REG - Balfour Beatty PLC - Balfour Beatty PLC Half-Year Results 2017 <Origin Href="QuoteRef">BALF.L</Origin> - Part 4
16/08/2017 07:06
- Part 4: For the preceding part double click ID:nRSP0957Oc
3 8,368
Share of revenue of joint ventures and associates (1,066) (27) (340) - (1,433) (12) - (1,445)
Group revenue 5,471 1,076 235 - 6,782 138 3 6,923
Group operating (loss)/profit^ (50) 33 62 (33) 12 1 (6)
Share of results of joint ventures and associates 29 1 27 - 57 - -
(Loss)/profit from operations^ (21) 34 89 (33) 69 1 (6)
Non-underlying items
- include results from certain legacy ES contracts within Construction Services (6) - - - (6)
- include results from Rail Germany within Construction Services 1 - - - 1
- amortisation of acquired intangible assets (3) - (6) - (9)
- other non-underlying items (26) (12) - - (38)
(34) (12) (6) - (52)
(Loss)/profit from operations (55) 22 83 (33) 17
Investment income 75
Finance costs (82)
Profit before taxation 10
^ Presented before non-underlying items for underlying operations (Note 7).
2 Re-presented to classify the Group's 49% interests in Dutco Balfour Beatty LLC and BK Gulf LLC as discontinued
operations.
3 Segment analysis continued
3.2 Assets and liabilities by activity
As at half-year ended 30 June 2017 unaudited ConstructionServices£m SupportServices£m InfrastructureInvestments£m Corporateactivities£m Total£m
Due from construction contract customers 256 128 - - 384
Due to construction contract customers (463) (68) - - (531)
Inventories and non-construction work in progress 22 52 21 - 95
Trade and other receivables - current 882 99 37 25 1,043
Trade and other payables - current (1,383) (251) (52) (60) (1,746)
Provisions - current (138) (13) (3) (15) (169)
Adjusted working capital* (824) (53) 3 (50) (924)
* Includes non-operating items and current working capital.
Total assets 2,298 485 1,283 820 4,886
Total liabilities (2,430) (365) (644) (682) (4,121)
Net (liabilities)/assets (132) 120 639 138 765
As at half-year ended 1 July 2016 unaudited ConstructionServices£m SupportServices£m InfrastructureInvestments£m Corporateactivities£m Total£m
Due from construction contract customers 246 136 - - 382
Due to construction contract customers (436) (40) - - (476)
Inventories and non-construction work in progress 44 61 22 - 127
Trade and other receivables - current 702 108 132 52 994
Trade and other payables - current (1,366) (254) (49) (72) (1,741)
Provisions - current (129) (6) (5) (25) (165)
Working capital excluding net assets held for sale* (939) 5 100 (45) (879)
Net assets classified as held for sale 6 - - - 6
Adjusted working capital* (933) 5 100 (45) (873)
* Includes non-operating items and current working capital.
Total assets 2,154 519 1,359 881 4,913
Total liabilities (2,260) (327) (628) (864) (4,079)
Net (liabilities)/assets (106) 192 731 17 834
As at year ended 31 December 2016 audited ConstructionServices£m SupportServices£m InfrastructureInvestments£m Corporateactivities£m Total£m
Due from construction contract customers 247 133 - - 380
Due to construction contract customers (492) (50) - - (542)
Inventories and non-construction work in progress 30 47 24 - 101
Trade and other receivables - current 882 93 45 46 1,066
Trade and other payables - current (1,421) (218) (57) (56) (1,752)
Provisions - current (126) (5) (3) (13) (147)
Working capital* (880) - 9 (23) (894)
* Includes non-operating items and current working capital.
Total assets 2,306 476 1,080 915 4,777
Total liabilities (2,534) (322) (449) (710) (4,015)
Net (liabilities)/assets (228) 154 631 205 762
3 Segment analysis continued
3.3 Other information
ConstructionServices£m SupportServices£m InfrastructureInvestments£m Corporateactivities£m Total£m
For the half-year ended 30 June 2017 unaudited
Capital expenditure on property, plant and equipment 3 8 - 2 13
Depreciation 7 5 1 2 15
For the half-year ended 1 July 2016 unaudited
Capital expenditure on property, plant and equipment 6 1 29 8 44
Depreciation 7 5 1 4 17
Gain on disposals of interests in investments - - 52 - 52
For the year ended 31 December 2016 audited
Capital expenditure on property, plant and equipment 17 3 14 7 41
Depreciation 14 11 2 3 30
Gain on disposals of interests in investments - - 65 - 65
3.4 Revenue by geographic destination
UnitedKingdom£m UnitedStates£m Rest ofWorld2£m Total2£m
For the half-year ended 30 June 2017 unaudited
Revenue including share of joint ventures and associates 1,575 2,032 594 4,201
Share of revenue of joint ventures and associates (73) (31) (553) (657)
Group revenue 1,502 2,001 41 3,544
For the half-year ended 1 July 2016 unaudited
Revenue including share of joint ventures and associates 1,663 1,686 627 3,976
Share of revenue of joint ventures and associates (100) (56) (497) (653)
Group revenue 1,563 1,630 130 3,323
For the year ended 31 December 2016 audited
Revenue including share of joint ventures and associates 3,465 3,533 1,370 8,368
Share of revenue of joint ventures and associates (202) (104) (1,139) (1,445)
Group revenue 3,263 3,429 231 6,923
2 Re-presented to classify the Group's 49% interests in Dutco Balfour Beatty LLC and BK Gulf LLC as discontinued
operations.
3.5 Infrastructure Investments
Underlying profit from operations1 Group2017 Share of jointventures andassociates 2017first halfunaudited+£m Total2017 Group2016 Share of jointventures andassociates 2016 Total2016 Group2016yearaudited£m Share of jointventures andassociates 2016yearaudited+£m Total2016yearaudited£m
first half first half first half first half first half
unaudited unaudited unaudited unaudited+ unaudited
£m £m £m £m £m
UK^ 5 6 11 2 7 9 6 14 20
North America 13 9 22 7 7 14 16 13 29
Gain on disposals of interests in investments - - - 52 - 52 65 - 65
18 15 33 61 14 75 87 27 114
Bidding costs and overheads (18) - (18) (5) - (5) (25) - (25)
- 15 15 56 14 70 62 27 89
+ The Group's share of the results of joint ventures and associates is disclosed net of investment income, finance costs
and taxation.
^ Including Singapore. The results for the first half of 2016 included Australia.
1 Before non-underlying items (Note 7).
4 Share of results and net assets of joint ventures and associates
4.1 Income Statement
Continuing operations 2017 2016 first half unaudited2£m 2016year
first halfunaudited £m audited2£m
Underlying revenue1 655 649 1,433
Underlying profit from operations1 25 10 53
Investment income 69 84 135
Finance costs (62) (64) (124)
Profit before taxation1 32 30 64
Taxation (2) (4) (7)
Profit after taxation before non-underlying items 30 26 57
Share of results within non-underlying items - - 1
Profit after taxation 30 26 58
1 Before non-underlying items (Note 7).
2 Re-presented to classify the Group's 49% interests in Dutco Balfour Beatty LLC and BK Gulf LLC as discontinued
operations.
4.2 Balance Sheet
2017 2016 first half unaudited3£m 2016year
first halfunaudited £m audited^£m
Intangible assets - goodwill 33 34 35
- Infrastructure Investments intangible 22 16 19
- other 15 11 15
Property, plant and equipment 63 70 62
Investment properties 59 52 61
Investments in joint ventures and associates 7 6 4
PPP financial assets 2,158 1,942 2,129
Military housing projects 118 111 121
Net borrowings (1,191) (1,089) (1,181)
Other net liabilities (654) (585) (637)
Share of net assets of joint ventures and associates 630 568 628
Reclassify net liabilities relating to Dutco+ to provisions - 15 -
Adjusted share of net assets of joint ventures and associates 630 583 628
+ Represents the combined results of BK Gulf LLC and Dutco Balfour Beatty LLC ("Dutco") as both joint ventures have common
ownership and report under the same management structure.
^ Excludes the Group's share of the balance sheets of BK Gulf LLC and Dutco Balfour Beatty LLC as this is presented within
provisions.
3 Re-presented to show assets that are held by the Group to generate rental income and/or capital appreciation separately
from property, plant and equipment. These assets meet the definition of investment properties and have been reclassified
accordingly.
5 Investment income
2017 2016 first half 2016year
first halfunaudited £m unaudited£m audited£m
Subordinated debt interest receivable 12 15 29
Interest receivable on PPP financial assets 5 12 21
Gain on foreign currency deposits - 12 19
Other interest receivable and similar income 3 1 6
20 40 75
6 Finance costs
2017 2016 first half 2016year
first halfunaudited £m unaudited£m audited£m
Non-recourse borrowings - bank loans and overdrafts 6 12 24
Preference shares - finance cost 6 6 12
- accretion 1 1 2
Convertible bonds - finance cost 2 3 5
- accretion 3 3 7
US private placement - finance cost 7 6 13
Other interest payable - committed facilities 1 2 4
- letter of credit fees 2 2 3
Other finance cost+ 6 1 8
Net finance cost on pension scheme assets and liabilities (Note 15) 3 2 4
37 38 82
+ The charge incurred in the first half of 2017 included a loss on foreign currency deposits of £3m.
7 Non-underlying items
2017 2016 first half 2016year
first halfunaudited £m unaudited£m audited£m
Items credited to/(charged against) profit
7.1Continuing operations
7.1.1 Trading results from Rail Germany (including £nil (2016: first half £6m, full-year £10m) of other net operating expenses) - 1 1
7.1.2 Results of certain legacy ES contracts - (4) (6)
7.1.3 Amortisation of acquired intangible assets (5) (4) (9)
7.1.4 Other non-underlying items:
- Build to Last transformation costs (5) (9) (14)
- provision increases resulting from revised legal guidelines and settlements - (25) (25)
- release of Trans4m provisions on liquidation - 9 8
- provision increases resulting from reassessment of industrial disease related liabilities - - (14)
- Other - 4 6
Total other non-underlying items from continuing operations (5) (21) (39)
(10) (28) (53)
7.1.5 Share of results of joint ventures and associates: release of Trans4m provisions on liquidation - - 1
Charged against profit/(loss) before taxation from continuing operations (10) (28) (52)
7.1.6 Tax on items above 2 1 4
Non-underlying items charged against profit/(loss) for the period from continuing operations (8) (27) (48)
7.2 Discontinued operations
7.2.1 Other non-underlying items:
- gain on disposal of Dutco Balfour Beatty LLC & BK Gulf LLC 5 - -
- gain on disposal of Parsons Brinckerhoff - 2 24
Total other non-underlying items from discontinued operations 5 2 24
Credited to profit/(loss) before taxation from discontinued operations 5 2 24
7.2.2 Tax on items above - - -
Non-underlying items credited to profit/(loss) for the period from discontinued operations 5 2 24
Charged against profit/(loss) for the period (3) (25) (24)
Continuing operations
7.1.1 Rail Germany's results continue to be presented as part of the Group's non-underlying items within continuing
operations as the Group remains committed to exiting its Mainland European rail businesses and does not consider its
operations part of the Group's underlying activity. In the first half of 2017, Rail Germany generated a trading result
before tax excluding share of joint ventures and associates of £nil (2016: first half £1m profit; full-year £1m profit).
7.1.2 The Group has continued to present the results of certain external legacy Engineering Services (ES) contracts in
non-underlying items. These contracts were classified as non-underlying items in 2014 as the performance of these contracts
was linked to poor legacy management and in regions where ES has withdrawn from tendering for third-party work. These
contracts resulted in £nil gain or loss before tax for the Group in the first half of 2017 (2016: first half £4m loss;
full-year £6m loss).
7.1.3 The amortisation of acquired intangible comprises: customer contracts £3m (2016: first half £3m; full-year £6m); and
customer relationships £2m (2016: first half £1m; full-year £3m).
7 Non-underlying items continued
7.1.4.1 The Group launched its Build to Last transformation programme in February 2015. The transformation programme is
aimed to drive continual improvement across all of the Group's businesses and realise operational efficiencies. As a result
of this programme, restructuring costs of £5m were incurred in the first half of 2017 (2016: first half £9m, full year
£14m) relating to: Construction Services £2m (2016: first half £5m; full-year £12m), Support Services £nil (2016: first
half £1m; full-year £1m) and Corporate £3m (2016: first half £3m, full-year £1m). These restructuring costs comprise:
redundancy costs £2m (2016: first half £5m; full-year £9m), external advisers £nil (2016: first half £2m; full-year £2m),
property-related costs £3m (2016: first half £1m; full-year £1m) and other restructuring costs £nil (2016: first half £1m;
full-year £2m).
7.1.6 The non-underlying items charged against Group operating profits from continuing operations gave rise to a tax credit
of £2m on amortisation of acquired intangible assets (2016: first half £1m credit comprising: £2m charge on the results of
Rail Germany and £1m credit on certain legacy Engineering services contracts; £1m credit on amortisation of acquired
intangible assets and £1m credit on other non-underlying items; full year tax credit of £4m comprising: £3m tax credit on
amortisation of intangibles assets; £3m tax charge on the results of Rail Germany; and £4m credit on other non-underlying
items).
Discontinued operations
7.2.1.1 On 1 March 2017, the Group disposed of its 49% interests in Dutco Balfour Beatty LLC and BK Gulf LLC to its joint
venture partner for a total cash consideration of £11m, resulting in a gain on disposal of £5m. Refer to Note 18.2.1.
7.2.2 The non-underlying items charged against profit from discontinued operations gave rise to a tax credit of £nil.
8 Taxation
Underlyingitems2017 Non-underlyingitems(Note 7)2017first halfunaudited£m Total2017first halfunaudited£m 2016 first half unaudited£m 2016 year audited£m
first halfunaudited1 £m
Total UK tax (11) - (11) (12) 2
Total non-UK tax 11 (2) 9 4 6
Total tax (credit)/chargex - (2) (2) (8) 8
UK current tax - - - - (7)
Non-UK current tax - - - 1 (7)
Total current tax - - - 1 (14)
UK deferred tax (11) - (11) (12) 9
Non-UK deferred tax 11 (2) 9 3 13
Total deferred tax - (2) (2) (9) 22
Total tax (credit)/chargex - (2) (2) (8) 8
x Excluding joint ventures and associates.
1 Before non-underlying items (Note 7).
In addition to the Group tax charge above, tax of £5m is credited (2016: first half £11m credit, full-year £16m credit)
directly to other comprehensive income, comprising: a deferred tax credit of £3m (2016: first half £nil, full-year £1m
credit) and a deferred tax credit in respect of joint ventures and associates of £2m (2016: first half £11m credit,
full-year £15m credit).
9 Earnings per ordinary share
2017 first half unaudited 2016 first half unaudited2 2016 year audited2
Earnings Basic£m Diluted£m Basic£m Diluted£m Basic£m Diluted£m
Continuing operations
Earnings/(loss) 14 14 (7) (7) 2 2
Amortisation of acquired intangible assets net of tax 3 3 3 3 6 6
Other non-underlying items net of tax 5 5 24 24 42 42
Underlying earnings 22 22 20 20 50 50
Discontinued operations
Earnings/(loss) 6 6 (4) (4) 22 22
Other non-underlying items net of tax (5) (5) (2) (2) (24) (24)
Underlying earnings/(loss) 1 1 (6) (6) (2) (2)
Total operations
Earnings/(loss) 20 20 (11) (11) 24 24
Amortisation of acquired intangible assets net of tax 3 3 3 3 6 6
Other non-underlying items net of tax - - 22 22 18 18
Underlying earnings 23 23 14 14 48 48
Basicm Dilutedm Basicm Dilutedm Basicm Dilutedm
Weighted average number of ordinary shares 680 684 680 680 680 684
Earnings per share Basicpence Dilutedpence Basicpence Dilutedpence Basicpence Dilutedpence
Continuing operations
Earnings/(loss) per ordinary share 2.0 2.0 (1.3) (1.3) 0.2 0.2
Amortisation of acquired intangible assets net of tax 0.4 0.4 0.5 0.5 0.9 0.9
Other non-underlying items net of tax 0.8 0.8 3.5 3.5 6.1 6.1
Underlying earnings per ordinary share 3.2 3.2 2.7 2.7 7.2 7.2
Discontinued operations
Earnings/(loss) per ordinary share 0.9 0.9 (0.3) (0.3) 3.3 3.3
Other non-underlying items net of tax (0.8) (0.8) (0.4) (0.4) (3.5) (3.5)
Underlying earnings/(loss) per ordinary share 0.1 0.1 (0.7) (0.7) (0.2) (0.2)
Total operations
Earnings/(loss) per ordinary share 2.9 2.9 (1.6) (1.6) 3.5 3.5
Amortisation of acquired intangible assets net of tax 0.4 0.4 0.5 0.5 0.9 0.9
Other non-underlying items net of tax - - 3.1 3.1 2.6 2.6
Underlying earnings per ordinary share 3.3 3.3 2.0 2.0 7.0 7.0
2 Re-presented to classify the Group's 49% interests in Dutco Balfour Beatty LLC and BK Gulf LLC as discontinued
operations.
10 Dividends on ordinary shares
2017 first half unaudited 2016 first half unaudited 2016 year audited
Per sharepence Amount£m Per sharepence Amount£m Per sharepence Amount£m
Proposed dividends for the period
Interim 2016 - - 0.9 6 0.9 6
Final 2016 - - - - 1.8 12
Interim 2017 1.2 8 - - - -
1.2 8 0.9 6 2.7 18
Recognised dividends for the period
Interim 2016 - - 6
Final 2016 12 - -
12 - 6
The interim 2016 dividend was paid on 2 December 2016. The final 2016 dividend was paid on 7 July 2017 to holders on the
register on 21 April 2017 by direct credit or, where no mandate has been given, by cheque posted on 6 July 2017 payable on
7 July 2017. The ordinary shares were quoted ex-dividend on 20 April 2017.
The Board is declaring an interim dividend of 1.2 pence per share, a 33% increase on prior year (0.9 pence per share). The
Board anticipates a progressive dividend policy going forward.
11 Intangible assets - goodwill
Cost £m Accumulatedimpairmentlosses£m Carryingamount £m
At 1 January 2016 audited 997 (153) 844
Currency translation differences 72 (20) 52
At 1 July 2016 unaudited 1,069 (173) 896
Currency translation differences 44 (5) 39
Additions 2 - 2
Disposals (5) 5 -
At 31 December 2016 audited 1,110 (173) 937
Currency translation differences (26) - (26)
At 30 June 2017 unaudited 1,084 (173) 911
As at 30 June 2017, the Group performed an assessment to identify indicators of impairment relating to goodwill allocated
to cash-generating units (CGUs). This included a review of internal and external indicators of impairment and consideration
of the year-to-date performance of the relevant CGUs and any changes in key assumptions. The result of this assessment did
not identify any indicators of impairment which could reasonably be expected to eliminate the headroom computed at 31
December 2016 and therefore no impairment charges were recorded in the first half of 2017 (2016: first half £nil; full-year
£nil).
A full detailed impairment review will be conducted at 31 December 2017.
12 Trade and other receivables
2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
Current
Trade receivables 719 545 653
Less: provision for impairment of trade receivables (6) (7) (7)
713 538 646
Other receivables 25 41 60
Due from joint ventures and associates 36 62 58
Due from joint operation partners 6 12 7
Contract retentions receivable+ 207 205 242
Accrued income 16 21 17
Prepayments 39 42 36
Due on disposals 1 73 -
1,043 994 1,066
Non-current
Other receivables 4 3 4
Due from joint ventures and associates 37 6 25
Contract retentions receivable+ 172 137 151
Due on disposals 4 - -
217 146 180
Total trade and other receivables 1,260 1,140 1,246
+ Including £378m (2016: first half £339m; full-year £390m) construction contract retentions receivable.
13 Trade and other payables
2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
Current
Trade and other payables 976 916 936
Accruals 651 750 701
Deferred income 21 6 15
Advance payments on contracts 1 - 4
VAT, payroll taxes and social security 65 64 73
Due to joint ventures and associates 10 2 11
Dividends on preference shares 6 - 6
Dividends on ordinary shares 12 - -
Due on acquisitions 3 3 3
Due on disposals 1 - 3
1,746 1,741 1,752
Non-current
Trade and other payables 129 104 110
Accruals 19 8 20
Due to joint ventures and associates 7 7 7
Due on acquisitions 11 13 14
166 132 151
Total trade and other payables 1,912 1,873 1,903
14 PPP financial assets
Economic infrastructure+£m Social infrastructure+£m Total £m
At 1 January 2016 audited 283 119 402
Income recognised in the income statement
- interest income (Note 5) 8 4 12
Gains recognised in the statement of comprehensive income
- fair value movements 17 5 22
Other movements
- cash expenditure 11 3 14
- cash received (15) (3) (18)
At 1 July 2016 unaudited 304 128 432
Income recognised in the income statement
- interest income (Note 5) 6 3 9
Gains/(losses) recognised in the statement of comprehensive income
- fair value movements (1) 6 5
Other movements
- cash expenditure 14 3 17
- cash received (13) (8) (21)
- disposal of interest in the five streetlighting projects (279) - (279)
At 31 December 2016 audited 31 132 163
Income recognised in the income statement
- interest income (Note 5) 1 4 5
Gains recognised in the statement of comprehensive income
- fair value movements - (2) (2)
Other movements
- cash expenditure - 2 2
- cash received (2) (7) (9)
At 30 June 2017 unaudited 30 129 159
+ These categories have been renamed to provide a more appropriate classification of the Group's PPP financial assets.
Economic infrastructure primarily represents assetsproviding transportation networks. Social infrastructure primarily
represents assets providing student accommodation, healthcare and fire and rescue services.
15 Retirement benefit assets and liabilities
Principal actuarial assumptions for the IAS 19 accounting valuations of the Group's principal schemes 2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
Discount rate on obligations 2.45 2.70 2.50
Inflation rate - RPI 3.20 2.75 3.20
- CPI 2.00 1.35 2.00
Future increases in pensionable salary 2.95 1.35 2.95
Analysis of net liabilities in the Balance Sheet 2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
Balfour Beatty Pension Fund (50) 27 (62)
Railways Pension Scheme^ (102) (71) (113)
Other schemes* (56) (52) (56)
(208) (96) (231)
* Other schemes include the Group's deferred compensation obligations for which available-for-sale investments in mutual
funds of £23m (2016: first half £21m, full-year £23m) are held by the Group to satisfy these obligations.
^ The triennial valuation of the Railways Pension Scheme as at 31 December 2016 is ongoing.
Amounts recognised in the Balance Sheet 2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
Present value of obligations (4,096) (3,904) (4,155)
Fair value of plan assets 3,888 3,808 3,924
Net liabilities in the Balance Sheet (208) (96)+ (231)
+ This amount represents the aggregate of the retirement benefit assets of £27m and the retirement benefit liabilities of
£123m at 1 July 2016. These amounts are shown separately on the balance sheet as the Balfour Beatty Pension Fund was in a
net surplus position of £27m.
Movements in the retirement benefit net liabilities for the period 2017first halfunaudited£m 2016first halfunaudited£m 2016yearaudited£m
At beginning of period (231) (146) (146)
Currency translation differences 2 (6) (9)
Current service cost (3) (3) (6)
Interest cost (51) (61) (122)
Interest income 48 59 118
Actuarial movements - on obligations from reassessing the difference between RPI and CPI - - (44)
- on obligations from changes to other financial assumptions (34) (538) (806)
- on obligations from changes in demographic assumptions 44 - (51)
- on obligations from experience (losses)/gains - - 76
- on assets 4 560 704
Contributions from employer - regular funding 1 1 2
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