Balfour Beatty has shrugged off more challenging economic conditions, as the infrastructure group’s work on the HS2 project helped deliver a solid first half.
Group revenues rose by 9 per cent to £4.5billion for the opening six months of the year, with growth from its UK and Hong Kong business offsetting declining sales in its US operations.
Turnover in Britain jumped by 23 per cent to over £1.5billion, mainly due to work on the planned HS2 high-speed rail line, where the firm is building Old Oak Common Station and other parts of the route between London and Birmingham.
Development: Balfour Beatty is working on the UK’s planned HS2 rail line, where it is building Old Oak Common Station and other parts of the route between London and Birmingham
It also continues to benefit from working on the Thames Tideway Tunnel, a super sewer being constructed under London, and the Hinkley Point C nuclear power station in Somerset.
Outside the domestic market, revenues in the group’s Gammon joint venture rose by 42 per cent to £583million due to activity related to the expansion of Terminal 2 at Hong Kong Airport.
By comparison, sales dipped slightly in the US as higher interest rates and slowing economic growth caused some delays in projects going to contract, especially in the commercial office market.
However, underlying pre-tax profits rose by 13 per cent to £97million on the back of growing margins, while its order book at the end of June stood at £16.4billion.
Among the recent contracts won by the firm include a £378million deal to build a new development at Hong Kong’s Cyberport business park and a £1.2billion deal for work on the proposed Lower Thames Crossing.
The latter development is a road scheme intended to reduce congestion on the extremely busy Dartford Crossing, which is notorious for its lengthy traffic jams.
Balfour Beatty told investors: ‘The strong, lower risk order book, combined with the opportunities identified in the group’s chosen markets, give the board confidence in Balfour Beatty’s continued ability to deliver profitable managed growth and sustainable cash generation.’
For the current year, the company expects profits from its earnings-based businesses to be broadly commensurate with the previous 12 months, while average net cash is set to be around £650million to £700million.
It additionally forecasts paying out £58million in dividends and completing a £150million share buyback in the fourth quarter.
Mark Crouch, an analyst at eToro, said: ‘The construction firm is growing profits, its balance sheet is strong, it’s cash generative, and it has a large order book, giving investors confidence that it can continue its recent performance.
‘Balfour benefitted from the boom in infrastructure demand post-Covid, although the fragile economic backdrop might mean that spending is tempered for the time being, which might cap future profitability.’
Balfour Beatty shares were 3.2 per cent, or 11.2p, lower at 335.6p on Wednesday morning but have still expanded by around 16 per cent over the past year.
