Slide 1: 2013 half-year results presentation
2013 half-year results presentation 14 August 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: Andrew McNaughton, Chief Executive Officer
ANDREW McNAUGHTON Chief Executive Officer
Slide 4: Opening remarks
Opening remarks Took over as CEO in March A number of headwinds in the UK and Australia Actions delivering results Still focused on longer term objectives 3
Slide 5: Duncan Magrath, Chief Financial Officer
DUNCAN MAGRATH Chief Financial Officer
Slide 6: Headline underlying numbers from continuing operations
Headline underlying numbers from continuing operations Difficult H1 trading HY 2013 HY 2012 Actual growth Constant currency Revenue including JVs & assoc* £4,967m £5,099m -3% -4% Profit from operations* £52m £156m -67% -67% Pre-tax profit* £45m £150m -70% Underlying EPS* 6.3p 18.7p -66% Interim divi
Slide 7: Professional Services – HY 2013 by geography
Professional Services – HY 2013 by geography Overall steady growth in orders and revenue £1.6bn RoW £205m US RoW £0.6bn 56% (up 5% v FY12) 33% (down 17%) £1.2bn (up 2% v HY12) £290m (down 4%) UK £0.3bn (down 21% v FY12) £485m £0.8bn (up 9%) (up 20% v HY12) £897m £0.4bn US £0.8bn (up 1%) £95m (up 14%
Slide 8: Professional Services
Professional Services FY 2012 HY 2013 HY 2012 Actual growth Constant currency £1.6bn Order book £1.7bn £1.6bn +9% +7% £1,668m Revenue £870m £845m +3% +2% £98m Profit* £26m £42m -38% -38% 5.9% Margin % 3.0% 5.0% * before non-underlying items 90% reduction in planned mining programmes leading to tou
Slide 9: Impact of Australia market downturn on global PS profit
Professional Services Impact of Australia market downturn on global PS profit £50m £40m £15m £(21)m £30m £(36)m £5m £20m £42m £15m £26m £10m £0m PS profit Australia net Australia cost Australia net Net other PS profit HY 2012 revenue decline savings impact movements HY 2013 £(67)m £43m £(24)m Estima
Slide 10: Construction Services – HY 2013 by geography
Construction Services – HY 2013 by geography UK revenue decline as expected, US gradual pickup £10bn RoW* 13% £401m US £8bn (up 14%) RoW* £1.8bn 43% (up 23% v FY12) £6bn (up 20% v HY12) £1,365m UK £2.7bn (up 5%) £4bn (down 6% v FY12) £1,385m (down 2% v HY12) (down 16%) £2bn US £3.5bn UK (up 15% v FY
Slide 11: Construction Services
Construction Services FY 2012 HY 2013 HY 2012 Actual growth Constant currency £7.4bn Order book* £8.0bn £7.7bn +5% +3% £6,511m Revenue* £3,151m £3,303m -5% -6% £119m (Loss)/profit* £(41)m £59m 1.8% Margin % (1.3)% 1.8% * from continuing operations, before non-underlying items Poor performance in U
Slide 12: Construction Services UK illustrative profit skew
Construction Services UK Illustrative profit skew H1 2013 H2 2013E Gross margin £10m £(5)m 9% £(10)m Normal Write- Normal Write- skew downs skew downs Overhead Base £(45)m Base £(88)m margin margin £115m £115m Overhead Overhead Profit £(95)m £32m H1/H2 swing Loss £(35)m Figures exclude UK rail const
Slide 13: Support Services – HY 2013 by market
Support Services – HY 2013 by market Strong revenue growth in power transmission £5bn Transport* Building* Power 39% £4bn 49% £255m Power £1.7bn (down 7%) (down 9% v FY12) £3bn (up 74% v HY12) £318m (up 34%) £2bn Water £0.2bn (down 32% v FY12) (down 52% v HY12) £1bn £75m Transport* £2.3bn (down £0bn
Slide 14: Support Services
Support Services FY 2012 HY 2013 HY 2012 Actual growth Constant currency £4.5bn Order book* £4.2bn £3.7bn +11% +11% £1,151m Revenue* £648m £593m +9% +9% £30m Profit* £17m £4m +325% +325% 2.6% Margin % 2.6% 0.7% * from continuing operations, before non-underlying items Good revenue and profit perfo
Slide 15: Order book position compared with a year ago
Order book position compared with a year ago Near-term improvement in US construction Total at HY 2013 £13.9bn continuing £4.4bn Total at HY 2012 £13.0bn continuing £4.1bn £4.2bn £4.0bn £0.5bn £0.5bn £0.9bn £0.9bn £3.3bn £2.6bn £2.3bn £2.9bn £3.0bn £2.0bn £2.2bn £3.0bn £0.6bn £2.7bn £0.6bn £1.7bn £1
Slide 16: Infrastructure Investments
Infrastructure Investments Continued strong earnings performance HY 2013 HY 2012 FY 12 £m Group JVs & assoc Total Group JVs & assoc Total 37 PPP UK/Singapore 1 12 13 1 19 20 18 PPP US 11 4 15 9 4 13 (4) Infrastructure (1) - (1) (2) (1) (3) (4) Fund (2) - (2) (3) - (3) (30) Bidding costs and overhead
Slide 17: Infrastructure Investments
Infrastructure Investments Achieved financial close on ● Edinburgh University and Aberystwyth University student accommodation projects (July 2013) ● Iowa University and University of Nevada, Reno (August 2013) student accommodation projects ● Northern Group military housing for US Air Force (Augu
Slide 18: PPP portfolio valuation movements – HY 2013
PPP portfolio valuation movements – HY 2013 Valuation stable, despite £97m net distributions £m Valuation as at December 2012 734 Cash invested 12 Cash received – distributions (28) – disposals (81) (109) Net cash received (97) Unwind of discount on NPV 36 New project wins 2 Disposal gains, operatio
Slide 19: Group profit skew
Group profit skew H2 2013 trading £m H2 2012 H1 2013 v H2 2012 Comments Further Australia weakness Professional Services 56 26 – however likely claim upside Improved operational performance Construction Services 60 (41) – should revert to last year9s H2 Steady underlying growth + Support Services 26
Slide 20: Net finance cost
Net finance cost Increase in interest payable with 3 months US PP FY 12 £m HY 2013 HY 2012 24 PPP subordinated debt interest receivable 13 11 PPP interest on financial assets 16 4 PPP interest on bank loans and overdrafts (14) 2 2 (9) Net finance costs – pension schemes (6) (5) Other interest receiv
Slide 21: Non-underlying items
Non-underlying items £m Restructuring and reorganisation costs relating to Australia (5) Restructuring and reorganisation costs relating to other existing businesses (27) Post-acquisition integration, reorganisation and other costs (1) Cost of implementing UK shared service centre (2) Other non-unde
Slide 22: 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 FY09 HY10 FY10 HY11 FY11 HY12
Slide 23: 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 -6% £(600)m -7% -7.9% -8% £(800)m -8.3% -9% -8.6% £(1,000)m -10% -11% £(1,200)m -10.9% -12% -13% £(1,400)m -13.1% -13.5% -13.5% -1
Slide 24: Net debt movement
Net debt movement £m HY 2013 Full-year expectation Change in working capital (153) c£200m FY working capital outflow guidance maintained Depreciation less net capex 5 Should remain broadly neutral Pension deficit payments (37) H2 deficit payments similar to those in H1 Tax, interest and dividend pay
Slide 25: Balance sheet and headroom
Balance sheet and headroom £m HY 2013 FY 2012 Net cash/(debt) excluding PPP subsidiaries (189) 35 Less: restricted cash (356) (340) available cash (175) (177) other borrowings/items - 72 US private placement 230 - Borrowings under committed facilities (490) (410) Main committed facilities available
Slide 26: Summary of first half 2013
Summary of first half 2013 Order book for continuing business at £13.9bn PS stable, but adverse impact from downturn in Australia Poor performance in UK construction; management action taken Good growth prospects for Support Services Investments providing a continuing source of value, stro
Slide 27: Andrew McNaughton, Chief Executive Officer
ANDREW McNAUGHTON Chief Executive Officer
Slide 28: Agenda
Agenda Operational developments ● Actions to strengthen the business in the UK and Australia ● Update on the USA ● Update on disposals Strategic initiatives ● Continuing to grow business in infrastructure and in attractive growth markets 27
Slide 29: UK construction business
UK construction business £50m profit shortfall due to operational issues Difficult market conditions Disruption caused by restructuring programme Plan of action Bolster bench strength Focus on key customers 28
Slide 30: Improving strength of UK construction business
Improving strength of UK construction business Closed regional units with weak future prospects Appointed new CEO of UK construction Aligning organisation more closely with customers Delivering the intended results ● Regional business improving ● Major projects outcome less immediate 2013
Slide 31: Taking swift action in Australia
Taking swift action in Australia Significant reduction in workforce Using flexible employment options Solutions to save property costs Pushing ahead with country model Taking advantage of strategic opportunities such as government outsourcing 30
Slide 32: Actions taken in the USA underpinning our progress
Actions taken in the USA underpinning our progress Made the right geographical choices for the right strategic reasons ● HSW in the NW and SpawMaxwell in Houston Made efficiency improvements Invested in innovation ● Capability Centre and 8Lean delivery9 Expecting market share gain and revenu
Slide 33: Divesting of Mainland European rail businesses
Divesting of Mainland European rail businesses Advanced discussions to sell the Swedish business to a trade buyer Work on finding new owners for the German and in time, Italian businesses 32
Slide 34: Growing our businesses in target sectors and geographies
Growing our businesses in target sectors and geographies Single-capability Economic markets infrastructure Share in order book 2013 H1 33% 67% 2012 37% 63% Adjusted to reflect continuing operations 33
Slide 35: Winning work in target sectors and geographies
Winning work In target sectors and geographies
Slide 36: Transferring capability to Australia
Transferring capability to Australia Water Transport
Slide 37: Growing position in the Middle East
Growing position in the Middle East Qatar Saudi Arabia
Slide 38: Capitalising on strength in target sectors
Capitalising on strength in target sectors Water Transport
Slide 39: Benefitting from public infrastructure spend
Benefitting from public infrastructure spend Hong Kong
Slide 40: Pursuing the Investments strategy
Pursuing the Investments strategy Core to the Group and a significant income generator Further diversification into student accommodation and energy Ability to develop assets generating development fees Increasingly acting as a differentiator for the Group Providing flexibility to provide
Slide 41: Sale of UK facilities management business, WorkPlace
Sale of UK facilities management business, WorkPlace Positive development, providing capacity to invest behind strategy Agreement to sell business to GDF Suez Energy Services for c.£190m Fair value achieved Good home for customers and employees 40
Slide 42: Increased pace of initiatives to drive business forward
Increased pace of initiatives to drive business forward Taken firm action in UK Construction business Delivered benefits on organisational change in the USA Continued to deliver against efficiency targets Made progress with sale of Swedish and German rail operations Initial successes in Au
Slide 43: Remain focused on operational delivery in the second half
Remain focused on operational delivery in the second half Deliver further progress on action plans in the UK and Australia Maintain momentum on the growth of market share in the USA Make further progress in US student accommodation market Progress the disposal of German Rail business Ensur
Slide 44: Our strategic vision
Our strategic vision Capitalise on the growth in global infrastructure from an international footprint of local businesses Ensure we maximise the benefit from the impending market recovery in our mature markets 43
Slide 45: Appendix
APPENDIX Balfour Beatty
Slide 46: Performance by sector
Performance by sector FY 2012 £m HY 2013 HY 2012 98 Professional Services 26 42 119 Construction Services (41) 59 30 Support Services 17 4 69 Infrastructure Investments 63 67 (32) Corporate costs (13) (16) 284 Profit from operations* 52 156 (7) Net finance cost (7) (6) 277 Pre-tax profit* 45 150 * f
Slide 47: Pensions charge
Pensions charge FY 2012 £m HY 2013 HY 2012 Defined benefit schemes: 48 P&L charge – service cost 24 25 (2) P&L credit – past service credit - (2) (127) Expected return on assets (61) (63) 137 Interest cost on scheme liabilities 67 68 10 Net finance charge 6 5 56 Net pension charge* 30 28 Defined con
Slide 48: Discontinued business – Rail Germany/Scandinavia/Spain
Discontinued business – Rail Germany/Scandinavia/Spain FY 2012 HY 2013 HY 2012 Actual growth Constant currency £0.6bn Order book £0.6bn £0.6bn -13% -14% £448m Revenue £187m £201m -7% -11% £2m (Loss)/profit* £(18)m £(6)m £(98)m Non-underlying items £(50)m - * before non-underlying items Poor financ
Slide 49: Discontinued business – UK Facilities Management
Discontinued business – UK Facilities Management FY 2012 HY 2013 HY 2012 Actual growth Constant currency £1.2bn Order book £1.5bn £1.4bn +15% +15% £482m Revenue £272m £235m +16% +16% £22m Profit* £9m £6m +50% +50% £(7)m Non-underlying items £(4)m £(3)m * before non-underlying items Good order book
Slide 50: Group balance sheet
Group balance sheet £m June 2013 Dec 2012 June 2012 Goodwill and intangible assets 1,307 1,372 1,487 Current assets# 2,066 2,047 2,333 Current liabilities and provisions# (2,809) (2,824) (3,091) Working capital# (743) (777) (758) Net assets held for sale 154 - - Net cash/(borrowings) (excluding PPP
Slide 51: Pensions – balance sheet movement
Pensions – balance sheet movement Pension deficits, net of tax Deferred tax assets £586m £166m £441m £24m £30m £25m £350m £120m £338m £275m £80m £88m £52m £15m £59m £420m £75m £321m £163m £291m £291m £200m £258m £262m Dec Dec Dec Dec Service Company Actuarial Actuarial Other Jun Available- Jun 2009
Slide 52: Balance sheet cash movement
Balance sheet cash movement £m HY 2013 HY 2012 Opening net cash† 35 340 Cash used in operations† (234) (289) Dividends from JVs and associates 13 32 Capital expenditure and financial investment 26 (33) Acquisitions and disposals (net of net cash acquired) (21) (3) Dividends, interest and tax paid (1
Slide 53: 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 -7% £(600)m -9% £(800)m -11.9% -11% £(1,000)m -12.8% -12.1% -13% £(1,200)m -14.2% -15% -14.7% £(1,400)m -15.4% -17% -16.5% -17.6% £(1,600)m -19% Period
Slide 54: 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 -7% £(400)m -9% £(500)m -11% £(600)m -13% £(700)m -16.2% -15% -16.5% -15.8% -17% £(800)m -16.8% -19% -18.6% -18.5% £(900)m -19.7% -21% -20.8% £(1,000)m -23% Peri
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 £(50)m -2% £(100)m -4% £(150)m -6% £(200)m -6.3% -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% -16.0% £(450)m -18% £(50
Slide 56: Working capital – Professional Services
Working capital – Professional Services £110m 5.3% 3.2% 5% £90m 3.5% 0% £70m 1.9% £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 Jun 13 Period end working capital Period end working ca
Slide 57: Working capital – Support Services
Working capital – Support Services £0m 4% £(10)m 3% £(20)m 2% £(30)m 1% £(40)m 0% £(50)m -1% £(60)m -2% £(70)m -2.5% -3% -2.5% -2.8% £(80)m -4% -3.8% -3.7% £(90)m -4.3% -4.0% -5% £(100)m -4.8% -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 Period end working
Slide 58: Average net cash/(borrowings)
Average net cash/(borrowings)† Reduction due to expected working capital movements £600m £572m £500m £518m £500m £440m £394m £400m £333m £340m £436m £434m £292m £300m £342m £200m £256m £296m £223m £224m £100m £34m £35m £104m £(189)m £0m £35m -£100m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 De
Slide 59: Analysis of net cash/(debt) balances
Analysis of net cash/(debt) balances† £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 Available cash Restricted cash Borrowings US PP Net cash/(debt) † excluding net debt of PPP subsidiaries 58
Slide 60: Available funds
Available funds £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 Available cash Available under committed facilities 59
Slide 61: 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 2013 Interim Final 60