Review of 2014: Grimm Tales

Balfour Beatty

What a stunning year for Balfour Beatty - just not in a good way. Once the poster boy of UK contracting, Balfour Beatty’s flurry of bad news in 2013 turned into a snowstorm, with three profit warnings writing off £140m of profit due to problems in its UK contracting business, and the exit of its chief executive Andrew McNaughton (pictured) in May. Amid all this the firm kept City analysts busy by first considering and then resoundingly rejecting a £3bn merger proposal by Carillion, selling its consulting arm Parsons Brinckerhoff to WSP for £820m, and then rejecting a £1bn approach from John Laing Infrastructure Fund to acquire its PPP business. Enter stage left Leo Quinn, current boss of defence firm QinetiQ and incoming Balfour Beatty chief executive, who will aim to steady the ship when he takes up the post from new year’s day. Executive chairman Steve Marshall and FD Duncan McGrath will also leave in 2015.

Contractor woes

While Balfour Beatty stole the headlines this year, the contractor was far from alone in encountering problems. Many major contractors - both listed and private - reported challenges, often down to problem jobs won during the recession at cut-throat prices. Vinci blamed the £570m Nottingham tram extension for half-year UK construction losses; Morgan Sindall issued a profit warning in October due to a handful of problem jobs; Bam’s parent company Royal Bam embarked on a cost-cutting drive that was in part prompted by losses on a UK job; and problem jobs dragged Mitie to a half-year loss this autumn. In the specialists sector, T Clarke issued a profit warning in October due to difficulties on two jobs. Sir Robert McAlpine also reported a pre-tax loss for the year 2012-13, although it said its problems lay overseas, citing losses on a £176m hospital in the Caribbean as the reason.

UK SBS consultants’ framework

Every pantomime needs a pantomime horse, and the role this year is ably filled by the £750m UK SBS consultants’ framework. The front of the horse is the government’s in-house buying-arm the Crown Commercial Service (CCS), while the back is its procurement partner UK SBS. In the way of pantomime horses, they’re really not very good at getting anywhere very fast. For the uninitiated, UK SBS cancelled the four-year framework - designed for use by all public sector clients - in November, after a 15-month bidding process that was challenged in the High Court by losing bidder Turner & Townsend. The saga dismayed consultants, which had to write off an estimated £5m in bidding costs. We later learned CCS now plans to re-procure the framework in-house within a year … with the help of UK SBS. Neigh problem!

Sweett Group

In the summer it seemed Sweett Group had turned a corner after enduring a tough recession, reporting solid growth in revenue and pre-tax profit, boosted by a resurgent UK business. But in November the firm was forced to issue a profit warning - its third in three years - due to problems in “certain overseas operations” and this month disclosed pre-tax profit fell almost 90% in its half-year period, prompting a strategic review to boost profitability. Meanwhile, a Serious Fraud Office investigation into historic bribery allegations made by the Wall Street Journal last year, relating to the firm’s Middle East division, has hung over the business all year. Last month Sweett admitted the Serious Fraud Office considers it to no longer be co-operating with its investigation, which could increase the likelihood of a prosecution, should the SFO decide it has a case to answer.

The World Cup

Busted budgets, poor planning and co-ordination, horrendous delays, cancelled transport schemes, laborious bureaucracy, corruption allegations, mass protests and onsite fatalities - Brazil’s World Cup construction programme got just about everything wrong. While the tournament itself was the hoped-for festival of sport, rancour over the bungled preparations contributed to a somewhat ambivalent mood in the home of samba football. Just two of the 12 venues were completed on their original schedule, and two were still being scrambled together in the weeks before kick-off. In total the build came in R$1bn over budget, despite the cancellation of a fifth of related transport schemes. Nine workers died during the construction programme.