BALFOUR BEATTY PLC RESULTS FOR THE FULL YEAR ENDED 31
DECEMBER 2023
13 March 2024
Solid performance with
expectations delivered
Operational momentum with
immediate and mid-term opportunities
Leo Quinn, Balfour Beatty Group
Chief Executive, said: "The Group's reliability and resilience has
again delivered a solid performance, with increased revenue and
profit from our earnings-based businesses and strong operating cash
flow. This success against a challenging economic backdrop is
driven by our disciplined contract risk management across a
geographically and operationally diversified portfolio.
"The Board remains confident in
Balfour Beatty's ongoing ability to deliver sustainable cash
generation for significant shareholder returns, with growth from
our earnings-based businesses in 2024 underpinned by the strength
of the Group's order book. Looking to 2025 and beyond, we expect
our unique capabilities and complex infrastructure project
experience to drive further earnings growth, with attractive
opportunities being pursued in the UK energy, transport and defence
markets and in the US."
Solid performance with continuing momentum from
earnings-based businesses
·
Revenue up 7% to £9.6 billion (2022: £8.9
billion)
· Underlying
profit from operations (PFO) from earnings-based businesses up 2%
to £236 million (2022: £232 million)
·
Underlying profit before tax down 10%, due
predominantly to lower gains on investment disposals as
guided
·
Underlying EPS of 37.3p down 21%: £55 million
increase in tax charge, following £56 million credit recognised in
2022
Resilience against economic challenges, with diversified
portfolio providing stability
·
Construction Services: PFO up 5% to £156 million
(2022: £149 million)
·
Support Services: PFO margin of 8.0% (2022: 8.4%)
at top of 6-8% targeted range
· Infrastructure
Investments: £1.2 billion Directors' valuation (2022: £1.3billion)
impacted by exchange and discount rates
·
Sixth consecutive year of improved employee
engagement
Continued shareholder returns supported by consistent cash
generation and balance sheet strength
·
10% increase in recommended full year dividend at
11.5 pence per share (2022: 10.5 pence per share)
·
£100 million share buyback commenced for 2024,
with total expected cash returns of c.£160 million (2023: £208
million)
·
Average net cash of £700 million (2022: £804
million) as forecast
Strategic focus on strong delivery of order book and
significant medium-term growth opportunity
·
Earnings growth in current year underpinned by
£16.5 billion order book (2022: £17.4 billion)
·
Unique Group capabilities aligned to significant
future opportunities
·
Earnings growth accelerating in 2025, driven by
energy, transport and defence in UK and buildings in US
(£ million unless otherwise
specified)
|
2023
|
|
2022
|
Underlying2
|
Total
|
|
Underlying2
|
|
Total
|
Revenue1
|
9,595
|
9,595
|
|
8,931
|
|
8,931
|
Profit from earnings-based
businesses
|
236#
|
223
|
|
232#
|
|
233
|
Profit from operations
|
228#
|
211
|
|
279#
|
|
275
|
Pre-tax profit
|
261
|
244
|
|
291
|
|
287
|
Profit for the year
|
205
|
194
|
|
290
|
|
287
|
Basic earnings per
share
|
37.3p
|
35.3p
|
|
47.5p
|
|
46.9p
|
Dividends per share
|
|
11.5p
|
|
|
|
10.5p
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
2022
|
Order book1
|
£16.5bn
|
|
|
|
£17.4bn
|
Directors' valuation of
Investments portfolio
|
£1.2bn
|
|
|
|
£1.3bn
|
Net cash -
recourse3
|
842
|
|
|
|
815
|
Average net cash -
recourse3
|
700
|
|
|
|
804
|
Segment analysis
|
2023
|
|
2022
|
Revenue1
|
PFO2,#
|
PFO
margin2
|
|
Revenue1
|
PFO2,#
|
PFO
margin2
|
£m
|
£m
|
%
|
|
£m
|
£m
|
%
|
UK Construction
|
3,027
|
69
|
2.3%
|
|
2,763
|
59
|
2.1%
|
US Construction
|
3,697
|
51
|
1.4%
|
|
3,651
|
58
|
1.6%
|
Gammon
|
1,357
|
36
|
2.7%
|
|
1,068
|
32
|
3.0%
|
Construction Services
|
8,081
|
156
|
1.9%
|
|
7,482
|
149
|
2.0%
|
Support Services
|
1,006
|
80
|
8.0%
|
|
989
|
83
|
8.4%
|
Earnings-based businesses
|
9,087
|
236
|
2.6%
|
|
8.471
|
232
|
2.7%
|
Infrastructure
Investments
|
508
|
31
|
|
|
460
|
81
|
|
Corporate activities
|
-
|
(39)
|
|
|
-
|
(34)
|
|
Total
|
9,595
|
228
|
|
|
8,931
|
279
|
|
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
Media enquiries:
Antonia Walton
Tel. +44 (0)203 810
2345
Antonia.walton@balfourbeatty.com
Investor and analyst presentation:
A presentation to investors and
analysts will be made at Numis, 45 Gresham Street, London, EC2V 7BF
at 09:00 (GMT) on 13 March 2024. There will be a live webcast of
this on:
www.balfourbeatty.com/webcast.
The webcast will be recorded and subsequently
available at
Results, reports and presentations - Investors - Balfour Beatty
plc.
2023 FULL YEAR RESULTS ANNOUNCEMENT
· GROUP CHIEF EXECUTIVE'S
OVERVIEW
· RESULTS
OVERVIEW
· DIVISIONAL
REVIEWS
· MEASURING OUR FINANCIAL
PERFORMANCE
GROUP CHIEF EXECUTIVE'S OVERVIEW
Full year Group expectations achieved
Balfour Beatty's solid performance
in 2023 resulted in the Group delivering underlying profit from
operations (PFO) from the earnings-based businesses (Construction
Services and Support Services) of £236 million, incrementally ahead
of the prior year (2022: £232 million). As expected, the Group's
underlying profit for the year reduced to £205 million (2022: £290
million) as gains on investment disposals reduced as planned and
the £56 million tax credit relating to the recognition of
additional UK tax losses in 2022 did not repeat. Capital
expenditure doubled in the year as the Group invested to support
growth, and £208 million of cash was returned to shareholders
(2022: £208 million) through a combination of dividends and share
buybacks. Average net cash reduced as expected to £700 million
compared to £804 million in 2022.
Resilient portfolio delivering stability
Balfour Beatty demonstrated the
importance of its geographical and operational diversity in 2023,
by delivering an overall improvement in underlying financial
results from its earnings-based businesses during challenging
economic conditions. The results were a further proof point in the
strategy to reduce Balfour Beatty's risk profile, with the Group
focusing on opportunities which utilise its end-to-end capabilities
and large-infrastructure project experience, as well as only
contracting on terms consistent with our disciplined risk
framework
The underlying PFO from
Construction Services increased in 2023 by 5%. UK Construction
continued to improve project delivery, making further progress with
its ambition to move towards the top of the 2-3% UK industry
standard margin target range, Gammon achieved strong margins while
growing revenue and US Construction profitability reduced due to
the cost of delays at a small number of civils projects. Support
Services had another successful year, delivering at the top of its
6-8% margin target range, and Infrastructure Investments achieved
its disposal targets. The Directors' valuation of the Investments
portfolio decreased by 6% due to foreign exchange movements and an
increase in discount rates.
Orders continue with improved second
half
The Group's 2023 year end order
book remains significant at £16.5 billion, which is 5% lower than
2022 or 2% lower at constant exchange rates. Both the UK
Construction and US Construction order books have remained flat on
a local currency basis, which is encouraging given the high
interest rate environment faced by customers throughout 2023. The
second half of the year showed a clear improvement in orders
compared to the first half as interest rates in both markets
stabilised. In the UK, the proportion of the order book signed on
lower risk target-cost or cost-plus contracts compared to higher
risk fixed-price contracts remained high at 82%. In the US, where
work is predominantly contracted on a fixed-price basis, the Group
ensures early issuing of subcontracts for buildings jobs and
insurance of the supply chain in order to protect its
margin.
The order book for Gammon has
reduced in the year, driven by the acceleration of major airport
project activity in Hong Kong and lower order intake, and Support
Services backlog has grown following the addition of significant
road maintenance contracts. Beyond the reported order book, Balfour
Beatty has been selected as one of ten preferred bidders on SSEN
Transmission's c.£10 billion Accelerated Strategic Transmission
Investment (ASTI) framework, with early works for nine projects
underway, and the Group's awarded but not contracted position
remains high, having added notable airport and major road awards in
2023.
Infrastructure disposals completed above Directors'
valuation
The Directors' valuation of the
Infrastructure Investments portfolio has reduced to £1.2 billion in
2023 (2022: £1.3 billion), due equally to a weakening of the US
dollar against sterling and an increase in discount rates given the
interest rate environment and market data. The other usual changes
to the valuation, including the equity invested, cash yield
received, unwind of discounting, asset disposals and operational
performance all largely offset.
The two asset disposals completed
in the year were sold at above the Directors' valuation and
contributed proceeds of £61 million and a gain on disposals of £26
million. The Group continues to invest in new opportunities
(targeting a minimum 2x end-to-end multiple) whilst optimising
value through the disposal of further operational
assets.
Growth opportunities in chosen markets
The principal markets in which
Balfour Beatty operates are showing signs of continued growth
backed by government supported spending that prioritises modern and
reliable infrastructure to support economic growth and help tackle
climate change. In the UK, the requirement for clean and
domestically generated energy is a priority for both the incumbent
Conservative party and Labour opposition and Balfour Beatty is
targeting opportunities on both the supply and demand sides of the
energy equation. On supply, steep growth in the volume of UK power
transmission and distribution projects will begin in 2025, with an
acceleration of work to strengthen and stabilise the power
networks, while nuclear, wind, carbon capture and hydrogen projects
continue to develop. On the demand side, given the Group's
involvement in HS2, construction of greener railways is a large
part of the Group's UK operations today and the importance of
continued investment in the transport sector is evident for both
political parties. Balfour Beatty has also identified the UK
defence and security infrastructure industry as a growth area, as
the Group's capabilities align well to market opportunities,
including projects with close adjacencies to the work delivered by
the Group for civil nuclear.
In the US, the Group's buildings
operations are focused primarily on specific, high growth regions.
These areas are population hubs with growth and migration projected
to continue driving increased investment, particularly in
transportation and social infrastructure. The stabilisation of
interest rates and reduced inflation have released some pressure on
the commercial office sector, while other market segments targeted
by the Group, such as aviation, leisure, education and federal,
remain strong. In Hong Kong, the Government's pipeline of
infrastructure projects continues to grow, with further major works
announced to increase connectivity within the Greater Bay Area,
aligned to plans to develop the Northern Metropolis.
Retention and investment in capability vital for meeting
future demand
Now more than ever, Balfour Beatty
is focused on making sure the right people, culture, policies and
procedures are in place to enable sustainable business performance;
prioritising attention on developing an environment where all
employees can perform, grow personally and enjoy coming to work.
The Group operates in markets where there can be tough competition
for the best people; therefore, this is critical to enable the
retention and development of talented experts and attract and
recruit the diverse skills and experiences that the business needs
to deliver today and for the future.
The annual employee engagement
survey remains the key tool for the Group to gauge how well it is
performing in this space and the 2023 results showed an improvement
for the sixth consecutive year. Overall employee engagement
increased to 81% (2022: 80%). Compared to peers, Balfour Beatty was
7 percentage points above an industry average and 8 percentage
points above companies of a similar size. Aligned to the strong
survey results, the Group's retention rates improved in
2023.
The challenge of attracting talent
into construction is industry-wide and Balfour Beatty, with its
size and prominence, can lead the market with its innovation. The
Group has diversified its hiring channels in 2023, with increased
recruitment from talent pools including military talent,
ex-offenders and those from underprivileged backgrounds, while it
also continues with its commitment to train the next generation of
employees. At year-end, 7.4% 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.
Further work required in journey to Zero
Harm
It is a matter of deep regret that
two colleagues have tragically lost their lives in 2023. The
Company offers its deepest sympathy and support to their family,
friends and co-workers. To ensure that lessons are learnt from
these events, and with both fatalities being caused in part by
stored energy, Balfour Beatty has established a new Stored Energy
Fatal Risk Working Group and is designing digitally-assured
processes to improve controls over such safety-critical
activities.
The Group remains determined that
all colleagues who walk onto a Balfour Beatty site should return
home safe and well. While the Group's lagging indicators of lost
time injury rate and accident frequency rate have improved in 2023,
the two fatalities make evident to all the importance of
maintaining focus on health and safety. As such, it is encouraging
to see voluntary safety observations increasing to nearly 400,000
in 2023 and proactive programmes having an impact on site. In 2023
these included a Slips, Trips and Falls focus in the UK, which
reduced these types of incidents by 33%, and the second year of the
What3Things? conversations, which have focused on a back to basics
approach.
Balfour Beatty is committed to
being an innovative leader in the world of health and safety and
launched a programme of digital safety initiatives in 2023, which
target improvements in not only the safety of the Group's
construction sites, but also productivity and assurance.
Next steps in sustainability journey
Balfour Beatty's sustainability
strategy, Building New Futures, was launched in 2020 to improve the
Group's approach to environment, materials and communities by
setting firm 2030 targets and longer-term ambitions for 2040. The
2030 targets set were the achievement of a science-based carbon
reduction target, a 40% reduction in waste generated and the
delivery of £3 billion in social value. It also outlines the
Group's 2040 ambitions to go Beyond Net Zero Carbon, to Generate
Zero Waste and to Positively Impact More than 1 Million People. In
the year, the UK business delivered £936 million of social value
and achieved a 40% reduction in tonnes of waste generated per
£million revenue compared to the restated 2021 baseline. The Group
also achieved a 2% absolute reduction and a 7% intensity reduction
in Scope 1 & 2 greenhouse gas (GHG) emissions.
In 2023, the Group launched
its Bridging the Gap action plan, which is
designed to help colleagues focus their efforts on initiatives that
will have the biggest impact in delivering Balfour Beatty's targets
and ambitions. By adopting a uniform approach, Bridging the Gap
will also support best practice and encourage greater collaboration
across the organisation whilst setting out minimum expectations of
sustainable leadership, carbon, materials, communities and
biodiversity.
In late 2023, Balfour Beatty
formally submitted Science-Based Targets and a related carbon
abatement plan, aligned with the 1.5°C global warming limit. The
Group's submission is awaiting validation by the Science Based
Targets initiative in 2024.
Dividend growth and further share buybacks
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. When considering the strength of the Group's order book
and balance sheet with 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 8.0 pence per share (2022: 7.0
pence), giving a total recommended dividend for the year of 11.5
pence per share (2022: 10.5 pence). Additionally, the Company
intends to repurchase £100 million of shares during the 2024 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 £750
million.
The total cash return to
shareholders in 2024 (including the final 2023 dividend and 2024
interim dividend) is therefore expected to be c.£160
million.
Outlook
The Board expects an increase in
PFO from its earnings-based businesses in 2024, with growth
accelerating in 2025.
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 2024, gains on investment disposals are expected in the range
of £20 - £30 million.
The Board expects net finance
income of around £30 million for 2024 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. Capital
expenditure in 2024 is expected to return closer to pre-2023 levels
of around £35 million and the Group's average cash in 2024 is
expected to be roughly in line with 2023.
The Group's longer-term outlook
remains positive and the growth forecast in 2025 and beyond is
driven by the 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
The Group's results for 2023
show a solid performance against a
backdrop of challenging economic conditions. Revenue increased by
7% (8% at constant exchange rates (CER)) to £9,595 million (2022:
£8,931 million) driven by an increase in Construction Services.
Statutory revenue, which excludes joint ventures and associates,
was £7,993 million (2022: £7,629 million).
The underlying profit from
operations for the year reduced to £228 million (2022: £279
million) despite an incremental increase in PFO from the
earnings-based businesses, as gains on investment disposals reduced
by £44 million. Corporate activity costs rose in 2023, due largely
to higher salaries following inflationary increases, audit fees and
share-based remuneration. Statutory profit from operations was £211
million (2022: £275 million).
Underlying profit / (loss) from
operations2
|
2023
£m
|
2022
£m
|
UK Construction
|
69
|
59
|
US Construction
|
51
|
58
|
Gammon
|
36
|
32
|
Construction Services
|
156
|
149
|
Support Services
|
80
|
83
|
Earnings-based
businesses
|
236
|
232
|
Infrastructure Investments
pre-disposals operating profit
|
5
|
11
|
Infrastructure Investments gain on
disposals
|
26
|
70
|
Corporate activities
|
(39)
|
(34)
|
Total underlying profit from
operations
|
228
|
279
|
2 Before non-underlying items (Note 9)
|
Net finance income of £33 million
(2022: £12 million) improved as a result of higher interest rates. Underlying
pre-tax profit was £261 million (2022: £291 million). The taxation
charge on underlying profits increased to £56 million (2022: £1
million) as there were no tax credits relating to the recognition
of additional UK tax losses (2022: £56 million). This resulted in
underlying profit after tax of £205 million (2022: £290 million).
Total statutory profit after tax for the year was £194 million
(2022: £287 million), as a result of the net effect of
non-underlying items.
Underlying basic earnings per
share was 37.3 pence (2022: 47.5 pence), which, along with a
non-underlying loss per share of 2.0 pence (2022: 0.6 pence), gave
a total basic earnings per share of 35.3 pence (2022: 46.9 pence).
This included the benefit from the basic weighted average number of
ordinary shares reducing to 558 million (2022: 612 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 £11 million for the period (2022: £3
million). Items included a £9 million post-tax charge in relation
to an increase to a provision, which was recognised in 2021 for
stone cladding rectification works, updated to current price
expectations, and a £2 million post-tax charge relating to the
amortisation of acquired intangible assets. Further detail is
provided in Note 9.
Cash flow performance
The Group's net cash increased by
£27 million in the year (2022: £25 million), resulting in a year
end net cash position of £842 million (2022: £815 million),
excluding non-recourse net borrowings and lease liabilities.
Operating cash flows were ahead of profit from operations. Cash
from operations, which included a working capital inflow, was
largely offset by shareholder returns and a higher than normal
programme of capital expenditure. 2023 was a peak year for capital
expenditure, with increased levels of investment in Support
Services to aid the Group's medium-term growth plans. 2024 capital
expenditure is expected to be close to 2022 levels.
Cash flow performance
|
2023
£m
|
2022
£m
|
Operating cash flows before
working capital movements and pension deficit payments
|
258
|
282
|
Working capital inflow /
(outflow)
|
63
|
(54)
|
Pension deficit
payments+
|
(28)
|
(43)
|
Cash from operations
|
293
|
185
|
Lease payments (including interest
paid)
|
(63)
|
(58)
|
Dividends from joint ventures and
associates∞
|
59
|
89
|
Capital expenditure
|
(66)
|
(31)
|
Share buybacks
|
(151)
|
(151)
|
Dividends paid
|
(58)
|
(58)
|
Infrastructure
Investments
|
|
|
- disposal proceeds
|
61
|
93
|
- new investments
|
(31)
|
(30)
|
Other
|
(17)
|
(14)
|
Net cash movement
|
27
|
25
|
Opening net cash*
|
815
|
790
|
Closing net cash*
|
842
|
815
|
*
Excluding infrastructure investments
(non-recourse) net borrowings and lease
liabilities
+ Including £3 million (2022: £2 million) of regular
funding
∞ Excluding £1 million (2022: £59 million) dividends received
in relation to Investments asset disposals within joint ventures
and associates
Working capital
A working capital inflow of £63
million (2022: £54 million outflow) was favourable to the outflow
previously expected for the year, driven by a spike in the negative
working capital position during the final weeks of December. The
inflow reported for 2023 is not reflective of the trend observed
throughout the year of average negative working capital
reducing.
Working capital flows^
|
2023
£m
|
2022
£m
|
Inventories
|
(11)
|
(6)
|
Net contract assets
|
(48)
|
(137)
|
Trade and other
receivables
|
(73)
|
34
|
Trade and other
payables
|
177
|
57
|
Provisions
|
18
|
(2)
|
Working capital inflow /
(outflow)^
|
63
|
(54)
|
^ Excluding impact of foreign exchange and disposals
Including the impact of foreign
exchange and non-operating items, negative (i.e. favourable)
current working capital increased to £1,230 million (2022: £1,167
million). In the medium term, the Group expects negative working
capital as a percentage of revenue to be around the top of its
historical long term average of 11-13% (2023: 15.4%; 2022: 15.3%)
with the range continuing to be dependent on contract mix and the
timing of project starts and completions.
Net cash/borrowings
The Group's average net cash
reduced to £700 million in 2023 (2022: £804 million). The Group's
year end net cash position, excluding non-recourse net borrowings
and lease liabilities, was £842 million (2022: £815
million).
Non-recourse net borrowings, held
in Infrastructure Investments entities consolidated by the Group,
were £264 million (2022: £242 million). The balance sheet also
included £143 million for lease liabilities (2022: £132 million).
Statutory net cash at 31 December 2023 was £435 million (2022: £441
million).
Share buyback
On 3
January 2023, Balfour Beatty
commenced an initial £50 million tranche
of its 2023 share buyback programme, which was subsequently
increased, following the release of its 2022 full year results, to
£150 million on 20 March 2023. The Group completed the 2023 share
buyback programme on 15 December 2023, having purchased 43.3
million shares, which were held in treasury. These shares were subsequently cancelled on 20 December
2023. The Group commenced the initial £50 million tranche of its
2024 share buyback programme on 2 January 2024.
Banking facilities
In June 2023, the Group completed
the refinancing of its core £375 million revolving credit facility,
which was set to expire in October 2024, replacing it with a new
£475 million facility that will expire in June 2027 (the RCF). The
RCF has an extension option for a further year to June 2028, with
the agreement of the lending banks, and its terms and conditions
are materially the same as the prior facility. The RCF is a
Sustainability Linked Loan, retaining the KPIs that featured in the
prior facility. The RCF ensures the Group will retain strong
liquidity support from a diverse banking group.
In March 2023, the Group repaid
US$209 million of US Private Placement (USPP) notes as they fell
due. The repayment was funded primarily from the proceeds of debt
issuance arranged in 2022, specifically US$158 million of new USPP
notes issued in June 2022 (US$35 million 6.31% notes maturing in
June 2027, US$80 million 6.39% notes maturing in June 2029 and
US$43 million 6.45% notes maturing in June 2032) and a new
bilateral committed facility, which expires in December 2024 and
was fully utilised through a US$36 million drawdown in March 2023.
The US$36 million drawdown was repaid in September 2023. This £30
million bilateral facility has an extension option for a further
three years subject to certain specific conditions that were met on
the completion of the refinancing of the Group's core facility in
June 2023. As at the end of the year the Group had not triggered
the bilateral facility's extension option.
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 reconfirmed their
commitment 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 have agreed the 31 March 2022 formal valuation,
and as a result Balfour Beatty paid deficit contributions to the
BBPF of £19 million in 2023 and will pay deficit contributions of
£24 million in 2024 and £6 million in 2025. The Company and the
trustees are making good progress with plans to reduce the overall
risk in the scheme and the Company has agreed that additional
amounts will become payable at £2 million per month from March 2025
if the BBPF's performance is materially different from that
expected. The next formal triennial funding valuation of the BBPF
is due with effect from 31 March 2025.
Following the formal triennial
funding valuation of the Railways Pension Scheme (RPS) as at 31
December 2019, the Group agreed to continue to make deficit
contributions of £6 million per annum which should reduce the
funding deficit to zero by 2025. A formal triennial funding
valuation of the RPS as at 31 December 2022 is currently ongoing.
The trustee and Balfour Beatty have reached agreement in principle
as to the financial and demographic assumptions to be adopted for
the purpose of this valuation, which would include the Group
continuing to make deficit contributions of £6 million per annum
until February 2025.
The Group's balance sheet includes
net retirement benefit assets of £69 million (2022: £223 million)
as measured on an IAS 19 basis, with the surpluses on the BBPF
(£101 million) and RPS (£3 million) partially offset by deficits on
other schemes (£35 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 3.5 pence per
ordinary share interim dividend declared at the half year, the
Board is recommending a final dividend of 8.0 pence per share,
giving a total recommended dividend for the year of 11.5 pence per
share (2022: 10.5 pence per share).
DIVISIONAL REVIEWS
CONSTRUCTION SERVICES
Financial review
Revenue at £8,081 million was up
8% (2022: £7,482 million), an 8% increase at CER, with higher
volumes in the UK and Gammon. Underlying profit from operations
increased to £156 million (2022: £149 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 £143 million (2022: £150
million). The order book reduced by 9% (6% at CER) in the year to
£13.7 billion (2022: £15.0 billion), due to a reduction at Gammon
and foreign exchange movements.
Construction Services
|
2023
|
|
2022
|
Revenue1
|
PFO
|
Order
book1
|
|
Revenue1
|
PFO
|
Order
book1
|
£m
|
£m
|
£bn
|
|
£m
|
£m
|
£bn
|
UK Construction
|
3,027
|
69
|
6.1
|
|
2,763
|
59
|
6.1
|
US Construction
|
3,697
|
51
|
5.6
|
|
3,651
|
58
|
6.0
|
Gammon
|
1,357
|
36
|
2.0
|
|
1,068
|
32
|
2.9
|
Underlying2
|
8,081
|
156
|
13.7
|
|
7,482
|
149
|
15.0
|
Non-underlying
|
-
|
(13)
|
-
|
|
-
|
1
|
-
|
Total
|
8,081
|
143
|
13.7
|
|
7,482
|
150
|
15.0
|
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 increased by 10% to £3,027
million (2022: £2,763 million) driven primarily by higher transport
volumes.
UK Construction underlying profit
from operations increased to £69 million (2022: £59 million),
driven by higher revenue and improved project delivery. This
represents a 2.3% PFO margin (2022: 2.1%) and demonstrates progress
in the Group's medium term ambition to achieve a 3% PFO margin in
UK Construction, with further improvement expected in
2024.
The UK Construction order book
remained flat at £6.1 billion, with 91% of
those orders from public sector and regulated industry
clients.
US Construction: Revenue in US Construction increased by 1% (1% at CER) to
£3,697 million (2022: £3,651 million). Underlying profit from
operations for US Construction reduced by 12% to £51 million (2022:
£58 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
2023 and we now expect PFO to be flat in 2024.
The US Construction order book
decreased by 7% to £5.6 billion (2022: £6.0 billion) due to foreign
exchange movements and was flat at CER. Following a difficult
period for orders in the first half of 2023, the stabilisation of
interest rates has contributed to an improvement in market
conditions, particularly in the commercial office sector, resulting
in a stronger period of order intake in the second half.
Gammon:
The Group's share of Gammon's revenue increased by 27% (27% at CER)
to £1,357 million (2022: £1,068 million) driven by an increase in
major civils volumes, including the Terminal 2 expansion at Hong
Kong Airport. Underlying profit increased to £36 million (2022: £32
million) representing a 2.7% profit margin (2022: 3.0%).
The Group's share of Gammon's
order book decreased by 31% (29% at CER) to £2.0 billion (2022:
£2.9 billion) with the accelerated utilisation of the order book
only partially offset by new orders, which included a HK$3.7
billion contract to construct a new development at Cyberport, which
is the largest Fintech community in Hong Kong, from a wholly owned
company of the Hong Kong Special Administrative Region
Government.
Operational review
UK
Construction
Breadth of opportunities in
chosen markets
The next UK general election is
expected in the second half of 2024 and both the incumbent
Government and the Opposition have set out their plans to help
accelerate the delivery of critical infrastructure in the UK, which
address industry challenges such as slow decision making, planning
delays and the uncertainty which has hindered private investment.
With both the Conservative and Labour parties recognising the
importance of infrastructure development to economic growth, the
outlook for Balfour Beatty in the UK remains positive. The Group's
chosen focus areas in the UK of energy and transportation
infrastructure are high on the priority list for both parties and
represented 81% of the Infrastructure and Project Authority's £775
billion National Infrastructure and Construction Pipeline published
in February 2024. In the same month, the Labour party revised down
its previous green investment policy due to economic pressures,
however the new commitment represents an increase to current levels
of spending and does not impact Balfour Beatty's view of the broad
opportunity in the medium term.
Balfour Beatty's end-to-end
capabilities position it well to capitalise on the market
opportunities in UK energy security and transition infrastructure.
During 2023, the number of conversations with potential customers
and the volume of work being pursued in this space has grown
significantly, aided in part by favourable fundamentals and
Government support. Recent developments include:
· As
part of the 2023 Spring Budget, the UK Government allocated £20
billion of funding to the development of carbon capture and
hydrogen production technologies. Opportunities include Net Zero
Teesside, a first-of-a-kind integrated power and carbon capture
project, for which Balfour Beatty was involved in the front-end
engineering and design study;
· In
July, the UK Government stated that up to £20 billion could be
spent on the development and construction of small nuclear reactors
(SMR), and in October, Holtec's SMR-160 pressurised light-water
nuclear reactor, for which Balfour Beatty is the main construction
partner, was selected as one of six designs to progress to the next
stage of a government competition for the development of innovative
technology to boost Britain's energy security and
sustainability;
· In
January 2024, the Development Consent Order (DCO) for Sizewell C
was triggered and the UK Government made an additional £1.3 billion
available for the new nuclear power station, specifically to
support ongoing preparatory works such as improvements to roads and
rail lines around the Suffolk site.
The Group also continues to pursue
opportunities in offshore wind and hydrogen, and from 2025 onwards,
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.
In the UK transport sector, the
Group's order book was unaffected by the Government's decision in
October 2023 to cancel HS2 Phase 2, as this stage of the project
had yet to be contracted. The Group continues to expect to deliver
material volumes of HS2 work across the balance of the decade and
is awaiting results for its bids submitted in November on four new
packages of HS2 work covering overhead catenary and track
installation. Aligned to the cancellation of HS2 Phase 2, the
Government announced Network North, a £36 billion plan to improve
the roads, buses and railways that people use every day. With
Balfour Beatty holding material market positions with both Network
Rail and National Highways, Network North could introduce new
opportunities for the Group.
Balfour Beatty was awarded a £1.2
billion contract by National Highways in January 2023 to deliver
the 'Roads North of the Thames' package of works for the proposed
Lower Thames Crossing. As part of the announcement by the UK
transport secretary on 9 March 2023 regarding a £40 billion
investment in transport schemes across 2023-2025, Lower Thames
Crossing was delayed by two years, with the notice to proceed from
the Department for Transport now not expected prior to
2026.
In the UK defence and security
sector, in which Balfour Beatty has been a long term participant,
the Group have identified opportunities to grow its market share at
a time when funding is also increasing. 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. The Ministry of Defence has £110 billion of funding
ringfenced for the Defence Nuclear Enterprise (DNE) for the ten
years to 2033, which will in part be used to upgrade defence
infrastructure, and during 2023, the Group started work at two of
the sites funded by the DNE.
Improved delivery driving
margin momentum
Balfour Beatty's market-leading
position in the UK infrastructure market is built on its unmatched
scale and vertically integrated capability for delivering major and
regional projects. In 2023, 95% of UK Construction revenue was from
public sector and regulated industry clients (2022: 91%). Balfour
Beatty will continue to be selective in the work that it bids,
through increased bid margin thresholds and utilisation of risk
frameworks and contract governance. To this end, the Group's
involvement in the Central London high-end private sector property
market concluded in 2023. Alongside the Group's focus on reducing
the risk within the order book is its determination to provide
industry leading project delivery across the UK Construction
portfolio.
At HS2, the scale and complexity
of construction activity continued to grow in 2023. At Area North,
the 2,000 tonne tunnel boring machine completed its second one mile
journey underneath an ancient Warwickshire wood, marking the
culmination of a three-year operation, from site set-up to the
completion of the second breakthrough. The team also completed the
first Birmingham viaduct pier in the city centre and three major
bridge slides. At Old Oak Common, the HS2 station in West London,
the diaphragm walls and piling to the HS2 Box have been completed,
with over 660,000 tonnes of London clay removed from site during
the year and transported 1.7 miles via conveyor to Willesden
Euroterminal.
At Hinkley Point C, good progress
continues to be made on the marine works for the new nuclear power
station. During the year the six vertical liners that will
ultimately connect the previously bored tunnels with the concrete
tunnel heads, which were placed on the seabed in 2022, were safely
installed using specialist marine vessels and equipment. In
addition, the side walls of the bored outfall tunnel were expertly
broken through to allow underground mining works to progress. When
all the connections in both the outfall and intake tunnels are
completed, the cooling water system will have the capacity to
circulate 120,000 litres of water per second directly from the sea
to the nuclear power station through the tunnels and underground
caverns.
At the Thames Tideway Tunnel
project, the Balfour Beatty joint venture's construction work at
Putney has been substantially completed and the new riverside area
created has been opened to the public, and at its main site,
Carnwath Road in Fulham, the team has reached the major milestone
of completing the shafts and tunnel works.
Major Highways is a year into the
major improvement scheme at the interchange between Junction 10 of
the M25 and the A3, which is expected to complete in the summer of
2025. In October, the team enforced a full closure of part of the
A3 over one weekend for the installation of ten 33-metre pre-cast
concrete beams to form a new bridge, which will provide a safer
route for walkers, cyclists, horse-riders, and drivers. This work
was completed safely, with the A3 reopened for traffic four and a
half hours earlier than anticipated. The Major Highways team also
completed concrete safety barrier work on the M3 and M1/A1 in the
year and made progress on the A63.
UK Construction currently has
around 700 live projects in the portfolio, which is slightly higher
than recent years. During 2023, work was completed on a wide range
of projects including the Mayfield Retirement Village in Watford,
the Forder Valley link road and bridge in Plymouth, the National
Treatment Centre Highland Hospital in Inverness and the Institute
for Regeneration and Repair at the University of Edinburgh. New
projects which started in the year included a new building at the
AWE Aldermaston site near Reading, civils work at Devonport
Dockyard in Plymouth, the Central Rhyl Coastal Defence scheme in
North Wales and the Dunfermline Learning Campus for Fife
College.
In addition to projects started in
the year, work added to the order book in 2023 included the £300
million West Slope student accommodation development a Sussex
University, which is a Balfour Beatty Infrastructure Investments
project, and a £67 million contract for a replacement Liberton High
School in Edinburgh.
US
Construction
Interest rate stability aids
progress in commercial office sector
Balfour Beatty's US Buildings
business accounted for 85% of US Construction revenues in 2023
(2022: 78%). With most of the projects undertaken by US
Construction contracted on fixed-price terms, Buildings remains the
lower risk business within the division, as the early issuing of
subcontracts for works packages and insurance of the supply chain
protects the Group's US margin. The Buildings business operates in
five geographies, each with a different mix of customers, and
therefore the macroeconomic conditions seen throughout the year
have had more of an influence on some areas than others. As a
result of this diversification, the result of the upcoming US
election is not expected to have a material impact on the US
Construction business.
During 2023, the education market
in California remained strong, while the federal market in the
Mid-Atlantic, and hospitality and aviation markets in the
Southeast, have shown growth. In the Northwest, the technology
market has started to show early signs of recovery, while the
business is also servicing new end-markets. In Texas, where the
Group has the majority of its commercial office exposure, there
have been positive signs towards the end of the year that the
impact of inflationary pressures and high interest rates is
reducing. The Group converted US$800 million of commercial office
projects from awarded to contracted in the fourth quarter and with
the awarded but not contracted position remaining significant, an
easing of economic pressures should lead to another strong year of
order intake in 2024.
Early successes in US
Buildings growth strategy
The US Buildings business has
adopted a growth strategy to add further diversification to its
regional businesses. By targeting additional cities in states with
existing Balfour Beatty offices, and broader end-markets in some
regions where the business is already active, new opportunities are
being identified. The new locations were chosen based on market
fundamentals and adjacency to established offices, and include
Sacramento in California, Savannah in Georgia, Charleston in South
Carolina, Richmond in Virginia, and Tampa in Florida. These offices
will take time to reach scale, but there are early signs of promise
such as the construction of a three-storey building at Sierra
College in Rocklin, California, an elementary school in Savannah, a
senior living facility in Charleston, a student housing project at
The College of William and Mary near Richmond, and a multifamily
housing project in Tampa.
By broadening the regions in which
it serves certain end-markets, the US Buildings business can
further utilise its inhouse expertise and customer relationships
held locally to drive organic growth. This has helped secure the
award of over US $1 billion of combined airport work at
Raleigh-Durham International Airport in North Carolina,
Jacksonville International Airport in Florida and Sacramento
International Airport in California, which is expected to be added
to the order book in phases when contracted. The Buildings business
is also working on a theme park in Texas and renovations at a theme
park in California, which follow many years of successful
construction at theme parks in Florida, as well as a data centre
project in Seattle, continuing on the successes in
Oregon.
Strong delivery and work
winning in 2023
During the year, progress has been
made on significant Buildings projects including:
· Substantial completion of Block 216, the fourth tallest
building in Portland, Oregon;
· Topping out of the Broward County Convention Center's East
Expansion and Hotel in Florida;
· Completion of the Icon Marina Village, a group of luxury
apartments in West Palm Beach, Florida;
· Substantial completion of the Del Sol High School in Oxnard,
California;
· Completion of the ilani Casino Hotel in Ridgefield,
Washington.
In the year, the Buildings
business booked material new phases of existing contracts and
standalone new contract awards including:
· US$350 million of data centres in the US
Northwest;
· Two
commercial office projects in Texas totalling US$800
million;
· US$480 million of additional Federal work in Washington
D.C.
Progress made on major US
Civils jobs
The US Civils business focuses on
highways projects in Texas and the Southeast and mass transit rail
in major US cities. Order intake improved compared to the prior
year, with additions including a US$242 million design-build
highways contract in North Carolina, however the volume of civils
jobs coming to market and aligned to the Group's capabilities has
not increased notably since the passing of the Inflation Reduction
Act in 2022.
Balfour Beatty remains cautious in
its approach to complex civils contracts in the US, as the
combination of fixed-price contractual terms and the self-perform
nature of the work gives limited scope to mitigate inflation and
schedule risk. As a result, the Group's civils bidding is focused
on those projects which closely align to its core
capabilities.
Progress at the major US Civils
projects in 2023 included:
· As
part of the LINXS Constructors joint venture at Los Angeles
International Airport, Balfour Beatty achieved energisation of the
two Intermodal Transportation Facilities and the traction power
substations;
· At
the Caltrain rail project in California, testing of the electric
trains, operated under power from the overhead contact system, has
begun;
· At
the Oak Hill Parkway highways project in Texas, the team completed
key traffic switches and opened the new William Cannon
Bridge;
· Completion of the US$300 million Tertiary Treatment
Facilities project at the EchoWater Project in
California;
· Completion of the US$60 million Harkers Island bridge in
North Carolina a year ahead of schedule. The bridge is the first
structure in the state to utilise non-corroding, carbon fibre
reinforced polymer strand and glass fibre reinforced polymer rebar
to combat corrosion in coastal environments.
Gammon
Strong position in buoyant Hong Kong construction
market
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 business is well placed to capitalise on the high level
of major infrastructure investment in the region, which will bring
the development of additional land, creating significant
development opportunities for both the public and private sectors.
The current pipeline of infrastructure projects is driven by the
Hong Kong Government's drive to increase connectivity within the
Greater Bay Area, as it announced three new strategic railways and
three new major roads. It has identified the Northern Metropolis as
a new engine for future development and is exploring the benefits
of developing the Kau Yi Chau Artificial Islands as a third central
business district.
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 lever engineering excellence,
with a key area of future work likely to be from significant
infrastructure programmes in Hong Kong and in Singapore.
During 2023, Gammon completed a
project at Hong Kong International Airport, which included the
construction of a bridge to connect the two islands which
accommodate the airport and the boundary crossing facilities for
the Hong Kong-Zhuhai-Macao bridge. Work continued on two other
major projects at the airport, with completion of the concrete
structure for the new Terminal 2 facility and its roof fabrication
largely complete, and steady progress on the tunnel construction
and the electrical and mechanical works for the automated people
mover.
At the student hostel project for
City University of Hong Kong, which will be the world's largest
student hostel to be constructed using modular integrated
construction (MiC), the final MiC module out of a total of 1,344
was successfully installed. It resulted in the safe and efficient
installation of all the units in less than eight
months.
As part of the Central Kowloon
Route project, a 4.7km dual three-lane trunk road that will enhance
connectivity between the east and west Kowloon districts,
Gammon continued to deliver the Kai Tak West tunnelling contract
and the route wide buildings, electrical and mechanical works
contract. During the year, excavation of the second stage of
underwater tunnelling was completed, with work beginning on the
construction of the tunnel structure.
New orders in the year included a
HK$3.7 billion contract to construct a new development at
Cyberport, which is the largest fintech community in Hong Kong,
from a wholly owned company of the Hong Kong Special Administrative
Region Government.
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 2% to £1,006 million (2022: £989 million), mainly due to the
commencement of two new major road maintenance contracts.
Underlying profit from operations at £80 million (2022: £83
million) was lower than the prior year, partially due to the new
road contracts incurring additional costs in the start-up phase, as
expected. This resulted in PFO margin of 8.0% in the year (2022:
8.4%), which is at the top of the targeted 6-8% PFO margin range
and represents a further strong year for the power, road and rail
maintenance businesses.
The Support Services order book
increased by 17% to £2.8 billion (2022: £2.4 billion) driven by the
addition of the £297 million East Sussex road maintenance contract
and the £330 million six-year extension to
the Lincolnshire road maintenance contract.
Support Services
|
2023
|
2022
|
Order book1
(£bn)
|
2.8
|
2.4
|
Revenue1
(£m)
|
1,006
|
989
|
Profit from operations2
(£m)
|
80
|
83
|
Non-underlying items
(£m)
|
-
|
-
|
Statutory profit from operations
(£m)
|
80
|
83
|
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
Market leading position in
rapidly growing Power T&D industry
The UK power transmission and
distribution construction industry, in which Balfour Beatty holds a
market leading position, is expanding sharply. Due to the necessity
of upgrading the UK's electricity network, Ofgem introduced the
Accelerated Strategic Transmission Investment (ASTI) regulatory
framework to fund the large strategic onshore transmission projects
required to deliver the Government's net zero targets. The £20
billion ASTI fund supports the accelerated delivery of network
upgrades, with an ambition to cut delivery times in half. This is
in addition to the RIIO-T2 spend period (2021-2026) investment,
which includes £30 billion for energy networks and potential for a
further £10 billion on green energy projects.
This has led to Balfour Beatty's
power transmission and distribution team bidding for record levels
of work and being selected in August as one of ten preferred
bidders on SSEN Transmission's c.£10 billion ASTI framework. The
Power business has now commenced early contractor involvement works
on nine electricity transmission projects across the north of
Scotland under the framework, which are expected to convert to full
awards at a later date, and has submitted a bid to be included in
National Grid's Great Grid Upgrade ASTI framework. As a result, the
Group expects volumes in the Power business to grow steeply across
2025 and 2026.
Operational highlights delivered
by the Power business in 2023 include:
· Completion of SSEN Transmission's first major project under
the RIIO T2 framework, which was energised after Balfour Beatty
installed 148 new steel-lattice towers across a 45km stretch from
Port Ann substation near Lochgilphead to the substation at
Crossaig.
· Completion of 116 T-pylon structures for National Grid's
Hinkley Connection Project. The 8.5km underground cable section
under the Mendip Hills Area of Outstanding Natural Beauty (AONB) is
now connected to the new line of T-pylons and also energised and
transporting electricity.
· Completion of National Grid and Energinet's record-breaking
new 'Viking Link' interconnector, for which Balfour Beatty was
responsible for the onshore cable installation stretching for 67km
between Bicker Fen and Sutton-on-Sea. The link between the UK and
Denmark will be able to transport enough green electricity to power
up to 2.5 million UK homes.
In November, Balfour Beatty was
awarded a significant scheme by National Grid to remove 4.6km of
overhead high voltage electricity line and replace it with
underground cables in the North Wessex Downs AONB. This is part of
National Grid's Visual Impact Provision (VIP) project to reduce the
visual impact of high voltage power lines in protected
areas.
Further opportunities in
rail
The rail maintenance market also
has a positive trajectory, with the UK Government's commitment to
invest £43 billion (as set out in the Statement of Funds Available
(SoFA)) in operations, maintenance and renewal for the period
2024-2029 as part of Network Rail's Control Period 7 (CP7)
strategic business plan. The cancellation of HS2 Phase 2 may also
bring further funding forward for other rail projects, as pressure
grows on the UK Government to direct investment into the North and
Midlands. The Group is particularly focused on electrification
schemes, as part of its ambition to deliver more net zero
infrastructure in the UK.
The Rail business has had a
successful year with good work volumes arising on the Core Valley
Lines upgrade project in South Wales and the technically
challenging emergency repairs of Nuneham Viaduct over the River
Thames just south of Oxford, which were completed at pace and ahead
of schedule.
Growing market share in road
maintenance
The addressable road maintenance
market remained positive in 2023. In addition to local council
budgets increasing by around 50% in 2022 following the start of a
five-year £2.7 billion scheme for road patching, the Government
announced in December that £8.3 billion previously allocated to HS2
Phase 2 would be redirected to highway maintenance over the next 11
years. Balfour Beatty's market share also increased in 2023 as the
£176 million eight-year contract for highways services for
Buckinghamshire County Council started in April and the £297
million seven-year contract for the maintenance of highways assets
and the delivery of infrastructure services across East Sussex
started in May. In the second half of the year, the Group secured a
£330 million six-year contract extension with Lincolnshire County
Council and a £54 million two-year extension with Herefordshire
County Council.
Looking to the future, there are
several Local Authority contracts, like those won by Balfour Beatty
for Buckinghamshire and East Sussex in 2022, coming to market in
the next year for which the Group is well positioned.
INFRASTRUCTURE INVESTMENTS
Financial review
Underlying pre-disposals profit
from operations in the year decreased to £5 million (2022: £11
million) due largely to increased costs relating to the independent
compliance monitor's work across the US military housing portfolio.
The sale of two assets delivered a gain on disposal of £26 million
(2022: £70 million) and resulted in underlying profit from
operations of £31 million (2022: £81 million).
Balfour Beatty continues to invest
in attractive new opportunities, each expected to meet its
investment hurdle rates. In the year, the Group invested £31
million in new and existing projects with one new student
accommodation project added to the portfolio. Balfour Beatty also
continues to sell assets, timed to maximise benefit to
shareholders. Two assets were disposed of in the second half of the
year and delivered £26 million gains on disposal, within the
Group's targeted range of £15 - £30 million. Both transactions were
above the Directors' valuation and total proceeds of £61 million
comprised £56 million from the disposal of the Group's 49.5%
interest in UBB Waste (Gloucestershire) Holdings Limited, the owner
of the energy from waste facility at Javelin Park near Gloucester,
and £5 million for its interest in the Moretti Apartments
multifamily housing project in Birmingham, Alabama.
Net investment income of £16
million was £8 million lower than the prior year (2022: £24
million) due largely to a net £8 million impairment of joint
ventures and associates subordinated debt and accrued interest
receivable (2022: £2 million) as the cost to repair a faulty OFTO
cable was provided for whilst contractual cost recoveries are being
pursued. Underlying profit before tax was £47 million (2022: £105
million) and statutory profit before tax was £43 million (2022:
£100 million).
Infrastructure Investments
|
2023
£m
|
2022
£m
|
Pre-disposals operating
profit2
|
5
|
11
|
Gain on
disposals2
|
26
|
70
|
Profit from
operations2
|
31
|
81
|
Net investment
income~
|
16
|
24
|
Profit before
tax2
|
47
|
105
|
Non-underlying items
|
(4)
|
(5)
|
Statutory profit before
tax
|
43
|
100
|
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, however in challenging market conditions, the
Group's focus must remain on its disciplined approach to
investments and disposals with each expected to meet its investment
hurdle rates. The Group 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, 41 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
bedroom West Slope development - on behalf of the University of
Sussex. In addition to £171 million of wrapped bond financing
raised through a private placement, Balfour Beatty will invest
equity of £32 million, 81% of the project equity, with the
University of Sussex as a co-investor providing the remaining 19%.
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. The Group also remains
preferred bidder on a further UK student accommodation project and
is investigating opportunities to invest in off-campus student
accommodation.
In the US, the Group added a
student accommodation project in Tallahassee, Florida to the
portfolio and started construction on the William & Mary
University project in Virginia, having completed the construction
of the Vanderbilt University student accommodation project for
which rentals started in the Fall 2023 semester.
In US military housing, the Group
completed demolition works at Fort Carson as part of a proposed
multi-phase project for the construction of new homes at the base,
with the preparation phase of work underway. This project is an
example of similar upgrade work opportunities likely to be required
across the Group's military housing portfolio. The Group continues
to work with the independent compliance monitor, who was appointed
by the Department of Justice in 2021 and commenced work in
2022.
The Group continued its investment
in the UK energy transition with entry into the on-street Electric
Vehicle (EV) charging market, partnering with EV chargepoint
company Urban Electric Networks to form Urban Fox. The partnership
combines Urban Electric Networks' innovative and entrepreneurial
spirit with Balfour Beatty's scale, while building on the Group's
experience and longstanding relationships with local authorities.
Urban Fox's innovative 7kW on-street chargepoint, which is
installed into the pavement and fully retractable underground, is
the first of its kind to the market.
Directors' valuation
The Directors' valuation decreased
by 6% to £1,212 million (2022: £1,291 million) due equally to a
weakening of the US dollar against sterling and an increase in
discount rates. The portfolio is 58% weighted towards the US (2022:
58%). The number of projects in the portfolio remained at 59 (2022:
59).
Movement in value 2022 to 2023
£m
|
2022
|
Equity
invested
|
Distributions received
|
Sales
proceeds
|
Unwind
of discount
|
Operational performance
|
FX
|
|
2023
|
Changes
to discount rates
|
UK
|
548
|
9
|
(20)
|
(56)
|
38
|
15
|
-
|
(25)
|
509
|
US
|
743
|
22
|
(28)
|
(5)
|
49
|
(16)
|
(43)
|
(19)
|
703
|
Total
|
1,291
|
31
|
(48)
|
(61)
|
87
|
(1)
|
(43)
|
(44)
|
1,212
|
Balfour Beatty invested £31
million (2022: £30 million) in new and existing projects, with UK
investment focused on the Eastwick and Sweetwater redevelopment and
US investment predominantly relating to the addition of a student
accommodation project in Tallahassee, Florida. The West Slope
student accommodation project at the University of Sussex, which
reached financial close in December 2023, has now been included as
a separate project.
Cash yield from distributions
amounted to £48 million (2022: £89 million). Balfour Beatty
continued disposals in the year with proceeds of £61 million (2022:
£93 million). This comprised £56 million from the sale of its stake
in Gloucestershire Waste PFI, and £5 million from the sale of the
Moretti Apartments multifamily housing project in Birmingham,
Alabama.
Unwind of discount at £87 million
(2022: £85 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 £1 million decrease (2022: £139 million increase).
The operational performance movements in the UK were primarily due
to a revaluation of a student accommodation project due to higher
than forecast rental increases, and an increase in short term
interest rates. In the US, the decrease arose in the US military
housing portfolio due to increased insurance and independent
compliance monitor costs, partially offset by higher annual
rents.
The foreign exchange movement was
a £43 million decrease, as sterling appreciated against the US
dollar (2022: £85 million increase).
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
multifamily 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.
The valuation methodology used at
the previous Directors' valuation is unchanged. The discount rates
used for the valuation at 31 December 2023 have been increased to
reflect changes in secondary market discount rates, which have
progressively responded to increases in long term interest rates.
As a result, the implied weighted average discount rate for the UK
portfolio increased by 0.4% to 8.3% (2022: 7.9%) and the implied
weighted average discount rate for the US portfolio increased by
0.2% to 8.1% (2022: 7.9%).
Discount rates applied to the UK
portfolio range from 7.25% to 9.25% (2022: 6.75% to 8.75%)
depending on the maturity and risk of each project. The implied
weighted average discount rate for the UK portfolio is 8.3% (2022:
7.9%) and a 1% change in the discount rate would change the value
of the UK portfolio by approximately £50 million.
Discount rates applied to the US
portfolio range from 6.25% to 10.5% (2022: 6.0% to 10.5%). The
implied weighted average discount rate for the US portfolio is 8.1%
(2022: 7.9%) and a 1% change in the discount rate would change the
value of the US portfolio by approximately £77 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 £26 million and a 1% change in the long term rental
growth rate in the US portfolio would change the valuation by
approximately £75 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 UK-adopted international accounting
standards rather than using a discounted cash flow approach. A full
reconciliation is provided in section i) of the Measuring Our
Financial Performance section.
Sector
|
2023
|
2022
|
2023
|
2022
|
|
No.
projects
|
No.
projects
|
£m
|
£m
|
Roads
|
12
|
12
|
168
|
171
|
Healthcare
|
2
|
2
|
129
|
126
|
Student accommodation
|
6
|
5
|
137
|
128
|
Energy transition
|
4
|
5
|
44
|
101
|
Other
|
2
|
2
|
31
|
22
|
UK total
|
26
|
26
|
509
|
548
|
US military housing
|
21
|
21
|
562
|
615
|
Student accommodation and other
PPP
|
4
|
3
|
83
|
59
|
Residential housing
|
8
|
9
|
58
|
69
|
US total
|
33
|
33
|
703
|
743
|
Total
|
59
|
59
|
1,212
|
1,291
|
Value by phase
Phase
|
2023
|
2022
|
2023
|
2022
|
|
No.
projects
|
No.
projects
|
£m
|
£m
|
Operations
|
55
|
55
|
1,164
|
1,239
|
Construction
|
3
|
3
|
46
|
47
|
Preferred bidder
|
1
|
1
|
2
|
5
|
Total
|
59
|
59
|
1,212
|
1,291
|
Value by income type
Income type
|
2023
|
2022
|
2023
|
2022
|
|
No.
projects
|
No.
projects
|
£m
|
£m
|
Availability based
|
17
|
17
|
353
|
353
|
Demand - operationally proven (2+
years)
|
37
|
36
|
807
|
761
|
Demand - early stage (less than 2
years)
|
5
|
6
|
52
|
177
|
Total
|
59
|
59
|
1,212
|
1,291
|
MEASURING OUR FINANCIAL PERFORMANCE
Providing clarity on the Group's alternative performance
measures
Following the issuance of the
Guidelines on Alternative Performance Measures (APMs) by the
European Securities and Markets Authorities (ESMA) in June 2015,
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 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 190 to 195 of the Annual Report and Accounts
2023.
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 2023. 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
|
2023
£m
|
2022
£m
|
Order book (performance
measure)
|
16,532
|
17,390
|
Less:
|
Share of orders included within
the Group's joint ventures and associates
|
(2,344)
|
(3,275)
|
Less:
|
Estimated orders under framework
agreements included in the order book disclosure
|
-
|
(25)
|
Add:
|
Transaction price allocated to
remaining performance obligations in Infrastructure
Investments+
|
1,917
|
2,009
|
Transaction price allocated to
remaining performance obligations for the Group+
(statutory measure)
|
16,105
|
16,099
|
+ Refer to Note 4.3 in the Annual Report and Accounts
2023.
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 2023 statutory results to performance
measures
|
|
|
Non-underlying
items
|
|
|
2023
statutory
results
£m
|
Intangible
amortisation
£m
|
Provision in relation to
rectification works in London
£m
|
2023 performance
measures
£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 net 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
statutory
results
£m
|
Intangible
amortisation
£m
|
Provision in relation to
rectification works in London
£m
|
2023 performance
measures
£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
|
Reconciliation of 2022 statutory results to performance
measures
|
|
|
|
Non-underlying
items
|
|
|
2022
statutory
results
£m
|
Intangible
amortisation
£m
|
Release of Heery
provision
£m
|
UK deferred tax assets
revaluation
£m
|
2022 performance
measures
£m
|
|
|
|
|
|
|
Revenue including share of joint ventures and associates
(performance)
|
8,931
|
-
|
-
|
-
|
8,931
|
Share of revenue of joint ventures
and associates
|
(1,302)
|
-
|
-
|
-
|
(1,302)
|
Group revenue (statutory)
|
7,629
|
-
|
-
|
-
|
7,629
|
Cost of sales
|
(7,202)
|
-
|
-
|
-
|
(7,202)
|
Gross profit
|
427
|
-
|
-
|
-
|
427
|
Amortisation of acquired
intangible assets
|
(6)
|
6
|
-
|
-
|
-
|
Other net operating
expenses
|
(251)
|
-
|
(2)
|
-
|
(253)
|
Group operating profit
|
170
|
6
|
(2)
|
-
|
174
|
Share of results of joint ventures
and associates
|
105
|
-
|
-
|
-
|
105
|
Profit from operations
|
275
|
6
|
(2)
|
-
|
279
|
Investment income
|
50
|
-
|
-
|
-
|
50
|
Finance costs
|
(38)
|
-
|
-
|
-
|
(38)
|
Profit before taxation
|
287
|
6
|
(2)
|
-
|
291
|
Taxation
|
-
|
1
|
-
|
(2)
|
(1)
|
Profit for the year
|
287
|
7
|
(2)
|
(2)
|
290
|
Reconciliation of 2022 statutory results to performance
measures by segment
|
|
Non-underlying
items
|
|
Profit/(loss) from operations
|
2022
statutory
results
£m
|
Intangible
amortisation
£m
|
Release of Heery
provision
£m
|
2022 performance
measures
£m
|
Segment
|
|
|
|
|
Construction Services
|
150
|
1
|
(2)
|
149
|
Support Services
|
83
|
-
|
-
|
83
|
Infrastructure
Investments
|
76
|
5
|
-
|
81
|
Corporate activities
|
(34)
|
-
|
-
|
(34)
|
Total
|
275
|
6
|
(2)
|
279
|
c) Underlying profit before tax
As explained, the Group's
Infrastructure Investments segment is assessed on an underlying
profit before tax (PBT) measure. This is calculated as
follows:
|
2023
£m
|
2022
£m
|
Underlying profit from operations
(section (b) and Note 5)
|
31
|
81
|
Add:
|
Subordinated debt interest
receivable+
|
34
|
27
|
Add:
|
Interest receivable on PPP
financial assets+
|
2
|
2
|
Add:
|
Fair value (loss)/gain on
investment asset+
|
(1)
|
6
|
Less:
|
Non-recourse borrowings finance
cost+
|
(11)
|
(9)
|
Less:
|
Net impairment of subordinated
debt and accrued interest receivable+
|
(8)
|
(2)
|
Underlying profit before tax
(performance)
|
47
|
105
|
Non-underlying items (section (b)
and Note 5)
|
(4)
|
(5)
|
Statutory profit before
tax
|
43
|
100
|
+ 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
|
2023
pence
|
2022
pence
|
Statutory basic earnings per
ordinary share
|
35.3
|
46.9
|
Amortisation of acquired
intangible assets after tax
|
0.4
|
1.2
|
Other non-underlying items after
tax
|
1.6
|
(0.6)
|
Underlying basic earnings per
ordinary share (performance)
|
37.3
|
47.5
|
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
|
2023
£m
|
2022
£m
|
Cash generated from operating
activities (statutory)
|
285
|
168
|
Add back: Pension payments
including deficit funding (Note 21)
|
28
|
43
|
Less: Repayment of lease
liabilities (including lease interest payments)
|
(63)
|
(58)
|
Add: Operational dividends
received from joint ventures and associates
|
59
|
89
|
Add back: Cash flow movements
relating to non-operating items
|
9
|
(12)
|
Less: Operating cash flows
relating to non-recourse activities
|
(8)
|
(11)
|
Operating cash flow (OCF)
(performance)
|
310
|
219
|
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 (£28 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) (£63 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 (£59 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 (£9 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 (£8 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
|
2023
statutory
£m
|
Adjustment
£m
|
2023
performance
£m
|
|
2022
statutory
£m
|
Adjustment
£m
|
2022
performance
£m
|
Total cash within the Group
|
1,414
|
(306)
|
1,108
|
|
1,179
|
(19)
|
1,160
|
Cash and cash
equivalents
|
- infrastructure
concessions
|
306
|
(306)
|
-
|
|
19
|
(19)
|
-
|
|
- other
|
1,108
|
-
|
1,108
|
|
1,160
|
-
|
1,160
|
Total debt within the Group
|
(979)
|
713
|
(266)
|
|
(738)
|
393
|
(345)
|
Borrowings - non-recourse
loans
|
(570)
|
570
|
-
|
|
(261)
|
261
|
-
|
- other
|
(266)
|
-
|
(266)
|
|
(345)
|
-
|
(345)
|
Lease liabilities
|
(143)
|
143
|
-
|
|
(132)
|
132
|
-
|
Net cash
|
435
|
407
|
842
|
|
441
|
374
|
815
|
|
|
|
|
|
|
|
|
|
|
|
|
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
£700 million for 2023 (2022: £804 million).
Using a statutory measure
(inclusive of non-recourse elements and the lease liabilities
recognised) gives average net cash of £438 million for 2023
(2022: £430 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 £1.21 billion at year end
(2022: £1.29 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
|
2023
£m
|
2022
£m
|
|
Net assets of the Infrastructure
Investments segment (refer to Note 5.1)
|
596
|
593
|
|
Less: Net assets not included
within the Directors' valuation - Housing division
|
(53)
|
(30)
|
Comparable statutory measure of
the Investments portfolio under IFRS
|
543
|
563
|
|
Comparison of the statutory measure of the Investments
portfolio to its performance measure
|
2023
£m
|
2022
£m
|
Statutory measure of the
Investments portfolio (as above)
|
543
|
563
|
Difference arising from the
Directors' valuation being measured on a 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
|
669
|
728
|
Directors' valuation (performance
measure)
|
1,212
|
1,291
|
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:
2023 statutory growth compared to performance
growth
|
Construction
Services
|
|
|
|
|
|
UK
|
US
|
Gammon
|
Total
|
Support
Services
|
Infrastructure
Investments
|
Total
|
Revenue (£m)
|
|
|
|
|
|
|
|
2023 statutory
|
3,027
|
3,668
|
-
|
6,695
|
1,006
|
292
|
7,993
|
2022 statutory
|
2,763
|
3,646
|
-
|
6,409
|
988
|
232
|
7,629
|
Statutory growth
|
10%
|
1%
|
-
|
4%
|
2%
|
26%
|
5%
|
|
|
|
|
|
|
|
|
2023
performance^
|
3,027
|
3,697
|
1,357
|
8,081
|
1,006
|
508
|
9,595
|
2022 performance
retranslated^
|
2,763
|
3,647
|
1,066
|
7,476
|
989
|
460
|
8,925
|
Performance CER growth
|
10%
|
1%
|
27%
|
8%
|
2%
|
10%
|
8%
|
|
|
|
|
|
|
|
|
Order book (£bn)
|
|
|
|
|
|
|
|
2023
|
6.1
|
5.6
|
2.0
|
13.7
|
2.8
|
-
|
16.5
|
2022
|
6.1
|
6.0
|
2.9
|
15.0
|
2.4
|
-
|
17.4
|
Growth
|
-
|
(7)%
|
(31)%
|
(9)%
|
17%
|
-
|
(5)%
|
|
|
|
|
|
|
|
|
2023
|
6.1
|
5.6
|
2.0
|
13.7
|
2.8
|
-
|
16.5
|
2022 retranslated
|
6.1
|
5.6
|
2.8
|
14.5
|
2.4
|
-
|
16.9
|
CER growth
|
-
|
-
|
(29)%
|
(6)%
|
17%
|
-
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
^ Performance revenue is
underlying revenue including share of revenue from joint ventures
and associates as set out in section (e).
Forward-looking statements
This announcement, including
information included or incorporated by reference in it, may
include certain forward-looking statements, beliefs or opinions,
including statements with respect to Balfour Beatty's business,
financial condition and results of operations. All statements other
than statements of historical facts included in this announcement
may be forward-looking statements.
These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "plans",
"anticipates", "targets", "aims", "continues", "expects",
"intends", "hopes", "may", "will", "would", "could" or "should" or,
in each case, their negative or other various or comparable
terminology. These statements are made by Balfour Beatty
in good faith based on the
information available to it at the date of this announcement and
reflect the beliefs and expectations of Balfour Beatty. 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.
A number of factors could cause
actual results and developments to differ materially from those
expressed or implied by the forward-looking statements, including,
without limitation, developments in the global economy, changes in
UK and US Government policies, spending and procurement
methodologies, failure in Balfour Beatty's health, safety or
environmental policies and those factors set out under Principal
Risks on pages 96 to 103 of the Annual Report and Accounts
2023.
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 announcement and Balfour Beatty and its
advisers expressly disclaim any obligations or undertaking to
release any update of, or revisions to, any forward-looking
statements in this announcement. No statement in this announcement
is intended to be, or intended to be construed as, a profit
forecast or profit estimate or to be interpreted to mean that
Balfour Beatty plc's earnings per share for the current or future
financial years will necessarily match or exceed the historical
earnings per share for Balfour Beatty plc. As a result, you are
cautioned not to place any undue reliance on such forward-looking
statements.
Group Income Statement
For the year ended 31 December
2023
|
|
2023
|
|
|
2022
|
|
Notes
|
Underlying
items1
£m
|
Non-underlying
items
(Note 9)
£m
|
Total
£m
|
|
|
Underlying
items1
£m
|
Non-underlying
items
(Note
9)
£m
|
Total
£m
|
Revenue including share of joint ventures and
associates
|
|
9,595
|
-
|
9,595
|
|
|
8,931
|
-
|
8,931
|
Share of revenue of joint ventures
and associates
|
15
|
(1,602)
|
-
|
(1,602)
|
|
|
(1,302)
|
-
|
(1,302)
|
Group revenue
|
|
7,993
|
-
|
7,993
|
|
|
7,629
|
-
|
7,629
|
Cost of sales
|
|
(7,581)
|
(12)
|
(7,593)
|
|
|
(7,202)
|
-
|
(7,202)
|
Gross profit/(loss)
|
|
412
|
(12)
|
400
|
|
|
427
|
-
|
427
|
Gain on disposals of interests in
investments
|
23.2
|
24
|
-
|
24
|
|
|
-
|
-
|
-
|
Amortisation of acquired
intangible assets
|
14
|
-
|
(5)
|
(5)
|
|
|
-
|
(6)
|
(6)
|
Other net operating
(expenses)/income
|
|
(261)
|
-
|
(261)
|
|
|
(253)
|
2
|
(251)
|
Group operating profit/(loss)
|
|
175
|
(17)
|
158
|
|
|
174
|
(4)
|
170
|
Share of results of joint ventures
and associates excluding gain on disposals of interests in
investments
|
|
51
|
-
|
51
|
|
|
35
|
-
|
35
|
Gain on disposals of interests in
investments
|
23.2
|
2
|
-
|
2
|
|
|
70
|
-
|
70
|
Share of results of joint ventures
and associates
|
15
|
53
|
-
|
53
|
|
|
105
|
-
|
105
|
Profit/(loss) from operations
|
|
228
|
(17)
|
211
|
|
|
279
|
(4)
|
275
|
Investment income
|
7
|
82
|
-
|
82
|
|
|
50
|
-
|
50
|
Finance costs
|
8
|
(49)
|
-
|
(49)
|
|
|
(38)
|
-
|
(38)
|
Profit/(loss) before taxation
|
|
261
|
(17)
|
244
|
|
|
291
|
(4)
|
287
|
Taxation
|
10
|
(56)
|
6
|
(50)
|
|
|
(1)
|
1
|
-
|
Profit/(loss) for the year
|
|
205
|
(11)
|
194
|
|
|
290
|
(3)
|
287
|
|
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
|
Equity holders
|
|
208
|
(11)
|
197
|
|
|
291
|
(3)
|
288
|
Non-controlling
interests
|
|
(3)
|
-
|
(3)
|
|
|
(1)
|
-
|
(1)
|
Profit/(loss) for the year
|
|
205
|
(11)
|
194
|
|
|
290
|
(3)
|
287
|
1 Before non-underlying items (Note 9).
|
|
|
Notes
|
2023
pence
|
2022 pence
|
|
Earnings per share
|
|
|
|
|
- basic
|
11
|
35.3
|
46.9
|
|
- diluted
|
11
|
34.8
|
46.3
|
|
|
|
|
|
|
Dividends per share proposed for the year
|
12
|
11.5
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Statement of Comprehensive Income
For the year ended 31 December 2023
|
|
|
2023
|
|
|
|
2022
|
|
Group
£m
|
Share of joint ventures and
associates
£m
|
Total
£m
|
|
Group
£m
|
Share
of
joint
ventures
and associates
£m
|
Total
£m
|
Profit for the year
|
141
|
53
|
194
|
|
182
|
105
|
287
|
Other comprehensive (loss)/income for the
year
|
|
|
|
|
|
|
|
Items which will not subsequently be reclassified to the
income statement
|
|
|
|
|
|
|
|
Actuarial (losses)/gains on
retirement benefit assets/liabilities
|
(197)
|
(1)
|
(198)
|
|
(52)
|
1
|
(51)
|
Fair value revaluations of
investments in mutual funds measured at fair value through
OCI+
|
1
|
-
|
1
|
|
-
|
-
|
-
|
Tax on above
|
49
|
-
|
49
|
|
20
|
-
|
20
|
|
(147)
|
(1)
|
(148)
|
|
(32)
|
1
|
(31)
|
Items which will subsequently be reclassified to the income
statement
|
|
|
|
|
|
|
|
Currency translation
differences
|
(17)
|
(13)
|
(30)
|
|
32
|
23
|
55
|
Fair value revaluations
|
-
|
PPP financial assets
|
-
|
20
|
20
|
|
(3)
|
(124)
|
(127)
|
|
-
|
cash flow hedges
|
-
|
2
|
2
|
|
3
|
29
|
32
|
|
-
|
investments in mutual funds
measured at fair value through OCI
|
-
|
-
|
-
|
|
(5)
|
-
|
(5)
|
Recycling of revaluation reserves
to the income statement on disposal^
|
-
|
(3)
|
(3)
|
|
-
|
(3)
|
(3)
|
Tax on above
|
(1)
|
(5)
|
(6)
|
|
(1)
|
25
|
24
|
|
(18)
|
1
|
(17)
|
|
26
|
(50)
|
(24)
|
Total other comprehensive (loss)/income for the
year
|
(165)
|
-
|
(165)
|
|
(6)
|
(49)
|
(55)
|
Total comprehensive income for the year
|
(24)
|
53
|
29
|
|
176
|
56
|
232
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
Equity holders
|
|
|
32
|
|
|
|
233
|
Non-controlling
interests
|
|
|
(3)
|
|
|
|
(1)
|
Total comprehensive income for the year
|
|
|
29
|
|
|
|
232
|
^ Recycling of revaluation reserves to the income statement on
disposal has no associated tax effect.
+ Fair value revaluations of investments in mutual funds are
measured at fair value through OCI and are not reclassified to the
income statement on disposal. Prior year comparatives have
not been re-presented.
Group Statement of Changes in
Equity
For the year ended 31
December 2023
|
Called-up
share
capital
£m
|
Share
premium
account
£m
|
Capital
redemption
reserve
£m
|
Share
of
joint
ventures'
and
associates'
reserves
£m
|
Other
reserves µ
£m
|
Retained
profits
£m
|
Non-
controlling
interests
£m
|
Total
£m
|
At 1 January 2022
|
345
|
176
|
1
|
72
|
144
|
631
|
7
|
1,376
|
Total comprehensive income/(loss)
for the year
|
-
|
-
|
-
|
56
|
25
|
152
|
(1)
|
232
|
Ordinary dividends
|
-
|
-
|
-
|
-
|
-
|
(58)
|
-
|
(58)
|
Joint ventures' and associates'
dividends
|
-
|
-
|
-
|
(148)
|
-
|
148
|
-
|
-
|
Non-controlling interests'
dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
Purchase of treasury
shares
|
-
|
-
|
-
|
-
|
-
|
(151)
|
-
|
(151)
|
Cancellation of ordinary
shares
|
(51)
|
-
|
51
|
-
|
-
|
-
|
-
|
-
|
Movements relating to share-based
payments+
|
-
|
-
|
-
|
-
|
1
|
(16)
|
-
|
(15)
|
At 31 December 2022
|
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
|
µ Other reserves include £22m of special reserve (2022:
£22m).
+ Movements relating to share-based payments include £nil tax
credit (2022: £2m) recognised directly within retained
profits.
Group Balance Sheet
At 31 December 2023
|
Notes
|
2023
£m
|
2022
£m
|
Non-current assets
|
|
|
|
Intangible assets
|
- goodwill
|
13
|
845
|
876
|
|
- other
|
14
|
288
|
292
|
Property, plant and
equipment
|
|
141
|
104
|
Right-of-use assets
|
|
135
|
127
|
Investment properties
|
|
66
|
27
|
Investments in joint ventures and
associates
|
15
|
389
|
426
|
Investments
|
|
28
|
40
|
PPP financial assets
|
|
24
|
26
|
Trade and other
receivables
|
17
|
308
|
286
|
Retirement benefit
assets
|
21
|
104
|
262
|
Deferred tax assets
|
|
188
|
176
|
|
|
2,516
|
2,642
|
Current assets
|
|
|
|
Inventories
|
|
124
|
114
|
Contract assets
|
16.1
|
300
|
300
|
Trade and other
receivables
|
17
|
894
|
881
|
Cash and cash
equivalents
|
- infrastructure
investments
|
20.3
|
306
|
19
|
|
- other
|
20.3
|
1,108
|
1,160
|
Current tax receivable
|
|
16
|
6
|
Derivative financial
instruments
|
|
1
|
1
|
|
|
2,749
|
2,481
|
Total assets
|
|
5,265
|
5,123
|
Current liabilities
|
|
|
|
Contract liabilities
|
16.2
|
(600)
|
(663)
|
Trade and other
payables
|
18
|
(1,734)
|
(1,595)
|
Provisions
|
19
|
(216)
|
(204)
|
Borrowings
|
- non-recourse
loans
|
20.3
|
(9)
|
(30)
|
|
- other
|
20.3
|
(104)
|
(173)
|
Lease liabilities
|
|
(50)
|
(49)
|
Current tax payable
|
|
(6)
|
(8)
|
|
|
(2,719)
|
(2,722)
|
Non-current liabilities
|
|
|
|
Contract liabilities
|
16.2
|
(2)
|
(2)
|
Trade and other
payables
|
18
|
(122)
|
(141)
|
Provisions
|
19
|
(201)
|
(197)
|
Borrowings
|
- non-recourse
loans
|
20.3
|
(561)
|
(231)
|
|
- other
|
20.3
|
(162)
|
(172)
|
Lease liabilities
|
|
(93)
|
(83)
|
Retirement benefit
liabilities
|
21
|
(35)
|
(39)
|
Deferred tax
liabilities
|
|
(160)
|
(152)
|
Derivative financial
instruments
|
|
(2)
|
(1)
|
|
|
(1,338)
|
(1,018)
|
Total liabilities
|
|
(4,057)
|
(3,740)
|
Net assets
|
|
1,208
|
1,383
|
Equity
|
|
|
|
Called-up share capital
|
|
272
|
294
|
Share premium account
|
|
176
|
176
|
Capital redemption
reserve
|
|
74
|
52
|
Share of joint ventures' and
associates' reserves
|
|
(27)
|
(20)
|
Other reserves
|
|
157
|
170
|
Retained profits
|
|
546
|
706
|
Equity attributable to equity holders of the
parent
|
|
1,198
|
1,378
|
Non-controlling
interests
|
|
10
|
5
|
Total equity
|
|
1,208
|
1,383
|
|
|
|
|
|
|
|
Group Statement of Cash Flows
For the year ended 31
December 2023
|
Notes
|
2023
£m
|
2022
£m
|
Cash flows from operating activities
|
|
|
|
Cash from operations
|
|
293
|
185
|
Income taxes paid
|
|
(8)
|
(17)
|
Net cash from operating activities
|
|
285
|
168
|
Cash flows from investing activities
|
|
|
|
Dividends received
from:
|
|
|
|
|
- joint ventures and associates -
infrastructure investments
|
|
24
|
114
|
|
- joint ventures and associates -
other
|
|
36
|
34
|
|
- other investments
|
|
3
|
4
|
Interest received - infrastructure
investments - joint ventures
|
|
7
|
10
|
Interest received
subsidiaries
|
- infrastructure
investments
|
|
4
|
7
|
|
- other
|
|
33
|
-
|
Acquisition of
businesses
|
23.1
|
-
|
(3)
|
Purchases of:
|
- intangible assets -
infrastructure investments
|
|
(30)
|
(1)
|
|
- property, plant and
equipment
|
|
(66)
|
(31)
|
|
- investment properties
|
|
(42)
|
-
|
|
- other investments
|
|
(2)
|
(7)
|
Investments in and long-term loans
to joint ventures and associates
|
|
(14)
|
(29)
|
Return of equity from joint
ventures and associates
|
|
4
|
34
|
PPP financial assets cash
expenditure
|
|
(2)
|
(2)
|
PPP financial assets cash
receipts
|
|
6
|
5
|
Disposals of:
|
- investments in joint ventures -
infrastructure investments
|
|
56
|
-
|
|
- investments in joint ventures -
other
|
|
-
|
1
|
|
- property, plant and equipment -
other
|
|
4
|
8
|
|
- other investments
|
|
12
|
2
|
Net cash from investing activities
|
|
33
|
146
|
Cash flows used in financing activities
|
|
|
|
Purchase of ordinary
shares
|
|
(18)
|
(25)
|
Purchase of treasury
shares
|
|
(151)
|
(151)
|
Proceeds from new loans relating
to:
|
- infrastructure investments
assets
|
20.4
|
336
|
8
|
|
- other
|
20.4
|
28
|
130
|
Repayments of loans relating
to:
|
- infrastructure investments
assets
|
20.4
|
(8)
|
(7)
|
|
- other
|
20.4
|
(197)
|
-
|
Repayment of lease
liabilities
|
|
(57)
|
(52)
|
Ordinary dividends paid
|
12
|
(58)
|
(58)
|
Other dividends paid -
non-controlling interests
|
|
-
|
(1)
|
Capital contribution -
non-controlling interests
|
|
8
|
-
|
Interest paid - infrastructure
investments
|
|
(11)
|
(9)
|
Interest paid - other
|
|
(30)
|
(24)
|
Net cash used in financing activities
|
|
(158)
|
(189)
|
Net increase in cash and cash equivalents
|
|
160
|
125
|
Effects of exchange rate
changes
|
|
(29)
|
55
|
Cash and cash equivalents at
beginning of year
|
|
1,179
|
999
|
Cash and cash equivalents at end of year
|
20.2
|
1,310
|
1,179
|
|
|
|
|
|
|
|
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 12
March 2024, does not constitute the Company's statutory accounts
for the years ended 31 December 2023 or 2022, but is derived from
those accounts. Statutory accounts for 2022 have been delivered to
the Registrar of Companies and those for 2023 will be delivered
following the Company's Annual General Meeting. The auditor has
reported on the 2023 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 2024.
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 96 to 103 of
the Annual Report and Accounts 2023.
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 2023, 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 £16.5bn at 31 December 2023 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 2023, the Group's
only debt, other than non-recourse borrowings ring-fenced within
certain concession companies, comprised US private placement (USPP)
notes. Of the USPP notes issued in 2013, US$209m matured in March
2023 and the remaining US$50m will mature in March 2025. The Group
raised US$158m in June 2022 through the issue of new USPP notes
which will mature in tranches in 2027, 2029 and 2032. In December
2022, the Group secured a new £30m bilateral committed facility
which was undrawn at 31 December 2023 and expires in December 2024;
the Group retains an option to extend the maturity of the facility
to December 2027. In March 2023, the funds raised through the new
USPP notes issuance and the new bilateral committed facility were
utilised towards repayment of the US$209m USPP notes. The US$36m
drawn under the bilateral committed facility was repaid in
September 2023.
The Group's £475m committed
sustainability linked bank facility which was signed in June 2023,
remained undrawn at 31 December 2023 and remains fully available to
the Group until June 2027. At the first anniversary of the facility
(June 2024), the Group has an option to extend the maturity of the
facility to June 2028, with the consent of the lending
banks.
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 2023:
· IFRS 17 Insurance Contracts
· Amendments to the following standards:
o IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting Policies
o IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors: Definition of Accounting Estimates
o IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
o IAS 12 Incomes Taxes: International Tax Reform - Pillar Two
Model Rules
o IFRS 17 Insurance Contracts: Initial Application of IFRS 17
and IFRS 9 - Comparative Information
These new and 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 2023:
· Amendments to the following standards:
o IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current
o IAS 1 Presentation of Financial Statements: Non-current
Liabilities with Covenants
o IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements
o IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack
of Exchangeability
o IFRS 16 Leases: Lease Liability in a Sale and
Leaseback
The Directors do not expect the
standards above 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 2.27
of the Annual Report and Accounts 2023.
4
Exchange rates
The following key exchange rates
were applied in the financial statements.
Average rates
£1 buys
|
2023
|
2022
|
Change
|
US$
|
1.24
|
1.24
|
-
|
HK$
|
9.73
|
9.72
|
0.1%
|
Closing rates
£1 buys
|
2023
|
2022
|
Change
|
US$
|
1.27
|
1.20
|
5.8%
|
HK$
|
9.95
|
9.39
|
6.0%
|
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
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
Income statement - performance by activity
|
Construction
Services
|
Support
Services
|
Infrastructure
Investments
|
Corporate
activities
|
Total
|
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£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
operations1
|
156
|
80
|
31
|
(39)
|
228
|
Non-underlying items:
|
|
|
|
|
|
-
provision recognised for rectification works to be carried out on a
development in London
|
(12)
|
-
|
-
|
-
|
(12)
|
-
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).
Income statement - performance by activity
|
Construction
Services
|
Support
Services
|
Infrastructure
Investments
|
Corporate
activities
|
Total
|
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
Revenue including share of joint
ventures and associates
|
7,482
|
989
|
460
|
-
|
8,931
|
Share of revenue of joint ventures
and associates
|
(1,073)
|
(1)
|
(228)
|
-
|
(1,302)
|
Group revenue
|
6,409
|
988
|
232
|
-
|
7,629
|
Group operating
profit/(loss)1
|
129
|
83
|
(4)
|
(34)
|
174
|
Share of results of joint ventures
and associates
|
20
|
-
|
85
|
-
|
105
|
Profit/(loss) from
operations1
|
149
|
83
|
81
|
(34)
|
279
|
Non-underlying items:
|
|
|
|
|
|
-
amortisation of acquired intangible assets
|
(1)
|
-
|
(5)
|
-
|
(6)
|
- other
non-underlying items
|
2
|
-
|
-
|
-
|
2
|
|
1
|
-
|
(5)
|
-
|
(4)
|
Profit/(loss) from
operations
|
150
|
83
|
76
|
(34)
|
275
|
Investment income
|
|
|
|
|
50
|
Finance costs
|
|
|
|
|
(38)
|
Profit before taxation
|
|
|
|
|
287
|
1 Before non-underlying items (Note 9).
5
Segment analysis continued
5.1 Total Group continued
Assets and liabilities by activity
|
Construction
Services
|
Support
Services
|
Infrastructure
Investments
|
Corporate
activities
|
Total
|
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£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.
Assets and liabilities by activity
|
Construction
Services
|
Support
Services
|
Infrastructure
Investments
|
Corporate
activities
|
Total
|
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
Contract assets
|
209
|
62
|
29
|
-
|
300
|
Contract liabilities -
current
|
(550)
|
(112)
|
(1)
|
-
|
(663)
|
Inventories
|
50
|
32
|
32
|
-
|
114
|
Trade and other receivables -
current
|
730
|
91
|
37
|
23
|
881
|
Trade and other payables -
current
|
(1,374)
|
(171)
|
(44)
|
(6)
|
(1,595)
|
Provisions - current
|
(179)
|
(3)
|
(8)
|
(14)
|
(204)
|
Working capital*
|
(1,114)
|
(101)
|
45
|
3
|
(1,167)
|
Total assets
|
2,342
|
443
|
940
|
1,398
|
5,123
|
Total liabilities
|
(2,421)
|
(378)
|
(347)
|
(594)
|
(3,740)
|
Net assets
|
(79)
|
65
|
593
|
804
|
1,383
|
* Includes non-operating items and current working
capital.
5
Segment analysis continued
5.1 Total Group continued
Other information
|
Construction
Services
|
Support
Services
|
Infrastructure
Investments
|
Corporate
activities
|
Total
|
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
Capital expenditure on property,
plant and equipment
|
8
|
47
|
-
|
11
|
66
|
Capital expenditure on intangible
assets (Note 14)
|
-
|
-
|
30
|
-
|
30
|
Depreciation
|
28
|
48
|
2
|
9
|
87
|
Gain on disposals of interests in
investments (Note 23.2)
|
-
|
-
|
24
|
-
|
24
|
Gain on disposals of interests in
investments within joint ventures and associates (Note
23.2)
|
-
|
-
|
2
|
-
|
2
|
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
|
Capital expenditure on property,
plant and equipment
|
13
|
15
|
-
|
3
|
31
|
|
Capital expenditure on intangible
assets (Note 14)
|
-
|
-
|
1
|
-
|
1
|
|
Depreciation
|
30
|
41
|
2
|
10
|
83
|
|
Gain on disposals of interests in
investments within joint ventures and associates
|
-
|
-
|
70
|
-
|
70
|
|
|
Performance by geographic
destination
|
United
Kingdom
|
United
States
|
Rest of
world
|
Total
|
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£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
|
|
|
|
|
|
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
Revenue including share of joint
ventures and associates
|
3,894
|
3,954
|
1,083
|
8,931
|
Share of revenue of joint ventures
and associates
|
(98)
|
(130)
|
(1,074)
|
(1,302)
|
Group revenue
|
3,796
|
3,824
|
9
|
7,629
|
|
|
|
|
|
|
|
|
|
5.2 Infrastructure Investments
Underlying profit/(loss) from
operations1
|
Group
2023
£m
|
Share of
joint
ventures
and
associates
(Note
15)+
2023
£m
|
Total
2023
£m
|
Group
2022
£m
|
Share of
joint
ventures
and
associates
(Note
15)+
2022
£m
|
Total
2022
£m
|
UK^
|
(1)
|
3
|
2
|
3
|
1
|
4
|
North America
|
7
|
12
|
19
|
18
|
14
|
32
|
Gain on disposals of interests in
investments
|
24
|
2
|
26
|
-
|
70
|
70
|
|
30
|
17
|
47
|
21
|
85
|
106
|
Bidding costs and
overheads
|
(16)
|
-
|
(16)
|
(25)
|
-
|
(25)
|
|
14
|
17
|
31
|
(4)
|
85
|
81
|
+ 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
24 to 60 months for large-scale
complex construction
|
The Group provides construction
services for three main types of infrastructure assets: highways,
railways and other large-scale infrastructure 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 normally
fixed-price and contract lengths can vary from 12 to 36 months, and
up to 20 years for offshore wind farm maintenance contracts. 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 2023
|
|
|
|
|
|
Revenue by primary geographical markets
|
|
United
Kingdom
£m
|
United
States
£m
|
Rest of
world
£m
|
Total
£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
Services
|
Revenue including share of joint
ventures and associates
|
1,003
|
-
|
3
|
1,006
|
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
|
Revenue including share of joint ventures and
associates
|
4,192
|
4,035
|
1,368
|
9,595
|
Group revenue
|
|
4,091
|
3,897
|
5
|
7,993
|
|
|
|
|
|
|
|
Revenue by types of assets serviced
|
Buildings
£m
|
Infrastructure
£m
|
Utilities
£m
|
Other
£m
|
Total
£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
Services
|
Revenue including share of joint
ventures and associates
|
9
|
661
|
326
|
10
|
1,006
|
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
|
Revenue including share of joint ventures and
associates
|
4,309
|
4,249
|
935
|
102
|
9,595
|
Group revenue
|
3,582
|
3,402
|
907
|
102
|
7,993
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
Construction
Services
£m
|
Support
Services
£m
|
Infrastructure
Investments
£m
|
Total
£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.
6
Revenue continued
For the year ended 31 December 2022
|
|
|
|
|
|
Revenue by primary geographical markets
|
|
United
Kingdom
£m
|
United
States
£m
|
Rest
of
world
£m
|
Total
£m
|
Construction Services
|
Revenue including share of joint
ventures and associates
|
2,761
|
3,650
|
1,071
|
7,482
|
Group revenue
|
|
2,761
|
3,645
|
3
|
6,409
|
Support
Services
|
Revenue including share of joint
ventures and associates
|
982
|
-
|
7
|
989
|
Group revenue
|
|
982
|
-
|
6
|
988
|
Infrastructure
Investments
|
Revenue including share of joint
ventures and associates
|
151
|
304
|
5
|
460
|
Group revenue
|
|
53
|
179
|
-
|
232
|
Total
revenue
|
Revenue including share of joint ventures and
associates
|
3,894
|
3,954
|
1,083
|
8,931
|
Group revenue
|
|
3,796
|
3,824
|
9
|
7,629
|
|
|
|
|
|
|
|
Revenue by types of assets serviced
|
Buildings
£m
|
Infrastructure
£m
|
Utilities
£m
|
Other
£m
|
Total
£m
|
Construction Services
|
Revenue including share of joint
ventures and associates
|
3,878
|
2,960
|
639
|
5
|
7,482
|
Group revenue
|
3,387
|
2,401
|
616
|
5
|
6,409
|
Support
Services
|
Revenue including share of joint
ventures and associates
|
5
|
625
|
349
|
10
|
989
|
Group revenue
|
5
|
625
|
348
|
10
|
988
|
Infrastructure
Investments
|
Revenue including share of joint
ventures and associates
|
291+
|
154
|
15
|
-
|
460
|
Group revenue
|
229+
|
3
|
-
|
-
|
232
|
Total
revenue
|
Revenue including share of joint ventures and
associates
|
4,174
|
3,739
|
1,003
|
15
|
8,931
|
Group revenue
|
3,621
|
3,029
|
964
|
15
|
7,629
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
Construction
Services
£m
|
Support
Services
£m
|
Infrastructure
Investments
£m
|
Total
£m
|
Over time
|
|
7,475
|
984
|
430
|
8,889
|
At a point in time
|
|
7
|
5
|
30
|
42
|
Revenue including share of joint ventures and
associates
|
7,482
|
989
|
460
|
8,931
|
Over time
|
|
6,402
|
983
|
202
|
7,587
|
At a point in time
|
|
7
|
5
|
30
|
42
|
Group revenue
|
|
6,409
|
988
|
232
|
7,629
|
6.2 Disaggregation of revenue continued
+ Includes rental income of £49m including share of joint
ventures and associates or £16m excluding share of joint ventures
and associates.
7
Investment income
|
2023
£m
|
2022
£m
|
Subordinated debt interest
receivable
|
34
|
27
|
Interest receivable on PPP
financial assets
|
2
|
2
|
Fair value gain on investment
asset
|
-
|
6
|
Interest received on bank
deposits
|
33
|
8
|
Other interest receivable and
similar income
|
-
|
2
|
Impairment reversal of joint
ventures and associates - accrued interest
|
1
|
-
|
Net finance income on pension
scheme assets and obligations (Note 21)
|
12
|
5
|
|
82
|
50
|
8
Finance costs
|
2023
£m
|
2022
£m
|
Non-recourse
borrowings
|
- bank loans and
overdrafts
|
11
|
9
|
US private placement
|
- finance cost
|
12
|
15
|
Interest on lease
liabilities
|
|
6
|
6
|
Fair value loss on investment
asset
|
1
|
-
|
Other interest payable
|
- committed
facilities
|
3
|
2
|
|
- letter of credit
fees
|
2
|
2
|
|
- other finance
charges
|
5
|
2
|
Impairment of joint ventures and
associates
|
- loans
|
9
|
-
|
|
- accrued interest
|
-
|
2
|
|
49
|
38
|
|
|
|
|
|
The net impairment of loans to
joint ventures and associates and accrued interest receivable of
£8m (2022: £2m) relates to expected credit loss assessments
performed. All of these impairments relate to subordinated debt and
accrued interest receivable from joint ventures and associates held
within the Infrastructure Investments segment.
9
Non-underlying items
|
2023
£m
|
2022
£m
|
Items (charged against)/credited to profit
|
|
|
9.1 Amortisation of acquired
intangible assets
|
(5)
|
(6)
|
9.2 Other non-underlying
items:
|
|
|
|
- provision recognised for
rectification works to be carried out on a development in
London
|
(12)
|
-
|
|
- release of indemnity provisions
relating to sale of Heery International Inc.
|
-
|
2
|
Total other non-underlying
items
|
(12)
|
2
|
Charged against profit before taxation
|
(17)
|
(4)
|
9.3 Tax
credit/(charge):
|
|
|
|
- tax on rectification works
provision
|
3
|
-
|
|
- tax on other items
above
|
3
|
(1)
|
|
- impact of tax rate change on
deferred tax assets previously recognised through
non-underlying
|
-
|
2
|
Total tax credit
|
6
|
1
|
Charged against profit for the year
|
(11)
|
(3)
|
|
|
|
|
|
9.1 The amortisation of
acquired intangible assets comprises: customer contracts £4m (2022:
£5m); and customer relationships £1m (2022: £1m).
The charge was recognised in the
following segments: Construction Service £1m (2022: £1m); and
Infrastructure Investments £4m (2022: £5m).
9.2 In 2021, the Group
recognised a provision of £42m in relation to rectification works
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. The provision was
initially calculated in line with a methodology based on an
independent expert's assessment of the rectification at that time
and included an estimate of costs associated with any potential
consequential disruption to the development as a result of these
rectification works. Rectification works are expected to complete
in 2025. The most recent assessment carried out in 2023 resulted in
a £12m increase in the estimated cost of rectification.
The Group initially presented the
provision recognised in 2021 in non-underlying due to its size. In
line with this presentation, the Group continues to present this
within non-underlying. The provision does not include potential
recoveries from third parties.
This charge was recognised in the
Construction Services segment.
9.3.1 As explained in Note
10.2.1, a non-underlying charge of £12m was recognised in relation
to the rectification works to be carried out on a development in
London. This expense has given rise to a tax credit of
£3m.
9.3.2 The remaining
non-underlying items recognised in the Group's operating profit
gave rise to a tax credit of £3m which was recognised mainly on the
amortisation of acquired intangible assets (2022: £1m
charge).
10 Income taxes
|
Underlying
Items1
2023
£m
|
Non-underlying
items
(Note 9)
2023
£m
|
Total
2023
£m
|
Total
2022
£m
|
Total UK tax
|
38
|
(3)
|
35
|
(35)
|
Total non-UK tax
|
18
|
(3)
|
15
|
35
|
Total tax charge/(credit)x
|
56
|
(6)
|
50
|
-
|
UK current tax
|
|
|
|
|
- current tax
|
7
|
(3)
|
4
|
2
|
|
7
|
(3)
|
4
|
2
|
Non-UK current tax
|
|
|
|
|
- current tax
|
2
|
(1)
|
1
|
18
|
- adjustments in respect of
previous periods
|
(3)
|
-
|
(3)
|
(3)
|
|
(1)
|
(1)
|
(2)
|
15
|
Total current tax
|
6
|
(4)
|
2
|
17
|
UK deferred tax
|
|
|
|
|
- origination and reversal of
temporary differences
|
30
|
-
|
30
|
(22)
|
- UK corporation tax rate
change
|
2
|
-
|
2
|
(13)
|
- adjustments in respect of
previous periods
|
(1)
|
-
|
(1)
|
(2)
|
|
31
|
-
|
31
|
(37)
|
Non-UK deferred tax
|
|
|
|
|
- origination and reversal of
temporary differences
|
17
|
(1)
|
16
|
17
|
- adjustments in respect of
previous periods
|
2
|
(1)
|
1
|
3
|
|
19
|
(2)
|
17
|
20
|
Total deferred tax
|
50
|
(2)
|
48
|
(17)
|
Total tax charge/(credit)x
|
56
|
(6)
|
50
|
-
|
x Excluding joint ventures and associates.
1 Before non-underlying items (Note 9).
The Group has recognised a £6m tax
credit (2022: £1m) 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 £43m has been credited (2022: £44m) directly to
other comprehensive income, comprising: a tax credit of £48m for
subsidiaries (2022: £19m); and a tax charge in respect of joint
ventures and associates of £5m (2022: £25m credit). A tax charge of
£nil (2022: £2m credit) has been recognised directly in equity
relating to share-based payments, comprising a current tax credit
of £2m (2022: £nil) and a deferred tax charge of £2m (2022: £2m
credit).
11 Earnings per share
|
2023
|
|
2022
|
Earnings
|
Basic
£m
|
Diluted
£m
|
Basic
£m
|
Diluted
£m
|
Earnings
|
197
|
197
|
288
|
288
|
Amortisation of acquired
intangible assets - including tax credit of £3m (2022: £1m charge)
|
2
|
2
|
7
|
7
|
Other non-underlying items
- including tax credit of £3m (2022: £2m)
|
9
|
9
|
(4)
|
(4)
|
Underlying earnings
|
208
|
208
|
291
|
291
|
|
Basic
m
|
Diluted
m
|
|
Basic
m
|
Diluted
m
|
Weighted average number of
ordinary shares
|
558
|
566
|
612
|
620
|
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 8m (2022: 8m).
Earnings per share
|
Basic
pence
|
Diluted
Pence
|
|
Basic
pence
|
Diluted
Pence
|
Earnings per ordinary
share
|
35.3
|
34.8
|
46.9
|
46.3
|
Amortisation of acquired
intangible assets after tax
|
0.4
|
0.4
|
1.2
|
1.1
|
Other non-underlying items after
tax
|
1.6
|
1.6
|
(0.6)
|
(0.6)
|
Underlying earnings per ordinary share
|
37.3
|
36.8
|
47.5
|
46.8
|
12 Dividends
|
2023
|
|
2022
|
|
Per share
pence
|
Amount
£m
|
Per
share
pence
|
Amount
£m
|
Proposed dividends for the year
|
|
|
|
|
Interim - current year
|
3.5
|
19
|
3.5
|
21
|
Final - current year
|
8.0
|
43&
|
7.0
|
40
|
|
11.5
|
62
|
10.5
|
61
|
Recognised dividends for the year
|
|
|
|
|
Final - prior year
|
|
39
|
|
37
|
Interim - current year
|
|
19
|
|
21
|
|
|
58
|
|
58
|
&
Amount dependent on number of shares on the
register on 17 May 2024.
Subject to approval at the Annual
General Meeting on 9 May 2024, the final 2023 dividend will be paid
on 3 July 2024 to holders on the register on 17 May 2024 by direct
credit or, where no mandate has been given, by cheque posted by 3
July 2024. The ordinary shares will be quoted ex-dividend on 16 May
2024. The last date for Dividend Reinvestment Plan (DRIP) elections
will be 12 June 2024.
13 Intangible assets - goodwill
|
Cost
£m
|
Accumulated
impairment
losses
£m
|
Carrying
amount
£m
|
At 1 January 2023
|
1,106
|
(230)
|
876
|
Currency translation
differences
|
(37)
|
6
|
(31)
|
At 31 December 2023
|
1,069
|
(224)
|
845
|
|
2023
|
|
2022
|
Carrying amounts of goodwill by cash-generating
unit
|
£m
|
Pre-tax
discount
rate
%
|
|
£m
|
Pre-tax
discount
rate
%
|
UK Regional and Engineering
Services
|
248
|
10.7
|
|
248
|
9.1
|
Balfour Beatty Construction Group
Inc
|
437
|
11.1
|
|
464
|
9.3
|
Rail UK
|
68
|
11.0
|
|
68
|
9.3
|
Balfour Beatty Investments
US
|
52
|
11.3
|
|
55
|
11.1
|
Other
|
40
|
11.0
|
|
41
|
9.3
|
Group total
|
845
|
|
|
876
|
|
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 2024 to 2026. 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
|
2023
|
|
2022
|
|
Inflation
rate
%
|
Real growth
rate
%
|
Nominal long-term growth
rate applied
%
|
|
Inflation rate
%
|
Real
growth
rate
%
|
Nominal
long-term growth
rate
applied
%
|
UK Regional and Engineering
Services
|
2.8
|
1.1
|
3.9
|
|
2.3
|
0.8
|
3.1
|
Balfour Beatty Construction Group
Inc
|
2.2
|
1.7
|
3.9
|
|
2.2
|
0.7
|
2.9
|
Rail UK
|
2.8
|
1.1
|
3.9
|
|
2.3
|
0.8
|
3.1
|
Balfour Beatty Investments
US
|
2.2
|
1.7
|
3.9
|
|
2.2
|
0.7
|
2.9
|
Other
|
2.6
|
1.3
|
3.9
|
|
2.3
|
0.8
|
3.1
|
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
£m
|
Accumulated
amortisation
£m
|
Carrying
amount
£m
|
At 1 January 2023
|
668
|
(376)
|
292
|
Currency translation
differences
|
(18)
|
15
|
(3)
|
Additions
|
30
|
-
|
30
|
Fair value movement on loan
associated with Infrastructure Investment intangible
asset
|
(19)
|
-
|
(19)
|
Charge for the year
|
-
|
(12)
|
(12)
|
At 31 December 2023
|
661
|
(373)
|
288
|
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
|
2023
|
|
|
|
Infrastructure
Investments
|
|
|
Construction
Services
£m
|
Support
Services
£m
|
UK^
£m
|
North
America
£m
|
Total
£m
|
Total
£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
intangible
|
-
|
-
|
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 -
non-recourse
|
-
|
-
|
(36)
|
-
|
(36)
|
(36)
|
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.
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
|
2022
|
|
|
|
Infrastructure Investments
|
|
|
Construction
Services
£m
|
Support
Services
£m
|
UK^
£m
|
North
America
£m
|
Total
£m
|
Total
£m
|
Income statement
|
|
|
|
|
|
|
Revenue
|
1,073
|
1
|
99
|
129
|
228
|
1,302
|
Operating profit excluding gain on disposals of interests in
investments
|
24
|
-
|
(3)
|
21
|
18
|
42
|
Gain on disposals of interests in
investments
|
-
|
-
|
-
|
70
|
70
|
70
|
Operating profit
|
24
|
-
|
(3)
|
91
|
88
|
112
|
Investment income
|
3
|
-
|
72
|
13
|
85
|
88
|
Finance costs
|
(1)
|
-
|
(66)
|
(20)
|
(86)
|
(87)
|
Profit before taxation
|
26
|
-
|
3
|
84
|
87
|
113
|
Taxation
|
(6)
|
-
|
(2)
|
-
|
(2)
|
(8)
|
Profit after taxation
|
20
|
-
|
1
|
84
|
85
|
105
|
Balance sheet
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Intangible assets:
|
|
|
|
|
|
|
- Infrastructure Investments
intangible
|
-
|
-
|
40
|
-
|
40
|
40
|
- other
|
-
|
-
|
13
|
-
|
13
|
13
|
Property, plant and
equipment
|
33
|
-
|
-
|
-
|
-
|
33
|
Investment properties
|
-
|
-
|
-
|
257
|
257
|
257
|
Investments in joint ventures and
associates
|
5
|
-
|
-
|
-
|
-
|
5
|
Money market funds
|
-
|
-
|
-
|
26
|
26
|
26
|
PPP financial assets
|
-
|
-
|
984
|
260
|
1,244
|
1,244
|
Military housing
projects
|
-
|
-
|
-
|
119
|
119
|
119
|
Other non-current
assets
|
106
|
-
|
27
|
13
|
40
|
146
|
Current assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
385
|
-
|
150
|
26
|
176
|
561
|
Other current assets
|
275
|
-
|
46
|
5
|
51
|
326
|
Total assets
|
804
|
-
|
1,260
|
706
|
1,966
|
2,770
|
Current liabilities
|
|
|
|
|
|
|
Borrowings -
non-recourse
|
(89)
|
-
|
(37)
|
-
|
(37)
|
(126)
|
Other current
liabilities
|
(579)
|
-
|
(124)
|
(12)
|
(136)
|
(715)
|
Non-current liabilities
|
|
|
|
|
|
|
Borrowings -
non-recourse
|
-
|
-
|
(885)
|
(502)
|
(1,387)
|
(1,387)
|
Other non-current
liabilities
|
(80)
|
-
|
(180)
|
(5)
|
(185)
|
(265)
|
Total liabilities
|
(748)
|
-
|
(1,226)
|
(519)
|
(1,745)
|
(2,493)
|
Net assets
|
56
|
-
|
34
|
187
|
221
|
277
|
Goodwill
|
33
|
-
|
-
|
-
|
-
|
33
|
Reclassify negative investment to
provisions
|
10
|
-
|
-
|
-
|
-
|
10
|
Loans to joint ventures and
associates
|
-
|
-
|
106
|
-
|
106
|
106
|
Total investment in joint ventures and
associates
|
99
|
-
|
140
|
187
|
327
|
426
|
^ Including Ireland.
16 Contract balances
16.1 Contract assets
|
£m
|
At 1 January 2022
|
214
|
Currency translation
differences
|
6
|
Transfers from contract assets
recognised at the beginning of the year to receivables
|
(196)
|
Increase related to services
provided in the year
|
304
|
Reclassified from contract
provisions (Note 19)
|
(1)
|
Reclassified from contract
liabilities (Note 16.2)
|
(21)
|
Impairments on contract assets
recognised at the beginning of the year
|
(6)
|
At 31 December 2022
|
300
|
Currency translation
differences
|
(4)
|
Transfers from contract assets
recognised at the beginning of the year to receivables
|
(241)
|
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
|
16.2 Contract liabilities
|
£m
|
At 1 January 2022
|
(678)
|
Currency translation
differences
|
(39)
|
Revenue recognised against
contract liabilities at the beginning of the year
|
578
|
Increase due to cash received,
excluding amounts recognised as revenue during the year
|
(547)
|
Reclassified to contract assets
(Note 16.1)
|
21
|
At 31 December 2022
|
(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 the year
|
(528)
|
Reclassified to contract assets
(Note 16.1)
|
11
|
At 31 December 2023
|
(602)
|
17 Trade and other receivables
|
2023
£m
|
2022
£m
|
Current
|
|
|
Trade receivables
|
484
|
526
|
Less: provision for impairment of
trade receivables
|
(8)
|
(3)
|
|
476
|
523
|
Due from joint ventures and
associates
|
16
|
16
|
Due from joint operation
partners
|
4
|
6
|
Contract fulfilment
assets
|
19
|
13
|
Contract retentions
receivable
|
227
|
194
|
Accrued income
|
13
|
15
|
Prepayments
|
57
|
56
|
Other receivables
|
82
|
58
|
|
894
|
881
|
Non-current
|
|
|
Due from joint ventures and
associates
|
111
|
86
|
Contract fulfilment
assets
|
40
|
31
|
Contract retentions
receivable
|
150
|
166
|
Other receivables
|
7
|
3
|
|
308
|
286
|
Total trade and other
receivables
|
1,202
|
1,167
|
18 Trade and other payables
|
2023
£m
|
2022
£m
|
Current
|
|
|
Trade and other
payables
|
602
|
605
|
Accruals
|
788
|
741
|
Contract retentions
payable
|
213
|
175
|
VAT, payroll taxes and social
security
|
131
|
74
|
|
1,734
|
1,595
|
Non-current
|
|
|
Accruals
|
9
|
10
|
Contract retentions
payable
|
104
|
122
|
Due to joint ventures and
associates
|
9
|
9
|
|
122
|
141
|
Total trade and other
payables
|
1,856
|
1,736
|
19 Provisions
|
Contract
provisions
£m
|
Employee
provisions
£m
|
Other
provisions
£m
|
Total
£m
|
At 1 January 2022
|
321
|
36
|
22
|
379
|
Currency translation
differences
|
9
|
-
|
1
|
10
|
Reclassified from
accruals
|
-
|
-
|
1
|
1
|
Charged/(credited) to the income
statement:
|
|
|
|
|
- additional provisions
|
134
|
6
|
2
|
142
|
- unused amounts
reversed
|
(48)
|
(2)
|
-
|
(50)
|
Utilised during the year
|
(80)
|
(7)
|
(3)
|
(90)
|
Reclassified to contract assets
(Note 16.1)
|
(1)
|
-
|
-
|
(1)
|
Reclassified negative investment in
Group's investments in joint ventures and associates
|
-
|
-
|
10
|
10
|
At 31 December 2022
|
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
|
20 Notes to the statement of cash flows
20.1 Cash from/(used in) operations
|
Underlying
items1
2023
£m
|
Non-underlying
items
2023
£m
|
Total
2023
£m
|
Total
2022
£m
|
Profit from operations
|
228
|
(17)
|
211
|
275
|
Share of results of joint ventures
and associates
|
(53)
|
-
|
(53)
|
(105)
|
Depreciation of property, plant
and equipment
|
28
|
-
|
28
|
27
|
Depreciation of
right-of-use-assets
|
57
|
-
|
57
|
54
|
Depreciation of investment
properties
|
2
|
-
|
2
|
2
|
Amortisation of other intangible
assets
|
7
|
5
|
12
|
13
|
Amortisation of contract
fulfilment assets
|
15
|
-
|
15
|
15
|
Pension deficit payments,
including regular funding
|
(28)
|
-
|
(28)
|
(43)
|
Movements relating to
equity-settled share-based payments
|
15
|
-
|
15
|
9
|
Gain on disposal of interests in
investments
|
(24)
|
-
|
(24)
|
-
|
Profit on disposal of property,
plant and equipment
|
(2)
|
-
|
(2)
|
(4)
|
Other non-cash items
|
(3)
|
-
|
(3)
|
(4)
|
Operating cash flows before
movements in working capital
|
242
|
(12)
|
230
|
239
|
Decrease/(increase) in operating
working capital
|
|
|
63
|
(54)
|
Inventories
|
|
|
(11)
|
(6)
|
Contract assets
|
|
|
(4)
|
(78)
|
Trade and other
receivables
|
|
|
(73)
|
34
|
Contract liabilities
|
|
|
(44)
|
(59)
|
Trade and other
payables
|
|
|
177
|
57
|
Provisions
|
|
|
18
|
(2)
|
Cash from operations
|
|
|
293
|
185
|
1 Before non-underlying
items (Note 9).
20.2 Cash and cash equivalents
|
2023
£m
|
2022
£m
|
Cash and deposits
|
890
|
828
|
Term deposits
|
218
|
332
|
Cash balances within
infrastructure concessions
|
306
|
19
|
Bank overdrafts
|
(104)
|
-
|
|
1,310
|
1,179
|
20.3 Analysis of net cash/(borrowings)
|
2023
£m
|
2022
£m
|
Cash and cash equivalents
(excluding infrastructure concessions)
|
1,108
|
1,160
|
Bank overdrafts
|
(104)
|
-
|
US private placement
|
(162)
|
(345)
|
Net cash excluding infrastructure
concessions
|
842
|
815
|
Non-recourse infrastructure
concessions project finance loans at
amortised cost with final maturity between 2024 and 2072
|
(570)
|
(261)
|
Infrastructure concessions cash
and cash equivalents
|
306
|
19
|
|
(264)
|
(242)
|
Net cash
|
578
|
573
|
The Company, together with certain
of its UK subsidiaries, operates a notional pooling facility with a
main relationship UK clearing bank where overdraft balances are
offset with cash balances and interest is calculated on a net
basis. During the year ended 31 December 2023, the Group maintained
a net cash position on this pooling facility, so there was no
interest payable to the bank in respect of these bank overdrafts.
Overdraft balances and cash held at this bank have been reported
gross in the Group balance sheet at 31 December 2023 as there was
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 £12m (2022: £3m) 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: £77m (2022: £194m) within construction project bank
accounts which is used for project specific expenditure; £369m
(2022: £253m) in relation to the Group's share of cash held by
joint operations which is used for expenditure within the joint
operation projects; and £306m (2022: £19m) relating to maintenance
and other reserve accounts in Infrastructure Investments
subsidiaries, of which £277m is reserved for the construction of
University of Sussex's West Slope student accommodation
project.
20.4 Analysis of movements in borrowings
|
|
Infrastructure
concessions
non-recourse
project
finance
£m
|
US private
placement
£m
|
Bilateral committed
facility
£m
|
Bank
overdrafts
£m
|
Total
£m
|
At 1 January 2023
|
|
(261)
|
(345)
|
-
|
-
|
(606)
|
Currency translation
differences
|
|
-
|
14
|
-
|
-
|
14
|
Proceeds of loans
|
|
(336)
|
-
|
(28)
|
(104)
|
(468)
|
Repayments of loans
|
|
8
|
169
|
28
|
-
|
205
|
Fair value adjustment to
loan
|
|
19
|
-
|
-
|
-
|
19
|
At 31 December 2023
|
|
(570)
|
(162)
|
-
|
(104)
|
(836)
|
20.4 Analysis of movements in borrowings
continued
In March 2023, the Group repaid
US$209m of US Private Placement (USPP) notes as they fell due. The
repayment was funded from the proceeds of debt issuance arranged in
2022, specifically US$158m of new USPP notes issued in June 2022
(US$35m 6.31% notes maturing in June 2027, US$80m 6.39% notes
maturing in June 2029 and US$43m 6.45% notes maturing in June
2032), and a US$36m drawdown in March 2023 under the £30m bilateral
committed facility. In September 2023, drawings under the £30m
bilateral committed facility were repaid and the facility was
undrawn at 31 December 2023. This facility is on similar terms to
the Group's core facility and has an initial maturity of December
2024, but the Group holds an extension option to extend the expiry
to December 2027. At 31 December 2023 the Group had not triggered
the bilateral committed facility's extension option.
In June 2023 the Group completed
the refinancing of its core £375m revolving credit facility, which
was set to expire in October 2024, replacing it with a new £475m
facility that will expire in June 2027 (the RCF). The RCF has an
extension option for a further year to June 2028, with the
agreement of the lending banks, and its terms and conditions are
materially the same as the prior facility. The RCF is a
Sustainability Linked Loan, under the terms of which the Group is
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 - these areas of performance and the associated metrics are
to be reviewed and updated in 2024. The RCF remained undrawn at 31
December 2023.
At 31 December 2023, £303m was
included within non-recourse borrowings relating to the
construction of the West Slope student accommodation project, of
which £171m relates to external funding obtained from a third party
bank and £132m relates to a loan provided by the University of
Sussex. The funding from the university represents a loan
arrangement which was entered into separately with the university
at the same time as the concession arrangement.
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.
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 2023, the BBPF received distributions of £2m from the SLP
(2022: £2m).
21 Retirement benefit assets and liabilities
continued
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 £19m in 2023 (2022: £35m) and
has agreed to pay deficit contributions to the BBPF of £24m in 2024
and £6m in 2025. The Company and the trustees expect to take
further steps over the coming months to reduce the overall risk in
the scheme and the Company has agreed that additional amounts will
become payable at £2m per month from March 2025 if the BBPF's
performance is materially different from that expected. 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
|
2023
|
2022
|
|
Balfour
Beatty
Pension
Fund
%
|
Railways
Pension
Scheme
%
|
Balfour
Beatty
Pension
Fund
%
|
Railways
Pension
Scheme
%
|
Discount rate
|
4.65
|
4.65
|
4.95
|
4.95
|
Inflation rate
|
- RPI
|
3.15
|
3.15
|
3.35
|
3.35
|
|
- CPI
|
2.60
|
2.75
|
2.75
|
2.90
|
Future increases in pensionable
salary
|
2.60
|
2.75
|
2.75
|
2.90
|
Rate of increase in pensions in
payment (or such other rate as is guaranteed)
|
2.95
|
2.85
|
3.10
|
2.95
|
|
|
|
|
|
|
Number
|
Number
|
Number
|
Number
|
Total number of defined benefit
members
|
25,535
|
2,946
|
26,208
|
2,972
|
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
2023 to reflect the most recent model available, with the Group
setting future improvements in line with the Continuous Mortality
Investigation (CMI) 2022 core projections model.
BBPF life expectancies
|
2023
|
2022
|
|
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
|
21.7
|
23.4
|
Members not yet in receipt of a
pension (current age 50)
|
22.2
|
23.9
|
22.6
|
24.3
|
RPS life expectancies
|
2023
|
2022
|
|
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
|
20.7
|
22.7
|
Members not yet in receipt of a
pension (current age 50)
|
21.6
|
23.6
|
21.6
|
23.7
|
21 Retirement benefit assets and liabilities
continued
Amounts recognised in the Balance Sheet
|
2023
|
2022
|
|
Balfour
Beatty
Pension
Fund
£m
|
Railways
Pension
Scheme
£m
|
Other
schemes^
£m
|
Total
£m
|
Balfour
Beatty
Pension
Fund
£m
|
Railways
Pension
Scheme
£m
|
Other
schemes^
£m
|
Total
£m
|
Present value of
obligations
|
(2,501)
|
(320)
|
(35)
|
(2,856)
|
(2,464)
|
(300)
|
(39)
|
(2,803)
|
Fair value of plan
assets
|
2,602
|
323
|
-
|
2,925
|
2,689
|
337
|
-
|
3,026
|
Assets/(liabilities) in the balance sheet
|
101
|
3
|
(35)
|
69
|
225
|
37
|
(39)
|
223
|
^ Investments in mutual funds of
£19m (2022: £20m) are held to satisfy the Group's deferred
compensation obligations.
The defined benefit obligations
comprise £35m (2022: £39m) arising from wholly unfunded plans and
£2,821m (2022: £2,764m) arising from plans that are wholly or
partly funded.
Movements in the retirement benefit assets and obligations
for the year
|
£m
|
At 1 January 2023
|
223
|
Currency translation
differences
|
2
|
Current service cost
|
(4)
|
Net finance income
|
12
|
Actuarial movements
|
- on obligations from reassessing
the difference between RPI and CPI
|
(4)
|
|
- on obligations from changes to
other financial assumptions
|
(101)
|
|
- on obligations from changes to
demographics
|
16
|
|
- on obligations from experience
losses
|
(2)
|
|
- on assets
|
(106)
|
Contributions from
employer
|
- regular funding
|
3
|
|
- ongoing deficit
funding
|
25
|
Benefits paid
|
5
|
At 31 December 2023
|
69
|
Sensitivity of the Group's retirement benefit obligations at
31 December 2023 to different actuarial
assumptions
|
Sensitivity to increase in
assumption
|
Sensitivity to decrease in
assumption
|
Assumption
|
Percentage
points/years
|
(Decrease)/
increase
in
obligations
%
|
(Decrease)/
increase
in
obligations
£m
|
Percentage
points/years
|
Increase/
(decrease)
in
obligations
%
|
Increase/ (decrease)
in
obligations
£m
|
Discount rate
|
0.5%
|
(5.7)%
|
(160)
|
(0.5)%
|
6.3%
|
177
|
Market expectation of RPI
inflation
|
0.5%
|
4.0%
|
112
|
(0.5)%
|
(3.9)%
|
(111)
|
Salary growth
|
0.5%
|
<0.1%
|
-
|
(0.5)%
|
<(0.1)%
|
-
|
Life expectancy
|
1 year
|
4.0%
|
114
|
(1 year)
|
(4.1)%
|
(117)
|
Sensitivity of the Group's retirement benefit assets at 31
December 2023 to changes in market conditions
|
Percentage
points
|
(Decrease)/
increase
in
assets
%
|
(Decrease)/
increase
in
assets
£m
|
Increase in interest
rates
|
0.5%
|
(5.4)%
|
(158)
|
Increase in market expectation of
RPI inflation
|
0.5%
|
3.9%
|
113
|
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.
21 Retirement benefit assets and liabilities
continued
The BBPF includes a defined
contribution section with 15,512 members at 31 December 2023 (2022:
15,382 members) with £48m (2022: £52m) 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 £58m (2022: £63m).
22 Share capital
During the year ended 31 December
2023, 5.1m (2022: 9.8m) shares were purchased at a cost of £18m
(2022: £25m) 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 2023 the Company commenced the
third phase of its share buyback programme, which completed on 15
December 2023. The Company purchased 43.3m (2022: 52.0m) shares for
a total consideration of £150m (2022: £150m) and held these shares
in treasury with no voting rights. The purchase of these shares,
together with associated fees and stamp duty amounting to £1m
(2022: £1m), utilised £151m (2022: £151m) of the Company's
distributable profits.
On 20 December 2023, the Company
cancelled the 43.3m treasury shares purchased through the 2023
phase of its share buyback programme (2022: 102.3m). This
cancellation resulted in a decrease in called-up share capital in
issue of £22m (2022: £51m) and a corresponding increase in the
capital redemption reserve.
23 Acquisitions and disposals
23.1 Current and prior year acquisitions
There were no material
acquisitions in 2023 or deferred consideration paid during 2023 in
respect of acquisitions completed in earlier years (2022: deferred
consideration £3m).
23.2 Current year disposals
During the year, the Group disposed
of two Infrastructure Investments assets as detailed below. The
gain recognised from the disposal of assets that were held within
joint venture entities of the Group is recognised within the
Group's share of results of joint ventures and
associates.
Notes
|
Disposal date
|
Entity/asset
|
Structure of sale
|
Percentage disposed %
|
Cash
consideration
£m
|
Net
assets
disposed
£m
|
Amount
recycled from reserves £m
|
Underlying
gain
£m
|
23.2.1
|
28 September 2023
|
Moretti
Apartments^
|
Asset sale
|
n/a
|
5
|
(3)
|
-
|
2
|
23.2.2
|
8 November 2023
|
Gloucester Waste
|
Equity
interest sale
|
49.5
|
56
|
(35)
|
3
|
24
|
|
|
|
|
|
61
|
(38)
|
3
|
26
|
^ Disposal of asset within a joint venture entity.
23.2.1 On 28 September 2023,
the Group disposed of its Moretti Apartments multifamily property
asset located in Homewood, Alabama, and received total cash
consideration of £5m. The asset disposal resulted in an underlying
gain of £2m being recognised in the Group's share of joint ventures
and associates.
23.2.2 On 8 November 2023, the
Group disposed of its entire 49.5% interest in UBB Waste
(Gloucestershire) Holdings Limited (Gloucester Waste) for a cash
consideration of £56m. The disposal included the Group's share of
joint venture net assets of £31m and £4m of accrued interest
receivable and resulted in a net gain of £24m being recognised in
underlying operating profit, including a loss of £6m in respect of
PPP financial asset reserves and a gain of £9m in respect of
hedging reserves recycled to the income statement
on disposal.
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. The Group takes legal advice as to the
likelihood of success of claims and actions and no provision is
made where the Directors consider, based on that advice, 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 2023. 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 £445m (2022: £447m).
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.
|
2023
£m
|
2022
£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 2023, 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 2022.
27 Events after the reporting date
In the period from 1 January 2024
to 11 March 2024 (the latest practicable date prior to the date of
this announcement) the Company purchased 8.2m ordinary shares,
which are held in treasury with no voting rights, for a total
consideration of £28m (including stamp duty and fees).
There were no other material post
balance sheet events arising after the reporting date.