6th Mar 2014 08:53
LONDON (Alliance News) - Construction giant Balfour Beatty PLC Thursday reported a sharp drop in profit for 2013, as it was hurt by the reorganisation of its UK construction business and a significant downturn in the Australian natural resources sector.
In November, the company warned that its professional services business had seen further deterioration in Australia, in both volume and pricing. These issues have not subsided, the company said, and despite cost-reduction measures, the division saw profit decline.
The FTSE 250 company posted pretax profit of GBP32 million for 2013 compared with GBP147 million a year earlier, even though group revenue rose to GBP8.74 billion from GBP8.66 billion. Revenue including the company's share of joint ventures and associates rose to GBP10.12 billion from GBP9.97 billion in 2012.
Balfour Beatty said the UK construction market has been a challenging environment in which to win and execute work, "allowing clients to impose increasingly stringent conditions onto contractors, and as a result, placing subcontractors under significant financial pressure". In addition, the business underwent a major reorganisation during 2012 and 2013.
In construction services, a revenue improvement in the US and in the rest of the world was partly offset by a 12% reduction in the UK.
Revenue for the construction services division including from joint ventures and associates amounted to GBP6.57 billion compared with GBP6.51 billion, while underlying profit from continuing operations dropped to GBP21 million from GBP119 million in 2012. This decline was mostly due to the performance of the UK business.
The order book for the construction services division held steady at GBP7.72 billion compared with GBP7.37 billion a year earlier.
The support services division did better with revenue rising to GBP1.27 billion, from GBP1.15 billion, a a result of a strong performance in the power sector.
However, the support services order book for continuing operations finished at GBP4.11 billion down 11% from the GBP4.63 billion recorded in 2012.
"As expected, the order book has declined in the power sector as we have completed the first year of the GBP1.1 billion of contracts with National Grid to upgrade the UK's gas distribution network," the firm said.
Underlying earnings per share for continuing operations stood at 20.0 pence down from 31.7 pence, which along with an underlying loss per share from discontinued operations of 2.2 pence, down slightly from 2.1 pence, gave an underlying earnings per share for total operations of 17.8 pence compared with 33.8 pence in 2012.
Looking ahead for the Australian business, Balfour Beatty said it expects volume and pricing risks to remain, but for the business to improve on its 2013 performance and to deliver a broadly breakeven result in 2014.
"Overall therefore, excluding any benefit of the longstanding contract dispute, we expect to make progress in 2014 across the business, with margins improving progressively as the losses in Australia are eliminated," it said.
In the UK, Balfour Beatty said the number of new major infrastructure projects to be awarded in the short term is expected to be low, with a small number of significant opportunities expected to arise.
However it said: "Our overall UK strategy remains to exploit our market leading position, and to continue to drive efficiency and build our skills and depth of capability in construction to capitalise on a gradual recovery."
The board maintained its final dividend of 8.5 pence per share, resulting in an unchanged full year dividend of 14.1 pence.
The stock was down 5.9% at 302.41 pence in early trade Thursday, making it the second biggest loser in the FTSE 250.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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