Balfour Beatty celebrates return to profit for UK construction arm

Steel beams secured into position at the Perth Transport Futures project

Balfour Beatty’s ‘Build to Last’ transformation programme has finally generated an operating profit for the firm’s UK construction business, though issues still remain within some of its problem contracts.

The firm’s 2017 financial results have revealed the construction division has followed up its 2016 operating loss of £65 million to report an operating profit of £16m in 2017.

However the figures do not include non-underlying items including a £44m provision on the Aberdeen Western Peripheral Route (AWPR) where Balfour Beatty had to step in following the collapse of Carillion. The contract is now expected to be complete in the summer of 2018.

Other items include £12m of restructuring costs and an £18m gain on the disposal of Heery International.

Balfour Beatty erecting the steel structure to form the Dundee railway station

The company said: “Each requires a high level of leadership involvement to ensure the best achievable outcome and a positive effect on customer relations. In most cases, the positions taken are proving adequate, reflecting, as expected, a mix of projects successfully closed out ahead of expectation, as well as others where the outcome, although disappointing, is being managed to its best conclusion.

“A very limited number of contracts have disappointed outside of this expectation. The largest of these is Aberdeen Western Peripheral Route which has experienced ongoing schedule and cost issues. These contracts have impacted the underlying results of Construction Services.”

Overall group underlying pre-tax profit rose from £62m to £165m for the year ended 31st December 2017. Underlying revenue is also up, from £8,215m to £8,234m.

The firm revealed that all earnings-based businesses “materially improved profit from operations” and said that it remains on track for “industry-standard margins” in the second half of 2018.

Leo Quinn

Leo Quinn, group chief executive, said: “These results clearly demonstrate that our Build to Last programme is transforming Balfour Beatty. The group has been repositioned to drive sustainable growth in profits, underpinned by a strong balance sheet. It has the right culture and capabilities to capitalise on the rising tide of infrastructure spend in our chosen markets.

“As a result of Build to Last, and the governance and controls now in place, we remain on track to achieve industry-standard margins in the second half of 2018. In the medium term, we are building a group capable of delivering market-leading performance.”

With around 2,000 employees in Scotland, Balfour Beatty is extremely active north of the Border with numerous schemes being delivered across the region.

Current portfolio projects include the Perth Transport Futures Project, which will support growth in Scotland’s third fastest developing region, the redevelopment of Dundee Rail Station and associated facilities and Dorenell Wind Farm in Moray, which on completion will connect the farm to Scottish Southern Electricity Networks (SSEN) Blackhillock Substation.

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