Industry standard

Balfour Beatty is on track to deliver industry standard build margins in the UK

Balfour Beatty said today it was well positioned for 2022 and beyond thanks to an improved order book and forecast UK construction margins of between 2% and 3%.

In a business update for the period January 1, 2022 to date, issued ahead of today’s annual general meeting, Balfour Beatty said overall transactions were in line with expectations, including continued strong performance in cash.

At the end of March, the group’s backlog stood at £15.6 billion (December 2021: £16.1 billion), which includes the recent award of the design and build contract for Fort Meade of $698 million (about £530 million) in Maryland by the US Army Corps of Engineers. Bidding discipline continues in favorable infrastructure markets which, combined with Balfour Beatty’s focus on its expertise capabilities, maintain the group’s higher quality order book.

The board continues to believe the group will deliver contained profit growth in 2022, building on the £181m generated from profit-based businesses (construction services and support services) in 2021 Infrastructure Investments has planned a number of asset disposals this year which should meet the Group’s return requirements.

In the first four months of 2022, the average monthly closing net cash balance increased to approximately £800 million (average for the full year of 2021: £671 million, net cash balance of December 2021: £790 million). Following the 2022 share buyback and some expected normalization of working capital, the average monthly net cash for the full year is expected to be slightly lower than the first four months of the year .

At Construction Services, operating performance is in line with expectations despite some COVID-19 related restrictions in Hong Kong remaining. UK Construction remains on track to deliver industry standard margins of 2-3% for full year 2022. In the US, a major milestone has been reached on the Green Line extension project in Boston, with the successful completion of one of two lines along the new 4.7-mile light rail route. US Construction is expected to generate a 1-2% margin for the full year of 2022.

In Support Services, electrical, road and rail maintenance activities continue to perform well and in line with the 6-8% margin target, albeit on a slightly lower revenue base following the strategic exit from the gas sector and water. During the period, the rail business agreed the fourth year work program with Network Rail at c. £120 million under the Central Rail Systems Alliance 10-year track renewal programme.

At Infrastructure Investments, several attractive asset investment opportunities are being developed. Disposals are expected to begin towards the end of the first half and continue throughout the second half.

As part of its multi-year share buyback programme, in the first four months of the year the group acquired just under £19m of its shares and plans to complete the share buyback full £150m for 2022 by the end of the year.

Leo Quinn, Balfour Beatty Group Chief Executive, said: “We remain confident that the Group is well positioned for 2022 and beyond. Our business portfolio has been transformed to focus on the growing infrastructure markets of the UK, US and Hong Kong, each backed by strong government investment programs. The strength of our balance sheet and the improved quality of our order book will allow us to maximize these opportunities for profitable growth while remaining resilient to the current macro-economic challenges.