Balfour Beatty survives further AWPR hit with profits boost

Balfour Beatty has delivered an impressive set of half-year results despite having suffered a further £23 million hit from delays and cost increases on the Aberdeen city bypass project.

The contractor confirmed today that the cash outflow on the Aberdeen Western Peripheral Route (AWPR) scheme in 2018 is now forecast to hit £135m. The additional loss includes £8m for fulfilling former partner Carillion’s obligations on the contract.

Balfour Beatty said the project’s final impact is dependent upon the result of ongoing claims discussions.

The AWPR issues saw operating profit at the firm’s UK Construction Services division only reach £5m for the six months to June 29 compared to £2m last time.

Excluding the Aberdeen contract, the group said its UK construction division had reported an encouraging profit from operations of £20m representing a margin of 2.1%.

Overall underlying pre-tax profits came in at £56m during the period, more than double the £22m achieved in the same period last year although underlying revenues fell to £3.8 billion from £4.19bn.

The group’s order book has also increased 11% to £12.6bn, up from £11.4bn in 2017.

Balfour Beatty said this was achieved whilst maintaining the group’s ‘Built to Last’ initiative.

Leo Quinn, group chief executive, added: “All our businesses are now either achieving industry standard margins or on track to do so in the second half. The disciplines installed under Build to Last are also enabling us to increase the order book with key infrastructure projects to translate Balfour Beatty’s expert capabilities into future profitable growth.

“Given the strength of our balance sheet and the Board’s confidence that the group’s full year earnings will meet expectations, we are raising the interim dividend by 33% and plan to repay the outstanding convertible bonds this year.”

John Moore, senior investment manager at Brewin Dolphin in Scotland, said the results show why “it’s good to be the survivor”.

He added: “Balfour Beatty’s underlying profit from operations is up 69%, the size of its order book has increased, and margins are improving. The company has watched many of its competitors struggle or fold in the past few years, which has reminded many of its customers why they picked it in the first place. It has also meant that today Balfour Beatty can look to win business not just focusing on price, but on aspects such as operational delivery and stability. In time, this position offers the potential to boost its market presence and, ultimately, profitability further.

“Balfour Beatty is a huge company. While it can be difficult to quickly change big businesses, there is solid evidence that the turnaround plans Leo Quinn put in place are beginning to bear fruit. There appears to be real momentum behind Balfour Beatty and its direction of travel is sound. The share price is up around a fifth in two years and, if it continues on its current journey, there could be room for further growth.”

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