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Balfour Beatty鈥檚 UK construction arm has slumped to a 拢317m operating loss for 2014, dragged down by problem jobs and dire results in its M&E division.

The UK construction division鈥檚 operating loss was up 16-fold on the previous year鈥檚 拢20m operating loss.

Balfour鈥檚 UK M&E division, known as engineering services, crashed to a 拢137m operating loss on just 拢183m of revenue, meaning it loss 75p on every 拢1 of business. This compared to a 拢11m operating loss on 拢212m revenue in 2013.

The engineering services loss was so great that Balfour reclassified a third of the business, accounting for 拢66m in revenue and an 拢88m operating loss, as 鈥渘on-underlying鈥�, meaning losses on these contracts will be reported separately by Balfour through to completion on the grounds they 鈥渄istort the underlying performance of the group鈥�, Balfour said.

Separating out the 鈥渘on-underlying鈥� engineering services contracts, Balfour鈥檚 UK construction arm reported a 拢229m operating loss, up 11-fold on a 拢20m loss the previous year, while revenue declined 6% to 拢2.35bn, down from 拢2.51bn.

The firm said it had made a further 拢118m writedown prompted by UK construction losses 鈥渇ollowing an assessment of the existing risk provisions by the board鈥�.

Balfour鈥檚 global construction services divison reported a 拢391m operating loss, compared to a 拢103m operating loss the previous year.

Setting aside all losses Balfour classed as 鈥渘on-underlying鈥� - including the UK engineering services losses and some overseas, including 拢53m of losses related to Rail Germany, which it is exiting - the global construction division reported a 拢209m operating loss compared to an 拢18m operating profit the previous year, on unchanged global revenue of 拢6.6bn.

Balfour鈥檚 US and Far East construction divisions were profitable - making operating profits of 拢29m and 拢12m respectively - and the Middle East made a 拢15m operating loss.

Balfour Beatty overall slumped to a 拢304m pre-tax loss for the year, compared to a 拢49m pre-tax loss in 2013, while revenue was 拢8.8bn, down marginally from 拢8.9m.

The firm said it made an after-tax loss of 拢59m - which includes finance costs and the impact of discontinued operations, and was a lower loss than it might otherwise have been thanks to a 拢234m gain from the sale of Parsons Brinckerhoff to WSP during the year - compared to a 拢25m loss the previous year.

The firm cancelled its final dividend payment for the year.

Balfour chief executive Leo Quinn (pictured) said the firm had 鈥渕ajor short term challenges鈥�. He said: 鈥淥ver the next two years we should work through the severe legacy of 鈥減roblem鈥� construction projects. However, in tackling the cultural change required to ensure these issues are behind us, we face major short-term challenges.

鈥淭he key is that we are determined to address this through self-help. Our transformation programme, Build to Last, is gaining rapid traction and we are driving initial improvements of 拢200 million cash in, 拢100 million cost out over 24 months. In addition, our Investments portfolio will provide the financial flexibility of both reliable income and the sale of maturing assets into a strong market.

鈥淚 remain convinced that all our operations can achieve industry-standard performance as markets improve. The real prize is a sustainable return to profitable growth, built on the Group鈥檚 unique capabilities, underpinned by leaner, stronger processes and flawless execution. Longer term we believe that as a leader in its core markets Balfour Beatty should be able to deliver superior returns to the benefit of its customers, employees and shareholders.鈥�

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