Annual Report and Accounts 2020
We’re driving the transformation of our industry to meet the challenges of the future
The 2020 results highlight a record year end order book and net cash, with capacity for enhanced returns.
Group highlights
Underlying revenue¹
£8.6bn
Number of employees
26,000
Underlying profit before tax
£36m
Directors’ valuation Investments portfolio
£1.09bn
Order book¹
£9.1bn
£5.2bn
£2.1bn
UNITED KINGDOM
UNITED STATES
HONG KONG
£16.4bn
GROUP ORDER BOOK
¹ Including share of joint ventures and associates, before non-underlying items
Magic Moments
During 2020, our people and partners worked hard to keep the wheels of the economy turning, transport networks moving, communities connected and essential services running.
Here are some of our employees' Magic Moments photos, you can find more on Instagram.
More Magic Moments
Throughout the pandemic, we have protected the Group’s strengths, supported our stakeholders and held firm to our disciplines. That we achieved this while exceeding our own targets for net cash demonstrates Balfour Beatty’s resilience and the dedication of our people and partners.
Our leading positions in large growing infrastructure and construction markets, record year end order book and £1.1 billion Investments portfolio provide confidence in future cash generation. This underpins our new capital allocation framework which demonstrates Balfour Beatty’s commitment to deliver enhanced returns to shareholders.
Group Chief Executive
Leo Quinn
Group Chief Executive’s review
Our strategy: Build to Last
Launched in 2015, Build to Last is our strategy for continuous improvement.
It is the day-to-day guide we use to uphold our purpose, and underpins everything we do.
Build to Last is fundamental to how we’re building a market-leading Balfour Beatty for the next 100 years. It’s our platform for sustainable growth, productivity, inclusive talent – all ensuring the best capability to deliver on our promises and our enduring commitment to Zero Harm.
The Build to Last strategy is measured against our five values – Lean, Expert, Trusted, Safe and Sustainable.
Lean
Expert
Trusted
We create value for our customers and drive continuous improvement
Our highly skilled colleagues and partners set us apart
We deliver on our promises and we do the right thing
Delivering Build to Last
Building New Futures
In the following sections, discover Balfour Beatty’s approach to developing and leveraging its capabilities and how the Group is creating value for all stakeholders through continuous improvement as well as encouraging and supporting employees to develop a positive culture.
Our KPIs
£581m
NET CASH (£m)
£51m
UNDERLYING PROFIT FROM CONTINUING OPERATIONS (£m)
2019: £512m
2019: £221m
2019: 66%
2019: 94%
75%
Our KPI
EMPLOYEE ENGAGEMENT INDEX (%)
95%
CUSTOMER SATISFACTION AVERAGE (%)
Our KPI
We make safety personal
We act responsibly to protect and enhance our planet and society
Safe
Sustainable
2019: 0.14
2019: 20.3 tCO
0.10
Our KPI
Our KPI
LOST TIME INJURY RATE
18.8
TOTAL SCOPE 1 & 2 EMISSIONS (tCO
excluding non-recourse borrowings
excluding international joint ventures
Leading in
our markets
We discuss macro trends and opportunities in our chosen markets, the way we operate and how we create value for all our stakeholders as well as the cutting edge solutions we are leveraging to meet our customers’ challenges.
Leading in our markets
Market review
Business model
Stakeholder value
Innovation
Construction Services
Our three operating divisions outline their key achievements throughout 2020 and how they are delivering our Build to Last strategy. We also look at our Investments portfolio in more detail.
Expert capabilities
Expert
capabilities
Support Services
Infrastructure Investments
Directors’ valuation of the Investments portfolio
Building a
positive culture
Health, safety and wellbeing
Our disciplined contracting is further strengthened by our approach to building the right culture – where people are encouraged and supported to always do the right thing, achieve high performance and make a positive difference, every day.
Building a positive culture
Business integrity
Sustainability
Our people
Risk management
Our response to COVID-19
Our experts have been helping keep the wheels of the economy turning, transport networks moving, communities connected and essential services running during COVID-19.
Whilst far reaching in its impact on the Group’s operations, the COVID-19 pandemic has proven the resilience of Balfour Beatty’s Build to Last strategy.
Across its US, UK and Hong Kong operations, the Group reacted swiftly and decisively to COVID-19 with a clear strategy to:
Keep people safe
Continue to build and maintain the infrastructure economies and the public rely on
Keep cash flowing through the supply chain
Support employees, whether
on-site, working remotely or furloughed
Our response to COVID-19
Focused on growing markets
Balfour Beatty operates in a number of carefully selected markets, based on level of opportunity and ability to outperform its competitors.
Projected growth of Balfour Beatty’s chosen markets is shown opposite.
2024
+42%
2020
2019
£43.3bn
£30.5bn
£32.0bn
United Kingdom
United States
2024
2020
2019
+23%
US$324bn
US$264bn
US$315bn
Hong Kong
2024
2020
2019
+5%
HK$163bn
HK$155bn
Market review
HK$143bn
Business model
Multi-disciplinary collaboration is core to Balfour Beatty’s identity; our Construction Services, Support Services and Infrastructure Investments teams work closely together to ensure high-quality outcomes for our stakeholders.
infrastructure
investments (II)
A proven track record of developing and financing projects.
CONSTRUCTION
SERVICES (CS)
We manage strong construction businesses in the UK, US and
Hong Kong
SUPPORT
SERVICES (SS)
We maintain, upgrade and manage vital services across
the power transmission,
utilities, road and
rail sectors.
Knowledge transfer
Delivery skills support investment opportunities
Profitable work for construction business
Cross-selling across customer base
Business model
Sharing the value we create
In striving to achieve its purpose of Building New Futures, Balfour Beatty touches the lives of many people. Working with its stakeholders across the industry and beyond, the Group continues to innovate, lead the market through driving change, shape the debate and inspire a new generation of talent to be the change-makers of tomorrow.
Collaborative and long-term mutually beneficial relationships with our customers are the foundation of our success.
Customers
Talented and engaged employees committed to upholding our values, enable us to deliver on our Build to Last strategy, ensuring we win the best and most exciting projects and continue to build a great place to work.
Employees
Our many supply chain partners, large and small, are an invaluable resource fundamental to the successful delivery of all of our projects. We also work with trusted partners in a number of long-term joint ventures which are critical to our success.
Supply chain and strategic partners
Our activities can have a lasting impact on the communities in which we operate – we strive to leave a lasting legacy.
Communities
Public policy, laws and regulations define the business environment in which Balfour Beatty operates. Governments – and their associated bodies – are also Balfour Beatty’s largest customers.
Governments
Shareholders are the owners of Balfour Beatty. The Board places great importance on having positive relationships with all shareholders and seeks to ensure there is an appropriate level of dialogue with them.
Shareholders
Stakeholder value
Our Building New Futures sustainability strategy guides our approach to help ensure the Group leaves a positive legacy for the people we work with, the communities we work in, and the world in which we operate.
Sustainability highlights
Tonnes of Scope 1 & 2 CO
18.8
Reduction in tonnes of tCO
54.7%
Waste avoided from landfill
98.2%
UK average Considerate Constructors score
41.8
Total raised by employees in charitable donations
£721,939
Direct donations from the Company
£626,105
UK earn and learn workforce
6.0%
Sustainability
As a member of The 5% Club, a dynamic movement of employers committed to ‘earn & learn’ roles as part of ensuring Britain’s social mobility and shared prosperity, we already exceed our charter promise to dedicate 5% of our employee numbers to such roles.
In support of our commitment to The 5% Club, which was founded by our Group Chief Executive Leo Quinn, we made a public declaration to a c.30% increase in our UK 2020 apprentice, graduate and trainee recruitment in comparison to the company’s 2019 intake levels.
The 5% Club
4.6%
2015
4.3%
5.3%
5.6%
5.4%
6.0%
2017
2018
2019
2020
Balfour Beatty’s operations recovered steadily through the second half of 2020. Today, all the Group’s sites are open and operating safely in accordance with local regulations.
Chief Financial Officer
Philip Harrison
Chief Financial Officer’s review
The following are financial performance measures which are considered most relevant to the Group and used to manage the Group’s performance.
Measuring financial performance
2017
2018
2019
2020
2016
8,234
7,802
8,405
8,587
2017
2018
2019
2020
196
205
221
51
CONTINUING UNDERLYING PROFIT FROM OPERATIONS (PFO) £m
2017
2018
2019
2020
20.9
26.3
26.7
3.7
CONTINUING UNDERLYING EARNINGS PER SHARE (BASIC) Pence
CONTINUING UNDERLYING REVENUE¹ £m
2017
2018
2019
2020
11.4
12.6
14.3
16.4
ORDER BOOK¹ £bn
2017
2018
2019
2020
6,916
6,634
7,313
7,320
STATUTORY REVENUE £m
2017
2018
2019
2020
3.6
4.8
2.1
1.5
DIVIDENDS PER SHARE Pence
2017
2018
2019
2020
168
135
133
30
STATUTORY PROFIT FOR THE YEAR £m
2017
2018
2019
2020
24.7
19.7
19.0
4.4
STATUTORY EARNINGS PER SHARE (BASIC) Pence
The Board acted quickly and decisively in response to the challenges posed by the COVID-19 pandemic, ensuring decisions and actions were taken to promote the long-term sustainable success of the Company.
Group Chair
Philip Aiken AM
Governance
Group Chair introduction
Governance highlights
Promoting the long-term, sustainable success of the Company
Establishing the Company’s purpose, values and vision supports the Board’s active promotion of a positive culture. Consideration of stakeholder interests is a key cornerstone of the Board’s
decision-making process.
Processes and procedures are in place to ensure that there is an appropriate balance of Board members who are sufficiently supported and have the necessary skills, experience and independence to discharge their duties as Directors.
The Board is the principal decision-making body of the Company and each Director has specific responsibilities depending on their individual role. The day-to-day operation of the Group is formally delegated by the Board to the Group Chief Executive.
Board leadership and Company purpose
Key statutory and regulatory disclosures are made by the Board on an annual basis to ensure compliance with all applicable requirements.
The Board has delegated authority on specific governance matters to its Committees: Nomination Committee, Audit and Risk Committee, Remuneration Committee and Safety and Sustainability Committee.
Directors’ report
Committee reports
Division of responsibilities
Composition, succession and evaluation
Governance
Maintaining a strong Board
Board of Directors
Remuneration
LTIR
tCO
COVID-19 best practice microsite
The Balfour Beatty handling of the COVID-19 situation is impeccable and unsurpassed.
Niccolo Barattieri di San Pietro
Chief Executive Officer, Northacre
How our Group works together
Building New Futures
Our commitment
% of our UK workforce in earn and learn positions
¹ Including share of joint ventures and associates, before non-underlying items
Financial statements
The Company’s approach to remuneration seeks to deliver a robust link between strategy, reward and performance and to ensure it is able to attract, retain and motivate key executives to deliver strong sustainable business performance.
The Directors have skills and experience relevant to the sector in which the Group operates in order to effectively set the strategic direction and purpose of the Group.
e
2
2
per £m revenue
revenue in 2020
Tonnes of Scope 1 & 2 CO
2
e/£m
e
revenue against 2010 baseline
2
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PHOTO GALLERY
Hong Kong: Central Kowloon Route - buildings, mechanical and electrical works, Highways Department, HKSAR Government. Photo Credit: Lee Ho Hang
US: Thunderbird flyover over the Pavilion Penn Medicine project. Photo credit: Joseph Ebert
Hong Kong: Central Kowloon Route - Kai Tak West, Highways Department, HKSAR Government. Photo credit: Lunggy Fung
UK: Inveraray to Crossaig project, Scottish Hydro Electric Transmission (SSEN). Photo credit: Adrian Smith
US: Balfour Beatty’s San Mateo office. Photo credit: Robera Bilata
UK: Regent Street bridge lift, Leeds City Council.
East Slope Residences, UK
Balfour Beatty financed, constructed and is operating a new on-campus student accommodation development for University of Sussex, providing rooms for over 2,000 students.
Los Angeles Airport Automated People Mover, US
Balfour Beatty, with its joint venture partners, is financing and constructing the US$1.95 billion project to develop a 2.25-mile above-ground airport transport system connecting passengers with airline terminals.
Littlebrook Substation, UK
As part of National Grid’s transformation programme, Balfour Beatty is replacing the high voltage Littlebrook substation. This project combines multiple aspects of the Group’s construction and support services capabilities, including ground engineering and power.
Our highly skilled colleagues and partners set us apart
Expert
Our KPI
EMPLOYEE ENGAGEMENT INDEX (%)
2019: 66%
e)
2
e
2019: 20.3 tCO
2
e
infrastructure
investments (II)
A proven track record of developing and financing projects.
Profitable work for construction business
Delivery skills support investment opportunities
PHOTO GALLERY
CONSTRUCTION
SERVICES (CS)
We manage strong construction businesses in the UK, US and
Hong Kong
Cross-selling across customer base
Knowledge transfer
SUPPORT
SERVICES (SS)
We maintain, upgrade and manage vital services across
the power transmission,
utilities, road and
rail sectors.
Chief Financial Officer
Philip Harrison
Group Chair
Philip Aiken AM
Group highlights
Magic Moments
Business model
Home
Group Chief Executive's review
Our strategy: Build to Last
Building New Futures
Our response to COVID-19
Focused on growing markets
Measuring financial performance
Sharing the value we create
Sustainability highlights
The 5% Club
Chief Financial Officer's review
Download centre
Group Chair's introduction
Governance highlights
Download centre
Governance highlights
Group Chair's introduction
Measuring financial performance
Chief Financial Officer's review
The 5% Club
Sustainability highlights
Sharing the value we create
Business model
Focused on growing markets
Our response to COVID-19
Building New Futures
Our strategy: Build to Last
Group Chief Executive's review
Magic Moments
Group highlights
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