Slide 1: 2017 half-year results presentation
2017 half-year results presentation 16th August 2017
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
Build to Last Simplifying and refocussing the business ▪ Streamlining structures Strengthening leadership ▪ Clear direction Improving governance and processes ▪ Short interval control Transforming the culture ▪ Measurement and transparency De-risking the future of Balfour Beatty 3
Slide 5: Build to Last
Build to Last Strong cash performance ▪ Average net cash £45m - no material investment disposals Underlying profit from operations £39m ▪ On track for full-year expectations Focused on chosen markets and capabilities ▪ Substantially de-risked portfolio; securing landmark infrastructure wins On track
Slide 6: Phil Harrison, Chief Financial Officer
Phil Harrison Chief Financial Officer
Slide 7: Financial Highlights
Financial Highlights ▪ Underlying profit from operations (PFO) £39m (2016: £11m); on track for full-year expectations ▪ Half-year net cash £161m, average net cash £45m - without material investment disposals ▪ Directors’ valuation of Investments portfolio up 1% at £1.235bn ▪ Underlying revenue £4.2b
Slide 8: Headline numbers
Headline numbers HY 2017 HY 2016^ Revenue* £4,191m £3,883m Profit from operations* £39m £11m Pre-tax profit* £22m £13m Post-tax profit* £22m £20m Total underlying EPS 3.3p 2.0p Dividends per share 1.2p 0.9p HY 2017 FY 2016^ Order book* £11.4bn £12.4bn Directors’ valuation £1,235m £1,220m Net cash≠ £
Slide 9: Underlying profit from operations
Underlying profit from operations £m HY 2017* HY 2016*^ US Construction 17 12 UK Construction# 2 (69) Far East 5 3 Construction Services 24 (54) Support Services 16 11 Infrastructure Investments 15 70 Corporate (16) (16) Total 39 11 * from continuing operations, before non-underlying items # re-pres
Slide 10: Order book
Order book £bn HY 2017 FY 2016^ HY 2016^ £bn HY 2017 HY 2016^ Construction Services 0-6 months 3.7 3.1 US 4.7 5.5 4.7 6-18 months 3.5 4.5 UK# 2.2 2.3 2.3 18-30 months 2.1 2.0 Far East 1.2 1.5 1.6 30 months+ 2.1 2.3 8.1 9.3 8.6 Total 11.4 11.9 Support Services Order book declined 8% (6% at CER) from
Slide 11: Construction Services
Construction Services £m HY 2017 HY 2016^ Performance Revenue* PFO* PFO %* Revenue* PFO* PFO %* Revenue Underlying revenue up 12% US 1,952 17 0.9% 1,632 12 0.7% (CER 4%) UK# 975 2 0.2% 991 (69) (7.0)% Increases in US and Far East Profit from operations Far East 481 5 1.0% 413 3 0.7% US : on track fo
Slide 12: Support Services
Support Services £m HY 2017 HY 2016 Performance Revenue* Revenue Utilities 299 291 Revenues down 5% Increase in utilities more than offset by Transportation 220 257 decrease in transportation Total 519 548 Profit from operations 3.1% PFO margin within industry-standard Profit from operations* 16 11
Slide 13: Infrastructure Investments
Infrastructure Investments £m HY 2017 HY 2016 Performance Pre-disposals operating profit 15 18 Operating profit broadly in line with prior year Profit on disposals - 52 No material disposals in H1 2017 Underlying profit from operations 15 70 Group will continue to: (i) Sell investment assets timed t
Slide 14: Directors' valuation of Investments portfolio
Directors’ valuation of Investments portfolio £m HY 2017 FY 2016 Opening valuation 1,220 1,244 Cash invested 24 Cash received – distributions (26) – disposals (2) → (28) Net cash received (4) (188) New project wins 2 6 Disposal gains against Directors’ valuation - 7 Unwind of discount on NPV 47 90 O
Slide 15: Half-year cash flow
Half-year cash flow £m HY 2017 HY 2016 £m HY 2017 HY 2016 Operating cash flows 26 (71) Working capital Working capital (9) 1 Inventory & WIP (1) 14 Pension deficit payments (10) (29) Construction contract balances (9) (23) Cash generated from/(used in) operations 7 (99) Trade & other payables 49 (25
Slide 16: Group balance sheet
Group balance sheet £m HY 2017 FY 2016 Goodwill and intangible assets 1,178 1,162 Working capital (924) (894) Net cash (excluding infrastructure concessions) 161 173 Investments in joint ventures and associates 630 628 PPP financial assets 159 163 Infrastructure concessions – non-recourse net debt (
Slide 17: Leo Quinn, Group Chief Executive
Leo Quinn Group Chief Executive
Slide 18: Build to Last
Build to Last Foundations laid for future profitable growth 17
Slide 19: Build to Last – LEAN
Build to Last – LEAN Cumulative annual total cash flow £100m 2015 Cash is our Compass - 2017 2016 £(100)m ▪ Net cash £161m (HY 2016: £115m) – achieved with no £(200)m material investment disposals £(300)m ▪ Average net cash £45m (HY 2016: average net debt £68m) £(400)m 2014* £(500)m ▪ Positive cash
Slide 20: Build to Last – EXPERT
Build to Last – EXPERT Creating a great place to work Upgrading leadership UK Voluntary Attrition ▪ Strong brand, Great leaders, Iconic projects (moving annual average) Implementing competency frameworks ▪ Investing in building capabilities 16% – Competency frameworks – assign to 14% Optimised resou
Slide 21: Build to Last – EXPERT
Build to Last – EXPERT Building a digital Balfour Beatty 20
Slide 22: Build to Last – TRUSTED
Build to Last – TRUSTED Circles of Risk Gated Lifecycle Continuing to deliver on promises Digital Briefcase ▪ Strong foundation established to better manage risk Project on a Page ▪ Continue to strengthen leadership team Site Mobilisation Hub ▪ Selective bidding: winning new business with better mar
Slide 23: Build to Last – SAFE
Build to Last – SAFE Improving KPIs Creating a safer culture Balfour Beatty Group Lost Time Injury Rate* Growth in observations ▪ Strong leadership of safety across organisation 0.4 0.3 Making Safety Personal ▪ Group LTIR* improved to 0.19 in 2017 (2014: 0.31) 0.2 .35 ▪ Observation rates continue to
Slide 24: Chosen markets outlook
Chosen markets outlook Revenue by US UK Far East Geography Positive market Positive infrastructure market Variable market Investments Fixing America’s Surface HS2 HK International airport Transportation (FAST) Act third runway £56bn HK$140bn 3% 3% UK $305bn Nationwide transportation bonds Hinkley Po
Slide 25: UK Market driver: HS2 (High speed rail)
UK Market driver: HS2 (High speed rail) Balfour Beatty VINCI JV successfully secured c.£2.5bn of HS2 Phase One Lots N1 & N2 Lot N1, c.£1.32 billion – Long Itchington Wood Green tunnel to the Delta Junction/Birmingham Spur ▪ Tunnelling ▪ Cuttings, embankments and viaducts ▪ Highway diversions Lot N2,
Slide 26: UK Market driver: HS2 future opportunities
UK Market driver: HS2 future opportunities Balfour Beatty Expertise Contract Description Total opportunity Detail Civils Rail Power M&E Stations Construction • Old Oak Common Station • Euston Station approx. £4.2bn Award expected ✓ ✓ • Birmingham Interchange in 2018-2020 Phase 1 Station Stations • C
Slide 27: 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 28: Build to Last
Build to Last Strong cash performance ▪ Average net cash £45m - no material investment disposals Underlying profit from operations £39m ▪ On track for full-year expectations Focused on chosen markets and capabilities ▪ Substantially de-risked portfolio; securing landmark infrastructure wins On track
Slide 29: Appendix
Appendix Balfour Beatty
Slide 30: Order book position HY17 v HY16
Order book position HY17 v HY16^ £4.5bn Total at HY 2017 £11.4bn £3.7bn £3.5bn £3.1bn Total at HY 2016^ £11.9bn £2.3bn £2.1bn £2.0bn £2.1bn 0-6 months 6-18 months 18-30 months 30 months+ Construction Services - UK (incl Rail) Construction Services - US Construction Services - ROW Support Services ^
Slide 31: Pensions – balance sheet movement
Pensions – balance sheet movement £2m £434m £11m £14m £231m £220m £208m £206m £231m £128m £146m Dec 2013 Dec 2014 Dec 2015 Dec 2016 Employer Net actuarial Other Jun 2017 contributions gain movements 1.05% 0.65% 0.7% (0.7)% Real discount rate (0.75)% 30
Slide 32: Working capital – Group
Working capital – Group 0 0 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 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)% £(1,200)m (13.9)% (16)% Period end working capital Period end working capital as % revenue Debtor days≠ 29 28 27 30 34 37 Creditor da
Slide 33: Working capital – Construction Services
Working capital – Construction Services 0 0 £(200)m Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 (4)% £(400)m (8)% £(600)m (12)% £(800)m (12.2) (16)% £(1,000)m (14.4) (14.2) £(1,200)m (16.8) (16.6) (20)% (18.2) Period end working capital Period end working capital as % revenue From continuing operation
Slide 34: Net interest cost
Net interest cost £m HY 2017 HY 2016 Subordinated debt interest receivable 12 Interest on PPP financial assets 5 Interest on non-recourse borrowings (6) 11 15 Net finance costs – pension schemes (3) (2) Other interest receivable 3 Other interest payable (6) FX gains (losses) on US deposits (3) (6) 8
Slide 35: Non-underlying items
Non-underlying items £m HY 2017 HY 2016 Trading - Engineering Services (ES) - (4) - Rail Germany - 1 Impairment & amortisation - Amortisation of acquired intangibles (5) (4) - Land impairment relating to Blackpool Airport - (2) Restructuring & reorganisation - Build to Last transformation costs (5)
Slide 36: Infrastructure Investments
Infrastructure Investments FY 2016 New wins in Projects HY 2017 Projects not yet projects period sold projects closed University/student accommodation 10 10 2 OFTO 3 3 Healthcare 6 6 Military housing 21 21 Transport 13 13 Private rented and regeneration 8 8 2 Energy 4 4 Other 4 4 Total 69 ≠ 1 1 69 4
Slide 37: Gated Lifecycle
Gated Lifecycle More selective Project Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Gate 7 Gate 8 bidding process Gate 6 approval gates Initial Tender Tender <Go/no GO= <Go/no GO= submission Contract Pre- signing commencement Monitoring and control Project completion End of defects Focus on cash, approval app
Slide 38: Financial history
Financial history £12bn £400m £10bn 450% £8bn £300m increase in £6bn £200m revenue £4bn £100m £2bn 45 £0bn -£2bn £0m acquisitions £(100)m 2000-2012 -£4bn -£6bn £(200)m 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenue (LHS) Profit from operations (RHS) 37
Slide 39: US Regional Construction
US Regional Construction West Texas Florida Carolinas & Georgia Mid Atlantic 38
Slide 40: Balfour Beatty
Balfour Beatty