Join our community of smart investors

Balfour Beatty warns on profits

Trading elsewhere remains solid enough, but construction weakness will remain a problem next year
November 8, 2012

Shares in Balfour Beatty (BBY) fell 16 per cent to 256p after the construction and support services group warned that weakness in the US and UK construction sectors will leave full-year profits below earlier expectations. Furthermore, the order book at the end of the third quarter was down from £15bn in June to £14.4bn. And while analysts at Numis still rate the shares as an 'add', they have downgraded full-year forecasts by 6 per cent for this year and 10 per cent for next year to pre-tax profits of £315m and £316m, respectively, and EPS of 36.3p and 35.5p.

IC TIP: Hold at 256p

Positive US leading indicators in the five months to March have been followed by five negative months, exacerbated by weaker Federal spending and a lack of any large complex project announcements. And it's very much the same story in the UK, where the group has been obliged to migrate towards smaller contracts.

But business elsewhere is holding up well. In professional services, a slight downturn in the UK has been offset by stronger growth elsewhere, while support services revenue was up in the third quarter. Infrastructure investments have also proved to be resilient, with more Public Private Partnership deals secured or in the pipeline.