Infrastructure services group Balfour Beatty said it expected its struggling UK construction business to break even this year.
The company warned last month of a £50 million shortfall in the division after an extremely challenging trading period in which revenues in the first five months of the year fell 23%.
The firm said it UK construction operation had been impacted by a shortage in the availability of major public contracts, and fierce competition in regional markets.
Despite its building divisions in the US, Hong Kong and Dubai being on track, Balfour Beatty’s construction performance in the UK dragged overall group revenues for the sector back by 11% in the period.
The problems were compounded by the mainland Europe rail business, which saw revenues fall 24% in the period. The business is currently up for sale.
In an update yesterday, Balfour Beatty said it professional services division was trading flat on the year, its support services business had continued to grow in line with expectations, while its infrastructure investments arm had maintained a “very good” underlying performance.
The firm said its order book stood at £16 billion at the end of March a 5% increase since the year end.
However, group average net debt increased in the first months of 2013 to £220m, and the figure is set to rise further in the next trading quarter before a partial reversal in the second half.
The company said its balance sheet remained strong despite the £50m hit from UK construction. It also said it had raised $350m via a private placement to US investors during the first quarter.
In an update to the markets yesterday, the company said it expected an upturn in its fortunes to become evident later in the year.
“As we progress through the year, our business is expected to benefit from the cost efficiency programmes we have in place, a recovery in operational performance in UK construction, and the ongoing implementation of strategic initiatives,” the group said.
“Based on these dynamics and the first- half weighting of the profit shortfall in UK construction, we expect our profits to be more heavily skewed to the second half than in previous years.
“We remain confident that the strategy we have set out for the medium term will transform Balfour Beatty into an increasingly diverse and international business which is better positioned to benefit from structural growth in infrastructure markets with less cyclical characteristics.”