UK construction continues to blight Balfour Beatty after underlying pre-tax profits fell by £25m in the first half of 2014.
Underlying pre-tax profits declined 53 per cent to £22m from £47m at the same point in 2013. Group revenue fell from £4.31bn in H1 2013 to £4.17bn in H1 2014.
It held total assets worth £5.63bn (2013: £6.2bn) with total liabilities of £4.66bn (2013: £5bn).
Balfour held cash and cash equivalents of £430m (2013: £562m) at the half year.
Fall in group revenue year on year, H1 2014
Increase in losses in construction services
Fall in construction order book
In construction services, the group made a loss of £76m, more than in H1 2013, for which it recorded a loss of £55m.
Professional services (£19m), support services (£18m) and infrastructure investments (£69m) all posted profit.
The group today announced it had rejected fresh terms from Carillion over a proposed mega merger.
In professional services, the group’s order book dipped from £1.6bn to £1.4bn, while revenue also fell £68m to £802m. The division maintained profitability at £26m, flat on H1 2013, with an increased margin of 3.2 per cent (2013: 3 per cent).
The group had improved profitability in the UK, particularly in highways and rail. In the US, power performance suffered from delayed projects. In Australia, actions to reduce costs were “taking effect”.
In construction services, the group presented results excluding rail operations in Germany, Scandinavia and Spain after it announced it would exit those businesses last year.
A reduction in its UK order book was offset by improvements elsewhere, particularly in Hong Kong.
The UK recorded a loss from continuing operations of £69m (2013: loss of £39m) due mostly to problems in M&E but also in its major building projects business.
Overall, its construction order book fell from £7.9bn to £7.6bn.
In the UK, its order book declined by 11 per cent, with “increased selectivity in bidding activity and reduced order intake within the Engineering Services business” the reasons given by the firm.
“In central London, Engineering Services will only be working with Balfour Beatty Group companies, where it can influence design and add value for customers”
On M&E, the company said: “The problem contracts are being stabilised, with the majority of the loss-making contracts due to complete in 2014. While short-term risks remain, we continue to pursue contractual entitlement.
“Given these issues, we have reviewed the size and geographic footprint of this business with the aim of ensuring a smaller, more focused business.
“In central London, Engineering Services will only be working with Balfour Beatty Group companies, where it can influence design and add value for customers.”
The regional business and major projects business was improving, Balfour Beatty said.
It is bidding for larger-scale contracts in the regional business, where the pipeline remains “extremely active with improving market conditions”.
Since the start of 2013, Balfour Beatty said it had seen a 2.8 per cent increase in bid margins in absolute terms and expects all regional business units to be profitable by January 2015.
Overall overheads have remained above 6 per cent, it said, despite reduction in overheads of more than £40m between 2011 and 2013, due to declines in revenue.
However, in the US the business achieved 14 per cent revenue growth (at constant currency).
In support services, its order book fell by 4 per cent to £4bn compared with the year-end.
The company’s performance in water has improved, but been offset by power and transportation contracts. Revenue was down 5 per cent on H1 2013 at £615m. Underlying profit from operations increased by £5m in the same period to £22m.
Average net borrowings in the six-month period were £424m (2013: £298m), with the group’s net debt at 27 June 2014 at £364m (2013: £173m).
Negative working capital was at 4.8 per cent (2013: 7.3 per cent), of which construction services accounted for 9.4 per cent (2013: 11.6 per cent).
At 27 June 2014 it had £262m drawn against its £950m of committed bank facilities.