Balfour on buying trail after deal for US firm

The company, which operates in 80 countries, said in a trading statement that the outlook for infrastructure markets remained positive in the medium to long-term.

However the short-term outlook for construction is less bright, particularly in Balfour’s domestic market.

The UK construction market is facing challenging times as the Government reins in spending on public buildings, schools, hospitals and infrastructure projects, against the wider backdrop of a weak economy.

This is having a damaging impact on commercial construction activity.

Balfour is taking advantage of its strong balance sheet and global presence to offset a difficult trading period at home.

It said that its net cash position will be reduced as a result of investments in the business, including acquisitions, and fluctuations in working capital.

Balfour announced last week that it had acquired US firm Howard S Wright for $93m, a contractor that primarily operates within the western US states.

Balfour Beatty chief executive Ian Tyler said last week: “Howard S Wright is a well-regarded company with a strong reputation for quality as evidenced by its blue-chip customers, and is a leader in sustainable building.

“HSW is an excellent geographic and strategic fit with our existing US capabilities, and the acquisition extends Balfour Beatty’s skill base and reach in Northern California and the US Pacific Northwest, a significant growth market that is emerging from the downturn.”

This announcement followed its larger acquisition in the US in 2009, when it boosted its professional services capacity through buying Parsons Brinckerhoff.

In a note about the trading statement, Liberum Capital said: “(The) order book is stable, and management guide to growth (is) helped by acquisitions.

“Share price weakness is based on fears of trading weakness which now appear unfounded.”

Liberum described it as a “reassuring update”, adding: “Balfour is stand-out cheap against overseas constructors.

“It is fair value against UK constructors but historically has traded at a premium.”

JP Morgan Cazenove Europe Equity Research said it continued to believe that the group was significantly undervalued.

Balfour is involved in a number of high profile Yorkshire contracts.

Last year, it completed a £62m contract at Pontefract Hospital to provide a new diagnostic and treatment unit featuring 33 departments, 66 beds and 581 car parking spaces.

It also secured a £249m contract at Pinderfields Hospital in Wakefield to deliver a new acute inpatient hospital on the existing Pinderfields Hospital site.

Balfour has also worked on the Humber Flood Prevention Strategy contract for the Environmental Agency.

The £22m contract includes seven flood defence schemes to provide improved protection for 40,000 people in the Humber area.

It has also carried out asset management work for the Highways Agency on the M62 between Halifax and Leeds under a £28m deal.

Making tracks...

Balfour Beatty was found-ed by George Balfour, a Scots mechanical engineer, and Andrew Beatty, an English chartered accountant, in 1909.

In Edwardian times, the company described itself as “general and electrical engineers, contractors, operating managers for tramways, railways and lighting properties and for the promoting of new enterprises”.

The company’s first contract was for a new tramway system in Dunfermline in Fife. Worth £141,450, it involved laying new track and lighting cables.