Balfour Beatty’s chief executive Leo Quinn remains confident about the group’s prospects as well as the potential for work in the UK construction industry, despite announcing a pretax loss of £199m in its latest 2015 annual results.
But he also said he expected it would take another 24 months before Balfour Beatty was able to deliver “industry-standard” margins.
For 2015 the group’s operating loss was £182m, reduced from £281m in 2014. This was largely due to an improved performance from engineering services. Turnover was reduced slightly to £8.235bn in 2015, from £.8.44bn in 2014.
The company says that its underlying pretax loss reflects 89 historic UK projects, which are expected to be 90% complete by the end of 2016.
According to the results presentation, 36 of these projects are still in progress, down from 61 six months ago, when the half-year results were announced. Twenty-nine have now reached financial completion, compared to only 10 six months ago.
Of the pretax loss, £150m was recorded in the first half of 2016, and £49m in the second half.
Despite the headline numbers, Quinn remained bullish on the group’s future for the next 12 months and stated they were deeply committed to their ongoing recovery plan.
Balfour Beatty Group Balance Sheet
Quinn was brought into the company last January to turn things around and immediately implemented a new turnaround plan, titled “Build to Last”.
The plan is aiming to build a global group which generates substantial shareholder value and has four guiding principles: Lean, Expert, Trusted and Safe.
Speaking about the results today in a webinar, Quinn said the company was now 12 months into the 24-month plan and the aim wasn’t for a quick fix for the business.
“We want to build things that last for decades, including the Balfour Beatty brand which we want to see for hundreds of years,” said Quinn.
The results indicated that Build to Last, targeting “£200m cash in and £100m cost out”, had achieved a cash flow improvement of £357m.
“Build to Last is working, overall we’re confident of delivering annualised savings of £100m by the end of 2016.”
Philip Harrison, Balfour Beatty chief financial officer
Cost savings included £39m in back office and support functions, £13m in IT savings, and £8m in indirect procurement. In addition, suspending the divided payment a year ago had saved £96m.
Chief financial officer Philip Harrison said: “Build to Last is working, overall we’re confident of delivering annualised savings of £100m by the end of 2016.”
On the UK market, Quinn said he remained very confident and there was enough work for everybody in the business. “I think we’re living in a very favourable world for construction these days. The UK market is extremely favourable, and the only challenge will be, which work and projects do you actually want to do? It will be the case of being even more selective.”
Looking at other parts of the business, Quinn said the Middle East was one other area of the market that presented plenty of opportunities.
“The Middle East for us is the single most challenging growth area. There’s lot of projects and potential,” he said.
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