With major road schemes and parts of HS2 are put on hold, big construction might be expected to take a hit but Balfour Beatty, Britain’s biggest contractor, has taken it in its stride.
“In March, the Department for Transport announced delays to parts of the HS2 project and various highways schemes, driven by government funding restrictions. Having worked through the change order on HS2 and rebalanced the workload, the group sees no material change to its forecasts,” said Balfour Beatty chief executive Leo Quinn.
Results for six months to 30th June 2023 show revenue in Balfour Beatty’s UK Construction division increased by 23% to £1,516m (2022: £1,237m) driven primarily by HS2 work. Underlying operating profit was up 67% from £18m last year to £30m this time.
Including US and Hong Kong construction operations, Balfour Beatty Construction Services made a first half operating profit of £52m (2022 H1: £48m) on revenue of £3,835m (2022 H1: £3,414m).
Support Services revenue decreased by 7% to £463m (2022 H1: £499m). This weas attributed to the timing of certain projects. Underlying profit from operations at £30m (2022: £36m) was softened by the reduced revenue and the start of two road maintenance contracts, which typically incur additional costs in the start-up phase. This reduced the operating profit margin to 6.5% in the period (2022: 7.2%) but this is expected to be nearer 8% by the time the full year results are posted.
For the whole group, revenue in the first half was up 9% at £4,527m (2022 H1: £4,147m) while pre-tax profit was marginally reduced at £82m (2022 H1: £83m).
Chief executive Leo Quinn said: “We continue to deliver from the scale and breadth of our lower risk order book, which, during this period of high inflation and interest rates, underpins the financial results reported today and our expectations for the full year.
“Looking beyond 2023, we have positioned Balfour Beatty strongly with unique capabilities and a sector-leading balance sheet, to capitalise on national plans to transform critical infrastructure, particularly in the energy and transport markets. This provides the board with confidence in both profitable managed growth and in our capacity to deliver significant future shareholder returns.”
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