The Courier & Advertiser (Angus and Dundee)
Construction giant back in the black
Shares in Balfour Beatty spiked yesterday after the construction and engineering giant revealed it had swung back into profit in the first half as its turnaround continued.
Pre-tax profit came in at £12 million in the six months to June 30, compared with a £15m loss in the same period last year. Group revenue increased over 6% to £3.5 billion but the firm’s order book fell 4.2% 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, which has significant operations in Scotland and is building out the new Dundee Railway Station, and its shareholders after it was held back by onerous construction contracts that delivered poor returns last year.
Chief executive Leo Quinn has spearheaded a restructuring of the business through his cost-cutting Build To Last programme.
“These results demonstrate the transformation being driven by focusing Balfour Beatty relentlessly on its chosen markets and capabilities,” Mr Quinn said.
“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.”
In the UK, Balfour swung from a £69m loss to a £2m profit.
The group added that its infrastructure pipeline in the US and UK remains “buoyant” and highlighted landmark contracts such as its involvement in HS2, Britain’s flagship high speed rail programme.
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.”
Shares closed up 17.63p at 280.13 yesterday.