Construction giant's strategy pays off as profits soar and orders pour in

The construction firm said yesterday that half-year pre-tax profit rose by 32 per cent, to 141m, compared with 107m in 2009.

"Our strategy has been to build Balfour as a global infrastructure business... the results now reflect the acquisition of Parsons Brinckerhoff ... it's performed extremely well in the first half," chief executive Ian Tyler said.

Profit at Balfour's professional services division rose to 49m, against 6m in 2009, largely as a result of the company buying US management firm Parsons Brinckerhoff, which contributed 35m to profits.

Interim dividend rose 5 per cent to 5.05 pence per share.

Balfour also said it had closed a 230m street lighting contract for Coventry and signed a 460m contract for the second phase of satellite building for Heathrow Airport's Terminal 2.

Projects in Yorkshire include Pindersfields and Pontefract hospital builds for the Mid Yorkshire Hospitals NHS Trust, a 70m network contract for Yorkshire Water and a highways maintenance contract for North Yorkshire Council.

Cuts in British public spending – which represents 20 per cent of Balfour sales – have raised concerns that the construction sector is likely to suffer in the coming year.

"While there are challenges in some markets, overall, we still would see in 2010 to 2011 areas where the business will grow," Mr Tyler said.

The firm said its order book stood at 14.6bn at June 2010, up from 14.1bn at the end of last year.

Mr Tyler said the company was very much focused on its global growth and future acquisitions in any one of its four core divisions were always a possibility.

The firm, which helped build the world's biggest shopping centre, the Burj Mall in Dubai, said its rail business in Scandinavia and a Hong-Kong-based contractor in which it

has a 50 per cent, had also performed well.

Profits in Balfour's construction services increased by 17 per cent but revenues declined in the United States by 22 per cent because of a smaller order book last year.

"It's fair to say we are a very broadly-based portfolio of businesses ... those directly servicing the UK Government will see some of their market come under pressure," Mr Tyler said.

Last month, the coalition Government said it would slash the Building Schools for the Future (BSF) programme, a multi-billion-pound scheme to rebuild schools across Britain.

Balfour, which won contracts with five local authorities and is preferred bidder with three others, said the cuts would not impact its order book or outlook as it represents only 2 per cent of its business.

Mr Tyler said a substantial number of contracts were funded by industry, rather than the Government, leaving Balfour well-positioned to weather government spending cuts.

Analyst Andy Brown at Panmure Gordon retained his 'buy' recommendation on the stock.

"It's a big international company. It's something that will quietly chug along, doing what you would expect it do, without setting the world on fire," he said.