The average value of Balfour Beatty’s UK construction new contract awards in 2012 was just £10m. By contracts, Laing O’Rourke’s average value was £150m and for Sir Robert McAlpine it was £114m. However, Balfour Beatty won more than 100 contracts in 2012, compared to only about a dozen for Laing O’Rourke and McAlpine.
Total revenue for Balfour Beatty in 2012, worldwide, was down 1% to £10.9bn. Excluding the impact of foreign exchange and acquisitions, the like-for-like decrease was 4%.
Pre-tax profit of £74m, down from £243m in 2011, includes a one-off hit of £104m incurred from getting of the rail business in mainland Europe. Balfour Beatty has decided to quit rail in Mainland Europe because it is its only activity in this region.
Balfour Beatty’s cost efficiency programme, started in 2010, achieved £36m of savings in 2012 at a non-underlying cost of £61m, the company said. The UK construction business has been reorganised into three business streams and 75 offices are being cut back to just 37. The plan is in line to hit the target of £80m annual savings by 2015.
Chief executive Ian Tyler, who steps down at the end of this month, said of Balfour Beatty’s 2012 performance: “We have delivered a set of results for the full year that demonstrated resilience in underlying earnings and a stable order book in the face of continuing challenging conditions in the construction markets in the UK and USA. We have also made good progress in the implementation of measures designed to increase organisational efficiency and are on track to realise the anticipated benefits. Furthermore, our growth strategy of focusing on key market sectors and geographies is making headway, and is reflected in the continuing shift in our order book towards economic infrastructure.
“While we still believe that construction markets in 2013 will be challenging, our actions to date and ongoing strategic focus on growth markets position us well for the medium term.”
Group results
|
(£m unless otherwise specified) |
2012 |
2011 |
Change (%) |
|
Revenue |
10,896 |
11,035 |
-1 |
|
Group revenue |
9,483 |
9,494 |
-- |
|
Profit from continuing operations |
|||
|
- underlying |
309 |
331 |
-7 |
|
- reported |
74 |
243 |
-70 |
|
Pre-tax profit from continuing operations |
|||
|
- underlying |
310 |
334 |
-7 |
|
- reported |
75 |
246 |
-70 |
|
Earnings per share from continuing operations |
|||
|
- underlying |
35.0p |
35.5p |
-1 |
|
- basic |
6.5p |
26.7p |
-76 |
|
Dividends per share |
14.1p |
13.8p |
+2 |
|
Financing |
|||
|
- net cash before PPP subsidiaries (non-recourse) |
35 |
340 |
|
|
- net borrowings of PPP subsidiaries (non-recourse) |
(368) |
(332) |
Construction Services
The construction order book finished the year at £8.0bn, down 6% from a year ago. The most significant decrease was in the US, down 17% from the end of 2011. In the UK the order book was up 1%, with a significant shift from major works to smaller contracts. The order book for less profitable regional building and civils business was up 15% from the end of 2011 while the order book for more profitable major construction work dropped by 24%. UK revenue was down by 6% in the year, with most of the decline occurring in the second half. Based on the order book profile, construction revenue is expected to fall 20% in the UK this year, Balfour Beatty said.
Mr Tyler attributed the reduction in profitability of the UK construction business not just to lower margins in the regional business but also to "delivery margins being impacted by rising subcontractor defaults".
He added: “We continue to believe that 2013 will be a difficult year for Construction Services notwithstanding the benefits of the cost reductions we are achieving.”
|
Construction Services |
2012 |
2011 |
Actual growth (%) |
Constant currency growth (%) |
|
Order book (£bn) |
8.0 |
8.5 |
-6 |
-4 |
|
Revenue (£m) |
6,959 |
7,050 |
-1 |
-1 |
|
Profit from operations (£m) |
122 |
169 |
-28 |
-28 |
|
Margin (%) |
1.8 |
2.4 |
Professional Services
The Professional Services division improved its order book by 5% despite uncertainty in the USA where it generates half of its revenue. Strong growth in the rest of the world, particularly Qatar and Canada, contributed to revenue. Performance was mixed in Australia, with a revenue decline in transportation offset partly by growth in mining. The UK remains a difficult market, but recent restructuring has improved financial performance.
|
Professional services |
2012 |
2011 |
Actual growth (%) |
Constant currency growth (%) |
|
Order book (£bn) |
1.6 |
1.6 |
+5 |
+9 |
|
Revenue (£m) |
1,668 |
1,645 |
+1 |
+1 |
|
Profit from operations (£m) |
98 |
87 |
+13 |
+12 |
|
Margin (%) |
5.9 |
5.3 |
Support Services
Support Services order book improved by 12% from the end of 2011 to £5.7bn. Order intake was particularly strong in power, which ended the year with its order book up 65% from the start of the year. Revenue was up 3% at £1.63bn, with a 24% increase in the power sector.
A reduction in profits to £52m (2011: £67m) was attributed to start-up costs on new contracts and £10m of one-off cost increases on a small number of power sector contracts in Australia and New Zealand in the first half of the year. Second half profitability was in line with that in the same period in 2011.
|
Support Services |
2012 |
2011 |
Actual growth (%) |
Constant currency growth (%) |
|
Order book (£bn) |
5.7 |
5.1 |
+12 |
+12 |
|
Revenue1 (£m) |
1,633 |
1,584 |
+3 |
+3 |
|
Profit from operations2 (£m) |
52 |
67 |
-22 |
-22 |
|
Margin2 (%) |
3.2 |
4.2 |
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