Something to build on
Balfour Beatty bucks the trend with higher profit forecasts
BALFOUR BEATTY struck an upbeat note, in a marked contrast to pessimism recently displayed by its peers in the construction industry, as it revealed higher profit forecasts and signalled the imminent end of its costly Aberdeen bypass project.
Britain’s largest building company made higher-than-expected gains by selling off its £43m interest in Fife Hospital and an 80pc stake in a student accommodation project at Edinburgh University, and now expects profits from disposals to top £65m this year.
Balfour’s improved position comes in contrast to others in the industry who have suffered in the wake of Carillion’s demise in January as banks have shied away from lending to builders. Interserve confirmed this week that it was considering a deal that would hand effective control to its lenders, leaving current shareholders all but wiped out. Kier, another construction contractor, has had to ask its investors or £264m to help shore up its balance sheet.
Last week Balfour paid off a £253m convertible bond, meaning it has cut its gross debt by 45pc in the past year.
The FTSE 250 giant is still in turnaround mode after bouncing back from several years of losses that in 2014 almost led to it falling into Carillion’s clutches. Leo Quinn, chief executive since 2015, has steered a sweeping transformation that brought the company back into the black in 2017.
Balfour said it expected to meet earnings targets for the year and that, while revenues in the last six months of the year would be roughly in line with the £3.8bn achieved in the first half, profits would continue to grow.
Balfour and rival Galliford Try have shouldered big losses on the Aberdeen bypass project, which had been a joint venture between them and Carillion. Yesterday it said it expected the route to be completed by the end of the month.
Mr Quinn said Balfour was on track to complete the second of three phases of his “Build to Last” turnaround plan, aimed at bolstering margins, this year. He added: “The actions we have taken since the start of 2015 have created a strong foundation for the future.”
Analysts at Numis welcomed a rise in projected net cash, from between £140 to £170m to £185m, noting: “Net debt is clearly an investor concern in the sector at present. We would expect to see further progress here in the current year due to cash-backed profit growth.”