REG - Balfour Beatty PLC - RESULTS FOR THE HALF-YEAR ENDED 27 JUNE 2014 <Origin Href="QuoteRef">BALF.L</Origin> - Part 3
29/10/2014 11:41
- Part 3: For the preceding part double click ID:nRSK7414Ob
(40)
Loss before taxation (4)
1Before non-underlying items (Note 7).2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
For the year ended 31 December 2013 audited Professional Services Construction Support Infrastructure Investments Corporate Total 2
£m Services 2 Services £m activities £m
£m £m £m
Revenue including share of joint ventures and associates 1,661 6,545 1,265 608 11 10,090
Share of revenue of joint ventures and associates (13) (971) (33) (356) - (1,373)
Group revenue 1,648 5,574 1,232 252 11 8,717
Underlying group operating profit/(loss)1 54 (18) 54 69 (29) 130
Share of results of joint ventures and associates - 37 1 33 - 71
Underlying profit/(loss) from operations1 54 19 55 102 (29) 201
Non-underlying items
- amortisation of acquired intangible assets (13) (10) - (7) - (30)
- other non-underlying items (28) (45) (15) - (37) (125)
Profit/(loss) from operations 13 (36) 40 95 (66) 46
Investment income 65
Finance costs (81)
Profit before taxation 30
1 Before non-underlying items (Note 7).
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
3.2 Assets and liabilities by activity
As at half-year ended 27 June 2014 unaudited Professional Services Construction Support Infrastructure Investments Corporate Total
£m Services Services £m activities £m
£m £m £m
Due from construction contract clients 191 342 188 - - 721
Due to construction contract clients (119) (193) (30) - - (342)
Inventories and non-construction work in progress 1 75 81 - 4 161
Trade and other receivables - current 327 738 155 113 2 1,335
Trade and other payables - current (252) (1,395) (335) (58) (88) (2,128)
Provisions - current (3) (65) (17) (2) (6) (93)
Working capital * 145 (498) 42 53 (88) (346)
*Includes non-operating items and current working capital.
Total assets 865 2,390 559 1,185 629 5,628
Total liabilities (481) (2,192) (477) (444) (1,069) (4,663)
Net assets/(liabilities) 384 198 + 82 741 (440) 965
+Includes net assets held for sale of £26m relating to the Rail disposal group (Note 9).
As at half-year ended 28 June 2013 unaudited Professional Services Construction Services £m SupportServices £m Infrastructure Investments 9£m Corporate Total 4, 8, 9£m
£m activities 4, 9
£m
Due from construction contract clients 204 305 135 - - 644
Due to construction contract clients (124) (181) (56) - - (361)
Inventories and non-construction work in progress 4 71 68 - 3 146
Trade and other receivables - current 314 750 147 58 7 1,276
Trade and other payables - current (290) (1,508) (300) (46) (98) (2,242)
Provisions - current 8 (6) (67) (10) (1) (13) (97)
Working capital * 102 (630) (16) 11 (101) (634)
* Includes non-operating items and current working capital.8Re-presented to include current provisions only in line with all other working capital balances.
Total assets 912 2,479 731 1,328 754 6,204
Total liabilities (513) (2,306) (569) (623) (997) (5,008)
Net assets/(liabilities) 399 173 + 162 ^ 705 (243) 1,196
+ Includes net assets held for sale of £39m relating to the Rail disposal group (Note 9).
^ Includes net assets held for sale of £115m relating to the UK facilities management disposal group (Note 9).
4 Restated to reflect the effects of IAS 19 Employee Benefits (Revised).
9 Re-presented to include the net non-recourse borrowings directly attributable to Infrastructure Investments within the
Infrastructure Investments segment rather than within Corporate activities.
3.2 Assets and liabilities by activity continued
As at year ended 31 December 2013 audited Professional Services Construction Services £m SupportServices £m Infrastructure Investments 9£m Corporate Total£m
£m activities 9
£m
Due from construction contract clients 179 316 136 - - 631
Due to construction contract clients (115) (192) (53) - - (360)
Inventories and non-construction work in progress 1 62 71 - 1 135
Trade and other receivables - current 303 685 142 50 10 1,190
Trade and other payables - current (279) (1,400) (283) (58) (26) (2,046)
Provisions - current (4) (58) (10) (2) (26) (100)
Working capital * 85 (587) 3 (10) (41) (550)
* Includes non-operating items and current working capital.
Total assets 833 2,133 486 1,278 982 5,712
Total liabilities (499) (2,056) (458) (613) (1,051) (4,677)
Net assets/(liabilities) 334 77 + 28 665 (69) 1,035
+ Includes net assets held for sale of £12m relating to the Rail disposal group (Note 9).
9 Re-presented to include the net non-recourse borrowings directly attributable to Infrastructure Investments within the
Infrastructure Investments segment rather than within Corporate activities.
3.3 Other information - continuing operations
Professional Services Construction Services 2 £m SupportServices £m Infrastructure Investments £m Corporate Total 2£m
£m activities
£m
For the half-year ended 27 June 2014 unaudited
Capital expenditure on property, plant and equipment 10 6 8 15 - 39
Depreciation 6 7 8 1 1 23
Gain on disposals of interests in investments - - - 51 - 51
For the half-year ended 28 June 2013 unaudited
Capital expenditure on property, plant and equipment 15 7 4 2 5 33
Depreciation 7 8 9 1 - 25
Gain on disposals of interests in investments - - - 45 - 45
For the year ended 31 December 2013 audited
Capital expenditure on property, plant and equipment 26 16 11 11 7 71
Depreciation 13 16 18 2 1 50
Gain on disposals of interests in investments - - - 82 - 82
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
3.4 Revenue by geographic destination - continuing operations
United Kingdom £m United States £m Rest ofworld 2 £m Total 2£m
For the half-year ended 27 June 2014 unaudited
Revenue including share of joint ventures and associates 2,132 1,944 775 4,851
Share of revenue of joint ventures and associates (171) (101) (405) (677)
Group revenue 1,961 1,843 370 4,174
For the half-year ended 28 June 2013 unaudited
Revenue including share of joint ventures and associates 2,286 1,936 734 4,956
Share of revenue of joint ventures and associates (225) (78) (342) (645)
Group revenue 2,061 1,858 392 4,311
For the year ended 31 December 2013 audited
Revenue including share of joint ventures and associates 4,607 3,921 1,562 10,090
Share of revenue of joint ventures and associates (436) (180) (757) (1,373)
Group revenue 4,171 3,741 805 8,717
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
3.5 Infrastructure Investments
Underlying profit from operations 1 Group2014 Share of jointventures andassociates 2014 Total2014 Group2013 Share of jointventures andassociates 2013 Total2013 Group2013Yearaudited£m Share of jointventures andassociates 2013yearaudited +£m Total2013yearaudited£m
first half first half first half first half first half first half
unaudited unaudited + unaudited unaudited unaudited + unaudited
£m £m £m £m £m £m
UK ^ 1 29 30 1 12 13 2 27 29
North America 7 3 10 11 4 15 21 6 27
Infrastructure Fund (1) - (1) (2) - (2) (2) - (2)
Infrastructure (1) - (1) (1) - (1) (3) - (3)
Gain on disposals of interests in investments 51 - 51 45 - 45 82 - 82
57 32 89 54 16 70 100 33 133
Bidding costs and overheads (17) - (17) (7) - (7) (31) - (31)
40 32 72 47 16 63 69 33 102
^ Including Singapore.
+ The Group's share of the results of joint ventures and associates is disclosed net of investment income, finance costs
and taxation.
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 2014 2013 first half 2013year
first halfunaudited £m unaudited 10£m audited 10£m
Total revenue 677 645 1,373
Underlying profit from operations relating to:- equity accounted joint ventures and associates 1 20 24 56
Investment income 102 86 166
Finance costs (70) (74) (142)
Taxation (10) (6) (9)
Share of underlying results of joint ventures and associates 42 30 71
1 Before non-underlying items (Note 7).
10 Re-presented to reflect the change in IFRS 11 for joint arrangements within the Group's joint ventures and associates.
4.2 Balance Sheet
2014 2013first half 2013 year
first half unaudited 10£m audited 10£m
unaudited £m
Intangible assets - goodwill 27 31 29
- Infrastructure Investments intangible 24 19 23
- other 6 1 6
Property, plant and equipment 52 45 51
Investments in joint ventures and associates 4 2 2
PPP financial assets 2,295 2,234 2,292
Military housing projects 84 75 83
Infrastructure Fund investment 10 9 11
Net cash/(borrowings) - non-recourse (1,593) (1,475) (1,599)
- other 189 205 196
Other net liabilities (419) (474) (428)
Share of net assets of joint ventures and associates 679 672 666
10 Re-presented to reflect the change in IFRS 11 for joint arrangements within the Group's joint ventures and associates.
4.3 Infrastructure Fund investment
2014 2013first half 2013 year
first half unaudited£m audited£m
unaudited £m
At beginning of period 11 - -
Capital calls - 9 11
Distributions received (1) - -
At end of period 10 9 11
5 Investment income
Continuing operations 2014 2013first half 2013 year
first half unaudited 2£m audited 2£m
unaudited £m
Subordinated debt interest receivable 13 13 25
Interest receivable on PPP financial assets (Note 15) 14 16 33
Other interest receivable and similar income 3 4 7
30 33 65
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
6 Finance costs
Continuing operations 2014 2013 2013year
first half first half audited 2 £m
unaudited £m unaudited 2 £m
Non-recourse borrowings 11 14 28
Preference shares 6 6 12
Convertible bonds 6 - 1
US private placement 5 4 9
Other interest payable - loans under committed facilities 3 4 9
- other bank loans and overdrafts 1 1 3
- commitment fees 2 1 4
- other finance charges 3 4 6
Net finance cost on pension scheme assets and liabilities 8 6 9
45 40 81
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
7 Non-underlying items
2014 2013 first half 2013 year
first half unaudited ^, +, 2£m audited ^, +, 2 £m
unaudited£m
Operating expenses (charged against)/credited to profit
7.1 Continuing operations
7.1.1 Amortisation of acquired intangible assets (10) (16) (30)
7.1.2 Other non-underlying items
- restructuring and reorganisation costs relating to continuing businesses ^ (4) (23) (52)
- cost of implementing shared service centres in the UK and US + (6) (11) (17)
- pension curtailment charges and related costs - - (52)
- post-acquisition integration, reorganisation and other costs - (1) (4)
Total other non-underlying items from continuing operations (10) (35) (125)
(20) (51) (155)
7.1.3 Share of results of joint ventures and associates - goodwill impairment in respect of Middle East (1) - -
Charged against profit before taxation from continuing operations (21) (51) (155)
7.1.4 Tax on items above 5 16 35
Non-underlying items charged against profit for the period from continuing operations (16) (35) (120)
7.2 Discontinued operations
7.2.1 Amortisation of acquired intangible assets - (2) (2)
7.2.2 Other non-underlying items
- goodwill impairment in respect of Mainland European rail businesses (20) (38) (38)
- IFRS 5 impairment charge in respect of Mainland European rail businesses (10) - -
- restructuring charges in respect of Mainland European rail businesses (4) (6) (6)
- UK facilities management business disposal net gain/(transaction costs) 3 (2) 16
- net gain/(loss) on disposals of other businesses 1 (4) (5)
- Rail Germany regulatory fine - (2) (2)
- pension curtailment charges - - (2)
Total other non-underlying items from discontinued operations (30) (52) (37)
Charged against profit before taxation from discontinued operations (30) (54) (39)
7.2.3 Tax on items above 6 1 2
Non-underlying items charged against profit for the period from discontinued operations (24) (53) (37)
Charged against profit for the period (40) (88) (157)
^ Re-presented to amalgamate restructuring and reorganisation costs relating to Australia and other continuing businesses.
+ Re-presented to amalgamate cost of implementing shared service centres in the UK and the US.
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
Continuing operations
7.1.1 The amortisation of acquired intangible assets from continuing operations comprises: customer contracts £3m (2013:
first half £5m, full-year £10m); customer relationships £4m (2013: first half £6m, full-year £11m); and brand names £3m
(2013: first half £5m, full-year £9m).
7.1.2.1 The Group continued to implement its plan to restructure a number of its businesses in order to increase its focus
on the needs of clients and upon growth sectors, further integrate its service offering to these clients, and realise
operational efficiencies.
In 2014 restructuring costs of £2m were incurred (2013: first half £23m, full-year £52m) relating to: Construction Services
UK £nil (2013: first half £9m, full-year £14m), where six business units have been streamlined and restructured into one
business with three business streams; Support Services UK £nil (2013: first half £2m, full-year £5m); other UK entities £2m
(2013: first half £6m, full-year £7m); Australia £nil (2013: first half £5m, full-year £20m) and other non-UK entities £nil
(2013: first half £1m, full-year £6m).
In addition, in the first half of 2014 £2m was incurred in respect of consultancy fees relating to the potential sale of
Parsons Brinckerhoff (2013: first half £nil, full-year £nil).
7.1.2.2 In the first half of 2014, transitioning other operating companies to the UK shared service centre in
Newcastle-upon-Tyne and increasing the scope led to incremental costs of £6m (2013: first half £2m, full-year £7m). In
2013, the implementation of the US shared service centre in Lancaster, Pennsylvania with the transfer of roles from New
York led to costs of £9m in the first half and £10m in the full-year.
7.1.2.3 On 31 August 2013 the majority of members of the Balfour Beatty Pension Fund ceased to accrue future defined
benefits and became deferred members resulting in a charge of £nil (2013: first half £nil, full-year curtailment charge of
£51m with associated costs of £1m).
7.1.2.4 Post-acquisition integration and reorganisation costs of £nil (2013: first half £1m, full-year £4m) have been
incurred in the first half of 2014 of which £nil (2013: first half £1m, full-year £3m) relates to Howard S. Wright
post-acquisition reorganisation costs and £nil (2013: first half £nil, full-year £1m) relates to Parsons Brinckerhoff
post-acquisition reorganisation costs.
7.1.3 One of the Group's investments in a joint venture in the Middle East had a carrying value of £nil at the half-year
resulting in a goodwill impairment of £1m in the first half of 2014 (2013: first half £nil, full-year £nil).
7.1.4 The non-underlying items charged against Group operating profit from continuing operations gave rise to a tax credit
of £5m comprising: £3m on amortisation of acquired intangible assets and £2m on other non-underlying items (2013: first
half £16m comprising: £5m on amortisation of acquired intangible assets and £11m on other non-underlying items, full-year
£35m comprising: £9m on amortisation of acquired intangible assets and £26m on other non-underlying items).
Discontinued operations
7.2.1 The amortisation of acquired intangible assets from discontinued operations comprises customer contracts £nil (2013:
first half £1m, full-year £1m); and customer relationships £nil (2013: first half £1m, full-year £1m). Under IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, intangible assets cease to be amortised from the date an
entity is classified as held for sale, therefore there is no amortisation charge in 2014.
7.2.2.1 Rail Italy met the criteria to be classified as held for sale at 27 June 2014. Rail Italy is carried at the lower
of cost and net realisable value which resulted in a goodwill impairment of £20m in 2014 first half. In the first half of
2013, a goodwill impairment of £38m was recognised in respect of Rail Germany. Refer to Note 9.
7.2.2.2 In the first half of 2014, as a result of the IFRS 5 requirements to cease depreciating or amortising assets once
classified as assets held for sale, an IFRS 5 impairment charge of £10m was recognised relating to assets in Rail Germany
which are still in use (2013: first half £nil, full-year £nil).
7.2.2.3 Restructuring costs of £4m (2013: first half £6m, full-year £6m) were incurred in respect of Mainland European rail
businesses.
7.2.2.4 On 13 December 2013 the Group disposed of the UK facilities management business, Balfour Beatty WorkPlace,
resulting in a net estimated gain of £16m being recognised in the second half of 2013 with preliminary transaction costs of
£2m being incurred in the 2013 first half. In the first half of 2014, the final settlement resulted in a net gain of £3m.
Refer to Note 19.2.
7.2.2.5 On 8 January 2014, the Group disposed of Rail Scandinavia for a net gain of £1m. Refer to Note 19.2. On 1 March
2013 the Group disposed of Rail Spain for a net loss of £4m. On 1 August 2013, as the initial step in disposing of Rail
Germany, the Group disposed of the Stassfurt Signalling Workshop to its local management for E1 resulting in a net loss of
£1m.
7.2.2.6 In the first half of 2013, Rail Germany incurred a £2m fine imposed by the German competition authority in respect
of allegations of historic anti-competitive behaviour occurring in Schreck-Mieves GmbH, a company acquired by Balfour
Beatty in 2008.
7.2.2.7 On 31 August 2013 the majority of members of the Balfour Beatty Pension Fund ceased to accrue future defined
benefits and became deferred members resulting in a curtailment charge of £2m being incurred in relation to Balfour Beatty
WorkPlace employees.
7.2.3 The non-underlying items charged against profit from discontinued operations gave rise to a tax credit of £6m
comprising: £nil on amortisation of acquired intangible assets and £6m on other non-underlying items (2013: first half £1m
on amortisation of acquired intangible assets, full-year £2m comprising: £nil on amortisation of acquired intangible assets
and £2m on other non-underlying items).
8 Taxation - continuing operations
UnderlyingItems2014first halfunaudited 1£m Non-underlyingitems(Note 7)2014first half Total2014 2013 2013
unaudited£m first half first halfunaudited 2 yearaudited 2£m
unaudited £m
£m
Total UK tax (15) (2) (17) (14) (13)
Total non-UK tax 10 (3) 7 - 27
Total tax credit ^ (5) (5) (10) (14) 14
UK current tax (10) - (10) (2) (9)
Non-UK current tax 20 (7) 13 4 11
Total current tax 10 (7) 3 2 2
UK deferred tax (5) (2) (7) (12) (4)
Non-UK deferred tax (10) 4 (6) (4) 16
Total deferred tax (15) 2 (13) (16) 12
Total tax (credit)/charge from continuing operations (5) (5) (10) (14) 14
^ Excluding joint ventures and associates.
1 Before non-underlying items (Note 7).
2 Re-presented to classify Rail Italy as a discontinued operation (Note 9).
In addition to the Group tax credit above, tax of £13m is charged directly to equity (2013: first half £20m credit,
full-year £37m credit), comprising a deferred tax charge of £5m (2013: first half £7m credit, full-year £9m credit);
current tax of £nil (2013: first half £nil, full-year £nil); and a deferred tax charge in respect of joint ventures and
associates of £8m (2013: first half £13m credit, full-year £28m credit).
9 Discontinued operations
Rail disposal group
Following a strategic review in light of low activity levels and the commoditisation of work, the Group decided to divest
all of its Mainland European rail businesses over time. The Group has been actively marketing its Mainland European rail
businesses and accordingly, as it became highly probable that these businesses would be sold within a year, they met the
criteria to be classified as an asset held for sale and formed part of the Rail disposal group disclosed as discontinued
operations.
To be classified as a discontinued operation, the businesses must represent a separate major line of business. Other than
the
Mainland European rail businesses there are no significant Group operations in Mainland Europe and therefore by exiting
these businesses, the Group is exiting from a separate major geographical operation and meets the criteria to classify
these businesses
as discontinued operations.
On 1 March 2013 the Group disposed of its interest in Rail Iberica SA (Rail Spain) to its local management for a cash
consideration
of E1 resulting in a net £4m loss on disposal.
On 28 June 2013 it became highly probable that Rail Germany and Rail Scandinavia would be disposed and therefore met the
criteria to be classified as an asset held for sale. A £38m goodwill impairment charge was recognised in the first half of
2013 as a non-underlying item. Rail Germany continues to meet the criteria to be classified as held for sale at 27 June
2014.
On 1 August 2013, as the initial step in disposing of Rail Germany, the Group disposed of the Stassfurt Signalling Workshop
to its
local management for E1 resulting in a net loss of £1m and closed its Switches and Crossings manufacturing facility during
2013.
On 8 January 2014 the Group disposed of its Rail business in Scandinavia for a cash consideration of £2m. The disposal
resulted in a £1m gain being recognised as a non-underlying item, comprising a £nil gain/loss in respect of the fair value
of net assets disposed, including cash disposed of £9m, and a £1m gain on recycling currency translation reserves to the
income statement.
On 27 June 2014, following progression of talks with potential purchasers, it became highly probable that Rail Italy would
be disposed within a year and met the criteria to be classified as an asset held for sale. Accordingly a £20m goodwill
impairment charge was recognised in the first half of 2014 as a non-underlying item, refer to Note 7.
At 27 June 2014, Rail Italy and Rail Germany constitute the Rail disposal group within discontinued operations. In 2013
discontinued operations included Rail Scandinavia and Rail Spain.
UK facilities management disposal group
Balfour Beatty WorkPlace (BBW) was the Group's only significant buildings facilities management business in the UK and
represented a separate major line of business. The Group disposed of BBW to GDF Suez Energy Services on 13 December 2013.
On 28 June 2013, it was highly probable that BBW would be disposed within a year and therefore BBW met the criteria to be
classified as an asset held for sale and consequently as a discontinued operation. In the first half of 2014, the final
settlement resulted in a gain of £3m being recognised within non-underlying items. Costs of £6m which were incurred in 2013
were paid in the first half of 2014.
BBW was part of the Support Services segment.
Results of the discontinued operations included in the Condensed Group income statement Raildisposalgroup2014first half Totaldiscontinued operations2014 Raildisposalgroup2013first half UK facilities management disposalgroup2013 Totaldiscontinued operations2013 first half Raildisposalgroup2013year UK facilities management disposalgroup2013 year Totaldiscontinued
unaudited£m first half unaudited 2£m first half unaudited 2£m audited 2 £m audited £m operations2013year
unaudited £m unaudited£m audited 2 £m
Revenue including share of joint ventures and associates 127 127 198 272 470 424 470 894
Share of revenue of joint ventures and associates - - (4) (45) (49) (4) (45) (49)
Group revenue 127 127 194 227 421 420 425 845
Underlying group operating (loss)/profit 1 (12) (12) (20) 9 (11) (24) 19 (5)
Share of results of joint ventures and associates - - - - - - - -
Underlying (loss)/profit from operations 1 (12) (12) (20) 9 (11) (24) 19 (5)
Net finance costs (1) (1) (2) - (2) (2) (1) (3)
Underlying (loss)/profit before tax 1 (13) (13) (22) 9 (13) (26) 18 (8)
Taxation on underlying (loss)/profit (1) (1) (2) (1) (3) (4) (2) (6)
Underlying (loss)/profit after tax 1 (14) (14) (24) 8 (16) (30) 16 (14)
Non-underlying items
- amortisation of acquired intangible assets - - - (2) (2) - (2) (2)
- gain/(loss) on disposals 1 4 ^ (4) (2) (6) (5) 16 11
- other non-underlying items (34) (34) (46) - (46) (46) (2) (48)
(33) (30)
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