Slide 1: 2012 full-year results presentation
2012 full-year results presentation 7 March 2013
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: Ian Tyler, Chief Executive Officer
IAN TYLER Chief Executive Officer
Slide 4: Resilient underlying earnings performance
Resilient underlying earnings performance Actual Constant FY 2012 FY 2011 growth currency Revenue* £10,896m £11,035m -1% -1% Profit from operations* £309m £331m -7% -7% Pre-tax profit* £310m £334m -7% Underlying EPS* 35.0p 35.5p -1% Full-year proposed dividend 14.1p 13.8p +2% Average (borrowings)/ca
Slide 5: Segmental highlights
Segmental highlights Professional Increasing margin towards target range Services Diversifying into a broadly based Infrastructure infrastructure business Investments Securing value from the disposal of mature assets Support 12% increase in order book underlies growth Services potential Construction
Slide 6: Strategic highlights
Strategic highlights Single-capability Economic markets infrastructure Share in order book 2012 37% 63% 2011 41% 59% 2009 57% 43% 6
Slide 7: Duncan Magrath, Chief Financial Officer
DUNCAN MAGRATH Chief Financial Officer
Slide 8: Professional Services – FY 2012 by geography
Professional Services – FY 2012 by geography Steady performance £bn UK RoW 12% 1.6 35% RoW £0.6bn £195m (down 3% v HY12) (down (up 7% v FY11) 5%) 1.2 £590m (up 9%) £3,182m US £0.7bn (down 6%) 0.8 (down 3% v HY12) (down 1% v FY11) £2,570m (up 8%) £883m 0.4 (down 2%) UK £0.3bn (up 51% v HY12) US (up 2
Slide 9: Professional Services
Professional Services Actual Constant FY 2012 FY 2011 growth currency Order book £1.6bn £1.6bn +5% +9% Revenue £1,668m £1,645m +1% +1% Profit* £98m £87m +13% +12% Margin % 5.9% 5.3% * before non-underlying items Improved margin v FY 2011 Good profit performance in the US, particularly power and
Slide 10: Construction Services – FY 2012 by geography
Construction Services – FY 2012 by geography Revenue decline, particularly in second half £bn RoW 10 17% UK RoW £2.1bn (down 5% v HY12) £1,207m 46% 8 (up 3% v FY11) (down 6%) 6 £3,182m US £3.1bn (down 6%) (down 10% v HY12) 4 (down 17% v FY11) £2,570m (up 8%) 2 UK £2.8bn (up 4% v HY12) 0 (up 1% v FY1
Slide 11: Construction order book coverage
Construction order book coverage Stronger US coverage than UK 31 Dec 2012 Multiple of revenue 2012 Unexecuted revenue orders ABNC Total Orders Total US £2.6bn £3.1bn £2.9bn £6.0bn 1.2x 2.3x UK £3.2bn £2.8bn £1.1bn £3.9bn 0.9x 1.2x 11
Slide 12: Construction Services
Construction Services Actual Constant FY 2012 FY 2011 growth currency Order book £8.0bn £8.5bn -6% -4% Revenue £6,959m £7,050m -1% -1% Profit* £122m £169m -28% -28% Margin % 1.8% 2.4% * before non-underlying items US revenues +9% from acquisitions, -1% organic, but margin down as anticipated UK
Slide 13: Support Services – FY 2012 by market
Support Services – FY 2012 by market Expected increases in power £bn 6 Building Transport Building £1.4bn 31% (down 2% v HY12) 28% 5 (up 3% v FY11) £504m £459m Power £1.8bn (down 11%) 4 (up 6%) (up 90% v HY12) (up 65% v FY11) 3 Water £0.3bn (down 30% v HY12) £158m 2 (down (down 41% v FY11) £512m 12%
Slide 14: Support Services
Support Services Actual Constant FY 2012 FY 2011 growth currency Order book £5.7bn £5.1bn +12% +12% Revenue £1,633m £1,584m +3% +3% Profit* £52m £67m -22% -22% Margin % 3.2% 4.2% * before non-underlying items Strong growth in order book, particularly power and local authority Good revenue growth
Slide 15: Order book position compared to a year ago
Order book position compared to a year ago Resilient medium term, construction weakness near term £7.5bn Total at FY 2012 £15.3bn £1.3bn £6.7bn Total at FY 2011 £15.2bn £1.3bn £5.2bn £4.5bn £5.3bn £3.4bn £3.2bn £3.4bn £4.5bn £2.8bn £1.0bn £1.0bn £1.9bn £2.1bn £1.3bn £1.4bn £0.9bn £0.9bn £0.3bn £0.3b
Slide 16: Infrastructure Investments
Infrastructure Investments Strong earnings performance FY 2012 FY 2011 £m Group JVs & assoc Total Group JVs & assoc Total PPP UK/Singapore 2 35 37 1 37 38 PPP US 12 6 18 12 7 19 Infrastructure (3) (1) (4) (3) (1) (4) Bidding costs & overheads (34) - (34) (30) - (30) Pre-disposals operating profit* (
Slide 17: Infrastructure Investments
Infrastructure Investments Achieved financial close on ● Waste facility in Essex ● Western Group military family housing for US Air Force ● Energy-from-waste facility in Gloucestershire (February 2013) Appointed preferred bidder on ● Edinburgh University student accommodation ● Aberystwyth Unive
Slide 18: Net interest income
Net interest income £m FY 2012 FY 2011 PPP subordinated debt interest receivable 24 25 PPP interest on financial assets 31 PPP interest on bank loans and overdrafts (27) 4 3 Net finance costs – pension schemes* - (3) Other interest receivable 7 Other interest payable (22) (15) (10) Preference shares
Slide 19: Impact of revised IAS19 standard
Impact of revised IAS19 standard Original Revised est. for est. for 2011 2012 2013 2013 Expected return on pension plan assets 6.10% 5.20% 5.20% 5.10% Discount rate on obligations 5.45% 4.85% 4.80% 4.40% Difference 0.65% 0.35% 0.40% 0.70% Impact on reported pension net finance cost £17m £10m £13m £2
Slide 20: Mainland European rail restructuring
Mainland European rail restructuring 2012 revenue £465m Not consistent with strategy of multiple market sectors within specific geographies Divesting all Mainland European rail businesses over time – Spain sold March 2013 Goodwill written down from £156m to £61m Restructuring costs of £9m
Slide 21: Cost efficiency programme
Cost efficiency programme Targeting £80m annual savings by 2015 Shared service centres – expand UK, set up Lancaster, PA Reorganisations ● UK construction into three business streams ● US construction into three regions Additional procurement efficiencies, including global Achieved £36m sa
Slide 22: Other non-underlying items
Other non-underlying items £m Post-acquisition integration, reorganisation and other costs (9) Write-down of investment in Exeter International Airport (12) Cost of implementing UK shared service centre (4) Other non-underlying items (25) Amortisation of acquired intangible assets (45) Other non-und
Slide 23: Cash from operations – FY 2012
Cash from operations – FY 2012 Working capital outflow from construction cycle £m FY 2012 FY 2011 Group operating profit* 212 256 Depreciation 64 70 Non-underlying items (83) (19) Gain on disposals of interests in PPP JVs (52) (20) Other items 11 7 152 294 Pension deficit payments (61) (58) Working
Slide 24: Balance sheet elements
Balance sheet elements Changing shape, remains in balance 743 Investments1 734 Working (1,085) capital (777) 340 Net cash2 35 (2) Aggregate3 (8) (275) Pension deficit (338) £(1,500)m £(1,000)m £(500)m £0m £500m £1,000m 1 Directors’ valuation of PPP concessions Dec 2011 Dec 2012 2 excluding net borro
Slide 25: PPP portfolio valuation movements – FY 2012
PPP portfolio valuation movements – FY 2012 Valuation stable, despite £114m net distributions £m Valuation as at December 2011 743 Cash invested 55 Cash received – distributions (85) – disposals (84) (169) Net cash received (114) Unwind of discount on NPV 75 New project wins 4 Disposal gains, operat
Slide 26: Working capital – Group
Working capital – Group Seasonal improvement offset by impact of volume reductions £(400)m 0 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 £(600)m -3% £(800)m -6% -7.9% £(1,000)m -8.3% -9% £(1,200)m -10.9% -12% £(1,400)m -13.1% -13.5% -13.5% £(1,600)m -14.2% -15% Perio
Slide 27: Working capital – Construction Services
Working capital – Construction Services In line with June, UK reduction offset by US increase £(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 -7% £(600)m -9% £(800)m -11.9% -11% £(1,000)m -12.1% -13% £(1,200)m -14.2% -15% -14.7% -15.4% £(1,400)m -17% -16.5% -
Slide 28: Working capital – Construction Services UK
Working capital – Construction Services UK Reduction from volume and mix £(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 -7% £(400)m -9% £(500)m -11% £(600)m -13% £(700)m -16.2% -15% -15.8% -17% £(800)m -16.5% -16.8% -19% -18.6% £(900)m -19.7% -21% -20.8% £(1
Slide 29: Working capital – Construction Services US
Working capital – Construction Services US Flattening out, ahead of UK cycle 0 0 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 £(50)m -2% £(100)m -4% £(150)m -6% £(200)m -8% -7.3% £(250)m -8.6% -10% £(300)m -10.1% -12% £(350)m -12.5% -14% -14.1% -14.4% £(400)m -16% -16
Slide 30: Average net cash/(borrowings)
Average net cash/(borrowings)† Impacted by working capital movements £600m £572m £500m £518m £500m £440m £394m £400m £340m £333m £436m £434m £292m £300m £342m £200m £296m £223m £256m £224m £100m £34m £35m £104m £0m £35m -£100m £(126)m -£200m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Ju
Slide 31: Pensions – balance sheet movement
Pensions – balance sheet movement Increased deficit from reduction in real discount rate £586m Pension deficits, net of tax Deferred tax assets £166m £441m £120m £48m £194m £338m £52m £275m £10m £80m £420m £75m £321m £96m £73m £258m £286m £286m £200m Dec Dec Dec Service Company Actuarial Actuarial O
Slide 32: Summary of 2012
Summary of 2012 Order book up 1% at £15.3bn Good margin performance in Professional Services Crystallisation of investments value offsetting Construction and Support Services declines Pre-tax profit down 7% and EPS down 1% Final dividend maintained at 8.5p, total dividend up 2% 32
Slide 33: Andrew McNaughton, Chief Operating Officer
ANDREW MCNAUGHTON Chief Operating Officer
Slide 34: Introduction
Introduction Patapsco Wastewater Update on our response to treatment plant, USA market conditions Specific actions over next few months Strategic initiatives we are implementing 34
Slide 35: Construction markets
Construction markets Conditions deteriorated in UK Terminal 2B, London Heathrow construction in the second half of 2012 ● Expected to continue in 2013 Some improvement in the US order book since the start of the year ● Higher margins not to come through before 2014 Overall, we see a difficult
Slide 36: Cost efficiency update
Cost efficiency update Phase 2 £50m annual savings target by 2015 Good progress made in 2012 Rationalisation in UK construction Unified operating model in US construction Tactical cost reduction in Support Services 36
Slide 37: Cost efficiency phasing
Cost efficiency phasing Phases 1&2 £80m total annual savings target £80m £60m Achieved £40m £20m £0m 2012 2013 2014 2015 Procurement People Property and other 37
Slide 38: Rail operations in Mainland Europe
Rail operations in Mainland Europe Successful businesses for the Gold Coast Light Rail, Australia Group in the past Investment programmes have been curtailed Having only rail operations in geographies is not consistent with Group strategy Divesting all of our Mainland European rail businesse
Slide 39: Rail business a key strength in strategy
Rail business a key strength in strategy Global rail market is large and growing Key element of our future development Major projects won ● Denver, Melbourne, Qatar Rail Increasing opportunities to combine our capabilities from design to delivery Major projects remain at the heart of globa
Slide 40: Facilities management business
Facilities management business Exploring our options Kirkcaldy Victoria Hospital, Scotland WorkPlace grown into a standalone business May generate more value by selling and redeploying capital to support our strategy 40
Slide 41: Strategy: Leveraging key strengths
Strategy Leveraging key strengths Local presence in End to end asset Skills as an investor multiple geographies knowledge and developer 41
Slide 42: Target geographies and market sectors
Strategy Target geographies and market sectors Hong Kong/ UK US GCC SE Asia Transport (Roads, Rail, Aviation) Complex private building Social infrastructure Mining Power Water Australia / New Canada South Africa India Brazil Zealand = Target geographies and market sectors for additional growth 42
Slide 43: Strategic developments: Local presence
Strategic developments Local presence Highways maintenance a core strength in the UK Australia a target market State government outsourcing of highways maintenance in Australia Specialist team from the UK to join Parsons Brinckerhoff to target these opportunities 43
Slide 44: Strategic developments: End to end asset knowledge
Strategic developments End to end asset knowledge Reorganising around customers in market sectors Breaking down divisional structures Creating the 8country model9 Arming our people with full extent of our expertise Starting to deploy across our footprint 44
Slide 45: Strategic developments: Skills as an investor and developer
Strategic developments Skills as an investor and developer Outstanding year for Investments business Diversified into student accommodation, energy- from-waste and offshore transmission assets, reducing reliance on government PFI Developed funds management business ● First close achieved ● Fir
Slide 46: Summary
Summary Continue to see 2013 as a difficult year for Construction Services ● Responding with effective actions Transition of the Group from construction to target geographies and market sectors ● Better growth dynamics and return characteristics ● Improving resilience Focus on pace and momentu
Slide 47: Appendix
APPENDIX Balfour Beatty
Slide 48: Order book
Order book £16bn June Dec £14bn £12bn £10bn £8bn £6bn £4bn £2bn £0bn 2005 2006 2007 2008 2009 2010 2011 2012 48
Slide 49: Performance by sector
Performance by sector £m FY 2012 FY 2011 Professional Services 98 87 Construction Services 122 169 Support Services 52 67 Infrastructure Investments 69 43 Corporate costs (32) (35) Profit from operations* 309 331 Net interest income 1 3 Pre-tax profit* 310 334 * from continuing operations, before no
Slide 50: Pensions charge
Pensions charge £m FY 2012 FY 2011 Defined benefit schemes: P&L charge – service cost 48 52 P&L credit – past service credit (2) (2) Expected return on assets (137) (143) Interest cost on scheme liabilities 137 146 Net finance charge - 3 Net pension charge* 46 53 Defined contribution schemes: P&L ch
Slide 51: Underlying effective tax rate
Underlying effective tax rate , FY 2012 FY 2011 Tax rate Tax rate £m PBT Tax PAT (%) PBT Tax PAT (%) Group, excluding JVs & associates* 213 (70) 143 32.9 259 (91) 168 35.1 JVs & associates* 110 (13) 97 11.8 89 (14) 75 15.7 Aggregate* 323 (83) 240 25.7 348 (105) 243 30.2 * before non-underlying items
Slide 52: Group balance sheet
Group balance sheet £m Dec 2012 Dec 2011 Goodwill and intangible assets 1,372 1,518 Current assets# 2,047 2,154 Current liabilities and provisions# (2,824) (3,239) Working capital# (777) (1,085) Net cash (excluding PPP subsidiaries) 35 340 PPP subsidiaries – financial assets 542 457 PPP subsidiaries
Slide 53: Balance sheet cash movement
Balance sheet cash movement £m Dec 2012 Dec 2011 Opening net cash† 340 518 Cash (used in)/generated from operations† (218) 35 Dividends from JVs and associates (inc. Barking) 58 59 Capital expenditure and financial investment (9) (92) Acquisitions and disposals (net of net cash acquired) (4) (63) Di
Slide 54: PPP portfolio over time
PPP portfolio over time Cashflow and value Total cashflow in year Portfolio value £180m £1,000m £160m £140m £750m £120m £100m £500m £80m £60m £250m £40m £20m £0m £0m 2020 2030 2040 2050 2060 54
Slide 55: Working capital – Professional Services
Working capital – Professional Services Continuing on trend to 5% of revenue £110m 5% £90m 3.2% 3.5% 1.9% 0% £70m £50m -2.4% -5% -3.9% £30m -10% £10m -10.9% -15% £(10)m -20% £(30)m £(50)m -21.9% -25% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Period end working capi
Slide 56: Working capital – Support Services
Working capital – Support Services Slightly negative – likely to be neutral to positive in 2013 0 4% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 3% £(20)m 2% 1% £(40)m 0% £(60)m -1% -2.5% -2% £(80)m -2.5% -3% -4% £(100)m -3.8% -3.7% -4.3% -4.0% -5% -4.8% £(120)m -6%
Slide 57: Analysis of net cash balances
Analysis of net cash balances† Mixture of available and restricted cash £800m £600m £400m £200m £0m £(200)m £(400)m £(600)m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Available cash Restricted cash Borrowings Net cash † excluding net debt of PPP subsidiaries 57
Slide 58: Available funds
Available funds Maintaining headroom £1,000m £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 Available cash 58
Slide 59: PPP portfolio valuation roll-forward – FY 2012
PPP portfolio valuation roll-forward – FY 2012 £55m £743m £34m £742m £734m £75m £704m £4m £174m £85m £191m £8m £182m £183m £84m 743 713 706 £551m £551m £569m 629 629 £522m Dec Equity Distributions Disposal Unwind Rebased New Operational Dec FX Dec 2011 invested proceeds of project & disposal 2012 tr
Slide 60: Dividends per share
Dividends per share 15.0p 12.5p 10.0p 7.5p 5.0p 2.5p 0.0p 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Interim Final 60