Chief exec Leo Quinn says firm’s problem UK construction division can return to 2-3% margins
The Balfour Beatty team behind the transformation of London’s Olympic stadium into West Ham United’s new ground has been moved on to preparatory work for the £1bn One Nine Elms twin tower project in the south of the capital.
Balfour Beatty chief executive Leo Quinn (pictured) told Building the team was now working on the high profile residential job, after handing over the renamed London Stadium to the London Legacy Development Corporation. The stadium’s main tenant, West Ham, will play its first home Premier League game at the 54,000-seat venue (pictured, middle) against Bournemouth this Sunday.
As revealed by Building last month, Balfour Beatty was awarded the first stage of a two-stage tender for One Nine Elms - which will rise to 42 and 58 storeys (pictured, bottom) - after an Interserve and Chinese builder joint venture failed to finalise terms with Chinese client Wanda One.
Quinn said the contract was “going very well” thus far and the firm had factored in satisfactory “margins and cash flow”. He added: “We’re building up an estimate with the customer that will move into a final contract if it suits both parties.”
Quinn argued the half-year results - which were dragged down by a £66m operating loss in UK construction - were nonetheless a sign of “real tangible progress”. He said: “After a pretty distressed 2013 and 2014 a lot of hard work has gone on. [These results] are a point of light from where we can hope to make progress in the second half of the year.”
Commenting on a £25m writedown caused by a “reassessment of potential liabilities on historical health and safety breaches” following the introduction of stricter sentencing guidelines earlier this year, Quinn said health and safety was the firm’s “number one priority”, but he felt the higher level of fines introduced was “excessive”.
Commenting on the higher level of fines, Quinn said: “It’s a very worrying area for the industry. If a small company of £50m turnover can be fined £5m for a single instance that could bankrupt the company.”
Commenting on Balfour’s struggling UK construction division, Quinn said he remained confident it would return to “industry-standard margins” of 2-3% by the end of 2018, noting that 81% of the problem jobs the firm had identified last year had now closed, with this set to hit 90% by the end of the year.
He said: “We’ve still got 19% [of the problem jobs] to go, and we can always be surprised, but we’ve got most of that behind us.”
Quinn highlighted Balfour’s improved financial position, with a net cash position of £115m and “one of the sector’s strongest balance sheets”, backed by investment assets worth £1.25bn.