Balfour Beatty profits quadruple as cautious approach pays off

Despite taking a £44m hit from the collapse of Carillion and significant losses on the Aberdeen bypass, UK construction giant Balfour Beatty has seen underlying operating profit skyrocket 69% in the first half of 2018.

Bosses have hailed successful cost-cutting and lower risk contracts as central to ensuring the company’s first half profit surge. Pre-tax profits grew from £12m to £50m in the six months to the end of June with its order book rising 10.5% to £12.6bn. Overall underlying profit from operations rose to £66m from £39m a year earlier.

Underlying profit from operations at its UK construction business rose to £5m from £2m after a charge of £15m for the Aberdeen Western Peripheral Route (AWPR). Problems on the project stemmed from Carillion’s collapse at the start of the year meaning Balfour became a 50% partner in with Galliford Try. Results posted today shows that cash outflow on the scheme in 2018 is now expected to hit £135m.

Balfour Beatty's first half results in full:

Excluding the AWPR project the UK construction division saw margins rise to 2.1% with the firm’s Build to Last transformation programme part of a long-term turnaround plan to increase its order book while ensuring tighter controls on bidding for future contracts.

Balfour Beatty chief executive Leo Quinn said, “All our businesses are now either achieving industry standard margins or on track to do so in the second half. The disciplines installed under Build to Last are also enabling us to increase the order book with key infrastructure projects to translate Balfour Beatty’s expert capabilities into future profitable growth. Given the strength of our balance sheet and the board’s confidence that the group’s full year earnings will meet expectations, we are raising the interim dividend by 33% and plan to repay the outstanding convertible bonds this year.”