March 14, 2018 / 8:08 AM / 4 days ago

REFILE-UPDATE 2-Balfour Beatty sees UK construction industry mending its ways

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* Annual underlying profit rises 166 pct to 165 mln pounds

* UK construction business back in black

* Company more selective in contract decisions

By Radhika Rukmangadhan

March 14 (Reuters) - Britain’s Balfour Beatty reported a tripling of annual profit on Wednesday and said the construction industry was returning to health after the high-profile collapse of Carillion this year.

The demise of Carillion came after construction companies took on major contracts at thin margins, leaving them nursing losses in the event of delays or problems.

“Companies are starting to recover from what effectively was very low pricing in 2013 and 2014,” Balfour Beatty Chief Executive Leo Quinn told Reuters.

“I wouldn’t brand the industry like Carillion,” he added.

Underlying pretax profit for the infrastructure and building company rose to 165 million pounds ($230.4 million) in 2017, from 62 million pounds a year earlier.

“The business increased bid margin thresholds ... coupled with a lower risk profile, so that the group wins work at appropriate terms and conditions,” the company said in a statement.

Its UK construction business reported an operating profit of 16 million pounds last year, recovering from a 65 million pound loss in 2016.

Shares in Balfour Beatty were up 2.8 percent at 284.7 pence at 1010 GMT.


Balfour Beatty has overhauled operations, in a turnaround dubbed “Build to Last”, after losses at its British construction division led to multiple profit warnings.

As well as selecting contracts more carefully, Balfour Beatty has also narrowed its focus to Britain and Ireland, the United States and the Far East.

It has pulled out of the Middle East, another problem region for Carillion, Indonesia and Australia.

Its order book fell 8 percent to 11.4 billion pounds in 2017 and it said it saw a strong commitment from the British government towards the new high speed railway (HS2) project and Highways England road programmes.

The company said it was on track to achieve “industry-standard margins” in the second half of 2018, and added it will continue to sell assets in its infrastructure investments business.

One of Carillion’s joint venture partners on the Aberdeen Western Peripheral Route (AWPR) road project in northern Scotland, it took a one-off charge of 44 million pounds in 2017 due to Carillion’s liquidation. ($1 = 0.7161 pounds) (Reporting by Radhika Rukmangadhan in Bengaluru; Editing by Keith Weir)

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