The contractor posted a £28m pre-tax loss for non-underlying items for the first half of the year, £25m of which was a charge relating to revised legal guidelines and settlements.
This was largely down to changes that came into force in February, which could see large companies (with turnover over £50m) face fines of more than £10m.
Leo Quinn told Construction News the company had taken a “prudent reserve” in the event of Balfour Beatty being fined in the future under the new sentencing guidelines, as the changes also apply to cases yet to go to court but that involve incidents that pre-date the revised rules.
He said the penalties had increased “almost tenfold”, which he later described as “pretty large and drastic”.
Balfour Beatty was hit with a major fine of £2.6m in May over the over the death of a worker on an offshore windfarm in Lancashire.
In January it also incurred a £1m fine, following the death of a road worker in 2012.
Mr Quinn said: “It’s most unusual to see that level of fine increase and it’s worrying for the industry because the definition of a large contractor is £50m turnover, this could bankrupt many small construction companies.”
Mr Quinn’s comments came as the company’s UK business posted a £66m loss in its construction services division for the half year to 1 July.
In the UK, underlying revenue fell in the first half by 23 per cent to £862m (2015: £1.12bn), predominantly due to a decline in the regional construction business.
On this, Mr Quinn said the company had reduced the number of live contracts in the regional business from 400 to 250, which gave the group “a sensible scope and span of control for the business”.
He added the company had previously taken on a large amount of contracts due to “forced growth” from acquisitions and winning new work on bad terms and with “inappropriate risk”.
The loss in the UK construction business over the period was also attributed to additional losses incurred on historical contracts.
In an analyst presentation, Mr Quinn said the group had challenges around the “black art” of getting projects signed off, which he said was “not always as easy as you think it’s going to be”.
One Nine Elms
He said the company was looking “much more” at two-stage bidding and used projects such as One Nine Elms as an example of this working effectively.
Mr Quinn said in the analyst presentation that he “knew the job and what [the company was] getting into”.
Speaking to Construction News he added that Balfour Beatty Engineering was onsite conducting piling works at One Nine Elms and was being paid to put together an estimate for the building over the next six months.
He said Balfour Beatty’s Olympic Park delivery team would be moving over to work on the project.
Balfour Beatty replaced Interserve on the job, after client Wanda One retendered in March.
Mr Quinn remained confident the UK construction business would still be able to hit 2-3 per cent margins, when asked by analysts.
He said margins continued to improve from a poor 2014 baseline, adding that revenue would remain flat.
“I’m not going to allow growth to save us,” he said. “Revenue will remain flat… if we do grow then that will be a bonus.”
Leo Quinn on:
Offsite manufacturing: Mr Quinn said he was “totally behind [offsite manufacturing]” but added that the construction sector “hasn’t managed to get it right yet in terms of logistics and distribution”.
Infrastructure: “What a fantastic time to be investing in infrastructure, when money is effectively free,” he said.
Nuclear: “Balfour Beatty wants uncertainty around new nuclear cleared up because we hold capability and expertise to deliver on these types of contracts – almost in some cases unique to Balfour Beatty.”