Balfour Beatty on track to deliver industry standard UK construction margins
Balfour Beatty said today it is well positioned for 2022 and beyond thanks to a higher quality order book and projected UK construction margins of between 2% and 3%.
In a trading update for the period 1 January 2022 to date, issued ahead of today’s Annual General Meeting, Balfour Beatty said overall trading has been in line with expectations, including continued strong cash performance.
At the end of March, the group’s order book was £15.6 billion (December 2021: £16.1bn) which includes the recent award of the $698 million (c. £530m) Fort Meade design and construct contract in Maryland by the US Army Corps of Engineers. Bidding discipline continues in favourable infrastructure markets which, together with Balfour Beatty’s focus on its expert capabilities, is maintaining the group’s higher quality order book.
The board continues to have confidence the group will deliver managed growth in profits in 2022, building on the £181m delivered by the earnings-based businesses (Construction Services and Support Services) in 2021. Infrastructure Investments has a number of asset disposals planned this year that are expected to meet the Group’s return requirements.
Over the first four months of 2022, the average monthly closing net cash balance increased to around £800m (full year 2021 average: £671m, December 2021 net cash balance: £790m). On completion of the 2022 share buyback, and some expected normalisation of working capital, average monthly net cash for the full year is expected to be moderately lower than the first four months of the year.
At Construction Services, operational performance is in line with expectations despite some continuing COVID-19 related restrictions in Hong Kong. UK Construction remains on track to deliver industry standard margins of 2-3% for the 2022 full year. In the US, a significant milestone was 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 anticipated to deliver a 1-2% margin for the 2022 full year.
In Support Services, the power, road and rail maintenance businesses continue to perform well and in line with the margin target of 6-8%, albeit on a slightly lower revenue base following the strategic withdrawal from the gas and water sector. In the period, the rail business agreed the year four work programme with Network Rail at c. £120m as part of the 10-year Central Rail Systems Alliance track renewals programme.
At Infrastructure Investments, several attractive asset investment opportunities are in the pipeline. Disposals are expected to commence towards the end of the first half and continue throughout the second half of the year.
As part of its multi-year share buyback programme, through the first four months of the year, the group has acquired just under £19 million of its shares and expects to complete the full £150 million share buyback for 2022 by year end.
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 underpinned by strong government investment programmes. The strength of our balance sheet and the higher quality of our order book will enable us to maximise these opportunities for profitable growth while remaining resilient to the current macro-economic challenges.”