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Trouble ahead for Balfour Beatty

Facing a transatlantic construction slowdown, perpetual delays to HS2 and now allegations of fraud in its US military housing business, Balfour’s outlook is looking increasingly uncertain
July 25, 2019

As UK construction companies struggle to escape the long shadow of Carillion’s demise, Balfour Beatty’s (BBY) transformation is often hailed as a beacon. Under the ‘build to last’ programme launched in 2015, 89 problematic contracts blunting profitability and cash generation were whittled down to five by the end of 2018. With more selective bidding on higher-margin and lower-risk jobs, the £12.6bn order book is considered a higher quality pipeline of work. Although construction revenue (79 per cent of the group total) fell by 8 per cent last year, underlying construction operating profit (40 per cent of the total) increased by 32 per cent to £95m.

IC TIP: Sell at 224.6p
Tip style
Sell
Risk rating
High
Timescale
Medium Term
Bull points

‘Build to last’ programme

Higher quality order book

Bear points

Low margins

HS2 delays

Military housing allegations

Poor cash generation

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