2nd Oct 2014 06:40
LONDON (Alliance News) - Struggling infrastructure company Balfour Beatty PLC Thursday said it had sold its stake in a UK hospitals project for more than it expected, and had reached financial close in a US housing project as well as being made preferred bidder in two student accommodation projects in the US and Australia.
In a statement, the company said it has sold it 50% interest in the Pinderfields and Pontefract hospital public-private partnership project to a subsidiary of HICL Infrastructure Co Ltd for GBP61.5 million, exceeding Balfour's expectations and generating a gain on disposal of GBP42.2 million. The proceeds exceed the revised directors' valuation by GBP13.5 million, representing an uplift of 28%, it said.
The proceeds of the hospital project sale will be reinvested, Balfour said.
Balfour said it has reached financial close on Carmendy Square, a multi-family housing community in Florida, and has also been appointed preferred bidder on two new student accommodation projects, one for The University of Texas at Dallas and one for University of Wollongong in Australia. Balfour Beatty expects to invest about GBP20 million of equity in these projects over the next three years.
"This disposal supports the substantial increase in the Directors' Valuation of the PPP portfolio, whilst also demonstrating that the valuation maintains a level of prudence. We continue to see a strong pipeline of opportunities and therefore, in line with our strategy of recycling equity, the proceeds will be invested in new projects as we continue to diversify our business," Ian Rylatt, Chief Executive of Balfour Beatty Investments said in a statement.
In August, Balfour had published a review of the directors' valuation of its PPP portfolio, which resulted in the UK portfolio valuation increasing by 63% to GBP801 million, and the total portfolio increasing by 46% to GBP1.05 billion as at June.
The moves represent good news for a company that has had to fend off a merger attempt by peer Carillion PLC in recent months, only to then have to issue another profit warning due to the problems it is facing in its UK construction arm.
On Monday, the company said it expects its Construction Services UK division will take another GBP75 million hit to its profit this year and said it has appointed auditors KPMG LLP to undertake a detailed independent review of the contract portfolio within the business.
In a separate statement, HICL Infrastructure said it now owns the whole of the Pinderfields and Pontefract Hospitals PPP project, and it funded the acquisition of Balfour's stake from existing cash and debt resources.
"We are pleased to have completed this incremental acquisition which meets the group's strategy of increasing its stakes to majority ownership when the opportunity arises. It demonstrates how the Group can leverage the existing portfolio to increase ownership," Erwan Fournis, director of infrastructure at InfraRed Capital Partners Ltd, the company's investment adviser, said.
By Steve McGrath; [email protected]; @stevemcgrath1
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