REG - Balfour Beatty PLC - Balfour Beatty 2015 full-year results <Origin Href="QuoteRef">BALF.L</Origin> - Part 4
15/03/2016 07:05
- Part 4: For the preceding part double click ID:nRSO0684Sc
Basicpence Dilutedpence Basicpence Dilutedpence
Continuing operations
Loss per ordinary share (30.2) (30.2) (43.9) (43.9)
Amortisation of acquired intangible assets 0.8 0.8 1.1 1.1
Other non-underlying items 9.7 9.7 31.3 31.3
Underlying loss per ordinary share (19.7) (19.7) (11.5) (11.5)
Discontinued operations
Earnings per ordinary share 0.1 0.1 35.3 35.3
Amortisation of acquired intangible assets - - 0.8 0.8
Other non-underlying items (0.2) (0.2) (32.6) (32.6)
Underlying (loss)/earnings per ordinary share (0.1) (0.1) 3.5 3.5
Total operations
Loss per ordinary share (30.1) (30.1) (8.6) (8.6)
Amortisation of acquired intangible assets 0.8 0.8 1.9 1.9
Other non-underlying items 9.5 9.5 (1.3) (1.3)
Underlying loss per ordinary share (19.8) (19.8) (8.0) (8.0)
12 Dividends on ordinary shares
2015 2014
Per sharepence Amount£m Per sharepence Amount£m
Proposed dividends for the year
Interim - current year - - 5.6 38
Final - current year - - - -
- - 5.6 38
Recognised dividends for the year
Final - prior year - 58
Interim - current year - 38
- 96
Whilst the Board continues to recognise the importance of the dividend to its shareholders, in order to ensure balance
sheet strength is maintained during the transformation programme it will not be recommending a final dividend payable for
2015. The Board expects to reinstate the dividend payments, at an appropriate level at the interim results in August 2016.
13 Intangible assets - goodwill
Cost £m Accumulatedimpairmentlosses£m Carryingamount £m
At 1 January 2015 977 (151) 826
Currency translation differences 20 2 22
Impairment charges in respect of Blackpool Airport (Note 8.1.4.9) - (4) (4)
At 31 December 2015 997 (153) 844
Carrying amounts of goodwill by cash-generating unit
2015 2014+
£m Pre-taxdiscount rate% £m Pre-taxdiscount rate%
UK Regional and Engineering Services 248 10.2 248 10.4
Balfour Beatty Construction Group Inc. 377 12.6 356 12.6
Rail UK 66 10.4 66 8.7
Gas & Water 58 10.3 58 8.7
Balfour Beatty Communities US 45 12.6 43 8.7
Other 50 10.3-12.7 55 8.7-12.8
Group total 844 826
+ Re-presented to align 2014's carrying amount of goodwill to 2015's CGU allocation as a result of changes in management
reporting structure within Construction Services UK and Support Services. Construction Services UK has now been split into
UK Regional and Engineering Services and Major Projects, the latter being included in Other. Support Services has also been
split into Rail UK, Gas & Water and Power, the latter being included in Other. Balfour Beatty Communities US is now being
shown separately from Other.
The recoverable amount of goodwill is based on value-in-use, a key input of which is forecast cash flows. The Group's cash
flow forecasts are based on the expected workload of each cash-generating unit (CGU), giving consideration to the current
level of confirmed and anticipated orders. Cash flow forecasts for the next three years are based on the Group's Three Year
Plan, which covers the period from 2016 to 2018 and includes a stabilisation of performance in the Construction Services UK
business. The cash flow forecasts for each CGU were compiled from each of its constituent business units as part of the
Group's annual financial planning process.
13 Intangible assets - goodwill continued
The other key inputs in assessing each CGU are its long-term growth rate and discount rate. The discount rates have been
calculated using the Weighted Average Cost of Capital (WACC) method, which takes account of the Group's capital structure
(financial risk) as well as the nature of each CGU's business (operational risk). Long-term growth rates are assumed to be
the estimated future GDP growth rates based on published independent forecasts for the country or countries in which each
CGU operates, less 1.0% to reflect current economic uncertainties and their consequent estimated effect on public sector
spending on infrastructure.
In the derivation of each CGU's value-in-use, a terminal value is assumed based on a multiple of earnings before interest
and tax. The multiple is applied to a terminal cash flow, which is the normalised cash flow in the last year of the
forecast period. The EBIT multiple is calculated using the Gordon Growth Model and is a factor of the discount rate and
growth rate for each CGU. The nominal terminal value is discounted to present value.
2015 2014+
Inflation rate% Real growth rate% Nominal long-term growth rate applied% Inflation rate% Real growth rate% Nominal long-term growth rate applied%
UK Regional and Engineering Services 1.6 1.2 2.8 1.9 1.3 3.2
Balfour Beatty Construction Group Inc. 1.6 1.7 3.3 1.9 1.7 3.6
Rail UK 1.6 1.2 2.8 1.9 1.3 3.2
Gas & Water 1.6 1.2 2.8 1.9 1.3 3.2
Balfour Beatty Communities US 1.6 1.7 3.3 1.9 1.7 3.6
Other 1.6 1.7 3.3 1.9 1.7 3.6
+ Re-presented to align 2014's carrying amount of goodwill to 2015's CGU allocation as a result of changes in management
reporting structure within Construction Services UK and Support Services. Construction Services UK has now been split into
UK Regional and Engineering Services and Major Projects, the latter being included in Other. Support Services has also been
split into Rail UK, Gas & Water and Power, the latter being included in Other. Balfour Beatty Communities US is now being
shown separately from Other.
Sensitivities
The Group's impairment review is sensitive to changes in the key assumptions used. The major assumptions that result in
significant sensitivities are the discount rate and the long-term growth rate.
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 CGUs 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.
Except as noted below, a reasonable possible change in a single assumption will not give rise to an impairment in any of
the Group's CGUs.
Using a pre-tax discount rate of 10.3% and nominal long-term growth rate of 2.8% the recoverable amount of the remaining
goodwill in Gas and Water is £67m based on value-in-use, with consequent headroom of £9m. A 1.0% increase in the discount
rate and a 1.0% reduction in the growth rate would lead to an impairment of £22m.
14 Intangible assets - other
Cost£m Accumulatedamortisation£m CarryingAmount£m
At 1 January 2015 440 (224) 216
Currency translation differences 12 (7) 5
Additions 43 - 43
Disposals (6) 6 -
Charge for the year - (25) (25)
Impairment charge - (17) (17)
At 31 December 2015 489 (267) 222
Other intangible assets comprise: acquired intangible assets of customer contracts, customer relationships, and brand
names; Infrastructure Investments' intangible assets on a student accommodation project in which the Group has demand risk;
software and other, including internally generated software.
In 2015, an impairment charge of £17m was recognised against software intangible assets relating to costs capitalised in
the transformation of the Group's UK IT estate from a federated to a more centralised model. Due to curtailments in the
scope of the implementation and the Group's termination of its agreement with its implementation partner, future benefits
expected to be generated from this asset are reduced. The impairment was recognised as a non-underlying charge. Refer to
Note 8.1.4.6.
15 Joint ventures and associates
2015
Infrastructure Investments
ConstructionServices£m SupportServices£m UK^£m North America£m InfrastructureFund£m Total£m
Continuing operations
Revenue1 1,168 25 187 91 - 1,471
Underlying operating profit1 8 1 8 11 3 31
Investment income 2 - 160 4 - 166
Finance costs (2) - (129) (7) - (138)
Profit before taxation1 8 1 39 8 3 59
Taxation (3) - (9) - - (12)
Profit after taxation before non-underlying items 5 1 30 8 3 47
Share of results within non-underlying items (3) - - - - (3)
Profit after taxation 2 1 30 8 3 44
Intangible assets:
- goodwill 30 - - - - 30
- Infrastructure Investments intangible - - 25 - - 25
- other - - 11 - - 11
Property, plant and equipment 38 - 26 39 - 103
Investments in joint ventures and associates 5 - - - - 5
PPP financial assets - - 2,159 77 - 2,236
Military housing projects - - - 101 - 101
Infrastructure Fund Investment - - - - 38 38
Net cash/(borrowings) 234 - (1,525) (82) - (1,373)
Other net (liabilities)/assets (204) 4 (291) (23) - (514)
Net assets 103 4 405 112 38 662
Reclassify net liabilities relating to Dutco+ to provisions 9 - - - - 9
Adjusted net assets 112 4 405 112 38 671
^ Including Singapore and Australia.
1 Before non-underlying items (Note 8).
+ Represents the combined results of BK Gulf LLC and Dutco Balfour Beatty LLC as both joint ventures have common ownership
and report under the same management structure.
15 Joint ventures and associates continued
The Group's investment in military housing joint ventures' and associates' projects is recognised at its remaining equity
investment plus the value of the Group's accrued returns from the underlying projects.
2014
Infrastructure Investments
ConstructionServices£m SupportServices£m UK^£m NorthAmerica£m InfrastructureFund£m Total£m
Continuing operations
Revenue1 1,168 26 249 47 - 1,490
Underlying operating profit1 10 1 11 8 - 30
Investment income 1 - 176 2 - 179
Finance costs - - (135) (4) - (139)
Profit before taxation1 11 1 52 6 - 70
Taxation (3) - (12) - - (15)
Profit after taxation before non-underlying items 8 1 40 6 - 55
Share of results within non-underlying items (2) - - - - (2)
Profit after taxation 6 1 40 6 - 53
Intangible assets:
- goodwill 29 - - - - 29
- Infrastructure Investments intangible - - 24 - - 24
- other - - 6 - - 6
Property, plant and equipment 41 - 16 4 - 61
Investments in joint ventures and associates 5 - - - - 5
PPP financial assets - - 2,326 33 - 2,359
Military housing projects - - - 91 - 91
Infrastructure Fund investment - - - - 20 20
Net cash/(borrowings) 208 2 (1,456) (24) - (1,270)
Other net liabilities (160) - (394) (12) - (566)
Net assets 123 2 522 92 20 759
^ Including Singapore and Australia.
1 Before non-underlying items (Note 8).
16 Trade and other receivables
2015£m 2014 £m
Current
Trade receivables 506 583
Less: provision for impairment of trade receivables (11) (26)
495 557
Other receivables 45 56
Due from joint ventures and associates 55 33
Due from joint operations 10 29
Contract retentions receivable+ 202 210
Accrued income 24 39
Prepayments 54 42
885 966
Non-current
Other receivables 2 7
Due from joint ventures and associates 12 16
Due from joint operations - 4
Contract retentions receivable+ 100 84
114 111
Total trade and other receivables 999 1,077
+ Including £298m (2014: £291m) construction contract retentions receivable.
17 Trade and other payables
2015£m 2014£m
Current
Trade and other payables 838 905
Accruals 755 961
Deferred income 7 5
Advance payments on contracts - 1
VAT, payroll taxes and social security 67 79
Due to joint ventures and associates 25 -
Dividends on preference shares 5 5
Due on acquisitions 3 3
1,700 1,959
Non-current
Trade and other payables 86 65
Accruals 18 24
Deferred income 1 3
Due to joint ventures and associates 11 27
Due on acquisitions 14 15
130 134
Total trade and other payables 1,830 2,093
18 Retirement benefit liabilities
IAS 19 Employee Benefits prescribes the accounting for defined benefit schemes in the Group's financial statements.
Obligations are calculated using the projected unit credit method and discounted to a net present value using the market
yield on high-quality corporate bonds. The pension expense relating to current service cost is charged to contracts or
overheads based on the function of scheme members and is included in cost of sales and net operating expenses. The net
finance cost arising from the expected interest income on plan assets and interest cost on scheme obligations is included
in finance costs. Actuarial gains and losses are reported in the Statement of Comprehensive Income.
The investment strategy of the Balfour Beatty Pension Fund (BBPF) is to hold assets of appropriate liquidity and
marketability to generate income and capital growth. The BBPF invests partly in a diversified range of assets including
equities and hedge funds in anticipation that, over the longer term, they will grow in value faster than the obligations.
The equities are in the form of pooled funds and are a combination of UK, other developed market and emerging market
equities. The remaining BBPF assets are principally fixed and index-linked bonds and swaps in order to match the duration
and inflation exposure of the obligations and enhance the resilience of the funding level of the scheme. The performance of
the assets is measured against market indices.
A formal triennial funding valuation of the BBPF was carried out as at 31 March 2013. As a result the Group agreed with
effect from April 2013 to make ongoing deficit payments of £50m per annum, increasing to: £55m per annum from April 2016;
£60m per annum from April 2017; and £65m per annum from April 2018 to May 2020, increasing each year by CPI (minimum 0% and
capped at 5%) plus (in the period before the next actuarial valuation is agreed) 200% of any increase in the Company's
dividend in excess of capped CPI. If the Company makes any one-off return of value to shareholders in excess of £200m such
as a special dividend, share buy-back, capital payment or similar before the next actuarial valuation is agreed, there will
be an additional increase in the deficit payment for the following year only, calculated as the regular deficit payment for
that year multiplied by 75%, multiplied by the value of the one-off return of value, divided by the total of the regular
dividends for the year prior to the year in which the one-off return was made. This agreement constitutes a minimum funding
requirement under IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction. Under the terms of the trust deed and subject to the agreement of the trustees (who would need to balance
their responsibility to set contribution rates in accordance with the trust rules together with the interests of the
beneficiaries at the time), the Group has the ability to use surplus funds, should they arise, in the defined benefit
section of the BBPF to pay its contributions towards further service benefits in the defined benefit and defined
contribution sections of the scheme. The Directors consider that, as the Group is permitted to assume that it would not be
required to make contributions to maintain a surplus, should one arise, these further service benefits will exceed the
minimum funding requirement.
In 2014, the Group commenced a commutation exercise for pensioner members and dependants with benefits with a value of less
than £30,000 and £18,000, respectively. This gave those members the option to extinguish their benefits within the BBPF in
exchange for a cash lump sum. The acceptance of this offer by certain members and dependants gave rise to a settlement
event resulting in a decrease in liabilities of £3m (2014: £2m), which was recognised in other non-underlying items. Refer
to Note 8.1.4.8.
In anticipation of the disposal of Parsons Brinckerhoff and the then proposed £200m return of capital to shareholders, and
following the scheme apportionment arrangement made in relation to the disposal of Balfour Beatty WorkPlace, agreement was
reached on 24 September 2014 with the trustees of the BBPF for additional deficit payments of £100m in 2015, of which £15m
was in respect of Balfour Beatty WorkPlace and £85m was in respect of Parsons Brinckerhoff. The £15m was paid to the BBPF
in 2015 in agreed monthly instalments.
18 Retirement benefit liabilities continued
On 1 July 2015, the Group established a Scottish Limited Partnership (SLP) structure into which its investment in Consort
Healthcare (Birmingham) Holdings Ltd (Consort Birmingham), which owns the Group's 40% interest in the Birmingham Hospital
PFI investment, was transferred. The BBPF is a partner in the SLP and is entitled to a share of the income of the SLP. In
accordance with IFRS 10 Consolidated Financial Statements, the SLP is deemed to be controlled by the Group, which retains
the ability to substitute the investment in Consort Birmingham for other investments from time to time. Alongside the
establishment of the SLP, agreement was reached to defer the payment of £85m which had been due to be paid to the BBPF in
2015 over the period to 2023, with the first payment of £4m due in 2016. Under IAS 19, the investment held by the BBPF in
the SLP does not constitute a plan asset and therefore the pension deficit presented in these financial statements does not
reflect the BBPF's interest in the SLP. Distributions from the SLP to the BBPF will be reflected in the Group's financial
statements as pension contributions on a cash basis. The first distribution was received in December 2015 and amounted to
£1m.
The next formal triennial valuation of the BBPF will be as at 31 March 2016. The Company and the trustees are in the early
stages of preparing for this valuation.
Principal actuarial assumptions for the IAS 19 accounting valuations of the Group's principal schemes
2015 2014
BalfourBeattyPensionFund % RailwaysPensionScheme % BalfourBeattyPensionFund % RailwaysPensionScheme %
Discount rate 3.70 3.70 3.60 3.60
Inflation rate - RPI 3.00 3.00 2.95 2.95
- CPI 1.60 1.60 1.55 1.55
Future increases in pensionable salary 1.60 1.60 1.55 1.55
Rate of increase in pensions in payment (or such other rate as is guaranteed) 2.85 1.80 2.80 1.80
Number Number Number Number
Total number of defined benefit members 31,956 3,078 34,264 3,123
The BBPF actuary undertakes regular mortality investigations based on the experience exhibited by pensioners of the BBPF
and due to the size of the membership of the BBPF (45,119 members at 31 December 2015) is able to make comparisons of this
experience with the mortality rates set out in the various published mortality tables. The actuary is also able to monitor
changes in the exhibited mortality over time. This research is taken into account in the Group's mortality assumptions
across its various defined benefit schemes.
The mortality assumptions as at 31 December 2015 have been updated to reflect the experience of Balfour Beatty pensioners
for the period 1 April 2004 to 31 March 2015. The mortality tables adopted for the 2015 IAS 19 valuations are the
Self-Administered Pension Scheme (SAPS) S2 tables (2014: SAPS S2 tables) with a multiplier of 102% for all male and female
members (2014: 102%) and 109% for female widows and dependants (2014: 109%); all with future improvements in line with the
CMI 2015 core projection model (2014: CMI 2014 core projection model), with long-term improvement rates of 1.25% per annum
and 1.00% per annum for males and females respectively (2014: 1.25% per annum and 1.00% per annum).
2015 2014
Average life expectancy at 65 years of age Average life expectancy at 65 years of age
Male Female Male Female
Members in receipt of a pension 22.1 23.9 22.2 24.0
Members not yet in receipt of a pension (current age 50) 23.4 25.0 23.5 25.1
18 Retirement benefit liabilities continued
Amounts recognised in the Balance Sheet
2015 2014
BalfourBeattyPensionFund£m RailwaysPensionScheme£m Other schemes^ £m Total£m BalfourBeattyPensionFund £m RailwaysPensionScheme£m Other schemes^ £m Total£m
Present value of obligations (3,031) (314) (52) (3,397) (3,140) (319) (59) (3,518)
Fair value of plan assets 2,988 263 - 3,251 3,128 261 1 3,390
Liabilities in the balance sheet (43) (51) (52) (146) (12) (58) (58) (128)
^ Available-for-sale investments in mutual funds of £20m (2014: £20m) are held to satisfy the Group's deferred compensation
obligations.
The defined benefit obligation comprises £52m (2014: £58m) arising from wholly unfunded plans and £3,345m (2014: £3,460m)
arising from plans that are wholly or partly funded.
Movements in the retirement benefit liabilities for the year 2015£m
At 1 January 2015 (128)
Currency translation differences (1)
Current service cost (7)
Interest cost (123)
Interest income 120
Actuarial movements - on obligations from changes to other financial assumptions 51
- on obligations from changes in demographic assumptions 16
- on obligations from experience gains 1
- on assets (154)
Contributions from employer - regular funding 4
- ongoing deficit funding 66
Benefits paid 6
Settlements 3
At 31 December 2015 (146)
The BBPF includes a defined contribution section with 13,163 members at 31 December 2015 (2014: 12,809 members) with £45m
(2014: £49m) of contributions paid from continuing operations and charged in the income statement in respect of this
section. Costs relating to discontinued operations in respect of this section were £nil (2014: £4m). The total net pension
cost recognised in the income statement in respect of employee service for defined benefit and defined contribution schemes
was £53m (2014: £94m), of which £nil (2014: £21m) relates to discontinued operations.
Sensitivity of the Group's retirement benefit obligations at 31 December 2015 to different actuarial assumptions
Obligations Percentagepoints/years (Decrease)/increase inobligations % (Decrease)/increase inobligations £m
Increase in discount rate 0.5% (7.8) (262)
Increase in market expectation of RPI inflation 0.5% 5.3 178
Increase in salary growth 0.5% 0.1 3
Increase in life expectancy 1 year 4.0 135
Sensitivity of the Group's retirement benefit assets at 31 December 2015 to changes in market conditions
Assets Percentagepoints (Decrease)/increase inassets% (Decrease)/increase inassets£m
Increase in interest rates 0.5% (8.3) (270)
Increase in market expectation of RPI inflation 0.5% 4.9 159
19 Share capital
During the year ended 31 December 2015, 210,214 (2014: 101,540) ordinary shares were issued following the exercise of
savings-related share options and nil (2014: 318,840) ordinary shares were issued following the exercise of executive share
options for an aggregate cash consideration of £1m (2014: £1m).
20 Notes to the statement of cash flows
Continuing operations
20.1 Cash (used in)/generated from operations Underlying items12015£m Non-underlying items(Note 8)2015£m Discontinuedoperations and assets held for sale2015£m Total2015£m Total2014£m
(Loss)/profit from operations (106) (76) - (182) (43)
Share of results of joint ventures and associates (47) 3 - (44) (53)
Depreciation of property, plant and equipment 33 2 - 35 54
Amortisation of other intangible assets 15 10 - 25 25
Impairment of IT intangible assets - 17 - 17 21
Pension deficit payments (66) - - (66) (49)
Pension fund settlement gain - (3) - (3) (2)
Movements relating to share-based payments 5 - - 5 5
Profit on disposal of investments in infrastructure concessions (95) - - (95) (93)
Profit on disposal of property, plant and equipment (1) - - (1) (7)
Net gain on disposal of other businesses - (13) (1) (14) (234)
Goodwill impairment - 4 - 4 24
Impairment of assets within Rail Germany - 7 - 7 30
Other non-cash items (1) - - (1) 1
Operating cash flows before movements in working capital (263) (49) (1) (313) (321)
Decrease/(increase) in operating working capital 179 (5) 4 178 (31)
Inventories and non-construction work in progress 21 5 1 27 (30)
Due from construction contract customers 160 22 - 182 (92)
Trade and other receivables 52 18 4 74 (43)
Due to construction contract customers 137 (11) - 126 50
Trade and other payables (181) (51) (4) (236) 85
Provisions (10) 12 3 5 (1)
Cash (used in)/generated from operations (84) (54) 3 (135) (352)
1 Before non-underlying items (Note 8).
20.2 Cash and cash equivalents 2015£m 2014£m
Cash and deposits 562 653
Term deposits 84 38
646 691
Bank overdrafts (3) (4)
643 687
Cash balances within infrastructure concessions 20 40
663 727
20 Notes to the statement of cash flows continued
20.3 Analysis of net borrowings 2015£m 2014£m
Cash and cash equivalents, excluding overdrafts and cash balances within infrastructure concessions 646 691
Bank overdrafts (3) (4)
US private placement (236) (224)
Liability component of convertible bonds (233) (227)
Other loans (10) (16)
Finance leases (1) (1)
163 219
Non-recourse infrastructure concessions project finance loans at amortised cost with final maturity between 2027 and 2037 (385) (485)
Infrastructure concessions cash and cash equivalents 20 40
(365) (445)
Net borrowings (202) (226)
20.4 Analysis of movement in net (borrowings)/cash Infrastructureconcessionsnon-recourseproject finance2015£m Other2015£m Total2015£m Total2014£m
Opening net borrowings (445) 219 (226) (420)
Currency translation differences (3) (12) (15) (21)
Net (decrease)/increase in cash and cash equivalents (20) (63) (83) 212
Accretion on convertible bonds - (6) (6) (6)
Proceeds from new loans (79) - (79) (247)
Proceeds from new finance leases - - - (1)
Repayments of loans 11 1 12 90
Repayments of finance leases - - - 3
Transfer of borrowings in the period (6) 6 - -
Disposal of non-recourse borrowings 177 - 177 163
Net decrease in cash within assets held for sale - 18 18 1
Closing net (borrowings)/cash (365) 163 (202) (226)
20.5 Borrowings
During the year ended 31 December 2015 the significant movements in borrowings were: a net decrease in cash and cash
equivalents (excluding cash held in infrastructure concession projects) of £63m (2014: £237m net increase); a net repayment
of short-term loans of £1m (2014: £83m); an increase of £79m (2014: £236m) in non-recourse loans funding the development of
financial assets in infrastructure concession subsidiaries; disposal of non-recourse borrowings in Thanet OFTO HoldCo Ltd
£177m (2014: £163m on disposal of Transform Schools (Knowsley) Holdings Ltd); and repayment of £11m (2014: £7m) of
non-recourse loans.
21 Acquisitions and disposals
21.1 Current and prior year acquisitions
There were no material acquisitions during the years ended 31 December 2015 and 2014.
Deferred consideration paid during 2015 in respect of acquisitions completed in earlier years was £3m (2014: £3m). This
related to the Group's acquisition of Centex Construction in 2007.
21.2 Current year disposals
Notes Disposal date Entity/business Percentagedisposed % Cashconsideration£m Net assetsdisposed £m Amount recycled fromreserves£m Direct costs incurred,indemnityprovisionscreated andfair valueuplift £m Underlying gain £m Non-underlying gain/(loss) £m
21.2.1 31 January 2015 Parts of Rail Germany * 100 5 (5) (1) (4) - (5)
21.2.2 16 February 2015 Thanet OFTO HoldCo Ltd * 80 40 (35) 18 6 29 -
21.2.3 11 March 2015 Rail Italy * 100 5 (6) (2) (1) - (4)
21.2.4 12 March 2015 Baoji BaoDeLi Electrification Ltd ^ 25 4 (2) - - - 2
21.2.5 28 April 2015 Edinburgh Royal Infirmary ^ 50 72 (15) (1) (1) 55 -
21.2.6 27 May 2015 Signalling Solutions Ltd ^ 50 18 (1) - (1) - 16
21.2.7 30 November 2015 Aura Holdings (Newcastle) Ltd ^ 25 7 (3) - - 4 -
21.2.8 2 December 2015 Greater Gabbard OFTO Holdings Ltd ^ 33 26 (25) 6 - 7 -
177 (92) 20 (1) 95 9
* Subsidiary.
^ Joint venture.
21.2.1 On 31 January 2015, as part of the ongoing process to exit the Mainland European rail business, the Group disposed
of part of its Rail business in Germany and its Rail business in Austria for a cash consideration of £5m. The disposal
resulted in a £5m loss being recognised as a non-underlying item within continuing operations, comprising a £1m loss on
recycling currency translation reserves to the income statement and costs of disposal of £4m, of which £1m remains unpaid.
The disposal included cash disposed of £12m.
21.2.2 On 16 February 2015, the Group disposed of an 80% interest in Thanet OFTO HoldCo Ltd (Thanet) for a cash
consideration of £40m. This infrastructure concession disposal resulted in a net gain of £29m being recognised within
underlying operating profit, comprising: a gain of £5m in respect of the investment in the subsidiary, an £18m gain in
respect of revaluation reserves recycled to the income statement and £6m representing the fair value uplift of the interest
retained. The Group retains a 20% interest in Thanet which will be accounted for as a joint venture using the equity
method. The disposal included cash disposed of £17m.
21.2.3 On 11 March 2015, as part of the ongoing process to exit the mainland European Rail business, the Group disposed of
its Rail business in Italy for a cash consideration of £5m. The disposal resulted in a £4m loss being recognised as a
non-underlying item within discontinued operations, comprising a £1m loss in respect of the fair value of net assets
disposed, a £2m loss on recycling currency translation reserves to the income statement and costs of disposal of £1m. The
disposal included cash disposed of £3m.
21 Acquisitions and disposals continued
21.2.4 On 12 March 2015, as part of the ongoing process to exit the mainland European Rail business, the Group disposed of
its 25% interest in Baoji BaoDeLi Electrification Equipment Ltd for a cash consideration of £4m. The disposal resulted in a
£2m gain being recognised as a non-underlying item within continuing operations in respect of the investment in the joint
venture.
21.2.5 On 28 April 2015, the Group disposed of its 50% interest in Consort Healthcare (Edinburgh Royal Infirmary) Holdings
Ltd (Edinburgh Royal Infirmary) for a cash consideration of £72m. This infrastructure concession disposal resulted in a net
gain of £55m being recognised within underlying operating profit, comprising: a gain of £57m in respect of the investment
in the joint venture, a £1m loss in respect of revaluation reserves recycled to the income statement and £1m costs of
disposal incurred.
21.2.6 On 27 May 2015, the Group disposed of its 50% interest in Signalling Solutions Ltd for an initial cash consideration
of £17m. An additional cash consideration of £1m was subsequently received in the second-half of the year. The disposal
resulted in a £16m gain being recognised in non-underlying items within continuing operations in respect of the disposal of
the investment in the joint venture, after deducting disposal costs of £1m.
21.2.7 On 30 November 2015, the Group disposed of its 25% interest in Aura Holdings (Newcastle) Ltd for a cash
consideration of £7m. This infrastructure concession disposal resulted in a net gain of £4m being recognised within
underlying operating profit in respect of the investment in the joint venture.
21.2.8 On 2 December 2015, the Group disposed of its 33% interest in Greater Gabbard OFTO Holdings Ltd for a cash
consideration of £26m. This infrastructure concession disposal resulted in a net gain of £7m being recognised within
underlying operating profit, comprising a gain of £1m in respect of the investment in the joint venture and a £6m gain in
respect of revaluation reserves recycled to the income statement.
21.2.9 In 2015, the Group finalised the cash consideration due on the disposal of its professional services business,
Parsons Brinckerhoff (PB), amounting to additional consideration for the Group of £16m of which £7m was recognised as a
receivable at the date of disposal in the prior period. In accordance with the stock purchase agreement, the Group received
cash of £20m relating to historic tax matters (£16m of which was recognised as a current tax receivable in the prior
period) and the Group also released an indemnity provision relating to an historic legal claim of £3m which was
successfully settled during the period. Offsetting this additional non-underlying gain on disposal are separation costs
incurred during the period of £4m, of which £2m were paid during the period, and the write-off of a deferred tax asset of
£7m resulting in an overall net gain of £5m. Transaction costs of £9m, which were accrued in the prior period, were paid in
the year.
22 Contingent liabilities
The Company and certain subsidiary undertakings have, in the normal course of business, given guarantees and entered into
counter-indemnities in respect of bonds relating to the Group's own contracts and given guarantees in respect of their
share of certain contractual obligations of joint ventures and associates and certain retirement benefit liabilities of the
Balfour Beatty Pension Fund and the Railways Pension Scheme. Guarantees are treated as contingent liabilities until such
time as it becomes probable payment will be required under the terms of the guarantee.
Provision has been made for the Directors' best estimate of known legal claims, investigations and legal actions in
progress. The Group takes legal advice as to the likelihood of success of claims and actions and no provision is made where
the Directors consider, based on that advice, that the action is unlikely to succeed, or that the Group cannot make a
sufficiently reliable estimate of the potential obligation.
23 Related party transactions
The Group has contracted with, provided services to, and received management fees from, certain joint ventures and
associates amounting to £414m (2014: £673m). These transactions occurred in the normal course of business at market rates
and terms. In addition, the Group procured equipment and labour on behalf of certain joint ventures and associates which
were recharged at cost with no mark-up. The amounts due from or to joint ventures and associates at the reporting date are
disclosed within Notes 16 and 17 respectively.
24 Principal risks and uncertainties
The nature of the principal risks and uncertainties which could adversely impact the Group's profitability and ability to
achieve its strategic objectives include: external
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