International infrastructure group Balfour Beatty has made its way back to black, recording a £12m pre-tax profit for the six months to June, overturning a £15m loss last year, and significantly improving on the £300m loss posted in 2014.
The historically problematic UK construction division contributed to the positive results, going from a £69m loss in 2016 to a £2m profit.
Balfour Beatty, which has offices and schemes on site across the North West, has been working through chief executive Leo Quinn’s ‘build to last’ recovery plan since the company’s profit dropped dramatically in 2014, due to 89 problem contracts.
According to the financial statement released today, only seven of those 89 projects remain on Balfour Beatty’s order books, and the company looks set to return to “industry-standard profit margins” of 2-3% by the second half of 2018.
The recovery has followed Quinn’s plan to “simplify and focus the group”, exiting the Middle East, and securing £4.2bn of HS2 contracts in a joint venture with Vinci last month.
Revenue for Balfour Beatty was £4.2bn, up 1% from £3.9bn recorded in the same period in 2016. The interim dividend payment increased by 30% to 1.2p/share.
Quinn 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. The balance sheet remains strong, underpinned by the £1.2bn investments portfolio.
“Under stronger leadership and much improved bidding disciplines, the businesses are booking new orders at improved margins and reduced risk. Our infrastructure pipeline in the US and UK remains buoyant and the Group continues to win landmark contracts such as the Dallas Southern Gateway and HS2.”
At Balfour Beatty’s lowest ebb in 2015 the company was fighting a takeover by rival Carillion. Now the contractors’ fortunes have reversed; Carillion announced an £845m write-down last month, prompting a crash in its share price, and the departure of senior figures from the business.
This morning, Balfour Beatty’s share price rose to 281p, while Carillion’s share price dipped to one of its lowest levels at 51.7p, a significant drop compared to the 192p recorded in July just before the profit warning was issued, and 85% below the share value in August 2016.