Balfour Beatty reports profits fall 78%

Cracks in the British foundations of Balfour Beatty resulted in a 78% hit to pre-tax profit for the construction giant that built the London 2012 aquatics centre.

In 2013, the 105-year-old group made just £32 million from bumper revenues of more than £10.1 billion — a margin of 0.3%, miniscule even in an industry notorious for its slight profits.

Many investors were unwilling to don hard hats and endure the fallout, as shares fell nearly 6%, dropping 18.8p to 302.6p.

Although Balfour Beatty is a global business operating in more than 80 countries, it was the core domestic UK market that led to the company’s undoing last year. Among its many one-off hits was a £26 million charge for restructuring its UK Construction Services arm. Last April, the industry veteran Nicholas Pollard was drafted in to sort out the problems in the division. His management team reviewed all operational contracts and improved basic disciplines such as estimating costs when bidding for work; the second half of 2013 saw a substantial financial improvement on the first six months.

Group chief executive Andrew McNaughton pointed to “improving conditions” in US and UK markets but said the benefits will “take time to feed through fully” into the group’s finances. Moreover, there are still inflation risks and financial pressure on Balfour Beatty’s sub-contractors.

At least investors were not hit by a decrease in their dividend payout, which remained flat at 14.1p.