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Stronger profits give share boost to Balfour
CONSTRUCTION group Balfour Beatty reported stronger than expected half year profits yesterday, lifting the group's share price by over eight per cent and providing the market with some much needed good news.
Balfour Beatty won four contracts in the first half including a 1bn contract to widen and maintain London's key M25 orbital motorway over the next three to four years.
In Yorkshire, the group is working on a 62m contract at Pontefract Hospital in Pontefract to provide a new diagnostic and treatment unit that will include 33 departments, 66 beds and 581 car parking spaces.
It is also involved in a 249m contract at Pinderfields Hospital in Wakefield to deliver a new acute inpatient hospital on the existing Pinderfields Hospital site, which will house 46 departments, 708 beds, 1,839 car park spaces and a stand-alone new build pathology building.
It is also involved in a 35m a year contract for North Yorkshire County Council on Highways Maintenance including surface dressing, street lighting and winter maintenance
Balfour's chief executive Ian Tyler said: "We are not seeing any hold-up in projects for their own sakes.
"The debt markets are coming back to finance projects. We have essentially had a flow of those projects now coming to fruition."
The group, whose activities span engineering, construction and road and rail transport, generated 108m in adjusted pre-tax profits in the six months to June 27, at the top end of market expectations and a 14 per cent increase on last year's 95m pre-tax profits.
Balfour said it expects to make good progress in the second half of 2009 based on what it described as a strong first half performance, boosted by growth at its US operations and British infrastructure wins.
Balfour's shares closed the day up 26.4p to 346p.
The group's focus on public sector contracts, which make up 85 per cent of its orders, means it has been relatively immune to the downturn.
"In the foreseeable future, we see the Government continuing to put new schemes out into the market," said Mr Tyler.
The group, which is building the Aquatics Centre for the London Olympics in 2012, reported an order book of 12.5bn which was down slightly on the 12.8bn reported at the end of 2008.
Mr Tyler forecast growth at the company's rail unit over the next two to three years, after the unit was impacted by the timing of contracts and lower volumes which dented underlying profits by 22 per cent to 7m.
Balfour raised its interim dividend by eight per cent to 5.5p.
While the wider housebuilding and construction sectors have suffered, the company celebrated its centenary this year and joined the FTSE 100 Index for the first time.
Numis Securities analyst Howard Seymour said: "Overall, this is a strong operational performance and the group has beaten our forecasts on almost all fronts.
"The order book is holding up well and cash flow remains strong."
Analyst Charlie Menegatos at Accendo Markets said: "The group is now seeing opportunities with clients seeking infrastructure partners in the medium and long term, and it is this area we believe will provide substantial upside in the medium term."
Balfour's rival Morgan Sindall reported a "record six months" at its infrastructure and construction units on Monday, but delivered a 28 per cent drop in first-half profits.
Balfour also said yesterday it has been selected by South West Water to work on its five-year capital programme and that it expects to receive over 100m out of the overall 590m project budget.
Big presence in the region
Balfour Beatty has won a number of contracts in Yorkshire aside from the big projects it is undertaking at Pontefract and Pinderfields Hospitals and its work on Highways Maintenance in North Yorkshire.
In Bradford it is working on a 450,000 a year framework contract with Bradford City Council.
It continues to work on a 32.5m a year five-year contract with Yorkshire Water on Design and Build Mains Water Rehabili-tation.
It is also continuing work for CE Electric in Yorkshire for one-off projects worth 4.4m a year.
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Saturday 11 February 2012
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