Construction giant Balfour Beatty forecasts stable profits despite higher costs amid continued strong trading
- Balfour Beatty expects earnings to be ‘broadly in line’ with last year
- The group’s order book was £17bn in March, up from £17.4bn in December
Balfour Beatty has said it still expects full-year earnings to remain flat as the company reported trading since January was in line with forecasts.
Britain’s largest construction contractor posted an underlying operating profit of £232 million from its revenue-based business last year, following strong performances across all of its construction divisions.
In a brief trading update released on Friday, the group stated that the 2023 equivalent figure is expected to be “broadly in line” with the previous year’s levels.
Achievements: Balfour Beatty, Britain’s largest construction contractor, posted an underlying operating income of £232 million from its revenue-based business last year
The company’s 2022 results were strongly boosted as the UK construction segment returned to profitability after writing off a number of private sector property projects in central London last year.
It further benefited from an 11 percent underlying revenue increase driven by a stronger US dollar, civil engineering activities at Hong Kong-based joint venture Gammon and work on the Hinkley Point C and HS2 railway line in the UK.
During the period, Balfour Beatty also increased the size of its order book by 8 per cent to £17.4bn, which then fell back to £17bn at the end of March.
So far this year, the group has won contracts to improve highways in North Carolina, build two coastal defense projects in Denbighshire and build a new campus at Fife College in Scotland.
But the biggest deal Balfour Beatty won was a £1.2 billion contract to work on the proposed Lower Thames Crossing, a major road scheme designed to ease congestion in southern England.
As well as numerous bridges and viaducts, the company will build 10 miles of new roads, including two underpasses under the River Thames, with the aim of easing pressure on the extremely busy Dartford Crossing.
Construction on the project will begin in 2024 and should be completed by the start of the next decade.
When completed, the Lower Thames Crossing will surpass the Queensway Tunnel under the River Mersey as Britain’s longest road tunnel and also be the third widest bored tunnel in the world.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘The UK government renewed its commitment to infrastructure investment at the end of last year and should look after major construction groups such as Balfour for years to come.
‘But even in good times, margins in the construction industry are pitifully thin. Last year we saw the operating margin creep back up to 2.5 percent, but such low margins leave little room for error when problems arise.
“Investors should also remember that Balfour’s fortunes will continue to rise and fall with the broader economy.”
Balfour Beatty Shares were 0.5 per cent higher at £391.2p late Friday afternoon, meaning they are up about 62 per cent over the past 12 months.