Firm says green light for £56bn railway would “significantly” improve its outlook
Balfour Beatty is the latest firm to admit it has not yet counted work on HS2 in its order book because it doesn’t know whether the scheme will go ahead.
The firm is lined up for £1.7bn worth of deals on the £56bn railway, including the stalled station at Old Oak Common in west London and tunnelling and viaducts work, known as Lots N1 and N2, on the route near Birmingham.
The country’s biggest contractor is working with Vinci on the schemes which have an overall value of £3.5bn.
But it said Lots N1 and N2 will only be included in its order book with the final signing of the main civils works contracts, now expected by the end of this year.
Last month, the world’s largest geotechnical contractor, Keller, said it too wasn’t counting HS2 as confirmed business because of uncertainties surrounding the scheme.
In May, Balfour Beatty warned that ongoing delays to work on HS2 could see the firm forced to lay off staff before they have even had the chance to work on it.
In an improved set of interim results for the six months to June, Balfour Beatty said its markets “remain favourable” but admitted: “Decisions to proceed with HS2 and Heathrow expansion would significantly improve the outlook.”
New prime minister Boris Johnson has ordered a review of HS2 while he has previously said he is opposed to the expansion of Heathrow and during his time as London mayor proposed a rival alternative – an airport in the Thames Estuary dubbed Boris Island.
Elsewhere, the firm said it had “gone beyond the legacy issues of forced growth” which saw chief executive Leo Quinn (pictured) inherit dozens of problem contracts when he joined at the beginning of 2015.
Its biggest business, construction, turned in an underlying profit of £45m, up 41%, while operating margins at its UK arm tripled from 0.5% to 1.7% with Balfour expecting full year margins here to be between 2% and 3%.
Turnover at construction was up 5% to £3.1bn with its UK business, which is carrying out smart motorway work on the M4 and M6 and recently won the next phase of the £375m Lewisham Gateway residential scheme in south-east London, accounting for just over £1bn of revenue.
Balfour Beatty said it had submitted an action plan which had been accepted after being booted off the Prompt Payment Code earlier this year. But it warned that “it operates in a sector where supply chains and contractual terms are complex and prompt payment is often materially impacted by resolution of disputes”.
The firm said it had a “sector-leading” balance sheet with net cash at the half year increasing to £425m with average net cash for the first six months at £290m. It said this would rise to £280m to £300m at the year end, an average £50m higher than its previous estimate.
Group revenue in the half year was flat at £3.8bn but pre-tax profit was up 28% to £63m.