Balfour Beatty ups dividend on rising profits

·2-min read
Reballasting the track formation at Bourne End in August 2003 during the West Coast Main Line upgrade, United Kingdom. (Photo by Rail Photo/Construction Photography/Avalon/Getty Images)
Balfour Beatty posted a profit of £51m, up from from £20m this time last year. Photo: Rail Photo/Construction Photography/Avalon/Getty

Balfour Beatty (BBY.L) doubled its profit in the first half of 2021 compared with last year as the UK economy’s reopening helped the company recover from the pandemic and reward shareholders with a dividend.

The FTSE 250 (^FTMC) infrastructure group posted a profit of £51m ($70m), up from from £20m this time last year. Pretax profit for the half year ended July 2 was £35m ($48.1m) compared with a loss of £26m.

Revenue rose slightly to £4.15bn from £4.12bn.

Shareholders received an interim dividend of 3 pence per share, 43% more than what they got in 2019. Last year, no dividends were given. The firm also purchased £99m of its £150m 2021 share buyback programme.

Its support services segment benefited from end of contract gains and exit from the gas and water sector.

However, the value of orders received by Balfour fell by £1.4bn to £16.1bn. CEO Leo Quinn said the company's priority "is on executing our already strong order book which will drive attractive cash generation and returns.”

The company’s stock tumbled roughly 7% on Wednesday morning.

Balfour Beatty's stock was down on Wednesday morning. Chart: Yahoo Finance UK
Balfour Beatty's stock was down on Wednesday morning. Chart: Yahoo Finance UK

"Losses on London property construction contracts mean Balfour’s UK construction business has not made any progress year-on-year," said Nicholas Hyett, Equity Analyst at Hargreaves Lansdown.

"Given the group was struggling with the complete closure of the construction industry 12 months ago that’s a particularly poor result," he added.

He said margins are expected to continue improving in support services and demand for the group’s infrastructure assets from institutional buyers remains solid, which is underpinning a hike in the dividend.

Read more: UK inflation slows down to 2% in temporary blip

"A firm grip on costs and cash means Balfour Beatty’s not in a bad place at the moment, but further progress rests on winning and executing new profitable construction contracts. It’s been a while since the group was able to do that reliably.”

Balfour CEO Quinn said: “We continue to reshape Balfour Beatty to play to its strengths."

“These include leading capability in markets where governments are committed to long-term infrastructure programmes. It means choosing to exclude regions and sectors which cannot provide profitable, low risk growth, in favour of those that can."

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