Image: Balfour Beatty group chief executive Leo Quinn (Balfour Beatty)
The UK’s biggest contractor, Balfour Beatty, has reported a near tripling of its annual profits in 2017 – on revenues roughly equal to the previous year’s – hailing the success of a business transformation programme begun when the company was bleeding cash in 2014.
Underlying profit from operations hit £196m, up from £69m in 2016, providing a stark counterpoint to its former rival Carillion, which collapsed under a mountain of debt on 15 January.
The company’s share price rose on the news, which marked a dramatic turnaround from 2014 when troubled Balfour Beatty and Carillion were in talks over a merger. (Balfour Beatty pulled out.)
“These results clearly demonstrate that our Build to Last programme is transforming Balfour Beatty,” said group chief executive Leo Quinn (pictured), who was brought in to turn the company around in its dark days just over three years ago.
With new governance and controls in place, the company was “on track to achieve industry-standard margins in the second half of 2018,” said Quinn.
He added that the industry is moving out of a period when builders underbid for big contracts to harvest turnover after the recession, saddling themselves with problems and cash-flow trouble.
“Companies are starting to recover from what effectively was very low pricing in 2013 and 2014,” Quinn told Reuters, adding, “I wouldn’t brand the industry like Carillion.”
The company’s UK construction business reported an operating profit of £16m in 2017, a drastic improvement on its £65m loss in 2016.
Its underlying revenue was £8.23bn in 2017, up marginally from £8.21bn in 2016, but it ended the year with £335m net cash, up from £173m the year before.
Balfour Beatty said it was choosing contracts more carefully, and had narrowed its focus to the UK and Ireland, the US and the Far East. It has pulled out of the Middle East, a region that gave Carillion grief, and also exited Indonesia and Australia.
Its order book fell 8% to £11.4bn in 2017, but it is banking on UK government infrastructure schemes such as the new high speed railway (HS2) project and Highways England road programmes.
Carillion’s liquidation caused it to suffer a one-off charge of £44m from their joint venture building the Aberdeen Western Peripheral Route (AWPR) in Scotland.
