Balfour Beatty has returned to profit after a torrid two years in which the construction group issued a string of profit warnings and fended off a takeover attempt.
Balfour, which had taken on too many contracts in the UK at rock-bottom prices in the wake of the recession, turned a statutory pre-tax loss of nearly £200m for 2015 into a profit of £8m for last year.
Leo Quinn, who joined as chief executive in 2015 to manage a turnround programme dubbed “built to last”, hailed it as a “transformation”. “Having simplified the group, we are focused on our core markets in the UK and US, where governments are committed to large scale expenditure on infrastructure. All this positions us for future profitable growth,” he said.
The recovery had been signalled last summer when Mr Quinn reinstated the company’s dividend.
Before Mr Quinn the company had seven profit warnings and a takeover attempt by rival Carillon. It had struggled to integrate 45 acquisitions it had made in 15 years.
Balfour has been working through its lossmaking contracts in the UK and said on Thursday that work on 90 per cent of these had been completed. It has also been simplifying its management structure, and focusing on core markets in UK, US and Asia after announcing a deal to sell its Middle Eastern joint ventures earlier this year.
The group is tipped to win more work from US president Donald Trump’s pledge to boost infrastructure spending. The company already maintains 1,835m of railway track across the US. In Britain it maintains the M25 orbital motorway in London and works on the capital’s new Crossrail train line and a new waste processing plant at the Sellafield nuclear facility.
Underlying revenues in its construction business grew 7 per cent to £6.8bn as work in the US, including a deal to electrify the 52-mile railway between San Francisco and San Jose, offset a decline in the UK. In support services, its underlying revenue declined 12 per cent to £1.1bn. Its order book grew 15 per cent to £12.7bn, also driven by the construction services business.
Balfour’s shares dipped in early trading on Thursday but Stephen Rawlinson, analyst at Applied Value, said the results showed it was well “on track”. “Getting back on track fully was always more likely to happen in 2018 and the news today suggests that has not altered,” he added.
Following the reinstatement of the dividend, the company said it recommended a final payout of 1.8p per share.