11.8)% (12.2)% (14.4)% (14.2)% (14.2)% (16)% £(1,000)m (14.7)% (16.8)% (16.6)% £(1,200)m (18.2)%
Slide 34: Net interest cost
Net interest cost £m 2018 2017 Subordinated debt interest receivable 21 Interest on PPP financial assets 9 Interest on non-recourse borrowings (14) 16 24 Net finance income/(cost) – pension schemes 2 (6) Other interest receivable 3 Other interest payable (9) (6) (9) US private placement (12) (13) Co
Slide 35: Non-underlying items
Non-underlying items £m 2018 2017 Impairment and amortisation Amortisation of acquired intangibles (8) (9) Restructuring and reorganisation Build to Last transformation costs (11) (12) Disposals and other Additional loss on the AWPR contract as a result of Carillion filing for liquidation (10) (44)
Slide 36: Group balance sheet
Group balance sheet £m 2018 2017 Goodwill and intangible assets 1,161 1,155 Working capital (680) (888) Net cash (excluding infrastructure concessions) 337 335 Investments in joint ventures and associates 524 531 PPP financial assets 156 163 Infrastructure concessions – non-recourse net debt (309) (
Slide 37: Borrowing repayment profile
Borrowing repayment profile £200m £150m £100m 112 164 £50m 36 39 £0m £(50)m (21) £(100)m (231) £(150)m £(200)m £(250)m (33) £(300)m 2017 2018 2019 2020 2023 2025 Convertible bonds repaid US PP notes repaid US PP notes Preference shares The Group has committed revolving credit facilities of £400 mill
Slide 38: US Construction
US Construction Our Buildings presence Our capabilities Buildings Civils Commercial Education Roads Rail Hospitality Residential Water Healthcare Our markets Buildings* Civils Annual opportunity $188bn $75bn Source: Dodge * in states in which Balfour Beatty operates 37
Slide 39: Financial history
Financial history 450% £12bn £400m Increase in £10bn revenue £300m £8bn 45 £6bn £200m Acquisitions £4bn £100m £2bn £94m £0bn £0m Average ordinary dividend -£2bn (2011-2014) £(100)m -£4bn £16m -£6bn 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 £(200)m Average ordinary dividend (2015-2018) Revenu
Slide 40: Balfour Beatty
Balfour Beatty