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Balfour Beatty boss: no more office closures

Balfour Beatty UK Construction Services chief executive Nick Pollard has insisted there are no more office closures planned in the UK and that the firm is set to benefit from regional growth.

Balfour Beatty has closed its Doncaster office and is in the process of shutting offices in Rochdale and Dartford where it is in ongoing consultation with staff over redundancies.

Mr Pollard told Construction News there were “no further plans to close delivery units” and that it would be “stupid as a regional business” not to keep “flexing its shape”.

He said the regional business was currently outperforming expectations despite its recent difficulties after a spate of contract wins.

The contractor would “try to retain everyone we possibly can”, he said, as it attempts to find new roles for staff at the closing offices.

Mr Pollard was speaking after Balfour Beatty announced half-year results which showed a £17m UK restructuring cost and a £41m loss in its construction services division.

The UK’s biggest contractor announced a £50m profit warning in April and, despite order book growth of 7 per cent on H1 2012, has seen revenue decline and experienced a 70 per cent pre-tax profit hit.

Group revenue was £4.32bn, down from £4.4bn (excluding joint ventures) – a reduction of 3 per cent on H1 2012 and underlying pre-tax profit was down 70 per cent at £45m (H1 2012: £150m).

He said that there were “no surprises” in the announcement, which was flagged in its £50m profit warning, issued earlier this year.

“Of course we are in a reasonably tough market but we are in the right headspace and getting into good shape,” he said.

“I am quietly encouraged by the market. We are seeing regional orders up and have had some big wins in the last four months which are worth around £400m.”

He said major schemes such as High Speed 2 were still some way off, but regional projects were beginning to “pick up quite nicely”, pointing to Balfour Beatty’s place on the £900m NHS Frameworks Scotland 2 framework as giving the contractor healthcare coverage in Scotland, Wales and England.

“Where we find the market coming back is in the regional business, not the big major projects,” he said.

Analyst Andrew Gibb at Investec warned that “numbers and cash are under pressure and the big risk is still to come, as the group starts to see costs rise against its thin-margin construction contracts”.

But Mr Pollard dismissed the concern that rising material and subcontractor costs could put Balfour Beatty in further difficulty.

He said the regional contracts had “typically short-term execution” so price increases on deals with a lead of three months to a year would have little impact on fixed cost bid prices.

He added that Balfour Beatty has “balance sheet strength and cash strength” to protect itself.

Asked how quickly he could turn around leadership issues cited by group chief executive Andrew McNaughton as having caused problems that led to the profit warning, Mr Pollard said “reasonably quickly”.

“It’s not like this business does not know how to build,” he said. “This was unfortunately about leadership that took its eye off the ball because of the internal restructure but we are through that now.”

Mr Pollard said he wanted to make sure the business “listens properly to clients” and aligns itself with “key asset clients” and that its three priorities are customers, its people and operational excellence.

Balfour Beatty Workplace sale

Balfour Beatty announced the sale of its FM arm to GDF Suez Energy Services this month in a deal expected to be worth around £150m in net cash, excluding pension levels and debt.

It is the latest sale for the contractor after it disposed of a 50 per cent stake in Salford hospital PFI for £22m in July, its Exeter Airport stake in June to Patriot Aerospace and the sale of its 50 per cent interests in four PFI schools projects.

The decision to sell Balfour Beatty Workplace would help it “flourish”, Mr Pollard said, insisting that Balfour Beatty was “not the right parent” for the business which was not a “hardcore of where [Balfour Beatty] wants to be”.

He said the sale would help to reduce debt and reinvest cash into areas of the business where it had greater focus.

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