Interactive Investor

Insider: infrastructure boss builds up shareholding by £500,000

7th September 2020 12:00

Graeme Evans from interactive investor


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Balfour Beatty chief Leo Quinn snaps up shares in the FTSE 250 builder, while new Moneysupermarket boss invests in comparison site.

Balfour Beatty (LSE:BBY) boss Leo Quinn has backed up his results-day words of optimism by snapping up £500,000 worth of shares in the FTSE 250 index infrastructure group.

Quinn's purchase on Wednesday was made at a price of 221p, which compares with 262p seen the day before Balfour slumped £26 million into the red in half-year results.

That loss reported on 12 August reflected the “unavoidable” impact of Covid-19 after site closures and productivity issues chiefly affected Balfour's UK construction services division.

Despite this disruption, Balfour still achieved positive cash flow and its order book increased by over 20% to £17.5 billion due to public sector infrastructure projects. Covid-19 uncertainty aside, the company expects its earnings-based businesses to recover steadily in the second half and to report a more normalised operating profit in 2021, broadly in line with 2019.

Quinn was quoted as saying that the “outlook could not be better”, given the company's strong balance sheet and capabilities, as well as the rising tide of infrastructure investment as governments focus on new projects to stimulate their economies.

Work on the HS2 rail scheme connecting London with Birmingham, Manchester and Leeds started on Friday and has provided visibility and impetus not only for Balfour but for the wider UK construction industry.

Balfour's joint venture with Vinci is set to deliver HS2's main civil engineering works south of Birmingham along with the London hub station at Old Oak Common.

The group is also one of three partners in Highways England's smart motorway programme worth up to £4.5 billion over 10 years. And at Hinkley Point C, Balfour is constructing a pair of six-metre diameter underwater tunnels to supply the nuclear power station with cooling water.

More than 75% of the order book is now contracted with public or regulated bodies, with the group expected to continue this focus on large, government-backed infrastructure contracts.

In the US, the forthcoming presidential and congressional elections provide some uncertainty but Balfour notes there is broad bipartisan support for increased infrastructure spending. In Hong Kong, two new terminal buildings and works associated with the third runway at the international airport should help to offset ongoing political uncertainty.

The companys right place, right time view of its markets failed to convince investors, however, as shares fell by 4% on the day of last month's bigger-than-expected loss. There was also no interim dividend after the full-year award of 4.3p a share was cancelled in March.

Balfour pledged to re-instate the dividend as soon as appropriate and to review the capital structure and potential for further distributions to shareholders.

Its continued strong cash performance allowed the group to fully redeem its preference shares on 1 July for £112 million, meaning it now has no more debt to repay until 2023. Balfour added: “The group continues to have one of the strongest balance sheets in the sector with customers increasingly recognising this competitive advantage.”

That view has a degree of support at Swiss bank UBS, whose analysts have a price target of 350p on the stock. It has been more than a decade since shares were trading at this level, with Balfour largely stuck in a range of 200p and 300p, despite widespread industry praise for Quinn's restructuring efforts since becoming chief executive at the start of 2015.

The former Qinetiq (LSE:QQ.) boss pulled the group out of the Middle East while his Build to Last strategy has focused on infrastructure projects offering improved margins and reduced risk in the UK, US, and Hong Kong.

The new chief executive of Moneysupermarket (LSE:MONY) has marked his start in the top job by purchasing £100,000 worth of shares in the price comparison specialist.

Peter Duffy, who was previously the boss of Just Eat (LSE:JET) and had been the chief commercial officer at easyJet (LSE:EZJbefore that, made the acquisition at a price of 309p.

The shares were as low as 221p in March as investors worried about how the poor availability of credit and banking products, as well as sharply lower interest rates, would impact the group at the height of the Covid-19 pandemic.

The MoneySavingExpert website owner recovered to almost 350p in June when the easing of lockdown measures brought a return to normality in its motor insurance division, while the company's performance in home services has remained strong.

First-half results published on 28 July revealed underlying earnings fell by 13% to £62.8 million, but good levels of cash flow meant outgoing chief executive Mark Lewis was still able to announce an unchanged interim dividend of 3.1p a share.

Financial guidance for 2020 remains suspended, with the company braced for greater earnings pressure in the second half due to comparisons with a strong first-quarter performance and the phasing of costs through the year. Its performance in its money segment continues to be suppressed, with very few promotional banking products to stimulate traffic.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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