Balfour posts first-half profit as turnaround builds momentum

BALFOUR Beatty has made further progress in its plan to transform the business, pushing pre-tax profits into the black for the first half of the year.

The construction company said that being more selective about the contracts it picked and “simplifying the group” by selling core assets meant its performance was improving.

Leo Quinn, the chief executive, has embarked on a comprehensive plan to revitalise the ailing business under his “build to last” programme, which has involved cutting costs across the board.

Pre-tax profits were £12m in the six months to June 30, up from a loss of £15m a year previously.

Revenues for the company were up 8pc at £4.2bn, and the firm lifted its interim dividend by a third to 1.2p.

The results are in stark contrast to the summer of 2015, when the company issued its seventh profit warning in a 30-month period. This is the first time since 2014 that the firm has reported a pre-tax profit in the first half of the year, although it managed to be in the black for 2016 as a whole after a better second half of last year.

Mr Quinn said the performance at the company now compared to two years ago was “night and day”.

“All the things we’ve been doing are starting to come through,” he said. Shares in the firm closed up 6.36pc at 279.2p.

Although the order book fell from £11.9bn last year to £11.4bn in the most recent six-month period, Mr Quinn said this was partly as a result of scaling back its exposure in certain sectors, including in the US, and some larger contracts that would be accounted for in the second half of the year.

Balfour Beatty was buoyed last month by the news it had won two contracts to build the High Speed 2 rail line worth around £2.5bn.

Mr Quinn added that the company would be trading at “industry-standard margins” by the end of next year.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “Evidence at the half-year stage suggests Balfour is making headway.

“Margins are heading in the right direction, and while the order book is shrinking, the group attributes that to being more selective in the projects it undertakes. Given that several historic contracts have proven loss-making, that’s welcome.”

He added that there was still “some way to go” for the firm – a final phase of the transformation project will begin in 2019.