Slide 1: 2011 Half-year results presentation
2011 Half-year results presentation 17 August 2011
Slide 2: Ian Tyler, Chief Executive
Balfour Beatty _ lan Tyler Chief Executive
Slide 3: Opening remarks
Opening remarks Results reflect the onset of tougher conditions which we had anticipated Strategic ambitions – Build capabilities across the infrastructure lifecycle – Access broader range of markets and customers Capabilities enhanced in the period Well-positioned for the growing demand for
Slide 4: Duncan Magrath, Chief Financial Officer
Duncan Magrath Chief Financial Officer
Slide 5: Headline underlying numbers
Headline underlying numbers Actual Constant HY 2011 HY 2010 growth currency Revenue £5,222m £5,160m# +1% +3% Profit from operations* £136m £143m# -5% -3% Pre-tax profit* £138m £133m# +4% Underlying eps* 14.7p 14.3p# +3% Interim dividend 5.30p 5.05p +5% Cash used in operations (£114m) (£21m) Average
Slide 6: Order book position compared to a year ago
Order book position compared to a year ago £5.1bn £4.7bn £4.7bn Total at HY 2011 £15.5bn £4.3bn £1.1bn Total at HY 2010 £14.6bn £0.7bn £0.6bn £1.0bn £3.5bn £3.3bn £2.3bn £2.2bn £2.3bn £3.4bn £3.6bn £2.1bn £3.3bn £3.2bn £0.8bn £0.7bn £1.2bn £1.3bn £0.8bn £0.8bn £0.4bn £0.6bn £0.5bn £0.4bn £0.3bn £0.4
Slide 7: Professional Services – HY 2011 by geography
Professional Services – HY 2011 by geography 1.6 UK 13% RoW £111m RoW £0.6bn 34% 1.2 (up 30%) (down 18%) £285m (up 20%) 0.8 US £0.8bn (down 4%) 0.4 £444m (down 3%) UK £0.2bn US 0.0 (down 21%) 53% FY 2009 HY 2010 FY 2010 HY 2011 Order book Revenue £1.6bn up 3% £840m up 1% (Dec 2010: £1.5bn) (June 201
Slide 8: Professional Services
Professional Services Actual Constant FY 2010 HY 2011 HY 2010 growth currency £1.5bn Order book £1.6bn £1.6bn -2% +2% £1,613m Revenue £840m £829m +1% +3% £85m Profit* £38m £49m -22% -23% 5.3% Margin % 4.5% 5.9% * before non-underlying items Excluding HY 2010’s incentive income, underlying trading
Slide 9: Construction Services – HY 2011 by geography
Construction Services – HY 2011 by geography 9.0 RoW 18% UK RoW £2.0bn (down 11%) £595m 52% (up 14%) 6.0 US £3.9bn £1,680m (up 21%) (down 2%) £995m 3.0 (down 4%) UK £3.2bn (down 15%) US 0.0 30% FY 2009 HY 2010 FY 2010 HY 2011 Order book Revenue £9.1bn down 1% £3,270m no change (Dec 2010: £9.2bn) (Ju
Slide 10: Construction Services
Construction Services Actual Constant FY 2010 HY 2011 HY 2010 growth currency £9.2bn Order book £9.1bn £8.5bn +7% +9% £6,734m Revenue £3,270m £3,278m - +2% £201m Profit* £67m £79m -15% -12% 3.0% Margin % 2.0% 2.4% * before non-underlying items Good performance in the US, but as anticipated, down o
Slide 11: Support Services – HY 2011 by market
Support Services – HY 2011 by market 4.8 Building Transport Building £1.3bn 30% 34% (up 23%) 3.6 Power £0.6bn (Up 1%) £227m £253m (up 9%) (down 7%) 2.4 Water £0.8bn (down 9%) 1.2 Transport £2.1bn £192m £85m (up 7%) (-) (up 28%) Power Water 0.0 25% 11% FY 2009 HY 2010 FY 2010 HY 2011 Order book Reven
Slide 12: Support Services
Support Services Actual Constant FY 2010 HY 2011 HY 2010 growth currency £4.5bn Order book £4.8bn £4.5bn +7% +7% £1,443m Revenue £757m £739m +2% +2% £62m Profit* £25m £25m - - 4.3% Margin % 3.3% 3.4% * before non-underlying items Good growth in order book, particularly building and local authority
Slide 13: Infrastructure Investments
Infrastructure Investments HY 2011 HY 2010 JVs & JVs & FY 10 £m Group assoc Total Group assoc Total 31 PPP UK/Singapore - 19 19 1 15 16 20 PPP US 9 3 12 9 3 12 (5) Infrastructure (2) (1) (3) (2) (1) (3) (34) Bidding costs & overheads (20) - (20) (19) - (19) 12 Pre-disposals operating profit (13) 21
Slide 14: PPP portfolio valuation roll-forward – HY 2011
PPP portfolio valuation roll-forward – HY 2011 £679m £18m £27m £682m £2m £2m £686m £682m £26m £16m £4m £146m £150m £150m £146m £533m £532m £536m £536m Dec 2010 Equity Distributions Unwind Disposal Rebased New Disposal HY 2011 FX HY 2011 invested of proceeds project gains (excl FX) translation discou
Slide 15: Infrastructure Investments
Infrastructure Investments Achieved financial close on – Hertfordshire BSF – North West Fire & Rescue – Cambridgeshire (April) and Northamptonshire (August) streetlighting Appointed preferred bidder on – Greater Gabbard Offshore high-voltage transmission (<OFTO=) Disposal of 60% interest in Co
Slide 16: Investment income and finance costs
Investment income and finance costs FY 10 £m HY 2011 HY 2010 19 PPP subordinated debt interest receivable 12 9 19 PPP interest on financial assets 12 9 8 Other interest receivable 3 4 46 Investment income 27 22 (20) PPP interest on bank loans and overdrafts (12) (9) (12) Preference shares finance co
Slide 17: Performance by sector
Performance by sector FY 10 £m HY 2011 HY 2010 85 Professional Services 38 49 201 Construction Services 67 79 62 Support Services 25 25 12 Infrastructure Investments 22 6 (35) Corporate costs (16) (16) 325 Profit from operations* 136 143 46 Investment income 27 22 (65) Finance costs (25) (32) 306 Pr
Slide 18: Non-underlying items
Non-underlying items HY 2011 Profit £m before tax Tax Net UK Shared Service Centre (7) 2 (5) Loss on disposal of rail manufacturing* (7) (1) (8) Acquisition, post-acquisition integration, reorganisation & other costs (4) 1 (3) (18) 2 (16) Amortisation of acquired intangible assets (29) 9 (20) (47) 1
Slide 19: Cash from operations
Cash from operations £m H1 2011 H2 2010 H1 2010 Group operating profit* 106 143 110 Depreciation 36 37 37 Non-underlying cash items (11) (32) (11) Other items (12) 5 (7) Pension deficit payments (30) (65) (16) Working capital (increase)/decrease (203) 102 (134) Cash (used in)/from operations (114) 1
Slide 20: Pensions – balance sheet movement
Pensions – balance sheet movement £629m £586m Pension deficits, net of tax Deferred tax assets £178m £27m £166m £441m £120m £50m £328m £46m £43m £88m £420m £451m £321m £240m Dec June Dec Service Company Actuarial Actuarial June 2009 2010 2010 cost contributions gain gain 2011 assets liabilities June
Slide 21: Net cash balances
† Net cash balances £600m £572m £500m £518m £500m £479m £440m £394m £400m £374m £333m £436m £434m £292m £300m £342m £312m £296m £200m £249m £256m £223m £224m £100m £0m Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Net cash 6-mthly average † excluding net debt of PPP subsidiaries 20
Slide 22: Summary of first half 2011
Summary of first half 2011 Pre-tax profit up 4% EPS up 3% Interim dividend up 5% Average cash £296m Order book £15.5bn – up 6% from HY 2010 – up 2% from Dec 2010 21
Slide 23: Ian Tyler, Chief Executive
Balfour Beatty _ lan Tyler Chief Executive
Slide 24: Agenda
Agenda Market overview Key actions Managing in changing markets 23
Slide 25: Market overview
Market overview Balfour Beatty
Slide 26: Short-term issues – long-term growth
Short-term issues – long-term growth Short-term Long-term Funding for infrastructure Demand for infrastructure will investment is scarce grow faster than GDP Impact on our markets in Market trends provide the short term opportunity for businesses with depth of resource, asset knowledge and c
Slide 27: UK market
UK market Background Key opportunities Public sector investment in Government is focused on public infrastructure will fall infrastructure development and over the next three years bringing more private finance into public infrastructure No wholesale drive towards outsourcing of services Sub
Slide 28: US transportation market
US transportation market Background Key opportunities Transportation funding is Transportation is delivered by caught in the cross-fire the states between politicians States are looking for Limitations in federal alternative means of funding transportation funding due to – 29 states have PPP
Slide 29: US building construction market
US building construction market Background Key opportunities Strong niche position in federal Exploitation of strong position in construction federal construction Commercial construction market is Although forecasts have been unlikely to recover until GDP revised down in Q3, strong growth re
Slide 30: Markets in the rest of the world
Markets in the rest of the world Growth is strong in parts of the Middle East – Dubai infrastructure market remains virtually dormant – Qatar, Kuwait and Saudi Arabia seeing high levels of infrastructure spend by their governments Australia’s resource-led economy is presenting excellent opportun
Slide 31: Key actions
Key actions Balfour Beatty
Slide 32: Five clear objectives
Five clear objectives 1. Develop our business further 2. Focus on markets with the greatest opportunities 3. Improve operational performance and cost-effectiveness 4. Continue to strengthen core skills 5. Continue to show leadership in values and behaviour 31
Slide 33: Developing our business further
Developing our business further Seeking out areas of market opportunity Acquiring businesses that fit our strategy Managing subsequent integration and growth 32
Slide 34: Developing our business further: Howard S. Wright acquisition
Developing our business further Howard S. Wright acquisition Based on the Pacific West Coast Region set to be one of the first in the US to resume healthy growth Good geographic, strategic and cultural fit Puts us in 3rd position in US general building Significant opportunities in leveragi
Slide 35: Developing our business further
Developing our business further Seeking out areas of market opportunity Acquiring businesses that fit our strategy Managing subsequent integration and growth Leveraging infrastructure investment skills – Establishing infrastructure funds management business – Good progress in the period 34
Slide 36: Increasing our focus on markets with the greatest opportunities
Increasing our focus on markets with the greatest opportunities UK power market Local Authority outsourcing International growth markets 35
Slide 37: Increasing our focus: UK power market
Increasing our focus on markets with the greatest opportunities UK power market UK's energy policy will move materially over the next 10 years towards cheaper clean technologies Our approach is to be capable in a range of technologies We are investing in a number of capabilities to take advant
Slide 38: Increasing our focus: Local Authority business
Increasing our focus on markets with the greatest opportunities Local Authority business, Order book progression* Living Places £1000m New integrated £800m New H/W & S/L Created a separate unit within £600m Existing H/W & S/L our Support Services group £400m £660m of contracts won in the £200m l
Slide 39: Increasing our focus: New growth markets
Increasing our focus on markets with the greatest opportunities New growth markets Developing a Canadian transportation practice following the acquisition of Halsall in Canada Opportunity to combine Parsons Brinckerhoff activities in India with our PPP skills to create a highly relevant offering
Slide 40: Improving operational performance and cost-effectiveness
Improving operational performance and cost-effectiveness Adjusting the cost structures of operating companies – Reduction of 1,700 employees in 12 months Have been rolling out procurement and back office initiatives since spring 2010 – Roll-out is proceeding according to plan – Completion expect
Slide 41: Strengthening our core skills
Strengthening our core skills Developing the culture and mechanisms to share and transfer knowledge Using our combined skills to gain competitive advantage – Global transport planning skills applied to the Local Authority market – PB’s world leading engineering and programme skills enhance our c
Slide 42: Managing in changing markets
Managing in changing markets
Slide 43: Professional Services
Professional Services Steady volume and reasonably robust margins expected Progress is impacted in the UK by the shift in market drivers from public to private sector market Repositioning resource to higher growth areas – Middle East and Asia – Mining Focus on value and efficiency to enhance
Slide 44: Construction Services
Construction Services Unlikely to see activity levels grow substantially in the short term in the UK and the US – Some further reduction possible in the UK Lack of volume will impact our business – Some reduction in gross margins – Working capital outflow Opportunities to grow elsewhere in the
Slide 45: Support Services
Support Services Steady growth in activity – Local government outsourcing – Energy sector Profits held back in the short term – Mobilisation costs impact the early stages of contracts – Full benefits accrue at the later stages 44
Slide 46: Infrastructure Investments
Infrastructure Investments Governments focusing on finding solutions involving the private sector Investment opportunities exist, particularly in the UK Generating further income by disposal of mature assets 45
Slide 47: Conclusion
Conclusion Although there are significant challenges in our markets, the nature and magnitude of these are as we expected and planned for We are confident of making progress in 2011 Looking further out, we will continue to manage the business on the basis that conditions will remain tough Ou
Slide 48: Forward-looking statements
Forward-looking statements This announcement 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 49: Appendix
Appendix Balfour Beatty
Slide 50: Pensions charge
Pensions charge FY 2010 £m HY 2011 HY 2010 Defined benefit schemes: 53 P&L charge – service cost 27 26 (130) Expected return on assets (72) (64) 151 Interest cost on scheme liabilities 73 75 21 Net finance charge 1 11 74 Net pension charge 28 37 Defined contribution schemes: 52 P&L charge 27 26 126
Slide 51: Group balance sheet
Group balance sheet £m June 11 Dec 10 Jun 10* Goodwill and intangible assets 1,523 1,447 1,464 Current assets# 2,180 1,877 2,201 Current liabilities and provisions# (3,297) (3,125) (3,411) Working capital# (1,117) (1,248) (1,210) Net cash (excluding PPP subsidiaries) 292 518 500 PPP subsidiaries – f
Slide 52: Balance sheet cash movement
Balance sheet cash movement £m HY 2011 HY 2010 Opening net cash† 518 572 Cash used in operations† (116) (39) Dividends from JVs, associates and Barking 27 26 Capital expenditure and financial investment (56) (61) Acquisitions/disposals (net of cash acquired) (58) 19 Dividends, interest and tax paid
Slide 53: Acquisitions and disposals
Acquisitions and disposals £m Acquisitions: Romec Services 30 March 29 Power Efficiency* 7 April 15 Fru-Con Construction* 15 June 13 Howard S. Wright* 30 June 35 Deferred consideration 3 95 Disposals: UK rail manufacturing 3 May (37) * net of cash acquired 58 52
Slide 54: Order book
Order book Balfour Beatty