A string of earlier profit warnings left little doubt that Balfour Beatty’s (BBY) first-half performance would be a lacklustre affair. Underlying earnings per share from continuing operations slid to 3.9p from last year's 6.6p, leaving the unchanged dividend uncovered by net earnings.
The construction and services group - still without a permanent chief executive - also revealed that, having rejected a takeover offer from Carillion (CLLN) late last month, it has since turned down a revised proposal. The main problem centres on Balfour’s determination to proceed with the sale of US-based services group, Parsons Brinckerhoff, a move that Carillion doesn't want. Management reckons that the sale of Parsons could result in up to £200m being returned to shareholders. Balfour remains in an offer period until 21 August and there's a possibility that Carillion could launch a hostile bid before then.
Balfour has battled for some time - and with little success - to restore shareholder value, and has taken a number of steps to refocus the business: disposing of rail operations in Germany, Scandinavia, Spain and Italy. It also sold its UK facilities management business for £155m. But the major drag of profits is coming from UK construction services. Problems with legacy contracts, and operational issues in engineering services, meant that losses from continuing operations jumped from £39m to £69m. Outside the UK, revenue in the Australian rail business fell as a result of delays in new tender opportunities and a decision has been taken not to bid for new rail construction contracts in the region.
Revenue from infrastructure investments fell from £295m to £271m, although underlying operating profit here rose from £63m to £72m after higher disposal gains of £51m. Support services benefited from more local authority work, which helped to offset lower volumes from the power transmission sector. That's partly because some projects were finished ahead of target, but also reflects lower capital replacement programmes.
Numis Securities expects underlying full-year pre-tax profit of £145m and EPS of 16p (from £186.6m and 19.9p in 2013).
| BALFOUR BEATTY (BBY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 240p | MARKET VALUE: | £1.65bn | |
| TOUCH: | 239-240p | 12-MONTH HIGH: | 322p | LOW: 194p |
| DIVIDEND YIELD: | 5.9% | PE RATIO: | 92 | |
| NET ASSET VALUE: | 140p* | NET DEBT: | 63% | |
| Half-year to 27 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 4.31 | -4.0 | 1.5 | 5.6 |
| 2014 | 4.17 | 1.0 | 1.6 | 5.6 |
| % change | -3 | - | +7 | - |
Ex-div: 8 Oct Payment: 5 Dec *Includes intangible assets of £1.2bn, or 176p a share | ||||
