Slide 1: 2019 half year results presentation
2019 half year results presentation 14 August 2019
Slide 2: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 3: Build to Last highlights
Build to Last highlights Operational excellence Financial strength PFO from earnings-based Average net cash at £290m; businesses up 29% Investments portfolio at £1.2bn Managed growth Long term value creation Order book up 5% at £13.2bn Interim dividend increased 31%; substantially de-risked portfoli
Slide 4: Delivering Build to Last
Delivering Build to Last 200 2019 Lean 2018 Expert 70 0 65 Cumulative annual (200) c.£400m improvement Employee cash flow^ 2014* engagement index 60 (£m) (400) (%) (600) 55 (800) 50 Dec Mar Jun Sept Dec 2015 2016 2017 2018 HY19 ^ includes other disposals * adjusting for sale of Parsons Brinckerhoff.
Slide 5: Wider benefits of Build to Last
Wider benefits of Build to Last Average net cash/(debt) Earnings-based businesses profit/(loss) from operations* £m £m (16) 45 290 (180) 40 63 HY 2015 HY 2017 HY 2019 HY 2015 HY 2017 HY 2019 Other net operating expenses* UK voluntary attrition: moving annual average £m % 212 158 137 15% 13% 11% HY 2
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 7: Headline numbers
Headline numbers £m (unless otherwise stated) HY 2019 HY 2018 Change Revenue* 3,881 3,836 1% Profit from operations* 72 66 9% Pre-tax profit* 64 56 14% Profit for the period* 54 52 4% Basic earnings per share* 7.6p 7.5p 1% Dividend per share 2.1p 1.6p 31% HY 2019 FY 2018 Change Order book* £13.2bn £
Slide 8: Underlying profit from operations
Underlying profit from operations £m HY 2019* HY 2018* Change UK Construction 17 5 240% US Construction 19 17 12% Gammon 9 10 (10)% Construction Services 45 32 41% Support Services 18 17 6% Earnings-based businesses 63 49 29% Pre-disposals operating profit 9 11 (18)% Profit on disposals 16 22 (27)%
Slide 9: Order book
Order book ● 5% increase driven by US Construction bookings Support Services ● UK Construction stable; UK Construction Support Services 3.0 increased 7% 3.0 2.8 3.0 ● Maintained Group’s disciplined bidding strategy ● £1.7bn (Balfour Beatty Gammon 13.2 12.6 share) HS2 Lots N1 & N2 1.6 1.6 and Old Oak
Slide 10: Construction Services
Construction Services HY 2019* HY 2018* £m Revenue PFO PFO% Revenue PFO PFO% UK 1,014 17 1.7% 947 5 0.5% US 1,727 19 1.1% 1,577 17 1.1% Gammon 380 9 2.4% 451 10 2.2% Total 3,121 45 2,975 32 * before non-underlying items ● UK: 7% increase in revenue, first under Build to Last. Expect full year PFO to
Slide 11: Support Services
Support Services ● Power: Hinkley and other contract successes £m HY 2019 HY 2018 with National Grid Revenue ● Gas and Water: selective focus on AMP7 Utilities 276 308 (2020–2025) contracts Transportation 227 235 ● Highways: 30 year M25 Total 503 543 Connect Plus contract; good local authorities opp
Slide 12: Infrastructure Investments
Infrastructure Investments ● Four first half disposals generated £16m profit £m HY 2019 HY 2018 ● All disposals at, or above, Pre-disposals operating profit* 9 11 Directors’ valuation Profit on disposals* 16 22 ● Group will continue to Investments profit* 25 33 dispose of assets in H2 2019 in line w
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £11m £45m £15m 167p/share 169p/share £(32)m £(26)m £1,151m £1,164m FY 2018 Equity Distributions Sales Unwind of Other* HY 2019 invested received proceeds discount * other includes movements in operational performance £12m, foreign exchange £2m and £1m ne
Slide 14: Realising value from the Investments portfolio
Realising value from the Investments portfolio 6 5 End to end multiple 4 3 2 1 0 2015 2016 2017 2018 2019 £30m+ Above At Sale proceeds: £11-30m Directors’ Directors’ valuation valuation £0-10m Track record of disposals demonstrate portfolio valuation 13
Slide 15: Cash flow waterfall
Cash flow waterfall Average net cash: half year at £290m; full year guidance increased to £280m - £300m £94m £11m £30m £15m £(16)m £(24)m £(13)m £(9)m £425m £337m FY 2018 Operating Working Pension IFRS 16 Dividends Capital Net Other HY 2019 cash flows capital deficit lease from JVAs^ expenditure Inv
Slide 16: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 17: Platform for profitable managed growth
Platform for profitable managed growth Creating long term value 16
Slide 18: Geographically and operationally diversified Group
Geographically and operationally diversified Group £13.2bn Order book at HY 2019 £1.2bn* Investments portfolio at HY 2019 * Directors’ valuation Over half of business outside the UK 17
Slide 19: US operations
US operations: Construction c.£3.5bn^; Investments £653m~ Strong infrastructure pipeline 28 by 2023 2028 Hi-tech offices (LA) Corporate head offices; campus redevelopment; The Wharf Dumbarton and data centres Selected for phase 2; office Rail Bridge buildings and public spaces US183 North 2022 West
Slide 20: US Military Housing
US Military Housing ▪ 55 military bases with 43,000 residential units; 50 year concessions ▪ 1,200 employees committed to providing the highest standards of service ▪ Reported allegations on 2 Air Force bases – Tinker: allegations from 2 former employees – Mountain Home: processing of 1 work order ▪
Slide 21: UK operations
UK operations: Construction c.£2bn^; Support Services c.£1bn^; Investments £511m~ Strong infrastructure pipeline 2023 Lower Thames Heathrow MECD Scape Civil Engineering Frameworks Crossing M25 Facility for the University of Manchester to create 4 year Framework valued at £500 million across Scotland
Slide 22: Hong Kong operations
Hong Kong operations: Gammon revenue c.£1bn^; 50:50 joint venture with Jardine Matheson Strong market pipeline 2023 Lok Ma MTR Chau Innovation East Park Kowloon Tuen Mun-Chek Lap Kok – Central Kowloon Route Line Tung Tunnel Kai Tak West Chung Sub-sea tunnel fit out and ancillary works Carriageway in
Slide 23: Profitable managed growth and cash generation
Profitable managed growth and cash generation Strong infrastructure markets Increasing order book and revenue Embedded culture of active risk management Improving margins Investment made to create platform for scalable growth Improving productivity and lower cost base Strong balance sheet Well posit
Slide 24: Appendix
Appendix Balfour Beatty
Slide 25: Forward-looking statements
Forward-looking statements This presentation may include certain forward-looking statements, beliefs or opinions, including statements with respect to Balfour Beatty’s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-lo
Slide 26: The Telegraph: Addressing the skills gap
Addressing the skills gap The Telegraph We must make Britain fit for future generations Leo Quinn, Balfour Beatty Group Chief Executive and Founder of The 5% Club 13 June 2019 Who is thinking about how to make Britain fit for future generations? A place to live, work and compete globally? Whatever o
Slide 27: Order book position compared with half year 2018
Order book position compared with half year 2018 Total at HY 2019 £13.2bn Total at HY 2018 £12.6bn £4.3bn £4.2bn £3.5bn £3.4bn £3.2bn £2.5bn £2.3bn £2.4bn HY 2018 HY 2019 HY 2018 HY 2019 HY 2018 HY 2019 HY 2018 HY 2019 0-6 months 6-18 months 18-30 months 30 months+ Construction Services - UK Constru
Slide 28: Pensions – balance sheet movement
Pensions – balance sheet movement £16m £32m £54m £22m £(48)m £(128)m £(146)m £(231)m 2014 2015 2016 2017 2018 Employer Net actuarial HY 2019 contributions losses* 0.65% 0.7% (0.7)% (0.6)% (0.4)% Real discount rate (1.0)% * including £1m of other movements 27
Slide 29: Working capital – Group
Working capital – Group £0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 £(200) (4)% £(400) £(600) (8)% £(800) (10.3)% (10.7)% (12)% (9.9)% £(1,000) (12.8)% (13.2)% (12.9)% (13.1)% (12.8)% (13.9)% (13.6)% £(1,200) (16)% Period end working capital Period end working capital
Slide 30: Working capital – Construction Services
Working capital – Construction Services £0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 £(200) (4)% £(400) (8)% £(600) (12)% £(800) (11.1)% (11.8)% (12.2)% (14.4)% (14.2)% (14.2)% (16)% £(1,000) (14.7)% (16.8)% (16.6)% £(1,200) (18.2)% (20)% Period end working capital Peri
Slide 31: Group balance sheet
Group balance sheet £m HY 2019 FY 2018 HY 2018 Goodwill and intangible assets 1,178 1,161 1,191 Working capital (728) (680) (877) Net cash (excluding infrastructure concessions) 425 337 366 Investments in joint ventures and associates 519 524 522 PPP financial assets 156 156 159 Infrastructure conce
Slide 32: Cash flow
Cash flow £m HY 2019 HY 2018 £m HY 2019 HY 2018 Operating cash flows 94 44 Working capital Working capital inflow/(outflow) 11 (66) Inventories (10) - Pension deficit payments° (16) (14) Net contract assets (36) - Cash from/(used in) operations 89 (36) Trade and other payables 98 52 IFRS 16 lease pa
Slide 33: IFRS 16 Leases
IFRS 16 Leases Background HY 2019 On 1 January 2019 the Group transitioned from IAS 17 Leases to Income statement IFRS 16 Leases ̶ Profit from operations +£3m The new standard replaces IAS 17 Leases and eliminates the ̶ Finance costs +£3m classification of leases as either operating leases or financ
Slide 34: Net interest cost
Net interest cost £m HY 2019 HY 2018 Subordinated debt interest receivable 13 Interest on PPP financial assets 4 Interest on non-recourse borrowings (7) 10 10 Net finance income – pension schemes 1 1 Other interest receivable 1 Other interest payable (3) (2) (4) US private placement (6) (6) Converti
Slide 35: Non-underlying items
Non-underlying items £m HY 2019 HY 2018 Trading Rail Germany - 1 Impairment and amortisation Amortisation of acquired intangibles (3) (4) Restructuring and reorganisation Build to Last transformation costs - (5) Disposals and other Provision release relating to settlements of health and safety claim
Slide 36: Borrowing repayment profile
Borrowing repayment profile £200m £150m £100m 112 164 £50m 36 39 £0m £(50)m (21) £(100)m (231) £(150)m £(200)m £(250)m (33) £(300)m 2017 2018 2019 2020 2023 2025 Convertible bonds repaid US PP notes repaid US PP notes Preference shares The Group has committed revolving credit facilities of £400m ext
Slide 37: Improved returns from de-risked business
Improved returns from de-risked business GEOGRAPHIC COMMERCIAL OPERATIONAL FINANCIAL Simplified and refocused Selective bidding for Upgraded leadership and Strong balance sheet; on growing markets in contracts best aligned governance running business with UK, US and with Group’s average net cash Hon
Slide 38: Financial history
Financial history 450% £12bn Build to Last £400m Increase in £10bn revenue £300m £8bn 45 £6bn £200m Acquisitions £4bn £100m £2bn £94m £0bn £0m Average ordinary dividend -£2bn (2011-2014) £(100)m -£4bn £16m -£6bn 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 £(200)m Average ordinary dividend (201