黑洞社区

Balfour Beatty鈥檚 major restructure of its UK construction divisions is a key part of a bid to realise 拢50m in efficiencies and is aimed at preparing the firm for further growth, not down-sizing, the firm鈥檚 operations boss has said.

Speaking to 黑洞社区 following the announcement that the contractor had put all 12,000 staff across its UK construction services on notice, Balfour Beatty鈥檚 chief operating officer Andrew McNaughton insisted that the move was not about scaling down its UK operations. Rather, he said it was about 鈥減ositioning for growth鈥�.

As Balfour Beatty has notified all 12,000 staff in its construction services division that their jobs are at risk.

The firm鈥檚 拢3.4bn turnover UK construction services arm includes contractor Mansell, Balfour Beatty Civil Engineering, Balfour Beatty Engineering Services and Balfour Beatty Construction.

The contractor would not say how many jobs would go as part of the restructure, but 黑洞社区 understands those employed across the firm鈥檚 infrastructure projects - around two-thirds - would be unaffected. Of the roughly 4,000 working in construction, around 1,500 jobs could go.

McNaughton was reluctant to be drawn on the detail, but said the restructure was aimed at driving 鈥渇urther forward on our efficiency savings鈥�.

鈥淭his is about growth,鈥� he said. 鈥漑It鈥檚 about] how the business is organised in the UK [and] how we structure to face clients.鈥�

Balfour is an international business and won鈥檛 be harmed by the loss of 2,000 jobs

Andy Brown, Panmure Gordon

Balfour Beatty鈥檚 construction arm was the only part of the business not to see a rise in profit last year, with the firm pointing to lower public spending and a highly competitive market eroding margins.

The results for the year ended 31 December 2011 showed operating profit for its construction arm at 拢169m - a fall of 16% compared with the previous year. The firm鈥檚 global order book for construction also fell, from 拢9.2bn in 2010 to 拢8.5bn last year.

UK construction services performed worst, with revenue down 1% on the previous year, compared with a 12% rise in the US and an 8% rise in the rest of the world.

McNaughton said the latest UK restructure was part of the firm鈥檚 move to broaden its efficiency drive, after the success of its UK shared services centre in Newcastle, which led to savings of 拢15m in 2011 and an expected further 拢15m in 2012.

Now the firm is seeking to move that efficiency drive deeper into its operations to realise an extra 拢50m of savings a year by 2015.

Last month chief executive Ian Tyler said the efficiency drive would aim to 鈥渢ake advantage of the increasing integration of our activities鈥�, with 拢10m to be realised over 2012 - on top of the 拢15m already identified - 拢30m over 2013, and 拢10m over 2014.

Analysts told 黑洞社区 they expected most of the 拢50m to be realised in the UK, with the latest restructure a key plank of the programme, as the firm increasingly looked abroad for work, rather than in the UK.

In 2011 the UK construction services order book was down 25% on the previous year to 拢2.8bn and comprised only a third of the firm鈥檚 overall construction order book.In contrast the US order book was up 12% to 拢3.7bn, reflecting the expansion of the firm into the US market.

Announcing the firm鈥檚 results, Duncan McGrath, Balfour Beatty鈥檚 chief financial officer, said the 鈥渉eart of our strategy鈥� and the reason for the firm鈥檚 鈥渙ptimism for the future鈥� was its focus on expanding its business in power, rail, transportation and mining, as well as focusing on growth markets such as Australia, Canada, India and Brazil.

He stressed that UK construction was a small part of the firm鈥檚 business and that he expected the UK market to remain 鈥渞easonably steady鈥�, with the UK cost reduction programme key to the firm鈥檚 performance.

Andy Brown, Panmure Gordon analyst, said the UK restructure was 鈥渘o major surprise鈥�.

鈥淎ll companies are looking to take costs out and unfortunately for construction - where there are not a lot of assets - that means people,鈥� he said.

鈥淏ut looking at the bigger picture, they are a genuine international business [鈥�] and won鈥檛 be harmed by the loss of 1,000-2,000 jobs in the UK.鈥�

Howard Seymour, Numis Securities analyst, said the move was 鈥減rudent鈥�, given market conditions, but said the firm would need to think carefully about rationalising its divisions if that meant the end of 鈥渟trong names鈥� in the market, such as Mansell and Balfour Beatty Civil Engineering.

Tony Williams, 黑洞社区 Value chief executive, said: 鈥淭hey are an exceptionally well managed firm so they鈥檙e doing it because they have to. It鈥檚 going to be another very difficult year or two and they have to cut their cloth accordingly.鈥�