Balfour Beatty boosts margins and pays down debt
Balfour Beatty has returned to “industry standard” margins while it has also managed to reduce its gross debt by 40%, its 2018 full-year financial results have revealed.
The firm’s revenue in its UK operations fell slightly to £1.9bn in the year to 31 December 2018, down from £1.99bn in 2017.
Meanwhile, underlying operating profit in the UK construction division rose 75% to £28m in 2018. The company recognised a £29m loss from the Aberdeen Western Peripheral Route (AWPR), where along with Galliford Try it had to deliver the obligations of collapsed joint venture partner Carillion’s 33% share.
Balfour’s UK construction order book also increased to £3bn in 2018, up from 2.7bn in 2017, despite a policy of selective bidding.
Chief executive Leo Quinn credited Balfour Beatty’s turnaround programme Build to Last with boosting underlying margin for the second half of 2018 to 2.4%, within the company’s target range of 2-3%. Underlying profit from operations margin throughout the whole of 2018 in the UK construction division was 1.5%.
Support services revenue increased by 4% to £1.1bn, driven by an increase in utilities work. Operating profit rose to £46m, from £41m the year before, as margin increased to 4.2% in 2018.
The group has also repaid £321m of convertible bonds, reducing its gross debt by over 40%.
Quinn said: “These results demonstrate the value being created through Build to Last. We continue to strengthen the Group and meet our targets. The businesses are back at industry standard margins, underpinned by a strong balance sheet and asset base.
"But Balfour Beatty's transformation goes well beyond resolving the issues of forced growth. We have relentlessly invested in capability and leadership to forge a culture which provides sustainable competitive advantage through standardisation of our systems and processes, on a reducing overhead base.
"This gives us a scalable platform to drive profitable managed growth. With this internal momentum and our positions in large growing infrastructure markets, we are well placed to deliver market leading performance."