Balfour Beatty has said that it is withdrawing from the UK water sector as future opportunities do not meet the Group’s selective bidding criteria and “contracts are generally being awarded on terms that are not acceptable to Balfour Beatty.”

The comments come with the announcement of the Group’s interim financial results for the period 1^st April 2019 to 31^st March 2020 which show the Group recorded an underlying loss in the period, principally attributed to the impact of COVID-19.

The statement issued by Balfour Beatty said:

“The overall market is mixed with areas of growth in power, road and rail offset by areas of decline in gas and water where Balfour Beatty is withdrawing from the market as future opportunities do not meet the Group’s selective bidding criteria.”

“The water business is now at the end of the current UK water regulatory cycle (AMP6 2015-2020). Balfour Beatty has historical contracts with Thames Water, Anglian Water and United Utilities. Under the new AMP7 regulatory period (2020-2025) contracts are generally being awarded on terms that are not acceptable to Balfour Beatty and therefore the Group is only expected to retain the Anglian Water contract.”

In the first half of the year, the Group achieved positive operating cash flow with the period end net cash balance at £563 million (FY 2019: £512 million; HY 2019: £425 million) and average net cash at £507 million (FY 2019: £325 million; HY 2019: £290 million).

The Group’s order book at half year was £17.5 billion (FY 2019: £14.3 billion; HY 2019: £13.2 billion), over 20% higher than the year end position. Over the last two years Balfour Beatty’s order book has grown substantially, driven by public sector infrastructure projects and now stands at over two years of revenue.

The increase at half year is due to the addition of over £3 billion of contracts following HS2 Notice to Proceed being issued by the UK Government in April. Balfour Beatty, in joint venture with VINCI, will deliver the main civils works south of Birmingham and the London hub station at Old Oak Common.

Notwithstanding the continuing uncertainty of COVID-19, on the assumption that Balfour Beatty’s markets continue to recover as currently anticipated, the Group said it expects the earnings-based businesses to recover steadily through the second half of 2020 and report a more normalised operating profit in 2021, broadly in line with 2019

Leo Quinn, Balfour Beatty Group Chief Executive, 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. Since the start of Build to Last, our balance sheet, order book and expert capability are at record levels. We look forward with confidence to returning to profitable managed growth, and to delivering ongoing value for all our stakeholders.”