Construction group dragged down by mounting cost of contracts vows to tackle ‘legacy of problem projects’

This article is more than 5 years old

This article is more than 5 years old

Construction group Balfour Beatty has warned it faces “major short-term challenges” after slumping to a £304m loss and scrapping its dividend.



The firm’s chief executive, Leo Quinn, said a dose of “self help” would be needed to lift the company out of a troubled period marked by a string of profits warnings.

Balfour has been blighted by the mounting costs of its contracts, following a period of rapid expansion since 2000 when it bought up other companies without properly integrating them.

Quinn – drafted in to turn the company around in January – said that by the time the financial crisis plunged the industry into a major downturn, the company was too complex, with weak controls over costs and project bidding.

“Over the next two years we should work through the severe legacy of problem construction projects,” he said. “However, in tackling the cultural change required to ensure these issues are behind us, we face major short-term challenges. The key is that we are determined to address this through self help.”



Balfour’s projects include a contract to convert London’s Olympic stadium into a multi-use venue which will host five 2015 Rugby World Cup matches before becoming the permanent home of West Ham United football club.

The company’s pre-tax losses widened to £304m in the year to 31 December 2014, from £49m a year earlier. Revenue was roughly unchanged at £8.8bn.

The company will not pay a final dividend to shareholders, but expects to reinstate the payout by March 2016. It had already shelved plans for a £200m-plus share buyback.

Shares rose 6% to 245p despite the losses and challenging outlook.

Alastair Stewart, analyst at Westhouse Securities, described the statement as “very messy”.



“Even with serious management efforts, we believe it will take at least another year before there is a reliable balance of investment risk and reward,” he added.

Quinn said Balfour was hoping to rapidly improve performance by restoring operational and financial discipline and simplifying the organisation.

The plan over the next two years is to improve operating cash flow by £200m and achieve £100m of cost savings compared with 2014 levels.