Construction giant Balfour Beatty has announced that the company made a pre-tax loss of £24m in the first six months of 2020 – with COVID-19 the driving force behind the firm’s struggles.
Balfour Beatty’s underlying first half revenue rose 6% to £4.1bn thanks to a strong performance in US Construction. The group made an underlying loss from operations of £14m, compared with a £72m profit in the same period last year.
However, 2019’s interim pre-tax profit of £63m became a £24m pre-tax loss for 2020. At an operating level, the loss was £16m.
Balfour Beatty’s UK Construction projects recorded an underlying loss from operations of £23m (compared to £17m profit in 2019) on £986m revenue.
Group chief executive Leo Quinn said: “Since the COVID-19 crisis broke, our mission has been to safely manage through it while protecting the group’s strengths. That meant balancing the needs of all our stakeholders. We have kept sites open wherever safe to do so, prioritised supply chain payments and supported staff. Our people’s response has been outstanding, working tirelessly whatever the challenge, to enable Balfour Beatty to provide the daily infrastructure relied on by the public.
“We have preserved the disciplines, expert capability and financial strength we will need as markets move back to normal and then beyond, driven by fiscal stimulus for infrastructure. In achieving this, our systems, processes and leadership have all proved the value of our investments over the last five years.
“The financial impacts of COVID-19 are unavoidable – but they will pass. We look forward with confidence to returning to profitable managed growth, and to delivering ongoing value for all our stakeholders.”
Assuming the group’s markets recover as anticipated Balfour Beatty expects operating profit to recover through the rest of 2020 and to be in line with 2019 in 2021. The board will look to re-establish the dividend when appropriate.
The shares fell 4.1% in early trading.
William Ryder, Equity Analyst at Hargreaves Lansdown comments: “Pandemic related disruption has pushed Balfour Beatty into loss making territory, and given the razor thin margins construction groups tend to operate on this isn’t that surprising. The group expects profits to recover over the next 18 months or so, and that seems like a reasonable timeframe to us provided we don’t get much further disruption.
“We think governments are likely to react to the prospect of a sustained recession with some degree of infrastructure spending, which bodes well for Balfour Beatty. This should help balance against lower demand in the private sector, and if so the challenge will be profitably meeting demand in the age of social distancing.”