Further disposal puts Balfour Beatty on course for industry standard margins

Balfour Beatty has forecasted that its performance for the year will be above previous expectations as a result of an additional infrastructure investments sale in December.

The construction group, which has been delivering the Aberdeen bypass in a joint venture with Galliford Try, said today that the 2018 infrastructure investments profit from disposals will be around £65 million. 

Leo Quinn

In a trading update covering the period to 13 December 2018, the firm also said that UK Construction is expected to achieve industry standard margins in the second half of 2018 in the range of 2-3%.

At the Aberdeen Western Peripheral Route (AWPR) project, completion of the full route is expected in 2018, with the construction joint venture continuing its dialogue with Transport Scotland on a commercial agreement in relation to associated claims.

In August Balfour Beatty reported it had suffered a further £23m hit from delays and cost increases on the AWPR - a key 20-mile section of which opened to traffic this week.

Today the firm also affirmed that revenue in the second half would be in line with the first half and signalled a higher level of new work.

The forecast year end order book is around £12 billion, higher than the 2017 year end (£11.4bn).

In line with its strategy of optimising value through the disposal of operational assets and following the sale of its interest in Fife Hospital for £43m in September, the group expects to complete a partial sale of 80% of its Edinburgh University student accommodation project for £24m.

Chief executive Leo Quinn said: “We are on track to deliver our Build to Last Phase Two goal of achieving industry standard margins in all earnings based businesses in the second half of 2018. 

“The actions we have taken since the start of 2015 have created a strong foundation for the future.  We have consistently invested in our capabilities, systems and leadership while de-risking the business, strengthening the balance sheet and selectively building the order book.

“Going forward, we aim to drive market leading performance by using the disciplines we have instilled to translate Balfour Beatty’s expert capabilities into long term profitable growth.”

The group’s full year results will be published on March 13.

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