Summary
- Overall first-half results are in line with our most recent trading update.
- Review of the Directors' Valuation of our UK PPP portfolio has been completed over the first half to take into account current market conditions. An update will be released as soon as possible.
- Competitive sale process of Parsons Brinckerhoff is well advanced. Subject to satisfying the interests of key stakeholders, it is anticipated that the Group will return up to £200 million to shareholders.
- Operational issues in our UK mechanical & electrical engineering business significantly impacted overall first- half financial performance. Remedial action plan and cost efficiencies are being implemented.
- Elsewhere in Construction Services the US performed strongly, with 14% revenue growth at constant currency whilst the order book remained stable. Good wins in Asia and the Middle East.
- Professional Services performance is in line with 2013, increased profitability in Support Services.
- Infrastructure Investments delivered another good performance, with disposal proceeds significantly above the Directors’ Valuation.
- Underlying2, 3 half-year pre-tax profit of £22 million (2013: £47 million) and underlying2, 3 EPS of 3.9 pence (2013: 6.6 pence).
- Order book2 stable at £13.0 billion, down 1% from the year end at constant currency.
- Interim dividend of 5.6 pence per ordinary share (2013: 5.6 pence per ordinary share).
| (£m unless otherwise specified) | 2014 | 20134 | Change (%) |
|---|---|---|---|
| Revenue1,2 | 4,851 | 4,956 | (2) |
| Group revenue2 | 4,174 | 4,311 | (3) |
| Profit from operations | |||
| - underlying2,3 | 37 | 54 | (31) |
| - reported2 | 16 | 3 | 433 |
| Pre-tax profit/(loss) | |||
| - underlying2,3 | 22 | 47 | (53) |
| - reported2 | 1 | (4) | (125) |
| Profit/(loss) for the period | |||
| - underlying3 | 13 | 29 | (55) |
| - reported | (27) | (59) | (54) |
| Earnings per share - underlying2,3 | 3.9p | 6.6p | (41) |
| Loss per share basic (total Group) | (3.9)p | (8.6)p | (55) |
| Dividends per share | 5.6p | 5.6p | – |
| Financing | |||
| - net (borrowings)/cash before PPP subsidiaries (non-recourse)5 | (364) | (173) | |
| - net borrowings of PPP subsidiaries (non-recourse) | (224) | (380) | |
“Balfour Beatty’s key priorities are clear; the Group is being simplified and refocused. The process for recruiting a new Group CEO is well underway. The Parsons Brinckerhoff sale process has remained competitive, and is also now well advanced. Our first-half trading and financial performance is in line with our most recent trading update. Whilst our first-half performance has been significantly impacted by recent UK Engineering Services contract write-downs, the other parts of the Group have continued to perform well. The Investments business has again demonstrated its significant value to the Group.”
Steve Marshall, Executive Chairman
Key group priorities
The Board is committed to restoring shareholder value. This will be achieved by addressing a number of important priorities over the coming period. The key priorities are as follows:
- Refocus the Group in order to reduce complexity and improve the risk profile.
- Conclude the Parsons Brinckerhoff sales process at a value attractive to shareholders.
- An optimal approach to restoring value from the UK construction business including progressively returning it back to peer group margins.
- Select and recruit an outstanding CEO to drive the Group forward. This process is being actively progressed.
- Balfour Beatty will be refocused as an Anglo-American construction and specialist services group, where there is strong US market opportunity and UK margin recovery potential. The Group’s over-arching investments business is value creating and synergistic. Joint ventures in the Far East and the Middle East will be retained subject to them being value accretive.
- Assess other value creation opportunities on an ongoing basis.
Update on sale of Parsons Brinckerhoff
The Parsons Brinckerhoff sale process is proceeding in line with the Board’s expectations and is well advanced with strong competitive interest being maintained. Round three bids are expected very shortly.
At the point of announcing a transaction the Board will set out the application of disposal proceeds, which will need to satisfy the interests of shareholders, debt providers and the pension fund. It is anticipated that the Group will return up to £200 million to shareholders. This can only take place after the end of the offer period.
The Board will consider the implications of the disposal on the Group dividend. This is likely to be reassessed at the year end. The Board will consider the sustainability and appropriateness of the level of ongoing dividend cover. It will take into account the characteristics of the Group once Parsons Brinckerhoff is sold, whilst maintaining a prudent approach to the Group balance sheet.
Analyst/investor enquiries
Anoop Kang
Balfour Beatty plc
Tel 020 7216 6913
Media enquiries
Patrick Kerr
Balfour Beatty plc
Tel 020 7963 4258
Additional information
A presentation to analysts and investors will be made at 9:00 (UK time) via webcast.
