Slide 1: 2011 full-year results presentation
2011 full-year results presentation 8 March 2012
Slide 2: Ian Tyler, Chief Executive
IAN TYLER Chief Executive Balfour Beatty
Slide 3: A strong performance
A strong performance Demonstrating diversity, flexibility and resilience Growth in revenue and earnings in all divisions except for Construction Services Underpinning profits in the near term by expanding cost efficiency and asset disposal programmes Opportunities for our business in industr
Slide 4: Duncan Magrath, Chief Financial Officer
DUNCAN MAGRATH Chief Financial Officer
Slide 5: Agenda
Agenda Financial highlights Segmental performance Balance sheet and cash 5
Slide 6: Headline underlying numbers
Headline underlying numbers Strong performance FY 2011 FY 2010# Actual growth Constant currency Revenue* £11,035m £10,473m +5% +6% Profit from operations* £331m £325m +2% +2% Pre-tax profit* £334m £306m +9% Underlying EPS* 35.5p 32.7p +9% Full-year proposed dividend 13.8p 12.7p +9% Cash generated fr
Slide 7: Order book position
Order book position Resilient order book, despite reduced construction orders £7.5bn £7.2bn Total at FY 2011 £15.2bn £1.2bn £1.3bn Total at FY 2010 £15.2bn £4.3bn £4.5bn £5.3bn £3.7bn £5.1bn £3.2bn £2.8bn £0.9bn £2.4bn £1.0bn £2.5bn £1.9bn £1.6bn £1.3bn £0.9bn £0.9bn £0.3bn £0.3bn £0.3bn £0.4bn 0-12
Slide 8: Professional Services – FY 2011 by geography
Professional Services – FY 2011 by geography Modest growth in order book and revenue £1.6bn UK RoW £0.6bn £205m 12% (down 1% v HY11) RoW (down 17%) £1.2bn (up 29% v FY10) 33% £543m (up 14%) £0.8bn US £0.8bn (down 4% v HY11) (down 8% v FY10) £897m £897m £0.4bn (up 1%) (up 1%) US UK £0.2bn (up 16% v H
Slide 9: Professional Services
Professional Services FY 2011 FY 2010 Actual growth Constant currency Order book £1.6bn £1.5bn +7% +6% Revenue £1,645m £1,613m +2% +2% Profit* £87m £85m +2% +1% Margin % 5.3% 5.3% * before non-underlying items 5.3% margin up on 2010’s underlying 4.8% excluding 2010’s £8m additional incentive incom
Slide 10: Construction Services – FY 2011 by geography
Construction Services – FY 2011 by geography Resilient global order book despite UK decline £10bn RoW 18% UK £8bn RoW £2.0bn £1,282m 48% (up 3% v HY11) (up 8%) (down 9% v FY10) £6bn £3,392m US £3.7bn (down 1%) £4bn (down 8% v HY11) £2,376m (up 12% v FY10) (up 12%) £2bn UK £2.8bn (down 12% v HY11) US
Slide 11: Construction Services
Construction Services FY 2011 FY 2010 Actual growth Constant currency Order book £8.5bn £9.2bn -8% -8% Revenue £7,050m £6,734m +5% +6% Profit* £169m £201m -16% -15% Margin % 2.4% 3.0% * before non-underlying items Good revenue performance in the US, but as anticipated, margin down on a very strong
Slide 12: Support Services – FY 2011 by geography
Support Services – FY 2011 by geography Strong orders and revenue growth £5bn Building £1.3bn Building Transport (down 2% v HY11) 33% £4bn (up 20% v FY10) 30% £477m £513m Power £1.1bn (up 2%) £3bn (up 10%) (up 40% v HY11) (up 41% v FY10) £2bn Water £0.5bn (down 15% v HY11) (down 22% v FY10) £414m £1
Slide 13: Support Services
Support Services FY 2011 FY 2010 Actual growth Constant currency Order book £5.1bn £4.5bn +13% +13% Revenue £1,584m £1,443m +10% +10% Profit* £67m £62m +8% +8% Margin % 4.2% 4.3% * before non-underlying items Good growth in order book, particularly power and local authority Revenue growth in all
Slide 14: Infrastructure Investments
Infrastructure Investments Strong earnings performance FY 2011 FY 2010# £m Group JVs & assoc Total Group JVs & assoc Total PPP UK/Singapore 1 37 38 1 30 31 PPP US 12 7 19 14 6 20 Infrastructure (3) (1) (4) (4) (1) (5) Bidding costs and overheads (30) - (30) (34) - (34) Pre-disposals operating profit
Slide 15: Infrastructure Investments
Infrastructure Investments Achieved financial close on ● Hertfordshire BSF ● North West Fire & Rescue ● Cambridgeshire and Northamptonshire streetlighting Appointed preferred bidder on ● Greater Gabbard Offshore high-voltage transmission (“OFTO”) ● Energy-from-waste facility in Gloucestershire a
Slide 16: Net interest income
Net interest income Benefiting from PPP investment and reduced pension costs £m FY 2011 FY 2010 PPP subordinated debt interest receivable 25 19 PPP interest on financial assets 25 PPP interest on bank loans and overdrafts (22) 3 (1) Net finance costs – pension schemes (3) (21) Other interest receiva
Slide 17: Cost efficiency update
Cost efficiency update Good progress on 2010 initiatives UK shared service centre launched in Newcastle in October 2010 to cover accounting, payroll and procurement Processed first transactions Q1 2011 Now employing 230 people Processing 50% of UK transactions or £3bn of revenue 17,500 pay
Slide 18: Balance sheet elements
Balance sheet elements Changing shape, continued strength 671 Investments1 Working 743 72 capital (1,248) 163 (1,085) 518 Net cash 2 Pension 340 178 deficit (441) (275) Net 166 assets 1,160 1,263 103 -£1500m -£1000m -£500m £0m £500m £1000m £1500m 2010 2011 1 Directors’ valuation of PPP concessions 2
Slide 19: PPP portfolio valuation movements – FY 2011
PPP portfolio valuation movements – FY 2011 Net cash realisation, and increased value £m Valuation as at December 2010 restated 671 Cash invested 52 Cash received – distributions (70) – disposals (28) (98) Net cash received (46) Unwind of discount on NPV 69 New project wins 32 Operational and dispos
Slide 20: Working capital – key points
Working capital – key points Management controls remain strong Varies through the business cycle Impacted by mix of geographies, sectors and project size Given the scale of business, cash movements can be significant Working capital remains within normal cyclical bounds 20
Slide 21: Working capital – Group
Working capital – Group Negative working capital, but cyclical reductions £(800)m -5% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 -6% £(900)m -7% £(1,000)m -8% £(1,100)m -9% -10.1% £(1,200)m -10% -10.8% -11% £(1,300)m -12.2% -12.1% -10.9% -12% £(1,400)m -11.9% -13% £(1,500)m -13.1
Slide 22: Working capital – Professional Services
Working capital – Professional Services Reverting to a normal 5% of revenue £40m 5% 1.9% £30m 0% £20m -2.4% £10m -3.9% -5% £0m -10% £(10)m -10.9% £(20)m -15% £(30)m -20% £(40)m -21.9% £(50)m -25% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Period end working capital Period end wor
Slide 23: Working capital – Support Services
Working capital – Support Services Impacted by contract cycles – particularly in HY 2011 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 £0m £(10)m 4% £(20)m 2% £(30)m £(40)m 0% £(50)m £(60)m -2% £(70)m -2.5% £(80)m -4% -3.8% -3.7% £(90)m -4.3% £(100)m -4.8% -6% Period end working cap
Slide 24: Working capital – Construction Services
Working capital – Construction Services Reductions due to cyclicality and mix Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 £(700)m -8% -9% £(800)m -10% -11% £(900)m -12% £(1,000)m -13% -14% £(1,100)m -14.2% -15% -14.7% £(1,200)m -15.4% -16% -16.5% -17.6% -17% £(1,300)m -18% Period
Slide 25: 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 £104m £0m Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Net cash 6-monthly average † excluding net debt of
Slide 26: Cash from operations – FY 2011
Cash from operations – FY 2011 Positive cash from operations £m FY 2011 FY 2010 Group operating profit* 256 253 Depreciation 70 74 Non-underlying cash items (19) (43) Other items (13) (2) 294 282 Pension deficit payments – ongoing (58) (41) Working capital increase (201) (32) 35 209 Pension deficit
Slide 27: Pensions – balance sheet movement
Pensions – balance sheet movement Continuing reduction in deficits Pension deficits, net of tax Deferred tax assets £586m £166m £441m £52m £152m £120m £275m £131m £71m £420m £6m £75m £321m £200m Dec Dec Service Company Actuarial Actuarial Other Dec 2009 2010 cost contributions gain loss movements 20
Slide 28: Dividends per share
Dividends per share Twelve years of growth 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 28
Slide 29: Summary of 2011
Summary of 2011 Order book stable at £15.2bn Good margin performance in Professional Services Profit growth in Professional Services, Support Services and Infrastructure Investments offset Construction Services decline Pre-tax profit and EPS up 9% Final dividend up 11%, total dividend up 9
Slide 30: Ian Tyler, Chief Executive
IAN TYLER Chief Executive Balfour Beatty
Slide 31: Introduction
Introduction Balfour Beatty
Slide 32: A year of strong performance
A year of strong performance +5% +9% +9% +9% Revenue1 Pre-tax profit2 EPS2 DPS 1 including joint ventures and associates, 2 from continuing operations, before non-underlying items 32
Slide 33: A year of progress towards the delivery of strategy
A year of progress towards the delivery of strategy Progress as planned in Parsons Brinckerhoff’s performance Professional Services operating margin up at 5.3% Completion of construction footprint in the US Howard S. Wright PPP asset disposal programme £20m gain Delivery of the first p
Slide 34: Agenda
Agenda Near-term challenges and actions Development of strategy Conclusion 34
Slide 35: Near-term challenges and actions
Near-term challenges and actions
Slide 36: Increasing operational performance
Increasing operational performance Current cost efficiency programme is delivering Expecting to be able to go further Moving the programme deeper into our operations Targeting a further £50m pa ● Modest savings in 2012 ● Major portion to come through in 2013 ● One-off cost expected to be in
Slide 37: Accelerating the PPP asset disposal programme
Accelerating the PPP asset disposal programme Programme successful in 2011 Good level of activity in the secondary market Targeting £40m of gains in 2012 Cash proceeds will support future investments in PPP Gains on disposals will contribute to profit and dividends 37
Slide 38: Near-term challenges: Conclusion
Near-term challenges Conclusion Headwinds in 2012 ● Construction margins contracting Long-term programmes ● Drive operational efficiency ● Recycle capital in investments business These two programmes will ensure we make progress in 2012 38
Slide 39: Development of strategy
Development of strategy
Slide 40: Developing our business model to deliver strategy
Developing our business model to deliver strategy Continuing to develop our business model Parsons Brinckerhoff acquisition Rationale ● Make us one of the world’s major infrastructure players in professional services ● Give us a leading position in US civil infrastructure ● Enhance our global po
Slide 41: Meeting customer demand in single-capability markets
Meeting customer demand in single-capability markets World-class businesses ● Market leadership positions ● Strong cash profile ● Cyclical characteristics ● Lower margin – lower risk ● Very attractive returns on the resources committed Need to invest in capabilities, take advantage of niche oppo
Slide 42: Seizing opportunity in industry verticals
Seizing opportunity in industry verticals Key industry verticals ● Power, rail, mining, water and transport ● Putting teams together from the breadth of the Group ● Providing solutions to infrastructure challenges ● Complex and valuable projects ● Growth potential with access to new territories 42
Slide 43: Directing resources to where we see value
Directing resources to where we see value 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 Devel
Slide 44: Growing prospects in industry verticals
Growing prospects in industry verticals Single-capability markets Industry verticals Share in order book 2011 41% 59% 2009 57% 43% 44
Slide 45: Rail: Demand for rail systems is growing
Rail Demand for rail systems is growing Rapid urbanisation leading to demand for urban transit systems Supports industrial growth e.g. mining Socially and environmentally desirable in developed markets Global rail infrastructure spend1 is forecast to grow, reaching £100bn by 2015 1 Associati
Slide 46: Rail: Opportunity in multi-disciplinary projects
Rail Opportunity in multi-disciplinary projects From design and track to Global rail infrastructure spend (£bn 2015) electrification and rolling 100% stock integration International rail projects won recently ● Melbourne ● Denmark ● Qatar Rail 0% Western Asia NAFTA CIS Eastern Rest of Middle Tot
Slide 47: Power: Considerable strength across the lifecycle
Power Considerable strength across the lifecycle Consumer (Commercial/ Fuel / Mining Generation Transmission Substation Distribution Residential) Infrastructure Investments Professional Services Construction Services Support Services 47
Slide 48: Power: Demand is increasing
Power Demand is increasing Growing demand in Global power generation 2011-2035 (GW) developing markets Oil Replacement of ageing Coal assets in developed markets Gas Environmental pressures Nuclear driving renewables Hydro 2011 existing capacity US$9trn is forecast to be Renewables: Wind For
Slide 49: Power: Transmission and distribution vital
Power Transmission and distribution vital Leader in the UK International transmission activity ● In the US with National Grid ● In Australia through joint venture with UGL ● Developing relationships in Canada 49
Slide 50: Mining: Integrated demand for mining infrastructure
Mining Integrated demand for mining infrastructure Mine structure Mine Process Infrastructure • Underground operations Upstream Downstream • Buildings • Shafts • Crushing • Smelting • Transportation networks • Extraction • Screening (e.g. rail, ports) • Utilities (e.g. generation, networks) 50
Slide 51: Mining: Expanding the addressable market
Mining Expanding the addressable market Mining construction market large and growing fast Mostly procured via EPCMs Parsons Brinckerhoff expected to be springboard Potential addressable mining market (US$bn) 14.2 14.2 12.7 Professional Services 8.4 8.4 Power and rail construction 3.4 1.1 Curre
Slide 52: Industry verticals: Conclusion
Industry verticals Conclusion We are a natural player in industry verticals such as: ● Rail ● Power ● Mining ● Transport (e.g. highways, airports) ● Water Creating value from our depth of asset knowledge Realising the promise of our professional services acquisition Expecting to devote more
Slide 53: Growth in resource-rich economies
Growth in resource-rich economies Australia ● Steady economy weighted towards infrastructure ● Sophisticated procurement model ● Substantial presence to develop Canada ● Acquired Halsall in 2010 ● Developing a transportation and power business 53
Slide 54: Growth in emerging markets
Growth in emerging markets Favourable growth dynamics Focusing on those with sufficient scale, good competitive environment and appropriate ethical standards Expected to grow hand in hand with our verticals strategy Challenges are not to be underestimated Prospects are very attractive 54
Slide 55: Emerging markets progress to date
Emerging markets progress to date India ● Office to complement Parsons Brinckerhoff’s presence ● Memorandum of Understanding with Tata Projects Brazil ● Opened office in 2011 Southern Africa ● Building out from the bridgehead we have with PB Middle East ● Two significant successes in Qatar 5
Slide 56: Conclusion
Conclusion Balfour Beatty
Slide 57: Conclusion
Conclusion Challenges in UK and US construction markets will remain Financial performance underpinned by cost reduction and asset disposal programmes ● Expected to offset short-term headwinds and provide momentum Focus on industry verticals which are less cyclical Exposure to higher-growth g
Slide 58: Long-term strategy
Long-term strategy Drive performance in key industry verticals Develop new geographies, deploying collective group capabilities Operate efficiently and benefit from cyclical recovery Development of infrastructure is becoming an increasing central theme of economic policy We are well placed
Slide 59: 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 60: Appendix
APPENDIX Balfour Beatty
Slide 61: Performance by sector
Performance by sector £m FY 2011 FY 2010# Professional Services 87 85 Construction Services 169 201 Support Services 67 62 Infrastructure Investments 43 12 Corporate costs (35) (35) Profit from operations* 331 325 Net interest income/(cost) 3 (19) Pre-tax profit* 334 306 * from continuing operations
Slide 62: Non-underlying items
Non-underlying items £m Loss before tax Tax Net loss UK shared service centre (12) 3 (9) Loss on disposal of UK rail manufacturing* (7) - (7) Acquisition, post-acquisition integration, reorganisation and other costs (7) 1 (6) (26) 4 (22) Amortisation of acquired intangible assets (62) 23 (39) (88) 2
Slide 63: PPP portfolio valuation roll-forward – FY 2011
PPP portfolio valuation roll-forward – FY 2011 £174m £32m £16m £742m £1m £743m £52m £69m £694m £671m £28m £173m £174m £146m £70m £147m 671 694 694 £569m £569m 653 653 £525m £547m Dec Equity Distributions Unwind Disposal Rebased New Operational Dec FX Dec 2010 invested of proceeds project & disposal
Slide 64: Group balance sheet
Group balance sheet £m Dec 2011 Dec 2010 Goodwill and intangible assets 1,518 1,447 Current assets# 2,154 1,877 Current liabilities and provisions# (3,239) (3,125) Working capital# (1,085) (1,248) Net cash (excluding PPP subsidiaries) 340 518 PPP subsidiaries – financial assets 457 327 PPP subsidiar
Slide 65: Balance sheet cash movement
Balance sheet cash movement £m FY 2011 FY 2010 Opening net cash† 518 572 Cash generated from operations 35 164 Dividends from JVs and associates (inc. Barking) 59 62 Capital expenditure and financial investment (92) (163) Acquisitions and disposals (net of net cash acquired) (63) (20) Dividends, int
Slide 66: Acquisitions and disposals
Acquisitions and disposals £m Acquisitions: Romec Services 30 March 29 Power Efficiency* 7 April 15 Fru-Con Construction* 15 June 14 Howard S. Wright* 30 June 33 Office Projects* 22 August 6 Deferred consideration 3 100 Disposals: UK rail manufacturing 3 May (37) * net of cash acquired 63 66
Slide 67: Order book
Order book £16bn June Dec £14bn £12bn £10bn £8bn £6bn £4bn £2bn £0bn 2005 2006 2007 2008 2009 2010 2011 67