Balfour Beatty share price: Balfour swings to first half loss

As far as UK as the construction sector is concerned the industry has had had to face a litany of challenges. With the collapse of Carillion, along with the restructuring of a number of its peers, Balfour Beatty has managed to be able to stand apart, its share price back to where it finished at the end of last year.

Balfour Beatty’s share price did see a big plunge in the lead up to the various sector shutdowns, but largely due to the diligence of CEO Leo Quinn, and his turnaround strategy the company is in a much better place now than it was all those years ago when it fended off a takeover approach from Carillion.

Since then the company has gone from strength to strength only focussing on high margin work. This has helped hugely in maintaining a healthy cash flow and saw profits last year rise 8% to £221m, when the company reported full year numbers in March.

A rise in the order book and focus on high margin work saw net cash rise 68% to £325m.

In June the company pulled the dividend to conserve cash, despite an order book of £17.4bn and a fairly solid liquidity base of £452m in cash and £375m in credit.

The company also has £3bn worth of contracts in relation to HS2, though given recent events around Covid-19 you have to question whether pursuing such a project would still make economic sense to future governments.

Today’s first half update has served to confirm this outlook despite a pre-tax loss of £24m, which was largely due to operational reasons with UK construction accounting for the bulk of it, with a loss of £23m. This was due to the various closures of sites in Scotland, while the London operations only had limited productivity. Airport operations were also adversely affected.   

Revenues came in 6% higher at £4.1bn, while the order book rose to £17.5bn, from £13.2bn a year ago, and 20% higher than the end of the last fiscal year, largely due to the addition of £3bn of new HS2 contracts.

Cash flow performance was also positive with an increase in net cash to £563m from £425m, helped in some part by various cost saving measures, including the up to 20% temporary salary reductions for senior management, as well as the cancellation of the final dividend.

The company also went on to say it would look to reinstate the dividend as soon as possible.