Reuters logo
Balfour Beatty to exit mainland Europe in growth quest
March 7, 2013 / 11:48 AM / 5 years ago

Balfour Beatty to exit mainland Europe in growth quest

Men work on a construction site in Leicester, central England April 17, 2008. REUTERS/Darren Staples

LONDON (Reuters) - British construction firm Balfour Beatty (BALF.L) plans to sell most of its businesses in mainland Europe to seek growth in Australia and elsewhere, its incoming chief executive said.

Andrew McNaughton, who will take the helm in April, said on Thursday he wanted to “put some pace” into predecessor Ian Tyler’s strategy of looking beyond UK construction for growth after Balfour Beatty reported a 7 percent fall in 2012 profit.

Balfour Beatty has already sold its Spanish business to management and McNaughton said he planned to divest all others in mainland Europe by the year-end, except the more decentralised German business, which he said would take longer.

The firm has been unsuccessful at expanding those divisions beyond rail since it acquired them in 2000, frustrated by fierce competition on contracts in Germany and Scandinavia, and a construction industry that has remained depressed alongside a weak European economy since the financial market shock of 2008.

McNaughton said that having a single-market regional business didn’t fit with his strategy for the firm.

European construction companies have sought to combat a weak market with ambitious cost-cutting, diversification into new services and expansion into new markets such as Brazil, India and Australia.

Balfour Beatty reported a “mixed” year in Australia, which has been earmarked as a key focus area. McNaughton was positive on the outlook for that market despite a slowdown in transportation that was not offset by growth in mining.

“We’re actually seeing quite a lot of activity and change in the public sector in Australia, outsourcing is coming forward,” he said, adding that the water industry presents a big opportunity for Balfour.

Shares in the company were down 4.29 percent by 1015 GMT to 275 pence, against a broader FTSE AllShare that was up 0.4 percent after Balfour Beatty reported profit fell to 310 million pounds ($466.69 million) in 2012 and revenue dropped one percent to 10.9 billion pounds.

The group warned that construction would continue to be challenging, with revenues from its UK business expected to fall 20 percent in 2013.

“The new CEO has a tough job on his hands convincing the market that the medium-term will outweigh the near-term uncertainty,” Investec analyst Andrew Gibb said.

Gibb, who has a “sell” rating on the shares added that it was probably better for Balfour to sell off its European rail businesses now than try to hang onto them.

McNaughton said it is too early to predict the conclusion of its review of UK facilities management division WorkPlace, which maintains parts of London’s Olympic Park. But he added that someone else may be better placed to invest in the business.

Reporting By Christine Murray; Editing by Greg Mahlich

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below