Balfour Beatty - Know Your Firm

http://www.balfourbeatty.com/

Balfour Beatty has over 100 years experience in business and is a major leading international infrastructure group.  The business has three core segments;

• Infrastructure Investments
• Construction Services
• Support Services

The company has technologically emerged in the way they display and explain data over the past three years, evidence can be seen clearly in the massive changes in their online presence.  The revolutionising  of Balfour Beatty on the internet appears to have commenced in 2013 with particular notability in this last year, 2015 at the hands of new CEO, Leo Quinn.  Outstanding material is being displayed for their investors, subcontractors & the like.  Their cleverly designed and marketed campaigns, made viewing enjoyable. I never thought I would find myself myself  immersed in a Chairman's or CEO's address, but I did. 

The influx of short feel good You Tube videos relevant to Balfour Beatty's core business and their clear future goals are cleverly delivered in a manner easily absorbed.  I can only assume that the marketing of this company has had a huge overhaul.  With a recent 300 million pound loss of income in their construction services sector, one would assume it was code red for this company, as in leave no stone unturned in catapulting Balfour Beatty's image into the 21st Century.

I found their website easy to read and follow, however it's funny how simple little things make a difference, like a home button so you don't have to flick around the place to get back to the start.  I ended up working out that if you click on their name it takes you back to the beginning.  To the GEN Y this might have been common sense, but considering that there would still be quite a number of older investors researching this site, I think the technology geeks should remember the simple basics like a home button.  I know for sure if my Uncle or Mother are investing and there's several companies to chose from, if the basics are too annoying, they will just move onto another company.  Which makes me wonder how many companies out there are losing customers and therefore money because they have over thought their websites and made it too complicated.  

I know in the property market we have something like 9 seconds to capture someones attention, if a customer has to spend their 9 seconds trying to find the home button, then they probably wouldn't be a customer for too long.  Especially if it's a company that is just being researched for share investment.

In saying all of this I have really enjoyed researching this company.  Balfour Beatty like all company's has had its ups and downs, however, as it is such an old established company, the leaders of Balfour Beatty have proven that they will take any drastic measures to stay one of the world's leading infrastructure groups.  

The 2011/2012 Reports show to counteract the US & UK construction problems the CEO continued on with of the 'Cost Efficiency' Program which commenced in 2010 in what appears to date in 2015, a successful way of helping recoup loss from past projects which failed.    This is one of the aspects I really like about this company, this mind set of we have been here already for over 100 years, we will not be going broke anytime soon.  They started it in 2010 & had plans to reach a massive target of 80 million pound annual savings by 2015, this apparently has been achieved.  This program helps to identify where the weaknesses are in the construction core of the business and sell off any non viable projects.  Focusing on instead a strategy that embraces the over 100 years of local presence in the infrastructure industry with end to end asset knowledge & skills across infrastructure assets as an investor and developer creating a niche in the market.  Key areas they planned to target were transportation, power, energy, water, mining and the emerging geographies & resources driven economies where they see potential growth.  

Taking a look at some other emerging problems for Balfour Beatty, we see in the 2013 report even though the 'Cost Efficiency Program' showed much success and on track, a new issue emerged in risk management when five employees of contractors lost their lives while working on Balfour Beatty projects.  The company needed to once again evolve.  However the core goals of the company - local presence, asset knowledge the companies skills as an investor developer continued to be the focus.  Sustainability also became of great importance for Balfour Beatty with a goal to achieve sustainability by 2020 in three key areas - profitable markets, healthy communities & environmental limits.

The 2014 Reports show Health & Safety back in the spotlight with the worrying news that six workers lost their lives across the Group. In the Chairman's address he outlined the renewed focus on fatal risks and health and safety targets which had been revised. The primary KPI for safety changed to Lost Time Injury Rate, which is a more thorough indicator.  From 2015, the Group redoubled efforts on Zero Harm programs.

Looking to the future - The move through 2015 saw Balfour Beatty implementing the 'Built to Last Program' focusing on the Group’s performance as it affects all stakeholders – customers and supply chain, employees and subcontractors, investors and communities – by driving continuous, measurable improvement against four goals: Lean, Expert, Trusted, Safe.  They also won an industry award for the construction company taking on the most contracts for 2015, proving the company is well aware that they need to successfully complete as many contracts as possible to financially stabilise the construction sector of their business, while at the same time focus on safety and risk management for all employees, contractors & employees of contractors working on Balfour Beatty projects.

KCQ

1. There are two sets of financial reports for Balfour Beatty in 2012.  I struggled with this until another student helped me find the document that explained what was going on.

1.  What is a PPP portfolio? - I obviously understood what a portfolio was, but had no idea what -PPP stood for.  I eventually got to the bottom of it when I was uploading information from the balance sheets and of course in 2011/2012 they recorded under current liabilities, borrowings being PPP non - recourse loans, but in 2013/2014 just stated non- recourse loans, so I had no choice then to go hunting, or googling to be exact.  So all it took was - what does Balfour Beatty mean by PPP and up pops....Public-Private Partnerships - Balfour Beatty explains it perfectly! Why didn't I do that in the first place - aaahhh!!!

   What are PPPs?

   PPPs are a long-term, performance-based approach for procuring public infrastructure such as highways, hospitals, schools and military housing. Through this approach, the infrastructure project is funded and operated through a partnership between a public sector agency (federal, state or local) and the private sector. They enable the public sector to use the services of private sector entities to share infrastructure development costs and risks from initial design and planning, to full lifecycle operations and maintenance.    
2. This discovery of what is a PPP and why do two years of financials state, PPP non-recourse loan, while the other two years do not, lead me to another question.  Does Balfour Beatty only do non-recourse loans for PPP's? The majority of them yes, but not entirely is the answer.
3. In the 2012 Balfour Beatty reported 9 million pound in Goodwill, without sounding naive I was under the impression that in this economic day and age, Goodwill was a thing of the past. - Goodwill continues throughout their four year reporting period?
4. Balfour Beatty has three core streams of income -  construction services, support services & infrastructure and investments.  Of the three the one that has been taking its financial toll on the company has been the construction services sector.  To recover a loss of $300 million pound the company has set up a revolving credit facility of $400 million pound and won quite a number of contracts in 2015 to bail out the previous loss.  The realisation for me I guess was that when I followed the reports over the years showing the company trying to recover lost money by dropping projects, starting cost cutting programs, rearranging their board, changing their image, pushing marketing, winning major awards proving they have won the most contracts, it made me see at this level of business, when you have been around for over 100 years, sometimes there is no other option than to pull out all stops and swim like crazy as there is just to much at stake to fail.  Fail is just not an option to this business level.  There is no option to say, oh I had a shot at this and it didn't work out, but I did try my best, I'm really sorry - NOT POSSIBLE.