US and Asian construction operations turned a profit

Balfour Beatty’s UK construction business has suffered a £23m loss in the first half of the year.

The UK’s biggest contractor said it was hit by problems on a number of fixed-price residential projects in central London – and as a result would pull out of the sector. One problem with cladding on a high-rise project could cost £50m to put right.

It said disruption caused by the pandemic had caused delays, which had forced the firm to write down its expected profit on them, leading to a £23m underlying operating loss for the division.

Balfour Beatty

The firm paid back the £19m it was handed from furlough

It said: ”Balfour Beatty will no longer bid for fixed-price residential property projects in central London.”

The firm also flagged up that it could be required to cough up for remedial works on another high-rise project in London, which was completed in early 2016.

It said: ”In June 2021, an initial structural expert assessment was received which indicated that the stone panels affixed to the façades will need to be modified, reinforced or replaced to meet performance requirements.”

Balfour said it was unable to say with any reliabilty exactly how much the work would cost it but that it could be as much as £50m. 

The firm also paid back £19m it received from putting staff on furlough in the early part of the pandemic.

It added that while its order book, which more than doubled in 2020 from £3bn at December 2019 to £6.4bn at December 2020 following notice to proceed on HS2, was relatively flat in the first half of the year at £6.2bn.  

At half year, 90% of the UK construction order book was from public-sector and regulated industry clients. 

Overall the firm’s profit for the first half of the year steadily recovered from the covid-19 pandemic – with its half-year results from last year the first time the firm had been in the red for four years.

Pre-tax profit for the period jumped from a £26m loss for the same period last year to £35m in the first half of 2021.

Shareholders were handed an interim dividend of 3 pence per share. The company purchased £99m of shares through a buyback programme launched this year.

Turnover was marginally up in the first six months of the year, increasing to £4.15bn from £4.12bn in the same period last year.