Balfour Beatty builds up to big savings

4 March 2011
One contractor left in Olympics tender
Supplier diversity applied in rail contract
Construction procurement must improve
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Shared services hit by cuts

4 March 2011 | Lindsay Clark

Construction and engineering company Balfour Beatty hopes to create £30 million annual gross savings during 2011, in part from procurement initiatives in the UK.

It said in its financial results that £20 million of these savings, which will also come from back-office functions, will go through to the bottom line. It is hoped they will contribute to increasing its operating margin to between 3.5 and 4 per cent, up from the 3.2 per cent operating margin experienced in the year ending 31 December 2010.

Meanwhile, Balfour Beatty has invested £12 million in the creation of a UK shared service centre. This cost, which occurred during 2010, has been written off the books as a one-time expenditure.

The Newcastle unit is designed to provide centralised accounting, payroll and procurement services for the whole of the Balfour Beatty group. The business has grown organically and through mergers, including the acquisition of Parsons Brinckerhoff.

Balfour Beatty, which is a key supplier to the London 2012 construction, expects the shared service centre investment to flow back into the business by the end of 2012, in part through procurement savings.

The company’s financial results revealed a pre-tax profit of £319 million, up 20 per cent on last year. 

Chief executive Ian Tyler said: “We are pleased with the resilient set of results achieved in challenging market conditions in a number of our major markets. The diversity and strength of the group is evident in the overall performance, and the successful integration of Parsons Brinckerhoff has driven our growth.”

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