Dive Brief:
- Balfour Beatty, based in London reported a drop in pre-tax profit to 244 million pounds ($312 million) for the full year 2023, down from 287 million pounds the previous year, a decrease of almost 15%.
- Chief Financial Officer Phil Harrison noted on a call with investors on March 13 that the impact was mainly in the company’s investment portfolio and pointed mainly to lower-than-expected earnings in divestitures.
- Despite the fall, revenue grew to £9.6bn in 2023, up from £8.9bn in 2022. Backlog, on the other hand, fell slightly to £16.5bn, down from £17.4bn last year previous Harrison characterized the figure as encouraging in the face of rising interest rates.
Diving knowledge:
Although profits fell from struggles in the investment portfolio, Balfour Beatty’s construction division had a solid year. The segment posted revenue of £8.1 billion in 2023, up from £7.5 billion in 2022.
With a message that looked to the future rather than the present, CEO Leo Quinn detailed the company’s success in the field of construction in its three key locations: the United States, the United Kingdom and Asia with his Hong Kong-based construction company Gammon. .
Revenues rose in all three regions, and while UK and Gammon profits grew, the US segment was flat, an improvement on its success six months ago. weak office and technology sectors all over the country
Quinn told investors on the call that both segments were seeing signs of recovery. Going further, the US construction market was one of four areas that Quinn identified as key to the company’s growth through 2025; pointed to its $800 million in orders in Texas in the fourth quarter of 2023 as a potential sign of future strength. Dallas, for example, has been against shady office trends that suffer most of the country.
“Six to 12 months ago, the US was very difficult for a number of reasons. Now we’re seeing the market unwind in anticipation of lower interest rates,” Quinn said.
However, the construction giant is still facing macroeconomic challenges. Quinn warned that for the first time, he’s seeing demand outpace supply, which is forcing builders to have what he called “grown-up conversations” with their customers about the risk the builder is willing to take. take on the job compared to the owner. must endure
Amid these challenges, the builder continues to de-risk its portfolio of work. About 24% of Balfour Beatty’s U.S. construction backlog was on civilian jobs in 2023, compared to 42% in 2020. It is also increasing its presence on federal and state contracts, after the $1.2 trillion Infrastructure Jobs and Investment Act.
“The ability and the ability to deliver what we have in front of us is becoming a huge challenge,” Quinn said.
