Last Updated May 18th 2023
Balfour Beatty plc
Balfour Beatty is one of the UK’s largest contractors with a global business spread which generates a turnover approaching £9 billion. Styling itself an “international infrastructure group”, the company has recovered from heavy losses in 2014 and a ‘build to last” transformation programme over recent years under chief executive Leo Quinn is yielding positive results.
In common with other majors in the sector, the group reported a marked improvement in profits in 2022 and showed a healthy balance sheet with net cash of £815 million together with a promising long term outlook, focused on its core markets in the UK, US and Hong Kong. The group employs 25,000 people.
The group”s order book stood rose 8% to £17.4 billion, boosted by an increase in its UK construction order book. Around 95% of the group’s UK construction revenue was from clients in the public sector and regulated industries.
Today, Balfour Beatty is well-placed to take advantage of expanding infrastructure sectors, particularly HS2, wind power, energy efficient buildings, carbon capture and new nuclear, highways, airports and rail electrification. Whilst the infrastructure market is positive, the group has become more selective with increased bid margin thresholds, improved risk frameworks and improved contract governance.
Unveiling the group”s results in spring 2023, Leo Quinn said: “We believe that Balfour Beatty’s unique capabilities and the positive outlook in its chosen markets will enable it to deliver ongoing profitable managed growth.”
Financials
To view the financials for Balfour Beatty Plc.,visit Companies House and use Company ID 00395826.
Balfour Beatty has recovered well from the pandemic and now enjoys a solid financial position with a healthy order book and some strong market positions at home and overseas. In 2022, pre-tax profit rose to £291 million from £187 million previously on a turnover of £8.93 billion, up from £8.3 billion. Underlying profit from operations rose to £279 million from £197 million. The balance sheet remained strong, underpinned by its £1.3 billion investments portfolio. At end-2022, the group”s net cash balances stood at £815 million, up from £790 million although it also had £242 million of (non-recourse) borrowings. The dividend rose to 10.5p from 9.0p and a further £150 million share buy-back was announced.
Construction Services
Today, the group”s UK construction business is organised into two units: Major Projects, covering major complex projects in sectors such as transportation, heavy infrastructure and energy and Regional, covering civil engineering, ground engineering, M & E (through Balfour Beatty Kirkpatrick) and building and integrated civil and building services. Over 90% of the group’s UK order book is on lower risk target-cost or cost-plus contracts.
Underlying revenues at the group”s construction division rose to £7.48 billion in 2022 from £6.75 billion previously. The year saw US construction revenues grow to £3.65 billion and turnover at its Hong Kong-based jv business Gammon rise to £1.07 billion. Meanwhile its UK construction revenues rose to £2.763 billion from £2.6 billion previously and reflecting higher revenues from HS2 and Hinkley Point C which offset reduced regional volumes. The group”s total construction order book rose stood at £15 billion, up from £13.6 billion.
After a dip in 2021, Balfour”s UK order book climbed to £6.1 billion from £5.6 previously mainly for public sector and regulated-industry clients. The UK construction arm returned to the black in 2022 with a profit of £59 million – giving a margin of 2.1% – compared to a £2 million loss previously.
In January 2023, Balfour Beatty was awarded a £1.2 billion contract by National Highways to deliver the ‘Roads North of the Thames’ package of works for the proposed £1.2 million Lower Thames Crossing.
BB is a major contractor on a series of innovative frameworks such as SCAPE, Crown Commercial Services and NHS Shared Business Services. On regional work Balfour Beatty has been appointed sole contractor to both the SCAPE Civil Engineering framework covering England, Wales and Northern Ireland worth up to £3.25 billion and the SCAPE Scotland Civil Engineering framework worth up to £750 million.
In spring 2023, Balfour secured two coastal defence schemes worth a combined c.£97 million for Denbighshire County Council in Wales through the SCAPE Civil Engineering framework. Early in 2023, the group also won a £90 million contract from Fife College for the design and construction of a new learning campus in Dunfermline.
The group also has significant work awards which have yet to be included in its order book including the £1.2 billion Lower Thames Crossing project and a seven-year, £297 million contract for highways maintenance in East Sussex along with the $222 million Jacksonville International Airport terminal project in Florida.
On HS2, a Balfour Beatty VINCI 400-strong tunnelling team marked a milestone in spring 2023 when it broke through the wall of the Long Itchington Wood Tunnel in Warwickshire.
Key projects in the pipeline in the energy sector at Balfour Beatty include an agreement with Aker Solutions in late 2022 to deliver design and construction solutions for the concrete floating and gravity-based UK offshore wind industry an agreement with Holtec Britain and Hyundai for the construction of Holtec’s SMR-160 pressurised light-water nuclear reactors in the UK.
Overseas Construction
In the group”s key US market, Balfour had revenues of £3.65 billion and reported an underlying profit from operations of £58 million in 2022. The group”s US business has a high level of work awarded but not included in the order book. At end-2022, the order book stood at £6 billion, up from £5.4 billion and around 80% of the group”s US business is on building and 20% on civils.
Key recent contract wins have included Fort Meade, a $700 million design-build contract for a federal building in Maryland, which includes a multi-storey 858,000 sq ft facility plus a 1.2 million sq ft parking garage.
Meanwhile, in Hong Kong and Singapore, Balfour Beatty”s share of underlying revenue at its Gammon jv rose by 32% to £1,068 million driven by more civils work – including a terminal expansion at Hong Kong airport – and underlying profits rose 7% to £32 million although margins came under pressure. The group”s share of Gammon”s order book rose 12% to £2.9 billion. Recent contract wins at Gammon include a HK$2.6 billion contract for Mandarin Oriental Hotel Group to construct an A-grade office building. Meanwhile, Gammon is set to benefit from more infrastructure projects planned in Hong Kong and an expansion of the rail network.
Support Services
Although revenues at the group”s support services business fell by 7% to £989 million in 2022 – reflecting its exit from the water and gas sector – profits beat expectations £83 million which gave a margin of 8.4% and the order book dipped slightly to £2.4 billion.
The business has refocused on recurring long term contracts in the growing power, plant road and rail maintenance sectors, where the prospects are bright in the UK. The RIIO-T2 spend period (2021-2026) in power includes £30 billion for investment in energy networks and potential further £10 billion on green energy projects.
Meanwhile, BB is well placed for more local authority road maintenance contracts where a five-year £2.7 billion scheme for road patching has increased local council budgets. Last year the group won contracts in Bucks and East Sussex.
Meanwhile, the group”s rail maintenance business should benefit from an extra £10 billion of funding for maintenance and renewals through Network Rail’s current CP6 control period (2019-2024).
Infrastructure Investments
The group”s expertise in financing, developing, building and maintaining infrastructure puts it in a strong position on new investment opportunities and the group is focused on the private rental and student accommodation sector in the US and UK and US public private partnership projects. Profit from operations at the group”s infrastructure investment arm rose to £81 million in 2022, up from £41 million previously.
Glenigan Data
Glenigan data shows that Balfour Beatty ranked as the 3rd largest major UK contractor in the year to March 2023 with 47 significant contracts worth £2145.9 million split between building (£547.8 million) and civils (£1598.0 million).
Regional figures from Glenigan also show that Balfour Beatty ranked as a significant contractor in various key areas across the in the year to March 2023, notably the East Midlands (2nd largest, with contracts worth £225.3m); the East of England (largest, contracts worth £1272.1m); Scotland (5th largest, contracts worth £139.8m); South East (6th largest, contracts worth £244.1 million) and Wales (3rd largest, contracts worth £127m).
Conclusion: A major force in infrastructure at home and overseas
Balfour Beatty saw some turbulent times in the last decade but having largerly recovered under new CEO Leo Quinn, the group is maintaining its momentum. Whilst its more selective approach is paying off, Balfour”s £17.4 billion order book continues to include some of the country”s largest infrastructure projects – notably on HS2 and Hinkley Point C – and major building schemes. Today, it has a healthy workload in the highways sector and in promising areas such as rail and energy as well as retaining places on key public sector frameworks. It is also making headway overseas, particularly in its chosen markets in the US and Far East. Today, with few remaining legacy contracts, the group is set to remain a significant force in UK construction and infrastructure.
Winning work with Balfour Beatty
Balfour Beatty spend two thirds of its revenues in procuring goods and services from suppliers and the group”s approach and details on its supply chain can be found here on the home page of its website.
Numerous points of contact for the group’s main UK subsidiaries such as Balfour Beatty Construction and Balfour Beatty Civil Engineering are available on the Glenigan website.
Its philosophy for working with suppliers highlights: safety and sustainability; sharing information; recognising and rewarding high performance; encouraging innovation, learning and teamwork; continuous measurable improvement in service as well as trust, integrity and open communication. The group has a Supplier Code which provides a framework for decision-making.
Key Contacts
Mick Jennings, Regional Head of Procurement & Supply Chain – London & SE at Construction Services Division of Balfour Beatty
Email: mick.jennings@balfourbeatty.com
Telephone: 0121 701 2020
Matthew Munn, Head of Supply Chain Management Balfour Beatty
Email matthew.munn@balfourbeatty.com
Telephone: 0121 701 2020