REG - Balfour Beatty PLC - Full Year Results <Origin Href="QuoteRef">BALF.L</Origin> - Part 4
25/03/2015 07:12
- Part 4: For the preceding part double click ID:nRSY3723Ic
Provisions (2) (10)
Borrowings (3) -
Current tax liabilities - (3)
(45) (180)
Non-current liabilities
Trade and other payables - (4)
Provisions - (3)
Retirement benefit liabilities (2) (30)
Deferred tax liabilities - (2)
(2) (39)
Total liabilities classified as held for sale (47) (219)
Net assets of disposal group 13 12
Reconciliation of net assets classified as held for sale
Raildisposalgroup2014
£m
At 1 January 2014 12
Rail Germany reclassified from net assets held for sale into continuing operations^ (7)
Rail Italy reclassified into net assets held for sale 8
At 31 December 2014 13
^ Includes impairment charge of £30m. Refer to Note 8.1.4.3.
Included within the Group's cash flows for the year ended 31 December 2014 are: net £1m operating cash outflows (2013:
£10m); net £9m investing cash outflows (2013: £10m); and net £nil financing cash outflows (2013: £1m) relating to the Rail
disposal group.
Included within the Group's cash flows for the year ended 31 December 2014 are: net £43m operating cash outflows; net £703m
investing cash inflows; and net £1m financing cash outflows relating to Parsons Brinckerhoff.
Included within the Group's cash flows for the year ended 31 December 2014 are: net £nil operating cash inflows (2013: £7m)
and net £14m investing cash outflows (2013: £139m inflows) relating to the UK facilities management disposal group.
11 Earnings per ordinary share
2014 20132,3,4
Earnings Basic£m Diluted£m Basic£m Diluted£m
Continuing operations
Loss (302) (302) (53) (53)
Amortisation of acquired intangible assets - net of tax credit of £4m (20132,3,4: £5m) 7 7 12 12
Other non-underlying items - net of tax charge of £3m (20132,3,4: credit £19m) 216 216 144 144
Underlying (loss)/earnings (79) (79) 103 103
Discontinued operations
Earnings 242 242 18 18
Amortisation of acquired intangible assets - net of tax credit of £2m (20132,3: £4m) 6 6 11 11
Other non-underlying items - net of tax credit of £17m (20132,3: £7m) (224) (224) 15 15
Underlying earnings 24 24 44 44
Total operations
Loss (60) (60) (35) (35)
Amortisation of acquired intangible assets - net of tax credit of £6m (20132,3,4: £9m) 13 13 23 23
Other non-underlying items - net of tax credit of £14m (20132,3,4: £26m) (8) (8) 159 159
Underlying (loss)/earnings (55) (55) 147 147
Basicm Dilutedm Basicm Dilutedm
Weighted average number of ordinary shares 686 686 685 686
Earnings per share Basicpence Dilutedpence Basicpence Dilutedpence
Continuing operations
Loss per ordinary share (43.9) (43.9) (7.5) (7.5)
Amortisation of acquired intangible assets 1.1 1.1 1.8 1.8
Other non-underlying items 31.3 31.3 21.0 21.0
Underlying (loss)/earnings per ordinary share (11.5) (11.5) 15.3 15.3
Discontinued operations
Earnings per ordinary share 35.3 35.3 2.4 2.4
Amortisation of acquired intangible assets 0.8 0.8 1.6 1.6
Other non-underlying items (32.6) (32.6) 2.2 2.2
Underlying earnings per ordinary share 3.5 3.5 6.2 6.2
Total operations
Loss per ordinary share (8.6) (8.6) (5.1) (5.1)
Amortisation of acquired intangible assets 1.9 1.9 3.4 3.4
Other non-underlying items (1.3) (1.3) 23.2 23.2
Underlying (loss)/earnings per ordinary share (8.0) (8.0) 21.5 21.5
2 Re-presented to classify Parsons Brinckerhoff and Rail Italy as discontinued operations (Note 10).
3 Re-presented to include results of Rail Germany, which no longer meets the definition of a discontinued operation, as
non-underlying items within continuing operations (Note 8).
4 Re-presented to show the results of certain legacy Engineering Services contracts as non-underlying items (Note 8).
12 Dividends on ordinary shares
2014 2013
Per sharepence Amount£m Per sharepence Amount£m
Proposed dividends for the year
Interim - current year 5.60 38 5.60 38
Final - current year - - 8.50 58
5.60 38 14.10 96
Recognised dividends for the year
Final - prior year 58 58
Interim - current year 38 38
96 96
The interim 2014 dividend was paid on 5 December 2014. Whilst the Board continues to recognise the importance of the
dividend to its shareholders, in order to ensure balance sheet strength is maintained during the transformation programme
it will not be recommending a final dividend payable for 2014. This results in a total dividend for the year of 5.6 pence
(2013: 14.1 pence). The Board will look to reinstate the dividend payments in March 2016, at an appropriate level.
2014£m 2013£m
Dividends on ordinary shares of the Company 96 96
Other dividends to non-controlling interests - 1
Total recognised dividends for the year 96 97
13 Intangible assets - goodwill
Cost £m Accumulatedimpairmentlosses£m Carryingamount £m
At 1 January 2014 1,091 (43) 1,048
Currency translation differences 24 5 29
Impairment charges in respect of Mainland European rail businesses (Note 8.2.2.2) - (20) (20)
Reclassified from assets held for sale relating to Rail Germany 113 (113) -
Reclassified to assets held for sale relating to Rail Italy (24) 20 (4)
Reclassified to assets held for sale and subsequently sold (227) - (227)
At 31 December 2014 977 (151) 826
Carrying amounts of goodwill by cash generating unit
2014£m Pre-taxdiscount rate2014% 2013+£m Pre-taxdiscount rate2013+%
Parsons Brinckerhoff - - 219 12.5
Construction Services UK 260 10.4 260 10.7
Balfour Beatty Construction Group Inc. 356 12.6 338 12.8
Support Services 129 8.7 129 9.1-12.7
Other 81 8.7-12.8 102 9.1-12.1
Group total 826 1,048
+ Re-presented to align 2013's carrying amount of goodwill to 2014's CGU allocation as a result of changes in management
reporting structure. Construction Services US has also been split into two CGUs being Balfour Beatty Construction Group
Inc. and Balfour Beatty Infrastructure Inc., the latter being included within 'Other'.
The recoverable amount of goodwill is based on value-in-use, a key input of which is forecast cash flows. The Group's cash
flow forecasts are based on the expected workload of each cash-generating unit (CGU), giving consideration to the current
level of confirmed and anticipated orders. Cash flow forecasts for the next three years are based on the Group's Three Year
Plan, which covers the period from 2015 to 2017 and includes a stabilisation of performance in the Construction Services UK
business. The cash flow forecasts for each CGU were compiled from each of its constituent business units as part of the
Group's annual financial planning process.
The other key inputs in assessing each CGU are its long-term growth rate and discount rate. The discount rates have been
calculated using the Weighted Average Cost of Capital (WACC) method, which takes account of the Group's capital structure
(financial risk) as well as the nature of each CGU's business (operational risk). Long-term growth rates are assumed to be
the estimated future GDP growth rates based on published independent forecasts for the country or countries in which each
CGU operates, less 1.0% to reflect current economic uncertainties and their consequent estimated effect on public sector
spending on infrastructure.
In the derivation of each CGU's value-in-use, a terminal value is assumed based on a multiple of earnings before interest
and tax. The multiple is applied to a terminal cash flow, which is the normalised cash flow in the last year of the
forecast period. The EBIT multiple is calculated using the Gordon Growth Model and is a factor of the discount rate and
growth rate for each CGU. The nominal terminal value is discounted to present value.
Construction Services UK2014% Balfour Beatty Construction Group Inc.2014% SupportServices2014% Other2014% Professional Services+2013% Construction Services UK2013% Balfour Beatty Construction Group Inc.2013+% SupportServices 2013+% Other2013+%
Inflation rate 1.9 1.9 1.9 1.9 2.4 2.4 2.4 2.4 2.4
Real growth rate 1.3 1.7 1.3 1.7 1.7 1.2 1.7 1.2 1.2
Nominal long-term revenue growth rate applied 3.2 3.6 3.2 3.6 4.1 3.6 4.1 3.6 3.6
+ Re-presented to align 2013's carrying amount of goodwill to 2014's CGU allocation as a result of changes in management
reporting structure. Construction Services US has also been split into two CGUs being Balfour Beatty Construction Group
Inc. and Balfour Beatty Infrastructure Inc., the latter being included within 'Other'.
Sensitivities
The Group's impairment review is sensitive to changes in the key assumptions used. The major assumptions that result in
significant sensitivities are the discount rate and the long-term revenue growth rate.
In light of the significant losses incurred within Construction Services UK in 2014 the Group has considered whether a
reasonable possible change in assumptions would lead to an impairment of the goodwill in that CGU and concluded that it is
not the case. The stabilisation and recovery of Construction Services UK to more normal levels of performance is however a
key assumption underpinning the cash flow forecasts used to assess the recoverable amount of the related goodwill.
Except as noted below, a reasonable possible change in a single assumption will not give rise to an impairment in any of
the Group's CGUs.
Using a pre-tax discount rate of 12.6% and revenue growth rate of 3.6% the recoverable amount of the remaining goodwill in
Balfour Beatty Construction Group Inc. is £443m based on value in use, with consequent headroom of £87m. A 1.0% increase in
the discount rate and a 1.0% reduction in the growth rate would lead to an impairment of £13m.
The recoverable amount of goodwill on Blackpool International Airport is £4m with £nil headroom, based on the fair value of
the land. Any decrease in the fair value of the land will lead to an equivalent impairment of the goodwill. Blackpool
Airport Ltd went into creditors' voluntary liquidation on 16 October 2014.
14 Intangible assets - other
Cost£m Accumulatedamortisation£m CarryingAmount£m
At 1 January 2014 490 (286) 204
Currency translation differences 17 (11) 6
Additions 63 - 63
Charge for the year - continuing operations - (17) (17)
Charge for the year - discontinued operations - (8) (8)
Impairment charge - continuing operations - (21) (21)
Impairment charge - discontinued operations - (8) (8)
Reclassified from property, plant and equipment 4 - 4
Reclassified from assets held for sale (Note 10) 4 (4) -
Reclassified to assets held for sale (Note 10) (1) 1 -
Reclassified to assets held for sale and subsequently sold (137) 130 (7)
At 31 December 2014 440 (224) 216
Other intangible assets comprise: acquired intangible assets of customer contracts, customer relationships, and brand
names; Infrastructure Investments' intangible assets on student accommodation project in which the Group has demand risk;
software and other, including internally generated software.
In 2014, an impairment charge of £27m was recognised against internally generated software intangible assets, of which £6m
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