On May 12th, Balfour Beatty announced an update on trading for the period 1 January 2022 to date.
Overall trading has been in line with shareholder expectations, including continued strong cash performance.
Financial Insight
At the end of March 2022, Balfour’s order book was £15.6 billion which includes the recent award of the £530 million Fort Meade design and construct contract in Maryland by the US Army Corps of Engineers.
Balfour’s board are confident the group will deliver managed growth in profits in 2022, building on the £181 million delivered by the earnings-based businesses (Construction Services and Support Services) in 2021.
From Jan-April 2022, the average monthly closing net cash balance increased to around £800 million (full-year 2021 average: £671 million, December 2021 net cash balance: £790 million).
On completion of the 2022 share buyback, and some expected normalisation of working capital, the average monthly net cash for the full year is expected to be moderately lower than the first four months of the year.
Operational Insight
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. During the period, the rail business agreed to the year four work programme with Network Rail at c. £120 million 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.
Capital Allocation Framework
As part of its multi-year share buyback programme, through the first four months of the year, Balfour has acquired just under £19 million of its shares and expects to complete the full £150 million share buyback by the end of 2022
Words from the CEO
“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.” – Leo Quinn, Balfour Beatty Group Chief Executive