Balfour Beatty Rises 11% on U.S. Orders, Improving U.K. Business
Balfour Beatty Plc (BBY) posted its biggest gain in London trading in more than 4 years as Britain’s largest construction company received more orders in the U.S. and predicted rising profitability at its U.K. unit.
“The positive order book development in U.S. construction has been converting into revenue, supporting our expectation of an increase in revenue in the second half,” the London-based company said in a statement today. “The losses expected in the U.K. construction business in the first half are expected to be recouped in the second half.”
The stock gained as much as 11 percent to 243.70 pence and was up 4.7 percent as of 9:01 a.m., valuing the company at 1.6 billion pounds ($2.4 billion). Before today, Balfour Beatty had dropped 20 percent since the start of the year, while the FTSE 100 index rose 10 percent.
The company, which has more than 50,000 employees and generates half of its revenue in Britain, is benefitting from an improving economy in its main markets. The International Monetary Fund this week lifted its estimate for the British economy in 2013. U.S. gross domestic product is forecast to expand 1.7 percent before accelerating by 2.7 percent next year, according to the Washington-based IMF.
Still, Balfour Beatty said some markets remain challenging and that it has not seen a material change in business conditions since May, except for a further worsening in the environment for its professional services business in Australia.
The company said it’s on track to post full-year results in line with management’s expectations, with the U.K. division breaking even.
“Balfour Beatty’s trading update reads relatively well given it has not announced a third profit warning and maintained full-year guidance,” RBC analyst Olivia Peters said in a note to clients. “Positively, Balfour Beatty has seen no further deterioration in the situation at its U.K. construction business.”
Balfour Beatty’s order book stayed at about 16 billion pounds. The average net debt in the first half was in line with management’s expectation for 300 million pounds, it said.
The company also said today it will enter the Australian water renewals business after winning a local water network contract. As a result, it will be able to bid for orders worth about A$150 million ($139 million) over the next five years.
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