REG - Balfour Beatty PLC - Balfour Beatty 2015 full-year results <Origin Href="QuoteRef">BALF.L</Origin> - Part 2
15/03/2016 07:05
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finance and operate the project under a 50-year contract, in partnership with the university. In Glasgow, the
business is designing, building and financing a 520-bed facility on Kennedy Street, which will also include ground floor
retail spaces and a student hub.
The Group has built a strong market position within the specialised, but sizeable, offshore transmission (OFTO) market for
the provision of sub-sea cabling and substations that connect offshore wind farms to the mainland electricity grid. In
February 2015, a Balfour Beatty consortium with Equitix completed the asset purchase of the £352 million Gwynt y Môr
offshore transmission project connecting the 576MW offshore wind farm to the onshore transmission grid in North Wales. In
September, the same Balfour Beatty consortium was appointed preferred bidder to own and operate the offshore transmission
link for the 220MW Humber Gateway wind project over a 20-year period. This wind farm, located in the North Sea off the
coast of East Yorkshire, features 73 wind turbines that can meet the energy requirements of around 170,000 homes.
In March 2015, the business, in partnership with Places for People, signed a development agreement with the London Legacy
Development Corporation to invest and construct the new East Wick and Sweetwater housing development project. The project
at Queen Elizabeth Olympic Park in East London will create two new neighbourhoods with up to 1,500 homes, including 450
affordable homes, 530 homes for private sale and 500 private rented sector homes.
In the energy sector, the £52 million Welland Waste Wood power station project reached financial close in March 2015. Once
complete, the project will convert 60,000 tonnes of dry waste wood feedstock into 9MW of electricity - powering over 17,000
households a year.
Within healthcare, the Investments business, in consortium with Prime and InfraRed Capital Partners was selected as
preferred tenderer for the E140 million Irish Primary Care PPP project to deliver 14 primary care centres across Ireland,
in the first programme of its kind in the Republic of Ireland's primary care market.
North America new contract wins and financial closes
In North America, the Investments business reached financial close on the acquisition of stakes in three private rental
housing developments and reached financial close on two student accommodation projects, one of which is an expansion of an
existing student accommodation project. Balfour Beatty Communities will perform property management services for each
development, leveraging the existing capabilities of the business. These include: a 398-unit garden style apartment
community in Coppell, Texas; a portfolio of five apartment communities in Dallas-Fort Worth, Texas; a 392-unit multifamily
community in Rogers, Arkansas; a 595-bed student accommodation project in Dallas, Texas; and a 420-bed student
accommodation expansion project in Iowa. In addition, the Investments business reached financial close on one fee-based
student accommodation project located in Texas.
The Investments business continues to pursue opportunities to leverage its existing property management, customer services
and related real estate capabilities from the multifamily, military, and student housing markets. This has resulted in
winning a number of fee-based residential projects, where no equity will be invested and the business acts as a third-party
manager; three further portfolios were awarded in 2015, consisting of seven locations in Florida. The Investments business
continues to see significant opportunities for future investment in the sector as well as third-party management
opportunities.
Asset sales and new investment
The business continued its stated strategy of selling assets at the optimum time to maximise value for the Group. Interests
in four assets were sold in 2015, one of which was a partial disposal, generating total book gains on disposal of £95
million (2014: £93 million from three assets). The business sold its 50% interest in the Edinburgh Royal Infirmary project,
80% of its interest in the Thanet OFTO project (where the Group retains a 20% interest), its 20% interest in the Aura BSF
schools project in Newcastle and its 33.3% interest in the Greater Gabbard OFTO project. All of these sales realised values
consistent with the revised methodology and Directors' valuation published in January 2015.
The Investments business continued to make substantial equity investments in the portfolio, with £102 million invested in
2015 (2014: £53 million). The bulk of this investment was in eight projects: Gwynt y Môr OFTO; Welland Waste Wood biomass;
student accommodation in Edinburgh, Glasgow and the University of Texas Dallas; and the three private rental housing
developments in North America that reached preferred bidder and financial close in the year. A further £15 million was
invested into the fund managed by Balfour Beatty Infrastructure Partners.
The Investments business continues to see significant opportunities for future investment in its core geographic markets in
the UK and North America, across both its existing market sectors and as it continues to grow into new adjacent sectors.
DIRECTORS' VALUATION OF THE INVESTMENTS PORTFOLIO
The Group continued to make substantial investments into the portfolio with £102 million of cash invested into projects in
2015. This reflected continued success in targeted sectors with nine new projects being included in the Directors'
valuation for the first time, as well as further investment in existing projects. The nine new projects include a project
which achieved preferred bidder in 2014 but wasn't included in the Directors' valuation until financial close was achieved
in 2015.
The Group continued its strategy of realising value through selling mature investments generating £145 million in aggregate
at pricing consistent with the Directors' valuation. Cash yield from distributions amounted to £82m. For the tenth year in
succession the portfolio generated cash flow to the Group net of investment.
In overall terms, the Directors' valuation fell slightly to £1,244 million at 31 December 2015 with the number of projects
in the portfolio increasing from 66 to 71.
The Directors' valuation has been undertaken using the revised methodology introduced in 2014. This produces a valuation
that more closely reflects market value and which consequently changes with movements in the market. For each project, cash
flows are forecast based on progress to date and market expectations of future performance. These cash flows have then been
discounted using different discount rates depending on project risk and maturity, and reflecting secondary market
transaction experience. As in previous years, the Directors' valuation may differ significantly from the accounting book
value of investments shown in the accounts, which are produced in accordance with International Financial Reporting
Standards rather than using a discounted cash flow approach.
UK portfolio
In 2015 five new projects in the health, OFTO, student accommodation and biomass sectors were included in the Directors'
valuation for the first time, increasing the value by £28 million. These included preferred bidder status on a student
accommodation project at Sussex University, the Humber Gateway OFTO and a Primary Care PPP project in Ireland, the start of
construction on an open market student accommodation project in Glasgow and financial close on a waste wood biomass project
in Welland. Significant investment was made in the Gwynt y Mor OFTO, the Welland biomass project, the student accommodation
projects in Edinburgh and Glasgow and into the fund managed by Balfour Beatty Infrastructure Partners (BBIP). Total
investment amounted to £88 million.
The secondary market remains strong and the Group continued its strategy of realising value from mature investments. The
business sold 80% of its interest in the Thanet OFTO as well as its entire interest in the Edinburgh Royal Infirmary,
Newcastle BSF schools and Greater Gabbard OFTO projects for an aggregate £145 million. The proceeds received from these
sales were consistent with the Directors' valuation. The business continues to preserve interests in projects with
strategic clients and those that offer further value to the wider Group through the provision of future lifecycle and
maintenance work. Strong demand for infrastructure investment allied to a shortage of supply in the secondary market is
expected to underpin pricing for the foreseeable future. With the largest primary infrastructure portfolio held by any
contractor in the UK, the Group remains well placed to benefit from these market dynamics.
Operational performance movements resulted in a £100 million reduction in value. The most significant components of this
were lower inflation (in the year, as well as forecast), lower forecast deposit interest rates, higher actual and forecast
lifecycle and management costs and an increase in the assumed tax burden for potential purchasers. The changes to inflation
reflect a lowering of forecast inflation which now steps up through 2016 and 2017 before reverting to a long-term
assumption of 3% thereafter. The long-term interest rate assumption has been lowered from 3.5% to 2.75% in response to the
continuing policy of near zero interest rates adopted by the Bank of England and the resulting impact on long-term rates
forecast by the financial markets. In line with government announcements the corporation tax rate has been reduced from 20%
currently to 19% in April 2017 and to 18% from April 2020.
The Group's investment in the fund managed by BBIP is included in the UK portfolio and amounted to £38 million at December
2015.
Discount rates applied to the UK portfolio range between 7% and 14% depending on project risk and maturity. The implied
weighted average discount rate for the UK portfolio (excluding BBIP) is 8.3% (2014: 7.8%). The increase during 2015
reflects the impact of selling mature operational projects with lower discount rates whilst investing in new projects where
construction has yet to be completed and which are valued using higher discount rates. A 1% change in the discount rate
would change the value of the UK portfolio (excluding BBIP) by approximately £95 million.
In 2015, the OECD BEPS project delivered its recommendations in relation to the tax deductibility of interest expense,
including the potential for a 'public benefit' exemption. A number of governments are currently considering their response
to these recommendations. The UK Government has consulted extensively in order to understand the views of the
infrastructure industry. At this stage any impact on the Directors' valuation remains uncertain as is the timing of any
changes to legislation. Balfour Beatty will continue to actively engage with the UK Government and to monitor developments
in this area.
North American portfolio
In North America, the business acquired investments in three residential housing developments at Coppell and Dallas-Fort
Worth (both in Texas) and at Rogers in Arkansas, achieved financial close on a student accommodation project for the
University of Texas at Dallas and commenced a further phase of accommodation at the University of Iowa. These projects
increased the value of the portfolio by £17 million. Overall investment in existing and new projects in the portfolio
totalled £14 million during the year. Operational performance movements increased the valuation by £13 million. This
increase arose predominantly from the annual budget settlement for the military housing portfolio, particularly the
inflation adjustment for housing rental allowances which feeds through to the fee income and equity returns from individual
projects. The Indianapolis justice facility which was at preferred bidder stage was cancelled by the procuring authority
just prior to financial close and has therefore been removed from the valuation.
Discount rates applied to the North American portfolio range between 7.5% and 10%. The implied weighted average discount
rate for the North American portfolio is 8.2% (2014: 8.1%). A 1% change in the discount rate would change the value of the
North American portfolio by approximately £58 million.
OTHER FINANCIAL ITEMS
Non-underlying items
Pre-tax losses from non-underlying items for continuing operations reduced by £148 million to £76 million (2014: £224
million). The improvement was largely due to lower trading losses on certain legacy ES contracts of £8 million (2014: £88
million) and lower trading losses in Rail Germany of £2 million (2014: £23 million). Non-underlying items also include
amortisation of acquired intangible assets of £10 million (2014: £11 million).
Significant other non-underlying items included £23 million of costs incurred relating to the Group's Build to Last
transformation programme which was launched in early 2015. At the same time, the Group incurred other restructuring costs
of £9 million, relating to restructuring costs incurred in Rail Germany and Heery. Rail Germany also recognised further
impairment in its underlying assets of £11 million, including £4 million relating to joint ventures and associates. This is
as a result of an impairment assessment following an agreement to sell parts of Rail Germany to Tianjin Keyvia Electric Co
Ltd. This agreement remains subject to various approvals at the year end.
The Group continued its plan to transition other business units to its UK shared service centre in Newcastle-upon-Tyne,
incurring further cost in the year of £8 million. In addition, the Group impaired £17 million of cost capitalised in
relation to the transformation of its UK IT estate from a federated to a more centralised model due to curtailments in
scope and termination of the agreement with its implementation partner.
The non-underlying charges recognised in 2015 were partially offset by a £16 million gain recognised on the disposal of
Signalling Solutions Ltd in May 2015.
Taxation
The Group's underlying loss before tax from continuing operations for subsidiaries of £170 million (2014: £135 million)
resulted in an underlying tax charge of £11 million (2014: credit £2 million). The tax charge principally arises due to
significant non-recognition of deferred tax assets on losses incurred in the year.
Discontinued operations
The underlying post-tax loss from discontinued operations was £1 million (2014: £24 million profit). Total post-tax profit
from discontinued operations was £nil (2014: £242 million).
Profit from discontinued operations reflects an additional gain on disposal of £5 million from the sale of Parsons
Brinckerhoff, which completed in 2014. Profit from discontinued operations also included an underlying post-tax loss of £1
million relating to Rail Italy which was disposed in March 2015 resulting in a loss on disposal of £4 million.
Goodwill and intangible assets
The goodwill on the Group's balance sheet at 31 December 2015 increased by £18 million to £844 million (2014: £826
million), primarily relating to movements in foreign currency being partially offset by a £4 million charge in respect of
Blackpool airport. Impairment reviews have been carried out, and none of the carrying values have been impaired.
In light of the significant losses incurred within the UK construction business in 2015, the Group has considered whether a
reasonable possible change in assumptions would lead to an impairment of the goodwill in the related cash-generating units
and concluded that it is not the case. The stabilisation and recovery of the Group's UK construction business to more
normal levels of performance is, however, a key assumption underpinning the cash flow forecasts used to assess the
recoverable amount of the related goodwill.
Other intangible assets increased to £222 million (2014: £216 million), which is primarily driven by additions in the
period, including £23 million in Infrastructure Investments from the continuing construction of Edinburgh student
accommodation and £20 million spend on software, partially offset by a £17 million impairment charge against the Group's UK
software assets due to curtailments in the scope of the implementation and termination of the agreement with its
implementation partner.
Pensions
The Group's balance sheet includes aggregate deficits of £146 million (2014: £128 million) for pension schemes. The Group
recorded net actuarial losses on those schemes of £86 million (2014: £237 million gains). The small increase in the deficit
in the year is largely as a result of poor performance of the return-seeking assets in the Group's largest scheme.
In July 2015, following the establishment of a Scottish Limited Partnership (SLP) into which the Group transferred its 40%
interest in the Birmingham Hospital PFI concession, agreement was reached to defer the payment of £85 million, which had
been due to be paid to the BBPF in 2015, over the period to 2023 with the first payment of £4 million due in 2016.
The next formal triennial valuation of the Group's largest pension scheme, the Balfour Beatty Pension Fund, will be as at
31 March 2016. The Company remains committed to proactively working with the trustees to agree an appropriate level of
funding which is consistent with the Build to Last programme and allows the Company and the trustees to meet their
obligations.
Banking facilities
In December 2015, the Group agreed a new £400 million syndicated revolving credit facility, refinancing the facilities that
had been due to expire in 2016. The size of the credit facility was reduced, consistent with the Group's ongoing capital
requirements and the underlying strength of the balance sheet. The new facility extends through to 2018, with the option
for two additional one-year extensions through to 2020, subject to bank approval. At 31 December 2015, these bank
facilities were undrawn.
Financial risk factors and going concern
The key financial risk factors for the Group remain largely unchanged. Some elements of the Group's markets are recovering,
and this can lead to increased risk of subcontractor failures, due to their cash requirements for increased working
capital, and also the potential for inflationary pressures in some areas. On the other hand, this should also reduce
pressure on bidding margins.
The Group's US private placement and committed bank facilities contain certain financial covenants, such as the ratio of
the Group's EBITDA to its net debt which needs to be less than 3.0 and the ratio of its EBITA to net borrowing costs which
needs to be in excess of 3.0. These covenants are tested on a rolling 12-month basis as at the June and December reporting
dates. At 31 December 2015, both these covenants were passed as the Group had net cash and net interest income from a
covenant test perspective, so the Group's poor trading performance and consequent low level of EBIT had no impact on these
tests.
The Group is forecasting to remain within its banking covenants during 2016. The losses incurred in the second half of 2015
will be included in the 12-month EBIT for the purpose of the covenant tests at June 2016, which will reduce headroom
against these tests. In considering that forecast, account was taken of the range of mitigating actions to conserve and
generate cash and EBIT. While recognising that there can be no absolute certainty, the Directors believe that these
covenant tests will be met.
The Directors have acknowledged the guidance 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies
2009' published by the Financial Reporting Council in October 2009. In reviewing the future prospects of the Group, the
following factors are relevant:
• the Group has a strong order backlog
• there continues to be underlying demand in infrastructure markets in the countries in which the Group operates
• excluding the non-recourse net borrowings of PPP subsidiaries, the Group had net cash balances of £163 million at 31
December 2015 and has committed bank facilities of £400 million lasting until December 2018, which were undrawn at
31 December 2015.
Based on the above, and having made appropriate enquiries and reviewed medium-term cash forecasts, the Directors consider
it reasonable to assume that the Group and the Company have adequate resources to continue for the foreseeable future and,
for this reason, have continued to adopt the going concern basis in preparing the financial statements.
To appreciate the prospects for the Group as a whole, the complete Annual Report and Accounts 2015 needs to be read.
Responsibility statement
The responsibility statement below has been prepared in connection with the Company's Annual Report and Accounts 2015.
Certain parts thereof are not included within this announcement.
The Directors confirm that to the best of their knowledge:
• the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the
European
Union and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and
profit or loss of
the Company and the undertakings included in the consolidation taken as a whole;
• the Strategic Report includes a fair review of the development and performance of the business and the position of
the Company
and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks
and
uncertainties they face; and
• the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provides the
information
necessary for shareholders to assess the Company's performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 14 March 2016 and is signed on its behalf by:
Leo Quinn
Group Chief Executive
Philip Harrison
Chief Financial Officer
ENDS
Forward-looking statements
This announcement 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 forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates",
"targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each
case, their negative or other various or comparable terminology. These statements are made by the Balfour Beatty plc
Directors in good faith based on the information available to them at the date of this announcement and reflect the Balfour
Beatty plc Directors' beliefs and expectations. By their nature these statements involve risk and uncertainty because they
relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause
actual results and developments to differ materially from those expressed or implied by the forward-looking statements,
including, without limitation, developments in the global economy, changes in UK and US government policies, spending and
procurement methodologies, and failure in Balfour Beatty's health, safety or environmental policies.
No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast
results will be achieved. Forward-looking statements speak only as at the date of this announcement and Balfour Beatty plc
and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any
forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be
construed as, a profit forecast or profit estimate or to be interpreted to mean that earnings per Balfour Beatty plc share
for the current or future financial years will necessarily match or exceed the historical earnings per Balfour Beatty plc
share. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.
Group Income Statement
For the year ended 31 December 2015
2015 2014
Notes UnderlyingItems1£m Non-underlying items (Note 8)£m Total£m Underlying items1£m Non-underlyingitems(Note 8)£m Total £m
Continuing operations
Revenue including share of joint ventures and associates 8,235 209 8,444 8,440 353 8,793
Share of revenue of joint ventures and associates 15 (1,471) (18) (1,489) (1,490) (39) (1,529)
Group revenue 6,764 191 6,955 6,950 314 7,264
Cost of sales (6,609) (189) (6,798) (6,723) (410) (7,133)
Gross profit/(loss) 155 2 157 227 (96) 131
Gain on disposals of interests in investments 21.2 95 - 95 93 - 93
Amortisation of acquired intangible assets - (10) (10) - (11) (11)
Other net operating expenses (403) (65) (468) (433) (114) (547)
Group operating loss (153) (73) (226) (113) (221) (334)
Share of results of joint ventures and associates 15 47 (3) 44 55 (2) 53
Loss from operations (106) (76) (182) (58) (223) (281)
Investment income 6 52 - 52 64 - 64
Finance costs 7 (69) - (69) (86) (1) (87)
Loss before taxation (123) (76) (199) (80) (224) (304)
Taxation 9 (11) 4 (7) 2 1 3
Loss for the year from continuing operations (134) (72) (206) (78) (223) (301)
(Loss)/profit for the year from discontinued operations 10 (1) 1 - 24 218 242
Loss for the year (135) (71) (206) (54) (5) (59)
Attributable to
Equity holders (135) (71) (206) (55) (5) (60)
Non-controlling interests - - - 1 - 1
Loss for the year (135) (71) (206) (54) (5) (59)
1 Before non-underlying items (Note 8).
Notes 2015 2014pence
pence
Basic (loss)/earnings per ordinary share
- continuing operations 11 (30.2) (43.9)
- discontinued operations 11 0.1 35.3
11 (30.1) (8.6)
Diluted (loss)/earnings per ordinary share
- continuing operations 11 (30.2) (43.9)
- discontinued operations 11 0.1 35.3
11 (30.1) (8.6)
Dividends per ordinary share proposed for the year 12 - 5.6
Group Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014+
Group£m Share of joint ventures and associates£m Total£m Group£m Share of joint ventures and associates£m Total£m
(Loss)/profit for the year (250) 44 (206) (112) 53 (59)
Other comprehensive (loss)/income for the year
Items which will not subsequently be reclassified to the income statement
Actuarial (losses)/gains on retirement benefit liabilities (86) (4) (90) 237 (5) 232
Tax on above 15 - 15 (48) - (48)
(71) (4) (75) 189 (5) 184
Items which will subsequently be reclassified to the income statement
Currency translation differences 29 3 32 30 2 32
Fair value revaluations - PPP financial assets (13) (170) (183) 79 224 303
- cash flow hedges 8 21 29 (54) (102) (156)
- available-for-sale investments in mutual funds - - - 2 - 2
Recycling of revaluation reserves to the income statement on disposal^ (15) (5) (20) 18 (7) 11
Tax on above 1 33 34 (6) (23) (29)
10 (118) (108) 69 94 163
Total other comprehensive (loss)/income for the year (61) (122) (183) 258 89 347
Total comprehensive (loss)/income for the year (311) (78) (389) 146 142 288
Attributable to
Equity holders (389) 287
Non-controlling interests - 1
Total comprehensive (loss)/income for the year (389) 288
+ Re-presented to show the share of comprehensive (loss)/income relating to the Group's joint ventures and associates
separately from the rest of the Group.
^ Recycling of revaluation reserves to the income statement on disposal has no associated tax effect.
Group Statement of Changes in Equity
For the year ended 31 December 2015
Called-upsharecapital£m Sharepremiumaccount£m Specialreserve£m Shareof jointventures'andassociates'reserves £m Otherreserves£m Retainedprofits£m Non-controllinginterests£m Total£m
At 1 January 2014 344 64 24 278 323 - 2 1,035
Total comprehensive income for the year - - - 142 69 76 1 288
Ordinary dividends - - - - - (96) - (96)
Joint ventures' and associates' dividends - - - (56) - 56 - -
Issue of ordinary shares 1 - - - - - - 1
Movements relating to share-based payments - - - - (3) 5 - 2
Reserve transfers relating to joint venture and associate disposals - - - (24) - 24 - -
Other transfers - - (1) - (249) 250 - -
At 31 December 2014 345 64 23 340 140 315 3 1,230
Total comprehensive (loss)/income for the year - - - (78) 5 (316) - (389)
Joint ventures' and associates' dividends - - - (69) - 69 - -
Issue of ordinary shares - 1 - - - - - 1
Movements relating to share-based payments - - - - (1) (12) - (13)
Minority interest - - - - - - 1 1
Reserve transfers relating to joint venture and associate disposals - - - (13) - 13 - -
Other transfers - - (1) 16 - (15) - -
At 31 December 2015 345 65 22 196 144 54 4 830
Group Balance Sheet
At 31 December 2015
Notes 2015 2014£m
£m
Non-current assets
Intangible assets - goodwill 13 844 826
- other 14 222 216
Property, plant and equipment 167 171
Investments in joint ventures and associates 15 671 759
Investments 44 51
PPP financial assets 402 559
Trade and other receivables 16 114 111
Deferred tax assets 58 52
2,522 2,745
Current assets
Inventories and non-construction work in progress 144 170
Due from construction contract customers 379 562
Trade and other receivables 16 885 966
Cash and cash equivalents - infrastructure concessions 20.2 20 40
- other 20.2 646 691
Current tax assets 4 8
Derivative financial instruments 1 2
2,079 2,439
Assets held for sale 10 - 60
2,079 2,499
Total assets 4,601 5,244
Current liabilities
Due to construction contract customers (472) (350)
Trade and other payables 17 (1,700) (1,959)
Provisions (126) (120)
Borrowings - non-recourse loans 20.3 (22) (14)
- other 20.3 (13) (4)
Current tax liabilities (20) (5)
Derivative financial instruments (11) (14)
(2,364) (2,466)
Liabilities held for sale 10 - (47)
(2,364) (2,513)
Non-current liabilities
Trade and other payables 17 (130) (134)
Provisions (80) (77)
Borrowings - non-recourse loans 20.3 (363) (471)
- other 20.3 (470) (468)
Liability component of preference shares (98) (96)
Retirement benefit liabilities 18 (146) (128)
Deferred tax liabilities (53) (49)
Derivative financial instruments (67) (78)
(1,407) (1,501)
Total liabilities (3,771) (4,014)
Net assets 830 1,230
Equity
Called-up share capital 345 345
Share premium account 65 64
Special reserve 22 23
Share of joint ventures' and associates' reserves 196 340
Other reserves 144 140
Retained profits 54 315
Equity attributable to equity holders of the parent 826 1,227
Non-controlling interests 4 3
Totalequity 830 1,230
Group Statement of Cash Flows
For the year ended 31 December 2015
Notes 2015 2014
£m £m
Cash flows used in operating activities
Cash used in:
- continuing operations - underlying1 20.1 (84) (192)
- non-underlying 20.1 (54) (114)
- discontinued operations 20.1 3 (46)
Income taxes received/(paid) 6 (20)
Net cash used in operating activities (129) (372)
Cash flows from investing activities
Dividends received from: - joint ventures and associates - infrastructure concessions2 45 28
- joint ventures and associates - other2 24 28
Interest received - infrastructure concessions 16 23
Interest received - other 5 5
Acquisition of businesses, net of cash and cash equivalents acquired 21.1 (3) (3)
Purchases of: - intangible assets - infrastructure concessions (23) (28)
- intangible assets - other (20) (35)
- property, plant and equipment - infrastructure concessions (13) (23)
- property, plant and equipment - other (27) (43)
- other investments (2) (8)
Investments in and long-term loans to joint ventures and associates (79) (40)
Capital repayment from infrastructure concession joint venture 7 -
Short-term loans to joint ventures and associates (11) (4)
Loans repaid from joint ventures and associates 2 2
PPP financial assets cash expenditure (75) (232)
PPP financial assets cash receipts 30 37
Disposals of: - investments in joint ventures - infrastructure concessions2 21.2 104 117
- investments in joint ventures - other2 21 -
- subsidiaries net of cash disposed, separation and transaction costs - infrastructure concessions2 23 34
- subsidiaries net of cash disposed, separation and transaction costs - other2 16 701
- property, plant and equipment 7 16
- other investments 10 12
Net cash from investing activities 57 587
Cash flows from financing activities
Purchase of ordinary shares (17) (2)
Proceeds from: - issue of ordinary shares 1 1
- other new loans - infrastructure concessions 20.4 79 236
- other new loans - other 20.4 - 11
- finance leases 20.4 - 1
Repayments of: - loans - infrastructure concessions 20.4 (11) (7)
- loans - other 20.4 (1) (83)
- finance leases 20.4 - (3)
Ordinary dividends paid 12 - (96)
Interest paid - infrastructure concessions (19) (21)
Interest paid - other (32) (29)
Preference dividends paid (11) (11)
Net cash used in financing activities (11) (3)
Net (decrease)/increase in cash and cash equivalents 20.4 (83) 212
Effects of exchange rate changes 1 (12)
Cash and cash equivalents at beginning of year 727 526
Net decrease in cash within assets held for sale 18 1
Cash and cash equivalents at end of year 20.2 663 727
1 Before non-underlying items (Note 8).
2 Re-presented to separately identify cash flows from infrastructure concessions and other.
Notes to the financial statements
1 Basis of accounting
The annual financial statements have been prepared on a going concern basis and in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation
and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The Group has applied
all accounting standards and interpretations issued by the International Accounting Standards Board (IASB) and
International Financial Reporting Interpretations Committee as adopted by the European Union and effective for accounting
periods beginning on 1 January 2015. The presentational currency of the Group is sterling.
The financial information in this announcement, which was approved by the Board of Directors on 14 March 2016, does not
constitute the Company's statutory accounts for the years ended 31 December 2015 or 2014, but is derived from those
accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be
delivered following the Company's Annual General Meeting. The auditor has reported on the 2015 accounts; the report is
unqualified, did not draw attention to any matters by way of emphasis without qualifying the report and did not contain
statements under Section 498(2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full
financial statements for the Group and the Company that comply with IFRS in April 2016.
2 Going concern
The Directors have acknowledged the guidance "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies
2009" published by the Financial Reporting Council in October 2009 and consider it reasonable to assume that the Group has
adequate resources to continue for the foreseeable future and, for this reason, have continued to adopt the going concern
basis in preparing the financial statements. Further information is provided within Other Financial Items on pages 19 to
22.
3 Accounting policies
3.1 Judgements and key sources of estimation uncertainty
The Group's principal judgements and key sources of uncertainty are set out in Note 2.26 of the Annual Report and Accounts
2015.
In respect of the available-for-sale financial assets, in addition to judgement on discount rates, judgement is also
required when assessing the non-market related
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