Balfour Beatty raises interim dividend as profits rise

Balfour Beatty announced a dividend increase on Wednesday as it reported modest growth in profits and turnover.

The construction giant said it would pay investors an interim dividend of 3.8 pence per share, up 9 percent from the 3.5 pence per share payout a year earlier.

Its revenue rose 3 per cent to £4.7bn in the six months to June due to strong results from its support services business and its Hong Kong-based joint venture Gammon.

Turnover at the former division rose by a fifth to £554m, largely due to deals for road maintenance work, including in Buckinghamshire and East Sussex.

At the same time, revenues rose 22 percent at Gammon thanks to high levels of activity at Hong Kong International Airport, where the company is working on the expansion of Terminal 2.

This offset falling revenues at its UK and US construction subsidiaries, with trading in Britain hit by lower volumes from the new Hinkley Point C nuclear plant.

The rise in turnover did not prevent Balfour Beatty’s underlying operating profit from falling by £3m to £77m due to rising costs in its infrastructure investment segment.

However, the London-based firm still expects the group’s underlying earnings to grow in the long term, helped by demand for labour in the US construction market and in the UK’s energy, transport and defence industries.

Balfour Beatty’s order book stood at £16.6bn in June, having recently won contracts for work at HMP Highland in Scotland, the Royal Navy’s Devonport base in Plymouth and Terminal B at Jacksonville International Airport in Florida.

Leo Quinn, chief executive of Balfour Beatty, said the group’s outlook “remains encouraging, including in the UK, with the new government reinforcing commitments to critical national infrastructure.”

The company highlighted the Labour Party’s pledge to increase defence spending to 2.5 per cent of GDP and investment in energy and transport infrastructure.

During the general election campaign, Labour promised to overhaul planning rules and launch a new 10-year infrastructure strategy as part of its aim to boost investment.

Mark Crouch, market analyst at eToro, said: ‘With a relatively small market capitalisation of £2bn, Balfour generates significantly more revenue than that, so the scope for extensive growth is clear.

‘The challenge, however, is to expand Balfour’s margins. Rising material costs have squeezed margins into single digits, which, if inflation were to return to the economy, would leave the company with little or no room to manoeuvre.’

Balfour Beatty shares fell 3.2 percent to 396.6 pence on Wednesday afternoon, although they are up around 18 percent since the start of the year.