Turnaround restores underlying profit at Balfour Beatty
Balfour Beatty's latest half-year results show an underlying profit of £7m compared to last year's equivalent figure of a £130m loss.
The overall total pre-tax figure for the group is still a loss, but the figure of £21m is a substantial improvement on the £150m loss for the same period last year.
The UK construction business made an underlying loss of £66m – also an improvement on last year’s figure for the same period, which saw a loss of £145m. Stripping out the impact of additional losses on historical projects, the business would have been close to break-even, said the company. It reported that good progress is being made on closing out the 89 problem contracts identified in 2015, with 81% of them at practical or financial completion as at June 2016.
Underlying revenue for the group was £4.024bn, down 6% from last year. The order book rose 7% to £12.4bn and the company said that disciplined bidding practices had been maintained.
The order book in the UK grew to £2.1bn from £1.9bn at the year end – the first growth in the UK order book since 2013. Notable wins in the period include a £170m contract to upgrade baggage screening and handling systems for Heathrow Airport; a contract for Highways England for the construction of a proposed lorry area near the M20, worth up to £130m; and an £82m contract to build engineering and training facilities at RAF Marham in Norfolk, in readiness for the arrival of the UK’s first F-35 Lightning II aircraft in 2018.
As a result of the focus on bidding for contracts with increased bid margins and more favourable contract terms, the regional business is now focused on fewer, larger contracts and is reducing its exposure to contracts under £5m.
The group launched its ‘Build to Last’ transformation programme in early 2015. Action was taken to remove management layers and upgrade leadership and governance through a simplified group structure.
Group chief executive Leo Quinn said: “We are now starting to see tangible benefits from the transformation of Balfour Beatty.
“Eighteen months into the first phase of Build to Last we have delivered our second successive half of underlying profitability and remain on track to achieve our initial targets of £200m cash in: £100m cost out. By concentrating on our selected markets, we are growing our order book within a control environment which ensures that our business decisions lead to sustainable profit and cash growth.
“We have maintained a strong balance sheet and expect Balfour Beatty to make further solid and measurable progress. As a result we are able to reinstate the dividend as planned.
“By the end of 2016 we will have successfully completed Phase One. Over the following 24 months, I am confident we can reach industry-standard margins and then build on the foundations Build to Last has put in place to deliver a Balfour Beatty with market-leading strengths and performance over the longer term.”
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This article was published on 17 Aug 2016 (last updated on 17 Aug 2016).