Balfour Beatty UK construction returns to profit

Aaron Morby 2 months ago
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Balfour Beatty’s UK construction arm put last year’s £23m interim loss behind it to bounce back with a £18m profit in the first half of this year.

CEO Leo Quinn has upgraded Balfour's full-year target after a strong first-half performance
CEO Leo Quinn has upgraded Balfour's full-year target after a strong first-half performance

The construction business turnaround after last year’s London property project writedowns helped the group to more than double pre-tax profit from all operations to £82m from revenue which remained flat at £4.1bn.

At UK construction, revenue slipped to £1.24bn with higher volumes on HS2 helping to replace lower volumes from buildings and the deferral of a number of highway projects.

Overall operation margins at the division reached 1.5% and are expected to improve further over the year despite mounting materials and wage pressure.

Leo Quinn, Balfour Beatty Group Chief Executive, said: “UK Construction remains on track to deliver industry standard margins of 2-3% for the 2022 full year and US Construction is anticipated to continue to deliver in the 1-2% margin target range.”

He said that support services also showed improvements in performance putting it on track to hit the top end of its targetted 6-8% margin for the full year.

Balfour Beatty first-half trading by division
Profit H1 22: 21 turnover H1 22:21 Orderbook 22
Construction services £48m -£8m £2.99bn £2.95bn £15.3bn
– UK construction £18m -£23m £1.24bn £1.26bn £5.6bn
– US Construction £21m £20m £1.77bn £1.70bn £6.3bn
– Gammon £10m £9m £411m £377m £3.2bn
Support Services £36m £49m £499m £555m £2.4bn
Infra. Invests £17m £15m £234m £123m

The improvement saw a strong rise in half-year average net cash at £811m (FY 2021: £671m).

Looking ahead, Quinn said Balfour’s group’s order book was 10% up on last year at £17.7bn, providing a good platform for further profit and dividend growth.

He said that Balfour Beatty’s focus on selectively bidding for contracts where it held expert capability and could achieve improved contract terms had resulted in a higher quality order book with enhanced risk protection in the inflationary environment.

“With the group well-positioned to capitalise on the growing infrastructure market, underpinned by its unique capability and balance sheet strength, the upgrade to the full year performance gives the board further confidence in future capital returns,” he added.

 

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