REG - Balfour Beatty PLC - Balfour Beatty PLC 2024 Full Year Results
12/03/2025 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250312:nRSL2732Aa&default-theme=true
RNS Number : 2732A Balfour Beatty PLC 12 March 2025
BALFOUR BEATTY PLC RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2024
12 March 2025
Continued strong performance delivering profitable growth
Further momentum into 2025 and 2026
Leo Quinn, Balfour Beatty Group Chief Executive, said: "The Group made further
strong progress in 2024. We once again delivered managed profitable growth
from our earnings-based businesses and healthy cash generation, while also
increasing our high-quality order book.
"The Board continues to have confidence in Balfour Beatty's ongoing ability to
deliver sustainable cash generation for significant shareholder returns, as
evidenced by our announcement of increased dividends and share buybacks for
2025. Balfour Beatty is well positioned to continue its disciplined
performance in the medium term, with strong order book visibility, attractive
opportunities in our growth markets of UK energy, transport and defence, and
US buildings, and our expert, highly engaged workforce positioning the Group
for ongoing success."
Profitable growth from earnings-based businesses
· Underlying profit from operations (PFO) from
earnings-based businesses up 7% to £252 million (2023: £236 million)
· Underlying profit before tax up 11%, including
increased Investments disposals and net finance income
· Underlying EPS of 43.6p up 17% (2023: 37.3p)
· Non-underlying charge of £49 million (2023: £11m),
including provision of costs relating to Building Safety Act
Diversified portfolio driving consistent earnings delivery, with PFO growth in
each segment
· Construction Services: PFO up 2% to £159 million
(2023: £156 million)
· Support Services: PFO up 16% to £93 million (2023:
£80 million) driven by strong revenue growth
· Infrastructure Investments: £1.3 billion Directors'
valuation up 3% (2023: £1.2 billion)
Financial strength and sustainable cash generation supporting increased
shareholder returns
· 9% increase in recommended full year dividend at 12.5
pence per share (2023: 11.5 pence per share)
· £125 million share buyback confirmed for 2025; 2025
total expected cash return of c.£188 million (2024: £161 million)
· Average net cash of £766 million (2023: £700 million)
Positive outlook with good short-term visibility and significant medium-to
long-term potential
· Continued growth in earnings-based businesses
underpinned by high-quality £18.4 billion order book (2023: £16.5 bn)
· Group capabilities aligned to significant future
opportunities
· High and rising employee engagement underpinning
progress in growing Group's capability
· Further profitable growth from earnings-based
businesses expected for 2025 and 2026
(£ million unless otherwise specified) 2024 2023
Underlying(2) Total Underlying(2) Total
Revenue(1) 10,015 10,015 9,595 9,595
Profit from earnings-based businesses 252(#) 180 236(#) 223
Profit from operations 248(#) 173 228(#) 211
Pre-tax profit 289 214 261 244
Profit for the year 227 178 205 194
Basic earnings per share 43.6p 34.2p 37.3p 35.3p
Dividends per share 12.5p 11.5p
2024 2023
Order book(1) £18.4bn £16.5bn
Directors' valuation of Investments portfolio £1.3bn £1.2bn
Net cash - recourse(3) 943 842
Average net cash - recourse(3) 766 700
Segment analysis 2024 2023
Revenue(1) PFO(2,#) PFO Revenue(1) PFO(2,#) PFO
margin(2) margin(2)
£m £m % £m £m %
UK Construction 3,011 81 2.7% 3,027 69 2.3%
US Construction 3,638 40 1.1% 3,697 51 1.4%
Gammon 1,550 38 2.5% 1,357 36 2.7%
Construction Services 8,199 159 1.9% 8,081 156 1.9%
Support Services 1,210 93 7.7% 1,006 80 8.0%
Earnings-based businesses 9,409 252 2.7% 9,087 236 2.6%
Infrastructure Investments 606 35 508 31
Corporate activities - (39) - (39)
Total 10,015 248 9,595 228
Notes:
(1) Including share of joint ventures and associates
(2) Before non-underlying items (Note 9)
(3) Excluding non-recourse net borrowings, which comprise cash and debt
ringfenced within certain infrastructure investments project companies, and
lease liabilities
(#) Underlying profit from operations, or PFO, as defined in the Measuring our
financial performance section
A reconciliation of the Group's performance measures to its statutory results
is provided in the Measuring our financial performance section
Investor and analyst enquiries:
Jim Ryan
Tel. +44 (0)7858 368527
jim.ryan@balfourbeatty.com (mailto:jim.ryan@balfourbeatty.com)
Media enquiries:
Antonia Walton
Tel. +44 (0)203 810 2345
Antonia.walton@balfourbeatty.com (mailto:)
Investor and analyst presentation:
A presentation to investors and analysts will be made at Deutsche Numis, 45
Gresham Street, London, EC2V 7BF at 09:00 (GMT) on 12 March 2025. There will
be a live webcast of this on: www.balfourbeatty.com/webcast
(https://eur02.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.balfourbeatty.com%2Fwebcast&data=05%7C01%7CJim.Ryan%40balfourbeatty.com%7C25665b1cf76942e13aeb08db98b7909e%7Ca04222fe0c5c40bb842097a219ba514e%7C0%7C0%7C638271686390333218%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=OTXWdtcSRw138kobSP1OBWwmUVHSSY7cejEYWZEsrvs%3D&reserved=0)
. (http://www.balfourbeatty.com/webcast) The webcast will be recorded and
subsequently available at Results, reports and presentations - Investors -
Balfour Beatty plc
(https://www.balfourbeatty.com/investors/results-reports-and-presentations/) .
2024 FULL YEAR RESULTS ANNOUNCEMENT
· GROUP CHIEF EXECUTIVE'S OVERVIEW
· RESULTS OVERVIEW
· DIVISIONAL REVIEWS
· MEASURING OUR FINANCIAL PERFORMANCE
GROUP CHIEF EXECUTIVE'S OVERVIEW
2024 profitable growth targets achieved
Balfour Beatty delivered another year of strong operational performance in
2024, which resulted in the Group growing earnings, average cash and order
book. The key 2024 objective of growing the profit from earnings-based
businesses (Construction Services and Support Services) was achieved, with
underlying profit from operations (PFO) from those businesses increasing by 7%
to £252 million (2023: £236 million), while the year-end order book
increased by 12% to £18.4 billion (2023: £16.5 billion) following progress
in Balfour Beatty's chosen growth markets. The Group's underlying profit for
the year improved to £227 million (2023: £205 million) driven by the
earnings-based businesses, increased gains on Investments disposals and higher
net finance income. Non-underlying items after tax were a loss of £49 million
(2023: £11 million) and included a charge in relation to the Group's
obligations under the UK Building Safety Act (BSA).
In 2024, £161 million of cash was returned to shareholders (2023: £208
million) through a combination of dividends and share buybacks and average net
cash increased to £766 million compared to £700 million in 2023.
Strong Group portfolio performance led by UK
Balfour Beatty's geographical, operational and contract diversity is a key
strength of the Group, and has been an important factor in the consistency of
its financial results in recent years. This was further demonstrated in 2024,
as the Group delivered profitable growth in both of the earnings-based
businesses. Construction Services underlying PFO increased to £159 million,
as UK Construction PFO margin continued to improve with a further year of
strong project delivery and Gammon recorded 14% revenue growth, while US
Construction profitability reduced due to the cost of delays at a small number
of civils projects. Support Services delivered strong growth, with revenue
increasing by 20% and PFO margin remaining close to the top of its targeted
range. Infrastructure Investments surpassed its disposal targets, which offset
an increase in costs. The Directors' valuation of the Investments portfolio
increased by 3% to £1.3 billion (2023: £1.2 billion), with two new projects
added. The Group has forecast further growth in the medium term, driven by its
focus on four key markets; UK energy, transport and defence and US
buildings.
High-quality order book providing foundations for 2025 and 2026
The Group's order book grew by 12% in 2024 to £18.4 billion (2023: £16.5
billion), and while orders remain significant across Balfour Beatty's focused
geographic footprint of the UK, US and Hong Kong, the increase was largely
driven by progress in two of the identified growth markets:
· In the UK, the strengthening and upgrading of the power
transmission network is underway and the demand for engineering and
construction expertise continues to outweigh supply. Balfour Beatty holds
market-leading capabilities in this space and the order book for power
transmission and distribution work has more than doubled in 2024;
· In the US, the combination of the Group's organic growth strategy
and a more stable economy has resulted in the buildings business growing its
order book by 26% (24% at constant exchange rate (CER)) during the year, with
increased demand across most of its geographies and client sectors.
In a period of rising demand, the Group continues to be selective in the work
it undertakes, using increased bid margin thresholds and utilisation of
disciplined risk frameworks and contract governance to reduce risk and raise
quality in the forward order book. As a result, the order book comprises a
portfolio of projects that the Group believes has the appropriate contractual
terms and conditions for the risk undertaken, with UK Construction being
heavily weighted towards lower-risk target cost and cost plus incentivised fee
contracts and US Construction being heavily weighted towards buildings
projects, for which the Group ensures early issuing of subcontracts and
insurance of the supply chain in order to protect its margin.
Beyond the reported order book, Balfour Beatty has positions on several
long-term frameworks, including Scottish and Southern Electricity Networks'
(SSEN) c.£10 billion Accelerated Strategic Transmission Investment (ASTI)
framework and two SCAPE Civil Engineering frameworks in the UK, which were
extended for two further years in 2024. The Group's awarded but not contracted
pipeline also grew in the year, due largely to the addition of SSEN's £690
million Skye 132kV reinforcement project and various US Buildings projects.
Looking ahead to further growth
The Group's outlook in each of its chosen markets is positive through the
medium term. In the UK, multi-year investment in infrastructure is a priority
and a necessity for the Government and will be crucial in achieving the
country's growth and clean energy goals. The Government has also committed to
leveraging private investment, upskilling the UK's workforce and delivering
planning reform with the Planning and Infrastructure Bill. In the US, US
Buildings' organic growth strategy and a more stable economy have contributed
to the division's encouraging progress.
· UK energy: The essential long-term upgrade to the UK's energy
infrastructure is well underway, driving improvement in energy security and
facilitating the energy transition, with significant and timely investment in
both generation and network infrastructure necessary to meet the Government's
net zero targets. Balfour Beatty is heavily involved in projects such as the
new Hinkley Point C nuclear power station and Net Zero Teesside and across the
UK with its market-leading power transmission and distribution capability.
· US buildings: Balfour Beatty's buildings operations are focused
primarily on specific, high growth regions, with construction spending in the
Group's chosen states projected to grow 7% per year to 2029, ahead of the
national average. There are encouraging trends in the division's specialist
industries, with increased investment in government buildings, higher
residential construction, and booming data centre demand. The Group has also
seen encouraging results from its organic growth strategy, securing increased
orders in sectors such as education, aviation and hospitality, as a result of
further geographic diversification.
· UK defence: Government plans to strengthen national security and
modernise defence infrastructure are bringing material opportunities to
market, with these schemes increasingly requiring contractors with
high-security experience and end-to-end capabilities. Balfour Beatty's
capabilities and credentials, including its experiences in civil nuclear
construction, are well matched to these requirements and in 2024 the Group was
selected by Rolls-Royce as a construction partner for its Ministry of Defence
and AUKUS expansion.
· UK transport: Investment in the UK transport network is an
important component of the Government's growth plans and is essential to
address ageing infrastructure, net zero targets and domestic and international
connectivity. Given Balfour Beatty's capabilities and market share in the
construction and maintenance of road and rail, and its experience in
delivering major airport projects, the Group is well positioned to capitalise
on transport opportunities when they arise, with growth expected in the medium
term.
In the shorter term, PFO growth across 2025 and 2026 in Balfour Beatty's
Construction Services division is expected to be weighted towards further
margin improvement, rather than higher volumes. Growth in the Support Services
division is expected to be largely driven by the expansion of work in the
power transmission and distribution sector, which is not reliant on Government
funding or the ongoing comprehensive spending review.
Capability is key
The combination of a strong order book and broad market opportunities is
supportive for Balfour Beatty's growth aspirations, but as demand rises,
challenges surrounding capability and workforce naturally rise too. As such,
attracting and recruiting new talent and retaining its existing experts are
increasingly important areas of focus and investment for the Group, as it
looks to closely match the rising trajectory of work with a growing, and
appropriately skilled, workforce.
The annual employee engagement survey is an essential tool for the Group to
assess its own performance and the progress made in the year. In 2024, the
survey results were particularly strong, with overall employee engagement at
84% (2023: 81%), which is 11 percentage points above the industry average.
This is the seventh successive year of improvement in Balfour Beatty's
employee engagement scores.
Balfour Beatty's people strategy focuses on the four strategic pillars of
Attract, Retain, Grow and Thrive. To attract new talent at all levels of
experience, the Group leverages its inclusive culture, the breadth of its
capabilities and its portfolio of nationally critical infrastructure projects
as a powerful part of its employer proposition. In 2024, this contributed to
an increase in new starters in the UK, including over 500 in the Power
Transmission and Distribution business alone. To retain its talent, Balfour
Beatty focuses on providing an inclusive environment where its people feel
valued and can be productive, and progress was made in the year with the
Group's voluntary attrition rates in the UK improving to 10% (2023: 12%). This
supportive culture also offers employees the opportunity to develop their
skills and competencies, while building their careers, with the Group's focus
on employee wellbeing supporting them to thrive. At year end, 7.3% of the UK
workforce were apprentices, graduates and sponsored students in 'earn and
learn' positions, exceeding both The 5% Club's base target and overall
average.
Strong progress in pursuit of Zero Harm
Health, safety and wellbeing (HS&W) continues to be the top priority for
Balfour Beatty. Given the nature of the work undertaken by the Group, Balfour
Beatty has a duty of care to all of those working on its projects and the
public to deliver an industry-leading HS&W programme, which is present on
site and reinforced each day. In 2024, the Group's key metrics, which exclude
international joint ventures, improved further and achieved record levels,
with the Lost Time Incident Rate reducing from 0.11 to 0.09, the three-day
Lost Time Injury Rate falling from 0.08 to 0.07 and observations increasing to
over 470,000 (2023: 400,000), due in part to the US business almost doubling
its number of observations raised throughout the year.
The Group remains determined to keep raising the bar and taking the next step
on the journey to Zero Harm, with further utilisation of technology a key
enabler to this. Balfour Beatty's introduction of digital permits and
checklists, while enabling AI solutions, has contributed to the Group leading
the industry in safety performance, while improving productivity and
assurance. In 2024, the roll out of human form recognition cameras continued
at pace. These award-winning multi-camera systems, installed on mobile plant,
detect the human form and proactively communicate this detection visually and
audibly to the plant operator. Insights from the data collected, combined with
advancements in AI, will allow for teams to plan work more safely and
effectively in the future. AI is also being used to more thoroughly analyse
the vast amount of safety data collected across Balfour Beatty, which will
allow the Group to be more predictive in the identification of safety trends
and events.
Launch of evolved Sustainability Strategy
In June, Balfour Beatty launched its evolved Sustainability Strategy,
extending its focus to six areas which encompass climate change, nature
positive, resource efficiency, supply chain integrity, community engagement
and employee diversity, equity, and inclusion. As part of the evolved
strategy, the Company has brought forward its UK based target to create £3
billion of social value by 2025 (previously 2030) as well as initiating new
net zero targets as its understanding of the scale of the challenge has
evolved. Following a process to stress test its targets with the Science Based
Targets initiative (SBTi), the Group has revised its net zero target for Scope
1 and 2 emissions to 2045, and Scope 3 to 2050, both originally set for 2040.
The targets, which are both stretching and realistic, have been validated by
the SBTi and are underpinned by an industry-leading, fully transparent UK
carbon reduction plan.
In 2024, the Group delivered £991 million (2023: £936 million) of social
value, including spend with local suppliers and local businesses, and
volunteering. The Group also achieved a small decrease in absolute carbon
emissions and a 13% intensity reduction in Scope 1 and 2 greenhouse gas (GHG)
emissions.
Increased dividends and share buybacks in 2025
The Group's capital allocation framework has been in place since 2021,
facilitating the delivery of attractive shareholder returns, while ensuring
the appropriate balance between investment in the business, and a strong
capital position. Given the Group's encouraging position, including its large
order book, strong balance sheet and the depth of opportunities in its chosen
markets, Balfour Beatty is confident of continuing to deliver significant
future shareholder returns. As such, the Board is today recommending a final
dividend of 8.7 pence per share (2023: 8.0 pence), giving a total recommended
dividend for the year of 12.5 pence per share (2023: 11.5 pence).
Additionally, the Company intends to repurchase £125 million of shares during
the 2025 phase of its multi-year share buyback programme, bringing the
cumulative return to shareholders since the introduction in 2021 of the
multi-year capital allocation framework to over £940 million.
The total cash return to shareholders in 2025 (including the final 2024
dividend and 2025 interim dividend) is therefore expected to be c.£188
million (2024: £161 million).
Outlook
The Board expects an increase in PFO from its earnings-based businesses in
2025, with further growth in 2026.
Infrastructure Investments is expected to continue to deliver attractive
end-to-end returns from its recurring income, by divesting assets and making
new investments in line with the Group's capital allocation framework. For
2025, gains on investment disposals are expected in the range of £20 - £30
million.
The Board expects net finance income of around £25 million for 2025 and for
the effective tax rates in each of the three geographies to remain close to
statutory rates, albeit with cash tax payments in the UK remaining below
statutory levels in the medium term as losses are utilised. Average net cash
in 2025 is expected to be roughly £800 million, with capital expenditure
between £35 and £40 million and working capital remaining broadly flat.
The Group's long-term outlook remains positive, with the growth forecast in
2025 and 2026 being driven by strong visibility from its high-quality order
book, alongside the further opportunities in the energy, transport and defence
sectors in the UK and the Group's chosen buildings sectors in the US. This
gives the Board confidence in Balfour Beatty's continued ability to deliver
profitable managed growth and sustainable cash generation, and in turn
significant ongoing shareholder returns.
RESULTS OVERVIEW
Unless otherwise stated, all commentary in this section and the Divisional
financial reviews is on an underlying basis.
Throughout this report, the Group has presented financial performance measures
which are considered most relevant to Balfour Beatty and are used to manage
the Group's performance. These financial performance measures are chosen to
provide a balanced view of the Group's operations and are considered useful to
investors as these measures provide relevant information on the Group's past
or future performance, position or cash flows. These financial performance
measures are also aligned to measures used internally to assess business
performance in the Group's budgeting process and when determining
compensation. An explanation of the Group's financial performance measures and
appropriate reconciliations to its statutory measures are provided in the
Measuring Our Financial Performance section. Non-underlying items are the
cause of the differences between underlying and statutory profitability.
Additionally, revenue includes the Group's share of revenue of joint ventures
and associates.
Group financial summary
Balfour Beatty's underlying results in 2024 show good progress at a Group
level. Revenue increased by 4% (6% at CER) to £10,015 million (2023: £9,595
million) driven by increases in Gammon and Support Services. Statutory
revenue, which excludes joint ventures and associates, was £8,234 million
(2023: £7,993 million).
The underlying profit from operations for the year increased to £248 million
(2023: £228 million) driven by an increase in PFO from the earnings-based
businesses and higher gains on investment disposals, partially offset by an
underlying pre-disposal loss in Infrastructure Investments. Statutory profit
from operations was £173 million (2023: £211 million).
Underlying profit / (loss) from operations(2) 2024 2023
£m £m
UK Construction 81 69
US Construction 40 51
Gammon 38 36
Construction Services 159 156
Support Services 93 80
Earnings-based businesses 252 236
Infrastructure Investments pre-disposals operating (loss) / profit (8) 5
Infrastructure Investments gain on disposals 43 26
Corporate activities (39) (39)
Total underlying profit from operations 248 228
(2) Before non-underlying items (Note 9)
Net finance income of £41 million (2023: £33 million) improved as a result
of higher interest rates and impairment write backs of subordinated debt.
Underlying pre-tax profit was £289 million (2023: £261 million). The
taxation charge on underlying profits increased to £62 million (2023: £56
million). This resulted in underlying profit after tax of £227 million (2023:
£205 million). Total statutory profit after tax for the year was £178
million (2023: £194 million), as a result of the net effect of non-underlying
items.
Underlying basic earnings per share were 43.6 pence (2023: 37.3 pence), which,
along with a non-underlying loss per share of 9.4 pence (2023: 2.0 pence),
gave a total basic earnings per share of 34.2 pence (2023: 35.3 pence). This
included the benefit from the basic weighted average number of ordinary shares
reducing to 521 million (2023: 558 million) as a result of the Group's share
buyback programme.
Non-underlying items
The Board believes non-underlying items should be separately identified on the
face of the income statement to assist in understanding the underlying
financial performance achieved by the Group. Non-underlying items after
taxation were a net charge of £49 million for the year (2023: £11 million).
This included four significant items.
Firstly, a charge of £83 million has been recognised in relation to the
Group's obligations under the UK Building Safety Act (BSA). The BSA, which was
introduced in 2022, extends the limitation for claims under the Defective
Premises Act 1972 from 6 years to 30 years for dwellings completed before 28
June 2022. Since the introduction of the BSA, the Group has conducted
investigations and due diligence on claims received to establish whether an
obligation exists and if costs can be reliably estimated. Previously, the
charge relating to this provision has been recognised within the Group's
underlying results as the amounts recognised did not result in a distortion of
the Group's underlying results. In 2024, following developments in the legal
landscape of the BSA and progression of the Group's investigations, the Group
has reassessed its provision for BSA claims resulting in an increase in the
provision of £83 million. The provision does not include potential recoveries
from third parties and the resulting cash outflow is expected over a number of
years. This increase has been recognised in non-underlying due to its size and
the nature of the cost, which has arisen from a change in legislation. The
Group continues to recognise defects on projects not covered by the BSA as
part of its underlying performance.
Secondly, a charge of £52 million has been recognised in relation to a US
Civils project completed in 2012. The Group, through a joint operation formed
with Fluor Enterprises Inc. in which the Group owns a 40% share, completed a
contract with the North Texas Tollway Authority (NTTA) to provide design and
build services in relation to the extension of NTTA's President George Bush
Turnpike Highway (SH161 in Texas). In October 2022, NTTA served the joint
operation with a claim demanding damages of an unquantified amount under
various claims relating to alleged breaches of contract and or negligence in
relation to retaining walls along the project. In November 2024, through a
jury verdict, damages were awarded against the joint operation in favour of
NTTA amounting to $112m (Group's share). This jury verdict was substantially
above the claim presented to the court of $77m (Group's share) comprising $8m
expended to date and $69m for possible repair costs over the next 10 years.
The NTTA has moved to enter the verdict as a judgement and is also requesting
pre-judgement interest of $50m (Group's share) plus legal costs. The joint
operation has opposed the NTTA's motion and the court has yet to issue a
decision on that motion with a court date set for 27 March 2025. The Group
believes that the jury verdict does not accurately reflect the evidence at
trial and is evaluating all options to set aside or reduce the verdict and, if
necessary, appeal any final judgement. The appeal would require a surety bond
of $10m (Group share) to be provided in place of settling the judgement.
However, in light of the jury verdict, the Group has recognised a
non-underlying charge of £52m. This charge, which is net of insurance
recoveries of £40m for which the Group has received confirmation of cover
from its insurers, represents the Group's best estimate of the probable
damages to be awarded. The Group maintains the view that these damages are a
result of design elements of the contract which were performed by
subcontractors to the joint operation. The Group, together with its joint
operation partner, is pursuing recoveries from these subcontractors, however
at this stage, the Group has not recognised any potential recoveries from
these parties.
Thirdly, the Group has recognised a credit of £43 million for an insurance
receivable relating to rectification work, for which the cost had previously
been provided. In 2021, the Group recognised a provision of £42 million
within non-underlying in relation to rectification work to be carried out on a
development in London which was constructed by the Group between 2013 and
2016. In 2023, the Group increased this provision to £54 million following a
reassessment of the rectification cost. The additional charge to the income
statement was also recognised in non-underlying. The Group's estimated
provision did not include potential recoveries from third parties. In 2024,
rectification work continued to progress and is expected to complete in the
first half of 2025. In July 2024, the Group received confirmation from its
insurers that the rectification work qualifies for insurance coverage. Upon
assessment of the interim cost by the insurer's loss adjusters as well as
receipt of cash for the first application for payment submitted by the Group
for a portion of the cost incurred to date, the Group has recognised an
insurance recovery of £43 million. The Group has presented this income within
non-underlying in line with the presentation adopted for the recognition of
the provision.
Finally, a net credit of £21 million was recognised in the Group's Rail
Germany operations. In 2024, the two remaining contracts held within Rail
Germany reached the end of their warranty periods, resulting in the release of
warranty provisions held in respect of these contracts. This release has been
credited to the Group's income statement within non-underlying, net of
provision increases relating to certain legacy liabilities remaining within
the business.
Further detail is provided in Note 9.
Cash flow performance
The Group's net cash increased by £101 million in the year (2023: £27
million), resulting in a year end net cash position of £943 million (2023:
£842 million), excluding non-recourse net borrowings and lease liabilities.
Cash from operations, which included a working capital inflow, was partially
offset by shareholder returns, while capital expenditure reduced in 2024 to a
more normalised level following a peak year for capital expenditure in 2023.
Cash flow performance 2024 2023
£m £m
Operating cash flows before working capital movements and pension deficit 208 258
payments
Working capital inflow / (outflow) 99 63
Pension deficit payments(+) (30) (28)
Cash from operations 277 293
Lease payments (including interest paid) (66) (63)
Dividends from joint ventures and associates(∞) 71 59
Capital expenditure (28) (66)
Share buybacks (101) (151)
Dividends paid (61) (58)
Infrastructure Investments
- disposal proceeds 43 61
- new investments (28) (31)
Other (6) (17)
Net cash movement 101 27
Opening net cash* 842 815
Closing net cash* 943 842
(*)( ) Excluding infrastructure investments (non-recourse) net borrowings and
lease liabilities
(+) Including £2 million (2023: £3 million) of regular funding
(∞) 2023 excludes £1 million (2024: nil) dividends received in relation to
Investments asset disposals within joint ventures and associates
Working capital
A working capital inflow of £99 million (2023: £63 million) was favourable
to the outflow previously expected for the year.
Working capital flows^ 2024 2023
£m £m
Inventories (34) (11)
Net contract assets 165 (48)
Trade and other receivables (225) (73)
Trade and other payables (6) 177
Provisions 199 18
Working capital inflow^ 99 63
(^) Excluding impact of foreign exchange
Including the impact of foreign exchange and non-operating items, negative
(i.e. favourable) current working capital reduced slightly to £1,228 million
(2023: £1,232 million). Negative working capital as a percentage of revenue
for 2024 was 14.9% (2023: 15.4%).
Net cash/borrowings
The Group's average net cash increased to £766 million in 2024 (2023: £700
million). The Group's year end net cash position, excluding non-recourse net
borrowings and lease liabilities, was £943 million (2023: £842 million).
Non-recourse net borrowings, held in Infrastructure Investments entities
consolidated by the Group, were £335 million (2023: £264 million). The
balance sheet also included £162 million for lease liabilities (2023: £143
million). Statutory net cash at 31 December 2024 was £446 million (2023:
£435 million).
Share buyback
On 2 January 2024, Balfour Beatty commenced an initial £50 million tranche of
its 2024 share buyback programme, which was subsequently increased, following
the release of its 2023 full year results, to £100 million on 13 March 2024.
The Group completed the 2024 share buyback programme on 20 September 2024,
having purchased 27.1 million shares, which were held in treasury. These
shares were subsequently cancelled on 31 October 2024. The Group commenced the
initial £50 million tranche of its 2025 share buyback programme on 6 January
2025. As announced today, the Group intends to buyback a total of £125
million of shares during the 2025 phase of its multi-year share buyback
programme.
Banking facilities
In the year, the Group extended its core Revolving Credit Facility (RCF) by
one year, to June 2028, with the support of the lending bank group. The
facility was reduced to £450 million (2023: £475 million) in the extension
process. The RCF remains a Sustainability Linked Loan (SLL) and subsequent to
the extension, in July 2024 new SLL metrics and targets were agreed with the
lending bank group. The Group continues to be incentivised to deliver annual
measurable performance improvement in three key areas: Carbon Emissions,
Social Value generation and an independent Environment, Social and Governance
(ESG) rating score. The RCF remained undrawn at 31 December 2024.
The Group retains an additional £30 million bilateral committed facility that
has materially the same terms and conditions as the RCF. The facility is
also an SLL, including metrics that mirror the RCF. In the second half of the
year, the Group triggered its extension option in respect of the bilateral
facility, to extend the maturity to December 2027. As at 31 December 2024, the
facility remained undrawn.
Debt Refinancing
During 2024, the Group completed the early refinancing of US$50 million of US
Private Placement (USPP) notes that were set to mature in March 2025. The
Group raised US$50 million of new USPP notes, on terms and conditions that
mirror existing debt facilities, and used this new funding to complete the
early repayment of the US$50 million 2025 USPP notes. The new debt is
comprised of US$25 million of 7-year notes, maturing in May 2031 at a fixed
coupon of 6.71%, and US$25 million of 12-year notes, maturing in May 2036 at a
fixed coupon of 6.96%. The refinancing exercise has extended the debt maturity
profile of the Group until 2036, with the next debt maturity now in June 2027
(US$35 million USPP notes).
Going concern
The Directors have considered the Group's medium-term cash forecasts and
conducted stress-test analysis on these projections in order to assess the
Group's ability to continue as a going concern. Having also made appropriate
enquiries, the Directors consider it reasonable to assume that the Group has
adequate resources to continue for the period of at least 12 months from the
date of approval of the financial statements and, for this reason, have
continued to adopt the going concern basis in preparing the full year Group
financial statements. Further detail is provided in Note 1.3 Going Concern.
Pensions
Balfour Beatty and the trustees of the Balfour Beatty Pension Fund (BBPF) have
agreed to a journey plan approach to managing the BBPF whereby the BBPF is
aiming to reach self-sufficiency by 2027. The Company and the trustees agreed
the 31 March 2022 formal valuation in 2023 and, as a result, Balfour Beatty
paid deficit contributions to the BBPF of £22 million in 2024 with a further
£6 million payable in 2025. The next formal triennial valuation of BBPF is
due with effect from 31 March 2025.
The Company and trustees of the Railways Pension Scheme (RPS) agreed the 31
December 2022 formal valuation in the first half of 2024 and, as a result,
Balfour Beatty agreed to continue making deficit contributions of £6 million
per annum until February 2025. The next formal triennial funding valuation
of the RPS is due with effect from 31 December 2025.
The Group's balance sheet includes net retirement benefit assets of £2
million (2023: £69 million) as measured on an IAS 19 basis, with the surplus
on the BBPF (£43 million) largely offset by deficits on RPS (£7 million) and
other schemes (£34 million).
Dividend
The Board is committed to a sustainable ordinary dividend which is expected to
grow over time, targeted at a pay-out ratio of 40% of underlying profit after
tax excluding gains on disposal of Investments assets.
Following the 3.8 pence per ordinary share interim dividend declared at the
half year, the Board is recommending a final dividend of 8.7 pence per share,
giving a total recommended dividend for the year of 12.5 pence per share
(2023: 11.5 pence per share).
DIVISIONAL REVIEWS
CONSTRUCTION SERVICES
Financial review
Revenue at £8,199 million was up 1% (2023: £8,081 million), a 3% increase at
CER, with higher volumes at Gammon. Underlying profit from operations
increased to £159 million (2023: £156 million) due to improved profitability
in UK Construction and higher volumes at Gammon, partially offset by reduced
profitability in US Construction. Statutory profit for the year was £87
million (2023: £143 million). The order book increased 11% (9% at CER) in the
year to £15.2 billion (2023: £13.7 billion), due to a strong year of orders
in US Construction.
Construction Services 2024 2023
Revenue(1) PFO Order book(1) Revenue(1) PFO Order book(1)
£m £m £bn £m £m £bn
UK Construction 3,011 81 6.2 3,027 69 6.1
US Construction 3,638 40 7.1 3,697 51 5.6
Gammon 1,550 38 1.9 1,357 36 2.0
Underlying(2) 8,199 159 15.2 8,081 156 13.7
Non-underlying - (72) - - (13) -
Total 8,199 87 15.2 8,081 143 13.7
(1) Including share of joint ventures and associates
(2) Before non-underlying items (Note 9)
A reconciliation of the Group's performance measures to its statutory results
is provided in the Measuring our financial performance section
UK Construction: Revenue in UK Construction decreased by 1% to £3,011 million
(2023: £3,027 million).
UK Construction underlying profit from operations increased to £81 million
(2023: £69 million), largely driven by improved project delivery and the mix
of work. This represents a 2.7% PFO margin (2023: 2.3%) and demonstrates
progress in the Group's medium-term ambition to achieve a 3% PFO margin in UK
Construction, with further improvement expected in 2025 and 2026.
The UK Construction order book grew marginally to £6.2 billion (2023: £6.1
billion), with 92% (2023: 91%) of those orders from public sector and
regulated industry clients.
US Construction: Revenue in US Construction decreased by 2% (1% increase at
CER) to £3,638 million (2023: £3,697 million). Underlying profit from
operations for US Construction reduced by 22% to £40 million (2023: £51
million) as a small number of civils projects have taken longer than initially
scheduled. Due to the fixed-price nature of the contracts, the cost of these
delays has impacted profitability in 2024 and US Construction PFO is expected
to improve in 2025.
The US Construction order book increased by 27% (25% at CER) to £7.1 billion
(2024: £5.6 billion) with increases in both the buildings and civils
divisions. US Buildings grew its order book in all but one of its geographic
divisions, with an increase in commercial office, hospitality, government,
education and airports. US Civils order book growth was largely due to the
business signing a $746 million contract to rebuild part of the Interstate 35
through Austin for the Texas Department of Transportation.
Gammon: The Group's share of Gammon's revenue increased by 14% (17% at CER) to
£1,550 million (2023: £1,357 million) driven by an increase in major civils
volumes, including the Terminal 2 expansion and automated people mover
projects at Hong Kong International Airport. Underlying profit increased to
£38 million (2023: £36 million) representing a 2.5% profit margin (2023:
2.7%).
The Group's share of Gammon's order book decreased by 5% (11% at CER) to £1.9
billion (2023: £2.0 billion), with the progress made on the airport projects
largely offset by new orders, which included a residential development in the
Kai Tak area for the Hong Kong Housing Society, data centres in Hong Kong and
Singapore, and a civils contract in Hong Kong's Northern Metropolis to prepare
the land and deliver engineering infrastructure works for a new development
area.
Operational review
UK Construction
Strong medium-term outlook in UK growth markets
Since coming to power in July 2024, the UK Government has been firm in its
commitment to stimulating growth in the UK economy, and has highlighted the
importance of maintaining, improving, and expanding UK infrastructure in
achieving this. As part of its broad investment plans, the Government has
addressed the requirement for additional investment in various sectors,
including Balfour Beatty's UK growth areas of energy, transport and defence,
with further detail to follow in June as part of the 10 Year Infrastructure
Strategy and multi-year comprehensive spending review. The Government is also
investigating other potential enablers to reduce the time and costs associated
with infrastructure development in the UK, including the simplification of
planning and the utilisation of private financing. In January 2025, the
Government announced plans to block campaigners from making repeated legal
challenges to planning decisions for major infrastructure projects in England
and Wales, with the intention of reducing the time taken to achieve the
relevant consents.
The essential long-term upgrade to the UK's energy infrastructure is now well
underway, driving improvement in energy security and facilitating the energy
transition, with Balfour Beatty heavily involved in active projects such as
the new Hinkley Point C nuclear power station in Somerset and across the UK
with its market-leading power transmission and distribution proposition. The
scale of work required to meet the UK's net zero ambitions is vast and is
likely to be ongoing for decades to come. In 2024, there were a number of key
developments in the progression of new projects which Balfour Beatty expect to
play a major role in:
· The UK Government announced a £21.7 billion pledge for projects
to capture and store carbon emissions from energy, industry and hydrogen
production. Following this, Balfour Beatty, alongside Technip Energies and GE
Vernova, received notice to proceed to start the full engineering, procurement
and construction package for the onshore power, capture and compression
contract at Net Zero Teesside, the world's first gas-fired power station with
carbon capture and storage;
· For the proposed Sizewell C nuclear power station, the UK
Government increased its financial commitment to take the project to final
investment decision to £5.5 billion. Balfour Beatty is part of the Civils
Works Alliance for Sizewell C, alongside Bouygues Travaux Publics and Laing
O'Rourke, which will deliver the extensive civil works package;
· Great British Nuclear, the UK Government's expert nuclear delivery
body, shortlisted four companies for its small modular reactor programme,
including Holtec, for which Balfour Beatty is the main construction partner.
Final decisions are expected to be announced in the coming months.
The Group also continues to pursue opportunities in offshore wind, fusion and
hydrogen, and the UK Construction division's civil engineering expertise is
expected to be drawn on further as a result of the forecast expansion of power
transmission and distribution volumes within Support Services.
The UK Government plans to strengthen national security and modernise defence
infrastructure, with the intent of increasing defence spending to 2.5% of GDP
by 2027. Balfour Beatty has been a long-term participant in the UK's defence
and security sector and has delivered growth in its market share during 2024.
The Group's experiences in civil nuclear construction hold close adjacencies
with some of the projects being tendered, while its end-to-end capabilities
can simplify high security project delivery by reducing complex interfaces. As
a testament to this, Balfour Beatty has been selected by Rolls-Royce as a
construction partner for the expansion work in Raynesway, Derby, needed to
meet the growth in demand from the Ministry of Defence and as a result of the
AUKUS agreement. As part of the package of works, which will be executed in
stages over the next eight years, Balfour Beatty will deliver infrastructure
enabling works, build new manufacturing and office facilities, and redevelop
existing industrial buildings on site. This will increase Rolls-Royce's
capacity to manufacture reactor components for nuclear submarines. The UK
defence sector has been identified as one of the Group's key growth markets,
and as such, further material opportunities are currently being pursued.
In the UK transport sector, the Group retains strong market positions in both
major road and rail construction. Transport is an important component of the
Government's growth plans, and further details are expected as part of the 10
Year Infrastructure Strategy and the Treasury's multi-year comprehensive
spending review, due in June. Following these announcements, National Highways
will release its third Road Investment Strategy (RIS3). These plans will give
a clearer timeline for projects such as the Lower Thames Crossing road scheme,
a project which the Group was awarded £1.2 billion of work for in 2023 but
has yet to go to contract, and major rail electrification schemes, all of
which are of strategic importance to both the UK and Balfour Beatty. The Group
also holds deep experience in construction at UK airports, so the Government's
plan for expansion and development of London airports is also positive for
Balfour Beatty in the medium term. During 2024, Balfour Beatty was awarded a
£185 million contract on the A9 road in Scotland, which will see the Group
upgrade six miles of single carriageway to dual carriageway, and undertook
early contractor involvement activities on the Lower Thames Crossing.
Continued margin expansion and strong operational delivery
Balfour Beatty holds a market-leading position in a growing UK infrastructure
market, with unmatched scale and vertically integrated capability for
delivering major and regional civils projects. In a period of increased
demand, the Group is being more selective in the work it undertakes, resulting
in a higher quality and lower-risk forward order book. The 2024 order book is
heavily weighted towards lower-risk contract forms, with 59% target cost and
20% cost plus incentivised fee, while the remaining 21% is weighted towards
two stage fixed price contracts, which are inherently lower-risk than one
stage fixed price arrangements. UK Construction currently has around 700 live
projects, and the Group remains focused on ensuring that new work is
contracted on the appropriate contractual terms and conditions for the risk
undertaken, in order to protect the Group's margin and reduce the loss-making
portion of the project portfolio.
The two key drivers of the ongoing increase in the UK Construction margin,
which has improved for a fourth successive year and is forecast to do so
further in 2025, are the lower-risk nature of the order book and strong
operational delivery. Balfour Beatty's ambition to provide industry-leading
project delivery across the UK Construction portfolio not only drives margin
performance in the period, but demonstrates the Group's capabilities and
standards, thereby aiding the pursuit of future work.
On the UK's largest infrastructure project, HS2, Balfour Beatty and its joint
venture partners are delivering the main civil engineering works for the Area
North section and the new station at Old Oak Common in west London. On Area
North, the Balfour Beatty VINCI joint venture has completed the four huge
piers of the Curzon 2 bridge, marking a significant construction milestone on
the sequence of viaducts that will take high-speed trains in and out of
Birmingham. At Old Oak Common, the Balfour Beatty VINCI SYTRA joint venture
completed the excavation of the stations underground box, a vast structure big
enough to accommodate the equivalent of 300 Olympic sized swimming pools, and
has now completed construction of the stations base slab, which required
76,000 cubic metres of concrete and 17,000 tonnes of reinforced steel. At
Hinkley Point C, the Balfour Beatty team delivering the marine works for the
new nuclear station have made strong progress under the Bristol Channel. In
December, the team completed the two connections in the outfall tunnel, which
was a key project milestone for the year, with focus now on the remaining
connections in the two intake tunnels.
The Major Highways team is two years in to the major improvement scheme at the
interchange between Junction 10 of the M25 and the A3. During 2024, Balfour
Beatty conducted three full weekend closures as part of the improvement scheme
at Wisley, the first in the M25's 38 year history, with works completed ahead
of schedule on all occasions. The team has also made good progress on the A63
improvement scheme in Hull and has added additional emergency refuge areas on
the M25, M3 and M4, improving safety for all users of these routes.
In 2024, the division completed work at a wide range of projects including the
Edinburgh Futures Institute at the University of Edinburgh, highway and
junction improvements in North West Crewe and the Lewisham Gateway residential
project. Beyond the new Rolls-Royce and A9 contracts, other projects added to
the UK Construction order book during 2024 included HMP Highland in Inverness,
on behalf of the Scottish Prison Service, enabling works at HMNB Devonport, a
replacement secondary school for the Nairn academy and also the divisions
share of the Group's recent power transmission and distribution orders.
In November, Balfour Beatty signed a two year extension to its existing four
year term as sole contractor to both of the SCAPE Civil Engineering
frameworks, which cover England, Wales and Northern Ireland, and the entirety
of Scotland. The frameworks will now run until November 2028.
US Construction
Positive outlook in Group's US geographies
Balfour Beatty's US Construction division is comprised of the US Buildings and
US Civils businesses. US Buildings is a construction management business
diversified across geographies and client sectors, which targets major cities
and urban areas in states with favourable economic outlooks. The US Civils
business focuses on highways projects in Texas and the Carolinas, and on local
rail and civils work in California. Given the division's diversification
across capabilities, geographies and sectors, the result of the recent US
election has not had a material impact on the outlook for US Construction,
while recent third party forecasts have projected construction spending in the
Group's chosen states to surpass the national average to 2029, with an annual
average growth of 7% forecast.
At the 2023 full year results announcement, the Group outlined differing
strategic approaches to the two US Construction disciplines, which have
influenced the direction of the businesses in 2024 and will continue to do so
in the future. US Buildings had been recognised as one of Balfour Beatty's
four growth markets, with the business making notable progress in 2024, and is
considered the lower-risk segment within the division. With most of the
projects undertaken by US Construction contracted on fixed-price terms,
Buildings utilise the early issuance of subcontracts and insurance of the
supply chain to mitigate risk. Comparatively, civils contracts in the US are
generally delivered on a self-perform basis, which on fixed price arrangements
gives limited scope to mitigate inflation and schedule risk. As a result, the
Group remains cautious in its approach to complex civils contracts in the US
and has reduced its exposure to the sector in recent years, with bidding now
focused on projects which closely align to its core capabilities.
US activities further weighted towards growing US Buildings business
Balfour Beatty's growth engine in the US is its buildings business, which
increased revenue by 2% (5% at CER) in 2024 and contributed 87% of US
Construction revenues (2023: 85%, 2022: 78%). Having identified the
opportunity for growth in 2023, based on the strength of some core markets,
including aviation, leisure, education and government, combined with the
impact of a more settled economy, the Group put to work its two-pronged
organic growth strategy to add further diversification to its regional
businesses. The Group opened new offices, targeting additional cities in
states with existing Balfour Beatty offices, and broadened the end-markets
served in some regions where the business was already active. These factors
have contributed to the US Buildings order book increasing 26% (24% at CER) in
2024, underpinning the growth expectations for 2025 and beyond.
The new office locations, which were chosen based on market fundamentals and
adjacency to established offices, include Sacramento in California, Savannah
in Georgia, Charleston in South Carolina, Wilmington in North Carolina,
Richmond in Virginia, and Jacksonville and Tampa in Florida. These offices
have played an important role in the order book growth and are delivering
projects such as the construction of a new terminal at the Jacksonville
International Airport, a runway expansion at the Airport in Onslow County near
Wilmington, and the second phase of an elementary school project in
Sacramento.
By broadening the regions in which it serves certain end-markets, the US
Buildings business is further utilising its in-house expertise and long-term
customer relationships to drive organic growth, with success in various
sectors. Following on from recent activity at Los Angeles International
Airport, the Group more than doubled its aviation order book in 2024, adding
new work in North Carolina, Florida and California. In education, the Group
has leveraged its market-leading Californian offering, where it was the top
education builder for the second consecutive year, to strengthen its local
order book and also win work in North Carolina and Oregon. While for theme
parks, as well as material new work being added in Florida, work is under way
on projects in Texas and California. The Group is also exploring data centre
opportunities outside of the Northwest market, which has served the business
well in recent years.
Strong operational delivery in US Buildings
During the year, progress has been made on significant Buildings projects
including:
· Transformation of an old Coca-Cola bottling facility in Atlanta,
Georgia, into an elevated mixed-use property;
· The completion of the Del Mar Heights School rebuild project in
San Diego, California;
· Began construction activities to deliver Sacramento International
Airport's pedestrian walkway project in California;
· Started construction of a mixed-use development in Dallas, Texas,
which includes retail, restaurant, office and parking;
· Broke ground at the new Durham School of the Arts in North
Carolina, alongside our joint venture partner.
Further progress made in US Civils strategy
The US Civils business continued to pivot towards a more concentrated
portfolio of projects in 2024. Highways and bridges, which are profitable
activities for the division, represents 75% of the order book at year end
compared to 60% the year before. This was driven by progress made on live
projects during the year and new orders, which included a $746 million
contract to rebuild part of the Interstate 35 through Austin for the Texas
Department of Transportation. The project, which is expected to complete in
2033, closely aligns to the Group's selective approach to US civils; working
for a long-term customer and in a geography where Balfour Beatty has proven
expertise, strong teams and trusted supply chain partners.
Progress at US Civils projects in 2024 included:
· Balfour Beatty achieved substantial completion on the Caltrain
electrification rail project in California in 2024, with final completion
achieved in February 2025;
· The business completed construction of the Sterling Natural
Resource Center, a water reclamation facility in California;
· As part of the LINXS joint venture at Los Angeles International
Airport, the Group entered the testing and commissioning phase of the project,
with recent testing bringing a train vehicle through the airport's central
terminal area, and the three automated people mover stations inside it, for
the first time;
· As part of the Colorado River Constructors joint venture on the
Oak Hill Parkway highways project in Texas, the Group opened four cross-street
bridges to traffic;
· Progress continues on the Havelock Bypass project in North
Carolina, with all 16 bridges and roadway construction now successfully
completed.
Gammon
Strong positions in Hong Kong and Singapore
Gammon, Balfour Beatty's 50:50 joint venture with Jardine Matheson based in
Hong Kong, has forged a reputation for delivering high-quality projects in
Southeast Asia. The outlook for the Hong Kong construction sector remains
positive, with Government commitments to grow the railway network and build
new major roads, in addition to the long-term Northern Metropolis project to
develop more than 3,000 hectares by phases over the next 20 years. Gammon's
Singapore operations finished 2024 with a record order book and further
opportunities to come. The Singapore Government is projecting increased
infrastructure spend in 2025 and 2026, as it rolls out major infrastructure
projects at its airport and metro, and the private sector property market
continues to be strong.
Gammon continues to have a strong share of both the buildings and civils
markets in Hong Kong. In buildings, the focus is on the use of Design for
Manufacture and Assembly (DfMA) and modular construction to improve
productivity and efficiency and expanding the customer base on a selective
basis. In civils, the strategy is to leverage engineering excellence, with a
key area of future work likely to be from significant infrastructure
programmes in Hong Kong and in Singapore.
During 2024, Gammon delivered an increased volume of work, with the automatic
people mover (APM) and Terminal 2 expansion projects at Hong Kong
International Airport both reaching peak levels of activity. The official
inauguration of the airport's three-runway system in November signified a key
milestone for both projects, with Gammon playing a crucial role in the
airports expansion to date, including the construction of a tunnel beneath the
runway and taxiways, as well as essential infrastructure for air traffic
control, utilities, roads, and drainage.
Gammon's Tonkin Street project reached substantial completion in October and
is the first private residential project in Hong Kong to adopt concrete
Modular Integrated Construction (MiC). By implementing MiC for the 22-storey,
198 unit, residential tower, the project achieved 65% reduction in
construction waste and noise, as well as 60% decrease in traffic loading,
significantly lowering carbon emissions throughout the construction process.
Gammon's buildings team is progressing with the One Causeway Bay project,
which when complete will have 500,000 square feet of office space across 24
floors and five floors for retail, marked a major milestone with a topping-out
ceremony. The project, which occupies the former site of the historic
Excelsior Hotel on the waterfront of Hong Kong's Victoria Harbour, will open
in 2025.
SUPPORT SERVICES
Financial review
The Support Services business provides power, plant, road and rail maintenance
and is characterised by profitable recurring revenues underpinned by long-term
frameworks targeting a PFO margin of 6-8%.
Support Services revenue increased by 20% to £1,210 million (2023: £1,006
million), mainly due to higher volumes in the road maintenance business, which
included the first full years of the major contracts at Buckinghamshire and
East Sussex, and increased power transmission and distribution activity.
Underlying profit from operations increased to £93 million (2023: £80
million) driven by higher revenue. This resulted in PFO margin of 7.7% in the
year (2023: 8.0%), which is at the top end of the targeted 6-8% PFO margin
range and represents a further strong year for the power, road and rail
maintenance businesses, with the reduction in margin driven by a change in the
mix of work delivered.
The Support Services order book increased by 14% to £3.2 billion (2023: £2.8
billion) driven by new power transmission and distribution contacts, aligned
with the growing demand in the sector.
Support Services 2024 2023
Order book(1) (£bn) 3.2 2.8
Revenue(1) (£m) 1,210 1,006
Profit from operations(2) (£m) 93 80
Non-underlying items (£m) - -
Statutory profit from operations (£m) 93 80
(1) Including share of joint ventures and associates
(2) Before non-underlying items (Note 9)
A reconciliation of the Group's performance measures to its statutory results
is provided in the Measuring our financial performance section
Operational review
Further traction in power transmission and distribution expansion
In 2024, the UK Electricity System Operator published a report titled 'Beyond
2030 - A national blueprint for a decarbonised electricity system in Great
Britain', which estimated that over £60 billion of investment in network
infrastructure is required by 2030 to facilitate the connection of new
offshore generation and other new renewable energy sources. The key
transmission infrastructure operators, National Grid, SSEN and SPEN, have now
published their RIIO-T3 business plans, which layout their proposed projects
to 2031 and confirm the sharp expansion of work required across the industry
in the balance of this decade and beyond.
Balfour Beatty holds a market-leading position in the rapidly growing UK power
transmission and distribution construction industry and saw a record level of
bidding success in 2024, being contracted or selected for various schemes and
frameworks including:
- An Initial Works Contract with SSEN for the Skye Reinforcement
project;
- A £192 million contract with SSEN for the Argyll Substations
project;
- A £363 million contract with National Grid to deliver the
Bramford to Twinstead Reinforcement project;
- A contract with Prysmian to install 69km of high-voltage direct
current land cables as part of the Eastern Green Link 2 (EGL2) project, being
jointly developed by SSEN Transmission and National Grid;
- Selected as one of eight preferred partners for Scottish Power
Energy Networks' Strategic Agreement for Transmission Overhead Line Works,
with up to £3 billion of work being tendered.
The increased activity in the market is driving a capability imbalance, with
demand outweighing supply. This brings commercial opportunities to the Group,
which benefits from holding the largest power workforce in the UK, and ensures
that contracts can be undertaken on a lower-risk basis than in the past. It
also leaves the Group with a recruitment challenge to meet the growing demand,
and in 2024 the Power team had over 500 new starters, while improving the
retention of existing colleagues.
During the year, the business finished wiring all 116 T-Pylons and
constructing a further 27 traditional lattice pylons on the Hinkley Point C
Connection project for National Grid. The Viking Link interconnector, the
longest interconnector in the world for which Balfour Beatty constructed the
65km UK onshore underground cable route, is now live and transmitting power
between the UK and Denmark. The Group also completed 62km of overhead line
refurbishment between Bramford and Norwich, began to transition 3.5km of
overhead lines in the North Wessex Downs to underground cables, handed back
the first leg of the London Power Tunnels 2 project and energised the final
circuit at the 400kV Littlebrook Substation. Balfour Beatty's portfolio of
power transmission and distribution projects continues to reflect the major
role which the Group is playing in upgrading the grid to meet the UK's net
zero ambitions.
Increased road maintenance activity
The addressable road maintenance market continues to grow, with the
Government's Autumn 2024 Budget announcing nearly £1.6 billion in capital
funding for local highways maintenance in England for the financial year
starting April 2025, which represents a £500 million increase on the prior
year. Longer-term funding will be determined by the ongoing comprehensive
spending review.
In 2024, Balfour Beatty substantially increased the volume of road maintenance
work delivered, driven by the first full year of the Buckinghamshire and East
Sussex contracts which had started in 2023, and increased demand for road
patching activities. Looking forward, there are several Local Authority
contracts coming to market in the next year for which the Group is well
positioned, as it looks to further deploy its effective maintenance solutions
and technology-driven infrastructure management.
Rail
The rail maintenance market is well funded for the period to 2029, with £45
billion available for investment in operations, maintenance and renewal as
part of Network Rail's Control Period 7 (CP7) strategic business plan. The
business is diversified across various frameworks, and during the year won
£169 million of work for the Central Rail Systems Alliance framework, with
the Group now half way through its 10 year contract.
The Group is particularly focused on electrification schemes, as part of its
ambition to deliver more net zero infrastructure in the UK. Furthermore, the
proposed restructuring of the UK rail industry should see greater
opportunities for efficiency as the management of track and trains are brought
closer together.
INFRASTRUCTURE INVESTMENTS
Financial review
Infrastructure Investments made an £8 million underlying loss from operations
in the year (2023: £5 million profit). In the US, the costs relating to the
independent compliance monitor's work across the US military housing portfolio
increased, and in the UK, the Group wrote off capitalised bidding costs
following the cancellation of a student accommodation project, for which it
had been awarded preferred bidder status. When including a gain on disposal of
£43 million (2023: £26 million), underlying profit from operations was £35
million (2023: £31 million).
Balfour Beatty continues to invest in attractive new opportunities, each
expected to meet its investment hurdle rates. In the year, the Group invested
£28 million in new and existing projects, with a US student accommodation
project and a US multifamily housing project added to the portfolio. Balfour
Beatty also continues to sell assets, timed to maximise benefit to
shareholders. One disposal was completed in 2024, with the Group reducing its
stake in the Northside student accommodation project at the University of
Texas at Dallas. The transaction delivered £43 million gain on disposal and
£43 million of cash, which was above the Directors' valuation.
Net investment income of £19 million was £3 million higher than the prior
year (2023: £16 million) and included an impairment write back of
subordinated debt as, following a final decision from Ofgem, costs were
recovered relating to a faulty OFTO cable, which had been provided for in
prior periods. This was partially offset by lower interest received on
subordinated debt.
Underlying profit before tax increased to £54 million (2023: £47 million).
Statutory profit before tax was £51 million (2023: £43 million).
Infrastructure Investments 2024 2023
£m £m
Pre-disposals operating profit(2) (8) 5
Gain on disposals(2) 43 26
Profit from operations(2) 35 31
Net investment income(~) 19 16
Profit before tax(2) 54 47
Non-underlying items (3) (4)
Statutory profit before tax 51 43
(2) Before non-underlying items (Note 9)
(~) Subordinated debt interest receivable, net interest receivable on PPP
financial assets and non-recourse borrowings, fair value (loss)/gain on
investment asset and impairment to subordinated debt receivable and accrued
interest
A reconciliation of the Group's performance measures to its statutory results
is provided in the Measuring our financial performance section
Operational review
Balfour Beatty's competitive expertise to finance, develop, build and maintain
infrastructure puts the Group in a strong position to capitalise on new
investment opportunities. The Group has maintained its disciplined approach to
investments and disposals to ensure the delivery of investment hurdle rates
and is currently assessing investment opportunities in:
· Student accommodation: Across the UK and US, demand for student
accommodation remains strong as universities continue to improve their
facilities to attract students;
· Residential: Balfour Beatty continues to see attractive US
multifamily housing come to market, providing opportunity to invest profitably
in the regeneration of these properties;
· US P3: The US has become an increasingly exciting market for
public-private partnerships, and, to date, 42 states (plus DC) have passed
legislation allowing P3 projects;
· Energy transition: As the UK's energy mix transitions to more
renewable sources, and the UK adopts more sustainable transport such as
electric vehicles, there are opportunities for private sector investment.
In the UK, the Group has commenced construction of a new student accommodation
project - the 1,899 bed West Slope development - on behalf of the University
of Sussex. The first new student accommodation and the health and wellbeing
centre are expected to be open in time for the 2026/27 academic year, with
more accommodation, catering and retail facilities opening over the following
two years.
In the US, the Group added two new projects to the portfolio, with a 564 bed
US student accommodation project in Denton, Texas, and a 296 unit US
multifamily housing project in Mount Laurel, New Jersey. The Group was also
awarded a developer contract to build a 1,070 bed undergraduate student
housing complex at the University of Texas in Austin, while good progress has
been made with construction on the 1,204 bed William & Mary University
project in Virginia. The Group's key US P3 investment is the automated people
mover project at Los Angeles International Airport, with US Construction
contributing to the build phase and Infrastructure Investments providing an
element of the financing. Construction is ongoing.
In US military housing, the Group supported the military's energy resilience
goals by completing rooftop solar projects across five Navy bases in Florida,
totalling 10.55 megawatts, and a $31 million energy savings performance
contract bringing energy and water efficiency improvements to the housing
communities at 11 Navy installations in the Southeast. In 2025, the Group will
be redeveloping homes at Ft Eisenhower and Ft Leonard Wood, with Government
funding announced for both, while a ground lease extension at Ft Carson is
under negotiation in order to bring forward funds to finance faster
redevelopment. The Group continues to work with the independent compliance
monitor, who commenced work in 2022 having been appointed by the Department of
Justice. In November 2024, Balfour Beatty Communities and the independent
compliance monitor agreed to extend the most recent implementation period to
enable the delivery of the additional recommendations set out in the first
follow-up report and agreed to commence the second follow-up review period in
March 2025.
Directors' valuation
The Directors' valuation increased by 3% to £1,254 million (2023: £1,212
million). The portfolio is 58% weighted towards the US (2023: 58%). The number
of projects in the portfolio increased by one to 60 (2023: 59).
Movement in value 2023 to 2024
£m 2023 Equity invested Distributions received Sales proceeds Unwind of discount Operational performance FX 2024
UK 509 2 (18) - 34 (1) (1) 525
US 703 26 (16) (43) 47 (1) 13 729
Total 1,212 28 (34) (43) 81 (2) 12 1,254
Balfour Beatty invested £28 million (2023: £31 million) in new and existing
projects. During the year the Group added two new investments: a student
accommodation project in Denton, Texas, and a multifamily housing project in
Mount Laurel, New Jersey.
Cash yield from distributions amounted to £34 million (2023: £48 million).
Balfour Beatty continued disposals in the year with proceeds of £43 million
(2023: £61 million), with the Group reducing its stake in the Northside
student accommodation project at the University of Texas at Dallas. A
preferred bidder student accommodation project in the UK was cancelled and has
been removed from the portfolio.
Unwind of discount at £81 million (2023: £87 million) is a function of
moving the valuation date forward by one year with the result that future cash
flows are discounted by twelve months less.
Operational performance movements resulted in a £2 million decrease (2023:
£1 million). The operational performance movements in the UK were primarily
due to recovery of costs for previous repairs on a faulty OFTO cable, offset
by a higher costs and risk premia on certain assets. In the US, higher than
forecast rental increases on the military housing portfolio were offset by
higher costs, including an increase in independent compliance monitor costs.
The exchange rate movement was a £12 million increase (2023: £43 million
decrease). This was driven by sterling depreciating against the US dollar,
slightly offset by sterling appreciating against the euro and thereby reducing
the valuation of the one euro denominated project in the portfolio.
Methodology and assumption changes
The methodology for valuing most investments in the portfolio remains the
discounted cash flow (DCF) method. Under this methodology cash flows for each
project are forecast based on historical and present performance, future risks
and macroeconomic forecasts. They also factor in secondary market assumptions.
These cash flows are then discounted using different discount rates, which are
based on the risk and maturity of individual projects and reflect secondary
market transaction experience. The main exception to the use of DCF is for US
multi-family housing projects which, due to the perpetual nature of the assets
and the depth and liquidity of the rental housing market, are valued based on
periodic broker reports for each property.
UK discount rates range from 7.25% to 10.25% (2023: 7.25% to 9.25%) depending
on the maturity and risk of each project. The implied weighted average
discount rate for the UK portfolio is 8.4% (2023 8.3%). A 1% change in the
discount rate would change the value of the UK portfolio by approximately £48
million.
US discount rates range between 6.25% and 10.5% (2023: 6.25% and 10.5%) and
the implied US weighted average discount rate is 7.9% (2023: 8.1%). A 1%
change in the discount rate would change the value of the US portfolio by
approximately £79 million.
The portfolio remains positively correlated to inflation. A 1% change in the
long-term inflation rate in the UK portfolio would change the valuation by
approximately £28 million and a 1% change in the long-term rental growth rate
in the US portfolio would change the valuation by approximately £74 million.
As in previous periods, the Directors' valuation may differ significantly from
the accounting book value of investments shown in the financial statements,
which are produced in accordance with International Financial Reporting
Standards (IFRS) rather than using a discounted cash flow approach. A full
reconciliation is provided in section i) of the Measuring Our Financial
Performance section.
Sector 2024 2023 2024 2023
No. projects No. projects £m £m
Roads 12 12 162 168
Healthcare 2 2 133 129
Student accommodation 5 6 137 137
Energy transition 4 4 64 44
Other 2 2 29 31
UK total 25 26 525 509
US military housing 21 21 605 562
Student accommodation and other PPP 5 4 58 83
Residential housing 9 8 66 58
US total 35 33 729 703
Total 60 59 1,254 1,212
Value by phase
Phase 2024 2023 2024 2023
No. projects No. projects £m £m
Operations 57 55 1,208 1,164
Construction 3 3 46 46
Preferred bidder - 1 - 2
Total 60 59 1,254 1,212
Value by income type
Income type 2024 2023 2024 2023
No. projects No. projects £m £m
Availability based 17 17 370 353
Demand - operationally proven (2+ years) 39 37 836 807
Demand - early stage (less than 2 years) 4 5 48 52
Total 60 59 1,254 1,212
MEASURING OUR FINANCIAL PERFORMANCE
Providing clarity on the Group's alternative performance measures
The Group has included this section in this announcement with the aim of
providing transparency and clarity on the measures adopted internally to
assess performance.
Throughout this announcement, the Group has presented financial performance
measures which are considered most relevant to Balfour Beatty and are used to
manage the Group's performance. These financial performance measures are
chosen to provide a balanced view of the Group's operations and are considered
useful to investors as these measures provide relevant information on the
Group's past or future performance, position or cash flows.
The Alternative Performance Measures (APMs) adopted by the Group are also
commonly used in the sectors it operates in and therefore serve as a useful
aid for investors to compare Balfour Beatty's performance to its peers.
The Board believes that disclosing these performance measures enhances
investors' ability to evaluate and assess the underlying financial performance
of the Group's operations and the related key business drivers.
These financial performance measures are also aligned to measures used
internally to assess business performance in the Group's budgeting process and
when determining compensation.
Equivalent information cannot be presented by using financial measures defined
in the financial reporting framework alone.
Readers are encouraged to review this announcement in its entirety.
Performance measures used to assess the Group's operations
Underlying profit from operations (PFO)
Underlying PFO is presented before non-underlying items, finance costs and
investment income and is the key measure used to assess the Group's
performance in the Construction Services and Support Services segments. This
is also a common measure used by the Group's peers operating in
these sectors.
This measure reflects the returns to the Group from services provided in these
operations that are generated from activities that are not financing in
nature and therefore an underlying pre-finance cost measure is more suited to
assessing underlying performance.
Underlying profit before tax (PBT)
The Group assesses performance in its Infrastructure Investments segment using
an underlying PBT measure. This differs from the underlying PFO measure used
to measure the Group's Construction Services and Support Services segments
because, in addition to margins generated from operations, there are returns
to the Investments business which are generated from the financing element of
its projects.
These returns take the form of subordinated debt interest receivable, interest
receivable on PPP financial assets and fair value gains
on certain investment assets, which are included in the Group's income
statement in investment income. These are then offset by the finance cost
incurred on the non-recourse debt associated with the underlying projects,
fair value losses on certain investment assets and any impairment of
subordinated debt and accrued interest receivable, which are included in the
Group's income statement in finance costs.
Operating cash flow (OCF)
The Group uses an internally defined measure of OCF to measure the performance
of its earnings-based businesses and subsequently to determine the amount of
incentive awarded to employees in these businesses under the Group's Annual
Incentive Plan (AIP). This measure also aligns to one of the vesting
conditions attributable to the Group's PSP awards.
Measuring the Group's performance
The following measures are referred to in this announcement when reporting
performance, both in absolute terms and also in comparison to earlier years:
Statutory measures
Statutory measures are derived from the Group's reported financial statements,
which have been prepared in accordance with UK-adopted international
accounting standards (IFRS) and in conformity with the requirements of the
Companies Act 2006.
Where a standard allows certain interpretations to be adopted, the Group has
applied its accounting policies consistently. These accounting policies can be
found on pages 200 to 206 of the Annual Report and Accounts 2024.
The Group's statutory measures take into account all of the factors, including
those that it cannot influence (principally foreign currency fluctuations)
and also non-recurring items which do not reflect the ongoing underlying
performance of the Group.
Performance measures
In assessing its performance, the Group has adopted certain non-statutory
measures because, unlike its statutory measures, these cannot be derived
directly from its financial statements.
The Group commonly uses the following measures to assess its performance:
a) Order book
The Group's disclosure of its order book is aimed to provide insight into its
pipeline of work and future performance. The Group's order book is not a
measure of past performance and therefore cannot be derived from its financial
statements.
The Group's order book comprises the unexecuted element of orders on contracts
that have been secured. Where contracts are subject to variations, only
secured contract variations are included in the reported order book.
Where contracts fall under framework agreements, an estimate is made of orders
to be secured under that framework agreement. This is based on historical
trends from similar framework agreements delivered in the past and the
estimate of orders included in the order book is that which is probable to
be secured.
In accordance with IFRS 15 Revenue from Contracts with Customers, the Group is
required to disclose the remaining transaction price allocated to performance
obligations not yet delivered. This can be found in Note 4.3 in the Annual
Report and Accounts 2024. This is similar to the Group's order book
disclosure, however it differs for the following reasons:
· The Group's order book includes its share of orders that are reported
within its joint ventures and associates. In line with section (e), the Board
believes that including orders that are within the pipeline of its joint
ventures and associates better reflects the size of the business and the
volume of work to be carried out in the future. This differs from the
statutory measure of transaction price to be allocated to remaining
performance obligations which is only inclusive of secured revenue from the
Group's subsidiaries.
· As stated above, for contracts that fall under framework agreements,
the Group includes in its order book an estimate of what the orders under
these agreements will be worth. Under IFRS 15, each instruction under the
framework agreement is viewed as a separate performance obligation and is
included in the statutory measure of the remaining transaction price when
received, but estimates for future instructions are not.
· The Group's order book does not include revenue to be earned in its
Infrastructure Investments segment as the value of this part of the business
is driven by the Directors' valuation of the Investments portfolio. Refer to
section (i).
Reconciliation of order book to transaction price to be allocated to remaining
performance obligations
2024 2023
£m
£m
Order book (performance measure) 18,443 16,532
Less: Share of orders included within the Group's joint ventures and associates (2,322) (2,344)
Add: Transaction price allocated to remaining performance obligations in 2,616 1,917
Infrastructure Investments(+)
Transaction price allocated to remaining performance obligations for the 18,737 16,105
Group(+) (statutory measure)
(+) Refer to Note 4.3 in the Annual Report and Accounts 2024.
b) Underlying performance
The Group adjusts for certain non-underlying items which the Board believes
assists in understanding the performance achieved by the Group. These items
include:
· gains and losses on the disposal of businesses and investments, unless
this is part of a programme of releasing value from the disposal of similar
businesses or investments such as infrastructure concessions;
· costs of major restructuring and reorganisation of existing businesses;
· costs of integrating newly acquired businesses;
· acquisition and similar costs related to business combinations such as
transaction costs;
· impairment and amortisation charges on intangible assets arising on
business combinations (amortisation of acquired intangible assets); and
· impairment of goodwill.
These are non-underlying costs as they do not relate to the underlying
performance of the Group.
From time to time, it may be appropriate to disclose further items as
non-underlying items in order to reflect the underlying performance of the
Group.
Further details of non-underlying items are provided in Note 9.
A reconciliation has been provided below to show how the Group's statutory
results are adjusted to exclude non-underlying items and their impact on its
statutory financial information, both as a whole and in respect of specific
line items.
Reconciliation of 2024 statutory results to performance measures
Non-underlying items
2024 Intangible Net release of provisions relating to Rail Germany Recognition of insurance on rectification works in London Provision recognised Recognition of charge for claim on legacy project in Texas 2024 performance
statutory
amortisation
measures
results
£m £m for BSA £m
£m
£m
£m claims
£m
Revenue including share of joint ventures and associates (performance) 10,015 - - - - - 10,015
Share of revenue of joint ventures and associates (1,781) - - - - - (1,781)
Group revenue (statutory) 8,234 - - - - - 8,234
Cost of sales (7,883) - (26) (43) 83 52 (7,817)
Gross profit 351 - (26) (43) 83 52 417
Gain on disposals of interests in investments 43 - - - - - 43
Amortisation of acquired intangible assets (4) 4 - - - - -
Other operating expenses (276) - 5 - - - (271)
Group operating profit 114 4 (21) (43) 83 52 189
Share of results of joint ventures and associates 59 - - - - - 59
Profit from operations 173 4 (21) (43) 83 52 248
Investment income 82 - - - - - 82
Finance costs (41) - - - - - (41)
Profit before taxation 214 4 (21) (43) 83 52 289
Taxation (36) (1) (2) 11 (21) (13) (62)
Profit for the year 178 3 (23) (32) 62 39 227
Reconciliation of 2024 statutory results to performance measures by segment
Non-underlying items
Profit/(loss) from operations 2024 Intangible Net release of provisions relating to Rail Germany Recognition of insurance on rectification works in London Provision recognised for BSA claims Recognition of charge for claim on legacy project in Texas 2024 performance
statutory
amortisation
measures
results
£m £m £m £m
£m £m
£m
Segment
Construction Services 87 1 (21) (43) 83 52 159
Support Services 93 - - - - - 93
Infrastructure Investments 32 3 - - - - 35
Corporate activities (39) - - - - - (39)
Total 173 4 (21) (43) 83 52 248
Reconciliation of 2023 statutory results to performance measures
Non-underlying items
2023 Intangible Provision in relation to rectification works in London 2023 performance
statutory
amortisation
measures
results
£m
£m £m
£m
Revenue including share of joint ventures and associates (performance) 9,595 - - 9,595
Share of revenue of joint ventures and associates (1,602) - - (1,602)
Group revenue (statutory) 7,993 - - 7,993
Cost of sales (7,593) - 12 (7,581)
Gross profit 400 - 12 412
Gain on disposals of interests in investments 24 - - 24
Amortisation of acquired intangible assets (5) 5 - -
Other operating expenses (261) - - (261)
Group operating profit 158 5 12 175
Share of results of joint ventures and associates 53 - - 53
Profit from operations 211 5 12 228
Investment income 82 - - 82
Finance costs (49) - - (49)
Profit before taxation 244 5 12 261
Taxation (50) (3) (3) (56)
Profit for the year 194 2 9 205
Reconciliation of 2023 statutory results to performance measures by segment
Non-underlying items
Profit/(loss) from operations 2023 Intangible Provision in relation to rectification works in London 2023
amortisation
statutory
£m performance
results £m
measures
£m £m
Segment
Construction Services 143 1 12 156
Support Services 80 - - 80
Infrastructure Investments 27 4 - 31
Corporate activities (39) - - (39)
Total 211 5 12 228
c) Underlying profit before tax
As mentioned on page 19, the Group's Infrastructure Investments segment is
assessed on an underlying profit before tax (PBT) measure. This is calculated
as follows:
2024 2023
£m £m
Underlying profit from operations (section (b) and Note 5) 35 31
Add: Subordinated debt interest receivable(+) 17 34
Add: Interest receivable on PPP financial assets(+) 2 2
Add: Fair value loss on investment asset(+) (2) (1)
Less: Non-recourse borrowings finance cost(+) (12) (11)
Add/(Less): Net impairment reversal/(impairment) of subordinated debt and accrued interest 14 (8)
receivable(+)
Underlying profit before tax (performance) 54 47
Non-underlying items (section (b) and Note 5) (3) (4)
Statutory profit before tax 51 43
(+) Refer to Note 7 and Note 8.
d) Underlying earnings per share
In line with the Group's measurement of underlying performance, the Group also
presents its earnings per share (EPS) on an underlying basis. The table below
reconciles this to the statutory earnings per share.
Reconciliation from statutory basic EPS to performance EPS
2024 2023
pence
pence
Statutory basic earnings per ordinary share 34.2 35.3
Amortisation of acquired intangible assets after tax 0.6 0.4
Other non-underlying items after tax 8.8 1.6
Underlying basic earnings per ordinary share (performance) 43.6 37.3
e) Revenue including share of joint ventures and associates (JVAs)
The Group uses a revenue measure which is inclusive of its share of revenue
generated from its JVAs. As the Group uses revenue as a measure of the level
of activity performed by the Group, the Board believes that including revenue
that is earned from its JVAs better reflects the size of the business and the
volume of work carried out and more appropriately compares to PFO.
This differs from the statutory measure of revenue which presents Group
revenue from its subsidiaries.
A reconciliation of the statutory measure of revenue to the Group's
performance measure is shown in the tables in section (b). A comparison
of the growth rates in statutory and performance revenue can be found in
section (j).
f) Operating cash flow (OCF)
The table below reconciles the Group's internal performance measure of OCF to
the statutory measure of cash generated from operating activities as reported
in the Group Statement of Cash Flows.
Reconciliation from statutory cash generated from operations to OCF
2024 2023
£m £m
Cash generated from operating activities (statutory) 265 285
Add back: Pension payments including deficit funding (Note 21) 30 28
Less: Repayment of lease liabilities (including lease interest payments) (66) (63)
Add: Operational dividends received from joint ventures and associates 71 59
Add back: Cash flow movements relating to non-operating items 13 9
Less: Operating cash flows relating to non-recourse activities (24) (8)
Operating cash flow (OCF) (performance) 289 310
The Group includes/excludes these items to reflect the true cash flows
generated from or used in the Group's operating activities:
Pension payments including deficit funding (£30 million): the Group has
excluded pension payments which are included in the Group's statutory measure
of cash flows from operating activities from its internal OCF measure as these
primarily relate to deficit funding of the Group's main pension fund, Balfour
Beatty Pension Fund (BBPF). The payments made for the deficit funding are in
accordance with an agreed journey plan with the trustees of the BBPF and are
not directly linked to the operational performance of the Group.
Repayment of lease liabilities (including lease interest payments) (£66
million outflow): the payments made for the Group's leasing arrangements are
included in the Group's OCF measure as these payments are made to third-party
suppliers for the lease of assets that are used to deliver services to the
Group's customers, and hence to generate revenue. Under IFRS, these payments
are excluded from the Group's statutory measure of cash flows from operating
activities as these are considered debt in nature under accounting standards.
Operational dividends received from joint ventures and associates (£71
million inflow): dividends received from joint ventures and associates which
are generated from non-disposal activities are included in the Group's OCF
measure as these are cash returns to the Group from cash flows generated from
operating activities within joint ventures and associates. Under IFRS, these
returns are classified as investing activities.
Cash flow movements relating to non-operating items (£13 million): the
Group's OCF measure excludes certain working capital movements that are not
directly attributable to the Group's operating activities.
Operating cash flows relating to non-recourse activities (£24 million): the
Group's OCF measure is specifically targeted to drive performance improvement
in the Group's earnings-based businesses and therefore any operating cash
flows relating to non-recourse activities are removed from this measure. Under
IFRS, there is no distinction between recourse and non-recourse cash flows.
g) Recourse net cash/borrowings
The Group also measures its performance based on its net cash/borrowings
position at the year end. This is analysed by excluding elements that are
non-recourse to the Group as well as lease liabilities.
Non-recourse elements are cash and debt that are ring-fenced within certain
infrastructure concession project companies and are excluded from the
definition of net debt set out in the Group's borrowing facilities. In
addition, lease liabilities which are deemed to be debt in nature under
statutory measures are also excluded from the Group's definition of net
cash/borrowings as these are viewed to be operational in nature reflecting
payments made in exchange for use of assets.
Net cash/borrowings reconciliation
2024 Adjustment 2024 2023 Adjustment 2023
statutory
£m
performance
statutory
£m
performance
£m
£m
£m
£m
Total cash within the Group 1,558 (265) 1,293 1,414 (306) 1,108
Cash and cash equivalents - infrastructure concessions 265 (265) - 306 (306) -
- other 1,293 - 1,293 1,108 - 1,108
Total debt within the Group (1,112) 762 (350) (979) 713 (266)
Borrowings - non-recourse loans (600) 600 - (570) 570 -
- other (350) - (350) (266) - (266)
Lease liabilities (162) 162 - (143) 143 -
Net cash 446 497 943 435 407 842
h) Average net cash/borrowings
The Group uses an average net cash/borrowings measure as this reflects its
financing requirements throughout the year. The Group calculates its average
net cash/borrowings based on the average opening and closing figures for each
month through the year.
The average net cash/borrowings measure excludes non-recourse cash and debt
and lease liabilities, and this performance measure shows average net cash of
£766 million for 2024 (2023: £700 million).
Using a statutory measure (inclusive of non-recourse elements and the lease
liabilities recognised) gives average net cash of £441 million for 2024
(2023: £438 million).
i) Directors' valuation of the Investments portfolio
The Group uses a different methodology to assess the value of its Investments
portfolio. As described in the Directors' valuation section, the Directors'
valuation for most of the investments in the portfolio has been undertaken
using forecast cash flows for each project on an asset by asset basis, based
on progress to date and market expectations of future performance. These cash
flows have been discounted using different discount rates depending on project
risk and maturity, reflecting secondary market transaction experience. As
such, the Board believes that this measure better reflects the potential
returns to the Group from those investments. The Directors have valued the
Investments portfolio at £1.25 billion at year end (2023: £1.21 billion).
The Directors' valuation will differ from the statutory carrying value of
these investments, which are accounted for using the relevant standards in
accordance with IFRS rather than a discounted cash flow approach.
Reconciliation of the net assets of the Infrastructure Investments segment to
the comparable statutory measure of the Investments portfolio included in the
Directors' valuation
2024 2023
£m £m
Net assets of the Infrastructure Investments segment (refer to Note 5.1) 626 596
Less: Net assets not included within the Directors' valuation - Housing (60) (53)
division
Comparable statutory measure of the Investments portfolio under IFRS 566 543
Comparison of the statutory measure of the Investments portfolio to its
performance measure
2024 2023
£m £m
Statutory measure of the Investments portfolio (as above) 566 543
Difference arising from the Directors' valuation being measured on a 688 669
discounted cash flow basis compared to the statutory measure primarily derived
using a combination of the following IFRS bases:
· historical cost
· amortised cost
· fair value
Directors' valuation (performance measure) 1,254 1,212
The difference between the statutory measure and the Directors' valuation
(performance measure) of the Group's Investments portfolio is not equal to the
gain on disposal that would result if the portfolio was fully disposed at the
Directors' valuation. This is because the gain/loss on disposal would be
affected by the recycling of items which were previously recognised directly
within reserves, which are material and can alter the resulting gain/loss on
disposal.
The statutory measure and the Directors' valuation are fundamentally different
due to the different methodologies used to derive the valuation of these
assets within the Investments portfolio.
As referred to in the Directors' valuation section, the Directors' valuation
for most investments is calculated using discounted cash flows. In deriving
these cash flows, assumptions have been made and different discount rates used
which are updated at each valuation date.
Unlike the Directors' valuation, the assets measured under statutory measures
using the appropriate IFRS accounting standards are valued using a combination
of the following methods:
· historical cost;
· amortised cost; and
· fair value for certain assets and liabilities within the PPP portfolio,
for which some assumptions are set at inception and some are updated at each
valuation date.
There is also an element of the Directors' valuation that is not represented
by an asset in the Group's balance sheet. This relates to the management
services contracts within the Investments business that are valued in the
Directors' valuation based on the future income stream expected from these
contracts.
j) Constant exchange rates (CER)
The Group operates across a variety of geographic locations and in its
statutory results, the results of its overseas entities are translated into
the Group's presentational currency at average rates of exchange for the year.
The Group's key exchange rates applied in deriving its statutory results are
shown in Note 4.
To measure changes in the Group's performance compared with the previous year
without the effects of foreign currency fluctuations, the Group provides
growth rates on a CER basis. These measures remove the effects of currency
movements by retranslating the prior year's figures at the current year's
exchange rates, using average rates for revenue and closing rates for order
book. A comparison of the Group's statutory growth rate to the CER growth rate
is provided in the table below:
2024 statutory growth compared to performance growth
Construction Services
UK US Gammon Total Support Services Infrastructure Investments Total
Revenue (£m)
2024 statutory 3,011 3,619 - 6,630 1,210 394 8,234
2023 statutory 3,027 3,668 - 6,695 1,006 292 7,993
Statutory growth (1)% (1)% - (1)% 20% 35% 3%
2024 performance(^) 3,011 3,638 1,550 8,199 1,210 606 10,015
2023 performance retranslated(^) 3,027 3,594 1,324 7,945 1,006 498 9,449
Performance CER growth (1)% 1% 17% 3% 20% 22% 6%
Order book (£bn)
2024 6.2 7.1 1.9 15.2 3.2 - 18.4
2023 6.1 5.6 2.0 13.7 2.8 - 16.5
Growth 2% 27% (5)% 11% 14% - 12%
2024 6.2 7.1 1.9 15.2 3.2 - 18.4
2023 retranslated 6.1 5.7 2.1 13.9 2.8 - 16.7
CER growth 2% 25% (10)% 9% 14% - 10%
^ Performance revenue is underlying revenue including share of revenue from
joint ventures and associates as set out in section (e).
Forward-looking statements
This report, including information included or incorporated by reference in
it, may include statements that are or may be forward-looking statements,
beliefs or opinions, including statements with respect to Balfour Beatty's
business, financial condition, operations and prospects. These forward-looking
statements may be identified by the use of forward-looking terminology or the
negative thereof such as "expects" or "does not expect", "anticipates" or
"does not anticipate", "targets", "aims", "continues", "is subject to",
"assumes", "budget", "scheduled", "estimates", "risks", "positioned",
"forecasts" "intends", "hopes", "believes" or variations of such words or
comparable terminology and phrases or statements that certain actions, events
or results "may", "could", "should", "shall", "would", "might" or "will" be
taken, occur or be achieved. Such statements are qualified in their entirety
by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements are not based on historical facts, but rather on
current predictions, expectations, beliefs, opinions, plans, objectives,
goals, intentions and projections about future events, results of operations,
prospects, financial condition and discussions of strategy.
By their nature, forward-looking statements involve known and unknown risks
and uncertainties because they relate to events and depend on circumstances
that may or may not occur in the future. These events and circumstances
include changes in the global, political, economic, business, competitive,
market and regulatory forces, future exchange and interest rates, changes in
tax rates, future business combinations or disposals, and any epidemic,
pandemic or disease outbreak. If any one or more of these risks or
uncertainties materialises or if any one or more of the assumptions prove
incorrect, actual results may differ materially from those expected, estimated
or projected. Such forward looking statements should therefore be construed in
the light of such factors. As a result, you are cautioned not to place any
undue reliance on such forward-looking statements.
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, and
projections are not guarantees of future performance. Forward-looking
statements speak only as at the date of this report and, other than in
accordance with its legal or regulatory obligations, Balfour Beatty expressly
disclaims any obligations or undertaking to update, or revise, any
forward-looking statements in this report.
No statement in this report is intended as a profit forecast or profit
estimate and no statement in this presentation should be interpreted to mean
that Balfour Beatty's earnings per share for the current or future financial
years would necessarily match or exceed the historical published earnings per
share for Balfour Beatty.
This report does not constitute or form part of any offer or invitation to
sell or issue, or any solicitation of any offer to purchase or subscribe for
any securities. The making of this presentation does not constitute any advice
or recommendation regarding any securities.
Group Income Statement
For the year ended 31 December 2024
2024 2023
Notes Underlying Non-underlying items Total Underlying Non-underlying Total
items(1) (Note 9) £m items(1) items £m
£m £m £m (Note 9)
£m
Revenue including share of joint ventures and associates 10,015 - 10,015 9,595 - 9,595
Share of revenue of joint ventures and associates 15 (1,781) - (1,781) (1,602) - (1,602)
Group revenue 8,234 - 8,234 7,993 - 7,993
Cost of sales (7,817) (66) (7,883) (7,581) (12) (7,593)
Gross profit/(loss) 417 (66) 351 412 (12) 400
Gain on disposals of interests in investments 23.2 43 - 43 24 - 24
Amortisation of acquired intangible assets 14 - (4) (4) - (5) (5)
Other operating expenses (271) (5) (276) (261) - (261)
Group operating profit/(loss) 189 (75) 114 175 (17) 158
Share of results of joint ventures and associates excluding gain on disposals 59 - 59 51 - 51
of interests in investments
Gain on disposals of interests in investments 23.2 - - - 2 - 2
Share of results of joint ventures and associates 15 59 - 59 53 - 53
Profit/(loss) from operations 248 (75) 173 228 (17) 211
Investment income 7 82 - 82 82 - 82
Finance costs 8 (41) - (41) (49) - (49)
Profit/(loss) before taxation 289 (75) 214 261 (17) 244
Taxation 10 (62) 26 (36) (56) 6 (50)
Profit/(loss) for the year 227 (49) 178 205 (11) 194
Attributable to
Equity holders 227 (49) 178 208 (11) 197
Non-controlling interests - - - (3) - (3)
Profit/(loss) for the year 227 (49) 178 205 (11) 194
(1) Before non-underlying items (Note 9).
Notes 2024 pence 2023 pence
Earnings per share
- basic 11 34.2 35.3
- diluted 11 33.7 34.8
Dividends per share proposed for the year 12 12.5 11.5
Group Statement of Comprehensive Income
For the year ended 31 December 2024
2024 2023
Group Share of joint ventures and associates Total Group Share of Total
£m £m £m £m joint £m
ventures
and associates
£m
Profit for the year 119 59 178 141 53 194
Other comprehensive (loss)/income for the year
Items which will not subsequently be reclassified to the income statement
Actuarial losses on retirement benefit assets/liabilities (102) - (102) (197) (1) (198)
Fair value revaluations of investments in mutual funds measured at fair value 2 - 2 1 - 1
through OCI
Tax on above 26 - 26 49 - 49
(74) - (74) (147) (1) (148)
Items which will subsequently be reclassified to the income statement
Currency translation differences 6 3 9 (17) (13) (30)
Fair value revaluations - PPP financial assets (2) (48) (50) - 20 20
- cash flow hedges 1 10 11 - 2 2
Recycling of revaluation reserves to the income statement on disposal(^) - - - - (3) (3)
Tax on above - 10 10 (1) (5) (6)
5 (25) (20) (18) 1 (17)
Total other comprehensive loss for the year (69) (25) (94) (165) - (165)
Total comprehensive income/(loss) for the year 50 34 84 (24) 53 29
Attributable to
Equity holders 84 32
Non-controlling interests - (3)
Total comprehensive income for the year 84 29
(^) 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 2024
Called-up Share Capital Share Other reserves (µ) Retained Non- Total
share premium redemption of joint £m profits controlling £m
capital account reserve ventures' £m interests
£m £m £m and £m
associates'
reserves
£m
At 1 January 2023 294 176 52 (20) 170 706 5 1,383
Total comprehensive income/(loss) for the year - - - 53 (17) (4) (3) 29
Ordinary dividends - - - - - (58) - (58)
Joint ventures' and associates' dividends - - - (60) - 60 - -
Purchase of treasury shares - - - - - (151) - (151)
Cancellation of ordinary shares (22) - 22 - - - - -
Movements relating to share-based payments(+) - - - - 4 (7) - (3)
Capital contribution - - - - - - 8 8
At 31 December 2023 272 176 74 (27) 157 546 10 1,208
Total comprehensive income for the year - - - 34 7 43 - 84
Ordinary dividends - - - - - (61) (1) (62)
Joint ventures' and associates' dividends - - - (71) - 71 - -
Purchase of treasury shares - - - - - (101) - (101)
Cancellation of ordinary shares (13) - 13 - - - - -
Movements relating to share-based payments(+) - - - - (2) 3 - 1
At 31 December 2024 259 176 87 (64) 162 501 9 1,130
(µ) Other reserves include £22m of special reserve (2023: £22m).
(+) Movements relating to share-based payments include £4m tax credit (2023:
£nil) recognised directly within retained profits.
Group Balance Sheet
At 31 December 2024
Notes 2024 2023
£m
£m
Non-current assets
Intangible assets - goodwill 13 854 845
- other 14 268 288
Service concession contract asset(+) 69 -
Property, plant and equipment 136 141
Right-of-use assets 153 135
Investment properties 101 66
Investments in joint ventures and associates 15 385 389
Investments 24 28
PPP financial assets 21 24
Trade and other receivables 17 326 308
Retirement benefit assets 21 43 104
Deferred tax assets 200 188
2,580 2,516
Current assets
Inventories 158 124
Contract assets 16.1 229 300
Trade and other receivables 17 1,099 894
Cash and cash equivalents - infrastructure investments 20.3 265 306
- other 20.3 1,293 1,108
Current tax receivable 8 16
Derivative financial instruments - 1
3,052 2,749
Total assets 5,632 5,265
Current liabilities
Contract liabilities 16.2 (697) (600)
Trade and other payables 18 (1,778) (1,734)
Provisions 19 (239) (216)
Borrowings - non-recourse loans 20.3 (11) (9)
- other 20.3 (185) (104)
Lease liabilities (57) (50)
Current tax payable (13) (6)
(2,980) (2,719)
Non-current liabilities
Contract liabilities 16.2 (2) (2)
Trade and other payables 18 (88) (122)
Provisions 19 (378) (201)
Borrowings - non-recourse loans 20.3 (589) (561)
- other 20.3 (165) (162)
Lease liabilities (105) (93)
Retirement benefit liabilities 21 (41) (35)
Deferred tax liabilities (153) (160)
Derivative financial instruments (1) (2)
(1,522) (1,338)
Total liabilities (4,502) (4,057)
Net assets 1,130 1,208
Equity
Called-up share capital 259 272
Share premium account 176 176
Capital redemption reserve 87 74
Share of joint ventures' and associates' reserves (64) (27)
Other reserves 162 157
Retained profits 501 546
Equity attributable to equity holders of the Parent 1,121 1,198
Non-controlling interests 9 10
Total equity 1,130 1,208
(+) Service concession contract asset of £69m relates to a student
accommodation project which features demand risk under IFRIC 12 Service
Concession Arrangements.
Construction of the asset commenced in December 2023 and is anticipated to
complete in 2028. This asset was previously presented within Intangible assets
- Other in
2023 and has not been re-presented as the Directors do not consider this to
be material.
Group Statement of Cash Flows
For the year ended 31 December 2024
Notes 2024 2023
£m
£m
Cash flows from operating activities
Cash from operations 277 293
Income taxes paid (12) (8)
Net cash from operating activities 265 285
Cash flows from investing activities
Dividends received from:
- joint ventures and associates - infrastructure investments 26 24
- joint ventures and associates - other 45 36
- other investments 1 3
Interest received - infrastructure investments - joint ventures 7 7
Interest received subsidiaries - infrastructure investments 11 4
- other 40 33
Purchases of: - intangible assets - infrastructure investments - (30)
- service concession contract asset - infrastructure investments (56) -
- property, plant and equipment (28) (66)
- investment properties (36) (42)
- other investments - (2)
Investments in and long-term loans to joint ventures and associates (20) (14)
Return of equity from joint ventures and associates - 4
PPP financial assets cash expenditure (5) (2)
PPP financial assets cash receipts 8 6
Disposals of: - investments in joint ventures - infrastructure investments 43 56
- property, plant and equipment - other 5 4
- other investments 5 12
Net cash from investing activities 46 33
Cash flows used in financing activities
Purchase of ordinary shares (12) (18)
Purchase of treasury shares (101) (151)
Proceeds from new loans relating to: - infrastructure investments assets 20.4 36 336
- other 20.4 39 28
Repayments of loans relating to: - infrastructure investments assets 20.4 (9) (8)
- other 20.4 (40) (197)
Repayment of lease liabilities (59) (57)
Ordinary dividends paid 12 (61) (58)
Other dividends paid - non-controlling interests (1) -
Capital contribution - non-controlling interests - 8
Interest paid - infrastructure investments (12) (11)
Interest paid - other (31) (30)
Net cash used in financing activities (251) (158)
Net increase in cash and cash equivalents 60 160
Effects of exchange rate changes 3 (29)
Cash and cash equivalents at beginning of year 1,310 1,179
Cash and cash equivalents at end of year 20.2 1,373 1,310
Notes to the financial statements
1 Basis of accounting
The annual financial statements have been prepared on a going concern basis in
accordance with UK-adopted international accounting standards and in
conformity with the requirements of the Companies Act 2006 (the Act). The
presentational currency of the Group is sterling.
The financial information in this announcement, which was approved by the
Board of Directors on 11 March 2025, does not constitute the Company's
statutory accounts for the years ended 31 December 2024 or 2023, but is
derived from those accounts. Statutory accounts for 2023 have been delivered
to the Registrar of Companies and those for 2024 will be delivered following
the Company's Annual General Meeting. The auditor has reported on the 2024
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 that comply with IFRS in April
2025.
2 Going concern
The Directors 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.
The key financial risk factors for the Group remain largely unchanged. The
Group's principal risks and the consequent impact these might have on the
Group as well as mitigations that are in place are detailed on pages 89 to 105
of the Annual Report and Accounts 2024.
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 2024, both these covenants were passed as the Group had net cash and
net interest income from a covenant test perspective.
The Directors have carried out an assessment of the Group's ability to
continue as a going concern for the period of at least 12 months from the date
of approval of the financial statements. This assessment has involved the
review of medium-term cash forecasts of each of the Group's operations. The
Directors have also considered the strength of the Group's order book which
amounted to £18.4bn at 31 December 2024 and will provide a pipeline of
secured work over the going concern assessment period. These base case
projections indicate that the headroom provided by the Group's strong cash
position and the debt facilities currently in place is adequate to support the
Group over the going concern assessment period.
At 31 December 2024, the Group's only debt, other than non-recourse borrowings
ring-fenced within certain concession companies, comprised $208m US private
placement (USPP) notes.
The Group's £450m committed sustainability linked bank facility remained
undrawn at 31 December 2024 and is fully available to the Group until June
2028. The Group's £30m bilateral committed facility, which was entered into
in December 2022, also remained undrawn at 31 December and remains fully
available to the Group until December 2027.
2 Going concern continued
The Directors have stress-tested the Group's base case projections of both
cash and profit against key sensitivities which could materialise as a result
of adverse changes in the economic environment including a deterioration in
commercial or operational conditions. The Group has sensitised its projections
against severe but plausible downside scenarios which include:
· elimination of a portion of unsecured work assumed within the Group's
base case projections and a delay of six months for any awarded but not yet
contracted work;
· a deterioration of contract judgements and restriction of a portion of
the Group's margins; and
· delay in the disposal of Investments assets by 12 months.
In the severe but plausible downside scenarios modelled, the Group continues
to retain sufficient headroom on liquidity throughout the going concern
period. Through these downside scenarios, the Group is still expected to be in
a net cash position and to remain within its banking covenants through the
going concern assessment period.
Based on the above and having made appropriate enquiries, the Directors
consider it reasonable to assume that the Group has adequate resources to
continue for the going concern period and, for this reason, have continued to
adopt the going concern basis in preparing the financial statements.
3 Accounting policies
3.1 Adoption of new and revised standards
The following accounting standards, interpretations and amendments have been
adopted by the Group in the year ended 31 December 2024:
· Amendments to the following standards:
· IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
· IAS 1 Presentation of Financial Statements:
§ Classification of Liabilities as Current or Non-current
§ Non-current Liabilities with Covenants
· IFRS 16 Leases: Lease Liability in a Sale and Leaseback
These amended standards did not have a material effect on the Group.
3.2 Accounting standards not yet adopted by the Group
The following accounting standards, interpretations and amendments have been
issued by the IASB but had either not been adopted by the UK or were not yet
effective in the UK at 31 December 2024:
· IFRS 18 Presentation and Disclosure in Financial Statements
· IFRS 19 Subsidiaries without Public Accountability: Disclosures
· Amendments to the following standards:
· IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of
Exchangeability
· IFRS 9 and IFRS 7: Classification and Measurement of Financial
Instruments
· IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent
Electricity
· Annual Improvements to IFRS Accounting Standards Volume 11
The Directors do not expect these new and amended standards to have a material
effect on the Group and have chosen not to adopt any of the above standards
and interpretations earlier than required.
3.3 Judgements and key sources of estimation uncertainty
The Group's principal judgements and key sources of estimation uncertainty are
set out in Note 2.28 of the Annual Report and Accounts 2024.
4 Exchange rates
The following key exchange rates were applied in the financial statements.
Average rates
£1 buys 2024 2023 Change
US$ 1.28 1.24 3.2%
HK$ 9.98 9.73 2.6%
Closing rates
£1 buys 2024 2023 Change
US$ 1.25 1.27 (1.6)%
HK$ 9.73 9.95 (2.2)%
5 Segment analysis
Reportable segments of the Group:
Construction Services - activities resulting in the physical construction of
an asset;
Support Services - activities which support existing assets or functions such
as asset maintenance and refurbishment; and
Infrastructure Investments - acquisition, operation and disposal of
infrastructure assets such as roads, hospitals, student accommodation,
military housing, multifamily residences, offshore transmission networks,
waste and biomass and other concessions. This segment also includes the
Group's housing development division.
5.1 Total Group Construction Support Infrastructure Corporate Total
Income statement - performance by activity Services Services Investments activities
2024 2024 2024 2024 2024
£m £m £m £m £m
Revenue including share of joint ventures and associates 8,199 1,210 606 - 10,015
Share of revenue of joint ventures and associates (1,569) - (212) - (1,781)
Group revenue 6,630 1,210 394 - 8,234
Group operating profit/(loss)(1) 118 93 17 (39) 189
Share of results of joint ventures and associates 41 - 18 - 59
Profit/(loss) from operations(1) 159 93 35 (39) 248
Non-underlying items:
- net release of provisions relating to Rail Germany 21 - - - 21
- recognition of insurance recovery in relation to rectification works 43 - - - 43
on a development in London
- provision recognised in relation to claims made under the Building (83) - - - (83)
Safety Act
- charge recognised in relation to a legacy claim received for a (52) - - - (52)
project completed in 2012 in Texas
- amortisation of acquired intangible assets (1) - (3) - (4)
(72) - (3) - (75)
Profit/(loss) from operations 87 93 32 (39) 173
Investment income 82
Finance costs (41)
Profit before taxation 214
(1) Before non-underlying items (Note 9).
Construction Support Infrastructure Corporate Total
Income statement - performance by activity Services Services Investments activities
2023 2023 2023 2023 2023
£m £m £m £m £m
Revenue including share of joint ventures and associates 8,081 1,006 508 - 9,595
Share of revenue of joint ventures and associates (1,386) - (216) - (1,602)
Group revenue 6,695 1,006 292 - 7,993
Group operating profit/(loss)(1) 120 80 14 (39) 175
Share of results of joint ventures and associates 36 - 17 - 53
Profit/(loss) from operations(1) 156 80 31 (39) 228
Non-underlying items:
- provision recognised for rectification works to be carried out on a (12) - - - (12)
development in London
- amortisation of acquired intangible assets (1) - (4) - (5)
(13) - (4) - (17)
Profit/(loss) from operations 143 80 27 (39) 211
Investment income 82
Finance costs (49)
Profit before taxation 244
(1) Before non-underlying items (Note 9).
5 Segment analysis continued
5.1 Total Group continued
Construction Support Infrastructure Corporate Total
Assets and liabilities by activity Services Services Investments activities
2024 2024 2024 2024 2024
£m £m £m £m £m
Contract assets 116 70 43 - 229
Contract liabilities - current (506) (188) (3) - (697)
Inventories 47 48 63 - 158
Trade and other receivables - current 939 99 22 39 1,099
Trade and other payables - current (1,470) (198) (59) (51) (1,778)
Provisions - current (213) (6) (3) (17) (239)
Working capital* (1,087) (175) 63 (29) (1,228)
Total assets 2,209 520 1,309 1,594 5,632
Total liabilities (2,635) (524) (683) (660) (4,502)
Net assets (426) (4) 626 934 1,130
* Includes non-operating items and current working capital.
Assets and liabilities by activity Construction Support Infrastructure Corporate Total
Services Services Investments activities
2023 2023 2023 2023 2023
£m £m £m £m £m
Contract assets 203 69 28 - 300
Contract liabilities - current (506) (90) (4) - (600)
Inventories 45 25 54 - 124
Trade and other receivables - current 768 73 33 20 894
Trade and other payables - current (1,491) (176) (48) (19) (1,734)
Provisions - current (187) (4) (7) (18) (216)
Working capital* (1,168) (103) 56 (17) (1,232)
Total assets 2,168 459 1,260 1,378 5,265
Total liabilities (2,484) (385) (664) (524) (4,057)
Net assets (316) 74 596 854 1,208
* Includes non-operating items and current working capital.
5 Segment analysis continued
5.1 Total Group continued
Other information Construction Support Infrastructure Corporate Total
Services Services Investments activities
2024 2024 2024 2024 2024
£m £m £m £m £m
Capital expenditure on property, plant and equipment 7 18 - 3 28
Capital expenditure on service concession contract assets - - 56 - 56
Depreciation 23 57 3 9 92
Gain on disposals of interests in investments (Note 23.2) - - 43 - 43
2023 2023 2023 2023 2023
£m £m £m £m £m
Capital expenditure on property, plant and equipment 8 47 - 11 66
Capital expenditure on intangible assets - - 30 - 30
Depreciation 28 48 2 9 87
Gain on disposals of interests in investments - - 24 - 24
Gain on disposals of interests in investments within joint ventures and - - 2 - 2
associates
Performance by geographic destination United United Rest of
Kingdom States world Total
2024 2024 2024 2024
£m £m £m £m
Revenue including share of joint ventures and associates 4,420 4,039 1,556 10,015
Share of revenue of joint ventures and associates (102) (125) (1,554) (1,781)
Group revenue 4,318 3,914 2 8,234
2023 2023 2023 2023
£m £m £m £m
Revenue including share of joint ventures and associates 4,192 4,035 1,368 9,595
Share of revenue of joint ventures and associates (101) (138) (1,363) (1,602)
Group revenue 4,091 3,897 5 7,993
( )
5.2 Infrastructure Investments
Group Share of joint Total Group Share of joint Total
2024 ventures and 2024 2023 ventures and 2023
£m associates £m £m associates £m
Underlying profit/(loss) from operations(1) (Note 15)(+) (Note 15)(+)
2024 2023
£m £m
UK^ (2) 9 7 (1) 3 2
North America 2 9 11 7 12 19
Gain on disposals of interests in investments 43 - 43 24 2 26
43 18 61 30 17 47
Bidding costs and overheads (26) - (26) (16) - (16)
17 18 35 14 17 31
(+) The Group's share of the results of joint ventures and associates is
disclosed net of investment income, finance costs and taxation.
(^) Including Ireland
(1) Before non-underlying items (Note 9).
6. Revenue
6.1 Nature of services provided
6.1.1 Construction Services
The Group's Construction Services segment encompasses activities in relation
to the physical construction of assets provided to public and private
customers. Revenue generated in this segment is measured over time as control
passes to the customer as the asset is constructed. Progress is measured by
reference to the cost incurred on the contract to date compared to the
contract's end of job forecast (the input method). Payment terms are based on
a schedule of value that is set out in the contract and fairly reflect the
timing and performance of service delivery. Contracts with customers are
typically accounted for as one performance obligation (PO).
Types of assets Typical contract length Nature, timing of satisfaction of performance obligations and significant
payment terms
Buildings 12 to 36 months The Group constructs buildings which include commercial, healthcare,
education, retail and residential assets. As part of its construction
services, the Group provides a range of services including design and/or
build, mechanical and electrical engineering, shell and core and/or fit-out
and interior refurbishment. The Group's customers in this area are a mix of
private and public entities.
The contract length depends on the complexity and scale of the building and
contracts entered into for these services are typically fixed price.
In most instances, the contract with the customer is assessed to only contain
one PO as the services provided by the Group, including those where the Group
is also providing design services, are highly interrelated. However, for
certain types of contracts, services relating to fit-out and interior
refurbishment may sometimes be assessed as a separate PO.
Infrastructure 1 to 3 months for small-scale infrastructure works The Group provides construction services for three main types of
infrastructure assets: highways, railways and other large-scale infrastructure
24 to 60 months for large-scale complex construction assets such as waste, water and energy plants.
Highways represent the Group's activities in constructing motorways in the UK,
US and Hong Kong. This includes activities such as design and construction of
roads, widening of existing motorways or converting existing motorways. The
main customers are government bodies.
Railway construction services include design and managing the construction of
railway systems delivering major multi-disciplinary projects, track work,
electrification and power supply. The Group serves both public and private
railways including high-speed passenger railways, freight and mixed traffic
routes, dense commuter networks, metros and light rail.
Other infrastructure assets include construction, design and build services on
large-scale complex assets predominantly servicing the waste, water and energy
sectors.
Contracts entered into relating to these infrastructure assets can take the
form of fixed-price, cost-plus or target-cost contracts with shared pain/gain
mechanisms. Contract lengths vary according to the size and complexity of the
asset build and can range from a few months for small-scale infrastructure
works to four to five years for large-scale complex construction works.
In most cases, the contract itself represents a single PO where only the
design and construction elements are contracted. In some instances, the
contract with the customer will include maintenance of the constructed asset.
The Group assesses the maintenance element as a separate PO and revenue from
this PO is recognised in the Support Services segment. Refer to Note 6.1.2.
6 Revenue continued
6.1 Nature of services provided continued
6.1.2 Support Services
The Group's work in this segment supports existing assets through maintaining,
upgrading and managing services across utilities and infrastructure assets.
Revenue generated in this segment is measured over time as control passes to
the customer as and when services are provided. Progress is measured by
reference to the cost incurred on the contract to date compared to the
contract's end of job forecast (the input method). Payments are structured as
milestone payments set out in the respective contracts.
Types of assets Nature, timing of satisfaction of performance obligations and significant
payment terms
Utilities Within the Group's services contracts, the Group provides support services to
various types of utility assets.
For contracts servicing power transmission and distribution assets, the Group
constructs and maintains electricity networks, including replacement or new
build of overhead lines, underground cabling, cable tunnels and offshore wind
farm maintenance. Contracts entered into are fixed-price, cost-plus or
target-cost contracts with shared pain/gain mechanisms. Contract lengths can
vary from 12 to 36 months. Each contract is normally assessed to contain one
PO. However, where a contract contains both a construction phase and a
maintenance phase, these are assessed to contain two separate POs.
Infrastructure The Group provides maintenance, asset and network management and design
services in respect of highways, railways and other publicly available assets.
The customer in this area of the Group is mainly government bodies. Types of
contract include a fixed schedule of rates, fixed-price, target-cost
arrangements and cost-plus.
Contract terms range from 1 to 25 years. Where contracts include a lifecycle
element, this is accounted for as a separate PO and recognised when the work
is delivered.
6 Revenue continued
6.1 Nature of services provided continued
6.1.3 Infrastructure Investments
The Group invests directly in a variety of assets, predominantly consisting of
infrastructure assets where there are opportunities to manage the asset upon
completion of construction. The Group also invests in real estate type assets,
in particular private residential and student accommodation assets. Revenue
generated in this segment is from the provision of construction, maintenance
and management services and also from the recognition of rental income. The
Group's strategy is to hold these assets until optimal values are achieved
through disposal of mature assets.
Types of services Nature, timing of satisfaction of performance obligations and significant
payment terms
Service concessions The Group operates a UK and US portfolio of service concession assets
comprising assets in the roads, healthcare, student accommodation, biomass and
waste and offshore transmission sectors. The Group accounts for these assets
under IFRIC 12 Service Concession Arrangements.
Where the Group constructs and maintains these assets, the two services are
deemed to be separate performance obligations and accounted for separately. If
the maintenance phase includes a lifecycle element, this is considered to be a
separate PO.
Contract terms can be up to 40 years. The Group recognises revenue over time
using the input method. Consideration is paid through a fixed unitary payment
charge spread over the life of the contract.
Revenue from this service is presented across Buildings, Infrastructure or
Utilities in Note 6.2.
Management services The Group provides real estate management services such as property
development and asset management services. Contract terms can be up to 50
years. The Group recognises revenue over time as and when service is delivered
to the customer.
Revenue from this service is presented within Buildings in Note 6.2.
Housing development The Group also develops housing units on land that is owned by the Group.
Revenue is recognised on the sale of individual units at the point in time
when control of the asset is transferred to the purchaser. This is deemed to
be when an unconditional sale is achieved.
Revenue from this service is presented within Buildings in Note 6.2.
6 Revenue continued
6.2 Disaggregation of revenue
The Group presents a disaggregation of its revenue according to the primary
geographical markets in which the Group operates as well as the types of
assets serviced by the Group. The nature of the various services provided by
the Group is explained in Note 6.1. This disaggregation of revenue is also
presented according to the Group's reportable segments as described in Note
5.
For the year ended 31 December 2024
United United Rest of Total
Revenue by primary geographical markets Kingdom States world £m
£m £m £m
Construction Services Revenue including share of joint ventures and associates 3,010 3,638 1,551 8,199
Group revenue 3,010 3,619 1 6,630
Support Revenue including share of joint ventures and associates 1,209 - 1 1,210
Services
Group revenue 1,209 - 1 1,210
Infrastructure Investments Revenue including share of joint ventures and associates 201 401 4 606
Group revenue 99 295 - 394
Total Revenue including share of joint ventures and associates 4,420 4,039 1,556 10,015
revenue
Group revenue 4,318 3,914 2 8,234
Buildings Infrastructure Utilities Other Total
Revenue by types of assets serviced £m £m £m £m £m
Construction Services Revenue including share of joint ventures and associates 4,178 3,465 417 139 8,199
Group revenue 3,420 2,657 414 139 6,630
Support Revenue including share of joint ventures and associates 12 782 385 31 1,210
Services
Group revenue 12 782 385 31 1,210
Infrastructure Investments Revenue including share of joint ventures and associates 445(+) 153 8 - 606
Group revenue 390(+) 4 - - 394
Total Revenue including share of joint ventures and associates 4,635 4,400 810 170 10,015
revenue
Group revenue 3,822 3,443 799 170 8,234
Timing of revenue recognition Construction Support Infrastructure Total
Services Services Investments £m
£m £m £m
Over time 8,194 1,209 587 9,990
At a point in time 5 1 19 25
Revenue including share of joint ventures and associates 8,199 1,210 606 10,015
Over time 6,625 1,209 375 8,209
At a point in time 5 1 19 25
Group revenue 6,630 1,210 394 8,234
+ Includes rental income of £48m including share of joint ventures and
associates or £26m excluding share of joint ventures and associates.
6 Revenue continued
6.2 Disaggregation of revenue continued
( )
For the year ended 31 December 2023
United United Rest of Total
Revenue by primary geographical markets Kingdom States world £m
£m £m £m
Construction Services Revenue including share of joint ventures and associates 3,025 3,697 1,359 8,081
Group revenue 3,025 3,669 1 6,695
Support Revenue including share of joint ventures and associates 1,003 - 3 1,006
Services
Group revenue 1,003 - 3 1,006
Infrastructure Investments Revenue including share of joint ventures and associates 164 338 6 508
Group revenue 63 228 1 292
Total Revenue including share of joint ventures and associates 4,192 4,035 1,368 9,595
revenue
Group revenue 4,091 3,897 5 7,993
Buildings Infrastructure Utilities Other Total
Revenue by types of assets serviced £m £m £m £m £m
Construction Services Revenue including share of joint ventures and associates 3,954 3,442 593 92 8,081
Group revenue 3,284 2,738 581 92 6,695
Support Revenue including share of joint ventures and associates 9 661 326 10 1,006
Services
Group revenue 9 661 326 10 1,006
Infrastructure Investments Revenue including share of joint ventures and associates 346(+) 146 16 - 508
Group revenue 289(+) 3 - - 292
Total Revenue including share of joint ventures and associates 4,309 4,249 935 102 9,595
revenue
Group revenue 3,582 3,402 907 102 7,993
Timing of revenue recognition Construction Support Infrastructure Total
Services Services Investments £m
£m £m £m
Over time 8,076 1,002 496 9,574
At a point in time 5 4 12 21
Revenue including share of joint ventures and associates 8,081 1,006 508 9,595
Over time 6,690 1,002 280 7,972
At a point in time 5 4 12 21
Group revenue 6,695 1,006 292 7,993
+ Includes rental income of £53m including share of joint ventures and
associates or £21m excluding share of joint ventures and associates.
7 Investment income
2024 2023
£m £m
Subordinated debt interest receivable 17 34
Interest receivable on PPP financial assets 2 2
Interest received on bank deposits 40 33
Other interest receivable and similar income 2 -
Impairment reversal of joint ventures and associates - loans 17 -
- accrued interest - 1
Net finance income on pension scheme assets and obligations (Note 21) 4 12
82 82
8 Finance costs
2024 2023
£m £m
Non-recourse borrowings - bank loans and overdrafts 12 11
US private placement - finance cost 10 12
Interest on lease liabilities 7 6
Fair value loss on investment asset 2 1
Other interest payable - committed facilities 2 3
- letter of credit fees 1 2
- other finance charges 4 5
Impairment of joint ventures and associates - loans 2 9
- accrued interest 1 -
41 49
The net impairment reversal of loans to joint ventures and associates and
accrued interest receivable of £14m (2023: £8m net impairment) relates to
expected credit loss assessments performed. All of the net impairment
reversals relate to subordinated debt and accrued interest receivable from
joint ventures and associates held within the Infrastructure Investments
segment.
9 Non-underlying items
2024 2023
£m £m
Items (charged against)/credited to profit
9.1 Amortisation of acquired intangible assets (4) (5)
9.2 Other non-underlying items:
- net release of provisions relating to Rail Germany 21 -
- recognition of insurance recovery/(provision) in relation to rectification 43 (12)
works on a development in
London
- provision recognised in relation to claims made under the Building Safety (83) -
Act
- charge recognised in relation to a claim received on a legacy project (52) -
completed in 2012 in Texas
Total other non-underlying items (71) (12)
Charged against profit before taxation (75) (17)
9.3 Tax credit:
- tax on amortisation of acquired intangible assets 1 3
- tax on other items above 25 3
Total tax credit 26 6
Charged against profit for the year (49) (11)
9.1 The amortisation of acquired intangible assets comprises: customer
contracts £3m (2023: £4m); and customer relationships £1m (2023: £1m).
The charge was recognised in the following segments: Construction Services
£1m (2023: £1m); and Infrastructure Investments £3m (2023: £4m).
9.2.1 In 2014, Rail Germany was reclassified from discontinued operations and
has since been presented as part of the Group's non-underlying items within
continuing operations in line with the Group's continued commitment to exit
this part of the business.
In 2024, the two remaining contracts held within Rail Germany reached the end
of their warranty periods resulting in the release of warranty provisions held
in respect of these contracts. This release has been credited to the Group's
income statement within
non-underlying, net of provision increases relating to certain legacy
liabilities remaining within the business. This net credit of £21m was
recognised in the Construction Services segment.
9.2.2 In 2021, the Group recognised a provision of £42m within non-underlying
in relation to rectification work to be carried out on a development in London
which was constructed by the Group between 2013 and 2016. The rectification
work includes the replacement of stone panels affixed to the façade of the
development to meet performance requirements as well as an estimate of any
potential consequential disruption to the development as a result of these
rectification works. In 2023, the Group increased this provision to £54m
following a reassessment of the rectification cost. The additional charge to
the income statement was also recognised in non-underlying. The Group's
estimated provision did not include potential recoveries from third parties.
In 2024, rectification work continued to progress and is expected to complete
in the first half of 2025. In July 2024, the Group received confirmation from
its insurers that the rectification work qualifies for insurance coverage.
Upon assessment of the interim cost by the insurer's loss adjusters as well as
receipt of cash for the first application for payment submitted by the Group
for a portion of the cost incurred to date, the Group has recognised an
insurance recovery of £43m. The Group has presented this income within
non-underlying in line with the presentation adopted for the recognition of
the provision.
Both the provision for the rectification work and the insurance coverage have
been recognised within the Construction Services segment.
9 Non-underlying items continued
9.2.3 The Building Safety Act (BSA), which was introduced in 2022, extends the
limitation for claims under the Defective Premises Act 1972 from 6 years to 30
years for dwellings completed before 28 June 2022. Since the introduction of
the BSA, the Group has conducted investigations and due diligence on claims
received to establish whether an obligation exists and if costs can be
reliably estimated. The Group has recognised a provision where a probable
obligation has been established and cost associated with the claim can be
reliably estimated. Previously, the charge relating to this provision has been
recognised within the Group's underlying results as the amounts recognised did
not result in a distortion of the Group's underlying results.
In 2024, following further developments and clarifications in the legal
landscape of the BSA, progression of the Group's investigation and due
diligence as well as adjudications on claims received to date, the Group has
reassessed its provision for BSA claims resulting in an increase in the
provision of £83m. The provision does not include potential recoveries from
third parties. This increase has been recognised in non-underlying due to its
size and the nature of the cost, which has arisen from a change in
legislation.
This charge has been recognised in the Construction Services segment.
9.2.4 In 2012, the Group, through a joint operation formed with Fluor
Enterprises Inc. in which the Group owns a 40% share, completed a contract
with the North Texas Tollway Authority (NTTA) to provide design and build
services in relation to the extension of NTTA's President George Bush Turnpike
Highway (SH161 in Texas). In October 2022, NTTA served the joint operation
with a claim demanding damages of an unquantified amount under various claims
relating to alleged breaches of contract and/or negligence in relation to
retaining walls along the project. In November 2024, through a jury verdict,
damages were awarded against the joint operation in favour of NTTA amounting
to $112m (Group's share). This jury verdict was substantially above the claim
presented to the court of $77m (Group's share) comprising $8m expended to date
and $69m for possible repair costs over the next 10 years. The NTTA has moved
to enter the verdict as a judgement and is also requesting pre-judgement
interest of $50m (Group's share) plus legal costs. The joint operation has
opposed the NTTA's motion and the court has yet to issue a decision on that
motion with a court date set for 27 March 2025. The Group believes that the
jury verdict does not accurately reflect the evidence at trial and is
evaluating all options to set aside or reduce the verdict and, if necessary,
appeal any final judgement. The appeal would require a surety bond of $10m
(Group share) to be provided in place of settling the judgement. However, in
light of the jury verdict, the Group has recognised a non-underlying charge of
£52m. This charge, which is net of insurance recoveries of £40m for which
the Group has received confirmation of cover from its insurers, represents the
Group's best estimate of the probable damages to be awarded.
The Group maintains the view that these damages are a result of design
elements of the contract which were performed by subcontractors to the joint
operation. The Group, together with its joint operation partner, is pursuing
recoveries from these subcontractors, however at this stage, the Group has not
recognised any potential recoveries from these parties.
This charge has been recognised in the Construction Services segment and has
been included within the Group's non-underlying results due to the size of the
provision.
9.3.1 The amortisation of acquired intangible assets gave rise to a tax credit
of £1m (2023: £3m credit).
9.3.2 The remaining non-underlying items recognised in the Group's operating
profit gave rise to a current tax credit of £25m (2023: £3m), of which £2m
credit relates to net provision releases relating to Rail Germany, £11m
charge relates to the insurance recovery for rectification works on a
development in London, £21m credit relates to the increase in provision for
BSA claims and £13m credit relates to the charge recognised in relation to a
claim received for a legacy project completed in 2012 in Texas.
10 Income taxes
Underlying Non-underlying Total Total
Items(1) items 2024 2023
2024 (Note 9) £m £m
£m 2024
£m
Total UK tax 39 (10) 29 35
Total non-UK tax 23 (16) 7 15
Total tax charge/(credit)(x) 62 (26) 36 50
UK current tax
- current tax 17 (10) 7 4
- adjustments in respect of prior periods 5 - 5 -
22 (10) 12 4
Non-UK current tax
- current tax 14 - 14 1
- adjustments in respect of previous periods 2 - 2 (3)
16 - 16 (2)
Total current tax 38 (10) 28 2
UK deferred tax
- origination and reversal of temporary differences 22 - 22 30
- UK corporation tax rate change - - - 2
- adjustments in respect of previous periods (5) - (5) (1)
17 - 17 31
Non-UK deferred tax
- origination and reversal of temporary differences 10 (16) (6) 16
- adjustments in respect of previous periods (3) - (3) 1
7 (16) (9) 17
Total deferred tax 24 (16) 8 48
Total tax charge/(credit)(x) 62 (26) 36 50
(x) Excluding joint ventures and associates.
(1) Before non-underlying items (Note 9).
The Group has recognised a £26m tax credit (2023: £6m) within non-underlying
items in the year. Refer to Notes 9.3.1 and 9.3.2.
The Group tax charge excludes amounts for joint ventures and associates (refer
to Note 15), except where tax is levied at the Group level.
In addition to the Group tax charge, tax of £36m has been credited (2023:
£43m) directly to Group other comprehensive income, comprising: a tax credit
of £26m for subsidiaries (2023: £48m); and a tax credit in respect of joint
ventures and associates of £10m (2023: £5m charge). A tax credit of £4m
(2023: £nil) has been recognised directly in Group equity relating to
share-based payments, comprising a current tax credit of £2m (2023: £2m) and
a deferred tax credit of £2m (2023: £2m charge).
11 Earnings per share
2024 2023
Earnings Basic Diluted Basic Diluted
£m £m £m £m
Earnings 178 178 197 197
Amortisation of acquired intangible assets - including tax credit of £1m 3 3 2 2
(2023: £3m)
Other non-underlying items - including tax credit of £25m (2023: £3m) 46 46 9 9
Underlying earnings 227 227 208 208
Basic Diluted Basic Diluted
m m m m
Weighted average number of ordinary shares 521 528 558 566
The basic earnings per ordinary share is calculated by dividing the profit for
the year attributable to equity holders by the weighted average number of
ordinary shares outstanding during the year, excluding treasury shares and
shares held in the Employee Share Ownership Trust.
The diluted earnings per ordinary share uses an adjusted weighted average
number of shares and includes shares that are potentially outstanding in
relation to equity-settled share-based payment arrangements.
Potential dilutive effect of ordinary shares issuable under equity-settled
share-based payment arrangements is 7m (2023: 8m).
Earnings per share Basic Diluted Basic Diluted
pence pence pence pence
Earnings per ordinary share 34.2 33.7 35.3 34.8
Amortisation of acquired intangible assets after tax 0.6 0.6 0.4 0.4
Other non-underlying items after tax 8.8 8.7 1.6 1.6
Underlying earnings per ordinary share 43.6 43.0 37.3 36.8
12 Dividends
2024 2023
Per share Amount Per share Amount
pence £m pence £m
Proposed dividends for the year
Interim - current year 3.8 19 3.5 19
Final - current year 8.7 44(&) 8.0 43
12.5 63 11.5 62
Recognised dividends for the year
Final - prior year 42 39
Interim - current year 19 19
61 58
(&) Amount dependent on number of shares on the register on 16 May 2025.
Subject to approval at the Annual General Meeting on 8 May 2025, the final
2024 dividend will be paid on 2 July 2025 to holders on the register on 16 May
2025 by direct credit or, where no mandate has been given, by cheque posted by
2 July 2025. The ordinary shares will be quoted ex-dividend on 15 May 2025.
The last date for Dividend Reinvestment Plan (DRIP) elections will be 11 June
2025.
13 Intangible assets - goodwill
Cost Accumulated Carrying
£m impairment amount
losses £m
£m
At 1 January 2024 1,069 (224) 845
Currency translation differences 5 4 9
At 31 December 2024 1,074 (220) 854
2024 2023
Carrying amounts of goodwill by cash-generating unit (CGU) £m Pre-tax £m Pre-tax
discount rate discount rate
% %
UK Regional and Engineering Services 248 10.8% 248 10.7
Balfour Beatty Construction Group Inc 445 11.2% 437 11.1
Rail UK 68 11.2% 68 11.0
Balfour Beatty Investments US 53 11.2% 52 11.3
Other 40 10.9% 40 11.0
Group total 854 845
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 future revenues and margins of each 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 2025 to 2027. 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.
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. However, due to the long-term nature and the
degree of predictability of some contracts within Balfour Beatty Investments
US, the forecast period used in the derivation of this CGU's value-in-use
extends beyond the Group's three-year cash flow forecast period in line with
the duration of the contracts within the CGU. 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.
13 Intangible assets - goodwill continued
2024 2023
Inflation rate Real growth rate Nominal long-term growth rate applied(+) Inflation rate Real growth Nominal long-term growth
% % % % rate rate applied(1)
% %
UK Regional and Engineering Services 2.4 1.2 3.6 2.8 1.1 3.9
Balfour Beatty Construction Group Inc 2.2 1.7 3.9 2.2 1.7 3.9
Rail UK 2.4 1.2 3.6 2.8 1.1 3.9
Balfour Beatty Investments US 2.2 1.7 3.9 2.2 1.7 3.9
Other 2.3 1.5 3.8 2.6 1.3 3.9
(+) These nominal long-term growth rates are reduced by 1.0% when performing
goodwill assessments to reflect current economic uncertainties and their
consequent estimated effect on public sector spending on infrastructure.
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, and for certain CGUs, changes to
underlying cash projections.
A reasonable possible change in key assumptions would not give rise to an
impairment in any of the Group's CGUs.
14 Intangible assets - other
Cost Accumulated Carrying
£m amortisation amount
£m £m
At 1 January 2024 661 (373) 288
Currency translation differences 5 (4) 1
Reclassified to service concession contract asset (11) - (11)
Charge for the year - (10) (10)
At 31 December 2024 655 (387) 268
Other intangible assets comprise: acquired intangible assets of customer
contracts, customer relationships, and brand names; Infrastructure Investments
intangible assets on student accommodation projects in which the Group bears
demand risk; and software and other.
15 Investments in joint ventures and associates
2024
Infrastructure Investments
Construction Support UK^ North Total
Services Services £m America £m Total
£m £m £m £m
Income statement
Revenue 1,569 - 104 108 212 1,781
Operating profit 40 - 33 17 50 90
Investment income 9 - 66 15 81 90
Finance costs (1) - (61) (23) (84) (85)
Profit before taxation 48 - 38 9 47 95
Taxation (7) - (11) - (11) (18)
Profit after taxation from joint ventures and associates 41 - 27 9 36 77
Adjustment for expected credit losses at Group level - - (18) - (18) (18)
Profit after taxation 41 - 9 9 18 59
Balance sheet
Non-current assets
Intangible assets:
- Infrastructure Investments - - 13 - 13 13
- other 9 - 11 1 12 21
Property, plant and equipment 24 - - 39 39 63
Investment properties - - - 173 173 173
Investments in joint ventures and associates 4 1 - - - 5
Money market funds - - - 1 1 1
PPP financial assets - - 833 266 1,099 1,099
Military housing projects - - - 116 116 116
Other non-current assets 115 - 23 8 31 146
Current assets
Cash and cash equivalents 334 - 158 24 182 516
Other current assets 395 - 87 2 89 484
Total assets 881 1 1,125 630 1,755 2,637
Current liabilities
Borrowings - - - (35) - (35) (35)
non-recourse
Other current liabilities (607) (1) (172) (5) (177) (785)
Non-current liabilities
Borrowings - non-recourse (104) - (750) (438) (1,188) (1,292)
Other non-current liabilities (116) - (149) - (149) (265)
Total liabilities (827) (1) (1,106) (443) (1,549) (2,377)
Net assets 54 - 19 187 206 260
Goodwill 32 - - - - 32
Reclassify negative investment to provisions 7 - - - - 7
Loans to joint ventures and associates - - 86 - 86 86
Total investment in joint ventures and associates 93 - 105 187 292 385
^ Including Ireland.
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.
15 Investments in joint ventures and associates continued
2023
Infrastructure Investments
Construction Support UK^ North Total
Services Services £m America £m Total
£m £m £m £m
Income statement
Revenue 1,386 - 103 113 216 1,602
Operating profit excluding gain on disposals of interests in investments 33 - 2 21 23 56
Gain on disposals of interests in investments - - - 2 2 2
Operating profit 33 - 2 23 25 58
Investment income 10 - 74 16 90 100
Finance costs (1) - (73) (25) (98) (99)
Profit before taxation 42 - 3 14 17 59
Taxation (6) - - - - (6)
Profit after taxation 36 - 3 14 17 53
Balance sheet
Non-current assets
Intangible assets:
- Infrastructure Investments - - 14 - 14 14
- other - - 12 - 12 12
Property, plant and equipment 21 - - - - 21
Investment properties - - - 232 232 232
Investments in joint ventures and associates 7 - - - - 7
Money market funds - - - 44 44 44
PPP financial assets - - 905 244 1,149 1,149
Military housing projects - - - 113 113 113
Other non-current assets 107 - 24 13 37 144
Current assets
Cash and cash equivalents 340 - 146 20 166 506
Other current assets 310 3 55 5 60 373
Total assets 785 3 1,156 671 1,827 2,615
Current liabilities
Borrowings - - - (36) - (36) (36)
non-recourse
Other current liabilities (549) (3) (158) (30) (188) (740)
Non-current liabilities
Borrowings - non-recourse (94) - (767) (461) (1,228) (1,322)
Other non-current liabilities (90) - (147) (5) (152) (242)
Total liabilities (733) (3) (1,108) (496) (1,604) (2,340)
Net assets 52 - 48 175 223 275
Goodwill 31 - - - - 31
Reclassify negative investment to provisions 10 - - - - 10
Loans to joint ventures and associates - - 73 - 73 73
Total investment in joint ventures and associates 93 - 121 175 296 389
(^) Including Ireland.
16 Contract balances
16.1 Contract assets
£m
At 1 January 2023 300
Currency translation differences (4)
Transfers from contract assets recognised at the beginning of the year to (241)
receivables
Increase related to services provided in the year 265
Reclassified from contract liabilities (Note 16.2) (11)
Impairments on contract assets recognised at the beginning of the year (9)
At 31 December 2023 300
Currency translation differences 3
Transfers from contract assets recognised at the beginning of the year to (220)
receivables
Increase related to services provided in the year 168
Reclassified from contract liabilities (Note 16.2) (16)
Impairments on contract assets recognised at the beginning of the year (6)
At 31 December 2024 229
16.2 Contract liabilities
£m
At 1 January 2023 (665)
Currency translation differences 19
Revenue recognised against contract liabilities at the beginning of the year 561
Increase due to cash received, excluding amounts recognised as revenue during (528)
the year
Reclassified to contract assets (Note 16.1) 11
At 31 December 2023 (602)
Currency translation differences (6)
Revenue recognised against contract liabilities at the beginning of the year 537
Increase due to cash received, excluding amounts recognised as revenue during (644)
the year
Reclassified to contract assets (Note 16.1) 16
At 31 December 2024 (699)
17 Trade and other receivables
2024 2023
£m £m
Current
Trade receivables 616 484
Less: provision for impairment of trade receivables (2) (8)
614 476
Due from joint ventures and associates 16 16
Due from joint operation partners 5 4
Contract fulfilment assets 17 19
Contract retentions receivable 242 227
Accrued income 12 13
Prepayments 65 57
Other receivables(+) 128 82
1,099 894
Non-current
Due from joint ventures and associates 123 111
Contract fulfilment assets 34 40
Contract retentions receivable 102 150
Other receivables(+) 67 7
326 308
Total trade and other receivables 1,425 1,202
( +) Includes insurance recoveries recognised in relation to rectification
works on a development in London (Note 9.2.2) and in relation to a claim
received for a legacy project completed in 2012 in Texas (Note 9.2.4).
18 Trade and other payables
2024 2023
£m £m
Current
Trade and other payables 625 602
Accruals 813 788
Contract retentions payable 230 213
VAT, payroll taxes and social security 108 131
Due to joint ventures and associates 2 -
1,778 1,734
Non-current
Accruals 10 9
Contract retentions payable 75 104
Due to joint ventures and associates 3 9
88 122
Total trade and other payables 1,866 1,856
19 Provisions
Contract Employee Other Total
provisions provisions provisions £m
£m £m £m
At 1 January 2023 335 33 33 401
Currency translation differences (3) - (1) (4)
Charged/(credited) to the income statement:
- additional provisions 170 9 4 183
- unused amounts reversed (59) (2) - (61)
Utilised during the year (91) (7) (4) (102)
At 31 December 2023 352 33 32 417
Currency translation differences 1 - - 1
Reclassified to accruals 1 - 1 2
Transfers (10) - 10 -
Charged/(credited) to the income statement:
- additional provisions 365 9 13 387
- unused amounts reversed (54) (3) (7) (64)
Utilised during the year (113) (7) (3) (123)
Transfer movement in negative investment in joint venture to provisions (Note - - (3) (3)
15)
At 31 December 2024 542 32 43 617
20 Notes to the statement of cash flows
20.1 Cash from/(used in) operations Non-underlying items Total Total
Underlying 2024 2024 2023
items(1) £m £m £m
2024
£m
Profit/(loss) from operations 248 (75) 173 211
Share of results of joint ventures and associates (59) - (59) (53)
Depreciation of property, plant and equipment 31 - 31 28
Depreciation of right-of-use-assets 60 - 60 57
Depreciation of investment properties 1 - 1 2
Amortisation of other intangible assets 6 4 10 12
Amortisation of contract fulfilment assets 27 - 27 15
Pension deficit payments, including regular funding (30) - (30) (28)
Movements relating to equity-settled share-based payments 10 - 10 15
Gain on disposal of interests in investments (43) - (43) (24)
Profit on disposal of property, plant and equipment (2) - (2) (2)
Other non-cash items - - - (3)
Operating cash flows before movements in working capital 249 (71) 178 230
Decrease in operating working capital 99 63
Inventories (34) (11)
Contract assets 74 (4)
Trade and other receivables (225) (73)
Contract liabilities 91 (44)
Trade and other payables (6) 177
Provisions 199 18
Cash from operations 277 293
(1) Before non-underlying items (Note 9).
20 Notes to the statement of cash flows continued
20.2 Cash and cash equivalents
2024 2023
£m £m
Cash and deposits 1,084 890
Term deposits 209 218
Cash balances within infrastructure concessions 265 306
Bank overdrafts (185) (104)
1,373 1,310
20.3 Analysis of net cash/(borrowings)
2024 2023
£m £m
Cash and cash equivalents (excluding infrastructure concessions) 1,293 1,108
Bank overdrafts (185) (104)
US private placement (165) (162)
Net cash excluding infrastructure concessions 943 842
Non-recourse infrastructure concessions project finance loans at amortised (600) (570)
cost with final maturity between 2025 and 2072
Infrastructure concessions cash and cash equivalents 265 306
(335) (264)
Net cash 608 578
The Company, together with certain of its UK and US subsidiaries, operates
notional pooling facilities with main relationship UK and US clearing banks
where overdraft balances are offset with cash balances and interest is
calculated on a net basis. During the year ended 31 December 2024, the Group
maintained a net cash position on these pooling facilities, so there was no
interest payable to the bank in respect of these bank overdrafts. Overdraft
balances and cash held at these banks have been reported gross in the Group
balance sheet at 31 December 2024 as there was no legal right of offset and no
intention to settle the bank overdrafts at that date.
The loans relating to project finance arise under non-recourse facilities
taken out by project-specific subsidiary companies. The loans of each company
are secured by a combination of fixed and floating charges over that company's
interests in its project's assets and revenues and the shares in the company
held by its immediate parent company.
Term deposits are held on a short-term basis and are readily accessible to the
Group at any time with insignificant break costs.
Included in cash and cash equivalents is restricted cash of £16m (2023:
£12m) held by the Group's self-insurance company, Delphian Insurance Company
Ltd, which is subject to Isle of Man insurance solvency regulations.
Cash and cash equivalents also include: £158m (2023: £77m) within
construction project bank accounts which is used for project specific
expenditure; £382m (2023: £369m) in relation to the Group's share of cash
held by joint operations which is used for expenditure within the joint
operation projects; and £265m (2023: £306m) relating to maintenance and
other reserve accounts in Infrastructure Investments subsidiaries, of which
£234m (2023: £277m) is reserved for the construction of University of
Sussex's West Slope student accommodation project.
20 Notes to the statement of cash flows continued
20.4 Analysis of movements in borrowings
Infrastructure US private placement Bank overdrafts Total
concessions £m £m £m
non-recourse
project finance
£m
At 1 January 2024 (570) (162) (104) (836)
Currency translation differences (1) (4) - (5)
Proceeds of loans (36) (39) (185) (260)
Repayments of loans 9 40 104 153
Arrangement fees 3 - - 3
Amortisation of fair value adjustment to loan (5) - - (5)
At 31 December 2024 (600) (165) (185) (950)
In June 2024 the Group extended its core Revolving Credit Facility (RCF) by
one year, to June 2028, with the support of the lending bank group. The
facility was reduced from £475m to £450m in the extension process. The RCF
remains a Sustainability Linked Loan (SLL) and, subsequent to the extension in
July 2024, revised SLL metrics and targets were agreed with the lending bank
group. The Group continues to be incentivised to deliver annual measurable
performance improvement in three key areas: carbon emissions, social value
generation and an independent Environment, Social and Governance (ESG) rating
score. The RCF remained undrawn at 31 December 2024.
The Group retains an additional £30m bilateral committed facility that has
materially the same terms and conditions as the RCF. The facility is also a
SLL, including metrics that mirror the RCF. In the second half of the year,
the Group triggered its extension option in respect of the bilateral facility,
to extend the maturity to December 2027. As of 31 December 2024, the facility
remained undrawn.
In May 2024, the Group completed the early refinancing of US$50m of US private
placement (USPP) notes that were set to mature in March 2025. The Group raised
US$50m of new USPP notes, on terms and conditions that mirror existing notes,
and used this new funding to complete the early repayment of US$50m USPP notes
that were due to expire in March 2025. The new debt is comprised of US$25m of
7-year notes, maturing in May 2031 and US$25m of 12-year notes, maturing in
May 2036. The refinancing exercise extended the debt maturity profile of the
Group until 2036, with the next debt maturity ($35m) now in June 2027.
21 Retirement benefit assets and liabilities
IAS 19 Employee Benefits (IAS 19) 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 income arising from the
expected interest income on plan assets and interest cost on scheme
obligations is included in investment income. 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 scheme's obligations. The BBPF has
been undertaking a phased withdrawal from equities and hedge funds. The only
residual equities held are a very small amount of emerging market equities
held via pooled funds. The remaining BBPF assets are principally fixed and
index-linked bonds and derivatives, providing protection against movements in
inflation and interest rates and hence enhancing the resilience of the funding
level of the scheme. The performance of the assets is measured against market
indices.
21 Retirement benefit assets and liabilities continued
The Group operates a Scottish Limited Partnership (SLP) structure which holds
the Group's 40% interest in the Birmingham Hospital PFI investment and the
Group's 15% share of the Connect Plus (M25) asset. 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 the Birmingham Hospital PFI investment and the Connect Plus
(M25) asset for other investments from time to time.
Under IAS 19, the investment held by the BBPF in the SLP does not constitute a
plan asset and therefore the pension surplus 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. In 2024, the BBPF received
distributions of £2m from the SLP (2023: £2m).
Balfour Beatty and the trustees of the BBPF have reconfirmed their commitment
to a journey plan approach to managing the BBPF with the aim of reaching
self-sufficiency by 2027. The Company and trustees have agreed the 31 March
2022 formal valuation and as a result Balfour Beatty made deficit
contributions to the BBPF of £22m in 2024 (2023: £19m) and has agreed to pay
deficit contributions to the BBPF of £6m in 2025. The next formal triennial
funding valuation is due with effect from 31 March 2025.
This agreement constitutes a minimum funding requirement (MFR) under IFRIC 14
IAS 19: The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction. The Group has not
recognised any liabilities in relation to this MFR as any
surplus of deficit contributions to the BBPF would be recoverable by way of a
refund and the Group has the unconditional right to the surplus and controls
the run-off of the benefit obligations once all other obligations of the BBPF
have been settled.
Principal actuarial assumptions for the IAS 19 accounting valuations of the
Group's principal schemes
2024 2023
Balfour Railways Balfour Railways
Beatty Pension Beatty Pension
Pension Scheme Pension Scheme
Fund % Fund %
% %
Discount rate 5.55 5.55 4.65 4.65
Inflation rate - RPI 3.25 3.25 3.15 3.15
- CPI 2.75 2.90 2.60 2.75
Future increases in pensionable salary 2.75 2.90 2.60 2.75
Rate of increase in pensions in payment (or such other rate as is guaranteed) 3.05 2.95 2.95 2.85
( )
Number Number Number Number
Total number of defined benefit members 24,880 2,905 25,535 2,946
Following the completion of the BBPF's 31 March 2022 triennial valuation, the
future improvements assumption adopted for the BBPF and RPS has also been
updated for 2024 to reflect the most recent model available, with the Group
setting future improvements in line with the Continuous Mortality
Investigation (CMI) 2023 core projections model.
21 Retirement benefit assets and liabilities continued
BBPF life expectancies
2024 2023
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 21.3 23.0 21.3 23.0
Members not yet in receipt of a pension (current age 50) 22.2 23.9 22.2 23.9
RPS life expectancies
2024 2023
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 20.8 22.7 20.8 22.7
Members not yet in receipt of a pension (current age 50) 21.6 23.6 21.6 23.6
Amounts recognised in the Balance Sheet
2024 2023
Balfour Railways Balfour Railways
Beatty Pension Beatty Pension
Pension Scheme Other schemes^ Pension Scheme Other schemes^
Fund £m £m Total Fund £m £m Total
£m £m £m £m
Present value of obligations (2,248) (287) (34) (2,569) (2,501) (320) (35) (2,856)
Fair value of plan assets 2,291 280 - 2,571 2,602 323 - 2,925
Assets/(liabilities) in the balance sheet 43 (7) (34) 2 101 3 (35) 69
^ Investments in mutual funds of £20m (2023: £19m) are held to satisfy the
Group's deferred compensation obligations.
The defined benefit obligations comprise £35m (2023: £35m) arising from
wholly unfunded plans and £2,535m (2023: £2,821m) arising from plans that
are wholly or partly funded.
Movements in the retirement benefit assets and obligations for the year £m
At 1 January 2024 69
Currency translation differences 1
Current service cost (3)
Net finance income 4
Actuarial movements - on obligations from reassessing the difference between RPI and CPI (2)
- on obligations from changes to other financial assumptions 241
- on obligations from changes to demographics 4
- on obligations from experience losses (8)
- on assets (337)
Contributions from employer - regular funding 2
- ongoing deficit funding 28
Benefits paid 3
At 31 December 2024 2
21 Retirement benefit assets and liabilities continued
Sensitivity of the Group's retirement benefit obligations at 31 December 2024
to different actuarial assumptions
Sensitivity to increase in assumption Sensitivity to decrease in assumption
Assumption Percentage (Decrease)/ (Decrease)/ Percentage Increase/ (decrease) Increase/ (decrease) in
points/years increase in increase in points/years in obligations
obligations obligations obligations £m
% £m %
Discount rate 0.5% (5.2)% (132) (0.5)% 5.7% 145
Market expectation of RPI inflation 0.5% 3.6% 90 (0.5)% (3.7)% (94)
Salary growth 0.5% - - (0.5)% - -
Life expectancy 1 year 3.7% 95 (1 year) (3.8)% (96)
Sensitivity of the Group's retirement benefit assets at 31 December 2024 to
changes in market conditions
Percentage (Decrease)/ (Decrease)/
points increase in increase in
assets assets
% £m
Increase in interest rates 0.5% (5.0)% (127)
Increase in market expectation of RPI inflation 0.5% 3.4% 88
The asset sensitivities only take into account the impact of the changes in
market conditions on bond-type assets. The value of the schemes'
return-seeking assets is not directly correlated with movements in interest
rates or RPI inflation.
The BBPF includes a defined contribution section with 16,619 members at 31
December 2024 (2023: 15,512 members) with £50m (2023: £48m) of contributions
paid and charged in the income statement in respect of this section. The
total pension cost recognised in the income statement in respect of employee
service for defined benefit and defined contribution schemes was £59m (2023:
£58m).
22 Share capital
During the year ended 31 December 2024, 2.9m (2023: 5.1m) shares were
purchased at a cost of £12m (2023: £18m) by the Group's employee
discretionary trust to satisfy awards under the Performance Share Plan, the
Deferred Bonus Plan and the Restricted Share Plan.
In 2024 the Company commenced the fourth phase of its share buyback programme,
which completed on 20 September 2024. The Company purchased 27.1m (2023:
43.3m) shares for a total consideration of £100m (2023: £150m) and held
those shares in treasury with no voting rights. The purchase of those shares,
together with associated fees and stamp duty amounting to £1m (2023: £1m),
utilised £101m (2023: £151m) of the Company's distributable profits.
On 31 October 2024, the Company cancelled the 27.1m treasury shares purchased
through the 2024 phase of its share buyback programme (2023: 43.3m). This
cancellation resulted in a decrease in called-up share capital in issue of
£13m (2023: £22m) and a corresponding increase in the capital redemption
reserve.
23 Acquisitions and disposals
23.1 Current and prior year acquisitions
On 9 December 2024, the Group acquired an additional 17% of Denver Transit
Operators LLC (DTO), an existing joint venture of the Group, for a purchase
price of £6m, which increased the Group's holding in this joint venture to
50%. The Group continues to apply equity-method accounting for DTO and has
recognised a customer contract intangible asset of £9m as a result of this
acquisition. Refer to Note 15.
There were no other acquisitions in 2024 (2023: £nil).
23.2 Current year disposals
During the year, the Group partially disposed of one of its portfolio of
Infrastructure Investments assets as detailed below. The gain recognised from
the disposal is recorded within the Group's gain on disposal of interests in
investments.
Notes Disposal date Entity/asset Structure of sale Percentage disposed % Cash Net assets Amount recycled from reserves £m Underlying
consideration disposed gain
£m £m £m
23.2.1 16 December 2024 Northside at UTD Phases 1 - 4(#) Equity interest sale 5% - 65% 43 - - 43
43 - - 43
(#) Disposal of joint venture.
23.2.1 On 16 December 2024, the Group disposed of 5%, 5%, 65% and 60% of its
interests respectively in the four phases of its Northside at UTD portfolio,
which is located in Richardson (Dallas), Texas, for a cash consideration of
£43m. The Group retains a 5% interest in all the entities within this
portfolio. The disposal resulted in an underlying gain of £43m.
24 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. This includes, but is
not limited to, any new claims that may arise relating to fire safety
regulations under the Building Safety Act. The Group assesses the likelihood
of success of claims, actions or ongoing investigations, taking into
consideration any legal advice received. No provision is made where the
Directors consider that the action is unlikely to succeed, or that the Group
cannot make a sufficiently reliable estimate of the potential obligation.
However, in certain cases where assessments are ongoing and the Group cannot
yet conclude whether it is probable the claim is valid, a possible obligation
may exist at 31 December 2024. In respect of these cases, it is not
practicable to estimate the financial effect based on the current status of
the assessments.
25 Related party transactions
Joint ventures and associates
The Group has contracted with, provided services to, and received management
fees from, certain joint ventures and associates amounting to £438m (2023:
£445m). 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 in Notes 17 and 18 respectively.
Transactions with non-Group members
The Group also entered into transactions and had amounts outstanding with
related parties which are not members of the Group as set out below. This
company was a related party as it was controlled, jointly controlled or under
significant influence by a director of Balfour Beatty plc.
2024 2023
£m £m
Site Assist Software Limited
Purchase of services 1 1
All transactions with this related party were conducted on normal commercial
terms, equivalent to those conducted with external parties. No guarantees have
been given or received. No expense has been recognised in the year for bad or
doubtful debts in respect of amounts owed by this related party.
During 2024, a member of the Group's staff was seconded on a full-time basis
to The 5% Club, a charity which is a dynamic movement of employer-members
working to create a shared prosperity across the UK by driving 'earn and
learn' skills training. The expense for the salary cost was borne by the Group
and no consideration was received in return.
26 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 risks arising from the effects of national or
market trends and political change and the complex and evolving legal and
regulatory environments in which the Group operates; organisation and
management risks including business conduct/compliance, data protection,
cybercrime and people-related risks; financial risks arising from failure to
forecast material exposures and manage financial resources; and operational
risks arising from work winning, project delivery, joint ventures, supply
chain, health and safety and sustainability matters.
The Directors do not consider that the nature of the principal risks and
uncertainties facing the Group has fundamentally changed since the publication
of the Annual Report and Accounts 2023.
27 Events after the reporting date
In the period from 1 January 2025 to 10 March 2025 (the latest practicable
date prior to the date of this announcement) the Company purchased 5.5m
ordinary shares, which are held in treasury with no voting rights, for a total
consideration of £25m (including stamp duty and fees).
On 17 January 2025, the Group reached agreement to dispose of Omnicom Balfour
Beatty, its specialist rail measurement hardware and intelligent software
business, for a consideration of £24m (subject to adjustment for working
capital) to Hitachi Rail. The disposal is subject to various conditions and
completion is anticipated to be in the first half of 2025. The carrying value
of Omnicom Balfour Beatty at 31 December 2024 was £(2)m. Profit on disposal,
net of disposal costs, will be recognised once completion is achieved within
the Group's non-underlying results.
There were no other material post balance sheet events arising after the
reporting date.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAEDFFSFSEAARecent news on Balfour Beatty
See all newsREG - Balfour Beatty PLC - Transaction in Own Shares
AnnouncementREG - Balfour Beatty PLC - Total Voting Rights
AnnouncementREG - Balfour Beatty PLC - Transaction in Own Shares
AnnouncementREG - Balfour Beatty PLC - Transaction in Own Shares
AnnouncementREG - Balfour Beatty PLC - Transaction in Own Shares
Announcement