Balfour Beatty Plc · LSE:BBY
Balfour Beatty — FY2023 Earnings Presentation
39 slides from Balfour Beatty's earnings presentation, Mar 13, 2024
Slide 1: 2023 full year results presentation
2023 full year results presentation 13 March 2024 Image: Port Ann to Crossaig, UK
Slide 2: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive Image: HS2 Bromford Tunnel, UK
Slide 3: Strong and well positioned Group
Strong and well positioned Group Delivered 2024 growth Significant expectations in underpinned by shareholder 2023 order book returns Incremental profit Increased profitability Strong balance sheet growth from earnings- in earnings-based and consistent based businesses businesses cash flow Resilienc
Slide 4: Multi-year shareholder returns to continue
Multi-year shareholder returns to continue Shareholder returns Group strengths Share buybacks Strong > Underpinned by Investments portfolio £750m Dividends shareholder balance > £700 million average net cash returns sheet > Strong cash generation 2021-24 £208m £208m £179m Active > £1.2 billion Direc
Slide 5: Growth drivers
Growth drivers Growth markets Growth markets Momentum UK Energy > Investment essential to deliver the UK Government’s net zero targets Transition – Detailed design commenced on nine SSEN ASTI schemes & Security – Started front end engineering and design study for large-scale offshore wind project >
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer Image: Icon Marina Village, US
Slide 7: Headline numbers: Group expectations delivered
Headline numbers: Group expectations delivered £m (unless otherwise stated) 2023 2022 Variance Group revenue 9,595 8,931 7% Profit from earnings-based businesses* 236 232 2% Profit from operations* 228 279 (18)% Profit for the year* 205 290 (29)% Basic earnings per share* 37.3p 47.5p (21)% Dividends
Slide 8: Construction Services: Increased revenue and profit
Construction Services: Increased revenue and profit £m 2023 2022 Revenue PFO* PFO % Revenue PFO* PFO % > 17% growth in UK Construction profit, UK 3,027 69 2.3% 2,763 59 2.1% with continuing upward margin trajectory US 3,697 51 1.4% 3,651 58 1.6% > 12% reduction in US Construction Gammon 1,357 36 2.7
Slide 9: Evolving the US portfolio
Evolving the US portfolio 2020 order book 2023 order book Civils Buildings Buildings > Progress made in de-risking Civils US Construction order book 13% 24% > Increased weighting of 30% orders towards buildings, 42% given lower risk business £5.6bn* £5.6bn 24% model > Reduced reliance on 4% commerci
Slide 10: Significant Construction Services order book
Significant Construction Services order book £13.7 billion Construction Services order book by geography > UK and US order book flat year on 2022* year (in local currency) which is 6.1 6.1 2023 encouraging given interest rate 5.6 5.6 environment > 82% of UK order book cost plus or target cost > UK c
Slide 11: Further strong performance in Support Services
Further strong performance in Support Services £m 2023 2022 Revenue > Profitable recurring revenues Utilities 326 363 underpinned by long term frameworks Transportation 680 626 > 8.0% PFO margin at top of targeted Total 1,006 989 6 - 8% range > £3 million reduction in profit primarily Profit from op
Slide 12: Infrastructure Investments
Infrastructure Investments £m 2023 2022 Pre-disposals operating profit* 5 11 > Pre-tax profit reduced from £81 million Gain on disposals 26 70 to £31 million: Investments profit* 31 81 ̶ Increased military housing costs relating to the independent compliance Subordinated debt interest receivable ^ 2
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £31m £87m £(48)m £(61)m £(1)m £(43)m £(44)m £1,291m £1,212m 2022 Equity Distributions Sales Unwind of Operational Foreign Changes to 2023 invested received proceeds discount performance exchange discount rates £1.2 billion Directors’ valuation 12
Slide 14: Cash flow
Cash flow £59m £30m £63m £258m £(28)m £(63)m £(66)m £(209)m £(17)m £815m £842m Net cash Operating Working Dividends Net Pension Lease Capital Shareholder Other Net cash 2022 cash flows capital from disposal deficit payments expenditure returns+ 2023 cash flows JVAs~ proceeds^ payments* ~ excludes £1
Slide 15: Multi-year capital allocation framework
Multi-year capital allocation framework Continued Active realisation of Strong but efficient Sustainable ordinary Additional cash investment in the Investments balance sheet dividend (target 40% returns via share organic growth portfolio payout ratio^) buybacks opportunities Investment Further Incre
Slide 16: Guidance
Guidance > Continued profit growth from earnings-based businesses in 2024 > Profit on Investments disposals expected in the range of £20 - 30 million > Net finance income of around £30 million > P&L tax charge forecast close to statutory rates (UK: 25%, US: 26%) > Average net cash in line with 2023
Slide 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive Image: Inveraray to Crossaig, UK
Slide 18: Projected UK infrastructure investment pipeline
Projected UK infrastructure investment pipeline Infrastructure Project Authority (IPA) planned and projected investment in the pipeline by sector 2023/24 to 2032/33 Energy Electricity / gas transmission Transport Total 10 year Energy pipeline Social infrastructure 41% 51% of IPA £775bn pipeline Wate
Slide 19: Growth market: UK Energy Transition & Security
Growth market: UK Energy Transition & Security Balfour Beatty End to end capabilities Transmission incl. substations: c.£50bn* > Commenced detailed design Commercial estimated phase for 9 SSEN ASTI schemes & technical total market > Present on multiple frameworks, Design & opportunity with further b
Slide 20: Market leading power transmission capability
Market leading power transmission capability Power transmission and distribution: Full engineering, procurement and construction offering Overhead lines Substations & Underground 132kV, 275kV and converter cabling 400kV stations Breadth of Group capabilities supports delivery Design and planning Gro
Slide 21: Case study: Strengthening the Scottish grid on behalf of SSEN
Case study: Strengthening the Scottish grid on behalf of SSEN Key: ASTI onshore > UK power transmission infrastructure Balfour Beatty OHL and Spittal demand outweighing supply underground transmission Other OHL and underground > Unmatched capability aligned to client and transmission market demand B
Slide 22: Growth market: UK Transport
Growth market: UK Transport Government committed to £43 billion CP7 rail programme > UK’s largest rail track renewals contractor Rail > Pursuing major electrification schemes including: (excl. HS2) ‒ Midlands Mainline Central Rail Systems Alliance ‒ Transpennine Route Upgrade Further funding expecte
Slide 23: Growth market: US Buildings
Growth market: US Buildings Existing footprint: Positive market outlook Organic growth strategy delivering success Construction spending in chosen states and markets Geographic expansion: further forecast to outpace the national presence in established states outlook > Offices opened and work won in
Slide 24: Infrastructure Investments: A source of value
Infrastructure Investments: A source of value Further investment for future returns Investment options being developed > Investment in 2024 forecast to increase to £50 million: > US military housing: Potential ground lease extensions – US P3: LAX equity investment > US P3: Positive outlook with grow
Slide 25: Building New Futures: Sustainability strategy
Building New Futures: Sustainability strategy Environment Materials Communities 2% reduction 40% reduction 15% increase in CO2 emissions* in UK waste intensity* in UK social value * absolute market based emissions * tonnage of waste per £ million of revenue * FY23 performance compared to FY22 Submit
Slide 26: Digital & AI: Driving safety, productivity & assurance
Digital & AI: Driving safety, productivity & assurance Embedded Embedding Innovating 15,000 supply chain partner In-house employees now using our apps AI assistant trial: AI tool development: StoaOne AI assistant mining Using AI to mine billions 8,000+ documents to get the of data points from right
Slide 27: Outlook
Outlook 2024 growth Growth Delivering for underpinned by accelerating in shareholders order book 2025 Increased profitability Attractive Consistent delivery in earnings-based opportunities in from multi-year businesses growth markets framework Strong order book Energy opportunities c.£750 million co
Slide 28: Q&A
Q&A Image: HS2 Curzon Street, UK
Slide 29: Appendix
Appendix Image: Modular Integrated Student Hostel, Hong Kong
Slide 30: Disclaimer & important information
Disclaimer & important information This presentation, including information incorporated by reference in it, contains statements that are or may be forward-looking statements which are prospective in nature with respect to Balfour Beatty’s business, financial condition and operations. These forward-
Slide 31: Order book by phase
Order book by phase Total FY 2023 £16.5bn £7.3bn £7.2bn Total FY 2022 £17.4bn £5.4bn £4.9bn £5.2bn £3.9bn FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 0-12 months 13-24 months 25+ months UK Construction US Construction Gammon Support Services US Construction Gammon 30
Slide 32: Underlying profit from operations
Underlying profit from operations £m 2023* 2022* UK Construction 69 59 US Construction 51 58 Gammon 36 32 Construction Services 156 149 Support Services 80 83 Earnings-based businesses 236 232 Infrastructure Investments Pre-disposals operating profit 5 11 Gain on disposals 26 70 Corporate activities
Slide 33: Group balance sheet
Group balance sheet £m 2023 2022 Goodwill and intangible assets 1,133 1,168 Current working capital (1,232) (1,167) Net cash (excluding infrastructure concessions) 842 815 Investments in joint ventures and associates 389 426 PPP financial assets 24 26 Infrastructure concessions – non-recourse net de
Slide 34: Cash flow
Cash flow £m 2023 2022 £m 2023 2022 Operating cash flows before working capital 258 282 Working capital flows^ movements and pension deficit payments Inventories (11) (6) Working capital inflow/(outflow) 63 (54) Net contract assets (48) (137) Pension deficit payments≠ (28) (43) Trade and other recei
Slide 35: Working capital: Group
Working capital: Group £0m 0 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 £(200)m (4)% £(400)m £(600)m (10.3)% (9.9)% (8)% (12.9)% (12.1)% £(800)m (12)% £(1,000)m (15.6)% (15.3)% (15.4)% (16)% £(1,200)m £(1,400)m (20)% Year end working capital Year end working capital as % revenue from continuin
Slide 36: Pensions: balance sheet movement
Pensions: balance sheet movement Employer Net contributions actuarial losses & other 35
Slide 37: Net finance income
Net finance income £m 2023 2022 Subordinated debt interest receivable 34 Interest on PPP financial assets 2 Interest on non-recourse borrowings (11) Fair value (loss)/gain on investment asset (1) 24 26 Net finance income – pension schemes 12 5 Other interest receivable 33 Other interest payable (10)
Slide 38: Borrowing repayment profile
Borrowing repayment profile £80m £40m 63 39 33 27 £0m 2025 2027 2029 2032 US Private Placement notes 37
Slide 39: Balfour Beatty
Balfour Beatty