Balfour Beatty’s order book has increased  7% to £12.4 billio, according to its interim results for the six months ended 1^st July 2016 published today.

Underlying profit before tax of stands at £7 million, compared to a £130 million loss for the same period in 2015 -however, underlying revenue  at £4.024 billion is down 6% compared to 2015.

Underlying revenue from continuing operations, including joint ventures and associates, (underlying revenue) declined by 1% (6% at constant exchange rates - CER) in the first half to £4,024 million (2015: £4,085 million) as a result of a more disciplined and selective approach to bidding introduced in 2015. Within this, Construction Services was flat (5% decline at CER) at £3,177 million (2015: £3,177 million) as growth in the US offset an expected decline in the UK. Support Services, as expected, declined 11% in the period due to the phasing of contract and regulatory cycles.

Balfour Beatty said its Support Services division had performed well, with profitability rebounding to more normalised levels compared to the prior year. Underlying revenue in the period declined, as expected, to £548 million (2015: £615 million), due to the phasing of contract and regulatory cycles. Revenue in the utilities business reduced by 3% to £291 million, whilst the transportation business declined by 18% to £257 million. Underlying profit from operations increased to £11 million (2015: £4 million). The order book increased by 6% in the first half to £3.3 billion (FY 2015: £3.1 billion), due to good growth in transportation whilst utilities was flat.

The Support Services segment comprises transportation and utilities businesses. Utilities operates across power transmission and distribution and the gas and water sectors. Transportation operates across rail, highways and managed road schemes for local authorities.

Underlying profit from operations increased to £11 million (2015: £4 million). The margin improved to 2.0%, from 0.7% in the first half of 2015 compared to a 1.9% margin for the whole of 2015.

Utilities revenue reduced by 3% to £291 million, as an expected reduction in Power was only partially offset by growth in Gas and Water. Volumes in Power were lower due to the completion of a number of projects in 2015, particularly in overhead lines, and as several long-term contracts approach completion, such as the Electricity Alliance East for National Grid. Gas and Water revenues increased slightly as new contracts under the AMP 6 regulatory cycle were mobilised, with further volume increases expected in the second half. The order book remained stable in the first half, following an extension to the gas transmission and distribution contract for Bord Gais, in Ireland, through to 2020

In its Construction Services division, underlying revenue of £3,177 million was flat (5% decline at CER) compared to the first half of the prior year (2015: £3,177 million).

The revenue growth by region was largely reflective of order book changes in the prior year and foreign exchange movements, as a decline in the UK due to more selective bidding was offset by an increase in the US. Revenue in the US increased by 10% (1% at CER) in the first half due to foreign exchange; whereas revenue in the UK declined by 23% reflecting the 17% decline in the order book in the prior year, as the business became more selective in the work it bid.

Underlying loss from continuing operations was £60 million (2015: £209 million), as losses in the UK more than offset a return to profitability in the US. The losses in the UK are substantially lower than the prior year, but Balfour Beatty said profitability continues to be impacted by the historical contracts which are still being traded through to completion.

Brexit - little impact on Balfour Beatty's markets to date

Commenting on Brexit, Balfour Beatty said:

“As yet there is little sign of impact on Balfour Beatty’s markets from the UK’s decision to exit the European Union and, given the late cycle nature of the construction industry it is too soon for clarity as to what, if any, direct impact the decision will have.”

In July Balfour Beatty published its Infrastructure 2050 paper setting out its views on the long-term infrastructure requirements for the UK and how they can be met. Balfour Beatty has called on the UK Government to minimise uncertainty and recommit to major projects such as the High Speed 2 rail project, Highways England investment programme, South East airport expansion, new nuclear build and flood defences over the medium term.

Commenting on the results, Leo Quinn, Group Chief Executive, said:

 “We are now starting to see tangible benefits from the transformation of Balfour Beatty."

 “Eighteen months into the first phase of Build to Last we have delivered our second successive half of underlying profitability and remain on track to achieve our initial targets of £200m cash in: £100m cost out. By concentrating on our selected markets, we are growing our order book within a control environment which ensures that our business decisions lead to sustainable profit and cash growth."

 “We have maintained a strong balance sheet and expect Balfour Beatty to make further solid and measurable progress. As a result we are able to reinstate the dividend as planned."

“By the end of 2016 we will have successfully completed Phase One. Over the following 24 months, I am confident we can reach industry-standard margins and then build on the foundations Build to Last has put in place to deliver a Balfour Beatty with marketleading strengths and performance over the longer term.”