Interim Results

Balfour Beatty PLC 17 August 2005 BALFOUR BEATTY PLC INTERIM RESULTS FOR THE SIX MONTHS TO 2 JULY 2005 Financial Summary 2005 2004 pro 2004 forma+ Revenue including joint ventures and associates Â£2,308m Â£2,026m Â£2,026m Profit before tax from continuing operations - before exceptional items Â£52m Â£44m Â£53m - after exceptional items Â£67m Â£49m Â£56m Earnings per share - adjusted* 9.3p 10.1p 10.4p - basic 13.4p 10.9p 9.6p Financing - Net cash before PPP subsidiaries Â£299m Â£121m Â£121m - Net borrowings of PPP subsidiaries (non-recourse) Â£(247m) Â£(238)m Â£(238)m * Before exceptional items and the premium arising on the buy-back of preference shares, and including the results of discontinued operations + Including the impact of IAS 32 and IAS 39 on first half 2004 numbers Highlights â€¢ Continuing growth in comparable pre-tax profits â€¢ Strong operating cash performance â€¢ Earnings per share impacted by increased tax charge â€¢ Interim dividend up 23% at 3.5p (2004: 2.85p) â€¢ Order book at record Â£7.4bn, up 9% since year end â€¢ Bassetlaw and North Lanarkshire Schools PFIs reach financial close â€¢ Acquisitions of UK ground engineering specialist and German rail signalling business 'The period saw satisfactory results in most of our businesses and strong order intake, most notably in the UK utilities market. In the US, management changes, reorganisation and other steps taken to address the poor performance of the last two years have begun to show results, with a significantly improved performance in the civil engineering business. We expect our seasonal performance to resume its normal pattern and anticipate that 2005 as a whole will be a year of good progress.' Sir David John, Chairman Ian Tyler, Chief Executive BALFOUR BEATTY PLC INTERIM RESULTS FOR THE SIX MONTHS TO 2 JULY 2005 INTERNATIONAL FINANCIAL REPORTING STANDARDS These results are the Group's first to be presented under International Financial Reporting Standards (IFRS). While the new standards have little impact on the results in Balfour Beatty's contracting sectors (Building, Engineering and Rail), two of the new standards, IAS 32 and IAS 39, relating to financial instruments, fundamentally affect the way we account for our interests in PFI/ PPP concessions and for our preference shares. The results presented in the formal accounts reflect the application of these standards to first half 2005 results but not to those for the first half of 2004, with a consequent impact on comparability. In order to provide appropriate period-to-period comparisons, in addition to the formal accounts we have provided 'pro forma' first half and full year 2004 results, including the impact of IAS 32 and IAS 39, following this statement. FIRST HALF YEAR RESULTS Balfour Beatty, the international engineering, construction and services group, today announced profits from continuing operations before tax and exceptional items for the six months to 2 July 2005 of Â£52 million (2004: Â£44 million*). Adjusted earnings per share were 9.3p (2004: 10.1p*), reflecting an increased tax charge following Â£4 million Advance Corporation Tax credits in the first half of 2004. The Board has declared an interim dividend increased by 23% to 3.5p per ordinary share (2004: 2.85p). This represents a rebased level, following the trend in recent periods of earnings per share growth to outstrip dividend growth. There was a net exceptional profit after tax of Â£17 million in the first half of 2005, arising from the receipt of initial distributions by Barking Power from the administrators of TXU Europe, of which Balfour Beatty's share was Â£24 million after tax. This was offset by the premium paid on the purchase of preference shares (Â£3 million), together with the cost of repaying a US$120 million term loan (Â£4 million after tax). Pre-tax profit for the period from continuing operations, including exceptional items, stood at Â£67 million (2004: Â£49 million*) and basic earnings per share rose to 13.4p (2004: 10.9p*). Cash performance was again strong and period-end net cash stood at Â£299 million (2004: Â£121 million) before taking account of the consolidation of Â£247 million non-recourse net debt (2004: Â£238 million) in the PPP road and street lighting concession companies which are wholly owned by Balfour Beatty. The period-end order book at a record Â£7.4 billion was up by 14% since June 2004 (Â£6.5 billion) and by 9% since the year end (Â£6.8 billion). Revenue, including the Group's share of joint ventures and associates, at Â£2,308 million (2004: Â£2,026 million), was up by 14% on the first half of 2004. * Including the impact of IAS 32 and IAS 39 on first half 2004 numbers First Half Year in Brief The Board Ian Tyler succeeded Mike Welton as Chief Executive on 1 January 2005. Operations The period saw satisfactory results in most of our businesses and strong order intake, most notably in the UK utilities market. In the US, management changes, reorganisation and other steps taken to address the poor performance of the last two years have begun to show results, with a significantly improved performance in the civil engineering business. However, losses on a US rail contract and US litigation settlement costs have impacted first half results. We have continued our review of the Group's strategy and the options available for further improving the business mix. Acquisitions The JCM Group, acquired in February 2005, gives Heery, our US project and programme management company, a substantial presence in southern California. This follows the purchase of HLM, a recognised leader in the planning and design of US healthcare projects in October 2004. Since the half year, the Group has acquired Pennine, a UK ground engineering specialist, for Â£8 million, and agreed to acquire SBB, a German rail signalling company, for â‚¬14 million. Pennine will strengthen the Group's presence in the UK foundations market and SBB will broaden the range of the services which we offer to Deutsche Bahn in Germany. Metronet The operating and financial performance of Metronet, the London Underground PPP concession company in which Balfour Beatty has a 20% interest, remains satisfactory and improvements in existing asset performance have continued. The 30-year capital works programme required to upgrade and renew the asset, made possible only by the adoption of a PPP approach, is enormous in its scope and complexity. In its early stages of development, some aspects of the programme are behind their original schedule. Metronet is confident that any delays will be recovered as start-up problems are addressed and resolved by the new management team appointed this year. Hatfield Charges of manslaughter against Balfour Beatty Rail Infrastructure Services (BBRIS) and two of its former employees in respect of the Hatfield rail accident of October 2000 were dismissed in July of this year. BBRIS has subsequently entered a qualified plea of guilty in respect of charges under the Health and Safety At Work Act. The trial of the other accused parties continues. BUSINESS SECTORS Building, Building Management and Services Profits from operations, before exceptional items, in this sector fell from Â£14 million in the first half of 2004 to Â£8 million in the first half of 2005. Performance was generally good, particularly in Mansell, which won substantial amounts of new work. However, losses were incurred on a small number of construction contracts, largely as a result of raw material cost inflation between contract and project execution. Order intake has been very strong, with several major new contracts secured in recent months, most notably under the North Lanarkshire and Bassetlaw Schools PFI projects. Preferred bidder status was also achieved for two new Ambulatory Care and Diagnostic Centres, a major hospital development scheme in Glasgow. These three contracts will be worth more than Â£400 million. The substantial orders won by Mansell were largely in the social housing sector and for the United States Air Force at Lakenheath in Suffolk. The first phase of University College London Hospital was handed over on time and budget, as was the major office development project at Waverleygate in Edinburgh. The substantial enabling works for the new Birmingham Hospital continued satisfactorily. A significantly stronger performance is expected in the building sector in the second half of the year. Civil and Specialist Engineering and Services Profits from operations, before exceptional items, in the engineering sector more than doubled to Â£17 million (2004: Â£8 million). This was very largely due to a significantly improved performance from Balfour Beatty Construction Inc in the US where losses were markedly reduced. Elsewhere in the sector, performance was steady. Order intake in the engineering sector has been strong during the course of the year so far. Balfour Beatty Utilities has been extremely successful in its bidding activities following last year's regulatory reviews in the gas and water sectors. In February, the Â£380 million contract to renew all the gas mains in Greater Manchester was secured from National Grid Transco. Major new long-term service contracts were also awarded by Anglian Water, United Utilities, Severn Trent Water, Yorkshire Water and South West Water to a total additional value of over Â£700 million. In March, Balfour Beatty Civil Engineering, now in the final stages of widening the M25 adjacent to Heathrow Airport, was awarded the Â£241 million contract to widen the M1 between Junctions 6A and 10. There were some notable successes for Gammon in Hong Kong, including winning contracts for a major casino and hotel complex in Macau, civil works for the Southern Link project for the Kowloon and Canton Railway Corporation and for road maintenance in Hong Kong. The new Â£132 million M77 motorway and Glasgow Southern Orbital relief road project was handed over in April to time and budget. In August, the acquisition was announced of Pennine, the UK ground engineering specialist. Balfour Beatty is, through Stent Foundations, already a leader in the piling sector and this acquisition provides a strong complementary presence in ground engineering. The good progress of the first half in this sector is expected to be maintained in the second half of the year. Rail Engineering and Services In this sector, profits from operations, before exceptional items, at Â£20 million (2004: Â£23 million) reflected a sound performance despite reduced UK volumes following the loss of the maintenance contracts which were taken back in-house by Network Rail in the middle of last year. Profits were enhanced by contract settlements in UK rail renewals. Performance under the substantial long-term programmes of track renewal being undertaken for Network Rail and under the London Underground PPP project was satisfactory, as was that on the West Coast Main Line electrification project and at Heathrow Terminal 5. Conditions in the US rail market continue to offer challenges to the Group. Problems in respect of a signalling contract continued to impact performance adversely. In Germany, demand remained depressed, while electrification work in Italy continued to be buoyant and progress was good on the current phase of the Metro do Porto contract. Two new projects were secured in Sweden with a total value of approximately Â£50 million. In July, we agreed to acquire SBB, the leading German signal specialist. This acquisition will further broaden Balfour Beatty's signalling capability and helps develop Balfour Beatty Rail Power Systems' strong existing relationship with Deutsche Bahn. Performance in the rail sector is expected to remain satisfactory in the second half of the year. Investments and Developments Profits from operations, before exceptional items, in the Investments and Developments sector at Â£8 million were marginally ahead of 2004 (Â£7 million). Much of the profits derived from assets in this sector are now accounted for as investment income. Operating concession performance was satisfactory, including contributions from Metronet and Barking Power in line with those of the first half of 2004. Barking Power also received initial distributions from the administrator of TXU Europe, with Balfour Beatty taking its share of Â£24 million, net of tax, as an exceptional profit. The cash has been retained within Barking Power. During the first half of the year, concessions for both University College London Hospital (Phase 1) and the M77/Glasgow Southern Orbital road became operational. In June, the Â£140 million North Lanarkshire Schools project reached financial close, followed in mid-July by the Â£127 million Bassetlaw Schools project in north Nottinghamshire. Work continues to bring the Â£520 million Birmingham Hospital and the Â£60 million Birmingham Schools projects, for which Balfour Beatty is preferred bidder, to financial close in the second half of the year. We are also preferred bidder for the Â£250 million Pinderfields Hospital in Yorkshire, for which a new design was recently approved and financial close is expected in 2006. Balfour Beatty now has 17 operational concessions and has committed some Â£238 million of equity to the PPP market. The prequalification and bidding pipeline remains strong. Andover Controls Andover Controls contributed Â£7 million of operating profit in the first half of 2004. The company was sold in July 2004 for US$403 million. OUTLOOK Trading prospects in our key markets continue to be positive, although the medium-term outlook in UK and German rail remains unclear. Significant new orders have been won already in the second half of the year and bidding opportunities in most of our markets remain encouraging. Our investment in PPP/PFI is continuing. Two further concessions are likely to have reached financial close before the year end. Three other major concessions will be at preferred bidder stage. We anticipate that recovery in US civil engineering will continue and that there will be good progress in the building sector in the second half of the year. We have substantial net cash. During the year, we have made good progress in developing our strategy with a view to maintaining, in the long-term, our successful trend of profits and earnings growth. We expect our seasonal performance to resume its normal pattern and anticipate that 2005 as a whole will be a year of good progress. ENDS Enquiries to:- Ian Tyler, Chief Executive Anthony Rabin, Finance Director Tim Sharp, Head of Corporate Communications Tel: 020 7216 6800 www.balfourbeatty.com * * * * * * * * Balfour Beatty is a world-class engineering, construction and services group, well positioned in infrastructure markets which offer significant growth potential. Its partnerships with public and private customers generate secure, sustainable income. Its financial position, with significant net cash and with strong operating cash flows, offers continuing flexibility to add additional capacity and expertise to the business mix and to make appropriate investments in PPP and other long-term growth opportunities. * * * * * * * * High resolution photographs are available to the media free of charge at www.newscast.co.uk (+44 (0)20 7608 1000). A presentation to analysts and investors will be made at JPMorgan Cazenove, 20 Moorgate, London EC2 at 10.00 am. A recording of this presentation will be available on www.balfourbeatty.com on 17 August 2005. The slides presented to the analysts and investors are also available on www.balfourbeatty.com. * * * * * * * * The Interim Report for the six months to 2 July 2005 together with the Independent Review Report of Deloitte & Touche LLP will be posted on 22 August 2005 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 and the Report can be viewed on the Company's website at www.balfourbeatty.com. The interim 2005 dividend of 3.5p net per ordinary share will be paid on 3 January 2006 to holders of these shares on the register on 28 October 2005 by direct credit or, where no mandate has been given, by cheque posted on 29 December 2005 payable on 3 January 2006. The ordinary shares will be quoted ex-dividend on 26 October 2005. 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 2005 on 1 January 2006 to holders of these shares on the register on 26 November 2005 by direct credit or, where no mandate has been given, by cheque posted on 29 December 2005 payable on 1 January 2006. The preference shares will be quoted ex-dividend on 24 November 2005. Group income statement For the half-year ended 2 July 2005 based on unaudited figures 2005 2004 2004 first half first half year Before Exceptional Before Exceptional Before Exceptional exceptional items exceptional items exceptional items items (Note 6) Total items (Note 6) Total items (Note 6) Total Notes Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Revenue including share of joint ventures and associates 2,308 - 2,308 2,026 - 2,026 4,239 - 4,239 Share of revenue of joint ventures and associates 3 (494) - (494) (334) - (334) (749) - (749) Group revenue 1,814 - 1,814 1,692 - 1,692 3,490 - 3,490 Group operating profit 24 - 24 29 3 32 58 (2) 56 Share of results of joint ventures and associates 3 19 24 43 13 - 13 36 - 36 Profit from operations 43 24 67 42 3 45 94 (2) 92 Investment income 4 29 - 29 26 - 26 56 - 56 Finance costs 5 (20) (9) (29) (15) - (15) (28) - (28) Profit before taxation 52 15 67 53 3 56 122 (2) 120 Taxation 7 (12) 2 (10) (9) (1) (10) (23) (5) (28) Profit for the period from continuing operations 40 17 57 44 2 46 99 (7) 92 Profit for the period from discontinued operations 8 - - - 7 - 7 8 160 168 Profit for the period 40 17 57 51 2 53 107 153 260 Preference dividends 5 - - - (7) - (7) (13) - (13) Premium paid on buy-back of preference shares - - - (5) - (5) (6) - (6) Profit for the period attributable to equity shareholders 40 17 57 39 2 41 88 153 241 2005 2004 2004 first first year half half pence pence pence Basic earnings per ordinary share - Continuing operations 10 13.4 8.0 17.3 - Discontinued operations 10 - 1.6 40.1 13.4 9.6 57.4 Diluted earnings per ordinary share - Continuing operations 10 13.2 7.9 17.2 - Discontinued operations 10 - 1.6 39.7 13.2 9.5 56.9 Dividends proposed for the period 9 3.50 2.85 6.60 Group statement of recognised income and expense For the half-year ended 2 July 2005 based on unaudited figures 2005 2004 2004 first first year half half Â£m Â£m Â£m Actuarial losses on retirement benefit obligations - - (17) Losses on cash flow hedges (14) - - Fair value revaluation of PFI/PPP financial assets 19 - - Tax on items taken directly to equity (1) - 3 Exchange adjustments 2 (2) 1 Net income/(expense) recognised directly in equity 6 (2) (13) Profit for the period from continuing operations 57 46 92 Profit for the period from discontinued operations - 7 168 Total recognised income for the period 63 51 247 Attributable to: Equity shareholders 63 44 234 Non-equity shareholders - 7 13 63 51 247 Group balance sheet At 2 July 2005 based on unaudited figures 2005 2004 2004 Notes first first year half half Â£m Â£m Â£m Non-current assets Goodwill 276 286 279 Property, plant and equipment 156 146 149 Investments in joint ventures and associates 13 252 137 189 Investments 42 36 42 PFI/PPP financial assets 356 255 282 Deferred tax assets 64 100 87 Trade and other receivables 52 45 41 1,198 1,005 1,069 Current assets Inventories 58 53 50 Due from customers for contract work 267 228 218 Derivative financial instruments 1 - - Trade and other receivables 520 590 563 Cash and cash equivalents - PFI/PPP subsidiaries 23 39 30 - other 306 197 388 1,175 1,107 1,249 Non-current assets classified as held for sale - 57 - Total assets 2,373 2,169 2,318 Current liabilities Trade and other payables (983) (993) (946) Due to customers for contract work (251) (206) (264) Derivative financial instruments - PFI/PPP subsidiaries (14) - - - other (4) - - Current tax liabilities (31) (42) (38) Borrowings - PFI/PPP non-recourse term loans (14) (13) (13) - other (7) (9) (15) (1,304) (1,263) (1,276) Non-current liabilities Borrowings - PFI/PPP non-recourse term loans (256) (264) (261) - other - (67) (62) Liability component of preference shares (99) - - Trade and other payables (68) (72) (58) Deferred tax liabilities (2) (1) (2) Retirement benefit obligations (256) (255) (254) Provisions (111) (113) (103) (792) (772) (740) Liabilities directly associated with non-current assets classified as held for sale - (14) - Total liabilities (2,096) (2,049) (2,016) Net assets 277 120 302 Capital and reserves Called-up share capital 213 212 213 Share premium account 24 148 150 Equity component of preference shares 18 - - Special reserve 178 185 181 Other reserves (156) (425) (242) 277 120 302 Equity interests 277 (17) 166 Non-equity interests - 137 136 Equity/shareholders' funds 277 120 302 Group cash flow statement For the half-year ended 2 July 2005 based on unaudited figures 2005 2004 2004 first first year half half Notes Â£m Â£m Â£m Cash flows from operating activities Cash generated from operations 14 (a) 89 109 148 Income taxes paid (12) (16) (41) Net cash from operating activities 77 93 107 Cash flows from investing activities Dividends received from joint ventures and associates 6 2 8 Acquisition of businesses, net of cash and cash equivalents acquired (6) 25 (17) Purchase of property, plant and equipment (29) (20) (51) Investment in and loans made to joint ventures and associates (4) (5) (11) Investment in financial assets (16) (34) (65) Disposal of businesses, net of cash and cash equivalents disposed - 1 217 Disposal of property, plant and equipment 4 5 13 Disposal of investments 2 - 51 Net cash (used in)/from investing activities (43) (26) 145 Cash flows from financing activities Proceeds from issue of ordinary shares 3 1 4 Purchase of ordinary shares (1) (1) (2) Proceeds from new loans 2 8 6 Repayment of loans (72) (6) (12) Finance lease principal repayments (2) (2) (2) Buy-back of preference shares (9) (18) (20) Ordinary dividends paid (28) (11) (25) Interest received 26 18 47 Interest paid (14) (15) (24) Premium paid on repayment of US Dollar term loan (9) - - Preference dividends paid (13) (7) (15) Net cash used in financing activities (117) (33) (43) Net (decrease)/increase in cash and cash equivalents (83) 34 209 Effects of exchange rate changes - 1 (1) Cash and cash equivalents at beginning of period 406 198 198 Cash and cash equivalents at end of period 14 (b) 323 233 406 Group statement of changes in equity For the half-year ended 2 July 2005 based on unaudited figures 2005 2004 2004 first first year half half Notes Â£m Â£m Â£m Total recognised income and expense attributable to equity shareholders 63 44 234 Ordinary dividends 9 (16) (14) (26) Premium paid on buy-back of preference shares - (5) (6) Issue of ordinary shares 3 1 4 Buy-back of preference shares - carrying value in equity/shareholders' funds (1) (13) (14) Movements relating to share-based payments 1 1 4 50 14 196 Shareholders' funds at beginning of period 302 106 106 Implementation of IAS 32 and IAS 39 1 (75) - - Equity/shareholders' funds at end of period 277 120 302 Notes 1 Basis of presentation The interim financial statements have been prepared for the first time in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), which have been adopted from 1 January 2004. As permitted by IFRS 1 'First-time Adoption of IFRS', the Group has adopted IAS 32 and IAS 39 'Financial Instruments' prospectively from 1 January 2005, and comparative figures have not been restated. These standards have a significant impact on the Group and particularly affect the accounting for the Company's convertible redeemable preference shares, the hedging activities of the Group's PFI/PPP concessions and their income which, in accordance with the International Financial Reporting Interpretations Committee (IFRIC)'s draft interpretations on service concessions, D12 to D14, is determined under IAS 39 to be a financial asset. The adoption of IAS 32 and IAS 39 has reduced the Group's net assets as follows: Â£m Net assets at 31 December 2004 302 Preference shares - liability element and deferred tax (113) Group derivatives (3) PFI/PPP concessions - derivatives (46) PFI/PPP concessions - financial assets 87 Net assets at 1 January 2005 227 The accounting policies used in the interim financial statements are consistent with those that the Directors intend to use in the annual financial statements, but some changes to these policies may be necessary if there are changes to IFRIC's draft interpretations on service concessions or those standards yet to be endorsed by the European Commission. The accounting policies are set out in Section 5 of the IFRS report published by the Company on 23 June 2005 and are available on its website (at www.balfourbeatty.com/bbeatty/ir/ifrs/). 2 Segment analysis - continuing operations For the period ended 2 July 2005 Building, Civil and building specialist Rail management engineering engineering Investments Performance by and and and and Corporate activity: services services services developments costs Total Â£m Â£m Â£m Â£m Â£m Â£m Group revenue 788 633 367 26 - 1,814 Group operating profit 6 12 20 (4) (10) 24 Share of results of joint ventures and associates 2 5 - 12 - 19 Profit from operations before exceptional items 8 17 20 8 (10) 43 Exceptional items - - - 24 - 24 Profit from operations 8 17 20 32 (10) 67 Investment income 29 Finance costs (29) Profit before taxation 67 Performance by geographic origin: Europe North America Other Total Â£m Â£m Â£m Â£m Group revenue 1,590 218 6 1,814 Profit from operations before exceptional items 58 (16) 1 43 Exceptional items 24 - - 24 Profit from operations 82 (16) 1 67 For the period ended 26 June 2004 Building, Civil and building specialist Rail management engineering engineering Investments Performance by and and and and Corporate activity: services services services developments costs Total Â£m Â£m Â£m Â£m Â£m Â£m Group revenue 690 586 374 42 - 1,692 Group operating profit 12 5 25 (3) (10) 29 Share of results of joint ventures and associates 2 3 (2) 10 - 13 Profit from operations before exceptional items 14 8 23 7 (10) 42 Exceptional items - - 3 - - 3 Profit from operations 14 8 26 7 (10) 45 Investment income 26 Finance costs (15) Profit before taxation 56 Performance by geographic origin: Europe North America Other Total Â£m Â£m Â£m Â£m Group revenue 1,518 172 2 1,692 Profit from operations before exceptional items 61 (18) (1) 42 Exceptional items 3 - - 3 Profit from operations 64 (18) (1) 45 For the year ended 31 December 2004 Building, Civil and building specialist Rail management engineering engineering Investments Performance by and and and and Corporate activity: services services services developments costs Total Â£m Â£m Â£m Â£m Â£m Â£m Group revenue 1,468 1,144 800 78 - 3,490 Group operating profit 32 7 45 (9) (17) 58 Share of results of joint ventures and associates 2 9 (1) 26 - 36 Profit from operations before exceptional items 34 16 44 17 (17) 94 Exceptional items - 1 (3) - - (2) Profit from operations 34 17 41 17 (17) 92 Investment income 56 Finance costs (28) Profit before taxation 120 Performance by geographic origin: Europe North America Other Total Â£m Â£m Â£m Â£m Group revenue 3,107 377 6 3,490 Profit from operations before exceptional items 137 (45) 2 94 Exceptional items 15 (18) 1 (2) Profit from operations 152 (63) 3 92 3 Share of results of joint ventures and associates 2005 2004 2004 first half first year half Â£m Â£m Â£m Share of revenue of joint ventures and associates 494 334 749 Operating profit before exceptional items 21 21 44 Investment income 29 27 56 Finance costs (22) (29) (49) Taxation (9) (6) (15) Share of results of joint ventures and associates before exceptional items 19 13 36 4 Investment income 2005 2004 2004 first first year half half Â£m Â£m Â£m PFI/PPP non-recourse - interest on financial assets 18 18 34 PFI/PPP subordinated debt interest receivable 3 3 9 Other interest receivable and similar income 8 5 13 29 26 56 5 Finance costs 2005 2004 2004 first first year half half Â£m Â£m Â£m PFI/PPP non-recourse - other interest payable 9 10 18 Other interest payable - bank loans and overdrafts 2 2 2 - finance leases - - 1 - other loans 2 3 7 13 15 28 Preference shares - finance cost 7 - - 20 15 28 Exceptional items - premium on buy-back of preference shares 3 - - - net premium on repayment of US Dollar term loan 6 - - 29 15 28 The finance cost and premium on buy-back of preference shares are treated as finance costs under IAS 32 from adoption on 1 January 2005, but were previously treated as appropriations of profit for the period. 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 2005 on 1 July 2005 to holders of these shares on the register on 27 May 2005. 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 2005 on 1 January 2006 to holders of these shares on the register on 26 November 2005 by direct credit or, where no mandate has been given, by cheque posted on 29 December 2005 payable on 1 January 2006. These shares will be quoted ex-dividend on 24 November 2005. 6 Exceptional items 2005 2004 2004 first first year half half Â£m Â£m Â£m (a) Credited to/(charged against) profit from operations Group operating profit - cancellation of Network Rail maintenance contracts - 3 7 - pension settlement gain - - 8 - profit on sale of Hong Kong business - - 1 - impairment of goodwill - - (18) Share of results of joint ventures and associates - TXU distributions to Barking Power Ltd 24 - - 24 3 (2) (b) Charged to finance costs - premium on buy-back of preference shares (3) - - - net premium on repayment of US Dollar term loan (6) - - Credited to/(charged against) profit before taxation 15 3 (2) Taxation thereon 2 (1) (5) Credited to/(charged against) profit for the period from continuing operations 17 2 (7) (c) Credited to profit for the period from discontinued operations - profit on sale of operations - - 160 Credited to profit for the period 17 2 153 In accordance with its IFRS accounting policies, the Group has presented and disclosed items of income and expense which are both material and non-recurring as 'exceptional items'. (a) The exceptional item credited to profit from operations in share of results of joint ventures and associates in 2005 arises in Barking Power Ltd in which the Group holds a 25.5% interest. In November 2002, TXU Europe, whose subsidiaries are respectively a shareholder and customer of Barking Power Ltd, entered administration. As a result, the long-term electricity supply contract with a TXU subsidiary was terminated, triggering an entitlement to payment for damages, for which Barking Power Ltd lodged a substantial claim. In December 2004, Barking Power Ltd reached an agreement in principle with the administrators on the value of its claim at Â£179m. The Group's share of the gain arising from the initial distributions received from TXU was Â£24m, after charging taxation of Â£10m. Exceptional items credited to profit from operations in 2004 arose in respect of the resolution of certain matters (first half Â£3m, full year Â£7m) previously provided for in 2003 in relation to the cancellation of three Network Rail maintenance contracts; an Â£8m settlement gain on curtailment of the Railways Pension Scheme; a profit of Â£1m arising on the transfer of the Group's construction contracts in progress in Hong Kong to the Gammon Skanska Group following the acquisition of a 50% interest in that business; and a goodwill impairment charge of Â£18m in respect of Balfour Beatty Rail Inc. (b) The exceptional items charged against finance charges in 2005 are the premium of Â£3m arising on the repurchase for cancellation of 5.6m preference shares at a cost of Â£9m, and the net premium of Â£6m arising from the repayment of the US Dollar term loan. (c) The exceptional item credited to profit for the period from discontinued operations in 2004 comprised the gain arising on the disposal of Andover Controls amounting to Â£160m, after charging taxation of Â£12m. 7 Taxation 2005 2004 2004 first first year half half Â£m Â£m Â£m UK current tax 6 8 29 UK advance corporation tax - (4) (17) Foreign current tax 2 2 4 Deferred tax 2 4 12 10 10 28 Corporation tax for the period is charged at 36% (2004: full year 27%, but on a 'pro forma' basis 32%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year. 8 Discontinued operations Andover Controls, sold in July 2004, has been classified as discontinued. The profit for the year from discontinued operations comprises the post-tax results of Andover Controls (2004: first half Â£7m, full year Â£8m) and the profit on sale of Andover Controls (2004: full year Â£160m). 9 Dividends on ordinary shares 2005 2004 2004 first half first half year Per Amount Per Amount Per Amount share share share pence Â£m pence Â£m pence Â£m Proposed dividends for the period: Interim 2004 - - 2.85 12 2.85 12 Final 2004 - - - - 3.75 16 Interim 2005 3.50 15 - - - - 3.50 15 2.85 12 6.60 28 Recognised dividends for the period: Final 2003 - 14 14 Interim 2004 - - 12 Final 2004 16 - - 16 14 26 The interim 2005 dividend will be paid on 3 January 2006 to holders of ordinary shares on the register on 28 October 2005 by direct credit or, where no mandate has been given, by cheque posted on 29 December 2005 payable on 3 January 2006. These shares will be quoted ex-dividend on 26 October 2005. 10 Earnings per share 2005 2004 2004 first half first half year Basic Diluted Basic Diluted Basic Diluted Â£m Â£m Â£m Â£m Â£m Â£m Earnings - Continuing operations 57 57 34 34 73 73 - Discontinued operations - - 7 7 168 168 57 57 41 41 241 241 Premium on buy-back of preference shares - 5 6 Exceptional items (17) (2) (153) Adjusted earnings 40 44 94 m m m m m m Weighted average number of ordinary shares 423.0 428.4 418.7 423.6 419.4 423.6 Earnings per share pence pence pence pence pence pence - Continuing operations 13.4 13.2 8.0 7.9 17.3 17.2 - Discontinued operations - - 1.6 1.6 40.1 39.7 13.4 13.2 9.6 9.5 57.4 56.9 Premium on buy-back of preference shares - 1.3 1.5 Exceptional items (4.1) (0.5) (36.4) Adjusted earnings per share 9.3 10.4 22.5 The calculation of basic earnings is based on profit from continuing operations after charging preference dividends and appropriations arising on the buy-back of preference shares. The weighted average number of shares used to calculate diluted earnings per share has been adjusted for the conversion of share options. No adjustment has been made in respect of the potential conversion of the cumulative convertible redeemable preference shares, the effect of which would have been antidilutive throughout each period. Adjusted earnings per ordinary share, before exceptional items and appropriations arising on the buy-back of preference shares and including the results of discontinued operations, have been disclosed to give a clearer understanding of the Group's underlying trading performance. 11 Acquisitions On 17 February 2005, the Group acquired JCM Group in the USA for an initial consideration of US$9m, deferred consideration of US$1m and costs of US$2m. The provisional fair value of net assets acquired was US$4m and provisional goodwill arising was US$8m. 12 PFI/PPP subsidiaries The Group has a 100% interest in four PFI/PPP concessions through its shareholdings in Connect Roads Ltd, Connect M77/GSO Holdings Ltd and Connect Roads Sunderland Holdings Ltd. The performance of these PFI/PPP concessions (since becoming subsidiaries as appropriate) and their balance sheets are summarised below: 2005 2004 2004 first first year half half Â£m Â£m Â£m Income statement Group revenue 24 42 78 Profit from operations - 1 1 Investment income 18 18 34 Finance costs (9) (10) (18) Profit before taxation 9 9 17 Taxation (3) (2) (5) Profit for the period 6 7 12 Cash flow Profit from operations - 1 1 Decrease in working capital 5 41 6 Income taxes paid (1) (1) (4) Net cash inflow from operating activities 4 41 3 Net cash outflow from investing activities (16) (37) (7) Net cash inflow/(outflow) from financing activities 9 (2) - Net cash (outflow)/inflow (3) 2 (4) Net borrowings at beginning of period/date of acquisition (244) (240) (240) Net borrowings at end of period (247) (238) (244) Balance sheet PFI/PPP financial assets 356 255 282 Derivative financial instruments (14) - - Current and deferred taxation (23) (10) (9) Other net current assets - 23 3 Cash and cash equivalents 23 39 30 Non-recourse term loans (270) (277) (274) Net assets 72 30 32 13 Investments in joint ventures and associates 2005 2004 2004 first first year half half Â£m Â£m Â£m Property, plant and equipment 184 167 180 PFI/PPP financial assets 795 576 635 Net cash/(borrowings) - PFI/PPP non-recourse (594) (486) (531) - other 2 (71) (29) Other net liabilities (135) (49) (66) 252 137 189 14 Notes to the cash flow statement 2005 2004 2004 first first year half half Â£m Â£m Â£m (a) Cash generated from operations comprises: Profit from operations 67 45 92 Trading profit from discontinued operations - 7 8 Share of results of joint ventures and associates (43) (13) (36) Depreciation of property, plant and equipment 20 20 41 Impairment of goodwill - - 18 Movements relating to share-based payments 2 1 2 (Profit)/loss on disposal of property, plant and equipment (1) 1 1 Profit on disposal of businesses - (1) (1) Operating cash flows before movements in working capital 45 60 125 Decrease in working capital 44 49 23 Cash generated from operations 89 109 148 (b) Cash and cash equivalents comprise: Cash and deposits 142 120 119 Term deposits 164 77 269 UK PFI/PPP project finance - cash and deposits 2 2 - - term deposits 21 37 30 Bank overdrafts (6) (3) (12) 323 233 406 (c) Analysis of net cash/(borrowings): US Dollar fixed rate term loan 8.06% (2008) - (65) (62) Bank overdrafts (6) (3) (12) Other short-term loans (1) (6) (1) Finance leases - (2) (2) Cash and deposits 142 120 119 Term deposits 164 77 269 299 121 311 UK PFI/PPP project - Sterling floating rate term loan finance (2008-2027)* (10) (5) (8) - Sterling floating rate term loan (2005-2011)* (24) (26) (25) - Sterling floating rate term loan (2005-2012)* (88) (98) (93) - Sterling fixed rate bond (2006-2034) (148) (148) (148) - cash and deposits 2 2 - - term deposits 21 37 30 Net cash/(borrowings) 52 (117) 67 * Interest rate swaps have been taken out to convert the UK PFI/PPP project finance floating rate term loans to various fixed rates. (d) Analysis of movement in net cash/(borrowings): Opening net cash 67 124 124 Net (decrease)/increase in cash and cash equivalents (83) 34 209 Acquisitions - borrowings at date of acquisition - (278) (278) New loans (2) (8) (6) Repayment of loans 72 6 12 Finance lease principal repayments 2 2 2 Exchange adjustments (4) 3 4 Closing net cash/(borrowings) 52 (117) 67 15 Post balance sheet events On 9 August 2005, the Group acquired Pennine, the UK ground engineering business, for approximately Â£8m. On 8 July 2005, the Group agreed to acquire Signalbau Bahn GmbH, the specialist German rail signalling contractor, for â‚¬14m. 16 Explanation of transition to IFRS As described in Note 1, the interim 2005 financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS). On 23 June 2005, the Company published restated consolidated financial information for the half-year 2004 and full year 2004. Following completion of the required conversion work on all the Group's PFI/PPP concessions resulting from the adoption of IAS 32 and IAS 39 'Financial Instruments' and the draft interpretations on PFI/PPP concession accounting prospectively from 1 January 2005, the Company has made further amendments to the restated 2004 financial information in relation to the accounting for five of its PFI/PPP concessions to conform with IFRIC 4. As a result of these further amendments, an increase in 'Net assets' of Â£19m arose on transition at 1 January 2004, 'Profit before taxation' increased by Â£5m and Â£12m for the half-year and full year 2004 respectively and 'Net assets' increased by Â£22m and Â£29m at 26 June 2004 and 31 December 2004 respectively. Revised reconciliations showing the changes between UK GAAP and IFRS disclosure format and the changes arising from the adoption of IFRS have been placed on the Company's website (at www.balfourbeatty.com/bbeatty/ir/ifrs/). Reconciliations of the Group's profit for the half-year 2004 and balance sheet as at 26 June 2004, showing the effects of changes in presentation and accounting policies arising from the adoption of the recognition and measurement criteria of IFRS on the figures published under UK GAAP on 11 August 2004, are set out on the following pages, with the principal changes described below. (a) Principal changes in presentation (reformat) The financial statements prepared under UK GAAP have been reformatted in accordance with the requirements of IFRS as follows: (i) Under IFRS, the post-tax results of discontinued operations include the profit on sale of those operations and are reported on a single line after 'Profit for the period from continuing operations'. Non-current assets and groups of assets to be disposed of and associated liabilities are separately classified if their carrying amount will be recovered through a sale transaction rather than through continuing use. The assets and associated liabilities of Andover Controls, which was sold in July 2004, are therefore separately disclosed in the balance sheet at 26 June 2004; (ii) Interests in associates and joint venture entities are accounted for using the equity method under UK GAAP and IFRS. Under UK GAAP, the Group's share of their operating profits, interest and taxation were included under those respective captions in the income statement. Under IFRS, the Group's share of the post-tax profits of joint ventures and associates are disclosed in a single line within 'Profit from operations'; (iii) Deferred tax assets, included within debtors under UK GAAP, are separately classified within 'Non-current assets' under IFRS. Current and deferred tax liabilities, included within other creditors under UK GAAP, are separately classified within 'Current liabilities' and 'Non-current liabilities' under IFRS; (iv) Debtors due after one year, included within current assets under UK GAAP, are reclassified within 'Non-current assets' under IFRS; and (v) Balances arising on long-term contracts are reclassified as 'Due from customers for contract work' and 'Due to customers for contract work' in accordance with the requirements of IAS 11 'Construction Contracts'. (b) Principal changes in accounting policy (restatement) The transition to IFRS has resulted in the following restatements as a result of changes in accounting policies: (i) Under UK GAAP, goodwill was amortised on a straight line basis over its economic useful life of up to 20 years, tested for impairment and provided for as necessary. Under IFRS, goodwill is no longer amortised but is carried at cost and subject to annual review for impairment at 31 December. This change increased 'Profit from operations' for the half-year 2004 and 'Net assets' at 26 June 2004 by Â£9m. Under UK GAAP, the gain on disposal of businesses was determined after taking into account goodwill previously written-off to reserves. Such goodwill is not included in determining the profit on disposal under IFRS. This change increased 'Profit from operations' for the half-year 2004 by Â£1m; (ii) Under UK GAAP, the Group accounted for its defined benefit pension schemes in accordance with the requirements of SSAP 24 'Accounting for Pension Costs'. The cost of providing the defined benefit pensions was charged against 'Operating profit' with surpluses and deficits arising in the funds amortised to 'Operating profit' over the remaining service lives of participating employees. Under IAS 19 'Employee Benefits', the cost of providing pension benefits (current service cost) for defined benefit pension schemes is recognised in the income statement and the defined benefit pension obligation is determined annually by independent actuaries and recognised on the balance sheet. The Group has elected to include within 'Group operating profit' the interest cost arising on the projected obligations and the returns on the schemes' assets in addition to the current service cost. Actuarial gains and losses are recognised in the Statement of recognised income and expense in the period in which they occur. The effect of this change is to decrease 'Profit from operations' for the half-year 2004 by Â£6m and 'Net assets' at 26 June 2004 by Â£162m; (iii) Under IFRS 2 'Share-based Payment', a charge is recognised in the Income statement for all share-based payments granted after 7 November 2002 but not vested, based on the fair values of the grants and the number expected to become exercisable. Â£1m of current and deferred tax credits recognised in the Income statement for the half-year 2004 are, under IAS 12 'Income Taxes', required to be credited directly to Equity. As a result 'Profit for the period' is reduced through the revised recognition of these credits. In the UK, the tax relief arising from share-based payments is not related to the expense recognised under IFRS 2. IAS 12 specifies how both the current tax relief and deferred tax arising on share-based payments should be assessed. Recognition of the deferred tax asset gives rise to an increase of Â£5m in 'Net assets' at 26 June 2004; (iv) Under UK GAAP, proposed dividends were recognised as a liability in the period to which they related. Under IAS 10 'Events after the Balance Sheet Date', dividends are not recognised as a liability until they are declared. As a result, 'Net assets' at 26 June 2004 increase by Â£12m; (v) IAS 12 requires the recognition of deferred tax on property revaluations and, subject to certain conditions, on the undistributed reserves of foreign subsidiaries, associates and joint ventures. Under UK GAAP such provisions were not required. The effect of this change is to reduce 'Net assets' at 26 June 2004 by Â£3m; and (vi) IFRIC 4 requires arrangements which convey the right to use assets in return for a payment or series of payments to be treated as a lease and accounted for in accordance with IAS 17 'Leases'. This change in accounting for certain of the Group's PFI/PPP concessions results in an increase of Â£5m in 'Profit before taxation' for the half-year 2004 and an increase of Â£22m in 'Net assets' at 26 June 2004. Reformat of Group income statement For the half-year ended 26 June 2004 based on unaudited figures JVs' and Ordinary UK GAAP as associates' dividend UK GAAP previously Discontinued tax and Exceptional to in IFRS UK GAAP in UK GAAP reported operations interest items reserves format IFRS format Â£m Â£m Â£m Â£m Â£m Â£m Turnover Revenue including share of including joint share of joint ventures and ventures and associates 1,992 (48) - - - 1,944 associates Share of Share of turnover of revenue of joint ventures joint ventures and and associates (279) - - - - (279) associates Group Group turnover 1,713 (48) - - - 1,665 revenue Group Group operating operating profit 44 (7) - (1) - 36 profit - before - before exceptional exceptional items 41 (7) - - - 34 items - exceptional - exceptional items 3 - - (1) - 2 items Share of Share of operating results of profits of joint ventures joint ventures and and associates 32 - (18) - - 14 associates Loss on sale of operations (3) - - 3 - - Provision for loss on sale of operations 2 - - (2) - - Profit on ordinary activities before Profit from interest 75 (7) (18) - - 50 operations Investment Investment income 9 - - - - 9 income Finance Finance costs (12) - - - - (12) costs Share of joint ventures' and associates' net interest payable (11) - 11 - - - Profit on ordinary activities before Profit before taxation 61 (7) (7) - - 47 taxation Profit on ordinary activities before Profit before goodwill goodwill amortisation, amortisation, exceptional exceptional items and items and taxation 68 (7) (7) - - 54 taxation Goodwill Goodwill amortisation (9) - - - - (9) amortisation Exceptional Exceptional items 2 - - - - 2 items Tax on profit on ordinary activities (17) - 7 - - (10) Taxation Profit for Profit for the the period from period 44 (7) - - - 37 continuing operations - 7 - - - 7 Profit for the period from discontinued operations 44 - - - - 44 Profit for the period Dividends (19) - - - 12 (7) Preference dividends Premium paid on buy-back Premium paid of on buy-back of preference preference shares (5) - - - - (5) shares Transfer to reserves 20 - - - 12 32 Profit for the period attributable to equity shareholders JVs' and Ordinary UK GAAP as associates' dividend UK GAAP previously Discontinued tax and Exceptional to in IFRS UK GAAP in UK GAAP reported operations interest items reserves format IFRS format pence pence pence pence pence pence Basic Basic earnings earnings per per ordinary ordinary share share - Continuing - Continuing operations - 6.0 - - - 6.0 operations - Discontinued - Discontinued operations - 1.5 - - - 1.5 operations 7.5 - - - - 7.5 Restatement of Group income statement For the half-year ended 26 June 2004 based on unaudited figures Impact of UK GAAP Goodwill Retirement IFRIC 4 on in IFRS Goodwill in benefit Share-based Deferred PFI/PPP format amortisation reserves obligations payments taxation concessions IFRS Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Revenue including share of joint ventures and associates 1,944 - - - - - 82 2,026 Share of revenue of joint ventures and associates (279) - - - - - (55) (334) Group revenue 1,665 - - - - - 27 1,692 Group operating profit 36 8 1 (6) - - (7) 32 - before exceptional items 34 8 - (6) - - (7) 29 - exceptional items 2 - 1 - - - - 3 Share of results of joint ventures and associates 14 1 - - - - (2) 13 Profit from operations 50 9 1 (6) - - (9) 45 Investment income 9 - - - - - 17 26 Finance costs (12) - - - - - (3) (15) Profit before taxation 47 9 1 (6) - - 5 56 Profit before goodwill amortisation, exceptional items and taxation 54 - - (6) - - 5 53 Goodwill amortisation (9) 9 - - - - - - Exceptional items 2 - 1 - - - - 3 Taxation (10) - - 2 (1) 1 (2) (10) Profit for the period from continuing operations 37 9 1 (4) (1) 1 3 46 Profit for the period from discontinued operations 7 - - - - - - 7 Profit for the period 44 9 1 (4) (1) 1 3 53 Preference dividends (7) - - - - - - (7) Premium paid on buy-back of preference shares (5) - - - - - - (5) Profit for the period attributable to equity shareholders 32 9 1 (4) (1) 1 3 41 Impact of UK GAAP Goodwill Retirement IFRIC 4 on in IFRS Goodwill in benefit Share-based Deferred PFI/PPP format amortisation reserves obligations payments taxation concessions IFRS pence pence pence pence pence pence pence pence Basic earnings per ordinary share - Continuing operations 6.0 2.1 0.3 (1.0) (0.1) 0.1 0.6 8.0 - Discontinued operations 1.5 0.1 - - - - - 1.6 7.5 2.2 0.3 (1.0) (0.1) 0.1 0.6 9.6 Reformat of Group balance sheet At 26 June 2004 based on unaudited figures UK GAAP UK GAAP as UK GAAP previously Dis-continued Contract in IFRS UK GAAP in reported operations Taxation Debtors balances Other format IFRS format Â£m Â£m Â£m Â£m Â£m Â£m Â£m Fixed Non-current assets assets Intangible assets - goodwill 302 (22) - - - - 280 Goodwill Tangible Property, assets plant and equipment - PFI/PPP - PFI/PPP constructed constructed assets 262 - - - - - 262 assets - other 150 (4) - - - - 146 - other Investments Investments in in joint ventures joint and ventures 73 - - - - 60 133 associates Investments in associates 60 - - - - (60) - Investments 36 - - - - - 36 Investments - - 32 - - - 32 Deferred tax assets - - - 66 - - 66 Trade and other receivables 883 (26) 32 66 - - 955 Current Current assets assets Stocks 127 (8) - - (66) - 53 Inventories - - - - 228 - 228 Due from customers for contract work Debtors -due within Trade and one other year 816 (23) (31) - (170) - 592 receivables - due after one year 66 - - (66) - - - Cash and Cash and cash deposits equivalents - PFI/PPP - PFI/PPP subsidiaries 39 - - - - - 39 subsidiaries - other 197 - - - - - 197 - other 1,245 (31) (31) (66) (8) - 1,109 - 57 - - - - 57 Non-current assets classified as held for sale 2,128 - 1 - (8) - 2,121 Total assets Creditors: Current amounts liabilities falling due within one year Other creditors (1,243) 13 42 - 182 - (1,006) Trade and other payables - - - - (206) - (206) Due to customers for contract work - - (42) - - - (42) Current tax liabilities Borrowings Borrowings - PFI/PPP - PFI/PPP non-recourse non-recourse term loans (13) - - - - - (13) term loans - other (9) - - - - - (9) - other (1,265) 13 - - (24) - (1,276) Creditors: Non-current amounts liabilities falling due after more than one year Borrowings Borrowings - PFI/PPP - PFI/PPP non-recourse non-recourse term loans (264) - - - - - (264) term loans - other (67) - - - - - (67) - other Other creditors (118) - - - 22 - (96) Trade and other payables - - (1) - - - (1) Deferred tax liabilities Provisions for liabilities and charges (177) 1 - - 10 - (166) Provisions (626) 1 (1) - 32 - (594) - (14) - - - - (14) Liabilities directly associated with non-current assets classified as held for sale (1,891) - (1) - 8 - (1,884) Total liabilities 237 - - - - - 237 Net assets Capital and Capital and reserves reserves Called-up Called-up share capital 212 - - - - - 212 share capital Share premium Share premium account 148 - - - - - 148 account Special Special reserve 185 - - - - - 185 reserve Other (308) - - - - - (308) Other reserves reserves Shareholders' funds 237 - - - - - 237 Shareholders' funds Restatement of Group balance sheet At 26 June 2004 based on unaudited figures Impact of UK GAAP Retirement IFRIC 4 on in IFRS benefit Share-based Proposed Deferred PFI/PPP format Goodwill obligations payments dividends taxation concessions IFRS Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Non-current assets Goodwill 280 7 - - - - (1) 286 Property, plant and equipment - PFI/PPP constructed assets 262 - - - - - (262) - - other 146 - - - - - - 146 Investments in joint ventures and associates 133 1 (11) - - - 14 137 Investments 36 - - - - - - 36 PFI/PPP financial assets - - - - - - 255 255 Deferred tax assets 32 - 65 5 - (3) 1 100 Trade and other receivables 66 - (16) - - - (5) 45 955 8 38 5 - (3) 2 1,005 Current assets Inventories 53 - - - - - - 53 Due from customers for contract work 228 - - - - - - 228 Trade and other receivables 592 - (2) - - - - 590 Cash and cash equivalents - PFI/PPP subsidiaries 39 - - - - - - 39 - other 197 - - - - - - 197 1,109 - (2) - - - - 1,107 Non-current assets classified as held for sale 57 - - - - - - 57 Total assets 2,121 8 36 5 - (3) 2 2,169 Current liabilities Trade and other (1,006) 1 - - 12 - - (993) payables Due to customers for contract work (206) - - - - - - (206) Current tax liabilities (42) - - - - - - (42) Borrowings - PFI/PPP non-recourse term loans (13) - - - - - - (13) - other (9) - - - - - - (9) (1,276) 1 - - 12 - - (1,263) Non-current liabilities Borrowings - PFI/PPP non-recourse term loans (264) - - - - - - (264) - other (67) - - - - - - (67) Trade and other payables (96) - 4 - - - 20 (72) Deferred tax liabilities (1) - - - - - - (1) Retirement benefit obligations - - (255) - - - - (255) Provisions (166) - 53 - - - - (113) (594) - (198) - - - 20 (772) Liabilities directly associated with non-current assets classified as held for sale (14) - - - - - - (14) Total liabilities (1,884) 1 (198) - 12 - 20 (2,049) Net assets 237 9 (162) 5 12 (3) 22 120 Capital and reserves Called-up share capital 212 - - - - - - 212 Share premium account 148 - - - - - - 148 Special reserve 185 - - - - - - 185 Other reserves (308) 9 (162) 5 12 (3) 22 (425) Shareholders' funds 237 9 (162) 5 12 (3) 22 120 The results for the half-year ended 2 July 2005 are unaudited and were approved by the Board on 16 August 2005. The full year figures for 2004 included in this report do not constitute statutory accounts for the purpose of Section 240 of the Companies Act 1985. A copy of the Company's statutory accounts for the year ended 31 December 2004 has been delivered to the Registrar of Companies. The independent auditors' report on those accounts was unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985. Pro forma financial statements For the half-year ended 2 July 2005 based on unaudited figures As permitted by IFRS 1 'First-time Adoption of IFRS', the Group has elected to adopt IAS 32 and IAS 39 'Financial Instruments' prospectively from 1 January 2005, and comparative figures have not been restated. These standards have a significant impact on the Group and particularly affect the accounting for the Company's convertible redeemable preference shares, the hedging activities of the Group and those of the PFI/ PPP concessions, and the assets and income of the PFI/PPP concessions. Pro forma IFRS financial statements, which include the impact of IAS 32 and IAS 39 as if the Group had adopted them for the year ended 31 December 2004, are included below with the IFRS financial statements for the half-year 2005. These pro forma statements assume the full adoption of IAS 32 and IAS 39, and the application of hedge accounting where management believes it is appropriate to assume the relevant accounting criteria regarding documentation and effectiveness could have been met. The changes which the adoption of IAS 39 and the IFRIC draft interpretations in respect of PFI/PPP concessions would have made on the restated IFRS profit for the period and net assets if these standards had been adopted for the year ended 31 December 2004 are summarised below. 2004 first half 2004 year Profit before Profit Net Profit before Profit for Net taxation* for the assets taxation* the assets period period Â£m Â£m Â£m Â£m Â£m Â£m IFRS restated 53 53 120 122 260 302 Preference shares - Dividend restated as a finance cost (7) (7) - (13) (13) - - Additional accrued interest - - - (1) (1) - - Premium on buy-back restated as a finance cost - (5) - - (6) - - Liability element and deferred tax - - (113) - - (113) Derivatives - Group interest rate swaps (2) (1) (3) (1) (1) (3) - Group PFI/PPP concessions - - (10) - - (9) - JV and associate PFI/PPP concessions - - (31) - - (37) PFI/PPP financial assets - Group PFI/PPP concessions - - 35 - - 35 - JV and associate PFI/PPP concessions - - 52 - - 52 Goodwill adjustment arising from concession share purchase - 7 - - 7 - Pro forma IFRS 44 47 50 107 246 227 * Before exceptional items Pro forma Group income statement For the half-year ended 2 July 2005 based on unaudited figures Pro forma IFRS including IAS 32 and IAS 39 2005 2004 2004 first first half year half Before Except- Before Before exceptional ional exceptional Exceptional exceptional Exceptional items items Total items items Total items items Total Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Revenue including share of joint ventures and associates 2,308 - 2,308 2,026 - 2,026 4,239 - 4,239 Share of revenue of joint ventures and associates (494) - (494) (334) - (334) (749) - (749) Group revenue 1,814 - 1,814 1,692 - 1,692 3,490 - 3,490 Group operating profit 24 - 24 29 10 39 58 5 63 Share of results of joint ventures and associates 19 24 43 13 - 13 36 - 36 Profit from operations 43 24 67 42 10 52 94 5 99 Investment income 29 - 29 26 - 26 56 - 56 Finance costs (20) (9) (29) (24) (5) (29) (43) (6) (49) Profit before taxation 52 15 67 44 5 49 107 (1) 106 Taxation (12) 2 (10) (8) (1) (9) (23) (5) (28) Profit for the period from continuing operations 40 17 57 36 4 40 84 (6) 78 Profit for the period from discontinued operations - - - 7 - 7 8 160 168 Profit for the period attributable to equity shareholders 40 17 57 43 4 47 92 154 246 2005 2004 2004 first first year half half Basic earnings per pence pence pence ordinary share - Continuing operations 13.4 9.3 18.6 - Discontinued operations - 1.6 40.1 13.4 10.9 58.7 Exceptional items (4.1) (0.8) (36.6) Adjusted earnings per share 9.3 10.1 22.1 Pro forma Group balance sheet At 2 July 2005 based on unaudited figures Pro forma IFRS including IAS 32 and IAS 39 2005 2004 2004 first first year half half Â£m Â£m Â£m Non-current assets Goodwill 276 281 274 Property, plant and equipment 156 146 149 Investments in joint ventures and associates 252 158 204 Investments 42 36 42 PFI/PPP financial assets 356 313 340 Deferred tax assets 64 78 64 Trade and other receivables 52 44 41 1,198 1,056 1,114 Current assets Inventories 58 53 50 Due from customers for contract work 267 228 218 Derivative financial instruments 1 - - Trade and other receivables 520 590 563 Cash and cash equivalents - PFI/PPP subsidiaries 23 39 30 - other 306 197 388 1,175 1,107 1,249 Non-current assets classified as held for sale - 57 - Total assets 2,373 2,220 2,363 Current liabilities Trade and other payables (983) (993) (946) Due to customers for contract work (251) (206) (264) Derivative financial instruments - PFI/PPP subsidiaries (14) (14) (13) - other (4) (4) (4) Current tax liabilities (31) (42) (38) Borrowings - PFI/PPP non-recourse term loans (14) (13) (13) - other (7) (9) (15) (1,304) (1,281) (1,293) Non-current liabilities Borrowings - PFI/PPP non-recourse term loans (256) (264) (261) - other - (67) (62) Liability component of preference shares (99) (103) (103) Trade and other payables (68) (72) (58) Deferred tax liabilities (2) (1) (2) Retirement benefit obligations (256) (255) (254) Provisions (111) (113) (103) (792) (875) (843) Liabilities directly associated with non-current assets classified as held for sale - (14) - Total liabilities (2,096) (2,170) (2,136) Net assets 277 50 227 Capital and reserves Called-up share capital 213 211 212 Share premium account 24 12 15 Equity component of preference shares 18 19 19 Special reserve 178 185 181 Other reserves (156) (377) (200) Equity 277 50 227 Pro forma segmental analysis For the period ended 26 June 2004 Performance by Building, Civil and activity: building specialist Rail management engineering engineering Investments and and and and Corporate services services services developments costs Total Â£m Â£m Â£m Â£m Â£m Â£m Group revenue 690 586 374 42 - 1,692 Group operating profit 12 5 25 (3) (10) 29 Share of results of joint ventures and associates 2 3 (2) 10 - 13 Profit from operations before exceptional items 14 8 23 7 (10) 42 Exceptional items - - 3 7 - 10 Profit from operations 14 8 26 14 (10) 52 Investment income 26 Finance costs (29) Profit before taxation 49 Performance by Europe North Other Total geographic origin: America Â£m Â£m Â£m Â£m Group revenue 1,518 172 2 1,692 Profit from operations before exceptional items 61 (18) (1) 42 Exceptional items 10 - - 10 Profit from operations 71 (18) (1) 52 For the year ended 31 December 2004 Performance by Building, Civil and activity: building specialist Rail management engineering engineering Investments and and and and Corporate services services services developments costs Total Â£m Â£m Â£m Â£m Â£m Â£m Group revenue 1,468 1,144 800 78 - 3,490 Group operating profit 32 7 45 (9) (17) 58 Share of results of joint ventures and associates 2 9 (1) 26 - 36 Profit from operations before exceptional items 34 16 44 17 (17) 94 Exceptional items - 1 (3) 7 - 5 Profit from operations 34 17 41 24 (17) 99 Investment income 56 Finance costs (49) Profit before taxation 106 Performance by Europe North Other Total geographic origin: America Â£m Â£m Â£m Â£m Group revenue 3,107 377 6 3,490 Profit from operations before exceptional items 137 (45) 2 94 Exceptional items 22 (18) 1 5 Profit from operations 159 (63) 3 99 This information is provided by RNS The company news service from the London Stock Exchange FFMMSISEFA

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Monday, 22nd July 2024

COMPANIES COVERED:

EZJ OCDO HMSO

Airlines lose altitude after profit update from Ryanair, Hammerson jumps as the company plans capital return to investors and Ocado finds favour off new technology order for US partner.

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Latest directors dealings

53 minutes ago Coca-Cola Europacific Partners (DI)
1 hour ago Europa Oil & Gas (Holdings)
1 hour ago Ninety One
1 hour ago Fusion Antibodies
1 hour ago North American Income Trust (The)

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