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Balfour Beatty expects to see benefits of restructure next year

Balfour Beatty is expecting to see the benefits of its UK construction restructuring next year, it said this morning.

Providing an interim statement to the Stock Exchange for the first three months of 2012, the contractor reiterated that it is building on its existing cost savings programme – which has a target of £30 million per year – with an additional £50m per year by realigning its UK construction business.

The company has said previously that it expects to make redundancies across its 12,000-strong UK arm as a result, but, as revealed by Construction News, has said this will not affect operational staff.

There are 4,000 non-operational staff in the UK division, but with the consultation ongoing, it is not yet clear how many jobs will go.

It said:  “As announced in March 2012, we are building on the existing programme with additional targeted savings of £50m per annum by 2015.

“Some of these measures will impact existing employees and a consultation process has now started.

“The majority of the benefits of this programme are likely to be delivered in 2013, underpinning margins primarily in UK Construction Services and Support Services.”

Balfour Beatty said its construction order book is “slightly lower” than at the year-end, with orders in the international businesses and in rail partly offsetting the shortfalls in the UK and the US. It has maintained a group order book of more than £15 billion despite an ongoing “challenging” UK market, it said today.

The company said construction revenue in the UK was flat on the same period in 2011, with particular strength in the south east.  A strong revenue performance in the US and Hong Kong resulted in higher overall construction revenue than in Q1 2011 despite some weakness in European Rail.

It expects the UK construction market to “remain competitive”.

The firm said margins remain under pressure, despite a boost from projects coming to a close in Hong Kong.

The support services order book has continued to grow since the year-end with good results in facilities management and steady progress in the local authority and the utilities businesses, it said. Contract wins include for National Grid, the Olympic Park Legacy Company, EDF Energy and UK Power Networks.

Performance of professional services stabilised in the UK, owing largely to the initiatives the business implemented in 2011 to align costs with the lower volume of activity in the market. Infrastructure investments - including PFI - have performed in line with our expectations.

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