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Leo Quinn pledges to stay at Balfour into next decade

Balfour Beatty’s chief executive has said he is already making plans for the fifth phase of the company’s turnaround programme – suggesting he is likely to remain at the helm well into the next decade.

Speaking to Construction News after the construction giant released its full-year 2016 results this morning, Mr Quinn outlined his vision for the business and committed his immediate future to Balfour Beatty.

Mr Quinn introduced Balfour’s ‘Build to Last’ turnaround plan in February 2015, and – after losses in 2014 and 2015 – the group today reported statutory pre-tax profit of £8m for the year to 31 December 2016.

This was seen as the end of phase one of the turnaround programme. Phase two will run to the end of 2018.

But Mr Quinn said: “I’m clocking up phase five – don’t think you can get rid of me at phase three.”

Asked whether today’s return to the black marked the end of the days of profit warnings and heavy losses, Mr Quinn said “you never say never” but added that the company had built a strong platform and could be confident about its trajectory.

He said that by the beginning of phase three of Build to Last in 2019, he expected the company to be moving towards market-leading margins.

“We have the scale to have market-leading returns, so we should be beyond the [industry-level margins when] we publish in 2018.”

The first two years of the Build to Last programme have seen a streamlining across the group, resulting in more than £439m coming into the business and £100m going out – ahead of the original objective of £200m cash in, £100m cash out.

Mr Quinn said phase two of the programme would see a continuation of streamlining that would increase productivity and free up more money to invest back into the business.

The second phase could also see a slowdown in the sale of the company’s PPP assets after a flurry of sales in recent years, he added.

“Because of the strength of the balance street you will see the number of sales of investment assets reduce over the next couple of years because we will want to manage them for income.”

Balfour Beatty will also be looking at the proposed pipeline of PF2 projects, with Mr Quinn saying the firm was well placed to take advantage.

“We are really keen and mobilised to make the most of these opportunities,” he said.

“We are the largest infrastructure fund in the UK with £1.2bn of assets, and we are keen to build on that and we are going to actively participate in that when we know exactly what PF2 is.”

Balfour continued to increase the number of legacy contract completions it made in 2016.

From the 89 jobs Mr Quinn had identified as dragging down profit when he joined the company, there are just nine left, all of which he expects to be fully tied up by 2018.

Mr Quinn said the company had learned from these projects and put in place more rigid processes when it came to the projects it bid for.

The company now uses a bid review committee, which is made up of Balfour Beatty’s executive committee, with members able to sign off bids outside of their market areas.

Mr Quinn said: “This is sensible governance – if it was my own money I would want to know the risk that I have taken on and the returns I am getting on that.”

He said this selective approach had also been a major factor in the company almost doubling its bid:win ratio.

“Do we know the customer? Do we know the geography? Do we know the application? That’s the criteria,” Mr Quinn said.

“Where we have ended up with bad projects, […] we were invariably working in a geography we haven’t worked in, or in an application that isn’t core to the company, or [where] we don’t have the required skillset to deliver on time and on budget.”

The company revealed it had a framework involving “less than a handful of design consultancy firms” with whom it would concentrate its spend moving forward.

Mr Quinn said that these included all of the “usual players”, including Atkins and Mott MacDonald.

The results did see a small drop in the staff satisfaction across the business, with the group employee satisfaction rating score down from 60 per cent in 2015 to 58 per cent for 2016.

Mr Quinn, who was previously group chief executive of defence research group Qinetiq, said the latest Balfour satisfaction score was remarkable considering the upheaval the company had been through over the past few years.

“I would put my money that staff morale in next year’s will increase, I have no doubt about that.”

Commenting on CN’s report last week outlining the lack of women on boards within the construction industry, Mr Quinn said the industry needed to do much more to boost diversity.

“I think the industry needs to do a much better job of getting women into senior roles across every function; unfortunately the pool we are fishing from is small and I think that goes back to getting people to chose STEM subjects and choosing the sciences over the arts in university.

“It’s a long-term effort but I’m really supportive of it.”

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