Building
New
Futures
ANNUAL REPORT AND
ACCOUNTS 2023
Strategic report
ABOUT US
Balfour Beatty is a leading international
infrastructure group with 26,000 employees
driving the delivery of powerful new solutions,
shaping thinking, creating skylines and
inspiring a new generation of talent to be
the change-makers of tomorrow.
We finance, develop, build, maintain and operate
the increasingly complex and critical infrastructure
that supports national economies and deliver
projects at the heart of local communities.
Infrastructure expertise
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OUR CORPORATE VIDEO
Digital transformation
Talented experts
Enhancing biodiversity
Balfour Beatty is using data, AI and digital
technologies to improve safety, productivity
and assurance.
Balfour Beatty’s people strategy is focused
on making sure we have the right people,
culture, policies and systems to foster a
sustainable business performance.
Balfour Beatty is dedicated to minimising
its environmental impact and enhancing
biodiversity, with a focus on protecting
natural environments to support
climate stability.
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At the beating heart of society
Look out for this icon in the report to meet some
of our experts and learn about the vital work they
do to leave a positive, lasting legacy in the
communities where we work.
AT THE BEATING HEART
FRONT COVER IMAGE:
Tremayne Taylor, General Operative,
London Power Tunnels 2
For the last year, I’ve been working on the London
Power Tunnels 2 scheme to help rewire London’s
electrical transmission system. It is a complex
project due to its city location. We use bikes to
travel through the 32.5km tunnel network to our
workstation, 40 metres beneath the capital! Once
the project is finished, we’ll donate the bikes to
local schools to support young people with their
cycling safety programmes.”
AT THE BEATING HEART
SCAN OR CLICK TO WATCH
OUR VIDEO ON HOW TO
REWIRE A CITY
Strategic report
FINANCIAL PERFORMANCE
The Group has presented financial performance measures which are
considered most relevant to the Group and used to manage the Group’s
performance. An explanation of these measures and appropriate
reconciliations to statutory measures are provided on pages 81 to 87.
UNDERLYING REVENUE¹
£m
UNDERLYING PROFIT FROM
OPERATIONS (PFO) £m
5
0
4
,
8
7
8
5
,
8
0
8
2
,
8
5
9
5
,
9
1
3
9
,
8
19
20
21 22
23
9
7
2
8
2
2
1
2
2
7
9
1
1
5
20
19
21 22
23
UNDERLYING EARNINGS PER
SHARE (BASIC) Pence
ORDER BOOK¹
£bn
5
.
7
4
3
.
7
3
7
.
9
2
7
.
6
2
7
.
3
4
.
7
1
5
.
6
1
1
.
6
1
4
.
6
3 1
.
4
1
19
20
21 22
23
19
20
21 22
23
NET CASH
£m
0
9
7
5
1
8
2
4
8
1
8
5
2
1
5
STATUTORY NET CASH/
(BORROWINGS) £m
8
1
4
1
4
4
5
3
4
)
0
2
(
9
3
1
19
20
21 22
23
19
20
21 22
23
STATUTORY REVENUE
£m
STATUTORY PROFIT
FOR THE YEAR £m
3
1
3
,
7
0
2
3
,
7
5
8
1
,
7
9
2
6
,
7
3
9
9
,
7
7
8
2
4
9
1
9
3
1
3
3
1
0
3
Strategic report
Financial performance
Balfour Beatty at a glance
Group Chair’s introduction
Business model
Group Chief Executive’s review
Market review
Our strategy: Build to Last
Stakeholder value
Operational review
Construction Services
Support Services
Infrastructure Investments
1
2
4
8
10
14
26
28
32
32
38
40
42
44
52
53
54
70
78
Directors’ valuation of the
Investments portfolio
Health, safety and wellbeing
Ethics and compliance
Tax strategy
Sustainability
Our people
My Contribution
Non-financial and sustainability
80
information statement
Measuring our financial performance 81
88
Chief Financial Officer’s review
91
Risk management
104
Viability statement
Climate change and Task Force on
Climate-related Financial Disclosures
(TCFD)
105
Governance
117
130
Board leadership and
Company purpose
Division of responsibilities
Composition, succession
134
and evaluation
138
Nomination Committee
Safety and Sustainability Committee 142
145
Audit and Risk Committee
152
Remuneration Committee
169
Directors’ report
19
20
21 22
23
19
20
21 22
23
Financial statements
STATUTORY EARNINGS
PER SHARE (BASIC) Pence
DIVIDENDS PER SHARE
Pence
9
.
6
4
3
.
5
3
0
.
9
1
4
.
4
3
.
1
2
5
.
1
1
5
.
0
0 1
.
9
5
.
1
1
.
2
19
20
21 22
23
19
20
21 22
23
KEY
Performance measures
Statutory measures
1
Including share of joint ventures and associates, before non-underlying items.
Independent auditor’s report
Financial statements
Notes to the financial statements
173
181
189
Other information
Unaudited Group five-year summary 255
256
Shareholder information
Balfour Beatty plc Annual Report and Accounts 2023
1
Strategic report
BALFOUR BEATTY AT A GLANCE
Our Cultural Framework
Balfour Beatty’s Cultural Framework provides a simple and clear view of our purpose, values
and behaviours under our Build to Last strategy. The framework reflects who we are now as an
international group, who we want to be, what we value and what drives the way we work.
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INFORMATION ON OUR
CULTURAL FRAMEWORK
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Our purpose
Building New Futures
We are leading the transformation of our industry to meet the challenges of the future.
Our strategy
Build to Last
Build to Last is our strategy for continuous improvement.
p26
Our values
LEAN
EXPERT
TRUSTED
SAFE
SUSTAINABLE
The norms and beliefs that drive the way we work and how we measure ourselves.
p26
Our behaviours
TALK
POSITIVELY
COLLABORATE
RELENTLESSLY
ENCOURAGE
CONSTANTLY
MAKE A
DIFFERENCE
VALUE
EVERYONE
Reflect the things we will do to consistently deliver to the standard set out in our values.
Our Code of Ethics
Our Code of Ethics is the foundation of everything we do.
It provides a clear direction on the standards, values and
expectations that guide the behaviours of our employees
and supply chain partners.
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INFORMATION ON OUR
CODE OF ETHICS
Group highlights
REVENUE1
£9,595m
NUMBER OF EMPLOYEES
26,000
UNDERLYING PROFIT
BEFORE TAX
£261m
DIRECTORS’ VALUATION
INVESTMENTS PORTFOLIO
£1.2bn
1 Including share of joint ventures and associates.
2
Balfour Beatty plc Annual Report and Accounts 2023
GROUP ORDER BOOK1
£16.5bn
l United Kingdom
£8.9bn
l United States
£5.6bn
l Hong Kong
£2.0bn
How we work
Our divisions
CONSTRUCTION
SERVICES
SUPPORT
SERVICES
INFRASTRUCTURE
INVESTMENTS
Hong Kong International Airport,
Airport Authority Hong Kong.
UK: Nuneham rail viaduct restoration,
Network Rail.
US: Automated People Mover,
Los Angeles International Airport.*
@ Our Construction Services
businesses operate across
infrastructure and buildings
markets in the UK, in the US
and in joint venture in
Hong Kong
@ Their capabilities include
civil engineering, building,
ground engineering, M&E,
refurbishment, fit-out and
rail engineering
@ Our Support Services
businesses operate principally
in the UK, designing, upgrading,
managing and maintaining
critical national infrastructure
@ Our Infrastructure Investments
business develops and finances
both public and private
infrastructure projects in
the UK and the US
@ Their capabilities span
electricity networks,
rail and highways
@ It operates and maintains
infrastructure projects and
a portfolio of military and
multifamily housing and
student accommodation assets
ORDER BOOK1
£13.7bn
ORDER BOOK1
£2.8bn
DIRECTORS’ VALUATION
£1.2bn
Expert capabilities
Selective bidding
for contracts
Our stringent gated lifecycle
process allows us to carefully
control our project portfolio
on an ongoing basis.
Financial
performance
REVENUE1
REVENUE1
£8,081m
£1,006m
REVENUE1
£508m
UNDERLYING PROFIT
FROM OPERATIONS
£156m
STATUTORY PROFIT
FROM OPERATIONS
£143m
UNDERLYING PROFIT
FROM OPERATIONS
£80m
STATUTORY PROFIT
FROM OPERATIONS
£80m
UNDERLYING
PROFIT BEFORE TAX
£47m
STATUTORY PROFIT
BEFORE TAX
£43m
FIND OUT MORE
Read the Operational review
p32
p38
p40
1
Including share of joint ventures and associates.
* Photo credit: Los Angeles World Airports.
Balfour Beatty plc Annual Report and Accounts 2023
3
Strategic report GROUP CHAIR’S INTRODUCTION
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Dear Shareholders,
I am pleased to report that the Group has
continued to benefit from its market-leading
positions and strong brand in a challenging
economic and geopolitical environment.
The Board is proud that Balfour Beatty has
delivered another solid performance in 2023.
As an international company, we remain
vigilant to macro events, from geopolitical
tensions in regions including Russia, Ukraine
and the Middle East, to the ongoing issues of
inflation, the rising cost of raw materials and
energy, and the uncertainty that comes
before the key elections we expect in 2024 in
the UK and US: two of our three core markets.
Despite this uncertainty, Balfour Beatty has
remained unwavering in its commitment to
the fundamental principles that underpin our
ongoing success: the health, safety and
wellbeing of our people; diversity and inclusion,
careful risk management, and an unyielding
focus on innovation to drive productivity.
These form part of Balfour Beatty’s enduring
commitment to sustainability for both
the business itself and its impact on
communities and the environment.
Charles Allen, Lord Allen
of Kensington, CBE
Non-executive Group Chair
4
Balfour Beatty plc Annual Report and Accounts 2023
Board composition
My priority is to ensure that the Board is
comprised of an appropriate mix of expertise,
experience, and external perspectives.
Following the 2024 AGM in May, Dr Stephen
Billingham CBE and Stuart Doughty CMG will
step down as non-executive Directors after
nine-year tenures. I would like to share my
sincere thanks and appreciation to them for
their wisdom and clear-headed insights,
which have been immensely valuable throughout
a period of transformation for the Company.
We wish them the very best for the future.
In December, we announced that Robert
MacLeod has been appointed as a non-executive
Director and member of the Audit and Risk
Committee with effect from 8 March 2024.
Robert will succeed Dr Stephen Billingham
CBE as Chair of the Audit and Risk Committee
following the 2024 AGM. He is an experienced
CEO and CFO and brings strong strategic,
financial, and commercial experience to
the Board.
In January 2024, we announced that
Gabrielle (Gabby) Costigan MBE has been
appointed as a non-executive Director with
effect from 8 March 2024. Gabby is an
aeronautical engineer with a diverse international
career spanning several executive positions
including CEO as well as 21 years in the
Australian Army. She will succeed Stuart
Doughty CMG as Chair of the Safety and
Sustainability Committee following the
2024 AGM.
Also in May, following the 2024 AGM, Anne
Drinkwater, a non-executive Director since
December 2018 will be appointed to succeed
Dr Stephen Billingham CBE as Senior
Independent Director.
I will be working closely with the Board and
Executive team to ensure that the Parker
Review requirements for the Board and
senior leader ethnic minority representation
recommendations across the Group by 2027
are considered in the actions taken at all stages
of the employee lifecycle, from attraction
through to recruitment and retention. Balfour
Beatty’s ambition is a workforce that reflects
the population of our chosen geographies,
and we remain committed to continuing
our progress.
Health, safety and wellbeing
remains our number one priority
It is with great sadness that I report two
fatalities on Balfour Beatty UK sites during
2023. On 27 April, a serious incident occurred
at the HS2 (High Speed 2) Area North project,
resulting in the tragic loss of a colleague
working for one of our subcontractors.
On 6 July, an incident at the AWE project
in Aldermaston resulted in the loss of a
colleague from Balfour Beatty Ground
Engineering. Our heartfelt thoughts remain
with their families, friends and colleagues.
These tragic events prompted a further
forensic review of Balfour Beatty’s health and
safety protocols, the creation of a new stored
energy fatal risk working group and digitally
assured processes to improve controls over
safety-critical activities. We have also increased
the emphasis on supervision and vigilance.
We will continue to refresh training, adhering
to the four Zero Harm Golden Rules, reporting
close calls and good practice through our
Observation App, and using the Employee
Assistance Programme for support.
In September, Balfour Beatty paused operations
for a dedicated Group-wide focus on smaller,
informal, local ‘Let’s Talk’ sessions at each of
its sites, encouraging discussions about local
safety challenges, areas that are working well
and making safety a personal commitment.
The Group’s Lost Time Injury Rate (LTIR),
Accident Frequency Rate for 3-day and 7-day
lost time injuries and major injury rates all
dropped to record lows in 2023, a year which
saw over 104 million hours worked across
the Group. These positive indicators have
been underpinned by a strong health and
safety culture which has seen observations
reach their highest number ever with almost
400,000 during 2023. As I referenced in last
year’s report, a culture where our workforce
is empowered to share observations means
we are learning lessons, sharing best practice,
gathering data, and improving the odds of
preventing incidents or near misses in the future.
In an industry plagued by poor mental health,
where the risk of suicide is amongst the highest
of any sector, Balfour Beatty is committed to
treating health like safety, and improving
mental health standards across the industry.
This mature and comprehensive approach
was recognised at the 2023 Mates in Minds
Impact Awards with Balfour Beatty securing
the award for Best Overall Workplace Mental
Health Programme. It also shone through in
the annual employee engagement survey in
which 94% of colleagues who responded to
the survey said they felt cared for. We will
continue to expand our efforts by investing in
a proactive approach to address the root
causes of poor mental health. This includes
integrating psychological health and psycho-social
risk factors into the Group’s fabric through
policies, processes and operating systems.
Continuing efforts to improve
diversity and inclusion
Balfour Beatty is committed to cultivating a
diverse and inclusive workplace. This focus is
embodied in our Right to Respect programme.
Rolled out across the UK in 2023 and
undergoing a pilot phase in the US, the
programme includes sessions to address
inappropriate language and behaviour and
foster positive workplace interactions.
Taking the time to listen
to different perspectives
to drive improvements
has been key for myself
and the Board.”
In 2023, the UK Diversity & Inclusion
strategy, Value Everyone, was refreshed,
underscoring our determination to drive
sustainable improvements, and set a clear
pathway to meeting the business’ 2030
diversity targets.
Taking the time to listen to different perspectives
to drive improvements has been key for
myself and the Board. In September, as part
of our National Inclusion Week activity, Leo
Quinn hosted a listening leader event with
some of the co-chairs of our five employee-
led UK Affinity Networks: Ability, Gender,
LGBTQ+, Multicultural and Neurodiversity.
They naturally and rightly took the opportunity
to tell it like it is – from the lack of adequate
on-site toilet facilities to meet everyone’s
needs, to ensuring we provide the right
‘tools’ to do the job, such as reading pens
and colour film to support people with
dyslexia. Their suggestions were practical
and thoughtful and led to the roll-out of
several initiatives such as strengthened
standards to mandate sanitary products,
sanitary bins and hand care facilities.
I followed up with our UK Affinity Network
co-chairs in February 2024, and enjoyed
hearing their personal stories and thoughts
on how we could build on the improvements
we have made to make a real difference on
the ground. The LGBTQ+ network described
the importance of showing visible leadership,
drawing the link between the small but
important actions we can take as leaders to
help colleagues feel psychologically safe at
work (meaning if they choose to, people can
be open about who they are and who they
love). I’m delighted to say that Balfour Beatty
will be taking a bigger role in Pride in London
in 2024, with a strong showing of colleagues
joining the parade. Thank you to all the
co-chairs, members and allies who lead and
contribute to the success of our Affinity
Networks across the UK, the US and Hong
Kong. I know the time and effort it takes on
top of the day job, but their passion and
commitment to making Balfour Beatty an
even greater place to work shines through.
Our Early Careers efforts are continuing to
deliver positive progress in the diversity of
hires, with 21% of UK graduates from a
minority ethnic background and 25% female.
Within Gammon, 17% of graduate engineers,
and technician and craft apprentices, hired
were female. In the US, 23% of summer
interns and on-the-job trained colleagues
were female and 42% were from a minority
ethnic background. This infusion of apprentices,
trainees, interns and graduates brings vital
fresh talent and novel perspectives, helping
to revitalise the industry and ultimately shape
the future landscape of the sector.
ABOVE
Charles’ site visit to the Royal Botanic Gardens in Scotland.
Balfour Beatty plc Annual Report and Accounts 2023
5
Strategic report GROUP CHAIR’S INTRODUCTION CONTINUED
Doubling down on sustainable
profitable growth
Diversifying into new markets is a strategic
imperative for Balfour Beatty to meet its
ambitions for sustainable profitable growth.
This proactive approach involves exploring
opportunities in UK regulated sectors with
private customers and partners to expand
the Group’s horizons in the energy market.
We are specifically focused on small modular
nuclear reactors, traditional nuclear such as
Sizewell C, Carbon Capture, Utilisation and
Storage and offshore wind. Our Investments
business entered the Electric Vehicle charging
infrastructure market in 2023 with the formation
of Urban Fox, a partnership with Urban Electric
Networks. Our end-to-end capabilities position
us well to capitalise on the market opportunities
across the full spectrum of UK energy
security and net zero transition infrastructure.
The UK defence and security infrastructure
market, including the Defence Nuclear
Enterprise, is another potential growth area
for which Balfour Beatty has a strong track
record of delivery and end-to-end capability
in high-security complex environments.
In the US, new offices have been set up in
high-growth areas within our established
state footprints, to leverage the Group’s
reputation and expertise in low-risk buildings
and civils markets. In US Investments we see
potential growth in our work for the US
Department of Defense including new
military housing developments.
In Hong Kong and Singapore, we expect
continued strong public infrastructure spend
and stimulation of the local residential market
with further growth in modular construction.
Bridging the gap towards our
sustainability ambitions
Balfour Beatty’s commitment to sustainability
entered a new phase in 2023 with the
introduction of its Bridging the Gap approach.
This new approach, supported by an
enhanced Scope 3 carbon emission data set,
is helping each business ‘bridge the gap’
between its current position and the contribution
it makes to achieving Group-wide sustainability
ambitions and targets for net zero, zero
waste and positive community impact.
Balfour Beatty has worked hard to enhance
its Scope 3 carbon emissions data set and
now has a deeper understanding of its
carbon emissions in the ‘purchased, goods
and services’ Scope 3 category. This work
has further clarified the scale of the challenge
in what is one of the most carbon intensive
industries. Building operations and construction
account for c.40%¹ of global energy-related
carbon emissions and in many areas proven
technologies and low-carbon materials to
support the transition to net zero do not
currently exist.
In late 2023, the Company formally
submitted Science Based Targets and a
related carbon abatement plan aligned with
the 1.5-degree limit global warming goal to
the Science Based Targets initiative, which
are awaiting validation in 2024. The Company
will share an updated sustainability strategy
later this year to reflect its deeper
understanding of the landscape and the
considerable progress it has made in its
sustainability efforts.
BELOW
Charles’ site visit with the Board to the Denver Transit Operators Contract in Colorado.
Global competition for
infrastructure talent continues
to intensify
Skilled infrastructure and construction
professionals continue to be increasingly
attracted to markets including Saudi Arabia,
Dubai, and Australia, not only due to substantial
investments in infrastructure but also
advantageous tax regimes. This situation
poses challenges for us as a Group in
sourcing the necessary capabilities,
particularly in the UK market.
With people so important to our business,
Balfour Beatty continues to invest in
strengthening its position as an excellent
employer to retain skills and develop its own
local skills pipeline. In the UK energy market,
we plan to triple our early careers workforce
in 2024 to ensure we have a robust talent
pipeline. Our advanced UK training centres
in Stanton and Raynesway play a crucial role,
providing training for 100 new workers and
project engineers, as well as refresher and
training courses for 350 colleagues every year.
Balfour Beatty has maintained its position as
a Gold member and supporting patron of The
5% Club, a dynamic movement of close to
1000 employing businesses committed to
‘earn and learn’, with a record 7.4% of its UK
workforce comprising apprentices, graduates,
and trainees at December 2023.
Employee engagement at an
all-time high
Balfour Beatty’s annual employee engagement
survey is crucial for gaining insights into the
satisfaction, motivation, and overall wellbeing
of our colleagues, as these directly impact
productivity, retention, and financial
performance. The survey has led to tangible
improvements, such as the new UK Recognition
Framework, which encourages greater
recognition of individual achievements
that align to business priorities.
This year’s engagement score reached 81%,
rising for the sixth year in a row, 7 percentage
points above an industry average. This annual
survey not only gauges workforce perspectives
but also fosters a culture where every individual
feels heard, contributing to our success.
Balfour Beatty also won the ‘Best Use of
Voice of the Employee award’ at the Engage
Awards in the UK, for the My Contribution
programme. My Contribution empowers
every colleague to deliver positive change
through sharing, evolving, and delivering
ideas; bringing together experts from across
the business to collaborate, innovate and
problem solve, and ensuring that colleagues
are invested in driving the business forward.
In 2023 the 13,000th idea was submitted
through the programme.
6
Balfour Beatty plc Annual Report and Accounts 2023
Section 172 statement
The Directors take their responsibilities
to stakeholders very seriously. Throughout
2023, the Board reviewed existing
engagement mechanisms across each
of the Group’s key stakeholder groups.
The Board ensures all complementary
and divergent stakeholder views are
understood and embedded into Board
discussions and the decision-making
process. In addition to having regard to
the interests of the Group’s stakeholders,
Directors also consider the impact of the
Group’s activities on the communities
within which it operates, the environment,
and the Group’s reputation for high
standards of business conduct.
The Directors seek to act in good faith
in the way most likely to promote the
long-term success of the Company for
the benefit of its shareholders, and to
act fairly between all of its stakeholders.
Through the Board and the Board
Committees, Directors have taken
action to promote and support these
objectives across the Group, details of
which can be found throughout this
Annual Report as set out here:
@ the Company’s purpose, values and
behaviours on pages 2 and 26;
@ a description of key stakeholder
groups and how the Group has
engaged with stakeholders on pages
28 to 31;
@ the range of activities undertaken
across the Group relating to
sustainability matters on pages 54
to 69;
@ details of how high standards of
integrity are maintained on page 52;
@ the proactive and pragmatic approach
of the Group toward risk on pages 91
to 103;
@ the framework of the Company’s
decision making on pages 130 to 133;
and
@ details of the Company’s governance
processes and practice on pages 117
to 137.
1 Source: United Nations Environment Programme (2022).
2022 Global Status Report for Buildings and
Construction: Towards a Zero-emission, Efficient and
Resilient Buildings and Construction Sector. Nairobi.
www.globalabc.org.
2 Market-based emissions.
Balfour Beatty plc Annual Report and Accounts 2023
7
ABOVE
Charles’ site visit to the Hong Kong International Airport project.
Balfour Beatty is
resolute in its pursuit
of excellence and
innovation.”
and AI, foster a culture of collaboration and
diversity, and expand its footprint in attractive
growth markets.
Balfour Beatty is well-positioned for
sustained success, and we look forward to
the exciting prospects that await us as we
move further in to 2024 and beyond.
Charles Allen
Lord Allen of Kensington CBE
Non-executive Group Chair
12 March 2024
In 2023, Balfour Beatty made strong
progress across its three focus areas of
environment, materials and communities
achieving a 2% reduction in absolute carbon
emissions², a 40% reduction in UK waste
intensity and a 15% increase in social value
delivered across its business.
Delivering a multi-year capital
allocation framework
Balfour Beatty is in its fourth year of delivering
shareholder returns from its multi-year capital
allocation framework. With the completion of
the 2023 share buyback programme in
December, £595 million has been distributed
to shareholders through share buybacks and
dividends since the start of 2021. We are
confident of delivering significant future capital
returns, evidenced by the £100 million share
buyback programme for 2024. The Board is
also recommending a final dividend of 8.0
pence per share, giving a total dividend for the
year of 11.5 pence per share.
Looking ahead
As ever, I extend my sincere gratitude to
Balfour Beatty’s dedicated colleagues,
steadfast partners, and committed stakeholders
for their unwavering support. Balfour Beatty
is resolute in its pursuit of excellence and
innovation as it continues to successfully
navigate its path through these challenging
times and identify opportunities for
further success.
Balfour Beatty eagerly looks to the future,
aspiring to continue to shape the industry,
lead transformative projects, drive sustainable
solutions, leverage the productivity
opportunities offered by digital technology
Strategic report BUSINESS MODEL
Delivering
sustainable growth
The Group is well positioned to ensure high-quality
outcomes for all its stakeholders by operating in
attractive markets, leveraging synergies between
its Business Units and continuing to focus on
world-class delivery.
How our Group works together
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.
Profitable work for construction business
Cross-selling across customer base
INFRASTRUCTURE
INVESTMENTS
A proven track record
of developing and
financing projects.
CONSTRUCTION
SERVICES
We manage strong
construction businesses
in the UK, the US and
Hong Kong.
SUPPORT
SERVICES
We maintain, upgrade and
manage vital services across
the power transmission,
distribution, utilities, road and
rail sectors.
Delivery skills support investment opportunities
Knowledge transfer
8
Balfour Beatty plc Annual Report and Accounts 2023
Why our customers choose us
BUILD TO LAST VALUES
WORLD-CLASS TRACK RECORD
EXPERT PEOPLE
Balfour Beatty has built an industry-
leading brand on its reputation as a
partner that is Lean, Expert, Trusted,
Safe and Sustainable – our five Build
to Last values.
With over 115 years of experience
successfully delivering transformational
infrastructure projects, Balfour Beatty
has cultivated a strong track record of
quality and reliability.
Our engineering and project management
expertise allows us to deliver complex,
one-of-a-kind projects and has made
Balfour Beatty a trusted construction
partner for the public and private sector
alike.
FINANCIAL STABILITY
SUSTAINABLE FOCUS
INNOVATION
Balfour Beatty’s strong balance sheet is
a testament to strong governance. It
gives customers confidence in the
Group’s ability to deliver, and that
Balfour Beatty is here for the long term.
Balfour Beatty takes its responsibility as
a custodian of the planet seriously and
seeks to leave a positive legacy in the
communities it works in.
Innovation is part of the Balfour Beatty
culture, harnessing the power of digital
and cutting-edge technology to drive
productivity and redefine the possible.
Reducing risk in
our order book
As part of our Build to Last strategy, Balfour
Beatty has strengthened its governance,
focusing on reducing risk in its order book by
selectively bidding for work it is best placed
to deliver on terms that are attractive to the
Group. This reduction has been most noticeable
in the UK Construction business, where the
proportion of fixed-price work in the order
book has fallen to 18% at the end of 2023.
4%
HY 2018
£2.7bn
UK Construction order book
50%
46%
HY 2018
4%
46%
50%
l Cost plus
l Target cost
l Fixed price
18%
17%
FY 2023
£6.1bn
UK Construction order book
65%
FY 2023
17%
65%
18%
Balfour Beatty plc Annual Report and Accounts 2023
9
Strategic report Full year Group
expectations achieved
Balfour Beatty’s solid performance in 2023
resulted in the Group delivering underlying
profit from operations (PFO) from the
earnings-based businesses (Construction
Services and Support Services) of £236 million,
incrementally ahead of the prior year
(2022: £232 million). As expected, the
Group’s underlying profit for the year reduced
to £205 million (2022: £290 million) as gains
on investment disposals reduced as planned
and the £56 million tax credit relating to the
recognition of additional UK tax losses in
2022 did not repeat. Capital expenditure
doubled in the year as the Group invested
to support growth, and £208 million of
cash was returned to shareholders (2022:
£208 million) through a combination of
dividends and share buybacks. Average net
cash1 reduced as expected to £700 million
compared to £804 million in 2022.
Resilient portfolio
delivering stability
Balfour Beatty demonstrated the importance
of its geographical and operational diversity
in 2023, by delivering an overall improvement
in underlying financial results from its
earnings-based businesses during
challenging economic conditions.
The results were a further proof point in
the strategy to reduce Balfour Beatty’s risk
profile, with the Group focusing on opportunities
which utilise its end-to-end capabilities and
large-infrastructure project experience, as
well as only contracting on terms consistent
with our disciplined risk framework.
The underlying PFO from Construction
Services increased in 2023 by 5%. UK
Construction continued to improve project
delivery, making further progress with its
ambition to move towards the top of the
2-3% UK industry standard margin target
range, Gammon achieved strong margins
while growing revenue and US Construction
profitability reduced due to the cost of
delays at a small number of civils projects.
Support Services had another successful
year, delivering at the top of its 6-8% margin
target range, and Infrastructure Investments
achieved its disposal targets. The Directors’
valuation of the Investments portfolio decreased
by 6% due to foreign exchange movements
and an increase in discount rates.
Leo Quinn
Group Chief Executive
GROUP CHIEF EXECUTIVE’S REVIEW
p
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o
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t
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s
o
p
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l
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e
w
d
n
a
g
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t
s
A
10
Orders continue with improved
second half
The Group’s 2023 year end order book
remains significant at £16.5 billion, which is
5% lower than 2022 or 2% lower at constant
exchange rates. Both the UK Construction
and US Construction order books have
remained flat on a local currency basis, which
is encouraging given the high interest rate
environment faced by customers throughout
2023. The second half of the year showed
a clear improvement in orders compared to
the first half as interest rates in both markets
stabilised. In the UK, the proportion of the
order book signed on lower risk target-cost
or cost-plus contracts compared to higher
risk fixed-price contracts remained high at
82%. In the US, where work is predominantly
contracted on a fixed-price basis, the Group
ensures early issuing of subcontracts for
buildings jobs and insurance of the supply
chain in order to protect its margin.
The order book for Gammon has reduced in
the year, driven by the acceleration of major
airport project activity in Hong Kong and
lower order intake, and Support Services
backlog has grown following the addition
of significant road maintenance contracts.
Beyond the reported order book, Balfour
Beatty has been selected as one of ten
preferred bidders on SSEN Transmission’s
c.£10 billion Accelerated Strategic
Transmission Investment (ASTI) framework,
with early works for nine projects underway,
and the Group’s awarded but not contracted
position remains high, having added notable
airport and major road awards in 2023.
Infrastructure disposals completed
above Directors’ valuation
The Directors’ valuation of the Infrastructure
Investments portfolio has reduced to £1.2 billion
in 2023 (2022: £1.3 billion), due equally to a
weakening of the US dollar against sterling
and an increase in discount rates given the
interest rate environment and market data.
The other usual changes to the valuation,
including the equity invested, cash yield
received, unwind of discounting, asset
disposals and operational performance all
largely offset.
The two asset disposals completed in the year
were sold at above the Directors’ valuation
and contributed proceeds of £61 million and
a gain on disposals of £26 million. The Group
continues to invest in new opportunities
(targeting a minimum 2x end-to-end multiple)
whilst optimising value through the disposal
of further operational assets.
Growth opportunities in
chosen markets
The principal markets in which Balfour Beatty
operates are showing signs of continued
growth backed by government supported
spending that prioritises modern and reliable
infrastructure to support economic growth
and help tackle climate change. In the UK,
the requirement for clean and domestically
generated energy is a priority for both the
incumbent Conservative party and Labour
opposition and Balfour Beatty is targeting
opportunities on both the supply and demand
sides of the energy equation. On supply,
steep growth in the volume of UK power
transmission and distribution projects will
begin in 2025, with an acceleration of work
to strengthen and stabilise the power
networks, while nuclear, wind, carbon
capture and hydrogen projects continue
to develop. On the demand side, given the
Group’s involvement in HS2, construction of
greener railways is a large part of the Group’s
UK operations today and the importance of
continued investment in the transport sector
is evident for both political parties. Balfour
Beatty has also identified the UK defence
and security infrastructure industry as a
growth area, as the Group’s capabilities align
well to market opportunities, including projects
with close adjacencies to the work delivered
by the Group for civil nuclear.
In the US, the Group’s buildings operations
are focused primarily on specific, high growth
regions. These areas are population hubs
with growth and migration projected to
continue driving increased investment,
particularly in transportation and social
infrastructure. The stabilisation of interest
rates and reduced inflation have released
some pressure on the commercial office
sector, while other market segments
targeted by the Group, such as aviation,
leisure, education and federal, remain strong.
In Hong Kong, the Government’s pipeline of
infrastructure projects continues to grow,
with further major works announced to
increase connectivity within the Greater Bay
Area, aligned to plans to develop the
Northern Metropolis.
Retention and investment
in capability vital for meeting
future demand
Now more than ever, Balfour Beatty is
focused on making sure the right people,
culture, policies and procedures are in
place to enable sustainable business
performance; prioritising attention on
developing an environment where all
employees can perform, grow personally
and enjoy coming to work. The Group
operates in markets where there can be
tough competition for the best people;
therefore, this is critical to enable the
retention and development of talented
experts and attract and recruit the diverse
skills and experiences that the business
needs to deliver today and for the future.
The annual employee engagement survey
remains the key tool for the Group to gauge
how well it is performing in this space and
the 2023 results showed an improvement for
the sixth consecutive year. Overall employee
engagement increased to 81% (2022: 80%).
Compared to peers, Balfour Beatty was
7 percentage points above an industry
average and 8 percentage points above
companies of a similar size. Aligned to the
strong survey results, the Group’s retention
rates improved in 2023.
2023 PERFORMANCE
Delivered
expectations
in 2023
@ Incremental profit
growth from
earnings-based
businesses
2024 growth
underpinned
by order book
@ Increased
profitability in
earnings-based
businesses
@ Resilience
@ Growth accelerating
demonstrated in
challenging macro
environment
from 2025
Significant
shareholder
returns
@ Strong balance
sheet and
consistent cash flow
@ Total shareholder
returns of c.£160
million in 2024
Growth and attractive total shareholder returns
1
Excluding non-recourse net borrowings, which comprise cash and debt ringfenced within certain infrastructure
investments project companies, and lease liabilities.
Balfour Beatty plc Annual Report and Accounts 2023
11
Strategic report LEO’S TOUR OF THE BUSINESS
1
4
7
2
3
8
4
5
6
7
8
9
1
2
3
6
5
9
A SELECTION OF PHOTOS FROM
LEO’S VISITS IN 2023
1. Los Angeles Airport Automated
People Mover, US
2. Denver Transit Operators
Contract, Colorado, US
3. Fort Carson Family Housing,
Colorado, US
4. Realising our Ambition: an
integrated supply chain event,
London, UK
5. Hinkley Point C, Somerset, UK
6. Peterhead substation,
Scotland, UK
7. M25 Junction 10/A3 Wisley
interchange scheme, Surrey, UK
8. Engineering Design Centre,
Bangalore, India
9. Hong Kong International Airport
12
Balfour Beatty plc Annual Report and Accounts 2023
GROUP CHIEF EXECUTIVE’S REVIEW CONTINUED
The Group’s longer-term outlook
remains positive and the growth
forecast in 2025 and beyond is driven
by the opportunities in the energy,
transport and defence sectors in the
UK and the Group’s chosen buildings
sectors in the US.”
Retention and investment
in capability vital for meeting
future demand continued
The challenge of attracting talent into
construction is industry-wide and Balfour
Beatty, with its size and prominence, can
lead the market with its innovation. The
Group has diversified its hiring channels in
2023, with increased recruitment from talent
pools including military talent, ex-offenders
and those from underprivileged backgrounds,
while it also continues with its commitment
to train the next generation of employees.
At year-end, 7.4% of the UK workforce were
apprentices, graduates and sponsored students
in ‘earn and learn’ positions, exceeding both
The 5% Club’s base target and overall average.
Further work required in journey
to Zero Harm
It is a matter of deep regret that two colleagues
have tragically lost their lives in 2023. The
Company offers its deepest sympathy and
support to their family, friends and co-workers.
To ensure that lessons are learnt from these
events, and with both fatalities being caused
in part by stored energy, Balfour Beatty has
established a new Stored Energy Fatal Risk
Working Group and is designing digitally-
assured processes to improve controls over
such safety-critical activities.
The Group remains determined that all
colleagues who walk onto a Balfour Beatty
site should return home safe and well. While
the Group’s lagging indicators of lost time
injury rate and accident frequency rate have
improved in 2023, the two fatalities make
evident to all the importance of maintaining
focus on health and safety. As such, it is
encouraging to see voluntary safety observations
increasing to nearly 400,000 in 2023 and
proactive programmes having an impact on
site. In 2023 these included a Slips, Trips and
Falls focus in the UK, which reduced these
types of incidents by 33%, and the second
year of the What3Things? conversations,
which have focused on a back to basics approach.
Balfour Beatty is committed to being an
innovative leader in the world of health and
safety and launched a programme of digital
safety initiatives in 2023, which target
improvements in not only the safety of the
Group’s construction sites, but also productivity
and assurance.
Next steps in sustainability
journey
Balfour Beatty’s sustainability strategy,
Building New Futures, was launched in 2020
to improve the Group’s approach to environment,
materials and communities by setting firm
2030 targets and longer-term ambitions for
2040. The 2030 targets set were the
achievement of a science-based carbon
reduction target, a 40% reduction in waste
generated and the delivery of £3 billion in
social value. It also outlines the Group’s 2040
ambitions to go Beyond Net Zero Carbon, to
Generate Zero Waste and to Positively Impact
More than 1 Million People. In the year, the
UK business delivered £936 million of social
value and achieved a 40% reduction in
tonnes of waste generated per £million
revenue compared to the restated 2021
baseline. The Group also achieved a 2%
absolute reduction and a 7% intensity
reduction in Scope 1 and 2 greenhouse gas
(GHG) emissions.
In 2023, the Group launched its Bridging the
Gap action plan, which is designed to help
colleagues focus their efforts on initiatives
that will have the biggest impact in delivering
Balfour Beatty’s targets and ambitions. By
adopting a uniform approach, Bridging the
Gap will also support best practice and encourage
greater collaboration across the organisation
whilst setting out minimum expectations of
sustainable leadership, carbon, materials,
communities and biodiversity.
In late 2023, Balfour Beatty formally
submitted Science Based Targets and a
related carbon abatement plan, aligned with
the 1.5°C global warming limit. The Group’s
submission is awaiting validation by the
Science Based Targets initiative in 2024.
Dividend growth and further
share buybacks
The Group’s capital allocation framework
has been in place since 2021, facilitating the
delivery of attractive shareholder returns,
while ensuring the appropriate balance between
investment in the business, and a strong capital
position. When considering the strength of
the Group’s order book and balance sheet
with the depth of opportunities in its chosen
markets, Balfour Beatty is confident of
continuing to deliver significant future
shareholder returns. As such, the Board
is today recommending a final dividend of
8.0 pence per share (2022: 7.0 pence), giving
a total recommended dividend for the year
of 11.5 pence per share (2022: 10.5 pence).
Additionally, the Company intends to repurchase
£100 million of shares during the 2024 phase
of its multi-year share buyback programme,
bringing the cumulative return to shareholders
since the introduction in 2021 of the multi-year
capital allocation framework to over £750 million.
The total cash return to shareholders in 2024
(including the final 2023 dividend and 2024
interim dividend) is therefore expected to be
c.£160 million.
Outlook
The Board expects an increase in PFO from
its earnings-based businesses in 2024, with
growth accelerating in 2025.
Infrastructure Investments is expected to
continue to deliver attractive end-to-end
returns from its recurring income, by divesting
assets and making new investments in line
with the Group’s capital allocation framework.
For 2024, gains on investment disposals are
expected in the range of £20 – £30 million.
The Board expects net finance income of
around £30 million for 2024 and for the
effective tax rates in each of the three
geographies to remain close to statutory
rates, albeit with cash tax payments in the
UK remaining below statutory levels in the
medium term as losses are utilised. Capital
expenditure in 2024 is expected to return
closer to pre-2023 levels of around £35 million
and the Group’s average cash in 2024 is
expected to be roughly in line with 2023.
The Group’s longer-term outlook remains
positive and the growth forecast in 2025 and
beyond is driven by the opportunities in the
energy, transport and defence sectors in the
UK and the Group’s chosen buildings sectors
in the US. This gives the Board confidence in
Balfour Beatty’s continued ability to deliver
profitable managed growth and sustainable
cash generation, and in turn significant
ongoing shareholder returns.
Leo Quinn
Group Chief Executive
12 March 2024
Balfour Beatty plc Annual Report and Accounts 2023
13
Strategic report MARKET REVIEW
Strength in our
chosen markets
The principal markets in which Balfour Beatty operates are showing signs of
continued growth backed by government supported spending that prioritises
modern and reliable infrastructure to support economic growth and help
tackle climate change.
Our chosen markets
CONSTRUCTION SPENDING
UNITED KINGDOM
£bn, nominal
+4%/yr
Sustained public investment in UK infrastructure
Public investment in UK infrastructure remains robust averaging £20 billion over the last decade with
government commitment to increase this to £30 billion per year for 2022–23 to 2024–25 at the last
spending review.
8
9
5
This level of investment is expected to continue as the role of infrastructure becomes more prominent
in helping the UK meet key strategic challenges including energy security, productivity improvement
and climate change resilience.
5
1
4
To meet these challenges, the National Infrastructure Commission has estimated that public spending
on economic infrastructure should be maintained at 1.3% of GDP.
2023
2032
UNITED STATES
US$bn, nominal
+3%/yr
4
6
4
,
2
3
6
8
,
1
2023
2032
HONG KONG
HK$bn, nominal
+2%/yr
5
9
2
0
4
2
FIND OUT MORE
p18
Federal funds flowing into US non-residential projects
In the US, non-residential construction spending growth remains positive associated with a boost to
manufacturing, transportation and clean energy infrastructure as funds from three key pieces of legislation
passed in 2021 and 2022 – the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act
(IRA), and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act – are expected to flow
into the industry.
Substantial infrastructure investments from state and local governments are likely to drive growth as they
look to make the most of federal spending programmes and loan initiatives.
FIND OUT MORE
p20
Buoyant pipeline in Hong Kong
In Hong Kong, construction spending is expected to range between HK$240 billion and HK$300 billion
per year for the next 10 years. Public spending has consistently been maintained at above HK$100 billion
per year and is expected to reach up to HK$200 billion by 2027.
There are high levels of investment in major infrastructure projects that will bring the development of
additional land, creating significant development opportunities for both the public and private sectors.
2023
2032
Source: S&P Global Market Intelligence, Construction Industry Council, Hong Kong.
FIND OUT MORE
p22
14
Balfour Beatty plc Annual Report and Accounts 2023
Market drivers
DEMOGRAPHIC SHIFTS DRIVING
INFRASTRUCTURE ENHANCEMENTS
Our markets are witnessing population
growth, especially in urban areas. This trend
demands upgraded transportation networks,
expanded housing and enhanced utilities to
accommodate the increasing population
density. At the same time ageing populations
increase the demand for healthcare facilities
and diverse accessibility needs.
AGEING INFRASTRUCTURE
INCREASING REPAIR AND
MAINTENANCE VOLUMES
In the UK and US, many elements of the
infrastructure systems were built decades
ago and are reaching the end of their intended
lifespans requiring significant attention and
investment. For example, the American
Society of Civil Engineers consistently grades
the US infrastructure at a grade below
satisfactory and 57% of the UK’s Strategic
Road Network (SRN) was built before 1980.
RECORD CAPITAL INVESTMENT IN
ENERGY INFRASTRUCTURE
Capital investment in energy infrastructure
will increase significantly in the next three
decades to enable the transition to more
electrified power systems. In the UK, average
annual capital expenditure is expected to
increase 25–30% per decade to a peak of
£32 billion per year. In the US, the Inflation
Reduction Act has allocated almost
US$400 billion in funding to clean energy.
INVESTMENT IN INFRASTRUCTURE
RESILIENCE TO DELIVER SOCIETAL NEEDS
Infrastructure reliability is threatened by
environmental risk and there is a need to
ensure infrastructure assets are resilient to
future challenges including environmental
threats. To achieve this, spending on
enhancements and the construction of spare
capacity for critical infrastructure are key to
ensure existing assets can withstand shocks.
OPPORTUNITY TO UNLOCK
NEW VALUE BY LEVERAGING
DIGITALISATION AND AI
Across engineering and construction, there
are meaningful ways to integrate technology
to drive better performance. Through the
adoption of new technologies into business
processes, such as Building Information
Modelling (BIM), robotics, and exploring
applications of emerging technologies,
including generative AI, the opportunity for
cost and schedule efficiency gains increases.
STRENGTH IN PUBLIC AND
INFRASTRUCTURE SPENDING
Infrastructure plays a crucial role in the
economy and is widely considered an
important determinant of productivity and,
therefore, economic growth. In the UK and
US, infrastructure continues to be a source of
fiscal stimulus for governments and funds are
expected to flow into projects aimed at
upgrading traditional infrastructure and
accelerating energy transition.
Balfour Beatty plc Annual Report and Accounts 2023
15
Strategic report MARKET REVIEW CONTINUED
IMAGE
Our Hinkley Point C Marine and Tunnelling works project in Somerset is an
example of infrastructure investment to accelerate the UK’s energy transition.
16
Balfour Beatty plc Annual Report and Accounts 2023
Market drivers continued
CHANGING TRANSPORTATION NEEDS
REQUIRING SYSTEM UPGRADES
Increased congestion, a need to reduce
carbon emissions, and altered commuting
patterns are creating a growing emphasis on
sustainable and efficient transportation.
To meet these changing mobility needs,
investments are being made in public
transportation, electric vehicle infrastructure,
bike lanes and pedestrian-friendly infrastructure.
This is coupled with stable spending to
maintain, repair and upgrade ageing
transportation systems.
INCREASED PARTNERING WITH
GOVERNMENTS AND REGULATORS
Balfour Beatty increasingly works
collaboratively to develop mutually beneficial
models of working to share risk and upside
appropriately. Via the UK Government’s
Construction Playbook, the Group can assist
government, as a customer, to create better
outcomes on issues such as risk allocation,
whole-life cost optimisation and social value.
In the US, there has been a growing trend
of public-private partnerships (PPPs) to
accelerate delivery and better manage risk.
POLICY SHIFTS AND MARKET
DEMAND FOR SUSTAINABLE
CONSTRUCTION PRACTICES
Construction activities have a significant
environmental footprint. As stricter
regulations and standards are enacted and
customers place growing importance on
environmental performance, the adoption
of sustainable practices that aim to reduce
waste, conserve resources and use
eco-friendly materials and technologies
become critical to comply with regulations
and create more resilient assets.
MANAGING INFLATION RISK
CONSUMER PRICE INDEX (CPI) INFLATION RATE FORECAST 2020–2027
Whilst general inflationary pressure in Balfour Beatty’s
core markets is expected to reduce the actual
pressure on the business is more complex and
determined by price trends for specific input costs.
Balfour Beatty manages inflationary risks through
target-cost and cost-plus contracts and by ensuring
contractual terms are replicated through its supply
chain in the case of fixed-price contracts.
The Group is selective in its bids to ensure it is best
placed to deliver the projects it takes on and that the
terms of the contracts are suitable.
Over the years, this approach has lowered the risk
in Balfour Beatty’s order book and the Group will
continue to monitor and manage inflation risk in a
similar fashion.
%
10
8
6
4
2
0
2020
2021
2022
2023
2024
2025
2026
2027
Current data
Forecast data
UK CPI
US CPI
HK CPI
UK CPI
US CPI
HK CPI
Source: S&P Global Market Intelligence.
Balfour Beatty plc Annual Report and Accounts 2023
17
Strategic report MARKET REVIEW CONTINUED
UK Construction and Support
Services: strong growth prospects
Balfour Beatty is the UK’s largest construction and infrastructure
provider, collaborating with its customers to develop cutting-edge
solutions to meet the challenges of tomorrow.
UK energy infrastructure momentum
The UK has legislated to achieve a 78% reduction in emissions by 2035 compared to 1990 levels. Reaching this target requires significant
capital investment in the UK’s energy infrastructure to transition to a more sustainable and circular economy and society. The energy transition
is attracting policy support and funding and that is creating exciting opportunities in energy infrastructure where the Group’s capabilities are strong.
UK Government commitments
@ £20 billion of funding for early deployment
of Carbon Capture, Usage and Storage
@ £20 billion of Great British Nuclear funding
for small modular reactors
@ £20 billion of Ofgem funding to deliver
strategic electricity transmission
network upgrades
@ £1.3 billion of further Government funding
confirmed for Sizewell C preparatory works
Connecting cleaner, low-carbon power
Balfour Beatty’s unique end-to-end capabilities perfectly position it to capitalise on the emerging UK energy market opportunities and deliver
the critical national infrastructure required for the UK to achieve Net Zero by 2050.
The Scottish and Southern Electricity Networks (SSEN) Accelerated Strategic Transmission Investment (ASTI) framework creates significant
opportunities for the Group in supporting the upgrade and expansion of the UK electricity grid to meet future needs.
Cabling, substations and overhead lines
Recent momentum
In 2023, Balfour Beatty was selected as one of 10 preferred bidders for SSEN’s Accelerated
Strategic Transmission Investment (ASTI) framework. Since then, we have started detailed
design on nine projects.
Balfour Beatty capabilities
@ Environmental, ecological and
consenting work
@ Design and pre-construction planning
@ Heavy civil engineering and tunnelling
@ Mechanical and electrical
engineering construction
@ Site enabling works and logistics
@ Road and rail construction
@ Overhead lines, underground
cables and substations
@ Steel fabrication, offsite
manufacture and modularisation
@ Ground engineering and bulk earthworks
@ Construction plant services
18
Balfour Beatty plc Annual Report and Accounts 2023
ASTI
FRAMEWORK:
c.£10bn
SSEN
UK Construction and Support Services sector drivers
ENERGY INFRASTRUCTURE RAMPING UP
The energy infrastructure market will see a wide range of large-scale
projects coming to market to enable the UK to address the growing
demand for clean and secure energy. This will include the construction
of new clean energy generation capacity, underpinned by multi-billion
pound government commitments for carbon capture, hydrogen production
and small modular reactors, alongside capacity additions to the UK’s
conventional nuclear fleet, including Sizewell C, to complement the
increase in variable energy sources in the electricity generation mix.
STABLE HIGHWAYS AND ROAD FUNDING
The £24 billion Road Investment Strategy (RIS) 2 scheme running to
2025 continues to drive investment in the sector. Several schemes
under RIS2 have been deferred to RIS3, providing an ongoing
baseload of enhancement projects in the future. Investment in local
road and highways maintenance is underpinned by the Department
for Transport’s (DfT) funding allocation of £2.7 billion between 2022
and 2025. In 2023, the DfT announced a further £8.3 billion of
funding over the next 10 years for local road surfacing and wider
maintenance activities.
ACCELERATING ELECTRICITY TRANSMISSION
Expanding and upgrading the existing electricity grid is essential
for future energy demands including rising electricity demand, the
integration of renewable energy sources like wind and solar and
enhancing energy efficiency. This is creating a strong pipeline of
opportunities through RIIO-T and RIIO-ED2, as well as SSEN’s
Pathway to Net Zero framework and National Grid’s Great Grid
Upgrade programme. These frameworks will see significant
investment until 2030 to support the UK’s net zero goals under
Ofgem’s £20 billion ASTI funding.
RESILIENT RAIL PIPELINE
Network Rail’s Control Period 7 will drive investment in Britain’s rail
network to 2029. A total of £43.1 billion, approved by the Office of
Rail and Road, will be invested over the next five-year period and
includes schemes covering both construction and maintenance
projects. Although the HS2 leg to Manchester was cancelled by
the UK Government, £36 billion will be redirected to rail and other
transport projects across the Midlands and the North of England,
including the Transpennine Route Upgrade and other upgrade works
awarded through the Central Rail Systems Alliance, which create
more immediate opportunities for the Group.
BOLSTERING NATIONAL SECURITY ASSETS
UK defence spending is expected to continue at its historical levels of
2% of GDP and increasing geopolitical tensions have reinforced the
UK Government’s desire to maintain its nuclear deterrent, but as
elements of its infrastructure systems are reaching the end of their
intended lifespans, they require significant attention and investment.
Meanwhile, the UK’s increasing reliance on digital infrastructure and
the growing risk of cyber-attacks are prompting greater investment to
bolster intelligence and cyber capabilities including the new National
Cyber Force campus.
INCREASING NEED FOR FLOOD RESILIENCE
Extreme weather events as a result of a changing climate increase
the risk of flooding of homes and critical national infrastructure.
The National Audit Office found 189,000 properties at risk in 2020
against a target of 49,000, driving the need for upgrades and expansion
of the infrastructure. The Department for Environment, Food and
Rural Affairs (Defra) will invest £5.2 billion in the period from 2021 to
2027, to upgrade and expand flood and coastal defences to reduce
flood risk.
POWERING UP BRITAIN
With over a century of experience in the energy sector,
Balfour Beatty stands ready to deliver the infrastructure
needed for the energy revolution.
We’re investing in the UK, leveraging our international
experience and local knowledge, ready to mobilise
thousands of experts to combat climate change and
ensure the nation’s energy security to power up Britain.
SCAN OR CLICK TO LEARN MORE
ABOUT OUR UNMATCHED
ENERGY CAPABILITY
Balfour Beatty plc Annual Report and Accounts 2023
19
Strategic report MARKET REVIEW CONTINUED
US Construction: investing
in geographic expansion
Balfour Beatty invests in and builds the structures and infrastructure
that enhance how people live, work, learn and play.
Construction spending
US$bn, nominal
4
6
1
6
5
1
3
3
1
5
3
1
6
7
0
4
0
3
0
0
1
4
5
0
4
2023
2027
Northwest
Mid-Atlantic
California
Southeast
Texas and Arizona
Source: Dodge Construction Central.
Construction spending in Balfour Beatty’s chosen
states is estimated to outpace the national outlook
Despite the recent challenging environment in commercial buildings and
single-family housing, the medium-term outlook remains positive as
federal funding flows to state and local government levels.
The Group’s regions are expected to experience strong growth in their traditional
non-residential buildings segments and public sector buildings, multifamily
housing and education all expected to reach strong growth.
The transportation sector will benefit from fiscal stimulus via the Infrastructure
Investment and Jobs Act and the Inflation Reduction Act.
Meanwhile, the CHIPS Act is catalysing growth in new sectors that creates
opportunities for expansion.
Continued growth anticipated in our chosen states
Balfour Beatty’s US operations are focused primarily on specific, high growth regions known internally as
‘The Southern Smile’. This starts in the Pacific Northwest and runs through California, Texas, Florida and up
through Georgia and the Carolinas to Washington, D.C. These areas are population hubs with growth and
migration projected to continue driving increased investment, particularly in transportation and social infrastructure.
Sacramento, CA
Los Angeles, CA
Phoenix, AZ
Why these areas
@ Strong delivery and outlook in the
Southeast and California
@ Favourable federal order book that
includes the District of Columbia,
Maryland, Virginia and California
Richmond, VA
@ Adjacent markets with favourable
Raleigh, NC
Charleston, NC
Savannah, NC
growth demographics
@ Airport awards in Jacksonville,
Sacramento and Raleigh
Austin, TX
Tampa, FL
Jacksonville, FL
Expansion areas
20
Balfour Beatty plc Annual Report and Accounts 2023
US Construction sector drivers
HISTORIC INVESTMENT IN TRANSPORTATION
US transportation investment is expected to reach US$71 billion in
2024, as federal programmes aim to modernise and improve the
country’s transportation networks. Highways investment is forecast
to grow by US$11 billion in 2024 due to stable input prices, new
awards and more projects starting. Airport infrastructure requirements
are expanding, with an estimated US$150 billion in spending needs
from 2023 to 2027, as projected by the Airports Council International,
to accommodate increasing cargo and passenger volumes. Rail
investment is also on the rise to support the growing freight rail
activity associated with a thriving manufacturing construction market,
with Amtrak committing up to US$32 billion from 2024 to 2026.
DEMOGRAPHIC TRENDS DRIVING HEALTHCARE
AND EDUCATION INVESTMENT
Demographic trends mean investment in healthcare and education
remains a priority. In Balfour Beatty’s chosen states, healthcare and
education construction spending is expected to rise to US$26 billion
and US$55 billion per year by 2027, respectively. An ageing and
growing population is driving a need for large hospital expansions and
increased demand for outpatient and speciality care, whilst maintenance
needs and recent demographic shifts continue to drive K-12 construction
spending growth.
OFFICE RENOVATION AND DATA CENTRE GROWTH
As vacancies rise and lending standards tighten, traditional office
construction faces challenges. Consequently, renovation activity is
expected to surge as employers aim to bring staff back to the office
and companies seek to renovate or repurpose office space.
Additionally, investment in data centre construction and upgrades is
anticipated to support technology’s increased processing demands,
offering opportunities to pivot into growth sectors.
SUSTAINED MULTIFAMILY HOUSING DEMAND
Multifamily housing plays a crucial role in bolstering housing
availability and development has been at historic highs with 980,000
multifamily units expected to come online in the next several
quarters. Although demand is expected to taper off this peak due to
potential oversupply resulting in rising vacancies and declining rental
rates, demand is expected to remain at an elevated level due to an
ongoing shortage of housing and a need for more affordable housing
particularly in densely populated metropolitan areas.
STEADY HOSPITALITY AND LEISURE GROWTH
While some headwinds related to unfavourable borrowing conditions
remain, increased consumer sentiment is leading to greater demand
for hospitality and leisure in major cities. The US hotel construction
pipeline continues to grow at a steady pace, up 7% year on year by
projects and rooms. In Balfour Beatty’s chosen states annual expenditure
is expected to rise from US$14 billion in 2023 to US$25 billion in
2027. Dallas and Phoenix rank in the top five US cities for the largest
hotel construction pipelines by project.
OPPORTUNITIES IN GOVERNMENT PROJECTS
As various government agencies are readying for replacement facilities
and rehabilitation or repurpose projects, large government spending
programmes for shovel-ready projects that are within Balfour Beatty’s
expertise are being released. The federal buildings sector is expected
to increase to reach US$9.6 billion by 2027 in Balfour Beatty’s chosen states.
CONSTRUCTION BEGINS ON THE
KNOX STREET DEVELOPMENT
In December, Balfour Beatty, in joint
venture with ANDRES Construction
Services, started construction on the
Knox Street mixed-use development in
Dallas, Texas.
The joint venture will provide construction
services to deliver a total of one million
square feet of world-class mixed-use
space sitting on a four-acre site adjacent to
the iconic Katy Trail and neighbouring town
of Highland Park.
Balfour Beatty’s Texas operation is known
for its expertise in the delivery of notable
projects in the Dallas neighbourhood
including Park District, the Perot Museum
of Nature and Science, the Atelier and the
Omni Convention Center and Hotel.
Balfour Beatty is honoured
to bring this unique and
transformational mixed-use
development to life in Dallas.
We are experts in providing
world-class office, hotel and
residential spaces and we look
forward to working with our
client and industry partners to
deliver another exceptional
project in our community.”
Pleas Mitchell
President – Texas/Arizona
Balfour Beatty
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
21
Strategic report MARKET REVIEW CONTINUED
Gammon: strong position
in a buoyant market
For over 65 years, Gammon, our joint venture with Jardine Matheson, has forged
a reputation for delivering high-quality projects throughout Southeast Asia.
Hong Kong construction spending
HK$bn, nominal
5
3
1
5
0
1
0
6
1
5
1
1
2023
2027
Private sector
Public sector
Source: Construction Industry Council, Hong Kong.
Key trends
Hong Kong
The current pipeline of infrastructure projects is driven by the Hong Kong
Government’s drive to increase connectivity within the Greater Bay Area, as it
announced three new strategic railways and three new major roads. It identified
the Northern Metropolis as a new engine for future development and is exploring
the benefits of developing the Kau Yi Chau artificial islands as a third central
business district.
Singapore
In Singapore, demand for construction is expected to remain stable. The public
sector continues to be the main driver, with projects such as the Cross Island
Mass Rapid Transit (MRT) Line, several hospital developments, the Sentosa Brani
Master Plan and the Changi Airport expansion.
Northern
Metropolis
The Northern Metropolis will
bring the development of more
than 3,000 hectares of land in
several phases over the next
20 years, and it is estimated
that about half of that is private
land. The development includes
the San Tin Technopole project,
which will provide 150 hectares
of additional land for innovation
and technology uses.
Long-term aviation
investment
The Airport Authority of Hong
Kong has spent HK$9 billion to
improve its infrastructure on
top of the HK$141.5 billion
Three Runway System project,
with works underway to
increase connectivity within
the Greater Bay Area.
Railway network extension
An ambitious programme of
new railway projects is
currently in progress to expand
the existing railway network
by 25%.
Stable construction
spending
Public sector investment is
driving expansion in Hong
Kong, with public construction
spending expected to reach
HK$160 billion by 2027.
22
Balfour Beatty plc Annual Report and Accounts 2023
Infrastructure Investments:
a source of value
Balfour Beatty Investments is recognised as a leader in public private
partnerships and other developments in the UK and the US.
Infrastructure assets remain resilient through macro shocks
Infrastructure assets are generally long-lived with stable cash flows
that are typically linked to inflation and often supported by regulatory
or contractual protection. As a result, infrastructure assets can
provide a predictable return over time and usually have lower volatility
than other traditional asset classes.
Moreover, the infrastructure sector continues to benefit from
long-term secular tailwinds – the need to decarbonise, modernise and
replace existing assets – that are expected to remain intact even as
markets adjust to higher underlying base rates and inflation.
Future investment focus
STUDENT ACCOMMODATION
Demand for student accommodation remains strong for both
conventional as well as off-campus student housing projects.
MILITARY HOUSING
The Group continues to develop and maintain a large network
of privatised military housing facilities across the US.
EV RESIDENTIAL CHARGING INFRASTRUCTURE
Growth in EV adoption provides opportunities for the Group
in the charger deployment market.
MULTIFAMILY HOUSING
US multifamily accommodation continues to come to market,
providing opportunity to invest in the regeneration of these properties.
NASCENT ENERGY TRANSITION
As the UK’s energy mix transitions to more renewable sources,
the Group continues to evaluate these changes for both investment
and construction opportunities.
PUBLIC-PRIVATE PARTNERSHIP PROJECTS
Legislation allowing public-private partnership (P3) projects has
passed in 41 states, creating opportunities in courthouse, school,
government building and transport projects.
TEAMING UP WITH THE UNIVERSITY OF SUSSEX TO FINANCE
AND BUILD NEW STUDENT ACCOMMODATION
Balfour Beatty has achieved
considerable success in the student
accommodation market with an
investment portfolio of nearly 5,000
beds in development or operation
across the UK, testament to its
end-to-end offering from funding
and development through to design,
construction, and maintenance in
partnership with Balfour Beatty’s
UK Construction business.
Balfour Beatty has reaffirmed its
longstanding partnership with the
University of Sussex by securing
the contract for the new West
Slope Residencies.
On completion, the campus will
provide 1,899 bedrooms, together
with a new health and wellbeing
centre as well as catering and retail
facilities for students.
Along with an equity commitment
of £32 million, Balfour Beatty
Investments has provided the
funding strategy which raised a
£171 million bond for the project.
Balfour Beatty plc Annual Report and Accounts 2023
23
Strategic report INNOVATION IN CONSTRUCTION
Digital drives
performance
IMAGE
Our Operational Control Hub on Balfour Beatty Living Places’ Lincolnshire County Council highways
maintenance contract.
24
Balfour Beatty plc Annual Report and Accounts 2023
Digital drives
performance
Balfour Beatty is using data, AI and digital technologies
to improve safety, productivity and assurance.
Our digital transformation gained momentum
back in 2018 when we established our data
lake – a secure, central repository of billions
of data points from across Balfour Beatty.
Today, we’re using it to power our digital
toolset, to bring supply chain partners into our
digital ecosystem and generate the real-time
data we need to manage and deliver works,
safely and sustainably.
Our project teams are now embedding a
range of software and hardware that is
improving how we deliver. Through our
digital passport initiative, our supply chain
partners’ employees can now access and
feed information into our project
management tools via our Site Apps.
Powering collaboration, Site Apps enable the
entire workforce to complete job cards and
quality checklists, request safety permits and
share safety observations, as well as allowing
our management teams to check the
competencies before they step on site.
The real-time data collated via our Site Apps
is shared with management teams and
operational control hubs to help us to plan
works and prioritise resources more effectively.
As we continue to roll out our digital passports
to supply chain partner employees, we’re
also deploying new hardware, such as
Human Form Recognition Cameras which
alert plant operators if someone is in close
proximity to their machine.
Using AI to refocus
our people’s time
We are developing our own secure AI
assistant, StoaOne, to provide everyone in
our business with a personal digital assistant
that can help with mundane and time-consuming
tasks, allowing our experts to focus on the
areas they provide the most value in. StoaOne
is a GPT model that mines our data lake,
summarising the 8,000+ documents in our
Business Management System, quickly
putting the right information at our people’s
fingertips. Now being trialled in our Regional
Civils business, with a view to rolling it out
wider in 2024, typical use cases include
compiling all the required safety procedures
and checks from across many documents,
into one place when planning crane lifts.
In what could be a step-change to how we
manage safety risks on our projects, we are
also developing an AI-powered tool that
analyses safety data, including incident
information and observations, to identify
safety risks on our projects before any
incidents occur.
See page 50 to read more about our
approach to digital safety.
15,000
UK SUPPLY CHAIN PARTNER
EMPLOYEES ARE NOW
USING OUR SITE APPS
57,000
DIGITAL SAFETY PERMITS
ISSUED VIA OUR APP
400,000+
HEALTH AND SAFETY
OBVERSATIONS RAISED
VIA OUR APP IN 2023
SCAN OR CLICK TO
WATCH A VIDEO ON OUR
DIGITAL JOURNEY
StoaOne, Balfour Beatty’s in-house AI assistant
is changing how we use technology. We continue
to be amazed by the tasks that it can undertake
and are discovering new ways to use it on an
almost daily basis. Our industry’s ability to
deliver is often hampered by skills shortages;
emerging technologies like StoaOne will help
solve this problem and also attract a more
diverse range of skillsets to our industry.”
Anthony Burgess
Technical Director, Balfour Beatty’s UK Construction business
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
25
Strategic report OUR STRATEGY: BUILD TO LAST
Delivering
Build to Last
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.
Our KPIs
The Build to Last strategy is
measured against our five
values – Lean, Expert, Trusted,
Safe and Sustainable.
Lean
Expert
We create value for our
customers and drive
continuous improvement
We’re thoughtful and agile, continuously
challenging our ways of working to improve
health and safety and productivity, eliminate
waste and enhance quality to make us
more competitive.
Our highly skilled
colleagues and
partners set us apart
Our people are leaders. We’re the experts of
today and inspire the leaders of tomorrow.
We invest in our colleagues, building their
skills and knowledge, to develop a passionate,
world-class workforce drawn from all parts of
our society.
NET CASH £m
excluding non-recourse
borrowings and lease
liabilities
UNDERLYING
PROFIT/(LOSS)
FROM CONTINUING
OPERATIONS £m
EMPLOYEE ENGAGEMENT
INDEX %
2
4
8
5
1
8
0
9
7
9
7
2
8
2
2
1
2
2
5
0
2
6
9
1
7
9
1
0
8
1
8
5
7
6
7
5
6
6
6
0
86
5
0
6
9
6
)
4
7
(
1
5
1
8
5
2
1
5
5
3
3
7
3
3
3
6
1
3
7
1
15
16
17
18
19
20
21
22
23
15
16
17
18
19
20
21
22
23
15
16
17
18
19
20
21
22
23
2023:
2023:
£842m
£228m
2023:
81%
More information
Find out how our strategy is supported
by the current market on pages 14 to 25.
For the risk appetite in the context of the
Company values see page 94.
p88
26
Balfour Beatty plc Annual Report and Accounts 2023
p70
Trusted
We deliver on our
promises and we
do the right thing
Safe
We make
safety personal
We build trust every day by delivering on our
promises, always. We’re accountable for our
decisions and work with the upmost integrity
to ensure we’re making the right choices.
Safety is our license to operate. Nothing is
more important than the health, safety
and wellbeing of our colleagues and the
communities we serve. We are unrelenting
and uncompromising in our commitment to
achieving Zero Harm.
Sustainable
We act responsibly to
protect and enhance
our planet and society
We leave a positive legacy for the people we
work with, the communities we work in, and
the world in which we operate. We want
to enhance our impact on the environment,
working with our supply chain partners,
customers and communities to ensure our
choices are sustainable.
CUSTOMER SATISFACTION
AVERAGE %
LOST TIME INJURY RATE (LTIR)
excluding international joint ventures
TOTAL SCOPE 1 AND 2 EMISSIONS
(tCO2e) 000s
4
9
1
9
2
8
7
9
4
9
5
9
6
9
5
9
5
9
4
2
.
0
4
2
.
0
8
1
.
60
1
.
0
6
1
.
0
9
1
.
0
4
1
.
0
5
1
.
0
1
1
.
0
6
9
1
1
9
1
5
5
1
1
3
1
2
2
1
4
2
1
7
4
1
6
4
1
9
3
1
15
16
17
18
19
20
21
22
23
15
16
17
18
19
20
21
22
23
15
16
17
18
19
20
21
22
23
2023:
95%
p52
2023:
0.11 LTIR
2023:
146 tCO2e 000s
p44
p54
Balfour Beatty plc Annual Report and Accounts 2023
27
Strategic report STAKEHOLDER VALUE
Sharing the
value we create
In striving to achieve its purpose of Building New Futures, Balfour Beatty touches the
lives of millions of people around the world. Working with multiple stakeholders across
the industry and beyond, the Group continues to innovate and lead the market through
driving change, shaping the debate and inspiring a new generation of talent to be the
change-makers of tomorrow.
About our stakeholders
From shareholders and employees to customers, supply chain partners and the communities we operate in, each stakeholder group
holds a vested interest in Balfour Beatty’s activities, performance or success. Their support, feedback and collaboration are vital for
driving business growth and profitability but also for fostering trust and sustainability, and building a positive lasting legacy.
Shareholders
Our shareholders, as owners of the Company,
are a critical stakeholder for the Group.
2023 engagement examples:
@ Throughout 2023, the Company held 75 meetings with shareholders
and investors. For details on how the Board engages with investors
see pages 128 and 129.
@ To keep shareholders up to date with company news including
financial information, we share regular updates via regulatory
announcements, webcasts and presentations. Balfour Beatty’s
2023 half year results and 2022 full year results announcements
generated 2,000 virtual views, with the announcements accessed
over 25,000 times in 2023. Headlines from full and half year results
are shared in an engaging way on our corporate social media channels
and from our Group Chief Executive, Leo Quinn’s LinkedIn profile.
In 2023, Leo’s LinkedIn post received record engagement levels,
in March 2023, his post was seen by 36,000 people and in
August 2023, his post was seen by 17,500 people.
Creating value:
Balfour Beatty has established the strongest balance sheet in
its sector and from this position of strength, continues to deliver
on its multi-year capital allocation framework, announced back
in March 2021. This provides a balanced approach between the
investment needs of the business, regular dividend payments and
additional returns to shareholders. Balfour Beatty intends to return
c.£160 million in 2024 through a combination of dividends and share
buybacks, which will bring the cumulative return to shareholders
since the introduction in 2021 of the multi-year capital allocation
framework to over £750 million.
28
Balfour Beatty plc Annual Report and Accounts 2023
INVESTOR VISIT TO HS2 OLD OAK COMMON STATION
In November 2023, Balfour Beatty welcomed seven investors,
including four of the Company’s top ten shareholders, to the
HS2 Old Oak Common station in London, the largest new
build station in the UK for 100 years, to share an update on
our progress and the expert capability we deploy to deliver
critical and complex infrastructure projects.
Group Chief Executive Leo Quinn, supported by Balfour Beatty
VINCI SYSTRA Project Director Nigel Russell, and Construction
Lead Brendan Seymour, emphasised collaboration and teamwork
as the main drivers in helping deliver a successful project with a
diverse supply chain comprised of multiple contractors.
ABOVE
Our investors visit to HS2 Old Oak Common station, London.
Customers
Employees
Collaborative and long-term mutually beneficial
relationships with our customers are the
foundation of our success.
2023 engagement examples:
@ As the industry leader, we know that freely sharing best practice is
the best way to help the industry develop and evolve. In 2023, we
launched our new ‘five minute read’ documents where our experts
share their perspectives on important topics within the construction
and infrastructure industry, discussing opportunities for the sector
and sharing views on how to increase awareness of Modern
Methods of Construction (MMC). The publication received a high
level of engagement on social media, with Balfour Beatty’s
customers such as National Highways supporting the initiative.
@ Balfour Beatty ran a successful series of high-level energy
roundtables in 2023, on nuclear power, Carbon Capture Utilisation
and Storage and offshore wind to discuss how to overcome key
issues in each area in order to deliver the critical energy infrastructure
the UK needs. The high-level events were attended by senior
participants including customers, Government, partners and
industry experts.
@ We regularly invite our key strategic customers and partners to play
an active role at Balfour Beatty’s conferences, providing them with
an opportunity to share their priorities and focus areas with our
leaders, and to help Balfour Beatty align its approach to best support
them. At our ‘Engineering our Future’ conference in November 2023,
we invited senior leaders from valued customer organisations,
including Sizewell C, Network Rail and Scottish and Southern
Electricity Networks to join a facilitated panel discussion and Q&A
in front of an audience of 180 Balfour Beatty leaders.
Creating value:
The key metric for our Trusted value is customer satisfaction. In 2023,
over 1,800 customer satisfaction reviews were carried out with the
Group’s customer satisfaction score standing at 95%.
SCAN OR
CLICK TO READ OUR FIVE
MINUTE READ ON MMC
This is a super ‘five
minute read’. Well done
to Balfour Beatty for putting complex
ideas into a simple format. Our
construction industry has to coalesce
if we are going to transform its reputation
from being fragmented to one that
grabs potential, makes it real and
takes strides to showcase the
use of MMC.”
Manjit Rana
Head of Sustainable Commercial Improvement
National Highways
Talented and engaged employees committed
to upholding our values enable us to deliver on
our Build to Last strategy ensuring we win, and
expertly deliver the best and most exciting projects
whilst continuing to build a great place to work.
2023 engagement examples:
@ My Contribution (MyC) is our engagement programme for
employee led business change giving each and every colleague a
voice empowering them to share their ideas. In 2023 colleagues
from across the UK shared 2,200 MyC ideas, with those delivered
generating £7.6 million of cash, £2.5 million of cost savings, 71,800
hours of time saved, and 417 ideas delivered in the Better Place to
Work category. Find out more about MyC on pages 78 and 79.
@ Live events and conferences form a key approach for delivering
impactful employee engagement across the Group. In 2023 across
the UK, we held more than 20 face-to-face events, engaging over
3,400 colleagues. These events provide an opportunity for leaders
and subject matter experts to engage employees on key strategic
and thematic areas, building a deeper understanding among
audiences and creating a space for two-way dialogue. From large
conferences attended by more than 200 people for our HS2 Major
Projects business, to small, focused events for Group-wide senior
leaders, each event is carefully devised to advance business
strategy, celebrate success, promote leadership engagement,
and build corporate knowledge.
@ The Group celebrates and takes part in a range of diversity and
inclusion focused events to help create an inclusive workplace.
In 2023, this included Hispanic Heritage Month, Women’s Equality
Day and Black History Month in the US, International Women’s Day
in Hong Kong and the UK, and International Day of People with
Disabilities, Pride Month and International Women in Engineering
Day in the UK.
For details on how the Board engages with employees see pages
125 to 127.
Creating value:
The key metric for our Expert value is employee engagement.
In 2023, our Group employee engagement score was the highest
to date, rising for the sixth year in a row to 81%.
Our surveys are run by an independent company and when
benchmarked, our engagement score for 2023 was 7 percentage
points above an industry average and 8 percentage points above
companies of a similar size.
ABOVE
Our HS2 Major Projects employee conference in Birmingham.
Balfour Beatty plc Annual Report and Accounts 2023
29
Strategic report STAKEHOLDER VALUE CONTINUED
Supply chain and strategic partners
Governments
Governments set the policy and legislative context
in which we operate and are also valued customers
across all of our chosen geographies.
2023 engagement examples:
@ In advance of the 2023 UK Government Autumn Statement, we
submitted a fulsome report to the Government on the changes that
we would wish the UK Prime Minister to make, in order to enhance
the industry.
@ In June 2023, we welcomed the Tees Valley Combined Authority
to Balfour Beatty VINCI’s HS2 Kingsbury Skills Academy to see at
first-hand the investment in skills we make when we work on a
major scheme.
@ In 2024, we participated in Labour’s Major Capital Projects Review
to discuss improvements in infrastructure delivery and how to
maximise its significant potential as a key catalyst for social and
economic benefits across the UK. We also made a comprehensive
written submission to the review, which included
recommendations and contributions from UK colleagues.
Creating value:
Thanks to the relationships we have established with key stakeholders
across the UK Government, we are able to engage with Whitehall
departments in order to improve our ability to deliver vital public
sector projects efficiently.
In 2023, Balfour Beatty led a response from 13 of the sector’s leading
contractors and consultants to the UK Government’s consultation on
operational reforms to the Nationally Significant Infrastructure Project
(NSIP) consenting process. This consultation outlined the Government’s
proposals to reform the planning and consenting approach for major
infrastructure schemes and, as such, has the potential to significantly
impact our work. Our single, cohesive and authoritative response
suggests a number of alternative solutions and was shared with
Government and the Labour Party to help shape a better approach
on this critical area.
The thousands of supply chain partners we work
with across the UK, US and Hong Kong play an
instrumental role in our success and in improving
and enhancing best practice across our industry.
2023 engagement examples:
@ In the UK, it is estimated that 122,000 people in the UK are victims
of modern slavery with our industry one of the highest risk industries.
Starting from October 2023, we made changes to our
ConstructionLine pre-qualification, and helped our supply chain
partners to either update or create their own Modern Slavery
Statement. We also provided training on how to conduct modern
slavery audits of our supply chain, further enhanced our sustainability
tender question set in Jaggaer – our UK eProcurement portal – to
include modern slavery questions and launched procurement guidance
in our solar PV supply chain in collaboration with Action Sustainability,
the delivery partner of the Supply Chain Sustainability School.
@ We launched a pilot of our new £10 million Innovation Fund at our
Strategic Supplier Conference in London in May 2023. The purpose
of the fund is to spur a wave of innovation to help future-proof not
just our business, but the wider industry, providing a launchpad for
new products, ideas and other solutions within a ‘live environment’
testing ground. We continue to receive applications.
@ In the UK, Leo Quinn, Group Chief Executive announced his
Founder’s Pledge as part of The 5% Club’s 10-year anniversary.
10 apprentices from across the UK business and its supply chain
secured the coveted Founder’s Pledge award. Leo personally gifted
£10,000 to support the 10 chosen apprentices and help address
the troubling statistics that nearly half of apprentices in the UK fail to
complete their training due to a lack of wellbeing and financial support.
Each apprentice has now embarked on a one-year mentoring
programme, where they will learn and gain experience directly from
their own business leaders to support their continued growth and
success whilst also ensuring the development of the industry’s
future talent.
Creating value:
Ensuring cash reaches our supply chain partners quickly for work
carried out remains a priority. In line with the UK’s Prompt Payment
Code, Balfour Beatty is committed to paying all supply chain partners
on time and to mutually agreed terms. We continually invest in our
processes and procedures to improve our payment performance and
enhance accuracy and transparency. In 2023, the percentage of
invoices paid in the UK within 60 days was maintained at 97%
– a significant improvement from 86% in 2019.
PARTNERING WITH THE CAROLINAS ASSOCIATED
GENERAL CONTRACTORS OF AMERICA (AGC)
Mark Johnnie, Senior Vice President at Balfour Beatty US,
attended a conference hosted by AGC of America, a leading
association for the construction industry which regularly engages
with influential members of Congress and top officials in federal
agencies. The conference allowed attendees to meet members
of the US Senate and House of Representatives from North and
South Carolina to discuss issues important to the construction
industry, including how to relieve the skills shortage, immigration,
and technical education funding for construction trades.
ABOVE
Leo Quinn, Group Chief Executive, with The 5% Club Founder’s Pledge
Award winners.
30
Balfour Beatty plc Annual Report and Accounts 2023
Communities
Our activities can have a lasting impact on the communities
in which we operate – we strive to leave a positive legacy.
2023 engagement examples:
@ In the UK, Balfour Beatty successfully completed the Regent Street
Flyover project for Leeds City Council via the SCAPE Civil Engineering
framework. Over the duration of the scheme, we generated an
impressive £10.8 million of social value providing job opportunities
to over 26 local people and delivered 200+ hours of volunteering in
the local community.
@ In 2023, Balfour Beatty Communities awarded 44 college
scholarships, totalling more than US$113,000, to residents living
in its US military housing, multifamily housing, and student
housing schemes. The annual scholarship programme supports
the Balfour Beatty Communities Foundation’s primary goal of
encouraging and promoting the pursuit of education and
commitment to community leadership.
@ In Hong Kong, Gammon launched an 18-month partnership with
Tung Wah Group, one of the oldest charitable organisations in
Hong Kong. The partnership reflects Gammon’s commitment to
societal wellbeing, with Tung Wah Group known for its constant
development of services to the medical and educational industries
as well as to local communities. In September, Gammon also
supported the successful launch of Tung Wah Group’s End of
Life Service for the Elderly.
Creating value:
In the UK, Balfour Beatty continues to use the National TOMs
framework as a method of measuring and reporting social value to a
consistent and recognised standard. In 2023, across Balfour Beatty’s
UK projects we delivered £937 million in social value, an increase of
15% on our 2022 performance.
BELOW
Pupils with HS2 Balfour Beatty VINCI volunteers in the new Forest School at Paget Primary School, Birmingham.
Learning in the wild
Pupils at Paget Primary School in Birmingham are now enjoying a new Forest School thanks to volunteers from Balfour Beatty VINCI
(BBV) and HS2. The new facilities encourage children to learn and develop, both physically and emotionally, through play, activities and
exploration of the outdoor area.
Over four days, a team of volunteers, including apprentices, from the nearby HS2 Bromford Tunnel Shaft construction site levelled the
area where the Forest School is situated and spread tree bark, before installing tables, chairs, a fire pit, a 1,000-litre water butt, two mud
kitchens, a bug hotel, bird tables, bird boxes and an area to practice country fence weaving.
Balfour Beatty plc Annual Report and Accounts 2023
31
Strategic report
Strategic report
OPERATIONAL REVIEW
Strong performance
across all divisions
Throughout this report, the Group has presented financial performance measures which are considered most relevant to Balfour Beatty
and are used to manage the Group’s performance. These financial performance measures are chosen to provide a balanced view of the
Group’s operations and are considered useful to investors as these measures provide relevant information on the Group’s past or future
performance, position or cash flows. These financial performance measures are also aligned to measures used internally to assess
business performance in the Group’s budgeting process and when determining compensation. An explanation of the Group’s financial
performance measures and appropriate reconciliations to its statutory measures are provided in the Measuring our financial performance
section on pages 81 to 87. Non-underlying items are the cause of the differences between underlying and statutory profitability.
Additionally, revenue includes the Group’s share of revenue of joint ventures and associates.
The US Construction order book decreased
by 7% to £5.6 billion (2022: £6.0 billion) due
to foreign exchange movements and was flat
at CER. Following a difficult period for orders
in the first half of 2023, the stabilisation of
interest rates has contributed to an improvement
in market conditions, particularly in the
commercial office sector, resulting in a stronger
period of order intake in the second half.
Gammon: The Group’s share of Gammon’s
revenue increased by 27% (27% at CER) to
£1,357 million (2022: £1,068 million) driven
by an increase in major civils volumes,
including the Terminal 2 expansion at Hong
Kong Airport. Underlying profit increased to
£36 million (2022: £32 million) representing
a 2.7% profit margin (2022: 3.0%).
The Group’s share of Gammon’s order book
decreased by 31% (29% at CER) to £2.0 billion
(2022: £2.9 billion) with the accelerated
utilisation of the order book only partially
offset by new orders, which included a
HK$3.7 billion contract to construct a new
development at Cyberport, which is the
largest Fintech community in Hong Kong,
from a wholly owned company of the Hong
Kong Special Administrative
Region Government.
Financial review
Revenue at £8,081 million was up 8% (2022:
£7,482 million), an 8% increase at CER, with
higher volumes in the UK and Gammon.
Underlying profit from operations increased
to £156 million (2022: £149 million) due to
improved profitability in UK Construction and
higher volumes at Gammon, partially offset
by reduced profitability in US Construction.
Statutory profit for the year was £143 million
(2022: £150 million). The order book reduced
by 9% (6% at CER) in the year to £13.7 billion
(2022: £15.0 billion), due to a reduction at
Gammon and foreign exchange movements.
UK Construction: Revenue in UK Construction
increased by 10% to £3,027 million (2022:
£2,763 million) driven primarily by higher
transport volumes.
UK Construction underlying profit from operations
increased to £69 million (2022: £59 million),
driven by higher revenue and improved
project delivery. This represents a 2.3% PFO
margin (2022: 2.1%) and demonstrates progress
in the Group’s medium term ambition to
achieve a 3% PFO margin in UK Construction,
with further improvement expected in 2024.
The UK Construction order book remained
flat at £6.1 billion, with 91% of those orders
from public sector and regulated industry clients.
US Construction: Revenue in US Construction
increased by 1% (1% at CER) to £3,697 million
(2022: £3,651 million). Underlying profit from
operations for US Construction reduced by
12% to £51 million (2022: £58 million) as a
small number of civils projects have taken
longer than initially scheduled. Due to the
fixed-price nature of the contracts, the cost
of these delays has impacted profitability in
2023 and we now expect PFO to be flat in 2024.
Construction Services
Our Construction Services
businesses operate across
infrastructure and buildings
markets in the UK, the US and
in joint venture in Hong Kong.
REVENUE1
£8,081m
2022: £7,482m
STATUTORY REVENUE
£6,695m
2022: £6,409m
UNDERLYING PROFIT
FROM OPERATIONS
£156m
2022: £149m
STATUTORY PROFIT FROM
OPERATIONS
£143m
2022: £150m
ORDER BOOK1
£13.7bn
2022: £15.0bn
1 Including share of joint ventures and associates.
32
Balfour Beatty plc Annual Report and Accounts 2023
Balfour Beatty’s
end-to-end capabilities
position it well to
capitalise on the
market opportunities
in UK energy security
and transition
infrastructure.”
Operational review
UK Construction
Breadth of opportunities in chosen markets
The next UK general election is expected
in the second half of 2024 and both the
incumbent Government and the Opposition
have set out their plans to help accelerate
the delivery of critical infrastructure in the
UK, which address industry challenges
such as slow decision making, planning
delays and the uncertainty which has
hindered private investment. With both
the Conservative and Labour parties
recognising the importance of infrastructure
development to economic growth, the
outlook for Balfour Beatty in the UK
remains positive. The Group’s chosen
focus areas in the UK of energy and
transportation infrastructure are high
on the priority list for both parties and
represented 81% of the Infrastructure and
Project Authority’s £775 billion National
Infrastructure and Construction Pipeline
published in February 2024. In the same
month, the Labour party revised down its
previous green investment policy due to
economic pressures, however the new
commitment represents an increase to
current levels of spending and does not
impact Balfour Beatty’s view of the broad
opportunity in the medium term.
Balfour Beatty’s end-to-end capabilities position
it well to capitalise on the market opportunities
in UK energy security and transition infrastructure.
During 2023, the number of conversations
with potential customers and the volume of
work being pursued in this space has grown
significantly, aided in part by favourable
fundamentals and Government support.
Recent developments include:
@ as part of the 2023 Spring Budget, the UK
Government allocated £20 billion of funding
to the development of carbon capture and
hydrogen production technologies.
Opportunities include Net Zero Teesside,
a first-of-a-kind integrated power and
carbon capture project, for which Balfour
Beatty was involved in the front-end
engineering and design study;
@ in July, the UK Government stated that
up to £20 billion could be spent on the
development and construction of small
nuclear reactors (SMR), and in October,
Holtec’s SMR-160 pressurised light-water
nuclear reactor, for which Balfour Beatty is
the main construction partner, was selected
as one of six designs to progress to the
next stage of a government competition
for the development of innovative
technology to boost Britain’s energy
security and sustainability; and
@ in January 2024, the Development Consent
Order (DCO) for Sizewell C was triggered
and the UK Government made an additional
£1.3 billion available for the new nuclear
power station, specifically to support
ongoing preparatory works such as
improvements to roads and rail lines
around the Suffolk site.
The Group also continues to pursue
opportunities in offshore wind and hydrogen,
and from 2025 onwards, the UK Construction
division’s civil engineering expertise is
expected to be drawn on further as a result
of the forecast expansion of power transmission
and distribution volumes within Support Services.
In the UK transport sector, the Group’s order
book was unaffected by the Government’s
decision in October 2023 to cancel HS2
Phase 2, as this stage of the project had yet
to be contracted. The Group continues to
expect to deliver material volumes of HS2
work across the balance of the decade and
is awaiting results for its bids submitted in
November on four new packages of HS2
work covering overhead catenary and track
installation. Aligned to the cancellation of
HS2 Phase 2, the Government announced
Network North, a £36 billion plan to improve
the roads, buses and railways that people
use every day. With Balfour Beatty holding
material market positions with both Network
Rail and National Highways, Network North
could introduce new opportunities for the Group.
Balfour Beatty was awarded a £1.2 billion
contract by National Highways in January
2023 to deliver the ‘Roads North of the Thames’
package of works for the proposed Lower
Thames Crossing. As part of the announcement
by the UK transport secretary on 9 March 2023
regarding a £40 billion investment in transport
schemes across 2023–2025, Lower Thames
Crossing was delayed by two years, with the
notice to proceed from the Department for
Transport now not expected prior to 2026.
In the UK defence and security sector,
in which Balfour Beatty has been a long
term participant, the Group have identified
opportunities to grow its market share at
a time when funding is also increasing.
The Group’s experiences in civil nuclear
construction hold close adjacencies with
some of the projects being tendered, while
its end-to-end capabilities can simplify high
security project delivery by reducing complex
interfaces. The Ministry of Defence has
£110 billion of funding ringfenced for the
Defence Nuclear Enterprise (DNE) for the ten
years to 2033, which will in part be used to
upgrade defence infrastructure, and during
2023, the Group started work at two of the
sites funded by the DNE.
CONSTRUCTION SERVICES
2023
2022
UK
US
Gammon
Underlying2
Non-underlying
Total
Revenue 1
£m
3,027
3,697
1,357
8,081
–
8,081
PFO
£m
69
51
36
156
(13)
143
Order book 1
£bn
6.1
5.6
2.0
13.7
–
13.7
Revenue 1
£m
2,763
3,651
1,068
7,482
–
7,482
PFO
£m
59
58
32
149
1
150
Order book 1
£bn
6.1
6.0
2.9
15.0
–
15.0
1 Including share of joint ventures and associates.
2 Before non-underlying items (Note 10).
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
Balfour Beatty plc Annual Report and Accounts 2023
33
Strategic report OPERATIONAL REVIEW CONTINUED
Balfour Beatty installs six offshore
liners at Hinkley Point C
In December 2023, Balfour Beatty successfully installed six
offshore liners at Hinkley Point C, a crucial step forward as
Hinkley Point C’s offshore works near completion.
Installed up to two miles off the coast in the Bristol Channel,
the second largest tidal range in the world, the six liners, each
weighing up to 270 tonnes, will play a significant role in the
power station’s vital cooling water system.
Lowered through 40-metre steel casings placed in the seabed
earlier in the year, the six vertical liners will support the
circulation of up to 120,000 litres of water per second from the
Bristol Channel to the nuclear power station through five miles
of underground tunnels to provide cooling to the power
station’s systems.
Reaching depths of 25 metres below sea level, each liner was
designed with a world-first, innovative pre-installed isolation
cap, allowing safe, ongoing access to the cooling water
tunnels for the remaining construction works prior to being
fully removed and stored for use, should tunnel maintenance
works be required.
SCAN OR CLICK TO LEARN MORE ABOUT THE
INSTALLATION OF THE SIX OFFSHORE LINERS
AT HINKLEY POINT C.
the M3 and M1/A1 in the year and made
progress on the A63.
UK Construction currently has around 700
live projects in the portfolio, which is slightly
higher than recent years. During 2023, work
was completed on a wide range of projects
including the Mayfield Retirement Village in
Watford, the Forder Valley link road and
bridge in Plymouth, the National Treatment
Centre Highland Hospital in Inverness and
the Institute for Regeneration and Repair at
the University of Edinburgh. New projects
which started in the year included a new
building at the AWE Aldermaston site near
Reading, civils work at Devonport Dockyard
in Plymouth, the Central Rhyl Coastal Defence
scheme in North Wales and the Dunfermline
Learning Campus for Fife College.
In addition to projects started in the year,
work added to the order book in 2023
included the £300 million West Slope
student accommodation development a
Sussex University, which is a Balfour Beatty
Infrastructure Investments project, and a
£67 million contract for a replacement
Liberton High School in Edinburgh.
Construction Services
continued
Operational review continued
Improved delivery driving margin momentum
Balfour Beatty’s market-leading position in
the UK infrastructure market is built on its
unmatched scale and vertically integrated
capability for delivering major and regional
projects. In 2023, 95% of UK Construction
revenue was from public sector and regulated
industry clients (2022: 91%). Balfour Beatty
will continue to be selective in the work that
it bids, through increased bid margin thresholds
and utilisation of risk frameworks and contract
governance. To this end, the Group’s involvement
in the Central London high-end private sector
property market concluded in 2023.
Alongside the Group’s focus on reducing the
risk within the order book is its determination
to provide industry leading project delivery
across the UK Construction portfolio.
At HS2, the scale and complexity of construction
activity continued to grow in 2023. At Area
North, the 2,000 tonne tunnel boring machine
completed its second one mile journey
underneath an ancient Warwickshire wood,
marking the culmination of a three-year
operation, from site set-up to the completion
of the second breakthrough. The team also
completed the first Birmingham viaduct pier in
the city centre and three major bridge slides.
At Old Oak Common, the HS2 station in West
London, the diaphragm walls and piling to the
HS2 Box have been completed, with over
660,000 tonnes of London clay removed from
site during the year and transported 1.7 miles
via conveyor to Willesden Euroterminal.
34
Balfour Beatty plc Annual Report and Accounts 2023
At Hinkley Point C, good progress continues
to be made on the marine works for the new
nuclear power station. During the year the six
vertical liners that will ultimately connect the
previously bored tunnels with the concrete
tunnel heads, which were placed on the
seabed in 2022, were safely installed using
specialist marine vessels and equipment. In
addition, the side walls of the bored outfall
tunnel were expertly broken through to allow
underground mining works to progress.
When all the connections in both the outfall
and intake tunnels are completed, the cooling
water system will have the capacity to circulate
120,000 litres of water per second directly
from the sea to the nuclear power station
through the tunnels and underground caverns.
At the Thames Tideway Tunnel project,
the Balfour Beatty joint venture’s construction
work at Putney has been substantially completed
and the new riverside area created has been
opened to the public, and at its main site,
Carnwath Road in Fulham, the team has
reached the major milestone of completing
the shafts and tunnel works.
Major Highways is a year into the major
improvement scheme at the interchange
between Junction 10 of the M25 and the A3,
which is expected to complete in the summer
of 2025. In October, the team enforced a full
closure of part of the A3 over one weekend
for the installation of ten 33-metre pre-cast
concrete beams to form a new bridge, which
will provide a safer route for walkers, cyclists,
horse-riders, and drivers. This work was
completed safely, with the A3 reopened for
traffic four and a half hours earlier than
anticipated. The Major Highways team also
completed concrete safety barrier work on
By broadening the regions in which it serves
certain end-markets, the US Buildings business
can further utilise its in-house expertise and
customer relationships held locally to drive
organic growth. This has helped secure the
award of over US$1 billion of combined airport
work at Raleigh-Durham International Airport
in North Carolina, Jacksonville International
Airport in Florida and Sacramento International
Airport in California, which is expected to be
added to the order book in phases when
contracted. The Buildings business is also
working on a theme park in Texas and
renovations at a theme park in California,
which follow many years of successful
construction at theme parks in Florida,
as well as a data centre project in Seattle,
continuing on the successes in Oregon.
Strong delivery and work winning in 2023
During the year, progress has been made on
significant Buildings projects including:
@ substantial completion of Block 216, the
fourth tallest building in Portland, Oregon;
@ topping out of the Broward County
Convention Center’s East Expansion and
Hotel in Florida;
@ completion of the Icon Marina Village, a
group of luxury apartments in West Palm
Beach, Florida;
@ substantial completion of the Del Sol High
School in Oxnard, California; and
@ completion of the ilani Casino Hotel in
Ridgefield, Washington.
In the year, the Buildings business booked
material new phases of existing contracts
and standalone new contract awards including:
@ US$350 million of data centres in the
US Northwest;
@ two commercial office projects in Texas
totalling US$800 million; and
@ US$480 million of additional Federal work
in Washington D.C.
Progress made in major Civils jobs
The US Civils business focuses on highways
projects in Texas and the Southeast and
mass transit rail in major US cities. Order
intake improved compared to the prior year,
with additions including a US$242 million
design-build highways contract in North
Carolina, however the volume of civils jobs
coming to market and aligned to the Group’s
capabilities has not increased notably since
the passing of the Inflation Reduction Act
in 2022.
Balfour Beatty remains cautious in its
approach to complex civils contracts in
the US, as the combination of fixed-price
contractual terms and the self-perform nature
of the work gives limited scope to mitigate
inflation and schedule risk. As a result, the
Group’s civils bidding is focused on those
projects which closely align to its
core capabilities.
Progress at the major US Civils projects in
2023 included:
@ As part of the LINXS Constructors joint
venture at Los Angeles International
Airport, Balfour Beatty achieved
energisation of the two Intermodal
Transportation Facilities and the traction
power substations;
@ at the Caltrain rail project in California,
testing of the electric trains, operated
under power from the overhead contact
system, has begun;
@ at the Oak Hill Parkway highways project
in Texas, the team completed key traffic
switches and opened the new William
Cannon Bridge;
@ completion of the US$300 million
Tertiary Treatment Facilities project at
the EchoWater Project in California; and
@ completion of the US$60 million
Harkers Island bridge in North Carolina
a year ahead of schedule. The bridge is
the first structure in the state to utilise
non-corroding, carbon fibre reinforced
polymer strand and glass fibre reinforced
polymer rebar to combat corrosion in
coastal environments.
US Construction
Interest rate stability aids progress
in commercial office sector
Balfour Beatty’s US Buildings business
accounted for 85% of US Construction
revenues in 2023 (2022: 78%). With most of
the projects undertaken by US Construction
contracted on fixed-price terms, Buildings
remains the lower risk business within the
division, as the early issuing of subcontracts
for works packages and insurance of the
supply chain protects the Group’s US margin.
The Buildings business operates in five
geographies, each with a different mix of
customers, and therefore the macroeconomic
conditions seen throughout the year have
had more of an influence on some areas than
others. As a result of this diversification, the
result of the upcoming US election is not
expected to have a material impact on the
US Construction business.
During 2023, the education market in
California remained strong, while the federal
market in the Mid-Atlantic, and hospitality and
aviation markets in the Southeast, have
shown growth. In the Northwest, the
technology market has started to show early
signs of recovery, while the business is also
servicing new end-markets. In Texas, where
the Group has the majority of its commercial
office exposure, there have been positive
signs towards the end of the year that the
impact of inflationary pressures and high
interest rates is reducing. The Group
converted US$800 million of commercial
office projects from awarded to contracted in
the fourth quarter and with the awarded but
not contracted position remaining significant,
an easing of economic pressures should lead
to another strong year of order intake in 2024.
Early successes in US Buildings
growth strategy
The US Buildings business has adopted a
growth strategy to add further diversification
to its regional businesses. By targeting additional
cities in states with existing Balfour Beatty
offices, and broader end-markets in some
regions where the business is already active,
new opportunities are being identified. The
new locations were chosen based on market
fundamentals and adjacency to established
offices, and include Sacramento in California,
Savannah in Georgia, Charleston in South
Carolina, Richmond in Virginia, and Tampa in
Florida. These offices will take time to reach
scale, but there are early signs of promise
such as the construction of a three-storey
building at Sierra College in Rocklin,
California, an elementary school in Savannah,
a senior living facility in Charleston, a student
housing project at The College of William and
Mary near Richmond, and a multifamily
housing project in Tampa.
Balfour Beatty plc Annual Report and Accounts 2023
35
Strategic report OPERATIONAL REVIEW CONTINUED
Celebrating the opening of
the new Harkers Island Bridge
ahead of schedule
In December 2023, Balfour Beatty celebrated the grand
opening of North Carolina Department of Transportation’s
(NCDOT) Harkers Island Bridge which was completed
about one year ahead of schedule. The new 3,200-foot-long,
fixed-span bridge connects Harkers Island to the mainland as
part of NCDOT’s US$60 million project which involved replacing
two 50-year-old bridges to increase capacity for emergency
access and evacuation and reduce congestion and delays
for marine vessels and vehicular traffic.
36
Balfour Beatty plc Annual Report and Accounts 2023
Construction Services
continued
Gammon
Strong position in buoyant Hong Kong
construction market
Gammon, Balfour Beatty’s 50:50 joint venture
with Jardine Matheson based in Hong Kong,
has forged a reputation for delivering high
quality projects in Southeast Asia. The
business is well placed to capitalise on the
high level of major infrastructure investment
in the region, which will bring the development
of additional land, creating significant
development opportunities for both the
public and private sectors. The current
pipeline of infrastructure projects is driven
by the Hong Kong Government’s drive to
increase connectivity within the Greater Bay
Area, as it announced three new strategic
railways and three new major roads. It has
identified the Northern Metropolis as a new
engine for future development and is exploring
the benefits of developing the Kau Yi Chau
Artificial Islands as a third central business district.
Gammon continues to have a strong share of
both the buildings and civils markets in Hong
Kong. In buildings, the focus is on the use of
Design for Manufacture and Assembly (DfMA)
and modular construction to improve productivity
and efficiency and expanding the customer
base on a selective basis. In civils, the
strategy is to lever engineering excellence,
with a key area of future work likely to be
from significant infrastructure programmes
in Hong Kong and in Singapore.
During 2023, Gammon completed a project
at Hong Kong International Airport, which
included the construction of a bridge to
connect the two islands which accommodate
the airport and the boundary crossing
facilities for the Hong Kong-Zhuhai-Macao
bridge. Work continued on two other major
projects at the airport, with completion of the
concrete structure for the new Terminal 2
facility and its roof fabrication largely complete,
and steady progress on the tunnel construction
and the electrical and mechanical works for
the automated people mover.
At the student hostel project for City University
of Hong Kong, which will be the world’s
largest student hostel to be constructed
using modular integrated construction (MiC),
the final MiC module out of a total of 1,344
was successfully installed. It resulted in the
safe and efficient installation of all the units
in less than eight months.
As part of the Central Kowloon Route project,
a 4.7km dual three-lane trunk road that will
enhance connectivity between the east and
west Kowloon districts, Gammon continued
to deliver the Kai Tak West tunnelling
contract and the route wide buildings,
electrical and mechanical works contract.
During the year, excavation of the second
stage of underwater tunnelling was
completed, with work beginning on the
construction of the tunnel structure.
New orders in the year included a HK$3.7 billion
contract to construct a new development at
Cyberport, which is the largest fintech
community in Hong Kong, from a wholly
owned company of the Hong Kong Special
Administrative Region Government.
Gammon wins Cyberport expansion project main contract in Hong Kong
In May 2023, Gammon was awarded the HK$3.7 billion (US$472
million) Cyberport expansion project by the Hong Kong Cyberport
Management Company Limited, a wholly owned innovation and
technology company of the Hong Kong Special Administrative
Region Government.
Gammon has developed solutions for the works that support
high-productivity construction (HPC). In particular, a multi-trade
integrated approach will be applied to 70% of the M&E and certain
building elements, with fabrication of the modules taking place at
the company’s dedicated factory. As well as improving efficiency,
safety and quality, this off-site approach will allow the team to
minimise disturbance within the community. HPC will be further
achieved through the implementation of a suite of digital solutions
including the company’s self-developed digital platform, GTwin,
which will allow the team to better monitor work progress,
streamline workflows, and collect data from various sources for
timely analysis to support improved and faster decision making.
The scope of the project includes construction of a 10-storey
(including the rooftop) new building to provide facilities including
office and co-working space, a data services platform, a multi-
function hall and ancillary facilities, as well as enhancement
to the adjacent Cyberport waterfront park.
Balfour Beatty plc Annual Report and Accounts 2023
37
Strategic report OPERATIONAL REVIEW CONTINUED
Support Services
Our Support Services businesses
operate principally in the UK,
designing, upgrading, managing
and maintaining critical national
infrastructure.
REVENUE1
£1,006m
2022: £989m
STATUTORY REVENUE
£1,006m
2022: £988m
UNDERLYING PROFIT
FROM OPERATIONS
£80m
2022: £83m
STATUTORY PROFIT FROM
OPERATIONS
£80m
2022: £83m
ORDER BOOK1
£2.8bn
2022: £2.4bn
1 Including share of joint ventures and associates.
SUPPORT SERVICES
Order book1 (£bn)
Revenue1 (£m)
Profit from operations2 (£m)
Non-underlying items (£m)
Statutory profit from operations (£m)
1
Including share of joint ventures and associates.
2 Before non-underlying items (Note 10).
A strong performance
across the business
has taken its PFO
margin to 8.0%.”
This has led to Balfour Beatty’s power
transmission and distribution team bidding
for record levels of work and being selected
in August as one of ten preferred bidders on
SSEN Transmission’s c.£10 billion ASTI
framework. The Power business has now
commenced early contractor involvement
works on nine electricity transmission
projects across the north of Scotland under
the framework, which are expected to
convert to full awards at a later date, and has
submitted a bid to be included in National
Grid’s Great Grid Upgrade ASTI framework.
As a result, the Group expects volumes in
the Power business to grow steeply across
2025 and 2026.
Financial review
The Support Services business provides
power, plant, road and rail maintenance and
is characterised by profitable recurring
revenues underpinned by long term frameworks
targeting a PFO margin of 6–8%.
Support Services revenue increased by 2%
to £1,006 million (2022: £989 million), mainly
due to the commencement of two new major
road maintenance contracts. Underlying profit
from operations at £80 million (2022: £83 million)
was lower than the prior year, partially due to
the new road contracts incurring additional
costs in the start-up phase, as expected.
This resulted in PFO margin of 8.0% in the
year (2022: 8.4%), which is at the top of the
targeted 6–8% PFO margin range and
represents a further strong year for the
power, road and rail maintenance businesses.
The Support Services order book increased
by 17% to £2.8 billion (2022: £2.4 billion)
driven by the addition of the £297 million
East Sussex road maintenance contract and
the £330 million six-year extension to the
Lincolnshire road maintenance contract.
Operational review
Market leading position in rapidly
growing Power T&D industry
The UK power transmission and distribution
construction industry, in which Balfour Beatty
holds a market leading position, is expanding
sharply. Due to the necessity of upgrading
the UK’s electricity network, Ofgem introduced
the Accelerated Strategic Transmission
Investment (ASTI) regulatory framework to
fund the large strategic onshore transmission
projects required to deliver the Government’s
net zero targets. The £20 billion ASTI fund
supports the accelerated delivery of network
upgrades, with an ambition to cut delivery
times in half. This is in addition to the RIIO-T2
spend period (2021–2026) investment, which
includes £30 billion for energy networks and
potential for a further £10 billion on green
energy projects.
2023
2.8
1,006
80
–
80
2022
2.4
989
83
–
83
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
38
Balfour Beatty plc Annual Report and Accounts 2023
Operational highlights delivered by the
Power business in 2023 include:
@ Completion of SSEN Transmission’s first
major project under the RIIO T2 framework,
which was energised after Balfour Beatty
installed 148 new steel-lattice towers
across a 45km stretch from Port Ann
substation near Lochgilphead to the
substation at Crossaig.
@ Completion of 116 T-pylon structures for
National Grid’s Hinkley Connection Project.
The 8.5km underground cable section
under the Mendip Hills Area of Outstanding
Natural Beauty (AONB) is now connected
to the new line of T-pylons and also
energised and transporting electricity.
@ Completion of National Grid and Energinet’s
record-breaking new ‘Viking Link’
interconnector, for which Balfour Beatty
was responsible for the onshore cable
installation stretching for 67km between
Bicker Fen and Sutton-on-Sea. The link
between the UK and Denmark will be able
to transport enough green electricity to
power up to 2.5 million UK homes.
In November, Balfour Beatty was awarded a
significant scheme by National Grid to remove
4.6km of overhead high voltage electricity
line and replace it with underground cables in
the North Wessex Downs AONB. This is part
of National Grid’s Visual Impact Provision
(VIP) project to reduce the visual impact of
high voltage power lines in protected areas.
Further opportunities in rail
The rail maintenance market also has a
positive trajectory, with the UK Government’s
commitment to invest £43 billion (as set out
in the Statement of Funds Available (SoFA))
in operations, maintenance and renewal for
the period 2024-2029 as part of Network
Rail’s Control Period 7 (CP7) strategic business
plan. The cancellation of HS2 Phase 2 may
also bring further funding forward for other
rail projects, as pressure grows on the UK
Government to direct investment into the
North and Midlands. The Group is particularly
focused on electrification schemes, as part
of its ambition to deliver more net zero
infrastructure in the UK.
The Rail business has had a successful year
with good work volumes arising on the Core
Valley Lines upgrade project in South Wales
and the technically challenging emergency
repairs of Nuneham Viaduct over the River
Thames just south of Oxford, which were
completed at pace and ahead of schedule.
Growing market share in road maintenance
The addressable road maintenance market
remained positive in 2023. In addition to local
council budgets increasing by around 50% in
2022 following the start of a five-year £2.7 billion
scheme for road patching, the Government
The restoration of Nuneham rail
viaduct in Oxfordshire
In June 2023, Balfour Beatty’s
experts worked around the clock to
safely reopen Nuneham rail viaduct
in Oxfordshire, following an intensive
10-week programme of work.
The railway between Didcot and
Oxford, which carries more than
100 passenger services and 40
freight trains a day, was closed in
April 2023 following the wettest
March in 30 years which caused
significant movements in the
160-year-old viaduct making it
unsafe for use.
Appointed via Network Rail’s
Western Reactive Framework, we
mobilised a team of approximately
800 people who worked over 60,000
hours to deliver a long-term fix to the
viaduct. This involved building a jetty
in the River Thames to temporarily
support the bridge deck, enabling
the team to rebuild the bridge’s
foundations. In the final week of this
major project, the 150-tonne bridge
was lowered onto the new abutment
and a new embankment built, before
the railway tracks and cables were
put back in place.
Traditionally, it can take up to three
years to develop a solution for a
scheme of this complexity however,
our team delivered the works in a
10-week programme, handing back
the railway line one day ahead
of schedule.
CLICK OR SCAN TO WATCH THE VIDEO OF THE
NUNEHAM RAIL VIADUCT RESTORATION PROJECT
announced in December that £8.3 billion
previously allocated to HS2 Phase 2 would be
redirected to highway maintenance over the
next 11 years. Balfour Beatty’s market share
also increased in 2023 as the £176 million
eight-year contract for highways services for
Buckinghamshire County Council started in
April and the £297 million seven-year contract
for the maintenance of highways assets and
the delivery of infrastructure services across
East Sussex started in May. In the second
half of the year, the Group secured a
£330 million six-year contract extension
with Lincolnshire County Council and a
£54 million two-year extension with
Herefordshire County Council.
Looking to the future, there are several Local
Authority contracts, like those won by Balfour
Beatty for Buckinghamshire and East Sussex
in 2022, coming to market in the next year
for which the Group is well positioned.
Balfour Beatty plc Annual Report and Accounts 2023
39
Strategic report OPERATIONAL REVIEW CONTINUED
Infrastructure Investments
Our Infrastructure Investments
business develops and finances
both public and private
infrastructure projects in
the UK and the US.
REVENUE1
£508m
2022: £460m
STATUTORY REVENUE
£292m
2022: £232m
UNDERLYING PROFIT BEFORE TAX
£47m
2022: £105m
STATUTORY PROFIT
BEFORE TAX
£43m
2022: £100m
DIRECTORS’ VALUATION
£1.21bn
2022: £1.29bn
1 Including share of joint ventures and associates, before
non-underlying items.
40
Balfour Beatty plc Annual Report and Accounts 2023
Financial review
Underlying pre-disposals profit from
operations in the year decreased to £5 million
(2022: £11 million) due largely to increased
costs relating to the independent compliance
monitor’s work across the US military
housing portfolio. The sale of two assets
delivered a gain on disposal of £26 million
(2022: £70 million) and resulted in underlying
profit from operations of £31 million (2022:
£81 million).
Balfour Beatty continues to invest in
attractive new opportunities, each expected
to meet its investment hurdle rates. In the
year, the Group invested £31 million in new
and existing projects with one new student
accommodation project added to the
portfolio. Balfour Beatty also continues to
sell assets, timed to maximise benefit to
shareholders. Two assets were disposed of
in the second half of the year and delivered
£26 million gains on disposal, within the
Group’s targeted range of £15–£30 million.
Both transactions were above the Directors’
valuation and total proceeds of £61 million
comprised £56 million from the disposal of
the Group’s 49.5% interest in UBB Waste
(Gloucestershire) Holdings Limited, the
owner of the energy from waste facility
at Javelin Park near Gloucester, and
£5 million for its interest in the Moretti
Apartments multifamily housing project
in Birmingham, Alabama.
Net investment income of £16 million was
£8 million lower than the prior year (2022:
£24 million) due largely to a net £8 million
impairment of joint ventures and associates
subordinated debt and accrued interest
receivable (2022: £2 million) as the cost to
repair a faulty OFTO cable was provided for
whilst contractual cost recoveries are being
pursued. Underlying profit before tax was
£47 million (2022: £105 million) and
statutory profit before tax was £43 million
(2022: £100 million).
Operational review
Balfour Beatty’s competitive expertise
to finance, develop, build and maintain
infrastructure puts the Group in a strong
position to capitalise on new investment
opportunities, however in challenging market
conditions, the Group’s focus must remain on
its disciplined approach to investments and
disposals with each expected to meet its
investment hurdle rates.
Balfour Beatty’s
competitive expertise to
finance, develop, build
and maintain
infrastructure puts the
Group in a strong position
to capitalise on new
investment opportunities.”
The Group is currently assessing investment
opportunities in:
@ student accommodation: Across the UK
and US, demand for student accommodation
remains strong as universities continue to
improve their facilities to attract students;
@ residential: Balfour Beatty continues to see
attractive US multifamily housing come to
market, providing opportunity to invest
profitably in the regeneration of these
properties;
@ US P3: The US has become an increasingly
exciting market for public-private partnerships,
and, to date, 41 states (plus DC) have
passed legislation allowing P3 projects; and
@ energy transition: As the UK’s energy mix
transitions to more renewable sources, and
the UK adopts more sustainable transport
such as electric vehicles, there are
opportunities for private sector investment.
In the UK, the Group has commenced
construction of a new student accommodation
project – the 1,899 bedroom West Slope
development – on behalf of the University of
Sussex. In addition to £171 million of wrapped
bond financing raised through a private
placement, Balfour Beatty will invest equity
of £32 million, 81% of the project equity,
with the University of Sussex as a co-investor
providing the remaining 19%. The first new
student accommodation and the health and
wellbeing centre are expected to be open in
time for the 2026/27 academic year, with
more accommodation, catering and retail
facilities opening over the following two
years. The Group also remains preferred
bidder on a further UK student accommodation
project and is investigating opportunities to
invest in off-campus student accommodation.
In the US, the Group added a student
accommodation project in Tallahassee, Florida
to the portfolio and started construction on
the William & Mary University project in
Virginia, having completed the construction
of the Vanderbilt University student
accommodation project for which rentals
started in the Fall 2023 semester.
In US military housing, the Group completed
demolition works at Fort Carson as part of a
proposed multi-phase project for the construction
of new homes at the base, with the preparation
phase of work underway. This project is an
example of similar upgrade work opportunities
likely to be required across the Group’s
military housing portfolio. The Group
continues to work with the independent
compliance monitor, who was appointed by
the Department of Justice in 2021 and
commenced work in 2022.
The Group continued its investment in the
UK energy transition with entry into the
on-street Electric Vehicle (EV) charging market,
partnering with EV chargepoint company
Urban Electric Networks to form Urban Fox.
The partnership combines Urban Electric
Networks’ innovative and entrepreneurial
spirit with Balfour Beatty’s scale, while
building on the Group’s experience and
longstanding relationships with local
authorities. Urban Fox’s innovative 7kW
on-street chargepoint, which is installed
into the pavement and fully retractable
underground, is the first of its kind to
the market.
INFRASTRUCTURE INVESTMENTS
Pre-disposals operating profit²
Gain on disposals²
Profit from operations²
Net investment income~
Profit before tax²
Non-underlying items
Statutory profit before tax
2 Before non-underlying items (Note 10).
SCAN OR CLICK TO WATCH
URBAN FOX’S CORPORATE VIDEO
Balfour Beatty enters the on-street electric
vehicle (EV) charging market
In March 2023, Balfour Beatty
Investments announced its entry
into the on-street Electric Vehicle
(EV) charging market with the
formation of Urban Fox – a
partnership with Urban Electric
Networks, a British EV chargepoint
operating company.
With 43% of British households
without access to off-street parking,
and the growing demand and uptake
of electric vehicles, Urban Fox’s quick
installation and replacement process
allows additional chargepoints to be
easily installed as demand dictates.
Urban Fox offers a whole life
solution to EV chargepoints: funding,
building, operating and maintaining a
range of fast, rapid and slow
chargepoints to local authorities.
Its innovative 7kW on-street
chargepoint is the first of its kind to
the market. Installed into the pavement,
the unit is fully retractable underground
when not in use, leaving pavements
clutter free and accessible.
Urban Fox supports local authorities
to achieve the green targets set out
in the UK Government’s electric
vehicle infrastructure strategy
‘Taking Charge’ by creating a
sustainable, resilient and convenient
network of chargepoints across the
UK whilst supporting local
authorities to meet the growing
demand for accessible and reliable
on-street chargepoints for the
travelling public.
Find out more visit:
www.urbanfox.network.
2023
£m
5
26
31
16
47
(4)
43
2022
£m
11
70
81
24
105
(5)
100
~ Subordinated debt interest receivable, net interest receivable on PPP financial assets and non-recourse borrowings, fair value (loss)/gain on investment asset and impairment
to subordinated debt receivable and accrued interest.
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
Balfour Beatty plc Annual Report and Accounts 2023
41
Strategic report DIRECTORS’ VALUATION OF THE INVESTMENTS PORTFOLIO
Strong track record
of value creation
The Directors’ valuation decreased by 6% to £1,212 million (2022: £1,291 million)
due equally to a weakening of the US dollar against sterling and an increase
in discount rates. The portfolio is 58% weighted towards the US (2022: 58%).
The number of projects in the portfolio remained at 59 (2022: 59).
Balfour Beatty invested £31 million
(2022: £30 million) in new and existing
projects, with UK investment focused on
the Eastwick and Sweetwater redevelopment
and US investment predominantly relating
to the addition of a student accommodation
project in Tallahassee, Florida. The West
Slope student accommodation project at the
University of Sussex, which reached financial
close in December 2023, has now been
included as a separate project.
Cash yield from distributions amounted to
£48 million (2022: £89 million). Balfour Beatty
continued disposals in the year with proceeds
of £61 million (2022: £93 million). This
comprised £56 million from the sale of its
stake in Gloucestershire Waste PFI, and
£5 million from the sale of the Moretti
Apartments multifamily housing project
in Birmingham, Alabama.
Unwind of discount at £87 million (2022:
£85 million) is a function of moving the
valuation date forward by one year with the
result that future cash flows are discounted
by twelve months less.
Operational performance movements
resulted in a £1 million decrease (2022:
£139 million increase). The operational
performance movements in the UK were
primarily due to a revaluation of a student
accommodation project due to higher than
forecast rental increases, and an increase in
short term interest rates. In the US, the
decrease arose in the US military housing
portfolio due to increased insurance and
independent compliance monitor costs,
partially offset by higher annual rents.
The foreign exchange movement was a
£43 million decrease, as sterling appreciated
against the US dollar (2022: £85 million increase).
PORTFOLIO VALUATION DECEMBER 2023
Value by sector
Sector
Roads
Healthcare
Student accommodation
Energy transition
Other
UK total
US military housing
Student accommodation and other PPP
Residential housing
US total
Total
Value by phase
Phase
Operations
Construction
Preferred bidder
Total
2023
No. projects
2022
No. projects
12
2
6
4
2
26
21
4
8
33
59
12
2
5
5
2
26
21
3
9
33
59
2023
No. projects
2022
No. projects
55
3
1
59
55
3
1
59
Value by income type
Income type
Availability based
Demand – operationally proven
(2+ years)
Demand – early stage (less than 2 years)
Total
2023
No. projects
2022
No. projects
17
37
5
59
17
36
6
59
2023
£m
168
129
137
44
31
509
562
83
58
703
1,212
2023
£m
1,164
46
2
1,212
2023
£m
353
807
52
1,212
2022
£m
171
126
128
101
22
548
615
59
69
743
1,291
2022
£m
1,239
47
5
1,291
2022
£m
353
761
177
1,291
Methodology and
assumption changes
The methodology for valuing most
investments in the portfolio remains the
discounted cash flow (DCF) method. Under
this methodology cash flows for each project
are forecast based on historical and present
performance, future risks and macroeconomic
forecasts. They also factor in secondary
market assumptions. These cash flows are
then discounted using different discount
rates, which are based on the risk and
maturity of individual projects and reflect
secondary market transaction experience.
The main exception to the use of DCF is for
US multifamily housing projects which, due
to the perpetual nature of the assets and the
depth and liquidity of the rental housing
market, are valued based on periodic broker
reports for each property.
42
Balfour Beatty plc Annual Report and Accounts 2023
MOVEMENT IN VALUE 2022 TO 2023
£m
UK
US
Total
2022
548
743
1,291
Equity
invested
9
22
31
Distributions
received
(20)
(28)
(48)
Sales
proceeds
(56)
(5)
(61)
Unwind of
discount
38
49
87
Operational
performance
15
(16)
(1)
Changes to
discount rates
(25)
(19)
(44)
FX
–
(43)
(43)
2023
509
703
1,212
The valuation methodology used at the
previous Directors’ valuation is unchanged.
The discount rates used for the valuation at
31 December 2023 have been increased to
reflect changes in secondary market discount
rates, which have progressively responded to
increases in long term interest rates. As a
result, the implied weighted average discount
rate for the UK portfolio increased by 0.4% to
8.3% (2022: 7.9%) and the implied weighted
average discount rate for the US portfolio
increased by 0.2% to 8.1% (2022: 7.9%).
Discount rates applied to the UK portfolio
range from 7.25% to 9.25% (2022: 6.75% to
8.75%) depending on the maturity and risk of
each project. The implied weighted average
discount rate for the UK portfolio is 8.3%
(2022: 7.9%) and a 1% change in the
discount rate would change the value of the
UK portfolio by approximately £50 million.
Discount rates applied to the US portfolio
range from 6.25% to 10.5% (2022: 6.0% to
10.5%). The implied weighted average
discount rate for the US portfolio is 8.1%
(2022: 7.9%) and a 1% change in the
discount rate would change the value of the
US portfolio by approximately £77 million.
The portfolio remains positively correlated
to inflation. A 1% change in the long term
inflation rate in the UK portfolio would
change the valuation by approximately
£26 million and a 1% change in the long term
rental growth rate in the US portfolio would
change the valuation by approximately
£75 million.
As in previous periods, the Directors’ valuation
may differ significantly from the accounting
book value of investments shown in the
financial statements, which are produced in
accordance with UK-adopted international
accounting standards rather than using a
discounted cash flow approach. A full
reconciliation is provided in section i) of the
Measuring Our Financial Performance section.
UK PORTFOLIO VALUE AT A RANGE OF DISCOUNT RATES
m
£
n
o
i
t
a
u
a
v
l
’
s
r
o
t
c
e
r
i
D
800
700
600
500
400
300
200
100
0
495
464
548
509
612
564
+2%
+1.5%
+1%
+0.5% DV case
-0.5%
-1%
-1.5%
2%
December 2023
December 2022
Discount rate
US PORTFOLIO VALUE AT A RANGE OF DISCOUNT RATES
m
£
n
o
i
t
a
u
a
v
l
’
s
r
o
t
c
e
r
i
D
1,200
1,000
800
600
400
200
0
666
634
743
703
838
788
+2%
+1.5%
+1%
+0.5% DV case
-0.5%
-1%
-1.5%
2%
December 2023
December 2022
Discount rate
PORTFOLIO INVESTMENT, DIVESTMENT AND DISTRIBUTIONS
1,500
1,250
1,000
750
500
250
0
-250
-500
-750
m
£
n
o
i
t
a
u
a
v
l
’
s
r
o
t
c
e
r
i
D
250
200
150
100
50
0
-50
-100
-150
m
£
s
n
o
i
t
u
b
i
r
t
s
d
d
n
a
i
s
e
a
s
l
,
t
n
e
m
t
s
e
v
n
I
2012
2013
2014
2015
2016
2017 2018
2019
2020
2021
2022
2023
Distributions
Investment
Sales
Directors’ valuation
Balfour Beatty plc Annual Report and Accounts 2023
43
Strategic report
HEALTH, SAFETY AND WELLBEING
Creating a safe and
healthy workplace
Making safety personal. Treating health like safety.
Project by project, day by day.
Governance
Safe, one of our Build to Last Values, is
fundamental to everything we do at Balfour
Beatty. Sending our colleagues home safe
and well at the end of every day will always
be our number one priority.
Health and safety is a collective responsibility
at Balfour Beatty. The Board’s Safety and
Sustainability Committee reviews the Zero
Harm strategy, monitors progress against the
strategy’s performance indicators and ensures
accountability. The health of employees is
viewed as a key component of the Zero Harm
strategy and mental health and wellbeing
was a particular area of focus for the Committee
in 2023.
The Group Health, Safety and Environment
(HS&E) Forum has continued to drive
innovation and best practice across Balfour
Beatty’s operations worldwide, culminating
in the sharing of the Health and Wellbeing
Maturity Matrix across the Group, and the
successful launch of ‘Let’s Talk’ sessions, a
Group-wide engagement approach delivered
impactfully at a local level.
However, while this approach to health and
safety culture is led by the Board and the
Executive Committee, it remains firmly
embedded throughout the Group’s governance
model and leadership structures, with
operational site supervisors invited to take
part in Business Unit Safety, Health and
Environment Leadership Team (SHELT)
meetings helping to shape the Zero Harm
strategy. The Executive Committee in turn
drives the accountability for this strategy,
working closely with the HS&E Enabling
Function to identify areas of focus and
performance criteria, and reviewing any
serious incidents where necessary.
Stuart Doughty CMG, Group Non-Executive
Director, has chaired the Safety and Sustainability
Committee for the past six years, and has
been on the Committee for nine years. In this
time, the Group has introduced a range of
health and safety initiatives, such as Fatal
Risk Working Groups, the Golden Rules,
What3Things?, the Observation App, Zero
Harm calendars and more, which have
contributed to our performance improvement
from a Lost Time Injury Rate (LTIR) of 0.31
in 2014, to 0.11 in 2023. These figures have
real-life implications. In 2014, on average,
one in three workers might experience a Lost
Time Injury (LTI) at some point in their career.
In 2023, that number has improved to one in
nine workers.
Performance
However, despite the Group’s continued
focus and efforts towards Zero Harm, two
colleagues suffered fatal injuries on Balfour
Beatty projects in 2023. On HS2, a subcontractor
colleague was killed during a directional
drilling operation, and at Aldermaston, a
Balfour Beatty Ground Engineering colleague
died during the cleaning of a concrete pumping
system. Determined to learn the lessons
from these tragic events, the Group established
a new Stored Energy Fatal Risk Working
Group, and is designing digitally-assured
processes to improve controls over safety-critical
activities. Our thoughts remain with the
family, friends and colleagues of those who
lost their lives.
PERFORMANCE STATISTICS
LOST TIME INJURY RATE
0.11
representing a 22% reduction in the
number of injuries from 2022
MAJOR INJURY RATE
0.02
representing a 21% reduction in the
number of injuries from 2022
ACCIDENT FREQUENCY RATE
3-DAY LOST TIME INJURIES
0.08
representing a 29% reduction in the
number of injuries from 2022
ACCIDENT FREQUENCY RATE
7-DAY LOST TIME INJURIES
0.05
representing a 33% reduction in the
number of injuries from 2022
44
Balfour Beatty plc Annual Report and Accounts 2023
While these two tragic incidents have rightly
remained at the forefront of the Group’s
attention, through the continued hard work
of colleagues across our business, the Group
sent record numbers of colleagues home
safe and well in 2023. Balfour Beatty’s
robust procedures and its Zero Harm culture,
combined with strategic focuses on visible
and active leadership, inspirational supervision,
and digital safety, delivered record-breaking
performance in 2023, reflected in the Group’s
lagging indicators. The Group (excluding
international joint ventures) saw its LTIR,
Accident Frequency Rate for 3-day lost time
injuries and 7-day lost time injuries (AFR3
and AFR7) and major injury rate all drop to
record lows in 2023. Overall, the Group’s
LTIR, excluding international joint ventures,
was 0.11. This performance was delivered
across 104 million worked hours, up from
95 million in 2022, whilst reducing the
number of LTIs from 150 (2022) to 117 (2023).
Indeed, hundreds of projects and multiple
business areas across the Group achieved
Zero Harm in 2023. In the US, Balfour Beatty
recorded its best-ever performance in every
single one of its lagging indicators, a testament
to the hard work and dedication of its teams,
reducing its LTIR to 0.10, down from 0.14 in
2022. In the UK, Balfour Beatty Kilpatrick,
Regional Scotland, Balfour Beatty Living
Places, Omnicom Balfour Beatty, Balfour
Beatty Homes and Balvac all celebrated
achieving Zero Harm, going a year without
an LTI, with the UK as a whole achieving a
record low LTIR in a non-COVID-19 year.
Underpinning these substantial improvements
is our health and safety culture, demonstrated
by another year of higher than ever rates of
observations, standing at almost 400,000 in
2023. This has worked in conjunction with
our back-to-basics focuses on our What3Things?
LOST TIME INJURY RATE AND OBSERVATIONS
0.30
0.25
0.20
0.15
0.10
0.05
0.00
14
15
16
17
18
19
20
21
22
Observations
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
23
LTIR
Pre 2022 LTIR adjusted upwards in 2022 report, following internal reclassification of incidents within one business area.
Excluding international joint ventures.
approach and initiatives such as our Slips,
Trips and Falls focus area in the UK, which
reduced these types of incidents by 30%
in 2023, compared to 2022.
Whilst these positive trends reflect a great
deal of hard work and determination, the two
fatal incidents in 2023 are stark reminders
against complacency. Committed to driving
uncompromising standards and behaviours,
the Group rolled out new health and safety
KPIs to its supply chain in 2023, working to
ensure that everyone who walks onto a
Balfour Beatty site goes home safe and well.
MAJOR INJURY RATE
6
0
.
0
5
0
.
0
5
0
.
0
5
0
.
0
4
0
.
0
4
0
.
0
3
0
.
0
3
0
.
0
2
0
.
0
15
16
17
18
19
20
21
22
23
Excluding international joint ventures.
Saratoga Springs US military
housing Navy base achieves
15 years of Zero Harm
In December 2023, Balfour Beatty Communities’ Saratoga
Springs team achieved an exceptional safety milestone as they
celebrated 15 years without an LTI. Over the years, the team has
maintained an unrelenting commitment to achieving Zero Harm.
Philip DeFilippo, Facility Manager at Saratoga Springs for the last
19 years, said: “All I want to see is our employees go home safe
every day, and to ensure this is accomplished, I will accompany
team members when they are completing tasks just to make
sure everything is okay and see if they need any help to get
things done in a timely and safe manner. After about 20 years
working at Saratoga, we are a family and we look out for
each other.”
Balfour Beatty plc Annual Report and Accounts 2023
45
Strategic report HEALTH, SAFETY AND WELLBEING CONTINUED
Q&A with Richard Ryan, Senior Vice
President for Health and Safety,
Balfour Beatty US
Q What are your health and
safety focus areas in 2024?
The road ahead for us in 2024
is captured primarily in two areas:
analysis-based, targeted, digital safety
solutions and engagement through our
operational leadership.
We will deploy the safety observation
process in a pinpoint manner, based on
analysis of the Occupational Safety and
Health Administration’s ‘fatal four’ risks,
to intervene and drive safety outcomes in
these areas. Using technology successfully
deployed in our UK business, we will also
focus on the elimination of events involving
a high potential for injury, such as
below-grade utility strikes.
Our operational leaders have taken on a
larger role and partnered with safety
professionals to further drive safety
through to the workface. This effort will be
augmented by a renewed call for our trade
partners to provide Competent Persons
who not only have higher technical skills,
but also the appetite to engage fully
on safety.
Q What does Zero Harm
mean to you?
I think less about the term Zero
Harm and more about the vision. I believe
practitioners should be committed to their
personal health and welfare, as well as that
of others. Colleagues should carry this
sentiment with them every day they work
for us, and even pack it up and take it with
them when they return home each night.
I see Zero Harm as the cornerstone of
our business and the reason why we
can function at the level of operational
excellence that we do. I hope that
employees are convinced of its
importance and take its teachings
with them wherever they go.
Q Why is collaboration across
the Group important if we are
to achieve Zero Harm?
The Group has a remarkable amount
of experience in safety. We are a large
organisation delivering a variety of
projects including buildings, transportation,
complex engineering and utilities. Our
processes have been developed all over
the world by our best and brightest. And
although our name and brand are global,
with a range of geographies, languages
and cultures, there is a simple connection
we all share: we place the welfare of
people at the core of our culture. When I
hear of a safety setback or success
anywhere in Balfour Beatty, I always think
in terms of the wider ‘us’. We need to help
each other across our businesses – indeed,
we need to collaborate better as an
industry – and work together to defeat a
common foe and the threat it represents to
our people and our industry every day.
Q You’ve had a year of excellent
performance across Balfour
Beatty US – what do you
attribute this to?
I attribute a lot of our success to our
discipline, our processes, accountability
and consistency. I believe the groundwork
for the results we have seen over the last
handful of years was put in position over
the last decade. Every year is a point on
the safety curve documenting continued
improvement with leading and lagging
indicators such as LTIR. That translates
into hundreds of additional workers
annually returning home to their families
safe and well.
46
Balfour Beatty plc Annual Report and Accounts 2023
AT THE BEATING HEART
Leading the industry
on health
Balfour Beatty is committed to treating
health like safety, going beyond compliance,
and improving health standards across the
industry. In 2023, Balfour Beatty entered the
third year of its Health and Wellbeing (H&W)
strategy which is underpinned by the H&W
Maturity Matrix (HMM). The matrix tool
empowers project teams to benchmark their
performance against industry best practice,
and to create bespoke plans to improve
health and wellbeing based on their specific
site teams, conditions and challenges. The
HMM is tracked by quarterly returns through
the project portal. This details the project’s
status against pre-defined criteria (beginner,
committed, established, leader).
In 2023 Balfour Beatty’s health priorities
were on good welfare and effective health
risk management, focusing on elimination,
occupational health interventions and
monitoring. Data capture has also been a key
focus and 2023 saw the release of the health
performance dashboard, which gives insights
and improvement performance metrics and
opportunities. In 2024, ‘Deliver Wellbeing’
has been identified as one of eight strategic
health priorities as Balfour Beatty continues
to embed its holistic approach to health.
Balfour Beatty is committed to improving
industry standards. Therefore, the HMM
tool was shared across the UK supply chain
and the Balfour Beatty Group. It was also
released to industry following a British
Occupational Hygiene Society (BOHS)
webinar co-hosted by Balfour Beatty for
BOHS and Health in Construction Leadership
Group (HCLG) members.
Providing individual sites and projects with
the tools they need to control risk is a vital
part of Balfour Beatty’s journey towards
Zero Harm and so in 2023, Balfour Beatty
launched a new Health Management
Procedure (HMP) which documents
the requirements for the assessment and
control of workplace hazards. However,
Balfour Beatty recognises that when
digital processes are used to support risk
management processes, risk can be
identified, monitored and controlled more
effectively. Therefore, a key priority was
also to incorporate digital procedures into
health processes to improve health
risk management.
As part of this, a new, bespoke, project-level
Health Risk Assessment tool has been
designed and built into the HMP to assist
projects in setting out a formal, structured
process for the management of any identified
health risks. Crucially, the tool will provide
a vehicle for outlining the control and
verification measures required, including any
task-based or site-specific risk assessments.
The tool is available digitally, allowing more
efficient record keeping and better user
engagement to support Zero Harm.
Finally, Balfour Beatty is committed to
leveraging its industry position to influence
customers and other contractors to adopt a
proactive approach to health and to establish
common, consistent practices and ways
of working, through its involvement in
communities such as the Tier 1 Health and
Safety Forum, the Supply Chain Sustainability
School and HCLG. Balfour Beatty continues
to co-chair HCLG, and also chairs both its
mental health and respiratory health
working groups.
Mental health
The four Golden Rules are the cornerstone
of our Zero Harm vision, and the Group’s
focus on ‘Be Fit for Work’ applies equally
to physical and psychological health.
SCAN OR CLICK TO READ
MORE ABOUT OUR FOUR
GOLDEN RULES
Balfour Beatty has created a solid and
holistic mental health programme which
was recognised at the 2023 Mates in Mind
Awards where Balfour Beatty won the
Best Overall Workplace Mental Health
Programme award. Balfour Beatty is focusing
on proactive mental health initiatives and has
an unwavering commitment to investigate
the root causes of poor mental health.
This work was supported by an investigation
paper from 2022 which looked at previous
lessons learnt. Balfour Beatty is now rolling
out a programme to deliver ISO 45003
(Psychological Health and Safety at Work) in
2024 which will improve the way psychological
health and psycho-social risk factors are
embedded into the fabric of the organisation
through policy, process and operating systems.
Balfour Beatty continues to provide reactive
support when required through the Employee
Assistance Programme and the mental health
first aider network. This approach has been
rolled out across the Group, with Gammon
leading the industry within its operating
area by training 114 mental health first aiders.
In the UK, Balfour Beatty maintains its
Manage the Conversation, Start the
Conversation, and Listen, Support and
Signpost training. However, it recognises that
the supervisor community remains a vital first
line when monitoring mental health in the
workforce and specific wellbeing and health
training has been added to the Supervisor
Passport. For more information see our
‘Digital safety’ section on page 50.
In the UK, Balfour Beatty marked Mental
Health Awareness Week (MHAW) with a
campaign on the week’s theme of anxiety.
A series of webinars and panel discussions
attended by various guest speakers including
representatives from Mates in Mind, the
Lighthouse charity and Mental Health Runner
were held on related topics including how to
identify and support someone experiencing
anxiety. Webinar and panel discussion
attendance increased by 64% since 2022,
with 98,855 social media impressions
recorded during the campaign, an increase
of 23.3% from 2022, evidencing the
increasing interest in the topic.
During MHAW, in an industry first, Balfour
Beatty launched its bespoke trauma support
guidance, ‘Supporting you through trauma’.
The material provides personal, practical and
mental health support alongside procedural
guidance to support colleagues who have
experienced stressful situations, providing
them with both pre-emptive and post-
incident support, and includes specific
guidance for line managers to ensure they
feel equipped to assist their teams following
a traumatic incident. Across the Group, 94%
of employees who responded to the 2023
employee engagement survey said that they
felt cared for at Balfour Beatty.
Your submission stood
out for its exceptional
quality, originality,
and passion to make a
significant impact in
the mental health
sector. Your dedication
and hard work have
truly paid off, and we
are thrilled to recognise
your efforts.”
Mates in Mind Awards
judging panel
Q&A with Cath Melvin, Project Wellbeing Adviser
wellbeing mean to you?
Q What does mental health and
For me, mental wellbeing is about
feeling good about yourself and being able
to care for yourself and others. Positive
mental wellbeing doesn’t mean that
you’re always happy or unaffected by your
experiences. It means that you’re able to
care for yourself, love yourself, and see
yourself as a valuable person in your
own right.
Q What have you done on your
project to support wellbeing?
On the Sellafield Box
Encapsulation Plant project, we’ve looked
in depth at the real issues that face the
people we work alongside. We’ve fostered
a community where our team genuinely
trust and care for each other and we’ve
made some fabulous connections to
ensure we have the best access to
support both from our organisation
and in our local community.
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
47
Strategic report HEALTH, SAFETY AND WELLBEING CONTINUED
Wellbeing on the Port
Ann to Crossaig overhead
line project
On phase two of SSEN Transmission’s
Port Ann to Crossaig project, over 200
Balfour Beatty colleagues delivered key
overhead line infrastructure in the Scottish
Highlands, where the terrain, weather
conditions and project’s remote location
presented challenges to wellbeing.
The project team understood that
encouraging employees to stay active,
particularly during winter, boosted
wellbeing, and team social activities
helped people cope with feelings of
loneliness that sometimes arose from
working in such remote environments.
Therefore, a wide range of activities were
organised to help people socialise, get
active and relax, including surfing, fishing,
go-karting and hiking. Weekly yoga
sessions were particularly popular and
provided colleagues with an excellent
opportunity to relax.
The nature of the project meant that it was
difficult to inform everyone what was
going on, as colleagues were spread
across the project site. Therefore, the
team created a community webpage to
allow them to communicate with everyone
on the project and a QR code linking
directly to the page was located in all
welfare vans and cabins.
48
Balfour Beatty plc Annual Report and Accounts 2023
Inspirational supervision
Balfour Beatty remains committed to
investing in the supervisor community,
including joint venture and supply chain
supervisors. The purpose of the Inspirational
Supervision Delivery Group is to embed a
high-standard health and safety culture
consistently across Balfour Beatty by
focusing on competence, communication and
community to establish a pipeline of
supervisor talent for the future.
In 2023, Balfour Beatty prioritised training and
development. 66% of supervisors in the UK
have completed the Supervisor Passport, a
two-stage, online training scheme covering
key competencies to ensure supervisors set
people to work safely. The passport was rolled
out to the supply chain in November 2023 and
will continue to be embedded in 2024. The
use of digitally-supported training and controls
facilitates the effective management of
competency and process discipline. 37
supervisors have also completed the
Supervisor Development Programme, an
ILM3 accredited course, bespoke to Balfour
Beatty, designed to support career
development that supervisors can apply for
upon completion of their mandatory training.
Balfour Beatty has focused on empowering
supervisors by breaking down barriers to the
digital world and improving supervisory
communication channels. An online supervisor
hub was launched in the UK and US on the
internal Sharepoint in March 2023 and has
already received over 5,200 visits. The site
contains supervisor-specific information
including access to Business Management
System resources, training and an online
supervisor community hosted on Viva Engage.
The UK Supervisor forum continues to bring
together supervisor representatives and joint
venture partners from across the business. In
addition, supervisor-led Business Unit (BU)
forums reach 670 supervisors. Led by
supervisor champions, they share knowledge
and expertise at BU Safety, Health and
Environment Leadership Team (SHELT)
meetings and workforce consultation
meetings. Work continues to set up supervisor-
led BU forums in the remaining BUs.
In 2024, the priority is to standardise the
supervisor approach across all UK BUs, joint
ventures and supply chain partners; to
incorporate supervisory input within different
stages of the Gated Business Lifecycle; and
to pilot this approach in the Group’s other
geographies.
Our Group-wide focus on inspirational
supervision saw Ramalingam Saravanan, lead
workplace safety and health co-ordinator in
Gammon, win both the Workplace Safety and
Health (WSH) award for supervisors and the
individual Singapore Contractors Association
Limited (SCAL) award, for his dedication to
ensuring the safety and wellbeing of team
members. At the Lighthouse Club Hong Kong
Contractor Safety Awards in May 2023, Tsang
Tsz Yan won the Site Safety Practitioner Silver
award, while Alan Mo Yuk Lun won the
Project Leader Champion award and Tam Ka
Hing Gary won the Safety Foreman
Champion award.
Impactful communication
What3Things?, a practical tool for site
colleagues outlining safety measures for 10
fatal risks, has been fully embedded across the
UK businesses. During the Group’s annual
safety month of September, the UK focused on
small-scale, impactful local conversations that
were led by the site teams and supervisory
community through the Let’s Talk campaign.
The outputs of the Let’s Talk events were
overwhelmingly positive, and the feedback will
help inform Balfour Beatty’s health and safety
approach moving forwards. In the US this
coincided with National Suicide Prevention
Awareness Month which Balfour Beatty
observed by hosting Question, Persuade and
Refer Gatekeeper training sessions.
SCAN OR CLICK TO LEARN
MORE ABOUT
WHAT3THINGS?
The Hi-Vis
Balfour Beatty understands that as Zero
Harm leaders, site leaders are vital to keep
people safe and well and that effective
engagement is vital to drive performance
and reduce incident rates. The Hi-Vis is a
bi-monthly health and safety newsletter
aimed primarily at site leaders in the UK, but
shared across the Group where appropriate,
which provides them with the resources they
need to keep people healthy and safe and
to share learnings across the business.
Balfour Beatty recognises that effective
engagement is a key driver of performance
and incident reduction.
Balfour Beatty identified that while incident
learnings were shared at a local and BU level,
learnings were not always effectively
disseminated across the whole business.
This constituted a missed opportunity to
learn from the past to reduce the risk of
similar incidents. Therefore, the highlight of
each newsletter is lessons learnt animated
videos which bring incidents to life in an
engaging way and provide projects with
discussion points when planning work
activities. As a direct communication to site
leaders, the Hi-Vis constitutes the missing
link between local learning and corporate
memory. Each edition is stored online, in a
repository of learning that will aid projects
now and in the future.
ABOVE Example of The Hi-Vis e-newsletter.
Balfour Beatty plc Annual Report and Accounts 2023
49
Strategic report HEALTH, SAFETY AND WELLBEING CONTINUED
Digital safety
Committed to being an innovative leader
in the world of health and safety, Balfour
Beatty launched a programme of digital
safety initiatives in 2023. These included the
roll-out of human form recognition cameras,
and a series of digitised tools for ensuring
greater control and governance of safety-
critical processes.
Launched in the UK, the Supervisor
Passport, a series of training modules and
competency checks for supervisors, has
been digitised. This approach has assigned
the passport to each supervisor’s digital site
access identity. This has helped identify and
support the training and development needs
of site supervisors, as well as providing
assurance of the competencies of our
supervisory community. The passport
approach, and the digitisation, are helping
to drive the recognition of site supervision
as a career, rather than a role.
Balfour Beatty has also worked to implement
digital solutions for permit-controlled
activities, which drive process compliance,
and minimise interface delay and handover
time. Timestamps, the ability to use
photographic evidence, digital signatures and
seamless document synchronisation via
cloud software, all combine to provide
greater levels of transparency and document
control. Further projects explored in 2023
include methods of digitising setting to work
processes, and tools to add additional digital
assurance and oversight of some safety-
critical activities.
Looking to remain a proactive, learning-
focused organisation, Balfour Beatty is keen
to leverage technological solutions wherever
possible. One such solution is SafetyPulse, an
AI-powered solution which analyses leading
and lagging data, including observations,
incident information and other project details,
and identifies risk factors for projects and
types of incident. Another such solution is
new exoskeletons on the Harkers Island
Bridge replacement project in North Carolina,
which aim to reduce injuries by minimising
fatigue and providing a support mechanism for
the shoulder joint when conducting overhead
work, also boosting efficiency.
Gammon wins
Geographic Information
Systems Award
Gammon won the esteemed 2023
special achievement in Geographic
Information Systems award for their
GTwin technology. GTwin is Gammon’s
Smart Site Management System
that leverages digital technologies
to boost site management efficiency
and enhance safety. It amalgamates
various construction data sources
including the most recent Building
Information Model, data streams from
computer vision, site progress and
environmental data, third-party app
data, and smart device data.
ABOVE
Exoskeleton in use on the Harkers Island Bridge
replacement project in North Carolina.
CLICK OR SCAN TO
READ MORE ABOUT
OUR SAFETY INNOVATIONS
INNOVATION IN SAFETY
Human form recognition
People plant interface is one of the
most prevalent fatal risks in
construction. As part of ongoing work
to eliminate the fatal risks, Balfour
Beatty is working to mandate the use
of human form recognition (HFR)
cameras on different types of mobile
plant, including, but not limited to,
telehandlers, crawler cranes and
piling rigs.
HFR cameras are a multi-camera
system, installed on mobile plant,
which detect the human form and
proactively communicate this detection
visually and audibly to the plant
operator. Where appropriate, the
system will also alert pedestrians that
they have been detected.
The HFR cameras will be used
alongside existing control and risk
mitigation measures as an additional
layer of protection for the workforce
and members of the public. Data from
HFR cameras will enable supervisors
and management to develop a clearer
picture of the risk profile of site
operations. Indeed, the embedding of
this technology into the new Managed
Service Desk, a Balfour Beatty initiative
delivered in conjunction with AECOM
and Anglian Water, which provides
insights into operators’ and site
workers’ behaviour and enables
proactive identification and resolution
of potential hazards, saw Balfour Beatty
win a British Construction Industry
award for Health, Safety & Wellbeing
Initiative of the Year. Balfour Beatty has
collaborated with supply chain partners
to agree a set of standards around the
use of HFR cameras, which it will be
progressively rolling out in 2024 and
2025 across its supply chain.
50
Balfour Beatty plc Annual Report and Accounts 2023
ABOVE
This is an example of the capture of data from HFR cameras which enables us
to pinpoint and eradicate people/plant interface risks.
Balfour Beatty Living Places introduces body-worn
cameras to combat roadworker abuse
To enhance the safety and wellbeing of our roadworkers,
Balfour Beatty Living Places introduced body-worn cameras for
public-facing teams following an alarming increase in incidents
of verbal harassment, threats and physical assault against
roadworkers while carrying out their essential duties.
Recognising the urgent need for action, body-worn cameras are
currently being trialled on Balfour Beatty Living Places’ highways
contract in Southampton. The idea to make bodycams compulsory
as part of the standard toolkit came through our Balfour Beatty
Living Places’ safety-focused My Contribution campaign.
National statistics provided by Safer Highways suggest that one in
10 roadworkers have been subjected to physical abuse in the last
year, with one in five reporting having missiles, such as litter and
bottles, thrown at them. In the most serious incidents, workers
have reported cars being deliberately driven through cones and
barriers towards them.
Balfour Beatty is encouraging the workforce to report all instances
of abuse, and has introduced a new category in the Observation
App specifically for abuse. The data will help us understand the
scale and nature of the problem so that the business can develop
solutions to reduce worker abuse. We are also providing conflict
management training for teams in public-facing roles.
And the risk is not limited to physical injuries. Two-thirds of workers
said they have been verbally abused by passing motorists and one
in four roadworkers have suffered with mental health issues as
a result.
This initiative is just one part of Balfour Beatty Living Places’ wider
commitment to ensure the safety and wellbeing of its workers, as
they play an essential role in maintaining and improving
infrastructure around the country.
It’s one of the best things
we’ve implemented; working
in residential areas, they’re a
must. 98% of the time, when
I’ve told a member of the public
I’m activating my camera, it
de-escalates the situation.”
Brenton McLean
Supervisor, Balfour Beatty Living Places
AT THE BEATING HEART
Fire safety
Balfour Beatty is committed to improving
fire safety. The business has continued
to proactively respond to changes in fire
legislation and guidance and recognises
the importance of leadership engagement,
strong compliance, and effective training
and awareness provision. A Fire Safety
Leadership Team has been established
to bring together representatives from each
part of the UK business to share insights
and relevant information and acts as a
point of contact for senior leaders to
understand performance.
Work has also continued to improve
compliance, and so a new digital tool has
been introduced in our project portal system
to allow each workplace location to self-
assess against key criteria on events and
legal requirements. The data will feed into
a live dashboard and provide a detailed
reporting capability for each location and
business unit. In 2024, data-driven digital
insights will be vital to facilitate continued
improvement and development.
Balfour Beatty is committed to improving fire
safety across the industry and so established,
and now chairs, a national forum for Tier One
construction leaders which aims to develop a
consistent fire safety management approach
across the industry. The forum intends to
enhance the role of fire safety co-ordinators,
and to look at how we can provide the right
tools through procedures and guidance which
support projects to improve the safety of all.
Balfour Beatty plc Annual Report and Accounts 2023
51
Strategic report ETHICS AND COMPLIANCE
Doing the
right thing
NUMBER OF SPEAK UP
HELPLINE CASES
NUMBER OF CASES PER
1,000 EMPLOYEES
Every day we are trusted by customers, business
partners and the communities we work with and
for, to do the right thing, make a difference and to
behave responsibly. That includes treating each
other fairly, respecting our business partners and
caring for our communities – leaving a legacy of
which we can be proud. It also means being
transparent and acting with integrity.
4
4
4
9
.
4
2
5
9
2
2
9
2
9
7
2
6
9
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19 20 21
22 23
19 20 21
22 23
Confirmed breaches of Balfour Beatty’s
Code of Ethics may result in disciplinary
action, including termination of employment
for serious breaches, with 55 individuals
leaving the business during 2023 following
substantiation of a Speak Up case.
A substantiated breach by a supply chain
partner of our Code of Ethics or Supplier
Standards may result in termination of
their contract.
Improving industry standards
The Group plays its part in supporting others
too and strives to help improve ethical
business standards across the industry,
regularly interacting with and supporting
industry bodies for ethics such as the
Institute for Business Ethics and the
Business Ethics Leadership Alliance.
Find out more information on Balfour
Beatty’s approach to modern slavery on
page 67.
SCAN OR CLICK TO READ
THE GROUP’S MODERN
SLAVERY STATEMENT
Ethics programme
Under the oversight of the Board, the Ethics
and Compliance Programme consists of a
framework of enterprise-wide and Strategic
Business Unit-specific policies, procedures,
guidelines and responsibilities designed to:
In relation to the US military housing
business, Balfour Beatty continues to
co-operate with the US Department of
Justice and is now in the second year
of a monitorship entered into on
6 September 2022.
@ promote and foster an organisational
culture of integrity, ethical decision making
and compliance with Balfour Beatty’s
values and behaviours as reflected in our
Cultural Framework;
@ assure that employees conduct business
with the highest standards of ethics and
integrity and in compliance with all
applicable laws and regulations; and
@ promote appropriate risk assessment and
due diligence to prevent and detect
unlawful and unethical conduct.
During 2023, a Group Ethics and Compliance
Programme Charter was formally adopted to
further drive consistency of practice across
the Group.
Externally-led ethics and compliance risk
assessments were also completed across UK
and US operations to identify, prioritise and
assign accountability for managing existing
and potential threats related to ethical
misconduct and non-compliance. Targeted
recommendations arising from the
assessments have been incorporated into
workplans for implementation during 2024.
Work to improve Group-wide ethics and
compliance systems continues with the
implementation of a new ethics helpline.
Design and roll-out of new disclosure
registers across the Group is planned
for 2024.
SCAN TO FIND OUT MORE
ABOUT OUR CODE OF
ETHICS PROGRAMME
Speak Up helpline
Fostering a speak-up culture, where employees
feel empowered to raise concerns without
fear of retaliation, is essential. Balfour Beatty
actively encourages speaking up in the event
of a question or concern and provides a
variety of channels through which employees
and stakeholders may do so, including a
confidential, third-party managed Speak Up
helpline. The 2023 employee engagement
survey showed that 74% of responding UK
and US employees felt empowered to raise
concerns and speak up without fear of
negative consequences.
In 2023 a total of 444 Speak Up reports were
received across the Group, an increase of
59% from 2022. We view this as a positive
trend attributed in large part to improved
employee awareness of doing the right thing
and the importance of speaking up, together
with progress made in rolling out the Right
to Respect approach; see page 76 for
more information.
Substantiated cases saw an increase to 39%
in 2023 (2022: 23%). Employee conduct
constituted the majority of cases received,
accounting for 51% of all cases in 2023
(2022: 45%), followed by cases relating to
fraud, deception and dishonesty (22%) and
other Code of Ethics violations (11%).
52
Balfour Beatty plc Annual Report and Accounts 2023
TAX STRATEGY
Being a responsible
taxpayer
This tax strategy has been prepared and published in accordance with
paragraph 16 (2), Schedule 19, Finance Act 2016, on behalf of Balfour
Beatty plc and all UK tax resident entities in the Balfour Beatty Group.
@ tax risks in relation to compliance and
reporting are managed by meeting
regularly with professional advisers,
industry groups and the tax authorities
to both keep abreast of changes in these
areas and to seek information on new
systems and software; and
@ risk in relation to tax in general is managed
by the internal tax team and if a position is
uncertain the Group may obtain third-party
advice in order to gain clarity or support for
a particular stance or approach.
Any tax risks are included in the Group Risk
Register as part of Balfour Beatty’s Group-
wide approach to risk management.
Interaction with tax authorities
Balfour Beatty’s approach to its tax affairs is
supported by an open, honest and positive
working relationship with the tax authorities,
with regular dialogue. Should any dispute
arise with regard to the interpretation
and application of tax law, the Group is
committed to addressing the matter
promptly and resolving it in an open
and constructive manner.
Being a responsible taxpayer
Balfour Beatty recognises that paying taxes
arising from its activities is an important part
of how it supports the communities in which
it operates. The Group makes a major contribution
to the tax revenues of governments in the
numerous territories in which it operates.
For example, the Group’s tax contribution
extends considerably beyond corporation tax
and the collection of substantial amounts of
income tax and includes the payment of
significant employer social security contributions.
The Group’s tax strategy, approved by the
Board, is to sustainably minimise tax cost
whilst complying with the law. In doing so,
Balfour Beatty ensures it acts in accordance
with its Cultural Framework, which provides
a simple and clear view of the purpose,
values and behaviours of the Group’s Build to
Last strategy. The Group aims to meet all
legal requirements, filing all appropriate tax
returns and making tax payments accurately
and on time. The Group’s tax strategy applies
to all territories in which it does business.
Tax governance
Balfour Beatty has clear tax policies,
procedures and controls in place which are
overseen by the Chief Financial Officer.
A dedicated internal tax team, led by the
Group Head of Tax, is responsible for the
implementation of the Group’s tax strategy
and supporting tax policies. Members of the
tax team are highly experienced with
appropriate professional qualifications and
experience which reflect the responsibilities
required for their roles.
Tax risk appetite
The Group manages its tax affairs in a
proactive manner that seeks to maximise
shareholder value and as such utilises tax
incentives or opportunities for obtaining tax
efficiencies where appropriate and where
they support genuine commercial activity.
The Group does not enter into artificial
arrangements that lack commercial purpose
in order to secure a tax advantage. The aim
is to ensure full compliance with all statutory
obligations and as a consequence attempt
to minimise risk wherever possible.
In keeping with the Corporate Criminal
Offence of Failure to Prevent the Facilitation
of Tax Evasion legislation, Balfour Beatty
does not tolerate tax evasion or the
facilitation of tax evasion. Balfour Beatty
applies appropriate procedures and controls
which seek to prevent any person acting on
its behalf from facilitating tax evasion.
Managing tax risk
There are a number of factors that affect the
Group’s tax risk and these arise both internally
and externally. Balfour Beatty’s ability to
control these factors varies and its internal
tax team works to minimise these risks to an
acceptable level. For example:
@ new and developing tax legislation is
monitored and where it is relevant Balfour
Beatty participates in consultations issued
by the tax authorities. When new or
changed legislation is announced, the
impact on the Group is assessed and
active measures are taken to ensure there
are adequate processes in place to comply
with any change;
Balfour Beatty plc Annual Report and Accounts 2023
53
Strategic report SUSTAINABILITY
s
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Introduction
In 2023, Balfour Beatty has shifted its
approach to sustainability, moving beyond
environmental compliance and carbon
reduction, to further integrate sustainable
practices to support delivery of Balfour
Beatty’s business strategy.
This shift has translated into consistent
performance aligned to our Building New
Futures strategy. We have continued to
invest in new technologies, fuels and operational
methods. Our transparent approach is evident
in the publication of a diary, Towards a Zero
Carbon Construction Site, where we openly
discuss both successes and challenges faced
in adopting sustainable solutions such as
electrified plant equipment and hydrogen
fuel cell technology.
SCAN OR CLICK TO READ OUR
LATEST ‘TOWARDS A ZERO
CARBON CONSTRUCTION SITE’
DIARY ENTRY
In keeping with the commitment outlined in
the 2022 Annual Report, Balfour Beatty has
developed its decarbonisation pathway, aligning
with the goal to cap global warming at 1.5°C,
and submitted both near- and long-term
targets for validation by the Science Based
Targets initiative (SBTi). We anticipate
validation from the SBTi in 2024.
0
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During 2023, we have continued to evaluate
our sustainability performance against our
sustainability targets and ambitions, with
a dedicated focus on achieving net zero,
reducing waste and fostering social value
creation. The materiality assessment
conducted by the Group in 2020 identified
these as the foremost sustainability
related financial and/or environmental
risks to the Group.
Our Building New Futures sustainability strategy
ENVIRONMENT
MATERIALS
COMMUNITIES
Responding to climate
change and managing
our impact on
the environment
Choosing the right
materials, using less
materials and creating
value from the
materials we no
longer need
Beyond Net
Zero Carbon
Generate
Zero Waste
Improving the
prosperity and
wellbeing of
individuals and
communities
Positively
Impact More
than 1 million
People
Achieve our
science-based
carbon reduction
target
40% reduction in
waste generated
£3bn social
value
generated
Local Sustainability Action Plans
SCAN OR CLICK TO READ OUR SUSTAINABILITY
STRATEGY IN FULL.
HOW WE MANAGE SUSTAINABILITY
Safety and
Sustainability
Committee
The Safety and
Sustainability Committee
reviews the Group’s
sustainability strategy,
monitoring progress and
ensuring accountability at
Board level.
Executive
Committee
Strategic
Business Units
Internal audit and
external assurance
The Executive Committee
has overall responsibility
for setting the Group’s
sustainability ambitions
and targets.
Internal audit teams review
performance against the
Group’s sustainability strategy.
PwC LLP is engaged by
Balfour Beatty to provide
independent limited assurance
over the reporting of social
value, and the Group’s Scope
1 and 2 Greenhouse Gas
(GHG) emissions.
Each Strategic Business
Unit (SBU) has a sustainability
director who is responsible
for the Business Unit (BU)
sustainability leads and
project-based sustainability
teams. The BU sustainability
leads are responsible for
developing bespoke Bridging
the Gap plans (see page 55)
aligned to the Group’s 2030
targets and 2040 ambitions.
The SBU sustainability
directors have overall
accountability for these plans.
54
Balfour Beatty plc Annual Report and Accounts 2023
In conversation with Jo Gilroy,
Group Sustainability Director
Q
Q
Q
What is Bridging the Gap?
At times, sustainability can seem complex and
overwhelming. The vocabulary is unfamiliar,
it’s moving at a fast pace, and it can be difficult
to pinpoint exactly where to start. That’s why,
across Balfour Beatty, we need to cut through
the complexity – to simplify, prioritise and
consolidate our approach. We need to ‘bridge
the gap’ between the targets and ambitions
set out in our Group-wide sustainability strategy,
Building New Futures, and the actions required
to get there. Bridging the Gap is a framework
which has informed the action plans we’ve
developed with each of our Business Units to
focus our efforts where we can have the
biggest impact and chart a course to deliver
our targets and ambitions. Adopting a uniform
approach will also support best practice and
encourage greater collaboration across our
organisation. Bridging the Gap sets out
minimum expectations of sustainable leadership,
carbon, materials, communities and biodiversity.
What work did you undertake
to inform the Bridging the
Gap framework?
During 2023, the sustainability leadership team,
which comprises environmental, social impact
and sustainability expertise across the Group,
conducted a review of the sustainability topics
that are most significant to Balfour Beatty. This
informed the framework for our Bridging the
Gap action plans. The key changes from the
initial assessment conducted in 2020 were an
increase in the importance of biodiversity,
protecting human rights and a need to focus on
how we embed sustainability further into the
business. We’re in the process of engaging
wider stakeholders to inform the evolution of
our approach in these areas.
Why is sustainable leadership
a key area to Balfour Beatty?
Sustainability is a business movement; it
needs to be embedded in how we do business
and is everyone’s responsibility. The leadership
section in the Bridging the Gap framework is
paramount to setting out how we are going to
deliver on our sustainability targets and
ambitions by building a robust sustainable
mindset across our workforce. We have
agreed a series of leadership principles with
our businesses and progress is reviewed as
part of the quarterly business review process.
AT THE BEATING HEART
SCAN THE QR CODE TO READ MORE ABOUT
OUR APPROACH TO SUSTAINABILITY AND
TO EXPLORE OUR BEST CASE STUDIES
Balfour Beatty plc Annual Report and Accounts 2023
55
Strategic report SUSTAINABILITY CONTINUED
Beyond Net
Zero Carbon
In its sustainability strategy, Building New
Futures, published in 2020, Balfour Beatty
set out its 2030 target to achieve its
science-based carbon reduction target and
a 2040 ambition of going Beyond Net Zero
Carbon on an absolute reduction basis.
During 2023, the Group has continued to
work towards this target and ambition. In
late 2023 Balfour Beatty submitted Science
Based Targets and a related carbon abatement
plan, aligned with the 1.5°C global warming
limit, to the Science Based Target initiative
(SBTi) for validation, which is expected during
2024.
As part of developing the SBTi submission,
Balfour Beatty has revisited the assessment
of organisational and operational control
boundaries, this is detailed on page 58 and
59. This has led to a restatement of previous
years’ performance.
In 2023 we achieved a 2% reduction in the
Group’s absolute carbon emissions, and a
7% reduction in carbon emissions intensity,
using the market-based methodology.
2023 actions to cut emissions
@ Bridging the Gap action plans: to support
our UK Business Unit action plans which
have a strong focus on carbon reduction,
the Group has mandated low-carbon
solutions including the use of EcoSense
cabins and the EcoNet energy
management tool.
@ Continued investment in hydrogen fuel
technology: this approach has included a
partnership with the Scottish Government,
Logan Energy and ULEMCo Ltd to retrofit
and deploy two gritters, an impact
protection vehicle and a pickup truck with
dual fuel technology on the M77 project.
The dual fuel technology is anticipated to
displace up to 30% of diesel usage.
@ Renewable energy systems: Gammon,
our 50:50 joint venture based in
Hong Kong, invested in the installation of
a further 200kWp capacity photovoltaic
renewable energy system, consisting of
480 photovoltaic panels, at the Gammon
Technology Park in Tseung Kwan O
industrial estate. In addition to the first
system installed in 2019, this is now
generating around 555 MWh of solar
energy electricity per year – equivalent
to the annual consumption of
c.170 households.
@ Electric vehicle alternatives and the use of
prefabrication methods: our US business
has continued to replace ‘dirty’ work
vehicles with electric alternatives and
increase the number of projects using
prefabrication as part of the build process.
During the project planning stage, active
consideration has been given to identifying
options for clean power generation,
including exploring the feasibility of an
ownership model for previously leased
plant equipment.
@ Implementing the purchase of Renewable
Energy Guarantee of Origin (REGO) backed
green tariff energy to minimise carbon
emissions from grid electricity.
SCAN OR CLICK TO LEARN
MORE ABOUT OTHER CARBON
REDUCTION INITIATIVES
Summary of the Group’s 2023
carbon performance
For 2023, for both location-based and
market-based measurements, Balfour
Beatty’s total Scope 1 and 2 Greenhouse
Gas (GHG) emissions have decreased from
2022, demonstrating a reversal of the trend
of annual increases year on year from the
2020 baseline.
Of the Group’s Scope 1 and 2 emissions,
91% were Scope 1 and 9% Scope 2. Balfour
Beatty’s GHG emissions are predominantly
from the use of diesel in vehicles and plant
and equipment.
Location-based
Balfour Beatty’s total Scope 1 and 2 GHG
emissions in 2023 were 146,461 tCO2e.
This is a decrease from 2022 of 148 tCO2e,
representing a reduction of under 1%. The
Group’s location-based GHG emissions
intensity decreased from 16.0 tCO2e/£m
revenue in 2022 to 15.2 tCO2e/£m revenue in
2023, a reduction of 5%. Location-based
methodology uses average emissions
intensity data to calculate carbon emissions
from electricity usage.
Market-based
Balfour Beatty’s total Scope 1 and 2 GHG
emissions in 2023 were 144,725 tCO2e.
This is a decrease from 2022 of 2,507 tCO2e,
representing a 2% reduction. Market-based
GHG emissions intensity also showed a
reduction from 16.1 to 15.0 tCO2e/£m
revenue, a 7% reduction. Market-based
methodology uses actual emissions intensity
data from the sources of energy an organisation
has purposefully chosen to calculate carbon
emissions from electricity usage.
Innovation in low-carbon
The Energy Management Unit (EMU), our
team of in-house experts, has been working
closely with projects across Balfour Beatty to
reduce cost, enhance sustainability and build
energy resilience. Achieving this balance is
key to delivering sustainable decarbonisation.
The EMU is actively engaging with suppliers
to trial new and innovative products and
services, enable the introduction of larger
low-carbon plant and machinery, and
understand the infrastructure and support
that suppliers require to integrate these
solutions into site operations.
The mandatory energy efficiency standards
developed with the EMU for use on all UK
Balfour Beatty projects, commit projects to
select low-energy assets for their sites. The
current mandate includes use of our in-house
tool, the Power Profiler, to correctly size power
supplies to avoid fuel wastage from oversized
generators. The EMU supports the business
to implement the mandate effectively, whilst
working with suppliers to identify the next
opportunity to add to the mandated standard
and continue to drive our energy use down.
This approach builds in energy efficiency to
all site setups and provides surety to our
projects that the technologies they are using
on their sites have been trialled and proven.
Delivery of battery storage to improve the
efficiency of our generator setups has been a
key focus and we have mobilised over 60 battery
storage units to off-grid sites in 2023. The
batteries enable generators to work more
efficiently by switching them off when they
are not needed. This reduces both ongoing
fuel usage and noise and air pollution when
the battery is able to provide all of the power
to the site. The EMU is looking closely at the
performance of these batteries to work with
our suppliers to achieve optimum performance
prior to embedding them into the energy
saving mandate.
The transition away from diesel for power
generation and plant is a key element of
meeting our carbon reduction and environmental
commitments. The EMU is working closely
with a range of solar, hydrogen and battery
electric technology suppliers to develop a
range of solutions for our projects. Operational
trials are underway on hydrogen fuel cell and
hydrogen internal combustion engine generators
to replace the current diesel versions, solar
and hydrogen fuelled mobile welfare units,
electric excavators and conversion of highways
maintenance vehicles to hydrogen hybrid.
Each of these trials and those that are planned
for 2024 bring insight into the complexity of
mobilising non-diesel assets on site and are
being embedded into our operational systems
to enable larger scale uptake of these alternative
technologies as they become more widely
available on the market.
56
Balfour Beatty plc Annual Report and Accounts 2023
As well as supporting adoption of technology
to enable projects to achieve their Bridging
the Gap action plans, the EMU provides
specialist support to ensure that projects can
reduce their use of energy through energy
auditing and data analysis, develop
behavioural change programmes and upskill
their core energy management. This focus on
efficiency delivers immediate carbon savings
and reduces the scale of the requirement for
replacement with alternative technologies
which will enable a more rapid and effective
transition towards zero carbon.
Using the expertise of the EMU, Balfour Beatty
has enabled efficient off-grid power provision
in some of the UK’s most remote locations.
Today, our teams are using the Power Profiler
to manage energy use, control costs and
maximise profits by using online data to
produce customised electric-load reports that
contain up to 25 months of electric-use history.
The Power Profiler can work in sync with the
EcoNet energy management system, these
being two of our five mandated solutions.
EcoNet can save energy by automatically
turning our site cabin equipment off when it
is not actively being used. In November 2023
we had 66 active EcoNet stations across our
UK sites.
BALFOUR BEATTY COMMUNITIES ENHANCES ENERGY
EFFICIENCY ACROSS 11 NAVY INSTALLATIONS
Balfour Beatty Communities successfully completed a US$31 million
investment project, focusing on energy efficiency improvements across
11 installations in the US Navy Southeast portfolio.
The turnkey project, delivered in partnership with ENGIE Services
US, included upgrades to high-efficiency heating, ventilation and air
conditioning (HVAC) systems, weatherproof sealing and installation
of domestic water retrofits and LED lighting.
These enhancements have provided energy savings of 9,941,959 kWh,
enough to power 946 average US Homes for a year.
PLANT TELEMATICS IMPROVING OPERATIONAL EFFICIENCIES
Balfour Beatty and its plant supply chain partners are putting significant
effort into utilisation of machine telemetry data across our projects to
improve plant utilisation and drive efficiencies
On our £240 million A63 Castle Street Improvement Scheme, we have
been using telematics data alongside Eco-Operator training. Across a
five-month test period from February to June 2023, the team saw
significant benefits including an increase in plant utilisation and a 50%
reduction in plant idling rates. Carbon emissions associated with idling
were reduced from 36% to 17%.
POWERING OUR BOTTESFORD DEPOT WITH SOLAR ENERGY
Following a successful trial in 2022, our Bottesford depot has
been utilising thin solar film to power their cabins, reducing
the need for diesel-generated electricity on site. From our
analysis via the Victron online portal of actual energy
generated (kWh), 60% of the energy generated by the solar
photovoltaic system was used directly by the cabins. In 2023,
the solar contribution to the site was 6,268 kWh which is
equivalent to the amount of electricity used by 2.3 average
households in the UK.
Thin film solar panels
provide an easy to
install, lightweight
solar PV solution for
modular buildings with
very little compromise
on performance.”
Stuart McLeod
Senior Energy and Sustainability
Manager, Balfour Beatty
SCAN OR CLICK TO
FIND OUT MORE
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
57
Strategic report SUSTAINABILITY CONTINUED
Science based targets
As articulated in the 2022 Annual Report Balfour Beatty committed to submitting a
Science Based Target (SBT), and related abatement plan to the Science Based Targets
initiative (SBTi). During 2023, this commitment was expanded to include setting both
near-term and long-term, or net zero, SBTs. The analysis has been completed and
application submitted. We anticipate validation from the SBTi in 2024.
The application has outlined the abatement measures the Group will continue to focus on
in 2024 for Scope 1 and 2, as well as Balfour Beatty’s first set of abatement measures for
Scope 3. With Scope 3 comprising 15 separate carbon reduction categories, the key focus
for the Group in the near term will be on the categories where we can have the most
significant impact. These include purchased goods and services, and investments
(including Gammon) – making up 83% and 8% of our Scope 1, 2 and 3 carbon
footprint respectively.
Scope 1 abatement measures include:
Electrification of
plant equipment
Electrification of
fleet (cars, light
commercial
vehicles, and
heavy goods
vehicles)
Fuel switching to
hydrogen and/or
biofuels mix for
plant equipment,
power generators
and fleet
Energy efficiency
for battery storage
and generators
Idling reduction
through telematics
to increase energy
efficiency for plant
equipment (e.g.
excavators,
dumpers, piling
rigs and crawler
cranes)
Scope 2 abatement measures include:
Green electricity
supply
Renewable energy certificates
Power Purchase Agreements
Scope 3 abatement measures include:
@ Investments
Other measures
@ Client engagement and
collaboration: continue
engaging with investment
clients included in near-term
Scope 3 target to track
progress towards the Group’s
validated near-term science
based target and collaborate on
decarbonisation measures
@ Recycling and circularity:
reduce emissions from waste
through recycling policies and
circularity in design
@ Sustainable business travel
policy: promote sustainable
business travel policies
@ Sustainable procurement:
prioritise sustainable
procurement for capital goods
@ Green commuting: promote
green commuting to reduce
emissions from employee
travel
Purchased goods
and services
@ Supplier engagement: focusing
on key product categories,
engage with suppliers to obtain
data, encourage target setting
and emission reduction,
collaborate on innovation, and
identify and source from
low-carbon suppliers
@ Low-carbon building design
and construction: incorporate
low-carbon criteria and metrics
into project design, including
material efficiency and material
substitution with low-carbon
alternatives
@ Client engagement: engage
with clients to educate them
on available low-carbon
solutions for their projects
58
Balfour Beatty plc Annual Report and Accounts 2023
Approach for
Group carbon reporting
From the consolidation approaches
for GHG reporting detailed in The
Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard –
Balfour Beatty Group adopts the
operational control approach.
The GHG Protocol operational control
methodology has been determined to
still be the most relevant and appropriate
consolidation approach for GHG
emissions for Balfour Beatty as the
Group moves into a more detailed and
expansive phase of GHG disclosures
encompassing Scopes 1 and 2, and all
relevant Scope 3 categories.
Through undertaking the detailed carbon
analysis required as part of the SBTi
submission process, the Group was
prompted to reconsider the full GHG
inventory of Scopes 1, 2 and 3 categories
in relation to its organisational and operational
boundaries. Therefore, the Group
revisited the treatment of Gammon
Construction Limited (Gammon), the
50:50 joint venture between Balfour
Beatty and Jardine Matheson based in
Hong Kong, as well as its UK and US
joint ventures and joint operations.
The outcome of this analysis has
determined that it is more appropriate to
report Balfour Beatty’s 50% share (based
on Balfour Beatty’s equity interest) of
Gammon’s Scope 1 and 2 emissions
within the Group’s Scope 3 Category 15:
Investments emissions, and not as part
of the Group’s Scope 1 and 2 emissions.
The reasoning being that any tangible
actions towards decarbonisation by way
of capital expenditure and investment in
low or zero carbon technologies would
need backing from both Gammon joint
venture partners.
Operating as an independent company,
Gammon also has its own separate
sustainability strategy with associated
United Nations Sustainable Development
Goals, a separate TCFD disclosure and
SBT, and in 2023 was the first
construction and engineering company in
Greater China to receive approval from
the SBTi for a 1.5°C aligned near-term
SBT. These factors indicate that Balfour
Beatty does not have operational control.
Balfour Beatty will continue to work
closely with Jardine Matheson to
collaborate relentlessly on the
implementation by Gammon of new
technologies and Modern Methods
of Construction contributing to
decarbonisation. The climate crisis is a global
issue which requires global solutions shared
across the construction sector.
Following the reassessment of the
operational control consolidation approach to
Gammon, Scope 1 and 2 emissions from the
Group’s UK and US joint ventures and joint
operations were also assessed, concluding
that there were no entities since the baseline
year that required restatement as Scope 3:
Category 15.
As outlined in the decision-making process
below, certain UK and US joint ventures and
joint operations where Balfour Beatty does
not have full authority to introduce and
implement operating policies, i.e. operational
control, that were previously included in the
Group’s Scope 1 and 2 emissions, are now
excluded from the operational control
boundary and are instead included within the
Group’s Scope 3 Category 15: Investments
emissions on a proportional basis in line
with ownership interests.
All operating partners within joint ventures
and joint operations have a responsibility to
use their influence to reduce carbon emissions
and it is important to provide visibility over
these efforts, but in a manner which does
not distort, either positively or negatively,
the Group’s carbon performance where the
Group does not have operational control as
strictly defined in the GHG Protocol.
Applying a consistent GHG consolidation
approach is important and should reflect an
obligation to undertake all measures possible
to avert the worst impacts of the climate crisis.
To this end, the Group has enhanced its
reporting criteria to enable us to communicate
the emissions performance of both operations
for which we have full authority, as well as
operations where Balfour Beatty does not have
full authority but does have considerable
influence over operating policies and
purchasing decisions. The total carbon
emissions from these operations will be
included as part of the Group’s operational
boundary and reported as part of the Group’s
total Scope 1 and 2 emissions, including for
emissions intensity.
The Group’s Scope 1 and 2 emissions for
2023 are therefore disclosed in the table on
page 61 in line with the improved and more
transparent carbon reporting approach as
described above, with the comparative
figures for the 2020 baseline year, 2021
and 2022 restated accordingly.
OUR
DIVISIONS
Construction Services
Support Services
Infrastructure Investments
100% Balfour Beatty
operations
Projects that are joint ventures or joint operations with
Balfour Beatty alongside other partners
Equity investments
Joint operation/
unincorporated joint
venture
Incorporated
joint venture
Yes
Does Balfour Beatty
have full authority to
introduce and
implement operating
policies in the shared
operation?
No
OPERATIONAL CONTROL
(FULL AUTHORITY)
Balfour Beatty uses the operational
control GHG consolidation approach,
applying only the guidance explicit in
the GHG Protocol. The Group accounts
for 100% of GHG data from operations
over which it has full authority in
Scopes 1 and 2 with their associated
Scope 3 value chain emissions.
ENHANCED REPORTING CRITERIA
VALUE CHAIN
Direct emissions from equity
investments and incorporated joint
ventures are accounted for as
proportional emissions that occur in the
reporting year within Scope 3, Category
15 (Investments) as are any other joint
operations where the Group does not
have considerable influence over
operating policies, purchasing decisions
or sustainability performance
improvement actions.
Balfour Beatty includes Scope 1 and 2
emissions of certain joint operations
and unincorporated joint ventures
where it has been concluded that
neither party has full authority in
accordance with the GHG protocol
guidance, but in line with the enhanced
reporting criteria where Balfour Beatty
believes that it exerts considerable
influence over operating policies and
purchasing decisions, including those
impacting carbon emissions. Balfour
Beatty therefore deems it appropriate
to include such operations within the
reporting boundary as it has operational
control in line with the enhanced
reporting criteria. All emissions from
these operations are included.
SCOPE 1 AND 2 GHG EMISSIONS
SCOPE 1 AND 2 GHG EMISSIONS
ALL RELEVANT SCOPE 3 CATEGORIES
ALL RELEVANT SCOPE 3 CATEGORIES
SCOPE 3 CATEGORY 15: INVESTMENTS
Balfour Beatty plc Annual Report and Accounts 2023
59
Strategic report SUSTAINABILITY CONTINUED
GHG reporting
methodology and
assurance
Energy and carbon reporting
methodology and assurance
Balfour Beatty discloses energy, carbon and
related data aligned to the UK Government
Streamlined Energy and Carbon Reporting
requirements (SECR), covering all seven UN
Framework Convention on Climate Change/
Kyoto gases, and includes data from certain
joint ventures and joint operations in line with
the reporting criteria set out on pages 58
and 59.
To meet this, the Group has determined and
reported all direct emissions it is responsible
for within the organisational boundary
set and does not believe there are any
material omissions.
Scope 1 and 2 GHG emissions were
calculated using the UK Government, US
Environmental Protection Agency (EPA) and
International Energy Agency’s (IEA) most
current conversion factors to determine
equivalent tonnes of carbon dioxide (tCO2e)
that include Global Warming Potential rates
from the Intergovernmental Panel on Climate
Change (IPCC) assessment reports based on
a 100-year timeframe.
Balfour Beatty’s Scope 1 and 2 GHG
emission sources include emissions from
assets that are otherwise not referred to
across the rest of the financial statements,
such as energy provided by landlords and
customers that Balfour Beatty does not
directly procure.
PwC LLP was engaged to undertake an
independent limited assurance engagement
of the Group’s Scope 1 and 2 emissions and
resulting emissions intensity (expressed as a
ratio of emissions to revenue), reporting to
Balfour Beatty plc using the assurance
standards ISAE 3000 (Revised) and ISAE
3410 over the GHG data that has been
highlighted in this report with the symbol .
PwC LLP’s full statement is available at:
www.balfourbeatty.com/ILA_2023.
Market-based methodology
Since 2020, alongside the location-based
method, Balfour Beatty has reported against
the GHG Protocol Scope 2 market-based
reporting methodology. This method allows
the application of an emissions factor of
zero tCO2e per kWh to supply contracts
from suppliers of electricity purchased from
renewable sources with a guarantee of origin
certificate. For example, in 2023 in the UK
c.13,000 MWh of Renewable Electricity
Guarantees of Origin (REGO) certificates for
60
Balfour Beatty plc Annual Report and Accounts 2023
electricity were procured for electricity purchased
through the Group’s utility procurement
contract. A residual mix emission factor is
applied to electricity where a REGO is not
available. For electricity which does not come
from a renewable source and a country-specific
residual mix emission factor is not available,
Balfour Beatty has applied either the appropriate
supplier factor based on the supplier’s
published fuel mix where it is known and
can be evidenced, or the country average
electricity emission factor provided by the UK
Government, EPA or IEA (as appropriate).
Scope 3 and Outside of Scopes emissions
Scope 3 emissions and biogenic emissions
have been prepared using the GHG Protocol
Scope 3 guidance.
As part of the compilation of a full GHG
inventory for submission for validation to
the SBTi, a review was undertaken for both
biogenic emissions and forest, land and
agriculture (FLAG) emissions. Outside of
scope emissions are detailed in the table on
page 62. FLAG emissions have been prepared
in alignment with the GHG Protocol Land
Sector and Removals guidance and the Draft
for Pilot Testing and Review.
Offsetting
Balfour Beatty does not, at present, offset
any GHG emissions arising from the Group’s
operations, on the basis that there are
significant opportunities to abate GHG
emissions across Scopes 1, 2 and 3 through
implementing efficiencies, Modern Methods
of Construction and the adoption of low-carbon
technologies and materials.
Balfour Beatty also recognises the role large
organisations can take in ‘insetting’ GHG
emissions by implementing reduced or
low-carbon solutions within the Group’s
value chain and supporting the sectoral
decarbonisation of the construction sector.
Insetting is the reduction of GHG emissions
through investing in projects that sequester
or reduce carbon emissions within a company’s
own supply chain or operational boundary
and focuses on internal actions that directly
contribute to emission reductions or removals.
As the Group has committed to set a
near-term Science Based Target and net zero
target aligned to the business ambition for
1.5°C campaign via the SBTi, should any
offsetting be decided to be undertaken by
the Group in future, this would abide by the
Oxford Principles*.
* https://www.smithschool.ox.ac.uk/sites/default/
files/2022-01/Oxford-Offsetting-Principles-2020.pdf.
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SCOPE 1 AND 2 TABLE
Carbon emissions
Absolute (tCO2e)
Scope 1 – operational control boundary (full authority)
Scope 1 – applying enhanced reporting criteria⁴
Total Scope 1 – restated³
As reported in previous years²
Scope 2 – operational control boundary (full authority)
Scope 2 – applying enhanced reporting criteria⁴
Total Scope 2 (location-based) – restated³
As reported in previous years²
Scope 2 – operational control boundary (full authority)
Scope 2 – applying enhanced reporting criteria⁴
Total Scope 2 (market-based) – restated³
As reported in previous years²
Scope 1 and 2 – operational control boundary (full authority)
Scope 1 and 2 – applying enhanced reporting criteria⁴
Total Scope 1 and 2 (location-based)
As reported in previous years²
Scope 1 and 2 – operational control boundary (full authority)
Scope 1 and 2 – applying enhanced reporting criteria⁴
Total Scope 1 and 2 (market-based)
As reported in previous years²
Intensity (tCO2e/£m revenue⁵) – restated³
Scope 1 and 2 – operational control boundary (full authority)
Scope 1 and 2 – applying enhanced reporting criteria⁴
Total Scope 1 and 2 intensity (location-based) – restated³
As reported in previous years²
Scope 1 and 2 – operational control boundary (full authority)
Scope 1 and 2 – applying enhanced reporting criteria⁴
Total Scope 1 and 2 intensity (market-based) – restated³
As reported in previous years²
Baseline year
2020
2021
2022
2023
90,850
20,117
110,967
162,816
12,668
534
13,202
42,701
11,859
788
12,647
38,596
103,518
20,651
124,169
205,517
102,709
20,905
123,614
90,180
30,772
120,952
199,002
17,245
775
18,020
41,779
16,399
791
17,190
34,340
107,425
31,547
138,972
240,781
106,579
31,563
138,142
83,456
48,223
131,679
217,757
12,296
2,634
14,930
35,938
11,650
3,903
15,553
34,629
95,752
50,857
146,609
253,695
95,106
52,126
147,232
201,412
233,342
252,386
11.9
64.8
13.8
18.8
11.8
65.6
13.8
18.4
14.2
99.8
17.6
25.3
14.1
99.8
17.5
24.5
11.7
50.4
16.0
22.4
11.7
51.7
16.1
22.3
77,854
54,736
132,590
10,628
3,243
13,871
6,584
5,550
12,134
88,482
57,979
146,461
84,439
60,286
144,725
12.3
20.7
15.2
11.8
21.5
15.0
1 The Group’s Greenhouse Gas operational control boundary, metrics and descriptions can be found in the Balfour Beatty Sustainability Reporting Guidance:
www.balfourbeatty.com/sustainabilityreporting
2 ‘As reported in previous years’ refers to the organisational boundary inclusive of the Gammon JV. Adjustments to this data have been made in accordance with the change
in approach to the Group’s operational control consolidation, reporting Gammon within Scope 3 Category 15: Investments in 2023 as outlined on pages 58 and 59.
3 Where previous years’ values have been recalculated as part of the reassessment of organisational and operational boundaries for submission of targets to SBTi, the revised values are
shown as ‘restated’.
4 All emissions of certain joint operations and unincorporated joint ventures where neither party has operational control over the joint operation, but Balfour Beatty has a considerable
influence over its operating policies and purchasing decisions, have been included in the Group’s consolidated Scope 1 and 2 emissions (including intensity calculations) in line with
enhanced reporting criteria. This is in addition to the emissions for Group entities for which Balfour Beatty has full authority in line with the GHG protocol operational control approach.
For more detail please refer to the decision-making process diagram on page 59.
5 To calculate the carbon intensity of the Group’s Scope 1 and 2 total emissions, an adjustment to the final revenue has been made from £10,023,793,038 to £9,641,974,959.
This includes intercompany revenue and the revenue of certain joint operations and unincorporated joint ventures over which the Group has a considerable influence over their operating
policies and purchasing decisions in line with enhanced reporting criteria and in addition to the revenue of entities which align fully to the GHG protocol operational control approach.
To calculate the carbon intensity of the Group’s Scope 1 and 2 emissions from entities which align fully to the GHG protocol operational control approach an adjustment to the final
revenue has been made from £10,023,793,038 to £7,177,110,611, which includes intercompany revenue.
Included within PwC LLP’s limited assurance scope.
Scope 1 and 2 GHG emissions
With the introduction of its Building
New Futures sustainability strategy and
commitment to a Science Based Target,
the Group re-baselined its absolute
reduction target.
From 2022 to 2023, the Group’s total Scope
1 and 2 location-based GHG emissions
decreased fractionally from 146,609 to
146,461 tCO2e. Market-based emissions
showed a similar downward trend, reducing
by 2,507 tCO2e or 2%.
The Group’s location-based GHG emissions
intensity decreased from 16.0 tCO2e/£m
revenue in 2022 to 15.2 tCO2e/£m revenue in
2023, a reduction of 5%. Market-based GHG
emissions intensity showed a similar
reduction of 7% from 16.1 to 15.0 tCO2e/£m
revenue in 2023.
TOTAL SCOPE 1 AND 2 CARBON
EMISSIONS PER £m REVENUE
(MARKET-BASED)
l Baseline year 2020
13.8
l 2021
17.5
l 2022
16.1
l 2023
15.0
Balfour Beatty plc Annual Report and Accounts 2023
61
Strategic report
SUSTAINABILITY CONTINUED
GHG reporting
methodology and
assurance continued
Scope 3 GHG emissions
Scope 3 emissions arise from Balfour
Beatty’s value chain and investments
(including Gammon) and are not directly
controlled by the Group, as set out in
SCOPE 3 AND OUTSIDE OF SCOPES
‘Approach for carbon reporting’ on pages 58
and 59. As Balfour Beatty has submitted its
Science Based Targets aligned to the
Business Ambition for 1.5°C campaign to the
SBTi, the Group has prepared Scope 3
information from a restated 2020 baseline
year as disclosed in the table below.
Implementing a business-wide assessment,
it was determined that 13 of the 15 Scope 3
categories are relevant to the Group’s
operations. The exceptions are Category 10:
Processing of sold products and Category 14:
Franchises, as the Group does not sell
intermediate products that are processed by
downstream companies or operate franchises.
All relevant categories are calculated and
included in the Group’s Scope 3 GHG
inventory. Scope 3 emissions are measured
using the GHG Protocol Corporate Value
Chain (Scope 3) Standard.
Scope 3 emissions (tCO2e)
Cat 1: Purchased goods and services
Cat 2: Capital goods
Cat 3: Fuel- and energy-related activities
(not included in Scope 1 and 2)
Cat 4: Upstream transportation and distribution
Cat 5: Waste generated in operations
Cat 6: Business travel
Cat 7: Employee commuting
Cat 8: Upstream leased assets
Cat 9: Downstream transportation and distribution
Cat 11: Use of sold products
Cat 12: End-of-life treatment of sold products
Cat 13: Downstream leased assets
Cat 15: Investments
Total Scope 3
Total Scope 3 intensity tCO2e/£m revenue¹
Biogenic emissions
FLAG emissions
Assessment status
Baseline year
2020
2021
2022
2023
Relevant Calculated
2,836,477
3,076,315
3,023,913
3,432,952
Relevant, Calculated
13,184
19,954
17,330
35,866
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
Relevant, Calculated
28,082
164,572
2,538
2,023
1,055
35,846
154,240
5,228
2,589
2,110
36,796
62,013
1,551
2,628
2,137
Included in Scope 1 and 2
Included in Cat: 4
36,912
110,016
2,460
7,072
2,091
118
16
137
18
235
16
244
17
336,318
3,384,383
339
12,527
646,198
Included in Cat: 15
359,353
3,665,790
420
3,828
859,158
383,528
3,530,147
345
5,838
390,158
342,628
3,970,258
327
8,263
1,079,492
1 To calculate the carbon intensity of the Group’s Scope 3 total emissions, an adjustment to the final revenue has been made from £10,023,793,038 to £12,141,525,482. In addition to the
revenue figure of £9,641,974,959 used for the Group’s Scope 1 and 2 total emissions (see Note 5 to the table on page 61) and in line with enhanced reporting criteria, this includes the
Group’s proportional share of the revenue of: (i) incorporated joint ventures and (ii) certain joint operations and unincorporated joint ventures where the Group does not have considerable
influence over their operating policies or purchasing decisions.
Approach for Scope 3 reporting
In 2023, the Group made significant progress
in developing its approach to Scope 3,
biogenic and forest, land and agriculture
(FLAG) emissions, compiling a full GHG
inventory from 2020 baseline year for
submission for validation to the SBTi.
Improvements in data quality, moving from
established estimation methodologies to
actual data and more granular data, will allow
Balfour Beatty to focus its efforts on GHG
reductions in the Scope 3 categories over
which the Group can have the most impact,
and play its role in reducing GHG emissions
in the value chain. Primary data collection
with a higher degree of specificity allows the
Group to target the most material Scope 3
categories of Category 1: Purchased goods
and services and Category 15: Investments.
Lack of availability of primary data and
corresponding embodied carbon for Category
1: Purchased goods and services is a
construction industry-wide issue. Not having
the ability to understand GHG emissions in a
business’ value chain is a potential barrier to
embodied GHG emissions reductions from
high-carbon products such as steel, concrete
and cement. During 2023, Balfour Beatty
collaborated with an industry-wide
consortium to tackle GHG data maturity from
purchased goods and services. See
‘Greening the Supply Chain’ on page 67.
Our close collaboration with Gammon has
allowed alignment with Balfour Beatty
sustainability reporting metrics and informed
the basis for other joint ventures and joint
operations to move reporting on Category 15:
Investments from an average data or
Environmentally Extended Input-Output
(EEIO) based methodology, to an investment-
specific method compiling actual Scope 1
and 2 data from our investments value chain.
This will help the Group’s GHG reduction
efforts to decarbonise investments.
Action
Achieving net zero emissions throughout the
Group’s entire supply chain will require
effective and co-ordinated collaboration
across diverse stakeholders. The Group’s
two most material categories of Scope 3;
Category 1: Purchased goods and services
and Category 15: Investments, will be the
primary focus of its Scope 3 emissions
abatement measures.
62
Balfour Beatty plc Annual Report and Accounts 2023
Energy
Changes to Balfour Beatty’s energy
consumption profile in 2023 have contributed
to the reduction in carbon emissions. In
2023, energy consumption (MWh) increased
by 2% to 624,367 MWh from 2022.
Balfour Beatty continues to focus on energy
efficiency and in 2023 the following
measures were implemented:
@ 69 EcoNet installations – 1,290 MWh
saved.
@ EcoSense cabins – 65% of cabin
and welfare units are energy efficient,
using around 30% less energy than
traditional cabins.
@ LED installation at Bishopsgate project in
Leeds City Centre – 7,500 kWh saved,
projected annual savings 15,128 kWh.
Through the deployment of renewable
energy generation solutions, Balfour Beatty
generated 173 MWh of renewable energy in
2023. This included:
@ Roof-mounted solar frames deployed on
Balfour Beatty’s Canvey Island project,
displacing 18,907 kWh of energy usually
produced by diesel generators.
@ 320 panel solar PV array at Balfour Beatty’s
Derby Raynesway depot – 102 MWh
saved, cost saving of £32,000.
@ Solar film installed at Bottesford depot –
annual estimated energy contribution to
the site 10,067 kWh.
The use of renewable energy also increased
in 2023:
@ 26,627 MWh of REGO-certified grid
electricity (up 40% from 2022).
@ 109 MWh of green hydrogen-generated
energy, including from the operation of two
hydrogen fuel cells on Balfour Beatty sites.
ENERGY USE IN MWH
Fuel MWh
Electricity purchased – green tariff
Electricity purchased – other
Electricity (generated from solar renewables)
Electricity (generated from green hydrogen)
Total electricity
Total electricity as reported in previous years
Diesel B7
Unleaded petrol
Gas oil (Red diesel)
GTL
Natural gas
Industrial gases
Boiler fuel
E85 petrol
LPG
100% mineral diesel
HVO
Diesel B20
100% mineral petrol
Biodiesel (1st generation)
Total fuels
Total fuels as reported in previous years
Global total
Global total as reported in previous years
UK energy use % of global total
UK energy use % of global total as reported in previous years
Energy intensity (MWh/£m revenue²)
Energy intensity (MWh/£m revenue) as reported in previous years
Baseline year
2020
12,536
35,258
27
–
47,821
89,555
143,687
57,642
236,750
–
8,147
2,990
410
166
64
534
–
55
2
–
450,447
2021
15,812
48,846
49
–
64,707
94,807
131,719
72,369
268,115
3,320
14,861
2,592
426
125
64
340
32
–
6
27
493,996
2022
16,096
46,423
161
413
63,093
96,077
348,137
77,298
100,515
3,612
13,106
3,021
380
268
65
438
82
–
–
–
546,922
2023
26,627
34,877
7
109
61,620
419,783
74,161
48,181
3,794
12,341
3,500
497
173
166
129
15
7
–
–
562,747
676,363
902,179
879,449
498,268
558,703
610,015
624,367
765,918
996,986
975,526
73%
50%
55.4
69.9
72%
33%
70.8
104.9
77%
40%
66.6
86.3
80%
64.8
1 The figures in this table include energy from the Group’s consolidated boundary aligned to the methodology referred to in Note 2 to the Scope 1 and 2 GHG emissions table on page 61.
2 The MWh per £m revenue is calculated using the adjusted revenue figure disclosed in Note 5 to the Scope 1 and 2 GHG emissions table on page 61.
Environmental impacts
and risk management
Balfour Beatty continues to maintain a robust
business management system for identifying
and managing environmental impacts and
risks at an organisational and project level. In
2023, sustainability was embedded into the
business risk management process through
comprehensive review and update of the Balfour
Beatty sustainability strategic risk register.
In 2023 Balfour Beatty launched the
Environment What3Things? initiative which
follows the same approach as What3Things?
for our fatal risks, launched in 2022. Environment
What3Things? is a short, digestible summary
of three key measures that must be in place
to manage environmental impact from our
operations over seven areas of risk: pollution
prevention, nuisance, waste management,
materials management, wildlife, archaeology
and cultural heritage and working near water.
Resources including quick-reference
pocket-cards, site posters and toolbox talks
were created, and a series of webinars were
delivered to support the initiative.
Balfour Beatty was not subject to any
prosecutions by environmental regulators
in 2023.
Environmental, Social and
Governance (ESG) ratings
and scores
In 2023, Balfour Beatty plc achieved a
FTSE4Good ESG score of 3.3 on a scale from
0 to 5 (higher scores are better), which was
in line with 2022.
In 2023, Balfour Beatty achieved a CDP
rating of B, which was in line with 2022 and
demonstrates that it is taking co-ordinated
action on climate issues.
Balfour Beatty plc Annual Report and Accounts 2023
63
Strategic report SUSTAINABILITY CONTINUED
Dedicated to minimising its environmental impact and enhancing
biodiversity, Balfour Beatty has established a Natural Environment
team to support our UK Business Units with expertise in ecology,
biodiversity and arboriculture/urban forestry.
In 2023, Balfour Beatty’s biodiversity specialists provided
ecological and arboricultural technical support for 26 projects
and customers, including 13 local authorities to optimise
biodiversity benefits.
To further its biodiversity goals, Balfour Beatty launched the
Bridging the Gap framework, which includes a mandatory
requirement for each UK Business Unit to set a SMART goal,
such as training sessions and standardising methodology, to
positively impact biodiversity. We also enhanced our project
sustainability portal tool to capture data on adverse and
beneficial impacts to biodiversity receptors across UK projects,
as well as establishing the Building with Nature Community of
Practice for employees from across the UK to share knowledge
and best practice on biodiversity and nature-based solutions.
Following a Science Based Target initiative (SBTi) forest, land
and agriculture (FLAG) emissions assessment, Balfour Beatty’s
FLAG emissions are dominated by land management emissions
related to extracted materials and wood, but at 18% in base
year 2020 and 11% in 2022, overall FLAG emissions are below
the 20% threshold mandating setting a separate FLAG target
under SBTi requirements.
Biodiversity
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Balfour Beatty plc Annual Report and Accounts 2023
Premises waste is generated from offices
and manufacturing facilities. Typical
composition includes paper, cardboard,
plastics and other office consumables, and
can also include timber, metals and other
materials from manufacturing activities.
Premises waste is typically managed by our
directly employed waste supply chain.
Balfour Beatty engages a variety of waste
contractors and management routes across
its operations and works closely with them to
identify opportunities to implement sustainable
waste management solutions. The options
available can be dependent on local waste
infrastructure.
All UK suppliers and subcontractors engaged
by Balfour Beatty to manage waste are
subject to Supplier Sustainability Conditions
which require full compliance with waste
duty of care legislation and for suppliers that
make their own arrangements for waste
disposal to provide records of all waste
transfers. Balfour Beatty works with several
waste disposal contractors to meet the
needs of its various operations.
In addition to improving the transparency of
waste data, in 2023 Balfour Beatty implemented
several initiatives to support the delivery of
its waste targets and ambitions. These focus
on preventing waste and applying circularity
measures to improve resource efficiency.
Our Canvey Island project trialled the use of
Pallet Loop, a service that repairs pallets for
reuse, eliminating pallet timber from site
waste streams. Based on the trials, we are
now rolling this out across the UK.
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The construction industry is responsible for
over 50% of all waste generated in the UK.
The generation of waste can negatively
impact on the environment through
discarding valuable materials, requiring
significant infrastructure to recycle, recover
or dispose of waste, impacts from the
transport of waste such as local air quality,
carbon and particulate emissions, and direct
impact from landfill including the use of
valuable land and potential contamination.
In its Building New Futures strategy, Balfour
Beatty set a 2030 target to achieve a 40%
reduction in waste generated per £m revenue
as a step towards the 2040 ambition to generate
zero waste, by choosing the right materials,
using less materials and creating value from
the materials that are no longer needed.
In 2023, the UK business achieved a 40%
reduction in tonnes of waste generated per
£m revenue compared to our restated 2021
baseline, achieving the 2030 target for UK
operations. However, due to the variable nature
of waste generation, Balfour Beatty will continue
to maintain a strong focus on resource
efficiency and waste reduction to deliver
against our 2040 ambition to generate zero
waste across both the UK and US businesses.
In line with how we report GHG emissions,
Balfour Beatty now excludes the Gammon
business from waste reporting on the same
operational control basis that it is excluded
from carbon reporting. Refer to the
‘Approach for Group carbon reporting’
section on pages 58 and 59 for further
information. The decision has also been
made to omit the US waste data from
reporting and restate performance for UK
only from our 2021 baseline year onwards.
Improvements in waste reporting processes
are needed before the US and UK datasets
are comparable. Inclusion of partial US waste
tonnage but full revenue would cause inaccurate
reporting of the Group’s waste performance.
In the UK, information about the types and
quantities of waste generated by Balfour
Beatty activities is captured for each project
via our in-house reporting tool using records
of waste removed from site by our waste
supply chain and subcontractors. Records of
waste movements from sites including types
and quantities are collated to generate overall
waste performance data. Waste data
includes waste that is removed from sites
and premises and is managed off site.
During 2023, Balfour Beatty has improved
the tools and processes used to capture
waste data and for the UK, can now report
under a set of waste categories that help to
better understand our waste profile and the
actions we are building into our Bridging the
Gap plans to meet the targets and ambitions
in our Building New Futures strategy. These
categories are aligned to well-established
industry waste reporting guidance. Non-
financial performance information is subject
to more inherent limitations than financial
information.
The Bridging the Gap materials and resource
efficiency actions for 2024 are focused on:
@ continuing to make improvements to waste
data reporting, including working with the
waste supply chain to automate data streams
for improved efficiency and accuracy;
@ working with materials and products
supply chain partners to implement
practical circularity measures and
evidence-based action;
@ improving waste data capture from our US
operations and understanding opportunities
for working towards zero waste; and
@ working with our UK Strategic Design
Partners to identify and implement
materials-efficient solutions through design.
Waste reporting categories
Construction waste includes offcuts of new
materials brought to site to construct
buildings and structures, and the associated
packaging for materials and products. The
typical composition of construction waste
includes timber, plastics, plasterboard,
metals, bricks and blocks.
Demolition waste is generated from the
demolition of buildings and structures,
including roads, basements and foundations.
The typical composition of demolition waste
is similar to construction waste but can also
include more hazardous material such as
asbestos or treated timber.
Excavation waste is generated from
earthworks, tunnelling and landscaping
activities. This is typically made up of soil
and stones and can include hazardous
material from contaminated sites.
Construction, demolition and excavation
waste is managed both by our directly
employed waste supply chain and our
subcontractor supply chain.
Balfour Beatty plc Annual Report and Accounts 2023
65
Strategic report SUSTAINABILITY CONTINUED
WASTE GENERATED
(TONNES)
WASTE LANDFILLED
(TONNES/£m REVENUE)
WASTE GENERATED
(TONNES/£m REVENUE)
6
0
6
,
0
4
2
,
1
6
6
5
,
4
4
0
,
1
3
1
5
,
3
5
8
21 22
23
3
2
8
6
2
4
6
1
2
6
1
21 22
23
44
21 22
23
1 The Group’s Waste disclosure metrics
and descriptions can be found in the
Global Sustainability Reporting
Guidance at: balfourbeatty.com/
sustainabilityreporting.
2 The 2021 and 2022 figures are restated
to exclude Gammon and the US business
and now cover UK available data.
3 Waste and revenue from certain joint
operations and unincorporated joint
ventures where Balfour Beatty uses
enhanced reporting criteria is included
to align with Balfour Beatty’s approach
to GHG reporting (in line with Notes 4
and 5 to the Scope 1 and 2 table on
page 61).
2023 UK WASTE BREAKDOWN (TONNES)
Construction (93,095t)
Demolition (155,974t)
Excavation (777,301t)
Premises (18,196t)
%
0
0
1
%
0
0
1
%
9
9
%
9
9
%
9
9
%
9
8
%
1
1
%
2
6
%
8
3
Landfill
Diverted
%
9
9
Non-hazardous
Hazardous
Non-hazardous
Hazardous
Non-hazardous
Hazardous
Non-hazardous
Hazardous
%
1
%
1
%
1
%
1
Helping us to bridge the gap to
sustainability, ProjectSurplus is live!
In October 2023, we launched ProjectSurplus in the UK, a platform
to facilitate the transfer of site furniture, unused materials or
surplus equipment between our depots, offices and projects, using
an online marketplace format. Starting as a My Contribution idea,
ProjectSurplus has evolved into a fully functional application with
the help of invaluable support from our IT team.
Implemented by Adam Collins, Head of Digital Transformation, who sponsored
the project, Paige Stevens, Project Manager, and IT Software Developers
Oliver Fenby and Andrew Grayson, the new application creates increased
visibility of surplus equipment and the opportunity to track material movement.
Aligned with our ‘Building New Futures’
strategy, ProjectSurplus gives visibility to
material exchange opportunities, measures
savings and will drive reductions in waste
across the UK businesses.”
Paige Stevens
Project Manager, Balfour Beatty
66
Balfour Beatty plc Annual Report and Accounts 2023
AT THE BEATING HEART
Positively Impact
More than
1 Million People
Whether we are building critical infrastructure
to provide renewable energy, helping connect
people by road, rail and air, or providing
accommodation for students and military
personnel, everything we do impacts people
and local communities. In the UK, social
value is an essential part of our ability to win
work with the UK Government and other
customers and carries a minimum 10%
weighting in tenders.
Social value: progress against
2030 target
Our 2030 target is to generate £3 billion of
social value, and our 2040 ambition is to
Positively Impact More than 1 Million People.
In 2023, Balfour Beatty UK projects delivered
£937 million in social value, an increase of
15% on our 2022 performance. The Group
has made substantial progress towards its
ambition to generate £3 billion in social value
by 2030.
Supply chain and
community impact
Balfour Beatty understands the critical part its
supply chain has to play in its ability to achieve
the ambitions set out in our Building New
Futures sustainability strategy. Notably, 86%
of our Scope 3 carbon emissions are attributed
to products and services that we buy. We
recognise that our procurement practices
extend beyond mere transactions; they
provide significant opportunities to positively
impact the communities in which we operate.
Recognising the interconnectedness of
sourcing responsibly and delivering social
impact, the Group restructured and resourced
a new Responsible Sourcing and Social Impact
team within the Sustainability function. This
integrated approach signifies a strategic move
towards embedding sustainability not only in
our procurement and commercial endeavours
but also in further promoting social
responsibility throughout our supply chain.
2023 also marked a pivotal shift in our approach
to social impact taking a longer-term and more
strategic view of what is needed now and in the
future. We have implemented a regional model
that adopts a place-based approach, recognising
the diverse needs and characteristics of
individual communities to drive focused
improvements where they matter most to the
communities in which we operate.
Taking a risk-based approach
As well as positively impacting our
employees and the communities within
which we operate, Balfour Beatty also has
responsibility to safeguard individuals and
environments potentially impacted by our
supply chain activities. Balfour Beatty has
taken a risk-based sustainability approach
to sourcing goods and services across its
supply chain. It considers the categories of
goods, services and subcontract trades
against 13 key sustainability topics across
Environment, Materials and Communities
which include: energy and carbon, resource
efficiency and modern slavery. The results
informed our sustainability risk heatmap
which was used to create specific question
sets for tenders based on the risk profile
of what we are sourcing. Our tenders
carry a minimum weighting of 10% for
sustainability; during 2023, we tendered
our waste requirements for the UK business
with a 40% weighting for environment
and sustainability.
Doing things differently –
addressing the risks of modern
slavery in the supply chain
It is estimated that 122,000 people in
the UK are victims of modern slavery
and construction is one of the highest risk
industries due to its long and complex supply
chains. During 2023, the UK business
Greening the supply chain
In 2022, in partnership with the Supply
Chain Sustainability School (SCSS) we
conducted our Greening the Supply
Chain survey to better understand the
barriers to net zero in our supply chain.
Read about the approach we have taken
during 2023 to address the key themes
raised.
SCAN OR CLICK TO
FIND OUT MORE
developed a new approach to undertaking
modern slavery audits of its supply chain,
through a more collaborative process of
discovery and improvement where suppliers
feel better supported to prevent modern
slavery across the industry.
We have used technology to develop an
easy to use and informative modern slavery
audit that is carried out with our suppliers
at their premises and we have upskilled our
procurement team to carry out the audits.
The audit report also signposts suppliers
to the free resources available within the
Supply Chain Sustainability School for more
information and training resources.
During 2023 we have undertaken 121 audits
with our supply chain. Feedback from suppliers
has been incredibly positive; not only have they
commented positively on our collaborative
approach, but they have been able to take
practical steps to enhance their business
processes. The audit has also enabled
greater engagement with the supply chain.
Alongside our audit approach, we have
also taken additional steps working with
Constructionline to develop additional
pre-qualification criteria for all suppliers to
the UK business. These changes went live in
November in preparation for our requirement
for all supply chain partners, regardless of
turnover, to produce a modern slavery
statement by the end of 2024. Regular
communications including supplier guidance
and a template have been shared with
suppliers since we announced the changes
in June.
Supply Chain Sustainability School
Balfour Beatty continues to recognise the
benefit provided by the Supply Chain
Sustainability School (SCSS) to its supply
chain and its employees. Jo Gilroy, Group
Sustainability Director, is a partner-elected
board member of SCSS, lending her expertise
to drive the future direction of the school.
During 2023, we also co-funded two key
pieces of research which were co-ordinated
by the SCSS. The first was a much-needed
procurement guide for solar PV, setting out
practical steps that can be taken to understand
and mitigate the risk of modern slavery in the
supply chain. The second is a deep dive into
how sustainable Hydrotreated Vegetable Oil
(HVO) really is; the results of this are due in
early 2024.
Balfour Beatty continues to provide support
and expertise in many of the SCSS’s working
groups and co-chairs the Modern Slavery
working group.
SCAN OR CLICK TO FIND OUT
MORE ABOUT HOW OUR SUPPLY
CHAIN AND EMPLOYEES HAVE
BENEFITED FROM THE SCSS
DURING 2023
Balfour Beatty plc Annual Report and Accounts 2023
67
Strategic report SUSTAINABILITY CONTINUED
Positively Impact More
than 1 Million People
continued
Social value reporting
and assurance
In the UK Balfour Beatty continues to use the
National TOMs framework as a method of
measuring and reporting social value to a
consistent and recognised standard.
Balfour Beatty has partnered with the Social
Value Portal to measure, manage and report
social value for the UK business. Following a
limited assurance approach, the Social Value
Portal validates the social value data quarterly
ensuring the methodology that underpins the
TOMs framework is consistently applied.
PwC LLP was engaged to undertake an
independent limited assurance engagement
of the social value generated in the UK,
reporting to Balfour Beatty plc, using the
assurance standard ISAE 3000 (Revised) on
the social value data that has been
highlighted in this report with the symbol .
PwC LLP’s full statement is available at:
www.balfourbeatty.com/ILA_2023.
In order to reach its opinion, PwC LLP
performed a range of testing procedures over
the social value data. A summary of the work
PwC LLP performed is included within its
assurance opinion. Non-financial performance
information is subject to more inherent
limitations than financial information.
The limited assurance statement should be
read in the context of the reporting criteria as
set out in Balfour Beatty’s Global Sustainability
Reporting Guidance available at: www.
balfourbeatty.com/sustainabilityreporting
The guidance outlines the non-financial KPIs
measured by the Group, their definitions and
evidence requirements.
Community investment through
volunteering and charitable
fundraising
Balfour Beatty employees have a long and
proud history of supporting charities. In the
UK, charitable donations to the value of
£398,513 were fundraised by employees and
donated by the company. This included two
donations to the British Red Cross, £24,000
for their Turkey-Syria Earthquake Appeal and
a further £25,000 in October towards the
humanitarian crisis in Israel and Gaza.
Employees also volunteered 18,986 hours
to support a variety of causes from creating
community spaces, supporting prisoners
with mock interviews before release, and
providing business support to social
enterprises. In December, Balfour Beatty
runs an annual festive fundraising campaign
which allowed LinkedIn followers the
opportunity to vote on how Balfour Beatty
should split a festive donation pot amongst
its chosen corporate charities including The
Prince’s Trust, Groundwork, Project RECCE
and in addition for 2023, Save the Children.
SOCIAL VALUE
GENERATED TO DATE
2030: £3bn
(target)
2023: £937m
2022: £816m
2021: £717m
COMMUNITY INVESTMENT THROUGH HOW WE BUY AND VOLUNTEERING
UK breakdown
Spend with local suppliers¹
Spend with SMEs
Employee volunteer hours
Volunteering hours positively
impacting the environment
2022
£892,762,951
Over £1.5 billion
19,645
2021
£761,486,644
Over £1 billion
23,000
2,572
872
2023
£959,174,488
Over £1.4 billion
18,986
2,968
1 A local supplier is defined as being located within 30 miles of a project unless the client has specified an alternative definition. Regional adjustments can be
made on a project-by-project basis to allow for things like rural or coastal locations.
68
Balfour Beatty plc Annual Report and Accounts 2023
HABITAT FOR HUMANITY
To support community outreach, US colleagues have
partnered with Habitat for Humanity – a non-profit
organisation that helps people around the world to build
or improve a place they can call home.
From California and Oregon to Washington D.C.,
colleagues have been living out their people-first culture
through fundraising, building and volunteering with
Habitat for Humanity to ensure affordable housing is
accessible in all communities.
In Dallas, Texas, the North Texas Connecting Women
Affinity Group chaired the Women Build Dallas
leadership team and successfully raised more than
US$100,000 for the programme.
LAP DOG CHALLENGE
2023 was the 8th year #TeamGammon took part in the Lap
Dog Challenge at the Stanley Ho Sports Centre athletic track.
The team demonstrated remarkable resilience and tenacity
running an impressive total of 428 laps over a five-hour period.
Their efforts extended beyond the track as well, raising over
HK$1.4 million for the Lighthouse Club Hong Kong Benevolent
Fund and the Hong Kong Breast Cancer Foundation, an
achievement that earned them the trophy for the most
sponsorship dollars raised.
BREAKING BARRIERS
During 2023, Balfour Beatty undertook a number of initiatives and
activities to break the barriers into the construction industry for
social enterprises.
Our Social Enterprise Accelerator & Development programme
(SEAD) provided an opportunity for the UK Construction Services
business’ executive team to volunteer their expertise on business
strategy and growth, supporting the social enterprises’ development
and also exploring ways of working with Balfour Beatty.
In collaboration with Nuneaton Signs, we organised an event to raise
awareness of the opportunities in the construction industry for those
with disabilities. Nuneaton Signs, a strategic social enterprise
partner which supplies Balfour Beatty with site signage, has a
diverse workforce where 70% of their employees have a disability.
The event was designed to raise awareness of the diverse range of
roles available in the construction industry and to showcase how
modern methods of construction will create more suitable roles for
those with disabilities. We also had an opportunity to learn from
Nuneaton Signs’ team on how Balfour Beatty could become a more
inclusive employer.
SCAN OR CLICK TO
FIND OUT MORE
Numbers only tell part of our social impact story; social
enterprises are purpose driven, putting people at the heart
of what they do. Businesses with a social purpose contribute
positively to society by addressing specific issues or
challenges. They naturally then make a meaningful impact
on people, place, or the planet. The aims of social
enterprises and such businesses delivering benefits to
communities or to the environment, mirror the personal
values that I try to live by day to day.”
Andrea Holt
Strategic Delivery Manager – Social Impact, Balfour Beatty
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
69
Strategic report Strategic report
OUR PEOPLE
Talented
experts
IMAGE
Haydn Samuals, Foreman, London Power Tunnels 2.
70
Balfour Beatty plc Annual Report and Accounts 2023
Now more than ever, Balfour Beatty is focused on making sure we have the right
people, culture, policies and systems to enable sustainable business performance;
prioritising attention on developing an environment where all employees can perform,
grow personally and enjoy working for Balfour Beatty. We operate in markets where
there can be tough competition for the best people, therefore it is critical for us to
retain and develop talented experts and attract and recruit the diverse skills and
experiences that the business needs to deliver today and for the future.
Balfour Beatty’s people strategy is proving successful and continues to deliver. Our People Plan is structured around four
strategic pillars – Attract, Retain, Grow and Thrive. These pillars embrace our unique context and culture as a business, which
fosters a great place to work, creating an environment that allows all our people to grow and develop and, in turn, sets the
business up for success.
Attract
Balfour Beatty has a strong brand
in all our key markets. We leverage
this to focus on attracting the
right people to meet resource
demand with diverse experience
in a variety of markets. Looking
at every aspect of the Group’s
brand, we continue to invest in
our attraction strategies at
different levels to ensure the
right people see Balfour Beatty
as a ‘Great Place to Work’, through:
@ Schools and university
engagement, encouraging
children to pursue STEM studies
@ A significant investment in
Early Careers
@ Widening the pool in which
Balfour Beatty searches for
talent through active
engagement with charities
and social enterprises
Retain
Balfour Beatty’s approach to
retention is driven by a strong
belief that people who enjoy
working for Balfour Beatty, in an
inclusive environment where
they feel valued and that enables
them to be productive and
develop, will stay with the
business. To drive this we are
focused on:
Grow
Balfour Beatty’s ‘Grow Our Own’
talent philosophy showcases our
commitment to giving all
employees the opportunity to
develop their skills, competence
and careers, enabling satisfaction
and success for individuals and
the business. Our continued
investment in training and
development is evident through:
Thrive
Culture is critical to creating an
environment where all employees
can be their best selves at work,
using innovation and creativity
to deliver for Balfour Beatty’s
customers through diverse
thinking and experience. In 2023
we have focused on strengthening
our culture and increasing the
diversity of the organisation through:
@ Employee engagement –
@ Ongoing commitment to
@ Developing an inclusive culture
achieving above the
industry average
@ Driving career progression,
leveraging the scale and scope
of the Group
@ Increasing recognition and
celebrating role model
behaviours as well as
performance
investing in development –
increasing the number of
people accessing development
year on year
@ Commitment to professional
development and excellence
@ High-calibre investment in
developing leadership talent
@ Driving the transformation of
our industry, through initiatives
such as Modern Methods
of Construction
– Value Everyone UK D&I
strategy and action plan
@ Making progress towards
diversity targets and measures
@ Supporting employees through
work and life
@ A continued commitment
to our Affinity Networks,
including the launch of a
new Neurodiversity network
in the UK
Balfour Beatty plc Annual Report and Accounts 2023
71
Strategic report OUR PEOPLE CONTINUED
Attract
Schools and university
engagement
Throughout 2023 across all our geographies,
Balfour Beatty has continued to focus on
inspiring young people to join the industry.
In the UK, the Balfour Beatty VINCI SYSTRA
joint venture working on HS2’s Old Oak
Common station project has developed an
award-winning skills, employment and
education strategy which looks to address
skills shortages whilst maximising the social
impact. This includes The Serious Gaming
Initiative, an online careers and construction
building game enabling students to develop
an understanding of how their classroom
learning is applied on a real project.
The US Buildings business focused on
engagement at all education levels, from
community engagement with schools,
delivering STEM workshops, student
mentorship in partnership with local colleges,
inspiring talks to students at Herndon High
School, Virginia, via the ACE Mentor Program
of America, and mentoring students in the
Asian American and Pacific Islander communities
at the University of Washington.
Gammon, our 50:50 joint venture in
Hong Kong, continued its programme of
educational engagement with 12 university
visits to introduce the construction industry,
hoping to attract more students to join
Gammon on graduation. Another highlight
was an innovation competition held at
Tsinghua University in Beijing at which
12 Gammon engineers took the chance to
share our innovations with students from
universities across China.
A significant investment
in Early Careers
Balfour Beatty is proud to continue its
substantial investment in the recruitment
and development of employees early in
their careers.
RIGHT
Volunteering at HMP
Wandsworth with StandOut, a
charity which supports people
leaving prison. Left to right:
Paul Fuller, Regional Social
Impact Manager, Paul Raby,
Group HR Director and Kevin
Koosaletse, Project Director.
72
Balfour Beatty plc Annual Report and Accounts 2023
2023 EARLY CAREERS HIRES: GRADUATES,
APPRENTICES, TRAINEES, INTERNS
AND INDUSTRIAL PLACEMENTS
0
6
3
5
0
3
9
1
3
UK
US
Gammon
% OF OUR UK WORKFORCE IN EARN
AND LEARN POSITIONS
%
6
.
4
%
3
.
4
%
3
.
5
%
6
.
5
%
4
.
5
%
0
.
6
%
2
.
6
%
5
.
6
%
4
.
7
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
15
16
17
18
19
20 21
22
23
Balfour Beatty retained its Gold membership
of The 5% Club in the UK for the third year
running. This award recognises our significant
and ongoing contribution to developing
colleagues through ‘earn and learn’ schemes
such as apprenticeships, graduate schemes
and sponsored students course placements.
At the end of 2023, the proportion of our
employees in earn and learn positions was
7.4%, up from 6.5% in 2022. This achievement
is particularly pertinent given that 2023
marked the 10th anniversary of The 5% Club,
which was founded by Leo Quinn, Balfour
Beatty Group Chief Executive.
The US continued with its summer intern
programme across all three business areas,
providing opportunities to 184 individuals to
build their skills and knowledge on key projects.
37% of the interns transitioned in to full-time
positions at the end of their programme.
In the UK, Balfour Beatty was delighted to be
placed ninth in the Rate My Apprenticeship
Best 100 Apprenticeship Employers, an award
voted for by apprentices themselves, based
on reviews of their experience. We also
ranked in the Department for Education’s
Top 100 Apprenticeship Employers list.
Widening the talent pools that
Balfour Beatty hires from
To support our plans to create a more diverse
workforce we have continued to strengthen
relationships with key external partners to
further widen the talent pools we hire from.
In the UK, we have had a particular focus
on hiring military talent and welcomed
100 veterans to fill critical roles, supported
through a tailored development pathway.
We have also increased activities around
hiring ex-offenders through a number of
successful programmes across the business.
We will look to evolve and scale up these
successful programmes for ex-forces and
ex-offenders in 2024.
It was a very fulfilling
afternoon and a
reflection of the caring
business that Balfour
Beatty is. I certainly
recommend this to
colleagues in our
business.”
Kevin Koosaletse
Project Director, Balfour Beatty
Retain
Employee engagement –
achieving above industry average
engagement scores
As an organisation, we know employee
engagement is a critical enabler for retention.
By listening to our employees across various
channels such as Viva Engage, starter/leavers
surveys and our annual engagement survey,
we develop a better understanding of how to
improve engagement and how we can best
support our employees.
In 2023, Balfour Beatty’s employee
engagement survey achieved its best ever
results. The Group engagement index score,
which measures satisfaction, motivation,
advocacy and retention, increased for the
sixth consecutive year to 81% (80% in 2022).
Compared to our peers, Balfour Beatty was
7 percentage points above an industry
average and 8 percentage points above
companies of a similar size.
In the US, the engagement score of 85%
was the highest score since the survey
process began in 2017. 2023 was also the
first year the US Buildings and Civils business
invited their operational, front-line workforce
to complete the engagement survey,
allowing more employees across the Group
the opportunity to provide feedback.
Feedback helps us improve the employee
experience; for example, a focus on
recognition resulted in an increase of 12%
from 2022 to 2023 in people feeling thanked
and recognised for great work.
This positive engagement trend is reflected
in a 2.1% reduction in our UK voluntary
leavers rate in 2023, stabilising back to the
rates we experienced before the COVID-19
pandemic. Our US voluntary attrition rate
also reduced by 1%.
Recognition and celebrating
role models
Recognition is a key strand of the Retain pillar
and focuses on acknowledging not only the
performance of our employees but also
colleagues’ exceptional behaviours.
In the UK, Balfour Beatty launched a
recognition framework, covering a variety of
tools to empower line managers to appreciate
their teams regularly through giving praise,
showing thanks, and recognising loyalty and
success. This framework guides the business
to embrace and embed our behaviours as set
out in our Cultural Framework.
The UK business has also continued to
recognise exemplary behaviours through its
Behaviour Champions and Early Careers Awards.
Gammon, our 50:50 joint venture based in
Hong Kong, continued to recognise long-service
employees with a total of 119 employees
receiving loyalty awards in the 15, 25, 35
and 45-year categories.
In the US, Balfour Beatty continued to
embrace employee recognition with
4,560 submissions in the US Buildings
business using the KUDOS online recognition
system. The US Investments business
through its BRAVO REWARDS system
received 8,303 submissions in 2023,
resulting in 84% of its employees engaged
in the recognition approach.
Driving career progression,
leveraging the scale and scope
of the Group
Balfour Beatty’s talent philosophy is centred
around our principle of ‘Grow Our Own’.
We deliver this through robust and
embedded processes to manage talent,
develop colleagues, define career paths and
plan for succession. These include regular
performance development reviews, an
Executive Committee Leadership Talent
and Succession Forum, focusing on internal
mobility and increasing leadership diversity.
‘Grow Our Own’ is a key part of our retention
and skills strategy for the future and we will
continue to focus on this in 2024 and beyond.
EMPLOYEE WELLBEING IS A KEY PART OF OUR PEOPLE STRATEGY. FURTHER
HIGH SCORES SHOW GREAT SUPPORT FOR EMPLOYEES IN THE UK AND US.
FEEL CARED FOR AT WORK
94%
85%
FEEL COMFORTABLE THEY CAN
BE THEMSELVES AT WORK
84%
SAY THEY ARE TREATED
WITH RESPECT
84%
BELIEVE OUR CULTURE IS
INCLUSIVE TO ALL PEOPLE
My 10-year journey with Balfour Beatty has been one of
opportunity, empowerment and inclusivity. The support
and trust from senior leaders has been instrumental,
enabling me to step up when opportunities for change
and growth have presented themselves.”
Jenni Kelley
Senior Vice President, Chief Financial Officer, Balfour Beatty’s US Civils business
ENGAGEMENT SURVEY SCORES %*
0
8
1
8
5
7
6
7
5
6
6
6
18
19
20 21
22 23
* Excluding international joint ventures in
2020 and earlier years.
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
73
Strategic report
OUR PEOPLE CONTINUED
Grow
Ongoing commitment to
investing in development
A key element of the Balfour Beatty approach
to development is to ensure we really know
our people. We have a number of processes
adopted throughout the business that drive
conversations with employees about
performance and development and regular
‘People Reviews’ which include succession
planning, undertaken at multiple levels across
the business.
By understanding our people we are better
able to direct our investment in training and
development activities which range from
regulatory certification through to bespoke
senior leadership development.
Employees can request and self-enrol onto
training and development offered by Balfour
Beatty, following performance development
conversations with their line managers. In
the UK, 3,450 training days were delivered
to employees through this route in 2023.
Commitment to professional
development and excellence
Developing professional capability has
continued to be central to activity for all
parts of the Group.
In Hong Kong, Gammon has continued to
focus on increasing the competence of its
team with 5.5% of employees taking part in
sponsored training programmes, and 25
people taking part in the fourth cohort of the
Gammon Project Management programme.
Continuing on from the significant work
completed in 2022 to upskill the employee
population on BIM, a BIM API eLearning
module was introduced in 2023.
Within the UK, professional competence
continues to be a key area of importance,
and in 2023, there has been a clear focus on
implementing robust infrastructure to enable
long-term support for employees to become
professionally qualified and expert in their
field. We became a Corporate Partner to the
Chartered Association of Building Engineers,
as well as maintaining our Corporate Partner
status with both the Institute of Engineering
and Technology and the Institute of Civil
Engineers, a reflection of our commitment to
improving competence across the UK business.
Across our six commercial programmes,
1,374 training events have been delivered
to 750 attendees representing the largest
participation since the programme started
in 2015.
74
Balfour Beatty plc Annual Report and Accounts 2023
Driving the transformation of our industry
Balfour Beatty is increasing the use of offsite manufacture and onsite assembly to meet
customer demand by rolling out a new Modern Methods of Construction (MMC) course
in the UK after a successful pilot in 2022. A total of 78 employees attended this two-day
course in 2023 and further courses are planned in 2024.
Delivered by internal experts, with input from our Strategic Design Partners, the course is
delivered in research and development centres aligned to MMC to enable delegates to
get involved in tours of manufacturing facilities and activities related to MMC.
In the UK, as a result of the implementation
of the Building Safety Act, a Fire and Building
Safety Leadership Group has been created
and a key item on the agenda is the
development of a range of new training
courses aligned to competence requirements,
professional bodies and external qualifications.
Our focus on supporting employees to
develop their expertise and careers in the UK
was recognised in 2023 when we won the
OpenLearn Impact Award for supporting
business and organisational Goals for our
Learning at Work Week activities.
Continued investment in
developing leadership talent
Talent programmes focused on career
progression are an essential enabler of
our ‘Grow Our Own’ philosophy, building
capability to strengthen the leadership and
succession pipeline. This include the Gravitas
programme launched within Gammon for
construction managers, and three leadership
development programmes in the US
Buildings and Civils business:
@ the Propel Emerging Leaders programme
continued with a new 2023 cohort, gathering
60 high-potential leaders from across US
Buildings and Civils to collaborate, innovate
and grow new leadership talents to propel
participants and the business to the next
level of shared success;
@ the Executive Leadership Development
Programme (ELDP) has been redeveloped
to reach a broader audience at multiple
levels of leadership, strengthening our
strong succession pipeline. There are now
two development opportunities: the legacy
ELDP and leadership workshops.
85 participants have attended Leadership
Workshops in 2023, with 22 participants
identified for the 2024 ELDP cohort; and
@ the Manager Success programme,
launched in December 2023, is focused on
providing newly promoted managers with
the fundamental knowledge necessary to
transition into leadership, supported by
one-to-one coaching. The first cohort has
68 participants.
In the UK, we continued to deliver high-calibre
and well-established programmes to enhance
the breadth and depth in our leadership
pipeline. This included completing the fifth
cohort of the UK Future Leaders programme
with a total of 24 leaders and the Aspiring
Leaders programmes which have now
supported leadership readiness for
72 employees. To embed their learning
participants are offered one-to-one
leadership coaching, with 400 hours
logged in 2023.
Thrive
Balfour Beatty’s aim is to foster a workforce
that mirrors the diversity of the communities
that we serve and to provide a supportive
working environment for all. In 2023, an
updated Value Everyone UK Diversity and
Inclusion (D&I) strategy was published,
reinforcing our commitment to create an
even more diverse and inclusive workplace.
To help us deliver its strategic goals, our
Value Everyone UK Action Plan sets out
in detail the steps we are taking to boost
the diversity of our business, including the
2030 targets we have set to help accelerate
the pace of change: a 50% increase in
female representation, 60% increase in
minority Ethnic and a 60% increase in
black representation by 2030, from a
2021 baseline.
In the UK, Balfour Beatty was awarded the
Clear Assured Bronze Standard, a globally
recognised inclusion standard for our
commitment to diversity and inclusion in the
workplace in 2023, and is working towards
the Silver Standard in 2024.
SCAN OR CLICK TO READ
OUR VALUE EVERYONE –
UK ACTION PLAN
Making progress towards
diversity targets and measures
Increasing the diversity of experience and
thinking within our teams remains a focus in
all our geographies. The Group has developed
an approach to targets and measures according
to their geography and the maturity of their
plans to increase diversity. These targets and
measures range from specific targets around
gender and ethnicity, through to representation
on talent programmes and promotions.
Gammon, our 50:50 joint venture based
in Hong Kong, has focused on increasing
diversity, with 15.7% of its senior
management population female at
31 December 2023.
In the US, Balfour Beatty uses data and
reporting to keep diversity top of mind.
At 31 December 2023, the gender and
ethnic diversity numbers in the workforce
were 21.8% and 48.0% across all
businesses respectively.
Alongside the UK’s 2030 D&I targets and to
recognise the importance of diverse senior
leadership teams, we have also established
specific senior leadership targets. We monitor
progress and are committed to reporting
externally at key points along the way.
The UK business is focusing on two strategic
areas to help achieve its D&I targets. In the
short-term, the UK executive search team
implemented a targeted recruitment approach
which enabled 21.9% of senior leadership hires
to be diverse. Long-term, we are committed
to our ‘Grow Our Own’ talent philosophy. In
2023, 27% of attendees on our two flagship
talent programmes were female, with 5.6%
from an ethnic minority.
We also continue to increase diversity
through our early careers hires across
the Group. 21% of UK graduates were
from a minority ethnic background and
25% were female.
At Gammon, 17% of graduate engineers,
technician and craft apprentices hired were
female. In the US, 23% of summer interns
and on-the-job trained employees were
female and 42% were from a minority
ethnic background.
In the US, Balfour Beatty hosted its fourth
‘Together Allies’ Summit to reinvigorate its
commitment to a respectful and inclusive
workplace for all. This summit had a
record-breaking 2,093 attendees and
included a series of panel discussions on
the vital importance of inclusion and marked
Balfour Beatty’s inaugural sponsorship of
Construction Inclusion Week.
Across the US, Balfour Beatty teams
gathered collectively and individually to
celebrate Martin Luther King, Jr. on MLK
Day. The Network of Black Leaders and
Executives (NOBLE) employee Affinity
Network provided educational resources
and hosted events to enhance understanding
of the deep significance of this national
federal holiday.
In Hong Kong, Gammon held an International
Women in Engineering Day event, with
a young female engineer representing
Gammon sharing her career journey with
the aim to inspire more females to join
the construction industry.
Progress towards diversity targets in three key areas:
FEMALE EMPLOYEES
ACROSS THE WORKFORCE %*
UK ETHNIC MINORITY
EMPLOYEES %
UK BLACK
EMPLOYEES %
2
.
0
2
6
.
9
1
0
.
9
1
0
.
8
1
7
.
8
1
7
.
8
1
4
.
2
1
0
.
1
1
8
.
8
3
.
7
3
.
6
2
.
6
9
.
2
8
.
2
3
.
2
9
.
1
7
.
1
5
.
1
18
19
20
21
22
23
18
19
20
21
22
23
18
19
20
21
22
23
* Excluding international joint ventures
in 2020 and earlier years.
Balfour Beatty plc Annual Report and Accounts 2023
75
Strategic report
OUR PEOPLE CONTINUED
Valuing everyone
by developing an
inclusive culture
In 2023, Balfour Beatty launched its Right to Respect
programme in the UK, following successful pilots in 2022.
Right to Respect supports our inclusive culture by clarifying
the Behaviours we expect and empowering colleagues to
hold each other to account and ‘Value Everyone’.
SCAN OR CLICK TO
WATCH THE VIDEO
100%
OF OUR SENIOR LEADERSHIP
TEAMS COMPLETED
THEIR SESSIONS
39%
OF LINE MANAGERS HAVE
COMPLETED THE TRAINING
4.7/5
SCORE FOR RECOMMENDING
THE SESSION TO A
COLLEAGUE
97%
AGREED THE FACILITATORS
CONVEYED THE MATERIAL
WELL
99%
FELT THEY WERE
ENGAGED AND
COULD CONTRIBUTE
Balfour Beatty is following up on
such an important culture shift
that is required not just within the
Company but around the world.”
Anonymous
Balfour Beatty employee
Useful material and stimulation
of honest and uncomfortable
conversations – a safe
environment for people to
explore the subject matter.”
Anonymous
Balfour Beatty supply chain partner
76
Balfour Beatty plc Annual Report and Accounts 2023
ABOVE
Photos from some of our Right to Respect training sessions.
Supporting employees
through work and life
Balfour Beatty is committed to building a
caring and inclusive culture where everyone
can speak openly without fear of stigma
to ask for the help they need to thrive,
supporting employees at various stages
of life and career.
In Gammon, there has been a strong focus
on increasing the number of qualified Mental
Health First Aiders, with 114 employees now
serving as mental health advocates. More
than 1,000 participants have attended mental
health workshops, supporting employees to
build resilience.
In the UK, Balfour Beatty received high
praise for its support for menopause in the
workplace as an accredited Menopause
Friendly employer – a Highly Commended
accolade at the Inspiring Women in
Construction and Engineering Awards as
well as an award in the ‘Enhancing Wellbeing
and Belonging at Work’ category at the
ENEI Inclusivity Excellence Awards.
In the US, our Buildings and Civils business
introduced two free preventative wellness
benefits to employees under the health
insurance offering, Hinge Health, which
focuses on muscle and joint health care
plans, and Livongo which focuses on
management of diabetes and hypertension.
In the UK, our improved family-friendly
leave schemes enable parents to take up
to 28 weeks of leave at full pay. This is
considerably higher than the UK statutory
minimum and recognised as ‘Leading’ under
the 2023 Bright Horizons Parental Leave and
Family Support Benchmark. We also offer up
to four weeks, fully paid neonatal leave, well
ahead of the UK statutory changes to be
implemented in 2025. We were also proud
to be recognised as a Menopause Friendly
employer in 2023.
A continued commitment
to our Affinity Networks
Affinity Networks form an important part
of our inclusion strategy across the Group.
These voluntary, employee-led groups
promote a sense of belonging and inclusivity
within Balfour Beatty.
2023 saw the launch of two new Affinity
Networks within the Group. In the UK, a
Neurodiversity and Allies Affinity Network
was launched, supporting employees
and their family members who may be
neurodivergent. In Hong Kong, Gammon’s
Chief Executive launched the Multicultural
Affinity Group and expressed his delight
at the creation of the network, praising
the company’s growth and increased
focus on diversity and inclusion.
In the US, two of our Affinity Network
colleagues were winners of prestigious
San Diego Business Journal awards. Annie
Del Rio, Minority Business Development
Specialist and member of Somos (Balfour
Beatty’s US Affinity Network for Hispanic/
Latin colleagues) was recognised as Latino
Leader of Influence and US Buildings’
Michelle Reiner, Vice President of
Operations, was named as a Top 50
LGBTQ+ Leader of Influence.
During the celebrations of National Inclusion
Week in the UK, Leo Quinn, Board sponsor
for Diversity and Inclusion, held a listening
session with representatives from each of
our Affinity Networks. The co-chairs of each
Affinity Network shared their members’
day-to-day experiences and their strategic
focus for the year ahead.
Find out more about our Group’s Affinity Networks
UK
US
Gammon
Supporting employee wellbeing in Hong Kong
In 2023, Balfour Beatty has received a number of accolades across the Group for its
wellbeing initiatives. Gammon has won two Grand Awards from CTgoodjobs: Best
Employee Engagement Strategy Award and Best Corporate Wellbeing Award. As this
was the third consecutive time Gammon had won the Best Corporate Wellbeing Award,
they were also presented with the ‘Triple Crown’ award for this category.
GENDER BREAKDOWN
At 31 December 2023
Male
Female
Board
Senior managers1
Directors of subsidiaries not
included above2
Employees3
6
95
3
32
Total
9
127
33
20,869
13
5,271
46
26,140
% Male
% Female
66.7%
74.8%
71.7%
79.8%
33.3%
25.2%
28.3%
20.2%
1 Senior managers are employees of the Company, its subsidiaries and Gammon, who have responsibility for planning,
directing or controlling the activities of the Group, or a strategically significant part of it, excluding Directors of
Balfour Beatty plc.
2 Directors of all subsidiaries have not been included as senior managers as this would not accurately reflect the
Group’s executive pipeline.
3 All employees of the Company and its subsidiaries, together with all employees of Gammon, the Group’s 50:50 joint
venture with Jardine Matheson based in Hong Kong.
Balfour Beatty plc Annual Report and Accounts 2023
77
Strategic report MY CONTRIBUTION
My Contribution
My Contribution (MyC) is our engagement programme for employee-led
business change giving each and every colleague a voice, empowering
them to share their ideas.
2023 UK PERFORMANCE
Engaging our workforce
2,200
ideas shared
26%
of employees
collaborating on ideas
2023 highlights
@ MyC Leads attended our first in-person
‘Lighting the Way’ MyC event to engage,
motivate and inspire the creation of a
high-performing, collaborative team.
@ We held our first Team MyC awards,
recognising the fundamental role that
Team MyC plays in the ongoing success
of MyC.
>400
Team MyC volunteers
@ We launched our UK Team MyC
development portal containing learning
modules to support personal development
as well as example PDR objectives.
Driving change
524
ideas delivered
Creating value
@ We embedded MyC into quarterly
business reviews to support leadership
engagement through the use of bespoke
MyC dashboards.
@ We ran three MyC Live events at senior
leader conferences, encouraging
collaboration on key themes and
generating 150 new ideas.
@ We have kicked off a MyC pilot at our
HS2 Old Oak Common station project
using Microsoft Teams.
£7.6m
cost savings
£2.5m
cash inflows
Great place to work
71,800
hours saved
417
better place to work
ideas delivered
Industry recognition
In November, MyC won the ‘Best Use of
Voice of the Employee’ award at the Engage
Awards, designed to recognise innovation
and excellence across the entire spectrum
of customer and employee engagement.
The team behind the programme, and our
400 team MyC volunteers from across the
company were acknowledged for their
passion, dedication and know-how in
converting ideas into outcomes and making
a real, tangible difference to our business.
This industry award recognises MyC as
an effective, sustainable and successful
programme that improves Balfour Beatty’s
understanding and insight of its people and
their working lives.
78
Balfour Beatty plc Annual Report and Accounts 2023
@ To make MyC more accessible, particularly
on our project sites, we pushed the Viva
Engage app out to more than 7,000 UK
mobile phones and tablets as part of our
Get Appy campaign.
13,000… MyC’s lucky number
In December, we received our 13,000th
MyC idea from Lee Chandler, Procurement
Category Lead. Lee’s container iStore idea
will enable our project sites to acquire
project-specific goods from a secure on site
container unit that can be collected via
automated unique access codes generated
by the supplier.
Working with our supply chain partner,
VJ Technology, we are piloting the iStore
facility at the Lewisham Gateway project
which has been uniquely adapted to work
with our e-Procurement solution, Jaggaer.
This solution helps to reduce the project’s
carbon footprint through fewer deliveries and
is an efficient stock management tool saving
time and costs.
ABOVE
13,000th idea submitter, Lee Chandler,
UK Procurement Category Lead.
Deafness and hearing loss awareness
Victoria Shute, Ethics, Data Privacy and Compliance Analyst,
shared her idea to support inclusivity and reduce communication
barriers by raising awareness of deafness, and helping
colleagues understand how simple changes in communication
can reduce feelings of isolation and help everyone work more
effectively together. Victoria created a hearing loss/deafness
community in Viva Engage which is being used to connect
colleagues, share experiences and promote opportunities to
learn sign language and attend events and webinars.
Victoria also connected with our UK Ability Affinity Network
which made hearing loss awareness a focus and dedicated a day
to it during UK National Inclusion Week where Victoria featured
in a video about her experience. The network also set up a series
of events to coincide with International Day of People with
Disabilities in December. This included a webinar with an
external speaker, a video on Deaf Awareness in the Workplace
and the release of Deaf Awareness Toolbox Talk materials.
SCAN OR
CLICK TO
WATCH THE
VIDEO
ABOVE Volunteering in Leeds for Surplus To Purpose, an environmental
enterprise that prevents food from becoming waste.
Volunteer bank
Jake Holness, Environmental Sustainability Advisor, had an idea
to create a volunteer bank database – a place for colleagues to
express their interest in local volunteering opportunities in the
UK and for people organising events to find people who would
like to support volunteering activity.
With support from the wider Sustainability team, the Volunteer
Bank was set up on our intranet, The Hub, and is proving to be
a great success with over 125 registering in the first couple of
months. This has helped set up more targeted events based on
people’s preferences for volunteering and social value activity,
as well as providing the opportunity to get in touch with people
outside local teams and projects to take part in events, saving
time and effort contacting people that have already registered
their interest.
Leveraging our
capabilities through
transatlantic
collaboration
In our US business, Louise Adamson,
Financial Controls Manager from the San
Diego office, shared a MyC idea for a
centralised job site setup – providing a
dedicated service for our projects in the
US to mobilise and demobilise
temporary site set ups, saving time
and cost.
The MyC team put Louise in touch with
Lisa Foster, Mobilisation Manager, who
shared her knowledge and learnings
from the UK Site Mobilisation Hub team,
and helped Louise develop her idea,
create a business case and identify the
subject experts needed to support her.
Louise’s idea is being implemented in
California and has the potential to
become a national initiative delivering
time and cost savings for the business.
As a result of connecting
with Balfour Beatty’s UK
site mobilisation team
and drilling into
their expertise, we’ve
been able to simplify
operations and
reduce cost by
setting up our site
services department
in San Diego.”
Louise Adamson
Financial Controls Manager,
Balfour Beatty’s US Buildings
business
AT THE BEATING HEART
Balfour Beatty plc Annual Report and Accounts 2023
79
Strategic report NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
This section of the Strategic report constitutes the Group’s Non-financial and Sustainability Information Statement, produced to comply with
Sections 414CA and 414CB of the Companies Act. The non-financial information is contained within the various sections of the Strategic report
and is cross-referenced below to help stakeholders find relevant information.
Reporting requirement
Policies and standards which govern our approach
Additional information necessary to understand impact
Page
Anti-corruption and
bribery matters
Human rights
Code of Ethics
Ethics and compliance
Supplier Standards
Modern Slavery Statement
Ethics and compliance
Employees
Code of Ethics
Code of Ethics
Health, safety and wellbeing
Health and safety policy
Our people
Climate-related risks
and opportunities
Environmental matters Our sustainability strategy –
Task Force on Climate-related Financial
Disclosures (TCFD)
Building New Futures
Sustainability policy
Sustainable procurement policy
Environmental policy
ISO 14001:2014 and ISO 20400:2017
Stakeholder value: employees
Ethics and compliance
Climate change and Task Force on Climate-
related Financial Disclosures (TCFD)
GHG reporting
Sustainability: Beyond Net Zero Carbon
Carbon Reduction Plan (PPN 06/21)
Social and community
matters
GHG Protocol
Our sustainability strategy – Building New
Futures
Social value reporting
Ethics and compliance
52
52
44
70
29
52
105
www.balfourbeatty.com/
ILA_2023
56
www.balfourbeatty.com/
carbon-reduction-plan
www.balfourbeatty.com/
ILA_2023
Social value policy
Code of Ethics
Stakeholder value: Communities
Sustainability: Positively Impact More
than 1 Million People
52
31
67
Discover more about the
Group’s policies at:
WWW.BALFOURBEATTY.COM/POLICIES
80
Balfour Beatty plc Annual Report and Accounts 2023
MEASURING OUR FINANCIAL PERFORMANCE
Providing clarity on
the Group’s alternative
performance measures
The Group includes this section in its Annual Report and Accounts
with the aim of providing transparency and clarity on the measures
adopted internally to assess performance.
Following the issuance of the Guidelines on
Alternative Performance Measures (APMs)
by the European Securities and Markets
Authority (ESMA) in June 2015, the Group
has included this section in its Annual Report
and Accounts with the aim of providing
transparency and clarity on the measures
adopted internally to assess performance.
Throughout this report, the Group has
presented financial performance measures
which are considered most relevant to
Balfour Beatty and are used to manage
the Group’s performance.
These financial performance measures are
chosen to provide a balanced view of the
Group’s operations and are considered useful
to investors as these measures provide
relevant information on the Group’s past or
future performance, position or cash flows.
The APMs adopted by the Group are also
commonly used in the sectors it operates
in and therefore serve as a useful aid for
investors to compare Balfour Beatty’s
performance to its peers.
The Board believes that disclosing these
performance measures enhances investors’
ability to evaluate and assess the underlying
financial performance of the Group’s operations
and the related key business drivers.
These financial performance measures are
also aligned to measures used internally
to assess business performance in the
Group’s budgeting process and when
determining compensation.
Equivalent information cannot be presented
by using financial measures defined in the
financial reporting framework alone.
Performance measures used to
assess the Group’s operations
Underlying profit from operations (PFO)
Underlying PFO is presented before
non-underlying items, finance costs and
investment income and is the key measure
used to assess the Group’s performance in
the Construction Services and Support
Services segments. This is also a common
measure used by the Group’s peers
operating in these sectors.
This measure reflects the returns to the Group
from services provided in these operations
that are generated from activities that are
not financing in nature and therefore an
underlying pre-finance cost measure is more
suited to assessing underlying performance.
Underlying profit before tax (PBT)
The Group assesses performance in its
Infrastructure Investments segment using
an underlying PBT measure. This differs
from the underlying PFO measure used to
measure the Group’s Construction Services
and Support Services segments because
in addition to margins generated from
operations, there are returns to the
Investments business which are generated
from the financing element of its projects.
These returns take the form of subordinated
debt interest receivable, interest receivable
on PPP financial assets and fair value gains
on certain investment assets, which are
included in the Group’s income statement in
investment income. These are then offset by
the finance cost incurred on the non-recourse
debt associated with the underlying projects,
fair value losses on certain investment assets
and any impairment of subordinated debt
and accrued interest receivable, which are
included in the Group’s income statement
in finance costs.
Operating cash flow (OCF)
The Group uses an internally defined measure
of OCF to measure the performance of its
earnings-based businesses and subsequently
to determine the amount of incentive
awarded to employees in these businesses
under the Group’s Annual Incentive Plan
(AIP). This measure also aligns to one of the
vesting conditions attributable to the Group’s
PSP awards. Refer to pages 159 to 162.
Readers of the Annual Report and
Accounts are encouraged to review
the financial statements in their entirety
Balfour Beatty plc Annual Report and Accounts 2023
81
Strategic report MEASURING OUR FINANCIAL PERFORMANCE CONTINUED
Measuring the Group’s
performance
The following measures are referred to in this
Annual Report and Accounts when reporting
performance, both in absolute terms and also
in comparison to earlier years.
Statutory measures
Statutory measures are derived from the
Group’s reported financial statements,
which have been prepared in accordance
with UK-adopted international accounting
standards (IFRS) and in conformity with the
requirements of the Companies Act 2006.
Where a standard allows certain
interpretations to be adopted, the Group has
applied its accounting policies consistently.
These accounting policies can be found
on pages 190 to 195.
The Group’s statutory measures take into
account all of the factors, including those
that it cannot influence (principally foreign
currency fluctuations) and also non-recurring
items which do not reflect the ongoing
underlying performance of the Group.
Performance measures
In assessing its performance, the Group
has adopted certain non-statutory measures
because, unlike its statutory measures,
these cannot be derived directly from its
financial statements.
The Group commonly uses the following
measures to assess its performance:
a) Order book
The Group’s disclosure of its order book is
aimed to provide insight into its pipeline of
work and future performance. The Group’s
order book is not a measure of past
performance and therefore cannot be
derived from its financial statements.
The Group’s order book comprises the
unexecuted element of orders on contracts
that have been secured. Where contracts are
subject to variations, only secured contract
variations are included in the reported
order book.
Where contracts fall under framework
agreements, an estimate is made of orders
to be secured under that framework
agreement. This is based on historical
trends from similar framework agreements
delivered in the past and the estimate of
orders included in the order book is that
which is probable to be secured.
In accordance with IFRS 15 Revenue from
Contracts with Customers, the Group is
required to disclose the remaining
transaction price allocated to performance
obligations not yet delivered. This can be
found in Note 4.3. This is similar to the
Group’s order book disclosure, however
it differs for the following reasons:
@ the Group’s order book includes its share
of orders that are reported within its joint
ventures and associates. In line with
section (e), the Board believes that
including orders that are within the pipeline
of its joint ventures and associates better
reflects the size of the business and the
volume of work to be carried out in the
future. This differs from the statutory
measure of transaction price to be
allocated to remaining performance
obligations which is only inclusive
of secured revenue from the
Group’s subsidiaries;
@ as stated above, for contracts that fall under
framework agreements, the Group includes
in its order book an estimate of what the
orders under these agreements will be
worth. Under IFRS 15, each instruction
under the framework agreement is viewed
as a separate performance obligation and is
included in the statutory measure of the
remaining transaction price when received
but estimates for future instructions are
not; and
@ the Group’s order book does not include
revenue to be earned in its Infrastructure
Investments segment as the value of this
part of the business is driven by the
Directors’ valuation of the Investments
portfolio. Refer to section (i).
b) Underlying performance
The Group adjusts for certain non-underlying
items which the Board believes assists in
understanding the performance achieved
by the Group. These items include:
@ gains and losses on the disposal of
businesses and investments, unless
this is part of a programme of releasing
value from the disposal of similar
businesses or investments such as
infrastructure concessions;
@ costs of major restructuring and
reorganisation of existing businesses;
@ costs of integrating newly
acquired businesses;
@ acquisition and similar costs related
to business combinations such as
transaction costs;
@ impairment and amortisation charges
on intangible assets arising on business
combinations (amortisation of acquired
intangible assets); and
@ impairment of goodwill.
These are non-underlying costs as they
do not relate to the underlying performance
of the Group.
From time to time, it may be appropriate
to disclose further items as non-underlying
items in order to reflect the underlying
performance of the Group.
Further details of non-underlying items are
provided in Note 10.
A reconciliation has been provided on page 83
to show how the Group’s statutory results
are adjusted to exclude non-underlying items
and their impact on its statutory financial
information, both as a whole and in respect
of specific line items.
82
Balfour Beatty plc Annual Report and Accounts 2023
Reconciliation of order book to transaction price to be allocated to remaining performance obligations
Order book (performance measure)
Less: Share of orders included within the Group’s joint ventures and associates
Less: Estimated orders under framework agreements included in the order book disclosure
Add: Transaction price allocated to remaining performance obligations in Infrastructure Investments*
Transaction price allocated to remaining performance obligations for the Group* (statutory measure)
* Refer to Note 4.3.
Reconciliation of 2023 statutory results to performance measures
2023
£m
16,532
(2,344)
–
1,917
16,105
2022
£m
17,390
(3,275)
(25)
2,009
16,099
Revenue including share of joint ventures and associates (performance)
Share of revenue of joint ventures and associates
Group revenue (statutory)
Cost of sales
Gross profit
Gain on disposals of interests in investments
Amortisation of acquired intangible assets
Other net operating expenses
Group operating profit
Share of results of joint ventures and associates
Profit from operations
Investment income
Finance costs
Profit before taxation
Taxation
Profit for the year
Reconciliation of 2023 statutory results to performance measures by segment
Profit/(loss) from operations
Segment
Construction Services
Support Services
Infrastructure Investments
Corporate activities
Total
Non-underlying items
2023
statutory
results
£m
Intangible
amortisation
£m
Provision in
relation to
rectification
works in
London
£m
2023
performance
measures
£m
9,595
(1,602)
7,993
(7,593)
400
24
(5)
(261)
158
53
211
82
(49)
244
(50)
194
–
–
–
–
–
–
5
–
5
–
5
–
–
5
(3)
2
–
–
–
12
12
–
–
–
12
–
12
–
–
12
(3)
9
9,595
(1,602)
7,993
(7,581)
412
24
–
(261)
175
53
228
82
(49)
261
(56)
205
Non-underlying items
2023
statutory
results
£m
Intangible
amortisation
£m
Provision in
relation to
rectification
works in
London
£m
2023
performance
measures
£m
143
80
27
(39)
211
1
–
4
–
5
12
–
–
–
12
156
80
31
(39)
228
Balfour Beatty plc Annual Report and Accounts 2023
83
Strategic report MEASURING OUR FINANCIAL PERFORMANCE CONTINUED
Measuring the Group’s performance continued
Performance measures continued
Reconciliation of 2022 statutory results to performance measures
Revenue including share of joint ventures and associates
(performance)
Share of revenue of joint ventures and associates
Group revenue (statutory)
Cost of sales
Gross profit
Amortisation of acquired intangible assets
Other net operating expenses
Group operating profit
Share of results of joint ventures and associates
Profit from operations
Investment income
Finance costs
Profit before taxation
Taxation
Profit for the year
Non-underlying items
Intangible
amortisation
£m
Release of
Heery provision
£m
UK deferred tax
assets
revaluation
£m
2022
performance
measures
£m
–
–
–
–
–
6
–
6
–
6
–
–
6
1
7
–
–
–
–
–
–
(2)
(2)
–
(2)
–
–
(2)
–
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
(2)
8,931
(1,302)
7,629
(7,202)
427
–
(253)
174
105
279
50
(38)
291
(1)
290
2022
statutory
results
£m
8,931
(1,302)
7,629
(7,202)
427
(6)
(251)
170
105
275
50
(38)
287
–
287
Reconciliation of 2022 statutory results to performance measures by segment
Profit/(loss) from operations
Segment
Construction Services
Support Services
Infrastructure Investments
Corporate activities
Total
Non-underlying items
2022
statutory
results
£m
Intangible
amortisation
£m
Release of
Heery provision
£m
2022
performance
measures
£m
150
83
76
(34)
275
1
–
5
–
6
(2)
–
–
–
(2)
149
83
81
(34)
279
84
Balfour Beatty plc Annual Report and Accounts 2023
c) Underlying profit before tax
As mentioned on page 81, the Group’s Infrastructure Investments segment is assessed on an underlying profit before tax (PBT) measure.
This is calculated as follows:
Underlying profit from operations (section (b) and Note 5)
Add: Subordinated debt interest receivable*
Add: Interest receivable on PPP financial assets*
Add: Fair value (loss)/gain on investment asset*
Less: Non-recourse borrowings finance cost*
Less: Net impairment of subordinated debt and accrued interest receivable*
Underlying profit before tax (performance)
Non-underlying items (section (b) and Note 5)
Statutory profit before tax
* Refer to Note 8 and Note 9.
2023
£m
31
34
2
(1)
(11)
(8)
47
(4)
43
2022
£m
81
27
2
6
(9)
(2)
105
(5)
100
d) Underlying earnings per share
In line with the Group’s measurement of underlying performance, the Group also presents its earnings per share (EPS) on an underlying basis.
The table below reconciles this to the statutory earnings per share.
Reconciliation from statutory basic EPS to performance EPS
Statutory basic earnings per ordinary share
Amortisation of acquired intangible assets after tax
Other non-underlying items after tax
Underlying basic earnings per ordinary share (performance)
2023
Pence
35.3
0.4
1.6
37.3
2022
Pence
46.9
1.2
(0.6)
47.5
e) Revenue including share of joint ventures and associates (JVAs)
The Group uses a revenue measure which is inclusive of its share of revenue generated from its JVAs. As the Group uses revenue as a
measure of the level of activity performed by the Group, the Board believes that including revenue that is earned from its JVAs better
reflects the size of the business and the volume of work carried out and more appropriately compares to PFO.
This differs from the statutory measure of revenue which presents Group revenue from its subsidiaries.
A reconciliation of the statutory measure of revenue to the Group’s performance measure is shown in the tables in section (b). A comparison
of the growth rates in statutory and performance revenue can be found in section (j).
f) Operating cash flow (OCF)
The table below reconciles the Group’s internal performance measure of OCF to the statutory measure of cash generated from operating
activities as reported in the Group statement of cash flows (page 187).
Reconciliation from statutory cash generated from operations to OCF
Cash generated from operating activities (statutory)
Add back: Pension payments including deficit funding (Note 30.2)
Less: Repayment of lease liabilities (including lease interest payments) (Note 28)
Add: Operational dividends received from joint ventures and associates (Note 19.5)
Add back: Cash flow movements relating to non-operating items
Less: Operating cash flows relating to non-recourse activities
Operating cash flow (OCF) (performance)
2023
£m
285
28
(63)
59
9
(8)
310
2022
£m
168
43
(58)
89
(12)
(11)
219
The Group includes/excludes these items to reflect the true cash flows generated from or used in the Group’s operating activities:
Pension payments including deficit funding (£28m): the Group has excluded pension payments which are included in the Group’s statutory
measure of cash flows from operating activities from its internal OCF measure as these primarily relate to deficit funding of the Group’s main
pension fund, Balfour Beatty Pension Fund (BBPF). The payments made for deficit funding are in accordance with an agreed journey plan with
the trustees of the BBPF and are not directly linked to the operational performance of the Group.
Balfour Beatty plc Annual Report and Accounts 2023
85
Strategic report MEASURING OUR FINANCIAL PERFORMANCE CONTINUED
Measuring the Group’s performance continued
Performance measures continued
f) Operating cash flow (OCF) continued
Repayment of lease liabilities (including lease interest payments) (£63m outflow): the payments made for the Group’s leasing arrangements
are included in the Group’s OCF measure as these payments are made to third-party suppliers for the lease of assets that are used to deliver
services to the Group’s customers, and hence to generate revenue. Under IFRS, these payments are excluded from the Group’s statutory
measure of cash flows from operating activities as these are considered debt in nature under accounting standards.
Operational dividends received from joint ventures and associates (£59m inflow): dividends received from joint ventures and associates which
are generated from non-disposal activities are included in the Group’s OCF measure as these are cash returns to the Group from cash flows
generated from operating activities within joint ventures and associates. Under IFRS, these returns are classified as investing activities.
Cash flow movements relating to non-operating items (£9m): the Group’s OCF measure excludes certain working capital movements that are
not directly attributable to the Group’s operating activities.
Operating cash flows relating to non-recourse activities (£8m): the Group’s OCF measure is specifically targeted to drive performance
improvement in the Group’s earnings-based businesses and therefore any operating cash flows relating to non-recourse activities are removed
from this measure. Under IFRS, there is no distinction between recourse and non-recourse cash flows.
g) Recourse net cash/borrowings
The Group also measures its performance based on its net cash/borrowings position at the year end. This is analysed by excluding elements
that are non-recourse to the Group as well as lease liabilities.
Non-recourse elements are cash and debt that are ring-fenced within certain infrastructure concession project companies and are excluded
from the definition of net debt set out in the Group’s borrowing facilities. In addition, lease liabilities which are deemed to be debt in nature
under statutory measures are also excluded from the Group’s definition of net cash/borrowings as these are viewed to be operational in nature
reflecting payments made in exchange for use of assets.
Net cash/borrowings reconciliation
Total cash within the Group
Cash and cash equivalents
– infrastructure concessions
– other
Total debt within the Group
Borrowings
– non-recourse loans
– other
Lease liabilities
Net cash
2023
statutory
£m
Adjustment
£m
2023
performance
£m
2022
statutory
£m
Adjustment
£m
2022
performance
£m
1,414
306
1,108
(979)
(570)
(266)
(143)
435
(306)
(306)
–
713
570
–
143
407
1,108
–
1,108
(266)
–
(266)
–
842
1,179
19
1,160
(738)
(261)
(345)
(132)
441
(19)
(19)
–
393
261
–
132
374
1,160
–
1,160
(345)
–
(345)
–
815
h) Average net cash/borrowings
The Group uses an average net cash/borrowings measure as this reflects its financing requirements throughout the year. The Group calculates
its average net cash/borrowings based on the average opening and closing figures for each month through the year.
The average net cash/borrowings measure excludes non-recourse cash and debt and lease liabilities, and this performance measure shows
average net cash of £700m for 2023 (2022: £804m).
Using a statutory measure (inclusive of non-recourse elements and the lease liabilities recognised) gives average net cash of £438m for 2023
(2022: £430m).
i) Directors’ valuation of the Investments portfolio
The Group uses a different methodology to assess the value of its Investments portfolio. As described on pages 42 and 43, the Directors’
valuation for most of the investments in the portfolio has been undertaken using forecast cash flows for each project on an asset by asset basis,
based on progress to date and market expectations of future performance. These cash flows have been discounted using different discount rates
depending on project risk and maturity, reflecting secondary market transaction experience. As such, the Board believes that this measure better
reflects the potential returns to the Group from those investments.
The Directors have valued the Investments portfolio at £1.21bn at year end (2022: £1.29bn).
The Directors’ valuation will differ from the statutory carrying value of these investments, which are accounted for using the relevant standards
in accordance with IFRS rather than a discounted cash flow approach.
Reconciliation of the net assets of the Infrastructure Investments segment to the comparable statutory measure of the Investments portfolio
included in the Directors’ valuation
Net assets of the Infrastructure Investments segment (refer to Note 5.1)
Less: Net assets not included within the Directors’ valuation – Housing division
Comparable statutory measure of the Investments portfolio under IFRS
86
Balfour Beatty plc Annual Report and Accounts 2023
2023
£m
596
(53)
543
2022
£m
593
(30)
563
Comparison of the statutory measure of the Investments portfolio to its performance measure
Statutory measure of the Investments portfolio (as above)
Difference arising from the Directors’ valuation being measured on a discounted cash flow basis compared
to the statutory measure primarily derived using a combination of the following IFRS bases:
– historical cost
– amortised cost
– fair value
Directors’ valuation (performance measure)
2023
£m
543
2022
£m
563
669
1,212
728
1,291
The difference between the statutory measure and the Directors’ valuation (performance measure) of the Group’s Investments portfolio is not
equal to the gain on disposal that would result if the portfolio was fully disposed at the Directors’ valuation. This is because the gain/loss on
disposal would be affected by the recycling of items which were previously recognised directly within reserves, which are material and can
alter the resulting gain/loss on disposal.
The statutory measure and the Directors’ valuation are fundamentally different due to the different methodologies used to derive the valuation
of these assets within the Investments portfolio.
As referred to in the Strategic report on page 42, the Directors’ valuation for most investments is calculated using discounted cash flows.
In deriving these cash flows, assumptions have been made and different discount rates used which are updated at each valuation date.
Unlike the Directors’ valuation, the assets measured under statutory measures using the appropriate IFRS accounting standards are valued
using a combination of the following methods:
@ historical cost;
@ amortised cost; and
@ fair value for certain assets and liabilities within the PPP portfolio, for which some assumptions are set at inception and some are updated
at each valuation date.
There is also an element of the Directors’ valuation that is not represented by an asset in the Group’s balance sheet. This relates to the
management services contracts within the Investments business that are valued in the Directors’ valuation based on the future income stream
expected from these contracts.
j) Constant exchange rates (CER)
The Group operates across a variety of geographic locations and in its statutory results, the results of its overseas entities are translated into
the Group’s presentational currency at average rates of exchange for the year. The Group’s key exchange rates applied in deriving its statutory
results are shown in Note 3.
To measure changes in the Group’s performance compared with the previous year without the effects of foreign currency fluctuations, the
Group provides growth rates on a CER basis. These measures remove the effects of currency movements by retranslating the prior year’s
figures at the current year’s exchange rates, using average rates for revenue and closing rates for order book. A comparison of the Group’s
statutory growth rate to the CER growth rate is provided in the table below:
2023 statutory growth compared to performance growth
Revenue (£m)
2023 statutory
2022 statutory
Statutory growth
2023 performance*
2022 performance retranslated*
Performance CER growth
Order book (£bn)
2023
2022
Growth
2023
2022 retranslated
CER growth
Construction Services
UK
US
Gammon
Total
Support
Services
Infrastructure
Investments
3,027
2,763
10%
3,027
2,763
10%
6.1
6.1
–
6.1
6.1
–
3,668
3,646
1%
3,697
3,647
1%
5.6
6.0
(7)%
5.6
5.6
–
–
–
–
1,357
1,066
27%
2.0
2.9
(31)%
2.0
2.8
(29)%
6,695
6,409
4%
8,081
7,476
8%
13.7
15.0
(9)%
13.7
14.5
(6)%
1,006
988
2%
1,006
989
2%
2.8
2.4
17%
2.8
2.4
17%
292
232
26%
508
460
10%
–
–
–
–
–
–
Total
7,993
7,629
5%
9,595
8,925
8%
16.5
17.4
(5)%
16.5
16.9
(2)%
* Performance revenue is underlying revenue including share of revenue from joint ventures and associates as set out in section (e).
Balfour Beatty plc Annual Report and Accounts 2023
87
Strategic report CHIEF FINANCIAL OFFICER’S REVIEW
d
e
c
n
a
m
r
o
f
r
e
p
i
l
o
s
f
o
r
a
e
y
A
88
Balfour Beatty plc Annual Report and Accounts 2023
Group financial summary
The Group’s results for 2023 show a solid
performance against a backdrop of
challenging economic conditions. Revenue,
including the Group’s share of the revenue
of joint ventures and associates, increased
by 7% (8% at constant exchange rates (CER))
to £9,595 million (2022: £8,931 million)
driven by an increase in Construction Services.
Statutory revenue, which excludes joint
ventures and associates, was £7,993 million
(2022: £7,629 million).
The underlying profit from operations for
the year reduced to £228 million (2022:
£279 million) despite an incremental increase
in PFO from the earnings-based businesses,
as gains on investment disposals reduced by
£44 million. Corporate activity costs rose
in 2023, due largely to higher salaries
following inflationary increases, audit fees
and share-based remuneration. Statutory
profit from operations was £211 million
(2022: £275 million).
Philip Harrison
Chief Financial Officer
Net finance income of £33 million (2022:
£12 million) improved as a result of higher
interest rates. Underlying pre-tax profit
was £261 million (2022: £291 million).
The taxation charge on underlying profits
increased to £56 million (2022: £1 million)
as there were no tax credits relating to the
recognition of additional UK tax losses
(2022: £56 million). This resulted in
underlying profit after tax of £205 million
(2022: £290 million). Total statutory profit
after tax for the year was £194 million
(2022: £287 million), as a result of the net
effect of non-underlying items.
Underlying basic earnings per share was
37.3 pence (2022: 47.5 pence), which, along
with a non-underlying loss per share of
2.0 pence (2022: 0.6 pence), gave a total
basic earnings per share of 35.3 pence
(2022: 46.9 pence). This included the benefit
from the basic weighted average number
of ordinary shares reducing to 558 million
(2022: 612 million) as a result of the Group’s
share buyback programme.
Non-underlying items
The Board believes non-underlying items
should be separately identified on the face
of the income statement to assist in
understanding the underlying financial
performance achieved by the Group.
Non-underlying items after taxation were
a net charge of £11 million for the period
(2022: £3 million). Items included a £9 million
post-tax charge in relation to an increase to a
provision, which was recognised in 2021 for
stone cladding rectification works, updated
to current price expectations, and a £2 million
post-tax charge relating to the amortisation
of acquired intangible assets. Further detail
is provided in Note 9.
Cash flow performance
The Group’s net cash increased by
£27 million in the year (2022: £25 million),
resulting in a year end net cash position of
£842 million (2022: £815 million), excluding
non-recourse net borrowings and lease
liabilities. Operating cash flows were ahead
of profit from operations. Cash from
operations, which included a working capital
inflow, was largely offset by shareholder
returns and a higher than normal programme
of capital expenditure. 2023 was a peak year
for capital expenditure, with increased levels
of investment in Support Services to aid the
Group’s medium-term growth plans. 2024
capital expenditure is expected to be close
to 2022 levels.
RESULTS FOR THE YEAR
Revenue1
Profit from earnings-based businesses
Profit from operations
Pre-tax profit
Profit for the year
Basic earnings per share
Dividends per share
UNDERLYING PROFIT/(LOSS) FROM OPERATIONS2
UK Construction
US Construction
Gammon
Construction Services
Support Services
Earnings-based businesses
Infrastructure Investments pre-disposal operating profit
Infrastructure Investments gain on disposals
Corporate activities
Total
1
Including share of joint ventures and associates.
2 Before non-underlying items (Note 10).
2023
£m
2022
£m
Underlying 2
Total
Underlying 2
9,595
236#
228#
261
205
37.3p
9,595
223
211
244
194
35.3p
11.5p
8,931
232#
279#
291
290
47.5p
2023
£m
69
51
36
156
80
236
5
26
(39)
228
3 Excluding non-recourse net borrowings, which comprise cash and debt ringfenced within certain infrastructure investments project companies, and lease liabilities.
# Underlying profit from operations, or PFO, as defined in the Measuring our financial performance section.
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
CASH FLOW PERFORMANCE
Operating cash flows before working capital movements and pension deficit payments
Working capital inflow / (outflow)
Pension deficit payments+
Cash from operations
Lease payments (including interest paid)
Dividends from joint ventures and associates∞
Capital expenditure
Share buybacks
Dividends paid
Infrastructure Investments
– disposal proceeds
– new investments
Other
Net cash movement
Opening net cash*
Closing net cash*
* Excluding infrastructure investments (non-recourse) net borrowings and lease liabilities.
+ Including £3 million (2022: £2 million) of regular funding.
∞ Excluding £1 million (2022: £59 million) dividends received in relation to Investments asset disposals within joint ventures and associates.
Unless otherwise stated, all commentary in this section relates to financial performance measures.
Refer to the Measuring our performance section on pages 81 to 87.
2023
£m
258
63
(28)
293
(63)
59
(66)
(151)
(58)
61
(31)
(17)
27
815
842
Total
8,931
233
275
287
287
46.9p
10.5p
2022
£m
59
58
32
149
83
232
11
70
(34)
279
2022
£m
282
(54)
(43)
185
(58)
89
(31)
(151)
(58)
93
(30)
(14)
25
790
815
Balfour Beatty plc Annual Report and Accounts 2023
89
Strategic report
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Working capital
A working capital inflow of £63 million
(2022: £54 million outflow) was favourable
to the outflow previously expected for the
year, driven by a spike in the negative
working capital position during the final
weeks of December. The inflow reported for
2023 is not reflective of the trend observed
throughout the year of average negative
working capital reducing.
Working capital flows^
Inventories
Net contract
assets
Trade and other
receivables
Trade and other
payables
Provisions
Working capital
inflow / (outflow)^
2023
£m
(11)
(48)
(73)
177
18
63
2022
£m
(6)
(137)
34
57
(2)
(54)
^ Excluding impact of foreign exchange and disposals.
Including the impact of foreign exchange
and non-operating items, negative (i.e.
favourable) current working capital increased
to £1,230 million (2022: £1,167 million). In the
medium term, the Group expects negative
working capital as a percentage of revenue
to be around the top of its historical long
term average of 11-13% (2023: 15.4%;
2022: 15.3%) with the range continuing
to be dependent on contract mix and the
timing of project starts and completions.
Net cash/borrowings
The Group’s average net cash reduced to
£700 million in 2023 (2022: £804 million).
The Group’s year end net cash position,
excluding non-recourse net borrowings
and lease liabilities, was £842 million
(2022: £815 million).
Non-recourse net borrowings, held in
Infrastructure Investments entities
consolidated by the Group, were £264 million
(2022: £242 million). The balance sheet also
included £143 million for lease liabilities
(2022: £132 million). Statutory net cash at
31 December 2023 was £435 million
(2022: £441 million).
Share buyback
On 3 January 2023, Balfour Beatty commenced
an initial £50 million tranche of its 2023 share
buyback programme, which was subsequently
increased, following the release of its 2022
full year results, to £150 million on 20 March
2023. The Group completed the 2023 share
buyback programme on 15 December 2023,
having purchased 43.3 million shares, which
were held in treasury. These shares were
subsequently cancelled on 20 December
2023. The Group commenced the initial
£50 million tranche of its 2024 share buyback
programme on 2 January 2024.
90
Balfour Beatty plc Annual Report and Accounts 2023
Banking facilities
In June 2023, the Group completed the
refinancing of its core £375 million revolving
credit facility, which was set to expire in
October 2024, replacing it with a new
£475 million facility that will expire in June
2027 (the RCF). The RCF has an extension
option for a further year to June 2028, with
the agreement of the lending banks, and its
terms and conditions are materially the same
as the prior facility. The RCF is a Sustainability
Linked Loan, retaining the KPIs that featured
in the prior facility. The RCF ensures the
Group will retain strong liquidity support
from a diverse banking group.
In March 2023, the Group repaid
US$209 million of US Private Placement
(USPP) notes as they fell due. The repayment
was funded primarily from the proceeds of
debt issuance arranged in 2022, specifically
US$158 million of new USPP notes issued
in June 2022 (US$35 million 6.31% notes
maturing in June 2027, US$80 million
6.39% notes maturing in June 2029 and
US$43 million 6.45% notes maturing in
June 2032) and a new bilateral committed
facility, which expires in December 2024 and
was fully utilised through a US$36 million
drawdown in March 2023. The US$36 million
drawdown was repaid in September 2023.
This £30 million bilateral facility has an
extension option for a further three years
subject to certain specific conditions that
were met on the completion of the
refinancing of the Group’s core facility in
June 2023. As at the end of the year the
Group had not triggered the bilateral facility’s
extension option.
Going concern
The Directors have considered the Group’s
medium term cash forecasts and conducted
stress-test analysis on these projections in
order to assess the Group’s ability to
continue as a going concern. Having also
made appropriate enquiries, the Directors
consider it reasonable to assume that the
Group has adequate resources to continue
for the period of at least 12 months from the
date of approval of the financial statements
and, for this reason, have continued to adopt
the going concern basis in preparing the full
year Group financial statements. Further
detail is provided in Note 1.3 Going Concern.
Pensions
Balfour Beatty and the trustees of the
Balfour Beatty Pension Fund (BBPF) have
reconfirmed their commitment to a journey
plan approach to managing the BBPF
whereby the BBPF is aiming to reach
self-sufficiency by 2027. The Company and
the trustees have agreed the 31 March 2022
formal valuation, and as a result Balfour
Beatty paid deficit contributions to the BBPF
of £19 million in 2023 and will pay deficit
contributions of £24 million in 2024 and
£6 million in 2025. The Company and the
trustees are making good progress with
plans to reduce the overall risk in the scheme
and the Company has agreed that additional
amounts will become payable at £2 million
per month from March 2025 if the BBPF’s
performance is materially different from that
expected. The next formal triennial funding
valuation of the BBPF is due with effect from
31 March 2025.
Following the formal triennial funding
valuation of the Railways Pension Scheme
(RPS) as at 31 December 2019, the
Group agreed to continue to make deficit
contributions of £6 million per annum which
should reduce the funding deficit to zero by
2025. A formal triennial funding valuation of
the RPS as at 31 December 2022 is currently
ongoing. The trustee and Balfour Beatty have
reached agreement in principle as to the
financial and demographic assumptions to
be adopted for the purpose of this valuation,
which would include the Group continuing
to make deficit contributions of £6 million
per annum until February 2025.
The Group’s balance sheet includes net
retirement benefit assets of £69 million
(2022: £223 million) as measured on an
IAS 19 basis, with the surpluses on the
BBPF (£101 million) and RPS (£3 million)
partially offset by deficits on other
schemes (£35 million).
Dividend
The Board is committed to a sustainable
ordinary dividend which is expected to grow
over time, targeted at a pay-out ratio of 40%
of underlying profit after tax excluding gains
on disposal of Investments assets.
Following the 3.5 pence per ordinary share
interim dividend declared at the half year, the
Board is recommending a final dividend of
8.0 pence per share, giving a total
recommended dividend for the year of
11.5 pence per share (2022: 10.5 pence
per share).
Philip Harrison
Chief Financial Officer
12 March 2024
RISK MANAGEMENT
Challenging our outlook
on business risk
Introduction
The Group risk profile in 2023 has continued
to reflect the political uncertainty and
economic turbulence seen in 2022, both
within the construction sector and beyond.
The Group’s risk management processes
have continued to provide a consistent
platform in responding to this, where key
drivers identified across multiple risks are
monitored and managed throughout the year,
minimising the potential exposure posed by
the instability within the economy.
In 2023 the central Group risk management
function undertook an exercise designed to
enhance the existing review process by
considering risks in the context of business
disruption and broader horizon scanning.
This workstream challenged the business to
contemplate risks in the context of disruption
to ongoing operations and objectives, and the
future viability of the business model, beyond
traditional time horizons. It also sought to
explore whether there were aggregations
or combinations of disruptive events that
concerned the business, and what potential
significant outcomes could be presented
should the risks occur simultaneously.
Prompts included key areas such as political,
reputational, economic, technological and
market risk to support discussions. The
outcomes of the exercise sought to highlight
drivers to existing Group risks, identify any
new Group risks or identify Emerging Risks
(see page 95) to the Group to be tracked and
monitored.
The Group’s risk process continues to
maintain a consistent approach and taxonomy
across the organisation. As the integration of
the Enterprise Risk Management (ERM)
framework evolves, the central Group Risk
Management function maintains oversight to
ensure processes remain current and
continues to ensure Group adherence to
regulatory requirements and good practice in
its approach to identifying, assessing,
responding to, and monitoring risk.
Balfour Beatty’s risk management process
1
2
IDENTIFY
@ Objective-focused risk
identification linked to
operational, business and
Group objectives
@ Identification of core drivers
(causes) and anticipated
outcomes (consequences)
@ Captures current control
environment and its
effectiveness
ASSESS
@ Assessment of the impact of the
risk and the probability of it
occurring, using the Group
Probability Impact (PI) Matrix
(page 95)
@ Assessment is based on the
effectiveness of current controls
@ Consistent assessment utilising
Group PI Matrix allows risks and
opportunities to be prioritised
Utilising this standard process from project
operations up to Group level ensures risks are
captured, accessed and communicated concisely
at each level of the organisation.
4
3
MONITOR
@ Risk environment monitored to
identify change in, or emergence
of, causes and consequences
@ Risk response is reviewed in line
with current risk assessment
@ Completion of actions and their
effect on reducing exposure
RESPOND
@ Response type ‘Accept’ or
‘Manage Further’ is assigned to
each risk and opportunity based on
current assessment and appetite
@ Response of Manage Further
drives identification of actions
@ Actions are assigned ownership
and due dates and are tracked for
completion alongside risk exposure
Balfour Beatty plc Annual Report and Accounts 2023
91
Strategic report Circles of Risk
Balfour Beatty’s Circles of Risk continues to
act as a core tool that frames early risk-based
discussions in the Gated Business Lifecycle
review process to ensure strategic opportunities
and pursuits remain in line with our appetite
around location, customer, supply chain,
project scope and contractual terms. The
Gated Business Lifecycle is a business-wide
method of reviewing, approving and
monitoring of new business opportunities.
The Circles of Risk guidance supports work
winning teams in ensuring high-level risks are
understood early in the pursuit of a project
and acts as a key control in highlighting any
‘show stoppers’. It drives teams to consider
and sets out response types to any key risks
as the opportunity evolves through
approval gates.
The guidance reflects experience from past
delivery and lessons learnt across a diverse
customer base, with proposed controls
aligned to the Group’s operating and
commercial principles.
This approach allows Balfour Beatty to make
decisions in the context of its risk appetite
and stay ahead of potential exposures
by ensuring:
@ the opportunity aligns to Group objectives,
business growth strategies and defined
risk tolerances;
@ all pursuits are assessed consistently so
that potential opportunities that do not fit
with approved business objectives are
qualified out; and
@ appropriate mitigation strategies are
developed in order to pursue the
opportunity whilst protecting the Group’s
operating and commercial principles.
CIRCLES OF RISK
SUPPLY
CHAIN
GEOGRAPHY
CONTRACT
CUSTOMER
TEAM
PROJECT
RISK MANAGEMENT CONTINUED
Our risk management process
Balfour Beatty’s simple four-step process
ensures the consistent identification,
assessment, response to, and monitoring
of risk across the organisation. Utilising this
standard process from project operations
up to Group level ensures risks are captured,
assessed and communicated concisely at
each level of the organisation. Embedding
this process into operational and business
environments ensures the consideration of
risk and opportunity remains central to
making decisions.
The Group’s risk
process continues to
maintain a consistent
approach and
taxonomy across
the organisation.”
92
Balfour Beatty plc Annual Report and Accounts 2023
Our risk framework
Ensuring risk management is embedded at each
level of the organisation.
GROUP
RISK
Strategic Risk
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BUSINESS RISK
Strategic Business Units / Business Units
P
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Escalate
Cascade
M
MITTEE
ppetite and Tolerance Setting | Risk Culture
MITTEE | EXECUTIVE CO
Risk Process
Governance and Oversight | Risk Policy Setting | Risk A
D RISK CO
DIT A
U
A
N
M
OPERATIONAL RISK
Project / Contract / Asset Risk
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Governance
and oversight
The Board accepts overall
responsibility for risk management,
with oversight of the Group Risk
Framework and its application across
the business. The Board also
ultimately determines the nature and
extent of the principal risks the
Company is willing to take in the
pursuit of its longer-term strategic
objectives. The Directors continue to
review the overall effectiveness of
the risk management framework and
internal control systems, including
the financial, operational and
compliance processes and controls
that are in place to prevent the
occurrence or limit the impacts of
risks. The Board reviews the Group
risk profile at half and full year which
includes a review of Emerging and
Principal risks faced by the Group.
The Audit and Risk Committee
provides independent oversight of
the effectiveness of the Group’s risk
management and associated internal
control environment.
Group risk
management
The Group’s risk management
process allows the Group Chief
Executive to monitor the risk profile
of the business through the Executive
Committee (ExCom) and the Executive
Risk Steering Group (ERSG).
Executive sponsorship for risk
management is provided by members
of the ERSG who provide valuable
input to Group risk themes based on
profiles within their respective
businesses and functions. Maintaining
all Business, Functional and
Operational risk registers alongside
the Group risk register within the IRIS
ERM system, enables greater
visibility of core and common themes
and linkage of these themes between
the Group and business risk profiles
to better inform half and full year
reviews. Work has taken place during
2023 to align both US and UK leaders
for Functional reviews to improve
understanding of functional risk
profiles and to provide greater insight
on trends and movements.
Risk Process
Business risk
management
Balfour Beatty’s business units are
distinct and diverse, meaning risk
profiles differ across operations.
Having a consistent approach in
both UK and US based businesses
is essential to gaining insight into
business risk and rolling this up to
Group level. The adoption of the IRIS
ERM system by Strategic Business
Units (SBU) has increased oversight
of operational and business risk
profiles to support decision making
in line with pursuit of strategies.
Work is ongoing to establish
SBU-specific risk appetites to better
inform risks requiring escalation to
senior management in the context
of each SBU’s business objectives.
Operational risk
The Gated Business Lifecycle
remains a fundamental control in
the management of Operational risk
across Balfour Beatty’s operations.
The review of risk profiles undertaken
at each review gate puts risk-based
decision making at the heart of both
current projects and future pursuits.
PowerBI Reporting provides the
business with insight to risk profiles
which can aid timely escalation of
project risk to business leadership,
and prompt appropriate management
response. The quality of risk
information is constantly evolving,
supported by internal and operational
audit activities and championed by
expectations set by Senior
Leadership on the importance of risk.
The business is continually exploring
how data from current systems can
be correlated with risk profiles to
better understand where there
may be unidentified risk exposures
and support a commonality on
management response. Utilising data
from previous risk events, whether
the exposures were realised or the
risk was managed well, can be used
to better understand risk profiles for
new pursuits.
Balfour Beatty plc Annual Report and Accounts 2023
93
Strategic report
RISK MANAGEMENT CONTINUED
Risk attitude and appetite
Risks that the Group is exposed to
throughout day-to-day delivery and the
longer-term pursuit of strategic objectives
continue to be monitored in line with appetite
– and decisions taken in line with the
organisation’s attitude to risk.
The Group’s risk appetite remains aligned to
the Build to Last strategy, ensuring that
risk-based decision making on whether
to accept or further manage risk supports
the pursuit of its objectives. The strength
and ongoing effectiveness of the internal
control environment within the risk
structure outlined on pages 145 to 151
is considered when addressing risk appetite.
The Board, its sub-committees and executive
management discuss and measure the
nature and extent of current and Emerging
Risks faced by the Group in achieving its
long-term strategic objectives. This requires
biannual review of the effectiveness of its
internal control environment within the risk
management structure outlined on pages 145
to 151. The outcome of this assessment
represents the Group’s risk appetite and can
be set out in the context of the Group’s
values as shown below.
Build to Last strategy
Risk attitude
Appetite
Related principal risks
Lean
We create value for
our customers and
drive continuous
improvement
Expert
Our highly skilled
colleagues and
partners set us apart
Trusted
We deliver on our
promises and we do
the right thing
Safe
We make
safety personal
Balfour Beatty remains committed to challenging ways of
working to improve outcomes and become more competitive.
The Group is prepared to accept a level of operational risk
in its delivery of cost effective solutions.
Such risks must not be at the expense of meeting
customer requirements.
The Group’s risk appetite for efficiency remains moderate.
Balfour Beatty continues to develop its expertise in
engineering, computer science, robotics, data analytics,
electronics and electrical and mechanical engineering to
deliver the very best solutions to its customers.
This drive for sustained innovation is undertaken with
industry experts in managed and safe environments to
minimise risk.
The Group continues to have a moderate appetite for
expert risk.
Balfour Beatty must deliver on its promises to stakeholders.
Aligning delivery objectives to those of the customer is
critical to ensuring successful outcomes – the Group strives
for Right First Time delivery.
Ensuring integrity is embedded throughout the Group and its
supply chain partners is key to doing the right thing.
The Group’s appetite for not meeting customer expectations
remains low.
Conducting business in a safe way and providing a
Zero Harm environment for Balfour Beatty’s people
and stakeholders is paramount.
The Group’s appetite for health and safety risk remains
at zero.
Sustainable
We act responsibly
to protect and
enhance our planet
and society
Balfour Beatty is committed to leaving a positive legacy
for the society and communities it serves.
The Group seeks to minimise its impact on the
environment, working with supply chain partners,
customers and communities to ensure its choices are
sustainable, whilst delivering customer objectives, and
pursuing new initiatives and technologies to achieve this.
The Group’s appetite for risk around sustainability is moderate.
7
9
12
p100 p101 p102
2
3
6
7
13
p97
p97
p99
p100 p103
M
REMAINS
MODERATE
M
REMAINS
MODERATE
L
REMAINS
LOW
2
3
4
5
6
p97
p97
p98
p98
p99
7
8
9
10
11
p100
p100
p101
p101 p102
1
7
p96
p100
2
3
7
p97
p97
p100
0
REMAINS
ZERO
M
REMAINS
MODERATE
94
Balfour Beatty plc Annual Report and Accounts 2023
Emerging Risks
The Group requests specific Emerging Risk
identification by each Strategic Business Unit
(SBU) and Enabling Function (EF) as part of
the Group’s biannual half year and full year
risk submissions. The functionality in IRIS to
flag Emerging Risks on respective strategic
risk registers enables greater visibility, allowing
SBUs and EFs to monitor Emerging Risks
alongside their existing review of current risks.
Balfour Beatty considers Emerging Risks
in relation to their longer-term impact and
shorter-term risk velocity and examines
them in the context of its viability statement.
The Group has defined Emerging Risks as
those risks faced by the business that:
@ are likely to be of significant scale beyond
a three-year timeframe;
@ have the velocity to significantly increase
in severity within the three-year period;
and/or
@ are not sufficiently defined or if there is not
enough information developed to enable
an informed assessment to be made of
their impact and whether they pose a
threat or an opportunity to the Group.
The discussion and review of Emerging Risks
includes ‘horizon scanning’ activities around
potential uncertainties that are not sufficiently
defined or developed to enable an informed
assessment to be made of their impact on
the ongoing viability of the Group and
whether they pose a threat or an opportunity.
The exercise conducted in 2023 sought to:
@ stress test the current Risk Profile ahead
of the full year review;
@ support the Board in its obligations in
identifying and understanding Emerging
Risk through horizon scanning; and
@ increase strategic resilience of the
business strategy.
Our risk matrix
the current risk rating and considered in the
context of risk appetite.
The matrix is calibrated to cater for financial
impacts across the three tiers of the risk
management framework: Operational risk,
Business risk and Group risk, which allows
the same matrix to be utilised for common
assessment whilst providing a flexible,
tailored approach for risks to be measured in
the context of project or business financial
objectives, and catering for adjustment when
rolled-up to Group level.
The Group remains prudent in ensuring
any exposure presented through economic
uncertainty and ongoing political and societal
factors are well understood and well managed.
Reviews of the Group risk profile have
continued to monitor where these drivers
manifested within existing Group risks.
The Balfour Beatty Group PI Matrix prompts
a consistent assessment of all risks identified
in the business in terms of their impact across
delivery, health, safety and sustainability and
financial impacts. The impact is assessed
alongside probability, providing an overall
rating that allows for the prioritisation and
comparison of risk and opportunity events.
This overall rating is assessed as the current
rating, which is based on controls that are in
place and effective for managing the risk.
Response to risks is determined based on
The Group is vigilant in ensuring risks are
accurately assessed and that controls
implemented and monitored are
commensurate with the risk exposure.
The decision to revise risk assessments
and associated risk ratings are subject to
robust review and, often the downgrading
of a risk is only made following a continued
period of certainty whereby movements
of internal and external factors are less
volatile and controls are known to be
well-established and effective.
Group Probability and Impact (PI) Matrix
8
12
2
6
4
13
5
3
10
7
1
9
11
c
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p
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S
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d
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M
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M
i
T
C
A
P
M
I
1
2
3
4
5
6
7
8
9
Health and safety
Contracting terms and conditions
Project delivery
Joint ventures
Cybersecurity
People and talent
p96
p97
p97
p98
p98
p99
Sustaining focus on Build to Last strategy p100
Financial strength
Supply chain
10
Code of Ethics compliance
11
Legal and regulatory
12
Legacy pension liabilities
13
Economic uncertainty
p100
p101
p101
p102
p102
p103
Rare
Unlikely
Possible
Likely
Almost certain
PROBABILITY
Balfour Beatty plc Annual Report and Accounts 2023
95
Strategic report
RISK MANAGEMENT CONTINUED
Principal risks
Balfour Beatty’s decision making remains
centred on a comprehensive and detailed
understanding of the exposures faced by
the organisation, carried out through
business-level and Group-level reviews.
Identifying risks that could impact on the
achievement of business and strategic
objectives, and consistently assessing and
responding to these, is essential to balancing
risk taken in line with risk appetite. The Group
risks that link to strategic plans, as well as
any Emerging Risks identified for the
business are reviewed and where required,
assessed to enable the Board to undertake
an assessment of the overall profile of
exposure faced by the Group. The Board
considers whether this represents new,
increased or decreased threats and the
level of response required to manage
them. The risk profile comprises both
interconnected and discrete risks at strategic,
business and operational level and focuses
on understanding the worst-case scenarios
that could threaten the Group’s strategy and
business model, and ongoing viability see
pages 8 and 104. The Group’s Principal risks
are described on pages 96 to 103.
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
1
HEALTH AND SAFETY
The Group works on and delivers
significant, complex and potentially
hazardous projects which require
continuous monitoring and
management of health and
safety risks.
What impact it might have
Failure to manage these risks presents
the potential for significant harm,
including fatal or life-changing injuries to
employees, subcontractor staff, third
parties or members of the public. It also
presents the threat of potential criminal
prosecutions, significant fines, debarring
from contract bidding and reputational
damage.
For more information please see
‘Health, safety and wellbeing’
on pages 44 to 51.
Common themes which drive health and
safety risks include:
@ inadequate risk identification/
assessment;
@ lack of competence or training;
@ processes that fail to deliver risk
elimination or mitigation;
@ lack of clear safety leadership,
impacting broader safety culture;
@ ineffective management and/or
oversight of subcontractors, JV
partners and other third parties;
@ failure to cascade and follow Health
and Safety procedures; and/or
@ lack of focus on the wellbeing and
mental health of staff faced by daily
work and life pressures.
Balfour Beatty’s Zero Harm strategy and its
supporting policies and procedures continue
to act as key controls in managing the risks
presented in the industry and across the
Group’s operations.
Owner
Safety and Sustainability Committee
Risk movement
–
No movement
Health and Safety risk continues to be
managed by well-established and
embedded controls and processes
throughout the Group and within
operational DNA (including partners)
to represent a stable control
environment.
Multiple contemporaneous failures
within this environment would be
required for the risk to be realised.
Internal and external audit provides
verification of systems and compliance
across the business. The strategy and
associated action plans are regularly
reviewed and monitored by management
and external accreditation bodies.
Zero Harm by Design training and process
in place across the business.
Experienced and competent health and
safety professionals provide advice and
support, monitor culture and undertake
regular reviews.
The Safety and Sustainability Committee
of the Board and business Health and Safety
executive leadership teams meet regularly
throughout the year to capture lessons learnt
and develop a consistent approach to health
and safety best practice. KPIs are reported
and closely monitored.
Training programmes (including behavioural
training) are in operation across the business,
including an increased focus on mental
health and wellbeing, with tracking
through leading KPIs.
Operational ownership of fatal risks through
well-established working groups with
Managing Director leadership.
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Balfour Beatty plc Annual Report and Accounts 2023
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
2
CONTRACTING TERMS AND CONDITIONS
The Group repeatedly delivers high
profile, complex and significant
projects that regularly carry
specialised deliverables combined
with multifaceted, and occasionally,
stringent commercial terms.
Establishing the right contractual
approach and delivering customer
obligations within agreed terms
alongside technical complexity, can
pose a risk if not managed correctly.
Maintaining a balance to protect the
interests of all parties, including the
supply chain, whilst maintaining a
profitable and sustainable order
book, and delivering stakeholder
value requires competency, skill and,
increasingly, greater collaboration
with clients.
What impact it might have
Failure to fully understand or manage
complex delivery in line with commercial
terms across the portfolio could potentially
result in disputes, leading to cost and
time to resolve, as well as potential
losses or reduction in profitability and
damage to relationships with key
customers and supply chain or
JV partners.
Failure to effectively engage and
collaborate with customers and supply
chain partners to agree contract terms
could additionally result in choosing not
to pursue certain works or may even
limit access to certain targeted markets
in the future, impacting on future order
book and growth targets.
3
PROJECT DELIVERY
Failure to deliver projects consistent
with customer expectations and
required specifications and/or quality,
in line with schedule and budget, and
to minimise the risk of increased
costs, delay related damages and
defect liabilities.
What impact it might have
Failure to manage and/or deliver against
customer expectations, scope
specifications and key deliverables to
time and budget could result in
exposures such as design issues,
contract disputes, liquidated damages,
cost overruns and failure to achieve
anticipated customer savings which in
turn could reduce the Group’s
profitability and damage its reputation.
The Group may also be at risk of
longer-term exposures including
litigation and costs to rectify defective
or unsafe work. Such failure may also
result in liability under the Building
Safety Act 2022.
Significant delivery failure on a
high-profile project could result in
substantial reputational damage,
debarment and significant associated
costs of rectification or dispute resolution.
Key causes that could drive this
risk include:
@ lack of clearly defined bid strategy
and engagement plan;
@ misalignment between Balfour
Beatty and client approach;
@ working with new or unknown
customers and partners, with no
previously established relationship;
@ entering into new markets or use of
new, unfamiliar technology;
@ lack of supply chain capacity to
accept and manage back-to-back
terms, resulting in increased risk
carried by Balfour Beatty;
@ failure to engage in an early
collaborative approach with the
customer to fully understand
requirements;
@ clients taking a more risk averse
attitude, driven by their own financial
or market pressures, resulting in a
less-balanced approach to allocation
or sharing of risk; and/or
@ lack of early identification of a
contracting strategy between
all parties.
The Group Tender and Investment
Committee (GTIC) reviews and challenges
all proposals in line with minimum
commercial expectations and the Circles of
Risk guidance.
Clear, defined delegated levels of authority
are in place for approving all tender and
infrastructure investment decisions.
Customer adoption of the UK Government
Construction Playbook steers an approach
towards increased collaboration, which
results in reduced risk, and an increased
focus on quality of bid rather than being
solely cost driven.
A ‘getting left early’ attitude adopted prior to
the procurement process enables influence
over contracting and procurement model. A
shift to a ‘two-stage’ tender approach
supports an early collaborative, solution-
based approach with customers and
minimises risk on both sides – especially in
new markets or ‘first-of-a-kind’ initiatives.
Ongoing work winning initiatives continue in
place across the Group to drive increased
commercial and customer awareness and
further embed an understanding of
expectations on margins and cost.
The Gated Business Lifecycle review process
highlights key commercial risks closely
aligned to Circles of Risk to ensure adequate
challenge and qualification of terms, and
early mitigation of key exposures.
Monthly business reviews identify early
indicators with potential for disputes arising
on contracts, including across the
subcontractor base.
Owner
Group Tender and Investment Committee
Risk movement
–
No movement
Current risk assessment remains,
reflecting the importance that the
business continues to attribute to
managing this risk as it enters into
new markets, works with new clients
and monitors customers’ response to
their own market pressures. Controls
to champion a more collaborative
approach with customers remain key
in seeking fair terms commensurate
with risk profiles, particularly with
new, complex and in some cases,
unfamiliar work scopes. GTIC and
Circles of Risk are key in ensuring we
do not proceed with unacceptable
terms, such as accepting process risk.
Controls to challenge and scrutinise
decision making prevent the Group
from bidding for unsustainable work,
limit potential exposure and lead to a
more risk-balanced portfolio.
Regular reporting of risk profiles
alongside mitigation strategies to
management throughout execution
remain key.
Close monitoring of this risk will
continue into 2024 as the Group
works closely with new and
existing customers.
Failure to implement, maintain and
challenge operational and commercial
controls (as detailed within checklists at
GBL reviews) could result in:
@ lack of comprehensive understanding
of contract obligations;
@ inadequate resource (people, plant
and materials inc. supply chain) or
competency verification of resource;
@ unrealistic project schedules;
@ unrealistic progress assessments
and cost to complete judgements
which could arise due to poor
training, lack of supervision, or lack
of accountability;
@ overly optimistic claim recovery
assumptions;
@ incomplete visibility and appreciation
of scale of commercial judgements;
@ failings in administering the contract
terms to safeguard or protect future
claims, change orders and
extensions of time (EOTs);
@ poor management, selection and
governance of subcontractors; and/or
@ lack of robust quality assurance
processes and systems.
Customer intervention and additional
pressure to complete could also be a
driver to this risk.
The GBL process continues to maintain
focus on identifying and reporting risks,
including planning, programme accuracy,
cost and cash forecasting and
resource reviews.
Early engagement of integrated work
winning and project delivery teams across
the GBL process ensures customer
expectations are understood and realistic.
Deployment and ongoing monitoring of
strong commercial management and
contract administration processes through
the project lifecycle.
Optimal scheduling of key staff and
associated competencies within project
delivery teams and senior management,
with ongoing and focused training.
The site mobilisation hub facilitates early
and effective start-up on site.
Drive for Right First Time delivery including
digital progressive assurance of project
delivery championed by UK Quality
Leadership Team with ExCom sponsorship.
Pre-qualification and competency/capacity
verification of supply chain partners, and
close monitoring of subcontractor and
supplier performance throughout the
project lifecycle.
Professional indemnity cover in place to
provide further financial safeguards.
Owner
Group management
Risk movement
–
No movement
This risk continues to be managed
through the consistent application of
operational reporting systems and
diligent use of short interval control
processes across all stages of project
delivery, providing greater certainty
of operational outcomes.
In 2023, the UK Quality Leadership
Team with ExCom sponsorship,
continued to champion a consistent
approach, improving quality
awareness and driving the
organisation’s Right First Time
‘mantra’ to project delivery.
Verification of the effectiveness of
controls remains key to managing
this risk together with an enhanced
focus on quality performance.
Balfour Beatty plc Annual Report and Accounts 2023
97
Strategic report RISK MANAGEMENT CONTINUED
Principal risks continued
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
4
JOINT VENTURES
Failure to implement robust controls
around the selection of joint venture
(JV) partners, or to define a clear
governance structure to monitor
delivery or establish a ‘one team’
culture may result in failure to deliver
expected returns and/or minimise the
risk of unexpected liabilities.
What impact it might have
Inability to select the right JV partner,
aligned to Balfour Beatty’s culture and
values, may result in a mismatch of
partner objectives, driving a knock-on
impact on the effective delivery of
contract requirements and a
misalignment in approach, resulting in a
significant impact to profitability and
reputational damage.
Any potential failure of a JV partner
could expose the Group to increased
resourcing costs and ongoing liability,
and warranty risks.
Disputes with JV partners could impact
the Group’s ability to operate successfully
and/or expand within its chosen markets.
Failure to align and integrate with the
Group’s health and safety management
expectations could result in increased
potential for injury and/or fatality.
5
CYBERSECURITY
Failure to protect key Group and
employee data or other confidential
information due to a breach of system
security and/or disruption to delivery
caused by system loss.
What impact it might have
Realisation of this risk could result in:
@ reputational harm (loss of market and
customer confidence);
@ loss of data, resulting in potential
fines and prosecution;
@ loss of intellectual property and
competitive advantage; and
@ operational impact restricting ability to
carry out business critical activities
(disruption to business as usual).
The risk could be driven through:
@ ineffective assessment of potential
JV partners including liquidity,
capacity and capability;
@ failure to ensure ‘fit for purpose’
terms with the right JV partner;
@ lack of clarity on the delegated levels
of authority between partners;
@ delayed and fettered decision making
between partners;
@ segregation from central management
systems (financial and operational);
@ lack of understanding of contract
requirements and expectations;
The Group has broad capability to
self-deliver projects but recognises that
establishing the right partnership can be an
opportunity to deliver work.
The GTIC process applies equally to all joint
ventures, ensuring approval and oversight.
Appointment of an appropriately
constituted JV board acts as the main
governance vehicle for the Group.
The GBL process provides governance over
JV partner selection, and highlights
partner-related risks closely aligned to
Circles of Risk including those related to
capacity, capability, previous experience
with the Group and liquidity.
@ lack of oversight over JV reporting and
application of processes implemented
across the project; and/or
Experienced project directors are appointed
to manage JVs and provide an ongoing
assessment of operational delivery risk.
@ misalignment of Balfour Beatty
and JV partner cultures, values
and practices.
Good practice, including the use of joint
reporting systems (where appropriate), is
shared between all partners to embed the
Group’s expectations and culture
throughout JV delivery teams.
Balfour Beatty monitors the performance
of its JV partners throughout the lifecycle
of a project.
Owner
Group Tender and Investment
Committee
Risk movement
–
No movement
The current risk rating is maintained.
The business continues to monitor
delivery across existing JV
partnerships and remains focused on
strong governance controls that
underpin decision making and early
partner selection as it looks to enter
new market sectors and work with
new partners and alliances.
Monitoring of health and safety
progress of existing key and
high-profile JVs continues.
There are several internal and external
factors that could contribute to the
realisation of this risk including:
The risk is managed via the following
controls:
Owner
Group management
@ network and endpoint protection,
Risk movement
–
Some increase noted
Despite no material change in rating,
risk noted as increasing in likelihood
during 2023, reflecting the role of AI
and an increase in the sophistication
of potential attacks. Continuous
improvement in the control
environment is essential to maintain
pace with the potential risk, and
reduce the likelihood of a major
incident. Ongoing monitoring and
review of controls remains key in
managing this risk.
@ poor internal governance;
encryption, patching and data back-up;
@ failure to embed preventative culture;
@ lack of, or inadequate staff training
and awareness;
@ awareness training and internal testing,
with mandated annual refresher in place
for all users;
@ increased exposure to phishing
attacks and ransomware due to new
and emerging techniques to bypass
preventative controls, remote
working and the emergence of
AI amplifying the sophistication
of attacks;
@ lack of retention policy applied
to data;
@ operational failure;
@ inconsistent approach to data
security with joint venture/
external partners;
@ increased use of cloud services
without equivalent investment in
modern threat prevention; and/or
@ cyber-attack.
@ data governance framework regularly
reviewed, and supported by policies
and certifications;
@ incident management feedback
mechanism (embeds lessons learnt);
@ partner and supplier controls in place
including vendor risk management
assessments and established
relationships with external security
authorities;
@ infoSec actively monitoring for security
incidents and remediating where
necessary;
@ access to all core systems subject to
multi-factor authentication;
@ systems are subject to 24/7 monitoring
with review of core controls to provide
additional protection in areas that are
potential new attack paths;
@ strong focus on supply chain partners to
ensure they are resilient to fraud and
cyber-attacks;
@ knowledge sharing initiatives with supply
chain partners and wider industry;
@ enhancement of internet controls (web
proxy); and
@ cybersecurity maturity assessment
providing assurance and oversight of
the operation and effectiveness of
cyber controls.
98
Balfour Beatty plc Annual Report and Accounts 2023
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
6
PEOPLE AND TALENT
Inability to attract and retain the
required level of skilled and
competent people, including Early
Careers to deliver current and
future pipeline to meet the Group’s
objectives.
What impact it might have
Failure to recruit and retain
appropriately skilled people or grow
in-house talent could harm the Group’s
ability to win or successfully perform
specific contracts, manage delivery
cost increases, grow business and/or
meet strategic objectives, including
securing future order book.
A high level of staff turnover or low
employee engagement could result in
loss of competency and morale,
reducing business confidence within
the market, loss of stakeholder
confidence and an inability to drive
business growth or improvements.
For more information please see
‘Our people’ on pages 70 to 77.
Failure to effectively mitigate the
Group’s people risks may arise through:
@ overheating of market causing
significant increase in demand or
competition for people, specifically
in certain sectors and regions;
@ overbidding or ineffective workload
and location scheduling;
@ lack of visibility of longer-term
pipeline or perceived lack of career
progression resulting in talent leaving
the Group or sector;
@ inability to recruit and retain strong
performers;
@ failure to maintain a culture of pride
and advocacy across the workforce;
@ ineffective and/or inadequate
investment in the development of
existing skills and capabilities;
@ lack of a diverse workforce;
@ labour supply issues including
onerous immigration controls as well
as a draw for skillsets to
geographical areas in which the
Group does not operate;
@ cost of living pressures and other
economic factors driving increase in
attrition and people movement; and/
or
@ pressure from wage inflation and
increase in competitive offers from
other infrastructure opportunities
– both inside and outside the Group’s
areas of operation.
Owner
The Board
Risk movement
–
No movement
Risk rating has been maintained
throughout 2023. Despite seeing
some ease in attrition and wage
inflation pressure, retention of key
skills alongside future access to the
required talent pool remains a key
focus, particularly for medium to
longer-term pursuits. The risk
continues to be managed by
well-established controls around
workforce planning, sight of pipeline
and talent development.
Providing a positive working environment to
support the development of employees has
been central to Build to Last.
Specific controls to mitigate this risk include:
@ HR strategy and plan, with associated
measurement of KPIs to inform decision
making against budgets;
@ increased focus on longer term resourcing
needs with a Group overview to overcome
the risk of siloed thinking and action;
@ strategic workforce planning protocol to
prevent resource conflicts;
@ work winning and project delivery
alignment to internal and external
recruitment activities, with early review of
people and resourcing needs to ensure
adequate capability and capacity to deliver
work prior to bidding;
@ competency frameworks within core job
families identify and support the
development of key knowledge, skills and
expertise;
@ internal mobility supports career
development and redeployment
opportunities via Careers portal;
@ regular measurement and review of
recruitment and retention rates across the
business, with succession plans identified
for core roles and disciplines;
@ annual OPR (people and talent reviews),
with regular reviews of remuneration and
incentive arrangements to ensure they are
appropriate to help the Group attract,
motivate and retain key employees;
@ remuneration package benchmarking
against peers, with participation in industry
forums to track market position;
@ employee engagement surveys, with
appropriate actions to address findings;
@ Balfour Beatty Academy established
in the UK supports professional and
personal development;
@ training needs analysis and competency
tools (including COMAEA) identify
capability requirements and highlight
development gaps to inform investment
decision making;
@ strong employee communication channels
to celebrate individual, business and
Group-level successes and to increase
future pipeline visibility;
@ Affinity Networks established to create
a diverse and inclusive working
environment; and
@ increased investment in emerging talent
through strong graduate, apprenticeship,
and industrial placement/internship
schemes.
Balfour Beatty plc Annual Report and Accounts 2023
99
Strategic report
RISK MANAGEMENT CONTINUED
Principal risks continued
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
7
SUSTAINING FOCUS ON BUILD TO LAST STRATEGY
Failure by the Group to sustain and
build upon the strong foundation
and culture created through its
Build to Last strategy, and
supporting Cultural Framework.
What impact it might have
Inconsistency in working practices and
siloed cultures across the business
could drive increased costs and
operational errors which impact the
Group’s ability to deliver on its purpose
of Building News Futures, could impact
its ability to deliver sustainable
profitable growth and could result in
reputational damage.
Delivering against the Group’s core
Values of Lean, Expert, Trusted, Safe
and Sustainable is integral to its
success and purpose.
For more information please see
‘Our strategy: Build to Last’ on
pages 26 to 27.
adaptations within core disciplines or
siloed cultures;
@ ineffective communication and/or
reinforcement of messaging through
a lack of leadership;
@ inadequate resourcing (financial,
physical assets and people) with the
right level of skill and competency;
@ lack of joined up approach across our
geographies, markets and business
units
@ new systems and processes being
used without appropriate controls
being in place and/or tested; and/or
@ new people joining the organisation
(including in leadership roles).
Failure to deliver and/or demonstrate
sustained focus and momentum could
arise from:
Ensuring Build to Last continues to drive
business success is a strategic priority for the
Group and is led by the Group Chief Executive.
Owner
The Board
Risk movement
@ complacency and/or localised
Controls include:
@ continuous measurement and reporting of
KPIs aligned to Lean (cash flow and profit
from operations), Expert (employee
engagement), Trusted (customer
satisfaction), Safe (Zero Harm) and
Sustainable (carbon emissions) within each
business;
@ Cultural Framework is embedded in
systems and processes, aligning the UK
and US under one unified approach and
reinforcing expected values and
behaviours;
@ clear and frequent senior leadership
engagement across the businesses and
functions;
@ upskilling, training, and business and
development initiatives at key levels
throughout the business to reinforce Build
to Last and the Cultural Framework for all
employees and in key job families i.e.
commercial, project management,
engineering etc;
@ induction, recognition and PDR approach
aligned to Build to Last strategy and
Cultural Framework;
@ Zero Harm provides a consistent approach
for the Group on the health and safety
agenda and delivery against the Safe value;
@ Building New Futures sustainability
strategy provides a consistent approach for
the Group on the Sustainability agenda and
delivery against the Sustainable value; and
@ regular programme of communications to
reinforce strategic priorities across the
Group. In 2023 this included multiple
Business Unit and Enabling Function
conferences reaching over
4,000 colleagues.
The Group continues to operate with a low
level of financial risk as evidenced by its
robust average net cash position.
The Group operates with a centralised
Treasury function, responsible for managing
key financial risks, cash resources and the
availability of liquidity and credit capacity.
The Group maintains significant undrawn term
committed bank facilities with a banking
group of high credit quality to underpin the
liquidity requirements of the Group. The
refinancing of the Group’s core revolving
credit facility (RCF) in 2023 increased the
quantum and extended the maturity of its
available facilities.
The Group maintains significant bank and
surety bonding facilities to deliver trade
finance requirements of the Group on an
ongoing basis.
The Group operates standardised reporting,
forecasting and budgeting financial processes.
This allows monitoring of the impact of
business decisions on financial performance
over future time horizons.
–
No movement
The Build to Last strategy and the
supporting Cultural Framework are
critical to the continuing success of
the business
Ensuring the Build to Last strategy
and Cultural Framework underpin
Balfour Beatty’s operations will
continue to be essential to the
success of the business.
Owner
The Board
Risk movement
–
No movement
Well-established controls within
Finance and Treasury functions
continue to demonstrate a clear ability
to manage existing and anticipated
risk, with the refinancing programme
implemented in the last 18 months
delivering an increased RCF and
lengthened debt maturity profile,
while the Group has maintained a
robust average net cash position.
Failure to manage financial risks,
including forecasting material exposures,
and the financial resources of the Group
that underpin its ability to:
@ meet ongoing liquidity obligations so
that it remains a going concern; and/
or
@ meet financial covenants as set out
in financing facility agreements.
8
FINANCIAL STRENGTH
The Group’s inability to maintain
the financial strength required to
operate its business and deliver its
objectives.
What impact it might have
Failure to protect and effectively
maintain the required financial strength
will mean the Group:
@ fails to meet financial covenant
tests, as set out in its financing
facility agreements, leading to a
default event if not remedied within
a specific grace period;
@ fails to pass required tests that
allow continued use of the going
concern basis of accounting in
preparing financial statements;
@ suffers a negative impact on
profitability and loses the
confidence of its chosen markets
and/or shareholders; and/or
@ loses the ability to compete for key
long-term contracts that are critical
to its viability and delivery of
long-term objectives.
100
Balfour Beatty plc Annual Report and Accounts 2023
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
9
SUPPLY CHAIN
Supply chain partners fail to meet
the Group’s operational
expectations and requirements in
relation to capacity, competency,
quality, financial stability, safety,
environmental, social and ethical
values.
Lack of capacity, competency, stability
or poor behaviours within the Group’s
supply chain may arise through:
@ failure to embed the Group’s
expectations within the procurement
process;
The Group continues to develop long-term
relationships with key supply chain partners,
working closely to understand their operations
and dependencies. This includes relationship
mapping with strategic suppliers and lessons
learnt from previous projects together with
briefing on order book requirements.
What impact it might have
Failure to manage and monitor
subcontractors or suppliers could result
in the Group becoming involved in
disputes, being forced to find
alternative providers or undertaking/
redoing the work itself. This could
result in delays, business disruption,
additional costs or a reduction in
quality/increased defects owing to lack
of expertise or competency.
Mistreatment of suppliers,
subcontractors and their staff, or poor
ethical standards in the supply chain,
could lead to legal proceedings,
investigations or disputes resulting in
business disruption, losses, fines and
penalties, reputational damage and, in
the worst case, debarment.
@ inadequate assessment of supply
chain partner capabilities, capacity
and process (including liquidity,
quality, safety, ethics, material
management and governance over
compliance with labour laws;
@ lack of supplier resilience arising
from rising market pressures (e.g.
global energy prices, inflation,
shipping delays, natural disaster,
ongoing political instability, etc).
@ failure to accurately assess project
resource requirements and key
deliverables;
@ increased tariffs and border delays
following UK’s exit from the EU;
@ lack of adequate oversight,
supervision or management during
delivery; and/or
@ unethical treatment of the
downstream supply chain.
10
CODE OF ETHICS COMPLIANCE
Failure to comply with the Code of
Ethics across the Group including
employees, joint venture partners,
and within the supply chain.
What impact it might have
Failure to comply with the Code of
Ethics and Balfour Beatty values could
leave the Group exposed to:
@ instances of bribery and corruption;
@ fraud, deception, false claims or
false accounting;
Failure to comply with the Code of
Ethics and Balfour Beatty values could
arise from:
@ failure to adopt a compliance
risk approach;
@ failure to establish appropriate
corporate culture;
@ failure to embed the Company’s
values and behaviours throughout
the organisation and across
joint ventures;
@ unfair competition practices;
@ lack of effective training programme;
@ human rights abuses, such as child
and other labour standards
generally, illegal workers, human
trafficking and modern slavery;
@ unethical treatment of and by the
supply chain;
@ failure to have a robust testing and
compliance monitoring programme
in place;
@ ethics and values being
compromised as a result of
commercial pressures;
@ potential impact to staff morale and
@ failure to ensure awareness of
whistleblowing processes across
the organisation; and/or
@ deliberate or reckless
non compliance.
wellbeing; and/or
@ potential health and safety impact.
Any of these failures could result in
legal investigations or disputes,
resulting in business disruption, losses,
fines and penalties, reputational
damage and debarment.
For more information please
see ‘Ethics and compliance’
on page 52.
The risk management framework and the GBL
process allows for early (pre-award) and
ongoing (delivery) assessment of the
appropriateness of resource allocation and
dependencies and development of
procurement strategies.
Pre-qualification accreditation in place for core
suppliers (validated in Gates 1–3), with oversight
of supplier metrics and overall ‘health’.
Contingency plans address potential
subcontractor failure, including replacement
supplier list.
A central database tracks subcontractor
scoring in relation to capacity, compliance,
performance and financial health, with market
trends and insights closely monitored and
distributed to relevant businesses.
The Group obtains project retentions, bonds
and/or letters of credit from subcontractors,
where appropriate, to mitigate the impact of
any insolvency.
Group-wide Code of Ethics cascaded to
supply chain, with targeted training
programmes and related policies and
procedures in place.
Detailed assessment process across supply
chain following any major natural disaster/
political incident to identify any disruption or
discontinuation of supply.
Code of Ethics and associated training
programme deployed Group-wide (last
refreshed and re-launched in 2022). Related
policies, procedures and training are
refreshed as appropriate – with Right to
Respect training being deployed across
the business.
Ethics and Compliance updates provided to
the Audit and Risk Committee biannually.
Each business unit, supported by the Ethics
and Compliance function, is responsible
for embedding the Code of Ethics and the
Company’s values and behaviours within
its operations.
The Group has a range of operational controls
(commercial, including procurement, due
diligence and risk assessment) that are
designed to identify and manage risks
internally and with third parties.
Independent third-party whistleblowing
helpline and dedicated email contact are in
place and actively promoted. All in-scope
complaints are independently investigated by
the Internal Audit and Compliance teams and
appropriate action is taken, where necessary.
Balfour Beatty works with a limited number
of agents, all of whom are, in addition to the
Group’s due diligence and approval process,
subject to specific contractual clauses,
policies and agreements.
Use of a central database to track supplier
and subcontractor performance history
providing insight into their internal operating
processes, governance and values.
Owner
Group management
Risk movement
–
No movement
Volatility in the market seen in the past
18 – 24 months, driven by inflation and
rising energy prices, has been a core
driver to this risk; however robust
controls implemented during and post
the COVID-19 pandemic continue to
manage this risk well, with strong
relationships maintained with key
supply chain partners. Closer
monitoring of supplier health, key risk
indicators and tracking of core
commodities, has meant this risk
remains stable. Focus remains on
monitoring any potential impacts from
ongoing political instability.
Owner
The Board
Risk movement
–
No movement
The refreshed Code of Ethics
programme was launched in 2022
and has continued to be embedded
throughout 2023, with Right to
Respect training being deployed
across the business, and specific
behaviours awareness to
targeted audiences.
Controls deployed through both
internal and external systems allow
oversight of compliance with the
Code of Ethics and enable the
business to monitor and manage
any potential breaches.
Balfour Beatty plc Annual Report and Accounts 2023 101
Strategic report RISK MANAGEMENT CONTINUED
Principal risks continued
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
11
LEGAL AND REGULATORY
The Group does not respond to any
change in relevant legal, tax and
regulatory requirements in a timely
manner or does not fully
understand the implications of
certain regulatory changes
resulting in a potential breach.
What impact it might have
The Group could face legal
proceedings, investigations or disputes
resulting in business disruption, losses,
fines and penalties, reputational
damage and debarment.
Such action could also impact the
valuation of assets within the affected
territory as well as have an impact on
shareholder confidence.
12
LEGACY PENSION LIABILITIES
The Group is exposed to and must
therefore effectively manage
significant defined benefit pension
risks.
What impact it might have
Failure to manage these risks
adequately could lead to the Group
being exposed to significant additional
liabilities due to increased pension
deficits.
This has the potential to affect the
longer-term viability of the Group as
well as incur reputational harm.
Failure to recognise or adapt to potential
impacts arising from changes in
applicable laws affecting the Group’s
businesses may result from:
The Group actively monitors and responds to
tax, legal and regulatory developments and
requirements in the territories in which
it operates.
Owner
The Board
Risk movement
@ lack of awareness of any changes in
laws or regulations made across the
geographies and jurisdictions within
which the Group operates;
@ ineffective communication of the
requirements across relevant
business units; and/or
@ entering into new markets and/ or
sectors with limited expertise and
due diligence.
Changes in the law and the requirements
arising from them are clearly cascaded to all
affected businesses.
Local legal and regulatory frameworks are
considered as part of any decision to conduct
business in a new territory.
Appropriate and responsive policies,
procedures, training and risk management
processes are in place throughout the
business.
Engagement of third-party expertise where
required on specific or localised legislation
and policy.
–
No movement
Unforeseen exposure to legal and
regulatory change is considered
extremely unlikely. The controls
embedded across the Group are
considered to remain effective in
managing this risk.
The Group is unable to ensure that the
trustees of the pension funds react
effectively to or manage:
@ changes in interest rates or outlook
for inflation;
@ an increase in life expectancies;
@ regulatory intervention or legislative
change;
@ prudent funding assumptions; and/or
@ investment performance of the
funds’ assets.
Owner
The Board
Risk movement
–
No movement
No change in risk. The trade-off
between risk and cost is kept under
regular review and has been
scrutinised fully as part of the 2022
actuarial valuations of the Group’s two
main UK funds.
The Group continues to constructively and
regularly engage with the trustees of the
pension funds to ensure that they are taking
appropriate advice and the funds’ assets and
liabilities are being managed appropriately. This
includes quarterly performance reporting and
investment committee meetings in which the
Company is represented.
The funding and investment arrangements of the
pension funds are subject to an in-depth triennial
valuation and funding review with regular
monitoring in years between.
The Group’s two main UK funds have hedged in
excess of 80% of their exposure to interest rate
and inflation movements and the largest of the
UK funds has hedged around 40% of its
exposure to an increase in life expectancies.
Following completion of the 31 March 2022
triennial funding review of the main UK fund in
May 2023, a substantial amount of de-risking
was agreed with the trustees and the majority of
this was implemented by 31 December 2023.
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Balfour Beatty plc Annual Report and Accounts 2023
DESCRIPTION AND IMPACT
CAUSES
MITIGATION
13
ECONOMIC UNCERTAINTY
The effects of national and
international market trends
including political, societal or
regulatory change, may cause
customers to re-evaluate existing or
future infrastructure expenditure
and the procurement of services. It
may also lead to changes in the
price and availability of labour,
products and services.
What impact it might have
Any significant delay or reduction in the
level of customer or local authority
spending or investment plans could
adversely impact the Group’s strategy
and order book, reduce revenue or
profitability in the near or medium
term, and negatively impact the
longer-term viability of the Group.
Restrictions on the availability of skilled
labour and competitively priced
materials could lead to increased costs,
reduced margins, and hence potentially
a devaluation of the business.
Financial failure of a customer,
including any government or public
sector body, as well as a key supply
chain or joint venture partner could
result in increased financial exposure to
counterparty risk.
Potentially negative impacts could be
related to the effects of:
@ customers postponing, reducing or
changing expenditure plans including
any delays associated with funding
or planning constraints or to meet
‘greener’ solutions;
@ impact of inflation arising from a
multitude of factors including rising
global costs of energy, strained
supply chains, rising demand and
residual impacts still being felt from
the UK’s exit from the EU;
@ pressure on public finances caused
by inflationary pressures and strained
public finances more generally;
@ increased competition (e.g. in the UK
from foreign investors acquiring
competitors);
@ political change or uncertainty;
@ recessionary pressures; and/or
@ increased supply chain risks (e.g.
solvency, people and materials).
The Group primarily operates across three
geographies (UK, US and Hong Kong) and
three sectors (Construction Services, Support
Services and Infrastructure Investments). This
balanced portfolio of projects provides
resilience and stability as the Group is less
exposed to a downturn in a single geography
or sector.
The Group continues to actively monitor market
trends and potential impacts and is involved in
government affairs activity to anticipate future
direction of government spend.
The financial solvency and strength of
counterparties forms part of key
considerations before contracts are signed
and assessments are updated and reviewed
whenever possible during the project
lifecycle. The business also seeks to ensure
that it is not overly reliant on any one
counterparty, whether customer, joint venture
partner or supply chain partner.
The annual review of market forecasts
continues to remain a core part of the Group’s
Budget and Plan processes, and a focus on
medium-term market outlook is considered and
presented by each strategic Business Unit.
Owner
The Board
Risk movement
–
No movement
Economic uncertainty continues to
create headwinds for our business,
from a combination of the lingering
impact of inflation, constrained public
finances and the prospect of elections
in both the US and UK. However
balanced against these, the Group has
a strong order book and continues to
see the award of major projects. The
Group also remains cognisant of
potential uncertainties presented by
ongoing conflicts and international
political unrest.
Other risks
Climate change and sustainability
Failure to manage and mitigate climate change is identified as a risk
on the Group register. The business continues to acknowledge that
understanding the impact of climate change on the organisation and
deploying the right strategies to mitigate any exposure is key.
The Group continues to explore the impact of climate change on the
business, and made significant steps in 2023 in understanding how
Group level risks are relevant across specific SBUs in the context of
their delivery objectives and growth strategies. An overview of this
work is outlined further in the TCFD section found on pages 105 to
115.
Delivering sustainability requirements is also identified as a Group
risk which recognises the varying pace of change anticipated across
geographies and the need for the Group to meet increasing, and
potentially onerous, reporting requirements and position itself to
meet future customer demands. There is also significant opportunity
presented by this as the business continues to develop its expertise
and capability. The Building New Futures sustainability strategy charts
a course for how Balfour Beatty plans to deliver carbon reduction
measures across its operations. More information is outlined in the
Sustainability section on pages 54 to 69.
Balfour Beatty plc Annual Report and Accounts 2023 103
Strategic report VIABILITY STATEMENT
In accordance with the requirements of the
Code, the Directors have assessed the Group’s
long-term prospects and its viability over a
three-year period to 31 December 2026.
Assessing the Group’s
long-term prospects
The Group operates primarily in the UK, US
and Hong Kong, specialising in multiple facets
of the construction and services industry.
The Group also maintains an Investments
portfolio which provides a strong underpin
to the Group’s balance sheet.
The Group has many elements necessary
for future business success – expertise in
technology and innovation, strong customer
relationships and a talented workforce.
The Group seeks to build on these strong
foundations with continued investment in
technological advances, not only to ensure
that projects are delivered on time and as
efficiently as possible whilst maintaining the
utmost focus on safety, but also to remain
market leaders in the way construction is
conducted and to push the boundaries of
innovation in line with achieving industry-
leading margins.
In doing so, the Group is also mindful of the
effects it has on the environment. The Group
strives to adapt to the emerging demand to
deliver innovative and sustainable solutions
which ensure the impact of any adverse
environmental impact is appropriately
mitigated against. The Directors have
assessed the impact of climate change on
the Group’s viability and have concluded that
whilst no significant impact is expected in
the medium term, the Directors will continue
to monitor and assess any impact of climate
change that may threaten the Group’s
viability in the longer term.
Assessing the Group’s viability
The Directors have assessed the Group’s
viability over a three-year period and consider
this to be appropriate because this is the
period aligned to the current order book
and for which there is a good visibility of
the pipeline of potential new projects. This
period also allows greater certainty over the
forecasting assumptions used in labour and
material pricing, skills and availability. There
is inherently limited visibility of contract
bidding opportunities beyond the three-year
period, and the accuracy of any forecasting
exercise is also impeded by uncertainties
around the costs involved in delivering
contracts. Consequently, the Group performs
its medium-term planning over three years.
The Directors and the Executive Risk
Steering Group continue to monitor the
principal risks facing the Group, including
those that would threaten the execution
of its strategy, its business model, future
performance, solvency and liquidity.
104
Balfour Beatty plc Annual Report and Accounts 2023
As part of assessing the Group’s future
viability, the Directors have considered these
principal risks and the mitigations available to
the Group. These principal risks and the
consequent impact these might have on the
Group as well as mitigations that are in place
are detailed on pages 96 to 103.
In their assessment of the Group’s viability,
the Directors have also considered the need
to be successful in focusing on the Group’s
values of Lean, Expert, Trusted, Safe and
Sustainable detailed on pages 26 and 27.
The Group’s progress in relation to Build to
Last for continuous improvement remains
critical to future success, although success
is also dependent on the Group’s ability to
selectively win new contracts which could
be partly impacted by political changes.
The Directors have assessed the Group’s
viability in conjunction with its current
financial position as well as projections of
its debt facilities and associated covenants.
These financial projections are based on the
Group’s Three-Year Plan, which has been
built on a bottom-up basis with a Group
overlay to provide a more top-down view and
alignment to the Group’s strategic objectives.
The Group raised US$158m in June 2022
through the issue of new US private placement
(USPP) notes which will mature in tranches
in 2027, 2029 and 2032. In December 2022,
the Group secured a new £30m bilateral
committed bank facility which was
undrawn at 31 December 2023 and expires
in December 2024 with an extension option
for a further three years subject to certain
specific conditions. The Group’s only other
debt repayment obligations in the viability
assessment period are US$50m of USPP
notes due in March 2025.
In June 2023, the Group completed the
refinancing of its core £375m revolving credit
facility which was set to expire in October
2024, replacing it with a new £475m facility
that will expire in June 2027 (the RCF). The
RCF has an extension option for a further
year to June 2028, with the agreement of the
lending banks, and its terms and conditions
are materially the same as the prior facility.
The Group’s projections indicate that the
headroom provided by the Group’s strong
liquidity position, including its net cash
position and the debt facilities currently in
place, is adequate to support the Group over
the next three years.
The Group’s projections have been stress-
tested against key sensitivities which could
materialise as a result of crystallisation of
one or a combination of the Group’s principal
risks with the aim of stress-testing the
Group’s future viability against severe but
plausible scenarios. These scenarios include:
@ failure to manage effectively any adverse
economic impact;
@ an operating event that damages the
Group’s reputation and results in
significant penalty; and
@ failure to maintain progress made in
relation to Build to Last.
The above scenarios result in: a reduction in
revenue; a reduction in margin; an increase in
operating costs; a slowdown in the Group’s
investments asset disposal programme; and/
or negative changes to working capital.
The Directors also assessed a ‘perfect storm’
scenario by combining multiple scenarios and
modelling the resulting downside to stress-
test the Group’s viability if these cash flows
were to immediately and simultaneously
come under severe threat. This scenario is
aimed to test the viability of the Group if it
was to experience a catastrophic failure and
to allow the Directors to assess the
mitigations available to avoid this.
In assessing the Group’s viability under
these severe but plausible scenarios
(including in the instance of a ‘perfect
storm’), the Directors have also considered
the Group’s projected cash position (which
excludes cash that is not immediately
available to the Group), bank facilities and
their maturity profile and covenants, the
borrowing powers allowed under the
Company’s Articles of Association and
the fact that the Group’s PPP investments
comprise reasonably realisable securities
which could be sold to meet funding
requirements if necessary.
It is unlikely, but not impossible, that the
crystallisation of a single risk would test the
future viability of the Group. However, it is
possible to construct scenarios where either
multiple occurrences of the same risk, or
single occurrences of different principal risks,
could put pressure on the Group’s ability to
meet its financial covenants. The Directors
have considered the strength of the
mitigations available and whether these
are sufficient to avoid a catastrophic outcome
to the Group’s viability and believe that there
are sufficient mitigations immediately
available to minimise this risk.
Based on the assessment undertaken to
stress-test the Group’s viability against
severe but plausible scenarios, and taking
into account the strength of mitigations that
are immediately available to the Group, the
Directors have concluded that there is a
reasonable expectation that the Group will
be able to continue in operation and meet its
liabilities as they fall due over the three-year
period to 31 December 2026.
Our 2023 Strategic report, from pages 1 to
115, was approved by the Board on 12
March 2024.
Philip Harrison
Chief Financial Officer
12 March 2024
CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
Climate change
and TCFD
Evolving the organisation’s understanding of the
impacts of climate change.
Balfour Beatty continues to acknowledge
the scale of the global transformative action
required to achieve net zero and the key role
that the construction and infrastructure
sector stands to play in both becoming more
resilient to threats posed by the climate
crisis, and in supporting the transition
to a lower-carbon economy.
For Balfour Beatty this means identifying
and managing climate-related risks and
opportunities, and reflecting how the Group
adapts to, and mitigates this risk profile
through its business strategy.
The formation of the Group’s TCFD Working
Group in 2021 established a structured
approach for the Group’s consideration of
what climate change could mean to the
organisation. The TCFD Working Group has
supported the business in evolving how it
considers the deepening effects of the climate
crisis, and integrates the identification of
climate-related risk and opportunity into
existing business risk reviews. During 2023
the TCFD Working Group continued to deploy
a consistent approach on guiding the business
through its journey on considering the impacts
of climate change on its operations. Building
on previous years’ disclosures, further action
has been undertaken during 2023 to:
@ engage with each Strategic Business Unit
(SBU) to consider climate-related risk in
the context of its specific business
strategies, growth objectives and
operational planning. This approach has
provided a greater understanding of the
previously identified 10 climate-related
risks and opportunities and their relevance
to the business portfolio; and
@ upskill business leaders through attendance
at TCFD SBU workshops as well as
targeted training delivered to the finance
community on what climate change and
associated reporting obligations mean for
their respective businesses.
It has also supported each SBU in better
understanding how the impacts of the
climate crisis may materialise within their
portfolio which better informs a Group-wide
understanding of how the organisation can
respond to these risks and opportunities,
and in developing Bridging the Gap
sustainability action plans (see page 55).
Whilst activity undertaken in 2023 has
provided greater insight into how each
business may be impacted by the effects
of climate change, the ability to accurately
quantify the financial impact of climate-
related risks and opportunities at a
Group-wide level remains a key area for
development. The diverse nature of the
Group’s operational activities continues to
represent a challenge for the development
of robust and replicable methodologies that
can be applied business-wide.
The Group continues to set out its TCFD
disclosures aligned with the 11 core
elements against the pillars of governance,
strategy, risk management, and metrics and
targets. In doing so, it has considered section
C of the 2021 TCFD Annex entitled Guidance
for All Sectors and Section E of the TCFD
Annex entitled Supplemental Guidance for
Non-Financial Groups. The Group remains
compliant with this guidance; assessment
of the climate-related impacts on the Group
undertaken to date are largely qualitative
and are yet to be fully integrated into the
longer-term financial planning processes
for the business. Initial work undertaken
to understand quantitative impacts is in
its infancy and cannot yet be relied upon
until this work stream is developed further.
The table below outlines where elements
of the TCFD disclosure requirements are
addressed within the report.
PILLAR
Governance
Strategy
TCFD RECOMMENDATION
a) Board oversight
b) Management role
a) Risks and opportunities
b) Impact on organisation
c) Resilience of strategy
SECTION NAME
Division of responsibilities
Audit risk and internal control
Sustainability
Division of responsibilities
Board composition, succession and evaluation
Sustainability
Risk management
Metrics and targets
a) Risk identification and assessment process
b) Risk management process
c) Integration into overall risk management
Risk management
a) Climate-related metrics
b) Scope 1, 2, and 3 GHG emissions
c) Climate-related targets
Sustainability
Page
p130
p145
p54
p130
p134
p54
p91
p54
Balfour Beatty plc Annual Report and Accounts 2023 105
Strategic report
CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
FIND OUT HOW WE ARE
HELPING TO COMBAT CLIMATE
CHANGE ON PAGES 54 TO 64.
Governance
Balfour Beatty’s governance structure and
organisation hierarchy underpin all Group
activities and ensure that the business is
managed and operated effectively (see page
54 for illustration). The structure allows the
Board, its sub-committees and senior
management to include climate-related risks
and opportunity considerations alongside
other potential exposures into the Group’s
strategic and operational risk profile.
Board oversight
The Board is responsible for setting the
Cultural Framework of the business including
its purpose, Build to Last strategy, values and
behaviours. Together with its sub-committees,
the Board provides leadership and oversight
of the system of risk management which
includes ensuring climate-related factors are
being considered as part of identification of
risk for the overall business.
The Safety and Sustainability Committee
(SSC) reviews the Group’s sustainability
strategy, Building New Futures¹, and monitors
progress on climate-related issues including
carbon emissions, materials and waste
management, and social and community
matters. The Group Chief Executive and two
non-executive Directors are members of the
SSC. The Group Chief Executive has overall
responsibility for climate-related risks and
issues as well as setting Balfour Beatty’s
sustainability policy and overseeing how
Environmental, Social and Governance (ESG)
matters are managed.
The SSC agenda is separated into two
specific areas of focus: (i) health and safety;
and (ii) sustainability, allowing for more time
and emphasis on climate-related matters.
Both the Group Chief Executive and Chief
Financial Officer have ESG-related targets
included as part of their personal objectives.
Examples include; a measurable improvement
in the UK social value annually from the
previous year; and a measurable improvement
in the quality of carbon reporting – which
takes into account carbon measurement
methodology, near/long-term plans
submitted to SBTi for validation and
establishment of the Bridging the Gap
sustainability action plans and progress
against these.
The Audit and Risk Committee supports the
Board in its oversight of all Group risks, which
includes the two Group risks; mitigating and
adapting to climate change, and delivering
sustainability commitments.
The Audit and Risk Committee assesses the
effectiveness of the Group’s risk management
framework, risk strategy and risk appetite
and considers this alongside the risk profile
and compliance with regulatory requirements.
The Board, through the Audit and Risk
Committee, is appraised of the climate-related
risks and opportunities on an annual basis,
alongside an overview of the TCFD
workstream carried out and disclosure
summary. Further information related to all
Board meetings held and attended can be
found in the Division of responsibilities
section on page 130.
1 https://www.balfourbeatty.com/media/318683/balfour-beatty-building-new-futures-sustainability-strategy.pdf.
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Balfour Beatty plc Annual Report and Accounts 2023
The TCFD Working Group oversees the
implementation of climate-related risk
management processes and reporting.
The ExCom is updated by the Group Risk and
Audit Director and the Director of Sustainability
as part of the ongoing assessment of risk
management and internal control.
The key objectives of the TCFD Working
Group remain as:
@ to communicate TCFD reporting
requirements to key stakeholders within
the business;
@ to build awareness of climate-related
risks and opportunities that could impact
the Group;
@ to identify, analyse and disclose high-priority
or potentially material climate-related risks
and opportunities; and
@ to deliver ongoing review of
climate-related risks and considerations
and support how these are integrated into
risk management processes.
Management role
The Executive Committee’s (ExCom)
responsibilities include setting ambitions and
targets in relation to climate-related matters
under the Building New Futures sustainability
strategy and supporting businesses in
establishing and implementing Bridging
the Gap sustainability action plans. ExCom
members are also responsible for monitoring
climate-related risks and opportunities
identified as relevant to their respective
businesses or functions.
The senior leadership of each BU is
responsible for agreeing its Bridging the
Gap action plan and ensuring it is delivered
and adequately resourced. These plans detail
how projects should deliver sustainability at
a local level, recognising that Balfour Beatty
has a responsibility to mitigate climate change,
protect biodiversity, and deliver long-lasting
social value wherever possible. Risks and
opportunities (including where defined as
Emerging Risks) are also identified and
tracked on BU risk registers where relevant.
Building on the Carbon Literacy training
delivered to ExCom in 2022, SBU
Financial Directors have been established
as TCFD Champions, with targeted training
undertaken in 2023. This training was
designed to upskill the finance community
in both an understanding of the TCFD
disclosure requirements, and their role in
supporting the identification, and ongoing
assessment of climate-related risks and
opportunities for their specific business.
The Group Sustainability function is
responsible for understanding material
sustainability considerations, setting related
targets and ambitions, and enabling the
development of operational action plans.
The ExCom has overall responsibility for
agreeing the Group’s sustainability ambitions
and targets. Each SBU has a sustainability
director who is responsible for the individual
business unit (BU) sustainability leads and
project-based teams. The BU sustainability
leads are responsible for developing bespoke
Bridging the Gap sustainability action plans
aligned to the Group’s 2030 targets and 2040
ambitions. The SBU sustainability directors
have overall accountability for these plans.
Areas of focus within the Bridging the Gap
action plans include leadership relating to
sustainability; reducing Greenhouse Gas
(GHG) emissions; biodiversity restoration
and enhancement; efficient use of materials
and reductions in waste; supporting local
employment and skills including local
businesses; and community engagement
through charitable fundraising, volunteering
and mentoring.
Internal audit teams review BU and project
performance as outlined in the Bridging the
Gap plans against the Group’s sustainability
strategy. PricewaterhouseCoopers LLP (PwC
LLP) is engaged by Balfour Beatty to provide
limited assurance over the reporting of social
value, and the Group’s Scope 1 and 2
greenhouse gas emissions for annual
reporting purposes.
The TCFD Working Group, co-led by the
Group Risk and Audit Director and Director
of Sustainability, includes representation
from Finance, Risk and Sustainability
functions, and draws on functional support
and expertise from the wider business.
It engages with business and functional
management across Balfour Beatty, ensuring
climate-related risks and opportunities are
adequately identified and incorporated into
the Group’s Enterprise Risk Management
(ERM) system.
Balfour Beatty plc Annual Report and Accounts 2023 107
Strategic report CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Strategy
The Build to Last strategy is fundamental to
how the organisation shapes a market-leading
Balfour Beatty for the next 100 years. Build
to Last is a platform for sustainable growth
and productivity and is well placed to enable
Balfour Beatty to develop resilience against
the impacts associated with climate change
over the short, medium and long term.
Sustainable is one of the five values within
the Build to Last strategy from which the
Building New Futures sustainability strategy
sets out the business’ 2040 ambition to go
Beyond Net Zero carbon emissions. It also
details a 2030 target to reduce emissions by
50%. Bridging the Gap sustainability action
plans developed by each SBU during 2023
are the focus for implementing and
monitoring progress against the Building
New Futures strategy.
As part of the business-specific SBU
workshops undertaken for climate risks and
opportunities in 2023, businesses were able
to consider climate risks and opportunities in
both the context of their current operations
and business development strategies.
Evolving our understanding
The outputs of these workshops reiterate
that impacts and benefits to the Group will
be proportional over time. Balfour Beatty’s
diverse operating portfolio and geographical
spread mean that the likelihood of a number
of climate-related risks occurring at the same
time is low and they are unlikely to impact
the Group’s short-term financial viability or
ability to operate in a business-as-usual state.
The nature of the Group’s business model at
present continues to provide an element of
protection from negative financial risk where
contractual mechanisms are in place. This
will continue to evolve in maturity in line with
the developing climate agenda as customers
embed and enhance more climate-focused
procurement evaluation criteria and
commercial contractual clauses.
The Group considers climate-related risks
and opportunities across different time
horizons, defined as the short, medium,
and long term:
@ short term (0–3 years): Balfour Beatty’s
current operations and asset investments
as well as near-term growth strategy;
@ medium term (3–10 years): ongoing
projects and contracts as well as growth
strategy and asset investment decisions
driven by government policy, infrastructure
needs and market conditions; and
@ long term (10–30 years): factors that could
impact Balfour Beatty’s business plans and
longer-term strategy and business resilience.
Setting climate scenarios
The two scenarios set out by the Group will
be used as it continues to develops a more
robust assessment of the impacts of
climate-related risks and opportunities.
The Group has maintained the two scenarios
identified in 2021, labelled Low Carbon,
and now, Limited Action.
Under the Limited Action scenario, it is
anticipated that the global mean temperature
will increase by approximately 2.7°C, a mix of
fossil fuels and renewables will be adopted
as energy sources, carbon pricing will remain
low, and legislation will be unchanged
compared to today, resulting in a medium
emissions future.
Key achievements
Core activities
2021
2022
2023
Establishment of TCFD Working
Group and integration into ERM
framework
Vulnerability/ Advantage (VA)
assessment and top 10
risks defined
SBU-level impact and
applicability assessments
@ Determined climate scenarios as
2°C and 4°C for the business
@ Captured physical and transition
risks split across both scenarios
informed by data, analysis,
interpretation and forecasts –
establishing a ‘long-list’ master
climate register
@ Facilitated workshops with
representation from business to
identify additional relevant lists
and prioritise – split across three
geographical locations
@ Consolidated workshop output
and high-level qualitative
analysis of prioritised risks and
opportunities
@ Ranked risks and opportunities
over the short, medium and
longer term
@ Commenced scenario analysis
@ Delivered climate awareness
session to the Board
@ Revised climate scenarios to
<2°C (Low Carbon) and ~2.7°C
(Limited Action)
@ Development of VA to evaluate
and prioritise risks from 2021
@ Applied the VA assessment to
determine top 10 highest rated
key climate-related risks and
opportunities to take forward for
further analysis
@ Identification of 500 site and
asset locations for physical data
modelling out to 2100, over both
climate scenarios to highlight
exposure to climate perils
@ Early development of financial
methodologies for top 10 risks
and opportunities allowing for
the identification of gaps in
consistent and comparable
internal data
@ Delivered carbon literacy training
to ExCom
@ Delivered TCFD training session
to the finance community, with
SBU Finance Directors identified
as TCFD Champions for each
SBU
@ Issued pre-workshop survey to
each SBU to gather information
on applicability of top 10
prioritised risks to their business
@ Facilitated individual workshops
for each SBU to explore the
relevant events in the context of
their specific business plans and
objectives – and understand
impacts and planned response
@ Analysed workshop findings to
identify common insights,
including any risks and
opportunities to be incorporated
into future reviews
@ Collated the information to
present back to SBUs for
consideration in future strategic
risk reviews, and where
required, actions integrated into
Bridging the Gap plans as part of
strategic delivery
108
Balfour Beatty plc Annual Report and Accounts 2023
CLIMATE SCENARIOS
Scenario
Warming by 2100
Future emissions
Energy sources
Policy narrative
Rationale for scenario
Physical
Transition
Limited
Action
Low
Carbon
~2.7⁰C
Medium
Mix of fossil fuels and
renewable energy
Achievement of Nationally
Determined Contributions
(NDC) under Paris Agreement
and other policy commitments
Represents possible future risks if there
is minimal additional action
Most significant impacts from physical
risks
<2⁰C
Low
Mostly renewables and
low-carbon fuels
Ambitious policy agenda
leading to transformation of
the energy system
Many advanced economies
reach net zero emissions by
2050, with the rest of the
world reaching net zero by
2070
Aligns with best-case scenario and
current recommendation from the IPCC
Most significant impacts from transition
risks
For physical scenarios, the IPCC AR6 SSP
2–4.5 Middle of the Road (Limited Action)
and SSP1–2.6 Sustainable (Low Carbon)
projections were utilised. For transition
scenarios, the IEA World Energy Outlook
2021 Stated Policies Scenario (Limited
Action) and Sustainable Development
Scenario (Low Carbon) were utilised.
Impact and response to
climate-related events
As was highlighted through the 2022
workstream, work to financially quantify
the impacts of climate change on the
business was presented with a number of
limitations which meant there was limited
confidence in determining, and subsequently
disclosing, any financial figures.
The Group continues to disclose the
anticipated financial impact category
associated with each event, and the
likelihood of each event occurring under the
Low Carbon and Limited Action scenarios.
Balfour Beatty’s operations are diverse,
undertaking very different work activities
across a broad client portfolio (both public and
private), often under differing contractual
terms and profit margins across distinct core
geographies. Therefore, to be able to
understand the potential impacts of climate
change on the business, the approach in 2023
was to review climate-related risks and
opportunities business-by-business. The work
carried out in 2023 with each SBU has
provided a better basis on which to approach
financial quantification. By understanding the
impact of each risk and opportunity event in
the context of specific business plans and
growth strategies, the methodologies
developed to financially assess impacts will
be informed by more accurate, granular data
on a business-by-business basis, making it
more relevant to that area of operation.
Compartmentalising the impact of a particular
event in this way will allow a more informed
view to be presented at Group level.
TCFD financial reporting considerations are
conducted by the Group Finance function.
Their assessment acknowledges the areas of
the business that could be impacted by
climate change but also highlights that in the
shorter-term the Group does not anticipate a
material impact from climate-related factors.
The Group considers climate change in its
going concern assessment biannually and
viability assessment annually (see page 104).
As part of this, consideration is given to
whether existing assets could be impaired.
It has been determined that the Group has an
in-built resilience to the impacts of climate
change in the short-term, due to the current
level of geographic and market diversity of
its operations.
This enables the Group to pivot away from
markets more exposed to climate risk and
expand into existing and/or new markets
presented by the global response to
climate change.
In 2022, with third-party support, a weather
modelling tool was developed that mapped
out the impact of specific weather perils
across 500 physical locations. Locations
were based on a sample of some medium-
term projects within the current order book,
and any fixed assets within the current
portfolio. These weather events have been
modelled under both the Low Carbon and
Limited Action scenarios out to the year
2100. Integrating the use of this tool into
the business will evolve in 2024.
Whilst much of the impact analysis to date
remains qualitative, the Group has begun
to consider quantifiable impacts against
certain risks internally, where the underlying
data is available and where current visibility
of the risks allows. Work to improve the
collection of consistent and reliable data
across the Group with regards to quantifying
impacts continues.
The potential financial impacts of the
Group’s positive and negative exposure to
climate risks and opportunities require many
assumptions to be made in respect of factors
such as low-carbon technology forecasts,
energy consumption, carbon pricing
forecasts, and others, which are subject
to high variability.
The analysis conducted to date shows that
the overarching business strategy would not
be impacted, and importantly, mitigating
actions are already in place for certain risks,
which significantly reduces potential negative
financial impacts. There will be opportunities
to continue to iterate the analysis as the
scope of relevant data and assumptions
becomes available both internally and
externally to support and inform further
quantitative assessment.
As part of the goal to explore how the
Group understands and defines financial
and non-financial materiality in the context
of climate-related impacts, the TCFD
Working Group continues to engage with
internal stakeholders and regulatory forums.
A discussion with Group Finance to review
and define materiality thresholds over the
medium and longer term has been held, with
the intention to explore this at SBU level with
the TCFD Champions as the TCFD
workstream evolves.
Furthermore, to support future assessments
of materiality in the context of climate-related
impacts over the medium and longer-term,
the Group continues to engage with
stakeholders and regulatory forums.
Balfour Beatty plc Annual Report and Accounts 2023 109
Strategic report CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Highest rated climate-related risks and opportunities
Risk/Opportunity
Potential impacts/outcomes to the business
Potential adaptation and mitigation/promotion strategies
Relevance to operations
Increase in demand
for renewable and
low-carbon energy
generation, storage,
transmission and
distribution
increases awarded
contracts
@ Increased revenue and positive impact on
@ Enhanced collaboration and dialogue with value chain
ESG scores.
members.
@ Opportunity to expand business capability
@ Promotion of research and development in green
and skillsets.
infrastructure technologies.
@ Collaboration with design partners to develop
@ Creation of partnerships to promote new green
low-carbon solutions.
infrastructure.
@ Support transition to lower-carbon economy.
@ Increased focus on climate-related opportunities
@ Collaboration with new and sustainable customers.
through Project Development Managers.
@ Adapt the Gated Business Lifecycle (GBL) to focus on
these opportunities.
1
2
3
4
Increase in demand
for green, energy
efficient, and net
zero buildings/
Infrastructure
increases awarded
contracts
Increase in demand
for climate disaster
adaptation/climate
resilient
infrastructure
increases awarded
contracts
infrastructure technologies.
@ Creation of partnerships to promote new
green infrastructure.
@ Increased focus on climate-related opportunities
through project development managers.
@ Adapt the GBL to focus on these opportunities.
@ Utilise machine telemetry data to drive efficiencies in
plant and equipment utilisation (see ‘plant telematics
improving operational efficiencies’ case study (p.59).
@ Upskilling our people through ‘Eco-Operator’ training
(see page 57).
@ Continued implementation of energy-demand side
response reduction solutions in our property and
project accommodation portfolio.
@ Actionable project-level resource efficiency plans to
avoid and minimise waste.
Increase in efficiency
reduces energy
consumption and
material use
@ Contribution to lower-carbon economy.
@ Reduced operating costs through reduced
energy use.
@ Reduced impact on natural resources, which
extends to not only the reduced use of materials by
using resources efficiently, but also the wider
reduced impact on the environment from the
transport of materials, mitigating the associated
carbon emissions, air quality and traffic impacts of
deliveries and end-of-life use of materials.
Implementing a circular economy for natural
resources reduces the associated impacts of waste
processing, recycling and landfill.
@ Increased revenue.
@ Enhanced collaboration and dialogue with value chain
Sustainable construction practices: It has been identified as a key market driver that
Increased
Short Term
@ Development of new low-carbon construction design
members.
methods to support the wider sector and built
environment positive impact on ESG scores.
@ Promotion of research and development in green
infrastructure technologies.
@ Increased revenue.
@ Creation of partnerships to promote new
green infrastructure.
@ Increased focus on climate-related opportunities
through project development managers.
@ Adapt the GBL to focus on these opportunities.
@ Enhanced collaboration and dialogue with value chain
@ Supports the mitigation of the effects of extreme
members.
weather events to our economy and society.
@ Promotion of research and development in green
There is a record capital investment in energy infrastructure (see page 15) driven by a
growing demand for clean and secure energy (see page 18) and increase in renewable
energy (see page 18), all of which contribute to Balfour Beatty being well positioned to
Increased
revenue
pursue opportunities in the following markets:
Short Term
Medium Term
Long Term
Almost
certain
Almost
certain
Financial impact
Anticipated Time
category
horizons
Limited Action
Low Carbon
Likelihood
Rail expansion and electrification: The UK Department for Transport reaffirmed in
2023 that it is committed to removing all diesel-only trains by 2040. Balfour Beatty
holds a market leading position with Network Rail (see page 38) placing the Group in a
strong position for future opportunities in the UK’s rail sector through the UK Rail
business.
Power transmission and distribution (UK): Energy generation and transmission is at
the core of the business’ workstream. An increase in use of renewable energy sources
is driving a strong pipeline of opportunities, including SSEN’s Accelerated Strategic
Transmission Investment (ASTI) framework, RIIO-T3, RIIO-ED2 and National Grid’s
Great Grid Upgrade programme that will see significant investment until 2030 to
support the UK’s net zero goals under Ofgem’s £20 billion ASTI funding.
Major infrastructure (UK): New low-carbon energy infrastructure – new nuclear,
carbon capture and hydrogen are all part of current or future opportunities (see page
Investments: The green energy transition is creating new investment opportunities in
markets such as EV charging e.g. Urban Fox EV charging solution in the UK (see page
18).
41).
policy shifts and market demand for sustainable construction practices (see page 17)
will shape how the Group operates in its chosen markets via the Construction services
revenue
and Support Services divisions across its UK and US regions.
Medium Term
Long Term
Building a positive legacy: Through Balfour Beatty’s investment portfolio, there are
opportunities to leave a sustainable legacy through energy efficiency projects in the
assets managed by the Group. Balfour Beatty Communities working in military housing
in the US, have enhanced energy efficiency across 11 Navy installations (see page 57).
Almost
certain
Almost
certain
Carbon capture and storage: There is an increasing understanding that as part of the
Increased
Short Term
response to the climate crisis, proven carbon capture and storage technology will need
to be deployed in order to mitigate the worst effects of climate change. Balfour Beatty
revenue
Medium Term
Long Term
Almost
certain
Almost
certain
through its proven capabilities in major infrastructure is proudly set to shape a
first-of-a-kind integrated power and carbon project in Teesside (see page 33).
Flood defences: Balfour Beatty already has several live projects in this market, with
future opportunities expected through the £5.2 billion The Department for
Environment, Food and Rural Affairs (DEFRA) will invest from 2021 to 2027, to upgrade
and expand flood and coastal defences to reduce flood risk (see page 19).
Highways: Climate resilient infrastructure – maintenance contracts for highways are
already part of the Group’s workstream, with future opportunities expected. There will
also be a need to increase the resilience of the road network to the extreme weather
driven by climate change, such as drainage capacity.
Plant telematics: Balfour Beatty and its plant supply chain partners are putting
significant effort into utilisation of machine telemetry data across our projects to
improve plant utilisation and drive efficiencies. On our £240 million A63 Castle Street
Improvement Scheme we have been using telematics data, alongside Eco-Operator
training to deliver improved fuel efficiency and carbon reductions (see page 57).
Lean: Improved efficiency in Balfour Beatty’s operations would have a significant
positive impact on the ability of the Group to deliver its sustainability targets and
ambitions outlined in its Building New Futures strategy. The Group’s performance to
date and the implementation abatement actions driving efficiencies are detailed by
category relating to: energy efficiency (see pages 60 to 63), materials management
(see pages 65 and 66) and responsible sourcing (see page 67).
Reduced
OPEX
Short Term
Medium Term
Almost
certain
Almost
certain
1
Carbon pricing
increases prices of
energy
and raw materials
@ Increased cost to the business and supply chain.
@ Monitoring of current carbon pricing to determine impact
@ Potential reduction in future projects horizon if
major infrastructure projects become too costly
to fund.
on business and supply chain across geographies.
@ Ensure, where possible, contractual protection from
increased additional costs to the customer.
@ Implementing efficient use of the products and
services we procure.
@ Avoiding, minimising or replacing carbon intensive
products and services for lower-carbon alternatives.
Increased project cost: Carbon pricing will affect both project delivery and the supply
Increased
Short Term
chain by increasing costs of essential goods and services fundamental to operational
delivery, especially materials with a high embodied carbon, such as steel. This may
OPEX
Medium Term
result in increased operating costs on projects.
Power transmission and distribution (UK): The power transmission and distribution
sector’s reliance on materials with high embodied carbon such as concrete, steel,
cement and aggregates has prompted the Group’s client base to discuss carbon pricing
at tender stage resulting in a more complex, detailed and therefore, demanding
contract tender process. This increased pre-award up-front transparency exercise has
resulted in greater early collaboration with the supply chain to increase visibility of
environmental product declarations and availability of low-carbon materials.
Likely
Almost
certain
110
Balfour Beatty plc Annual Report and Accounts 2023
Risk/Opportunity
Potential impacts/outcomes to the business
Potential adaptation and mitigation/promotion strategies
Relevance to operations
Financial impact
category
Anticipated Time
horizons
Limited Action
Low Carbon
Likelihood
There is a record capital investment in energy infrastructure (see page 15) driven by a
growing demand for clean and secure energy (see page 18) and increase in renewable
energy (see page 18), all of which contribute to Balfour Beatty being well positioned to
pursue opportunities in the following markets:
Increased
revenue
Short Term
Medium Term
Long Term
Rail expansion and electrification: The UK Department for Transport reaffirmed in
2023 that it is committed to removing all diesel-only trains by 2040. Balfour Beatty
holds a market leading position with Network Rail (see page 38) placing the Group in a
strong position for future opportunities in the UK’s rail sector through the UK Rail
business.
Power transmission and distribution (UK): Energy generation and transmission is at
the core of the business’ workstream. An increase in use of renewable energy sources
is driving a strong pipeline of opportunities, including SSEN’s Accelerated Strategic
Transmission Investment (ASTI) framework, RIIO-T3, RIIO-ED2 and National Grid’s
Great Grid Upgrade programme that will see significant investment until 2030 to
support the UK’s net zero goals under Ofgem’s £20 billion ASTI funding.
Major infrastructure (UK): New low-carbon energy infrastructure – new nuclear,
carbon capture and hydrogen are all part of current or future opportunities (see page
18).
Investments: The green energy transition is creating new investment opportunities in
markets such as EV charging e.g. Urban Fox EV charging solution in the UK (see page
41).
Almost
certain
Almost
certain
Sustainable construction practices: It has been identified as a key market driver that
policy shifts and market demand for sustainable construction practices (see page 17)
will shape how the Group operates in its chosen markets via the Construction services
and Support Services divisions across its UK and US regions.
Increased
revenue
Short Term
Medium Term
Long Term
Building a positive legacy: Through Balfour Beatty’s investment portfolio, there are
opportunities to leave a sustainable legacy through energy efficiency projects in the
assets managed by the Group. Balfour Beatty Communities working in military housing
in the US, have enhanced energy efficiency across 11 Navy installations (see page 57).
Almost
certain
Almost
certain
@ Increased revenue.
@ Enhanced collaboration and dialogue with value chain
@ Supports the mitigation of the effects of extreme
members.
weather events to our economy and society.
@ Promotion of research and development in green
Carbon capture and storage: There is an increasing understanding that as part of the
response to the climate crisis, proven carbon capture and storage technology will need
to be deployed in order to mitigate the worst effects of climate change. Balfour Beatty
through its proven capabilities in major infrastructure is proudly set to shape a
first-of-a-kind integrated power and carbon project in Teesside (see page 33).
Increased
revenue
Short Term
Medium Term
Long Term
Almost
certain
Almost
certain
Increase in demand
for renewable and
low-carbon energy
generation, storage,
transmission and
distribution
ESG scores.
and skillsets.
@ Increased revenue and positive impact on
@ Enhanced collaboration and dialogue with value chain
@ Opportunity to expand business capability
@ Promotion of research and development in green
members.
infrastructure technologies.
@ Collaboration with design partners to develop
@ Creation of partnerships to promote new green
low-carbon solutions.
infrastructure.
increases awarded
@ Support transition to lower-carbon economy.
@ Increased focus on climate-related opportunities
contracts
@ Collaboration with new and sustainable customers.
through Project Development Managers.
@ Adapt the Gated Business Lifecycle (GBL) to focus on
these opportunities.
Increase in demand
@ Increased revenue.
@ Enhanced collaboration and dialogue with value chain
@ Development of new low-carbon construction design
members.
methods to support the wider sector and built
environment positive impact on ESG scores.
@ Promotion of research and development in green
infrastructure technologies.
@ Creation of partnerships to promote new
green infrastructure.
@ Increased focus on climate-related opportunities
through project development managers.
@ Adapt the GBL to focus on these opportunities.
infrastructure technologies.
@ Creation of partnerships to promote new
green infrastructure.
@ Increased focus on climate-related opportunities
through project development managers.
@ Adapt the GBL to focus on these opportunities.
1
2
3
4
for green, energy
efficient, and net
zero buildings/
Infrastructure
increases awarded
contracts
Increase in demand
for climate disaster
adaptation/climate
resilient
infrastructure
increases awarded
contracts
Increase in efficiency
@ Contribution to lower-carbon economy.
@ Reduced operating costs through reduced
energy use.
reduces energy
consumption and
material use
@ Utilise machine telemetry data to drive efficiencies in
plant and equipment utilisation (see ‘plant telematics
improving operational efficiencies’ case study (p.59).
@ Upskilling our people through ‘Eco-Operator’ training
@ Reduced impact on natural resources, which
extends to not only the reduced use of materials by
(see page 57).
using resources efficiently, but also the wider
reduced impact on the environment from the
@ Continued implementation of energy-demand side
response reduction solutions in our property and
transport of materials, mitigating the associated
project accommodation portfolio.
carbon emissions, air quality and traffic impacts of
deliveries and end-of-life use of materials.
Implementing a circular economy for natural
resources reduces the associated impacts of waste
processing, recycling and landfill.
@ Actionable project-level resource efficiency plans to
avoid and minimise waste.
Carbon pricing
increases prices of
energy
1
@ Increased cost to the business and supply chain.
@ Monitoring of current carbon pricing to determine impact
@ Potential reduction in future projects horizon if
on business and supply chain across geographies.
major infrastructure projects become too costly
@ Ensure, where possible, contractual protection from
and raw materials
to fund.
increased additional costs to the customer.
@ Implementing efficient use of the products and
services we procure.
@ Avoiding, minimising or replacing carbon intensive
products and services for lower-carbon alternatives.
Flood defences: Balfour Beatty already has several live projects in this market, with
future opportunities expected through the £5.2 billion The Department for
Environment, Food and Rural Affairs (DEFRA) will invest from 2021 to 2027, to upgrade
and expand flood and coastal defences to reduce flood risk (see page 19).
Highways: Climate resilient infrastructure – maintenance contracts for highways are
already part of the Group’s workstream, with future opportunities expected. There will
also be a need to increase the resilience of the road network to the extreme weather
driven by climate change, such as drainage capacity.
Plant telematics: Balfour Beatty and its plant supply chain partners are putting
significant effort into utilisation of machine telemetry data across our projects to
improve plant utilisation and drive efficiencies. On our £240 million A63 Castle Street
Improvement Scheme we have been using telematics data, alongside Eco-Operator
training to deliver improved fuel efficiency and carbon reductions (see page 57).
Lean: Improved efficiency in Balfour Beatty’s operations would have a significant
positive impact on the ability of the Group to deliver its sustainability targets and
ambitions outlined in its Building New Futures strategy. The Group’s performance to
date and the implementation abatement actions driving efficiencies are detailed by
category relating to: energy efficiency (see pages 60 to 63), materials management
(see pages 65 and 66) and responsible sourcing (see page 67).
Increased project cost: Carbon pricing will affect both project delivery and the supply
chain by increasing costs of essential goods and services fundamental to operational
delivery, especially materials with a high embodied carbon, such as steel. This may
result in increased operating costs on projects.
Power transmission and distribution (UK): The power transmission and distribution
sector’s reliance on materials with high embodied carbon such as concrete, steel,
cement and aggregates has prompted the Group’s client base to discuss carbon pricing
at tender stage resulting in a more complex, detailed and therefore, demanding
contract tender process. This increased pre-award up-front transparency exercise has
resulted in greater early collaboration with the supply chain to increase visibility of
environmental product declarations and availability of low-carbon materials.
Reduced
OPEX
Short Term
Medium Term
Almost
certain
Almost
certain
Increased
OPEX
Short Term
Medium Term
Likely
Almost
certain
Balfour Beatty plc Annual Report and Accounts 2023 111
Strategic report CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Highest rated climate-related risks and opportunities continued
Risk/Opportunity
Potential impacts/outcomes to the business
Potential adaptation and mitigation/promotion strategies
Relevance to operations
2
Cost of transitioning
owned plant and
equipment to lower-
carbon options
@ Increased capital expenditure to replace existing
@ Assess the viability of construction projects that
plant and fleet.
utilise low-carbon emission technology.
@ Enable capability by providing training for low-carbon
design optioneering and use of new technologies.
@ Strong collaboration with supply chain to ensure
low-carbon asset requirements are met, implemented
through the Asset and Technology Solutions team.
@ Continue to implement ‘Eco-operator’ training (see
page 57) to ensure lean driver behaviours and more
effective asset management deliver fuel efficiencies
for plant and equipment.
@ Increased research, innovation and implementation
costs may present risks associated with bringing
new technologies to market, resulting in new skills
development and training required to deploy
low-emission technology alternatives.
@ Lifecycle of existing assets may be reduced
resulting in early impairment and retirement, or
write-off of plant, equipment and fleet assets.
Investment in newer replacement assets earlier
than planned.
@ Low carbon technology for high-impact equipment
does not innovate as fast as required in order to meet
milestones of planned carbon reduction targets.
@ A disparity grows between geographies and
regions with more robust EV charging or hydrogen
supply infrastructure in comparison to lagging
jurisdictions where this technology is not available
to implement at all or at scale.
3
4
5
6
Insurance premiums
increase/ become
unavailable due to
higher cost of adaptation
measures or more
stringent insurance
policies
@ Potential reduction in future projects horizon if
@ Review insurance arrangements.
Insurance cost and availability for construction projects: An increase in the cost
Increased
Medium Term
major infrastructure projects become too costly
to fund.
@ Diminished returns across Infrastructure
Investments assets.
@ Increased cost to the business.
@ Monitor insurance market shifts.
@ Engagement with broker and insurers.
@ Disclosure and transparency with insurers for any
nascent or new project technology.
OPEX
Long Term
Unlikely
Unlikely
High-speed wind leads
to damage to physical
assets and disruption
at own sites
@ Delays to project delivery from stand-down of sites
and /or to rectify damage caused by high-speed
winds.
@ Close monitoring of weather forecasts to ensure
employee safety and adequate preparation.
@ Utilising third-party expertise for support with climate
@ Increased costs as extreme weather event
modelling to understand physical risk impacts.
Increased precipitation
leads to environmental
impacts, damage to
physical assets and
disruption at own sites
Droughts cause
disruption or lead to
increase in operation
costs due to higher
water prices and
restrictions on
water consumption
classification may not be provisioned for within
contractual clauses.
@ Increase resilience of sites to extreme weather events
by implementing contingency plans.
@ Delays to project delivery from stand-down of sites
@ Close monitoring of weather forecasts to ensure
and / or to rectify damage caused by flooding.
employee safety and adequate preparation.
@ Impact on valuation of assets in known flood zones.
@ Evaluation of physical climate risk exposure
@ Potential increased exposure to environmental
incidents and fines.
@ Increased costs as extreme weather event
classification may not be provisioned for within
contractual clauses.
@ Increased costs as extreme weather event
classification may not be provisioned for within
contractual clauses.
@ Reduction in horizon opportunities for planned
major infrastructure schemes as projects become
too costly to fund due to drought-driven cost
increases.
@ Challenging or unsafe working conditions
for employees.
@ Delays to project delivery due to pollution
concerns arising from the inability to use
water for dust suppression.
specifically to asset and project locations near
waterways or coasts.
@ Utilising third-party expertise for support with climate
modelling to understand physical risk impacts.
@ Increase resilience of sites to extreme weather events by
improving defences and implementing contingency plans.
@ Considering relocation of manufacturing activities.
@ Close monitoring of weather forecasts to ensure
employee safety and adequate preparation.
@ Evaluation of physical climate risk exposure
specifically to asset and project locations near
waterways or coasts.
@ Third-party climate modelling expertise to understand
physical risk impacts.
@ Increase resilience of sites to extreme weather events
by implementing contingency plans.
112
Balfour Beatty plc Annual Report and Accounts 2023
Financial impact
Anticipated Time
category
horizons
Limited Action
Low Carbon
Likelihood
Increased
CAPEX
Medium Term
Long Term
Almost
certain
Almost
certain
Asset and Technology Solutions (ATS): A specialist in-house team which provides
comprehensive plant, vehicle and equipment services to Balfour Beatty across the UK.
Strategic asset services include in-house solutions such as HGVs, tower and crawler
cranes, piling equipment, fire and security services, suction excavation, modular
buildings and driver risk. Across all these asset types the challenges of availability and
commercial viability of low-carbon options for equipment and machinery, and the
extent of EV charging infrastructure, have the potential to impact the Group’s ability to
fulfil customer climate-related ambitions.
US Buildings and Civils: Availability of low-carbon options for construction machinery
in the supply chain is a concern for our US Buildings and Civils business which have a
lower proportion of projects that are self-delivered in comparison to the UK counterpart
businesses. The requirement to transition to low-carbon equipment will have an impact
over time on the value chain through the ability to select subcontractors that can deliver
project demands using low-carbon alternative equipment.
Specialised equipment: To deliver the Group’s complex construction and
infrastructure activities, specialist equipment and larger plant assets are often required
which do not, as yet, have low-carbon alternatives available in the market. In the Rail
sector, low-carbon options are not available for on-track fleet. Where low-carbon
alternatives do not yet exist, efficiencies for these assets will be pursued by the Group.
of insurance may result in operations not being sufficiently covered by insurance or
insurance not being available across the full project lifecycle. Both scenarios would
result in project start-up delays or increased operating cost. In some cases, clients may
choose not to proceed with certain private sector opportunities should insurance costs
be too high or unrecoverable, potentially impacting future horizon opportunities in this
market segment in the longer-term.
Insurance cost and availability for asset insurance and returns: The risk of
Infrastructure Investments assets becoming uninsurable is considered minimal,
however insurance premium increases could be seen for areas prone to severe
weather events specifically in the US such as California and Florida.
Safe operation of equipment: High winds can disrupt on-site activity as machinery
Expected
Medium Term
and equipment must be operated under safe wind speeds. Cranes, both tower crane
and luffer type, which are vital to project delivery when building at height for our UK
Construction, US Buildings, Major Projects and US Civils businesses are most affected
asset impact
Long Term
by this.
Possible
Possible
Silt pollution: Increased rainfall can increase the likelihood and impact of silt runoff
and landslides, disrupting site access and potentially creating environmental incidents
with enforcement risk. Pollution from silt is one of the more frequent environmental
incidents, especially when working in rural and high elevation environments with
significant annual rainfall in the UK. Overhead line construction and refurbishment
projects delivered by the Power Transmission & Distribution business and the UK
Construction Regional Scotland business and operations in the US Pacific Northwest
are especially prone to these kind of events based on the locations where these project
operations take place.
Expected
asset impact
Medium Term
Long Term
Possible
Possible
Wildfires: Droughts can effect our operations through the increased risk of wildfires, which
Increased
Medium Term
would have the most potential impact on our US Buildings projects in California and the
OPEX
Pacific Northwest, through project delays and supply chain disruption.
Long Term
Possible
Possible
Water usage restrictions: Where water cost increases or water use is restricted due to
drought conditions, this has the potential to cause disruption across the Group’s operations.
Processes such as concrete mixing and soil compaction require water, and drought
conditions would have the potential to delay or disrupt these activities, leading to potential
wider project delays and over-runs which would increase operating costs. The Group’s US
Buildings and Civils business operates in the chosen states of Texas, Arizona, California and
Florida which are demarcated as states with high underlying water stress with the potential
to worsen as the effects of climate change deepen.
Dust suppression capabilities also require water. This is relevant across the majority of the
Group’s portfolio of operations and to a wide remit of construction activities including
demolition work, earthmoving, concrete grinding and cutting, asphalt paving and milling,
renovation and remodelling activities, land-clearance, as well as the grading, compacting, and
laying of aggregates and the handling of construction waste.
Goods and services: There is the potential for deeper supply chain disruption, where
increased cost of clean water or water use restrictions impact on the cost to manufacture
goods procured by the Group and used in operations. Lack of reliability of supply for these
goods because of water scarcity from drought conditions presents the possibility of project
delays and disruptions and increased operating costs. The textile industry, which consumes
significant amounts of water in various stages of production with a manufacturing base in
areas of water stress, is a potential area which would negatively impact the Group via lack of
availability of or affordability of PPE.
2
Cost of transitioning
owned plant and
equipment to lower-
carbon options
@ Increased capital expenditure to replace existing
@ Assess the viability of construction projects that
plant and fleet.
utilise low-carbon emission technology.
@ Increased research, innovation and implementation
@ Enable capability by providing training for low-carbon
costs may present risks associated with bringing
design optioneering and use of new technologies.
@ Strong collaboration with supply chain to ensure
low-carbon asset requirements are met, implemented
through the Asset and Technology Solutions team.
@ Continue to implement ‘Eco-operator’ training (see
page 57) to ensure lean driver behaviours and more
effective asset management deliver fuel efficiencies
for plant and equipment.
new technologies to market, resulting in new skills
development and training required to deploy
low-emission technology alternatives.
@ Lifecycle of existing assets may be reduced
resulting in early impairment and retirement, or
write-off of plant, equipment and fleet assets.
Investment in newer replacement assets earlier
than planned.
@ Low carbon technology for high-impact equipment
does not innovate as fast as required in order to meet
milestones of planned carbon reduction targets.
@ A disparity grows between geographies and
regions with more robust EV charging or hydrogen
supply infrastructure in comparison to lagging
jurisdictions where this technology is not available
to implement at all or at scale.
@ Potential reduction in future projects horizon if
@ Review insurance arrangements.
Insurance premiums
increase/ become
unavailable due to
higher cost of adaptation
measures or more
stringent insurance
policies
major infrastructure projects become too costly
to fund.
@ Diminished returns across Infrastructure
Investments assets.
@ Increased cost to the business.
@ Monitor insurance market shifts.
@ Engagement with broker and insurers.
@ Disclosure and transparency with insurers for any
nascent or new project technology.
High-speed wind leads
to damage to physical
assets and disruption
at own sites
winds.
@ Delays to project delivery from stand-down of sites
@ Close monitoring of weather forecasts to ensure
and /or to rectify damage caused by high-speed
employee safety and adequate preparation.
@ Increased costs as extreme weather event
classification may not be provisioned for within
contractual clauses.
@ Utilising third-party expertise for support with climate
modelling to understand physical risk impacts.
@ Increase resilience of sites to extreme weather events
by implementing contingency plans.
Increased precipitation
leads to environmental
impacts, damage to
physical assets and
disruption at own sites
@ Delays to project delivery from stand-down of sites
@ Close monitoring of weather forecasts to ensure
and / or to rectify damage caused by flooding.
employee safety and adequate preparation.
@ Impact on valuation of assets in known flood zones.
@ Evaluation of physical climate risk exposure
@ Potential increased exposure to environmental
incidents and fines.
@ Increased costs as extreme weather event
classification may not be provisioned for within
contractual clauses.
specifically to asset and project locations near
waterways or coasts.
@ Utilising third-party expertise for support with climate
modelling to understand physical risk impacts.
@ Increase resilience of sites to extreme weather events by
improving defences and implementing contingency plans.
@ Considering relocation of manufacturing activities.
Droughts cause
disruption or lead to
increase in operation
costs due to higher
water prices and
restrictions on
water consumption
@ Increased costs as extreme weather event
@ Close monitoring of weather forecasts to ensure
classification may not be provisioned for within
employee safety and adequate preparation.
contractual clauses.
@ Evaluation of physical climate risk exposure
@ Reduction in horizon opportunities for planned
specifically to asset and project locations near
major infrastructure schemes as projects become
waterways or coasts.
too costly to fund due to drought-driven cost
@ Third-party climate modelling expertise to understand
@ Challenging or unsafe working conditions
increases.
for employees.
@ Delays to project delivery due to pollution
concerns arising from the inability to use
water for dust suppression.
physical risk impacts.
@ Increase resilience of sites to extreme weather events
by implementing contingency plans.
3
4
5
6
Risk/Opportunity
Potential impacts/outcomes to the business
Potential adaptation and mitigation/promotion strategies
Relevance to operations
Asset and Technology Solutions (ATS): A specialist in-house team which provides
comprehensive plant, vehicle and equipment services to Balfour Beatty across the UK.
Strategic asset services include in-house solutions such as HGVs, tower and crawler
cranes, piling equipment, fire and security services, suction excavation, modular
buildings and driver risk. Across all these asset types the challenges of availability and
commercial viability of low-carbon options for equipment and machinery, and the
extent of EV charging infrastructure, have the potential to impact the Group’s ability to
fulfil customer climate-related ambitions.
US Buildings and Civils: Availability of low-carbon options for construction machinery
in the supply chain is a concern for our US Buildings and Civils business which have a
lower proportion of projects that are self-delivered in comparison to the UK counterpart
businesses. The requirement to transition to low-carbon equipment will have an impact
over time on the value chain through the ability to select subcontractors that can deliver
project demands using low-carbon alternative equipment.
Specialised equipment: To deliver the Group’s complex construction and
infrastructure activities, specialist equipment and larger plant assets are often required
which do not, as yet, have low-carbon alternatives available in the market. In the Rail
sector, low-carbon options are not available for on-track fleet. Where low-carbon
alternatives do not yet exist, efficiencies for these assets will be pursued by the Group.
Insurance cost and availability for construction projects: An increase in the cost
of insurance may result in operations not being sufficiently covered by insurance or
insurance not being available across the full project lifecycle. Both scenarios would
result in project start-up delays or increased operating cost. In some cases, clients may
choose not to proceed with certain private sector opportunities should insurance costs
be too high or unrecoverable, potentially impacting future horizon opportunities in this
market segment in the longer-term.
Insurance cost and availability for asset insurance and returns: The risk of
Infrastructure Investments assets becoming uninsurable is considered minimal,
however insurance premium increases could be seen for areas prone to severe
weather events specifically in the US such as California and Florida.
Safe operation of equipment: High winds can disrupt on-site activity as machinery
and equipment must be operated under safe wind speeds. Cranes, both tower crane
and luffer type, which are vital to project delivery when building at height for our UK
Construction, US Buildings, Major Projects and US Civils businesses are most affected
by this.
Silt pollution: Increased rainfall can increase the likelihood and impact of silt runoff
and landslides, disrupting site access and potentially creating environmental incidents
with enforcement risk. Pollution from silt is one of the more frequent environmental
incidents, especially when working in rural and high elevation environments with
significant annual rainfall in the UK. Overhead line construction and refurbishment
projects delivered by the Power Transmission & Distribution business and the UK
Construction Regional Scotland business and operations in the US Pacific Northwest
are especially prone to these kind of events based on the locations where these project
operations take place.
Financial impact
category
Anticipated Time
horizons
Limited Action
Low Carbon
Likelihood
Increased
CAPEX
Medium Term
Long Term
Almost
certain
Almost
certain
Increased
OPEX
Medium Term
Long Term
Unlikely
Unlikely
Expected
asset impact
Medium Term
Long Term
Expected
asset impact
Medium Term
Long Term
Possible
Possible
Possible
Possible
Wildfires: Droughts can effect our operations through the increased risk of wildfires, which
would have the most potential impact on our US Buildings projects in California and the
Pacific Northwest, through project delays and supply chain disruption.
Increased
OPEX
Medium Term
Long Term
Water usage restrictions: Where water cost increases or water use is restricted due to
drought conditions, this has the potential to cause disruption across the Group’s operations.
Processes such as concrete mixing and soil compaction require water, and drought
conditions would have the potential to delay or disrupt these activities, leading to potential
wider project delays and over-runs which would increase operating costs. The Group’s US
Buildings and Civils business operates in the chosen states of Texas, Arizona, California and
Florida which are demarcated as states with high underlying water stress with the potential
to worsen as the effects of climate change deepen.
Dust suppression capabilities also require water. This is relevant across the majority of the
Group’s portfolio of operations and to a wide remit of construction activities including
demolition work, earthmoving, concrete grinding and cutting, asphalt paving and milling,
renovation and remodelling activities, land-clearance, as well as the grading, compacting, and
laying of aggregates and the handling of construction waste.
Goods and services: There is the potential for deeper supply chain disruption, where
increased cost of clean water or water use restrictions impact on the cost to manufacture
goods procured by the Group and used in operations. Lack of reliability of supply for these
goods because of water scarcity from drought conditions presents the possibility of project
delays and disruptions and increased operating costs. The textile industry, which consumes
significant amounts of water in various stages of production with a manufacturing base in
areas of water stress, is a potential area which would negatively impact the Group via lack of
availability of or affordability of PPE.
Possible
Possible
Balfour Beatty plc Annual Report and Accounts 2023 113
Strategic report CLIMATE CHANGE AND TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Risk management
The Group maintains its approach to integrate
climate-related risk identification into the
existing ERM framework to ensure that it is
considered at Group, business and operational
levels, and this will continue to evolve.
Mitigation of, and adaptation to, climate
change is identified as a risk on the Group
risk register. This risk is monitored by the
ExCom as part of the half year and full year
reviews of the Group’s risk profile (see page
91). Current management plans are largely
focused on exploring and understanding the
full impacts of risks to develop appropriate
mitigation and adaptation strategies which,
where possible and relevant, are
incorporated as part of Bridging the Gap
plans. The diagram below outlines how
consideration of climate-related risk is
incorporated into Balfour Beatty’s current
ERM framework.
A mapping exercise is conducted to identify
where climate change may be a cause or
driver to other Group risks, and/ or where it
may further compound impacts.
As part of the TCFD workstream, the highest
rated risks and opportunities for the Group
have been identified, and have been taken
forward as part of the 2023 work activity
with SBUs to explore their impact within
the business. These are detailed on page 110
to 113 and are grouped by opportunities and
then risks. These are not listed in sequence
of impact and likelihood, nor by their
significance to the business.
The Balfour Beatty risk management process
to identify, assess, respond to, and monitor
risk (outlined on page 92) is applied by the
business to identify climate-related risks and
opportunities alongside other risks. Whilst
this ensures a consistent process is applied
when identifying and reviewing all risks,
there are some specific additional
considerations that differ for climate-related
risk that should be taken into account.
Additional guidance has been developed to
highlight the differences (and in some cases,
limitations) when addressing climate-related
considerations at each stage of the risk
process. The key differences in the time-
horizons over which the business traditionally
identifies and assesses risk are also
highlighted as part of this guidance. Key
areas are outlined in the table below.
Work undertaken by the TCFD Working
Group in 2023 explored the specific impacts
of each relevant risk and opportunity in the
context of specific SBU objectives which has
resulted in greater understanding of the risks
the business faces and the capture of these
on Strategic Risk Registers. SBUs consider
risk in the context of their business
objectives and growth strategies. Reviewing
climate-related risks and opportunities
alongside existing strategic risks will support
more targeted responses to manage these
over the medium and longer-term.
Balfour Beatty’s IRIS ERM system captures
risk data at each level outlined in the ERM
framework and includes climate change as a
specific category, providing insight to trends
on operational and business level risk data.
Businesses can use any specific climate-
related risk information captured across
operational portfolios to provide insight at
SBU level.
Metrics and targets
Full details of climate-related metrics and
targets, including Scope 1, 2 and 3
emissions, can be found in the Sustainability
section on pages 54 to 63.
Transition plan
Balfour Beatty is aware of the Transition Plan
Taskforce (TPT) release of final outputs in
2024, including a disclosure framework,
implementation guidance and its proposed
development of sector specific guidance
documents. The Group will work towards
adopting the TPT disclosure framework
guidance as it continues to integrate its own
Transition Plan into the Group’s strategic
goals. Balfour Beatty’s GHG abatement
actions will be driven by the GHG reduction
targets contained within its Science Based
Targets, supported by a robust and credible
GHG reduction pathway. For more information
on Balfour Beatty’s commitment and
progress on Science Based Targets, see
page 58.
INTEGRATION OF CLIMATE-RELATED CONSIDERATIONS INTO THE EXISTING BALFOUR BEATTY RISK PROCESS
Balfour Beatty’s risk
management process
1. IDENTIFY
4. MONITOR
Risk and opportunity
management
2. ASSESS
3. RESPOND
Activities
@ Identify material risk/opportunity events, causes,
1. IDENTIFY
and consequences
@ Identify current relevant controls in place
2. ASSESS
3. RESPOND
4. MONITOR
@ Assess risks and opportunities, by considering size of potential
impact, and overall likelihood of event to occur
@ Manage further by developing SMART actions to reduce or
eliminate impact and/or likelihood
@ Monitor outstanding actions and effectiveness of controls, and
re-assess as actions are implemented. Escalation of the most
critical risks is considered as part of the review process
Traditional Risk Time Horizon ~ 3 years
Climate-related risks and opportunities span from
short-term to long-term (2050 onwards)
114
Balfour Beatty plc Annual Report and Accounts 2023
INTEGRATION OF CLIMATE-RELATED CONSIDERATIONS INTO THE EXISTING BALFOUR BEATTY RISK PROCESS
CLIMATE-RELATED RISK
INTEGRATION INTO ERM
FRAMEWORK
GROUP
RISK
Strategic risk
BUSINESS RISK
Strategic Business Units/
Business Units/Enabling Functions
OPERATIONAL RISK
Project/Contract/Asset Risk
Group
Business
Operational
@ Climate-related and sustainability risks
@ Stand-alone enabling function
@ Grouping of project short-term
identified in Group risk register
@ Climate-related risk mapped as a
potential driver to existing Group risks
@ Establishment of climate risk and
opportunity register in ERM system to
facilitate tracking and monitoring
sustainability risk register (inc. climate-
related risks)
@ Capture of climate-related risk events
(including where defined as Emerging
Risk) in SBU, BU and Functional
strategic risk registers where relevant
@ Grouping of climate-related
categorised risks in ERM system for
use by the Sustainability function
climate-related categorised risks in
ERM system provides sight to
Sustainability function and can be
used to inform BU and SBU risk
profiles
@ IRIS Risk Library prompts capture of
core and common short-term
climate-related risks at both project
and business level
@ Physical risk event dashboard models
weather perils across 500
operating locations
Climate-related risk/opportunity considerations and limitations
@ Events span longer time horizons and may not occur in
the current business planning period (more risks captured
as emerging)
@ Due to timeframes, current controls tend to be longer-term
planning and innovative thinking, that will become more specific
and targeted over time
@ Events need to be considered in different possible futures
(Low Carbon or Limited Action scenarios)
@ Longer time horizons and the continuous evolution of climate
science and associated models cause increased uncertainty on
both impact and likelihood
@ Responses to manage further can include better understanding
of, adapting to, or mitigating the impacts of climate risk, and the
promotion or pursuit of opportunities. Some action plans may
be longer-term in nature
@ Actions could involve gathering more information about the risk,
rather than managing it directly – examples could include
establishing indicators to better understand the likelihood of
possible climate futures, and building the capability to adapt to
risk and take advantage of opportunities. In some cases, these
actions may be in the form of strategic direction rather than
localised actions
@ Often, risks and opportunities have unknown or approximated
@ Limited or inconsistent data to accurately quantify risks
impacts and are captured and tracked as Emerging Risks
@ Impacts are more qualitative in nature – VA assessment
@ Key risk (and opportunity) indicators will be leveraged to
developed as a tool in 2021, can be used to assess climate-
related risk events at Group level to assess exposure, sensitivity
and adaptive capacity
track progression
Balfour Beatty plc Annual Report and Accounts 2023 115
Strategic report governance
GOVERNANCE
Promoting the
long-term,
sustainable success
of the Company
IN THIS SECTION
Board leadership and
Company purpose
Division of
responsibilities
Composition,
succession and
evaluation
Nomination
Committee
Safety and
Sustainability
Committee
Audit and Risk
Committee
Remuneration
Committee
Directors’ report
116
Balfour Beatty plc Annual Report and Accounts 2023
– Group Chair’s introduction
– Leading with experience
– Board activities
– Promoting a positive culture
– Stakeholder engagement
– Report of the Workforce Engagement Lead
– A robust governance framework
– Board composition
– Board succession
– Board evaluation
– Report of the Nomination Committee Chair
– Board composition and succession
– Diversity and inclusion
– Report of the Safety and Sustainability Committee Chair
– Safety performance and Zero Harm
– Environment and sustainability
– Report of the Audit and Risk Committee Chair
– Financial reporting
– External auditor
– Risk management and internal control
– Report of the Remuneration Committee Chair
– Remuneration at a glance
– Summary of the Remuneration Policy and proposed
implementation in 2024
– Annual report on remuneration
p117
p130
p134
p138
p142
p145
p152
p169
BOARD LEADERSHIP AND COMPANY PURPOSE
Group Chair’s introduction
committed to achieving this through our
employee training and development
programmes which will contribute to ensuring
diversity of thought and experience across all
levels. For further information on our employee
initiatives, please see pages 125 to 127.
Louise Hardy, who was appointed as
Workforce Engagement Lead in 2022, has
been influential in advancing our engagement
activities. Louise’s work has enabled the Board
to obtain direct insights into the workforce
dynamics. In 2023, the Board expanded its
efforts to enhance employee engagement by
organising 57 site visits, which both the
non-executive Directors and I attended,
allowing for meaningful conversations with
employees in each of the geographies in which
the Group operates (UK, US and Hong Kong)
and at all levels of the organisation. In early
2024, I was lucky enough to spend time with
the co-chairs of our Affinity Networks:
Ability, Gender, LGBTQ+, Multicultural and
Neurodiversity, who are making a difference
to our workplace processes and practices.
Details of Louise’s responsibilities as the
Workforce Engagement Lead can be found
on page 131 and further details on workforce
engagement can be found on pages 125 to
127.
During 2023, the search for two new
non-executive Directors was carried out with
support from Odgers Berndston, and whilst
the search included a mix of criteria relevant
to both diversity and inclusion, including
gender and ethnicity, all appointments are
made on merit to ensure the appropriate mix
of skills and experience on the Board, valuing
the unique contribution that an individual will
bring. I am delighted that as a result of the
search, we welcomed both Robert MacLeod
and Gabrielle (Gabby) Costigan MBE as
non-executive Directors, who joined the
Board on 8 March 2024. At the conclusion
of the Company’s 2024 AGM, Robert will
be appointed as Chair of the Audit and
Risk Committee and Gabby as Chair of the
Safety and Sustainability Committee.
As a result of the changes that will take place
at the conclusion of the 2024 AGM, the Board
will have 44.4% female representation and
with the appointment of Anne Drinkwater as
Senior Independent non-executive Director,
the Board will have female representation
within its most senior positions. The Board
remains supportive of the recommendations
set out in the Parker Review and will therefore
continue to pursue compliance with its
established targets. In support of this, the
Board updated its Diversity and Inclusion
policy, as referred to on page 140, with
G
o
v
e
r
n
a
n
c
e
the aim to have no less than 40% female
representation and at least one Director
from an ethnic minority background.
Beyond the Board, Balfour Beatty has
decided to address diversity and inclusion in
the UK through the Value Everyone Diversity
and Inclusion Action Plan, and through the
Ability, Gender, LGBTQ+, Multicultural and
Neurodiversity Affinity Networks.
The Board continued to demonstrate
effectiveness through constructive debate,
a spirit of openness and mutual respect, and
a measured approach to decision making. As
noted on pages 136 and 137, our internal
Board effectiveness review concluded that
the Board and its Committees continued to
operate effectively throughout 2023.
Executive remuneration
After the triennial review of the Directors’
Remuneration Policy carried out by the
Remuneration Committee, an updated
version of the policy was, following
consultation with shareholders and
considering the feedback received,
approved by shareholders at the 2023 AGM.
Succession planning
The Nomination Committee undertook
succession planning for both the Board and
the Executive Committee. The Committee
also reviewed the talent and succession
plans for business unit managing directors
and project directors in addition to monitoring
some of the development programmes that
are operated across the Group. In succession
planning and reviews of Board and executive-
level composition, the Board considers a
range of different aspects of diversity,
including age, disability, gender, ethnicity,
education and social background.
I would like to thank the Board for their
extensive workforce engagement activities
carried out in the year, and also the
Committee Chairs for improving governance
across the Board’s areas of responsibility.
Charles Allen, Lord Allen of Kensington,
CBE
Non-executive Group Chair
12 March 2024
Balfour Beatty plc Annual Report and Accounts 2023 117
Dear Shareholder
On behalf of the Board, I am delighted to
present my report describing the activities
of the Board during 2023, along with our
governance arrangements and our focus
for 2024.
During 2023, the Board continued to focus
on the delivery of our Build to Last strategy,
which is underpinned by strong governance
and controls. The Board oversees the Group’s
purpose, values and strategy, ensuring that
these are aligned to the culture of the
business. As an example of the Board’s focus
on governance, in July, the Board visited Fort
Carson in the US where it had the opportunity
to meet the site Commander and a broad
spectrum of employees working in the
military housing business to see in practice
the positive effects of the We Care cultural
transformation programme, and the work
being carried out by the Communities team to
address the actions set out in the independent
compliance monitor’s first report. I am
pleased to say that good progress is being
made and I look forward to seeing continued
progress in 2024.
The Group’s diversified portfolio, both
geographically in the UK, US and Hong Kong,
and operationally across Construction
Services, Support Services and Infrastructure
Investments, provides a strong platform for
future shareholder returns. To capitalise on
these opportunities, the Group will continue
to operate effective governance and control
frameworks that ensure agility, responsiveness,
and adaptability in its decision-making
processes. The Board is optimistic that this
proactive approach will ensure that the Group
can seize emerging opportunities and
navigate evolving market conditions.
The Board recognises that the Group’s
long-term success depends on our ability
to attract and retain a diverse workforce
equipped with the essential skills. We are
Governance BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
GOVERNANCE AT A GLANCE
100%
BOARD MEETING
ATTENDANCE
100%
COMMITTEE MEETING
ATTENDANCE
Diversity of
nationalities
31 Dec 23
Post-AGM
Board gender
diversity
31 Dec 23
Post-AGM
Board
independence
31 Dec 23
Post-AGM
l Female
l Male
31 Dec 23 Post-AGM
44.4%
55.6%
33.3%
66.7%
Non-executive
Directors’ tenure
31 Dec 23
Post-AGM
l Executive Directors
l Independent
31 Dec 23
2
Post-AGM
2
non-executive Directors
7
7
Age diversity
31 Dec 23
Post-AGM
l UK
l US
l Australia
31 Dec 23 Post-AGM
7
1
1
8
1
0
l 0-3y
l 4-6y
l 7-9y
31 Dec 23 Post-AGM
4
1
2
2
1
4
l 51-60
l 61-70
l 71-80
31 Dec 23 Post-AGM
3
6
0
1
7
1
BOARD CHANGES FOLLOWING THE 2024 AGM
@ Robert MacLeod joined the Board as an independent non-executive Director on 8 March 2024 and will be appointed
as Chair of the Audit and Risk Committee on 9 May 2024
@ Gabby Costigan MBE joined the Board as an independent non-executive Director on 8 March 2024 and will be appointed
as Chair of the Safety and Sustainability Committee on 9 May 2024
@ Dr Stephen Billingham CBE will step down as an independent non-executive Director, Senior Independent non-executive Director
and Chair of the Audit and Risk Committee on 9 May 2024
@ Stuart Doughty CMG will step down as an independent non-executive Director and Chair of the Safety and Sustainability Committee on 9 May 2024
@ Anne Drinkwater will be appointed as Senior Independent non-executive Director on 9 May 2024
KEY ACTIONS FROM 2023:
PRIORITIES FOR 2024:
@ Considered actions arising from the 2022 Board
@ Complete the actions arising from the 2023 Board
effectiveness review
effectiveness review
@ Enhanced the effectiveness of the Board’s workforce engagement
@ Provide a comprehensive induction programme for the two new
@ Monitored progress against targets to improve diversity and
inclusion across the Group
@ Conducted succession planning for the Board, Executive Committee,
Business Unit managing directors and project directors
@ Carried out a search for two new non-executive Directors
@ Reviewed progress against the military housing business’
response to the independent compliance monitor’s initial report
and resulting action planning
non-executive Directors
@ Review Board balance and composition and conduct Board
succession planning with a view to enhancing Board diversity
@ Review Executive Committee succession planning and oversee
the continued professional development of a diverse pipeline
of candidates
@ Monitor progress against the Value Everyone UK Diversity and
Inclusion Action Plan and Parker Review diversity targets
@ Review and prepare for the UK Corporate Governance Code reforms
118
Balfour Beatty plc Annual Report and Accounts 2023
BOARD AND COMMITTEE MEETING ATTENDANCE
AT SCHEDULED MEETINGS DURING THE YEAR
KEY
Attended Board
Attended Committee
DIRECTOR
B
BOARD
A
AUDIT
AND RISK
N
NOMINATION
R
REMUNERATION
S
SAFETY AND
SUSTAINABILITY
Charles Allen
Leo Quinn
Philip Harrison
Stephen Billingham
Anne Drinkwater
Stuart Doughty
Barbara Moorhouse
Michael Lucki
Louise Hardy
BOARD AND COMMITTEE SCHEDULED
MEETINGS DURING THE YEAR
B
A
R
B
N
R
S
B
A
R
JAN
FEB
MAR
APR
MAY
JUN
B
A
S
JUL
B
B
A
B
B
A
N
R
S
AUG
SEP
OCT
NOV
DEC
MAJOR BOARD ACTIVITIES THROUGHOUT 2023
FEBRUARY
MARCH
MAY
JULY
AUGUST
NOVEMBER
DECEMBER
Approval of
Modern
Slavery
Statement.
Received and
considered the
US military
housing
independent
compliance
monitor’s first
report.
Approval of:
@ Interim dividend
@ Half-year financial
report
Enhancement
of workforce
engagement
activities and
reporting.
Approval of:
@ Trading update
announcement
@ Initial tranche of
2024 share
buyback
programme
Approval of
the terms of
reference for
each of the
Board’s
Committees.
Approval of:
@ 2023 budget
and three-year
plan
@ Final dividend
@ Annual Report
and Accounts
2022
@ 2023 share
buyback
programme
Compliance with the UK Corporate Governance Code
During the year, the Company was subject to the Financial Reporting Council’s 2018 UK Corporate Governance Code, which can be found
at: www.frc.org.uk. This report, together with the reports from the Audit and Risk, Nomination, Remuneration, and Safety and Sustainability
Committees, provide details of how the Company has applied the spirit of the principles of the Code (pages 117 to 172).
In 2023, the Company complied with all the provisions of the UK Corporate Governance Code.
Balfour Beatty plc Annual Report and Accounts 2023 119
Governance
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Leading with
experience
The Directors hold the necessary skills and experience relevant to the
sectors in which the Group operates, enabling the Board to effectively
set the strategic direction and purpose of the Group and promote its
long-term sustainable success
1
2
3
4
5
6
7
8
9
Key
I Independent
N Nomination Committee
Committee Chair
R Remuneration Committee
A Audit and Risk Committee
S Safety and Sustainability Committee
120
Balfour Beatty plc Annual Report and Accounts 2023
1. CHARLES ALLEN
Non-executive Group Chair
N
3. PHILIP HARRISON
Chief Financial Officer
Appointed
13 May 2021
Nationality
British
Appointed
1 June 2015
Nationality
British
Experience
Lord Allen has extensive corporate
experience across a range of sectors, most
notably in support services and media. His
previous positions include chair of ISS A/S,
executive chair of EMI Music, chief
executive of ITV plc, chief executive of
Compass Group, chief executive of Granada
Group and chief adviser to the British Home
Office.
Charles was awarded a CBE in 2002, was
knighted in 2012 and was ennobled in 2013.
Key external appointments
Lord Allen sits in the House of Lords and
currently holds positions as chair of THG
PLC, chair of Global Media and
Entertainment Ltd and chair of the Invictus
Games Foundation.
Experience
Philip has considerable financial expertise
and extensive experience of working in
large multi-national manufacturing and
services businesses. Philip was appointed
as Chief Financial Officer in June 2015,
having previously served as group finance
director at Hogg Robinson Group plc, and
as group finance director at VT Group plc.
Prior to that, he was VP finance at
Hewlett-Packard (Europe, Middle East and
Africa regions) and was a member of its
EMEA board.
Philip’s earlier career included senior
international finance roles at Compaq, Rank
Xerox and Texas Instruments. Philip is a
fellow of the Chartered Institute of
Management Accountants.
S
Key external appointments
Philip is a non-executive director and chair
of the audit committee of Dowlais Group plc.
2. LEO QUINN
Group Chief Executive
Appointed
1 January 2015
Nationality
British
Experience
Leo has strong leadership expertise and
significant experience of successfully
delivering transformation strategies for large
multi-national companies. Leo is a civil
engineer and began his career at Balfour
Beatty. He was educated at Portsmouth
University and Imperial College, London,
where he completed his MSc in
Management Science. Before being
appointed as Group Chief Executive of
Balfour Beatty, Leo spent five years as
group chief executive of QinetiQ Group plc
and, prior to that, five years as chief
executive officer of De La Rue plc. Before
this, he spent almost four years as chief
operating officer of Invensys plc’s
production management business,
headquartered in the US, and 16 years with
Honeywell Inc. in senior management roles
across the UK, Europe, the Middle East and
Africa, including global president of H&BC
Enterprise Solutions. Leo was previously a
non-executive director of Betfair Group plc
and Tomkins plc. Leo was also a member of
the Build Back Better Business Council in
2021, which brought together government
and business leaders to drive economic
recovery and growth across the UK.
Key external appointments
Leo is the founder of The 5% Club, a
dynamic movement of employers
committed to ‘earn and learn’ as part of
building and developing the workforce
needed for a socially mobile, prosperous
and cohesive nation. In 2021, Leo’s
contribution to business was recognised
through his appointment as a visiting
professor at the College of Business and
Social Science at Aston University.
4. DR STEPHEN
BILLINGHAM CBE
Senior Independent
Non-executive Director
I
A
N
Appointed
1 June 2015
Nationality
British
Experience
Stephen has significant recent and relevant
financial experience and has worked in the
construction, infrastructure and support
services industries for over 30 years.
Stephen was the chief financial officer of
British Energy Group plc and the chief
financial officer of WS Atkins plc. He was
also executive chairman at Punch Taverns
plc. He played instrumental roles in the
financial and operational transformation of
all companies. He was also non-executive
chairman of Anglian Water Group and
chairman of the Royal Berkshire NHS
Foundation Trust. Stephen spent 11 years
with Balfour Beatty, when it was BICC plc,
in corporate finance and other roles. He is a
fellow of the Association of Corporate
Treasurers. He was awarded a CBE in 2019
for services to Government owned, public
and regulated businesses and awarded an
honorary doctorate from Aston University
in 2016.
Key external appointments
Stephen is currently non-executive
chairman of Urenco Ltd, where he also
chaired the Urenco Ltd audit committee
from 2009 to 2015.
5. ANNE DRINKWATER
Non-executive Director
I
R
S
Appointed
1 December 2018
Nationality
British
Experience
Anne has significant experience in heavy
industry including multiple large capital
expenditure projects with infrastructure
considerations and knowledge of doing
business in the UK and US. She was at BP
plc for over 30 years, holding a number of
senior strategic and operational roles across
multiple jurisdictions including the US,
Norway, Indonesia, the Middle East and
8. MICHAEL LUCKI
Non-executive Director
I
A
R
Appointed
1 July 2017
Nationality:
American
Experience:
Michael has over 40 years of business
and leadership experience in the US and
internationally in the engineering and
construction sector. He has held a number
of leadership and finance roles, including
that of chief financial officer, executive vice
president and board member at CH2M
HILL. He was formerly an audit partner at
Ernst & Young LLP and its global industry
leader for infrastructure, construction and
engineering practices. He has recently
acted as a strategic adviser to companies
and private equity firms in the engineering
and construction industry.
Key external appointments:
Michael is a board member and chair of
the compensation committees of Psomas
Corporation, and a board member and chair
of the audit and risk committee of Bernards
Construction and HMC Architects, Inc.
Michael is a member of the board of
governors of The California State University
Foundation, and a board member of
Walker Consultants.
9. LOUISE HARDY
Non-executive Director
I
S
Appointed
1 April 2022
Nationality:
British
Experience
Louise has over 30 years of business and
leadership experience in the construction
and built engineering industry. A civil
engineer, she has held a range of senior
roles at London Underground, Bechtel and
Laing O’Rourke and as infrastructure
director responsible for the portfolio of
projects for the London 2012 Olympic
Games. Her most recent executive
appointment was European project
excellence director for AECOM, where she
was responsible for monitoring project
performance for a portfolio of 10,000
projects across 15 countries and eight
businesses within Europe. Since then,
Louise has held a number of non-executive
roles in the public sector and FTSE 250.
Louise is a Fellow of the Institution of Civil
Engineers, the Chartered Management
Institute and the Women’s Engineering
Society. Louise won the European Women
in Construction and Engineering, Lifetime
Achievement in Construction Award, 2019.
Key external appointments
Louise is currently a non-executive director
of Crest Nicholson Holdings plc, Travis
Perkins plc and Severfield plc. Louise is also
independent chair of Oriel, the joint initiative
between Moorfields Eye Hospital, UCL and
Moorfields Eye Charity. She is also a keen
volunteer within the industry as a STEM
Ambassador and Diversity Champion.
Africa culminating in the role of president
and CEO of the Canadian business. Anne
was previously a non-executive director
at Aker Solutions A.S.A. and at UK listed
Tullow Oil plc, where she served on a
number of board committees. She was
previously oil and gas adviser to the
Falkland Islands Government.
Key external appointments
Anne is non-executive deputy chair of
Equinor A.S.A. where she is also chair of
the audit committee and a member of the
safety, sustainability and ethics committee.
6. STUART
DOUGHTY CMG
Non-executive Director
I
S
A
N
Appointed
8 April 2015
Nationality
British
Experience
Stuart has over 50 years’ experience in the
civil engineering, construction and
infrastructure sectors. Stuart was chief
executive of Costain Group plc between
2001 and 2005. This followed executive
positions in Welsh multi-utility Hyder plc,
Alfred McAlpine plc and Tarmac
Construction, where he represented the
company on the Channel Tunnel board,
following 21 years with John Laing
Construction. He has also served as a senior
non-executive director of Scott Wilson
Group plc and chairman of Alstec Ltd,
Somero plc and Beck & Pollitzer Limited,
and as non-executive director representing
AustralianSuper (the largest pension fund
in Australia) on the board of King’s Cross
Development Partnership LLP. He is a
chartered engineer and a fellow of both
the Institution of Civil Engineers and the
Institute of Highway Engineers. Stuart was
honoured with a CMG in 2004 and received
an honorary doctorate from Aston
University in 2018.
Key external appointments
Stuart does not hold any external
appointments.
7. BARBARA
MOORHOUSE
Non-executive Director
I
A
N
R
Appointed
1 June 2017
Nationality
British
Experience
Barbara has extensive leadership
experience across the private, public and
regulated sectors. She was group finance
director at Morgan Sindall plc, regulatory
director at South West Water and chief
finance officer for two international listed IT
companies – Kewill Systems plc and Scala
Business Solutions NV. Latterly, she was
director general at the Ministry of Justice
and the Department for Transport. Her most
recent executive appointment was as chief
operating officer at Westminster City
Council. She is a fellow of the Chartered
Institute of Management Accountants and
an associate member of the Association of
Corporate Treasurers.
Key external appointments
Barbara is independent chair of the Agility
Trains Group. Barbara is also senior
independent non-executive director and
chair of the remuneration committee of
Aptitude Software Group plc, and
non-executive director and chair of the
quality and safety committee at Dwr
Cymru/Welsh Water.
Balfour Beatty plc Annual Report and Accounts 2023 121
Governance BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
The Group Chair
ensures there is
sufficient time allocated
to each agenda item to
promote constructive
debate and support
decision making.”
@ commitment to paying a sustainable
ordinary dividend, targeted at a pay-out
ratio of 40% of underlying profit after tax
(excluding gain on disposal of Investments
assets), with the Board expecting
dividends to grow over time with
underlying profit; and
@ additional cash returns via share buybacks
(or other mechanisms depending on market
conditions) broadly based on surplus cash
delivered from Investments disposals as
well as surplus operating cash flows.
During the year the Board reviewed the
capital allocation framework and considered
that it remained appropriate.
Share buyback
Following Board authorisation, the Company
launched an initial £50 million tranche of its
2023 share buyback programme on 3 January
2023. The Board increased this programme
by £100 million to a maximum value of £150
million following the announcement of the
Company’s 2022 full year results. As part of
the 2023 program, the Company purchased
43,286,805 ordinary shares for a total
consideration of £150 million. The 2023
buyback programme was part of the Company’s
capital allocation framework which includes
making additional cash returns to shareholders
based on surplus cash delivered from
Investments disposals as well as surplus
operating cash flows. On 2 January 2024,
the Board announced the initial tranche of
its share buyback programme for 2024 at a
level of £50 million.
Board activities
Throughout the year the Board met
sufficiently frequently to fully discharge
its duties. The Board held eight scheduled
meetings in the year, as well as ad hoc and
Board sub-committee meetings to manage
matters arising outside the formal schedule
of meetings. Individual attendance at the
scheduled meetings can be found on
page 119.
The Group Chair sets the Board agendas,
with input from the executive Directors and
support from the Company Secretary, and
ensures the Board receives timely and accurate
papers in advance of meetings. The Group
Chair ensures there is sufficient time allocated
to each agenda item to promote constructive
debate and support considered decision making.
The Company Secretary supports the Group
Chair in annual agenda planning, ensuring
that matters are scheduled for the appropriate
meetings based on the business cycle and an
even distribution of matters throughout the year.
A schedule of Board activities can be found
opposite and further detail on key actions is
set out below.
Strategy
The Board held a US-focused strategy
session in July and UK-focused strategy
session in November. The Board reviewed
the economic and political context in each of
the markets and senior leaders across the
Group presented on the following matters:
@ market overview and future pipeline
of opportunities;
@ operational and financial performance; and
@ key strategic issues and actions, including
risks and opportunities.
Capital allocation
The Board remains committed to delivering
strong total cash returns to shareholders,
whilst maintaining an appropriate balance of
investment in the business. In March 2021,
the Board announced a new capital allocation
framework, which comprises:
@ continued investment in organic growth
opportunities in Infrastructure Investments
which meet the Group’s return hurdles;
@ active realisation of Investments assets
with disposals timed to optimise value for
shareholders;
@ a strong but efficient balance sheet which
provides the financial platform to make
long-term business decisions, in response
to both opportunities and periods of
market dislocation;
122
Balfour Beatty plc Annual Report and Accounts 2023
HOW THE BOARD SPENT ITS
TIME DURING 2023
9%
3%
INDICATION OF
TIME SPENT IN
BOARD MEETINGS
88%
l Strategy, performance and operations
l Reviewing matters discussed at
Committee meetings
l Governance and other matters
4%
8%
20%
INDICATION OF
RELATIVE TIME
SPENT ON BOARD
AND COMMITTEE
MEETINGS
9%
59%
l Board
l Remuneration Committee
l Audit and Risk Committee
l Safety and Sustainability Committee
l Nomination Committee
The share buyback programme was adopted
in order to increase earnings per share, as
fewer shares will be in circulation and
shareholders will have a greater stake in the
Company’s profits. Further details on the
2023 share buyback programme can be
found in the Directors’ report on pages 169
and 170.
Artificial intelligence (AI)
During the year, the Board received an
update on how AI can be utilised in the
business in areas including resourcing and
health and safety. Balfour Beatty prides itself
on its innovative approach to its industry and
sector and will continue to explore opportunities
technology may provide.
BOARD ACTIVITIES IN 2023
LINK TO
VALUES
LINK TO PRINCIPAL
RISKS
STAKEHOLDERS
CONSIDERED
See pages 26 to
27 for more
information
See pages 96 to
103 for more
information
PERFORMANCE
@ Reviewed routine reports from the executive Directors on performance
@ Reviewed Group strategy and approved the Group’s budget
@ Approved the Company’s Annual Report and Accounts, financial results, trading updates and ancillary
LEAN
EXPERT
documents relating to the Annual General Meeting, including the Notice of Meeting
@ Reviewed the capital allocation framework and its application
@ Approved matters where required in accordance with the matters reserved for the Board
@ Received ‘deep dive’ presentations and reports on significant matters, key contracts and projects
@ Received updates on control improvements at the US military housing business
@ Reviewed reports from the Group’s brokers
HEALTH, SAFETY, ENVIRONMENT AND SUSTAINABILITY
@ Received verbal updates from the Safety and Sustainability Committee following each Committee meeting
@ Received routine Group health, safety, environment and sustainability reports where a Safety and
Sustainability Committee meeting was not scheduled in the same cycle of meetings
@ Reviewed the Group’s strategies, policies and procedures in relation to safety
@ Reviewed the environmental impact and sustainability of the Group’s operations, and the strategies
LEAN
SAFE
SUSTAINABLE
and policies of the Group
AUDIT AND RISK
@ Received verbal updates from the Audit and Risk Committee following each Committee meeting
@ Received reports on financial and accounting issues and contract and commercial issues
@ Approved the going concern statement and assessment of viability, the Directors’ valuation of the
LEAN
TRUSTED
Investments portfolio and principal and emerging risks
@ Approved recommendations from the Audit and Risk Committee relating to the fee and appointment of
the external auditor
@ Received reports from the external auditor in respect of full and half year results
@ Reviewed and monitored the Group’s risk profile, including a robust review of principal and emerging risks
@ Reviewed the effectiveness of the systems of risk management and internal control
3
8
3
1
4
9
1
4
2
7
13
2
11
@ Shareholders
@ Customers
@ Suppliers
@ Partners
@ Communities
@ Employees
@ Shareholders
@ Employees
@ Partners
@ Communities
3
8
2
11
@ Shareholders
@ Employees
@ Suppliers
CULTURE
@ Monitored the Company’s purpose, values and behaviours
@ Monitored engagement with key stakeholder groups and reviewed the effectiveness of stakeholder
engagement mechanisms
@ Received reports from the Directors on workforce engagement activity, as well as management
information on workforce matters, including analyses of employee survey results and insights derived
from the Stakeholder Voice initiative
@ Received biannual updates on business integrity including reports on Speak Up, the Group’s
whistleblowing service
@ Received updates from the Group’s Affinity Networks and individuals participating in the reverse
mentoring programme
@ Approved the Group’s 2023 Modern Slavery Statement
PEOPLE
TRUSTED
SAFE
1
7
5
6
10
11
@ Employees
@ Communities
@ Partners
@ Investors
@ Reviewed the effectiveness of the Board’s approach to workforce engagement activities and reporting
@ Received verbal updates from the Remuneration Committee following each Committee meeting
@ Received updates and supported workforce diversity and inclusion initiatives
@ Received an annual update on pensions
EXPERT
TRUSTED
SUSTAINABLE
6
10
12
@ Employees
@ Communities
@ Shareholders
GOVERNANCE
@ Conducted an internal evaluation of the performance and effectiveness of the Board, its main
TRUSTED
Committees and individual Directors
@ Identified two new non-executive Directors who joined the Board in March 2024
@ Senior Independent non-executive Director and Committee Chair succession planning
@ Conducted succession planning for the Executive Committee to support the development of a diverse
6
11
pipeline of candidates
@ Reviewed conflicts of interest of the Directors
@ Reviewed the formal matters reserved for the Board and terms of reference for each of the
Board Committees
@ Convened sub-committees of the Board where necessary to deal with specific matters
@ Updated the Board Diversity and Inclusion Policy
@ Considerations relating to the new Listing Rules on Diversity and Inclusion
@ Customers
@ Employees
@ Shareholders
@ Partners
@ Suppliers
Balfour Beatty plc Annual Report and Accounts 2023 123
Governance BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
WORKFORCE
ENGAGEMENT
Action taken
The Board undertakes a
number of site visits,
participate in employee
events, and meet with
employee networks and
Directors and provide
feedback to the full Board
following each engagement
activity to share the
knowledge gained
Link to culture
@ Provides the Board with
direct insights into
working environments,
workforce attitudes,
behaviours and practices,
and the practical
application of policies and
standards on the ground
@ Sharing experiences of
site visits and discussing
these as a Board assisted
in creating a broader
exposure for each
Director than would
otherwise be possible
due to the range and
scale of the Group’s
operations across
different sectors
and geographies
WHISTLEBLOWING
INTERNAL AUDIT
Action taken
The Audit and Risk
Committee and the wider
Board review whistleblowing
statistics, as well as details
of any serious cases raised
through the Speak Up
helpline and the progress of
related investigations
Link to culture
@ Speak Up reports provide
the Board with a view of
the nature of employee
concerns and trends
in behaviours of
the workforce
Action taken
The Audit and Risk Committee
reviewed details of the
outcomes of internal audits
judged to be less than
satisfactory (with details
available to all Board members)
Link to culture
@ Provides the Board with a
direct view of areas of
practice, policy and
behaviours that were not
at the desired standard
and provides details of
the corrective action
being taken
How the Board
monitored
culture in 2023
MODERN SLAVERY
Action taken
The Board reviewed and
approved the Group’s
Modern Slavery Statement
Link to culture
@ Provides the Board with
a broad understanding of
practices and behaviours
across the Group, and
how these align with the
purpose, values and
strategy of the Group
@ Provides oversight of
steps taken to prevent
modern slavery and
human trafficking within
the Group and its
supply chain
EMPLOYEE
MANAGEMENT
INFORMATION
Action taken
The Board annually reviews
the results of the employee
engagement survey
Link to culture
@ Analysis of employee
survey data enables the
Board to understand the
employee experience.
This provides the Board
with insights into working
environments, employee
behaviours and attitudes,
as well as the workforce’s
understanding of the
Group’s culture
@ Enables the Board to
assess how working
practices and behaviours
align with the purpose,
values and strategy of
the Group
124
Balfour Beatty plc Annual Report and Accounts 2023
SAFETY MANAGEMENT
INFORMATION
Action taken
The Safety and
Sustainability Committee
receives management
information to monitor
safety culture across the
Group. This includes insights
derived from:
@ Statistics and trends of
lost time injury rates
@ Metrics on safety
observations reported by
employees
@ Analysis of employee
survey data
Link to culture
@ Enables the Directors to
assess the effectiveness
of safety practices and
behaviours
@ Facilitates further insight
into safety behaviours by
evidencing the extent of
individual responsibility
taken by employees with
regard to proactively
reporting safety concerns
Stakeholder engagement
The Board ensures that a balanced view of stakeholder needs and
interests are taken into consideration and embedded within Board
discussions and decision making.
Report of the
Board’s Workforce
Engagement Lead
I am pleased to present my report in my
capacity as the Board’s Workforce
Engagement Lead.
The Board designs the framework within
which stakeholder engagement takes place,
and shapes how relationships with key
stakeholders are developed and maintained.
The Board is fully cognisant of the importance
of maintaining an ongoing interactive dialogue
with key stakeholders, understanding that this
is crucial to support well-informed and
high-quality decision making that creates
value for all stakeholders and promotes the
long-term sustainable success of the Group.
The Board undertakes engagement initiatives
throughout the year in order to understand
the interests of the Group’s key stakeholders,
specifically its customers, workforce, supply
chain and strategic partners, communities,
governments and investors. The Board takes
a balanced view of the complementary and
divergent interests in discussions and
decision making. The Board on its own,
however, cannot engage meaningfully with
every single stakeholder. To address this,
stakeholder engagement is supplemented by
a network of mature executive and business-
led stakeholder relationships across the Group.
Feedback on wider stakeholder engagement
is reported to the Board to support effective
decision making and a timely recognition of
emerging stakeholder issues.
Workforce
The Board recognises that the workforce is
the Group’s most valuable resource and is
pivotal to building its long-term sustainable
success. The Board is therefore committed
to constructive two-way dialogue with the
workforce to enable a better reflection of
their interests in future strategic decisions.
To ensure Balfour Beatty is an employer of
choice, operating effectively, and creating a
working environment where all employees
feel safe, valued, and are given the tools
to succeed and develop throughout their
careers, the Board must listen and engage
meaningfully with employees.
Following a review of Board-led workforce
engagement mechanisms, I was appointed
as the Group’s Workforce Engagement Lead
in 2022. I am tasked with establishing and
shaping the Group workforce engagement
strategy and reporting to the Board on
outcomes and insights. Further details of the
workforce strategy can be found on pages
126 and 127. My responsibilities as the
Board’s Workforce Engagement Lead are set
out on page 131.
In 2023, I met with some of the UK’s Affinity
Networks to understand their experiences of
working life at Balfour Beatty, what could be
done to enhance their experience, and what
approach to engagement was needed to
enhance communications and develop an
efficient two-way feedback loop between
the workforce and the Board.
During 2023 actions were taken to enhance
workforce engagement. All engagement
activities are recorded centrally and reported
to the Board periodically to ensure balanced
coverage across the Group’s Business Units
and key employee types are identified through
the output of the employee engagement
survey. Key findings from the engagement
activities are also discussed to ensure that
any lessons learned can be applied, any
further engagement activities are organised
and any relevant actions are taken to address
the key findings. Further enhancements will be
made in 2024.
Louise Hardy
Workforce Engagement Lead
12 March 2024
The Board is
committed to
constructive two-
way dialogue with
the workforce to
enable a better
reflection of
their interests in
future strategic
decisions.”
Balfour Beatty plc Annual Report and Accounts 2023 125
Governance BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Stakeholder engagement continued
Balfour Beatty HS2 visit –
recognising exceptional
contribution
In September 2023, the Board invited Balfour Beatty
colleagues from the HS2 joint venture to attend an
event recognising their exceptional contribution to
the Group through the excellent work being
undertaken, both on Area North and Old Oak
Common station.
The event presented an opportunity for the
workforce to network directly with the Board, the
Executive Committee, and other colleagues whose
contributions were being recognised. The event was
organised in such a way as to ensure the Board had
an opportunity to speak to a broad range of
colleagues during the evening and obtain first-hand
perspectives on a variety of matters. The feedback
from the workforce on the evening was very upbeat
with several colleagues feeling very positive about
the opportunity to meet with the Board. The
following day, the Board visited with a number of
HS2 Area North Sites.
Great networking event in
which I was able to engage
with the most senior
business leaders and discuss
their views on the future of
infrastructure construction
in the UK and worldwide.”
Oliver Shore
Construction Director, Balfour Beatty
It was a very pleasant
evening which allowed us
to get to know our senior
management, tap into their
vast experience and
better understand the key
opportunities and challenges
of our business and industry.
I would like to thank them
for the opportunity and
insights they provided.”
Tamta Kutateladze
Environmental Manager, Balfour Beatty
126
Balfour Beatty plc Annual Report and Accounts 2023
It was a pleasure
to visit HS2 Area
North and recognise
the exceptional
contributions of our
colleagues whilst
hearing their
experiences first
hand.”
Leo Quinn
Group Chief Executive
Workforce engagement strategy
The Board approved Louise’s
recommendations to shape the workforce
engagement strategy, specifically:
@ The scope: Initially the engagement
strategy will focus on the US and UK, with
the strategy to be extended to also cover
the Gammon business in Hong Kong once
the UK and US programmes have been
embedded.
@ Topics of engagement: Topics of
engagement will be identified each year
for Board approval and will be informed
by engagement surveys and various
engagement activities, supported by
particular areas of management focus.
@ Targeted engagement: The Workforce
Engagement Lead will conduct ongoing
analysis of the employee base to identify
which groups of employees should
be engaged for a good cross-representation
of the Group.
@ Wider Board engagement: With the
support and direction of the Workforce
Engagement Lead, the wider Board
will continue to conduct workforce
engagement initiatives, for example
through training workshops, talent
activities, site visits, town halls and
contract award meetings. Non-executive
Directors will continue to ensure
they devote sufficient time to engage
meaningfully with employees, especially
those from underrepresented groups.
@ Board reporting: The Board will be
@ the US Civils team on the Denver Transit
Operators Contract in Colarado, where the
Board met and engaged with members of
staff and representatives of our joint
venture partner.
In March 2023, members of the Board visited
Hong Kong, where Gammon, the Group’s
50:50 joint venture with Jardine Matheson,
is based. They visited the Hong Kong
International Airport, Caroline Hill and
Kai Tak West sites and met many Gammon
colleagues as well as representatives of
Jardine, and Gammon’s customers.
Following engagement activities, Board
members report on their findings to the
rest of the Board. Whilst undertaking
engagement activities, they discuss and
gather feedback on topics such as:
@ health and safety;
@ environment and sustainability;
@ diversity and inclusion;
@ leadership and engagement;
@ culture and morale;
@ resources and personal development;
@ understanding of Group strategy, values
and behaviours; and
@ Directors’ remuneration, and its alignment
with workforce remuneration.
In addition to first-hand engagement, the
Board obtains feedback across the breadth
of the employee population through both the
employee survey and the Stakeholder
Voice initiative.
Both engagement tools continue to provide
insightful data on workforce views and
experiences. Reporting on key performance
indicators such as voluntary attrition rates,
safety observations, engagement, and
participation rates for My Contribution
(Balfour Beatty’s employee-led change
programme), all help to build a strong
picture of life as a Balfour Beatty employee
and support robust and considered Board
decision making that creates value for
our workforce.
updated at least biannually on workforce
engagement, specifically to set out the
focused topics of engagement, the
proposed programme of engagement
activities, and a thematic analysis of the
findings. Furthermore, each Director will
be required to report on the outcomes of
their workforce engagement activities at
each Board meeting.
@ Effectiveness review: The Board will
evaluate the effectiveness of workforce
engagement on an annual basis,
predominantly by:
» assessing the outcomes of engagement
activities undertaken;
» data analysis of employee survey results
and other KPIs on workforce engagement
experience; and
» reviewing feedback from the workforce
on the Board’s approach to engagement.
Key workforce engagement
actions taken in 2023
During 2023, the Board carried out a full
schedule of site visits and in-person
engagement activities with an array of
employees across the business units and
geographies in the Group. The Group Chair
and the non-executive Directors undertook a
total of 57 site visits collectively. These visits
provided invaluable opportunities for the
Board to gain insights into ongoing projects
across the business, engage directly with the
workforce, and deepen the Directors’
understanding of the culture and diversity
within the organisation. Moreover, they were
provided a first-hand opportunity to engage
in discussions regarding the challenges and
opportunities faced by the workforce, while
also enabling conversations on project safety
protocols and controls.
The Directors visited a number of sites
across the UK including HS2 Old Oak
Common station, Lewisham Gateway,
HS2 Curzon Street Station, Bromford Tunnel,
Edinburgh Airport, Royal Botanic Garden
Edinburgh, Thames Tideway and the Midland
Metropolitan University Hospital.
During the Board’s visit to the US in July,
Directors had the opportunity to meet a large
number of employees, including:
@ The Balfour Beatty Communities team at
Fort Carson US Army Garrison. The visit
gave the Board the opportunity to meet
employees at all levels across Fort Carson
in addition to meeting residents and getting
feedback from the site Commander on the
company’s performance. The visit gave the
Board the opportunity to see the positive
effects of the We Care initiative and the
hard work that colleagues are undertaking
to implement the improvements that have
been identified in the independent
compliance monitor’s first report; and
The Board visited
Fort Carson in the
US where it had
the opportunity
to meet the site
Commander and
a broad spectrum
of employees
working in the
Military Housing
business to see
in practice the
positive effects
of the We Care
cultural
transformation
programme’’
Charles Allen
Non-executive Group Chair
Balfour Beatty plc Annual Report and Accounts 2023 127
Governance BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Stakeholder engagement continued
Investors
Investors play a valuable role in the corporate
governance of the Company. The Board is
committed to maintaining an open dialogue
with its investors, which is achieved through
a programme of structured engagement,
including visits to key project sites and
facilities. A selection of investor events that
took place in the year can be found within the
investor calendar on the facing page.
Institutional investors
The Group Chair, Group Chief Executive, and
Chief Financial Officer held meetings with
individual institutional investors throughout
2023. The Remuneration Committee Chair
also held meetings with institutional
investors as part of the remuneration policy
consultation exercise. In addition, the
executive Directors conducted analyst
presentations following the announcements of
the Group’s financial results and they also
carried out an investor site visit to Old Oak
Common station in November.
Either on request by investors or at Company
presentations and one-to-one meetings,
Committee Chairs will engage with investors
on matters specific to the remit of their
respective Committees. The Senior Independent
non-executive Director is also available to
shareholders as a separate channel to report
any other views or concerns. In addition,
management engages with proxy advisory
firms to support them in their reporting
to their members. The outcomes of
engagement activities are reported back
to the full Board.
The Board receives biannual reports from the
Head of Investor Relations summarising
analyst research briefings and changes to
institutional shareholdings, as well as ad hoc
reports on share price movements.
Engaging directly with shareholders is
integral to effective Board decision making
that promotes shareholder and wider
stakeholder value. It provides an opportunity
for candour, insight, and the means to build
relationships with key shareholders. The
Board concluded that the key benefits arising
from its direct shareholder engagement
initiatives held throughout the year included
the opportunity to:
@ build transparency and trust;
@ provide greater clarity over Board decisions
and the decision-making process;
@ showcase the Board’s skills, experience,
and diversity, enabling shareholders to
assess the composition and effectiveness
of the Board as a decision-making unit; and
@ enhance the Board’s self-awareness and
understanding of shareholder expectations.
Considerations following the
2023 AGM
Comments from shareholders at, or in
relation to, the AGM are considered by the
Board, and where relevant, its Committees.
Following the 2023 AGM, feedback from
shareholders focused on the following
key points:
@ The Remuneration Policy received 81.11%
votes in favour and 18.89% votes against.
On the lead-up to the 2023 AGM, the
Chair of the Remuneration Committee
engaged with institutional shareholders
and the Remuneration Committee
incorporated changes to the Remuneration
Policy following feedback to ensure
alignment with shareholders. One
institutional shareholder did not raise any
concerns during the consultation process
and whilst apparently supporting the
Remuneration Policy, they voted against
it, which resulted in a higher number of
votes against the approval of the policy.
The Remuneration Committee Chair
engaged with this shareholder following
the 2023 AGM to understand why their
votes were cast against the policy despite
concerns not having been raised during
the consultation process.
OUR APPROACH TO STAKEHOLDER ENGAGEMENT
Investors play a
valuable role in
the corporate
governance of the
Company. The
Board is
committed to
maintaining an
open dialogue
with its
investors.”
Identify key
stakeholders
Define
engagement
approach
Communicate
decisions made
Stakeholder
engagement
Engage
Embed stakeholder
views into decision
making (S172)
Report insights
and outcomes
Assess
stakeholder
views
128
Balfour Beatty plc Annual Report and Accounts 2023
Investors are
consulted on an
ongoing basis to
ensure that the
Group has a full
and clear
understanding
of their views.”
@ The re-election of the Group Chair received
83.61% votes in favour and 16.39% votes
against. The Group acknowledges
shareholders’ calls for a more diverse
Board and has taken steps during 2023
to make progress on Board succession
planning. Following the AGM on 9 May 2024,
the Company will be compliant with the
Board gender diversity recommendations
set out in the FTSE Women Leaders
Review with 44.4% female representation
on the Board and Anne Drinkwater
appointed as Senior Independent
non-executive Director. When carrying
out the recruitment of the two new
non-executive Directors, the short-list in
both cases was diverse in terms of gender
and ethnicity. For future recruitment
activities, the Board will ensure a suitably
diverse list of candidates is considered to
ensure that progress is made against the
diversity targets set out in the updated
Board Diversity and Inclusion Policy.
Approach to shareholder
engagement
Retail investors
The Company’s website provides access to
full year and half year results information in
addition to a plethora of information on the
Company including in relation to the Group’s
operations, governance, health and safety,
and sustainability so that retail investors
can keep equally as informed as institutional
investors. Retail investors are also encouraged
to raise any questions or queries they may
have with the Company Secretary, who will
arrange for an appropriate response to
be provided.
Investors are consulted on an ongoing basis
to ensure that the Group has a full and clear
understanding of their views.
Annual General Meeting (AGM)
The AGM provides an opportunity for investors
to engage directly with the Board in person.
Corporate website
The Company’s website has a section
dedicated to investors where a range of
valuable information can be found, including:
@ published Annual Reports and results
announcements;
@ a financial calendar of events;
@ details on the Company’s corporate
governance arrangements;
@ Board and Executive Committee member
profiles;
@ the Group’s sustainability strategy, Building
New Futures; and
@ regulatory announcements.
CALENDAR OF SHAREHOLDER EVENTS
March 2023
June 2023
November 2023
@ Full year results presentation
@ Private client fund manager roadshow –
@ Private client fund manager roadshow –
Leeds and York
August 2023
London
@ Investec best ideas conference
@ UK private client virtual roadshow
@ Half year results presentation
@ Investor site visit to Old Oak Common
@ London roadshow
@ Jefferies Pan-European Mid-Cap
Conference
April 2023
@ Annual Report and Accounts published
@ US roadshow
May 2023
September 2023
@ UK roadshow
@ US virtual roadshow
@ Liberum fire side chat
@ Annual General Meeting
@ Numis CEO dinner
@ Trading update
@ Numis institutional lunch
@ UBS Pan-European Small and Mid-Cap
Conference
@ HSBC UK Corporate & Investor
Conference
station
@ Bank of America European Materials
Conference
December 2023
@ Trading update
Balfour Beatty plc Annual Report and Accounts 2023 129
Governance DIVISION OF RESPONSIBILITIES
A robust governance
framework
In accordance with Principle A of the UK Corporate Governance
Code, the primary role of the Board is to effectively lead the Group by
promoting the long-term sustainable success of the Company,
generating value for shareholders and contributing to wider society.
The Board is the principal decision-making body of the Company, with
authority for specific matters being delegated to Committees of the
Board. Responsibility for the day-to-day operation of the Group is
formally delegated by the Board to the Group Chief Executive who
manages the operational running of the business through the
Executive Committee. The members of the Executive Committee
each have responsibility for particular business units and enabling
functions, with authority being further delegated to appropriate
individuals throughout the Group based on their role and seniority.
The framework set out below provides a high-level summary of the
Group’s governance framework, illustrating the flow of authority as
it is delegated throughout the Group.
5 Establishes the Company’s strategic direction, purpose and values
5 Assesses and monitors Company culture and promotes the long-term
success of the Company
5 Approves the Company’s financial statements, dividends and budget
5 Ensures maintenance of a framework of prudent and effective controls
5 Ensures effective engagement with stakeholders including employees
5 Approves matters relating to the composition of the Board and Committees
B
BALFOUR BEATTY PLC BOARD OF DIRECTORS
N
NOMINATION COMMITTEE
R
REMUNERATION COMMITTEE
A
AUDIT AND RISK COMMITTEE
5 Oversees the structure and
composition of the Board
5 Conducts succession planning
5 Oversees the appointment and
induction processes of
new Directors
5 Makes recommendations
regarding Directors’
independence against the
Code’s criteria
5 Reviews the Remuneration
Policy for Directors and
Executive Committee
members
5 Approves the remuneration of
the Group Chair, the executive
Directors and Executive
Committee members
5 Oversees the implementation
of the Remuneration Policy
5 Reviews the form, content and
process for preparing the
financial statements
5 Reviews principal risks and
internal controls, and the
effectiveness of the risk
management framework
5 Monitors the independence
and effectiveness of the
Internal Audit function and
external auditor
S
SAFETY AND SUSTAINABILITY
COMMITTEE
5 Reviews strategies, policies
and performance in relation to
health, safety and sustainability
5 Reviews the environmental
impact and sustainability of the
Group’s operations
5 Reviews in detail incidents
where significant harm has
occurred
@ The Group Chief Executive manages the operational running of the Group through the Executive Committee, members of which are responsible for particular business
units and enabling functions. The Executive Committee oversees the implementation of Group strategy, and matters relating to health and safety, sustainability,
employee matters (including succession and remuneration), legal and governance, technology and innovation, and communications and investor relations
@ Responsibility for the day-to-day running of each of the strategic business units and enabling functions is delegated to individual members of the Executive Committee
EXECUTIVE COMMITTEE
GROUP TENDER AND INVESTMENT COMMITTEE
T
F
FINANCE AND GENERAL PURPOSES COMMITTEE
5 Responsible for the content, maintenance and operation of the Gated
Business Lifecycle which forms the core process for evaluating and
monitoring the governance of operational projects
5 Approves borrowings, banking arrangements, management of interest
rate and foreign exchange rate exposures, contract financing, bonding
and leasing matters and guarantees
CONSTRUCTION SERVICES
SUPPORT SERVICES
INFRASTRUCTURE INVESTMENTS
ENABLING FUNCTIONS
@ Operates across infrastructure
@ Operates principally in the UK,
@ Develops and finances both
@ Bring together shared services
and buildings markets in the UK,
the US and through the Gammon
joint venture in Hong Kong
designing, upgrading, managing
and maintaining critical national
infrastructure
public and private infrastructure
projects in the UK and the US
(Legal, Finance, IT and
Procurement, Communications,
HR and HSE and Sustainability)
to support the delivery of
business objectives
130
Balfour Beatty plc Annual Report and Accounts 2023
This section sets out the defined roles and responsibilities of Board members and outlines the support
the Directors receive to assist them in discharging their duties in accordance with the Companies Act,
and their responsibilities under the UK Corporate Governance Code.
Leadership
GROUP CHAIR
GROUP CHIEF EXECUTIVE
@ Leads the Board and demonstrates objective judgement
@ Responsible for the day-to-day management of the Group and the Group’s
@ Encourages high standards of corporate governance
@ Sets the Board agenda and drives Board effectiveness
@ Promotes a culture of constructive debate, mutual respect and openness
@ Ensures that Directors receive accurate, timely and clear information
@ Leads shareholder and wider stakeholder engagement
performance
@ Leads the Group
@ Enables planning and execution of the Company’s strategy, purpose and
values set by the Board
@ Drives the cultural tone of the Group
@ Ensures the Board is kept abreast of the views of the workforce, and any
divergent views amongst members of the Executive Committee
NON-EXECUTIVE DIRECTORS
@ Oversee the Company’s strategy and provide
strategic guidance and expert advice to
management
@ Monitor Group performance against objectives,
and hold management to account
@ Review management proposals
@ Provide effective and constructive challenge
to management
@ Serve on Board Committees which are
responsible for specified governance roles
NON-EXECUTIVE DIRECTOR MEETINGS
Oversight
SENIOR INDEPENDENT NON-
EXECUTIVE DIRECTOR
@ Acts as sounding board for the Group Chair
@ Assumes the role of intermediary for the Group
Chief Executive, non-executive Directors and
shareholders as required
@ Leads the review of the Group Chair’s performance
@ Chairs the Nomination Committee when the
Group Chair’s succession is considered
@ Available to meet with shareholders
WORKFORCE ENGAGEMENT LEAD
@ Oversees and monitors the workforce
engagement strategy and provide biannual
updates to the Board
@ Identifies topics of engagement for Board approval
@ Conducts ongoing analysis of the employee base
to identify which groups should be engaged with
for a good cross-representation
@ Supports and provides direction to the Board on
workforce engagement activities
@ Provides opportunity for two-way feedback from
the workforce
The non-executive Directors, led by the Group Chair, hold regular scheduled meetings without the executive Directors present prior to or following Board meetings. The
non-executive Directors meet annually, led by the Senior Independent non-executive Director and without the Group Chair present, as part of the Board effectiveness review
to discuss the Group Chair’s performance.
Governance
COMPANY SECRETARY
The Board is supported by the Company Secretary who, in accordance with Principle
I of the 2018 UK Corporate Governance Code, ensures that the Board is able to
function effectively and efficiently, and is available to all Directors, maintaining
dialogue with each of them on an individual basis.
In addition to providing logistical support for Board and Committee meetings, the
Company Secretary is responsible for advising the Board on all governance matters,
supporting the annual Board effectiveness review, managing policies and processes
related to the Board, supporting induction and ongoing training and development of
the Directors, and ensuring that the Directors receive information in a timely manner.
Role of the Board
The role of the Board is to be effective and entrepreneurial and to
promote the long-term sustainable success of the Company, whilst
having regard to the interests of stakeholders and ensuring high
standards of business conduct. Each Director has a defined role with
individual duties; with a clear division of responsibilities, particularly
between the Group Chair (leadership of the Board) and the Group
Chief Executive (leadership of the Company’s business). The balance
of responsibilities at Board level set out above supports a balanced
approach to decision making, ensuring that no one individual has
unfettered powers.
basis, each Director declares their external appointments and
commitments to the Board as part of the conflicts of interest
declaration. Any additional external appointments are subject to
Board approval in order to mitigate the risk of overboarding and
ensure they do not impact the capacity of Directors to discharge their
duties. The Directors’ significant commitments are set out in their
biographies on page 121. The Group Chief Executive does not hold
any non-executive board positions at a listed company. The Chief
Finance Officer is a non-executive director and chair of the audit
committee of Dowlais Group plc, which the Board approved in
January 2023.
Time commitment of Directors
The Board recognises the importance of individual members having
sufficient time to discharge their duties effectively. On an annual
The Board did not approve any other external board appointments
in the year.
Balfour Beatty plc Annual Report and Accounts 2023 131
Governance DIVISION OF RESPONSIBILITIES CONTINUED
Corporate governance
framework
The Company’s governance framework
operates to support the delivery of its strategy
by ensuring that business is conducted
within a framework of robust principles and
procedures and in an orderly fashion.
The Company has a premium listing on the
London Stock Exchange and is therefore
subject to The UK Corporate Governance
Code. A copy of the Code can be found on
the FRC’s website at: www.frc.org.uk.
The Company’s compliance with the Code is
set out on page 119.
The Board
The role of the Board is summarised on page
130. Principally, the Board establishes the
strategic direction of the Group and assesses
the basis upon which the Company
sustainably generates and preserves value
over the long term. The Board also sets and
monitors culture and leads by example to set
the right cultural tone from the top as to how
the Company will achieve its strategic goals
and purpose.
The Group’s governance framework is
designed to facilitate effective, resilient and
prudent management of the business, which
helps to ensure that the Board’s decision
making is considered, long term in its nature,
and takes into account the desirability of
maintaining high standards of business conduct
and the need to act fairly between members.
One of the primary responsibilities of the
Board is to ensure that the Company
preserves value over the long term in a
sustainable manner, taking into consideration
both value derived for the Company’s
stakeholders and the Company’s contribution
to wider society. In setting, monitoring and
delivering the Group’s Build to Last strategy,
and its drive towards the targets and
ambitions outlined in the Building New
Futures sustainability strategy, the Board
ensures that risks and opportunities facing
the Group are identified and, where
appropriate, mitigated appropriately.
The primary responsibilities of the Board are
set out in the Matters Reserved for the
Board, available on the Company’s website.
Key responsibilities include:
@ setting Group strategy and ensuring
resources are in place to meet objectives;
@ setting Group performance objectives and
monitoring performance;
@ significant corporate activities;
@ approval of the annual Group budget;
@ risk management and internal control;
@ Board, Executive Committee and Company
Secretary appointments and succession;
132
Balfour Beatty plc Annual Report and Accounts 2023
@ approval of the annual accounts and
financial reports to shareholders;
The primary responsibilities of the Executive
Committee include:
@ setting the capital allocation framework
@ developing Group strategy to recommend
and share capital structure;
to the Board for approval;
@ approval of significant bids and contracts;
@ review of the pipeline of significant projects;
@ ensuring Group, regional and functional
strategies and resources are effective
and aligned;
@ monitoring Group operating performance;
@ managing the enabling functions;
@ overseeing the management and
development of Group talent;
@ monitoring communication to Group
employees and external stakeholders; and
@ matters relating to health and safety,
sustainability and employees.
Risk and internal control
Risk management
The Board is responsible for undertaking a
robust assessment of the principal risks
facing the Group, as described on pages 96
to 103 of the Strategic report and ensuring
that appropriate mitigating actions are in
place to manage them. This includes those
risks that would threaten the Group’s
business model, future performance,
solvency and liquidity.
The Group’s approach to risk management,
described in more detail on pages 91 to 103,
ensures that the most significant risks to the
Group’s objectives are identified, assessed
and managed on an ongoing basis.
The Business Management System (BMS),
which forms the basis of the Group’s internal
control framework, contains all policies,
procedures and controls. BMS is regularly
updated to reflect the output and effectiveness
of risk and assurance activity to ensure that
there is continuous improvement to the
control environment.
Internal control
The Board has overall responsibility for the
Group’s systems of risk management and
internal control and regularly reviews their
effectiveness. In accordance with the FRC
Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting, the Audit and Risk Committee has
undertaken this review throughout the financial
year. Further details can be found on page
151 of the Audit and Risk Committee report.
@ engagement with shareholders,
employees and wider stakeholders; and
@ reviewing and monitoring the Group’s
culture and its alignment with Group
purpose, values and strategy.
Board and Committee meetings
In order to discharge its responsibilities, the
Board held eight scheduled meetings
throughout 2023. Details of attendance by
Board members at scheduled meetings can
be found on page 119.
The Group Chair sets a structured agenda for
each Board meeting in consultation with the
Group Chief Executive and Company
Secretary. Capacity is maintained on the
agenda for each meeting to allow for the
timely consideration of matters as they arise
during the year. The Group Chair seeks a
consensus at Board meetings, but, if necessary,
decisions are taken by majority. If any Director
has concerns on any issues that cannot be
resolved, such concerns are noted in the Board
minutes. No such concerns arose in 2023.
The key activities of the Board in 2023 are
detailed on pages 122 and 123. These
activities are discussed under the value
pillars of Lean, Expert, Trusted, Safe and
Sustainable which underpin the Board’s
decision-making process.
As referenced above, the Board has a formal
schedule of matters reserved for its decision
making and has delegated certain
responsibilities to Board Committees, each
with separate terms of reference. There are
four main Board Committees: Audit and Risk,
Nomination, Remuneration, and Safety and
Sustainability. The principal activities of each
Committee during the year are set out in the
Committee reports on pages 138, 142, 145,
and 152.
The Group Chair encourages all Directors to
attend all Committee meetings, with the
exception of instances where there is a
conflict of interest, for example where an
individual’s performance or remuneration is
being considered. Additional attendees are
invited to attend Board and Committee
meetings at the discretion of the
relevant Chair.
The Executive Committee is managed by
the Group Chief Executive, and included
the Chief Financial Officer and nine
further senior Group executives at
31 December 2023.
The Group uses the ERM framework across
the business to ensure consistency in
application of risk systems and controls and
that exposure to significant risks is managed
effectively. The Board is cognisant of the fact
that such a system can only manage rather
than eliminate the risk of failure to achieve
business objectives and can only provide
reasonable, but not absolute, assurance
against material misstatement or loss.
The Group has an independent Internal Audit
function which undertakes an annual
programme of risk-based audits across all of
the Group’s operations. All audit reports are
shared with the relevant business unit
management who are accountable for
implementing appropriate measures to
address any risks or control weaknesses.
The results of all internal audit activity are
also shared with the Group Chief Executive,
Chief Financial Officer, external auditor and
scrutinised by the Audit and Risk Committee
on a regular basis. Further details can be
found on pages 145 to 151 of the Audit and
Risk Committee report.
RISK MANAGEMENT: RESPONSIBILITIES AND ACTIONS
RESPONSIBILITIES
BOARD
ACTIONS UNDERTAKEN
@ Establishment of a framework of prudent and effective controls to enable
@ Reviewed the Group’s risk landscape profile, principal and emerging risks, and
risk to be assessed, monitored and mitigated
required responses
@ Determine Group appetite for and attitude to risk in pursuit of its
strategic objectives
AUDIT AND RISK COMMITTEE
@ Reviewed the effectiveness of the Group’s whistleblowing (Speak Up) processes and
procedures, and other channels for raising concerns about Code of Ethics breaches
@ Review significant accounting judgements
@ Received regular reports on internal and external audit and other assurance activities
@ Review the effectiveness of Group internal controls, including systems to
@ Reviewed the effectiveness of Group risk management and internal control systems
identify assess, manage and monitor risks
@ Review and assess the effectiveness of the Internal Audit function, and the
Internal Audit workplan
SAFETY AND SUSTAINABILITY COMMITTEE
@ Review main risks in relation to safety, the environment, and the Group’s
@ Received regular reports on risks in relation to safety
overall sustainability
@ Received regular risk reports on matters impacting the environment
GROUP TENDER AND INVESTMENT COMMITTEE
@ Review and approve tenders and investments, triggered by certain financial
@ Critically appraised significant tender and investment/divestment proposals, with a
thresholds or other risk factors
specific focus on risk
GROUP MANAGEMENT
@ Strategic leadership
@ Reviewed the strategic plan and annual budget process
@ Review and implementation of the Group risk management policy
@ Produced and monitored Group risk register
@ Ensure appropriate actions are taken to manage strategic risks and other
@ Reviewed risk management and assurance activities and processes
key risks
@ Monthly/quarterly finance and performance reviews
STRATEGIC BUSINESS UNIT MANAGEMENT
@ Maintain an effective system of risk management and internal control
@ Reviewed key risks and mitigation plans
within its businesses
@ Ensure that business units’ responsibilities are discharged
@ Reviewed and challenged business units’ internal control environment
@ Reviewed results of internal control testing
@ Escalated key risks to Group management and the Board
ENABLING FUNCTION MANAGEMENT
@ Maintain an effective system of risk management and internal control
@ Maintained and regularly reviewed enabling function risk registers
within its enabling functions
BUSINESS UNIT MANAGEMENT
@ Reviewed mitigation plans
@ Planned, executed and reported on internal control testing
@ Escalated key risks to Group management and the Board
@ Maintain a robust and effective system of risk management and internal
@ Maintained and regularly reviewed business unit and project risk registers
control within its business units and projects
@ Reviewed mitigation plans
@ Planned, executed and reported on internal control testing
@ Escalated key risks to strategic business unit management
Balfour Beatty plc Annual Report and Accounts 2023 133
Governance COMPOSITION, SUCCESSION AND EVALUATION
Maintaining an
appropriate balance
The Board monitored its composition throughout 2023 to ensure that
it remained appropriately balanced, diverse and fully equipped to lead
the Group successfully into the future
The Board has diversity of thought within the
boardroom, which fosters insightful and
constructive debate and in turn leads to
considered, prudent, risk-adjusted decision
making that promotes long-term shareholder
and stakeholder value.
Directors, the Senior Independent
non-executive Director and five further
independent non-executive Directors.
Biographies of each Board member who
served throughout 2023 are set out on
page 121.
The Board’s diverse array of technical and
soft skills, complemented by their sector-
specific expertise and commitment to
objectivity and independence fosters creative
thinking and innovative problem solving, and
better facilitates the Board’s ability to convert
risks into opportunities. The range of skills
and experience within the Board is
demonstrated in the skills matrix below.
As at 31 December 2023, the Board
consisted of nine members, comprising the
non-executive Group Chair, two executive
Conflicts of interest
and independence
The Board has a number of processes and
procedures in place to assess conflicts of
interest and the independence of non-
executive Directors against the criteria set
out in the Code:
@ each Director has a duty to disclose any
actual or potential conflict of interest for
consideration and approval, if appropriate,
by the Board;
@ Directors are requested to declare any
conflicts at the start of all Board and
Committee meetings;
@ the Nomination Committee conducts an
annual review of the Conflicts of Interest
Register and seeks confirmation from each
Director of any changes to their external
appointments; and
@ there is also a formal process in place
for the approval of all new external
appointments of Directors. In considering
such appointments, the Board will consider
any conflicts of interest that may arise, as
well as the Directors’ capacity to continue
discharging their duties effectively in order
to mitigate the risk of overboarding.
KEY SKILLS AND EXPERIENCE OF DIRECTORS
LEO QUINN
CHARLES
ALLEN
PHILIP
HARRISON
STEPHEN
BILLINGHAM
ANNE
DRINKWATER
STUART
DOUGHTY
BARBARA
MOORHOUSE
MICHAEL
LUCKI
LOUISE
HARDY
SKILLS AND EXPERIENCE
CEO
Government relationships
Finance and audit
Health & Safety
ESG
Remuneration and people
Hong Kong experience
US experience
UK experience
Construction sector experience
CAPEX heavy
Major contracting
Risk
Experienced
Some experience
No experience
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Balfour Beatty plc Annual Report and Accounts 2023
At the conclusion of the
AGM on 9 May 2024, the
Board will have 44.4%
female representation
and a female Senior
Independent non-
executive Director.”
Charles Allen
Non-executive Group Chair
As a result of these assessments, the Board
noted that Dr Stephen Billingham CBE is a
member of the Company’s pension scheme
resulting from his employment with the
Group over 20 years ago. Stephen recuses
himself from any discussions relating to the
Company’s pension scheme.
The Nomination Committee and the Board
have, after completing all of the processes
detailed above, confirmed the continuing
independence and objective judgement of
each non-executive Director, and the overall
independence of the Board in line with the
recommendations of the Code.
Board succession
Board and Executive Committee succession
plans are based on merit and assessed against
objective criteria, whilst also being managed
through the lens of promoting diversity of
gender, social and ethnic backgrounds, and
cognitive and personal strengths. Succession
plans are reviewed annually by the Nomination
Committee. Each individual on the succession
plan has a development plan in place to
support them in gaining the experience
needed to progress in the organisation.
Dr Stephen Billingham CBE and Stuart
Doughty CMG will retire as non-executive
Directors of the Company following the AGM
on 9 May 2024, having served on the Board
around nine years. Succession planning and the
review of Board composition resulted in the
appointment of Robert MacLeod and
Gabby Costigan MBE as independent
non-executive Directors from 8 March 2024.
Further information on the Board changes is
set out in the Nomination Committee report
on pages 138 to 141.
In addition to the range of technical skills and
experience detailed within the skills matrix,
both the Nomination Committee and the
Board recognise the importance of gender
and ethnic diversity. As at the date of this
report, female representation on the Board
stands at 36.4% and as such, the Company
is not yet compliant with the FTSE Women
Leaders Review or the FCA Listing Rules
relating to diversity. However, the Group
will exceed the targets relating to gender
diversity on the Board at the conclusion
of the 2024 AGM with 44.4% female
representation and a female Senior
Independent non-executive Director.
The Company does not currently have any
Directors from an ethnic minority background
but remains committed to ensuring
compliance with ethnic diversity targets set
by the Parker Review and FCA Listing Rules
through succession planning.
The Board is also committed to supporting
and developing a diverse pipeline of
candidates for senior manager and subsidiary
director roles within the Group. For further
information on active diversity initiatives
within the Group please refer to pages 75 to
77.
TENURE AS AT 31 DECEMBER 2023 FOR NON-EXECUTIVE DIRECTORS
DIRECTOR
1 YEAR
2 YEARS
3 YEARS
4 YEARS
5 YEARS
6 YEARS
7 YEARS
8 YEARS
9 YEARS
Charles Allen
Stephen Billingham
Anne Drinkwater
Stuart Doughty
Barbara Moorhouse
Michael Lucki
Louise Hardy
Balfour Beatty plc Annual Report and Accounts 2023 135
Governance The evaluation concluded that each Director
continues to have sufficient time, knowledge
and commitment to effectively contribute
to the long-term sustainable success of
the business.
Findings
The findings of the Board and Committee
evaluations concluded that the Board and
Committees continued to function effectively,
and identified the following strengths:
@ The Board monitors revenue, profitability,
margin and other financial driven indicators
to ensure the Company performs
as forecasted
@ Board members comprehend and respect
the difference between the Board’s role
and the executive’s responsibility for
running the Company’s business
@ The Board and executive management
work effectively together in achieving the
Group’s objectives
@ Board goals, expectations and concerns
are freely communicated with the Group
Chief Executive
Board effectiveness action plan
and progress
Led by the Group Chair, with support from
the Company Secretary, the Board approved
and implemented an action plan to address
the findings of the Board evaluation and
enhance Board effectiveness. Four key
themes were identified as areas that
require improvement.
The recommendations following the 2023
Board evaluation, along with a detailed action
plan for 2024 are presented on the facing
page. Complementing this, are the actions
from the 2022 evaluation, as well as the
measures undertaken throughout 2023 to
address those recommendations.
COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
Director reappointment
All non-executive Directors undertake a
fixed term of three years subject to annual
re-election by shareholders. The fixed term
can be extended and, consistent with best
practice, would not go beyond nine years
unless exceptional circumstances were
deemed to exist.
The current length of tenure for the Group
Chair and each of the non-executive Directors
as at 31 December 2023 is set out on
page 135.
Training and development
The Board receives a full programme of
briefings and updates annually across all
areas of the Company’s business from the
executive Directors, members of the
Executive Committee, senior executives,
and advisers. In addition, training and
development sessions are arranged on
specific areas during the year as required.
Examples of training and development in
2023 included, amongst others, sustainability,
corporate governance, digital and cyber
security, Artificial Intelligence, the Building
Safety Act and accounting developments.
Any Director can request further information
to support the fulfilment of their individual
duties or collective Board role and,
throughout the year, the Group Chair
maintains dialogue with individual Directors
to identify any specific training needs. Where
appropriate, such training is integrated into
Board meetings to ensure all Directors can
benefit. Alternatively, training sessions may
be conducted through formal presentations,
one-on-one meetings, or site visits, providing
opportunities to delve deeper into specific
initiatives or projects.
Information and support
During the year, the Company Secretary
advised the Board on matters related to
governance, ensuring Board procedures
were followed and relevant statutory and
regulatory requirements were complied with.
The Company Secretary has responsibility for
facilitating the timely distribution of information
between the Board and its Committees and
the executive and non-executive Directors.
The Directors have direct access for advice
to the Company Secretary who is able to
arrange, at the Company’s expense, for the
Directors to receive independent professional
advice where appropriate.
Board evaluation
In line with best practice, the performance
and effectiveness of the Board, its Committees
and individual Directors are assessed annually
through formal performance evaluation
processes. The Board and Committee
evaluation process follows a three-year
cycle, with the 2023 Board evaluation being
internally facilitated. In accordance with the
UK Corporate Governance Code, the 2024
evaluation will be externally facilitated.
Process – Board and Committee
evaluations
The Group Chair and Committee Chairs,
supported by the Company Secretary,
considered the context, strategy, purpose,
and approach of the internal Board and
Committee evaluations respectively which
were carried out by way of an anonymous
questionnaire following the same format as
those used in 2022 for ease of comparison.
The questionnaires covered:
@ leadership;
@ effectiveness;
@ Board dynamics;
@ behaviours; and
@ risk and controls.
The Company Secretariat function collated
the completed questionnaires and the Group
Chair and Committee Chairs obtained
additional qualitative insights through private
meetings held with the Directors individually.
The final findings were presented by the
Group Chair or Committee Chair and were
discussed in a Board or Committee meeting.
Group Chair evaluation
The evaluation of the Group Chair was also
carried out by way of an anonymous
questionnaire that was designed by the
Senior Independent non-executive Director
in consultation with the Company Secretary.
The questionnaire followed the same format
as that used in 2022 for ease of comparison,
and was completed by all Directors other
than the Group Chair. The non-executive
Directors, led by the Senior Independent
non-executive Director, also held a meeting
at which the evaluation of the Group Chair
was discussed, following which the
Senior Independent non-executive Director
provided feedback to the Group Chair.
Evaluation of Directors’
The evaluation of the Directors was carried
out by the Group Chair in one-to-one
meetings. The evaluation of the Directors
included an assessment of time commitments
of any external appointments and whether
these have impacted the Director’s ability
to discharge their duties and responsibilities
to the Board.
136
Balfour Beatty plc Annual Report and Accounts 2023
BOARD EVALUATION PROCESS
Year 1 (2022)
Internal assessment
Year 2 (2023)
Internal assessment
Year 3 (2024)
External assessment
@ Evaluation co-ordinated
internally by Group Chair,
Committee Chairs and
Company Secretary
@ Separate questionnaires
prepared on a range of issues
related to the Board and
Board Committees
@ One-to-one meetings held
between Group Chair and
each Director to review
responses and for individual
appraisal. Senior Independent
non-executive Director leads
the review of the Group Chair
@ Group discussion at a Board
meeting and actions agreed
@ Outcomes from previous
evaluation and progress
against each action reviewed
@ Internal evaluation
questionnaires prepared by
Group Chair and Company
Secretary, taking account
of areas of concern in
previous year
@ One-to-one meetings held
between Group Chair and
each Director to review
responses and for individual
appraisal. Senior Independent
non-executive Director leads
the review of the Group Chair
@ Group discussion at a Board
meeting and actions agreed
@ Independent external
evaluation firm appointed
@ Evaluator works with Group
Chair to refine scope of
evaluation in light of previous
internal evaluations
@ Evaluation conducted by use
of interviews with Directors
and key regular attendees at
Board/Committee meetings
and review of agendas/papers
@ Report on evaluation
discussed with Group Chair
and tabled for discussion at a
Board meeting
@ Outcomes and actions agreed
2023 RECOMMENDATIONS
ACTIONS PLANNED FOR 2024
Ensure continued improvements
in information gathering
relating to strategy, competitors,
and addressable markets
Support initiatives on
employee engagement
Support Board and talent
development and succession
@ Continue to enhance the strategic review of the Group
@ Carry out an annual competitor/industry update
@ Consider addressable markets as appropriate
@ Non-executive Directors to attend at least two meetings of the Group Tender and Investment
Committee per year
@ Non-executive Directors to attend at least two site visits per year
@ Carry out a skills and experience review of the Board
@ Carry out a talent review of the executive Directors, Executive Committee members and other senior
managers as appropriate
@ Continue to monitor succession plans for the executive Directors, Executive Committee members
and other senior managers as appropriate
Progress the diversity and
inclusion agenda for the Group
@ Regularly monitor the diversity and inclusion performance of the Group and set a plan to address the
gender and ethnicity imbalance on the Board, its Committees, the Executive Committee and across
the wider Group
2022 RECOMMENDATIONS
ACTIONS TAKEN DURING 2023
Improve balance of
management information
provided across the Group’s
key jurisdictions
Ensure the Board is kept
sufficiently up to date with
industry developments and the
Group’s relative competitive
positioning
Close out any ongoing actions
from the 2021 external
Board evaluation
@ The Board received regular reports on talent development and succession across the Group within
Board meetings and Committee meetings
@ The Board received regular updates from executive Directors on competitors and market
developments
@ There was emphasis on ensuring that presentations to the Board were suitably balanced between
activities in all markets in which the Group operates
@ All ongoing actions from the 2021 external Board evaluation were closed
Balfour Beatty plc Annual Report and Accounts 2023 137
Governance COMMITTEE REPORTS
Nomination
Committee
Report of the Nomination
Committee
I am pleased to present the report of the
Nomination Committee, setting out the key
activities undertaken throughout 2023 and
the priorities for 2024.
During the year, the Committee continued to
focus on the long-term succession planning
for the Board, its Committees, and the
Executive Committee. The Committee
remained mindful of the importance of
diversity within the Board, its Committees
and senior management, and the
recommendations set out in the FTSE
Women Leaders Review, the Parker Review,
and the new diversity criteria set out in the
Listing Rules. The Board’s key focus in 2023
was on identifying candidates as non-
executive Directors who would add to the
collective skills, experience and diversity
of the Board when they take over from
Dr Stephen Billingham CBE and Stuart
Doughty CMG as they step down from
the Board following the conclusion of the
2024 AGM.
The Committee is responsible for identifying,
reviewing, and recommending suitable
candidates to the Board. With the support
of Odgers Berndtson, the Committee
conducted an extensive selection process,
unanimously recommending Robert
MacLeod and Gabby Costigan MBE as
non-executive Directors. The decision
followed a thorough evaluation of role
profiles, initiated searches, and a thorough
review of candidates. Throughout this
process, the Committee assessed the
current Board and Committee composition,
ensuring diversity in skills, knowledge,
gender and ethnicity aligned with the roles.
The Committee made diversity a focal point
of the search, challenging Odgers Berndtson
to ensure inclusivity in candidate short-listing.
Odgers Berndtson’s involvement in the
process remained entirely independent,
ensuring impartiality and integrity throughout.
Robert’s leadership of large, complex
international businesses and significant
corporate and financial experience, and
Gabby’s experience of large, complex
international organisations and significant
experience in regulated markets are valuable
additions to our Board. Their combined skills
and experiences will undoubtedly strengthen
our Board’s capabilities. The Committee
diligently oversaw the recruitment and
induction process for both Robert and Gabby.
Further details regarding the induction process
can be found on page 141. Following the
2024 AGM, the Board will have more than
40% female representation and while the
Board has not yet achieved compliance with
the Parker Review’s recommendations, the
Committee is actively prioritising efforts to
enhance ethnic diversity through the Group’s
ongoing succession planning.
At the conclusion of the Company’s AGM on
9 May 2024, Dr Stephen Billingham CBE and
Stuart Doughty CMG will step down from
their roles as non-executive Directors. The
Committee recommended to the Board that
Robert be appointed as Chair of the Audit
and Risk Committee and Gabby as the Chair
of the Safety and Sustainability Committee at
the conclusion of the 2024 AGM. I would like
to thank both Stephen and Stuart for the
significant contributions they have both made
in helping steer the business through an
exceptional period of transformation.
Further to the above, the Committee
recommended the appointment of Anne
Drinkwater, who has served on the Board for
over five years, as the Senior Independent
non-executive Director when Stephen
Billingham steps down from the Board
following the 2024 AGM. Anne will remain
as Chair of the Remuneration Committee.
I would like to thank the Board for their
support and engagement with the Board
succession planning during the year.
Charles Allen
Chair of the Nomination Committee
12 March 2024
138
ROLES AND RESPONSIBILITIES OF THE COMMITTEE
@ Make recommendations to the Board
on the appointment, reappointment,
retirement or continuation of any Director
@ Propose and oversee induction plans for
newly appointed Board members
Directors’ independence
@ Monitor the balance, composition,
diversity, structure, and size of the
Board and Committees
@ Conduct and monitor Board and Executive
@ Make recommendations regarding
Committee succession planning
SCAN TO READ
THE TERMS OF
REFERENCE
MEMBERSHIP
@ Charles Allen (Chair of the Committee)
@ Stephen Billingham
@ Stuart Doughty
@ Barbara Moorhouse
KEY ACTIONS FROM 2023
@ Conducted search for two new
non-executive Directors
@ Senior Independent non-executive
Director and Committee Chair
succession planning
ALLOCATION
OF TIME
33%
67%
l Performance, balance and
@ Reviewed Board balance, composition
composition reviews
and diversity
l Recruitment
@ Reviewed succession plans for the
Board, its Committees and the
Executive Committee
@ Completed an internal evaluation
of the Nomination Committee
PRIORITIES FOR 2024
@ Review the Board’s succession plans
@ Review the Executive Committee’s
succession plans and the progress of
professional development programmes
underway to support a diverse pipeline
of candidates
@ Set the induction plans for Gabby
Costigan and Robert MacLeod
@ Review Board balance, composition and
diversity against the short, medium and
long-term needs of the Company
@ In the event of vacancies arising on the
Board, the selection of new Directors
Committee composition
The Committee comprises two non-
executive Directors, the Senior Independent
non-executive Director, and the Group Chair.
Board composition
and succession
Board composition is shaped and informed by:
@ succession planning activities undertaken
by the Committee;
@ ongoing assessments of the skills,
experience and diversity required on the
Board to deliver against the Group’s
strategy, purpose and values;
@ insights derived from the Board evaluation
process; and
@ shareholder feedback.
The perspectives, skills and experience on
the Board are mapped to the needs of the
business and aligned to the Group’s strategy,
purpose and values. Biographies of the
Directors who served throughout 2023,
including details of their backgrounds and
experience, can be found on page 121.
The Committee considers the length of
service of the members of the Board as a
whole, as well as the need for the Board to
remain agile and responsive to the evolving
needs of the Group and an ever-changing
external environment.
Time commitment
The anticipated time commitments of the
Group Chair and non-executive Directors are
agreed and set out in their respective Letters
of Appointment. To ensure each Director has
sufficient time to conduct their duties
effectively, and mitigate the risk of Director
overboarding, the Committee takes the
following preventative steps:
@ prior to appointment, the Committee
considers and assesses any existing
external commitments on an individual’s
time. This is necessary to confirm their
capacity to take on the role and discharge
their duties effectively; and
@ any additional external appointments are
subject to Board approval to ensure
Directors can continue to devote the
necessary time to their duties.
Evaluation of the Committee
In 2023 the Committee undertook an internal
effectiveness review as part of the wider
Board evaluation process.
Election and re-election of Directors
All non-executive Directors undertake a fixed
term of three years, subject to annual re-election
by shareholders at the AGM. The fixed term
can be extended, but would not normally
exceed nine years, unless the Board deemed
there to be exceptional circumstances that
merit an extension beyond nine years. As
part of the internal Board evaluation process,
the Board undertook a review of the
effectiveness and performance of each of
the Directors, with a specific focus on:
@ their continued ability to contribute
to the long-term sustainable success
of the Company; and
@ their capacity to discharge their
responsibilities effectively, given
their external time commitments
and responsibilities.
Balfour Beatty plc Annual Report and Accounts 2023 139
Governance COMMITTEE REPORTS CONTINUED
Report of the Nomination
Committee continued
Election and re-election of Directors
continued
Following this review and considerations
of the Directors’ tenure, the Committee
unanimously recommends the re-election
of each of Charles Allen, Leo Quinn, Philip
Harrison, Anne Drinkwater, Louise Hardy,
Michael Lucki and Barbara Moorhouse at the
2024 AGM. Following their appointment, the
Committee also unanimously recommends
the elections of both Gabby Costigan and
Robert MacLeod at the 2024 AGM.
Diversity and inclusion
As Balfour Beatty continues to navigate
through macroeconomic headwinds, an
ever-changing risk environment, and the
global challenge to achieve net zero and
operational sustainability, the Board needs
to ensure it has the right balance of skills,
experience, and perspectives in the
boardroom to face those challenges head on.
Therefore, diversity must be embraced and
embedded into the business, and that starts
with the Board. While diversity is a key
factor, the Board continues to appoint on
merit, based on the skills and experience
required for membership, while considering
all forms of diversity and independence.
With Dr Stephen Billingham CBE and Stuart
Doughty CMG reaching the end of their
nine-year tenure in 2024, the Committee took
a proactive step to carry out a recruitment
process with the diversity of the Board being
a key consideration. At the date of this report,
the Board has 36.4% female representation
which will increase to 44.4% following the
Company’s AGM on 9 May 2024. In addition,
Anne Drinkwater will be appointed Senior
Independent non-executive Director,
ensuring female representation within the
key Board positions. As a result of the
positive work carried out by the Committee,
the Board will not only be compliant, in
relation to gender diversity on the Board
with the recommendations set out in the
FTSE Women Leaders Review and the
targets in the Listing Rules, but will exceed
them following the Company’s 2024 AGM.
The Group’s progress on its Value Everyone
UK Diversity and Inclusion Action Plan can be
found on pages 75 to 77. The Board monitored
progress against this initiative by receiving
updates from the Group HR Director.
In February 2024, the Committee
recommended the Board Diversity and
Inclusion Policy for approval by the Board in
compliance with Disclosure and Transparency
Rule 7.2.8AR. The updated policy applies
specifically to the Board and its Committees
(the Nomination, Remuneration, Audit and
Risk and Safety and Sustainability
140
Balfour Beatty plc Annual Report and Accounts 2023
Committees). The policy codifies the Group’s
ultimate goal of obtaining female and male
parity on the Board and its Committees and
its goal of having no less than 40% male or
female representation, and having a Director
from an ethnic minority background on the
Board, while recognising that periods of
transition and change in Board composition
may result in temporary periods when this
balance is not achieved.
Further to this, the Committee will regularly
review the structure, size and composition
of the Board and its Committees, and make
recommendations to the Board with regard
to changes that are deemed necessary.
The Board’s definition of diversity covers
gender, ethnicity, and age (as well as other
protected characteristics set out by the 2010
Equalities Act).
Gender diversity
With the appointments of Gabby Costigan
MBE as a non-executive Director and
Anne Drinkwater as Senior Independent
non-executive Director, the Board is positioned
to achieve compliance with the board diversity
recommendations set out in the FTSE Women
Leaders Review following the Company’s AGM
on 9 May 2024. The Committee considers that
diversity on the Board is fundamental to setting
the tone for the Group as it seeks to foster
inclusivity and create a dynamic environment
that nurtures innovation and sustainable
growth. Balfour Beatty is dedicated to actively
promoting gender diversity and empowering
women in the construction industry. For
insights into the Group’s initiatives aimed at
advancing gender diversity and supporting
women’s career progression, please refer to
pages 75 to 77.
As Balfour Beatty continues its journey towards
greater gender diversity and inclusion, the
recent Board appointments mark a significant
milestone. While the Board is now positioned
to achieve compliance with the board diversity
recommendations in the FTSE Women
Leaders Review following the 2024 AGM, the
Committee acknowledges the imperative of
ensuring gender parity in senior management,
particularly on the Executive Committee.
To achieve this, Balfour Beatty is actively
engaged in succession planning and prioritising
the professional development of its existing
female workforce, enabling them to progress to
more senior positions with the Group.
For a breakdown of gender demographics
across the Group, please refer to the People
section on page 77.
In compliance with LR 9.8.6R(10) additional
diversity analysis can be found on page 169.
Ethnic diversity
The Committee acknowledges the
significance of the Parker Review, which
provides guidance and targets for increasing
ethnic diversity within the Board and senior
leadership positions.
While the Board has not yet achieved
compliance with the Parker Review
recommendations, the Committee is actively
prioritising efforts to enhance ethnic diversity
within the Group’s leadership. This
commitment is reflected in the Group’s
ongoing succession planning.
The Committee recognises the importance
of ethnic diversity on the Board, and
acknowledges that for the Group to develop
a truly diverse and inclusive culture, the
Board needs to:
@ set the right top-down example;
@ be a more proportionate representation of
the Group’s workforce, the communities in
which it operates, and society at large; and
@ foster a culture that embraces and
celebrates diversity and inclusion.
As a business, Balfour Beatty must make every
effort to attract and retain a diverse talent and
break down the barriers that stifle recruitment
and progression of ethnic minorities within the
industry. With the support of the HR function,
the Group drives a number of initiatives to
support career development of ethnic
minorities within the workforce. Details of such
initiatives can be found in the People section on
pages 75 to 77.
Listing Rules and Disclosure Guidance
and Transparency Rules
The Board is mindful of the requirements
under Listing Rule 9.8.6R(9)(a) which applied
to the Company for the first time in 2023.
The Board is yet to meet the diversity targets
set in the Listing Rules. As at 31 December
2023, the Group had 33.3% female
representation on the Board and 18.2% on
the Executive Committee. However, the
Company will achieve compliance with the
Listing Rules targets relating to gender
diversity on the Board following the 2024
AGM. There is currently no Board or
Executive Committee member from an
ethnic minority background. Data on these
targets in the required standardised form
can be found in the Directors’ Report on
page 169.
Despite the fact that the Company is not yet
compliant with the targets set out under
Listing Rule 9.8.6R(9)(a), the Committee
remains optimistic that through the positive
work being carried out across the Group
with regards to diversifying the workforce
at all levels and the progress made on its
succession pipeline, Balfour Beatty will
address the shortages of diversity within
its sector and strive to comply with the
requirements while maintaining the desired
levels of skills, knowledge and experience.
DIRECTOR APPOINTMENT PROCESS
When making a new appointment, the Committee takes the following steps:
1
Define recruitment criteria
Identify and articulate
objectives and criteria based
on its Board composition
reviews and succession
planning.
3
Shortlist and interview
Shortlist candidates and
conduct interviews.
5
Recommend
Agree a recommendation for
appointment to the Board,
taking account of matters such
as gender, social and ethnic
backgrounds and cognitive and
personal strengths.
2
Instruct external consultant
Engage an executive search
consultant to provide a diverse
array of candidates for
consideration.
4
Assess
Assess each candidate’s
existing skills, experience and
time commitments, as well as
any potential for actual
conflicts of interest.
See page 138 for details relating to the appointments of Robert MacLeod and Gabby Costigan MBE as members of the Board.
Director induction
Following appointment, all Directors receive a comprehensive and tailored induction programme. All newly appointed Directors are required to devote
the time required to complete the induction programme. The time commitments are set out in their respective Letters of Appointment. Induction
programmes are designed by the Company Secretary in conjunction with the Group Chair, Senior Independent non-executive Director and Group
Chief Executive.
Induction programmes are varied and include a selection of:
Meetings with the Board
One-to-one meetings with the executive Directors, non-executive Directors, and the Group General Counsel
and Company Secretary.
Meetings with the Executive
Committee and senior
management
One-to-one meetings with members of the Executive Committee, as well as meetings with key members of
senior management from a variety of departments and business units, with the content of meetings varying
depending on the Director being inducted and their background and individual experience.
Meetings with the auditors Meetings with the Head of Internal Audit and the external audit partner (particularly for newly appointed
Directors who are members of the Audit and Risk Committee).
Self-study
Documents provided via the electronic Board portal covering key information relating to the Group including
financial performance, Board policies and procedures and governance matters. These documents are also
available to all other Board members as a continuing point of reference.
Site visits and workforce
engagements
Visits to key operational sites, offering a chance to meet the workforce. Directors continue to make regular
site visits throughout their tenure, in line with the Company’s Employee Voice initiative, gaining valuable
insight into operations and feedback from the workforce.
Meetings with key
shareholders and
stakeholders
Education and training
Supported by the Group Chair and the Company Secretary, the induction programme will, as appropriate,
include a schedule of meetings with major shareholders and key stakeholders in order to support newly
appointed Directors’ understanding of shareholder and stakeholder views, and the discharge of their
directors’ duties under Section 172 of the Companies Act 2006.
If any gaps in skills or experience are identified within the interview process, internal and external training will
be provided and tailored to the needs of the Director. Directors engage in an ongoing programme of
education and training throughout their tenure to continually enhance their knowledge and skills.
Balfour Beatty plc Annual Report and Accounts 2023 141
Governance COMMITTEE REPORTS CONTINUED
Safety and
Sustainability Committee
Report of the Safety and
Sustainability Committee
I am pleased to present my final Safety
and Sustainability Committee report before
I step down from the Board following the
Company’s 2024 AGM after having served
as a non-executive Director for the last nine
years. During my tenure I have overseen
continued progress in how health and safety
is managed and how the Group is working
to achieve its Zero Harm target. I have also
seen the Group’s progress towards its
Beyond Net Zero Carbon, Generate Zero
Waste, and Positively Impact More than
1 Million People ambitions. As a result of
work that the Safety and Sustainability
Committee has done during my tenure,
I know that Balfour Beatty is well placed
to continue to improve its safety and
sustainability performance and to lead
the way in the sectors in which the
Group operates.
Following the roll-out of the What3Things?
initiative, lost time incident rates (LTIR)
were down to 0.11 (2022: 0.15), the
lowest figure ever achieved in a non-
pandemic year. In addition, the major
injury rate was down to 0.02 (2022:
0.03). For further details on our safety
performance, see pages 44 and 45.
Despite the positive safety performance
in 2023, there were tragically two
fatalities. One of these incidents
occurred on the HS2 Area North
project and the second occurred on
the AWE project. I extend my deepest
sympathies to the families, friends,
and co-workers of our late colleagues.
Both incidents have been thoroughly
investigated and lessons learnt have
been shared across the Group. The
Group has established a stored energy
fatal risk working group to specifically
look at stored energy risks. As a result,
Balfour Beatty is working with
manufacturers to improve the design
of machinery to further reduce potential
stored energy related risks. The Group is
also harnessing digital solutions to reduce
other key safety risks.
The Group continued its positive work on
supporting the mental health of employees in
2023. The health of employees is viewed as
a key component of the Zero Harm initiative
as the focus on ‘Be Fit for Work’ explores
physical, emotional, and mental health. In
2023, the Group furthered its efforts by
renewing its partnership with construction
industry charity Mates in Mind. Balfour
Beatty continues to work closely with the
charity across the UK in a bid to promote
positive mental health and wellbeing, and to
create proactive support measures to tackle
mental ill health in the construction sector.
More information relating to the Group’s
initiatives surrounding mental health is referred to
on page 47.
The Company has also developed Science-
Based Targets to set a clearly defined path to
reduce emissions in line with the Paris Agreement
goals. The targets were submitted to the
Science Based Targets initiative (SBTi) in
December 2023 for validation in line with the
most recent SBTi criteria. Following SBTi
validation, the Company will publish those
targets on its website, and will disclose each
year the Group’s emissions and progress
against targets.
The Committee met three times in 2023 and
its meetings were regularly attended by other
members of the Board as well as the Health,
Safety and Environment Director, Lee Hewitt,
and the Group Director of Sustainability, Jo
Gilroy, both of whom provide expertise and
support to the Committee on their relevant
subject matters. Other key individuals are
invited to meetings of the Committee to
support the Committee in understanding
particular matters and to enable the
Committee to see first hand what progress
is being made in a particular area.
When I step down from the Board following
the conclusion of the 2024 AGM, Gabby
Costigan MBE will take over as Chair of the
Safety and Sustainability Committee. Gabby
has considerable executive leadership
experience and brings with her significant
relevant knowledge and experience. As such,
I will be leaving the Committee in good
hands, having ensured a smooth transition.
Stuart Doughty CMG
Chair of the Safety and Sustainability
Committee
12 March 2024
142
ROLES AND RESPONSIBILITIES OF THE COMMITTEE
@ Reviewing strategies, policies and
procedures of the Group in relation
to health, safety, environment and
sustainability (HSES) matters.
@ Monitoring and updating the Group’s
control processes where appropriate.
@ Approving health and safety targets
and key performance indicators,
monitoring the Group’s performance
against them and taking corrective action
where necessary.
@ Monitoring the Group’s performance
against the main health, safety,
environmental and sustainability risk
groups, and implementing strategies to
mitigate such risks.
@ Reviewing the environmental and
sustainability performance of the Group,
including but not limited
to energy and carbon
emissions, materials and
waste management and
social and community matters.
SCAN TO READ
THE TERMS OF
REFERENCE
@ Approving environmental and
sustainability targets and key
performance indicators, monitoring the
Group’s performance against them and
taking corrective action where necessary.
Main activities of the
Committee during the year
Safety performance and
Zero Harm
The Health, Safety and Environment Director
issued regular reports to the Committee
throughout 2023 on the Group’s performance
against various health and safety metrics
including data covering fatalities, injuries,
serious and minor events, near misses and
health and safety observation reporting.
Following a strong performance in 2022, the
Group continued to receive a high volume of
workforce safety observations, indicating
strong employee engagement in respect of
health and safety matters. Positive employee
engagement results also confirmed the
continued strong Zero Harm culture within
the business. Further details on Zero Harm
can be found on pages 44 and 45.
Reports were received regarding progress on
Group initiatives, including:
@ US Civils building safety;
@ progress against Zero Harm and priorities;
@ incident overview and actions; and
@ Bridging the Gap sustainability strategy.
Notable incidents and fatalities
Tragically, despite a continued focus on
Zero Harm, two fatal incidents occurred
during 2023, as referred to on pages 44 and
45. The incident in the HS2 Area North
project occurred in the closing stages of a
horizontal direction drilling operation for a
service diversion. Following the incident, a full
investigation was undertaken which led to
enhanced scrutiny of our work site protocols.
Particularly, similar activities with certain coil
diameters have since been ceased and the
Group has worked in the industry to look at
whether the kick out risk of a cable can be
designed out or better controlled to minimise
risks. At the AWE project, the incident
occurred as an employee was clearing a pipe
of concrete. The subsequent investigation
allowed the Group to identify and rectify
procedural lapses, resulting in the
development of a bespoke, digital, assurance
process for this activity which reinforces our
commitment to stringent safety compliance
Group-wide.
The Committee continued to receive regular
reports on learnings and actions arising from
incidents or near-misses that had high
potential of serious injury. Some examples
include the implementation of project safety
assessment tools highlighting activities
which may contain higher risks and a review
of any pipe trailer operations involving a pipe
diameter of more than or equal to 125mm.
MEMBERSHIP
@ Stuart Doughty
(Chair of the Committee)
@ Anne Drinkwater
@ Louise Hardy
@ Leo Quinn
KEY ACTIONS FROM 2023
@ Received reports on the
implementation of Group initiatives
@ Reviewed findings from incidents and
near misses and ensured learnings
were embedded across the Group
@ Implemented and monitored the
Bridging the Gap commitments
@ Received updates on regulatory
developments across HSES matters
PRIORITIES FOR 2024
@ Monitor progress towards carbon and
waste reduction targets
@ Monitor progress against the Bridging
the Gap sustainability commitments
@ Focus on a culture of Zero Harm and
Group-wide sustainability
@ Continued focus on targeted risk
elimination
@ Monitor progress against the Group’s
science-based carbon targets
@ Support the induction of Gabby Costigan
MBE
46%
ALLOCATION
OF TIME
54%
l Health and Safety updates
l Environment and sustainability updates
Balfour Beatty plc Annual Report and Accounts 2023 143
Governance COMMITTEE REPORTS CONTINUED
Report of the Safety and Sustainability Committee continued
BRIDGING THE GAP AREAS OF FOCUS
@ Leadership relating to sustainability
@ Reuse of materials and reduction in waste
@ Reducing Greenhouse Gas emissions
@ Supporting local employment skills including
local businesses
@ Community engagement through charitable
fundraising, volunteering and mentoring
@ Biodiversity restoration and enhancement
Evaluation of the Committee
The Committee undertook an internal
effectiveness review as part of the wider
internal Board evaluation. Further details can
be found on pages 136 and 137.
Environment and sustainability
The Committee received regular updates
throughout the year on the Company’s
performance on sustainability and
environmental targets, including waste
management and carbon performance. The
Committee also monitored the Group’s social
impacts and creation of social value for local
communities.
During 2023, the Group launched the
Bridging the Gap framework, intended to
simplify, prioritise, and consolidate the
Group’s approach to sustainability and the
adoption of a uniform approach to delivering
sustainability ambitions.
The Group Sustainability function
recommends targets and ambitions to enable
the development of a sustainability
operational action plan and enhance the
Group’s understanding of material
sustainability considerations. Strategic
Business Unit sustainability directors are
responsible for the business unit
sustainability leads and project-based teams
and are accountable for sustainability action
plans relating to their business unit. The
Business Unit sustainability lead is
responsible for developing the Bridging the
Gap sustainability action plan, which are
aligned to the Group’s 2030 targets and 2040
ambitions. PwC is engaged to provide limited
external assurance over the reporting of
social value, and the Group’s Scope 1 and 2
Greenhouse Gas emissions for annual
reporting purposes.
The senior leadership of each Business Unit
is responsible for agreeing its Bridging the
Gap action plan, detailing how projects
should deliver sustainability at a local level,
recognising the Group’s responsibility for
eliminating climate change causing gases,
protecting biodiversity, and delivering long
lasting social value wherever possible.
Performance was monitored in 2023 and key
takeaways of performance against focus areas
were identified which in turn assisted with the
development of a tailored plan of action. The
Company believes this strategy demonstrates
alignment with the Sustainable Development
Goals set by the United Nations and allows for
consistency across the business.
Governance
During the year, the Committee reviewed its
terms of reference, which can be found on
the Company’s website.
The Committee monitored the resourcing of
the HSES function, and reviewed the
appropriateness and effectiveness of the
governance framework for HSES matters.
The Committee also developed additional
governance measures to ensure sustainable
considerations are understood and acted
upon across all layers of the business.
144
Balfour Beatty plc Annual Report and Accounts 2023
Audit and Risk
Committee
Report of the Audit
and Risk Committee
I am pleased to present my final report of the
Audit and Risk Committee before I step
down from the Board following the
Company’s 2024 AGM after having served as
a non-executive Director for the last nine
years. This report is intended to provide
shareholders with an insight into key areas
considered by the Committee, together with
how the Audit and Risk Committee has
discharged its responsibilities and provided
assurance on the integrity of the Annual
Report and Accounts 2023.
The Audit and Risk Committee assists the
Board in fulfilling its responsibilities related to
Group financial statements, risk management
and financial controls and overseeing the
Internal Audit function and the external
auditor.
The Committee held five meetings in 2023.
Further detail on attendance can be found
on page 119. All non-executive Directors are
encouraged to attend Committee meetings
and meetings were also regularly attended by
the Group Chair, Group Chief Executive,
Chief Financial Officer, Group Risk and Audit
Director, UK Head of Internal Audit, Group
Financial Controller, Group General Counsel
and Company Secretary and representatives
of the external auditor, including the lead
audit partner. There were further ad hoc
attendees who joined Committee meetings
for specific agenda items.
An area of focus during 2023 was expanding
the reporting around Group risk management,
and further developing the maturity of the
internal controls framework. This will improve
the Group’s controls and risk management
frameworks, especially over key financial,
operational and compliance controls, and the
identification and assessment of emerging
and principal risks. Further information on the
Group’s principal and emerging risks can be
found on pages 96 to 103.
In July, during the Board visit to the US, the
Committee took the opportunity to meet
with the independent compliance monitor
who briefed the Committee and other Board
members on her first report on the work
carried out across the US military housing
portfolio. The meeting provided an
opportunity for the monitor to provide
insights on Balfour Beatty Communities’
compliance programme. The Committee was
also able to assure the monitor that it will
closely assess the Balfour Beatty
Communities team’s implementation of the
monitor’s recommendations and ensure that
the team receives the support needed to
make the monitorship process a success.
The Committee remains alert to regulatory
and legislative developments for matters
under its remit. The Board and the
Committee are aware of revisions to the UK
Corporate Governance Code, which are
effective for the Group’s 2024 financial year,
and publications setting out the minimum
standards of audit committees and will
monitor developments and update processes
as appropriate in 2024.
The Committee remained focused on
monitoring the integrity of the Group’s
financial and risk reporting and continued
to discharge its duties in accordance with its
terms of reference. Further detail on the
Committee’s activities throughout the year
is set out on the following pages.
During the year, the Committee reviewed its
terms of reference, which can be found on
the Company’s website.
When I step down from the Board following
the 2024 AGM, Robert MacLeod will take
over as Chair of the Audit and Risk
Committee. Robert has considerable
executive leadership experience and brings
with him significant relevant knowledge and
experience. As such, I will be leaving the
Committee in good hands, having ensured a
smooth transition.
Stephen Billingham
Chair of the Audit and Risk Committee
12 March 2024
Balfour Beatty plc Annual Report and Accounts 2023 145
Governance COMMITTEE REPORTS CONTINUED
Report of the Audit and Risk Committee continued
ROLES AND RESPONSIBILITIES OF THE COMMITTEE
@ Monitoring the integrity of the Group’s financial statements,
@ Monitoring the effectiveness of the Internal
including providing advice (where requested by the Board) on
whether the Annual Report, taken as a whole, is fair, balanced,
and understandable, and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy
@ Reviewing the significant financial issues and judgements
related to the Group’s financial statements, including
Investments portfolio valuations
@ Ensuring management has relevant and effective systems of
risk management and internal control in place
Audit function
@ Overseeing the relationship with the external auditor,
including annual approval of the external audit plan, review
of audit opinions, setting of external auditor remuneration,
and reporting the results of external audits to the Board
@ Monitoring the effectiveness, objectivity and
independence of the external auditor, including factors
related to the provision of non-audit services
@ Reviewing the Company’s environmental, social and
corporate governance reporting in line with the
increasing focus in this area
SCAN TO READ THE
TERMS OF
REFERENCE
MEMBERSHIP
@ Stephen Billingham
(Chair of the Committee)
@ Stuart Doughty
@ Michael Lucki
@ Barbara Moorhouse
25%
17%
24%
33%
ALLOCATION
OF TIME
34%
l Financial reporting
l Internal audit, risk management
and internal control
l External auditor
l Governance and other matters
PRIORITIES FOR 2024
@ Continue to review and challenge
management’s judgements on significant
accounting issues including key
contract judgements
@ Review future reports from the
independent compliance monitor and
assess any findings in association with
the control environment in the US Military
Housing business
@ Robust review of the detailed drivers
and mitigation activities of the Group’s
principal risks
@ Review and monitor the implementation
and improvement of internal controls
while taking the revised UK Corporate
Governance Code reforms into
consideration.
@ Support the induction of Robert MacLeod
KEY ACTIONS FROM 2023
@ Continued to monitor developments
in the control environment in the US
Military Housing business. Reviewed
progress on the implementation of
the recommendations set out in the
independent compliance monitor’s
first report
@ Held a US-focused Audit and Risk
Committee meeting, reviewing US
Buildings, Civils and Investments
compliance and controls
@ Continued to monitor and review staff
training and development, investment risk
assessments, ethics and compliance risk
assessments and Group-wide internal
controls and risk management
frameworks to ensure the Group has the
ability to identify risks and how these
translate into internal controls
@ Succession planning for the Committee
Chair replacement in conjunction with the
Nomination Committee and the Board
@ Support the onboarding of the external
auditor’s new lead partner
146
Balfour Beatty plc Annual Report and Accounts 2023
COMMITTEE ACTIVITIES DURING 2023
The Committee has a substantial remit and cycle of actions to complete throughout the year. The Committee Chair, with the support of the
Company Secretary, ensures the Committee fully discharges its responsibilities in accordance with its terms of reference, whilst
maintaining sufficient time for discussion of ad hoc items that arise throughout the year.
MAR MAY
JUL
AUG
NOV
Group financial
statements
Received reports on financial and accounting, contract and commercial issues and
litigation
Approved financial results press releases and the Annual Report and Accounts to be
put to the Board
Approved the Group’s viability and going concern statements
Reviewed Directors’ valuation of the Investments portfolio
Approved greenhouse gas emissions representation letter to PwC
External auditor
Reviewed the external auditor’s report on the Company’s full year and half year
financial statements
Reviewed the external auditor’s assessment of its objectivity and independence
including a review of non-audit services (and associated fees) provided by the
external auditor
Reviewed management representation letters related to the Company’s full year
and half year financial statements
Reviewed the external auditor’s half year review plan and audit strategy
Reviewed and discussed the results of the AQRT review on KPMG’s 2022 audit
Approved the external auditor’s fees
Conducted assessments of the Group’s systems of risk management and internal
control, including a robust assessment of principal and emerging risks
Approved internal audit plans and received updates on internal audit and risk
Received updates on US military housing controls and compliance
Held discussions with the independent compliance monitor on the report issued
and progress on addressing the recommendations within it
Received an update on US Buildings and Civils controls and compliance
Risk management
and financial
controls (including
the Internal Audit
function)
Received the half year risk and controls report
Other matters
Received updates on Group tax and insurance
Received updates on Group ethics and compliance, including whistleblowing reports
Terms of reference review
Held private meetings between the non-executive Directors, Group Risk and
Audit Director and KPMG
Balfour Beatty plc Annual Report and Accounts 2023 147
Governance COMMITTEE REPORTS CONTINUED
Report of the Audit and Risk Committee continued
Significant issues and other accounting judgements
The following sets out all significant issues reviewed by the Committee throughout the year, being those requiring management to
exercise the highest level of judgement or estimation. The Committee assesses these judgements or estimates to determine if
they are reasonable and appropriate.
REVENUE AND MARGIN RECOGNITION
CONTRACT PROVISIONS
Given the nature of the Group’s operations, these elements are central to how it
values its work. Having reviewed detailed reports and met with management, the
Committee considered contract and commercial issues with exposure to both
revenue and margin recognition risks. As a key area of audit focus, the Committee
also received a detailed written report from the external auditor setting out the
results of its work in relation to key contract estimates.
GOING CONCERN AND VIABILITY STATEMENT
In order to satisfy itself that the Group has adequate resources to continue in
operation for the foreseeable future and that there are no material uncertainties
that could lead to significant doubt as to the Group’s ability to continue as a going
concern, the Committee considered the Group’s viability statement, cash position
(both existing and projected), bank facilities and covenants (including bonding
lines) and the borrowing powers allowed under the Company’s Articles of
Association. The Committee subsequently recommended to the Board the
adoption of the going concern statement and the viability statement for inclusion
in the Annual Report and Accounts. More details on going concern and the
viability statement are contained in Note 1 on page 189 and on page 104
respectively.
NON-UNDERLYING ITEMS
The key judgement is whether items relate to underlying trading or not and
whether they have been presented in accordance with the Group’s accounting
policy. The Committee conducted a review of each of the non-underlying items,
receiving written reports from management and the external auditor as to their
quantum and nature.
The Committee reviewed the significant estimates of the quantum and timing of
liabilities relating to contract provisions, including litigation and other risks. The
Committee received detailed reports, including relevant legal advice.
RETIREMENT BENEFIT OBLIGATIONS
The key judgement relates to the assumptions underlying the valuation of
retirement benefit obligations. The Committee received reports from
management outlining the assumptions used, including input from the Group’s
actuaries, in particular in relation to discount rates, inflation and mortality which
were evaluated against external benchmarks and, in relation to which, the external
auditor also provided reports.
DIRECTORS’ VALUATION OF THE INVESTMENTS PORTFOLIO
The Committee assessed the methodology used to value the assets in terms of
the discount rates applied. It also critically appraised the output of the Directors’
valuation exercise.
Committee composition
The Committee is chaired by Dr Stephen
Billingham CBE. In accordance with the UK
Corporate Governance Code, the Board has
determined that Stephen has recent and
relevant financial experience, and the
Committee as a whole has the required skills
and expertise to discharge their duties.
The Committee Chair is supported by the
other Committee members in delivering the
Committee’s governance responsibilities.
Committee members possess a range of
experience relevant to the sector within
which the Company operates, and also in
relation to financial management, audit
and risk. The Committee members’ full
biographical details can be found on
page 121.
Evaluation of the Committee
During the year, the Committee undertook
an internal effectiveness review as part of
the wider Board evaluation.
Financial reporting
A key responsibility of the Committee is
to monitor and oversee the integrity of the
Group’s published financial statements. This
responsibility is discharged in part through
the review and evaluation of the Company’s
full year and half year financial statements.
The Committee has full access to
management, in order to ask questions and
gain further insights where necessary, and
receives reports from members of the
Finance and Internal Audit teams and the
external auditor.
The Committee assessed whether the annual
financial statements provide a ‘fair, balanced
and understandable’ view of the Group’s
position and performance, business model
and strategy, as well as:
@ assessing whether the accounting policies
applied, and judgements (including key
contract judgements), estimates and
assumptions made, by management are
reasonable and appropriate based on
information available (further details are in
Note 2 on pages 190 to 195); and
@ assessing whether the Company has
complied with relevant financial reporting
standards and other regulatory requirements,
including the UK Corporate Governance
Code and European Securities and Markets
Authority Guidelines on Alternative
Performance Measures.
148
Balfour Beatty plc Annual Report and Accounts 2023
The Audit and Risk
Committee’s role in ensuring
the financial statements taken
as a whole are fair, balanced
and understandable
As part of the Committee’s assessment
as to whether the annual financial
statements provide a ‘fair, balanced and
understandable’ view, the Committee has
oversight of and reviews the effectiveness
of the following processes implemented
by management:
@ comprehensive guidance issued to
all contributors;
@ verification of the factual content of the
financial statements;
@ review of the disclosures made by the
contributors to each section; and
@ comprehensive reviews by senior
management to ensure consistency and
overall balance.
In addition to the above, the Committee
also undertakes a review to determine if
the entire financial statements are
representative of the Group’s
performance in the year and challenges
management on the overall balance of the
report prior to recommending approval of
the financial statements to the Board.
Going concern and
viability statement
The Committee was presented with
management’s assessments of the
Group’s viability over a three-year period to
31 December 2026, and its going concern
basis for the period of at least 12 months
from the date of approval of the financial
statements as part of the Board’s wider
responsibility for assessing the Group’s
principal and other risks (see pages 96
to 103).
The Committee assessed these analyses
and assumptions, taking into account cash
flows, current levels of debt and the
availability of future finance if required. The
viability and going concern assessments,
including the severe but plausible downside
scenarios modelled, were discussed and the
Committee concluded that the assessments
were appropriate. The Committee also
continued to consider the impact of climate
change on the Group’s viability. The Committee
subsequently approved the viability
statement and the going concern disclosures
for inclusion in the Annual Report and
Accounts 2023.
The viability statement and the going concern
disclosure can be found on page 104 and in
Note 1 on page 189 respectively.
Review of compliance and controls
of the US Construction businesses
In July, the Committee held a meeting which
focused on the controls and compliance
environment within the US Buildings and
Civils businesses.
The Committee reviewed reports which set
out updates to the risk profiles of both
businesses together with the highest rated
risks in each business. Alongside these risks,
management described the controls in place,
both for work winning and operational phases
of contracts, which were centred around
the Gated Business Lifecycle process.
Management also continued to identify areas
of internal audit findings and updates to the
progress on actions taken to address lessons
learnt. The reports also provided updates on
identified improvement areas and actions.
US Military Housing
During the year the Committee received
regular updates on the work within Balfour
Beatty Communities to improve the control
environment within the Military Housing
business. This included reports from
the Group Risk and Audit Director which
summarised the matters discussed at
the dedicated Military Housing control and
compliance committee; this management
committee is chaired by the Chief Financial
Officer and includes senior leaders from
the Communities business as well as senior
representatives from Group Enabling Functions.
This management committee monitors and
assesses improvement activities being
undertaken within the military housing
business to enhance the Ethics and
Compliance programme and internal controls,
and considers the results of relevant audit
and assurance reviews to assess the
strength of the control environment.
In addition, the independent compliance
monitor, appointed by the US Department
of Justice to review improvement actions
in the military housing business, presented
to the Committee in July, outlining the
progress of her work and initial findings.
The Committee also regularly assesses the
progress of the actions being undertaken
to address the recommendations in the
monitor’s first report.
Financial Reporting Council
During 2023, the Committee was made
aware that the FRC’s Audit Quality Review
Team (AQRT) would be reviewing
KPMG’s audit of the Group’s 2022 financial
statements as part of its annual inspection
of audit firms. The Committee received and
reviewed the final report from the FRC in
November 2023 and discussed the findings
with KPMG’s new lead audit partner. The
Committee was satisfied that the matters
raised by the AQRT were appropriately
incorporated into the 2023 external
audit plan.
Balfour Beatty plc Annual Report and Accounts 2023 149
Governance COMMITTEE REPORTS CONTINUED
Report of the Audit and
Risk Committee continued
External auditor
Rotation and reappointment
The Company’s external auditor is KPMG
LLP. KPMG’s appointment was first approved
by shareholders at the 2016 AGM, following
an audit tender process in 2015. KPMG
replaced Deloitte, the incumbent for the
preceding 14 years.
Pursuant to the provisions of the Revised
Ethical Standard 2019 (as summarised
below), the Company has adopted a policy
that no external auditor, appointed following
the implementation of the Revised Ethical
Standard 2019, can remain in post for longer
than 20 years. The Company has adopted a
policy that the Committee will lead an audit
tender process every 10 years and that this
will apply to the current incumbent, KPMG.
Consequently, the next external audit tender
is anticipated to take place following the
completion of KPMG’s audit for the year
ended 31 December 2025.
The Committee considers that the external
auditor relationship is appropriate and
productive and the Committee is satisfied
with KPMG’s effectiveness. The Committee
considers annually the need to conduct an
earlier formal tender process, where this may
be required for audit quality or independence
reasons. Provided the results of the annual
external audit review are satisfactory, KPMG
is recommended for reappointment at the
AGM. There are no contractual obligations in
place that restrict the Group’s choice of
statutory auditor.
Mike Barradell completed his first year
as lead audit partner for the year ended
31 December 2023 having replaced Paul
Sawdon. The external auditor is required to
rotate the lead partner every five years –
such changes are planned carefully to ensure
business continuity, whilst avoiding the
introduction of undue risk of inefficiencies.
The key aspects of the Revised Ethical
Standard 2019 include the following:
@ audit firms should have a maximum tenure
of 10 years, although the UK Government
proposes to allow an extension of:
» up to an additional 10 years where a public
tender is carried out after 10 years; or
» by up to an additional 14 years where
more than one audit firm is appointed
to carry out the audit;
@ audit firms are prohibited from providing
certain non-audit services;
@ where permitted non-audit services are
provided by a group’s auditor, they will be
subject to a fees cap; and
@ restrictions within any contract limiting a
group’s choice of auditor are prohibited.
The disclosures provided within this report
constitute the Company’s statement of
compliance with the requirements of the
Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014.
Independence
A formal review of the external auditor’s
independence is conducted by the Committee
annually. The most recent review took place
in March 2024, when the Committee
considered a letter submitted by KPMG
which sets out:
@ any relationships that bear on its objectivity
and independence and the safeguards
implemented to address any consequent
threats to independence; and
@ considerations related to the provision of
non-audit services, including a comparison
for the prior year (further detail below).
Following review of this letter, the
Committee satisfied itself that KPMG
remained sufficiently independent in
accordance with the relevant professional
ethical standards.
Non-audit work
The Company maintains a Non-Audit
Services Policy governing the provision of
non-audit services. The policy sets out:
@ specific services that the external auditor
is prohibited from providing to the Group;
@ details of any characteristics that could
potentially make a service prohibited; and
@ a requirement for the Chief Financial
Officer to approve non-prohibited services
where the fee is below £50,000, and for
the Chair of the Audit and Risk Committee
to approve non-prohibited services where
the fee exceeds £50,000.
KPMG also operates its own internal policy
that prohibits it from providing non-audit
services, other than one closely related to
an audit, to any FTSE 350 company.
These provisions help to safeguard the
external auditor’s objectivity and
independence, and mitigate the risk that the
external auditor will:
@ audit its own work;
@ make management decisions on behalf
of the Group;
@ act as advocate for the Group; and/or
@ create a mutuality of interest with
the Group.
In accordance with the policy for the
provision of non-audit services, and in line
with the Financial Reporting Council’s ethical
standards, the aggregated spend on
non-audit services with the external auditor
must not exceed 60% of the Group audit fee,
unless exceptional circumstances exist, with
a three-year rolling average not exceeding
70% of the Group audit fee.
EXTERNAL AUDITOR ROTATION AND REAPPOINTMENT
2001 – 2014
2015 – 2016
2023
2026
@ Deloitte incumbent
external auditor
@ Audit tender process
conducted; KPMG appointed as
external auditor at 2016 AGM
@ KPMG lead audit partner, Paul
Sawdon, replaced by Mike
Barradell for the 31 December
2023 audit
@ Next scheduled audit tender
process, per Company policy
150
Balfour Beatty plc Annual Report and Accounts 2023
The effectiveness of the Internal Audit
function is assessed by the Committee
by evaluating internal audit reports and at
meetings without management present.
The Committee also reviewed the resources
and skills of the Internal Audit function and
concluded that they are appropriate for its
activities. Accordingly, the Committee is
satisfied that the quality, experience and
expertise of the Internal Audit function is
appropriate for the business.
Internal control and risk
Details of the Group’s internal controls and
risk management framework are set out
more fully on pages 91 to 95 in the Strategic
report and pages 132 and 133 in the
Governance report. The Group’s principal
risks are set out on pages 96 to 103.
The Committee has evaluated the
effectiveness of the internal control systems
operated within the Group pursuant to the
FRC’s guidance on internal control. The
evaluation covered:
@ all material financial, operational and
compliance controls;
@ management confirmation reports;
@ reports on controls;
@ reports on fraud perpetrated against the
Group;
@ the Group’s approach to anti-bribery and
corruption and whistleblowing; and
@ reports from both the Internal Audit
function and the external auditor.
The review did not identify any significant
weaknesses in the system of internal control
and risk management.
Whistleblowing and fraud
Throughout 2023 the Committee, on
behalf of the Board, considered the Group’s
confidential reporting and whistleblowing
procedures and remains satisfied that these
procedures are sufficiently robust and
appropriate. The Committee also tracks
any Speak Up reports received, and monitors
any investigations undertaken and any
restorative actions taken by the Group.
The Committee also reviews any instances
of fraud perpetrated against the Group and
the action taken by management to
prevent recurrences.
During 2023, there were fees of £0.5 million
(2022: £0.8 million) paid to KPMG for
non-audit services. 2023 non-audit services
provided by KPMG primarily related to the
review of the Group’s half year results.
Audit fees for 2023 were £5.1 million (2022:
£4.1 million). Further details are included in
Note 6.2 on page 201.
69% of non-audit related work provided by
international accounting firms in 2023 was
carried out by firms other than KPMG.
Effectiveness
As part of the Committee’s annual cycle of
activities, the Committee conducts an
effectiveness review of the external auditor,
assesses the appropriateness of the external
audit plan, and assesses the external auditor’s
professional scepticism. From this review,
recommendations for improvement are
identified and communicated to the external
auditor where necessary. Committee
members meet privately with the external
auditor and management throughout the
year in order to gain feedback to support
these assessments.
Risk management and
internal control
The Board assumes ultimate responsibility
for the effective management of risk and
internal control across the Group. However,
the Committee assists the Board in
monitoring the Group’s internal financial
controls, and internal control and risk
management systems, and monitoring and
reviewing the work and effectiveness of
the Internal Audit function.
Internal Audit
The Internal Audit function plays an integral
role in the Company’s governance structure,
providing independent assurance and advice
to help the Group achieve its strategic
priorities. The half yearly internal audit plans
were approved by the Committee in May,
August and November 2023 when it also
assessed the adequacy of the budget and
resources. Each audit plan is based on risk,
strategic priorities and consideration of the
strength of the control environment. The
Committee monitors progress against the
plan and reviews the results of internal audit
reports during each meeting. Management is
responsible for ensuring that issues raised in
internal audit reports are addressed within
the agreed timetable and their timely
completion is reviewed by the Committee.
Where internal or external circumstances
give rise to an increased level of risk, the
audit plan is modified accordingly.
Balfour Beatty plc Annual Report and Accounts 2023 151
Governance governance
COMMITTEE REPORTS CONTINUED
Remuneration
Committee
Report of the
Remuneration Committee
As Chair of the Remuneration Committee,
I am pleased to present our Directors’
remuneration report for the year ended
31 December 2023.
At the AGM in 2023, the Remuneration
Policy was approved by over 81% of the
shareholders who voted. A summary of
the Policy and how this will be implemented
for the year ending 31 December 2024 is
set out on pages 156 to 157. The remainder
of the report including the Annual Report on
remuneration details how the Remuneration
Policy was applied over the year ended
31 December 2023.
Strategic and business context
As set out in this Annual Report;
@ Balfour Beatty has delivered solid financial
results across its diversified portfolio in
2023, with an incremental improvement in
underlying financial results from earnings-
based businesses during challenging
economic conditions.
@ The principal markets in which Balfour Beatty
operates are showing signs of continued
growth and the Group's longer-term
outlook remains positive giving the Board
confidence in Balfour Beatty's continued
ability to deliver profitable managed
growth and sustainable cash generation.
discuss their health and wellbeing at work
and 84% saying they are treated with
respect and feel the culture is inclusive.
@ Although inflation rates appear to have
peaked, the impact of the elevated cost
of living on colleagues continues to be
a focus area for the Group and the
Committee. Further details on how
Balfour Beatty supports colleagues
during these challenging times is included
within the wider workforce section.
@ Operating in markets with tough competition
for the best people, attracting and retaining
talented experts and developing a strong
pipeline of talent is critical for future
success. In the UK, ‘earn and learn’ roles
increased to 7.4% at 31 December 2023,
exceeding the 5% target in the year marking
the 10th anniversary of The 5% Club.
Incentive outcomes for 2023
The outcomes of the Annual Incentive Plan
(AIP) for the executive Directors reflected the
following (with further detail provided on
pages 159 to 161).
@ Stretching financial targets were set
at the start of the year. In setting cash
flow targets, the Committee reviewed
previous targets and outperformance
and incorporated additional stretch.
Profit exceeded Target performance and
the cash performance was very strong,
exceeding the Maximum target.
@ The Group has continued to make good
@ The formulaic assessment of the
progress in developing a culture which is
inclusive and supports the attraction and
retention of talent. The Right to Respect
programme was launched in 2023 which
embeds the Balfour Beatty culture by
clarifying expected behaviours and
empowering colleagues to hold each
other accountable. The Value Everyone
UK D&I strategy and action plan continues
to show steady progress with increased
representation across key measures.
Progress on colleague engagement and
wellbeing was evidenced by a further
improvement to 81% in the Group
engagement score, positioning Balfour
Beatty 7 percentage points above an
industry average and 8 percentage points
above companies of a similar size.
Colleagues in the UK and US responded
that they feel strong support for their
wellbeing with 86% telling us they can
AIP indicated 75.7% of maximum in
respect of the financial targets for the
executive Directors.
@ A number of consistent strategic business
objectives were set for the executive
Directors together with role-specific
personal objectives. Leo Quinn and
Philip Harrison performed strongly
against these objectives resulting in
92% of maximum for Leo Quinn and
96% of maximum for Philip Harrison
for this element.
@ In line with good practice, the Remuneration
Committee reviewed the overall outcome
for the executive Directors. However,
despite strong safety leadership and
safety metrics that are industry leading,
there were two tragic fatalities in 2023.
Reflecting on this the Committee, in
discussion with the executive Directors,
152 Balfour Beatty plc Annual Report and Accounts 2023
MEMBERSHIP
@ Anne Drinkwater
(Chair of the Committee)
@ Michael Lucki
@ Barbara Moorhouse
KEY ACTIONS FROM 2023
The Committee’s time in 2023 was
focused on engaging shareholders around
the new Remuneration Policy which was
approved at the 2023 AGM and overseeing
its implementation. Key actions included:
@ the Remuneration Policy was
implemented in alignment with
business strategy and culture;
@ considered ongoing developments in
external corporate governance and best
practice including the effective use of ESG
measures within incentive arrangements;
@ reviewed senior management and
wider workforce demographics and
remuneration, including management's
response to the cost of living pressures
faced by Balfour Beatty colleagues; and
@ reviewed and monitored remuneration
practice across the Group’s operations.
PRIORITIES FOR 2024
@ Ensure the implementation of the
Remuneration Policy maintains
alignment with business strategy and
culture.
@ Further evolve the ESG measures to
match delivery of the Company's
sustainability strategy.
@ Continue to monitor remuneration
across the Group’s operations to ensure
alignment with, and as broader context
for executive remuneration.
@ Ensure remuneration is consistent with
attracting, developing and retaining a
diverse workforce demographic to
deliver the Group's ambition.
9%
30%
ALLOCATION
OF TIME
61%
decided to apply downward discretion
to the safety element of the strategic
business and personal objectives for both
executive Directors, reducing the overall
scoring for strategic business and personal
objectives for Leo Quinn and Philip Harrison
to 84% and 88% respectively. Further
detail is included in the AIP metrics and
outcomes section on page 159.
@ Following this adjustment, 77.8% of
maximum is to be paid to Leo Quinn and
78.8% of maximum to Philip Harrison for
the AIP. In line with the Policy, 50% of the
pay-out will be deferred into shares for
three years.
@ Leo Quinn has continued to show
strong leadership demonstrated by the
performance against the strategic business
and personal objectives. In particular,
he has led the activities to develop an
inclusive culture across the Group through
improved engagement, diversity and the
launch of the 'Right to Respect' campaign
in the UK. Further details of Leo Quinn's
strategic business and personal objectives
are set out on page 160.
@ Philip Harrison has also demonstrated
strong leadership across the business.
In particular, he has successfully
completed a replacement revolving credit
facility with extended tenor. He has also
led the successful agreement with the
Balfour Beatty Pension Fund trustees in
respect of the latest triennial valuation.
Further details of Philip Harrison's strategic
business and personal objectives are set
out on page 161.
@ Leo Quinn and Philip Harrison have led the
development of carbon reduction targets,
with plans submitted to the Science Based
Targets initiative.
The performance conditions relating to the
2021 PSP awards measured performance over
the three years ended 31 December 2023.
TSR performance over the period was above
upper quartile and the maximum of both
operating cash flow and EPS were exceeded.
This results in these awards vesting in full.
In assessing the appropriateness of this
outcome, the Remuneration Committee
considered the overall performance of the
Company over the performance period
together with shareholder experience, and
considered the outcome reflective of the
strong achievement.
Remuneration for 2024
On 1 July 2023, in line with the normal salary
review date, the Committee awarded a circa.
4% increase to the Group Chief Executive
and Chief Financial Officer, lower than the
average for the wider workforce in 2023.
At the annual review on 1 July 2023,
non-executive Directors’ base fees and the
Group Chair’s fee were also increased by
circa. 4% and Committee Chair and SID
fees by circa. 4%. The next review date
is 1 July 2024.
No changes are proposed to the structure of
the performance measures to be used in the
AIP for 2024. It will continue to be based on
challenging profit before tax (50%), Group
total cash flow (25%) and strategic business
and personal objectives (25%). These
objectives will be disclosed in the 2024
Remuneration report and include measurable
objectives aligned to delivering on our
Environmental, Social and Governance (ESG),
people and quality business objectives. The
executive Directors will be able to earn a
maximum bonus of 150% of base salary.
The PSP awards to be granted in 2024 will be
based on the achievement of three performance
measures: EPS (33.3%); Operating Cash
Flow (33.3%); and TSR relative to the FTSE
250 excluding investment trusts (33.3%).
The Committee is satisfied that the balance
of measures remains appropriate and
supports the Company's business strategy.
The Group Chief Executive will be granted a
PSP award over shares worth 200% of base
salary and the Chief Financial Officer 175%
of base salary.
The Remuneration Committee will continue
to be mindful of the importance of setting
appropriately stretching targets for both the
AIP and PSP to ensure that the incentive
out-turns are commensurate with the
performance delivered, wider stakeholder
experience and the long-term sustainable
success of the Group. Given the commercial
sensitivity, the 2024 AIP targets will be
disclosed on a retrospective basis in the 2024
Remuneration report. The EPS and Operating
Cash Flow targets for the 2024 PSP awards
are disclosed on page 156.
ROLES AND RESPONSIBILITIES OF THE COMMITTEE
SCAN TO READ THE
TERMS OF
REFERENCE
l Remuneration Policy
l Remuneration of executive Directors and
Executive Committee members
l Governance and other matters
The terms of reference of the
Remuneration Committee are available on
the Company’s website.
The Committee’s terms of reference were
reviewed during the year to ensure
compliance with the Code.
Balfour Beatty plc Annual Report and Accounts 2023 153
Governance We believe that the
Remuneration Policy
will continue to deliver
a robust link between
strategy, reward and
performance,
supporting Balfour
Beatty’s drive to deliver
profitable managed
growth and sustainable
cash generation.”
COMMITTEE REPORTS CONTINUED
Report of the
Remuneration Committee
continued
Shareholder engagement
In the autumn of 2023, I held meetings with
shareholders representing approximately 13%
of the Company's share capital. The meetings
covered a wide range of topics, including:
further feedback on the new Remuneration
Policy and its implementation; the importance
of relevant and challenging financial targets; a
desire to maintain measurable targets within
the ESG arena; the Real Living Wage and
how Balfour Beatty manages cost of living
challenges; the value of clear and descriptive
narrative for strategic objectives; and the
importance of D&I in the recruitment and
career progression of colleagues.
Wider workforce remuneration
In addition to the executive Directors, the
Committee reviewed both the level and
structure of remuneration for the members
of the Executive Committee, with a focus
on alignment with strategy and culture.
The Committee receives regular updates
on wider workforce pay and takes these
into account when reviewing executive
and senior management remuneration.
The main salary review for the wider
workforce for the UK (excluding some
collective agreements) was effective from
1 January 2023, at a time when inflation
rates had reached a peak in the prior quarter
before falling progressively during 2023.
A total budget of 6% was established for
2023 with 5% available for allocation in
January 2023 in line with review guidelines
(award ranges based on earnings level,
performance and market positioning).
This specifically included a focus on lower
paid roles, with increases consolidated into
base pay (rather than ‘one off’ payments)
delivering a sustained effect on pay levels
and associated benefits. During 2023, all UK
employees within the January review, other
than where they were part of a specific
group, e.g. apprentices, were paid at or
above the voluntary Real Living Wage either
as part of the annual review or as part of a
planned review carried out later in the year.
In addition to enabling a pay budget to best
support colleagues, Balfour Beatty introduced
various enhancements to UK employee
benefits. During 2023, a successful financial
coaching pilot was completed in the UK
and elements will be incorporated into the
broader benefits offering during 2024.
Support for the wellbeing of colleagues
across the Group has received a number
of accolades in 2023. Gammon received
awards for best employee engagement and
corporate wellbeing strategies. In the UK,
154
Balfour Beatty plc Annual Report and Accounts 2023
the support plans for menopause received
high praise, an improved family-friendly leave
scheme was launched which increased paid
leave for parents and paid leave for neonatal
support was introduced.
For 2024, Balfour Beatty will be establishing
a salary review budget with a continued
focus on lower paid roles, applying consistent
pay principles to ensure fair, equitable and
market competitive pay levels, with increases
consolidated into base pay. This will continue
to take the voluntary Real Living Wage
level into consideration when setting and
implementing guidelines for pay for the UK
employee categories mentioned earlier.
Balfour Beatty’s UK gender pay gap
narrowed slightly in 2023 compared to 2022
across both mean and median measures and
shows a greater narrowing when compared
to the pre-COVID-19 reporting period. We
continue to build on previous analysis of the
reported trends, conduct benchmarking
against sector and UK reported pay gap
information and enhance our understanding
of the factors impacting the gender pay gap
over the longer term. This informs the
focused activity implemented through the
Value Everyone D&I action plan which is
pivotal to narrowing the gap.
The Group Chief Executive to average
UK employee pay ratio reduced for 2023
compared to 2022, reflecting the fact that
out-turn of the AIP in 2023 was lower
when compared to 2022, and the greater
proportion of executive Director pay linked
to this incentive plan.
Conclusion
We believe that implementation of the
Remuneration Policy will continue to deliver
a robust link between strategy, reward and
performance, supporting Balfour Beatty’s
drive to deliver profitable managed growth
and sustainable cash generation. The Company’s
remuneration policies have been, and will
continue to be, implemented rigorously,
aligned with the Group’s strategic goals and
culture. We hope you will support the
Remuneration report at the 2024 AGM.
Anne Drinkwater
Chair of the Remuneration Committee
12 March 2024
Our full Remuneration Policy can
be found within our Directors'
remuneration report for the year
ended 31 December 2022:
www.balfourbeatty.com/ar2022
REMUNERATION AT A GLANCE
Ahead of the Annual report on remuneration, we have summarised below the key remuneration outcomes for 2023, the key elements of the
Remuneration Policy approved at the 2023 AGM and how we intend to implement it in 2024. The Committee confirms that the Remuneration
Policy operated as intended throughout 2023. The full Remuneration Policy can be found in the Directors’ remuneration report for the year
ended 31 December 2022, available on our website.
AIP METRICS AND OUTCOMES
Key:
• Threshold • Target • Maximum • Actual
Profit before tax and non-underlying items
Group total cash flow1
Threshold
Target
Maximum
Actual
£203.3m
£254.1m
£279.5m
£261m
ACTUAL
£261m
63.6%
of maximum
Threshold £(56.4)m
Target £(47.0)m
Maximum £73.0m
Actual
£177m
ACTUAL
£177m
>100%
of maximum
Strategic business and personal objectives
AIP out-turn
ACTUAL
84%
of Maximum
ACTUAL
88%
of Maximum
ACTUAL
77.8%
of Maximum
ACTUAL
78.8%
of Maximum
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
PSP METRICS AND OUTCOMES
Total shareholder return
Threshold Median
Maximum
Actual
Earnings per share3
Threshold
18.5p
Maximum
Actual
Upper Quartile
Above Upper Quartile
ACTUAL
>100%
of maximum
Operating Cash Flow (OCF)2
Threshold £104m
Target
£149m
Maximum
£167m
Actual
PSP out-turn
ACTUAL
>100%
of maximum
£310m
27.7p
ACTUAL
>100%
of maximum
37.3p
CEO
CFO
100% of Maximum
100% of Maximum
EXECUTIVE DIRECTOR REMUNERATION SCENARIOS4
EXECUTIVE DIRECTORS’ SHAREHOLDING GUIDELINES5
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
£
£3,654k
£2,356k
£1,949k £1,309k
47%
28%
25%
35%
26%
39%
Key:
PSP
AIP
Fixed pay
42%
30%
28%
32%
28%
40%
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
1,437% 200%
660%
150%
(% of base
salary held)
ACTUAL
ON-
TARGET
ACTUAL
ON-
TARGET
ACTUAL
GUIDELINE
ACTUAL
GUIDELINE
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
1 Group total cash flow of £177m is the movement between opening and closing net cash adjusted for £150m share buyback.
2 Operating cash flow of £310m is defined in the Measuring our financial performance section.
3 Underlying basic earnings per share from continuing operations.
4 Group Chief Executive’s and Chief Financial Officer’s remuneration scenarios are calculated on base salaries at 1 January 2023 of £828k and £480k respectively.
5
In line with the Investors Association (IA) guidelines, calculations shown include shares beneficially owned at 31 December 2023 plus unvested shares which are not subject
to a further performance condition, on a net of tax basis, calculated using base salary at 31 December 2023.
Balfour Beatty plc Annual Report and Accounts 2023 155
Governance DIRECTORS' REMUNERATION POLICY
Summary of the Remuneration Policy and proposed implementation in 2024
Remuneration Policy
Our approach for 2024
During the year the Committee reviewed the market positioning for remuneration of the Group Chief
Executive and Chief Financial Officer.
On 1 July 2023, in line with the normal salary review date, the Committee awarded a circa. 4% increase
for both the Group Chief Executive from £828k to £861.1k and the Chief Financial Officer from £480k to
£499.2k, a lower increase than the average for the wider workforce.
The next base salary review date is 1 July 2024.
The pension provision for executive Directors is aligned to the level of the wider workforce, currently
7% of base salary.
Private medical cover is provided for executive Directors (and their immediate family) and a car or car
allowance are offered.
For 2024, the AIP for the executive Directors will be a maximum bonus of 150% of base salary, based
on the achievement of three performance measures:
@ profit before tax (50%);
@ cash (25%); and
@ strategic business (including ESG , people and quality measures) and personal objectives (25%).
The three elements are measured and calculated independently of each other and 50% of any bonus
earned will be deferred for three years in shares.
While the Committee has chosen not to disclose in advance the performance targets for 2024 as these
include items which the Committee considers commercially sensitive, retrospective disclosure of the
targets and performance against them will be presented in the Remuneration report for 2024.
For 2024, the Group Chief Executive will be granted a Performance Share Plan (PSP) award over shares
worth 200% of base salary and the Chief Financial Officer 175% of base salary.
The PSP awards to be granted in 2024 will be based on the achievement of three performance
measures EPS (33.3%), cash (33.3%) and relative TSR (33.3%).
The TSR peer group will be FTSE 250 companies (excluding investment trusts).
Metric
Measure
Threshold
Target
Maximum
Total shareholder return
Cash
EPS
TSR ranking
Operating cash flow
(OCF)
Underlying basic EPS
from continuing
operations
Median
— Upper quartile
£255m
£364m
£414m
36.5p
—
56.0p
The Committee considers that the performance measures are aligned to long-term business strategy
and appropriately stretching reflecting the current environment.
200% of base salary for the Group Chief Executive and 150% of base salary for the Chief Financial Officer.
The post-vesting holding condition applying to PSP awards (from 2019 onwards) requires the vested
shares (net of tax) to be held until the fifth anniversary of grant and will continue to apply post cessation
of employment.
BASE SALARY
To attract and retain high-calibre individuals.
To provide a competitive salary relative to
comparable companies in terms of size
and complexity.
PENSION AND
BENEFITS
ANNUAL INCENTIVE
PLAN (AIP)
LONG-TERM
INCENTIVE
Executive Directors can elect for Balfour
Beatty to contribute to a defined contribution
pension or receive a cash equivalent that will
not exceed the level of contribution available
to the wider workforce.
Benefits are provided that are appropriate to
the role and which take into account typical
practice, the nature and location of the role
and individual circumstances.
Bonuses are subject to the achievement of
stretching key performance measures
without encouraging excessive risk. Each
year the Committee selects performance
measures that are aligned with the
Company’s strategy and reflect the changing
needs of the business. At least 50% is based
on financial measures.
A proportion of any bonus earned is deferred
into shares to facilitate share ownership, aid
retention and provide further alignment
with shareholders.
Incentivise and reward delivery of long-term
performance linked to the Company’s
strategy and further facilitate share
ownership and alignment with shareholders.
Vesting, subject to performance, on the
third anniversary of the grant followed by
a two-year holding period, with a minimum
of 30% based on relative total shareholder
return. The balance of any award may be
based on financial and/or non-financial
metrics provided that at least 75% of the
award is based on financial and/or
TSR measures.
SHAREHOLDING
GUIDELINES
Shareholding guidelines apply to executive
Directors to align their long-term interests
with those of shareholders.
The Group Chief Executive and Chief
Financial Officer must accumulate a
shareholding to the value of 200% and 150%
of base salary respectively (200% of base
salary for all new executive Directors).
New executive Directors will be required to
hold the lower of 100% of their in-post share
ownership requirement or their actual holding
on departure, for two years post cessation
of employment.
156
Balfour Beatty plc Annual Report and Accounts 2023
Summary of the Remuneration Policy and proposed implementation in 2024 continued
Remuneration Policy
Our approach for 2024
NON-EXECUTIVE
DIRECTORS
Fees are set at a level to attract and retain
high-quality and experienced non-executive
Directors.
The Company’s approach to setting non-executive Directors’ fees is by reference to fees paid at similar
companies and reflects the time commitment and responsibilities of each role. At the annual review on
1 July 2023, non-executive Directors’ fees were increased at a lower rate than the average for the wider
workforce. The next review date is 1 July 2024.
Group Chair
Base fee
SID fee
Committee Chair fee
1 July 2022 (£)
1 July 2023 (£)
300,150
67,275
10,000
15,000
312,150
69,950
10,400
15,600
Louise Hardy also receives a fee of £10k per annum in respect of her responsibility as Workforce
Engagement Lead.
All non-executive Directors may be paid a travel allowance for intercontinental travel on Company
business (excluding travel within home continent).
Alignment with provision 40 of the Corporate Governance Code
Code requirements
Our approach
SIMPLICITY AND CLARITY
Remuneration arrangements should be transparent and
promote effective engagement with shareholders and the
workforce. Remuneration structures should avoid
complexity and their rationale and operation should be easy
to understand.
RISK
Remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural
risks that can arise from target-based incentive plans, are
identified and mitigated.
The remuneration framework is made up of three key elements: fixed pay
(including base salary, pension and benefits), annual bonus (AIP) and a separate
long-term incentive (PSP).
The framework is simple to understand for both participants and shareholders
and the incentive elements are aligned to the strategic priorities for the business.
Identified risks have been mitigated as follows:
@ variable remuneration targets are set at levels which reward high
performance but which do not encourage inappropriate business risk;
@ deferral of part of any bonus earned under the AIP into shares and the
holding period applied to any PSP award ensure variable remuneration is
linked to sustainable performance and discourages short-term behaviours;
@ all AIP and PSP awards to executive Directors include provisions for malus
and clawback; and
@ the Committee has the discretion to vary formulaic outcomes for incentive
vesting should outcomes not reflect the underlying performance of the Company.
PREDICTABILITY
The range of possible values of rewards to individual
directors and any other limits or discretions should be
identified and explained at the time of approving the policy.
In the 2022 Directors' Remuneration Report the potential remuneration in
future periods was set out under several performance scenarios for the Group
Chief Executive and the Chief Financial Officer in respect of awards to be made
in 2023 under the proposed Remuneration Policy.
PROPORTIONALITY
The link between individual awards, the delivery of strategy
and the long-term performance of the Company should be
clear. Outcomes should not reward poor performance.
ALIGNMENT TO CULTURE
Incentive schemes should drive behaviours consistent with
company purpose, values and strategy.
The Committee is comfortable that the discretions available to it are sufficient.
A significant proportion of an executive Director’s reward is linked to
performance through the incentive framework, with a clear line of sight
between performance and the delivery of long-term shareholder value.
Performance measures and the underlying targets are reviewed regularly by
the Committee to ensure that they are directly aligned to the Group’s strategic
priorities, and targets are calibrated to reward strong performance over the
performance period.
Executive Directors are required to build material shareholdings in the Company
and are subject to a post-cessation shareholding requirement which will ensure
that their interests are aligned to the Group’s long-term performance.
The Committee is focused on ensuring that the Company's Cultural
Framework, with its values and behaviours, is reflected across the entire
business and believes that the executive Directors are rewarded on both what
they deliver and how that is delivered.
Balfour Beatty plc Annual Report and Accounts 2023 157
Governance DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration
This part of the Remuneration report sets out how the Remuneration Policy was implemented over the year ended 31 December 2023. Details
of the remuneration earned by Directors and the outcomes of incentive schemes, including details of relevant links to Company performance,
are also provided in this part.
The following sections have been audited by KPMG: remuneration received by Directors for the year ended 31 December 2023 including
related notes (page 158); outstanding share awards (page 163), PSP awards granted during the year (page 164); AIP awards for the year ended
31 December 2023 (page 159), AIP metrics and outcomes (pages 159 to 161), Vesting of PSP awards for the year under review (page 161),
PSP metrics and outcomes (pages 161 to 162), payments to past Directors and payments for loss of office (page 164); and statement of
Directors’ shareholdings and share interests (page 164).
Remuneration received by Directors for the year ended 31 December 2023
The table below sets out the Directors’ remuneration for the year ended 31 December 2023 (or for performance periods ended in that year
in respect of long-term incentives) together with comparative figures for the year ended 31 December 2022.
Fixed pay
Variable pay
Base salary
and fees 1
£
Taxable
benefits 2,3
£
Year
Pension
cash
allowance
£
Sub total
£
Annual
incentive
cash 4
£
Annual
incentive
deferred
shares 4
£
Long-term
incentives 5,6
£
Sub total
£
Other
£
Total 6
£
Executive Directors
Philip Harrison
Leo Quinn
Non-executive Directors
Charles Allen
Stephen
Billingham
Stuart Doughty
Anne Drinkwater
Louise Hardy
Michael Lucki
Barbara
Moorhouse
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
489,600
463,998
844,550
814,000
306,150
295,075
83,913
81,138
83,913
81,138
83,913
81,138
78,613
54,332
68,613
66,138
68,613
66,138
14,904
14,617
20,904
21,218
15,217
6,458
3,394
1,229
7,133
1,776
12,874
12,706
4,139
1,222
19,389
12,618
6,502
3,313
34,272
92,800
59,118
162,800
538,776
571,415
924,572
998,018
295,027
349,200
502,452
589,950
295,027
349,200
502,452
589,950
820,617
1,001,028
1,724,779
2,226,829
1,410,671
1,699,428
2,729,683
3,406,729
– 321,367
301,533
–
87,307
–
82,367
–
91,046
–
82,914
–
96,787
–
93,844
–
82,752
–
55,554
–
88,002
–
78,756
–
75,115
–
69,451
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£1,949,447
£2,270,843
£3,654,255
£4,404,747
321,367
301,533
87,307
82,367
91,406
82,914
96,787
93,844
82,752
55,554
88,002
78,756
75,115
69,451
1 Base salary and fees were those paid in respect of the period of the year during which the individuals were Directors.
2 Taxable benefits are calculated in terms of UK taxable values. Leo Quinn received private medical insurance for himself and his spouse and received a car allowance of £20,000 per
annum. Philip Harrison received private medical insurance for himself and his spouse, and received a car allowance of £14,000 per annum. Charles Allen is eligible for a contribution
to his reasonable business expenses, receiving £11,201, taxable travel expenses of £1,516 and a taxable travel allowance of £2,500.
3 The non-executive Directors received taxable travel expenses and/or travel allowances which are shown in the taxable benefits column.
4 AIP 2023: further details of these awards are set out on pages 159 to 161. For 2022, details of the AIP awards were set out in the 2022 Remuneration report.
5 For 2023, this relates to the 2021 PSP award for which the performance period ended in 2023, with the valuation of vesting shares calculated on a three-month average share price to
31 December 2023 of 319.3p. This compares to the 296.2p average middle market price for the three dealing dates before the PSP award date which was used for calculating the
number of shares granted, so there is a benefit relating to share price appreciation since award of 23.1p per share and a value of £124,780 and £59,368 for Leo Quinn and Philip Harrison
respectively. Further details of the 2021 PSP awards are set out on pages 161 to 162. For 2022, this relates to the 2020 PSP award for which the performance period ended in 2022,
details of which were set out in the 2022 Remuneration report. For 2022, the valuation of the vesting shares for the 2020 PSP has been adjusted from the valuation included in the 2021
Remuneration report to reflect the actual valuation on the 11 June 2023 vesting date, based on a share price of 365.2p. This compares to the 262.4p average middle market price for the
three dealing days before the PSP award date (which was used to calculate the number of shares granted), so there was a benefit relating to share price appreciation since award of
102.8p per share and a value of £626,829 and £281,779 for Leo Quinn and Philip Harrison respectively. For 2021, the 2019 PSP award related to the performance period ended in 2021,
details of which were set out in the 2021 Remuneration report. For 2021, the valuation of the vesting shares for the 2019 PSP were adjusted from the valuation included in the 2021
Remuneration report to reflect the actual valuation on the 28 March 2022 vesting date, based on a share price of 262.2p, of £973,711 for Leo Quinn and £425,999 for Philip Harrison.
This compares to the 259.8p average middle market price for the three dealing days before the PSP award date (which was used to calculate the number of shares granted), so there
was a benefit relating to share price appreciation since award of 2.4p per share and a value of £8,913 and £3,899 for Leo Quinn and Philip Harrison respectively. Under the rules of the
PSP, participants may receive an award of shares in lieu of the value of dividends paid over the vesting period on vested shares. For the 2020 PSP award this was 31,881 shares for Leo
Quinn and 14,331 shares for Philip Harrison with a valuation of £116,429 and £52,337 respectively calculated on the share price on the 11 June 2023 vesting date.
6 Total figures and long-term incentive figures for 2022 have been adjusted from the figures included in the 2022 Remuneration report to reflect the actual valuation on 11 June 2023
vesting date of shares vesting under the 2020 PSP.
158
Balfour Beatty plc Annual Report and Accounts 2023
AIP awards for the year ended 31 December 2023
For 2023, the AIP for the executive Directors was a maximum bonus of 150% of base salary based on the achievement of three
performance measures:
@ profit before tax (50%):
@ cash (25%); and
@ strategic business and personal objectives (25%).
The three elements are measured and calculated independently of each other and 50% of the bonus earned is deferred for three years in the
form of Balfour Beatty shares, granted subject to service conditions and not subject to further performance conditions. For the profit before tax
element, 20% of the award would vest for threshold performance, increasing to 50% vesting of that element at target performance and then
to 100% of that element at maximum performance or above. For the Group total cash flow element, 20% of that element would vest for
threshold performance, increasing to 50% vesting of that element at target performance and then to 100% of that element at maximum
performance or above.
AIP metrics and outcomes
The formulaic assessment of the AIP against the plan targets indicated 75.7% of maximum against the financial targets for the executive
Directors, with strong performance against the strategic business and personal objectives of 92% of maximum for Leo Quinn and 96% of
maximum for Philip Harrison. This included a maximum score recorded against the safety objectives, reflecting the significant progress made
by the business against its key leading and lagging indicators and in developing a safety culture aligned to its zero harm goals. However,
despite this, there were two tragic fatalities in 2023 and reflecting on this the Committee, in discussion with the executive Directors, has
decided to apply downward discretion and reduce the safety element for both Leo Quinn and Philip Harrison by 8% resulting in an adjusted
strategic business and personal objectives score of 84% of maximum for Leo Quinn and 88% of maximum for Philip Harrison.
In taking this action the Committee discussed in detail the particular circumstances of the two incidents with members of the Safety and
Sustainability Committee and senior leadership. This included a comprehensive review of the investigation process, the specific nature of each
of the tragic incidents and any lessons learnt. The decision and scale of adjustment reflected the detailed knowledge gained through this
review of each incident and was taken within the overall context of the significant improvements to the general safety performance and culture
across the Group in 2023.
Following this adjustment, the final outturn of the Annual Incentive Plan is 77.8% of maximum to be paid to Leo Quinn and 78.8% of maximum
to Philip Harrison.
PROFIT BEFORE TAX AND
NON-UNDERLYING ITEMS
£261m
ACTUAL
GROUP TOTAL
CASH FLOW1
STRATEGIC BUSINESS AND
PERSONAL OBJECTIVES
AIP OUT-TURN
£177m
ACTUAL
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
63.6%
OF MAX.
100%
OF MAX.
84%
OF MAX.
88%
OF MAX.
77.8%
OF MAX.
78.8%
OF MAX.
£
2
0
3
.
3
M
T
H
R
E
S
H
O
L
D
£
2
5
4
.
1
M
T
A
R
G
E
T
£
2
7
9
.
5
M
M
A
X
I
M
U
M
£
(
5
6
.
4
)
M
T
H
R
E
S
H
O
L
D
£
(
4
7
.
0
)
M
T
A
R
G
E
T
£
7
3
.
0
M
M
A
X
I
M
U
M
1 Group total cash flow of £177m is the movement between opening and closing total net cash adjusted for the £150m share buyback.
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
Balfour Beatty plc Annual Report and Accounts 2023 159
Governance
DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration continued
AIP metrics and outcomes continued
Performance against the 2023 AIP strategic business and personal objectives relating to the executive Directors was:
CEO – strategic business and personal objectives 2023
Objective
Weight Outcome and comments
Environmental, Social and Governance
Social value Progress towards 2030 target of
20% Strong progress towards long-term objective with total social value
Achievement
20%
Safety
£3bn social value achieved,
demonstrating measurable increase
in total social value generated
across the UK in 2023 versus 2022.
Continue to demonstrate safety
leadership and improve overall
safety culture and performance in
2023 versus 2022.
Environment Continue to develop appropriate
carbon reporting arrangements
across the business.
Submit a compliant carbon
measurement methodology
to Science Based Targets
initiative (SBTi).
People
Continue to develop and improve
employee engagement across
the Group, targeting a Group
engagement index score (EIS)
within upper quartile of sector
peer group.
Improve diversity of the
workforce in 2023 versus
2022, promoting activities to
improve inclusion.
Quality
Drive digital evolution,
encouraging new opportunities
leveraged from use of AI.
Continue to accelerate high
quality project completions.
Total
160
Balfour Beatty plc Annual Report and Accounts 2023
achieved increasing to £937m in 2023 versus £817m in 2022, an increase
of £120m.
20% Demonstrated strong safety leadership and performance across a range of
12%
activities which have improved health, safety and wellbeing culture and
performance.
Safety performance metrics demonstrate strong, progressive performance
improvements in 2023 versus 2022 across the key Group metrics, including:
@ LTIR: 0.11 (improved versus 0.15 in 2022); and
@ observations: 400,000 (improved versus 380,000 in 2022).
@ Good progress in the roll-out of a digital permitting solution across UK
businesses, directly contributing to a reduction in service strikes.
However, there were two fatalities in the UK business.
20% Significant progress to create improved awareness and reporting:
20%
@ Bridging the Gap sustainability action plan created and embedded into all
operational UK business units, incorporating specific actions and
recommendations;
@ improved carbon measurement methodology to include Scope 3
emissions with clear standards which articulate how greenhouse gas
protocol is applied; and
@ near and long-term carbon reduction targets, along with abatement
plans, submitted to the SBTi for validation.
20% Group employee engagement index scores showed further improvement:
16%
@ Group EIS increased to 81% in 2023 (versus 80% in 2022) with an
increased participation rate of 77% (versus 74% in 2022); and
@ Group EIS participation rate and index score positioned within upper
quartile versus sector and all-client peers.
UK EIS
US EIS
HK EIS
2023
78%
86%
84%
2022
78%
84%
82%
Steady progress against key measures with strong overall performance in the
delivery of activities and processes to develop culture:
@ UK female representation increased to 20.9% in 2023 (from 20.1% in
2022) and UK minority ethnic increased to 12.4% (from 10.6% in 2022).
@ UK ‘Right to Respect’ launched, building an inclusive, safe workplace;
@ employees in ‘earn and learn’ roles increased to 7.4% at December 2023
versus the 5% target in the year marking the 10th anniversary of The 5%
Club, founded by Leo Quinn; and
@ achieved Bronze accreditation for Clear Assured, a globally recognised
inclusion standard.
20% Identified and actioned series of digital and AI initiatives to improve
16%
efficiency, productivity and safety.
Consistently focused on raising awareness and encouraging the
identification of new opportunities.
100%
84%
AIP metrics and outcomes continued
CFO – strategic business and personal objectives 2023
Capital
restructure
Objective
Replace revolving credit facility,
on improved tenor and quantum.
Weight Outcome/comments
40% Existing £375m facility replaced and upscaled to £475m facility with
extended tenor of four years with a one year extension option.
Achievement
40%
Deliver pension triennial
agreement aligned to strategy.
Agreement reached with the trustees of the Balfour Beatty Pension Fund
to achieve Company cash/ balance sheet objectives and the fund's journey
plan funding objectives.
Safety
Improve overall safety culture and
performance in 2023 versus 2022.
10% Key member of senior management team with positive leadership in
2%
developing safety culture and performance improvement.
Safety performance metrics demonstrate strong, progressive performance
across a range of heath, safety and wellbeing initiatives with
improvements in 2023 versus 2022 across the key Group metrics,
including:
@ LTIR: 0.11 (improved versus 0.15 in 2022); and
@ observations: 400,000 (improved versus 380,000 in 2022).
However, there were two fatalities in the UK business.
Environment Continue to develop appropriate
10% Led the enhancement of scenarios for measuring the financial impact of
10%
People
Task Force on Climate-related
Financial Disclosures (TCFD)
reporting arrangements across
the Group.
Improve sustainability reporting
and submit a compliant carbon
measurement methodology to
the Science Based Targets
initiative (SBTi).
Demonstrate further progression
across the Group and specifically
within the Finance function
during 2023, measured against
employee engagement index
score in 2022.
Improve diversity of the
workforce in 2023 versus
2022, promoting activities
to improve inclusion.
climate change on the Group.
Improved carbon measurement methodology to include Scope 3
emissions with clear standards which articulate how green house gases
protocol is applied.
Near-term and long-term carbon reduction targets, along with abatement
plans, submitted to the SBTi for validation.
20% Strong performance with employee engagement index scores showing
20%
further improvement:
@ Group EIS increased to 81% in 2023 (versus 80% in 2022) with an
increased participation rate of 77% (versus 74% in 2022);
@ Group EIS participation rate and index score positioned within upper
quartile versus sector and all-client peers; and
@ EIS for the UK Finance function increased to 86% (from 84% in 2022).
Steady progress against key measures, promoting improved inclusion
activities to develop culture:
Quality
Maintain improvements in UK
Prompt Payment Code
performance on invoices paid
within 60 days.
Review and improve efficiencies
within site support processes
@ UK female representation increased to 20.9% in 2023 (from 20.1% in
2022) and UK minority ethnic increased to 12.4% (from 10.6 % in 2022).
20% Strong performance with improvement and changes including:
16%
@ continued to exceed the Prompt Payment Code requirement to pay 95%
of UK invoices within 60 days, with 97% achievement (H2 2023); and
@ re-engineered invoice gateway process to deliver improved cost
efficiency in 2024.
Total
100%
88%
Vesting of PSP awards for the year under review
The PSP awards granted on 19 March 2021 were based on a performance period for the three years ended 31 December 2023. The performance
conditions applying to one-third of each award were comparative total shareholder return measured versus the companies ranked 51–200 by
market capitalisation in the FTSE All Share Index (excluding investment trusts), operating cash flow and earnings per share. 25% of each of the
total shareholder return and earnings per share parts of the award would vest for threshold performance, increasing to 100% of each part of
the award vesting for maximum performance or above. For the operating cash flow part, 25% of that part would vest for threshold
performance, increasing to 50% vesting of that part at target performance and then to 100% of that part at maximum performance or above.
In assessing the appropriateness of the formulaic outcomes of the performance targets, the Remuneration Committee considered the underlying
performance of the Group over the three-year period and, on balance, the Committee considered the vesting outcome appropriately reflected
the Group’s underlying performance and no discretionary adjustments were necessary. The share price used for calculating the number of
shares granted for the 2021 PSP awards was broadly in line with a typical share price range, therefore the Remuneration Committee was
satisfied there were no windfall gains. Details of the PSP awards vesting for the year under review are therefore as follows:
Balfour Beatty plc Annual Report and Accounts 2023 161
Governance DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration continued
PSP metrics and outcomes
Metric
Performance condition
Total shareholder
return
TSR against the 114 remaining
companies ranked 51–200 in the FTSE All
Share Index (excluding investment trusts)
Measure
Threshold
Target
Maximum
Actual
Vesting %
TSR ranking
57.5 or
above
–
29.3 or
above
21
100%
Cash
Earnings per share
Total vesting
Name of Director
Philip Harrison
Leo Quinn
Type of award
2021 conditional
2021 conditional
£104m
£149m
£167m
£310m
100%
18.5p
–
27.7p
37.3p
100%
Operating cash
flow (OCF)
Underlying basic
earnings per share
from continuing
operations
Vesting date
Number
of shares
at grant
Number
of shares
to vest
Number
of shares
to lapse
100%
Value of
vesting
shares 1
19 March 2024
19 March 2024
257,005
540,175
257,005
540,175
–
–
820,617
1,724,779
1 Valuation of vesting shares calculated on a three-month average share price to 31 December 2023 of 319.3p. This compares to the 296.2p average middle market price for the three dealing
dates before the PSP award date which was used for calculating the number of shares granted, so there is a benefit relating to share price appreciation since award of 23.1p.
TOTAL SHAREHOLDER
RETURN
OPERATING CASH FLOW
(OCF)1
EARNINGS
PER SHARE2
Above upper
quartile
ACTUAL
£310m
ACTUAL
PSP OUT-TURN
37.3p
ACTUAL
GROUP CHIEF
EXECUTIVE
CHIEF FINANCIAL
OFFICER
100%
OF MAX.
100%
OF MAX.
M
E
D
I
A
N
T
H
R
E
S
H
O
L
D
:
U
P
P
E
R
Q
U
A
R
T
I
L
E
M
A
X
I
M
U
M
:
£
1
0
4
M
T
H
R
E
S
H
O
L
D
£
1
4
9
M
T
A
R
G
E
T
£
1
6
7
M
M
A
X
I
M
U
M
100%
OF MAX.
1
8
.
5
P
T
H
R
E
S
H
O
L
D
.
2
7
7
P
M
A
X
I
M
U
M
1 Operating cash flow of £310m is defined in the Measuring our financial performance section.
2 Underlying basic earnings per share.
A reconciliation of the Group’s performance measures to its statutory results is provided in the Measuring our financial performance section.
100%
OF MAX.
100%
OF MAX.
162
Balfour Beatty plc Annual Report and Accounts 2023
Outstanding share awards
Maximum number of shares subject to award
Name of Director
Share award
Date granted
Philip Harrison
Leo Quinn
PSP1,5,6
PSP2,5,6
PSP3,5,6
PSP4,5,6.7
DBP8,10,11
DBP8,9,11,13
DBP8,9,11,13
DBP8,9,11,12,13
PSP1,5,6
PSP2,5,6
PSP3,5,6
PSP4,5,6,7
DBP8,10,11
DBP8,9,11,13
DBP8,9,11,13
DBP8,9,11,12,13
11 June 2020
19 March 2021
1 April 2022
3 April 2023
31 March 2020
31 March 2021
31 March 2022
31 March 2023
11 June 2020
19 March 2021
1 April 2022
3 April 2023
31 March 2020
31 March 2021
31 March 2022
31 March 2023
At
1 January
2023
274,104
257,005
302,119
–
143,916
63,620
113,076
–
609,756
540,175
616,570
–
280,131
124,363
201,923
–
Awarded
during the
year
–
–
–
224,418
–
1,997
3,549
96,350
–
–
–
442,425
–
3,903
6,338
162,779
Vested
during the
year
Lapsed
during the
year
At
31 December
2023
Exercisable and/or
vesting from
274,104
–
–
–
143,916
–
–
–
609,756
–
–
–
280,131
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11 June 2023
257,005 19 March 2024
1 April 2025
302,119
3 April 2026
224,418
– 31 March 2023
65,617 31 March 2024
116,625 31 March 2025
96,350 31 March 2026
11 June 2023
540,175 19 March 2024
1 April 2025
616,570
3 April 2026
442,425
– 31 March 2023
128,266 31 March 2024
208,261 31 March 2025
162,779 31 March 2026
–
1 2020 PSP award: This award vested in full on 11 June 2023. Details of the Company’s performance against the performance conditions were set out in the 2021 Remuneration report.
Philip Harrison and Leo Quinn also received 14,331 and 31,881 shares respectively in lieu of the dividends which would have been payable on the shares which vested. The closing
middle market price of ordinary shares on the vesting date was 365.2p.
2 2021 PSP award: Further details of this award are set out on pages 161 to 162.
3 2022 PSP award: This award is subject to three performance targets over a three-year performance period commencing 1 January 2022. The TSR part (33.3% weighting), measured
against a comparator group of companies ranked 51–200 by market capitalisation in the FTSE All Share Index (excluding investment trusts), no vesting below median ranking, 25%
vesting of this part at median, rising to 100% vesting at upper quartile performance or better. No portion of the cash part (33.3%) will vest unless the 2024 operating cash flow (OCF) is
greater than £130 million. 25% to 50% will vest for OCF between £130 million and £185 million, rising to full vesting for OCF of £204 million or more. For the EPS part (33.3%), no
vesting unless 2024 EPS is 28.7p, 25% vesting of this part at 28.7p, rising to full vesting at 43.9p or more.
4 2023 PSP award: Details are set out on page 164.
5 The average middle market price of ordinary shares in the Company for the three dealing dates before the PSP award dates, which was used for calculating the number of shares
granted, was 202.3p for the award granted on 23 March 2020, 262.4p for the award granted on 11 June 2020, 296.2p for the award granted on 19 March 2021, 259.5p for the 2022
award and 374.3p for the 2023 award. The closing middle market price of ordinary shares on the date of the awards was 197.3p, 259.0p, 298.0p, 256.8p and 371.2p respectively.
6 All PSP awards are granted for nil consideration and are in respect of 50p ordinary shares in Balfour Beatty plc. It is the Company’s current intention that awards will be satisfied by
shares purchased in the market.
7 A maximum of 2,625,626 conditional shares were awarded for all participants in the PSP in 2023, which are exercisable on 3 April 2026.
8 All DBP awards are granted for nil consideration and are in respect of 50p ordinary shares in Balfour Beatty plc. It is the Company’s current intention that awards will be satisfied by
shares purchased in the market.
9 The DBP awards made on 31 March 2021, 31 March 2022 and 31 March 2023 will vest on 31 March 2024, 31 March 2025 and 31 March 2026 respectively, providing the participant is
still employed by the Group at the vesting date (unless specified leaver conditions are met, in which case early vesting may be permitted).
10 The DBP awards made on 31 March 2020 vested on 31 March 2023. The closing middle market price of ordinary shares in the Company on the vesting date was 372.4p.
11 The shares subject to the DBP awards made on 31 March 2020, 31 March 2021, 31 March 2022 and 31 March 2023 were purchased at average prices of 216.9p, 300.8p, 261.3p and
373.8p respectively.
12 On 31 March 2023, for all participants in the DBP, a maximum of 752,862 conditional shares were awarded which will normally be released on 31 March 2026.
13 On 5 July 2023 and 5 December 2023 a further 43,046 conditional shares and 22,638 conditional shares were granted in lieu of entitlements to the final 2022 and interim 2023 dividend
respectively for all participants in the DBP. These shares were allocated at prices of 340.4p and 329.8p respectively.
14 The closing market price of the Company’s ordinary shares on 31 December 2023 was 331.2p. During the year, the highest and lowest closing market prices were 393.4p and
295.4p respectively.
Balfour Beatty plc Annual Report and Accounts 2023 163
Governance DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration continued
PSP awards granted during the year
On 3 April 2023, the following PSP awards were granted to executive Directors:
Executive
Type of award
Philip Harrison
Conditional
Leo Quinn
Conditional
Basis of award
granted
Share price
applied at
date of grant
Number of
shares over
which award
was granted
% of face value
that would vest
at threshold
performance
Face value
of award
Vesting determined
by performance
over three
years to
Vesting date
175% of salary of
£480,000
200% of salary of
£828,000
374.3p
224,418
£840,000
25% 31 December 2025
3 April 2026
374.3p
442,425 £1,656,000
25% 31 December 2025
3 April 2026
Awards will vest to executives after three years, subject to the achievement of three independently measured performance conditions as set
out below:
Metric
Performance condition
One-third
relative TSR
One-third cash Group operating cash flow from continuing operations; straight-line
Relative TSR against the constituents of the FTSE 250 Index
(excluding investment trusts); straight-line vesting between points
vesting between points
One-third EPS Group EPS; straight-line vesting between points
Threshold
Median
(25% vests)
£242m
(25% vests)
33.0p
(25% vests)
Target
Maximum
£346m
(50% vests)
–
– Upper quartile
(100% vests)
£396m
(100% vests)
50.7p
(100% vests)
For these PSP awards, a post-vesting holding period will apply requiring the shares (net of tax) to be retained for two years.
Payments to past Directors and payments for loss of office
There were no payments to past executive Directors or payments for loss of office made during 2023.
Statement of Directors’ shareholdings and share interests
The interests of the Directors and connected persons (including, amongst others, members of the Director’s immediate family) in the share
capital of Balfour Beatty plc and its subsidiary undertakings during the year are set out below:
Directors
Philip Harrison
Leo Quinn
Charles Allen
Stephen Billingham
Stuart Doughty
Anne Drinkwater
Louise Hardy
Michael Lucki
Barbara Moorhouse
Outstanding
PSP awards
783,542
1,599,170
Outstanding
DBP awards
278,592
499,306
Beneficially owned at
Beneficially owned at
1 January 2023 1,2
31 December 20232,3,4
619,271
2,983,726
100,000
44,375
4,550
4,500
–
–
4,000
846,886
3,470,498
100,000
44,495
7,325
4,500
–
–
4,000
1 Or date of appointment, if later.
2
Includes any shares held in the Company’s all-employee Share Incentive Plan.
3 Or date of stepping down from the Board, if earlier.
4 As at 12 March 2024, the latest practicable date prior to the date of this report, there had been no changes to the above.
The closing market price of the Company’s ordinary shares as at 31 December 2023, 331.2p, was used to calculate the value of shares for the purposes of the executive Directors
shareholding guidelines on page 164.
Executive Directors’ shareholding guidelines
The Group Chief Executive and Chief Financial Officer are required
under the Company’s shareholding guidelines to hold shares in the
Company worth 200% and 150% of base salary respectively and
must retain no fewer than 50% of the shares, net of taxes, vesting
under their outstanding DBP and PSP awards until the required
shareholding is met.
In line with the Investors Association guidelines, the calculations
shown in the chart include shares beneficially owned at 31 December
2023 plus unvested shares, which are not subject to a further
performance condition (outstanding DBP awards), on a net of tax
basis. Both executive Directors’ share interests met the Company’s
shareholding guidelines at 31 December 2023.
164
Balfour Beatty plc Annual Report and Accounts 2023
EXECUTIVE DIRECTORS’ SHAREHOLDING GUIDELINES
GROUP CHIEF
EXECUTIVE
1,437% 200%
CHIEF FINANCIAL
OFFICER
660%
150%
(% of base
salary held)
200
G
U
I
D
E
L
I
N
E
A
C
T
U
A
L
150
G
U
I
D
E
L
I
N
E
A
C
T
U
A
L
Performance graph
As in previous reports, the Remuneration Committee has chosen to compare the TSR on the Company’s ordinary shares against the FTSE 250
Index (excluding investment trusts) principally because this is a broad index of which the Company is a constituent member. The values indicated
in the graph show the share price growth plus reinvested dividends from a £100 hypothetical holding of ordinary shares in Balfour Beatty plc
and in the index and have been calculated using 30-day average values.
Total shareholder return (TSR)
350
300
250
200
150
100
50
0
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
Source: Thomson Reuters Datastream
31/12/13
31/12/14
31/12/15
31/12/16
31/12/17
31/12/18
31/12/19
31/12/20
31/12/21
31/12/22
31/12/23
Balfour Beatty plc
FTSE 250 (excluding Investment Trusts)
Group Chief Executive’s remuneration table
The total remuneration figures for the Group Chief Executive during each of the last 10 financial years are shown in the table below. The total
remuneration figure includes the AIP award based on that year’s performance and the PSP award based on the three-year performance period
ending in the relevant year. The AIP payout and PSP vesting level as a percentage of the maximum opportunity are also shown for each of
these years.
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total
remuneration1,3,4
AIP (%)2
PSP (%)
£797,568 £1,442,070 £1,445,250 £4,124,104 £2,982,121 £3,066,624 £2,254,806 £2,942,943
85%
60.3%
97.0% 69.06% 96.25%
64.17% 60.92%
88.6%
59.25%
33.33%
47.0%
0%
47.5%
0%
0%
0%
£4,404,747 £3,654,255
77.8%
100%
95%
100%
1 The figure for 2014 is an annualised figure for Andrew McNaughton who stepped down on 3 May 2014. The figures from 2015 onwards relate to Leo Quinn.
2 Andrew McNaughton did not qualify for any 2014 AIP.
3 Total remuneration for 2022 has been adjusted from the total figure included in the 2022 Remuneration report to reflect the actual valuation on the 11 June 2023 vesting date of shares
vesting under the 2020 PSP.
4 The figures for 2017 and 2018 exclude the vesting of awards made under the recruitment terms for the Group Chief Executive. Full details of these were included in the 2018
Remuneration report.
Percentage change in Directors’ remuneration compared with all UK employees
The table below shows the percentage change in the remuneration of the Directors undertaking the roles of Group Chief Executive and
Chief Financial Officer and the non-executive Directors between the financial years, compared with the percentage increase for the same
years for all UK employees of the Group where UK employees have been selected as the most appropriate comparator. Charles Allen was
not a Director until 13 May 2021 and therefore his percentage change between 2021 and 2022 is shown in the table on an annualised basis.
Louise Hardy was not a Director until 1 April 2022 and therefore the percentage change between 2022 and 2023 is also shown on an
annualised basis.
Balfour Beatty plc Annual Report and Accounts 2023 165
Governance
DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration continued
Percentage change in Directors’ remuneration compared with all UK employees continued
% change between 2022 and 2023
% change between 2021 and 2022
Base
salary
Benefits
Annual
bonus
Total
remuneration
Annual
bonus
Total
remuneration
(57)%
(15)%
(17)%
Leo Quinn,
Group Chief Executive
Philip Harrison,
Chief Financial Officer
Charles Allen, Group Chair
Stephen Billingham,
Senior Independent Director
Stuart Doughty,
non-executive Director
Anne Drinkwater,
non-executive Director
Louise Hardy,
non-executive Director
Michael Lucki,
non-executive Director
Barbara Moorhouse,
non-executive Director
All UK employees
Leo Quinn,
Group Chief Executive
Philip Harrison,
Chief Financial Officer
Charles Allen, Group Chair
Stephen Billingham,
Senior Independent Director
Stuart Doughty,
non-executive Director
Anne Drinkwater,
non-executive Director
Louise Hardy,
non-executive Director
Michael Lucki,
non-executive Director
Barbara Moorhouse,
non-executive Director
All UK employees
45%
239%
4%
6%
4%
3%
3%
3%
4%
4%
5%
Base
salary
3%
11%
–
6%
6%
5%
–
(54)%
(38)%
176%
302%
1%
54%
96%
–
3%
8%
–
(42)%
77%
(87)%
–
(16)%
–
(14)%
7%
–
–
–
–
–
–
(5)%
6%
10%
3%
49%
12%
8%
5%
43%
57%
–
–
–
–
–
–
21%
30%
–
6%
7%
(1)%
–
(9)%
7%
0%
7%
(100)%
7%
(2)%
(5)%
5%
–
122%
Base
salary
2%
5%
31%
2%
2%
3%
–
3%
3%
7%
Base
salary
(3)%
(2)%
–
(1)%
(1)%
Benefits
2%
4%
2,930%
817%
13%
1,802%
–
–
16%
22%
–
–
–
–
–
–
9%
14%
34%
3%
2%
18%
–
22%
6%
7%
198%
13%
–
11%
Benefits
Annual
bonus
Total
remuneration
(3)%
(38)%
(22)%
1%
–
(29)%
(52)%
6%
(12)%
–
(3)%
(3)%
0%
–
(39)%
34%
3%
(39)%
–
(22)%
–
–
–
–
–
–
–
(44)%
(1)%
(2)%
5%
–
(10)%
(2)%
0%
% change between 2020 and 2021
% change between 2019 and 2020
Benefits
Annual
bonus
Total
remuneration
Note: Benefits for non-executive Directors relate to taxable travel expenses and/or travel expenses which are shown in the taxable benefits column of the remuneration received by Directors for
the year ended 31 December 2023 table on page 158. The reported percentage increases in benefits in 2022 from 2021 have been impacted significantly by COVID-19 restrictions on travel in 2021.
Note: In response to the COVID-19 pandemic, the executive Directors and non-executive Directors took a voluntary 20% reduction in salary/fees in April and May 2020.
Pay ratio of Group Chief Executive to average employee
The Regulations require certain companies to disclose the ratio of the Chief Executive’s pay, using the amount set out in the single total figure
table, to that of the median, 25th and 75th percentile total remuneration of full-time equivalent UK employees.
The table below shows the relevant data for Balfour Beatty’s UK employees for 2023, together with the 2022, 2021, 2020 and 2019 data,
calculated using Option A as set out in the legislation.
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Year
2023
2022
2021
2020
2019
Method of calculation adopted
(Group Chief Executive: UK
employees)
(Group Chief Executive: UK
employees)
(Group Chief Executive: UK
employees)
Option A
Option A
Option A
Option A
Option A
98.1
115:1
84:1
64:1
92:1
69:1
81:1
57:1
45:1
65:1
50:1
59:1
40:1
32:1
45:1
166
Balfour Beatty plc Annual Report and Accounts 2023
Pay ratio of Group Chief Executive to average employee continued
Pay details for the Group Chief Executive and individuals whose 2023 remuneration is at the median, 25th percentile and 75th percentile
amongst UK-based employees are as follows:
Salary
Total pay and benefits
Group Chief Executive
25th percentile
£861,100 1
£3,654,255
£29,913
£37,243
Median
£40,405
£53,321
75th percentile
£57,000
£73,057
1 Group Chief Executive base salary at 31 December 2023.
The median, 25th percentile and 75th percentile figures used to determine the above ratios were calculated by reference to the full-time
equivalent annualised remuneration (comprising salary, benefits, pension, annual bonus and long-term incentives) of all UK-based employees
of the Group as at 31 December 2023 (i.e. ‘Option A’ under the Regulations). The Committee selected this calculation methodology as it was
felt to produce the most statistically accurate result.
The Committee considers that the median pay ratio for 2023 that is disclosed in the above table is consistent with the pay, reward and
progression policies for Balfour Beatty’s UK employees taken as a whole. It reflects the fact that a greater proportion of executive Director
pay is linked to annual performance through a higher annual incentive plan opportunity (a percentage of which is subject to deferral into shares)
and a long-term incentive plan. The reduction in the pay ratios for 2023 when compared to 2022 reflect the lower out-turn of the AIP in 2023
when compared to 2022.
Relative importance of spend on pay, dividends and underlying pre-tax profit
The following table shows the Company’s actual spend on pay for all Group employees relative to dividends and underlying pre-tax profit:
Staff costs (£m)1
Dividends (£m)
Underlying pre-tax profit (£m)
2022
1,259
58
291
2023
1,318
58
261
% change
5%
–
(10)%
1 Staff costs include base salary, benefits and bonuses for all Group employees (excluding joint ventures and associates).
Directors’ pension allowances
No Directors were contributing members of the Balfour Beatty Pension Fund during 2023. The executive Directors were in receipt of a cash
allowance in lieu of pension equivalent to 7% of base salary, in line with the wider workforce, as disclosed in the Directors’ remuneration table
on page 158.
External appointments of executive Directors
At the discretion of the Board, executive Directors are allowed to act as non-executive Directors of other companies and retain any fees relating
to those posts. Philip Harrison was appointed a non-executive director and chair of the audit committee of Dowlais Group plc in April 2023.
Service contracts
Executive Directors’ contracts are on a rolling 12-month basis and are subject to 12 months’ notice when terminated by the Company and
six months’ notice when terminated by the Director.
The current non-executive Directors, including the Chairman, do not have a service contract and their appointments, whilst for a term of three
years, may be terminated with three months’ notice (six months’ notice for the Group Chair) by either party. All non-executive Directors have
letters of appointment and their appointment and subsequent re-appointment is subject to annual approval by shareholders.
Name
Leo Quinn, Group Chief Executive
Philip Harrison, Chief Financial Officer
Charles Allen, Group Chair
Stephen Billingham, non-executive Director
and Senior Independent Director
Stuart Doughty, non-executive Director
Commencement date
1 January 2015
1 June 2015
13 May 2021
1 June 2015
8 April 2015
Anne Drinkwater, non-executive Director
1 December 2018
Louise Hardy, non-executive Director
Michael Lucki, non-executive Director
1 April 2022
1 July 2017
Barbara Moorhouse, non-executive Director
1 June 2017
Gabrielle Costigan, non-executive Director
8 March 2024
Robert MacLeod, non-executive Director
8 March 2024
Unexpired term remaining
Terminable on 12 months’ notice
Terminable on 12 months’ notice
Fixed term expiring on 12 May 2024 (subject to renewal) and
terminable on six months’ notice
Fixed term expiring on 31 May 2024 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 7 April 2024 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 30 November 2024 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 31 March 2025 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 30 June 2026 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 31 May 2026 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 7 March 2027 (subject to renewal) and
terminable on three months’ notice
Fixed term expiring on 7 March 2027 (subject to renewal) and
terminable on three months’ notice
Balfour Beatty plc Annual Report and Accounts 2023 167
Governance DIRECTORS' REMUNERATION POLICY CONTINUED
Annual report on remuneration continued
Consideration by the Directors of matters relating to Directors’ remuneration
The members of the Remuneration Committee are independent non-executive Directors, as defined under the Corporate Governance Code.
No member of the Committee has conflicts of interest arising from cross-directorships and no member is involved in the day-to-day executive
management of the Group. During the year under review, the members of the Committee were as follows:
@ Anne Drinkwater (Committee Chair);
@ Michael Lucki; and
@ Barbara Moorhouse.
The Committee also receives advice from several sources, namely:
@ the Group Chief Executive and the Group HR Director, who are invited to attend meetings of the Committee but are not present when
matters relating directly to their own remuneration are discussed; and
@ Deloitte LLP.
At regular intervals the Committee reviews the appropriateness and independence of the advice received from remuneration consultants.
As the result of a competitive tender process in 2020, Deloitte LLP was appointed as independent remuneration consultants to the Committee.
Deloitte LLP is a member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in relation to
executive remuneration consulting in the UK.
During the year, the Committee’s remuneration consultants provided a range of advice to the Committee, including:
@ analysis of market practice and corporate governance update;
@ provision of benchmark data for senior management and non-executive director remuneration;
@ assistance with the implementation of the Remuneration Policy;
@ assistance with the drafting of the remuneration report; and
@ calculation of vesting levels under the TSR element of the PSP awards.
During 2023, Deloitte LLP received fees amounting to £51,250 excluding VAT (£106,750 excluding VAT in 2022) in respect of advice given
to the Committee. Deloitte also provided tax and legal services to the Group related to the operation of the Group's share plans. Other than
as disclosed above, Deloitte LLP has no connection with the Company or individual Directors. The Committee is satisfied the advice provided
by Deloitte LLP is independent.
Terms of reference
During the period, the Committee has agreed a number of minor changes to be made to its terms of reference, as part of the annual review.
Full terms of reference can be found in the Investors section of the Company’s website at: www.balfourbeatty.com/investors/governance/
board-committees/.
Statement of shareholder voting at the AGM
At the AGM on 12 May 2023, the resolution to approve the Annual report on remuneration received the following votes from shareholders:
For
Against
Total votes cast
Abstentions
Total number of votes
427,684,140
22,735,424
450,419,564
49,049
% of votes cast
94.95%
5.05%
100%
The resolution to approve the Remuneration Policy was also approved at the AGM on 12 May 2023 and received the following votes
from shareholders:
Total number of votes
364,512,799
84,890,014
449,402,813
1,065,800
% of votes cast
81.11%
18.89%
100%
For
Against
Total votes cast
Abstentions
By order of the Board
Anne Drinkwater
Chair of the Remuneration Committee
12 March 2024
168
Balfour Beatty plc Annual Report and Accounts 2023
DIRECTORS' REPORT
The Directors of Balfour Beatty plc present their report, together with
the audited financial statements for the year ended 31 December
2023. For the purpose of the Financial Reporting Council’s Disclosure
Guidance and Transparency Rule (DTR) 4.1.8R, the Directors’ report is
also the Management report for the year ended 31 December 2023.
As permitted by Section 414 C(11) of the Companies Act 2006, some
matters required to be included in the Directors’ report have instead
been included in the Strategic report. These disclosures are
incorporated by reference in the Directors’ report. The Strategic
report can be found on pages 1 to 115.
Corporate governance
The Governance section on pages 116 to 168, forms part of this
Directors’ report.
The Company complied with all the provisions of the UK Corporate
Governance Code during the year ended 31 December 2023.
Directors and their interests
The Directors as at 31 December 2023 were Charles Allen CBE, Leo
Quinn, Philip Harrison, Dr Stephen Billingham CBE, Anne Drinkwater,
Stuart Doughty CMG, Barbara Moorhouse, Michael Lucki, and Louise
Hardy. Further details and individual biographies for those Directors
are set out on page 121.
The interests of the Directors and their connected persons in the
Company’s shares (as notifiable to the Company under Article 19
of the Market Abuse Regulation) are set out on page 164.
At no time during 2023 did any of the Directors have a material
interest in any contract with the Company or any of its subsidiaries.
Listing Rule 9.8.6R(10)
Data on the diversity of the individuals on the Board and in executive
management as at 31 December 2023, as required by Listing Rule
9.8.6R(10) is set out below. The data is collated by self-disclosure
from the individuals concerned. Further narrative surrounding Listing
Rule 9.8.6R(9) and compliance with the targets set out can be found
in the Nomination Committee report on pages 138 to 140.
Disclosure Guidance and Transparency Rules
(DTRS) 7.2.8AR
The Company is compliant with DTRS 7.2.8AR. Further information
on how the Board Diversity and Inclusion Policy has been updated to
include the Board's Committees is reflected in the Nomination
Committee report on page 140.
Directors' indemnities and insurance
The Group maintains directors’ and officers’ liability insurance which
provides appropriate cover for legal action brought against its Directors.
Qualifying third-party indemnity provisions were in force during 2023
and as at the date of this report for the benefit of certain employees
who are directors of a subsidiary company.
Qualifying pension scheme indemnity provisions (as defined by
Section 235 of the Companies Act 2006) were in force during the
year ended 31 December 2023 for the benefit of the trustee directors
of the Balfour Beatty Pension Fund.
Articles of Association
The Company has not adopted any special rules regarding the
appointment and replacement of Directors or the amendment of the
Articles of Association, other than as provided for under UK company
law.
Share capital
Details of the share capital of the Company as at 31 December 2023,
including the rights attaching to the shares, are set out in Note 31
on page 229. No shares were issued during 2023.
The powers of the Directors to issue or buy back the Company’s
shares are determined by the Companies Act 2006 and the Articles
of Association. The Directors are authorised to issue and allot shares
and to buy back shares subject to annual shareholder approval at the
AGM. Such authorities were granted by shareholders at the 2023
AGM and it will be proposed at the 2024 AGM that the Directors
be granted new authorities to issue, allot and buy back shares.
Female
Male
Not specified/prefer not to say
Total
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (Chair, CEO,
CFO and SID)
Number in
executive
management
Percentage in
executive
management
3
6
0
9
33.3%
66.7%
0
100.0%
0
4
0
4
2
9
0
11
18.2%
81.8%
0
100.0%
Number of Board
members
Percentage of the
Board
Number of senior
positions on the
Board (Chair, CEO,
CFO and SID)
Number in
executive
management
Percentage in
executive
management
White British or other White (including minority White groups)
Mixed/multiple ethnicity groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
9
0
0
0
0
0
100.0%
0
0
0
0
0
4
0
0
0
0
0
11
0
0
0
0
0
100.0%
0
0
0
0
0
Balfour Beatty plc Annual Report and Accounts 2023 169
Governance DIRECTORS' REPORT CONTINUED
Share capital continued
Under the authority provided at the 2022 AGM, the Company
commenced its 2023 share buyback programme on 3 January 2023.
Further authority for share buybacks was provided at the 2023 AGM
and the 2023 share buyback programme was completed on 15
December 2023. Under this programme, the Company purchased
43,286,805 ordinary shares of 50 pence each, for a total
consideration of £150,000,000 (exclusive of expenses) and these
shares were held in treasury with no voting or dividend rights. On 20
December 2023, 43,286,805 treasury shares were cancelled,
resulting in a balance of zero treasury shares held as at 31 December
2023. The Company commenced the initial tranche of its 2024 share
buyback programme on 2 January 2024. As at 11 March 2024 (the
latest practicable date prior to the date of this document), the
Company had purchased 8,255,946 ordinary shares of 50 pence
each, for a total consideration of £27,664,224 (exclusive of expenses)
and these shares are held in treasury with no voting or dividend
rights.
Throughout 2023, the Company’s issued share capital was publicly
listed on the London Stock Exchange and it remains so as at the
date of this report. There are no specific restrictions on the size of
a shareholding which is governed by the Articles of Association and
the prevailing law. Other than in respect of shares that vest under
the Company’s share schemes and are subject to a two-year holding
period, there are no specific restrictions on the transfer of shares
which are governed by both the Articles of Association and the
prevailing law. The Directors are not aware of any agreements
between holders of the Company’s shares that may result in
restrictions on the transfer of shares or on voting rights.
No person has special rights of control over the Company’s share
capital and all issued shares are fully paid. Shares held by the
Balfour Beatty Employee Share Ownership Trust rank pari passu
with the ordinary shares in issue and have no special rights. Voting
rights and rights of acceptance of any offer relating to the shares
held in this trust rest with the trustees, who may take account of any
recommendation from the Company. Voting rights are not exercisable
by the employees on whose behalf the shares are held in trust.
Dividends are waived by the trustees in relation to the shares held in
trust. Details of shares held by the Balfour Beatty Share Ownership
Trust in relation to the Company’s share schemes can be found in
Note 32.3 on page 231.
Major shareholders’ interests
Notifications provided to the Company by major shareholders in
accordance with the DTR are published via a Regulatory Information
Service and on the Company’s website.
The Company has been notified of the following interests in voting
rights in its shares as at 31 December 2023 and as at the date of
this report. Please note that percentages provided are as at the date
of notification.
Shareholder
Schroders plc
Percentage of
voting rights (%)
as at
31 December 2023
Percentage of
voting rights (%)
as at
11 March 2024
5.10
5.10
Dividends
An interim dividend of 3.5 pence (2022: 3.5 pence) was paid on
5 December 2023. A final dividend of 8.0 pence per share (2022:
7.0 pence) has been recommended by the Board for shareholder
approval at the 2024 AGM, giving total dividends per ordinary share of
11.5 pence for 2023 (2022: 10.5 pence). The Directors will continue to
offer a Dividend Reinvestment Plan, which allows holders of ordinary
shares to reinvest their cash dividends in the Company’s shares
through a specially arranged share dealing service.
Branches
As the Group is an international business, there are activities operated
through branches in certain jurisdictions.
Auditor
KPMG LLP has indicated its willingness to continue as auditor to the
Company and a resolution for its reappointment will be proposed at
the 2024 AGM.
Company Secretary
Tracey Wood is Company Secretary at the date of this report and was
Company Secretary throughout the year ended 31 December 2023.
Innovation, future development and research and
development
Information concerning innovation, future development and research
and development is set out on pages 25 and 56 and forms part of the
Directors’ report disclosures.
Sustainability
A full description of the Group’s approach to sustainability, including
information on its community engagement programme, appears on
pages 54 to 69.
Policies
The Group’s Code of Ethics and other published policies, including:
Speak Up; health and safety; conflicts of interest, sustainability;
sustainable procurement; social value; environment; supply chain
media, PR and marketing; quality; and information security, remain
in place and can be accessed on the Company’s website,
www.balfourbeatty.com.
Engagement with suppliers and customers
Details of the Company's approach to stakeholder engagement,
including engagement with customers and suppliers can be found
on pages 28 to 31.
Greenhouse gas emissions
Details of Balfour Beatty’s greenhouse gas emissions and the actions
which the Group is taking to reduce them are set out on pages 56 to
63 and form part of the Directors’ report disclosures.
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Balfour Beatty plc Annual Report and Accounts 2023
Employment
The Balfour Beatty Group operates across a number of geographies
and end markets. Balfour Beatty provides a Human Resources
framework for promoting diversity, ethical behaviour and learning
and development as well as continuing to fulfil its commitments in
relation to regulation and corporate governance.
The Group provides fair and flexible employment policies and practices
that respond to the different needs of its people. Information concerning
employee diversity is set out on page 77 and forms part of the
Directors’ report disclosures. Balfour Beatty strives to provide
employment, training and development opportunities for the disabled
community wherever possible, does not discriminate, and is committed
to supporting employees who become disabled during employment,
and helping disabled employees make the best use of their skills,
expertise and potential, consistent with any other employee.
The Company operates an employee Share Incentive Plan (SIP) which
enables UK-based employees to acquire the Company’s ordinary
shares on a potentially tax-favourable basis, in order to encourage
employee share ownership and provide additional alignment between
the interests of employees and shareholders. Participants in the SIP
are the beneficial owners of shares but not the registered owners,
and the voting rights to such shares are exercised by the trustee of
the SIP at the discretion of the participants.
Information concerning financial and economic factors affecting the
performance of the Group and the Company’s share price is available
to all employees via the Company’s intranet site.
Further information on how Directors have engaged with employees
and how they have had regard to employee interests can be found on
pages 125 to 127.
Employees
Details on the average number of employees within the Group can be
found in Note 7.1 on page 202.
Diversity
Details on the Board's Diversity and Inclusion Policy can be found in
the Nomination Committee report on page 140.
Details of the Group’s approach to diversity and inclusion can be
found on pages 75 to 77.
Disclosures required under Listing Rule 9.8.4
There are no disclosures required to be made under UK Listing
Rule 9.8.4. Details of long-term incentive plans can be found in the
Summary of the Remuneration Policy and proposed implementation
in 2024 on pages 156 to 157.
Events after the reporting date
Events after the reporting date are set out in Note 39 on page 236.
Political donations
At the 2023 AGM, shareholders granted authority, for the purposes
of Part 14 of the Companies Act 2006, for the Company and its
subsidiaries to make donations to political organisations up to a
maximum aggregate amount of £25,000. This approval is a
precautionary measure in view of the broad definition of these
terms in the Companies Act. No such expenditure or donations
were made during 2023 and shareholder authority will be sought
again at the 2024 AGM.
In the US, corporate political contributions totalling US$2,500 (£1,961.25)
were made to a Political Action Committee during 2023. These
contributions are not covered by Part 14 of the Companies Act 2006.
Any such contributions or donations are tightly controlled and must
be approved in advance in accordance with the Company's internal
procedures and must also adhere strictly to the Company's Code
of Ethics.
Capitalised interest
Details of the Group’s capitalised interest can be found in Note 15 on
page 207.
Financial instruments
The Group’s financial risk management objectives and policies
(including its hedging policy) and its exposure to the following risks –
liquidity, foreign currency, interest rate, price and credit – are detailed
in Note 40 on pages 237 to 241.
Going concern and viability
The Group’s going concern statement is detailed in Note 1 on
page 189.
The Group's long-term viability statement is set out on page 104.
Change of control provisions
The Group’s bank facility and surety agreements contain provisions
that, where the parties are unable to agree the implications of any
change of control, on notice being given to the Group, the lenders and
sureties may exercise their discretion to require prepayment of any
loans or outstanding bonds and cancel all commitments under the
agreement concerned.
The Group’s US private placement arrangements require the
Company, promptly upon becoming aware that a change of control
of the Company has occurred (and in any event within 10 business
days), to give written notice of such fact to all noteholders and make
an offer to prepay the entire unpaid principal amount of the notes,
together with accrued interest.
A number of joint venture, client contracts and contract bond agreements
include provisions which become exercisable by a counterparty on a
change of control. These include the right of a counterparty to request
additional security and to terminate an agreement.
Some other commercial agreements, entered into in the normal
course of business, include change of control provisions. The Group’s
share and incentive plans include usual provisions relating to change
of control. There are no agreements providing for compensation for
the Directors or employees on a change of control.
Annual General Meeting
All resolutions continue to be put to a poll rather than a show of
hands. Each substantially separate issue is proposed via a separate
resolution and proxy forms provide for shareholders to vote for, vote
against or withhold their vote on each resolution.
All Board members typically attend the AGM and are available to
answer questions during the formal part of the meeting as well as
being present for informal discussion over refreshments after the AGM.
The 2024 AGM will be held at The Curve, Axis Business Park,
Hurricane Way, Langley SL3 8AG, United Kingdom on Thursday
9 May 2024 commencing at 10am.
Balfour Beatty plc Annual Report and Accounts 2023 171
Governance Under applicable law and regulations, the Directors are also responsible
for preparing a Strategic report, Directors’ report, Directors’ remuneration
report and Corporate governance statement that complies with that
law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Responsibility statement of the Directors in respect
of the Annual Financial Report
We confirm that to the best of our knowledge:
@ the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken
as a whole; and
@ the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
We consider the Annual Report and Accounts, taken as a whole,
is fair, balanced, and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
By order of the Board
Tracey Wood
Group General Counsel and Company Secretary
12 March 2024
Registered Office: 5 Churchill Place, Canary Wharf, London E14 5HU
Registered in England and Wales, registered number 395826
DIRECTORS' REPORT CONTINUED
Statement of Directors as to disclosure of
information to the Company's auditor
We confirm that to the best of our knowledge:
@ each of the persons who are Directors at the time when this
Directors’ report is approved confirms that, so far as they are
aware, there is no relevant audit information of which the
Company’s auditor is unaware and that they have taken all
the steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and to
establish that the Company’s auditor is aware of that information.
Statement of Directors’ responsibilities in respect
of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the
Group and Parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in
accordance with UK-adopted international accounting standards and
applicable law and have elected to prepare the Parent Company
financial statements in accordance with UK accounting standards and
applicable law, including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the Group’s profit or loss for that period. In preparing each of the
Group and Parent Company financial statements, the Directors are
required to:
@ select suitable accounting policies and then apply them consistently;
@ make judgements and estimates that are reasonable, relevant,
reliable, and prudent;
@ for the Group financial statements, state whether they have
been prepared in accordance with UK-adopted international
accounting standards;
@ for the Parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the Parent
Company financial statements;
@ assess the Group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
@ use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
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Balfour Beatty plc Annual Report and Accounts 2023
Financial statements
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BALFOUR BEATTY PLC
1 Our opinion is unmodified
We have audited the financial statements of Balfour Beatty plc (“the Company”) for the year ended 31 December 2023 which comprise the
Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Changes in Equity, Company Statement of
Changes in Equity, Group and Company Balance Sheets, Group Statement of Cash Flows and the related notes, including the accounting
policies in Note 2. The commentary provided by the Directors on pages 182, 183, 184, 186 and 188 does not form part of the financial
statements.
In our opinion:
@ the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2023
and of the Group’s profit for the year then ended;
@ the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
@ the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework; and
@ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit and Risk Committee.
We were first appointed as auditor by the shareholders on 19 May 2016. The period of total uninterrupted engagement is for the eight financial
years ended 31 December 2023. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited
by that standard were provided.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which
had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
We summarise below the key audit matters unchanged from 2022, in decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose
of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on these matters.
Balfour Beatty plc Annual Report and Accounts 2023 173
Financial statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BALFOUR BEATTY PLC CONTINUED
2 Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
Contract accounting Construction Services segment – revenue £6,695 million (2022: £6,409m), contract assets £203 million (2022: £209m),
contract liabilities (current) £506 million (2022: £550m), and loss provisions included within contract provisions (current) of £187 million (2022:
£179m).
Refer to pages 145-151 (Audit and Risk Committee report), Note 2.4 (Principal accounting policies – Revenue recognition), Note 2.27(a)
(Judgements and key sources of estimation uncertainty – Revenue and margin recognition)
Subjective estimates
The recognition of revenue and margin within the Construction
Services segment relies on estimates in relation to the forecast
total costs of each contract. Where a contract has become, or is
expected to be, loss-making, a provision is recognised using these
estimates. Cost contingencies may also be included in these
estimates to take account of specific uncertain risks or disputed
claims against the Group arising within each contract.
Further estimation uncertainty exists in relation to assessing the
amount of variable consideration that should be included on a
contract-by-contract basis for variations and claims. The Group has
to estimate the amount they expect to receive and assess whether
it is highly probable such that a significant reversal in the amount of
cumulative revenue recognised will not occur.
Professional standards require us to make a rebuttable presumption
that the fraud risk associated with revenue recognition is a
significant risk. The potential incentives and pressures to achieve
bonus targets and meet profit targets could increase the risk of
fraudulent revenue recognition in relation to the Construction
Services segment revenue.
The effect of these matters is that, as part of our risk assessment,
we determined that contract revenue within the Construction
Services segment and the related contract balances have a high
degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the Group
financial statements as a whole, and possibly many times that
amount. Therefore, auditor judgement is required to assess whether
the Directors’ estimates for total forecast costs and variable
consideration, and therefore the amount of revenue, margin and
related contract balances recognised, fall within acceptable ranges.
The financial statements (Note 2.27(a)) disclose the nature and the
extent of the estimation uncertainty estimated by the Group.
We performed the tests below rather than seeking to rely on the
Group’s controls because the nature of the balances is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
Using a variety of quantitative and qualitative criteria we selected a
sample of contracts to assess and challenge the most significant and
complex contract estimates. We obtained the project review papers
prepared by the Group which explained the estimates made and
challenged the judgements underlying those papers with operational,
legal, commercial and financial management.
Our procedures on the contracts selected included:
@ Historical comparisons: assessing the Group’s ability to
accurately forecast end of life contract margins by comparing the
total forecast costs and variable consideration previously
recognised to final outcomes;
@ Customer and subcontractor correspondence scrutiny:
analysing correspondence with customers and subcontractors
around variations, claims to challenge the estimates of variations
and claims and forecast costs made by the Group;
@ Legal correspondence scrutiny: analysing correspondence with
lawyers and other legal advice obtained by the Group relating to
variations and claims;
@ Test of detail: analysing the end of job forecasts and challenging
the total cost estimates within the forecasts by considering the
amounts already procured, the amounts still to be procured, the
site and time related cost forecasts against programme and run
rates, and any contingency held;
@ Test of detail: inspecting contracts for key clauses; identifying
relevant contractual mechanisms such as pain/gain shares,
disallowed costs, liquidated damages, inflation related clauses and
success fees, and assessing whether these key clauses have been
appropriately reflected in the amounts recognised in the financial
statements;
@ Site visits: for certain higher risk or larger value contracts,
attending in person site visits or holding video conference calls
where we inspected the physical progress of the project and
discussed the project with site personnel. Our own construction
industry specialists attended a selection of these site visits;
@ Use of our own specialists: utilising our own industry specialists
for certain contracts where specific risk factors were identified to
assist with identifying the risks and opportunities associated with
the contract and developing a range of possible outcomes for
specific assumptions. This assisted us in challenging the
appropriateness of revenue recognised and, where applicable,
provisions held in relation to these contracts; and
@ Assessing transparency: considering the adequacy of the
Group’s disclosures around the degree of estimation uncertainty
involved in recognising revenue and related contract balances in
the Construction Services segment.
Our results:
We consider the amount of revenue and the related contract assets,
contract liabilities and loss provisions recognised within the
Construction Services segment to be acceptable (2022: acceptable).
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Balfour Beatty plc Annual Report and Accounts 2023
2 Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
Recoverability of the parent Company’s investment in subsidiaries
Investment in subsidiaries £1,745 million (2022: £1,733m)
Refer to Note 20.2 (Investments)
Low risk, high value
The carrying amount of the parent Company’s investment in
subsidiaries represents 72% of the parent Company’s total assets.
Their recoverability is not at a high risk of significant misstatement
or subject to significant judgement. However, due to their materiality
in the context of the parent Company financial statements, this is
considered to be the area that had the greatest effect on our overall
parent Company audit.
In particular, we have spent more time on the recoverability of the
investment in Balfour Beatty Investment Holdings Limited (“BBIHL”)
as a value in use model has been used to support the investment’s
carrying amount.
We performed the tests below rather than seeking to rely on any of
the Company’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through the
detailed procedures described.
Our procedures included:
@ Tests of detail: comparing the carrying amount of 100% of
investments (2022: 100%) with the relevant subsidiaries’ draft
balance sheets to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in
excess of their carrying amount; and
@ Assessing subsidiary audits: assessing the work performed by
the subsidiary audit teams on the subsidiaries, and considering the
results of that work, on those subsidiaries’ profits and net assets.
The below procedures were performed over the investment in
BBIHL only:
@ Our knowledge of the entity and environment: critically
assessing the profit from operations and long term growth rate
assumptions underlying the cash flow forecast with reference to
historical forecasting accuracy, and our knowledge of the entity and
the sector in which it operates;
@ Benchmarking assumptions: challenging the assumptions
used by the Company in the calculation of BBIHL’s discount rates
and the long-term growth rates by comparisons with external
data sources; and
@ Sensitivity analysis: performing our own sensitivity analysis over
BBIHL’s value in use, including a reasonably possible reduction in
assumed long term growth rates and profit from operations and
consideration of the possible impacts of current economic
uncertainty, to identify the most sensitive disclosures.
Our results:
We found the Company’s conclusion that there is no impairment of
its investment in subsidiaries to be acceptable (2022: acceptable).
3 Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £22.0m (2022: £20.0m), determined with reference to a benchmark of
Group revenue of which it represents 0.28% (2022: 0.26%).
We consider total revenue to be the most appropriate benchmark due to the focus on revenue by investors and the differing nature of the
investments business (an asset-based business) compared to the contracting businesses (profit orientated entities). Whilst the contracting
businesses are focused on profit measures, there has been significant volatility in recent years which has impacted the Group’s profit before
tax without any reduction in the scale of the contracting businesses. In setting our materiality, we have also given consideration to the Group’s
profit before tax normalised for a range of factors including contract write-downs.
Materiality for the parent Company financial statements as a whole was set at £18.0m (2022: £18.0m), determined with reference to a
benchmark of Company total assets, of which it represents 0.75% (2022: 0.48%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account
balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 75% (2022: 75%) of materiality for the financial statements as a whole, which equates to £16.5m (2022:
£15m) for the Group and £13.5m (2022: £13.5m) for the parent Company. We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an elevated level of risk.
We agreed to report to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £1.1m (2022 £1.0m), in
addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group’s fifteen (2022: fourteen) reporting components, we subjected six (2022: six) to full scope audits for Group purposes and five
(2022: four) to specified risk-focused audit procedures. The latter were not individually financially significant enough to require a full scope audit
for Group purposes, but did present specific individual risks that needed to be addressed. For two (2022: two) components, the specified audit
procedures were performed over revenue and other contract accounting related balances, including contract assets and liabilities and any
contract provisions. For one (2022: one) component, the specified audit procedures were performed over expenses and cash; for two (2022:
one) components, the specified procedures were performed over cash.
For the residual components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant
risks of material misstatement within these.
Balfour Beatty plc Annual Report and Accounts 2023 175
Financial statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BALFOUR BEATTY PLC CONTINUED
3 Our application of materiality and an overview of the scope of our audit continued
The components within the scope of our work accounted for the percentages illustrated below
GROUP REVENUE
GROUP PROFIT BEFORE TAX
GROUP TOTAL ASSETS
99%
94%
98%
l Full scope audit 90% (2022: 90%)
l Specified risk-focused procedures 9% (2022: 9%)
l Out of scope 1% (2022: 1%)
l Full scope audit 66% (2022: 80%)
l Specified risk-focused procedures 28% (2022: 16%)
l Out of scope 6% (2022: 4%)
l Full scope audit 77% (2022: 71%)
l Specified risk-focused procedures 21% (2022: 28%)
l Out of scope 2% (2022: 1%)
The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above
and the information to be reported back. The Group audit team approved the component materialities, which ranged from £1.6m to £14.0m
(2022: £1.6m to £12.0m), having regard to the mix of size and profile of the Group across the components. The work on eight of the eleven
in-scope components (2022: seven of the ten in-scope components) was performed by the component auditors and the rest, including the
audit of the parent Company, was performed by the Group audit team.
The Group audit team visited four (2022: three) overseas component audit teams in the US and Hong Kong, and four (2022: three) UK
component audit teams to assess the audit risk and strategy. Video and telephone conference meetings were also held with all component
auditors regularly. At these meetings, the findings reported to the Group audit team were discussed in more detail, and any further work
required by the Group audit team was then performed by the component auditor.
The scope of the audit work performed was predominantly substantive as we placed limited reliance upon the Group’s internal controls over
financial reporting.
4 The impact of climate change on our audit
In planning our audit, we considered the potential impacts of climate change on the Group’s business and its financial statements.
The Group has set out in its Strategic Report its ambition to go Beyond Net Zero Carbon by 2040 and other climate-related targets, as well
as the potential climate risks to the Group.
As stated in Note 1 to the financial statements, whilst the Group has set these targets and considered the climate risks identified in the TCFD
disclosure, the Directors do not believe that there is a material impact on the financial reporting judgements and estimates from these matters
as at 31 December 2023.
As a part of our audit, we have performed a risk assessment, including enquiries of management, to understand how the impact of
commitments made by the Group in respect of climate change, as well as the physical or transition risks of climate change, may affect the
financial statements and our audit. We also held discussions with our own climate change professionals to challenge our risk assessment.
There was no impact of this on our key audit matters.
We did not identify any significant risk in the current period of climate change having a material impact on the Group’s significant accounting
estimates. For contract accounting, as well as contract provisions, this is due to a range of factors including the shorter-term nature of this
estimate (the majority of contracts will substantially complete within two years of the Balance Sheet date) and contract mechanisms in place
which limit risk (e.g. either where risk remains with the customer or is passed to the supply chain). For other estimates, this is due to a range of
factors including the use of market-based estimates, and the nature of the estimate (retirement benefit obligations, retirement benefit assets,
financial assets measured through OCI, employee and other provisions).
We have read the disclosure of climate-related information in the front half of the Annual Report and considered consistency with the financial
statements and our audit knowledge.
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Balfour Beatty plc Annual Report and Accounts 2023
5 Going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company
or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic. They
have also concluded that there are no material uncertainties that could have cast significant doubt over the ability of the Group or the Company
to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model
and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going
concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources and
metrics relevant to debt covenants over this period were a deterioration in contract profitability due to economic conditions, unforeseen
operational challenges or commercial disputes, or a combination of these, leading to a sustained medium-term decline in profits, delays to
planned disposals of PPP financial assets and delays to the start date of contracts leading to a reduction in revenue.
We also considered less predictable but realistic second order impacts, such as a unique one-off event including the financial consequences of
a major health and safety breach.
We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by assessing the
Directors’ sensitivities over the level of available financial resources and covenant thresholds indicated by the Group’s financial forecasts taking
account of severe but plausible adverse effects that could arise from these risks individually and collectively.
Our procedures also included:
@ critically assessing assumptions in the base case and downside scenarios, particularly in relation to contract profitability and its impact on
forecast liquidity and covenant compliance, by comparing to historical trends, overlaying knowledge of the Group’s plans based on approved
budgets, as well as our knowledge of the Group and the sector in which it operates;
@ comparing past budgets to actual results to assess the Directors’ track record of budgeting accurately;
@ inspecting the confirmation from the lender of the level of committed financing, and the associated covenant requirements; and
@ considering whether the going concern disclosure in Note 1 to the financial statements gives a full and accurate description of the Directors’
assessment of going concern, including the identified risks, and related sensitivities.
Our conclusions based on this work:
@ we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
@ we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the going
concern period;
@ we have nothing material to add or draw attention to in relation to the Directors’ statement in Note 1 to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of
that basis for the going concern period, and we found the going concern disclosure in Note 1 to be acceptable; and
@ the related statement under the Listing Rules set out on page 90 is materially consistent with the financial statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will
continue in operation.
6 Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
@ enquiring of Directors, the Audit and Risk Committee, internal audit and compliance officers and inspection of policy documentation as to the
Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for
“whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud;
@ reading Board and all relevant Committee minutes;
@ considering remuneration incentive schemes (primarily the annual incentive plan) and performance targets for management and Directors;
including the underlying profit from operations targets;
@ using analytical procedures to identify any unusual or unexpected relationships; and
@ using our own forensic specialists to assist us in identifying fraud risks based on discussions of the circumstances of the Group and
the Company.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.
This included communication from the Group audit team to all in-scope component audit teams of relevant fraud risks identified at the Group
level and requesting all component audit teams to report to the Group audit team any instances of fraud that could give rise to a material
misstatement at the Group level.
Balfour Beatty plc Annual Report and Accounts 2023 177
Financial statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BALFOUR BEATTY PLC CONTINUED
6 Fraud and breaches of laws and regulations – ability to detect continued
Identifying and responding to risks of material misstatement due to fraud continued
As required by auditing standards, and taking into account possible pressures to achieve bonus targets and meet profit targets and our overall
knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk of
fraudulent revenue recognition, in particular:
@ the risk that Group and component management may be in a position to make inappropriate accounting entries; and
@ the risk of bias in accounting estimates such as the forecast costs and the recognition of variable consideration in relation to the Construction
Services segment revenue.
Further detail in respect of the fraud risk related to revenue recognition in the Construction Services segment, including estimation of forecast
costs and variable consideration, is set out in the Contract Accounting key audit matter disclosures in section 2 of this report.
However, on this audit we do not believe there is a fraud risk related to revenue recognition in the Support Services segment due to the size of
its revenue and the nature of contracts operated in this segment. We also do not believe there is a fraud risk related to revenue recognition in
the Infrastructure Investments segment based on the contractual nature of the segment’s revenue with no significant judgement or estimation
required in recognising revenue.
We did not identify any additional fraud risks.
We performed procedures including:
@ identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified
entries to supporting documentation. These included those posted by senior finance management or Directors and those posted to unusual
accounts; and
@ assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material misstatement related to compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our
general commercial and sector experience, through discussion with the Directors and other management (as required by auditing standards),
and from inspection of the Group’s regulatory and legal correspondence and discussed with the Directors and other management the policies
and procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the
audit. This included communication from the Group audit team to component audit teams of relevant laws and regulations identified at the
Group level, and a request for component auditors to report to the Group audit team any instances of non-compliance with laws and
regulations that could give rise to a material misstatement at the Group level.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation
(including related companies legislation), distributable profits legislation, pensions legislation and taxation legislation, and we assessed the
extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s license to
operate. We identified the following areas as those most likely to have such an effect: health and safety, data protection laws, anti-bribery,
employment law, environmental law, building safety, contract legislation and certain aspects of company legislation recognising the nature of
the Group’s activities. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to
enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of
operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the
financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement.
We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
178
Balfour Beatty plc Annual Report and Accounts 2023
7 We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we
have not identified material misstatements in the other information.
Strategic report and Directors’ report
Based solely on our work on the other information:
@ we have not identified material misstatements in the strategic report and the Directors’ report;
@ in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
@ in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of
emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
@ the Directors’ confirmation within the viability statement on page 104 that they have carried out a robust assessment of the emerging and
principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
@ the Emerging Risks and Principal Risks disclosures on pages 95-103 describing these risks and how emerging risks are identified, and
explaining how they are being managed and mitigated; and
@ the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done
so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement, set out on page 104 under the Listing Rules. Based on the above procedures, we have
concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance
disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit
knowledge:
@ the Directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business model
and strategy;
@ the section of the Annual Report describing the work of the Audit and Risk Committee, including the significant issues that the Audit and
Risk Committee considered in relation to the financial statements, and how these issues were addressed; and
@ the section of the Annual Report that describes the review of the effectiveness of the Group’s risk management and internal control
systems.
We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.
Balfour Beatty plc Annual Report and Accounts 2023 179
Financial statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BALFOUR BEATTY PLC CONTINUED
8 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
@ adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
@ the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
@ certain disclosures of Directors’ remuneration specified by law are not made; or
@ we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
9 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 172, the Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group’s and parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to
do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance but does not
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and
Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has been prepared
in accordance with those requirements.
10 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Mike Barradell (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
12 March 2024
180
Balfour Beatty plc Annual Report and Accounts 2023
GROUP INCOME STATEMENT
For the year ended 31 December 2023
Revenue including share of joint ventures
and associates
Share of revenue of joint ventures and associates
Group revenue
Cost of sales
Gross profit/(loss)
Gain on disposals of interests in investments
Amortisation of acquired intangible assets
Other net operating (expenses)/income
Group operating profit/(loss)
Share of results of joint ventures and
associates excluding gain on disposals
of interests in investments
Gain on disposals of interests in investments
Share of results of joint ventures and associates
Profit/(loss) from operations
Investment income
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Attributable to
Equity holders
Non-controlling interests
Profit/(loss) for the year
1 Before non-underlying items (Notes 2.10 and 10).
Earnings per share
– basic
– diluted
Dividends per share proposed for the year
Notes
19.2
4
34.2/34.3
15
34.2/34.3
19.2
6
8
9
11
Underlying
items 1
£m
9,595
(1,602)
7,993
(7,581)
412
24
–
(261)
175
51
2
53
228
82
(49)
261
(56)
205
208
(3)
205
2023
Non-
underlying
items
(Note 10)
£m
Total
£m
Underlying
items 1
£m
2022
Non-
underlying
items
(Note 10)
£m
–
–
–
(12)
(12)
–
(5)
–
(17)
–
–
–
(17)
–
–
(17)
6
(11)
(11)
–
(11)
9,595
(1,602)
7,993
(7,593)
400
24
(5)
(261)
158
51
2
53
211
82
(49)
244
(50)
194
197
(3)
194
8,931
(1,302)
7,629
(7,202)
427
–
–
(253)
174
35
70
105
279
50
(38)
291
(1)
290
291
(1)
290
Notes
12
12
13
–
–
–
–
–
–
(6)
2
(4)
–
–
–
(4)
–
–
(4)
1
(3)
(3)
–
(3)
2023
Pence
35.3
34.8
11.5
Total
£m
8,931
(1,302)
7,629
(7,202)
427
–
(6)
(251)
170
35
70
105
275
50
(38)
287
–
287
288
(1)
287
2022
Pence
46.9
46.3
10.5
Balfour Beatty plc Annual Report and Accounts 2023 181
Financial statements
Non-underlying items
Non-underlying items in 2023 comprised the amortisation of acquired
intangible assets of £5m (2022: £6m) and a £12m increase in a
provision recognised for rectification works to be carried out on a
development in London, which was initially established in 2021
within non-underlying.
Within non-underlying tax there was a £6m credit (2022: £1m).
Net finance income
Net finance income of £33m increased from £12m in 2022. The
increase was primarily driven by higher interest income on cash
deposits of £33m (2022: £8m) and a higher net pension finance
income of £12m (2022: £5m). Against these items, there was a net
impairment recognised on the Group’s subordinated debt and accrued
interest receivable from joint ventures and associates of £8m
compared to £2m in 2022.
Taxation
The Group’s underlying profit before tax from subsidiaries of £208m
(2022: £186m) resulted in an underlying tax charge of £56m (2022:
£1m). The tax charge for 2022 included a £56m credit relating to the
recognition of additional UK tax losses.
Earnings per share
Basic earnings per share were 35.3p (2022: 46.9p). Underlying basic
earnings per share were 37.3p (2022: 47.5p).
GROUP INCOME STATEMENT CONTINUED
For the year ended 31 December 2023
Commentary on the Group income statement*
Total profit before taxation for 2023 was £244m (2022: £287m),
which is inclusive of a non-underlying loss before tax of £17m
(2022: £4m). The total profit after tax was £194m (2022: £287m).
Background
The Group income statement includes the majority of the Group’s
income and expenses for the year with the remainder being recorded
within the Group statement of comprehensive income. The Group’s
income statement is presented showing the Group’s underlying and
non-underlying results separately on the face of the income
statement to assist in understanding the underlying financial
performance achieved by the Group.
The income statement shows the revenue and results of continuing
operations. There were no discontinued operations in either year.
Revenue
Revenue from operations including the Group’s share of joint ventures
and associates increased by 7% to £9,595m (2022: £8,931m), largely
driven by an increase in Construction Services.
Share of results of joint ventures and associates
Joint ventures and associates are those entities over which the Group
exercises joint control or has significant influence and whose results
are generally incorporated using the equity method whereby the
Group’s share of the post-tax results of joint ventures and associates
is included in the Group’s operating profit.
The Group’s underlying profit generated from its share of joint
ventures and associates decreased to £53m (2022: £105m) primarily
due to fewer disposals of Infrastructure Investments assets in 2023.
The Group disposed of one asset (Moretti Apartments) resulting in an
underlying gain of £2m. Refer to Note 34.2.
Underlying profit from operations
The underlying profit from operations for the year decreased to
£228m (2022: £279m), primarily due to the reduction in profitability
from the Group’s share of its results from joint ventures and associates.
Group underlying profit was in line with the previous year at £175m
(2022: £174m).
* The commentary forms part of the Chief Financial Officer’s review on pages 88 to 90 and does not form part of the financial statements.
182
Balfour Beatty plc Annual Report and Accounts 2023
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
Profit for the year
Other comprehensive (loss)/income for the year
Items which will not subsequently be reclassified
to the income statement
Actuarial (losses)/gains on retirement benefit
assets/liabilities
Fair value revaluations of investments in mutual
funds measured at fair value through OCI+
Tax on above
Items which will subsequently be reclassified to
the income statement
Currency translation differences
Fair value revaluations – PPP financial assets
– cash flow hedges
– investments in
mutual funds
measured at fair
value through OCI
Notes
32.1
32.1
32.1
32.1
32.1
32.1
32.1
Recycling of revaluation reserves to the
income statement on disposal^
Tax on above
34.2/34.3
32.1
Total other comprehensive (loss)/income
for the year
Total comprehensive income/(loss) for the year
Attributable to
Equity holders
Non-controlling interests
Total comprehensive income for the year
32.1
32.1
2023
Share of joint
ventures and
associates
£m
53
Group
£m
141
(197)
1
49
(147)
(17)
–
–
–
–
(1)
(18)
(165)
(24)
(1)
–
–
(1)
(13)
20
2
–
(3)
(5)
1
–
53
Total
£m
194
(198)
1
49
(148)
(30)
20
2
–
(3)
(6)
(17)
(165)
29
32
(3)
29
2022
Share of joint
ventures and
associates
£m
105
Group
£m
182
(52)
–
20
(32)
32
(3)
3
(5)
–
(1)
26
(6)
176
1
–
–
1
23
(124)
29
–
(3)
25
(50)
(49)
56
Total
£m
287
(51)
–
20
(31)
55
(127)
32
(5)
(3)
24
(24)
(55)
232
233
(1)
232
^ Recycling of revaluation reserves to the income statement on disposal has no associated tax effect.
+ Fair value revaluations of investments in mutual funds are measured at fair value through OCI and are not reclassified to the income statement on disposal. Prior year comparatives have not been re-presented.
Commentary on Group statement
of comprehensive income*
Total comprehensive income for 2023 was £29m comprising
a total profit after tax of £194m and other comprehensive loss
after tax of £165m.
Background
The Group statement of comprehensive income is presented on a
total Group basis. Other comprehensive income (OCI) is categorised
into items which will affect the profit and loss of the Group in
subsequent periods when the gain or loss is realised and those
which will not be recycled into the income statement.
Items which will not subsequently be reclassified
to the income statement
Actuarial movements on retirement benefit assets/liabilities are
increases or decreases in the present value of the pension balances
because of:
@ differences between the previous actuarial assumptions and what
has actually occurred; or
@ changes in actuarial assumptions used to value the obligations.
Actuarial losses for the Group (excluding joint ventures and associates)
totalled £197m in 2023 compared to a £52m loss in 2022. Refer to
Note 30.
Items which will subsequently be reclassified to the
income statement
Currency translation differences
The Group operates in a number of countries with different local
currencies. Currency translation differences arise on translation of the
balance sheet and results from the local functional currency into the
Group’s presentational currency, sterling.
Fair value revaluations – PPP financial assets
Assets constructed by PPP concession companies are classified
principally as financial assets measured at fair value through OCI.
In the operational phase fair value is determined by discounting the
future cash flows allocated to the financial asset using discount rates
based on long-term gilt rates adjusted for the risk levels associated
with the assets, with market-related fair value movements recognised
in OCI. During the year, gilt rates have decreased resulting in fair
value gains including joint ventures and associates of £20m being
taken through OCI (2022: £127m losses).
Fair value revaluations – cash flow hedges
Cash flow hedges are principally interest rate swaps to manage the
interest rate and inflation rate risks in Infrastructure Investments’
subsidiary, joint venture and associate companies which are exposed
by their long-term contractual agreements. The fair value of derivatives
changes in response to prevailing market conditions. During the year,
SONIA movements resulted in fair value gains on the interest rate
swaps of £nil (2022: £3m) within the Group’s subsidiaries and £2m
(2022: £29m) within the Group’s joint ventures and associates being
recognised in OCI.
Recycling of revaluation reserves to the income statement on disposal
Fair value gains and losses and currency translation differences
recognised in OCI are transferred to the income statement upon
disposal of the asset. £3m of gains (2022: £3m) were recycled to the
income statement from OCI and included in the gain on disposal.
There is no associated tax on the amounts recycled to the
income statement.
* The commentary forms part of the Chief Financial Officer’s review on pages 88 to 90 and does not form part of the financial statements.
Balfour Beatty plc Annual Report and Accounts 2023 183
Financial statements
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
At 1 January 2022
Total comprehensive income/(loss) for the year
Ordinary dividends
Joint ventures’ and associates’ dividends
Non-controlling interests’ dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
At 31 December 2022
Total comprehensive income/(loss) for the year
Ordinary dividends
Joint ventures’ and associates’ dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
Capital contribution
At 31 December 2023
Share of joint
ventures’
and
associates’
reserves
(Note 19.6)
£m
72
56
–
(148)
–
–
–
–
(20)
53
–
(60)
–
–
–
–
(27)
Capital
redemption
reserve
£m
1
–
–
–
–
–
51
–
52
–
–
–
–
22
–
–
74
Other
reserves µ
(Note 32.1)
£m
144
25
–
–
–
–
–
1
170
(17)
–
–
–
–
4
–
157
Share
premium
account
£m
176
–
–
–
–
–
–
–
176
–
–
–
–
–
–
–
176
Notes
32.1
13
19.1
31.1
31.1
32.1
13
19.1
31.1
31.1
Called-up
share capital
£m
345
–
–
–
–
–
(51)
–
294
–
–
–
–
(22)
–
–
272
Retained
profits
£m
631
152
(58)
148
–
(151)
–
(16)
706
(4)
(58)
60
(151)
–
(7)
–
546
Non-
controlling
interests
£m
7
(1)
–
–
(1)
–
–
–
5
(3)
–
–
–
–
–
8
10
Total
£m
1,376
232
(58)
–
(1)
(151)
–
(15)
1,383
29
(58)
–
(151)
–
(3)
8
1,208
µ
+
Other reserves include £22m of special reserve (2022: £22m).
Movements relating to share-based payments include £nil tax credit (2022: £2m) recognised directly within retained profits.
Commentary on Group statement of changes
in equity*
Total equity was £1,208m at 31 December 2023.
Background
The Group statement of changes in equity includes the total
comprehensive income/(loss) attributable to equity holders of
the Company and non-controlling interests and also discloses
transactions which have been recognised directly in equity and
not through the income statement.
Dividends
The Board is recommending a final dividend of 8.0p. Dividends paid in
the year comprised £39m for the final 2022 dividend 7.0p and £19m
for the interim 2023 dividend 3.5p.
Joint ventures’ and associates’ dividends
Dividends of £60m (2022: £148m) were received in the year from
joint ventures and associates (JVA), resulting in a transfer of this
amount between JVA reserves and Group retained profits.
Purchase of treasury shares
In 2023 the Company commenced the third phase of its share
buyback programme, which completed on 15 December 2023.
The Company purchased 43.3m (2022: 52.0m) shares for a total
consideration of £150m (2022: £150m) and held these in treasury
with no voting rights. The purchase of these shares, together with
associated fees and stamp duty amounting to £1m (2022: £1m),
utilised £151m (2022: £151m) of the Company’s distributable profits.
Cancellation of ordinary shares
On 20 December 2023, the Company cancelled the 43.3m treasury
shares purchased through the 2023 phase of its share buyback
programme (2022: 102.3m). This resulted in a decrease in called-up
share capital of £22m and a corresponding increase in the capital
redemption reserve (2022: £51m).
Reserves
Other reserves comprise: hedging reserves £(5)m (2022: £(4)m);
PPP financial assets revaluation reserve £1m (2022: £1m); currency
translation reserve £115m (2022: £132m); special reserve £22m
(2022: £22m); and other reserves £24m (2022: £19m ).
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
At 1 January 2022
Total comprehensive income for the year
Ordinary dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
At 31 December 2022
Total comprehensive income for the year
Ordinary dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
At 31 December 2023
Notes
32.2
13
31.1
31.1
32.2
13
31.1
31.1
Called-up
share capital
£m
345
–
–
–
(51)
–
294
–
–
–
(22)
–
272
Share
premium
account
£m
176
–
–
–
–
–
176
–
–
–
–
–
176
Capital
redemption
reserve
£m
1
–
–
–
51
–
52
–
–
–
22
–
74
Other
reserves
(Note 32.2) ∆
£m
128
–
–
–
–
8
136
1
–
–
–
12
149
Retained
profits
£m
676
175
(58)
(151)
–
(24)
618
265
(58)
(151)
–
(15)
659
Total
£m
1,326
175
(58)
(151)
–
(16)
1,276
266
(58)
(151)
–
(3)
1,330
∆ Other reserves include £22m of special reserve (2022: £22m).
+ Movements relating to share-based payments include £nil tax credit (2022: £1m) recognised directly within retained profits.
* The commentary forms part of the Chief Financial Officer’s review on pages 88 to 90 and does not form part of the financial statements.
184
Balfour Beatty plc Annual Report and Accounts 2023
BALANCE SHEETS
At 31 December 2023
Non-current assets
Intangible assets
– goodwill
– other
Property, plant and equipment
Right-of-use assets
Investment properties
Investments in joint ventures and associates
Investments
PPP financial assets
Trade and other receivables
Retirement benefit assets
Deferred tax assets
Current assets
Inventories
Contract assets
Trade and other receivables
Cash and cash equivalents
– infrastructure investments
– other
Current tax receivable
Derivative financial instruments
Total assets
Current liabilities
Contract liabilities
Trade and other payables
Provisions
Borrowings
Lease liabilities
Current tax payable
Non-current liabilities
Contract liabilities
Trade and other payables
Provisions
Borrowings
– non-recourse loans
– other
– non-recourse loans
– other
Lease liabilities
Retirement benefit liabilities
Deferred tax liabilities
Derivative financial instruments
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
Capital redemption reserve
Share of joint ventures’ and associates’ reserves
Other reserves
Retained profits
Equity attributable to equity holders of the Parent
Non-controlling interests
Total equity
On behalf of the Board
Leo Quinn
Director
12 March 2024
Philip Harrison
Director
Group
2023
£m
Notes
14
15
16
17
18
19
20
21
24
30
29
22
23
24
27
27
40
23
25
26
27
27
28
23
25
26
27
27
28
30
29
40
31
32
32
32
32
32
32
845
288
141
135
66
389
28
24
308
104
188
2,516
124
300
894
306
1,108
16
1
2,749
5,265
(600)
(1,734)
(216)
(9)
(104)
(50)
(6)
(2,719)
(2)
(122)
(201)
(561)
(162)
(93)
(35)
(160)
(2)
(1,338)
(4,057)
1,208
272
176
74
(27)
157
546
1,198
10
1,208
2022
£m
876
292
104
127
27
426
40
26
286
262
176
2,642
114
300
881
19
1,160
6
1
2,481
5,123
(663)
(1,595)
(204)
(30)
(173)
(49)
(8)
(2,722)
(2)
(141)
(197)
(231)
(172)
(83)
(39)
(152)
(1)
(1,018)
(3,740)
1,383
294
176
52
(20)
170
706
1,378
5
1,383
Company
2023
£m
–
–
–
–
–
–
1,745
–
283
–
5
2,033
–
–
1
–
368
13
–
382
2,415
–
(591)
–
–
(58)
–
–
(649)
–
(274)
–
–
(162)
–
–
–
–
(436)
(1,085)
1,330
272
176
74
–
149
659
1,330
–
1,330
2022
£m
–
–
–
–
–
–
1,733
–
2
–
2
1,737
–
–
1,560
–
424
–
–
1,984
3,721
–
(2,052)
–
–
(218)
–
–
(2,270)
–
(3)
–
–
(172)
–
–
–
–
(175)
(2,445)
1,276
294
176
52
–
136
618
1,276
–
1,276
Balfour Beatty plc Annual Report and Accounts 2023 185
Financial statements
Retirement benefit assets and liabilities
The Group’s balance sheet includes net retirement benefit assets
of £69m (2022: £223m) representing net surpluses in the Group’s
pension schemes, as measured on an IAS 19 basis. The movement
in pension surplus in the year is primarily due to actuarial losses of
£197m (2022: £52m losses), partially offset by ongoing deficit
funding of £25m (2022: £41m).
Any surplus of deficit contributions would be recoverable by way of a
refund as, according to the relevant trust deed and rules documents,
the Group has the unconditional right to the surplus and controls the
run-off of the benefit obligations once all other obligations of the
schemes have been settled.
Other
In addition to the liabilities on the balance sheet, in the normal course
of its business, the Group arranges for financial institutions to provide
customers with guarantees in connection with its contracting activities,
commonly referred to as bonds. These bonds provide a customer
with a level of financial protection in the event that a contractor fails
to meet its commitments under the terms of a contract. They are
customary or mandatory in many of the markets in which the Group
operates. In return for issuing the bonds, the financial institutions
receive a fee and a counter-indemnity from the Company. As at
31 December 2023, contract bonds in issue by financial institutions
covered £4.3bn (2022: £4.3bn) of the contract commitments of
the Group.
Equity commitments
During 2023, the Group invested £31m (2022: £30m) in a combination
of equity and shareholder loans to Infrastructure Investments’ project
companies and at the end of the year had committed to provide a
further £90m from 2024 onwards, inclusive of £35m expected for
projects at preferred bidder stage. £24m of this is expected to be
invested in 2024, as disclosed in Note 41(f).
* The commentary forms part of the Chief Financial Officer’s review on pages 88 to 90
and does not form part of the financial statements.
BALANCE SHEETS CONTINUED
At 31 December 2023
Commentary on the Group balance sheet*
Total assets of £5.3bn were 3% higher than last year and total
liabilities of £4.1bn increased by 8%. Net assets decreased to
£1.2bn primarily driven by the Group’s actuarial losses impacting
the Group’s net retirement benefit assets.
Background
The Group’s balance sheet shows the Group’s assets and liabilities as
at 31 December 2023 in accordance with IAS 1 Presentation of
Financial Statements.
Goodwill
The goodwill on the Group’s balance sheet at 31 December 2023
decreased to £845m (2022: £876m), solely due to foreign currency
movements.
Investments in joint ventures and associates
Investments in joint ventures and associates have decreased by
£37m to £389m. The decrease was primarily driven by dividends in
the year of £60m and the disposal of Gloucester Waste of £31m
offset by income recognised in the year of £53m.
Working capital
Net movements in working capital are discussed in the statement of
cash flows commentary on page 188.
Borrowings
Borrowings excluding non-recourse loans
As at 31 December 2023, the Group had £505m of undrawn
committed bank facilities, comprising a £475m sustainably linked
revolving credit facility (RCF) and an additional bilateral committed
bank facility of £30m. The purpose of these facilities is to provide
liquidity to support Balfour Beatty’s ongoing activities.
In June 2023 the Group refinanced its £375m main RCF facility,
which was due to mature in October 2024, with a new £475m
sustainably linked RCF provided by a set of relationship banks that
has an initial maturity of June 2027. At the first anniversary of the
facility (June 2024), the Group has the option to extend the maturity
of the facility to June 2028, with the consent of the lending banks.
The facility was undrawn at 31 December 2023.
In September 2023, the drawdown under the £30m bilateral
committed facility which is also a SLL was repaid and the facility was
undrawn at 31 December 2023. This facility has an initial maturity of
December 2024, but the Group holds an option to extend the maturity
to December 2027.
The Group has US$208m of USPP notes outstanding, with the next
maturity being US$50m due in March 2025. The remaining USPP
notes mature between 2027 and 2032, with US$35m of notes
maturing in 2027, US$80m maturing in 2029 and US$43m maturing
in 2032, demonstrating a smooth debt maturity profile with limited
refinancing risk.
Non-recourse loans
In addition, the Group has non-recourse facilities in companies
engaged in certain infrastructure concession projects.
At 31 December 2023, the Group’s share of these non-recourse net
borrowings amounted to £1,362m (2022: £1,490m), comprising
£1,098m (2022: £1,248m) in relation to joint ventures and associates
as disclosed in Note 19.2 and £264m (2022: £242m) on the Group
balance sheet in relation to subsidiaries as disclosed in Note 27.
186
Balfour Beatty plc Annual Report and Accounts 2023
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
Cash flows from operating activities
Cash from operations
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Dividends received from:
– joint ventures and associates – infrastructure investments
– joint ventures and associates – other
– other investments
Interest received – infrastructure investments – joint ventures
Interest received subsidiaries:
– infrastructure investments
– other
Acquisition of businesses
Purchases of:
– intangible assets – infrastructure investments
– property, plant and equipment
– investment properties
– other investments
Investments in and long-term loans to joint ventures and associates
Return of equity from joint ventures and associates
PPP financial assets cash expenditure
PPP financial assets cash receipts
Disposals of:
– investments in joint ventures – infrastructure investments
– investments in joint ventures – other
– property, plant and equipment – other
– other investments
Net cash from investing activities
Cash flows used in financing activities
Purchase of ordinary shares
Purchase of treasury shares
Proceeds from new loans relating to:
– infrastructure investments assets
– other
Repayments of loans relating to:
– infrastructure investments assets
– other
Repayment of lease liabilities
Ordinary dividends paid
Other dividends paid – non-controlling interests
Capital contribution – non-controlling interests
Interest paid – infrastructure investments
Interest paid – other
Net cash used in financing activities
Net increase in cash and cash equivalents
Effects of exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
33.1
19.5
19.5
20
19.5
34.1
15
16
18
20
19.5
19.5
21
21
19.5
19.5
20
32.3
31.1
33.3
33.3
33.3
33.3
28
13
33.2
2023
£m
293
(8)
285
24
36
3
7
4
33
–
(30)
(66)
(42)
(2)
(14)
4
(2)
6
56
–
4
12
33
(18)
(151)
336
28
(8)
(197)
(57)
(58)
–
8
(11)
(30)
(158)
160
(29)
1,179
1,310
2022
£m
185
(17)
168
114
34
4
10
7
–
(3)
(1)
(31)
–
(7)
(29)
34
(2)
5
–
1
8
2
146
(25)
(151)
8
130
(7)
–
(52)
(58)
(1)
–
(9)
(24)
(189)
125
55
999
1,179
Balfour Beatty plc Annual Report and Accounts 2023 187
Financial statements
GROUP STATEMENT OF CASH FLOWS CONTINUED
For the year ended 31 December 2023
Commentary on the Group statement of cash flows*
Cash and cash equivalents increased during the year to £1,310m.
The Group generated cash from operating activities in the year
of £285m compared to £168m in the prior year.
Background
The Group statement of cash flows shows the cash flows from
operating, investing and financing activities during the year.
Working capital
Working capital includes: inventories; contract assets and liabilities;
trade and other receivables; trade and other payables; and provisions.
Where the net working capital balance is in an asset position, i.e. the
inventories and receivables balances are greater than the payables
and provisions, this is referred to as unfavourable/positive working
capital. Where this is not the case, this is referred to as favourable/
negative working capital.
Cash used in operations
Cash inflow from operations of £293m (2022: £185m) included a
profit from operations of £211m (2022: £275m), a working capital
inflow of £63m (2022: £54m outflow) and the following significant
adjustment items: share of results of joint ventures and associates
£53m (2022: £105m); depreciation and amortisation charges £114m
(2022: £111m); gain on disposal of interests in investments of £24m
(2022: £nil); and pension payments including deficit funding of £28m
(2022: £43m).
Working capital movements
The movement of the individual working capital balances on the
balance sheet will not be reflective of the underlying movement of
working capital due to the balance sheet being affected by foreign
currency movements and disposals.
Working capital movements are disclosed in Note 33.1.
Changes in the Group’s working capital position during the year resulted
in a cash inflow of £63m (2022: £54m outflow). The increase in the
negative working capital position was driven by a spike in the final
weeks of December. The inflow reported for 2023 is not reflective of
the trend observed throughout the year of average negative working
capital reducing.
Cash flows from investing activities
The Group received dividends of £60m (2022: £148m) from joint
ventures and associates during the year.
The Group continued to invest in Infrastructure Investments assets,
acquiring Quarters at Tallahassee as an investment property for
£42m. Construction at West Slope student accommodation project
for the University of Sussex also commenced in December 2023,
incurring £30m of capitalised costs in other intangible assets in
the year.
The Group also continued to invest in its Infrastructure Investments
joint ventures and associates, contributing £14m (2022: £29m) in
the year.
The Group disposed of two infrastructure investment assets, Moretti
Apartments and Gloucester Waste, earning proceeds from disposal
of £61m. The £56m Gloucester Waste proceeds are included within
disposals of investments in joint ventures and the £5m Moretti
proceeds are included within dividends received and return of equity
from joint ventures and associates.
Cash flows used in financing activities
On 15 December 2023 the Company completed its 2023 share
buyback programme resulting in 43.3m (2022: 52.0m) shares
purchased for a total consideration of £151m (2022: £151m), including
associated fees and stamp duty amounting to £1m (2022: £1m).
In March 2023, the Group used the funds raised through the issue in
June 2022 of US$158m of new USPP notes and a US$36m (£28m)
drawdown under its new £30m bilateral committed facility to repay
US$209m (£169m) of its USPP notes as they matured. The US$36m
(£28m) drawdown was repaid in September 2023.
The Group has total committed bank facilities of £505m, including
the £475m sustainably linked revolving credit facility (RCF) signed
in June 2023. Under the terms of these sustainability linked loan
(SLL) facilities, the Group is incentivised to deliver annual measurable
performance improvement in three key areas: Carbon Emissions,
Social Value generation and an independent Environment, Social and
Governance (ESG) rating score – these areas of performance and the
associated metrics are to be reviewed and updated in 2024. All
committed bank facilities were undrawn at 31 December 2023.
Interest payments amounted to £41m (2022: £33m) during the year,
of which £11m (2022: £9m) related to infrastructure investments,
£12m (2022: £15m) related to the USPP, £6m (2022: £6m) related
to the interest paid on lease liabilities and £12m (2022: £3m) related
to other finance charges.
* The commentary forms part of the Chief Financial Officer’s review on pages 88 to 90
and does not form part of the financial statements.
188
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of accounting
Going concern
The Directors consider it reasonable to assume that the Group has
adequate resources to continue for the foreseeable future and, for
this reason, have continued to adopt the going concern basis in
preparing the financial statements.
The key financial risk factors for the Group remain largely unchanged.
The Group’s principal risks and the consequent impact these might
have on the Group as well as mitigations that are in place are detailed
on pages 96 to 103.
The Group’s US private placement and committed bank facilities
contain certain financial covenants, such as the ratio of the Group’s
EBITDA to its net debt which needs to be less than 3.0 and the ratio
of its EBITA to net borrowing costs which needs to be in excess of
3.0. These covenants are tested on a rolling 12-month basis as at the
June and December reporting dates. At 31 December 2023, both
these covenants were passed as the Group had net cash and net
interest income from a covenant test perspective.
The Directors have carried out an assessment of the Group’s ability
to continue as a going concern for the period of at least 12 months
from the date of approval of the financial statements. This assessment
has involved the review of medium-term cash forecasts of each of
the Group’s operations. The Directors have also considered the
strength of the Group’s order book which amounted to £16.5bn at
31 December 2023 and will provide a pipeline of secured work over
the going concern assessment period. These base case projections
indicate that the headroom provided by the Group’s strong cash
position and the debt facilities currently in place is adequate to
support the Group over the going concern assessment period.
At 31 December 2023, the Group’s only debt, other than non-recourse
borrowings ring-fenced within certain concession companies,
comprised US private placement (USPP) notes. Of the USPP notes
issued in 2013, US$209m matured in March 2023 and the remaining
US$50m will mature in March 2025. The Group raised US$158m in
June 2022 through the issue of new USPP notes which will mature in
tranches in 2027, 2029 and 2032. In December 2022, the Group
secured a new £30m bilateral committed facility which was undrawn at
31 December 2023 and expires in December 2024; the Group retains
an option to extend the maturity of the facility to December 2027.
In March 2023, the funds raised through the new USPP notes
issuance and the new bilateral committed facility were utilised towards
repayment of the US$209m USPP notes. The US$36m drawn under
the bilateral committed facility was repaid in September 2023.
The Group’s £475m committed sustainability linked bank facility which
was signed in June 2023, remained undrawn at 31 December 2023
and remains fully available to the Group until June 2027. At the first
anniversary of the facility (June 2024), the Group has an option to
extend the maturity of the facility to June 2028, with the consent
of the lending banks.
The Directors have stress-tested the Group’s base case projections of
both cash and profit against key sensitivities which could materialise
as a result of adverse changes in the economic environment including
a deterioration in commercial or operational conditions. The Group
has sensitised its projections against severe but plausible downside
scenarios which include:
@ elimination of a portion of unsecured work assumed within the
Group’s base case projections and a delay of six months for any
awarded but not yet contracted work;
@ a deterioration of contract judgements and restriction of a portion
of the Group’s margins; and
@ delay in the disposal of Investments assets by 12 months.
In the severe but plausible downside scenarios modelled, the Group
continues to retain sufficient headroom on liquidity throughout the
going concern period. Through these downside scenarios, the Group
is still expected to be in a net cash position and to remain within its
banking covenants through the going concern assessment period.
Based on the above and having made appropriate enquiries, the
Directors consider it reasonable to assume that the Group and the
Company have adequate resources to continue for the going concern
period and, for this reason, have continued to adopt the going
concern basis in preparing the financial statements.
Consideration of climate change
In preparing the financial statements, the Directors have considered
the impact of climate change, particularly in the context of the risks
identified in the TCFD disclosure on pages 105 to 115. There has
been no material impact identified on the financial reporting
judgements and estimates. In particular, the Directors considered
the impact of climate change in respect of the following areas:
@ contract judgements made on the Group’s Construction Services
and Support Services contracts;
@ going concern and viability of the Group over the next three years;
@ cash flow forecasts used in the impairment assessments of
non-current assets including the Group’s intangible assets such
as customer contracts and goodwill;
@ cash flow forecasts used in the impairment assessments of the
Group’s infrastructure investments assets;
@ carrying value and useful economic lives of property, plant and
equipment; and
@ the valuation of assets held within the Group’s pension schemes.
As current legislation stands, there is currently no material medium-
term impact expected from climate change due to the contractual
mechanisms and insurance arrangements in place. The Directors are
however aware of the ever-changing risks attached to climate change
and will regularly assess these risks against judgements and
estimates made in preparation of the Group’s financial statements.
Basis of preparation
The annual financial statements have been prepared in accordance
with UK-adopted international accounting standards and in conformity
with the requirements of the Companies Act 2006 (the Act).
The financial statements have been prepared under the historical cost
convention, except as described under Note 2.26. The functional and
presentational currency of the Company and the presentational
currency of the Group is sterling.
The separate financial statements of the Company are presented
as required by the Act and have been prepared in accordance with
FRS 101 Reduced Disclosure Framework. In preparing these financial
statements, the Company applies the recognition, measurement and
disclosure requirements of UK-adopted international accounting
standards, but makes amendments where necessary in order to
comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken
As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management,
presentation of a cash flow statement, related party transactions and
comparative information. Where required, equivalent disclosures are
given in the consolidated financial statements.
In addition to the application of FRS 101, the Company has taken
advantage of Section 408 of the Act and consequently its statement
of comprehensive income (including the profit and loss account) is not
presented as part of these financial statements.
Balfour Beatty plc Annual Report and Accounts 2023 189
Financial statements 2 Principal accounting policies
2.1 Accounting standards
Adoption of new and revised standards
The following accounting standards, interpretations and amendments
have been adopted by the Group in the year ended 31 December 2023:
@ IFRS 17 Insurance Contracts
@ Amendments to the following standards:
@ IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting Policies
@ IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates
@ IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
@ IAS 12 Income Taxes: International Tax Reform – Pillar Two
Model Rules
@ IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and
IFRS 9 – Comparative Information
These new and amended standards did not have a material effect on
the Group or the Company.
Accounting standards not yet adopted by the Group
The following accounting standards, interpretations and amendments
have been issued by the IASB but had either not been adopted by the
UK or were not yet effective in the UK at 31 December 2023:
@ Amendments to the following standards:
@ IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current
@ IAS 1 Presentation of Financial Statements: Non-current
Liabilities with Covenants
@ IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements
@ IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack
of Exchangeability
@ IFRS 16 Leases: Lease Liability in a Sale and Leaseback
The Directors do not expect the standards above to have a material
effect on the Group or the Company and have chosen not to adopt
any of the above standards and interpretations earlier than required.
2.2 Basis of consolidation
The Group financial statements include the results of the Company
and its subsidiaries, together with the Group’s share of the results of
joint ventures and associates, drawn up to 31 December each year.
a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls
an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity.
The results of subsidiaries are consolidated from the date that control
commences until the date that control ceases.
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group. On acquisition, the assets,
liabilities and contingent liabilities of a subsidiary are measured at
their fair values at the date of acquisition. Any excess of the fair value
of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost
of acquisition below the fair values of the identifiable net assets
acquired (discount on acquisition) is credited to the income statement
in the period of acquisition. The interest of non-controlling equity
holders is stated at the non-controlling equity holders’ proportion
of the fair value of the assets and liabilities recognised.
When the Group loses control of a subsidiary, the profit or loss on
disposal is calculated as the difference between: (i) the aggregate of
the fair value of the consideration received and the fair value of any
190
Balfour Beatty plc Annual Report and Accounts 2023
retained interest less direct costs of the transaction; and (ii) the
previous carrying amount of the assets (including goodwill) less
liabilities of the subsidiary. The fair value of any investment retained in
the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under IFRS 9
Financial Instruments or, when applicable, the cost on initial recognition
of an investment in an associate or jointly controlled entity. Amounts
previously recognised in other comprehensive income in relation to the
subsidiary are accounted for in the same manner as would be required
if the relevant assets or liabilities were disposed of (i.e. reclassified to
profit or loss or transferred directly to retained earnings).
Any acquisition or disposal which does not result in a change in control
is accounted for as a transaction between equity holders. The carrying
amounts of the controlling and non-controlling interests are adjusted
to reflect the changes in their relative interests in the subsidiary. Any
difference between the fair value of the consideration paid or received
and the amount by which the non-controlling interests are adjusted is
recognised directly in equity and attributed to the owners of the Parent.
Accounting policies of subsidiaries are adjusted where necessary to
ensure consistency with those used by the Group. All intra-Group
transactions, balances, income and expenses are eliminated on
consolidation.
b) Joint ventures and associates
Joint ventures are those entities over whose activities the Group has
joint control, whereby the Group has rights to the net assets of the
entity, rather than rights to its individual assets and obligations for its
individual liabilities.
Associates are those entities over whose financial and operating policies
the Group has significant influence, but not control or joint control.
The results, assets and liabilities of joint ventures and associates are
incorporated in the financial statements using the equity method of
accounting except when classified as held for sale. The equity return
from the military housing joint ventures of the Group is contractually
limited to a maximum level of return, beyond which the Group does
not share in any further return. Therefore the Group’s investment in
these projects is recognised at initial equity investment plus the value
of the Group’s accrued preferred return from the underlying projects.
Any excess of the fair value of the cost of acquisition over the Group’s
share of the fair values of the identifiable net assets of the joint
venture or associate entity at the date of acquisition is recognised as
goodwill. Any deficiency of the fair value of the cost of acquisition
below the Group’s share of the fair values of the identifiable net
assets of the joint venture or associate at the date of acquisition
(discount on acquisition) is credited to the income statement in the
period of acquisition.
Investments in joint ventures and associates are initially carried in the
balance sheet at cost (including goodwill arising on acquisition) and
adjusted by post-acquisition changes in the Group’s share of net
assets of the joint venture or associate, less any impairment in the
value of individual investments. Losses of joint ventures and
associates in excess of the Group’s interest in those joint ventures
and associates are only recognised to the extent that the Group is
contractually liable for, or has a constructive obligation to meet, the
obligations of the joint ventures and associates.
Unrealised gains and losses on transactions with joint ventures and
associates are eliminated to the extent of the Group’s interest in the
relevant joint venture or associate.
c) Joint operations
The Group’s share of the results, assets and liabilities of contracts
carried out in conjunction with another party are included under each
relevant heading in the income statement and balance sheet.
The results of a small number of joint operations are drawn up to
a date other than 31 December, typically in the last two weeks of
December. Adjustments are made for any significant transactions
between such date and 31 December.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2 Principal accounting policies continued
2.3 Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange
at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are translated at the rates of exchange at the
reporting date. Significant exchange rates used in the preparation of
these financial statements are shown in Note 3.
For the purpose of presenting consolidated financial statements, the
results of foreign subsidiaries, associates and joint venture entities are
translated at average rates of exchange for the year, unless the
exchange rates fluctuate significantly during that period, in which case
the exchange rates at the date of transactions are used. Assets and
liabilities are translated at the rates of exchange prevailing at the
reporting date. Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the rates of exchange at the reporting
date. Currency translation differences arising are transferred to the
Group’s foreign currency translation reserve and are recognised in the
income statement on disposal of the underlying investment.
In order to hedge its exposure to certain foreign exchange risks, the
Group may enter into forward foreign exchange contracts. Refer to
Note 2.26(b) for details of the Group’s accounting policies in respect of
such derivative financial instruments.
2.4 Revenue recognition
The Group recognises revenue when it transfers control over a
product or service to its customer. Revenue is measured based
on the consideration specified in a contract with a customer and
excludes amounts collected on behalf of third parties. Where
consideration is not specified within the contract and is therefore
subject to variability, the Group estimates the amount of
consideration to be received from its customer. The consideration
recognised is the amount which is highly probable not to result in a
significant reversal in future periods.
Where a modification to an existing contract occurs, the Group
assesses the nature of the modification and whether it represents a
separate performance obligation required to be satisfied by the Group
or whether it is a modification to the existing performance obligation.
The Group does not expect to have any contracts where the period
between the transfer of the promised goods or services to the customer
and payment by the customer exceeds one year. As a consequence, the
Group does not adjust its transaction price for the time value of money.
The Group’s activities are wide ranging, and as such, depending on
the nature of the product or service delivered and the timing of when
control is passed onto the customer, the Group will account for revenue
over time and at a point in time. Where revenue is measured over time,
the Group uses the input method to measure progress of delivery.
Revenue is recognised as follows:
@ revenue from construction and services activities is recognised
over time and the Group uses the input method to measure
progress of delivery;
@ revenue from manufacturing activities is recognised at a point in
time when title has passed to the customer; and
@ dividend income in the Parent Company is recognised when the
equity holders’ right to receive payment is established.
2.5 Construction and services contracts
When the outcome of individual contracts can be estimated reliably,
contract revenue is recognised by reference to the measure of progress
at the reporting date using the input method. Costs are recognised as
incurred and revenue is recognised on the basis of the proportion of total
costs at the reporting date to the estimated total costs of the contract.
Estimates of the final out-turn on each contract may include cost
contingencies to take account of the specific risks within each
contract that have been identified during the early stages of the
contract. The cost contingencies are reviewed on a regular basis
throughout the contract life and are adjusted where appropriate.
However, the nature of the risks on contracts are such that they often
cannot be resolved until the end of the project and therefore may not
reverse until the end of the project. The estimated final out-turns on
contracts are continuously reviewed, and in certain limited cases,
recoveries from insurers are assessed, and adjustments made
where necessary.
No margin is recognised until the outcome of the contract can
be estimated with reasonable certainty. Provision is made for all
known or expected losses on individual contracts once such losses
are foreseen.
Revenue in respect of variations to contracts and incentive payments
is recognised when there is an enforceable right to payment and it is
highly probable it will be agreed by the customer. Variable consideration
is assessed on a contract by contract basis according to the facts,
circumstances and terms of each project and only recognised to the
extent that it is highly probable not to significantly reverse in the future.
Revenue in respect of claims is recognised only if it is highly probable
not to reverse in future periods. Profit for the year includes the benefit
of claims settled in the year to the extent not previously recognised on
contracts completed in previous years.
2.6 Segmental reporting
The Group considers its Board of Directors to be the chief operating
decision maker and therefore the segmental disclosures provided in
Note 5 are aligned with the monthly reports provided to the Board
of Directors. The Group’s reporting segments are based on the types
of services provided. Operating segments with similar economic
characteristics have been aggregated into three reportable segments
which reflect the nature of the services provided by the Group.
A description of each reportable segment is provided in Note 5.
Further information on the business activities of each reportable
segment is set out on pages 196 to 201.
Operating segments are aggregated on the basis of the nature of the
services provided and the manner in which returns are earned by the
Group. Further information on the nature of services provided within
each segment is included in Note 4.
Working capital is the balance sheet measure reported to the chief
operating decision maker. The profitability measure used to assess
the performance of the Group is underlying profit from operations.
Segment results represent the contribution of the different segments after
the allocation of attributable corporate overheads. Transactions between
segments are conducted at arm’s-length market prices. Segment assets
and liabilities comprise those assets and liabilities directly attributable to
the segments. Corporate assets and liabilities include cash balances, bank
borrowings, tax balances and dividends payable. Non-recourse net
borrowings are directly attributable to Infrastructure Investments and
therefore not included within Corporate activities.
Major customers are defined as customers contributing more than
10% of the Group’s external revenue.
2.7 Pre-contract bid costs and recoveries
Pre-contract costs are expensed as incurred until preferred bidder
status is awarded at which point further costs are capitalised as there
is a high probability that the Group would be able to recover these
costs. Amounts subsequently recovered in respect of pre-contract
costs that have been written off before preferred bidder status was
awarded are recognised in full in the income statement when they are
received in cash.
2.8 Profit from operations
Profit from operations is stated after the Group’s share of the post-tax
results of equity accounted joint venture entities and associates, but
before investment income and finance costs.
Balfour Beatty plc Annual Report and Accounts 2023 191
Financial statements 2 Principal accounting policies continued
2.9 Investment income and finance costs
Interest income is accrued on a time basis using the effective interest
method by reference to the principal outstanding and the effective
interest rate, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to that
asset’s net carrying amount.
Finance costs of debt, including premiums payable on settlement
and direct issue costs, are charged to the income statement on an
accruals basis over the term of the instrument, using the effective
interest method. Finance costs also include interest cost on the
discount unwind of lease liabilities and impairment of loans to joint
ventures and associates and accrued interest thereon.
2.10 Non-underlying items
Non-underlying items are items of financial performance which the
Group believes should be presented separately on the face of the
income statement to assist in understanding the underlying financial
performance achieved by the Group. Such items will not affect the
absolute amount of the results for the period and the trend of results.
The Group’s underlying results exclude non-underlying items.
Non-underlying items include:
@ gains and losses on the disposal of businesses and investments,
unless this is part of a programme of releasing value from the
disposal of similar businesses or investments such as
infrastructure concessions;
@ costs of major restructuring and reorganisation of existing businesses;
@ costs of integrating newly acquired businesses;
@ acquisition and similar costs related to business combinations such
as transaction costs;
@ impairment and amortisation charges on intangible assets
arising on business combinations (amortisation of acquired
intangible assets); and
@ impairment of goodwill.
These are examples, however, from time to time it may be appropriate
to disclose further items as non-underlying items in order to highlight
the underlying performance of the Group. Refer to Note 10.
2.11 Taxation
The tax charge comprises current tax and deferred tax, calculated
using tax rates that have been enacted or substantively enacted by
the reporting date. Current tax and deferred tax are charged or
credited to the income statement, except when they relate to items
charged or credited directly to equity, in which case the relevant tax is
also accounted for within equity. Current tax is based on the profit for
the year.
Deferred tax is provided, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. Deferred tax
on such assets and liabilities is not recognised if the temporary
difference arises from the initial recognition of goodwill or from the
initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the temporary
differences can be utilised. The carrying amount of deferred tax
assets is reviewed at each reporting date.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, joint ventures and associates, except
where the timing of the reversal of the temporary difference can be
controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when they relate to
income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
The Organisation for Economic Co-operation and Developments
(OECD) released Pillar Two model rules in December 2021 introducing
a global minimum tax rate of 15% to address the tax concerns about
uneven profit distribution and tax contributions of large multinational
corporations. In December 2022, the OECD released transitional safe
harbour rules as a short-term measure to minimise the compliance
burden for lower risk jurisdictions.
The Pillar Two top-up tax rules were substantially enacted in the UK
in 2023 with application from 1 January 2024. The Group does not
expect to be subject to the top-up tax in relation to its operations in
any of the jurisdictions in which it operates because they fall within
the OECD transitional safe harbour rules which have also been
adopted by the UK. The Group has applied a temporary mandatory
relief from deferred tax accounting for the impacts of the top-up tax
and will account for it as current tax when it is incurred.
2.12 Intangible assets
a) Goodwill
Goodwill arises on the acquisition of subsidiaries and other
businesses, joint ventures and associates and represents the excess
of the fair value of consideration over the fair value of the identifiable
assets and liabilities acquired. Goodwill on acquisitions of subsidiaries
and other businesses is included in non-current assets. Goodwill on
acquisitions of joint ventures and associates is included in investments
in joint ventures and associates.
Goodwill is reviewed annually for impairment and is carried at cost
less accumulated impairment losses. Goodwill is included when
determining the profit or loss on subsequent disposal of the business
to which it relates.
Goodwill arising on acquisitions before the date of transition to
IFRS (1 January 2004) has been retained at the previous UK GAAP
amounts subject to being tested for impairment. Goodwill written
off or discount arising on acquisition credited to reserves under UK
GAAP prior to 1998 has not been reinstated and is not included in
determining any subsequent profit or loss on disposal.
b) Other intangible assets
Other intangible assets are stated at fair value or cost less accumulated
amortisation and impairment losses. Amortisation charges in respect of
software and Infrastructure Investments intangibles are included in
underlying items.
c) Research and development
Internally generated intangible assets developed by the Group are
recognised only if all the following conditions are met: an asset is
created that can be identified; it is probable that the asset created will
generate future economic benefits; and the development cost of the
asset can be measured reliably.
Other research expenditure is written off in the period in which
it is incurred.
2.13 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and impairment losses. Cost includes expenditure
associated with bringing the asset to its operating location and condition.
Refer to Note 16 for further detail.
2.14 Investment properties
The Group classifies land and buildings which it holds to generate
capital appreciation and/or to earn rental income as investment
properties. The Group has chosen to state its investment properties
at cost less accumulated depreciation and impairment losses. The
Group depreciates its investment properties over 25 years. Land is
not depreciated.
192
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2 Principal accounting policies continued
2.15 Leasing
As a lessee, the Group assesses whether a contract is, or contains,
a lease at the inception of a contract. A lease exists if the contract
conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. To assess if a lease exists, the
Group assesses whether: (i) the contract involves the use of an
identified asset; (ii) the Group has the right to obtain substantially all
of the economic benefits from the use of the asset throughout the
lease term; and (iii) the Group has the right to direct the use of the
asset. In order to determine if the contract involves the use of an
identified asset, the Group exercises judgement to assess if the
supplier has a substantive substitution right over the asset. An asset
is not identified if it has been determined that the supplier has
substantive substitution rights.
The Group recognises a right-of-use asset and a lease liability at the
lease commencement date. The right-of-use asset is initially measured
at cost and subsequently depreciated over the lease term. The lease
liability is measured at the present value of the lease payments that
are not paid at the commencement date, discounted using the interest
rate implicit in the lease, or if that rate cannot be readily determined,
the Group’s incremental borrowing rate. The Group has elected to
apply the practical expedient which allows the Group to use a single
discount rate for a portfolio of leases with similar characteristics.
2.19 Inventories
Inventories are valued at the lower of cost and net realisable value.
Cost includes an appropriate proportion of manufacturing overheads
incurred in bringing inventories to their present location and condition
and is determined using the first-in first-out method. Net realisable
value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling
and distribution.
2.20 Trade receivables and contract retention receivables
Trade and contract retention receivables are initially recorded at fair
value and subsequently measured at amortised cost as reduced
by allowances for estimated irrecoverable amounts and expected
credit losses.
2.21 Trade payables and contract retention payables
Trade and contract retention payables are not interest bearing and are
stated at cost.
2.22 Provisions
Provisions for insurance liabilities retained in the Group’s captive
insurance arrangements, legal claims, defects and warranties,
environmental restoration, onerous leases, and other onerous
commitments are recognised at the best estimate of the expenditure
required to settle the Group’s liability.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases of less than 12 months and leases of
low value assets. Instead, the Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
Provisions are recognised when: (i) the Group has a present legal or
constructive obligation as a result of a past event; (ii) it is probable
that an outflow of resources will be required to settle the obligation;
and (iii) the amount of the obligation can be estimated reliably.
Provisions are discounted where appropriate.
2.16 Impairment of assets
Assets that have an indefinite useful life (such as goodwill arising on
acquisitions) are reviewed at least annually for impairment. Other
intangible assets, property, plant and equipment and right-of-use
assets are reviewed for impairment whenever there is any indication
that the carrying amount of the asset may not be recoverable.
If the recoverable amount of an asset is less than its carrying amount,
an impairment loss is recognised.
Recoverable amount is the higher of fair value less costs to sell and
value in use. Value in use is assessed by discounting the estimated
future cash flows that the asset is expected to generate. For this
purpose assets, including goodwill, are grouped into cash-generating
units representing the level at which they are monitored by the Board
of Directors for internal management purposes. Goodwill impairment
losses are not reversed in subsequent periods. Reversals of other
impairment losses are recognised in income when they arise.
2.17 Investments
Investments are recognised and derecognised on the trade date
where a purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured at
cost, including transaction costs.
Investments in mutual funds are measured at fair value. Gains and
losses arising from changes in the fair value of these investments are
recognised in other comprehensive income. Investments that are held
until they reach maturity are measured at amortised cost.
Investments in subsidiaries are recognised and held at cost and
subsequently tested for impairment on an annual basis. Where an
impairment is identified, a provision for impairment is recorded
against the carrying value of the investment.
2.18 Government grants
Government grants are recognised when there is a reasonable
assurance that the Group will be able to comply with the conditions
attached to the grant and that the grant will be received. Grants are
recognised in the income statement on a systematic basis as a
deduction from the related category of cost in the periods in which
the expenses are recognised.
2.23 Borrowings
Interest-bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct issue costs. Premiums payable on
settlement or redemption and direct issue costs are included in the
carrying amount of the instrument and are charged to the income
statement on an accruals basis using the effective interest method
together with the interest payable.
2.24 Retirement benefit costs
The Group, through trustees, operates a number of defined benefit
and defined contribution retirement and other long-term employee
benefit schemes, the largest of which are of the defined benefit type
and are funded. Defined benefit contributions are determined in
consultation with the trustees, after taking actuarial advice.
For defined benefit pension schemes, the cost of providing benefits
recognised in the income statement and the defined benefit
obligations are determined at the reporting date by independent
actuaries, using the projected unit credit method. The liability
recognised in the balance sheet comprises the present value of the
defined benefit pension obligations, determined by discounting the
estimated future cash flows using the market yield on a high-quality
corporate bond, less the fair value of the scheme assets. Actuarial
gains and losses are recognised in the period in which they occur in
the statement of comprehensive income.
Contributions to defined contribution pension schemes are charged
to the income statement as they fall due.
Any surplus of deficit contributions to the Balfour Beatty Pension
Fund (BBPF) and the Railways Pension Scheme (RPS) would be
recoverable by way of a refund as, according to the relevant trust
deed and rules documents, the Group has the unconditional right to
the surplus and controls the run-off of the benefit obligations once
all other obligations of the BBPF and RPS have been settled.
2.25 Share-based payments
Employee services received in exchange for the grant of equity-settled
and cash-settled awards are charged to the income statement on a
straight-line basis over the vesting period, based on the fair values
of the awards at the date of grant.
Balfour Beatty plc Annual Report and Accounts 2023 193
Financial statements Due to the nature of the contractual arrangements, the projected cash
flows can be estimated with a high degree of certainty.
In the construction phase, the fair value of the Group’s PPP financial
assets is determined by applying an attributable profit margin to the
construction costs representing the fair value of construction services
performed. In the operational phase, fair value is determined by
discounting the future cash flows allocated to the financial asset
using discount rates based on long-term gilt rates adjusted for the risk
levels associated with the assets, with market-related movements in
fair value recognised in OCI. In both instances, the fair value is
reduced by allowances for estimated irrecoverable amounts and
expected credit losses. Amounts originally recognised in OCI are
transferred to the income statement upon disposal of the asset.
2.27 Judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements under IFRS
requires management to make judgements, estimates and assumptions
that affect amounts recognised for assets and liabilities at the
reporting date and the amounts of revenue and expenses incurred
during the reporting period. Actual outcomes may differ from these
judgements, estimates and assumptions.
The judgements, estimates and assumptions that have the most
significant effect on the carrying value of assets and liabilities of the
Group as at 31 December 2023 are discussed below.
a) Revenue and margin recognition (estimate)
The Group’s revenue recognition and margin recognition policies,
which are set out in Notes 2.4 and 2.5, are central to how the Group
values the work it has carried out in each financial year.
These policies require forecasts to be made of the outcomes of
long-term construction services and support services contracts,
which require estimates to be made of both cost and income
recognition on each contract. On the cost side, estimates of forecasts
are made on the final out-turn of each contract in addition to potential
costs to be incurred for any maintenance and defects liabilities. On
the income side, estimates are made on variations to consideration
which typically include variations due to changes in scope of work,
recoveries of claim income from customers, and potential liquidated
damages that may be levied by customers. On cost reimbursable
contracts there are also estimates required on the level of
disallowable costs which requires an assessment of whether costs
are recoverable under the terms of the contract and therefore should
be recognised as income. Estimates are reviewed regularly
throughout the contract life based on latest available information
and adjustments are made where necessary. The Group continues
to regularly assess these estimates.
As at 31 December 2023, the Group’s contract assets, contract liabilities
and contract provisions amounted to £300m, £602m and £352m
respectively as set out in Notes 23 and 26. The Group has considered
the nature of the estimates involved in deriving these balances and
concluded that it is possible, on the basis of existing knowledge, that
outcomes within the next financial year may be different from the
Group’s assumptions applied as at 31 December 2023 and could
require a material adjustment to the carrying amounts of these assets
and liabilities in the next financial year. However, due to the level of
uncertainty, combination of cost and income variables and timing
across a large portfolio of contracts (in excess of 1,000) at different
stages of their contract life, it is impracticable to provide a quantitative
analysis of the aggregated estimates that are applied at a portfolio level.
2 Principal accounting policies continued
2.25 Share-based payments continued
The credits in respect of the amounts charged are included within
separate reserves in equity for equity-settled awards or within accruals
for cash-settled awards until such time as the awards are exercised,
when the shares are transferred or cash payments made to employees.
2.26 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s
balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
a) Classification of financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to
the substance of the contractual arrangements. An equity instrument
is any contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments issued by
the Company are recorded at the proceeds received, net of direct
issue costs.
b) Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to manage interest
rate risk and to hedge exposures to fluctuations in foreign currencies
in accordance with its risk management policy. The Group does not
use derivative financial instruments for speculative purposes. A
description of the Group’s objectives, policies and strategies with regard
to derivatives and other financial instruments is set out in Note 40.
Derivatives are initially recognised in the balance sheet at fair value on
the date the derivative transaction is entered into and are subsequently
re-measured at their fair values.
Changes in the fair value of derivatives that are designated and qualify
as fair value hedges are recognised in the income statement together
with any changes in the fair value of the hedged item that are
attributable to the hedged risk.
Changes in the fair value of the effective portion of derivatives that
are designated and qualify as cash flow hedges are recognised in
other comprehensive income (OCI). Changes in the fair value of the
ineffective portion of cash flow hedges are recognised in the income
statement. Amounts originally recognised in OCI are transferred to
the income statement when the underlying transaction occurs or, if
the transaction results in a non-financial asset or liability, are included
in the initial cost of that asset or liability.
Changes in the fair value of derivative financial instruments that do
not qualify for hedge accounting are recognised in the income
statement as they arise.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, or exercised, or no longer qualifies for
hedge accounting. At that time, any cumulative gain or loss on the
hedging instrument recognised in OCI is retained in equity until the
hedged transaction occurs. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
OCI is transferred to the income statement for the period.
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives and recorded in the
balance sheet at fair value when their risks and characteristics are not
closely related to those of the host contract. Changes in the fair value
of those embedded derivatives recognised in the balance sheet are
recognised in the income statement as they arise.
c) PPP concession companies
Assets constructed by PPP concession companies are classified
principally as financial assets measured at fair value through OCI.
In the construction phase, income is recognised by applying an
attributable profit margin to the construction costs representing the
fair value of construction services performed. In the operational
phase, income is recognised by allocating a proportion of total cash
receivable over the life of the project to service costs by means of a
deemed rate of return on those costs. The residual element of
projected cash is allocated to the financial asset using the effective
interest rate method, giving rise to interest income.
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Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2 Principal accounting policies continued
2.27 Judgements and key sources of estimation uncertainty
continued
a) Revenue and margin recognition (estimate) continued
Within this portfolio, there are a limited number of long-term contracts
where the Group has incorporated significant estimates over contractual
entitlements relating to recoveries of claim income from customers,
suppliers and liquidated damages levied by the customer. This is in
the Construction Services segment. These recoveries have been
recognised at the amount that is considered highly probable not to
significantly reverse. However, there are a host of factors affecting
potential outcomes in respect of these entitlements which could
result in a range of reasonably possible outcomes on these contracts
in the following financial year, ranging from a gain of £60m to a loss of
£(35)m. The Directors have assessed the range of reasonably
possible outcomes on these limited number of contracts based on
facts and circumstances that were present and known at the balance
sheet date. As with any contract applying long-term contract accounting,
these contracts are also affected by a variety of uncertainties that
depend on future events, and so often need to be revised as
contracts progress.
b) Non-underlying items (judgement)
Non-underlying items are items of financial performance which the
Group believes should be presented separately on the face of the
income statement to assist in understanding the underlying financial
performance achieved by the Group. Determining whether an item is
part of underlying items or non-underlying items requires judgement.
A total non-underlying loss after tax of £11m (2022: £3m) was charged
to the income statement for the year ended 31 December 2023.
Refer to Note 10.
c) Financial assets measured at fair value through OCI (estimate)
At 31 December 2023, £1,173m (2022: £1,270m) of PPP financial
assets constructed by the Group’s subsidiary, joint venture and
associate companies were classified as financial assets measured at
fair value through OCI. In the operational phase the fair value of these
financial assets is measured at each reporting date by discounting the
future value of the cash flows allocated to the financial asset. A range
of discount rates is used from 4.3% to 17.4% (2022: 4.6% to 10.0%),
which reflects the prevailing risk-free interest rates and the different
risk profiles of the various concessions. These represent key sources
of estimation uncertainty. Refer to Note 40.
A £20m gain was taken to other comprehensive income in 2023 (2022:
£127m loss) and a cumulative fair value gain of £198m had arisen
on these financial assets as a result of market-related movements
in the fair value of these financial assets at 31 December 2023
(2022: £178m).
d) Contract provisions (estimate)
Contract provisions are liabilities of uncertain timing or amount and
therefore in making a reliable estimate of the quantum and timing of
liabilities estimates are applied and re-evaluated at each reporting
date. The range of potential outcomes on contract provisions as a
result of uncertain future events could result in a materially positive
or negative swing to profitability and cash flow.
The Group has considered the nature of these estimates and
concluded that it is possible, on the basis of existing knowledge,
that outcomes within the next financial year may be different from
the Group’s assumptions applied as at 31 December 2023 and could
require a material adjustment to the carrying amounts of assets
and liabilities in the next financial year. As disclosed in Note 26,
the majority of the Group’s provision balance relates to contract
provisions, which include loss provisions, defect and warranty
provisions, where estimates are made around forecast costs, timing
and whether it is probable there will be an outflow of future economic
benefit. Contract loss provisions may also include estimates around
variable consideration as disclosed in Note 2.27(a). However, due to
the level of uncertainty, combination of variables and timing across
a large portfolio of complex contracts at different stages of their
contract life, it is impracticable to provide a quantitative analysis of
the aggregated estimates that are applied at a portfolio level.
To the extent that the sensitivities disclosed in Note 2.27(a) affect
a loss-making contract, this will have an impact on the Group’s
provisions in the next financial year.
e) Retirement benefit obligations (estimate)
Details of the Group’s defined benefit pension schemes are set out
in Note 30, including tables showing the sensitivity of the pension
scheme obligations and assets to different actuarial assumptions.
At 31 December 2023, the net retirement benefit assets recognised
on the Group’s balance sheet were £69m (2022: £223m). The effects
of changes in the actuarial assumptions underlying the schemes’
obligations (including inflation and mortality) and discount rates and
the differences between expected and actual returns on the
schemes’ assets are classified as actuarial gains and losses. During
2023, the Group recognised net actuarial losses of £198m (2022:
£51m) in OCI, including its share of the actuarial gains and losses
arising in joint ventures and associates.
3 Exchange rates
The following key exchange rates were applied in these financial statements:
Average rates
£1 buys
US$
HK$
Closing rates
£1 buys
US$
HK$
2023
1.24
9.73
2023
1.27
9.95
2022
1.24
9.72
2022
1.20
9.39
Change
–%
0.1%
Change
5.8%
6.0%
Balfour Beatty plc Annual Report and Accounts 2023 195
Financial statements 4 Revenue
4.1 Nature of services provided
4.1.1 Construction Services
The Group’s Construction Services segment encompasses activities in relation to the physical construction of assets provided to public and
private customers. Revenue generated in this segment is measured over time as control passes to the customer as the asset is constructed.
Progress is measured by reference to the cost incurred on the contract to date compared to the contract’s end of job forecast (the input
method). Payment terms are based on a schedule of value that is set out in the contract and fairly reflect the timing and performance of
service delivery. Contracts with customers are typically accounted for as one performance obligation (PO).
Types of assets
Typical contract length
Nature, timing of satisfaction of performance obligations and significant payment terms
Buildings
12 to 36 months
Infrastructure
1 to 3 months for
small-scale infrastructure
works
24 to 60 months for
large-scale complex
construction
The Group constructs buildings which include commercial, healthcare, education, retail and
residential assets. As part of its construction services, the Group provides a range of services
including design and/or build, mechanical and electrical engineering, shell and core and/or fit-out
and interior refurbishment. The Group’s customers in this area are a mix of private and public entities.
The contract length depends on the complexity and scale of the building and contracts entered
into for these services are typically fixed price.
In most instances, the contract with the customer is assessed to only contain one PO as the
services provided by the Group, including those where the Group is also providing design
services, are highly interrelated. However, for certain types of contracts, services relating to
fit-out and interior refurbishment may sometimes be assessed as a separate PO.
The Group provides construction services for three main types of infrastructure assets: highways,
railways and other large-scale infrastructure assets such as waste, water and energy plants.
Highways represent the Group’s activities in constructing motorways in the UK, US and Hong
Kong. This includes activities such as design and construction of roads, widening of existing
motorways or converting existing motorways. The main customers are government bodies.
Railway construction services include design and managing the construction of railway systems
delivering major multi-disciplinary projects, track work, electrification and power supply. The Group
serves both public and private railways including high-speed passenger railways, freight and mixed
traffic routes, dense commuter networks, metros and light rail.
Other infrastructure assets include construction, design and build services on large-scale complex
assets predominantly servicing the waste, water and energy sectors.
Contracts entered into relating to these infrastructure assets can take the form of fixed-price,
cost-plus or target-cost contracts with shared pain/gain mechanisms. Contract lengths vary
according to the size and complexity of the asset build and can range from a few months for
small-scale infrastructure works to four to five years for large-scale complex construction works.
In most cases, the contract itself represents a single PO where only the design and construction
elements are contracted. In some instances, the contract with the customer will include maintenance
of the constructed asset. The Group assesses the maintenance element as a separate PO and
revenue from this PO is recognised in the Support Services segment. Refer to Note 4.1.2.
4.1.2 Support Services
The Group’s work in this segment supports existing assets through maintaining, upgrading and managing services across utilities and
infrastructure assets. Revenue generated in this segment is measured over time as control passes to the customer as and when services are
provided. Progress is measured by reference to the cost incurred on the contract to date compared to the contract’s end of job forecast (the
input method). Payments are structured as milestone payments set out in the respective contracts.
Types of assets
Nature, timing of satisfaction of performance obligations and significant payment terms
Utilities
Within the Group’s services contracts, the Group provides support services to various types of utility assets.
For contracts servicing power transmission and distribution assets, the Group constructs and maintains electricity networks,
including replacement or new build of overhead lines, underground cabling, cable tunnels and offshore wind farm maintenance.
Contracts entered into are normally fixed-price and contract lengths can vary from 12 to 36 months, and up to 20 years for
offshore wind farm maintenance contracts. Each contract is normally assessed to contain one PO. However, where a
contract contains both a construction phase and a maintenance phase, these are assessed to contain two separate POs.
Infrastructure The Group provides maintenance, asset and network management and design services in respect of highways, railways and
other publicly available assets. The customer in this area of the Group is mainly government bodies. Types of contract include
a fixed schedule of rates, fixed-price, target-cost arrangements and cost-plus.
Contract terms range from 1 to 25 years. Where contracts include a lifecycle element, this is accounted for as a separate
PO and recognised when the work is delivered.
196
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 4 Revenue continued
4.1 Nature of services provided continued
4.1.3 Infrastructure Investments
The Group invests directly in a variety of assets, predominantly consisting of infrastructure assets where there are opportunities to manage
the asset upon completion of construction. The Group also invests in real estate type assets, in particular private residential and student
accommodation assets. Revenue generated in this segment is from the provision of construction, maintenance and management services
and also from the recognition of rental income. The Group’s strategy is to hold these assets until optimal values are achieved through
disposal of mature assets.
Types of services
Nature, timing of satisfaction of performance obligations and significant payment terms
Service
concessions
The Group operates a UK and US portfolio of service concession assets comprising assets in the roads, healthcare, student
accommodation, biomass and waste and offshore transmission sectors. The Group accounts for these assets under IFRIC 12
Service Concession Arrangements.
Where the Group constructs and maintains these assets, the two services are deemed to be separate performance obligations
and accounted for separately. If the maintenance phase includes a lifecycle element, this is considered to be a separate PO.
Contract terms can be up to 40 years. The Group recognises revenue over time using the input method. Consideration is paid
through a fixed unitary payment charge spread over the life of the contract.
Management
services
Housing
development
Revenue from this service is presented across Buildings, Infrastructure or Utilities in Note 4.2.
The Group provides real estate management services such as property development and asset management services. Contract
terms can be up to 50 years. The Group recognises revenue over time as and when service is delivered to the customer.
Revenue from this service is presented within Buildings in Note 4.2.
The Group also develops housing units on land that is owned by the Group. Revenue is recognised on the sale of individual
units at the point in time when control of the asset is transferred to the purchaser. This is deemed to be when an
unconditional sale is achieved.
Revenue from this service is presented within Buildings in Note 4.2.
4.2 Disaggregation of revenue
The Group presents a disaggregation of its revenue according to the primary geographical markets in which the Group operates as well as the
types of assets serviced by the Group. The nature of the various services provided by the Group is explained in Note 4.1. This disaggregation
of revenue is also presented according to the Group’s reportable segments as described in Note 5.
For the year ended 31 December 2023
Revenue by primary geographical markets
Construction Services
Support Services
Infrastructure
Investments
Total revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
United
Kingdom
£m
3,025
3,025
1,003
1,003
164
63
4,192
4,091
United
States
£m
3,697
3,669
–
–
338
228
4,035
3,897
Revenue by types of assets serviced
Construction Services
Support Services
Infrastructure
Investments
Total revenue
Revenue including share of joint ventures
and associates
Group revenue
Revenue including share of joint ventures
and associates
Group revenue
Revenue including share of joint ventures
and associates
Group revenue
Revenue including share of joint ventures
and associates
Group revenue
Buildings
£m
Infrastructure
£m
Utilities
£m
3,954
3,284
3,440
2,738
9
9
346 +
289 +
661
661
146
3
4,309
3,582
4,247
3,402
595
581
326
326
16
–
937
907
Rest of
world
£m
1,359
1
3
3
6
1
1,368
5
Other
£m
92
92
10
10
–
–
102
102
Timing of revenue recognition
Over time
At a point in time
Revenue including share of joint ventures and associates
Over time
At a point in time
Group revenue
Construction
Services
£m
Support
Services
£m
Infrastructure
Investments
£m
8,076
5
8,081
6,690
5
6,695
1,002
4
1,006
1,002
4
1,006
496
12
508
280
12
292
+ Includes rental income of £53m including share of joint ventures and associates or £21m excluding share of joint ventures and associates.
Total
£m
8,081
6,695
1,006
1,006
508
292
9,595
7,993
Total
£m
8,081
6,695
1,006
1,006
508
292
9,595
7,993
Total
£m
9,574
21
9,595
7,972
21
7,993
Balfour Beatty plc Annual Report and Accounts 2023 197
Financial statements 4 Revenue continued
4.2 Disaggregation of revenue continued
For the year ended 31 December 2022
Revenue by primary geographical markets
Construction Services
Support Services
Infrastructure
Investments
Total revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
Revenue including share of joint ventures and associates
Group revenue
United
Kingdom
£m
2,761
2,761
982
982
151
53
3,894
3,796
Revenue by types of assets serviced
Construction Services
Support Services
Infrastructure
Investments
Total revenue
Revenue including share of joint ventures and
associates
Group revenue
Revenue including share of joint ventures and
associates
Group revenue
Revenue including share of joint ventures and
associates
Group revenue
Revenue including share of joint ventures and
associates
Group revenue
Timing of revenue recognition
Over time
At a point in time
Revenue including share of joint ventures and associates
Over time
At a point in time
Group revenue
United
States
£m
3,650
3,645
–
–
304
179
3,954
3,824
Utilities
£m
639
616
349
348
15
–
Rest of
world
£m
1,071
3
7
6
5
–
1,083
9
Other
£m
5
5
10
10
–
–
15
15
Buildings
£m
Infrastructure
£m
3,878
3,387
2,960
2,401
5
5
291 +
229 +
625
625
154
3
4,174
3,621
3,739
3,029
1,003
964
Construction
Services
£m
Support
Services
£m
Infrastructure
Investments
£m
7,475
7
7,482
6,402
7
6,409
984
5
989
983
5
988
430
30
460
202
30
232
Total
£m
7,482
6,409
989
988
460
232
8,931
7,629
Total
£m
7,482
6,409
989
988
460
232
8,931
7,629
Total
£m
8,889
42
8,931
7,587
42
7,629
+ Includes rental income of £49m including share of joint ventures and associates or £16m excluding share of joint ventures and associates.
4.3 Transaction price allocated to the remaining performance obligations (excluding joint ventures and associates)
Construction Services
Support Services
Infrastructure Investments
Total transaction price allocated to remaining performance obligations
2024
£m
5,362
703
82
6,147
2025
£m
2,847
452
66
3,365
2026
onwards
£m
3,183
1,641
1,769
6,593
Total
£m
11,392
2,796
1,917
16,105
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earned by the Group for
distinct goods and services which the Group has promised to deliver to its customers. These include promises which are partially satisfied at
the period end or those which are unsatisfied but which the Group has committed to providing. In deriving this transaction price, any element
of variable revenue is estimated at a value that is highly probable not to reverse in the future.
The transaction price above does not include any estimated revenue to be earned on framework contracts for which a firm order or instruction
has not been received from the customer.
198
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5 Segment analysis
Reportable segments of the Group:
@ Construction Services – activities resulting in the physical construction of an asset;
@ Support Services – activities which support existing assets or functions such as asset maintenance and refurbishment; and
@ Infrastructure Investments – acquisition, operation and disposal of infrastructure assets such as roads, hospitals, student accommodation,
military housing, multifamily residences, offshore transmission networks, waste and biomass and other concessions. This segment also
includes the Group’s housing development division.
5.1 Total Group
Income statement – performance by activity
Revenue including share of joint ventures and associates
Share of revenue of joint ventures and associates
Group revenue
Group operating profit/(loss)1
Share of results of joint ventures and associates
Profit/(loss) from operations1
Non-underlying items:
– provision recognised for rectification works to be carried out on a
development in London
– amortisation of acquired intangible assets
Profit/(loss) from operations
Investment income
Finance costs
Profit before taxation
1 Before non-underlying items (Notes 2.10 and 10).
Income statement – performance by activity
Revenue including share of joint ventures and associates
Share of revenue of joint ventures and associates
Group revenue
Group operating profit/(loss)1
Share of results of joint ventures and associates
Profit/(loss) from operations1
Non-underlying items:
– amortisation of acquired intangible assets
– other net operating income
Profit/(loss) from operations
Investment income
Finance costs
Profit before taxation
1 Before non-underlying items (Notes 2.10 and 10).
Assets and liabilities by activity
Contract assets
Contract liabilities – current
Inventories
Trade and other receivables – current
Trade and other payables – current
Provisions – current
Working capital*
Total assets
Total liabilities
Net assets
*
Includes non-operating items and current working capital
Construction
Services
2023
£m
8,081
(1,386)
6,695
120
36
156
Support
Services
2023
£m
1,006
–
1,006
80
–
80
Infrastructure
Investments
2023
£m
508
(216)
292
14
17
31
Corporate
activities
2023
£m
–
–
–
(39)
–
(39)
(12)
(1)
(13)
143
–
–
–
80
–
(4)
(4)
27
–
–
–
(39)
Construction
Services
2022
£m
7,482
(1,073)
6,409
129
20
149
(1)
2
1
150
Support
Services
2022
£m
989
(1)
988
83
–
83
Infrastructure
Investments
2022
£m
460
(228)
232
(4)
85
81
–
–
–
83
(5)
–
(5)
76
Corporate
activities
2022
£m
–
–
–
(34)
–
(34)
–
–
–
(34)
Construction
Services
2023
£m
203
(506)
45
768
(1,491)
(187)
(1,168)
2,168
(2,484)
(316)
Support
Services
2023
£m
69
(90)
25
73
(176)
(4)
(103)
459
(385)
74
Infrastructure
Investments
2023
£m
28
(4)
54
33
(48)
(7)
56
1,260
(664)
596
Corporate
activities
2023
£m
–
–
–
20
(19)
(18)
(17)
1,378
(524)
854
Total
2023
£m
9,595
(1,602)
7,993
175
53
228
(12)
(5)
(17)
211
82
(49)
244
Total
2022
£m
8,931
(1,302)
7,629
174
105
279
(6)
2
(4)
275
50
(38)
287
Total
2023
£m
300
(600)
124
894
(1,734)
(216)
(1,232)
5,265
(4,057)
1,208
Balfour Beatty plc Annual Report and Accounts 2023 199
Financial statements
5 Segment analysis continued
5.1 Total Group continued
Assets and liabilities by activity
Contract assets
Contract liabilities – current
Inventories
Trade and other receivables – current
Trade and other payables – current
Provisions – current
Working capital*
Total assets
Total liabilities
Net assets
*
Includes non-operating items and current working capital.
Other information
Capital expenditure on property, plant and equipment (Note 16)
Capital expenditure on intangible assets (Note 15)
Depreciation (Note 16, Note 17 and Note 18)
Gain on disposals of interests in investments (Note 34.2)
Gain on disposals of interests in investments within joint ventures and
associates (Note 34.2)
Other information
Capital expenditure on property, plant and equipment (Note 16)
Capital expenditure on intangible assets (Note 15)
Depreciation (Note 16, Note 17 and Note 18)
Gain on disposals of interests in investments within joint ventures and
associates (Note 34.3)
Performance by geographic destination
Revenue including share of joint ventures and associates
Share of revenue of joint ventures and associates
Group revenue
Performance by geographic destination
Revenue including share of joint ventures and associates
Share of revenue of joint ventures and associates
Group revenue
Construction
Services
2022
£m
209
(550)
50
730
(1,374)
(179)
(1,114)
2,342
(2,421)
(79)
Support
Services
2022
£m
62
(112)
32
91
(171)
(3)
(101)
443
(378)
65
Infrastructure
Investments
2022
£m
29
(1)
32
37
(44)
(8)
45
940
(347)
593
Corporate
activities
2022
£m
–
–
–
23
(6)
(14)
3
1,398
(594)
804
Construction
Services
2023
£m
Support
Services
2023
£m
Infrastructure
Investments
2023
£m
Corporate
activities
2023
£m
8
–
28
–
–
47
–
48
–
–
–
30
2
24
2
11
–
9
–
–
Construction
Services
2022
£m
Support
Services
2022
£m
Infrastructure
Investments
2022
£m
Corporate
activities
2022
£m
13
–
30
–
15
–
41
–
United
Kingdom
2023
£m
4,192
(101)
4,091
United
Kingdom
2022
£m
3,894
(98)
3,796
–
1
2
70
United
States
2023
£m
4,035
(138)
3,897
United
States
2022
£m
3,954
(130)
3,824
3
–
10
–
Rest of
world
2023
£m
1,368
(1,363)
5
Rest of
world
2022
£m
1,083
(1,074)
9
Total
2022
£m
300
(663)
114
881
(1,595)
(204)
(1,167)
5,123
(3,740)
1,383
Total
2023
£m
66
30
87
24
2
Total
2022
£m
31
1
83
70
Total
2023
£m
9,595
(1,602)
7,993
Total
2022
£m
8,931
(1,302)
7,629
Major customers
Included in Group revenue are revenues of £1,981 m (2022: £1,903m) from the US Government and £3,198m (2022: £2,670m) from the UK
Government, which are the Group’s two largest customers, through multiple central and regional bodies. These revenues are included in the
results across all three reported segments.
200
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 5 Segment analysis continued
5.2 Infrastructure Investments
Underlying profit/(loss) from operations1
UK^
North America
Gain on disposals of interests in investments (Note
34.2/34.3)
Bidding costs and overheads
Net assets/(liabilities)
UK^
North America
Non-recourse borrowings net of associated cash and cash
equivalents (Note 27)
Total Infrastructure Investments net assets
Share of joint
ventures and
associates
(Note 19.2) +
2023
£m
3
12
2
17
–
17
121
175
296
–
296
Group
2023
£m
(1)
7
24
30
(16)
14
412
152
564
(264)
300
Total
2023
£m
2
19
26
47
(16)
31
533
327
860
(264)
596
Group
2022
£m
3
18
–
21
(25)
(4)
384
124
508
(242)
266
+ The Group’s share of the results of joint ventures and associates is disclosed net of investment income, finance costs and taxation.
^ Including Ireland.
1 Before non-underlying items (Notes 2.10 and 10).
6 Profit/(loss) from operations
6.1 Profit/(loss) from operations is stated after charging/(crediting)
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment properties
Amortisation of other intangible assets
Amortisation of contract fulfilment assets
Net charge of trade receivables impairment provision
Profit on disposal of property, plant and equipment
Government grant income
Cost of inventory recognised as an expense
Auditor’s remuneration
6.2 Analysis of auditor’s remuneration
Services as auditor to the Company
Services as auditor to Group subsidiaries
Total audit fees
Audit-related assurance fees
Other assurance fees
Total non-audit fees
Total fees in relation to audit and other services
Share of joint
ventures and
associates
(Note 19.2) +
2022
£m
1
14
70
85
–
85
140
187
327
–
327
2023
£m
28
57
2
12
15
5
(2)
(6)
222
6
2023
£m
0.8
4.3
5.1
0.5
–
0.5
5.6
Total
2022
£m
4
32
70
106
(25)
81
524
311
835
(242)
593
2022
£m
27
54
2
13
15
–
(4)
(6)
154
5
2022
£m
0.7
3.4
4.1
0.8
–
0.8
4.9
Balfour Beatty plc Annual Report and Accounts 2023 201
Financial statements
7 Employee costs
7.1 Group
Employee costs during the year
Wages and salaries
Redundancy costs
Social security costs
Pension costs (Note 30)
Share-based payments (Note 35)
Average number of Group employees
Construction Services
Support Services
Infrastructure Investments
Corporate
2023
£m
1,318
6
97
58
24
1,503
2023
Number
12,069
4,375
1,636
146
18,226
2022
£m
1,259
4
98
63
20
1,444
2022
Number
12,233
3,794
1,546
145
17,718
Detailed disclosures of items of remuneration, including those accruing under the Company’s equity-settled share-based payment
arrangements can be found within the Remuneration report on pages 152 to 168.
7.2 Company
The Company did not have any employees and did not incur any employee costs in the year (2022: £nil). Balfour Beatty Group Employment Ltd,
which was established in February 2013, remains the employing entity for the Balfour Beatty Group’s UK employees.
8 Investment income
Subordinated debt interest receivable
Interest receivable on PPP financial assets (Note 21)
Fair value gain on investment asset (Note 20)
Interest received on bank deposits
Other interest receivable and similar income
Impairment reversal of joint ventures and associates
Net finance income on pension scheme assets and obligations (Note 30.2)
– accrued interest (See Note 9)
9 Finance costs
Non-recourse borrowings
US private placement
Interest on lease liabilities (Note 28)
Fair value loss on investment asset (Note 20)
Other interest payable
Impairment of joint ventures and associates
– bank loans and overdrafts
– finance cost
– committed facilities
– letter of credit fees
– other finance charges
– loans
– accrued interest
2023
£m
34
2
–
33
–
1
12
82
2022
£m
27
2
6
8
2
–
5
50
2023
£m
2022
£m
11
12
6
1
3
2
5
9
–
49
9
15
6
–
2
2
2
–
2
38
The net impairment of loans to joint ventures and associates and accrued interest receivable of £8m (2022: £2m) relates to expected credit
loss assessments performed. All of these impairments relate to subordinated debt and accrued interest receivable from joint ventures and
associates held within the Infrastructure Investments segment.
202
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10 Non-underlying items
Items (charged against)/credited to profit
10.1
10.2
Amortisation of acquired intangible assets
Other non-underlying items:
– provision recognised for rectification works to be carried out on a development in London
– release of indemnity provisions relating to sale of Heery International Inc.
Total other non-underlying items
Charged against profit before taxation
Tax credit/(charge):
10.3
– tax on rectification works provision
– tax on other items above
– impact of tax rate change on deferred tax assets previously recognised through non-underlying
Total tax credit
Charged against profit for the year
2023
£m
2022
£m
(5)
(12)
–
(12)
(17)
3
3
–
6
(11)
(6)
–
2
2
(4)
–
(1)
2
1
(3)
10.1 The amortisation of acquired intangible assets comprises: customer contracts £4m (2022: £5m); and customer relationships £1m (2022: £1m).
The charge was recognised in the following segments: Construction Services £1m (2022: £1m); and Infrastructure Investments £4m (2022: £5m).
10.2.1 In 2021, the Group recognised a provision of £42m in relation to rectification works to be carried out on a development in London which
was constructed by the Group between 2013 and 2016. The rectification work includes the replacement of stone panels affixed to the façade
of the development to meet performance requirements. The provision was initially calculated in line with a methodology based on an
independent expert’s assessment of the rectification at that time and included an estimate of costs associated with any potential consequential
disruption to the development as a result of these rectification works. Rectification works are expected to complete in 2025. The most recent
assessment carried out in 2023 resulted in a £12m increase in the estimated cost of rectification.
The Group initially presented the provision recognised in 2021 in non-underlying due to its size. In line with this presentation, the Group
continues to present this within non-underlying. The provision does not include potential recoveries from third parties.
This charge was recognised in the Construction Services segment.
10.3.1 As explained in Note 10.2.1, a non-underlying charge of £12m was recognised in relation to the rectification works to be carried out on a
development in London. This expense has given rise to a tax credit of £3m.
10.3.2 The remaining non-underlying items recognised in the Group’s operating profit gave rise to a tax credit of £3m which was recognised mainly
on the amortisation of acquired intangible assets (2022: £1m charge).
10.3.3 In 2022, there was an additional deferred tax credit of £2m to revalue deferred tax assets previously recognised through non-underlying
items due to a corporation tax rate change enacted in the UK.
Balfour Beatty plc Annual Report and Accounts 2023 203
Financial statements
11 Income taxes
11.1 Income tax charge/(credit)
Total UK tax
Total non-UK tax
Total tax charge/(credit) x
UK current tax
– current tax
Non-UK current tax
– current tax
– adjustments in respect of previous periods
Total current tax
UK deferred tax
– origination and reversal of temporary differences
– UK corporation tax rate change
– adjustments in respect of previous periods
Non-UK deferred tax
– origination and reversal of temporary differences
– adjustments in respect of previous periods
Total deferred tax
Total tax charge/(credit) x
x Excluding joint ventures and associates.
1 Before non-underlying items (Notes 2.10 and 10).
Underlying
items 1
2023
£m
Non-underlying
items
(Note 10)
2023
£m
Total
2023
£m
38
18
56
7
7
2
(3)
(1)
6
30
2
(1)
31
17
2
19
50
56
(3)
(3)
(6)
(3)
(3)
(1)
–
(1)
(4)
–
–
–
–
(1)
(1)
(2)
(2)
(6)
35
15
50
4
4
1
(3)
(2)
2
30
2
(1)
31
16
1
17
48
50
Total
2022
£m
(35)
35
–
2
2
18
(3)
15
17
(22)
(13)
(2)
(37)
17
3
20
(17)
–
The Group has recognised a £6m tax credit (2022: £1m) within non-underlying items in the year. Refer to Notes 10.3.1 to 10.3.3.
The Group tax charge excludes amounts for joint ventures and associates (refer to Note 19.2), except where tax is levied at the Group level.
In addition to the Group tax charge, tax of £43m has been credited (2022: £44m) directly to Group other comprehensive income, comprising: a
tax credit of £48m for subsidiaries (2022: £19m); and a tax charge in respect of joint ventures and associates of £5m (2022: £25m credit). A tax
charge of £nil (2022: £2m credit) has been recognised directly in Group equity relating to share-based payments comprising a current tax credit
of £2m (2022: £nil) and a deferred tax charge of £2m (2022: £2m credit). Refer to Note 32.1.
204
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 Income taxes continued
11.2 Income tax charge/(credit) reconciliation
Profit before taxation including share of results from joint ventures and associates
Less: share of results of joint ventures and associates
Profit before taxation
Add: non-underlying items charged excluding share of joint ventures and associates
Underlying profit before taxation for subsidiaries1
Tax on underlying profit before taxation at standard UK corporation tax rate of 23.5% (2022: 19%)
Adjusted for the effects of:
Expenses not deductible for tax purposes and other permanent items
Benefit of tax incentives
Non-taxable disposals
Tax levied at Group level on share of joint ventures’ and associates’ profits#
Recognition of losses not previously recognised
Utilisation of other losses not previously recognised
Effect of tax rates in non-UK jurisdictions
Recognition of UK deferred tax at 25%
Adjustments in respect of previous periods
Total tax charge on underlying profit
Add: tax credit in non-underlying items (Note 10.3)
Total tax charge on profit from operations
2023
£m
244
(53)
191
17
208
49
7
–
(6)
3
–
(1)
3
2
(1)
56
(6)
50
# These are mainly in connection with US joint ventures and associates where tax is levied at the Group level rather than within the share of joint ventures and associates.
1 Before non-underlying items (Notes 2.10 and 10).
12 Earnings per share
Earnings
Earnings
Amortisation of acquired intangible assets – including tax credit of £3m (2022: £1m charge)
Other non-underlying items – including tax credit of £3m (2022: £2m)
Underlying earnings
Weighted average number of ordinary shares
Basic
2023
£m
197
2
9
208
Basic
2023
m
558
Diluted
2023
£m
197
2
9
208
Diluted
2023
m
566
Basic
2022
£m
288
7
(4)
291
Basic
2022
m
612
2022
£m
287
(105)
182
4
186
35
2
(1)
–
13
(43)
–
12
(12)
(5)
1
(1)
–
Diluted
2022
£m
288
7
(4)
291
Diluted
2022
m
620
The basic earnings per ordinary share is calculated by dividing the profit for the year attributable to equity holders by the weighted average
number of ordinary shares outstanding during the year, excluding treasury shares and shares held in the Employee Share Ownership Trust.
The diluted earnings per ordinary share uses an adjusted weighted average number of shares and includes shares that are potentially outstanding
in relation to the equity-settled share-based payment arrangements detailed in Note 35.
Potential dilutive effect of ordinary shares issuable under equity-settled share-based payment arrangements is 8m (2022: 8m).
Earnings per share
Earnings per ordinary share
Amortisation of acquired intangible assets after tax
Other non-underlying items after tax
Underlying earnings per ordinary share
Basic
2023
Pence
35.3
0.4
1.6
37.3
Diluted
2023
Pence
34.8
0.4
1.6
36.8
Basic
2022
Pence
46.9
1.2
(0.6)
47.5
Diluted
2022
Pence
46.3
1.1
(0.6)
46.8
Balfour Beatty plc Annual Report and Accounts 2023 205
Financial statements 13 Dividends
Proposed dividends for the year
Interim – current year
Final – current year
Recognised dividends for the year
Final – prior year
Interim – current year
Per share
2023
Pence
Amount
2023
£m
Per share
2022
Pence
Amount
2022
£m
3.5
8.0
11.5
3.5
7.0
10.5
19
43&
62
39
19
58
21
40
61
37
21
58
& Amount dependent on number of shares on the register on 17 May 2024.
Subject to approval at the Annual General Meeting on 9 May 2024, the final 2023 dividend will be paid on 3 July 2024 to holders on the register
on 17 May 2024 by direct credit or, where no mandate has been given, by cheque posted by 3 July 2024. The ordinary shares will be quoted
ex-dividend on 16 May 2024. The last date for Dividend Reinvestment Plan (DRIP) elections will be 12 June 2024.
14 Intangible assets – goodwill
At 1 January 2022
Currency translation differences
At 31 December 2022
Currency translation differences
At 31 December 2023
Carrying amounts of goodwill by segment
Construction Services
Support Services
Infrastructure Investments
Group
Carrying amounts of goodwill by cash-generating unit
UK Regional and Engineering Services
Balfour Beatty Construction Group Inc
Rail UK
Balfour Beatty Investments US
Other
Group total
Accumulated
impairment
losses
£m
(218)
(12)
(230)
6
(224)
Cost
£m
1,035
71
1,106
(37)
1,069
United
Kingdom
£m
260
73
–
333
2023
United
States
£m
460
–
52
512
Total
£m
720
73
52
845
United
Kingdom
£m
260
73
–
333
2022
United
States
£m
488
–
55
543
Carrying
amount
£m
817
59
876
(31)
845
Total
£m
748
73
55
876
2023
2022
Pre-tax
discount rate
%
10.7
11.1
11.0
11.3
11.0
£m
248
437
68
52
40
845
Pre-tax
discount rate
%
9.1
9.3
9.3
11.1
9.3
£m
248
464
68
55
41
876
The recoverable amount of goodwill is based on value-in-use, a key input of which is forecast cash flows. The Group’s cash flow forecasts are
based on the expected future revenues and margins of each CGU, giving consideration to the current level of confirmed and anticipated orders.
Cash flow forecasts for the next three years are based on the Group’s Three-Year Plan, which covers the period from 2024 to 2026. The cash
flow forecasts for each CGU were compiled from each of its constituent business units as part of the Group’s annual financial planning process.
The other key inputs in assessing each CGU are its long-term growth rate and discount rate. The discount rates have been calculated using the
Weighted Average Cost of Capital (WACC) method, which takes account of the Group’s capital structure (financial risk) as well as the nature of
each CGU’s business (operational risk). Long-term growth rates are assumed to be the estimated future GDP growth rates based on published
independent forecasts for the country or countries in which each CGU operates, less 1.0% to reflect current economic uncertainties and their
consequent estimated effect on public sector spending on infrastructure.
206
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14 Intangible assets – goodwill continued
In the derivation of each CGU’s value-in-use, a terminal value is assumed based on a multiple of earnings before interest and tax. The multiple
is applied to a terminal cash flow, which is the normalised cash flow in the last year of the forecast period. However, due to the long-term
nature and the degree of predictability of some contracts within Balfour Beatty Investments US, the forecast period used in the derivation of
this CGU’s value-in-use extends beyond the Group’s three-year cash flow forecast period in line with the duration of the contracts disclosed in
Note 41(e). The EBIT multiple is calculated using the Gordon Growth Model and is a factor of the discount rate and growth rate for each CGU.
The nominal terminal value is discounted to present value.
UK Regional and Engineering Services
Balfour Beatty Construction Group Inc
Rail UK
Balfour Beatty Investments US
Other
2023
2022
Inflation rate
%
Real growth
rate
%
2.8
2.2
2.8
2.2
2.6
1.1
1.7
1.1
1.7
1.3
Nominal
long-term
growth rate
applied
%
3.9
3.9
3.9
3.9
3.9
Inflation rate
%
Real growth
rate
%
2.3
2.2
2.3
2.2
2.3
0.8
0.7
0.8
0.7
0.8
Nominal
long-term
growth rate
applied
%
3.1
2.9
3.1
2.9
3.1
Sensitivities
The Group’s impairment review is sensitive to changes in the key assumptions used. The major assumptions that result in significant
sensitivities are the discount rate and the long-term growth rate, and for certain CGUs, changes to underlying cash projections.
A reasonable possible change in key assumptions would not give rise to an impairment in any of the Group’s CGUs.
15 Intangible assets – other
Customer
contracts
£m
Customer
relationships
£m
Brand
names
£m
Infrastructure
Investments
intangibles
£m
Software
and other
£m
Cost or valuation
At 1 January 2022
Currency translation differences
Additions
At 31 December 2022
Currency translation differences
Additions
Fair value movement on loan associated with intangible asset
At 31 December 2023
Accumulated amortisation
At 1 January 2022
Currency translation differences
Charge for the year
At 31 December 2022
Currency translation differences
Charge for the year
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
218
26
–
244
(14)
–
–
230
(164)
(20)
(5)
(189)
11
(4)
(182)
48
55
49
6
–
55
(3)
–
–
52
(42)
(5)
(1)
(48)
3
(1)
(46)
6
7
3
–
–
3
–
–
–
3
(3)
–
–
(3)
–
–
(3)
–
–
236
–
1
237
–
30
(19)
248
(8)
–
(5)
(13)
–
(5)
(18)
230
224
127
2
–
129
(1)
–
–
128
(120)
(1)
(2)
(123)
1
(2)
(124)
4
6
Total
£m
633
34
1
668
(18)
30
(19)
661
(337)
(26)
(13)
(376)
15
(12)
(373)
288
292
The Group recognises certain assets held as part of service concession arrangements as Infrastructure Investments intangible assets where
the Group bears demand risk under IFRIC 12 Service Concession Arrangements. In December 2023, the Group commenced the construction
phase at University of Sussex’s West Slope student accommodation project, incurring a spend of £30m (2022: £nil) in the year, which includes
bank arrangement fees of £3m. No interest was capitalised in the year, however a fair value movement of £19m was recognised against the
value of the asset, which will unwind over the course of the construction phase. Construction on this project is anticipated to complete in
2028. The Infrastructure Investments intangible assets are amortised on a straight-line basis over the life of the projects, which is 50 years.
Intangible assets are amortised on a straight-line basis over their expected useful lives, which are one to four years for customer contracts,
three to 10 years for customer relationships, three to seven years for software, and up to five years for brand names, except for customer
contracts and relationships relating to Balfour Beatty Investments North America which are amortised on a basis matching the returns earned
over the life of the underlying contracts and relationships of up to 50 years.
Other intangible assets are amortised over periods up to 10 years.
Balfour Beatty plc Annual Report and Accounts 2023 207
Financial statements
16 Property, plant and equipment
Cost or valuation
At 1 January 2022
Currency translation differences
Transfers
Additions
Removal of fully depreciated assets/assets scrapped
Disposals
At 31 December 2022
Currency translation differences
Transfers
Additions
Reclassified from right-of-use assets (Note 17)
Removal of fully depreciated assets/assets scrapped
Disposals
At 31 December 2023
Accumulated depreciation
At 1 January 2022
Currency translation differences
Charge for the year
Removal of fully depreciated assets/assets scrapped
Disposals
At 31 December 2022
Currency translation differences
Charge for the year
Removal of fully depreciated assets/assets scrapped
Reclassified from right-of-use assets (Note 17)
Disposals
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
Land and
buildings
£m
Plant and
equipment
£m
Assets in
the course of
construction
£m
65
2
–
–
(10)
–
57
(1)
–
4
4
(3)
–
61
(49)
–
(4)
10
–
(43)
1
(4)
3
(1)
–
(44)
17
14
252
9
7
31
(5)
(17)
277
(5)
1
48
–
(5)
(15)
301
(178)
(5)
(23)
5
13
(188)
3
(24)
5
–
13
(191)
110
89
8
–
(7)
–
–
–
1
–
(1)
14
–
–
–
14
–
–
–
–
–
–
–
–
–
–
–
–
14
1
Total
£m
325
11
–
31
(15)
(17)
335
(6)
–
66
4
(8)
(15)
376
(227)
(5)
(27)
15
13
(231)
4
(28)
8
(1)
13
(235)
141
104
Except for land and assets in the course of construction, the costs of property, plant and equipment are depreciated on a straight-line basis
over their expected useful lives. Buildings are depreciated at 2.5% per annum and plant and equipment is depreciated at 4% to 33% per annum.
208
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17 Right-of-use assets
Cost or valuation
At 1 January 2022
Currency translation differences
Additions
Removal of fully depreciated assets/assets scrapped
Disposals
At 31 December 2022
Currency translation differences
Additions
Removal of fully depreciated assets/assets scrapped
Reclassified to property, plant and equipment (Note 16)
Lease modification
Disposals
At 31 December 2023
Accumulated depreciation
At 1 January 2022
Currency translation differences
Charge for the year
Removal of fully depreciated assets/assets scrapped
Disposals
At 31 December 2022
Currency translation differences
Charge for the year
Removal of fully depreciated assets/assets scrapped
Reclassified to property, plant and equipment (Note 16)
Disposals
At 31 December 2023
Carrying amount
At 31 December 2023
At 31 December 2022
18 Investment properties
At 1 January 2022
Depreciation charge for the year
At 31 December 2022
Currency translation differences
Additions
Depreciation charge for the year
At 31 December 2023
Land and
buildings
£m
Plant and
equipment
£m
Motor
vehicles
£m
86
6
19
(11)
(5)
95
(3)
11
(6)
(4)
–
(4)
89
(34)
(2)
(18)
11
3
(40)
1
(18)
6
1
4
(46)
43
55
44
–
13
(10)
(1)
46
(1)
16
(4)
–
–
(2)
55
(19)
(1)
(11)
10
1
(20)
1
(11)
4
–
1
(25)
30
26
92
–
24
(6)
(4)
106
–
47
(14)
–
(1)
(10)
128
(44)
–
(25)
6
3
(60)
–
(28)
14
–
8
(66)
62
46
Total
£m
222
6
56
(27)
(10)
247
(4)
74
(24)
(4)
(1)
(16)
272
(97)
(3)
(54)
27
7
(120)
2
(57)
24
1
13
(137)
135
127
Cost
£m
Accumulated
depreciation
£m
Carrying
amount
£m
35
–
35
(1)
42
–
76
(6)
(2)
(8)
–
–
(2)
(10)
29
(2)
27
(1)
42
(2)
66
Investment properties are held by the Group to generate rental income and capital appreciation. The Group has chosen to account for its investment
property assets under the cost method. In 2023, the Group acquired a new student accommodation property in Tallahassee, Florida for £42m. The
Group has non-recourse project specific financing amounting to £48m (2022: £23m), which is secured through floating charges over the properties.
Once a property is ready for use, the Group ceases capitalisation of interest cost and commences depreciation on the property, on a straight-line
basis over 25 years. The Group generated £7m (2022: £4m) of rental income from its investment properties.
Balfour Beatty plc Annual Report and Accounts 2023 209
Financial statements
19 Investments in joint ventures and associates
19.1 Movements
At 1 January 2022
Currency translation differences
Income recognised
Fair value revaluation of PPP financial assets (Note 32.1)
Fair value revaluation of cash flow hedges (Note 32.1)
Actuarial movements on retirement benefit assets/liabilities (Note 32.1)
Tax on items taken directly to other comprehensive income (Note 32.1)
Dividends
Additions
Return of equity
Loans repaid
Distribution in excess of earnings recognised directly in income statement
Reclassify negative investment to provisions (Note 26)
At 31 December 2022
Currency translation differences
Income recognised
Fair value revaluation of PPP financial assets (Note 32.1)
Fair value revaluation of cash flow hedges (Note 32.1)
Actuarial movements on retirement benefit assets/liabilities (Note 32.1)
Tax on items taken directly to other comprehensive income (Note 32.1)
Dividends
Additions
Disposal of Gloucester Waste (Note 34.2.2)
Return of equity
Impairment of loans to joint ventures and associates (Note 9)
At 31 December 2023
Net
assets +
£m
396
28
105
(124)
29
1
25
(148)
30
(34)
–
2
10
320
(16)
53
20
2
(1)
(5)
(60)
14
(7)
(4)
–
316
Loans ^
£m
107
–
–
–
–
–
–
–
–
–
(1)
–
–
106
–
–
–
–
–
–
–
–
(24)
–
(9)
73
Total
£m
503
28
105
(124)
29
1
25
(148)
30
(34)
(1)
2
10
426
(16)
53
20
2
(1)
(5)
(60)
14
(31)
(4)
(9)
389
+ Includes goodwill arising on acquisition of the Group’s interests in investments in joint ventures and associates.
^ Loans include subordinated debt receivable from joint ventures and associates within the Infrastructure Investments segment.
The principal joint ventures and associates are shown in Note 41.
The amount of the Group’s share of borrowings of joint ventures and associates which was supported by the Group and the Company was £nil
(2022: £nil).
The non-recourse borrowings of joint venture and associate entities relating to infrastructure concessions projects are repayable over periods
extending up to 2057. The non-recourse borrowings arise under facilities taken out by project-specific joint venture and associate concession
companies. The borrowings of each concession company are secured by a combination of fixed and floating charges over that concession
company’s interests in its project’s assets and revenues and the shares in the concession company held by its immediate parent company.
A significant part of these loans has been swapped into fixed rate debt by the use of interest rate swaps.
As disclosed in Note 41(f), the Group has committed to provide its share of further equity funding of joint ventures and associates in
Infrastructure Investments’ projects and military housing concessions. Further, in respect of a number of these investments the Group has
committed not to dispose of its equity interest until construction is complete. As is customary in such projects, banking covenants restrict
the payment of dividends and other distributions.
210
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 19 Investments in joint ventures and associates continued
19.2 Share of results and net assets of joint ventures and associates
Income statement
Revenue
Operating profit excluding gain on disposals of interests
in investments
Gain on disposals of interests in investments
Operating profit
Investment income
Finance costs
Profit before taxation
Taxation
Profit after taxation
Balance sheet
Non-current assets
Intangible assets – Infrastructure Investments intangible
– other
Property, plant and equipment
Investment properties
Investments in joint ventures and associates
Money market funds
PPP financial assets
Military housing projects
Other non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Borrowings – non-recourse
Other current liabilities
Non-current liabilities
Borrowings – non-recourse
Other non-current liabilities
Total liabilities
Net assets
Goodwill
Reclassify negative investment to provisions
Loans to joint ventures and associates
Total investment in joint ventures and associates
^ Including Ireland.
Construction
Services
2023
£m
1,386
33
–
33
10
(1)
42
(6)
36
–
–
21
–
7
–
–
–
107
340
310
785
–
(549)
(94)
(90)
(733)
52
31
10
–
93
Support
Services
2023
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
3
–
(3)
–
–
(3)
–
–
–
–
–
Infrastructure Investments
UK ^
2023
£m
103
2
–
2
74
(73)
3
–
3
14
12
–
–
–
–
905
–
24
146
55
1,156
(36)
(158)
(767)
(147)
(1,108)
48
–
–
73
121
North
America
2023
£m
113
21
2
23
16
(25)
14
–
14
–
–
–
232
–
44
244
113
13
20
5
671
–
(30)
(461)
(5)
(496)
175
–
–
–
175
Total
2023
£m
216
23
2
25
90
(98)
17
–
17
14
12
–
232
–
44
1,149
113
37
166
60
1,827
(36)
(188)
(1,228)
(152)
(1,604)
223
–
–
73
296
Total
2023
£m
1,602
56
2
58
100
(99)
59
(6)
53
14
12
21
232
7
44
1,149
113
144
506
373
2,615
(36)
(740)
(1,322)
(242)
(2,340)
275
31
10
73
389
The Group’s investment in military housing joint ventures’ and associates’ projects is recognised at its remaining equity investment plus the
value of the Group’s accrued returns from the underlying projects. The military housing joint ventures and associates have total non-recourse
net borrowings of £2,090m (2022: £2,249m). Note 41(e) details the Group’s military housing projects.
On certain Infrastructure Investments concessions where net fair value revaluations of PPP financial assets and cash flow hedges resulted
in the Group’s carrying value of these investments being negative, the Group has not recognised losses beyond the carrying value of its
investments. This is because the Group has not committed to provide any further funding to these investments and the borrowings within
these concessions are non-recourse to the Group. At 31 December 2023, the unrecognised cumulative net fair value charges to other
comprehensive income amounted to £66m (2022: £56m).
Balfour Beatty plc Annual Report and Accounts 2023 211
Financial statements
19 Investments in joint ventures and associates continued
19.2 Share of results and net assets of joint ventures and associates continued
Infrastructure Investments
Construction
Services
2022
£m
1,073
24
–
24
3
(1)
26
(6)
20
–
–
33
–
5
–
–
–
106
385
275
804
(89)
(579)
–
(80)
(748)
56
33
10
–
99
Support
Services
2022
£m
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Income statement
Revenue
Operating profit excluding gain on disposals of interests
in investments
Gain on disposals of interests in investments
Operating profit
Investment income
Finance costs
Profit before taxation
Taxation
Profit after taxation
Balance sheet
Non-current assets
Intangible assets – Infrastructure Investments intangible
– other
Property, plant and equipment
Investment properties
Investments in joint ventures and associates
Money market funds
PPP financial assets
Military housing projects
Other non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total assets
Current liabilities
Borrowings – non-recourse
Other current liabilities
Non-current liabilities
Borrowings – non-recourse
Other non-current liabilities
Total liabilities
Net assets
Goodwill
Reclassify negative investment to provisions (Note 26)
Loans to joint ventures and associates
Total investment in joint ventures and associates
^ Including Ireland.
19.3 Aggregate information of joint ventures and associates
The Group’s share of profit from operations
Aggregate carrying amount of the Group’s interest
The Group’s share of profit from operations
Aggregate carrying amount of the Group’s interest
UK ^
2022
£m
99
(3)
–
(3)
72
(66)
3
(2)
1
40
13
–
–
–
–
984
–
27
150
46
1,260
(37)
(124)
(885)
(180)
(1,226)
34
–
–
106
140
North
America
2022
£m
129
21
70
91
13
(20)
84
–
84
–
–
–
257
–
26
260
119
13
26
5
706
–
(12)
(502)
(5)
(519)
187
–
–
–
187
Total
2022
£m
228
18
70
88
85
(86)
87
(2)
85
40
13
–
257
–
26
1,244
119
40
176
51
1,966
(37)
(136)
(1,387)
(185)
(1,745)
221
–
–
106
327
Joint ventures
2023
£m
Associates
2023
£m
42
276
11
113
Joint ventures
2022
£m
Associates
2022
£m
89
300
16
126
Total
2022
£m
1,302
42
70
112
88
(87)
113
(8)
105
40
13
33
257
5
26
1,244
119
146
561
326
2,770
(126)
(715)
(1,387)
(265)
(2,493)
277
33
10
106
426
Total
2023
£m
53
389
Total
2022
£m
105
426
212
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19 Investments in joint ventures and associates continued
19.4 Details of material joint ventures
Proportion of the Group’s ownership interest in the joint venture
Income statement
Revenue
Underlying operating profit
Investment income
Finance costs
Income tax charge
Profit
Total other comprehensive income/(loss)
Total comprehensive income/(loss) (100%)
Group’s share of total comprehensive income/(loss)
Dividends received by the Group during the year
Balance sheet
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Current liabilities
Trade and other payables
Provisions
Borrowings – non-recourse
Other current liabilities
Non-current liabilities
Trade and other payables
Provisions
Borrowings – non-recourse
Other non-current liabilities (including shareholder loans)
Net assets (100%)
Reconciliation of the above summarised financial information to the carrying
amount of the interest in the above joint ventures recognised in the
consolidated financial statements:
Net assets of joint venture (100%)
Group’s share of net assets
Add: Group’s interest in shareholder loans
Goodwill
Carrying amount of the Group’s interest in the joint venture
Gammon China Ltd
Connect Plus (M25) Ltd
2023
£m
50%
2,715
65
21
(3)
(12)
71
–
71
36
36
2022
£m
50%
2,135
72
6
(3)
(12)
63
2
65
33
33
2023
£m
15%
231
20
146
(101)
(15)
50
18
68
10
5
2022
£m
15%
270
9
140
(101)
(9)
39
(274)
(235)
(35)
6
270
289
1,682
1,667
654
613
1,267
(897)
(49)
–
(101)
(1,047)
(126)
(33)
(189)
(20)
(368)
122
122
61
–
31
92
743
541
1,284
(914)
(48)
(179)
(142)
(1,283)
(94)
(28)
–
(37)
(159)
131
123
74
197
(64)
–
(19)
(10)
(93)
–
–
(1,137)
(419)
(1,556)
230
131
66
–
33
99
230
35
26
–
61
133
65
198
(56)
–
(19)
(5)
(80)
–
–
(1,167)
(421)
(1,588)
197
197
30
27
–
57
Balfour Beatty plc Annual Report and Accounts 2023 213
Financial statements
19 Investments in joint ventures and associates continued
19.5 Cash flow from/(to) joint ventures and associates
Infrastructure Investments
Infrastructure Investments
UK ^
2023
£m
North
America
2023
£m
Other
2023
£m
Total
2023
£m
UK ^
2022
£m
North
America
2022
£m
Other
2022
£m
Total
2022
£m
9
7
(9)
(9)
–
–
–
7
15 +
36
–
(5)
(5)
–
4 +
–
–
–
–
–
–
–
60
7
(14)
(14)
–
4
–
14
36
57
11
10
(7)
(8)
1
–
–
14
103 x
34
148
–
(22)
(22)
–
34 x
–
115
–
–
–
–
–
1
10
(29)
(30)
1
34
1
35
164
Cash flows from investing activities
Dividends from joint ventures and
associates
Subordinated debt interest
received
Investments in and loans to joint
ventures and associates
Equity
Subordinated debt repaid
Return of equity from joint
ventures and associates
Disposal of investments in joint
ventures
Net cash flow from joint
ventures and associates
^ Including Ireland.
+ In 2023, dividends and return of equity from joint ventures and associates included £1m and £4m respectively of proceeds generated from the disposal of Moretti Apartments.
x
In 2022, dividends and return of equity from joint ventures and associates included £59m and £34m respectively of proceeds generated from the disposal of Infrastructure Investments
assets, of which £12m, £50m, £4m, £13m and £14m respectively of proceeds were generated from the disposal of Regard at Med Center, Aspire at Discovery Park, Preserve at Southwind,
Preserve at Bartlett and Waterchase Apartments.
19.6 Share of reserves of joint ventures and associates
At 1 January 2022
Currency translation differences
Income recognised
Fair value revaluation of PPP financial assets
Fair value revaluation of cash flow hedges
Actuarial movements on retirement benefit assets/liabilities
Tax on items taken directly to other comprehensive income
Dividends
Recycling of revaluation reserves to the income statement on disposal
At 31 December 2022
Currency translation differences
Income recognised
Fair value revaluation of PPP financial assets
Fair value revaluation of cash flow hedges
Actuarial movements on retirement benefit assets/liabilities
Tax on items taken directly to other comprehensive income
Dividends
Recycling of revaluation reserves to the income statement on disposal
At 31 December 2023
Accumulated
profit/(loss)
£m
Hedging
reserve
£m
PPP
financial
assets
£m
Currency
translation
reserve
£m
Total
(Note 32.1)
£m
8
–
105
–
–
1
–
(148)
–
(34)
–
53
–
–
(1)
–
(60)
–
(42)
(54)
–
–
–
29
–
(5)
–
–
(30)
–
–
–
2
–
(1)
–
(9)
(38)
80
–
–
(124)
–
–
30
–
–
(14)
–
–
20
–
–
(4)
–
6
8
38
23
–
–
–
–
–
–
(3)
58
(13)
–
–
–
–
–
–
–
45
72
23
105
(124)
29
1
25
(148)
(3)
(20)
(13)
53
20
2
(1)
(5)
(60)
(3)
(27)
214
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 20 Investments
20.1 Group
At 1 January 2022
Currency translation differences
Additions
Fair value (losses)/gains
Interest accrued
Benefits paid
Dividends
At 31 December 2022
Additions
Fair value gains/(losses)
Maturities
Interest accrued
Benefits paid
Dividends
At 31 December 2023
Corporate
bonds
£m
Investments in
mutual funds
£m
Other
£m
Total
£m
2
–
–
–
–
–
–
2
–
–
(2)
–
–
–
–
24
2
–
(5)
1
(2)
–
20
–
1
–
1
(3)
–
19
9
–
7
6
–
–
(4)
18
2
(1)
(7)
–
–
(3)
9
35
2
7
1
1
(2)
(4)
40
2
–
(9)
1
(3)
(3)
28
The investments in mutual funds comprise holdings in a number of funds, based on employees’ investment elections, in respect of the
deferred compensation obligations of the Group as disclosed in Note 30.2. The fair value of these investments is £19m (2022: £20m),
determined by the market price of the funds at the reporting date.
Other investments relate to the Group’s interest in two Limited Partnerships (LPs) incorporated in Bermuda. The principal activity of the two LPs is
to receive carried interest from a fund. Carry interest refers to a performance fee payable once the performance of the fund exceeds agreed hurdles.
During the year, the Group recognised a fair value loss in relation to its carry interest of £1m (2022: £6m gain). The fund matures in January 2025.
All gains will be realised by the final maturity date. Dividends of £3m were received from the fund in the year (2022: £4m).
Included in other investments is also £2m (2022: £7m) of cash held in term deposits that have a maturity date of more than three months.
20.2 Company
Investment in subsidiaries
Provisions
2023
£m
1,771
(26)
1,745
2022
£m
1,759
(26)
1,733
The increase of investment in subsidiaries of £12m (2022: £7m) relates to new capital injected into the Company’s existing subsidiaries.
Including provisions recognised to date, the Directors have assessed the Company’s investment in subsidiaries to be fully recoverable.
21 PPP financial assets
At 1 January 2022
Income recognised in the income statement:
– interest income (Note 8)
Losses recognised in the statement of comprehensive income:
– fair value movements
Other movements:
– cash expenditure
– cash received
At 31 December 2022
Income recognised in the income statement:
– interest income (Note 8)
Other movements:
– cash expenditure
– cash received
At 31 December 2023
Economic
infrastructure
£m
Social
infrastructure
£m
23
2
(3)
2
(3)
21
2
2
(6)
19
7
–
–
–
(2)
5
–
–
–
5
Total
£m
30
2
(3)
2
(5)
26
2
2
(6)
24
Assets constructed by PPP subsidiary concession companies are classified as financial assets measured at fair value through OCI and are
denominated in sterling. The maximum exposure to credit risk at the reporting date is the fair value of the PPP financial assets.
There were no impairment provisions in 2023 or 2022.
Balfour Beatty plc Annual Report and Accounts 2023 215
Financial statements
22 Inventories
Raw materials and consumables
Development and housing land and work in progress
Finished goods and goods for resale
2023
£m
69
54
1
124
2022
£m
81
32
1
114
23 Contract balances
The timing of revenue recognition, billings and cash collection results in trade receivables (billed amounts), contract assets (unbilled amounts)
and customer advances and deposits (contract liabilities) on the Group’s balance sheet. For services in which revenue is earned over time,
amounts are billed in accordance with contractual terms, either at periodic intervals or upon achievement of contractual milestones. The timing
of revenue recognition is measured in accordance with the progress of delivery on a contract which could either be in advance or in arrears of
billing, resulting in either a contract asset or a contract liability.
23.1 Contract assets
At 1 January 2022
Currency translation differences
Transfers from contract assets recognised at the beginning of the year to receivables
Increase related to services provided in the year
Reclassified from contract provisions (Note 26)
Reclassified from contract liabilities (Note 23.2)
Impairments on contract assets recognised at the beginning of the year
At 31 December 2022
Currency translation differences
Transfers from contract assets recognised at the beginning of the year to receivables
Increase related to services provided in the year
Reclassified from contract liabilities (Note 23.2)
Impairments on contract assets recognised at the beginning of the year
At 31 December 2023
23.2 Contract liabilities
At 1 January 2022
Currency translation differences
Revenue recognised against contract liabilities at the beginning of the year
Increase due to cash received, excluding amounts recognised as revenue during the year
Reclassified to contract assets (Note 23.1)
At 31 December 2022
Currency translation differences
Revenue recognised against contract liabilities at the beginning of the year
Increase due to cash received, excluding amounts recognised as revenue during the year
Reclassified to contract assets (Note 23.1)
At 31 December 2023
£m
214
6
(196)
304
(1)
(21)
(6)
300
(4)
(241)
265
(11)
(9)
300
£m
(678)
(39)
578
(547)
21
(665)
19
561
(528)
11
(602)
The amount of revenue recognised in the year from performance obligations satisfied (or partially satisfied) in previous periods amounted to
£4m (2022: £12m).
216
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 Trade and other receivables
Current
Trade receivables
Less: provision for impairment of trade receivables
Due from subsidiaries
Due from joint ventures and associates
Due from joint operation partners
Contract fulfilment assets
Contract retentions receivable
Accrued income
Prepayments
Other receivables
Non-current
Due from subsidiaries
Due from joint ventures and associates
Contract fulfilment assets
Contract retentions receivable
Other receivables
Total trade and other receivables
Comprising
Financial assets (Note 40)
Non-financial assets – prepayments
Group
2023
£m
Group
2022
£m
Company
2023
£m
Company
2022
£m
484
(8)
476
–
16
4
19
227
13
57
82
894
–
111
40
150
7
308
1,202
1,145
57
1,202
526
(3)
523
–
16
6
13
194
15
56
58
881
–
86
31
166
3
286
1,167
1,111
56
1,167
–
–
–
–
–
–
–
–
–
–
1
1
279
1
–
–
3
283
284
284
–
284
–
–
–
1,560
–
–
–
–
–
–
–
1,560
–
1
–
–
1
2
1,562
1,562
–
1,562
Based on prior experience, an assessment of the current economic environment and a review of the financial circumstances of individual
customers, the Directors believe no further credit risk provision is required in respect of the financial assets above.
The Directors consider that the carrying values of current and non-current trade and other receivables approximate their fair values.
Amounts due from subsidiaries of the Company are repayable on demand and have been adjusted for expected credit losses, which are
not material.
Maturity profile of impaired trade receivables and trade receivables past due but not impaired
Up to three months
Three to six months
Six to nine months
Nine to 12 months
More than 12 months
Impaired
Past due but not impaired
Group
2023
£m
Group
2022
£m
Group
2023
£m
Group
2022
£m
4
–
1
1
2
8
–
–
1
–
2
3
26
7
6
5
10
54
37
8
4
3
29
81
At 31 December 2023, trade receivables of £54m (2022: £81m) were past due but not impaired. These relate to a number of individual
customers where there is no reason to believe that the receivable is not recoverable.
Balfour Beatty plc Annual Report and Accounts 2023 217
Financial statements
25 Trade and other payables
Current
Trade and other payables
Accruals
Contract retentions payable
VAT, payroll taxes and social security
Due to subsidiaries
Non-current
Accruals
Contract retentions payable
Due to joint ventures and associates
Borrowings from subsidiaries
Total trade and other payables
Comprising
Financial liabilities (Note 40)
Non-financial liabilities:
– accruals not at amortised cost
– VAT, payroll taxes and social security
Group
2022
£m
Company
2023
£m
Company
2022
£m
Group
2023
£m
602
788
213
131
–
1,734
9
104
9
–
122
1,856
605
741
175
74
–
1,595
10
122
9
–
141
1,736
1,708
1,638
17
131
1,856
24
74
1,736
–
3
–
–
588
591
–
–
3
271
274
865
865
–
–
865
–
6
–
–
2,046
2,052
–
–
3
–
3
2,055
2,055
–
–
2,055
Total
2023
£m
89
28
5
122
Total
2022
£m
75
62
4
141
Borrowings from subsidiaries include a loan to the Company from Balfour Beatty Overseas Investments Limited. The loan matures in
December 2033 and bears interest at 1.35% plus SONIA. Amounts due to the Company’s subsidiaries are repayable on demand.
Maturity profile of the Group’s non-current financial liabilities at 31 December
Due within one to two years
Due within two to five years
Due after more than five years
Due within one to two years
Due within two to five years
Due after more than five years
Contract
retentions
payable
2023
£m
Due to
joint
ventures and
associates
2023
£m
81
23
–
104
3
1
5
9
Contract
retentions
payable
2022
£m
Due to
joint
ventures and
associates
2022
£m
70
52
–
122
1
4
4
9
Accruals
2023
£m
5
4
–
9
Accruals
2022
£m
4
6
–
10
The Directors consider that the carrying values of current and non-current trade and other payables and contract retentions payable approximate
their fair values. The fair value of non-current trade and other payables and contract retentions payable has been determined by discounting
future cash flows using yield curves and exchange rates prevailing at the reporting date.
218
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 Provisions
Contract
provisions
£m
Employee
provisions
£m
Other
provisions
£m
At 1 January 2022
Currency translation differences
Reclassified from accruals
Charged/(credited) to the income statement:
– additional provisions
– unused amounts reversed
Utilised during the year
Reclassified to contract assets (Note 23)
Reclassified negative investment in Group’s investments in joint ventures and associates
(Note 19.2)
At 31 December 2022
Currency translation differences
Charged/(credited) to the income statement:
– additional provisions
– unused amounts reversed
Utilised during the year
At 31 December 2023
321
9
–
134
(48)
(80)
(1)
–
335
(3)
170
(59)
(91)
352
36
–
–
6
(2)
(7)
–
–
33
–
9
(2)
(7)
33
22
1
1
2
–
(3)
–
10
33
(1)
4
–
(4)
32
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
Contract
provisions
2023
£m
Employee
provisions
2023
£m
Other
provisions
2023
£m
190
97
49
16
352
8
4
10
11
33
18
7
4
3
32
Total
2023
£m
216
108
63
30
417
Contract
provisions
2022
£m
Employee
provisions
2022
£m
Other
provisions
2022
£m
174
77
53
31
335
7
7
10
9
33
23
3
4
3
33
Total
£m
379
10
1
142
(50)
(90)
(1)
10
401
(4)
183
(61)
(102)
417
Total
2022
£m
204
87
67
43
401
Contract provisions include construction insurance liabilities, principally in the Group’s self-insurance arrangements, which cover claims relating
to contractors all risk, public liability and professional indemnity. Contract provisions also include loss provisions, and defect and warranty
provisions on contracts, primarily construction contracts, that have reached practical completion. There is a latent defect period for which the
provision is held, but where there are known identified issues then the provision may be required to cover rectification work over a more
extended period.
Employee provisions are principally liabilities relating to employers’ liability insurance retained in the Group’s self-insurance arrangements.
Other provisions principally comprise: motor and other insurance liabilities in the Group’s self-insurance arrangements; legal claims and costs, where
provision is made for the Directors’ best estimate of known legal claims, investigations and legal actions in progress; and environmental provisions.
The Group takes actuarial advice when establishing the level of provisions in the Group’s self-insurance arrangements and certain other
categories of provision.
Insurance-related provisions within these categories were £70m (2022: £64m) as follows: Contract provisions £49m (2022: £44m); Employee
provisions £16m (2022: £16m); and Other, mainly motor, provisions £5m (2022: £4m).
Balfour Beatty plc Annual Report and Accounts 2023 219
Financial statements
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
27 Cash and cash equivalents and borrowings
27.1 Group
Unsecured borrowings at amortised cost
– Bank overdrafts
– US private placement (Note 27.2)
Cash and deposits at amortised cost
Term deposits at amortised cost
Cash and cash equivalents (excluding infrastructure
concessions)
Non-recourse infrastructure concessions project finance loans
at amortised cost with final maturity between 2024 and 2072
Infrastructure concessions cash and cash equivalents
Net cash/(borrowings)
Current
2023
£m
Non-current
2023
£m
(104)
–
(104)
890
218
1,108
1,004
(9)
306
297
1,301
–
(162)
(162)
–
–
–
(162)
(561)
–
(561)
(723)
Total
2023
£m
(104)
(162)
(266)
890
218
1,108
842
(570)
306
(264)
578
Current
2022
£m
Non-current
2022
£m
–
(173)
(173)
828
332
1,160
987
(30)
19
(11)
976
–
(172)
(172)
–
–
–
(172)
(231)
–
(231)
(403)
Total
2022
£m
–
(345)
(345)
828
332
1,160
815
(261)
19
(242)
573
The Company, together with certain of its UK subsidiaries, operates a notional pooling facility with a main relationship UK clearing bank
where overdraft balances are offset with cash balances and interest is calculated on a net basis. During the year ended 31 December 2023,
the Group maintained a net cash position on this pooling facility, so there was no interest payable to the bank in respect of these bank
overdrafts. Overdraft balances and cash held at this bank have been reported gross in the Group balance sheet at 31 December 2023 as
there was no intention to settle the bank overdrafts at that date.
The loans relating to project finance arise under non-recourse facilities taken out by project-specific subsidiary companies. The loans of each
company are secured by a combination of fixed and floating charges over that company’s interests in its project’s assets and revenues and the
shares in the company held by its immediate parent company.
Term deposits are held on a short-term basis and are readily accessible to the Group at any time with insignificant break costs.
Included in cash and cash equivalents is restricted cash of £12m (2022: £3m) held by the Group’s self-insurance company, Delphian Insurance
Company Ltd, which is subject to Isle of Man insurance solvency regulations.
Cash and cash equivalents also include: £77m (2022: £194m) within construction project bank accounts which is used for project specific
expenditure; £369m (2022: £253m) in relation to the Group’s share of cash held by joint operations which is used for expenditure within the joint
operation projects; and £306m (2022: £19m) relating to maintenance and other reserve accounts in Infrastructure Investments subsidiaries, of
which £277m is reserved for the construction of University of Sussex’s West Slope student accommodation project.
Maturity profile of the Group’s borrowings at 31 December
Due on demand or within one year
Due within one to two years
Due within two to five years
Due after more than five years
Non-recourse
project
finance
2023
£m
Other
borrowings
2023
£m
(9)
(10)
(181)
(370)
(570)
(104)
(39)
(27)
(96)
(266)
Non-recourse
project
finance
2022
£m
Other
borrowings
2022
£m
(30)
(8)
(25)
(198)
(261)
(173)
–
(70)
(102)
(345)
Total
2023
£m
(113)
(49)
(208)
(466)
(836)
Total
2022
£m
(203)
(8)
(95)
(300)
(606)
The carrying values of the Group’s borrowings are equal to the fair values at the reporting date. The fair values are determined by discounting
future cash flows using yield curves and exchange rates prevailing at the reporting date.
Undrawn Group committed borrowing facilities at 31 December in respect of which all conditions precedent were satisfied
Expiring in one year or less
Expiring in more than one year but not more than two years
Expiring in more than two years
Non-recourse
project
finance
2023
£m
Other
borrowings
2023
£m
–
–
–
–
30
–
475
505
Non-recourse
project
finance
2022
£m
Other
borrowings
2022
£m
–
–
–
–
–
405
–
405
Total
2023
£m
30
–
475
505
Total
2022
£m
–
405
–
405
In June 2023, the Group completed the refinancing of its core £375m revolving credit facility which was set to expire in October 2024,
replacing it with a new £475m facility that will expire in June 2027 (the RCF). The RCF has an extension option for a further year to June 2028,
with the agreement of the lending banks, and its terms and conditions are materially the same as the prior facility. The RCF is a Sustainability
Linked Loan (SLL), under the terms of which the Group is incentivised to deliver annual measurable performance improvement in three key
areas: Carbon Emissions, Social Value generation and an independent Environment, Social and Governance (ESG) rating score – these areas of
performance and the associated metrics are to be reviewed and updated in 2024.
220
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27 Cash and cash equivalents and borrowings continued
27.1 Group continued
The Group also has a £30m bilateral committed facility which is also a SLL. This facility is on similar terms to the main RCF and has an initial maturity
of December 2024, but following the refinancing of the main RCF the Group holds an extension option to extend maturity on this bilateral facility to
December 2027. As at 31 December 2023 the Group had not triggered the bilateral committed facility’s extension option.
The RCF and the £30m bilateral committed facility were both undrawn at 31 December 2023.
27.2 US private placement
In March 2013, the Group raised US$350m (£231m) of borrowings through a US private placement (USPP) of a series of notes with an average
coupon of 4.94% per annum and an average maturity of 9.3 years. On 7 March 2018, the Group repaid the first tranche of these notes amounting
to US$45m (£32.5m). On 5 March 2020, the Group repaid the second tranche of these notes amounting to US$46m (£36m). On 3 March
2023, the Group repaid the third tranche of these notes amounting to US$209m (£169m). At 31 December 2023, US$50m (£39m) remain with
a coupon of 5.3% and a remaining maturity of 1.2 years.
In June 2022, the Group raised US$158m (£130m) of debt in the form of new USPP notes on terms and conditions materially the same as the
existing USPP notes. The new debt comprises US$35m of notes maturing in June 2027 at a fixed coupon of 6.31%, US$80m of notes
maturing in June 2029 at a fixed coupon of 6.39% and US$43m of notes maturing in June 2032 at a fixed coupon of 6.45%. At 31 December
2023, the US$158m new USPP notes have an average coupon of 6.4% per annum and a remaining average maturity of 5.9 years.
Current
2023
£m
Non-current
2023
£m
150
218
(58)
–
310
–
–
–
(162)
(162)
Total
2023
£m
150
218
(58)
(162)
148
Current
2022
£m
Non-current
2022
£m
95
329
(45)
(173)
206
–
–
–
(172)
(172)
27.3 Company
Cash
Term deposits
Bank overdrafts
US private placement (Note 27.2)
Net cash/(borrowings)
28 Lease liabilities
28.1 Movements
At 1 January 2022
Currency translation differences
Additions
Payments made for lease liabilities+
Disposals
Interest on lease liabilities
At 31 December 2022
Currency translation differences
Additions
Lease modification
Payments made for lease liabilities+
Disposals
Interest on lease liabilities
At 31 December 2023
+ Payments made for lease liabilities include an interest element of £6m (2022: £6m).
28.2 Maturity analysis – contractual undiscounted cash flows
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
Total undiscounted cash flows
Land and
buildings
2023
£m
Plant and
equipment
2023
£m
Motor
vehicles
2023
£m
13
10
17
13
53
10
7
14
4
35
27
19
20
–
66
Total
2023
£m
50
36
51
17
154
28.3 Amounts recognised in the income statement
Interest on lease liabilities
Expenses relating to short-term leases
Total
2022
£m
95
329
(45)
(345)
34
Total
£m
129
4
54
(58)
(3)
6
132
(2)
75
(1)
(63)
(4)
6
143
Total
2022
£m
49
32
41
17
139
2022
£m
6
121
Land and
buildings
£m
Plant and
equipment
£m
Motor
vehicles
£m
55
4
17
(19)
(2)
3
58
(2)
11
–
(20)
(1)
3
49
25
–
13
(12)
–
1
27
–
17
–
(13)
(1)
1
31
49
–
24
(27)
(1)
2
47
–
47
(1)
(30)
(2)
2
63
Land and
buildings
2022
£m
Plant and
equipment
2022
£m
Motor
vehicles
2022
£m
16
11
20
13
60
9
7
10
4
30
24
14
11
–
49
2023
£m
6
123
Balfour Beatty plc Annual Report and Accounts 2023 221
Financial statements 29 Deferred tax
29.1 Group
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
Net deferred tax position at 31 December
Deferred tax assets
Deferred tax liabilities
Movement for the year in the net deferred tax position
At 1 January 2022
Currency translation differences
Credited to income statement
Credited to other comprehensive income
Credited to equity
Research and development tax credits
At 31 December 2022
Currency translation differences
Charged to income statement
Credited to other comprehensive income
Charged to equity
Research and development tax credits
At 31 December 2023
Group
2023
£m
188
(160)
28
Group
2022
£m
176
(152)
24
Group
£m
5
(17)
17
19
2
(2)
24
9
(48)
48
(2)
(3)
28
The table below shows the deferred tax assets and liabilities before being offset where they relate to income taxes levied by the same tax authority.
Net deferred tax position
Depreciation
in excess
of capital
allowances
£m
Retirement
benefits
£m
Unrelieved
trading
losses
£m
Share-based
payments
£m
Provisions
£m
Fair value
adjustments
£m
Derivatives
£m
Other GAAP
differences
£m
Research
and
development
credits
£m
At 1 January 2022
Currency translation differences
Transfers
Credited/(charged) to income
statement
Credited/(charged) to other
comprehensive income
Credited to equity
Research and development tax
credits
At 31 December 2022
Currency translation differences
(Charged)/credited to income
statement
Credited/(charged) to other
comprehensive income
Charged to equity
Research and development tax credits
At 31 December 2023
35
(1)
–
(8)
–
–
–
26
1
(24)
–
–
–
3
(69)
–
–
(11)
20
–
–
(60)
–
(11)
49
–
–
(22)
150
1
–
48
–
–
–
199
–
6
–
–
–
205
5
–
–
–
–
2
–
7
–
1
–
(2)
–
6
50
6
–
(5)
–
–
–
51
(3)
(85)
(12)
(1)
(6)
–
–
–
(104)
6
(24)
–
–
–
–
24
(1)
–
–
(99)
1
–
–
–
(1)
–
–
–
–
–
–
–
–
–
(87)
(11)
1
(1)
–
–
–
(98)
5
4
–
–
–
(89)
5
–
–
–
–
–
(2)
3
–
–
–
–
(3)
–
Total
£m
5
(17)
–
17
19
2
(2)
24
9
(48)
48
(2)
(3)
28
As a result of the adoption of the amendment to IAS 12 in relation to Deferred Tax related to Assets and Liabilities arising from a Single
Transaction, the Group has provided further disclosure below to show the assets and liabilities to which the depreciation in excess of capital
allowances relate.
At 1 January 2023
Currency translation differences
(Charged)/credited to income statement
At 31 December 2023
222
Balfour Beatty plc Annual Report and Accounts 2023
Property,
plant and
equipment
£m
Right-of-use
assets
£m
Lease
liabilities
£m
Depreciation
in excess
of capital
allowances
£m
25
1
(25)
1
(8)
–
3
(5)
9
–
(2)
7
26
1
(24)
3
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29 Deferred tax continued
29.1 Group continued
Net deferred tax position continued
At the balance sheet date, the Group had unused trading tax losses of £1,207m (2022: £1,193m) available for offset against future profits,
of which £828m (2022: £835m) arose in the UK, £37m (2022: £8m) in the US and £342m (2022: £350m) in other jurisdictions.
A deferred tax asset has been recognised in respect of £821m (2022: £794m) of such losses, of which £786m (2022: £789m) have been
recognised in the UK and £35m (2022: £5m) in the US. In considering the amount of deferred tax asset to be recognised for UK and US tax
losses, the potential use of those losses based on the latest current and forecast business performance was assessed, and losses were
recognised where it is probable that they will be utilised.
No deferred tax asset has been recognised in respect of the losses of £386m (2022: £399m) where it is considered that it is not probable that
they will be utilised due to restrictions in use and unpredictability of future profitability.
Of the Group’s tax losses, £7m (2022: £3m) will expire within 20 years after the year in which they arose, using losses incurred in earlier years
before those incurred in later years. Other losses will be carried forward indefinitely.
In addition to the losses referred to above, at 31 December 2023 the Group had UK capital losses available to carry forward of £1.4bn
(2022: £1.4bn). No deferred tax assets have been recognised in respect of these losses as there are no capital profits forecast against
which these losses can be utilised.
Deferred tax liabilities on fair value adjustments of £99m (2022: £104m) relate to temporary differences arising on goodwill and intangibles.
Deferred tax liabilities on other GAAP differences of £89m (2022: £98m) relate to temporary differences on joint ventures.
At the reporting date, undistributed reserves of non-UK subsidiaries, joint ventures and associates for which deferred tax liabilities have not
been recognised were £607m (2022: £665m) in respect of subsidiaries and £42m (2022: £45m) in respect of joint ventures and associates.
No liability has been recognised in respect of these differences because either no temporary difference arises or the timing of any distribution
is under the Group’s control and no distribution which gives rise to taxation is contemplated.
29.2 Company
The table below shows the deferred tax assets and liabilities before being offset where they relate to income taxes levied by the same tax authority.
At 1 January 2022
Credited to income statement
Credited to equity
At 31 December 2022
Credited to income statement
Credited to equity
At 31 December 2023
Unrelieved
trading
losses
£m
Share-based
payments
£m
Total
deferred
tax assets
£m
–
1
–
1
3
–
4
–
–
1
1
–
–
1
–
1
1
2
3
–
5
30 Retirement benefit assets and liabilities
30.1 Introduction
The Group, through trustees, operates a number of defined contribution and defined benefit pension schemes.
Defined contribution schemes are those where the Group’s obligation is limited to the amount that it contributes to the scheme and the
scheme members bear the investment and actuarial risks.
Defined benefit schemes are schemes other than defined contribution schemes where the Group’s obligation is to provide specified benefits
on retirement.
IAS 19 Employee Benefits (IAS 19) prescribes the accounting for defined benefit schemes in the Group’s financial statements. Obligations are
calculated using the projected unit credit method and discounted to a net present value using the market yield on high-quality corporate bonds.
The pension expense relating to current service cost is charged to contracts or overheads based on the function of scheme members and is
included in cost of sales and net operating expenses. The net finance income arising from the expected interest income on plan assets and
interest cost on scheme obligations is included in investment income. Actuarial gains and losses are reported in the statement of
comprehensive income. The IAS 19 accounting valuations are set out in Note 30.2.
A different calculation is used for the formal triennial funding valuations undertaken by the scheme trustees to determine the future Company
contribution level necessary so that over time the scheme assets will meet the scheme obligations. The principal difference between the two
methods is that under the funding basis the obligations are discounted using a rate of return reflecting the composition of the assets in the
scheme, rather than the rate of return on high-quality corporate bonds as required by IAS 19 for the financial statements. Details of the latest
formal triennial funding valuations are set out in Note 30.3.
The assets of the schemes do not include any direct holdings of the Group’s financial instruments, nor any property occupied by, or other
assets of, the Group.
Balfour Beatty plc Annual Report and Accounts 2023 223
Financial statements 30 Retirement benefit assets and liabilities continued
30.1 Introduction continued
Principal schemes
The Group’s principal schemes are the Balfour Beatty Pension Fund (BBPF), which includes defined contribution and defined benefit sections,
and the Balfour Beatty Shared Cost Section of the Railways Pension Scheme (RPS). The defined benefit sections of both schemes are funded
and closed to new members with the exception of employees where employment has transferred to the Group under certain agreed
arrangements. Pension benefits for defined benefit schemes are based on employees’ pensionable service and their pensionable salary.
The schemes operate under trust law and are managed and administered by trustees on behalf of the members in accordance with the terms
of the trust deed and rules and relevant legislation. Defined benefit contributions are determined in consultation with the trustees, after taking
actuarial advice. The trustees are responsible for establishing the investment strategy and ensuring that there are sufficient assets to meet the
cost of current and future benefits.
These schemes expose the Group to investment and actuarial risks where additional contributions may be required if assets are not sufficient
to pay future pension benefits:
» investment risk: the investment portfolio is subject to a range of risks typical of the investments held, for example, credit risk on corporate bond
holdings; and
» actuarial risk: the ultimate cost of providing pension benefits is affected by inflation rates and members’ life expectancy. The net present value
of the obligations is affected by the market yield on high-quality corporate bonds used to discount the obligations.
Changes in the principal actuarial assumptions based on market data, such as inflation and the discount rate, and experience, such as life
expectancy, expose the Group to fluctuations in the net IAS 19 liability and the net finance cost.
Balfour Beatty Pension Fund
The investment strategy of the BBPF is to hold assets of appropriate liquidity and marketability to generate income and capital growth.
The BBPF invests partly in a diversified range of assets including corporate bonds, equities and hedge funds in anticipation that, over the
longer term, they will grow in value faster than the scheme’s obligations. The BBPF has been undertaking a phased withdrawal from equities
and hedge funds. The only residual equities held are a very small amount of emerging market equities held via pooled funds. The remaining
BBPF assets are principally fixed and index-linked bonds and derivatives, providing protection against movements in inflation and interest rates
and hence enhancing the resilience of the funding level of the scheme. The performance of the assets is measured against market indices.
The BBPF’s defined benefit section is exposed to a number of liability related risks, namely changes in gilt yields, inflation and the longevity
of the scheme’s members.
With respect to interest rate and inflation risks, the trustee seeks to mitigate the majority of these risks through its liability hedging portfolio.
This is a segregated portfolio of hedging assets which includes physical gilts, gilt repurchase agreements and interest rate and inflation swaps.
The current objective of the portfolio is to hedge 100% of the impact that changes in interest rates and inflation can have on the funding position.
The BBPF’s Fiduciary Manager and Investment Committee closely monitor the collateral being held within the liability hedging portfolio
to ensure that the scheme holds sufficient collateral to support its liability hedging programme.
With respect to longevity risk the BBPF has a longevity swap contract as part of the investment portfolio which will provide income in the
event that pensions are paid out for longer. The fair value of the longevity swap has been included as part of the fair value of plan assets.
The Group operates a Scottish Limited Partnership (SLP) structure which holds the Group’s 40% interest in the Birmingham Hospital PFI
investment and the Group’s 15% share of the Connect Plus (M25) asset. The BBPF is a partner in the SLP and is entitled to a share of the
income of the SLP. In accordance with IFRS 10 Consolidated Financial Statements, the SLP is deemed to be controlled by the Group, which
retains the ability to substitute the investment in the Birmingham Hospital PFI investment and the Connect Plus (M25) asset for other
investments from time to time.
Under IAS 19, the investment held by the BBPF in the SLP does not constitute a plan asset and therefore the pension surplus presented in these
financial statements does not reflect the BBPF’s interest in the SLP. Distributions from the SLP to the BBPF will be reflected in the Group’s
financial statements as pension contributions on a cash basis. In 2023, the BBPF received distributions of £2m from the SLP (2022: £2m).
Balfour Beatty and the trustees of the BBPF have reconfirmed their commitment to a journey plan approach to managing the BBPF with the
aim of reaching self-sufficiency by 2027. The Company and trustees have agreed the 31 March 2022 formal valuation and as a result Balfour
Beatty made deficit contributions to the BBPF of £19m in 2023 (2022: £35m) and has agreed to pay deficit contributions to the BBPF of £24m
in 2024 and £6m in 2025. The Company and the trustees expect to take further steps over the coming months to reduce the overall risk in the
scheme and the Company has agreed that additional amounts will become payable at £2m per month from March 2025 if the BBPF’s
performance is materially different from that expected. The next formal triennial funding valuation is due with effect from 31 March 2025.
This agreement constitutes a minimum funding requirement (MFR) under IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction. The Group has not recognised any liabilities in relation to this MFR as any surplus of deficit
contributions to the BBPF would be recoverable by way of a refund and the Group has the unconditional right to the surplus and controls
the run-off of the benefit obligations once all other obligations of the BBPF have been settled.
224
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 30 Retirement benefit assets and liabilities continued
30.1 Introduction continued
Railways Pension Scheme
The RPS is a shared cost scheme. The legal responsibility of the Group in the RPS is approximately 60% of the scheme’s assets and liabilities
based on the relevant provisions of the trust deed and rules and trustee guidelines regarding future surplus apportionments and deficit financing.
The assumed cost of providing future service benefits is split between the Group and the members in the ratio 60:40.
Because of a declining population of active members, it has become less likely that the Group’s costs of meeting any deficits would be capped
in line with its strict legal obligation of 60% as members might only be able to afford to fund a small proportion of the scheme deficit. It has
therefore been assumed that the Group will be responsible for 100% of any deficit and the balance sheet assets and obligations disclosed,
therefore, are equal to 100% of the total scheme assets and obligations.
The RPS invests in a range of pooled investment funds intended to generate a combination of capital growth and income and, as determined
by the trustee, taking account of the characteristics of the obligations and the trustee’s attitude to risk. The majority of the RPS’s assets that
are intended to generate additional returns, over the rate at which the obligations are expected to grow, are invested in a single pooled growth
fund. This fund is invested in a wide range of asset classes and the fund manager Railpen has the discretion to vary the asset allocation to
reflect its views on the relative attractiveness of different asset classes at any time. The remaining assets in the RPS are principally fixed and
index-linked bonds.
The RPS is exposed to a number of liability related risks, namely changes in gilt yields, inflation and the longevity of the scheme’s members.
With respect to interest rate and inflation risks, the strategic asset allocation was reviewed and amended in 2023 to mitigate these risks by
increasing the allocation to fixed and index-linked bond pooled funds. The current objective of the portfolio is to hedge around 100% of the
impact that changes in interest rates and inflation can have on the funding position.
The formal triennial funding valuation of the RPS as at 31 December 2019 was completed in December 2021, with the Group agreeing to
continue to make fixed deficit contributions of £6m per annum which should reduce the deficit to zero by 2025. This agreement constitutes a
MFR under IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The Group has not
recognised any liabilities in relation to this MFR as any surplus of deficit contributions to the RPS would be recoverable by way of a refund and
the Group has the unconditional right to the surplus and controls the run-off of the benefit obligations once all other obligations of the RPS
have been settled.
A formal triennial valuation of the RPS as at 31 December 2022 is currently ongoing. The trustee and Balfour Beatty have reached agreement
in principle as to the financial and demographic assumptions to be adopted for the purpose of this valuation; which would include the Group
continuing to make fixed deficit contributions of £6m per annum until February 2025.
Other schemes
Other schemes comprise unfunded post-retirement benefit obligations in Europe, the majority of which are closed to new entrants, and deferred
compensation schemes in North America, where an element of employees’ compensation is deferred and invested in investments in mutual
funds (as disclosed in Note 20.1) in a trust, the assets of which are for the ultimate benefit of the employees but are available to the Group’s
creditors in the event of insolvency.
The Group also participates in The Plumbing & Mechanical Services Industry Pension Scheme (Plumbers Scheme), which is an industry-wide
non-associated multi-employer defined benefit scheme. As the Plumbers Scheme does not segregate assets and liabilities between the different
participating employers, the Group’s only obligation to the Plumbers Scheme is to pay the contributions requested by the scheme trustees as
they fall due. In accordance with IAS 19, this obligation has been accounted for on a defined contribution basis and the relevant employer
contributions have been charged to the income statement.
Membership of the principal schemes
Balfour Beatty Pension Fund 2023
Railways Pension Scheme 2023
Balfour Beatty Pension Fund 2022
Railways Pension Scheme 2022
Number
of
members
Defined
benefit
obligations
£m
Average
duration
Years
Number
of
members
Defined
benefit
obligations
£m
Average
duration
Years
Number
of
members
Defined
benefit
obligations
£m
Average
duration
Years
Number
of
members
Defined
benefit
obligations
£m
Average
duration
Years
Defined benefit
– active members
– deferred
pensioners
– pensioners,
1
1
8,770
1,007
widow(er)s and
dependants
16,764
Defined contribution 15,512
41,047
Total
1,493
–
2,501
12
18
9
–
12
70
972
1,904
–
2,946
26
90
204
–
320
17
1
1
12
92
16
9,261
952
18
1,006
10 16,946
– 15,382
12 41,590
1,511
–
2,464
9
–
12
1,874
–
2,972
33
97
170
–
300
16
16
10
–
12
Balfour Beatty plc Annual Report and Accounts 2023 225
Financial statements
30 Retirement benefit assets and liabilities continued
30.2 IAS 19 accounting valuations
Principal actuarial assumptions for the IAS 19 accounting valuations of the Group’s principal schemes
Discount rate
Inflation rate – RPI
– CPI
Future increases in pensionable salary
Rate of increase in pensions in payment (or such other rate as is guaranteed)
Balfour Beatty
Pension
Fund
2023
%
Railways
Pension
Scheme
2023
%
Balfour Beatty
Pension
Fund
2022
%
4.65
3.15
2.60
2.60
2.95
4.65
3.15
2.75
2.75
2.85
4.95
3.35
2.75
2.75
3.10
Railways
Pension
Scheme
2022
%
4.95
3.35
2.90
2.90
2.95
The BBPF actuary undertakes regular mortality investigations as part of the formal triennial valuation based on the experience exhibited by
pensioners of the BBPF and due to the size of the membership of the BBPF is able to make comparisons of this experience with the mortality
rates set out in the various published mortality tables. The actuary is also able to monitor changes in the exhibited mortality over time. This
research is taken into account in the BBPF’s mortality assumptions. The mortality assumptions as at 31 December 2023 have been updated
to reflect the experience of BBPF pensioners for the period to 30 September 2021.
Similarly, the RPS actuary also undertakes regular mortality investigations as part of the formal triennial valuation based on the experience
exhibited by pensioners of the RPS. In previous years, the mortality assumptions for the RPS have been set using the mortality analysis
conducted for the BBPF for the reason of practicality given the assumed life expectancies have historically been similar for both schemes.
However, these have diverged over time and the mortality assumptions adopted as at 31 December 2023 for the RPS have been updated
in line with the experience analysis conducted as part of the ongoing 31 December 2022 triennial valuation, which considered experience
analysis up to 31 December 2021.
Following the completion of the BBPF’s 31 March 2022 triennial valuation, the future improvements assumption adopted for the BBPF and
RPS has also been updated for 2023 to reflect the most recent model available, with the Group setting future improvements in line with the
Continuous Mortality Investigation (CMI) 2022 core projections model.
BBPF life expectancies
Members in receipt of a pension
Members not yet in receipt of a pension (current age 50)
RPS life expectancies
Members in receipt of a pension
Members not yet in receipt of a pension (current age 50)
2023
Average life expectancy
at 65 years of age
2022
Average life expectancy
at 65 years of age
Male
21.3
22.2
Female
23.0
23.9
Male
21.7
22.6
Female
23.4
24.3
2023
Average life expectancy
at 65 years of age
2022
Average life expectancy
at 65 years of age
Male
20.8
21.6
Female
22.7
23.6
Male
20.7
21.6
Female
22.7
23.7
Amounts recognised in the income statement
The BBPF defined contribution employer contributions paid and charged to the income statement have been separately identified in the table
below and the defined contribution section assets and liabilities amounting to £710m (2022: £628m) have been excluded from the tables on
pages 227 to 228. Defined contribution charges for other schemes include contributions to multi-employer pension schemes.
Group
Current service cost
Defined contribution charge
Included in employee costs (Note 7)
Interest income
Interest cost
Net finance income/(cost) (Note 8)
Total (charged)/credited to income
statement
Balfour
Beatty
Pension
Fund
2023
£m
Railways
Pension
Scheme
2023
£m
Other
schemes
2023
£m
(2)
(48)
(50)
130
(118)
12
(38)
(1)
–
(1)
16
(14)
2
1
(1)
(6)
(7)
–
(2)
(2)
(9)
Balfour
Beatty
Pension
Fund
2022
£m
Railways
Pension
Scheme
2022
£m
Other
schemes
2022
£m
(2)
(52)
(54)
75
(69)
6
(48)
(2)
–
(2)
7
(8)
(1)
(3)
(1)
(6)
(7)
–
–
–
(7)
Total
2023
£m
(4)
(54)
(58)
146
(134)
12
(46)
Total
2022
£m
(5)
(58)
(63)
82
(77)
5
(58)
226
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30 Retirement benefit assets and liabilities continued
30.2 IAS 19 accounting valuations continued
Amounts recognised in the statement of comprehensive income
Actuarial movements on pension scheme obligations
Actuarial movements on pension scheme assets
Total actuarial movements recognised in the
statement of comprehensive income
(Note 32.1)
Cumulative actuarial movements recognised in
the statement of comprehensive income
Balfour
Beatty
Pension
Fund
2023
£m
(70)
(85)
(155)
(336)
Railways
Pension
Scheme
2023
£m
Other
schemes
2023
£m
–
–
–
(21)
(21)
(42)
(18)
Balfour
Beatty
Pension
Fund
2022
£m
1,178
(1,314)
Total
2023
£m
(91)
(106)
(197)
(136)
Railways
Pension
Scheme
2022
£m
131
(54)
77
24
Other
schemes
2022
£m
7
–
7
Total
2022
£m
1,316
(1,368)
(52)
(22)
(179)
(22)
(376)
(181)
The actual return on plan assets was a gain of £40m (2022: £1,286m loss).
Amounts recognised in the balance sheet
Present value of obligations
Fair value of plan assets
Asset/(liabilities) in the balance sheet
Balfour
Beatty
Pension
Fund
2023
£m
(2,501)
2,602
101
Railways
Pension
Scheme
2023
£m
(320)
323
3
Other
schemes †
2023
£m
(35)
–
(35)
Total
2023
£m
(2,856)
2,925
69
Balfour
Beatty
Pension
Fund
2022
£m
(2,464)
2,689
225
Railways
Pension
Scheme
2022
£m
(300)
337
37
Other
schemes †
2022
£m
(39)
–
(39)
Total
2022
£m
(2,803)
3,026
223
+ Investments in mutual funds of £19m (2022: £20m) are held to satisfy the Group’s deferred compensation obligations (Note 20.1).
The defined benefit obligations comprise £35m (2022: £39m) arising from wholly unfunded plans and £2,821m (2022: £2,764m) arising from
plans that are wholly or partly funded.
The BBPF saw a reduction in corporate bond yields, which led to a corresponding reduction in the IAS19 discount rate, offset by some
positive changes in demographic assumptions and led to an overall increase in the present value of obligations from 31 December 2022
to 31 December 2023. Conversely, and driven by challenging investment markets, the scheme’s assets fell in value over 2023. These two
factors compounded and resulted in a material reduction in the scheme’s net assets from £225m to £101m over 2023.
Movement in the present value of obligations
At 1 January
Currency translation differences
Current service cost
Interest cost
Actuarial movements from reassessing the
difference between RPI and CPI
Actuarial movements from changes in
demographic assumptions
Other financial actuarial movements
Experience (losses)/gains
Total actuarial movements
Benefits paid
At 31 December
Balfour
Beatty
Pension
Fund
2023
£m
(2,464)
–
(2)
(118)
Railways
Pension
Scheme
2023
£m
(300)
–
(1)
(14)
(2)
(2)
17
(85)
–
(70)
153
(2,501)
(1)
(16)
(2)
(21)
16
(320)
Other
schemes
2023
£m
(39)
2
(1)
(2)
–
–
–
–
–
5
(35)
Balfour
Beatty
Pension
Fund
2022
£m
(3,718)
–
(2)
(69)
Railways
Pension
Scheme
2022
£m
(437)
–
(2)
(8)
Total
2023
£m
(2,803)
2
(4)
(134)
(4)
–
2
16
(101)
(2)
(91)
174
(2,856)
–
1,157
21
1,178
147
(2,464)
–
129
–
131
16
(300)
Other
schemes
2022
£m
(46)
(3)
(1)
–
–
–
7
–
7
4
(39)
Total
2022
£m
(4,201)
(3)
(5)
(77)
2
–
1,293
21
1,316
167
(2,803)
Balfour Beatty plc Annual Report and Accounts 2023 227
Financial statements 30 Retirement benefit assets and liabilities continued
30.2 IAS 19 accounting valuations continued
Movement in the fair value of plan assets
At 1 January
Interest income
Actuarial movements
Contributions from employer
– regular funding
– ongoing deficit funding
Benefits paid
At 31 December
Fair value of the assets held by the schemes at 31 December
Return-seeking
– Developed nation equities#
– Emerging market equities
– Hedge funds#
– Return-seeking growth pooled funds$
– Other return-seeking assets#@
Liability-matching bond-type assets
– Corporate bonds
– Fixed interest gilts^
– Index-linked gilts^
– Currency hedging
– Liability-matching pooled funds~
– Interest and inflation rate swaps
Property#
Secure income assets#%
Fair value longevity swap
Cash and other
Total
Balfour
Beatty
Pension
Fund
2023
£m
2,689
130
(85)
2
19
(153)
2,602
Balfour
Beatty
Pension
Fund
2023
£m
276
92
–
168
–
16
1,822
776
496
554
15
–
(19)
40
153
1
310
2,602
Railways
Pension
Scheme
2023
£m
337
16
(21)
1
6
(16)
323
Railways
Pension
Scheme †
2023
£m
110
–
–
–
110
–
212
–
–
137
–
75
–
–
–
–
1
323
Total
2023
£m
3,026
146
(106)
3
25
(169)
2,925
Total
2023
£m
386
92
–
168
110
16
2,034
776
496
691
15
75
(19)
40
153
1
311
2,925
Balfour
Beatty
Pension
Fund
2022
£m
4,039
75
(1,314)
1
35
(147)
2,689
Balfour
Beatty
Pension
Fund
2022
£m
748
197
30
395
–
126
1,423
298
665
604
28
–
(172)
98
186
–
234
2,689
Railways
Pension
Scheme
2022
£m
393
7
(54)
1
6
(16)
337
Railways
Pension
Scheme †
2022
£m
140
–
–
–
140
–
197
–
–
111
–
86
–
–
–
–
–
337
Total
2022
£m
4,432
82
(1,368)
2
41
(163)
3,026
Total
2022
£m
888
197
30
395
140
126
1,620
298
665
715
28
86
(172)
98
186
–
234
3,026
† The amounts represent 100% of the scheme’s assets.
^ Fixed interest gilts and index-linked gilts totalling £1,187m (2022: £1,380m) are assets held in pooled investment vehicles with underlying securities that have quoted prices in active
markets. The remaining assets that are neither quoted nor traded on an active market are stated at fair value estimates provided by the manager of the investment or fund.
# Level 3 assets with valuations based on unobservable inputs held by the BBPF include hedge funds, property funds, developed nation equities, secure income assets and other return
seeking assets total £610m (2022: £1,099m). These are pooled investments stated at fair value provided by the fund managers, of which £130m (2022: £103m) have been valued on
September 2023 valuations and £181m (2022: £nil) on November 2023 valuations, for which valuations were adjusted for cash movements that occurred in the last quarter of the year as a
result of December 2023 valuations not being available as at the reporting date. The Directors consider these values to be a fair approximation for these assets at 31 December 2023.
@ Other return-seeking assets are alternative beta assets, which provide exposure to a range of risk premia that are intended to diversify portfolio returns from traditional equity and credit
markets.
% Secure income assets reflect more illiquid investments that offer long term contractual cash flows that can be used for the payment of pensions.
$ The RPS return-seeking growth pooled funds assets are the Growth Pooled Fund, Illiquid Growth Pooled Fund and the Private Equity Pooled Fund which are HMRC approved pooled funds.
~ The RPS liability-matching pooled funds are Long Term Income Pooled Funds which are HMRC approved pooled funds.
Estimated contributions expected to be paid to the Group’s principal defined benefit schemes during 2024
Regular funding
Ongoing deficit funding+
Total contributions
Estimated BBPF running costs to be funded from deficit contributions*
Estimated total cash contributions
* The running costs of the BBPF are funded from deficit contributions as per the BBPF schedule of contributions.
228
Balfour Beatty plc Annual Report and Accounts 2023
Balfour
Beatty
Pension
Fund
2024
£m
1
24
25
(4)
21
Railways
Pension
Scheme
2024
£m
1
6
7
–
7
Total
2024
£m
2
30
32
(4)
28
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 30 Retirement benefit assets and liabilities continued
30.2 IAS 19 accounting valuations continued
The sensitivity analysis below has been determined based on reasonably possible changes in assumptions occurring at the end of the
reporting period. In each case the relevant change in assumption occurs in isolation from potential changes in other assumptions. In practice
more than one variable is likely to change at the same time. The sensitivities have been calculated using the projected unit credit method.
Sensitivity of the Group’s retirement benefit obligations at 31 December 2023 to different actuarial assumptions
Assumptions
Discount rate
Market expectation of RPI inflation
Salary growth
Life expectancy
Sensitivity to increase in assumption
Sensitivity to decrease in assumption
Percentage
points/years
0.5%
0.5%
0.5%
1 year
(Decrease)/
increase in
obligations
%
(Decrease)/
increase in
obligations
£m
(5.7)%
4.0%
<0.1%
4.0%
(160)
112
–
114
Percentage
points/years
(0.5)%
(0.5)%
(0.5)%
(1 year)
Increase/
(decrease) in
obligations
%
Increase/
(decrease) in
obligations
£m
6.3%
(3.9)%
<(0.1)%
(4.1)%
177
(111)
–
(117)
Sensitivity of the Group’s retirement benefit assets at 31 December 2023 to changes in market conditions
Increase in interest rates
Increase in market expectation of RPI inflation
Percentage
points
0.5%
0.5%
(Decrease)/
increase
in assets
%
(5.4)%
3.9%
(Decrease)/
increase
in assets
£m
(158)
113
The asset sensitivities only take into account the impact of the changes in market conditions on bond-type assets. The value of the schemes’
return-seeking assets is not directly correlated with movements in interest rates or RPI inflation.
Year end historical information for the Group’s retirement defined benefit schemes
Present value of obligations
Fair value of assets
Surplus
Experience adjustment for obligations
Experience adjustment for assets
Total deficit funding
30.3 Latest formal triennial funding valuations
Date of last formal triennial funding valuation
Scheme deficit
Market value of assets
Present value of obligations
Surplus/(deficit) in defined benefit scheme
Funding level
31 Share capital
Called-up share capital in issue
2023
£m
(2,856)
2,925
69
(2)
(106)
25
2022
£m
(2,803)
3,026
223
21
(1,368)
41
2021
£m
(4,201)
4,432
231
1
87
39
2020
£m
(4,317)
4,406
89
5
392
15
2019
£m
(3,959)
4,092
133
(53)
329
30
Balfour Beatty
Pension
Fund
£m
Railways
Pension
Scheme
£m
31/03/2022 31/12/2019
4,426
(4,414)
12
100.3%
354
(380)
(26)
93.2%
2023
Million
544
£m
272
2022
Million
588
£m
294
All issued ordinary shares are fully paid. Ordinary shares have a nominal value of £0.50 each and carry no right to fixed income but each share
carries the right to one vote at general meetings of the Company. No ordinary shares were issued during the current or prior year.
In 2023 the Company commenced the third phase of its share buyback programme, which completed on 15 December 2023. The Company
purchased 43.3m (2022: 52.0m) shares for a total consideration of £150m (2022: £150m) and held these shares in treasury with no voting rights.
The purchase of these shares, together with associated fees and stamp duty amounting to £1m (2022: £1m), utilised £151m (2022: £151m)
of the Company’s distributable profits.
On 20 December 2023, the Company cancelled the 43.3m treasury shares purchased through the 2023 phase of its share buyback programme
(2022: 102.3m). This cancellation resulted in a decrease in called-up share capital in issue of £22m (2022: £51m) and a corresponding increase
in the capital redemption reserve.
Balfour Beatty plc Annual Report and Accounts 2023 229
Financial statements 32 Movements in equity
32.1 Group
At 1 January 2023
Profit/(loss) for the year
Currency translation differences
Actuarial movements on retirement
benefit assets/liabilities
Fair value revaluations
– PPP financial assets
– cash flow hedges
– investments in mutual funds
measured at fair value through OCI
Recycling of revaluation reserves to
the income statement on disposal@
Tax on items recognised in other
comprehensive income
Total comprehensive income/(loss)
for the year
Ordinary dividends
Joint ventures’ and associates’
dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based
payments+
Capital contribution
At 31 December 2023
Called-
up share
capital
2023
£m
294
–
–
Share
premium
account
2023
£m
176
–
–
Capital
redemption
reserve
2023
£m
52
–
–
Share
of joint
ventures’
and
associates’
reserves
(Note 19.6)
2023
£m
(20)
53
(13)
Other reserves
PPP
financial
assets
2023
£m
1
–
–
Currency
translation
reserve
2023
£m
132
–
(17)
Hedging
reserves
2023
£m
(4)
–
–
Other µ
2023
£m
41
–
–
Retained
profits
2023
£m
706
144
–
Non-
controlling
interests
2023
£m
5
(3)
–
–
–
–
–
–
–
–
–
–
–
(22)
–
–
272
–
–
–
–
–
–
–
–
–
–
–
–
–
176
–
–
–
–
–
–
–
–
–
–
22
–
–
74
(1)
20
2
–
(3)
(5)
53
–
(60)
–
–
–
–
(27)
–
–
–
–
–
(1)
(1)
–
–
–
–
–
–
(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
(17)
–
–
–
–
–
–
115
–
–
–
1
–
–
1
–
–
–
–
4
–
46
(197)
–
–
–
–
49
(4)
(58)
60
(151)
–
(7)
–
546
Total
2023
£m
1,383
194
(30)
(198)
20
2
1
(3)
43
–
–
–
–
–
–
(3)
–
–
–
–
–
8
10
29
(58)
–
(151)
–
(3)
8
1,208
µ Other reserves include £22m of special reserve.
+
Movements relating to share-based payments include £nil tax charge recognised directly within retained profits.
Called-
up share
capital
2022
£m
345
–
–
Share
premium
account
2022
£m
176
–
–
Capital
redemption
reserve
2022
£m
1
–
–
Share
of joint
ventures’and
associates’
reserves
(Note 19.6)
2022
£m
72
105
23
Other reserves
Hedging
reserves
2022
£m
(5)
–
–
PPP
financial
assets
2022
£m
4
–
–
Currency
translation
reserve
2022
£m
100
–
32
Other µ
2022
£m
45
–
–
Retained
profits
2022
£m
631
183
–
Non-
controlling
interests
2022
£m
7
(1)
–
Total
2022
£m
1,376
287
55
–
–
–
–
–
–
–
–
–
–
–
(51)
–
294
–
–
–
–
–
–
–
–
–
–
–
–
–
176
–
–
–
–
–
–
–
–
–
–
–
51
–
52
1
(124)
29
–
(3)
25
56
–
(148)
–
–
–
–
(20)
–
–
3
–
–
(2)
1
–
–
–
–
–
–
(4)
–
(3)
–
–
–
–
(3)
–
–
–
–
–
–
1
–
–
–
–
–
–
32
–
–
–
–
–
–
132
–
–
–
(5)
–
–
(5)
–
–
–
–
–
1
41
(52)
–
–
–
–
21
152
(58)
148
–
(151)
–
(16)
706
–
–
–
–
–
–
(1)
–
–
(1)
–
–
(51)
(127)
32
(5)
(3)
44
232
(58)
–
(1)
(151)
–
–
5
(15)
1,383
At 1 January 2022
Profit/(loss) for the year
Currency translation differences
Actuarial movements on retirement
benefit assets/liabilities
Fair value revaluations
– PPP financial assets
– cash flow hedges
– investments in mutual funds
measured at fair value through OCI
Recycling of revaluation reserves to
the income statement on disposal@
Tax on items recognised in other
comprehensive income
Total comprehensive income/(loss)
for the year
Ordinary dividends
Joint ventures’ and associates’
dividends
Non-controlling interests’ dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based
payments+
At 31 December 2022
µ Other reserves include £22m of special reserve.
+
Movements relating to share-based payments include £2m tax credit recognised directly within retained profits.
@ Recycling of revaluation reserves to the income statement on disposal has no associated tax effect.
230
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32 Movements in equity continued
32.2 Company
At 1 January 2022
Profit for the year
Currency translation differences
Total comprehensive profit for the year
Ordinary dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
At 31 December 2022
Profit for the year
Currency translation differences
Total comprehensive profit for the year
Ordinary dividends
Purchase of treasury shares
Cancellation of ordinary shares
Movements relating to share-based payments+
At 31 December 2023
Other reserves
Called-up
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Special
reserve
£m
345
–
–
–
–
–
(51)
–
294
–
–
–
–
–
(22)
–
272
176
–
–
–
–
–
–
–
176
–
–
–
–
–
–
–
176
1
–
–
–
–
–
51
–
52
–
–
–
–
–
22
–
74
22
–
–
–
–
–
–
–
22
–
–
–
–
–
–
–
22
Other
£m
106
–
–
–
–
–
–
8
114
1
–
1
–
–
–
12
127
Retained
profits
£m
676
178
(3)
175
(58)
(151)
–
(24)
618
261
4
265
(58)
(151)
–
(15)
659
Total
£m
1,326
178
(3)
175
(58)
(151)
–
(16)
1,276
262
4
266
(58)
(151)
–
(3)
1,330
+ Movements relating to share-based payments include £nil tax credit (2022: £1m) recognised directly within retained profits.
As permitted under Section 408 of the Companies Act 2006, the Company has elected not to present its statement of comprehensive income
(including the profit and loss account) for the year. Balfour Beatty plc reported a profit for the financial year ended 31 December 2023 of £262m
(2022: £178m).
During the year, £151m of the Company’s distributable profits were utilised for the purchase of shares into treasury (2022: £151m) and 43.3m
(2022: 102.3m) treasury shares were cancelled. See Note 31.
The majority of the retained profits of Balfour Beatty plc are distributable. By special resolution on 13 May 2004, confirmed by the court on
16 June 2004, the share premium account was reduced by £181m and the £4m capital redemption reserve was cancelled, effective on
25 June 2004, and a special reserve of £185m was created. This reserve becomes distributable to the extent of future increases in share
capital and share premium account, of which £nil occurred in 2023 (2022: £nil).
32.3 Balfour Beatty Employee Share Ownership Trust
The retained profits in the Group and the retained profits of the Company are stated net of investments in Balfour Beatty plc ordinary shares
acquired by the Group’s employee discretionary trust, the Balfour Beatty Employee Share Ownership Trust, to satisfy awards under the
Performance Share Plan, the Deferred Bonus Plan and the Restricted Share Plan. In 2023, 5.1m (2022: 9.8m) shares were purchased at a cost
of £18m (2022: £25m). The market value of the 7.5m (2022: 7.5m) shares held by the trust at 31 December 2023 was £25.0m (2022: £25.3m).
The carrying value of these shares was £23.1m (2022: £19.8m).
Following confirmation of the performance criteria at the end of the performance period in the case of the Performance Share Plan, and at
the end of the vesting period in the case of the Deferred Bonus Plan and the Restricted Share Plan, the appropriate number of shares will be
unconditionally transferred to participants. In 2023, 3.2m shares were transferred to participants in relation to the March 2020 and June 2020
awards under the Performance Share Plan (2022: 1.7m shares were transferred to participants in relation to the March 2019 awards under the
Performance Share Plan), 1.0m shares were transferred to participants in relation to awards under the Deferred Bonus Plan (2022: 0.6m shares)
and 0.9m shares were transferred to participants in relation to awards under the Restricted Share Plan (2022: 1.2m).
The trustees have waived the rights to dividends on shares held by the trust. Participants in the schemes receive an award of shares to
represent the dividends which would have been payable on the shares since the date of grant.
Other reserves in the Group and Company include £12.2m (2022: £8.8m) relating to unvested Performance Share Plan awards, £4.4m
(2022: £3.8m) relating to unvested Restricted Share Plan awards and £2.7m (2022: £2.7m) relating to unvested Deferred Bonus Plan awards.
Balfour Beatty plc Annual Report and Accounts 2023 231
Financial statements 33 Notes to the statement of cash flows
33.1 Cash from/(used in) operations
Profit from operations
Share of results of joint ventures and associates
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment properties
Amortisation of other intangible assets
Amortisation of contract fulfilment assets
Pension deficit payments, including regular funding
Movements relating to equity-settled share-based payments
Gain on disposal of interests in investments
Profit on disposal of property, plant and equipment
Other non-cash items
Operating cash flows before movements in working capital
Decrease/(increase) in operating working capital
Inventories
Contract assets
Trade and other receivables
Contract liabilities
Trade and other payables
Provisions
Cash from operations
1 Before non-underlying items (Notes 2.10 and 10).
33.2 Cash and cash equivalents
Cash and deposits
Term deposits
Cash balances within infrastructure concessions
Bank overdrafts
Notes
19
16
17
18
15
30.2
34.3
Underlying
items 1
2023
£m
Non-
underlying
items
2023
£m
228
(53)
28
57
2
7
15
(28)
15
(24)
(2)
(3)
242
(17)
–
–
–
–
5
–
–
–
–
–
–
(12)
2023
£m
211
(53)
28
57
2
12
15
(28)
15
(24)
(2)
(3)
230
63
(11)
(4)
(73)
(44)
177
18
293
2022
£m
275
(105)
27
54
2
13
15
(43)
9
–
(4)
(4)
239
(54)
(6)
(78)
34
(59)
57
(2)
185
Group
2023
£m
890
218
306
(104)
1,310
Group
2022
£m
828
332
19
–
1,179
Company
2023
£m
Company
2022
£m
150
218
–
(58)
310
95
329
–
(45)
379
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of less than three months.
33.3 Analysis of movements in borrowings
At 1 January 2022
Currency translation differences
Proceeds of loans
Repayments of loans
At 31 December 2022
Currency translation differences
Proceeds of loans
Repayments of loans
Fair value adjustment to loan
At 31 December 2023
Infrastructure
concessions
non-recourse
project finance
£m
US private
placement
£m
Bilateral
committed
facility
£m
Bank
overdrafts
£m
(260)
–
(8)
7
(261)
–
(336)
8
19
(570)
(192)
(23)
(130)
–
(345)
14
–
169
–
(162)
–
–
–
–
–
–
(28)
28
–
–
(34)
–
–
34
–
–
(104)
–
–
(104)
Total
£m
(486)
(23)
(138)
41
(606)
14
(468)
205
19
(836)
In March 2023, the Group repaid US$209m of US Private Placement (USPP) notes as they fell due. The repayment was funded from the
proceeds of debt issuance arranged in 2022, specifically US$158m of new USPP notes issued in June 2022 (US$35m 6.31% notes maturing in
June 2027, US$80m 6.39% notes maturing in June 2029 and US$43m 6.45% notes maturing in June 2032), and a US$36m drawdown in
March 2023 under the £30m bilateral committed facility. In September 2023, drawings under the £30m bilateral RCF bank facility were repaid
and the facility was undrawn at 31 December 2023. This facility is on similar terms to the Group’s core facility and has an initial maturity of
December 2024, but the Group holds an extension option to extend the expiry to December 2027. At 31 December 2023 the Group had not
triggered the bilateral committed facility’s extension option.
232
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
33 Notes to the statement of cash flows continued
33.3 Analysis of movements in borrowings continued
In June 2023 the Group completed the refinancing of its core £375m revolving credit facility, which was set to expire in October 2024,
replacing it with a new £475m facility that will expire in June 2027 (the RCF). The RCF has an extension option for a further year to June 2028,
with the agreement of the lending banks, and its terms and conditions are materially the same as the prior facility. The RCF is a Sustainability
Linked Loan, under the terms of which the Group is incentivised to deliver annual measurable performance improvement in three key areas:
Carbon Emissions, Social Value generation and an independent Environment, Social and Governance (ESG) rating score – these areas of
performance and the associated metrics are to be reviewed and updated in 2024. The RCF remained undrawn at 31 December 2023.
At 31 December 2023, £303m was included within non-recourse borrowings relating to the construction of the West Slope student
accommodation project, of which £171m relates to external funding obtained from a third party bank and £132m relates to a loan provided by
the University of Sussex. The funding from the university represents a loan arrangement which was entered into separately with the university
at the same time as the concession arrangement.
34 Acquisitions and disposals
34.1 Current and prior year acquisitions
There were no material acquisitions in 2023.
Deferred consideration paid during 2023 in respect of acquisitions completed in earlier years was £nil (2022: £3m).
34.2 Current year disposals
During the year, the Group disposed of two Infrastructure Investments assets as detailed below.
The gain recognised from the disposal of assets that were held within joint venture entities of the Group is recognised within the Group’s share
of results of joint ventures and associates.
Notes
Disposal date
Entity/asset
Structure of sale
Percentage
disposed
%
Cash
consideration
£m
Net assets
disposed
£m
34.2.1
34.2.2
28 September 2023 Moretti Apartments^
8 November 2023 Gloucester Waste
Asset sale
Equity interest sale
n/a
49.5
5
56
61
(3)
(35)
(38)
Amount
recycled
from
reserves
£m
–
3
3
Underlying
gain
£m
2
24
26
^ Disposal of asset within a joint venture entity.
34.2.1 On 28 September 2023, the Group disposed of its Moretti Apartments multifamily property asset located in Homewood, Alabama, and
received total cash consideration of £5m. The asset disposal resulted in an underlying gain of £2m being recognised in the Group’s share of
joint ventures and associates.
34.2.2 On 8 November 2023, the Group disposed of its entire 49.5% interest in UBB Waste (Gloucestershire) Holdings Limited (Gloucester
Waste) for a cash consideration of £56m. The disposal included the Group’s share of joint venture net assets of £31m and £4m of accrued
interest receivable and resulted in a net gain of £24m being recognised in underlying operating profit, including a loss of £6m in respect of PPP
financial asset reserves and a gain of £9m in respect of hedging reserves recycled to the income statement on disposal.
34.3 Prior year disposals
During 2022, the Group disposed of several Infrastructure Investments assets as detailed below.
The gain recognised from the disposal of assets that were held within joint venture entities of the Group was recognised within the Group’s
share of results of joint ventures and associates.
Notes
Disposal date
Entity/asset
34.3.1
30 June 2022
Regard at Med Center
(formerly City Lake) ^
Aspire at Discovery Park ^
Preserve at Southwind ^
Preserve at Bartlett^
11 August 2022
23 August 2022
23 August 2022
2 November 2022 Waterchase Apartments ^
34.3.2
34.3.3
34.3.4
34.3.5
Structure of sale
Asset sale
Asset sale
Asset sale
Asset sale
Asset sale
Percentage
disposed
%
Cash
consideration
£m
Net assets
disposed
£m
n/a
n/a
n/a
n/a
n/a
12
50
4
13
14
93
(5)
(12)
(1)
(4)
(4)
(26)
Amount
recycled
from
reserves
£m
Underlying
gain
£m
1
2
–
–
–
3
8
40
3
9
10
70
^ Disposal of asset within a joint venture entity.
34.3.1 On 30 June 2022, the Group disposed of its Regard at Med Center multifamily property asset located in Houston, Texas, and received
total cash consideration of £12m. The asset disposal resulted in an underlying gain of £8m being recognised in the Group’s share of joint ventures
and associates, including a gain of £1m in respect of foreign currency translation reserves recycled to the income statement on disposal.
34.3.2 On 11 August 2022, the Group disposed of its Aspire at Discovery Park on-campus accommodation at Purdue University in West
Lafayette, Indiana, and received total cash consideration of £50m. The asset disposal resulted in an underlying gain of £40m being recognised
in the Group’s share of joint ventures and associates, including a gain of £2m in respect of foreign currency translation reserves recycled to the
income statement on disposal.
34.3.3 On 23 August 2022, the Group disposed of its Preserve at Southwind multifamily property asset located in Memphis, Tennessee, and
received total cash consideration of £4m. The asset disposal resulted in an underlying gain of £3m being recognised in the Group’s share of
joint ventures and associates.
Balfour Beatty plc Annual Report and Accounts 2023 233
Financial statements 34 Acquisitions and disposals continued
34.3 Prior year disposals continued
34.3.4 On 23 August 2022, the Group disposed of its Preserve at Bartlett multifamily property asset located in Bartlett, Tennessee, and
received total cash consideration of £13m. The asset disposal resulted in an underlying gain of £9m being recognised in the Group’s share
of joint ventures and associates.
34.3.5 On 2 November 2022, the Group disposed of its Waterchase Apartments multifamily property asset located in Largo, Florida, and
received total cash consideration of £14m. The asset disposal resulted in an underlying gain of £10m being recognised in the Group’s share
of joint ventures and associates.
In addition to the disposals above, the Group received a further £1m of deferred consideration in relation to the disposal of its Middle Eastern
joint ventures in 2017. This deferred consideration was included in the Group’s assessment of the gain on disposal recognised in 2017.
35 Share-based payments
The Company operates three equity-settled share-based payment arrangements, namely the Performance Share Plan (PSP), the Deferred
Bonus Plan (DBP) and the Restricted Share Plan (RSP). The Group recognised total expenses relating to equity-settled share-based payment
transactions of £15m (2022: £9m). Refer to the Remuneration report for details of the PSP and DBP schemes.
The Company also operates three cash-settled share-based payment arrangements, namely the Shadow PSP (SPSP), the Shadow RSP (SRSP)
and the Shadow Deferred Bonus Plan (SDBP). These share-based payment arrangements mirror the conditions of the equity-settled PSP, RSP
and DBP plans, the only difference being they are settled in cash. The Group recognised total expenses relating to cash-settled share-based
payment transactions of £9m (2022: £11m).
Movements in share plans
Equity-settled share-based payment awards
2023 number of awards
Outstanding at 1 January
Granted during the year
Awards in lieu of dividends
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for awards exercised in the year
2022 number of awards
Outstanding at 1 January
Granted during the year
Awards in lieu of dividends
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for awards exercised in the year
PSP
conditional
awards
9,616,845
2,625,626
–
(776,896)
(3,240,658)
8,224,917
–
1.2
370.4
PSP
conditional
awards
9,333,341
3,624,249
–
(1,612,041)
(1,728,704)
9,616,845
–
1.3
262.2
DBP
conditional
awards
2,301,915
752,862
65,684
(108,696)
(958,042)
2,053,723
–
1.4
371.2
DBP
conditional
awards
1,979,385
947,192
77,559
(82,787)
(619,434)
2,301,915
–
1.3
256.6
RSP
conditional
awards
3,600,926
839,532
79,471
(279,134)
(861,192)
3,379,603
–
1.4
340.5
RSP
conditional
awards
3,747,665
1,305,184
176,669
(443,791)
(1,184,801)
3,600,926
–
1.6
242.2
The principal assumptions, including expected volatility determined from the historical weekly share price movements over the three-year period
immediately preceding the award date, used by the consultants in the stochastic model for the 33.3% of the PSP awards granted in 2023 subject
to market conditions, were:
Award date
3 April 2023
Name of award
PSP award
Closing
share
price on
award date
Pence
Expected
volatility of
shares
%
Number of
awards
2,625,626
371.2
27.03%
Expected
term of
awards
Years
3.0
Risk-free
interest
rate
%
3.40
Calculated
fair value
of an
award
Pence
267.0
For the 66.7% of the PSP awards granted in 2023 subject to non-market conditions and for the DBP and RSP awards granted in 2023, the fair
value of the awards is the closing share price on the date of grant.
234
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 35 Share-based payments continued
Movements in share plans continued
Cash-settled share-based payment awards
2023 number of awards
Outstanding at 1 January
Granted during the year
Awards in lieu of dividends
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for awards exercised in the year
SPSP
conditional
awards
8,383,533
2,278,123
–
(875,764)
(3,296,904)
6,488,988
–
1.2
341.0
SDBP
conditional
awards
1,598,936
308,417
38,015
(94,174)
(600,954)
1,250,240
–
1.3
341.2
SRSP
conditional
awards
1,346,825
435,869
31,159
(160,708)
(417,243)
1,235,902
–
1.7
320.9
As at 31 December 2023, the Group’s liability in respect of outstanding cash-settled share-based payment awards amounted to £21m
(2022: £21m). This liability has been recorded within accruals.
2022 number of awards
Outstanding at 1 January
Granted during the year
Awards in lieu of dividends
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for awards exercised in the year
SPSP
conditional
awards
8,538,863
2,750,733
–
(1,314,076)
(1,591,987)
8,383,533
–
1.1
263.0
SDBP
conditional
awards
1,255,815
605,746
53,384
–
(316,009)
1,598,936
–
1.2
259.5
SRSP
conditional
awards
1,480,557
499,350
35,299
(216,919)
(451,462)
1,346,825
–
1.6
260.6
36 Commitments
Capital expenditure authorised and contracted for which has not been provided for in the financial statements amounted to £12m (2022: £5m)
in the Group and £nil (2022: £nil) in the Company.
The Group has committed to provide its share of further equity funding and subordinated debt in Infrastructure Investments projects which
have reached financial close. Refer to Note 41(f).
37 Contingent liabilities
The Company and certain subsidiary undertakings have, in the normal course of business, given guarantees and entered into counter-indemnities
in respect of bonds relating to the Group’s own contracts and given guarantees in respect of their share of certain contractual obligations of joint
ventures and associates and certain retirement benefit liabilities of the Balfour Beatty Pension Fund and the Railways Pension Scheme. Guarantees
are treated as contingent liabilities until such time as it becomes probable payment will be required under the terms of the guarantee.
Provision has been made for the Directors’ best estimate of known legal claims, investigations and legal actions in progress. The Group takes
legal advice as to the likelihood of success of claims and actions and no provision is made where the Directors consider, based on that advice,
that the action is unlikely to succeed, or that the Group cannot make a sufficiently reliable estimate of the potential obligation. However, in
certain cases where assessments are ongoing and the Group cannot yet conclude whether it is probable the claim is valid, a possible obligation
may exist at 31 December 2023. In respect of these cases, it is not practicable to estimate the financial effect based on the current status of
the assessments.
Balfour Beatty plc Annual Report and Accounts 2023 235
Financial statements 38 Related party transactions
Joint ventures and associates
The Group has contracted with, provided services to, and received management fees from, certain joint ventures and associates amounting to
£445m (2022: £447m). These transactions occurred in the normal course of business at market rates and terms. In addition, the Group procured
equipment and labour on behalf of certain joint ventures and associates which were recharged at cost with no mark-up. The amounts due from
or to joint ventures and associates at the reporting date are disclosed in Notes 24 and 25 respectively.
Transactions with non-Group members
The Group also entered into transactions and had amounts outstanding with related parties which are not members of the Group as set out below.
This company was a related party as it was controlled, jointly controlled or under significant influence by a Director of Balfour Beatty plc.
Site Assist Software Limited
Purchase of services
2023
£m
1
2022
£m
1
All transactions with this related party were conducted on normal commercial terms, equivalent to those conducted with external parties. No
guarantees have been given or received. No expense has been recognised in the year for bad or doubtful debts in respect of amounts owed by
this related party.
Compensation of key management personnel of the Company
Short-term benefits
Share-based payments
2023
£m
3.103
3.866
6.969
2022
£m
3.273
1.634
4.907
Key management personnel comprise the executive Directors who are directly responsible for the Group’s activities and the non-executive
Directors. The compensation included above is in respect of the period of the year during which the individuals were Directors. Further details
of Directors’ emoluments, post-employment benefits and interests are set out in the Remuneration report on pages 152 to 168.
During 2023, a member of the Group’s staff was seconded on a full-time basis to The 5% Club, a charity which is a dynamic movement of
employer-members working to create a shared prosperity across the UK by driving ‘earn and learn’ skills training. The expense for the salary
cost was borne by the Group and no consideration was received in return.
39 Events after the reporting date
In the period from 1 January 2024 to 11 March 2024 (the latest practicable date prior to the date of this annual report and accounts), the
Company purchased 8.2m ordinary shares, which are held in treasury with no voting rights, for a total consideration of £28m (including stamp
duty and fees).
There were no other material post balance sheet events arising after the reporting date.
236
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 40 Financial instruments
Capital risk management
The Group manages its capital to ensure its ability to continue as a going concern and to maintain an optimal capital structure to reduce the
cost of capital. The components of capital are as follows: equity attributable to equity holders of the Company comprising issued ordinary
share capital, reserves and retained earnings as disclosed in Notes 31 and 32; US private placement as disclosed in Note 27; and cash and
cash equivalents and borrowings as disclosed in Note 27.
The Group maintains or adjusts its capital structure through the payment of dividends to equity holders, issue of new shares and buyback of
existing shares, and drawdown of new borrowings and repayment of existing borrowings. The policy of the Group is to ensure an appropriate
balance between cash, borrowings (other than the non-recourse borrowings of companies engaged in Infrastructure Investments projects),
working capital and the value in the Infrastructure Investments investment portfolio.
The overall capital risk management strategy of the Group remains unchanged from 2022.
In 2023 the Company commenced the third phase of its share buyback programme, which completed on 15 December 2023. The Company
purchased 43.3m (2022: 52.0m) shares for a total consideration of £150m (2022: £150m) and held these shares in treasury with no voting
rights. The purchase of these shares, together with associated fees and stamp duty amounting to £1m (2022: £1m), utilised £151m (2022:
£151m) of the Company’s distributable profits.
On 20 December 2023, the Company cancelled the 43.3m treasury shares purchased through the 2023 phase of its share buyback programme
(2022: 102.3m). This cancellation resulted in a decrease in called-up share capital in issue of £22m (2022: £51m) and a corresponding increase
in the capital redemption reserve.
Categories of financial instruments
Loans and
receivables
at amortised
cost, cash
and deposits
2023
£m
Financial
liabilities at
amortised
cost
2023
£m
Financial
assets at
fair value
through
OCI
2023
£m
Financial
assets at
amortised
cost
2023
£m
Financial
assets at
fair value
through
P&L
2023
£m
Loans and
receivables at
amortised
cost, cash
and deposits
2022
£m
Financial
liabilities at
amortised
cost
2022
£m
Financial
assets at
fair value
through
OCI
2022
£m
Financial
assets at
amortised
cost
2022
£m
Financial
assets at
fair value
through
P&L
2022
£m
Derivatives
2023
£m
Derivatives
2022
£m
Financial
assets
Fixed rate
bonds and
treasury stock
Mutual funds
Other
investment
assets
PPP financial
assets
Cash and
deposits
Trade and
other
receivables
Derivatives
Total
Financial
liabilities
Trade and
other payables
Unsecured
borrowings
Infrastructure
concessions
non-recourse
term loans
Derivatives
Total
Net
Current year
comprehensive
income/(loss)
excluding share
of joint
ventures and
associates
–
–
–
–
1,414
1,145
–
2,559
–
–
–
–
–
–
–
–
–
–
(1,708)
(266)
–
–
–
2,559
(570)
–
(2,544)
(2,544)
–
19
–
24
–
–
–
43
–
–
–
–
–
43
–
–
2
–
–
–
–
2
–
–
–
–
–
2
–
–
7
–
–
–
–
7
–
–
–
–
–
7
–
–
–
–
–
–
1
1
–
–
–
–
–
–
1,179
1,111
–
2,290
–
–
–
–
–
–
–
–
–
–
(1,638)
(345)
–
(2)
(2)
(1)
–
–
–
2,290
(261)
–
(2,244)
(2,244)
–
20
–
26
–
–
–
46
–
–
–
–
–
46
2
–
7
–
–
–
–
9
–
–
–
–
–
9
–
–
11
–
–
–
–
11
–
–
–
–
–
11
–
–
–
–
–
–
1
1
–
–
–
(1)
(1)
–
63
(33)
4
–
(1)
–
35
(30)
(6)
–
6
3
Balfour Beatty plc Annual Report and Accounts 2023 237
Financial statements
40 Financial instruments continued
Derivatives
Fuel hedges
Held for trading at fair value through income statement
Forward exchange contracts
Held for trading at fair value through income statement
Interest rate swaps
Designated as cash flow hedges
Financial assets/(liabilities)
Financial assets/(liabilities)
Current
2023
£m
Non-
current
2023
£m
Total
2023
£m
Current
2022
£m
1
–
–
1
–
(1)
(1)
(2)
1
(1)
(1)
(1)
1
–
1
Non-
current
2022
£m
–
(1)
(1)
Total
2022
£m
1
(1)
–
Non-derivative financial liabilities gross maturity
The following table details the remaining contractual maturity for the Group’s non-derivative financial liabilities. The table reflects the undiscounted
contractual maturities of the financial liabilities including interest that will accrue on those liabilities except where the Group is entitled to and
intends to repay the liability before its maturity. The discount column represents the possible future cash flows included in the maturity
analysis, such as future interest, that are not included in the carrying value of the financial liability.
Maturity profile of the Group’s non-derivative financial liabilities at 31 December
Due on demand or within one year
Due within one to two years
Due within two to five years
Due after more than five years
Discount
Carrying value
Due on demand or within one year
Due within one to two years
Due within two to five years
Due after more than five years
Discount
Carrying value
Non-recourse
project
finance
2023
£m
Other
borrowings
2023
£m
(15)
(18)
(221)
(934)
(1,188)
618
(570)
(104)
(39)
(27)
(96)
(266)
–
(266)
Non-recourse
project
finance
2022
£m
Other
borrowings
2022
£m
(32)
(8)
(26)
(385)
(451)
190
(261)
(173)
–
(70)
(102)
(345)
–
(345)
Other
financial
liabilities
2023
£m
(1,593)
(82)
(28)
(5)
(1,708)
–
(1,708)
Other
financial
liabilities
2022
£m
(1,503)
(68)
(62)
(5)
(1,638)
–
(1,638)
Total non-
derivative
financial
liabilities
2023
£m
(1,712)
(139)
(276)
(1,035)
(3,162)
618
(2,544)
Total non-
derivative
financial
liabilities
2022
£m
(1,708)
(76)
(158)
(492)
(2,434)
190
(2,244)
Discount
2023
£m
6
8
40
564
618
Discount
2022
£m
2
–
1
187
190
Carrying
value
2023
£m
(1,706)
(131)
(236)
(471)
(2,544)
Carrying
value
2022
£m
(1,706)
(76)
(157)
(305)
(2,244)
Derivative financial liabilities gross maturity
The following table details the Group’s expected maturity for its derivative financial liabilities. The table reflects the undiscounted net cash
inflows/(outflows) on the derivative instruments that settle on a net basis (interest rate swaps) and undiscounted gross inflows/(outflows) for
those derivatives that are settled on a gross basis (foreign exchange contracts). When the amount payable or receivable is not fixed, the
amount disclosed has been determined by reference to the projected interest rates, using the yield curves at the reporting date.
Maturity profile of the Group’s derivatives at 31 December
Due on demand or within one year
Due within one to two years
Due within two to five years
Total
Payable
2023
£m
Receivable
2023
£m
(14)
(31)
(7)
(52)
15
30
6
51
Net
payable
2023
£m
1
(1)
(1)
(1)
Payable
2022
£m
Receivable
2022
£m
(11)
(5)
–
(16)
11
5
–
16
Net
payable
2022
£m
–
–
–
–
238
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
40 Financial instruments continued
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk; credit risk; and liquidity risk. The Group’s financial risk management
strategy seeks to minimise the potential adverse effect of these risks on the Group’s financial performance.
Financial risk management is carried out centrally by Group Treasury under policies approved by the Board. Group Treasury liaises with the
Group’s business units to identify, evaluate and hedge financial risks. The Board provides written principles for overall financial risk management,
as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits
is monitored through the Group’s internal audit and risk management procedures. The Group uses derivative financial instruments to hedge
certain risk exposures. The Group does not trade in financial instruments, including derivative financial instruments, for speculative purposes.
(a) Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters
into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:
» forward foreign exchange contracts to hedge the exchange rate risk arising on trading activities transacted in a currency that is not the functional
currency of the business unit; and
» interest rate swaps to mitigate the cash flow variability in non-recourse project finance loans arising from variable interest rates on borrowings.
There has been no material change to the Group’s exposure to market risks and there has been no change in how the Group manages those
risks since 2022.
(i) Foreign currency risk management
The Group operates internationally and is exposed to foreign exchange risk arising from exposure to various currencies, primarily to US dollars, euros
and Hong Kong dollars. Foreign exchange risk arises from future trading transactions, assets and liabilities and net investments in foreign operations.
Group policy requires business units to manage their transactional foreign exchange risk against their functional currency. Whenever a current or
future foreign currency exposure is identified with sufficient reliability, Group Treasury enters into forward contracts on behalf of business units to
cover 100% of foreign exchange risk above materiality levels determined by the Chief Financial Officer.
As at 31 December 2023, the notional principal amounts of foreign exchange contracts in respect of foreign currency transactions where hedge
accounting is not applied was £51m (2022: £16m) receivable and £52m (2022: £16m) payable with related cash flows expected to occur within three
years (2022: three years). The foreign exchange gains or losses resulting from fair valuing these unhedged foreign exchange contracts will affect the
income statement throughout the same periods.
The Group has not designated any forward exchange contracts as cash flow hedges in 2022 and 2023.
The Group’s investments in foreign operations are exposed to foreign currency translation risks. The Group does not enter into forward foreign
exchange or other derivative contracts to hedge foreign currency denominated net assets.
In June 2022 the Group raised US$158m of debt in the form of new US private placement (USPP) notes on terms and conditions materially the same
as the existing USPP notes raised in 2013, of which US$50m remained outstanding at 31 December 2023. The USPP notes are designated as a net
investment hedge against changes in the value of the Group’s US net assets due to exchange movements. The Group reassessed the US$208m
hedge at 31 December 2023 and concluded that the hedge continued to be effective. Exchange movements in the year led to a £14m reduction in
the carrying amount of the liability on the Group’s balance sheet (2022: £23m increase). A 5% increase/decrease in the US dollar to sterling exchange
rate would lead to a £8m decrease (2022: £16m)/£9m increase (2022: £18m) in the carrying amount of the liability on the Group’s balance sheet, with
the movement recognised in other comprehensive income.
The hedging policy is reviewed periodically. At the reporting date there had been no change to the hedging policy since 2022.
(ii) Interest rate risk management
Interest rate risk arises in the Group’s non-recourse project companies which borrow funds at both floating and fixed interest rates and hold financial
assets measured at fair value through OCI. Floating rate borrowings expose the Group to cash flow interest rate risk. The Group’s policy to manage
this risk is to swap floating rate interest to fixed rate, using interest rate swap contracts.
In an interest rate swap, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional
principal amounts. The net effect of a movement in interest rates on income would be immaterial. The fair value of interest rate swaps is determined
by discounting the future cash flows using the yield curve at the reporting date.
During 2023 and 2022, the Group’s non-recourse project subsidiaries’ borrowings at variable rates of interest were denominated in sterling. The
notional principal amounts of the subsidiaries’ interest rate swaps outstanding at 31 December 2023 totalled £17m (2022: £17m) with maturities that
match the maturity of the underlying borrowings of 8 years. At 31 December 2023, the fixed interest rate was 5.1% (2022: 5.1%) and the principal
floating rates are SONIA plus a fixed margin. A 50 basis point increase/decrease in the interest rate on floating rate borrowings for interest rate swaps
would lead to a £nil increase (2022: £nil)/£nil decrease (2022: £nil) in amounts taken directly to other comprehensive income by the Group in relation
to the Group’s exposure to interest rates on the PPP financial assets and cash flow hedges of its Infrastructure Investments subsidiaries.
Interest rate risk also arises on the Group’s cash and cash equivalents, term deposits and other borrowings. Other than the non-recourse project
subsidiaries’ borrowings at variable rates of interest, all the debt of the Group is held at fixed interest rates. A 50 basis point increase/decrease in the
interest rate of each currency in which these financial instruments are held would lead to a £5m decrease (2022: £6m)/£5m increase (2022: £6m)
in the Group’s net finance cost.
Balfour Beatty plc Annual Report and Accounts 2023 239
Financial statements 40 Financial instruments continued
Financial risk factors continued
(a) Market risk continued
(iii) Price risk management
The Group’s principal price risk exposure arises in its Infrastructure Investments concessions. At the commencement of the concession, an
element of the unitary payment by the customer is indexed to offset the effect of inflation on the concession’s costs. The Group is exposed
to price risk to the extent that inflation differs from the index used.
(b) Credit risk
Credit risk is the risk that a counterparty will default on its contractual obligations, resulting in financial loss. Credit risk arises from cash and
deposits, derivative financial instruments, loans provided to joint ventures and associates and credit exposures to customers, including
outstanding receivables and committed transactions. The Group has a policy of assessing the creditworthiness of potential customers before
entering into transactions set by the Board for the Group.
For cash and deposits and derivative financial instruments, the Group has a policy of only using counterparties that are independently rated
with a minimum long-term credit rating of BBB- and at 31 December 2023 this criterion was met (2022: BBB+). The credit rating of a financial
institution will determine the amount and duration for which funds may be deposited under individual risk limits set by the Board for the Group
and subsidiary companies. Management monitors the utilisation of these credit limits regularly.
For trade and other receivables, credit evaluation is performed on the financial condition of accounts receivable using independent ratings
where available or by assessment of the customer’s credit quality based on its financial position, past experience and other factors. The
Group’s most significant customers are public or regulated industry entities which generally have high credit ratings or are of a high credit
quality due to the nature of the customer. As such, the Group does not expect material credit losses to occur on balances owed to the Group
by its public or regulated customers. This is in line with the Group’s experience in the past of recovering balances owed by these customers.
The Group is exposed to credit risk on loans provided to joint ventures and associates and accrued interest on those loans, as the repayment
of these amounts is contingent on the performance of the underlying concession or operation. In the Infrastructure Investments segment the
concessions are typically financed by a combination of non-recourse external borrowings and subordinated loans provided by the joint venture
partners. The Group assesses any expected credit losses on its loans provided to joint ventures and associates by comparing the carrying value
of the relevant investment in joint venture or associate balance (which includes the loans provided and any accrued interest) to future cash
flows expected to be received from the joint venture or associate, discounted where appropriate.
The maximum exposure to credit risk in respect of the above at the reporting date is the carrying value of financial assets recorded in the
financial statements, net of any allowance for losses.
There has been no material change to the Group’s exposure to credit risks and there has been no change in how the Group manages those
risks since 2022.
(c) Liquidity risk
The Group manages liquidity risk by maintaining adequate cash balances and banking facilities, continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets and liabilities. Details of undrawn committed borrowing facilities are set out
in Note 27.1. The maturity profile of the Group’s financial liabilities is set out on page 238.
There has been no material change to the Group’s exposure to liquidity risks and there has been no change in how the Group manages those
risks since 2022.
Fair value estimation
The Group holds certain financial instruments on the balance sheet at their fair values. The following hierarchy classifies each class of financial
asset or liability in accordance with the valuation technique applied in determining its fair value.
There have been no transfers between these categories during 2023 or 2022.
Level 1 – The fair value is calculated based on quoted prices traded in active markets for identical assets or liabilities.
The Group holds investments in mutual funds measured at fair value through OCI which are traded in active markets and valued at the closing
market price at the reporting date.
Level 2 – The fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly.
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows utilising yield curves at the reporting date
and taking into account own credit risk. Own credit risk for Infrastructure Investments’ swaps is not material and is calculated using the following
credit valuation adjustment (CVA) calculation: loss given default multiplied by exposure multiplied by probability of default.
The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the reporting date and yield curves
derived from quoted interest rates matching the maturities of the foreign exchange contracts. Own credit risk for the other derivative liabilities is
not material and is calculated by applying a relevant credit default swap (CDS) rate obtained from a third party.
Level 3 – The fair value is based on unobservable inputs.
The fair value of the Group’s PPP financial assets is determined in the construction phase by applying an attributable profit margin by reference to
the construction margin on non-PPP projects reflecting the construction risks retained by the construction contractor, and fair value of construction
services performed. In the operational phase it is determined by discounting the future cash flows allocated to the financial asset at a discount
rate which is based on long-term gilt rates adjusted for the risk levels associated with the assets, with market-related movements in fair value
recognised in other comprehensive income and other movements recognised in the income statement. Amounts originally recognised in other
comprehensive income are transferred to the income statement upon disposal of the asset.
A change in the discount rate would have a significant effect on the value of the asset and a 50 basis point increase/decrease, which represents
management’s assessment of a reasonably possible change in the risk-adjusted discount rate, would lead to a £1m decrease (2022: £1m)/£1m
increase (2022: £1m) in the fair value of the assets taken through equity. Refer to Note 21 for a reconciliation of the movement from the opening
balance to the closing balance.
240
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 40 Financial instruments continued
Financial risk factors continued
(c) Liquidity risk continued
Fair value estimation continued
For PPP financial assets held in joint ventures and associates, a change in the discount rate by a 50 basis point increase/decrease, which represents
management’s assessment of a reasonably possible change in the risk-adjusted discount rate, would lead to a £25m decrease (2022: £28m)/£26m
increase (2022: £29m) in the fair value of the assets taken through equity within the share of joint ventures’ and associates’ reserves.
Financial instruments at fair value
Investments in mutual fund financial assets
PPP financial assets
Other investment assets
Financial assets – fuel hedges
Total assets measured at fair value
Financial liabilities – infrastructure
concessions interest rate swaps
Financial liabilities – forward exchange contracts
Total liabilities measured at fair value
2023
2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
19
–
–
–
19
–
–
–
–
–
–
1
1
(1)
(1)
(2)
–
24
7
–
31
–
–
–
19
24
7
1
51
(1)
(1)
(2)
20
–
–
–
20
–
–
–
–
–
–
1
1
(1)
–
(1)
–
26
11
–
37
–
–
–
Total
£m
20
26
11
1
58
(1)
–
(1)
41 Principal subsidiaries, joint ventures and associates
(a) Principal subsidiaries
Construction and support services
Balfour Beatty Group Ltd
Balfour Beatty Construction Group Inc
Balfour Beatty Infrastructure Inc
Infrastructure Investments
Balfour Beatty Communities LLC
Balfour Beatty Infrastructure Investments Ltd*
Balfour Beatty Investments Inc
Balfour Beatty Campus Solutions LLC
Balfour Beatty Developments Inc
Other
Balfour Beatty Holdings Inc.
(b) Principal joint ventures and associates
Construction and support services
Gammon China Ltd
Infrastructure Investments (Note 41
Connect Plus (M25) Ltd
Country of incorporation
or registration
US
US
US
US
US
US
US
Country of incorporation
or registration
Ownership interest
%
Hong Kong
50.0
15.0
(c) Principal joint operations
The Group carries out a number of its larger contracts in joint arrangements with other contractors so as to share resources and risk. The principal
joint projects in progress during the year are shown below.
M25 Maintenance
HS2 – Area North
Central Rail Systems Alliance
Old Oak Common
Gilbane/Balfour Beatty Eccles 1951
Skanska/Balfour Beatty
Driscoll/Balfour Beatty
Greenline Extension
LAX Integrated Express Solutions
LBJ East
Country of incorporation
or registration
Ownership interest
%
52.5
50.0
80.0
42.0
50.0
50.0
35.0
25.0
30.0
45.0
US
US
US
US
US
US
Notes
(i) Subsidiaries, joint ventures and associates whose results did not, in the opinion of the Directors, materially affect the results or net assets of the Group are not shown.
(ii) Unless otherwise stated, 100% of the equity capital is owned and companies are registered in England and Wales and the principal operations of each company are conducted in the
country of incorporation.
*
Indicates held directly by Balfour Beatty plc.
A full list of the Group’s related undertakings is included in Note 43.
Balfour Beatty plc Annual Report and Accounts 2023 241
Financial statements 41 Principal subsidiaries, joint ventures and associates continued
(d) Balfour Beatty Investments UK
Roads
Balfour Beatty is a promoter, developer and investor in 12 road and street lighting projects to construct new roads, to upgrade and maintain
existing roads and to replace and maintain street lighting. The principal contract is the project agreement with the governmental highway
authority. All assets transfer to the customer at the end of the concession.
Concession company (i)
Project
£m Shareholding
Total debt
and equity
funding
Method of
accounting
Financial
close
Duration
years
Construction
completion
Connect M1-A1 Ltd (ii)
Connect A50 Ltd (ii)
Connect A30/A35 Ltd (ii)
Connect M77/GSO plc (ii)
Connect Roads Sunderland Ltd (ii)
Connect Roads South Tyneside Ltd (ii)
Connect Roads Derby Ltd
Connect Plus (M25) Ltd (ii)
Connect CNDR Ltd (ii)
Connect Roads Coventry Ltd (ii)
Connect Roads Cambridgeshire Ltd (ii)
Connect Roads Northamptonshire Ltd (ii)
30km road
57km road
102km road
25km road
Streetlighting
Streetlighting
Streetlighting
J16 – J23, J27 – J30
and
A1(M) Hatfield Tunnel
Carlisle Northern
Development Route
Streetlighting
Streetlighting
Streetlighting
290
42
127
167
27
28
36
1,309
176
56
51
64
20%
25%
20%
85%
20%
20%
March 1996
JV
May 1996
JV
July 1996
JV
May 2003
JV
JV
August 2003
JV December 2005
April 2007
100% Subsidiary
15%
25%
20%
20%
20%
JV
JV
JV
JV
JV
May 2009
July 2009
August 2010
April 2011
August 2011
30
30
30
32
25
25
25
30
30
25
25
25
1999
1998
2000
2005
2008
2010
2012
2012
2012
2015
2016
2016
Notes
(i) Registered in England and Wales and the principal operations of each company are in England and Wales, except Connect M77/GSO plc which is registered, and conducts their principal
operations, in Scotland.
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholder requiring unanimity of agreement in respect of significant matters related to the financial and
operating policies of this company, the Directors have accounted for its interest in this company as a joint venture.
Healthcare
Balfour Beatty is a promoter, developer and investor in two healthcare projects to build hospital accommodation and to provide certain non-medical
facilities management services over the concession period. The principal contract for Birmingham is the project agreement between the concession
company and the NHS Trust and for the Irish primary care centres, the project agreement is with the Irish Government. All assets transfer to the
customer at the end of the concession.
Concession company (i)(ii)
Project
£m Shareholding
Total debt
and equity
funding
Method of
accounting
Financial
close
Duration
years
Construction
completion
Consort Healthcare (Birmingham) Ltd
Healthcare Centres PPP Ltd
Teaching hospital and
mental health hospital
Primary health
care centres
553
158
40%
40%
JV
JV
June 2006
May 2016
40
26
2011
2019
Notes
(i) Registered in England and Wales and the principal operations of each company are in England and Wales, except Healthcare Centres PPP Ltd which is registered, and conducts its principal
operations, in Ireland.
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholder requiring unanimity of agreement in respect of significant matters related to the financial and
operating policies of this company, the Directors have accounted for its interest in this company as a joint venture.
Student accommodation
Balfour Beatty is a promoter, developer and investor in five student accommodation projects. On Holyrood, Aberystwyth and two Sussex projects,
the principal agreement is between the concession company and the university and the assets transfer to the customer at the end of the
concession. On Glasgow Residences the building is owned outright by Balfour Beatty and rooms are let to individual students.
Concession company (i)
Project
Holyrood Student Accommodation SPV
Ltd (ii)
Edinburgh
Aberystwyth Student Accommodation Ltd Aberystwyth
Glasgow Residences (Kennedy Street) LLP
Glasgow
East Slope Residencies Student
Accommodation LLP
Sussex
West Slope Residencies LLP
Sussex
Total debt
and equity
funding
£m
82
51
40
218
343
Shareholding
Method of
accounting
Financial
close
Duration
years
Construction
completion
20%
JV
100% Subsidiary
100% Subsidiary
July 2013
July 2013
April 2016
80% Subsidiary
March 2017
81% Subsidiary
December 2023
50
35
n/a
50
50
2016
2015
2017
2020
2028
Notes
(i) Registered in England and Wales and the principal operations of each company are in England and Wales, except Holyrood Student Accommodation SPV Ltd and Glasgow Residences
(Kennedy Street) LLP which are registered, and conduct their principal operations, in Scotland.
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholder requiring unanimity of agreement in respect of significant matters related to the financial and
operating policies of this company, the Directors have accounted for its interest in this company as a joint venture.
242
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 41 Principal subsidiaries, joint ventures and associates continued
(d) Balfour Beatty Investments UK continued
Other concessions
Pevensey Coastal Defence Ltd (PCDL) has a 25-year contract with the Environment Agency to maintain a shingle bank sea defence in East Sussex.
Thanet involves the operation of transmission assets for the 300MW offshore wind farm project located off the Kent coast. Gwynt y Môr
involves the operation of transmission assets for the 576MW offshore wind farm in the Irish Sea. Humber involves the operation of transmission
assets for the 219MW offshore wind farm in the North Sea. Thanet, Gwynt y Môr and Humber operate and maintain the transmission assets
under the terms of perpetual licences granted by Ofgem which contain the right to be paid a revenue stream over a 20-year period on an
availability basis. Welland Bio Power involves the design, construction, financing, operation and maintenance of a 10.4MW waste wood gasifier
located at Pebble Hall Farm, Thredingworth. The East Wick and Sweetwater development is a London Legacy Development Corporation
project, being carried out in phases, which will result in the creation of two communities, East Wick and Sweetwater, at the Queen Elizabeth
Olympic Park in London. With the exception of the Welland Bio Power plant and the Eastwick and Sweetwater project, all assets transfer to
the customer at the end of the relevant concession.
Concession company (i) (ii)
Pevensey Coastal Defence Ltd
East Wick and Sweetwater
Projects (Phase 1) Ltd
East Wick and Sweetwater
Projects (Phase 2) Ltd
Thanet OFTO Ltd
Gwynt y Môr OFTO plc
Welland Bio Power Ltd
Humber Gateway OFTO Ltd
Project
Sea defences
Property development
Property development
Offshore transmission
Offshore transmission
Waste wood gasifier
Offshore transmission
Total debt
and equity
funding
£m
3
99
76
197
256
17
187
Shareholding
Method of
accounting
Financial
close
Duration
years
Construction
completion
25%
50%
50%
20%
60%
29.2%
20%
JV
JV
JV
JV
JV
JV
JV
July 2000
January 2019
August 2023
December 2014
February 2015
March 2015
September 2016
25
3
3
20
20
n/a
20
n/a
2021
2026
n/a
n/a
2018
n/a
Notes
(i) Registered in England and Wales and the principal operations of each company are in England and Wales.
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholder requiring unanimity of agreement in respect of significant matters related to the financial and
operating policies of this company, the Directors have accounted for its interest in these companies as a joint venture.
(e) Balfour Beatty Investments North America
Military housing
Summary Balfour Beatty through its subsidiary Balfour Beatty Communities LLC is a manager, developer, and investor in a number of US
military privatisation projects associated with a total of 55 US Government military bases which includes 55 military family housing communities
and one unaccompanied personnel housing community that are expected to contain approximately 43,000 housing units once development,
construction and renovation are complete.
The projects comprise 11 military family housing privatisation projects with the United States Department of the Army (Army), seven projects
with the United States Department of the Air Force (Air Force) and two projects with the United States Department of the Navy (Navy). In addition,
there is one unaccompanied personnel housing (UPH) project with the Army at Fort Stewart.
Contractual arrangements The first phase of the project, known as the initial development period, covers the period of initial construction or
renovation of military housing on a base, typically lasting three to eight years. With respect to Army and Navy projects, the Government becomes
a member or partner of the project entity (Project LLC); the Air Force is not a named partner or member in Balfour Beatty Communities’ Project
LLCs, however it contributes a commitment to provide a Government direct loan to the Project LLC and has similar rights to share in distributions
and cash flows of the Project LLC. On each project, the Project LLC enters into a ground lease with the Government, which provides the Project
LLC with a leasehold interest in the land and title to the improvements on the land for a period of 50 years. Each of these military housing
privatisation projects includes agreements covering the management, renovation, and development of existing housing units, as well as the
development, construction, renovation and management of new units during the term of the project, which, in the case of the Army, could
potentially extend for up to an additional 25 years. The 50-year duration of each project calls for continuous renovation, rehabilitation,
demolition and reconstruction of housing units. At the end of the ground lease term the Project LLC’s leasehold interest terminates and all
project improvements on the land generally transfer to the Government.
Preferred returns The projects will typically receive, to the extent that adequate funds are available, an annual minimum preferred return.
On most existing projects, this annual minimum preferred return ranges from 9% to 12% of Balfour Beatty Communities’ initial equity
contribution to the project.
Balfour Beatty plc Annual Report and Accounts 2023 243
Financial statements 41 Principal subsidiaries, joint ventures and associates continued
(e) Balfour Beatty Investments North America continued
Military housing continued
Allocation of remaining operating cash flow Operating cash flow remaining after the annual minimum preferred return is paid is shared
between Balfour Beatty Communities and the reinvestment account held by the project for the benefit of the Government. On most of the
existing projects, the total amount that Balfour Beatty Communities is entitled to receive (inclusive of the preferred return) is generally capped
at an annual modified rate of return, or cash-on-cash return, on its initial equity contribution to the project. Historically, these caps have ranged
between approximately 9% to 18% depending on the particular project and the type of return (annual modified rates of return or cash-on-cash).
However, in some of the more recent projects, there are either no annual caps or lower projected annual rates of return. The total capped
return generally will include the annual minimum preferred return. The reinvestment account is an account established for the benefit of the
military, but funds may be withdrawn for construction, development and renovation costs during the remaining life of a privatisation project
upon approval by the applicable military service.
Return of equity Generally, at the end of a project term, any monies remaining in the reinvestment account are distributed to Balfour Beatty
Communities and the Army, Navy or Air Force, in a predetermined order of priority. Typically these distributions will have the effect of providing
the parties with sufficient funds to provide a minimum annual return over the life of the project and a complete return of the initial capital contribution.
After payment of the minimum annual return and the return of a party’s initial contribution, all remaining funds will typically be distributed to the
applicable military service.
Military concession company (i)
Military family housing
Fort Carson Family Housing LLC
– Fort Carson expansion
– Fort Carson GTA expansion
– Fort Carson GTA II expansion
Stewart Hunter Housing LLC
Fort Hamilton Housing LLC
Fort Detrick/Walter Reed Army Medical Center
Housing LLC
Northeast Housing LLC
Fort Eustis/Fort Story Housing LLC
– Fort Eustis expansion
– Fort Eustis – Marseilles Village
Fort Bliss/White Sands Missile Range Housing LP
– Fort Bliss expansion
– Fort Bliss GTA expansion phase I
– Fort Bliss GTA expansion phase II
Fort Gordon Housing LLC
Carlisle/Picatinny Family Housing LP
– Carlisle Heritage Heights phase II
AETC Housing LP
Southeast Housing LLC
Vandenberg Housing LP
Leonard Wood Family Communities LLC
AMC West Housing LP
West Point Housing LLC
Fort Jackson Housing LLC
Lackland Family Housing LLC
Western Group Housing LP
Northern Group Housing LLC
ACC Group Housing LLC
Military unaccompanied personnel housing
Stewart Hunter Housing LLC
Total project
funding
US$m
Projects
Financial
close
Duration
years
Construction
completion
Army base
Two Army bases
Army base
Two Army bases
Seven Navy bases
Two Army bases
Two Army bases
Army base
Two Army bases
Four Air Force bases
11 Navy bases
Air Force base
Army base
Three Air Force bases
Army base
Army base
Air Force base
Four Air Force bases
Six Air Force bases
Two Air Force bases
176
130
99
68
374
61
November 2003
November 2006
April 2010
June 2015
November 2003
June 2004
July 2004
112
November 2004
496
March 2005
175
July 2010
8
March 2013
26
July 2005
427
December 2009
46
July 2011
156
November 2012
146
May 2006
109
July 2006
84
October 2012
21
February 2007
359
November 2007
558
November 2007
155
Acquired June 2008
231
July 2008
428
August 2008
220
181
October 2008
105 Acquired December 2008
March 2012
328
August 2013
427
June 2014
56
36
January 2008
46
43
39
34
50
50
50
50
50
45
42
50
46
44
43
50
50
44
50
50
50
47
50
50
50
50
50
50
50
50
2004
2010
2013
2018
2012
2009
2008
2010
2011
2011
2015
2011
2011
2014
2016
2012
2011
2014
2012
2013
2012
2014
2015
2016
2013
2013
2017
2019
2018
2010
Note
(i) Registered in the US and the principal operations of each project are conducted in the US.
The Group evaluated each of its interests in the military housing projects to determine if the entities should be consolidated. This analysis
included, but was not limited to, identifying the activities that most significantly impact an entity’s economic performance, which party or
parties control those activities and the risks associated with these entities. Decision-making power over key facets of the contracts was
evaluated when determining which party or parties had control over the activities that most significantly impacted a project’s economics.
Based on this review, the Directors consider that the Group does not have the power to direct these activities and does not have control
and therefore the Group does not consolidate the military housing projects and accounts for these projects as investments in associates.
244
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 41 Principal subsidiaries, joint ventures and associates continued
(e) Balfour Beatty Investments North America continued
Aviation
Summary Balfour Beatty is a developer, operator and investor in an automated people mover at Los Angeles International Airport. The people
mover will be a 2.25-mile above ground airport transport system.
Contractual arrangements The principal contract is the project agreement between the concession partnership and the airport authority.
All assets transfer to the authority at the end of the concession.
Concession company
LAX Integrated Express Solutions LLC (i)(ii)
Project
LINXS
Total project
funding
US$m
Shareholding
Method of
accounting
Financial
close
Duration
years
Construction
completion
2,828
27%
JV
June 2018
30
2024
Notes
(i) Registered in the US and the principal operations of the project are conducted in the US.
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholder requiring unanimity of agreement in respect of significant matters related to the financial and
operating policies of this company, the Directors have accounted for its interest in this company as a joint venture.
Residential investments
Summary Balfour Beatty is a developer, operator and investor in eight multifamily residential projects.
Contractual arrangements Balfour Beatty has acquired residential apartment buildings for eight multifamily residential projects. For all residential
projects, the entities have entered into agreements with Balfour Beatty Communities LLC to perform the operations and renovation work.
Residential investments (i)(ii)
Carolina Cove (Wilmington) Owner LLC (North Carolina)
Lexington (Ridgeland) Owner, LLC (Jackson, Mississippi)
Landings (Jacksonville) Owner, LLC (Florida)
Retreat at Schillinger (Mobile) Owner, LLC (Alabama)
Paces Brook (Columbia) Owner, LLC (South Carolina)
Chenal Pointe (Little Rock) Owner, LLC (Arkansas)
San Mateo (Kissimmee) Owner, LLC (Florida)
View SA LLC (San Antonio, Texas)
Total project
funding
US$m
Shareholding
Method of
accounting
Financial
close
Renovation
completion
48
27
48
33
27
34
81
76
50%
50%
50%
50%
50%
50%
50%
87%
JV
JV
JV
JV
JV
JV
JV
JV
December 2017
August 2018
August 2019
December 2019
December 2019
October 2020
August 2021
June 2022
2022
2025
2025
2026
2026
2027
2027
2025
Notes
(i) Registered in the US and the principal operations of each project are conducted in the US.
(ii) Due to the shareholders’/partnership agreement between Balfour Beatty and the other shareholder/partner requiring unanimity of agreement in respect of significant matters related to the
financial and operating policies of this undertaking, the Directors have accounted for its interests in these undertakings as a joint venture.
Balfour Beatty plc Annual Report and Accounts 2023 245
Financial statements 41 Principal subsidiaries, joint ventures and associates continued
(e) Balfour Beatty Investments North America continued
Student accommodation
Summary Balfour Beatty is also a developer and owner of six student accommodation projects.
Contractual arrangements The principal contracts in the student accommodation projects are the ground leases, development leases and
operating agreements with the state universities setting out the obligations for the construction, operation and maintenance of the student
accommodation including lifecycle replacement during the concession period. The Tallahassee project is an investment in an existing off-
campus student housing community which is structured as a subsidiary.
Concession company (i)(ii)
Northside Campus Partners LP (Texas Dallas)
Northside Campus Partners 2, LP (Texas Dallas)
Northside Campus Partners 3, LP (Texas Dallas)
Northside Campus Partners 4, LP (Texas Dallas)
Swiftsure Housing Partners, LLC (Vanderbilt)
Oktiv (Tallahassee) Owner, LLC (Florida)
Total project
funding
US$m
Shareholding
Method of
accounting
Financial
close
Duration
years
Construction/
renovation
completion
54
67
36
70
154
53
10%
10%
70%
65%
23%
JV
JV
JV
JV
JV
100% Subsidiary
March 2015
February 2017
June 2019
December 2019
April 2021
June 2023
61
61
61
61
45
2016
2018
2020
2021
2023
2025
Notes
(i) Registered in the US and the principal operations of each project are conducted in the US.
(ii) Due to the shareholders’/partnership agreement between Balfour Beatty and the other shareholder/partner requiring unanimity of agreement in respect of significant matters related to the
financial and operating policies of this undertaking, the Directors have accounted for its interests in these undertakings as a joint venture.
(f) Balfour Beatty Investments UK and North America
Total future committed equity and debt funding for Infrastructure Investments’ project companies
Concessions
UK
Student accommodation
Other concessions
North America
Aviation
Projects at financial close
Projects at preferred bidder stage
Total
2024
£m
2025
£m
2026
£m
2027
onwards
£m
–
5
5
19
24
19
5
24
–
–
–
4
4
4
–
4
–
–
–
–
–
–
–
–
62
–
62
–
62
32
30
62
Total
£m
62
5
67
23
90
55
35
90
42 Audit exemptions taken for subsidiaries
The following subsidiaries are exempt from the requirements under the Companies Act 2006 relating to the audit of individual financial
statements by virtue of Section 479A of the Act.
Education Investments Holdings Ltd
Consort Healthcare Infrastructure Investments Ltd
Company registration number
6863458
6859623
246
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
43 Details of related undertakings of Balfour Beatty
plc as at 31 December 2023
In accordance with Section 409 of the Companies Act 2006 a full list
of subsidiaries, partnerships, associates and joint ventures, including
the principal activity, the country of incorporation and the effective
percentage of equity owned as at 31 December 2023 is disclosed
below. Unless otherwise stated, all interests are in the ordinary
share capital or shares of common stock in the entity and are held
indirectly by the Company, and all entities operate principally in their
country of incorporation. All subsidiaries had a reporting period ended
31 December 2023 and are wholly owned and consolidated into the
Group’s results, except where indicated.
Subsidiary undertakings incorporated in the United Kingdom
Principal activity
Entity
Q14 Quorum Business Park, Benton Lane, Newcastle upon Tyne
NE12 8BU
Aberystwyth Student Accommodation Ltd Infrastructure Concession
Balfour Beatty Infrastructure
Investments Ltd (i)
Balfour Beatty Infrastructure Partners
Member Ltd
Balfour Beatty Infrastructure Projects
Investments Ltd
Balfour Beatty Investments Ltd
Investment Holding
Company
Investment Holding
Company
Investment Holding
Company
Agent of Balfour Beatty
Group Ltd
Investment Holding
Company
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Investment Holding
Company
Investment Partnership
Investment Holding
Company
Infrastructure Concession
Investment Holding
Company
Investment Holding
Company
Infrastructure Concession
Investment Holding
Company
Infrastructure Concession
Infrastructure Concession
Infrastructure Concession
Investment Holding
Company
Investment Holding
Company
Infrastructure Concession
Investment Holding
Company
Infrastructure Concession
Infrastructure Concession
Investment Holding
Company
Infrastructure Concession
Infrastructure Concession
Investment Holding
Company
Balfour Beatty OFTO Holdings Ltd
Balfour Beatty Rail Corporate
Services Ltd
Balfour Beatty WorkSmart Ltd
BBI Holdings Australia Ltd
BBPF LLP (iii)
Connect Roads Derby Holdings Ltd
Connect Roads Derby Ltd
Connect Roads Infrastructure
Investments Ltd
Consort Healthcare Infrastructure
Investments Ltd
East Slope Residencies Facilities
Management Ltd
East Slope Residencies Holdings Ltd
East Slope Residencies Partner Ltd
East Slope Residencies plc (ii)
East Slope Residencies Student
Accommodation LLP (ii) (iii)
Education Investments Holdings Ltd
Initial GP1 Ltd
Manchester Residences (New Cross) Ltd
South Cambridgeshire Investments
Holdings Ltd
West Slope Residencies Facilities
Management Ltd
West Slope Residencies Finance Ltd
West Slope Residencies Holdings Ltd
West Slope Residencies LLP (iii) (v)
West Slope Residencies Partners Ltd
West Stratford Developments Ltd (iv)
Principal activity
Entity
5 Churchill Place, Canary Wharf, London E14 5HU
Dormant
Avatar Ltd
Agent of Balfour Beatty
Balfour Beatty Build Ltd
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Balfour Beatty Building Ltd
Balfour Beatty CE Ltd
Balfour Beatty Civil Engineering (SW) Ltd Agent of Balfour Beatty
Balfour Beatty Civil Engineering Ltd
Balfour Beatty Civils Ltd
Balfour Beatty Const Ltd
Balfour Beatty Construction (SW) Ltd
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Balfour Beatty Construction International
Ltd
Balfour Beatty Construction Northern Ltd Agent of Balfour Beatty
Balfour Beatty Group Ltd
Balfour Beatty Homes Ltd
Balfour Beatty Engineering Services (HY)
Ltd
Balfour Beatty Group Employment Ltd
Group Ltd
Agent of Balfour Beatty
Group Ltd
Employer For UK
Workforce
Construction & Support
Services
Agent of Manring Homes
Ltd
Agent of Balfour Beatty
Group Ltd
Investment Holding
Company
Agent of Balfour Beatty
Group Ltd
Balfour Beatty Nominees Ltd
Nominee Company
Balfour Beatty Overseas Investments Ltd Investment Holding
Balfour Beatty Investment Holdings Ltd (i)
Balfour Beatty Management Ltd
Balfour Beatty International Ltd
Balfour Beatty Overseas Ltd
Balfour Beatty Property Ltd (i)
Balfour Beatty Rail Infrastructure Services
Ltd
Balfour Beatty Rail Ltd
Balfour Beatty Rail Projects Ltd
Balfour Beatty Rail Technologies Ltd
Balfour Beatty Rail Track Systems Ltd
Balfour Beatty Refurbishment Ltd
Company
Investment Holding
Company
Agent of Balfour Beatty
plc
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Balfour Beatty Regional Construction Ltd Agent of Balfour Beatty
Balfour Beatty Utility Solutions Ltd
Balfour Kilpatrick Ltd
BB Indonesia Ltd
Balvac Ltd
Bical Construction Ltd
Group Ltd
Agent of Balfour Beatty
Group Ltd
Dormant
Support Services
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Balfour Beatty plc Annual Report and Accounts 2023 247
Financial statements 43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Subsidiary undertakings incorporated in the United Kingdom continued
Principal activity
Entity
Principal activity
Entity
Bignell & Associates Ltd
Birse Group Ltd
Birse Metro Ltd
Bnoms Ltd (i)
BPH Equipment Ltd
Cowlin Group Ltd
Devonshire House Dormant Three Ltd
Guinea Investments Ltd
G. N. Haden & Sons Ltd
Haden Building Services Ltd
Haden Young Ltd (i)
Hall & Tawse Western Ltd
Laser Rail Ltd
Lounsdale Electric Ltd
Manring Homes Ltd (i)
Multibuild (Construction & Interiors) Ltd
Office Projects (Interiors) Ltd
Omnicom Engineering Ltd
Raynesway Construction Ltd
Agent of Balfour Beatty
Group Ltd
Investment Holding
Company
Dormant
Nominee Company
Agent of Balfour Beatty
Group Ltd
Dormant
Dormant
Investment Holding
Company
Dormant
Dormant
Dormant
Dormant
Agent of Balfour Beatty
Group Ltd
Dormant
Property Investment
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Dormant
Agent of Balfour Beatty
Group Ltd
Dormant
Infrastructure Concession
Agent of Balfour Beatty
Group Ltd
Strata Construction Ltd
Urban Fox Networks (UK) Ltd (vi)
Hereford Steel Works, Holmer Road, Hereford HR4 9SW
Painter Brothers Ltd
Pension Fund Trustee
Kings Business Park, Kings Drive, Prescot, Merseyside L34 1PJ
Balfour Beatty Pension Trust Ltd (i)
C/O Mc Griggors LLP, Arnott House, 12–16 Bridge Street, Belfast
BT1 1LS, Northern Ireland
Balfour Kilpatrick Northern Ireland Ltd
The Curve Building, Axis Business Park, Hurricane Way, Langley,
Berkshire SL3 8AG
Balfour Beatty Ground Engineering Ltd
Dormant
Agent of Balfour Beatty
Group Ltd
Balfour Beatty Infrastructure Services Ltd Agent of Balfour Beatty
Balfour Beatty Living Places Ltd
Sunderland Streetlighting Ltd
Testing and Analysis Ltd
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Maxim 7, Maxim Office Park, Parklands Avenue, Eurocentral,
Holytown ML1 4WQ
Balfour Beatty Construction Ltd
Balfour Beatty Construction Scottish &
Southern Ltd
Balfour Beatty Kilpatrick Ltd
Balfour Beatty Rail Residuary Ltd
Balfour Beatty Regional Civil Engineering
Ltd
BBPFS LP (iii)
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Agent of Balfour Beatty
Group Ltd
Investment Partnership
248
Balfour Beatty plc Annual Report and Accounts 2023
Investment Holding
Company
Glasgow Residences (Kennedy Street)
Holdings Ltd
Glasgow Residences (Kennedy Street) LLP (iii)Infrastructure Concession
Infrastructure Concession
Glasgow Residences (Kennedy Street)
SPV Ltd
Hall & Tawse Ltd
Initial Founder Partner GP1 Ltd
Dormant
Investment Holding
Company
Agent of Balfour Beatty
Group Ltd
Midmill Business Park, Tumulus Way, Kintore, Aberdeenshire
AB51 0TG
Balfour Beatty Engineering
Services (CL) Ltd
C/O Mazars, Tower Bridge House, St Katharine’s Way, London
E1W 1DD
Balfour Beatty Power Construction Ltd
Balfour Beatty Power Networks
(Distribution Services) Ltd
Branlow Ltd
Mansell Maintenance Ltd
C/O Mazars LLP, 30 Old Bailey, London EC4M 7AU
Birse Construction Ltd
Dormant
Dormant
Dormant
Dormant
Edgar Allen Engineering Ltd
Mansell plc
Investment Holding
Company – In Liquidation
Dormant – In Liquidation
Investment Holding
Company – In Liquidation
West Service Road, Raynesway, Derby DE21 7BG
Balfour Beatty Plant & Fleet Services Ltd Agent of Balfour Beatty
Group Ltd
Dormant
Dormant
C/O Mazars LLP, 100 Queen Street, Glasgow G1 3DN Scotland
Balfour Beatty Engineering Services
(LEL) Ltd
Lumina Building, 40 Ainslie Road, Hillington Park, Glasgow
G52 4RU
Shaw-Petrie Ltd
42-44 Clarendon Road, Watford, Hertfordshire WD17 1DR
Barlow & Young, Ltd
Haden International Ltd
Fourth Floor, 130 Wilton Road, London SW1V 1LQ
00158345 Ltd
01198171 Ltd
BICC Dormant One Ltd
Devonshire House Dormant One Ltd
Third Floor Devonshire House, Mayfair Place, London W1X 5FH
BICC Thermoheat Ltd
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Notes
(i) Held directly by Balfour Beatty plc.
(ii) 80% owned.
(iii) Partnership interests held.
(iv) 31 March year end.
(v) 81% owned.
(vi) The Group holds a 77.8% direct interest in Urban Fox Networks (UK) Ltd and an indirect
interest of 5.6% through the Group interest in Urban Electric Networks Ltd.
Subsidiary undertakings incorporated outside the United Kingdom
Principal activity
Entity
Australia
Allens Corporate Services Pty Limited, Level 33, 101 Collins
Street, Melbourne, Victoria, 3000
Balfour Beatty Australian Limited
Partnership (ii)
Holding company
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Subsidiary undertakings incorporated outside the United Kingdom continued
Entity
Level 12, 680 George Street, Sydney, NSW 2000
Balfour Beatty Australia Pty Ltd
Principal activity
Construction & Support
Services
Bahamas
The Alexander Corporate Group Limited, One Millars Court,
P.O. Box N-7117, Nassau
Balfour Beatty Bahamas Ltd
Canada
Borden Ladner Gervais LLP, 22 Adelaide Street West, Suite 3400,
Toronto, ON, M5H 4E3
BB Group Canada Inc
Dormant
Investment Holding
Company
Taylor McCaffrey LLP, 900-400 St. Mary Avenue, Winnipeg, MB,
R3C 4K5
Balfour Beatty Communities GP, Inc
Balfour Beatty Communities, LP (ii)
Balfour Beatty Construction, LP (ii)
Balfour Beatty Construction GP, Inc
Balfour Beatty Investments GP, Inc
Balfour Beatty Investments, LP (ii)
BB NIH GP, Inc
Germany
Garmischer Strasse 35, 81373 Munich
Balfour Beatty Rail GmbH
BICC Holdings GmbH
Infrastructure Investment
Infrastructure Investment
Construction Services
Construction Services
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Dormant
Investment Holding
Company
Dormant
Schreck-Mieves GmbH
Hong Kong
5/F, Manulife Place348 Kwun Tong Road Kowloon Hong Kong
Balfour Beatty Hong Kong Ltd
Construction & Support
Services
Support Services
India
6th Floor, N-1 Balsa Block, Manyata Embassy Business Park,
Nagavara, Rachenahalli Village, Bangalore – 560045, India
Engineering Design
Balfour Beatty Infrastructure India
Consultancy
Pvt. Ltd
Ireland
City Junction Business Park, Northern Cross, Malahide Road,
Dublin 17
Balfour Beatty Ireland Ltd
Isle of Man
Tower House, Loch Promenade, Douglas IM1 2LZ, Isle of Man
Delphian Insurance Company Ltd (i)
Jersey
12 Castle Street, St. Helier, Jersey
Balfour Beatty Employees Trustees Ltd (i)
Malaysia
12th Floor, Menara symphony, No 5, Jalan Prof. Khoo Kay Kim,
Seksyen 13, 46200 Petaling Jaya, Selangor
Balfour Beatty Rail Design International
Sdn Bhd
Netherlands
Rapenburgerstraat 177/B, 1011 VM Amsterdam
Balfour Beatty Netherlands B.V.
Insurance Company
Support Services
Employee Trust
Investment Holding
Company
Romania
23 General Ernest Brosteanu Street, 1st
District, 010527, Bucharest
S.C. Balfour Beatty Rail S.R.L.
Sri Lanka
Phase 3 Investment Promotion Zone, Katunayake, Colombo,
Western Province
Balfour Beatty Ceylon (Private) Ltd
Thailand
9 Soi Santisuk, Sithisarn Road, Huay Kwang, Bangkok
Asia Trade Development Co Ltd
Support Services
Dormant
Dormant - In Liquidation
Entity
Principal activity
Dormant
Balfour Beatty Construction
(Thailand) Co Ltd
Balfour Beatty Holdings (Thailand) Co Ltd Dormant
Dormant
Balfour Beatty Thai Ltd
Linwood Co Ltd
Dormant
United States
1011 Centre Road, Suite 310, Wilmington DE 19805
Balfour Beatty Holdings Inc
Balfour Beatty LLC
Investment Holding
Company
Investment Holding
Company
Construction Services
Construction Services
300 Galleria Parkway, Suite 2050, Atlanta, GA 30339
National Engineering & Contracting
Company
Balfour Beatty Infrastructure, Inc
Corporation Service Company, 1127 Broadway Street NE, Suite
310, Salem OR 97301
Balfour Beatty Rock Springs, LLC
Corporation Service Company, 1703 Laurel Street, Columbia,
SC 29201
National Casualty and Assurance, Inc
Corporation Service Company, 251 Little Falls Drive, Wilmington
DE 19808
Balfour Beatty Campus Solutions, LLC
Construction Services
Insurance Company
Infrastructure Holding
Company
Infrastructure Investment
Construction Services
Construction Services
Infrastructure Investment
Infrastructure Investment
Investment Holding
Company
Infrastructure Investment
Construction Services
Construction Services
Investment Company
Business Services
Infrastructure Investment
Balfour Beatty Communities, LLC
Balfour Beatty Construction D.C., LLC
Balfour Beatty Construction, LLC
Balfour Beatty Developments Holdo, LLC Infrastructure Investment
Balfour Beatty Developments, Inc
Balfour Beatty Equipment, LLC
Balfour Beatty Investments, Inc
Balfour Beatty Management Inc
Balfour Beatty/Benham
Military Communities LLC (v)
Balfour Beatty/PHELPS
Military Communities LLC (iv)
Balfour Beatty Military Housing
Development LLC
Balfour Beatty Military Housing
Investments LLC
Balfour Beatty Military Housing
Management LLC
Construction Services
Balfour Beatty – Worthgroup, LLC
BBC AF Housing Construction LLC
Infrastructure Investment
BBC AF Management/Development LLC Infrastructure Investment
Infrastructure Investment
BBC Independent Member I, Inc
Infrastructure Investment
BBC Independent Member II, Inc
Infrastructure Investment
BBC Military Housing – ACC Group, LLC
Infrastructure Investment
BBC Military Housing – AETC General
Partner LLC (iii)
BBC Military Housing – AETC Limited
Partner LLC (iii)
BBC Military Housing – AMC General
Partner LLC
BBC Military Housing – AMC Limited
Partner LLC
BBC Military Housing – Bliss/WSMR
General Partner LLC
BBC Military Housing – Bliss/WSMR
Limited Partner LLC
BBC Military Housing – Carlisle/
Picatinny General Partner LLC
BBC Military Housing – Carlisle/
Picatinny Limited Partner LLC
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Balfour Beatty plc Annual Report and Accounts 2023 249
Financial statements
43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Subsidiary undertakings incorporated outside the United Kingdom continued
% held by
the Group Principal activity
Entity
Principal activity
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
BBC Military Housing – FDWR LLC (v)
Infrastructure Investment
BBC Military Housing – Fort Carson LLC
Infrastructure Investment
BBC Military Housing – Fort Gordon LLC Infrastructure Investment
BBC Military Housing – Fort Hamilton LLC Infrastructure Investment
BBC Military Housing – Fort Jackson LLC Infrastructure Investment
Infrastructure Investment
BBC Military Housing – Hampton Roads
LLC
Infrastructure Investment
BBC Military Housing – Lackland LLC
BBC Military Housing – Leonard Wood LLC Infrastructure Investment
Infrastructure Investment
BBC Military Housing – Navy Northeast
LLC (v)
BBC Military Housing – Navy Southeast
LLC
BBC Military Housing – Northern Group,
LLC
BBC Military Housing – Stewart Hunter
LLC
BBC Military Housing – Vandenberg
General Partner LLC (v)
BBC Military Housing – Vandenberg
Limited Partner LLC (v)
BBC Military Housing – West Point LLC
BBC Military Housing – Western General
Partner, LLC
BBC Military Housing – Western Limited
Partner, LLC
BBC Multifamily Holdings, LLC
BBCS – Northside Campus LLC
BBCS Development, LLC
BB Developments Sub Holdco, LLC
BICC Cables Corporation
Oktiv (Tallahassee) Owner, LLC
Corporation Service Company, 300 Deschutes Way SW, Suite
304, Tumwater WA 98501
Howard S. Wright Construction Co
HSW, Inc
CSC – Nevada, C/O CSC Services of Nevada, Inc., 502 East John
Street Carson City, Nevada 89706
Balfour Beatty-Golden Construction
Company
Balfour Beatty Construction Company, Inc Construction Services
Construction Services
Balfour Beatty Construction Group, Inc
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Business Services
Infrastructure Investment
Infrastructure Investment
Infrastructure Investment
Construction Services
Construction Services
Infrastructure Investment
Infrastructure Investment
Construction Services
Notes
(i) Held directly by Balfour Beatty plc.
(ii) Partnership interests held.
(iii) 80% interest held.
(iv) 89% interest held.
(v) 90% interest held.
Joint ventures incorporated in the United Kingdom
Entity
Q14 Quorum Business Park, Benton Lane, Newcastle Upon
Tyne, England, England, NE12 8BU
BBDE Orbital Holdings, LLP (iii) (v)
37.5
% held by
the Group Principal activity
Investment Holding
Company
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Connect A30/A35 Holdings Ltd (iv)
Connect A30/A35 Ltd (iv)
Connect A50 Ltd (iv)
Connect CNDR Holdings Ltd (iv)
20
20
25
25
250
Balfour Beatty plc Annual Report and Accounts 2023
Entity
Connect CNDR Intermediate Ltd (iv)
Connect CNDR Ltd (iv)
Connect M1-A1 Holdings Ltd (i) (iv)
Connect M1-A1 Ltd (iv)
25
25
20
20
Connect M77/GSO Holdings Ltd (ii) (iv) 85
Connect M77/GSO plc (ii) (iv)
Connect Roads Cambridgeshire
Holdings Ltd
Connect Roads Cambridgeshire
Intermediate Ltd
Connect Roads Cambridgeshire Ltd
85
20
20
20
Connect Roads Coventry Holdings Ltd 20
Connect Roads Coventry Intermediate
Ltd
Connect Roads Coventry Ltd
20
20
Connect Roads Ltd (iv)
25
Connect Roads Northamptonshire
Holdings Ltd
Connect Roads Northamptonshire
Intermediate Ltd
Connect Roads Northamptonshire Ltd 20
20
20
Connect Roads South Tyneside
Holdings Ltd
Connect Roads South Tyneside Ltd
Connect Roads Sunderland Holdings
Ltd
Connect Roads Sunderland Ltd
20
20
20
20
50
50
50
50
East Wick and Sweetwater Projects
(Holdings) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 1) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 2) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 3) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 4) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 5) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 7A) Ltd (iv)
East Wick and Sweetwater Projects
(Phase 7) Ltd (iv)
East Wick and Sweetwater Finance
(Holdings) Ltd (iv)
East Wick and Sweetwater Projects
(Finance) Ltd (iv)
Gwynt y Mor OFTO Holdings Ltd (ii) (iv) 60
50
50
50
50
50
50
Gwynt y Mor OFTO Intermediate Ltd
(ii) (iv)
60
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
NOTES TO THE FINANCIAL STATEMENTS CONTINUED 43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Joint ventures incorporated in the United Kingdom continued
Entity
% held by
the Group Principal activity
Notes
(i) Held directly by Balfour Beatty plc.
Gwynt y Mor OFTO plc (ii) (iv)
60
Humber Gateway OFTO Holdings Ltd
(iv)
20
Humber Gateway OFTO Intermediate
Ltd (iv)
Humber Gateway OFTO Ltd (iv)
20
20
South Cambridgeshire Projects LLP (v) 50
Thanet OFTO Holdco Ltd (iv)
Thanet OFTO Intermediate Ltd (iv)
Thanet OFTO Ltd (iv)
20
20
20
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Connect Plus House, St Albans Road, South Mimms,
Hertfordshire EN6 3NP
Connect Plus (M25) Holdings Ltd (iii) (iv) 15
Connect Plus (M25) Intermediate Ltd
(iii) (iv)
Connect Plus (M25) Issuer plc (iii) (iv)
Connect Plus (M25) Ltd (iii) (iv)
15
15
15
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Maxim 7, Maxim Office Park, Parklands Avenue, Eurocentral,
Holytown ML1 4WQ
Holyrood Holdings Ltd
20
Holyrood Student Accommodation
Holdings Ltd
Holyrood Student Accommodation
Intermediate Ltd
Holyrood Student Accommodation plc 20
20
20
25
20
Infrastructure
Concession
Holyrood Student Accommodation
SPV Ltd
Westminster House, Crompton Way, Segensworth West,
Fareham, Hampshire PO15 5SS
Pevensey Coastal
Defence Ltd
C/O Pario Ltd, 18 Riversway Business Village, Navigation Way,
Preston PR2 2YP
Consort Healthcare (Birmingham)
Funding plc
Consort Healthcare (Birmingham)
Holdings Ltd
Consort Healthcare (Birmingham)
Intermediate Ltd
Consort Healthcare (Birmingham) Ltd 40
Infrastructure
Concession
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
40
40
40
9 Amberside House Wood Lane, Paradise Industrial Estate,
Hemel Hempstead, Hertfordshire, England HP2 4TP
Pebblehall Bio Power Ltd
29.2
Urban Electric Networks Ltd
Welland Bio Power Ltd
25
29.2
(ii) Due to the shareholders’ agreement between Balfour Beatty and the other shareholders
requiring unanimity of agreement in respect of significant matters related to the financial
and operating policies of the company, the Directors consider that the Group does not
control the company and it has been accounted as a joint venture.
(iii) The Group owned a 37.5% partnership interest in BBDE Orbital Holdings LLP at 31
December 2022. Connect Plus (M25) Holdings Ltd and its subsidiaries are 40% owned
by BBDE Orbital Holdings LLP.
(iv) 31 March year end.
(v) Partnership interests held.
Joint ventures incorporated outside the United Kingdom
% held by
the Group Principal activity
Entity
Bermuda
Conyers Dill & Pearman Limited, Clarendon House, 2 Church
Street, Hamilton HM 11
CP Bay Carry A LP (iii)
20
CP Bay Carry B LP (iii)
20
Infrastructure
Concession
Infrastructure
Concession
British Virgin Islands
Vistra Corporate Services Centre, Wickhams Cay II Road Town,
Tortola VG1110
Gammon Asia Ltd
50
Management
Company
Investment Holding
Company
50
Gammon Construction
Holdings Ltd
Canada
Taylor McCaffrey LLP, 900-400 St. Mary Avenue, Winnipeg, MB,
R3C 4K5
CWH Facilities
Management,LP (iii)
CWH FM GP Inc
50
50
Infrastructure
Investment
Infrastructure
Investment
Construction Services
CWH Design – Build GP (iii)
China
Hong Kong Avenida da Praia Grande, n°429, 25° andar D, em
Macau
BBE&M (Macau) Ltd
50
50
Electrical and
Mechanical
Contracting
Building Construction
Gammon Building Construction
(Macau) Ltd
No. 457, Shatian Section, Ganggang Avenue, Shatian Town,
Dongguan City, Guangdong Province
50
Dongguan Pristine Metal Works Ltd
50
Manufacturing
Services
25
25th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong
Construction Services
Sanfield-Gammon Construction JV
Company Ltd
22/F, Tower 1, The Quayside, 77 Hoi Bun Road, Kwun Tong,
Kowloon, Hong Kong
AsiaBuild Ltd
Balfour Beatty E&M Ltd
Digital G Ltd
50
50
50
Investment Holding
Company
Infrastructure
Concession
Infrastructure
Concession
Entasis Ltd
Gammon Building Construction Ltd
Gammon Capital Ltd
Gammon Capital Management Ltd
50
50
50
50
Dormant
Dormant
Technology and
Innovation
General Contractor
Building Construction
Dormant
Dormant
Balfour Beatty plc Annual Report and Accounts 2023 251
Financial statements
43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Joint ventures incorporated outside the United Kingdom continued
% held by
the Group Principal activity
Entity
Gammon Pte. Ltd
Entity
Gammon China Ltd
Gammon Concrete Services Ltd
Gammon Construction (China) Ltd
Gammon Construction (Vietnam)
Holdings Ltd
Gammon Construction Consultants
(Shenzhen) Ltd
Gammon Construction Ltd (ii)
Gammon E&M Ltd
Gammon Engineering & Construction
Company Ltd
Gammon Engineering Ltd
Gammon Finance Ltd
50
50
50
50
50
50
50
50
50
50
50
Gammon Interiors Ltd
Gammon Management Services Ltd 50
Gammon Plant Ltd
Gold Tactics Investment Ltd
Into G Ltd
Lambeth Associates Ltd
Pristine Metal Works Ltd
50
50
50
50
50
Investment Holding
Company
Dormant
Building Construction
Construction and
Project Management
Support Services
Engineering and
Construction
Engineering Services
Engineering and
Construction
Dormant
Finance and
Investment
Dormant
Construction
Management
Services
Plant and Equipment
Hire and Maintenance
Dormant
Interior Fit-Out and
Contracting
Management and
Consultancy Services
Investment Holding
Company
Ireland
3 Dublin Landings, North Wall Quay, Dublin 1, D01 C4E0
Balfour Beatty CLG Ltd
C/O Pario SPV Management Limited, Suite 54, Morrison
Chambers, 32 Nassau St, Dublin 2, D02 AP29
Healthcare Centres PPP Holdings Ltd 40
50
Support Services
Healthcare Centres PPP Ltd
40
Investment Holding
Company
Infrastructure
Concession
% held by
the Group Principal activity
50
Engineering and
Construction
Management and
Consultancy Services
50
24.5
Lambeth Associates Design &
Consultancy Pte Ltd
Thailand
21st Floor, Times Square Building, 246 Sukhumvit Road, Klongtoey
Sub-District, Klongtoey District, Bangkok 10110, Thailand
Gammon (Thailand) Ltd
23rd Floor, Times Square Building,
246 Sukhumvit Road, Klongtoey
Sub-District, Klongtoey District,
Bangkok 10110, Thailand
Gammon Construction (Thailand) Ltd 24.5
Thai Gammon Ltd
24.5
United States
Corporation Service Company 1201 Hays Street, Tallahassee FL
32301
C-BB Management, LLC
Dormant
Dormant
Dormant
50
C-BBC Development, LLC
50
Corporation Service Company, d/b/a CSC-Lawyers,
Incorporating Service Company, 211 E. 7th Street, Suite 620,
Austin TX 78701-3218
Northside Campus Partners, LP (iii)
10
Northside Campus Partners 2,LP (iii)
10
Northside Campus Partners 3, LP (i)(iii) 70
Northside Campus Partners 4, LP (i)(iii) 65
Northside Campus General Partner,
LLC
Corporation Service Company, 251 Little Falls Drive, Wilmington
DE19808
BBC – ApexOne Carolina Cove, LLC 50
50
50
15
Dormant
Dormant
Malaysia
Unit B-9-7, Level 9, Capital 2, Oasis Square, No.2 Jalan PJU
1A/7A, Ara Damansara, 47301 Petaling Jaya, Selangor, Malaysia
Gammon Sdn Bhd
Pesaka Gammon Construction Sdn
Bhd
Philippines
G/F Makati Stock Exchange, Ayala Avenue, Makati City, Metro
Manila, Philippines
Gammon Philippines, Inc.
MG Construction Ventures
Holdings, Inc.
Singapore
239 Alexandra Road, 159930
Digital G (Singapore) Pte. Ltd
Gammon Construction and
Engineering Pte. Ltd
Gammon Construction Holdings (S)
Pte. Ltd
General Construction
Property Investment
Investment Holding
Company
Equipment Services
Construction Services
20
16.65
50
50
50
BBC – ApexOne Chenal Pointe, LLC 50
BBC – ApexOne City Lake, LLC
BBC – ApexOne Landings, LLC
BBC – ApexOne Lexington, LLC
BBC – ApexOne Moretti, LLC
50
50
50
50
BBC – ApexOne Paces Brook, LLC
50
BBC – ApexOne Retreat, LLC
50
252
Balfour Beatty plc Annual Report and Accounts 2023
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Concession
Infrastructure
Investment
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Joint ventures incorporated outside the United Kingdom continued
% held by
the Group Principal activity
Entity
BBC – ApexOne Riverchase
Landing, LLC
BBC – ApexOne San Mateo, LLC
BBC – ApexOne Southwind, LLC
BBC – ApexOne Wolfchase, LLC
BBC Army Integrated, LLC
Carolina Cove (Wilmington) Owner,
LLC
Chenal Pointe (Little Rock) Owner,
LLC
City Lake (Houston) Owner, LLC
50
50
50
50
10
50
50
50
LAX Integrated Express Solutions
Holdco, LLC
LAX Integrated Express Solutions,
LLC
Landings (Jacksonville) Owner, LLC 50
27
27
Lexington (Ridgeland) Owner, LLC
Moretti (Homewood) Owner, LLC
50
50
Northside Campus Limited Partner,
LLC
Paces Brook (Columbia) Owner, LLC 50
10
Retreat at Schillinger (Mobile) Owner,
LLC
Riverchase Landing (Hoover) Owner,
LLC
San Mateo (Kissimmee) Owner, LLC 50
50
7.5
Southwind (Memphis) Owner, LLC
20
Southwind (Memphis) Holdings, LLC 20
Swiftsure Housing Partners, LLC
T-BBA Riverchase Holdings, LLC
View SA Holding Company LP (i)(iii)
View SA LLC (i)
Wolfchase (Bartlett) Owner, LLC
23
7.5
87
87
50
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Concession
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Concession
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Infrastructure
Investment
Design and
Construction
Operations and
Maintanence
Design and
Construction
Corporation Service Company, 1900 W Littleton Blvd., Littleton,
CO 80120
Denver Transit Constructors LLC
30
Denver Transit Operators LLC
33.3
Denver Transit Systems LLC
50
Entity
Registered Agent Solutions, Inc. 9 E Loockerman Street, Suite
311 Dover DE 19901
United Campus Partners, LLC
50
% held by
the Group Principal activity
Infrastructure
Investment
Vietnam
5th Floor, Gemadept Tower, 2Bis–4–6 Le Thanh Ton Street, Ben
Nghe Ward, District 1, Ho Chi Minh City, Vietnam
Gammon Construction Vietnam Co.
Ltd
50
Building Construction
and Management
Services
Notes
(i) Due to the shareholders’ agreement between Balfour Beatty and the other shareholders
requiring unanimity of agreement in respect of significant matters related to the financial
and operating policies of the company, the Directors consider that the Group does not
control the company and it has been accounted for as a joint venture.
(ii) Preference shares and/or deferred shares also held.
(iii) Partnership interest held.
Balfour Beatty plc Annual Report and Accounts 2023 253
Financial statements
43 Details of related undertakings of Balfour Beatty plc as at 31 December 2023 continued
Associated undertakings incorporated in and outside the United Kingdom
% held by
the Group Principal activity
Entity
United Kingdom
Ashford House, Grenadier Road, Exeter EX1 3LH
UBB Waste (Essex) Ltd
United States
Corporation Service Company, 251 Little Falls Drive,
Wilmington DE 19808
ACC Group Housing, LLC (i)
Dormant
100
30
Notes
(i) The Group evaluated each of its interests in the military housing projects to determine if
the associated entities should be consolidated. This analysis included, but was not
limited to, identifying the activities that most significantly impact an entity’s economic
performance, which party or parties control those activities and the risks associated with
these entities. Decision-making power over key facets of the contracts were evaluated
when determining which party or parties had control over the activities that most significantly
impact a project’s economics. Based on this review, the Directors consider that the
Group does not have the power to direct these activities and does not control or jointly
control them and therefore the entities have been accounted for as associated undertakings.
(ii) Partnership interests held.
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
Infrastructure
Concession
AETC Housing LP (i)(ii)
AMC West Housing LP (i)(ii)
80
100
Carlisle/Picatinny Family Housing LP (ii) 10
FDWR Parent LLC
Fort Bliss/White Sands Missile Range
Housing LP (ii)
Fort Carson Family Housing LLC
Fort Detrick/Walter Reed Army
Medical Center Housing LLC (i)
Fort Eustis/Fort Story Housing LLC
Fort Gordon Housing LLC
Fort Hamilton Housing LLC
Fort Jackson Housing LLC
10
10
10
100
10
10
10
10
Lackland Family Housing, LLC (i)
100
Leonard Wood Family Communities,
LLC
Northeast Housing LLC
10
10
Northern Group Housing, LLC (i)
Southeast Housing LLC (i)
Stewart Hunter Housing LLC
Vandenberg Housing LP (i)(ii)
Western Group Housing, LP (i)(ii)
West Point Housing LLC
100
100
10
90
100
10
254
Balfour Beatty plc Annual Report and Accounts 2023
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Other information
UNAUDITED GROUP FIVE-YEAR SUMMARY
Income
Revenue including share of joint ventures and associates
Share of revenue of joint ventures and associates
Group revenue
Underlying profit from operations
Underlying net finance income/(costs)
Underlying profit before taxation
Amortisation of acquired intangible assets
Other non-underlying items
Profit before taxation
Taxation
Profit for the year
Profit for the year attributable to equity holders
(Loss)/profit for the year attributable to non-controlling interests
Profit for the year
Capital employed
Equity holders’ equity
Liability component of preference shares
Net non-recourse borrowings – infrastructure concessions
Net cash – other
Statistics
Underlying earnings per ordinary share*
Basic earnings per ordinary share
Diluted earnings per ordinary share
Proposed dividends per ordinary share
Underlying profit from operations before net finance income/(costs)
including share of joint ventures and associates as a percentage of revenue
including share of joint ventures and associates
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
9,595
(1,602)
7,993
228
33
261
(5)
(12)
244
(50)
194
197
(3)
194
1,198
–
264
(842)
620
2023
Pence
37.3
35.3
34.8
11.5
8,931
(1,302)
7,629
279
12
291
(6)
2
287
–
287
288
(1)
287
1,378
–
242
(815)
805
2022
Pence
47.5
46.9
46.3
10.5
8,263
(1,078)
7,185
197
(10)
187
(5)
(95)
87
52
139
140
(1)
139
1,369
–
243
(790)
822
2021
Pence
29.7
21.3
21.1
9.0
8,593
(1,273)
7,320
51
(15)
36
(6)
18
48
(18)
30
30
–
30
1,336
–
317
(581)
1,072
2020
Pence
3.7
4.4
4.4
1.5
8,411
(1,098)
7,313
221
(21)
200
(6)
(56)
138
(5)
133
130
3
133
1,368
110
302
(512)
1,268
2019
Pence
26.7
19.0
18.8
2.1
2.4%
3.1%
2.4%
0.6%
2.6%
Note
* Underlying earnings per ordinary share have been disclosed to give a clearer understanding of the Group’s underlying trading performance.
Balfour Beatty plc Annual Report and Accounts 2023 255
Other information
SHAREHOLDER INFORMATION
Financial calendar 2024
9 May
3 July
14 August*
2 December*
5 December*
* Dates are subject to change
Registrar
Balfour Beatty’s share register is maintained by Equiniti, the
Company’s Registrar. All administrative enquiries relating to
shareholdings and requests to receive corporate documents by email
should, in the first instance, be directed to Equiniti, clearly stating your
registered address and, if available, your shareholder reference
number.
Please visit their website www.shareview.co.uk.
Telephone: +44 (0) 371 384 2703. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom are charged at the applicable international rate. Lines are
open between 8.30am to 5.30pm, Monday to Friday excluding public
holidays in England and Wales.
Share certificates
In order to sell or transfer your shares, you must ensure that you have
a valid share certificate. This must be in the name of Balfour Beatty
plc. If you lose or misplace your share certificate, you can contact
Equiniti customer experience centre and request a replacement
certificate. Equiniti will then issue a letter of indemnity to you which
you will need to sign and return for a new certificate to be produced.
There is a fee charged for this service which includes an
administration charge and a counter signature fee (the counter
signature fee can vary depending on the value of the shareholding).
Annual General Meeting
Final 2023 dividend payable
2024 half year results announcement
Interim 2024 dividend payable
Trading update
Dividends and dividend reinvestment plan
Dividends may be paid directly into your bank or building society
account through the Bankers Automated Clearing System (BACS).
Equiniti can provide a dividend mandate form. A Dividend
Reinvestment Plan (DRIP) is offered which allows holders of shares to
reinvest their cash dividends in the Company’s shares through a
specially arranged share dealing service. Full details of the DRIP and
its charges, together with mandate forms, are available
at: www.shareview.co.uk.
International payment service
Shareholders outside the UK may elect to receive dividends directly
into their overseas bank account, or by currency draft, instead of by
sterling cheque. For further information, contact the Company’s
Registrar, Equiniti using the contact details above.
Electronic shareholder communications
The Company’s website www.balfourbeatty.com provides a range of
information about the Company, our people and businesses and our
policies on corporate governance, sustainability and health and safety.
The website should be regarded as your first point of reference for
information on any of these matters. The share price can also be
found there. You can create a Shareview account, through which you
will be able to access the full range of online shareholder services,
including the ability to: view your holdings and indicative share price
and valuation; view movements on your holdings and your dividend
payment history; register a dividend mandate to have your dividends
paid directly into your bank account; change your registered address;
sign up to receive e-communications to access the online proxy
voting facility; and download and print shareholder forms. Shareview
is easy to use. Please visit www.shareview.co.uk.
256
Balfour Beatty plc Annual Report and Accounts 2023
Unsolicited telephone calls
In the past, some of our shareholders have received unsolicited
telephone calls or correspondence concerning investment matters
from organisations or persons claiming or implying that they have
some connection with the Company. We advise our shareholders
to be wary of any unsolicited telephone calls, advice or correspondence
concerning investment matters from organisations or persons
claiming or implying that they have some connection with the
Company. These are typically from overseas-based “brokers” who
target UK shareholders offering to sell them what often turn out to
be worthless or high-risk shares in UK or overseas investments.
Shareholders are advised to be very wary of any unsolicited
advice, offers to buy shares at a discount or offers of free annual
and/or other reports on the Company.
If you receive any unsolicited investment advice:
@ Always ensure the firm is authorised by the Financial Conduct
Authority (FCA), is on the FCA Register and is allowed to provide
financial advice before handing over your money. You can check if
a firm is on the FCA’s Register via https://register.fca.org.uk.
@ Ask the caller for their name and telephone number and inform
them you will call them back. Then check their identity to ensure
that they are from the firm they say they are from by calling the
firm using the contact number listed on the FCA Register. If
there are no contact details on the FCA Register or you are told
that they are out of date, or if you have any other doubts, call the
FCA Consumer Helpline on 0800 111 6768 (freephone) or 0300
500 8082 from the UK, or +44 207 066 1000 from abroad. Calls
using next generation text relay, please call (18001) 0207 066
1000.
@ If you are approached about a share scam, please visit the FCA’s
ScamSmart website at www.fca.org.uk/scamsmart where you
can access information about the various types of scam,
including share and boiler room fraud, see the FCA’s Warning
List and reports on firms about whom consumers have
expressed concerns. Alternatively, you can call the FCA
Consumer Helpline (see above). If you use an unauthorised firm
to buy or sell shares or other investments, you will not have
access to the Financial Ombudsman Service or be eligible to
receive payment under the Financial Services Compensation
Scheme if things go wrong.
@ You should also report any approach to Action Fraud, which is
the UK’s national fraud reporting centre, at www.actionfraud.
police.uk, or by calling 0300 123 2040.
American Depository Receipts (ADRs)
An American Depository Receipt (ADR) is a negotiable instrument
issued by a depositary bank that evidences ownership of shares in a
corporation organised outside the US. Each ADR represents a specific
number of underlying shares in the non-US company, on deposit with
a custodian in the applicable home market.
ADRs are generally treated as US domestic securities. They are
quoted and traded in US Dollars and are subject to the trading and
settlement procedures of the market in which they trade.
Balfour Beatty’s ADR Depositary Bank is JP Morgan Chase N.A. For
all ADR-related enquiries, investors can contact JP Morgan via
telephone, in writing or email as follows:
Telephone:
Toll free within the United States at: 1-800-990-1135 or locally at
651-306-4383.
JP Morgan representatives are available from 7.00am to 7.00pm
Central Time, Monday to Friday.
Balfour Beatty’s ADR programme details
Symbol: BAFYY
ADR: Ordinary Share Ratio: 1:2
CUSIP: 05845R306
ADR ISIN: US05845R3066
Underlying ISIN: GB0000961622
Depositary Bank: JP Morgan Chase Bank N.A.
Country: United Kingdom
In writing:
Mail
JP Morgan Shareholder Services
P.O Box 64504
St. Paul, Minnesota 55164-0504
Overnight Mail
JP Morgan Chase Bank N.A.
1110 Centre Pointe Curve, Suite 101
Mendota Heights MN 55120-4100
Contact Online
jpmorgan.adr@eq-us.com
Balfour Beatty plc Annual Report and Accounts 2023 257
Other information SHAREHOLDER INFORMATION CONTINUED
Gifting shares to your family or to charity
To transfer shares to another member of your family as a gift, please
ask the Registrar for a Balfour Beatty gift transfer form. Alternatively,
if you only have a small number of shares whose value makes it
uneconomic to sell them, you may wish to consider donating them to
the share donation charity ShareGift (registered charity no. 1052686),
whose work Balfour Beatty supports. Any shares you donate to
ShareGift will be aggregated and sold when possible, and the
proceeds will be donated to a wide range of other UK charities. Since
ShareGift was launched, over £47m has been given to more than
3,650 charities. The relevant share transfer form may be obtained
from the Registrar. For more information visit www.sharegift.org.
Share dealing services
In addition to share dealing services provided by UK banks and
brokers, Equiniti provide a telephone and online share dealing service
for UK resident shareholders. To use this service, telephone 023456
037037 from within the UK. Calls are charged at the standard
geographic rate and will vary by provider. Lines are open Monday to
Friday 8.00 am to 4.30 pm, UK time, excluding public holidays in
England and Wales. Alternatively, you can log on to www.equiniti.com.
Equiniti Limited is authorised and regulated by the Financial Conduct
Authority.
London Stock Exchange Codes
The London Stock Exchange Daily Official List (SEDOL) code is:
0096162.
The London Stock Exchange ticker code is: BBY.
Capital gains tax (CGT)
For CGT purposes the market value on 31 March 1982 of Balfour
Beatty plc’s ordinary shares of 50p each was 267.6p per share.
This has been adjusted for the 1 for 5 rights issue in June 1992, the 2
for 11 rights issue in September 1996 and the 3 for 7 rights issue in
October 2009 and assumes that all rights have been taken up.
Consolidated tax vouchers
Balfour Beatty issues a consolidated tax voucher annually to all
shareholders who have their dividends paid direct to their bank
accounts. If you would prefer to receive a tax voucher at each
dividend payment date rather than annually, please contact the
Registrar. A copy of the consolidated tax voucher may be
downloaded from the Share Portal at www.shareview.co.uk.
Enquiries
Enquiries relating to Balfour Beatty’s results, business and
financial position should be made in writing to the Corporate
Communications Department at the address shown below or
by email to info@balfourbeatty.com.
Balfour Beatty Registered Office: 5 Churchill Place, Canary Wharf,
London E14 5HU
Registered in England and Wales, registered number 395826
Forward-looking statements
This report, including information included or incorporated by
reference in it, may include statements that are or may be forward-looking
statements, beliefs or opinions, including statements with respect to
Balfour Beatty’s business, financial condition and results of operations.
All statements other than statements of historical facts included in this
document may be forward-looking statements. These forward-looking
statements can be identified by the use of forward-looking terminology,
including the terms “believes”, estimates”, “projects”, “plans”,
“anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”,
“hopes”, “may”, “will”, “would”, “could” or “should” or, in each case,
their negative or other various or comparable terminology. These
statements are made by Balfour Beatty in good faith based on the
information available to it at the date of this report and reflect the beliefs
and expectations of Balfour Beatty. By their nature, forward-looking
statements involve known and unknown risks and uncertainties
because they relate to events and depend on circumstances that
may or may not occur in the future.
A number of factors could cause actual results and developments
to differ materially from those expressed or implied by the forward-
looking statements, including, without limitation, developments in
the global economy, changes in UK and US Government policies,
spending and procurement methodologies, failure in Balfour Beatty’s
health, safety or environmental policies and those factors set out
under Principal Risks on pages 96 to 103 of this report.
No representation or warranty is made that any of these statements
or forecasts will come to pass or that any forecast results will be
achieved, and projections are not guarantees of future performance.
Forward-looking statements speak only as at the date of this report
and Balfour Beatty and its advisers expressly disclaim any obligations
or undertaking to release any update of, or revisions to, any forward-looking
statements in this report. No statement in this report is intended to
be, or intended to be construed as, a profit forecast or profit estimate
or to be interpreted to mean that Balfour Beatty plc’s earnings per
share for the current or future financial years will necessarily match or
exceed the historical earnings per share for Balfour Beatty plc. As a
result, you are cautioned not to place any undue reliance on such
forward-looking statements.
Find out more about our investor relations at:
www.balfourbeatty.com/investors
258
Balfour Beatty plc Annual Report and Accounts 2023
Other information
MORE INFORMATION
Online annual report
For a summary of our 2023 Annual Report and Accounts visit:
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CBP023851
Balfour Beatty plc’s commitment to environmental issues is
reflected in this Annual Report, which has been printed on Symbol
Matt Plus, an FSC® certified material. This document was printed
by Park Communications using its environmental print technology,
which minimises the impact of printing on the environment, with
99% of dry waste diverted from landfill. Both the printer and the
paper mill are registered to ISO 14001.
Balfour Beatty plc Annual Report and Accounts 2023 259
Balfour Beatty
5 Churchill Place
Canary Wharf
London E14 5HU
Telephone: +44(0) 20 7216 6800
www.balfourbeatty.com
Balfour Beatty is a registered trademark of Balfour Beatty plc