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Consultancy work boosts Balfour Beatty

Balfour Beatty’s acquisition of Parsons Brinckerhoff (PB) saved the firm from a sharp drop in turnover last year, according to figures published last week.

Revenue increase

The contractor reported a modest 2% increase in revenue to £10.5bn in its full year results for the year to 31 December 2010.

But this was heavily reliant on turnover from acquisitions like Parsons Brinckerhoff, which made up for a fall of 11% in revenues from businesses Balfour Beatty already owned.

This 11% fall was caused largely by weakness in construction markets in the UK and the United States, it said.
Group pretax profit was up by 20% to £319M, lifting operating margins to 3.2%. This too was largely due to the consolidation of the higher-margin PB business.

Further margin increase planned

Balfour Beatty chief executive Ian Tyler said he hoped to increase margins further next year.

“After a year of integration we should lift our margin from a historic level of 4.5% to 6%,” he told analysts, adding that this would come through “improved staff utilisation, cost savings, better integration with the group, and the leveraging of PB’s capability”.

Tyler added that the firm planned to sell £200M to £300M of PFI assets to free capital for investment in new projects. “We will be acting increasingly as a developer,” he said. The firm is in the process of setting up a funds management business.

‘Good medium-term opportunities’

Tyler said he expected the global infrastructure market to offer good medium term opportunities.

“In the UK we have seen an unparalleled reduction in government investment. The US is equally challenging.
“But the growth in global infrastructure to is set to create £22trillion of work between 2010 and 2020.

“We are going to maintain our UK market leadership and build on our presence in the US, Canada and Australia. We will also develop our capability in water and power, including nuclear and renewables,” he said.

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