14th Aug 2024 12:13
(Alliance News) - Analysts expect to make minor tweaks to forecasts for Balfour Beatty PLC after broadly as expected interim results.
In the six months to June 28, the London-based infrastructure construction contractor said pretax profit rose 37% to GBP112 million from GBP82 million a year prior. In contrast, underlying profit from operations fell 3.8% to GBP77 million from GBP80 million.
Revenue grew 3.3% to GBP4.68 billion from GBP4.53 billion driven by increases at Support Services and Gammon, Balfour Beatty's Hong Kong-based joint venture with Jardine Matheson Holdings Ltd.
Basic earnings per share climbed 63% to 18.1 pence from 11.1p.
Construction Services profit from operations rose 3% to GBP67 million with growth in UK.
At Support Services, profit from operations rose 13% to GBP34 million, with full-year margin seen at towards the top of a 6% to 8% targeted range.
Infrastructure Investments reported a GBP7 million operating loss.
The order book edged up 0.6% to GBP16.6 billion from GBP16.5 billion.
Chief Executive Leo Quinn said: "The outlook for the group's chosen growth markets...remains encouraging, including in the UK with the new government reinforcing commitments to critical national infrastructure. Balfour Beatty's prospects across these markets provide the board with confidence that the group will continue to deliver significant and attractive shareholder returns in the coming years."
Balfour Beatty continues to expect an increase in profit from operations from its earnings-based businesses for the full year.
"Balfour Beatty's strong operational performance in the first half of the year has further underpinned the board's expectations of earnings growth in 2024, accelerating in 2025."
The longer-term outlook remains positive too, the firm said, with growth forecast in 2025 and beyond, driven by the increasing opportunities in four key growth markets - energy, transport and defence sectors in the UK and the US buildings market.
Balfour Beatty raised its interim dividend by 8.6% to 3.8 pence from 3.5p a year ago. The firm said the GBP100 million share buyback is on track to complete in year.
UBS said the results were "largely in line with expectations".
The Swiss bank noted revenue was 5% above expectations, while pretax profit was 3% below forecast. Earnings per share were 2% above consensus.
UBS doesn't expect the consensus for Balfour's profit from operations of GBP240 million to change, but thinks the mix should change somewhat with investment PFO likely lower, offset by higher PFO in the earnings-based businesses.
UBS reiterated a 'buy' rating on Balfour Beatty.
Peel Hunt said pretax profit beat its estimate of GBP96 million with no "major surprises" across the earnings-based businesses.
"We view Balfour's comments as supportive for sentiment for the rest of the listed contractors. We believe UK construction margin progression will likely remain an important driver to a re-rating," the broker remarked.
Peel Hunt nudged its 2024 pretax profit forecast down to GBP269 million from GBP271 million, but increased its adjusted earnings per share forecast by 4% to reflect lower tax and share buyback to date. Pretax profit was GBP261 million in 2023, and underlying pretax profit was GBP291 million. Basic EPS was 37.3p, or 47.5p on an underlying basis.
"We believe the shares remain materially undervalued on 9.5x December 2025 estimated EPS, given the asset backing, operational progress, and shareholder returns," Peel Hunt said.
Peel Hunt has a 'buy' rating on Balfour Beatty.
Shares were down 2.5% to 399.40p in London on Wednesday morning.
By Jeremy Cutler, Alliance News reporter
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