Balfour Beatty ups profit forecasts as it defies construction gloom
Balfour Beatty has boosted its earnings and cash flow targets, as the construction firm’s “real momentum” defies wider gloom facing the sector. The group, which works with the government on major infrastructure projects, has seen the value of its order book jump by 17 per cent to £22.9bn in the six months to June, as [...]
Balfour Beatty has raised its profit and cash flow expectations, bucking the trend of decline within the construction industry. The firm, which works on large-scale infrastructure projects alongside the government, reported a 17% increase in its order book to £22.9bn over the six months ending June, with revenue rising 8% to £5.6bn.
This growth was fueled by heightened demand in the US housebuilding sector and the UK's power industry, according to the company. Balfour Beatty lifted its earnings projections, moving from modest single-digit growth to high double-digit figures, and expanded its forecast for net cash surplus from £1.5bn to £1.7bn. The group's underlying profit climbed by 42% to £153m in the period, though headline pre-tax profit fell by 2% to £129m.
Speaking about the company's strong start to the second half, CEO Phillip Hoare said: "Balfour Beatty enters the second half with real momentum. Our strong first-half performance reflects the quality of our business, the discipline of our execution, and most importantly the exceptional contribution of our people in delivering for our customers."
Despite the gloomy outlook facing the UK construction sector, driven by rising costs and reduced private-sector demand, Balfour Beatty credits its success to government contracts. The firm highlighted growth in the UK's energy, defence, and transport infrastructure sectors as a key factor behind its revenue increase. In the first half of the year, Balfour Beatty secured major contracts including a £325m power transmission project in Scotland, a £315m road maintenance scheme in Warwickshire, and $350m (£259m) in US data centre orders.
Analysts at Peel Hunt commended the firm's revenue visibility, stating that its ability to selectively choose work in areas with enduring customer demand has driven quality growth. Freetrade analyst Alex Pugh added that Balfour Beatty has avoided the struggles of private-sector housebuilders by focusing on areas where spending is essential, such as power networks, transport, defence, and the US building market.
The company's strong cash generation allows it to fund growth while maintaining attractive dividends and share buybacks for investors.
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