Balfour Beatty boosts interim dividend as income rise

Balfour Beatty announced a dividend hike on Wednesday as it revealed modest profit and turnover growth.

The construction giant said it would hand investors a 3.8 pence per share interim dividend, a 9 per cent increase on the previous year’s 3.5p per share payout.

Its revenue rose by 3 per cent to £4.7billion in the six months ending June due to strong results from its support services business and Hong Kong-based joint venture Gammon. 

Turnover at the former division jumped by a fifth to £554million, largely owing to road maintenance work deals, including in Buckinghamshire and East Sussex.

At the same time, revenue soared by 22 per cent at Gammon thanks to elevated activity levels at Hong Kong International Airport, where the firm is working on the expansion of Terminal 2. 

This compensated for revenues falling at its UK and US construction arms, with trade in Britain hit by lower volumes from the new-build Hinkley Point C nuclear plant.

Higher turnover failed to stop Balfour Beatty’s underlying profits from operations declining by £3million to £77million owing to increased costs at its infrastructure investments segment.

Yet the London-based firm still expects underlying group earnings to grow over the long term, helped by demand for work in the US buildings market and the UK’s energy, transport and defence industries.

Balfour Beatty’s order book stood at £16.6billion as of June, having recently gained contracts for work on HMP Highland in Scotland, the Royal Navy’s Devonport base in Plymouth, and Terminal B at Jacksonville International Airport in Florida.

Leo Quinn, chief executive of Balfour Beatty, said the group’s outlook ‘remains encouraging, including in the UK, with the new Government reinforcing commitments to critical national infrastructure.’

The company pointed to Labour’s pledge to boost defence spending to 2.5 per cent of GDP and investment in energy and transport infrastructure.

During the general election campaign, Labour vowed to overhaul the planning rules and release a new 10-year infrastructure strategy as part of its goal to encourage investment.

Mark Crouch, market analyst at eToro, said: ‘With a relatively small market cap of £2billion, Balfour generates revenues significantly more than that, so the scope for extensive growth is clear to see. 

‘The challenge however is for Balfour to widen their margins. Rising material costs have compressed margins to low single digits, which, if inflation were to creep back into the economy, would leave the company with little to no wiggle room.’

Balfour Beatty shares fell 3.2 per cent to 396.6p on Wednesday afternoon, although they have increased by around 18 per cent since the year started.