Construction firm Balfour Beatty (BBY) looks in good shape judging by today’s first half results. The shares are up 3.6% as the dividend is hiked by a third to 1.6p per share with underlying operating profit up nearly 70% on a big recovery in margins.

The company was arguably on course to go the same way as its ill-fated peer Carillion when Leo Quinn took over as chief executive in 2014. It had over-reached with several big acquisitions and the business was both too complex and financially weak.

Quinn (pictured below) rolled up his sleeves and pursued a similar approach to the one which worked at printer De La Rue (DLAR) and QinetiQ (QQ.) in the past. He brought in rigorous controls and disciplines, which are critical in construction businesses, as well as numerous other changes to operational processes.

WHAT DOES QUINN  DO NOW?

However, as AJ Bell investment director Russ Mould observes there are now questions on the future direction of the business.

‘You can sum up the market reaction to Balfour Beatty's results as 'what have you got up your sleeve for your next trick?

‘Chief executive Leo Quinn has a well-earned reputation as a turnaround specialist, a role he performed with aplomb at defence firm QinetiQ and printing outfit De La Rue in the past.

‘He has done a good job of fixing Balfour's balance sheet, bringing costs under control and boosting profitability.

‘However, now that all of its divisions are either achieving industry-standard margins or are set to do so in the second half, attention will turn to where Quinn can take Balfour next. He may face a difficult task in an uncertain UK construction market despite a robust looking order book.’


Issue Date: 15 Aug 2018