Slide 1: 2015 full-year results presentation
2015 full-year results presentation 15th March 2016
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: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 4: Agenda
Agenda Summary and Financial Build to Last operational report update overview Leo Quinn Phil Harrison Leo Quinn 3
Slide 5: Strong progress on transformation
Strong progress on transformation Phase One: 12 months into 24-month self-help Stabilising order book; one of sector9s strongest balance sheets Building governance and control Employees responding – cash performance Legacy challenges – expect >90% to complete in 2016 Favourable market ba
Slide 6: Phil Harrison, Group Chief Financial Officer
Phil Harrison Group Chief Financial Officer
Slide 7: Headline numbers
Headline numbers H1 2015 H2 2015 2015 2014 Revenue* £4,085m £4,150m £8,235m £8,440m (Loss) / profit from operations* £(120)m £14m £(106)m £(58)m Pre-tax (loss) / profit – underlying* £(130)m £7m £(123)m £(80)m Pre-tax (loss) / profit – total continuing £(150)m £(49)m £(199)m £(304)m Underlying EPS*
Slide 8: Order book
Order book £bn FY 2015 HY 2015 FY 2014 £bn FY 2015 FY 2014 Construction Services 0-12 months 5.6 5.6 US 4.1 3.8 3.7 12-24 months 2.5 2.5 UK 1.9 2.0 2.3 24 months+ 2.9 3.3 Rail 0.2 0.2 0.3 Total 11.0 11.4 Middle East* 0.5 0.4 0.3 Far East 1.2 1.3 1.3 Construction stable at £7.9bn 7.9 7.7 7.9 Support
Slide 9: Construction Services
Construction Services £m 2015 2014 Performance Revenue PFO Revenue PFO Revenue US 3,097 (22) 2,996 29 UK impacted by active decision to tighten bid governance; UK 2,024 (187) 2,350 (229) biggest declines in previous Rail UK & International 274 (5) 368 (6) problem regions Overseas joint ventures Grow
Slide 10: Support Services
Support Services £m 2015 2014 Performance Revenue Revenue Transport 628 655 Revenue stable Utilities 631 618 Utilities: Water AMP6 contracts mobilising, but fall in Power overhead line volumes 1,259 1,273 Transport: lower volumes from local authority road schemes Profit from operations 24 50 Profit
Slide 11: Infrastructure Investments
Infrastructure Investments £m 2015 2014 Performance UK† 33 42 Investment of £102m, including: North America 25 21 • Two student accommodation projects, three US private rental housing Infrastructure Fund 3 - developments Infrastructure - (2) Portfolio increased to 71 assets (2014: 66) Bidding costs
Slide 12: Infrastructure Investments
Infrastructure Investments Successful period for closes and preferred bidders Achieved Appointed Remain financial preferred preferred FY 15 FY 14 close bidder Total bidder projects projects University / student accommodation 4 9 6 OFTO 2 3 3 Healthcare 1 6 6 Military housing - 21 21 Transport - 13 1
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £m FY 2015 HY 2015 FY 2014 Opening valuation 1,300 1,300 766 Cash invested incl. BBIP investment 102 Cash received – distributions (82) – disposals (145) (227) Net cash received (125) (85) (178) New project wins 45 28 26 Disposal gains against Directors9
Slide 14: Non-underlying items
Non-underlying items £m Continuing Trading - ES (8) - Rail Germany (2) (10) Impairment & amortisation - Amortisation of acquired intangibles (10) - Impairment of IT intangible asset (17) - Other impairments (15) (42) Restructuring & reorganisation - Build to Last transformation costs (23) - Shared s
Slide 15: UK historic contracts impacting profit and cash
UK historic contracts impacting profit and cash FY 2015: 60% of projects at practical or financial completion HY 2015: 31% of projects at practical or financial completion Historic contracts as at FY 2015 HY 2015 Expected Continuing 36 61 practical or financial Practical completion 24 18 completion
Slide 16: Full-year cash flow
Full-year cash flow £m 2015 2014 £m 2015 2014 Operating cash flows† (247) (272) Working capital Working capital 178 (31) Inventory & WIP 27 (30) Infrastructure Investments Construction contract balances# 313 (43) - Disposal proceeds 145 159 Trade & other payables (236) 85 - New investments (102) (73
Slide 17: Group balance sheet
Group balance sheet £m 2015 2014 Goodwill and intangible assets 1,066 1,042 Working capital* (890) (731) Net cash / (debt) (excluding infrastructure concessions) 163 219 Investments in joint ventures and associates 671 759 PPP financial assets 402 559 Infrastructure concessions – non-recourse net de
Slide 18: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 19: Build to Last – Transforming Balfour Beatty
Build to Last – Transforming Balfour Beatty Simplifying the business Streamlining structures Strengthening leadership Clear direction Improving governance and processes Short interval control Changing the culture Measurement and transparency 12 months into 24-month self-help plan 18
Slide 20: Build to Last – LEAN: £200m cash in
Build to Last – LEAN Phase One target: £200m cash in Cumulative annual cash flow 100 Cash is our Compass: - 2015 £357m of cash flow improvement (100) Improved working capital £178m £362m (200) Capex / software spend down £31m (300) £357m Dividend suspension £96m (400) 2013 (500) 2014* Invest
Slide 21: Build to Last – LEAN: £100m cost out
Build to Last – LEAN Phase One target: £100m cost out Simplifying the business structure and £12bn £400m leaning-out core processes £10bn 45 £300m Removal of management layers acquisitions £8bn since 2000 £200m Terminate loss-makers / non-core £6bn Continue to drive integration contracts £100m
Slide 22: Build to Last – EXPERT
Build to Last – EXPERT Recruit Five new Board members including construction experience Two-thirds of Executive Committee new to business or new in post 156 apprentices and 216 graduates hired in UK and US Train Investing in competencies – project management, engineering, estimating First
Slide 23: Build to Last – TRUSTED
Build to Last – TRUSTED Balance sheet strength Refinanced debt facilities £163m net cash at December 2015 £1.24bn Investments portfolio Disciplined, business-like contracting 60% of problem contracts at practical or financial completion 8-gated lifecycle applied across the business improvi
Slide 24: Build to Last – TRUSTED: Gated business lifecycle
Build to Last – TRUSTED Gated business lifecycle More selective Project approval gates Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Gate 6 Gate 7 Gate 8 bidding process Initial Tender Tender Contract Monitoring Project End of Pre- <Go/no GO= <Go/no GO= submission signing and control completion defects approva
Slide 25: US Construction – new tender examples in 2015
US Construction – new tender examples in 2015 Balfour Beatty Infrastructure Inc Echo GA 400 Bergstrom Expressway Client evaluation drivers Price 100% 80% 70% Technical score n/a 20% 30% Price Balfour Beatty bid value US $442m US $783m US $582m Lowest bid US $415m US $460m US $473m Technical score Ba
Slide 26: Build to Last – TRUSTED: Standardised project reports
Build to Last – TRUSTED Standardised project reports Gate: 6 (Execution) Risk Value: £7.7m (69%) Risk Score: 13 Percentage Completion Test Explanation Risk Factor Risk Value % of NSV Missed Completion Date Completion date in the past 0 - - Excessive Working capital Receivables or IAS 11 WIP above 3
Slide 27: Build to Last – SAFE
Build to Last – SAFE Reinvigorated focus on Safety – New Group Safety and Sustainability Board Committee – met three times in 2015 – Single UK function aligned to the business – enabling transfer of best-in-class practice Group employee opinion survey demonstrates staff believe Group has good at
Slide 28: Market outlook
Market outlook Positive outlook across core markets Market growth UK Construction US Construction International JVs Support Services Investments ~£60bn market ~£80bn market ~£13bn market ~£20bn market ~£6bn market • Strong pipeline of • New transportation bill • Strong residential • Pick-up in mediu
Slide 29: The Build to Last journey
The Build to Last journey Today, halfway through 24-month self-help phase Immediate focus: deliver £200m cash in / £100m cost out targets Following 24 months: reach industry-standard margins Longer term: market-leading performance Building the foundations of profitable growth 28
Slide 30: Appendix
Appendix Balfour Beatty
Slide 31: Order book position compared with a year ago
Order book position compared with a year ago £5.6bn £5.6bn Total at FY 2015 £11.0bn Total at FY 2014 £11.4bn £3.3bn £2.9bn £2.5bn £2.5bn 0-12 months 12-24 months 24 months+ Construction Services - UK (incl Rail) Construction Services - US Construction Services - ROW Support Services From continuing
Slide 32: Pensions – balance sheet movement
Pensions – balance sheet movement £586m £441m £434m £333m £7m £275m £(5)m £(70)m £154m £128m £146m £(68)m Dec Dec Dec Dec Dec Dec Service Employer Actuarial Actuarial Other Dec 2009 2010 2011 2012 2013* 2014* cost contributions gain loss movements 2015 liabilities assets 2.15% 2.05% 1.9% 1.5% 1.05%
Slide 33: Working capital – Group
Working capital – Group 0 0 £(200)m Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 (3)% £(400)m £(600)m (6)% £(800)m (9)% £(1,000)m (8.5)% (9.5)% (9.9)% (12)% £(1,200)m (11.9)% (12.6)% (12.2)% (12.8)% (15)% £(1,400)m (14.4)% (14
Slide 34: Working capital – Construction Services
Working capital – Construction Services 0 0 Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec (2)% £(200)m 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 (4)% £(400)m (6)% (8)% £(600)m (10)% £(800)m (9.7)% (12)% (11.1)% (12.2)% (14)% £(1,000)m (14.2)% (13.4)% (16)% (14.6)% £(1,
Slide 35: Net interest cost
Net interest cost £m 2015 2014 Subordinated debt interest receivable 24 Interest on PPP financial assets 24 Interest on non-recourse borrowings (19) 29 35 Net finance costs – pension schemes (3) (16) Other interest receivable 4 Other interest payable (12) (8) (8) US private placement (11) (10) Conve
Slide 36: Balfour Beatty
Balfour Beatty