Balfour Beatty is well down the road to recovery

In early 2015, Balfour introduced its Build to Last programme, prompted by what chief executive Leo Quinn described as "an overly complex business, [with] poor contract discipline and unaffordable overhead costs". Since then, management has been working through a string of legacy contracts, mainly in the UK construction division, where underlying losses were trimmed from £145m to £66m. If you strip out from this figure the additional losses incurred on historical projects, the division would have been more or less at break-even.

Of the 89 problem contracts identified last year, 81 per cent are now at practical or financial completion, and this is expected to grow to above 90 per cent by the year-end. Underlying revenue dipped by 23 per cent to £862m, although this was mostly the result of selective bidding, where business is now focused on fewer, larger contracts, reducing its exposure to contracts under £5m.

In the US, underlying revenue grew by 10 per cent to £1.63bn, although that was just 1 per cent at constant currencies. The order book was up 2 per cent on the same basis. Structural improvements included the unification of the general building business (around 85 per cent of revenue here) and the infrastructure side. Last year's first-half loss of £41m turned into a profit of £12m and the 0.74 per cent operating margin is close to that of previous years.

On the support services side, which includes transportation and utilities, revenue declined as expected as a result of the timing on certain contracts, but by cutting costs, underlying profit rose from £4m to £11m.

Analysts at Numis are forecasting pre-tax profit for the year to December 2016 of £80m and EPS of 10p, rising to £135m and 17.4p the following year (from losses of £123m and 19.7p in 2015).