Slide 1: 2012 half-year results presentation
2012 half-year results presentation 15 August 2012
Slide 2: Ian Tyler, Chief Executive Officer
IAN TYLER Chief Executive Officer
Slide 3: Half-year 2012
Half-year 2012 A resilient business £5bn of orders in six months Increased margins in Professional Services Mitigating the negative trend in construction margins with cost savings EPS further enhanced by asset disposals 2
Slide 4: Duncan Magrath, Chief Financial Officer
DUNCAN MAGRATH Chief Financial Officer
Slide 5: Headline underlying numbers
Headline underlying numbers Good earnings growth HY 2012 HY 2011 Actual growth Constant currency Revenue including JVs & assoc £5,535m £5,222m +6% +5% Profit from operations* £156m £136m +15% +14% Pre-tax profit* £154m £138m +12% Underlying EPS* 18.8p 14.7p +28% Interim dividend 5.6p 5.3p +6% Averag
Slide 6: Professional Services – HY 2012 by geography
Professional Services – HY 2012 by geography Good steady performance UK £1.6bn 12% RoW £0.6bn £100m (up 10% v FY11) RoW £205m (down 10%) £1.2bn (up 9% v HY11) 36% (down 17%) £301m (up 6%) US £0.8bn £0.8bn (up 2% v FY11) (down 2% v HY11) £444m £0.4bn £897m (-) UK £0.2bn (up 1%) US (down 20% v FY11) 5
Slide 7: Professional Services
Professional Services FY 2011 HY 2012 HY 2011 Actual growth Constant currency £1.6bn Order book £1.6bn £1.6bn +1% +1% £1,645m Revenue £845m £840m +1% - £87m Profit* £42m £38m +11% +11% 5.3% Margin % 5.0% 4.5% * before non-underlying items Improved margin v HY 2011 Good performance in the US, par
Slide 8: Construction Services – HY 2012 by geography
Construction Services – HY 2012 by geography Strong US revenue growth £10bn RoW 16% £554m UK £8bn RoW £2.2bn (down 7%) 47% (up 9% v FY11) (up 11% v HY11) £6bn £1,645m US £3.4bn (down 2%) £4bn (down 8% v FY11) £1,305m (down 15% v HY11) (up 31%) £2bn UK £2.7bn (down 3% v FY11) US £0bn (down 14% v HY11
Slide 9: Construction Services
Construction Services FY 2011 HY 2012 HY 2011 Actual growth Constant currency £8.5bn Order book £8.3bn £9.1bn -9% -9% £7,050m Revenue £3,504m £3,270m +7% +7% £169m Profit* £53m £67m -21% -21% 2.4% Margin % 1.5% 2.0% * before non-underlying items Good revenue performance in the US, but as anticipat
Slide 10: Support Services – HY 2012 by geography
Support Services – HY 2012 by geography Revenue growth across three sectors £5bn Building £1.3bn Building Transport (up 6% v FY11) 31% (up 3% v HY11) 30% £4bn £247m £262m Power £1.0bn (up 4%) (up 9%) (down 13% v FY11) £3bn (up 22% v HY11) Water £0.5bn £2bn (down 16% v FY11) £82m (down 28% v HY11) £2
Slide 11: Support Services
Support Services FY 2011 HY 2012 HY 2011 Actual growth Constant currency £5.1bn Order book £5.1bn £4.8bn +5% +5% £1,584m Revenue £828m £757m +9% +9% £67m Profit* £10m £25m -60% -60% 4.2% Margin % 1.2% 3.3% * before non-underlying items Stable order book after strong growth last year Good revenue
Slide 12: Order book position compared to a year ago
Order book position compared to a year ago Resilient order book, despite reduced construction orders £5.1bn £4.7bn Total at HY 2012 £15.0bn £4.5bn £4.5bn £0.7bn £1.1bn Total at HY 2011 £15.5bn £0.7bn £1.3bn £3.5bn £3.4bn £3.6bn £2.6bn £3.4bn £3.1bn £2.2bn £2.3bn £2.3bn £2.8bn £0.8bn £0.7bn £1.6bn £1
Slide 13: Infrastructure Investments
Infrastructure Investments Strong earnings performance HY 2012 HY 2011 FY 11 £m Group JVs & assoc Total Group JVs & assoc Total 38 PPP UK/Singapore 1 19 20 - 19 19 19 PPP US 9 4 13 9 3 12 (4) Infrastructure (2) (1) (3) (2) (1) (3) (30) Bidding costs and overheads (15) - (15) (20) - (20) 23 Pre-dispo
Slide 14: Infrastructure Investments: Directors' valuation at £711m
Infrastructure Investments Achieved financial close on ● Waste facility in Essex ● Western Group military housing for US Air Force Preferred bidder on ● Energy-from-waste facility in Gloucestershire ● Two offshore transmission (<OFTO=) projects (Thanet & Greater Gabbard) ● Two military housing p
Slide 15: Net interest cost
Net interest cost Increased interest cost due to lower cash balances FY 11 £m HY 2012 HY 2011 25 PPP subordinated debt interest receivable 11 12 PPP interest on financial assets 15 3 PPP interest on bank loans and overdrafts (13) 2 - (3) Net finance costs – pension schemes - (1) Other interest recei
Slide 16: Non-underlying items
Non-underlying items £m Restructuring and reorganisation costs relating to existing businesses (14) Post-acquisition integration, reorganisation and other costs (12) Write-down of investment in Exeter Airport (12) Other non-underlying items (38) Amortisation of acquired intangible assets (23) Non-un
Slide 17: Cash from operations – HY 2012
Cash from operations – HY 2012 Cyclical operating working capital outflow £m HY 2012 H2 2011 H1 2011 Group operating profit* 104 150 106 Depreciation 32 34 36 Non-underlying items (26) (8) (11) Profit on disposal of investments in PPP JVs (52) (6) (14) Other items 1 5 2 59 175 119 Pension deficit pa
Slide 18: Balance sheet elements
Balance sheet elements Changing shape, continued strength 682 711 Investments1 Working (1,117) capital (758) 292 Net cash2 1004 (143) 534 Aggregate3 (328) Pension deficit (223) £(1,500)m £(1,000)m £(500)m £0m £500m £1,000m 1 Directors’ valuation of PPP concessions 2 excluding net debt of PPP subsidi
Slide 19: PPP portfolio valuation movements – HY 2012
PPP portfolio valuation movements – HY 2012 Continuing crystallisation of value £m Valuation as at December 2011 743 Cash invested 39 Cash received – distributions (42) – disposals * (84) (126) Net cash received * (87) Unwind of discount on NPV 33 New project wins - Disposal gains + FX 22 Valuation
Slide 20: Working capital – Group
Working capital – Group Cyclical reduction in negative working capital £(400)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 -6% £(600)m -7% -8% £(800)m -9.1% -7.9% -9% £(1,000)m -10% -11% £(1,200)m -12.2% -10.9% -10.8% -12% -11.9% -12.1% -13% £(1,400)m -13.1% -14% -13.5%
Slide 21: Working capital – Construction Services
Working capital – Construction Services Reductions due to cyclicality and mix £(400)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 -7% £(600)m -9% £(800)m -11.9% -11% £(1,000)m -13% £(1,200)m -14.2% -15% -14.7% -15.4% £(1,400)m -17% -16.5% -17.6% £(1,600)m -19% Period en
Slide 22: Working capital – Construction Services UK
Working capital – Construction Services UK Reduced negative working capital from peak - still significant £(300)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 -7% £(400)m -9% £(500)m -11% £(600)m -13% £(700)m -15% -16.5% -15.8% -17% £(800)m -16.8% -19% -18.6% £(900)m -19
Slide 23: Working capital – Construction Services US
Working capital – Construction Services US Less negative and 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 £(50)m -2% £(100)m -4% £(150)m -6% £(200)m -8% -7.3% £(250)m -10% £(300)m -10.1% -12% £(350)m -12.5% -14% -14.1% -14.4% £(400)m -16% -16.0% £(450)m
Slide 24: Net cash balances
Net cash balances† Impacted by working capital movements £600m £572m £500m £518m £500m £440m £394m £400m £333m £436m £434m £340m £292m £300m £342m £200m £296m £223m £256m £224m £100m £34m £104m £0m £35m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Net cash 6-monthly average † exclu
Slide 25: Pensions – balance sheet movement
Pensions – balance sheet movement Continuing reduction in deficits Pension deficits, net of tax Deferred tax assets £586m £166m £441m £120m £25m £275m £9m £223m £420m £75m £49m £31m £6m £60m £321m £200m £163m Dec Dec Dec Service Company Actuarial Actuarial Other Jun 2009 2010 2011 cost contributions
Slide 26: Dividends per share
Dividends per share 6% growth in interim dividend 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 25
Slide 27: Summary of first half 2012
Summary of first half 2012 Order book at £15.0bn Good margin performance in Professional Services Crystallisation of investments value offsetting Construction and Support Services declines Cyclical cash reduction Pre-tax profit up 12% and EPS up 28% Interim dividend up 6% 26
Slide 28: Ian Tyler, Chief Executive Officer
IAN TYLER Chief Executive Officer
Slide 29: Markets
Balfour Beatty
Slide 30: Transportation markets
Transportation markets US Transportation Bill was authorised in July for a period of over two years ● Visibility and security of funding should help some of the larger highways and transit projects Increased focus on fiscal stimulus from the UK and US governments ● Little impact in the short ter
Slide 31: Power markets
Power markets UK power infrastructure ● Need for investment undiminished ● Projects held back by lack of clarity in energy policy Growing range of opportunities ● North America, Australia, the Middle East and Africa ● Both in generation and transmission ● Across the public and private sectors 30
Slide 32: Social infrastructure markets
Social infrastructure markets UK market remains challenging ● Reduction in public sector capital spend ● Lack of private sector investment Patches of recovery in the US, but not a consistent trend 31
Slide 33: Strategy
Strategy Balfour Beatty
Slide 34: Three stages of strategy
Three stages of strategy ● Efficiency Immediate measures ● Crystallisation of value from investment assets Medium-term strategy ● Industry verticals Long-term view ● Growth in global infrastructure demand 33
Slide 35: Immediate measures: Efficiency
Immediate measures Efficiency Phase 1 £30m savings by 2013 Run-rate of £15m achieved by end-2011 On track Phase 2 £50m savings by 2015 Good progress so far in 2012 Rationalisation in UK construction Tactical cost reduction in Support Services Most of the savings to come through in 2013
Slide 36: Immediate measures: Crystallisation of value from investment assets
Immediate measures Crystallisation of value from investment assets FY 2011 HY 2012 Total Number of assets sold 2 2 4 Disposal proceeds (£m) 28 84 112 Gains on disposal (£m) 20 52 72 Directors’ valuation (£m) 743 711 Disposals achieved lower discount rates than in Directors’ valuation Expect to d
Slide 37: Immediate measures: Positioning for cyclical recovery
Immediate measures Positioning for cyclical recovery Leaner, stronger operational model Margins underpinned by cost efficiency programmes in the near-term Strong and efficient balance sheet To seize the opportunities for profitable growth when cyclical recovery starts 36
Slide 38: Medium-term strategy: Industry verticals
Medium-term strategy Industry verticals Single-capability markets Industry verticals Single capability Multi-capability UK, US, Hong Kong Global Developed markets Emerging markets Social Commercial infrastructure buildings Transport Rail Power Mining Water Design Manage Construct Develop
Slide 39: Medium-term strategy: Verticals in order book
Medium-term strategy Verticals in order book Single-capability markets Industry verticals Resources Share in order book Power June 2012 39% 61% Rail 2011 41% 59% Roads and 2009 57% 43% aviation 38
Slide 40: Medium-term strategy: Transportation
Medium-term strategy Transportation One of top three design and RECENT CONTRACT WINS programme management businesses and a leading transportation contractor Extend professional services from Midtown Tunnel, I-275 Widening Waterloo Rapid client-side to delivery in the US Virginia, Project, Florid
Slide 41: Medium-term strategy: Rail
Medium-term strategy Rail Global presence in design, RECENT CONTRACT WINS delivery and maintenance Operations in 23 countries Align capabilities across the world Deliver fundamentally better solutions to customers by combining capabilities Melbourne Rail Link, Danish Rail Signalling, Austral
Slide 42: Medium-term strategy: Power
Medium-term strategy Power Take full advantage of the RECENT CONTRACT WINS upcoming investment in the UK over the next 10 years Leverage global power design and engineering capability in key Saudi Electric geographies around the world Essex Waste Gloucester Company Power Treatment, Waste to Ener
Slide 43: Medium-term strategy: Water and Mining
Medium-term strategy Water and Mining Develop delivery capability in RECENT CONTRACT WINS US water and leverage capabilities nationally Develop mining business in Australia to bring together all our skills in infrastructure delivery and operation, including power and rail Galveston Water Project
Slide 44: Long-term view
43 Long-term view totalpoltties = “Infrastructure matters because itis the “| nfra structure s h ou | d n't magic ingredient in so much of modern life be a pa rtisa n iss U e” ..- itis the invisible thread that ties our prosperity together” President Obama, 30 April 2012 David Cameron, 19 March 2012
Slide 45: Conclusion
Conclusion Solid set of results Financial performance underpinned by cost savings and asset disposals Medium-term strategy to increase exposure to higher growth sectors and geographies ● Drive performance in key industry verticals ● Develop new geographies, deploying collective group capabilit
Slide 46: 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 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 46
Slide 49: Performance by sector
Performance by sector FY 11 £m HY 2012 HY 2011 87 Professional Services 42 38 169 Construction Services 53 67 67 Support Services 10 25 43 Infrastructure Investments 67 22 (35) Corporate costs (16) (16) 331 Profit from operations* 156 136 3 Net finance (cost)/income (2) 2 334 Pre-tax profit* 154 138
Slide 50: Pensions charge
Pensions charge FY 11 £m HY 2012 HY 2011 Defined benefit schemes: 52 P&L charge – service cost 25 27 (2) P&L credit – past service gain (2) - (143) Expected return on assets (68) (72) 146 Interest cost on scheme liabilities 68 73 3 Net finance charge - 1 53 Net pension charge 23 28 Defined contribut
Slide 51: Group balance sheet
Group balance sheet £m June 2012 Dec 2011 June 2011 Goodwill and intangible assets 1,487 1,518 1,523 Current assets# 2,333 2,154 2,180 Current liabilities and provisions# (3,091) (3,239) (3,297) Working capital# (758) (1,085) (1,117) Net cash (excluding PPP subsidiaries) 34 340 292 PPP subsidiaries
Slide 52: Balance sheet cash movement
Balance sheet cash movement £m HY 2012 HY 2011 Opening net cash† 340 518 Cash used in operations (289) (116) Dividends from JVs and associates 32 27 Capital expenditure and financial investment (33) (56) Acquisitions and disposals (net of net cash acquired) (3) (58) Dividends, interest and tax paid
Slide 53: PPP portfolio over time
PPP portfolio over time Cashflow and value Total cashflow in year Portfolio value £200m £1,000m £150m £750m £100m £500m £50m £250m £0m £0m 2020 2030 2040 2050 2060 £(50)m £(250)m 51
Slide 54: Working capital – Professional Services
Working capital – Professional Services Continuing on trend to 5% of revenue £100m 5% £80m 3.2% 0% £60m 1.9% £40m -2.4% -5% -3.9% £20m -10.9% -10% £0m -15% £(20)m -20% £(40)m £(60)m -21.9% -25% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Period end working capital Period en
Slide 55: Working capital – Support Services
Working capital – Support Services Slightly negative - impacted by contract cycles 0 4% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 3% £(20)m 2% 1% £(40)m 0% £(60)m -1% -2% £(80)m -2.5% -2.5% -3% -4% £(100)m -3.8% -3.7% -4.3% -5% -4.8% £(120)m -6% Period end working capital
Slide 56: 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 Available cash Restricted cash Borrowings Net cash † excluding net debt of PPP subsidiaries 54
Slide 57: Available funds
Available funds Strong headroom £1000m £800m £600m £400m £200m £0m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Available cash Available under unused facilities 55