Balfour Beatty’s newly appointed chief executive Leo Quinn yesterday promised to put a stop to “surprises” at the troubled construction firm.
“It’s a company of £10m turnover, with 40,000 employees worldwide, and its returns are far too low,” he told City A.M.. “The continuing surprises that it’s had should not be happening in a company of this size. I’m committed to the mission of ensuring that an iconic brand like Balfour Beatty is restored to its rightful place.”
The move sees Quinn, who spent the past five years as group CEO at QinetiQ, rejoining the company where he began his career 35 years ago. However, he will now be on a basic annual salary of £800,000. He says he saw an opportunity at Balfour because of the way it has been performing recently – the surprises he mentions include several profit warnings over the past year.
The firm’s executive chairman Steve Marshall welcomed Quinn’s appointment, and said the new CEO had a “track record in improving the performance of major international businesses”. Several analysts also heralded Quinn’s arrival as a positive move for Balfour, and Roger Johnston at Edison Investment Research said shareholders and “the many Quinn fans” would be “readying to benefit from yet another rescue mission”.
He is credited with turning Qinetiq into a more commercially adept business, and with making similar reforms at De La Rue before that. Quinn confirms that he is not afraid to work hard at cleaning up a firm. Delcaring that he enjoys football, rugby and horse-racing – he does not specify whether watching or participating – he explains: “It’s about working hard and playing hard.”
According to Quinn, his first step in improving Balfour will be to try to understand why the “surprises” have occurred. “The KPMG review should help with that,” he said. “We seem to be delivering things for more than they cost and failing to extract the cash. If we win business we need to build it and get the cash out.”
Balfour hit headlines this summer over its controversial merger talks with Carrillion, which were abruptly cut off by Balfour after just one week. As a Liverpool fan, it might be expected that Quinn would welcome a deal with the company in charge of improving Anfield – but he stated simply: “My stance is no different to that of the board. And if we do our jobs correctly, I’m sure we will stay an independent company.”
In terms of a timeline for turning Balfour’s fortunes around, Quinn says only that he thinks “in spans of five years” when it comes to setting goals for a project. Others, of course, do not share his optimism. Alastair Stewart at Westhouse Securities said the situation in the group might have deteriorated too far and was currently deteriorating too quickly for Quinn to turn it around “without further pain for shareholders”.
However, Quinn claims to be undaunted by the troubled state of the company he is about to join.
“With the last two companies I worked at, one had recently had three profit warnings and the other had two,” he said. “But after three to five years, they were happy.” And Balfour’s shareholders may well have been happy yesterday as shares jumped by five per cent following the news of Quinn’s appointment.
Meanwhile, QinetiQ’s shares fell by almost 12 per cent, and Quinn is not too pleased about that: “I personally own £5m worth of QinetiQ shares, and they weren’t supposed to do that. One might feel smug about Balfour’s share price, but smug doesn’t really go with my personality.”
TIMELINE: BALFOUR’S TRACK RECORD 2014
The company issues a £30m profit warning, and announces the resignation of chief executive Andrew McNaughton
Balfour issues another profit warning, this time amounting to £35m, blaming “further worsening” in its UK construction business
Firm confirms it is in preliminary discussions in relation to a possible merger with Carillion – the offer is rejected a week later
Balfour reveals that it rejected the merger bid because Carillion intended to reduce the scale of UK Construction Services, and to terminate the sale of Parsons Brinckerhoff. Later the same day, Carillion confirms it will no longer pursue a merger
The company announces the sale of its professional services operation Parsons Brinckerhoff to WSP Global for £820m
Balfour announces a further profit shortfall of approximately £75m in Construction Services UK. At the same time it confirms that chairman Steve Marshall will step down after his replacement has been found