- AECOM’s Construction Services segment brought in $1.9 billion in revenue in its third quarter, the firm reported this week, or 38% of its nearly $5 billion in total revenue for the period. Adjusted operating income for the three-month period that ended June 30 was $49 million, representing 17% of the firm’s trailing 12-month adjusted operating income.
- Building construction made up 69% of the segment’s trailing 12-month revenue, with civil construction and oil and gas each making up 11% and power-related construction at 9%.
- Backlog for the segment was up more than 50% from the year before, helping the company realize nearly four years of run-rate revenue value in backlog, with nearly 90% of that volume based in four core markets including New York and Los Angeles.
CEO and Chairman Michael S. Burke said the positive results were due in part to the actions the company announced late last year, such as “de-risking” its portfolio by focusing on lower-risk construction management work. The plan, as the contractor laid out in its earnings presentation, also includes extracting its involvement in all at-risk, self-perform construction, all non-core oil and gas and international development work, and more related to its capital services business.
In its Design and Consulting Services segment, the firm said it is witnessing its strongest growth in several years in the Middle East and is actively positioning for post-Brexit growth opportunities in the U.K. However, the firm is also reportedly actualizing its plan to exit more than 30 countries, with 76% of its business in the U.S., 11% in Europe, Middle-East and Africa, 8% in Asia-Pacific and 5% in Canada, in terms of trailing 12-month revenue.
Changes AECOM announced in the prior period seem to already be paying off, so the trend may be that large contractors will continue taking on less risk, or at least re-evaluate the way they view risk. That’s playing out currently, with Granite, Fluor and other major contractors also announcing major shifts in focus at the conclusion of their respective second quarters so far this month.
Granite said its $97 million loss in the quarter was partly due to delivery methods that put too much risk on recent megaprojects and with the earnings results report, announced it was changing the way it does business. For example, the contractor will no longer take on megaprojects in its heavy civil division. The company is also moving away from public-private partnerships (P3s).
Fluor, upon announcing a $555 million loss in its second quarter, said that going forward, it will only pursue fixed-price energy work that meets strict criteria, narrow focus on infrastructure work to five key states, and will no longer pursue most lump-sum projects in the government sector.