No new writedowns, so maybe Balfour Beatty can rebuild

Outlook

Well, at least it wasn’t a profit warning. When that is the key mantra about your financial numbers, you know you’ve got an image problem.

Balfour Beatty, the engineer which bid too cheaply for contracts in the desperate days of the recession, is firmly in that position. Seven profit warnings, senior staff deserting for rivals, and a spurned takeover suitor in Carillion do not a happy ship make. But Leo Quinn, the new chief executive who compares himself with Henry V stepping unto the breach, remains optimistic. It sounds hubristic, but he may have reason.

Losses of £150m looked shocking, but were predictable after the big writedown he announced in July on the value of its old, badly negotiated contracts. More important was the news that, in its main market of the UK, those projects are not getting any worse and most will be finished next year. The Far East remains a potential banana skin, with the Hong Kong Express Rail link going over budget. But again, no new writedowns.

Looking ahead, Balfour’s order book is smaller but far more profitable, while it is still sitting on £1.3bn of PPP contracts which have been fetching huge premiums from financial buyers. That’s not much shy of the £1.8bn value of the entire company, so shares could well have further to rise.

Balfour’s turnaround is under way.