Balfour Beatty profits stressed

The average value of Balfour Beatty’s UK construction new contract awards in 2012 was just £10m. By contracts, Laing O’Rourke’s average value was £150m and for Sir Robert McAlpine it was £114m. However, Balfour Beatty won greater than 100 contracts in 2012, when compared with only a couple of dozen for Laing O’Rourke and McAlpine.

Total revenue for Balfour Beatty in 2012, worldwide, was down 1% to £10.9bn. Excluding the impact of currency trading and acquisitions, the like-for-like decrease was 4%.

Pre-tax profit of £74m, down from £243m in 2011, incorporates a one-off hit of £104m incurred from getting of the rail business in mainland Europe. Balfour Beatty has decided to quit rail in Mainland Europe since it is its only activity on this region.

Balfour Beatty’s cost efficiency programme, started in 2010, achieved £36m of savings in 2012 at a non-underlying cost of £61m, the corporate said. The united kingdom construction business was reorganised into three business streams and 75 offices are being curb to simply 37. The plan is in line to hit the objective of £80m annual savings by 2015.

Chief executive Ian Tyler, who steps down on the end of this month, said of Balfour Beatty’s 2012 performance: “We have delivered a fixed of results for the whole year that demonstrated resilience in underlying earnings and a stable order book within the face of constant challenging conditions within the construction markets within the UK and USA. We’ve also made good progress within the implementation of measures designed to extend organisational efficiency and are on the right track to understand the predicted benefits. Furthermore, our growth process of specializing in key market sectors and geographies is making headway, and is reflected inside the continuing shift in our order book towards economic infrastructure.

“While we still believe that construction markets in 2013 would be challenging, our actions up to now and ongoing strategic discuss growth markets position us well for the medium term.”

Group results

Construction Services

The construction order book finished the year at £8.0bn, down 6% from a year ago. Probably the most significant decrease was within the US, down 17% from the tip of 2011. Within the UK the order book was up 1%, with a serious shift from major works to smaller contracts. The order book for less profitable regional building and civils business was up 15% from the top of 2011 while the order book for more profitable major construction work dropped by 24%. UK revenue was down by 6% within the year, with among the decline occurring within the second half. In accordance with the order book profile, construction revenue is predicted to fall 20% within the UK this year, Balfour Beatty said.

Mr Tyler attributed the reduction in profitability of the united kingdom construction business not only to lower margins within the regional business but additionally to “delivery margins being impacted by rising subcontractor defaults”.

He added: “We continue to believe that 2013 could be a hard year for Construction Services notwithstanding some great benefits of the associated fee reductions we’re achieving.”

Professional Services

The Professional Services division improved its order book by 5% despite uncertainty within the USA where it generates 1/2 its revenue. Strong growth inside the remainder of the realm, particularly Qatar and Canada, contributed to revenue. Performance was jumbled in Australia, with a revenue decline in transportation offset partly by growth in mining. The united kingdom remains a tricky market, but recent restructuring has improved financial performance.

Support Services

Support Services order book improved by 12% from the top of 2011 to £5.7bn. Order intake was particularly strong in power, which ended the year with its order book up 65% from the beginning of the year. Revenue was up 3% at £1.63bn, with a 24% increase within the power sector.

A reduction in profits to £52m (2011: £67m) was attributed to begin-up costs on new contracts and £10m of 1-off cost increases on a small choice of power sector contracts in Australia and New Zealand within the first half the year. Second half profitability was consistent with that during the similar period in 2011.