Balfour Beatty construction swings back into profit

Balfour Beatty’s UK construction services arm returned to profit for the first time in several years in the first half of 2017.

The improvement helped to lift overall group pre-tax profit in the first half to £22m from a £15m loss in the same period last year.

Chief executive Leo Quinn said his Build to Last turn around plan, now moving into its second two-year phase, had put Balfour on track to deliver industry standard construction margins of 2-3% by the end of 2018.

As the firm stemmed cash outflows from legacy contracts, Balfour Beatty also generated cash from its operations for the first time since 2013.

Underlying group revenue also improved by nearly 8% to £4.2bn, despite Balfour more selective approach to bidding.

The three main operating divisions – construction services, support services and infrastructure investments – all reported underlying profit from operations for the first time since Quinn took the helm.

Construction Services swung from a £54m loss in the first half of 2016, to a profit from operations of £24m in 2017 as UK construction reported an underlying profit of £2m in the period (2016: £69m loss).

Support Services rebounded to more normal levels, compared to the prior year, with underlying profit from operations of £16m (2016: £11 million).

Infrastructure Investments declined from prior year as, in line with expectations, the Group made no material disposals in the first half of 2017.

Quinn said the business continued to manage legacy contracts. Just seven of Balfour’s 89 problem jobs identified two years ago are ongoing. Two of the remaining seven contracts are expected to reach practical completion in 2017, with the remainder in 2018.

“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. The balance sheet remains strong, underpinned by the £1.2 billion Investments portfolio.

“All of this gives us confidence that the Group remains on track to achieve industry-standard margins in the second half of 2018, and in line with this, we are declaring an interim dividend of 1.2 pence per share.”

from Construction Enquirer http://www.constructionenquirer.com/2017/08/16/balfour-beatty-construction-swings-back-into-profit/

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