Balfour Beatty Profit Plunges 70% on Weak UK and Australia Markets

Balfour Beatty's profit plunged 70% in the first half of 2013, when compared with a year before, after its Australian professional services and UK construction markets both took a hit.

The British infrastructure and services giant said public spending plans and project cancellations in Australia weighed heavily on profit, but it was taking action to ensure the impact did not carry through into the second half's results.

Its trading statement for the half year ending 28 June also blamed a weak economy, driven in large part because of a contracting construction sector as public contracts dried up in the government's spending cuts, pushed its UK construction business to a £41m (€48m, $63m) loss in the period.

Balfour Beatty said underlying pre-tax profit was £45m, down from £150m. Revenue dropped 3% to £4.97m.

"Our markets continue to be challenging, but our actions are delivering the intended results," said Andrew McNaughton, Balfour Beatty's chief executive.

"With sustained focus on operational delivery, we expect to achieve a performance in our continuing operations that is in line with the current market expectations for 2013.

"In the longer term, our goal is to capitalise on the growth in global infrastructure from an international footprint of local businesses. The benefits from this focus combined with the impending recovery in some of our mature markets position us well for the future."

The group's share price dropped over 1.5% in early trading to 246.25 pence.

Loss Making Activities

The firm has been trying to ditch its loss-making mainland European rail businesses because of a limited flow of new work. Its loss from the rail businesses grew to £18m in the first half, from £6m in the same period a year before.

Balfour Beatty said it had made good progress in disposing of the businesses in Germany, Scandinavia and Spain.

It has also sold its UK facilities management business, WorkPlace, to GDF Suez for £190m on a debt and cash-free basis.

The unit employs around 9,000 people and generated £481m of revenue in 2012, with operating profit of £21m.

WorkPlace provides various services to British people including hospitals, schools and local government establishments, complementing GDF Suez's Cofely business, which provides energy and technical services to the private sector.

The deal should be completed in the fourth quarter.