Balfour Beatty has bounced back into the black as boss Leo Quinn’s turnaround efforts continue to pay off.
The group today reported statutory pre-tax profit of £8m in the year to 31 December 2016. In the prior year the firm had reported a pre-tax loss of £199m.
Underlying group revenue in 2016 rose 4 per cent to £8.5bn, while the firm’s order book increased 15 per cent to £12.7bn.
Chief executive Leo Quinn, who has been overseeing Balfour’s ‘Build to Last’ turnaround plan since he joined the firm in early 2015, said: “The transformation of Balfour Beatty is well under way.
“We have returned the group to profit and significantly exceeded our Build to Last Phase One targets.
“We have upgraded leadership, processes and controls while continuing to invest in the group’s unique strengths. As a result, we have improved not just the quality of our order book but our customer satisfaction scores.”
The first two years of Build to Last has seen the group invest £439m and take out £123m in cost.
Mr Quinn added: “Having simplified the group, we are focused on our core markets in the UK and US, where governments are committed to large-scale expenditure on infrastructure.”
Last month, the company revealed it was offloading its stake in its Middle East joint ventures.
In its UK construction arm, Balfour narrowed its annual loss to £64m, compared with a loss of £187m the prior year, while revenue slid 6 per cent to £1.89bn.
In the US, underlying operating profit in 2016 was £33m, compared with a loss of £22m the previous year. Underlying revenue rose 11 per cent to £3.4bn.
The group is continuing to deal with the fall-out from problem legacy contracts.
Across the group, Mr Quinn had identified 89 contracts that were dragging down profit.
Balfour said 90 per cent were at “practical completion” at the end of last year. Four of the remaining nine will complete this year, with the rest finishing in 2018.
During the next phase of Build to Last, the company said it will continue to offload infrastructure assets “timed to maximise value to shareholders”.
Prior to Mr Quinn’s return to the business where he started his career, Balfour suffered a slew of high-profile profit warnings and management exits.
Mr Quinn said that, prior to him joining, Balfour Beatty had “become overly complex following more than a decade of acquisition-led forced growth”.
He added: “There was an overall lack of leadership and strategic direction.
“Project bidding and delivery lacked standard processes and internal systems and controls were weak with little focus on cash management.
“A federated culture had resulted in layers of unnecessary cost and a tendency for elements of the business to compete with one another. Inevitably, performance had deteriorated not only financially but in terms of customer and employee satisfaction.”
But looking ahead, Balfour said it has a “solid platform” to build on.
It added: “The group expects each of its construction services and support services businesses to continue their positive trajectory to reach industry-standard margins.”
Balfour Beatty back in the black as 2016 results show turnaround on track