Slide 1: 2017 full year results presentation
2017 full year results presentation 14 March 2018
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 plc’s 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: Build to Last highlights
Build to Last highlights Underlying profit from operations more than doubled to £196m (2016: £69m) All earnings-based businesses materially improved profit from operations Average net cash £42m (2016: £46m net debt); year end net cash £335m (2016: £173m) M25 partial sales in line with strate
Slide 5: De-risking Balfour Beatty to improve returns
De-risking Balfour Beatty to improve returns GEOGRAPHIC COMMERCIAL OPERATIONAL FINANCIAL Simplified and Selective bidding for Upgraded Strong balance refocused on chosen contracts best leadership and sheet; running markets in UK & aligned with Group’s governance business with Ireland, US and infrast
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 7: Headline numbers
Headline numbers 2017 2016^ Revenue* £8,234m £8,215m Profit from operations* £196m £69m Pre-tax profit* £165m £62m Post-tax profit £143m £48m Statutory profit £168m £24m Underlying basic EPS* 20.9p 7.2p Dividends per share 3.6p 2.7p Order book* £11.4bn £12.4bn Directors’ valuation £1,244m £1,220m Ye
Slide 8: Underlying profit from operations
Underlying profit from operations £m 2017* 2016*^ US Construction 41 33 UK Construction# 16 (65) Gammon 15 11 Construction Services 72 (21) Support Services 41 34 Infrastructure Investments 116 89 Corporate activities (33) (33) Total 196 69 * from continuing operations, before non-underlying items #
Slide 9: Order book
Order book £bn FY 2017 HY 2017 FY 2016^ £bn FY 2017 FY 2016^ Construction Services 0-12 months 4.9 5.9 US 4.3 4.7 5.5 12-24 months 3.3 3.4 UK# 2.7 2.2 2.3 24 months+ 3.2 3.1 Gammon 1.3 1.2 1.5 Total 11.4 12.4 8.3 8.1 9.3 Support Services Full year 8% decrease (down 3% at CER) Utilities 1.3 1.5 1.5 D
Slide 10: Construction Services
Construction Services £m 2017* 2016*^ Performance Revenue PFO PFO % Revenue PFO PFO % Revenue increased 2% (down 2% at CER) US 3,634 41 1.1% 3,427 33 1.0% Construction Services UK# 1,998 16 0.8% 2,143 (65) (3.0)% returned to profit Gammon 1,017 15 1.5% 967 11 1.1% Materially improved PFO in all busi
Slide 11: Support Services
Support Services £m 2017 2016 Performance Revenue Revenue decreased by 4% Utilities 608 590 Power: restructure and cost removal Transportation 453 513 Gas and Water: middle of regulatory cycles Total 1,061 1,103 Highways: strong work winning Profit from operations* 41 34 Rail: Network Rail operation
Slide 12: Infrastructure Investments
Infrastructure Investments £m 2017 2016 Performance Pre-disposals operating profit* 30 24 Increased profit driven by higher gains on disposals Gain on disposals 86 65 Three partial sales of Connect Plus M25: Investments underlying operating profit* 116 89 2017 profit & cash: 12.5% sale for £54m Subo
Slide 13: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £35m £106m £97m £(53)m £(56)m £(105)m £1,220m £1,220 £1,202 £1,194 £1,244m £1,097 £1,097 2016 Equity Distributions Sales Unwind of US tax FX & other 2017 invested received proceeds discount Directors’ valuation remains stable at £1.2bn 12
Slide 14: Aberdeen Western Peripheral Route (AWPR)
Aberdeen Western Peripheral Route (AWPR) Bid in 2014 Delays caused by utilities and weather throughout the project Project completion expected summer 2018 Cash outflow in the range announced 15 January 2018 – Balfour Beatty’s 50% obligation c. £105m to £120m As a result of Carillion’s liqu
Slide 15: Full year cash flow
Full year cash flow £m 2017 2016 £m 2017 2016 Operating cash flows 39 (58) Working capital Working capital inflow/(outflow) 27 (48) Inventories & WIP (12) 42 Pension deficit payments (25) (41) Construction contract balances 7 36 Cash generated from/(used in) operations 41 (147) Trade & other payable
Slide 16: Group balance sheet
Group balance sheet £m 2017 2016 Goodwill and intangible assets 1,155 1,162 Working capital (888) (894) Net cash (excluding infrastructure concessions) 335 173 Investments in joint ventures and associates 531 628 PPP financial assets 163 163 Infrastructure concessions – non-recourse net debt (305) (
Slide 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 18: Build to Last
Build to Last Platform to underpin future profitable growth 17
Slide 19: Build to Last
Build to Last Lean: Cumulative annual cash flow+ Expert: UK voluntary attrition £m moving annual average 300 2017 Jan-18 100 2015 -100 Jan-17 2016 -300 Jan-16 -500 2014* Jan-15 -700 Dec Mar Jun Sept Dec 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% * adjusting for the sale of Parsons Brinckerhoff + includes ot
Slide 20: Infrastructure Investments model
Infrastructure Investments model Project: M25 Orbital Road Utilise favourable construction working capital Project finance makes return on capital employed Enhanced returns when Investments, Construction and Services deliver as one Optimise value through the disposal of operational assets, w
Slide 21: Infrastructure Investments case study
Infrastructure Investments case study Project: LAX Automated People Mover 2.25 miles elevated trainlines, six stations, 30 million passengers a year $1.95bn DBFO (30% construction & 27% equity partner) Experienced four-way joint venture construction team Plays to Balfour Beatty strengths: –
Slide 22: Infrastructure Investments portfolio by sector
Infrastructure Investments portfolio by sector Directors’ valuation Directors’ valuation by sector (£m) 2017 2014* by geography Roads 290 467 Healthcare 136 225 Other PFI 28 116 Non-PFI 182 135 UK total^ 636 943 US military housing 497 322 US other 111 15 49% 51% North America total 608 337 Total 1,
Slide 23: Positive infrastructure markets
Positive infrastructure markets Construction revenue US UK Far East Positive infrastructure Positive infrastructure Positive infrastructure by geography & buildings market market market Fixing America’s Surface HK International airport Transportation (FAST) Act HS2 third runway US UK US$305bn £56bn
Slide 24: UK infrastructure expenditure 2018 – 2024
UK infrastructure expenditure 2018 – 2024 £30bn Energy (incl. Nuclear) £25bn £20bn Water Highways England £15bn Heathrow TfL £10bn HS2 Crossrail 1 £5bn Crossrail 2 Network Rail £0bn 2018 2019 2020 2021 2022 2023 2024 Source: Network Rail Significant infrastructure investment market 23
Slide 25: Case study – HS2 opportunity
The Four H’s: Case study – HS2 opportunity Planned HS2 phases Contract Total Balfour Beatty expertise Detail description opportunity Civils Rail Power M&E Lot N1 main works £1.3 billion Awarded (awarded) civils* Phase 1 Lot N2 main works civils* £1.2 billion Awarded Old Oak Common Approx. £1
Slide 26: Build to Last outlook
Build to Last outlook Phase One (2015-16) Targets achieved: solid foundations for sustainable, profitable growth Phase Two (2017-18) Earnings-based businesses: reach industry-standard margins – UK Construction: 2%-3% – US Construction: 1%-2% – Support Services: 3%-5% Asset-based business: port
Slide 27: Balfour Beatty today
Balfour Beatty today Strong operational controls and strong balance sheet Build to Last transforming Balfour Beatty Proven leadership team Building bench strength in depth across the organisation Focused strategy Sustainable profitable growth Positive market outlook Capitalising on expert in
Slide 28: Appendix
Appendix Balfour Beatty
Slide 29: Build to Last – LEAN
Build to Last – LEAN Cumulative annual cash flow+ Cash is our compass 300 Average net cash £42m (2016: £46m net debt) 200 2017 100 Year end net cash £335m (2016: £173m) 2015 - (100) 2016 (200) Cost out (300) (400) Build to Last Phase One: £123m cost out (500) 2014* 2017: additional £30m cost
Slide 30: Build to Last – EXPERT
Build to Last – EXPERT Creating a great place to work UK voluntary attrition Continue to strengthen leadership (moving annual average) 16% – Rail, Power T&D, Gas and Water under one leader in UK & Ireland 14% – Two executive leaders promoted for Buildings and Civils operations in US 12% .35 10%
Slide 31: Build to Last – TRUSTED
Build to Last – TRUSTED Continuing to deliver on promises Customer Governance and controls providing a transparent and satisfaction rate disciplined contracting framework 95% – Over 1,000 projects utilising Digital Briefcase 90% 85% .35 – Project on a Page fully embedded within ERP system 80% – Wi
Slide 32: Build to Last – SAFE
Build to Last – SAFE Creating a safer culture Balfour Beatty Group Group Lost Time Injury Rate* improved to 0.17 (2016: 0.22) Lost Time Injury Rate* Observation rates continue to increase – sign of engagement 0.4 0.3 Making Safety Personal – a pause for thought 0.2 .35 – Over 24,000 employees
Slide 33: Order book position compared with prior year
Order book position compared with prior year Total at FY 2017 £11.4bn £5.9bn Total at FY 2016 £12.4bn˄ £4.9bn £3.4bn £3.3bn £3.2bn £3.1bn FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 0-12 months 13-24 months 24 months+ UK Construction # US Construction Gammon Support Services # re-presented to in
Slide 34: Pensions – balance sheet movement
Pensions – balance sheet movement £242m £32m £(128)m £(6)m £(146)m £(231)m £27m 2014 2015 2016 Employer Net actuarial Other 2017 contributions gains movements 0.65% 0.7% (0.7)% Real discount rate (0.6)% 33
Slide 35: Working capital – Group
Working capital – Group 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 £(200)m (4)% £(400)m £(600)m (8)% £(800)m (12)% £(1,000)m (9.9)% (12.8)% (13.2)% (13.1)% (13.1)% (13.2)% £(1,200)m (13.9)% (16)% Period end working capital Period end working capital as % revenue Debtor days¹ 29 28 27 30 34
Slide 36: Working capital – Construction Services
Working capital – Construction Services 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 £(200)m (4)% £(400)m (8)% £(600)m (12)% £(800)m (12.2)% (16)% £(1,000)m (14.4)% (14.2)% (15.3)% (16.8)% (16.6)% £(1,200)m (18.2)% (20)% Period end working capital Period end working capital as % revenue from
Slide 37: Net interest cost
Net interest cost £m 2017 2016 Subordinated debt interest receivable 26 Interest on PPP financial assets 11 Interest on non-recourse borrowings (13) 24 26 Net finance costs – pension schemes (6) (4) Other interest receivable 4 Other interest payable (14) (10) (9) US private placement (13) (13) Gain
Slide 38: Non-underlying items
Non-underlying items £m 2017 2016 Trading - ES & Rail Germany - (5) Impairment & amortisation - Amortisation of acquired intangibles (9) (9) - Land impairment relating to Blackpool Airport - (3) Restructuring & reorganisation - Build to Last transformation costs (12) (14) Disposals and other - Gain
Slide 39: Financial history
Financial history £12bn £400m 450% £10bn Increase in revenue £300m £8bn £6bn £200m 45 £4bn Acquisitions £100m £2bn £94m £0bn £0m Average ordinary -£2bn dividend -£100m (2011-2014) -£4bn -£6bn -£200m £10m 2000 2002 2004 2006 2008 2010 2012 2014 2016 Average ordinary dividend (2015-2017) Revenue (LHS)
Slide 40: US Regional Construction
US Regional Construction West Texas Florida Carolinas & Georgia Mid Atlantic 39
Slide 41: Balfour Beatty
Balfour Beatty