Balfour Beatty's UK construction revenue has dropped 9% in the half year to 26 June 2010, compared to the same period a year ago, due to the completion of several large projects and volume reductions in its regional businesses.
But the global construction group still posted impressive results overall, with pre-tax profit up around a quarter at 拢81m (H1 2009: 拢65m), and revenue climbing marginally to 拢5.2bn (H1 2009: 拢5.1bn).
Balfour Beatty's order book has increased 4% to 拢14.6bn (拢14.1bn) at December 2009).
Its cash position looks strong at 拢500m, compared to 拢394m a year ago.
The half-year results include an exceptional loss of 拢18m (2009: 拢22m loss), including 拢11m relating to the integration of Parsons Brinckerhoff.
The pension deficit has increased to 拢629m before tax.
Balfour Beatty said it has been evaluating additional levels of cost efficiency through procurement savings and a support centre which would be responsible for managing accounting services and payroll processes to the Group's UK construction services and support services businesses.
This is expected to deliver benefits of at least 拢30m a year, though the one-off costs of implementation are approximately 拢25 million in 2010/11, plus around 拢10 million in additional IT investment.
Operations
Balfour Beatty's Construction Services business delivered a 17% increase in operating profit, before exceptional items and amortisation, to 拢83m (2009: 拢71m), despite a decline in revenue to 拢3.3bn (2009: 拢3.8bn).
The biggest reduction in revenue was in the US, where revenue declined 22%. In the UK, turnover dropped 9%, with the completion of large hospital projects affecting the building and mechanical and electrical businesses, along with reductions in the regional building business, which were only partially offset by continued growth in the civil engineering businesses.
In the Middle East, there was a significant reduction in total revenue, due to significant reductions in the Dubai building and civil construction markets, though the M&E business delivered strong profit.
The order book for construction services stands at 拢8.5bn, an increase of 4%.
In Professional Services, Balfour Beatty was able to include a full six months' contribution from Parsons Brinckerhoff, which it acquired last year, for the first time. Following the integration of Balfour Beatty Management and Heery with PB, the group's professional services business comprises 14,000 people working on infrastructure projects in over 80 countries.
Revenue in the six-month period was 拢829m, including 拢710m from PB.
Profit from operations, before exceptional items and amortisation, increased by 拢43m to 拢49m (2009: 拢6m), including a six-month contribution from PB of 拢35m.
Support Services experienced a sharp fall in operating profit, before exceptional items and amortisation, to 拢21m (2009: 拢28m). This was due to the investment in a national operations centre set up to support external facilities management customers and a slow start-up to AMP5.
Revenue increased by 1% in the period to 拢735m (2009: 拢726m), with growth in facilities management and business services outsourcing offset by a reduction in rail renewals and the slow start to AMP5 contracts in the water sector.
The order book for support services was flat at 拢4.5 billion (December 2009: 拢4.5bn).
Outlook
Looking ahead, Balfour Beatty's trading statement said: 鈥淏alfour Beatty is uniquely well-placed in major markets to benefit from the long-term, global growth in investment in infrastructure. While the timing of short-term movements in individual markets is difficult to predict, the Group now has significant capabilities across the infrastructure lifecycle and operates in diverse markets and geographies, which gives the business strength and resilience.
鈥淭he Group has a high-quality order book of 拢14.6bn at June 2010 and a number of opportunities in the second half of the year. This, along with the actions taken and proposed to drive efficiency, means the Group is well-positioned to manage any challenges in individual markets. Our continuing progressive dividend policy reflects our confidence in the Group's ability to deliver growth over the medium term.
鈥淥verall, we remain confident about the outlook for the Group.鈥�
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