ii view: Balfour Beatty builds on clean energy and transport demand
Aligned with the UK government’s infrastructure focus and with a key management performance indicator growing nicely. We assess prospects for this FTSE 250 company.
13th August 2025 11:50
by Keith Bowman from interactive investor
First-half results to 30 June
- Revenue up 10% to £5.15 billion
- Adjusted profit from operations up 7% to £108 million
- Order book up 6% to £19.5 billion from late December
- Interim dividend up 10.5% to 4.2 pence per share
- Average net cash held up 44% from late December to £1.1 billion
Guidance:
- Continues to expect full-year 2025 growth in adjusted profit from operations
Chief executive Leo Quinn said: “Our continuing strong cash generation is underpinned by a growing order book with improved margins and lower-risk contract forms. This provides the board with increasing confidence in significant future cash generation that supports our ongoing dividends and share buybacks.”
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ii round-up:
Construction firm Balfour Beatty (LSE:BBY) today detailed a growing order book fuelled by demand for energy transition and transport infrastructure although with growth in the UK countered by challenges in the US.
An order book of £19.5 billion rose from £18.4 billion in late December with adjusted profit from operations and excluding infrastructure investments growing 7% to £108 million. A loss of £11 million for the US construction business came after cost overruns for a Texas road-building project which management is attempting to claim back.
Shares for the FTSE 250 company fell 3% in UK trading having come into these latest results up by close to 40% over the last year. That’s similar to fellow construction company Kier Group (LSE:KIE). The FTSE 250 index is up almost 6% over that time.
Balfour Beatty projects include connecting new wind farms for UK power companies, a carbon capture project on Teesside, involvement in the planned Sizewell C nuclear reactor, as well as the building of the lower Thames Road Crossing.
UK construction-related profits rose 65% from a year ago to £56 million. Groupwide support services profits, and including road and rail maintenance services, improved 35% to £46 million.
The value of Balfour’s infrastructure investments fell 8% from late December to £1.2 billion. The US government is extending its monitoring of Balfour’s US military housing developments until June 2026.
Average group net cash held, a key management health indicator, rose to £1.1 billion from £766 million as of late December. A £125 million share buyback is expected to complete by the year end with the interim dividend raised 10.5% to 4.2 pence per share.
As previously announced, chief executive Leo Quinn is stepping down in September and will be replaced by Philip Hoare of AtkinsRéalis. A third-quarter trading update is scheduled for 4 December.
ii view:
Started in 1909, Balfour today employs more than 27,000 people. Construction accounted for most revenues during 2024 at 80%. That was followed by Support Services at 15% and infrastructure investments the balance of 5%. Geographically, the UK generated most sales at 44%, followed by the US at 40% and the rest of the world the balance of 16%.
For investors, a cost overrun and ongoing monitoring of its infrastructure investments in the US warrant consideration. The pending departure of the CEO offers some uncertainty given Quinn’s transformation of Balfour during his tenure. Elevated US government borrowing could yet see infrastructure spending reduced going forward, while construction projects taken on at fixed prices always offer a degree of cost-overrun risk.
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On the upside, an order book of £19.5 billion as of late June supports management’s prediction for operational profit growth over 2025 and 2026. Diversity in both operations and geographical regions exists. Previous management initiatives have looked to lower risks including reducing fixed-price contracts where possible, while a focus on shareholder returns sees a continuing share buyback programme sat alongside an estimated future dividend yield of around 2.4%.
For now, and despite ongoing risks, order book momentum is likely to keep fans of this major construction company optimistic for the long term.
Positives:
- A focus on lower-risk contracts
- Increasing shareholder returns
Negatives:
- Uncertain economic outlook
- Risk of cost overruns
The average rating of stock market analysts:
Buy
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