Half-year operating losses at Balfour Beatty (BBY) widened to £148m, from £84m a year ago, as the engineering contractor struggled to extricate itself from underpriced legacy contracts. These low-margin arrangements, many of which were inked during the financial crisis, have generated successive profit warnings and have prompted a major rationalisation programme by chief executive Leo Quinn, who came in to tighten up affairs at the beginning of this year.
Mr Quinn's 'Build to Last' transformation programme is on track to deliver its 24-month targets for "£200m cash in and £100m cost out". Management has no intention of committing the sins of the past. As a consequence, in London and the southeast higher bid thresholds and a decision to pull out of certain types of work resulted in lower UK order intake. But the overall £11.3bn order book remains healthy enough and is expected to increase in the second half as contracts at preferred bidder stage crystallise.
The past few months have been particularly encouraging as the group has secured contracts or preferred bidder status for the Bergstrom Expressway in Texas, a 'smart' motorway package to update parts of the M4, M5 and M6, and work on the new Hinkley Point C power station.
Broker Numis Securities forecasts adjusted full-year losses per share of 6.4p, swinging to EPS of 14.3p next year (from a loss per share of 11.6p in 2014).
| BALFOUR BEATTY (BBY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 244p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 243-244p | 12-MONTH HIGH: | 262p | LOW: 146p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 123p* | NET DEBT: | 18% | |
| Half-year to 26 June | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 3.56 | -58 | -6.2 | 5.6 |
| 2015 | 3.47 | -150 | -22.0 | nil |
| % change | -2 | - | - | - |
*Includes intangible assets of £1.06bn or 153p a share | ||||
