Balfour profits quadruple after ditching riskier deals

CONSTRUCTION company Balfour Beatty has quadrupled its pre-tax profits as chief executive Leo Quinn’s strategy of being more picky over contracts appears to be paying off.

The country’s biggest contractor recorded total pre-tax profit of £50m for the six months to June, well up on the same time last year when it made £12m.

The company said “reducing costs and raising productivity across its operations” were key factors in its strong performance.

Mr Quinn has been implementing a turnaround plan called “Build to Last”, which has focused on improving company margins and winning fewer risky contracts. It has exited operations in the Middle East, Indonesia and Australia, preferring to concentrate on work in the US and Far East.

Balfour nearly collapsed in 2015 when losses at its British construction division led to multiple profit warnings. While its more cautious approach meant revenues dipped 8.6pc to £3.8bn in the first half, profits still rose as it kept spending under control. Mr Quinn said all the company’s divisions were now either achieving industry standard margins or on track to do so in the second half.

Balfour’s order book also increased from £11.4bn a year ago to £12.6bn. It raised its dividend 33pc to 1.6p a share.

Mr Quinn said: “We’ve been effectively de-risking the portfolio both geographically and technically.”

He blamed “far too much exposure to developers and builders in London” for the company’s earlier problems, and said Balfour had found success in securing repeat work from major clients including Highways England and Heathrow. The company has also won significant contracts in the US.

But Mr Quinn warned that the construction industry as a whole faced a potential skills shortage in the next decade. “Demand far exceeds supply and it’s about how you train and retain the right staff,” he said.

Balfour also took a £44m hit from the collapse of Carillion for work on the Aberdeen Western Peripheral Route, a joint venture it had been building with the failed firm. The company’s shares closed up 2.4p at 292.7p.