Public-sector work lifts Balfour Beatty

BALFOUR Beatty has revealed that a strong base of public-sector contracts has cushioned it from the economic downturn as it unveiled a 25 per cent rise in half-year profits.

The UK's biggest construction and infrastructure services firm, which is part of the consortium selected to build the M74 motorway extension in Glasgow, said pre-tax profits of 95 million in the six months to 28 June had topped expectations, up from 76m last time.

It also forecast a strong end to its financial year, saying its order book stood at 12.1 billion, up 14 per cent on a year earlier and by 6 per cent since the year-end.

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Revenue shot up to 4.3bn from 3.4bn, as public-sector-driven growth was underpinned by a number of acquisitions including Blackpool international airport.

The company added it was still on the lookout for other acquisitions, despite having spent 272m on five takeovers in the first half of the year.

Balfour, which has the contract to build the aquatics centre for the London 2012 Olympics and employs more than 30,000 people, added in a separate announcement that it had scooped contracts on three major projects in the United Arab Emirates (UAE) with a total value of 1.7bn Dirhams (240m).

Balfour said the contracts – a civil engineering deal to construct two major interchanges as part of the waterfront development in Dubai, as well as two building services contracts on hotels in Dubai and Abu Dhabi – "underlined" the firm's leading position in UAE.

Yesterday's half-year profits figure beat City expectations of 91m.

Chief executive Ian Tyler said: "We anticipate that order intake and trading performance will remain strong throughout the year and that we will make further good progress in the second half of the year."

He added: "We are seeing no signs of any slowdown in the public and regulated sectors, which account for 80 per cent of our business, or even in the private sector, which is also continuing to invest through the cycle."

Tyler said he expected growth in all four of Balfour's businesses – building, engineering, rail and investments – in the second half, despite recent surveys pointing to UK construction activity continuing to fall at a record pace, in a further sign that the sector is weakening sharply.

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Panmure Gordon analyst Andy Brown said: "Having been cautious due to broad top-down sector issues, today we are moving our recommendation from 'sell' to 'buy', partly on the back of good results but also reflecting the sound strategic moves taken by the group in recent months."

The consensus City forecast for full-year profits stood at 237m before yesterday's statement, compared with 201m reported a year earlier.

Other recent deals for the firm have included a $330m (150m) contract to build a new highway in San Antonia, Texas.

Major UK customers include the Highways Agency, BAA, National Grid, British Energy and the NHS.