The fall was caused by the sale of the group's loss-making cables businesses earlier this year and subsequent restructuring.
However, a joint operating profit of £54m was made by construction arm Balfour Beatty, private finance initiative arm Capital Projects, building management control specialist Andover Controls and data cable business Brand-Rex in the first six months of 1999. This was 23% up on the 1998 first-half result of £44m.
Despite this, one analyst said: "The City will remain cool about BICC until the next six months' figures are out. Balfour Beatty is well respected, but the water's still muddy at BICC." Balfour Beatty made an operating profit, before exceptional items, of £36m, thanks to a more selective bidding policy that led to increased margins. A BICC spokesman said: "Sales have remained flat, but margins have improved significantly." Balfour Beatty has a 33% share of the rail maintenance market and, despite reduced margins in the sector, the spokesman said it remained a core activity for the firm.
"Margins on rail maintenance are declining, but we expected that as part of privatisation," the spokesman said. "Margins are still better in rail than in UK construction. We think it will be a growth area," he added.
Capital Projects also reported improved profit, from £5m to £13m.
Sales have remained flat, but margins have improved significantly
BICC Spokesman
"Profits are up because building work has now been completed and we are starting to earn money on projects. The PFI is an area of the market we will concentrate on. The good thing about PFI is that you get substantial construction contracts, a good return on the initial investment and also get to pick up the maintenance and asset management contracts," said the spokesman.
However, he added that the number of major construction projects in the UK and abroad was declining. "There are just no big projects around any more, apart from rail – particularly as the Asia-Pacific market has had so many big projects postponed." He added that there would be "a slimming-down" of management staff as the company continued its restructuring programme.
Overseas, its US civil engineering arm continued to perform well, enjoying an increased turnover of £180m, making it the 11th biggest US civil engineering contractor.
The spokesman said BICC expected its US operation to continue to expand. "It's growing fast and the margins are good," he said.
BICC had to offset £408m against the sale of its cables businesses. This included a £295m goodwill charge that the company paid in addition to the asset value of the cable companies when they purchased them in the 1980s.
