Carillion’s collapse gives Balfour Beatty a leg up
British construction group says it won more business following bankruptcy of low-price bidder as it reports a nearly 10% jump in full-year profit
British construction group Balfour Beatty said on Wednesday it won more business following the collapse of Carillion as it reported a nearly 10% jump in full-year profit.
The bankruptcy of Carillion in January 2018 was seen as a watershed for Britain’s construction sector that ended a race to the bottom in terms of pricing of bids for public sector work.
“We have benefited in our order book from Carillion’s collapse but that’s a function of us being a higher-quality company and the low-price bidder not being there in the market anymore,” said CEO Leo Quinn.
Shares of Balfour Beatty rose nearly 3% to 293.1p in early-morning trading, outshining the broader midcap index.
“Leo Quinn has successfully proven that revenue is vanity and profits are sanity,” said George Salmon, equity analyst at Hargreaves Lansdown.
But he added that the downfall of Carillion is a constant reminder of how little room for error there is in the industry.
That point is underlined by the plight of support services group Interserve, the shareholders of which will vote on Friday on a debt-for-equity swap.
Quinn launched a turnaround plan after taking over at Balfour Beatty in 2015, his efforts chiefly involving a sharper focus on winning higher-margin projects in its markets.
The company, which builds transportation, power and utility systems, attributed the rise in 2018 profit to its turnaround plan and its more selective approach to contracts.
Underlying pretax profit climbed to £181m for 2018 from £165m a year earlier, the company said, adding that margins in the US and the UK came in above its target in the second half of the year.
The FTSE 250-listed company said its order book rose 11% to £12.6bn at the end of 2018.
Quinn said the impact of Brexit on its operations would be minimal since it is a local business, but it has contingency plans in place to ensure it can continue to deliver on current and future work commitments.