Monday 14 December 2015

In the News - Know Your Firm

In the NEWS –
As reported the 14th Dec 2015 -UK Balfour Beatty wins the trophy for the construction company winning the most new work in 2015

My thoughts – If construction appears the weakest commodity for this company as clearly outlined over the past three financial statements and by the Chairman’s own declarations, while at the same time winning a major award that claims itself to be the ‘most transparent construction award’ as it is based on mathematics for the most new builds in 2015, then has this company simply poured much of its energy and finances into its weakest area to bail it out.  Have they had to purposely take on as much work as possible to pay back the investors losses of the previous projects that failed?  My question to the company would be how will you continue to manage risk with subcontractors under such a workload, considering that five employees of subcontractors lost their lives in 2013 while working on Balfour Beatty projects.

As reported 10th Dec 2015- Balfour Beatty expecting good results from the ‘Built to Last Program’ designed to turn things around

My thoughts- The implementation of the 'Built to Last Program' including refinancing of the existing financial facilities/loan costing in reality a total of $700 million pound - $300 million pound lost last year and the $400 million pound to refinance is quite a lot of money to recover, hence the only way to do this is to dive into as much work as possible.  The revolving credit facility will allow them to move swiftly from one job to another without lengthy delays from banks, valuers and the like.  I do think these measures that CEO Leo Quinn has implemented, make good financial sense.  Balfour Beatty could not afford to let the construction side of the business fail so badly.  The only obvious way to bail it out is to go quite further in, taking on as many profitable contracts as possible –although there is no room for risky new investment contracts.  The question then would be, is Balfour Beatty spending enough on a well executed risk management system.  I fully understand that decision makers need to save the company financially by pouring the construction side of the company into as many projects as possible, so that the projects can be turned over as quickly as possible to recoup lost funds, but nothing or no one can buy back a life or the bad publicity the company will get if the numbers of deaths increase. 

Managing the financial clean up and risk management of the company simultaneously is going to be paramount for a successful future for Balfour Beatty.  It appears at a glance if the company could clean up the loss or most of the loss from their construction side over a period of time, they should then run a business plan alongside the clean up to start cutting back on physical construction, diversifying further and moving into the infrastructure investments & support services in which they appear so strong in.  Working out the magic percentages of focus for each area of expertise I feel will be the way of the future for Balfour Beatty. 

At a glance- Balfour Beatty can not afford over the long term to drop construction as a core of the business entirely or it would lose touch with the 'physicality' of the industry that Balfour Beatty's company model has steamed from.  It appears that the company's strengths in infrastructure investments and support services comes from the stability of over 100 years in the construction industry, so the absence of this aspect of business over generations would deteriorate the strengths in the areas of infrastructure investments and support services which have grown successfully from the knowledge of being so long in the physical construction industry.  An idea to combat this problem would be to look to the future of technology in the construction area and develop this area into two categories - physical construction and construction technology.  The new Balfour Beatty business model could look like the following - 35% Infrastructure Investments, 35% Support Services,  Construction - (15% Physical Construction & 15% Construction Technology)

You Tube Video Released 28th October 2014 -
Titled – Zero Harm – Make Safety Personal

My thoughts – Fantastic video, I was really impressed and inspired by this video.  Very cleverly executed and in the 4 mins and 13 sec it takes to play it, it dissolves all of my previous concerns on whether or not this company is going to make safety of human life a prime concern.  The answer is ‘Yes’!  Let's hope hey continue to make risk management a focus.

You Tube Video Released 16th April 2013 –
Titled – Sustainability Next Generation Stakeholders Panel


My thoughts – Clever marketing department in this company!  Obviously the ideas are filtering down from the CEO and leaders of Balfour Beatty to the marketing department; however the simple execution is nothing short of clever.  Nerd to Normal information and the use of making a Next Generation Panel whether it was because the company was actually interested in their views or whether Balfour Beatty  just wanted to use the fact that they this panel meeting to use as a form of advertising. Either way it was ingenious.  Since the next generation is who excels at internet marketing, twitter, face book, Linked In etc, I think this will prove a successful marketing ploy,  The use of You Tube is clever as it is a cost effective viral way to distribute the company's marketing campaign & message. It is also a great way to show that Balfour Beatty nearly an 107 year old company can still power through the generations by focusing on new blood.

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