Balfour Beatty recorded a £66m loss in UK construction in the first half of the year, but the group recorded an underlying profit.
The underlying profit from continuing operations was £5m (2015: £120m loss), primarily due to losses within Construction Services being substantially lower at £60m (2015: £209m).
In the UK, underlying revenue fell in the first half by 23 per cent to £862m (2015: £1.12bn), predominantly due to a decline in the regional construction business.
The group has reduced its live contracts in the regional business from 400 to 250.
The underlying loss from the UK construction business was £66m, down from a loss of £145m at the same time in 2015.
Balfour Beatty said it has closed more than four-fifths (81 per cent) of the 89 problem contracts identified in 2015, with 21 per cent closed in the first half of the year and a 90 per cent target by the end of 2016.
A leadership development programme has been launched, initially in the UK regional construction, power and rail businesses.
In the US it made a profit from operations of £12m (2015: £41m loss).
The group this week announced it had scooped its biggest US deal to date, with a contract worth around £520m to electrify a 84 km high-speed rail line in California.
The group order book increased by 13 per cent (7 per cent at constant exchange rates) to £12.4bn from £11bn at December 2015.
Construction Services orders grew by 15 per cent (7 per cent at CER) to £9.1bn, driven by growth in the UK and Far East.
Its Support Services order book increased by 6 per cent to £3.3bn due to “good growth in transportation”, with utilities “stable”.
It has proposed an interim dividend of 0.9p.
Balfour Beatty’s cash position was affected by cash generated through its Investments business and cash management, combined with historical problem contracts, operating losses in the period and pension deficit payments.
Its net cash position declined from £163m at FY 2015 to £115m as a result.
The group will make cash contributions to its pension fund totalling £182m over the next eight years. It had previously agreed contributions totalling £376m over the same period.
Leo Quinn reaction:
“We are now starting to see tangible benefits from the transformation of Balfour Beatty.
“Eighteen months into the first phase of Build to Last we have delivered our second successive half of underlying profitability and remain on track to achieve our initial targets of £200m cash in, £100m cost out.
“By concentrating on our selected markets, we are growing our order book within a control environment which ensures that our business decisions lead to sustainable profit and cash growth.
“We have maintained a strong balance sheet and expect Balfour Beatty to make further solid and measurable progress. As a result, we are able to reinstate the dividend as planned.
“By the end of 2016 we will have successfully completed phase one. Over the following 24 months, I am confident we can reach industry-standard margins and then build on the foundations Build to Last has put in place to deliver a Balfour Beatty with market-leading strengths and performance over the longer term.”
More to follow