Construction weakness weighs on Balfour Beatty

LONDON Thu Mar 7, 2013 8:03am GMT

A Balfour Beatty construction worker walks onto a site in London August 10, 2009. REUTERS/Luke MacGregor

A Balfour Beatty construction worker walks onto a site in London August 10, 2009.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - British construction firm Balfour Beatty (BALF.L) reported a 7 percent fall in profits on Thursday as new growth markets failed to offset a continued weakness in its core construction business in Britain and the United States.

The group made an underlying pre-tax profit of 310 million pounds in 2012, ahead of analysts' forecasts which ranged between 204 million and 323 million pounds and averaged 295 million pounds.

The construction division finished the year with an order book of 8 billion pounds, down 6 percent on a year ago, including a 17 percent fall in the United States, while revenue in the division was down 1 percent at 6.96 billion pounds.

Total revenue was also down 1 percent at 10.9 billion pounds.

Construction groups have become volatile through the industry downturn that hit in 2008, having embarked on ambitious cost cutting drives and diversifying into adding new services as well as new markets like Brazil, India and Australia.

Balfour Beatty's Professional -- project management, design and planning -- and Support Services divisions combined jumped from making up 44 percent of its order book in 2011 to 47 percent in 2012, though some analysts worry its progress has been slow.

The order book for Support Services was up 12 percent at 5.7 billion after a 3 percent rise in revenue to 1.6 billion pounds. Professional Services' revenue was up 1 percent at 1.67 billion pounds and the order book was up 9 percent at 1.6 billion.

Balfour also said that 2012 was a mixed year in Australia, a market it has earmarked for growth, with revenue decline in transport offset only partly by growth in mining.

The group said it still believes that construction markets in 2013 will be challenging and that it is on track to deliver combined annual cost savings of £80 million in 2015.

(Reporting By Christine Murray; Editing by Greg Mahlich)

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