(Alliance News) - Construction firm Balfour Beatty PLC restarted interim payouts and reiterated its 2021 outlook after a profitable start to 2021.
In the half-year ended July 2, the company reported a pretax profit of GBP35 million, compared to a GBP26 million loss a year before.
However, pretax profit remained 44% below the GBP63 million reported in the corresponding period in 2019.
Revenue increased slightly year-on-year to GBP4.15 billion from GBP4.12 billion, up 7.0% from the GBP3.88 billion reported in the equivalent period in 2019.
After withholding interim payouts in 2020, FTSE 250-listed Balfour declared an dividend of 3.0p at its half-year mark, up 43% from the 2.1p interim payout issued in 2019.
Balfour ended the first half with an order book of GBP16.1 billion, down from GBP17.5 billion 12 months earlier and lower than the GBP16.4 billion seen six months prior.
Looking ahead, the company reiterated its 2021 profit from operations outlook for earnings-based businesses to be in line with the GBP172 million reported in 2019.
The construction business raised its support services margin target range to between 6% and 8% - up from a 3% to 5% range previously guided - to represents an increase in its expectations for 2022.
"We continue to reshape Balfour Beatty to play to its strengths. These include leading capability in markets where governments are committed to long-term infrastructure programmes. It means choosing to exclude regions and sectors which cannot provide profitable, low risk growth, in favour of those that can. Our priority is on executing our already strong order book which will drive attractive cash generation and returns," said Chief Executive Leo Quinn.
Shares in Balfour Beatty were trading down 5.5% at 301.40 pence each in London on Wednesday morning.
Balfour said the underlying loss from operation at its UK Construction arm was GBP23 million in the first half of 2021, unchanged from a year ago, while the US Construction business improved to an underlying profit of GBP20 million from GBP6 million a year ago.
"Losses on London property construction contracts mean Balfour's UK construction business has not made any progress year-on-year," commented Nicholas Hyett, an equity analyst at Hargreaves Lansdown.
"Given the group was struggling with the complete closure of the construction industry 12 months ago that's a particularly poor result."
Balfour explained: "Performance issues at a small number of private sector property projects in central London have been exacerbated by COVID-19 disruptions, leading to a lengthening of project schedules. This situation has necessitated a reassessment of those contract end forecast positions, triggering write-downs.
"Balfour Beatty will no longer bid for fixed price residential property projects in central London."
Hargreaves's Hyett added: "A firm grip on costs and cash means Balfour Beatty's not in a bad place at the moment, but further progress rests on winning and executing new profitable construction contracts. It’s been a while since the group was able to do that reliably."
By Scarlett Butler; scarlettbutler@alliancenews.com
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