黑洞社区

Contractors should not diversify into markets fraught with risk, Balfour Beatty鈥檚 chief executive Leo Quinn has told 黑洞社区.

Quinn鈥檚 comments came after Balfour reported that its UK construction arm had posted a 拢2m profit in the first half of the year, compared to the 拢69m loss it piled up in the first six months of last year.

He said the country鈥檚 biggest contractor was returning to being a 鈥渕ore normal鈥� contractor which meant backing away from high-risk PPP projects.

He confirmed the firm was no longer actively bidding for energy to waste contracts 鈥� a market which has contributed to heavy losses at rival Interserve - and is now just working through its remaining contracts as that part of the business is wound down.

Quinn (pictured) said: 鈥淧PP鈥�is full [of] risk [鈥�] The crux of it is you shouldn鈥檛 be playing in areas you don鈥檛 necessarily understand or you don鈥檛 have the capability.

鈥淔or example, if I take energy from waste, we see a lot of our people reporting losses in this area. When you鈥檙e a construction company what do you know about process risk and all the implications of that?

鈥淚t鈥檚 getting ahead of yourself and its having an ambition beyond your ability to deliver. And that鈥檚 where it goes wrong. Right at the strategic level in that you shouldn鈥檛 even be playing there.鈥�

He admitted Balfour, which still has several energy to waste contracts, had found the projects 鈥渃hallenging鈥� and added: 鈥淢any of these things are legacy. They go back five years and even further and part and parcel of the challenge is you just have to work through these things.鈥�

But in its latest results, the firm said it was continuing 鈥渢o see significant opportunities for future investment in its chosen geographic markets in the UK and North America, including any potential development of a PF2 pipeline in the UK and the new administration鈥檚 proposed PPP infrastructure investment in the US鈥�.

Balfour on Wednesday posted improved results for the first half of 2017, including a pre-tax profit of 拢12m for the first six months of the year, which was more than the 拢10m profit it recorded for the whole of 2016 and up on the pre-tax loss of 拢15m for the first half of 2016.

The firm is also on course to achieve 鈥渋ndustry standard鈥� margins next year, Quinn said, adding that he was 鈥減retty confident鈥� Balfour would exceed those margins in 2019 despite Brexit and fears over hikes in materials and labour costs. 鈥淚t鈥檚 been a long time since we鈥檝e seen 2-3% margins,鈥� he said.

Quinn said Balfour was currently contracting through agreed target prices with clients with contracts that provide more of a 鈥�50:50 in terms of gain, pain. So if we make excessive profits we give half back. If we make excessive losses we only pay half of them [鈥�] it鈥檚 more balanced in the outcome.鈥�

He added the weakening pound against the euro was deterring foreign workers from coming to the UK. Traditionally, overseas labour has reaped the benefits of a strong pound when sending money back home.

鈥淲e do need a slightly stronger pound in our industry whereas manufacturing enjoys the benefits of the weaker pound,鈥� Quinn said.