Balfour Beatty back in profit amid '˜selective' bidding
Balfour Beatty swung back into profit in the first half as the construction and infrastructure group's turnaround under chief executive Leo Quinn continues.
Pre-tax profit came in at £12 million for the six months to 30 June, compared with a £15m loss in the same period last year. The interim dividend was lifted by a third to 1.2p a share.
Revenues rose over 8 per cent to £4.2 billion but the firm’s order book fell 8 per cent to £11.4bn, with Balfour putting it down to a “disciplined and selective approach to bidding”.
The results come as welcome relief to the firm after it was held back by onerous construction contracts that delivered poor returns last year.
Quinn, who has been cutting costs under his “build to last” recovery programme, said: “These results demonstrate the transformation being driven by focusing Balfour Beatty relentlessly on its chosen markets and capabilities.
“Profitability is rising, backed by positive cash flow from operations, and the group had average net cash during the period; all achieved without any material investment disposals.”
In the UK, Balfour swung from a £69m loss a year ago to a £2m profit for the first half.
The group added that its infrastructure pipeline in the US and UK remains “buoyant” and highlighted landmark contracts such as the Dallas Southern Gateway road project in Texas and on the HS2 high-speed rail link.
Balfour Beatty is also working on the Kennedy Street student accommodation project in Glasgow, and has secured a £16m contract with Network Rail for the redevelopment of the city’s Queen Street Station.
In addition, the group will install a new overhead line to connect the Dorenell wind farm, near Dufftown in Moray, for SSE Networks.
Neil Wilson, senior market analyst at ETX Capital, said: “Construction is all about margins and bidding too aggressively for work cost Balfour dearly for a couple of loss-making years in which it delivered seven profit warnings.
“Now it’s a lot more selective and as a result says it’s on course to achieve industry-standard profit margins by the second half of 2018.”