Construction companies with wafer-thin margins and lots of debt made investors nervous in the wake of the Carillion collapse, so Balfour Beatty (BBY) should come as a breath of fresh air. Net debt is a nominal 6 per cent of total equity, while operating margins are now up to industry standards, rising in the second half of 2018 to 2.4 per cent in UK construction, 1.5 per cent in the US and 5.2 per cent for support services.
This is backed up by a much-improved balance sheet, with average net cash up from £42m in 2017 to £194m. During the year, it paid down over 40 per cent of gross debt, including repayment of convertible bonds.
The company remains highly selective about what new work it takes on, but still managed to increase the order book by 11 per cent to £12.6bn. It also launched its '25 by 2025' vision, which is designed to reduce onsite activity by 25 per cent by 2025, using more modular and digital innovations, thereby significantly reducing costs.
Analysts at Numis are forecasting adjusted pre-tax profits of £175m for the year to December 2019 and EPS of 22.2p, down from £180.6m and 26p in 2018.
| BALFOUR BEATTY (BBY) | ||||
| ORD PRICE: | 289.3p | MARKET VALUE: | £2.00bn | |
| TOUCH: | 289-289.5p | 12-MONTH HIGH: | 319p | LOW: 231p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 178p* | NET DEBT | 6% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 7.26 | -304 | -43.9 | 5.6 |
| 2015 | 6.96 | -199 | -30.2 | nil |
| 2016 | 6.92 | 10 | 0.2 | 2.7 |
| 2017 | 8.26 | 117 | 23.7 | 3.6 |
| 2018 | 7.81 | 123 | 19.7 | 4.8 |
| % change | -5 | +5 | -17 | +33 |
| Ex-div: | 16 May | |||
| Payment: | 5 Jul | |||
| Includes intangible assets of £1.16bn, or 168p a share | ||||
