Howard Seymour

Howard David Seymour from Numis asked for clarification on the confidence in achieving industry-standard margins, specifically whether it was greater for the U.S. and Support Services, and if cost-cutting efforts were still primarily U.K.-driven.

Answer

Group Chief Executive Leo M. Quinn responded that the confidence in achieving margin targets extends across the entire business, aided by the expected settlement of legacy projects by the second half of 2018. He also confirmed that cost savings are substantial in both the U.S. and U.K., noting that over $40 million in costs had been removed from the U.S. business in the last two years.

Howard Seymour from Numis inquired about the investment pipeline over the next few years and its potential for lumpiness, and also asked if the path to achieving industry-standard margins would be linear or skewed towards the end of the period.

Answer

CEO Leo Quinn confirmed that the investments business is inherently lumpy due to deal-based activity but has a significant pipeline with a lot of activity expected in the next six months. CFO Phil Harrison clarified that margin improvement will be progressive, with a more significant ramp-up in 2018 as existing lower-margin contracts trade out during 2017.

Howard Seymour from Numis questioned the changes in the U.S. business, asking if they were part of the original Build to Last program and when to expect cost benefits. He also inquired about the potential growth speed of the rail business and the government's reception of the company's recent infrastructure report.

Answer

CEO Leo Quinn confirmed the U.S. changes were a planned phase of the global Build to Last program, with benefits expected from better execution and standardization rather than large-scale cost cuts. On rail, he stated that Balfour Beatty has the expertise to grow but will only do so under sensible contracting terms. He positioned the infrastructure report as a frank analysis of the UK's needs rather than a direct lobbying effort.