Balfour Beatty slips following mixed trading update

Investing.com -- Shares of Balfour Beatty (LON:BALF ) fell on Thursday after the infrastructure group reported a mixed trading update. 

While the company remains on track to deliver overall profit growth, challenges in its U.S. construction business offset gains in other divisions.

Balfour Beatty expects sales to rise by about 2% year-on-year, with its order book increasing by 5%. 

The group anticipates pre-tax profit from operations to grow to around £240-£245 million, up from £236 million last year, reflecting a slight improvement in profitability. 

UBS analysts had forecast £251 million, suggesting the results may fall just short of some expectations. 

Profit after tax is projected to come in slightly ahead of the consensus estimate of £209 million, boosted by average net cash of £750 million, which exceeded previous guidance of £700 million.

The company’s Support Services division emerged as a bright spot, with revenues expected to grow by 15% year-on-year, outpacing analyst expectations of 10%. 

Improved execution in its power revenue streams is driving this growth, with margins anticipated at 8%, translating into PFO of £93 million—higher than both the £83 million forecast by UBS and the £85 million consensus. This offsets weaker earnings from the U.S. construction division.

The construction arm faced setbacks, particularly in the U.S., where additional provisions on three civil projects weighed on performance. PFO for the division is now expected to remain flat at £156 million, compared with market expectations of £168 million. 

By contrast, the UK construction business is performing in line with expectations, with margin improvements continuing to provide support.

Balfour Beatty's Investments division offered a further cushion to its overall performance, with capital gains expected to exceed the previously guided range of £20-30 million, as several divestments near completion. 

However, the division's operating performance remains under pressure, with a £7 million loss projected, partly due to elevated monitoring costs.

Looking ahead to 2025, Balfour Beatty has yet to provide formal guidance, but UBS analysts suggest the company could see further profit growth, albeit at a slower pace. 

The analysts said that ongoing challenges in the U.S. construction business could continue to drag margins as it works through existing civil projects.

Source: Investing.com