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Balfour Beatty: trading statement
Balfour Beatty is set to report another year of steady growth, according to the latest trading update released by the company. The company’s order book grew by 13% to around £7.7bn, with a further £1.2bn more work at preferred bidder stage, including, the £520m Birmingham Hospital PFI project. Operating cash flow is said to have been very satisfactory.
Operating results are expected to be in line with market expectations but a net exceptional profit will arise from initial distributions by Barking Power from the administrators of TXU Europe and the gain on disposal of a 15% interest in three PFI road schemes (partly offset by costs of the purchase of preference shares and the costs of repaying a term loan and settling a legacy legal issue in America).
Order intake in the building sector has strengthened in the year with the conversion to contract of PPP schools projects in Scotland and Nottinghamshire. A wide range of other contracts in the social housing, accommodation, healthcare and commercial sectors have also been won.
In Engineering, performance has been good with particularly strong performances from RCS, the road manager and maintainer, and Balfour Beatty Power Networks.
Performance in rail was more mixed with good business in the UK and in the international rail electrification business, but negatively impacted by the first full year without UK maintenance profits and contract difficulties in the US.
Prospects look good, a solid order book and the wide diversity of the company’s businesses providing reassurance against weaknesses in any single market. The share trades at 369.58p, on a prospective PE (2006 earnings) of 13.9x, at the upper of the sector range, justified by the lower levels of risk. The yield is 2.2%.
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