Balfour shrugs off UK construction loss to beat expectations

60 Curzon Street, a luxury Mayfair apartment block that Balfour Beatty was supposed to have finished in 2020.

For the year to 31st December 2021, Balfour Beatty’s revenue was down 4% in 2021 to £8,263m (2020: £8,583m) but pre-tax profit was up 81% to £87m (2020: £48m).

Full year average net cash was £671m, up from £527m in 2020 and £325m in 2019.

Chief executive Leo Quinn attributed the success of the company to the spread of operations – in the UK, the USA and Hong Kong; in construction, support services and investments.

The order book at the end of 2021 stood at £16.1bn, down slightly from £16.4bn at the start of the year. But the quality of orders has improved, Leo Quinn said, with fewer and fewer high-risk fixed price contracts. The UK Construction business has only 14% of its order book from fixed price contracts now, compared to 20% a year ago and 50% three years ago.   

The Construction Services business reported an underlying profit at £79m (2020: £29m), with Gammon (the Hong Kong joint venture with Jardine Matheson) contributing £30m (2020: £29m) and US Construction £51m (2020: £26m).

UK Construction, however, made a £2m  loss (2020: £26m loss) because of write-downs on three private sector building jobs in central London.  One of these projects was completed in November 2021. At 60 Curzon Street, a 32-flat luxury residential scheme for Brockton Capital in Mayfair, work was supposed to have been finished in 2020. It is now set for mid-2022 completion. A third central London job is set to be finished by the end of 2022.

As announced in August 2021, Balfour Beatty will no longer bid for fixed price residential property projects in central London.

Balfour Beatty Support Services more than doubled its underlying profit from operations to £102m (2020: £46m) as a result of improved performance across the portfolio, coupled with quitting the gas and water sector.

“In 2021, despite the challenges presented by Covid-19, we have delivered operating profits ahead of expectations,” said Leo Quinn. “Balfour Beatty emerges from the last two years with capabilities intact and a higher quality order book. Together these provide the visibility to deliver profitable managed growth and sustainable cash generation.”

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