ii view: Balfour Beatty shares soar as it ups profit hopes

First-half results to 30 June

Revenue up 8% to £5.56 billion

Adjusted profit from operations up 55% to £119 million

Adjusted earnings up 51.7% to 21.7p per share

Order book up 17% to £22.9 billion

Interim dividend up 12% to 4.7p per share

Average net cash held up 47% to £1.62 billion

Guidance:

• Now expects full-year 2026 adjusted profits to grow by a low double-digit percentage, up from a previous high single-digit percentage

Chief executive Philip Hoare said:

“Balfour Beatty enters the second half with real momentum. Our strong first-half performance reflects the quality of our business, the discipline of our execution and, above all, the exceptional contribution of our people in delivering for our customers.”

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ii round-up:

Balfour Beatty (LSE:BBY) today upped full-year profit hopes, aided by the construction company’s ongoing focus on UK energy transition and the building of new US datacentres.

Adjusted profits for the first half to late June rose 55% to £119 million, comfortably surpassing City forecasts of around £94 million. The largely UK and US-focused Balfour now expects full-year 2026 adjusted earnings to grow by a low double-digit percentage, up from a previous high single-digit percentage.

Shares in the FTSE 250 company rose 9% in UK trading having come into these latest results up by just over a fifth so far in 2026. Shares for fellow construction company Kier Group (LSE:KIE) and the FTSE 250 index have both risen by around a tenth year-to-date.

Balfour focuses on the four arenas of energy transition, defence, and transport in the UK, as well as new buildings used for health, education, technology, hospitality and government facilities in the US.

Notable contract wins during the period included a £325 million power transmission project in Scotland, a £315 million road maintenance contract in Warwickshire, and a combined $350 million (£259 million) total for new US data centres.  

An order book of £22.9 billion as of late June rose from £19.5 billion a year earlier. An interim dividend of 4.7p per share, and payable to eligible shareholders on 4 December, is up 12% from a year ago.

Average group net cash held, previously highlighted by management as a key health indicator, rose 47% year-over-year to £1.62 billion.

The value of the group’s own infrastructure investments as of late June at £1.1 billion remained unchanged from late December.

A full-year trading update is scheduled for 3 December.

ii view:

Began in 1909 by George Balfour and Andrew Beatty, the London-headquartered company today employs over 25,000 people. Construction accounted for most revenues during 2025 at 81%, followed by Support Services at 13% and infrastructure investments the balance of 6%.

Geographically, the UK and US each generated around 45% of sales last year, with the balance of around 10% largely coming from Hong Kong.

For investors, a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Elevated UK and US government borrowing could see infrastructure-related spending reduced at some point going forward, while any construction projects taken on at fixed prices always provide a degree of cost-overrun risk.

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More favourably, a robust order book supports raised hopes for growth in adjusted 2026 annual profits. Previous management initiatives have looked to lower risks including reducing fixed-price contracts where possible. The business is diversified both in operations and by geographical region, while a focus on shareholder returns has seen over £1.2 billion returned to shareholders since 2021, with the shares now sat on estimated future dividend yield of around 1.8%.  

On balance, and while risks remain, exposure to areas such as energy transition and data centres will likely mean fans of this major construction company remain 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