Slide 1: 2013 full-year results presentation
2013 full-year results presentation 6 March 2014
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: Andrew McNaughton, Chief Executive Officer
ANDREW MCNAUGHTON Chief Executive Officer
Slide 4: Opening remarks: First year as CEO
Opening remarks First year as CEO Challenging economic conditions and operational issues in UK Construction, and a significant downturn in Australia led to a disappointing financial performance Many parts of the Group performed well Professional Services performed well outside of Australia Infrastru
Slide 5: Duncan Magrath, Chief Financial Officer
DUNCAN MAGRATH Chief Financial Officer
Slide 6: Headline underlying numbers
Headline underlying numbers Actual Constant FY 2013 FY 2012 growth currency Order book* £13.4bn £13.5bn -1% - Revenue* £10,118m £9,966m +2% +1% Profit from operations* £203m £284m -29% -29% Pre-tax profit* £187m £277m -32% Underlying EPS* 20.0p 31.7p -37% Average (borrowings)/cash for the year*# £(3
Slide 7: Professional Services
Professional Services Overall orders and revenue broadly stable despite Australia £1.0bn Order book £2.0bn FY13 Growth Constant £0.8bn % £bn V FY12 Currency £1.5bn £0.6bn UK 7% 0.1 - 25% n/a £1.0bn £0.4bn US 53% 0.8 + 6% + 8% £0.2bn £0.5bn RoW 40% 0.6 + 1% + 6% £0.0bn £0.0bn 09HY 09FY 10HY 10FY 11HY
Slide 8: Construction Services
Construction Services UK revenue decline as expected, US gradual pickup £6.0bn Order book £10.0bn FY13 Growth Constant £5.0bn £8.0bn % £bn V FY12 Currency £4.0bn £6.0bn UK 35% 2.7 - 3% n/a £3.0bn £4.0bn £2.0bn US 43% 3.3 + 10% + 12% £1.0bn £2.0bn RoW 22% 1.7 + 10% + 14% £0.0bn £0.0bn 09HY 09FY 10HY
Slide 9: US construction
US construction 54% increase in US construction order intake in 2013 Book to Bill Ratio ABI Reading $3bn 1.75 65 1.5 60 $2bn 1.25 55 1 50 $1bn 0.75 45 0.5 40 $0bn 0.25 35 H109 H209 H110 H210 H111 H211 H112 H212 H113 H213 June Dec June Dec June Dec June Dec June Dec 09 09 10 10 11 11 12 12 13 13 Orde
Slide 10: Support Services
Support Services Strong revenue growth in power and transport £3.0bn Order book £5.0bn FY13 Growth £4.0bn % £bn V FY12 £2.0bn £3.0bn Transport 56% 2.3 -1% £2.0bn £1.0bn Power 39% 1.6 -21% £1.0bn Water 5% 0.2 -32% £0.0bn £0.0bn 09HY 09FY 10HY 10FY 11HY 11FY 12HY 12FY 13HY 13FY Total 100% 4.1 - 11% FY
Slide 11: Infrastructure Investments
Infrastructure Investments Successful year for closes and disposals Achieved Appointed Remain financial close preferred bidder preferred bidder Total University/student accommodation 6 OFTOs 3 Hospitals 2 Military housing 2 Energy – waste/bio plants 2 Total 8 5# 2 15# Reached first close of infrastr
Slide 12: Profit from operations – by segment
Profit from operations – by segment Professional Construction Support Infrastructure Corporate Services Services Services Investments Activities FY13 FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13 FY12 £54m £98m £21m £119m £55m £30m £102m £69m 3.3% 5.9% 0.3% 1.8% 4.3% 2.6% 16.8% 10.8% • Strong performance
Slide 13: Australia performance
Australia performance Revenue -1% 38% drop in 100% -27% -10% revenue 62% Cost £70m cost reduction -2% -12% 100% -16% 70% For one off cost of £20m in 2013 H1 2012 H2 2012 H1 2013 H2 2013 Current revenue & revenue & cost base cost base 8-9% Break even profit margin 12
Slide 14: Construction Services UK
Construction Services UK Revenue by business stream 10% 10% April 2013 - £50m reduced profit expectations 19% 23% Ended down £60m, with pluses 2012 2013 Actual 51% Actual 54% and minuses, but overall: Regional – as expected; 20% 13% improvements in volume and pricing Major Projects: - – Building - s
Slide 15: FX rates
FX rates US $ sensitivity – profit from operations 1.7 1.65 2014 YTD Average = $1.66 1.6 1.55 2013 FY Average = $1.57 1.5 US $ Sensitivity 1.45 1¢ movement 31 Dec 2012 31 Mar 2013 30 Jun 2013 30 Sep 2013 31 Dec 2013 = £0.8m profit GBP:USD spot rate 2013 Average 2014 Average 14
Slide 16: Cost efficiency programme
Cost efficiency programme Targeting £80m annual savings by 2015, £70m achieved in 2013 2013 actions Reorganisations – UK construction into three business streams – US construction into three regions Shared service centres – Expansion of Newcastle, UK into HR and IT Shared Services – Set up of Lancas
Slide 17: Non-underlying items
Non-underlying items £m FY 2013 Restructuring and reorganisation costs: Australia (20) £70m reduction in annualised cost base Other existing businesses (32) 1300 reduction in Construction UK headcount Post-acquisition integration, (4) Howard S Wright reorganisation and other costs Pension curtailmen
Slide 18: Cash used in operating activities
Cash used in operating activities £m FY 2013 FY 2012 Profit from underlying operations 203 308 Share of JV profit (71) (96) Depreciation 50 64 Pension deficit payments (57) (61) Profit on disposal of PPP investments (82) (52) Working capital (127) (310) Other 1 11 (83) (136)* Income taxes paid (13)
Slide 19: Net cash flow before financing
Net cash flow before financing £m FY 2013 FY 2012 Cash used in operating activities (175) (238) Dividends from JV’s 48 58 PPE capex & intangibles, net of proceeds (68) (53) Investments: Infrastructure & assets in course of construction (33) - Investment in infrastructure investments (59) (55) Dispos
Slide 20: Managing the balance sheet
Managing the balance sheet Facilities and cash/debt have flexed as working capital reduced Maintaining strength Maintaining liquidity £600m £600m £200m £200m £(200)m £(200)m £(600)m £(600)m £(1,000)m £(1,000)m £(1,400)m £(1,400)m FY09 HY10 FY10 HY11 FY11 HY12 FY12 HY13 FY13 FY09 HY10 FY10 HY11 FY11
Slide 21: PPP portfolio valuation movements
PPP portfolio valuation movements Valuation increased, despite £163m net distributions, and no change in discount rates £m FY 2013 FY 2012 Opening valuation 734 743 Cash invested 48 Cash received – distributions (83) – disposals (128) (211) Net cash received (163) (114) Unwind of discount on NPV 74
Slide 22: Working capital – small inflow in H2
Working capital – small inflow in H2, better than expected, £127m outflow for the year on continuing businesses US Construction stabilised, and starting to improve Professional Services – stable around 5% 5.9% 3.8% 0 0 £100m 5.4% 5% Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec -1.5% 4.2% 07 0
Slide 23: Net cash/(debt) balances
Net cash/(debt) balances† Debt diversified and maturity extended £800m £600m £400m £200m £0m £(200)m £(400)m £(600)m £(800)m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Available cash Restricted cash Borrowings US PP Convertible bond Net cash/(debt) 6-monthly
Slide 24: Net interest cost
Net interest cost Increase in year due to US private placement £m FY 2013 FY 2012 PPP subordinated debt interest receivable 25 24 PPP interest on financial assets 33 PPP interest on bank loans and overdrafts (28) 5 4 Net finance costs – pension schemes* (9) (9) Other interest receivable 7 Other inte
Slide 25: Pensions – balance sheet movement
Pensions – balance sheet movement Pension deficits, net of tax Deferred tax assets £586m £166m £441m £51m £15m £434m £73m £333m^ £30m £120m £44m £94m £275m £79m £60m £420m £75m £82m £163m £434m £340m £374m £374m £321m £200m £254m Dec Dec Dec Dec Service Company Actuarial Actuarial Closure to Other D
Slide 26: Model guidance matters
Model guidance matters Investment disposal gains reverting back to regular £40m in 2014 (2013: £82m) 2014 P&L finance cost for US PP and convertible bonds will be c.£20m (2013: £10m) 2014 Pension interest cost £15m (2013: £9m) Current FX rates impacting reported profits, c.£0.8m per 1 cent movement
Slide 27: Summary of 2013 performance
Summary of 2013 performance Disappointing 2013 financial performance, due to UK Construction and Australia Actions taken so Group is better positioned to focus on growth in some parts of core UK & US markets Impact of working capital outflows reduced in 2013 and anticipated to reduce further in 2014
Slide 28: Andrew McNaughton, Chief Executive Officer
ANDREW MCNAUGHTON Chief Executive Officer
Slide 29: Agenda
Agenda Major issues impacting financial performance Other strategic actions taken in 2013 Focusing on growth opportunities Construction: capitalising on growth opportunities Infrastructure Investments: generating value for the Group Summary 28
Slide 30: Major issues: Australian Professional Services
Major issues impacting financial performance Australian Professional Services Swift market deterioration in early 2013 Organisational restructuring Reduced operational costs by 30% Adverse impact on financial performance Volume and pricing risks remain Expect to return to break-even in 2014 29
Slide 31: Major issues: UK Construction Services
Major issues impacting financial performance UK Construction Services Disappointing financial performance Challenging trading environment Major reorganisation impacted operational delivery Operational review swiftly implemented Reviewed over 1,000 ongoing projects to identify causes of underperforma
Slide 32: Other strategic actions taken in 2013
Other strategic actions taken in 2013 Disposals WorkPlace Mainland European Rail Exeter Airport Cost savings initiatives Closed UK defined benefit pension scheme to future accrual Diversified our corporate funding sources US private placement Convertible bond 31
Slide 33: Focusing on our growth opportunities
FOCUSING ON OUR GROWTH OPPORTUNITIES
Slide 34: US Construction Services: Building the business
US Construction Services Building the business Decision to diversify away from UK into untapped US market in 2007 Strategic objectives: Strengthen local footprint Create national structure Broaden sector capability Business reorganisation in 2011-12 Leaner operating model – Restructured into 3 regio
Slide 35: US Construction Services: Anticipating market changes
US Construction Services Anticipating market changes Prepared business to respond to US revenue & order book progression changing market environment $5bn $3bn Focus on Federal building at start of $4bn downturn reduced impact of $2bn market decline $3bn Leveraging capabilities and customer $2bn $1bn
Slide 36: US Construction Services: Summary
US Construction Services Summary US business closely aligned to Order book progression growth markets $7bn Outperformed the wider market in 2013 $6bn through market share gains $5bn Volumes recovering, but bid margin improvement may not occur until 2015 $4bn Remain focused on the quality $3bn of wor
Slide 37: UK Construction: Lagging the US
UK Construction Lagging the US UK recovery expected 12-18 months after the US Evidence of increased activity in early cycle industries Regional business already benefitting from increased UK housing activity Wider construction recovery will take time Regional business will continue to be primary ben
Slide 38: Infrastructure Investments: Generating value for the Group
Infrastructure Investments Generating value for the Group Value driver for the Group Generates activity across the group UK Infrastructure Investments 15 year track record in UK PFI / PPP hospitals, schools & roads Adapted model to successfully enter new markets: Power transmission, energy-from-wast
Slide 39: Infrastructure Investments: 'Investor and developer' model
Infrastructure Investments ‘Investor and developer’ model Asset disposal programme announced in 2010 PPP valuation movements since 2010 Recycled proceeds into new investments Maintained strength & diversity of portfolio 2010 Closing Valuation £671m Generated further construction revenues Equity inve
Slide 40: Infrastructure Investments: Case studies: M25 & Canada
Infrastructure Investments Case studies: M25 & Canada M25 contract awarded in 2009 Connect Plus – £600m UK construction revenue to date Connect Plus Services – £900m Support Services contract over concession life Children’s & Women’s Hospital, Canada Leveraged existing knowledge and skills: – Leader
Slide 41: Summary: Capitalising on our opportunities
Summary Capitalising on our opportunities Addressed underperformance in 2013 Actions taken in Australian Professional Services & UK construction Strategic actions across the group position the Group for growth opportunities Our focus for 2014 is: Capitalising on growth opportunities in core US & UK
Slide 42: Appendix
APPENDIX
Slide 43: Order book position compared to a year ago
Order book position compared to a year ago Resilient, with improved short term, particularly US construction £6.2bn £6.4bn Total at FY 2013 £13.4bn £0.9bn £1.1bn Total at FY 2012 £13.5bn £4.3bn £4.0bn £4.5bn £3.0bn £3.0bn £4.2bn £2.7bn £2.5bn £0.8bn £0.7bn £2.0bn £2.1bn £1.2bn £1.2bn £0.9bn £1.0bn £
Slide 44: Infrastructure Investments
Infrastructure Investments FY 2013 FY 2012# £m Group JVs & assoc Total Group JVs & assoc Total UK† 2 27 29 2 35 37 North America 21 6 27 12 6 18 Infrastructure (3) - (3) (3) (1) (4) Infrastructure Fund (2) - (2) (4) - (4) Bidding costs and overheads (31) - (31) (30) - (30) Pre-disposals operating pr
Slide 45: Discontinued business – Rail Germany/Scandinavia/Spain
Discontinued business – Rail Germany/Scandinavia/Spain FY 2013# FY 2012 Actual growth Constant currency Order book £516m £609m -15% -13% Revenue £396m £448m -12% -8% (Loss)/profit* £(26)m £2m Non-underlying items† £(52)m £(98)m * before non-underlying items † FY 2013 includes losses on business disp
Slide 46: Underlying effective tax rate
Underlying effective tax rate , FY 2013 FY 2012 £m PBT Tax PAT Tax rate (%) PBT Tax PAT Tax rate (%) Group, excluding JVs & associates* 116 (50) 66 43.1 185 (61) 124 33.0 JVs & associates* 80 (9) 71 11.3 105 (13) 92 12.4 Aggregate* 196 (59) 137 30.1 290 (74) 216 25.5 Less JV tax* (9) (13) Pre-tax pr
Slide 47: Pensions charge
Pensions charge £m FY 2013 FY 2012 Defined benefit schemes: P&L charge – service cost 30 41 P&L credit – past service credit - (2) Curtailment cost 52 2 Interest income (108) (110) Interest cost 117 119 Net finance charge† 9 9 Net pension charge* 91 50 Defined contribution schemes: P&L charge 46 50
Slide 48: Balance sheet cash movement
Balance sheet cash movement £m Dec 2013 Dec 2012 Opening net cash† 35 340 Cash used in operations†* (165) (218) Dividends from JVs and associates 48 58 Capital expenditure and financial investment (26) (9) Acquisitions and disposals (net of net cash acquired / disposed) 150 (4) Dividends, interest a
Slide 49: Group balance sheet
Group balance sheet £m Dec 2013 June 2013 Dec 2012* Goodwill and intangible assets 1,252 1,307 1,372 Current assets# 1,956 2,066 2,047 Current liabilities and current provisions# (2,506) (2,700) (2,712) Working capital #* (550) (634) (665) Net assets held for sale 12 154 - Net cash/(borrowings) (exc
Slide 50: PPP portfolio valuation roll-forward – FY 2013
PPP portfolio valuation roll-forward – FY 2013 £734m £48m £74m £76m £770m £766m £45m £690m £4m £4m £183m £83m £236m £232m £128m £199m 734 699 697 £490m £535m £551m 643 £491m £534m £534m Dec Equity Distributions Unwind Disposal Gain on Rebased New Inflation & Dec FX Dec 2012 invested received of proc
Slide 51: Working capital – Group
Working capital – Group Impacted by revenue drop in Construction Services £(400)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 -6% £(600)m -6.2% -7% -6.5% -7.1% -7.3% £(800)m -8% -9% £(1,000)m -10% -9.6% £(1,200)m -11% -12% £(1,400)m -12.2% -12.6% -1
Slide 52: Working capital – Professional Services
Working capital – Professional Services £110m 5.9% 5.4% 3.8% 5% £90m 4.2% £70m 2.5% 0% -1.5% £50m -2.5% -5% £30m -10% £10m -10.7% -15% £(10)m -20% £(30)m £(50)m -21.6% -25% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Period end working capital Period en
Slide 53: Working capital – Support Services
Working capital – Support Services £20m 4% 3% £0m 2% 1% £(20)m 0% 0.2% £(40)m -1% -1.4% -1.2% -1.3% -2% £(60)m -2.2% -3% -2.8% -2.8% -2.6% -3.4% -4% £(80)m -5% £(100)m -6% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Period end working capital Period end
Slide 54: Working capital – Construction Services consolidated
Working capital – Construction Services consolidated £(400)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 -7% £(600)m -9% £(800)m -10.5% -10.2% -11% £(1,000)m -11.1% -11.6% -13% -13.4% £(1,200)m -13.4% -15% -14.6% -15.4% £(1,400)m -17% -16.5% £(1,600
Slide 55: Working capital – Construction Services US
Working capital – Construction Services US 0 0 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 £(50)m -2% £(100)m -4% £(150)m -6% £(200)m -6.2% -6.3% -8% -8.2% -7.2% £(250)m -10% -9.2% £(300)m -12% -11.8% £(350)m -14% -13.3% -13.7% £(400)m -16% -15.3% £(450
Slide 56: Working capital – Construction Services UK
Working capital – Construction Services UK £(300)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 £(400)m -7% -9% £(500)m -11% £(600)m -13.9% -13% £(700)m -14.7% -15% £(800)m -15.7% -15.0% -15.3% -17% -16.7% £(900)m -17.4% -19% -18.3% £(1,000)m -19.6%
Slide 57: Available funds
Available funds £1400m £1200m £1000m £800m £600m £400m £200m £0m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec-13 Available cash Available under committed facilities 56
Slide 58: Balfour Beatty
Balfour Beatty