Balfour Beatty boss Leo Quinn has said he expects troubled rival Carillion to recover and emerge a “better” but potentially smaller company.
Last month Carillion issued a profit warning, suspended its dividend and parted ways with its chief executive Richard Howson.
Its share price has remained in the doldrums after dropping 70 per cent last month.
However, Mr Quinn told CN he believed Carillion – which had a merger offer rejected by Balfour at a time when their fortunes were reversed three years ago – can recover.
“Over the history of the industry, companies have tripped and stumbled,” he said.
“[Carillion] is a good company and it’s in the industry’s interest that we all work to see them through this and I’m sure they’ll come out the other end a better company for the experience.
“They have got a good brand and good people. It might be a smaller company in the future, but I’m sure it will be around.”
Mr Quinn is overseeing a turnaround at Balfour Beatty after inheriting a company hit by a string of profit warnings due to problem legacy contracts.
Today it reported a group half-year pre-tax profit of £12m, compared with a £15m loss in H1 2016.
The UK’s largest contractor, which reported a return to half-year profit in its UK construction business, is aiming for a margin of 2-3 per cent by 2018 but is targeting 5 per cent margins in the long term.
Mr Quinn told Construction News: “As the legacy of low-margin bidding fades into the distance, you will start to see much more substantial returns and I think 5 per cent is realistic.
“More importantly, anything less than that and the industry is not sustainable.”
Earlier this week, Midas chief executive Alan Hope called for the industry to push for margins of 3-5 per cent by showing the value of service they can deliver.
Mr Quinn added: “It’s incumbent on all leaders that they are thinking the same way and stop worrying about setting expectations and do what’s right for the business.”
He continued: “We want to reinvest in the business so we have the capability and capital to deliver on projects.”
Meanwhile, on the Grenfell Tower tragedy, Mr Quinn said: “It’s really important we understand the root causes and move to effect any change as an industry.”
He said Balfour had reviewed buildings it had worked on, but the firm was not involved in any recladding work.
He added: “We, like everyone else, have gone through any building and looked to understand what the composition of those buildings are.”