You have got to take good news in the UK construction sector where you can get it and in that sense Balfour Beatty’s (BBY) guidance for full year profit to top expectations is extremely welcome.

Granted, the beat is largely the result of the sale of an infrastructure investment. The company has been making divestments from its portfolio of school and hospital facilities, street lighting, renewables and student accommodation as part of its ‘Build to Last’ restructuring plan under chief executive Leo Quinn, who joined in 2014.

It recently sold its interest in Fife Hospital for £43m and expects to complete a partial sale of its Edinburgh University student accommodation project for £24m.

The rise in the shares reflects the somewhat artificial nature of this better-than-expected performance, as they are up just 3.7% to 255.1p.

There were some positive underlying signs with its year end order book expected to be modestly higher, up from £11.4bn at the end of 2017 to £12bn. Revenue is expected to be flat on the first half.

WILL QUINN ‘RIDE OFF INTO THE SUNSET’

AJ Bell investment director Russ Mould says: ‘Today’s upgraded guidance from construction firm Balfour Beatty is no reason to get carried away.

‘The boost to its full year numbers is principally driven by a series of disposals from its infrastructure investment arm rather than any significant improvement in trading.

‘However, that should not detract from the job chief executive Leo Quinn is doing at Balfour which is successfully navigating a very challenging construction market in the UK.

‘Revenue looks set to fall year-on-year, but this reflects the more disciplined approach inherent in the company’s ‘Build to Last’ strategy.

‘Simply put the company is being more selective about the contracts it takes on in order to avoid the kind of work which ends up being a financial burden, something which happened all too regularly before Quinn took over in 2014.

‘The company now has an enviably strong balance sheet and a good platform for the future. The question is what that future might look like and whether turnaround specialist Quinn will feel his work here is done and ride off into the sunset or if he’s in it for the long haul.'


Issue Date: 14 Dec 2018