Balfour Beatty reports £199m pre-tax loss
Balfour Beatty’s turnaround plan may be starting to take hold despite a £199 million pre-tax loss.
The loss, which the contractor said is related to historic projects, is down from £304m a year before, on revenues 4 per cent lower at £8.4 billion.
The infrastructure group has issued seven profit warnings after a series of problems that begun in 2012.
However, chief executive Leo Quinn said Balfour Beatty was well on track with its two-year Build to Last transformation programme at the half-way stage.
In the second half the group delivered a £14m operating profit for the first time.
During the year Quinn said Balfour Beatty had focused on cost savings, cutting 846 backroom staff, but delivering annualised savings of £60m from the 2016 target of £100m.
The total loss from the UK construction business including provisions to maintain cover against the likely end contract positions on several historic contracts that suffered schedule slippages and operational deterioration and non-underlying Engineering Services contracts was £195m (2014: £317m).
He said the business was making good progress working through legacy contracts, with 60 per cent now complete, up from 31 per cent or 89 projects at the half-year.
As a result of improved controls and disciplines on bidding, together with the decision to withdraw from certain types in London and the Middle East, the underlying order book declined by 4 per cent in 2015 to £11bn.Tighter controls on UK construction services saw orders fall 17 per cent.
Leo Quinn said: “In its first year, Build to Last has achieved significant progress in transforming Balfour Beatty.
“We have upgraded the leadership team and set out a clear direction. We are implementing consistent processes to integrate our businesses into a Group with greater transparency and control. Our main markets are providing a positive backdrop, so that with stronger governance we can both win and deliver business on the right terms. Looking to the future, we are investing to maintain Balfour Beatty’s expertise and assets.
“By the end of 2016 we will achieve our Phase One targets: our costs are coming down, our cash flow has improved substantially and we expect to reinstate our dividend later this year. Over the following 24 months, I am confident we can reach industry-standard margins. But above all, Build to Last is putting in place the foundations to build a Balfour Beatty with market leading strengths and performance over the longer term.”