5th Mar 2008 07:00
Balfour Beatty PLC05 March 2008 News Release PRESS RELEASE - 04/03/08 BALFOUR BEATTY PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 EXCELLENT PROGRESS IN BUILDING SHAREHOLDER VALUE Financial Summary 2007 2006 Increase Revenue including joint ventures and associates(1) £7,488m £5,506m 36% Pre-tax profit(1) - before exceptional items and amortisation £201m £136m 48%- after exceptional items and amortisation £157m £109m 44% Earnings per share - adjusted(2) 35.0p 27.3p 28%- basic 35.1p 21.2p 66%Financing - net cash before PFI/PPP subsidiaries (non-recourse) £374m £305m - net borrowings of PFI/PPP subsidiaries (non-recourse) £(61)m £(21)m (1) continuing operations (2) before exceptional items and amortisation of intangible assets, andincluding the pre-exceptional results of discontinued operations (3) from continuing operations, before exceptional items and amortisation ofintangible assets Highlights - Pre-tax profit(3) up by 48% to £201 million- Adjusted earnings per share(2) up by 28% to 35.0p- Cash generated from operations up by 29% at £281 million- Order book increased by 25% to £11.4 billion- Acquisition of Centex Construction significantly advances US strategy- GMH Military Housing acquisition to enhance US and PPP strategy- Good progress in other strategic acquisitions and investments- Final dividend of 6.9p, full-year dividend up 26% at 11.5p "2007 was a very good year for the Group, both in terms of financial performanceand progress made in pursuing our medium and long-term strategic objectives. Ourcash position and our order book also improved significantly. "We have record order books and an exceptionally strong pipeline of high-qualitynew work approaching contract. Our acquisitions will add substantially to ourearning power. We are confident that we will continue to make further goodprogress in 2008 and beyond." Sir David John, Chairman Ian Tyler, Chief Executive -------------------------------------------------------------------------------- News Release 5 March 2008 BALFOUR BEATTY PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 OVERVIEW 2007 was a very good year for the Group, both in terms of financial performanceand progress made in pursuing our medium and long-term strategic objectives. Ourcash position and our order book also improved significantly. We continued to enhance the earnings capacity of the Group. The acquisition ofCentex Construction (now Balfour Beatty Construction US) was a very importantstep in creating a major domestic business in the United States. This processhas continued with the agreement to acquire GMH Military Housing, announced inFebruary 2008. The acquisitions of Exeter International Airport, Cowlin andCovion, and a number of smaller acquisitions in rail technology and upstreamprofessional services further strengthened our business core. We are absolutely committed to the continuing delivery of the reliable,responsible growth that our shareholders have enjoyed over recent years. We areclear about our priorities for the further development of the business and havethe proven management capability to deliver. RESULTS Pre-tax profits(3) for the 12 months to 31 December 2007 were up 48% at£201 million (2006: £136 million). Adjusted earnings per ordinary share(2) wereup 28% at 35.0p (2006: 27.3p). Basic earnings per ordinary share stood at 35.1p(2006: 21.2p). The Board recommends a final dividend of 6.9p per ordinary share, making a totaldividend for the year of 11.5p (2006: 9.1p), an increase of 26%. Operating profits from continuing operations in the building sector increased by74%, in the engineering sector by 83% and in the rail sector by 16%. Reportedresults in the investments sector were down on 2006 as our investment inresources in markets outside the UK and our bidding activity increasedsignificantly. There were a number of exceptional items, resulting in a net exceptional profitof £7 million (2006: £25 million charge). Operating cash flow was, once again, strong and in line with profits. Year-endnet cash stood at £374 million (2006: £305 million), despite net acquisitionexpenditure of £106 million and before taking account of the consolidation of£61 million of non-recourse net debt held in PPP subsidiaries (2006: £21million). The year-end order book increased by 25% to £11.4 billion (2006: £9.1 billion),with almost £2 billion of further work at preferred bidder stage. Revenue from continuing operations, including the Group's share of jointventures and associates, at £7,488 million (2006: £5,506 million) was up by 36%. BUSINESS SECTOR PERFORMANCE Building, Building Management and Services Profits from operations before exceptional items and amortisation of intangibleassets in the building sector improved by 74% to £75 million (2006: £43million). Balfour Beatty Construction US contributed a first nine months' profitat better than anticipated levels, while very good progress was made across theboard in building construction, building services and facilities management inthe UK and in professional services in the US. We achieved our ambition to become a major player in the US buildingconstruction market through the acquisition of Balfour Beatty Construction US.This is a high-quality business operating in those state markets which enjoyedhigher than average growth and with a management culture and strategicobjectives highly compatible with Balfour Beatty. In the UK, our programme to extend our leading presence in regional UK buildingconstruction markets continued with the acquisition of Cowlin, which has astrong position in the south and south-west of England and in Wales. We alsoenhanced our offer to the outsourced services market with the acquisition ofCovion, a fast-growing integrated services business. UK public spending and private investor markets remain buoyant and conditions inour key US markets are also positive. Our high-quality, long-term order books,strong blue-chip customer relationships and current pipeline give us confidencein further substantial progress in the sector in 2008. Civil and Specialist Engineering and Services Profits from continuing operations before exceptional items and amortisation ofintangible assets in the engineering sector improved by 83% to £86 million(2006: £47 million). This reflects improvements across the board, withparticularly strong progress in the UK from the regional civil engineeringbusiness and the utility businesses and significantly improved performance fromGammon in South-East Asia, Balfour Beatty Dutco in Dubai and Balfour BeattyInfrastructure Inc (previously Balfour Beatty Construction Inc) in the US. In June, we completed the sale of our 24.5% interest in Devonport ManagementLimited (DML) to Babcock International. Long-term involvement in DML was notcore to our strategy and the sale, part of a wider rationalisation in theownership of the defence supply industry, represented excellent value toshareholders. Towards the end of the year, Balfour Beatty Utilities and Balfour Beatty PowerNetworks were merged to form Balfour Beatty Utility Solutions. Subsequentreorganisation has created a structure designed to optimise the service levelswhich the business offers to its UK utility customers. Our markets continue to offer substantial opportunity, with Dubai, Singapore andregional markets in the UK particularly buoyant and further improvement inperformance in the US is anticipated. We expect to see another year of goodprogress in the sector in 2008. Rail Engineering and Services Profits from operations before exceptional items and amortisation of intangibleassets in the rail sector improved by 16% to £44 million (2006: £38 million).Performance was good in all business streams in the UK, with our rail projects,renewals, track systems and plant businesses making progress in a largely flatmarket. Outside the UK, our international rail electrification and power supplybusiness continued to perform well and our performance in the US improved. The 2007 uncertainties for our rail business arising from the entry into PPPadministration of Metronet and the stated intention of Network Rail to reduceits supply base for rail renewals from six to four were resolved positively,with confirmation of our ongoing role on both the underground and overgroundnetworks. We continued to strengthen our market position with acquisitions in systemstechnology and in the Swedish market, and the formation of new signalling jointventures in both the UK and Germany. The UK business was reorganised better tomatch evolving customer requirements. During 2007, our rail business operated in largely flat markets, which are notexpected to grow during 2008. There are now, however, clear signs of medium-termimprovement in many of our principal markets. The stimulus of the UK GovernmentWhite Paper and the confirmation of the Thameslink and Crossrail projects createthe best market outlook in the UK for some years. Investment in mass transitsystems and high-speed rail links around the world is growing and major projectbidding opportunities are increasing. Investments Profits from continuing operations before exceptional items in the investmentssector were £16 million (2006: £24 million). This reflected good underlyingconcession performance, but also substantial and increasing investment indeveloping our PPP operations in the US, Germany and South-East Asia, in biddingfor projects in these markets and for non-PPP assets. Core UK PPP growth continued. Five PPP projects reached financial close andpreferred bidder status was achieved on three UK projects, namely Fife Hospital,Islington Schools and the Carlisle Northern Distributor Road. Barking Power again performed satisfactorily, with profits in line with those of2006. The strategic extension of our investment business into non-PPP investments andPPP markets outside the UK was marked by the completion of our acquisition ofExeter International Airport and the award of preferred bidder status on ourfirst non-UK PPP project - the £90 million Institute of Technical Education inSingapore. In July, the Metronet concessions for the London Underground PPP, in which wehad a 20% interest, entered PPP administration. The London Underground PPP wasunique and we do not believe that any lasting negative impact on the PPP marketwill arise as a result of Metronet's administration. The UK PPP market remains buoyant and is expected to continue to produce asteady flow of opportunities. In the US, the road and rail transport sector isproving slow to take off, but accommodation markets look very promising. Ourinvestment in resources to exploit new PPP markets and in bidding projects isaccelerating, the costs of which will impact reported results in this segment in2008. EXCEPTIONAL ITEMS The write-off of our investment in Metronet and other consequential write-offsamounted to £95 million post-tax. These were more than offset by credits arisingfrom the sale of our 24.5% interest in Devonport Management Limited(£57 million) and the crystallisation of tax benefits in the US following theacquisition of Balfour Beatty Construction US (£51 million). In addition, othersmall exceptional items netted to a £6 million charge, resulting in a net exceptional profit of £7 million. STRATEGY AND ACQUISITIONS Good progress was made in pursuing the Group's medium-term growth strategy whichcentres on the expansion of its privately financed project business in the UKand overseas, further expansion of its professional and technical servicesbusiness and the broadening of its regional contracting base in the UK. We alsomade very significant progress in our longer-term objective of creatingsubstantial domestic businesses on our successful UK model in selected marketsoutside the UK, particularly the US. Private finance In the period since the UK Government first turned to private finance to addmomentum to its public service agenda, Balfour Beatty has become a leader in thefield. The expertise which has been developed in the Group, as a result,represents an ideal base from which to extend our reach into otherinfrastructure investment markets both in the UK and internationally. The acquisition of Exeter International Airport for £60 million was completed inJanuary 2007. This constitutes a first step in our strategy of investing innon-PPP infrastructure assets in the UK. Exeter International is one of the UK'sfastest-growing regional airports, with passenger numbers forecast to double by2016. Subsequently, 40% of the £30 million equity invested in this asset hasbeen sold to Galaxy, the international transportation equity investment fund,for £12 million. We have significant expertise in the design and construction ofairport assets and are currently developing a master plan for the long-termdevelopment of the airport. The completion of the acquisition of GMH Military Housing will add a substantialUS investment base to our portfolio and will increase our potential to pursuePPP opportunities in a growth market. Professional and technical services Balfour Beatty Management, our UK-based professional and technical servicesbusiness, has grown substantially in 2007. This puts us in an increasinglypowerful position to satisfy our long-term relationship customers' demand for ahigher-level, integrated presence at the top of their supply chain and to engagein design, project planning and programme management in the broader marketplace. Three small acquisitions, two in the UK and one in the US, were completed toextend the scope and coverage of Balfour Beatty Management and HeeryInternational respectively. Balfour Beatty Management is now an integral part ofBalfour Beatty's major UK project bids and was instrumental in securing majorprojects for BAA, National Grid and British Energy during the year. UK infrastructure We make amongst our best and most reliable margins where we lead the market ininfrastructure provision in the UK's regions. These markets are delivering andpromise further vigorous demand growth as investment in new buildings,affordable housing, roads, bridges and other transport facilities continues toincrease. In August, we acquired Cowlin, a high-quality building and refurbishmentcontractor based in Bristol, for £53 million. Cowlin provides a strong,established presence in the south and south-west of England and in Wales. Theacquisition provides the Group with additional coverage in a UK building marketwhich is growing significantly, underpinned by government spending oninfrastructure and by buoyant private sector investments. International markets To sustain strong growth in earnings and shareholder value in the long term,Balfour Beatty must establish substantial contracting and investment businessesoutside the UK. Our primary objective is to create, in the US, amulti-disciplinary business with similar characteristics to our successful UKmodel, adapted to local conditions, with the capacity to integrate financing, professional and technical services, project delivery and long-term support services. In March 2007, we completed the acquisition of Balfour Beatty Construction USfor a cash consideration of £106 million, net of cash acquired. This acquisitionof a top-tier building construction and construction management business, wellplaced in a number of growth markets, with annual revenues in excess of $2billion and with highly compatible management processes and culture, is a majorstep forward in our long-term US strategy. The acquisition provides strongmarket presence and substantial potential to exploit new growth opportunities inconjunction with our established US businesses. In February 2008, we announced that we had agreed to acquire GMH MilitaryHousing for a cash consideration of $350 million, subject to regulatory andother clearances. GMH, a leader in its market, is responsible for thedevelopment, renovation, financing, operation and management of militaryaccommodation projects for the US Army, Navy and Air Force. It has, to date,been awarded 15 concession projects covering over 30,000 family units at 42bases across the US. Other acquisitions In October, we acquired Covion, the facilities infrastructure services business,for £33 million. Covion provides integrated packages to manufacturing facilitiesand the corporate business sector and is one of the fastest growing companies inthe UK. The acquisition has increased our penetration of the private sectorfacilities management market and broadens and deepens our range of expertise intechnology, property and people-related services. This provides Haden BuildingManagement, which is already growing strongly, with a significantly enhancedservice offering. A number of small acquisitions and new joint venture arrangements were alsocompleted in the rail sector at a total cost of £12 million. THE BOARD Jim Cohen retired from the Board on 18 February 2007. He took leadresponsibility for the development of both our UK PPP business and ourinternational rail operations and left with the Board's sincere gratitude andbest wishes. On 19 February 2008, it was announced that Anthony Rabin will become DeputyChief Executive with effect from 31 March 2008, with responsibility for themanagement and development of our international infrastructure investmentbusiness, which is of increasing strategic importance to the Group. DuncanMagrath will become Finance Director and join the Board, having been DeputyFinance Director since he joined the Group in 2006. On 26 February 2008, it was announced that Sir David John is to retire asChairman after the AGM on 15 May 2008. He will be succeeded by Steven Marshall,who has been a non-executive Director since 2005. During Sir David's period of five years as Chairman, the Group's revenues andearnings have doubled. He is owed a great debt of thanks by the Company for hisuntiring work as Chairman. SAFETY AND ENVIRONMENT The Group's Accident Frequency Rate reduced by a further 16% in 2007, continuingthe positive trend of recent years, despite very significant increases in thenumbers of people employed by the Group and for whom we are responsible onproject sites. We also continued to make good progress in minimising ourenvironmental impacts. OUTLOOK We have record order books and an exceptionally strong pipeline of high-qualitynew work approaching contract. Our acquisitions will add substantially to ourearning power. We are confident that we will continue to make further good progress in 2008 andbeyond. ENDS Enquiries to:- Ian Tyler, Chief Executive Anthony Rabin, Finance Director Tim Sharp, Director of Corporate Communications Tel: 020 7216 6800 www.balfourbeatty.com * * * * * * * * Balfour Beatty is a world-class engineering, construction, services andinvestment business, well-positioned in infrastructure markets which offersignificant long-term growth. We work in partnership with sophisticatedcustomers who value the highest levels of quality, safety and technicalexpertise. Our skills are applied in appropriate combinations to meet individualcustomer need. Balfour Beatty's financial position, with significant net cashand with strong operating cash flows, offers continuing flexibility to addadditional capacity and expertise to the business mix and to make appropriateinvestments in PPP and other long-term growth opportunities. * * * * * * * * High resolution photographs are available to the media free of charge atwww.newscast.co.uk (tel +44 (0)20 7608 1000). A presentation to analysts and investors will be made at ABN AMRO,250 Bishopsgate, London, EC2 at 10.30 am. There will be a live webcast of this presentation on www.balfourbeatty.com andthe slides presented will be available on the website from 10.30 am. Group income statementFor the year ended 31 December 2007 2007 2006 Notes Before Exceptional Total Before Exceptional Total exceptional items* exceptional items* items* (Note 5) items* Note 5) £m £m £m £m £m £mContinuing operationsRevenue including share of joint ventures and associates 7,488 - 7,488 5,506 - 5,506 Share of revenue ofjoint ventures and associates 13 (1,022) - (1,022) (1,019) - (1,019) Group revenue 6,466 - 6,466 4,487 - 4,487Cost of sales (5,959) (33) (5,992) (4,121) - (4,121) Gross profit 507 (33) 474 366 - 366Net operating expenses- amortisation of intangible assets - (9) (9) - (1) (1)- other (381) (6) (387) (286) (19) (305) Group operating profit 126 (48) 78 80 (20) 60Share of results ofjoint ventures and associates 13 65 6 71 48 - 48 Profit from operations 191 (42) 149 128 (20) 108Investment income 3 29 - 29 26 - 26Finance costs 4 (19) (2) (21) (18) (7) (25) Profit before taxation 201 (44) 157 136 (27) 109 Taxation 6 (53) 65 12 (35) 1 (34) Profit for the year fromcontinuing operations 148 21 169 101 (26) 75 (Loss)/profit for the yearfrom discontinued operations 7 2 (20) (18) 16 - 16 Profit for the year attributableto equity shareholders 150 1 151 117 (26) 91 * and amortisation of intangible assets (Note 12) 2007 2006 pence pence Basic earnings per ordinary share - continuing operations 8 39.3 17.6 - discontinued operations 8 (4.2) 3.6 35.1 21.2Diluted earnings perordinary share - continuing operations 8 39.0 17.4 - discontinued operations 8 (4.2) 3.6 34.8 21.0Dividends per ordinary shareproposed for the year 9 11.5 9.1 Group statement of recognised income and expenseFor the year ended 31 December 2007 Notes 2007 2006 £m £mActuarial gains on retirement benefit obligations 2 36PFI/PPP cash flow hedges - fair value revaluations (7) 32 - reclassified and reported in net profit 7 - PFI/PPP financial assets - fair value revaluations (26) (2) - reclassified and reported in net profit (3) - Changes in fair value of net investment hedges (4) 14Currency translation differences 7 (17)Tax on items taken directly to equity 5 (26) Net (expense)/income recognised directly in equity (19) 37Profit for the year from continuing operations 169 75(Loss)/profit for the year from discontinued operations (18) 16 Total recognised income for the year attributable to equity shareholders 17 132 128 Group balance sheetAt 31 December 2007 Notes 2007 2006 £m £mNon-current assetsIntangible assets - goodwill 11 694 427 - other 12 59 9 Property, plant and equipment 215 183Investments in joint ventures and associates 13 381 458Investments 57 46PFI/PPP financial assets 62 22Deferred tax assets 125 102Derivative financial instruments 3 2Trade and other receivables 77 50 1,673 1,299 Current assetsInventories 72 75Due from customers for contract work 338 252Derivative financial instruments 1 3Trade and other receivables 881 626Cash and cash equivalents - PFI / PPP subsidiaries 3 - - other 391 323 1,686 1,279 Total assets 3,359 2,578 Current liabilitiesTrade and other payables (1,718) (1,289)Due to customers for contract work (415) (265)Derivative financial instruments (6) (1)Current tax liabilities (7) (28)Borrowings - PFI / PPP non-recourse loans (3) - - other (16) (17) (2,165) (1,600)Non-current liabilitiesTrade and other payables (135) (77)Derivative financial instruments (6) -Borrowings - PFI/PPP non-recourse term loans (61) (21) - other (1) (1)Deferred tax liabilities (7) (5)Liability component of preference shares (87) (90)Retirement benefit obligations 16 (286) (288)Provisions (128) (109) (711) (591) Total liabilities (2,876) (2,191) Net assets 483 387 EquityCalled-up share capital 15 216 215Share premium account 17 52 43Equity component of preference shares 17 16 16Special reserve 17 164 169Share of joint ventures' and associates' reserves 17 178 243Other reserves 17 9 5Accumulated losses 17 (152) (304)Total equity 17 483 387 Group cash flow statementFor the year ended 31 December 2007 Notes 2007 2006 £m £mCash flows from operating activitiesCash generated from operations 18(a) 281 217Income taxes paid (24) (24)Net cash from operating activities 257 193 Cash flows from investing activitiesDividends received from joint ventures andassociates 83 24Interest received 26 29Acquisition of businesses, net of cash andcash equivalents acquired (198) (80)Purchase of property, plant and equipment (80) (57)Purchase of investments (11) (8)Investment in and loans made to jointventures and associates (50) (22) Investment in financial assets (39) (12)Disposal of businesses, net of cash and cash equivalents disposed 92 -Disposal of property, plant and equipment 9 9Net cash used in investing activities (168) (117) Cash flows from financing activitiesProceeds from issue of ordinary shares 5 6Purchase of ordinary shares (4) (3)Proceeds from new loans 42 35Repayment of loans (1) (27)Finance lease principal repayments - (1)Buy-back of preference shares (8) (19)Ordinary dividends paid (42) (52)Interest paid (7) (5)Preference dividends paid (11) (12)Net cash used in financing activities (26) (78) Net increase/(decrease) in cash and cash equivalents 63 (2) Effects of exchange rate changes 8 (6) Cash and cash equivalents at beginning of year 308 316 Cash and cash equivalents at end of year 18(b) 379 308 Notes 1 Basis of accounting The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation and with those parts of the Companies Act 1985 that are applicable to companies reporting under IFRS. The Group has applied all accounting standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee relevant to its operations and effective for accounting periods beginning on 1 January 2007. IAS 1 Presentation of Financial Statements (Revised 2007), IAS 23 Borrowing Costs (Revised 2007), IFRS 8 Operating Segments, IFRIC 12 Service Concession Arrangements, IFRIC 13 Customer Loyalty Programmes and IFRIC 14 IAS19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction were in issue at the date of authorisation of the financial statements but not yet effective. IAS 1 (Revised) and IFRS 8 affect presentation and disclosures and therefore are not anticipated to have any material impact on the financial statements of the Group. IFRIC 12 relates to the accounting for the Group's PFI/PPP concessions and would require certain assets constructed by certain of the concessions currently accounted for as "available-for-sale" financial assets to be accounted for as intangible assets. IFRIC 12 is not yet adopted for use by the European Union. The European Commission is currently preparing an effect study and an adoption decision is expected during 2008. IAS 23 (Revised), IFRIC 13 and IFRIC 14 will have no impact on the financial statements of the Group. The financial statements have been prepared using accounting policies which have been applied consistently throughout the year and the preceding year. 2 Segment analysis - continuing operations For the year ended 31 December 2007 Performance by Building, Civil and activity: building specialist Rail management engineering engineering and and and Corporate services services services Investments costs Total £m £m £m £m £m £m Group revenue 3,527 2,112 775 51 1 6,466 Group operating profit 75 63 43 (25) (30) 126 Share of results of joint ventures and associates - 23 1 41 - 65 Profit from operations before exceptional items and amortisation 75 86 44 16 (30) 191 Exceptional items (26) (9) 2 - - (33) Amortisation of intangible assets (6) (3) - - - (9) Profit from operations 43 74 46 16 (30) 149 Investment income 29 Finance costs (21) Profit before taxation 157 Performance by geographic North origin: Europe America Other* Total £m £m £m £m Group revenue 4,958 1,471 37 6,466 Profit from operations before exceptional items and amortisation 145 18 28 191 Exceptional items (27) (6) - (33) Amortisation of intangible assets (4) (5) - (9) Profit from operations 114 7 28 149 For the year ended 31 December 2006 Performance by Building, Civil and activity: building specialist Rail management engineering engineering and and and Corporate services services services Investments costs Total £m £m £m £m £m £m Group revenue 2,030 1,677 766 14 - 4,487 Group operating profit 42 46 35 (19) (24) 80 Share of results of joint ventures and associates 1 1 3 43 - 48 Profit from operations before exceptional items and amortisation 43 47 38 24 (24) 128 Exceptional items - (21) 2 - - (19) Amortisation of intangible assets - (1) - - - (1) Profit from operations 43 25 40 24 (24) 108 Investment income 26 Finance costs (25) Profit before taxation 109 Performance by geographic North origin: Europe America Other* Total £m £m £m £m Group revenue 3,893 572 22 4,487 Profit from operations before exceptional items and amortisation 125 (12) 15 128 Exceptional items (1) (18) - (19) Amortisation of intangible assets (1) - - (1) Profit from operations 123 (30) 15 108 * Other principally comprises the Group's operations in Hong Kong and Dubai. 3 Investment income 2007 2006 £m £m PFI/PPP non-recourse - interest on financial assets 2 1 PFI/PPP subordinated debt interest receivable 11 8 Other interest receivable and similar income 16 16 Gains on derivatives designated as hedges of net investments in foreign operations - 1 29 26 4 Finance costs 2007 2006 £m £m PFI/PPP non-recourse - other interest payable 2 1 Other interest payable - bank loans and overdrafts 3 3 - other loans 1 2 Losses on derivatives designated as hedges of net investments in foreign currencies 1 - Preference shares - finance cost 12 12 19 18 Exceptional items - premium on buy-back of preference shares 2 7 21 25 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 2007 on 1 July 2007 to holders of these shares on the register on 1 June 2007. A preference dividend of 5.375p gross (4.8375p net) per cumulative convertible redeemable preference share was paid in respect of the six months ended 31 December 2007 on 1 January 2008 to holders of these shares on the register on 23 November 2007. 5 Exceptional items and amortisation of intangible assets 2007 2006 Metronet Other Total Total £m £m £m £m(a) (Charged against)/credited to profit from operations Cost of sales - Metronet - contract losses (33) - (33) - Net operating expenses - North America integration and reorganisation costs - (6) (6) (2) - National Engineering and Contracting Company - impairment of goodwill - - - (16) - litigation settlements and fines - - - 2 - Birse Group integration costs - - - (3) Share of joint ventures - Metronet - contract profits 6 - 6 - and associates (27) (6) (33) (19) (b) Charged to finance costs - premium on buy-back of preference shares - (2) (2) (7) (Charged against)/credited to profit before taxation (27) (8) (35) (26) (c) Credited to taxation - tax on items above 9 2 11 1 - recognition of US deferred tax assets - 51 51 - Credited to/(charged against) profit from continuing operations (18) 45 27 (25) (d) (Charged against)/credited to profit from discontinued operations - profit on sale of operations - 57 57 - - Metronet - impairment of investment (87) - (87) - - tax thereon 10 - 10 - Exceptional items credited to/(charged against) profit for the year (95) 102 7 (25) Amortisation of intangible assets - (9) (9) (1) Tax thereon - 3 3 - Credited to/(charged against) profit for the year (95) 96 1 (26) (a) In 2007, as a result of the request by Metronet Rail BCV Ltd to the Arbiter for an Extraordinary Review of the incurred and forecast costs, his subsequent interim award, and the consequent appointment to both Metronet Rail CV Ltd and Metronet Rail SSL Ltd (collectively "Metronet") of a PPP Administrator, provision has been made for an estimate of the costs resulting from the administration of Metronet, including the impact on its contract with Trans4m Ltd, in which the Group owns 25% of the ordinary share capital and with which certain Group subsidiaries contract, and other direct contracts with Group subsidiaries. These costs include, where relevant, provision for winding down contracts, outstanding receivables and settlement of other trading items. In the US, costs of £3m incurred in the reorganisation and integration of Balfour Beatty Construction (formerly Centex Construction) acquired in the year have been charged against Group operating profit, together with costs of £2m (2006: £nil) incurred on the reorganisation of Balfour Beatty Rail Inc and further costs of £1m (2006: £2m) arising on the re-organisation of the central division of Balfour Beatty Infrastructure Inc (formerly Balfour Beatty Construction Inc). In 2006, as a result of unsatisfactory performance in the central division of Balfour Beatty Infrastructure Inc (formerly Balfour Beatty Construction Inc), the goodwill arising on the acquisition of National Engineering and Contracting Company was written off and charged against Group operating profit (£16m). The exceptional item credited to Group operating profit in 2006 (£2m) arose from the reduction in the fine (less associated costs) imposed on Balfour Beatty Rail Infrastructure Services Ltd in respect of the Hatfield derailment in October 2000. Costs incurred in the reorganisation and integration of Birse Group acquired in 2006 (£3m) were charged against Group operating profit. (b) The exceptional items charged against finance costs are the premium of £2m (2006: £7m) arising on the repurchase for cancellation of 5.0m (2006: 12.0m) preference shares at a cost of £8m (2006: £19m). (c) The exceptional items charged against profit from operations have given rise to a net tax credit of £11m (2006: £1m). As a result of the acquisition of Balfour Beatty Construction (formerly Centex Construction), the benefits of tax losses and other tax assets arising from temporary differences in the US have crystallised and have been recognised in full in accordance with IAS12, giving rise to an exceptional gain of £51m in 2007. (d) Approval of the sale of the Group's 24.5% interest in its associate, Devonport Management Ltd, was obtained from the Ministry of Defence on 26 June 2007, at which time this investment became held for sale. On 28 June 2007, the Group completed the sale of this investment for a total cash consideration of £86m, resulting in a gain on disposal of £57m, which has been credited to profit from discontinued operations. The carrying value of this investment at the date of sale was £27m and the costs associated with the disposal amounted to £2m. As a result of the appointment to Metronet of a PPP Administrator, the Group's investment in the Metronet concessions, including profits recognised in previous periods, has been written down to £nil. 6 Taxation 2007 2006 Before Exceptional Total Total exceptional items* items* £m £m £m £m UK current tax - corporation tax for the year at 30% (2006: 30%) 31 (9) 22 19 - double tax relief (6) - (6) (4) - adjustments in respect of previous periods (2) - (2) - 23 (9) 14 15 Foreign current tax - foreign tax on profits for the year 11 - 11 7 - adjustments in respect of previous periods 2 - 2 - 13 - 13 7 Total current tax 36 (9) 27 22 Deferred tax - UK 6 (1) 5 11 - foreign tax 11 (55) (44) 1 Total deferred tax 17 (56) (39) 12 Total tax (credit)/charge 53 (65) (12) 34 * and amortisation of intangible assets The Group tax charge above does not include any amounts for joint ventures and associates (see Note 13) or discontinued operations (see Note 7), whose results are disclosed in the income statement net of tax. In addition to the Group tax charge above is £5m of tax credited (2006: £26m charged) directly to equity, comprising a current tax credit of £1m (2006: £8m charge), a deferred tax charge of £3m (2006: £7m), and a credit in respect of joint ventures and associates of £7m (2006: £11m charge). Further, there is a credit of £10m (2006: £nil) which relates to tax on discontinued operations as disclosed in Note 7. The weighted average applicable tax rate is 33% (2006: 32%) based on profit before taxation, exceptional items and amortisation of intangible assets, excluding the results of joint ventures and associates. 7 Discontinued operations 2007 2006 EDAL DML Metronet Total Total £m £m £m £m £m Group revenue 3 - - 3 - Group share of revenue of joint ventures and associates - 55 142 197 346 Group operating profit (1) - - (1) 1 Group share of results of joint ventures and associates - 3 - 3 15 (1) 3 - 2 16 Profit on sale of operations - 57 - 57 - Impairment of investment - - (87) (87) - Taxation thereon - - 10 10 - (Loss)/profit for the year from discontinued operations (1) 60 (77) (18) 16 On 5 January 2007, the Group acquired a 100% indirect interest in Exeter and Devon Airport Ltd ("EDAL") with the intent of selling on a 40% equity interest. Consequently, from 5 January 2007 to 4 April 2007, when the 40% equity interest was sold, EDAL has been treated as an asset held for resale, and its results shown under discontinued operations. The Group's 24.5% interest in Devonport Management Ltd ("DML"), sold on 28 June 2007 and previously included in Civil and specialist engineering and services, has been classified as discontinued. The results of Metronet Rail BCV Holdings Ltd and Metronet Rail SSL Holdings Ltd ("Metronet") previously included in Investments have been classified as discontinued as a result of the appointment of a PPP Administrator to the concession companies on 18 July 2007. DML contributed £2m to the Group's cash generated from investing activities during the year (2006: £nil), excluding net proceeds of sale. Cash used in investing activities during 2007 in respect of Metronet was £32m (2006: £11m). EDAL used £1m cash from operating activities and £1m cash in financing activities during the year. 8 Earnings per ordinary share 2007 2006 Basic Diluted Basic Diluted £m £m £m £m Earnings - continuing operations 169 169 75 75 - discontinued operations (18) (18) 16 16 151 151 91 91 Exceptional items (7) 25 Amortisation of intangible assets 6 1 Adjusted earnings 150 117 Comprising: - continuing operations 148 101 - discontinued operations 2 16 150 117 m m m m Weighted average number of ordinary shares 430.0 433.7 427.1 431.0 pence pence pence pence Earnings per ordinary share - continuing operations 39.3 39.0 17.6 17.4 - discontinued operations (4.2) (4.2) 3.6 3.6 35.1 34.8 21.2 21.0 Exceptional items (1.6) 5.9 Amortisation of intangible assets 1.5 0.2 Adjusted earnings per ordinary share 35.0 27.3 Comprising: - continuing operations 34.4 23.7 - discontinued operations 0.6 3.6 35.0 27.3 The calculation of basic earnings is based on profit for the year attributable to equity shareholders. The weighted average number of ordinary shares used to calculate diluted earnings per ordinary 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 year. Adjusted earnings per ordinary share, before exceptional items and amortisation of intangible assets, and including the pre-exceptional results of discontinued operations, has been disclosed to give a clearer understanding of the Group's underlying trading performance. 9 Dividends on ordinary shares 2007 2006 Per share Amount Per share Amount pence £m pence £m Proposed dividends for the year: Interim - current year 4.6 20 3.9 17 Final - current year 6.9 30 5.2 22 11.5 50 9.1 39 Recognised dividends for the year: Final - prior year 22 20 Interim - current year 20 17 42 37 An interim dividend of 4.6p (2006: 3.9p) per ordinary share was paid on 12 December 2007. Subject to approval at the Annual General Meeting on 15 May 2008, the final 2007 dividend will be paid on 1 July 2008 to holders of ordinary shares on the register on 25 April 2008 by direct credit or, where no mandate has been given, by cheque posted on 24 June 2008 payable on 1 July 2008. These shares will be quoted ex-dividend on 23 April 2008. 10 Acquisitions On 5 January 2007, the Group invested £30.1m cash in Regional & City Airports (Exeter) Holdings Ltd ("RCAH"), which acquired a 100% interest in Exeter and Devon Airport Ltd, having entered into a put option agreement to dispose of a 40% interest in RCAH to Galaxy SARL ("Galaxy") for a cash consideration of £12.0m. The Group exercised this put option on 10 January 2007 and subsequently completed the sale of the 40% interest in RCAH to Galaxy on 4 April 2007. In the period 5 January 2007 to 4 April 2007, the Group's interest in RCAH was held as a non-current asset classified as held for sale, including £6.0m cash acquired and goodwill inherent in this transaction amounting to £39.2m. Due to the shareholders' agreement between Balfour Beatty and Galaxy requiring unanimity of agreement in respect of significant matters relating to the financial and operating policies of RCAH, the remaining 60% interest in RCAH has been accounted for as a joint venture. On 1 February 2007, the Group acquired the net assets of the Traffic Systems Division of SAAB AB in Sweden, for a cash consideration of £3.1m. The fair value of net assets acquired was £1.4m and goodwill arising was £1.7m. The goodwill recognised is attributable to the acquisition complementing the Group's rail electrification business in Sweden. On 30 March 2007, the Group acquired 100% of the issued share capital of Balfour Beatty Construction Group Inc (formerly Centex Construction Group Inc), a leading US building company, for an initial cash consideration of £191.0m, deferred consideration of £20.0m and costs of £1.4m. The fair value of net assets acquired was £34.4m and goodwill arising was £178.0m. The goodwill recognised is attributable to the acquisition strengthening the Group's position in the US building market. On 12 April 2007, the Group acquired 100% of the issued share capital of Bignell & Associates Ltd, a UK project management company, for an initial cash consideration of £0.5m and deferred consideration of £0.2m. The fair value of net assets acquired was £0.7m and goodwill arising was £nil. On 1 May 2007, the Group acquired 100% of the issued share capital of Sequeira & Gavarette Inc, a US design and programme management business, for an initial cash consideration of £2.4m, deferred consideration of £1.5m and costs of £0.2m. The fair value of net assets acquired was £0.6m and goodwill arising was £3.5m. The goodwill recognised is attributable to the acquisition complementing the Group's US project and programme management business. On 17 July 2007, the Group acquired 100% of the issued share capital of Chris Britton Consultancy Ltd, a UK consulting engineering company, for a cash consideration of £3.3m and costs of £0.1m. The fair value of net assets acquired was £0.9m and goodwill arising was £2.5m. The goodwill recognised is attributable to the acquisition strengthening the Group's road management and maintenance business. On 17 July 2007, the Group acquired 100% of the issued share capital of Carillion Rail Sverige AB, a Swedish rail contracting company, for a cash consideration of £3.3m. The provisional fair value of net assets acquired was £3.3m and provisional goodwill arising was £nil, pending finalisation of the post-acquisition review of the fair value of the net assets. On 31 July 2007, the Group acquired the business and assets of NAP Partnership LLP, a UK cost and contract consultancy, for an initial cash consideration of £4.3m, deferred consideration of £0.2m and costs of £0.1m. The fair value of net assets acquired was £3.7m and goodwill arising was £0.9m. The goodwill arising is attributable to the acquisition strengthening the regional presence of the Group's professional and technical services business. On 29 August 2007, the Group acquired 100% of the issued share capital of Cowlin Group Ltd, a leading UK regional building business, for a cash consideration of £51.6m and costs of £1.4m. The fair value of net assets acquired was £7.2m and goodwill arising was £45.8m. The goodwill recognised is attributable to the acquisition strengthening the Group's position in the UK building market. On 19 September 2007, the Group acquired 100% of the issued share capital of Laser Rail Ltd, a leading UK specialist rail asset monitoring and management business, for a cash consideration of £4.8m and costs of £0.1m. The fair value of net assets acquired was £2.7m and goodwill arising was £2.2m. The goodwill recognised is attributable to the acquisition strengthening the Group's position in the rail asset management market. On 17 October 2007, the Group acquired 100% of the issued share capital of Covion Holdings Ltd, a UK integrated facilities infrastructure services business, for a cash consideration of £32.7m and costs of £0.3m. The provisional fair value of net assets acquired was £4.5m and provisional goodwill arising was £28.5m, pending finalisation of the post-acquisition review of the fair value of the net assets. The goodwill recognised is attributable to the acquisition strengthening the Group's position in the private sector facilities management market. The fair value of the net assets acquired, consideration paid and goodwill arising on these transactions were: Centex Construction Other Total (now Balfour Beatty Construction) Book Fair value Fair Book Fair value Fair Book Fair value Fair value of adjust-ments value of value of adjust-ments value of value of adjust-ments value of assets assets assets assets assets assets acquired acquired acquired acquired acquired acquired £m £m £m £m £m £m £m £m £mNet assets acquired: Intangible assets - other - 38 38 - 21 21 - 59 59 Property, plant and equipment 4 - 4 4 (1) 3 8 (1) 7 Assets held for sale - - - 30 - 30 30 - 30 Working capital (92) (4) (96) (6) (11) (17) (98) (15) (113) Retirement benefit obligations - - - (1) - (1) (1) - (1) Provisions (18) (1) (19) (1) 1 - (19) - (19)Current tax liabilities - - - (1) 3 2 (1) 3 2 Deferred taxation - 1 1 (1) (4) (5) (1) (3) (4) Cash and cash equivalents 106 - 106 23 - 23 129 - 129 - 34 34 47 9 56 47 43 90 Goodwill 178 85 263 212 141 353Satisfied by: Cash consideration 191 136 327 Costs incurred 1 3 4 192 139 331Deferred consideration 20 2 22 212 141 353 Fair value adjustments include intangible assets recognised in respect of brand names, customer contracts and relationships, adjustments to harmonise accounting policies for the recognition of profit on long-termcontracts and provision for onerous commitments. In 2007, £2m deferred consideration was paid in respect of acquisitions completed in earlier years. Centex Construction (now Balfour Beatty Construction Group Inc) earned revenues of £879m and profits from operations of £18m in the period since acquisition. Other acquired businesses earned revenues of £108m andprofits from operations of £nil in the period since acquisition. 11 Intangible assets - goodwill Accumulated impairment Carrying Cost losses amount £m £m £m At 1 January 2007 464 (37) 427 Exchange and other adjustments 3 1 4 Businesses acquired (see Note 10) 263 - 263 At 31 December 2007 730 (36) 694 12 Intangible assets - other Accumulated Carrying Cost amortisation amount £m £m £m At 1 January 2007 10 (1) 9 Businesses acquired (see Note 10) 59 - 59 Amortisation charge for the year - (9) (9) At 31 December 2007 69 (10) 59 Other intangible assets comprise customer contracts, customer relationships and brand names. 13 Joint ventures and associates Share of results and net assets of joint ventures and associates 2007 Building, Civil and Rail Investments building specialist engineering management engineering and and and services services services PFI/PPP Infra- Total structure £m £m £m £m £m £m Revenue 113 556 10 275 68 1,022 Operating profit before exceptional items - 23 1 5 18 47 Investment income - 3 - 113 2 118 Finance costs - - - (78) (5) (83) Profit before taxation and exceptional items - 26 1 40 15 82 Taxation - (3) - (11) (3) (17) Exceptional items - 6 - - - 6 Profit after taxation - continuing operations - 29 1 29 12 71 Profit after taxation - discontinued operations 3 Profit after taxation 74 Intangible assets - goodwill - 22 2 - 24 48 - other - - - 2 - 2 Property, plant and equipment 2 17 1 - 112 132 PFI/PPP financial assets - - - 1,375 - 1,375 Net (borrowings)/cash (4) 92 5 (1,357) (24) (1,288) Other net assets/ (liabilities) 5 (56) (4) 192 (25) 112 Net assets 3 75 4 212 87 381 2006 Building, Civil and Rail Investments Total building specialist engineering management engineering and and and services PFI/PPP Barking services services Power £m £m £m £m £m £m Revenue 115 594 4 223 83 1,019 Operating profit before exceptional items 2 - 3 5 23 33 Investment income - 3 - 106 2 111 Finance costs - (1) - (69) (4) (74) Profit before taxation and exceptional items 2 2 3 42 21 70 Taxation (1) (1) - (14) (6) (22) Profit after taxation - continuing operations 1 1 3 28 15 48 Profit after taxation - discontinued operations 15 Profit after taxation 63 Intangible assets - goodwill - 22 2 - - 24 - other - - - 2 - 2 Property, plant and equipment 2 61 - 29 105 197 PFI/PPP financial assets - - - 1,541 - 1,541 Net (borrowings)/cash (2) 93 6 (1,260) (9) (1,172) Other net assets/ (liabilities) 4 (108) (6) 2 (26) (134) Net assets 4 68 2 314 70 458 14 PFI/PPP subsidiaries The Group has a 100% interest in four PFI/PPP concessions through its shareholdings in Connect Roads Sunderland Holdings Ltd, Connect Roads South Tyneside Holdings Ltd, Connect Roads Derby Holdings Ltd and Transform Schools (Knowsley) Holdings Ltd. The performance of the wholly-owned PFI/PPP concessions and their balance sheets are summarised below: 2007 2006 £m £m Income statement Group revenue 51 14 Profit from operations 1 - Investment income 2 1 Finance costs (2) (1) Profit before taxation 1 - Taxation - - Profit for the year 1 - Cash flow Profit from operations 1 - (Increase)/decrease in working capital (3) 1 Income taxes paid - - Net cash (outflow)/inflow from operating activities (2) 1 Net cash outflow from investing activities (36) (7) Net cash outflow from financing activities (2) (1) Net cash outflow (40) (7) Net borrowings at beginning of year (21) (14) Net borrowings at end of year (61) (21) Balance sheet PFI/PPP financial assets 62 22 Other net current liabilities (4) (1) Cash and cash equivalents 3 - Non-recourse term loans (64) (21) Net liabilities (3) - 15 Share capital During the year ended 31 December 2007, 1,286,018 ordinary shares were issued following the exercise of savings-related share options and 1,271,342 ordinary shares were issued following the exercise of executive share options for an aggregate cash consideration of £5m. During the year ended 31 December 2007, 4,957,163 preference shares were repurchased for cancellation by the Company for a total consideration of £8m at an average price of 151.3p. 16 Retirement benefit obligations The latest actuarial funding valuations of the Group's principal defined benefit schemes have been updated by the actuaries to 31 December 2007, using mortality assumptions strengthened compared with their valuations at 31 December 2006, on the basis prescribed by IAS 19. In particular, scheme liabilities have been discounted using the rate of return on a high-quality corporate bond rather than the expected rate of return on the assets in the scheme used in the funding valuations. On 5 April 2007 the Birse Group Retirement Benefit Scheme was merged with the Balfour Beatty Pension Fund. Details of these valuations and the disclosures prescribed by IAS 19 are set out in the Directors' report and accounts along with the funding valuation reviews. The principal assumptions used by the actuaries, the scheme details and IAS 19 disclosures for the Group's principal defined benefit schemes are summarised below: 2007 2006 Balfour Railways Mansell Balfour Railways Mansell Birse Beatty Pension schemes Beatty Pension schemes scheme Pension Scheme Pension Scheme Fund Fund % % % % % % % Inflation rate 3.35 3.35 3.35 3.10 3.10 3.10 3.10 Discount rate 5.85 5.85 5.85 5.15 5.15 5.15 5.15 Future salary increases 4.85 4.85 4.85 4.60 4.60 4.60 4.60 Future pension increases 3.35 3.35 3.35 3.10 3.10 3.10 3.10 Expected return on plan assets 6.53 7.45 6.83 6.35 7.30 6.79 7.36 Number Number Number Number Number Number Number Total number of 36,406 3,308 3,321 33,943 3,322 3,361 2,086 members £m £m £m £m £m £m £m IAS 19 DEFICIT Present value of funded obligations (2,036) (164) (207) (1,876) (158) (210) (94) Fair value of plan assets 1,796 160 191 1,688 150 177 62 Liability in the balance sheet (240) (4) (16) (188) (8) (33) (32) In addition, the Group has funded and unfunded post-retirement defined benefit obligations in Europe and North America amounting to £26m (2006: £27m), the majority of which arrangements are closed to new entrants. The movement in retirement benefit obligations of the Group's defined benefit schemes for the year ended 31 December 2007 was as follows: £m At 1 January 2007 (288) Exchange adjustments (1) Service cost (54) Interest cost (120) Expected return on plan assets 133 Contributions from employer 44 Benefits paid 2 Businesses acquired (1) Actuarial gains - assets and losses (21) - liabilities 20 At 31 December 2007 (286) The Balfour Beatty Pension Fund includes a defined contribution section with 4,984 members as at 31 December 2007 (2006: 4,119 members). Including £10m (2006: £7m) contributions paid and charged in the income statement in respect of this section and £7m (2006: £6m) pension costs in respect of other defined contribution schemes, the total net pension cost recognised in the income statement in the year was £58m (2006: £52m), with contributions paid of £61m (2006: £49m). 17 Movements in equity For the year ended 31 December 2007 Called-up Share Equity Special Share of Other Accumulated Total share premium component reserve joint reserves losses capital account of ventures' preference and shares associates' reserves £m £m £m £m £m £m £m £m At 1 January 2007 215 43 16 169 243 5 (304) 387 Net profit for the year - - - - 74 - 77 151 Actuarial gains on retirement benefit obligations - - - - 3 - (1) 2 PFI/PPP cash flow hedges - fair value revaluations - - - - (2) (5) - (7) - reclassified and reported in net profit - - - - 7 - - 7 PFI/PPP financial assets - fair value revaluations - - - - (26) - - (26) - reclassified and reported in net profit - - - - (3) - - (3) Changes in fair value of net investment hedges - - - - - (4) - (4) Currency translation differences - - - - - 7 - 7 Tax on items taken directly to equity - - 1 - 7 2 (5) 5 Total recognised income for the year - - 1 - 60 - 71 132 Ordinary dividends - - - - - - (42) (42) Joint ventures' and associates' dividends - - - - (83) - 83 - Issue of ordinary shares 1 4 - - - - - 5 Buy-back of preference shares - 5 (1) - - - (5) (1) Movements relating to share-based payments - - - - - 4 (2) 2 Transfers - - - (5) (42) - 47 - At 31 December 2007 216 52 16 164 178 9 (152) 483 For the year ended 31 December 2006 Called-up Share Equity Special Share of Other Accumulated Total share premium component reserve joint reserves losses capital account of ventures' preference and shares associates' reserves £m £m £m £m £m £m £m £m At 1 January 2006 214 26 18 175 182 5 (328) 292Net profit for the year - - - - 63 - 28 91 Actuarial gains on retirement benefit obligations - - - - 10 - 26 36 PFI/PPP cash flow hedges - fair value revaluations - - - - 32 - - 32 PFI/PPP financial assets - fair value revaluations - - - - (2) - - (2) Changes in fair value of net investment hedges - - - - - 14 - 14 Currency translation differences - - - - (7) (10) - (17) Tax on items taken directly to equity - - 1 - (11) (8) (8) (26) Total recognised income for the year - - 1 - 85 (4) 46 128 Ordinary dividends - - - - - - (37) (37) Joint ventures' and associates' dividends - - - - (24) - 24 - Issue of ordinary shares 1 5 - - - - - 6 Buy-back of preference shares - 12 (3) - - - (12) (3) Movements relating to share-based payments - - - - - 2 (1) 1 Transfers - - - (6) - 2 4 - At 31 December 2006 215 43 16 169 243 5 (304) 387 18 Notes to the cash flow statement 2007 2006 £m £m(a) Cash generated from operations comprises: Profit from operations - continuing 149 108 Trading (loss)/profit from discontinued operations (1) 1 Share of results of joint ventures and associates (71) (48) Depreciation of property, plant and equipment 50 43 Amortisation of other intangible assets 9 1 Impairment charges - 16 Movements relating to share-based payments 7 4 Profit on disposal of property, plant and equipment (3) (1) Operating cash flows before movements in working capital 140 124 Decrease in working capital 141 93 Cash generated from operations 281 217 (b) Cash and cash equivalents comprise: Cash and deposits 293 142 Term deposits 98 181 PFI/PPP cash balances 3 - Bank overdrafts (15) (15) 379 308(c) Analysis of net cash: Bank overdrafts (15) (15) Other short-term unsecured loans (1) (1) Finance leases (1) (1) Other secured loans - (1) Cash and deposits 293 142 Term deposits 98 181 374 305 PFI/PPP non-recourse - Sterling floating rate term loan term loans (2008-2027) (22) (17) - Sterling floating rate term loan (2011-2030) (9) (4) - Sterling floating rate term loan (2012-2031) (2) - - Sterling floating rate term loan (2010-2034) (31) - PFI/PPP cash and cash equivalents 3 - Net cash 313 284 A significant part of the PFI/PPP non-recourse project finance floating rate term loans has been swapped into fixed rate debt by the use of interest rate swaps. (d) Analysis of movement in net cash: Opening net cash 284 301 Net increase/(decrease) in cash and cash equivalents 63 (2) Acquisitions - borrowings at date of acquisition (36) (2) Businesses sold - borrowings at date of disposal 35 - New loans (42) (35) Repayment of loans 1 27 Finance lease principal repayments - 1 Exchange adjustments 8 (6) Closing net cash 313 284 19 Post balance sheet events On 11 February 2008, the Group agreed to acquire the military PPP accommodation business of GMH Communities Trust for a cash consideration of approximately US$350m. The transaction is conditional upon certain US military division, funder and regulatory consents. The financial information set out above (which was approved by the Board on 4 March 2008) has been compiled in accordance with the recognition and measurement criteria of IFRS, but does not contain sufficient information to comply with IFRS. That financial information does not constitute the Company's statutory accounts for the year ended 31 December 2007 for the purpose of Section 240 of the Companies Act 1985which comply with IFRS, but is extracted from those accounts. The Company's statutory accounts for the year ended 31 December 2007 will be filed with the Registrar of Companies following the Annual General Meeting. The independent auditors' report on those accounts was unqualified and did not contain any statementunder Section 237(2) or (3) of the Companies Act 1985. The Company's statutory accounts for the year ended 31 December 2006 have been filed with 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Balfour Beatty