Upbeat Balfour Beatty narrows losses

A workman installs concrete reinforcement rods during building works at Balfour Beatty Plc's St. James's Market construction site, a joint Crown Estate and Oxford Properties Group Inc. commercial real estate development, in London, U.K., on Thursday, Aug. 14, 2014. Balfour Beatty rejected a renewed merger proposal by Carillion Plc to form the U.K.'s biggest builder with a market valuation of about 3 billion pounds ($5 billion) because of a dispute over whether to dispose of the Parsons Brinckerhoff division. Photographer: Simon Dawson/Bloomberg©Bloomberg

Balfour Beatty, the construction and infrastructure group which built the Channel tunnel and the Docklands Light Railway, has narrowed its losses and remains confident that a turnround programme is on track.

The building company reported revenue of £8.44bn in the year to December compared with £8.79bn in 2014 and a pre-tax loss of £199m, less than the loss of £304m a year earlier.


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The group, the largest UK building company by revenues, said it expected to reinstate its dividend — scrapped last year — when it presents interim results in 2016, stressing that business in its main UK and US markets “remains positive”.

Leo Quinn, who was parachuted in last March to rescue the business following a calamitous two years, is halfway through a two-year turnround programme called “Build To Last”.

The builder had mismanaged contracts won at rock bottom prices during the fiercely competitive period after the recession and was forced to issue seven profit warnings in two years, as well as fend off two takeover approaches.

The company, which employs 34,000 staff worldwide, has been reviewing its lossmaking contracts in Britain and the Middle East. It has completed 60 per cent of the lossmaking contracts on its books and expects that to rise to 90 per cent by the end of the year. ”If you look under the bonnet, you’ll see we’ve made strong progress in stabilising the business,” said Mr Quinn. “We’re confident we’re winning contracts at better terms.”

Although its order book fell £400m to £11bn, the company cited infrastructure opportunities in the UK, Hong Kong and the US, including the £300bn new highways budget in North America.

In the UK it has won deals including a £25m contract to build an onshore wind farm substation. The farm, which is to be constructed by Dong Energy off the Yorkshire coast, will eventually power 1m homes. It has also secured a £416m contract to build the western section of the new £4.2bn London supersewer under the Thames river from Ealing to Hammersmith in a consortium with Morgan Sindall.

Stephen Rawlinson, analyst at Applied Value, said the fact that the company was on track to achieve industry level margins this year demonstrated the “medicine is working”.

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