Interim Results

Balfour Beatty PLC 15 August 2001 15 August 2001 BALFOUR BEATTY PLC INTERIM RESULTS FOR THE HALF-YEAR ENDING 30 JUNE 2001 41% INCREASE IN EARNINGS - ORDER BOOK APPROACHING £4 BILLION Balfour Beatty plc today announces its half-year results for the period ended 30 June 2001. Highlights - Pre-tax profits* up by 17% at £41 million (2000: £35 million) - Earnings per share* up by 41% at 5.5p (2000: 3.9p) - Dividend increased to 2.2p (2000: 2.0p) - Order book up by 20% from year-end at £3.9 billion - Net cash of £63 million - Further excellent progress in the building sector - Rail profits recovering In their statement to shareholders, Chairman, Viscount Weir, and Chief Executive, Mike Welton, said: 'We remain confident that we will deliver results for 2001 which will show significant improvement over last year. Our order book, at over £3.9 billion, is at record levels, with an increasing proportion in long-term contracts with more predictable margins struck with relationship customers. 'We have established positions in a number of markets where future growth is predicted. These are, most notably, transportation in the USA, the worldwide rail market and the UK infrastructure market, including, particularly, that segment which is wholly or partly privately financed. 'We are a soundly-based business with a number of key strengths which, taken together, differentiate us clearly from our competition. We will continue to develop this business mix with carefully targeted acquisitions as they become available.' * Before exceptional items and goodwill amortisation Financial Highlights First Half First Half 2001 2000 Turnover 1,436m 1,215m Operating profit*+ 59m 48m Profit before tax* 41m 35m Net cash 63m 135m Shareholders' funds 163m 146m Order book 3.9bn 2.8bn Earnings per share* 5.5p 3.9p Dividend per ordinary share 2.2p 2.0p * Before exceptional items and goodwill amortisation + Continuing operations OOOOOOOOOOOO There will be a presentation for analysts and investors at ABN AMRO, 250 Bishopsgate, London, EC2 at 10.00 am. Enquiries to:- Mike Welton, Chief Executive Ian Tyler, Finance Director Tim Sharp, Head of Corporate Communications Tel: 020 7216 6800 Webcast analyst conference from pm at www.balfourbeatty.com Media can download high resolution images from NewsCast at www.newscast.co.uk from 12 noon. OOOOOOOOOOOO Balfour Beatty's business is the creation and care of essential assets. Its aim is to create shareholder value by providing engineering, construction and service skills to customers for whom infrastructure quality, efficiency and reliability are critical. RESULTS FOR THE HALF-YEAR TO 30 JUNE 2001 Balfour Beatty plc, the international engineering, construction and services group, today announced pre-tax profits before exceptional items and goodwill amortisation for the six months to 30 June 2001 of £41 million (2000: £35 million). Operating profits before exceptionals and goodwill amortisation attributable to the group's continuing businesses increased by 23% to £59 million (2000: £ 48 million). Turnover rose by 18% to £1.44 billion, reflecting both acquisition and organic growth. The group's order book, which stood at the record level of £3.3 billion at the end of 2000, had risen by 20% to over £3.9 billion by the end of June. Pre-exceptional earnings per share, before goodwill, at 5.5p were up by 41% on 2000 (3.9p). The interim dividend is increased to 2.2p per ordinary share (2000: 2.0p). Half-year net cash stood at £63 million (2000: £135 million), reflecting a strong operating cash performance. The comparable figure for 2000 included the proceeds of the sale of Brand-Rex, but predated the cost of acquiring the rail electrification and power systems businesses of Adtranz. Shortly after the half year, agreement was reached to sell the group's 30% interest in the Dubai Cable Company for a cash consideration of £25 million. Ducab was the last significant cable manufacturing interest remaining in the Balfour Beatty group. Outlook We remain confident that we will deliver results for 2001 which will show significant improvement over last year. Our order book, at over £3.9 billion, is at record levels, with an increasing proportion in long-term contracts with more predictable margins struck with relationship customers. We have established positions in a number of markets where future growth is predicted. These are, most notably, transportation in the USA, the worldwide rail market and the UK infrastructure market, including, particularly, that segment which is wholly or partly privately financed. We have also created and will continue to build on our substantial capability in support services, often working alongside our established engineering, construction and project management activities. The success we have had in creating a unique mix of strengths in the building market will continue to be driven forward by a series of business process improvement programmes. There has been some speculation about the UK property and US commercial construction markets. They give us no cause for current concern, but we do continue to monitor the situation closely. We are a soundly-based business with a number of key strengths which, taken together, differentiate us clearly from our competition. We will continue to develop this business mix with carefully targeted acquisitions as they become available. Business Sectors Building, Building Management and Services Profits in the building, building management and services sector advanced by over 50% to £22 million following the excellent progress made in 2000. Once again, all constituent businesses improved their profit performance. The results reflected an impressive contribution from Integral, the US security systems company acquired last year; benefit from the group's continuing business process improvement programme; and good progress in the support services portion of the business. The latter comprises construction and programme management, both in the US and the UK, and asset maintenance and management in the UK. Both of these businesses significantly extended their order book in the period. Good progress was made in the building and building services work for many major PFI projects, including those where the group is also part of the concession company, such as Edinburgh, Durham and UCLH hospitals and the Stoke Schools scheme. Repeat business and projects undertaken on an alliance basis form a very substantial proportion of the work of all the operating companies in the building sector. Civil and Specialist Engineering and Services Profits in the civil and specialist engineering and services sector at £7 million were £3 million down on the comparable period in 2000. This was largely attributable, as noted in the AGM trading statement, to the access restrictions suffered by our overhead power line business due to the foot and mouth epidemic adversely affecting activity and profits. Although there is some improvement, restrictions remain in place. Major infrastructure projects continued at low levels and the Scottish civil engineering market was weak. The US civil engineering and the regional civil engineering businesses both performed steadily, as did the UK road maintenance operation which won a new five-year contract for the Highways Agency Area 3. Performance should, as in previous years, improve in the second half. Rail Engineering and Services Profits in rail engineering and services improved by 17% to £7 million in the first half of the year. The first quarter saw the final period of the problematical RT1a contracts let at privatisation in 1996, on which losses have been incurred over their final months. At the beginning of April, these were replaced by the new IMC2000 contracts, in which the interests of the customer and the contractor are much more closely aligned. Profits in the specialist renewals, plant and engineering divisions all improved and Marta Metroplex in the US and Balfour Beatty Rail Power Systems in Europe made sound profit contributions. The profits pattern in the latter business is particularly biased towards the second half. Major new rail construction projects were secured on the UK's West Coast Main Line and in Malaysia and progress on the several major rail development projects in the UK was in line with expectations. Investments and Developments Profits in the group's investments and developments businesses improved by 28% to £23 million. Returns from the group's interest in Barking Power were particularly strong. Profits from this source were adversely affected by planned maintenance outages in the first half of 2000. Profits from the PFI project concessions managed by Balfour Beatty Capital Projects developed as expected. No new concessions were won during the period, with no consequent recovery of bid costs. First-half profits in 2000 benefited from the recovery of bid costs at financial close from University College London Hospital and the Aberdeen Waste Water project. We are involved in 11 concessions, the great majority of which are now either fully or partly operational. There was a first contribution from the North Durham Hospital, phase one of which became operational, on time, during April. Metronet, in which Balfour Beatty has a 20% interest, has been appointed preferred bidder for the Bakerloo, Central and Victoria Line concession under the Government's PPP scheme. The process of converting preferred bidder status into a concession contract is now under way. Under the Metronet proposals, in the first 71/2-year period of the contract, in addition to the £ 490 million to be spent on trains and signalling, some £660 million will be spent on stations and £142 million on infrastructure. £324 million will be spent on track, some 50 kilometres of which will be replaced or reconditioned in the first three years. Metronet also continues to compete for the concession for the sub-surface lines. In addition, Balfour Beatty is bidding or prequalifying for a number of other new schemes in rail and road transport, healthcare and education. The Interim Report for the six months to 30 June 2001 will be posted on 16 August 2001 to holders of ordinary shares and preference shares. Copies will also be available for members of the public at the Company's registered office at 130 Wilton Road, London, SW1V 1LQ. The interim 2001 dividend of 2.2p net will be paid on 2 January 2002 to ordinary shareholders on the register on 2 November 2001. The ordinary shares will be quoted ex-dividend on 31 October 2001. Dividend warrants will be posted on 28 December 2001, payable on 2 January 2002. A preference dividend of 5.375p gross (4.8375p net at current tax rate) will be paid on 1 January 2002 in respect of the six months ending 31 December 2001 to preference shareholders on the register on 23 November 2001. The preference shares will be quoted ex-dividend on 21 November 2001. Dividend warrants will be posted on 28 December 2001, payable on 1 January 2002. Group profit and loss account 2001 2000 2000 For the half-year ended 30 June 2001 first first year based on unaudited figures half half Notes £m £m £m Turnover including share of joint ventures and 2 1,436 1,215 2,603 associates Share of turnover of joint ventures (53) (25) (83) Share of turnover of associates (112) (79) (178) Group turnover 1,271 1,111 2,342 Continuing operations 1,266 1,074 2,305 Acquisitions 5 - - Discontinued operations - 37 37 Group operating profit 25 28 57 Group operating profit before goodwill 30 28 60 amortisation Goodwill amortisation (5) - (3) Share of operating profit of joint ventures 14 13 30 Share of operating profit of associates 15 8 24 Operating profit including share of joint 54 49 111 ventures and associates Operating profit before goodwill amortisation 59 49 114 Goodwill amortisation (5) - (3) Continuing operations 55 48 110 Acquisitions (1) - - Discontinued operations - 1 1 Exceptional items Net profit on sale of operations 4 - 12 11 Profit before interest 54 61 122 Net interest payable and similar charges: Group (1) 2 2 Share of joint ventures' interest (12) (11) (20) Share of associates' interest (5) (5) (10) Profit before taxation 36 47 94 Taxation 5 (10) (10) (23) Profit for the period 26 37 71 Dividends: Preference 6 (8) (9) (17) Ordinary (9) (8) (19) Transfer to reserves 9 20 35 Adjusted earnings per ordinary share 5.5p 3.9p 10.9p Goodwill amortisation (1.1)p -p(0.6)p Exceptional items after attributable taxation -p 2.8p 2.5p Earnings per ordinary share 7 4.4p 6.7p 12.8p Diluted earnings per ordinary share 7 4.3p 6.7p 12.8p Dividends per ordinary share 8 2.2p 2.0p 4.5p Statement of total recognised gains and losses 2001 2000 2000 For the half-year ended 30 June 2001 first first year based on unaudited figures half half £m £m £m Profit for the period 26 37 71 Exchange adjustments (1) (2) 1 Total recognised gains and losses for the 25 35 72 period Group balance sheet 2001 2000 2000 At 30 June 2001 first first year based on unaudited figures half half Notes £m £m £m Fixed assets Intangible assets - goodwill 173 63 168 Tangible assets 130 118 124 Investments 24 - - Investments in joint ventures: Share of gross assets 526 389 503 Share of gross liabilities (471) (351) (444) 55 38 59 Investments in associates 34 39 39 Current assets 416 258 390 Stocks 102 61 81 Debtors - due within one year 582 555 554 - due after one year 84 94 85 Cash and deposits 201 179 192 969 889 912 Creditors: amounts falling due within one year Borrowings (37) (23) (71) Other (962) (839) (927) Net current (liabilities) / assets (30) 27 (86) Total assets less current liabilities 386 285 304 Creditors: amounts falling due after more than one year Borrowings (101) (21) (17) Other (31) (32) (48) Provisions for liabilities and charges (91) (86) (82) 163 146 157 Capital and reserves 9 163 145 156 Minority equity interests - 1 1 163 146 157 Capital and reserves include non-equity shareholders' funds of £170m (2000: first half £171m, year £170m). Group cash flow statement For the half-year ended 30 June 2001 2001 2000 2000 based on unaudited figures first first year half half Notes £m £m £m Net cash inflow from operating activities 10 24 4 105 Dividends from joint ventures and associates 6 2 14 Returns on investments and servicing of finance (9) (16) (17) Taxation (1) 1 (5) Capital expenditure and financial investment (41) (17) (38) Acquisitions and disposals of businesses (8) 89 (11) Ordinary dividends paid (8) (8) (17) Cash (outflow)/inflow before use of liquid (37) 55 31 resources and financing Management of liquid resources 33 1 (7) Financing Buy-back of ordinary and preference shares (1) (8) (15) Repayment of minority interests (1) - - New loans/(repayment of loans) 52 (21) 23 Increase in cash in the period 46 27 32 Notes 1 Basis of presentation The interim financial statements have been prepared on the basis of the accounting policies set out in the 2000 Balfour Beatty plc Annual Report and Accounts. The Brand-Rex cable businesses sold in 2000 have been classified as discontinued. 2 Segment analysis Turnover Operating profit before exceptional items 2001 2000 2000 2001 2000 2000 first first year first first year half half half half £m £m £m £m £m £m Total group, including share of joint ventures and associates Building, building management and services 527 485 1,017 22 14 39 Civil and specialist engineering 525 461 1,011 7 10 27 and services Rail engineering and services 314 190 439 7 6 6 Investments and developments 70 42 99 23 18 41 1,436 1,178 2,566 59 48 113 Discontinued operations - 37 37 - 1 1 1,436 1,215 2,603 59 49 114 Goodwill amortisation (5) - (3) Operating profit 54 49 111 Net interest payable (18) (14) (28) Profit before tax and exceptional 36 35 83 items Goodwill amortisation arose in Building, building management and services £0.8m (2000: year £0.7m), Civil and specialist engineering and services £0.2m (2000: year £0.3m) and Rail engineering and services £ 3.7m (2000: year £1.8m). 3 Acquisitions In February 2001 the group acquired the Rail Systems Division of ABC-NACO for total consideration of US$21.5m all of which was paid on completion. After provisional fair value adjustments goodwill arising on this transaction was £ 10m. In April 2001 the group received Euros 20m in respect of the rail electrification business of Adtranz - Daimler Chrysler Rail Systems acquired in October 2000 to reflect the net asset value of the business at completion. In addition, £5m deferred consideration was paid in the period in respect of acquisitions completed in 2000. Notes (continued) 4 Exceptional items In 2000, the net profit on sale of discontinued operations arose on the disposal of the Brand-Rex cable businesses (£20m after charging goodwill of £ 53m previously written off to reserves) less further losses arising from the disposal in 1999 of the Energy cable businesses and related costs (first half £ 8m, year £9m). Exceptional items had no effect on the group's tax charge in 2000. 5 Taxation 2001 2000 2000 first half first half year £m £m £m UK 7 9 18 Foreign 3 1 5 Tax charge 10 10 23 6 Dividends per preference share A preference dividend of 5.375p gross (4.8375p net) per cumulative convertible redeemable preference share of 1p was paid in respect of the six months ended 30 June 2001 on 1 July 2001 to holders of these shares on the register on 18 May 2001. A preference dividend of 5.375p gross (4.8375p net at current tax rate) per cumulative convertible redeemable preference share will be paid in respect of the six months ending 31 December 2001 on 1 January 2002 to holders of these shares on the register on 23 November 2001 by direct credit or, where no mandate has been given, by cheques posted on 28 December 2001 payable on 1 January 2002. 7 Earnings per ordinary share The calculation of the earnings per ordinary share is based on the profit for the period, after charging preference dividends, divided by the weighted average number of ordinary shares in issue during the period of 414m (2000: first half 421m, year 419m). The calculation of diluted earnings per ordinary share is based on the profit for the period, after charging preference dividends, divided by the weighted average number of ordinary shares in issue adjusted for the conversion of share options by 5m (2000: first half nil, year 1m). As in 2000, no adjustment has been made in respect of the conversion of the cumulative convertible redeemable preference shares which were antidilutive throughout the period. Adjusted earnings per ordinary share before goodwill amortisation and exceptional items have been disclosed to give a clearer understanding of the group's underlying trading performance. 8 Dividends per ordinary share The interim dividend on ordinary shares will be paid on 2 January 2002 to holders of these shares on the register on 2 November 2001 by direct credit or, where no mandate has been given, by cheques posted on 28 December 2001 payable on 2 January 2002. 9 Reconciliation of movements in shareholders' 2001 2000 2000 funds first half first half year £m £m £m Profit for the period 26 37 71 Dividends (17) (17) (36) 9 20 35 Other recognised gains and losses (net) (1) (2) 1 Goodwill - on businesses sold - 53 53 Buy-back of ordinary and preference shares (1) (8) (15) 7 63 74 Opening shareholders' funds 156 82 82 Closing shareholders' funds 163 145 156 Notes (continued) 10 Notes to the cash flow statement 2001 2000 2000 first first year half half £m £m £m (a) Net cash inflow from operating activities: Group operating profit before exceptional items 25 28 57 Depreciation 16 14 32 Goodwill amortisation 5 - 3 (Profit)/loss on disposal of fixed assets (1) 1 (5) Exceptional items - cash expenditure (2) (13) (20) Working capital (increase)/decrease (19) (26) 38 Net cash inflow from operating activities 24 4 105 (b) Analysis of movement in net cash: Opening net cash 104 84 84 Cash (outflow)/inflow before use of liquid resources (37) 55 31 and financing Buy-back of ordinary and preference shares (1) (8) (15) Repayment of minority interests (1) - - Disposal of businesses - debt at date of disposal - 6 6 Exchange adjustments (2) (2) (2) Closing net cash 63 135 104 (c) Reconciliation of cash flow to movement in net cash: Increase in cash in the period 46 27 32 Cash (inflow)/outflow from increase/decrease in (52) 21 (23) borrowings Cash (inflow)/outflow from decrease/increase in term (33) (1) 7 deposits Change in net cash resulting from cash flows (39) 47 16 Disposal of businesses - debt at date of disposal - 6 6 Exchange adjustments (2) (2) (2) Movement in net cash (41) 51 20 11 Post balance sheet event On 26 July 2001 the group sold its 30% interest in the Dubai Cable Company for a cash consideration of UAE Dirham 129.9m (£25m). The transaction will result in an exceptional profit of approximately £15m after associated costs. The financial information set out above (which was approved by the Board on 14 August 2001) does not constitute the Company's statutory accounts. Comparative figures have been extracted from the 2000 Balfour Beatty plc Annual Report and Accounts which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act 1985.

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