Interim Management Statement

RNS Number : 3078C

Balfour Beatty PLC

11 November 2009

 



11 November 2009

INTERIM MANAGEMENT STATEMENT

Balfour Beatty, the international infrastructure group operating in construction services, professional services, support services and infrastructure investments, today issues this Interim Management Statement, covering the period 28 June to 10 November 2009.

Financial performance

Trading performance continues to be in line with expectations.

Our balance sheet and general financial position remain strong, with average net cash in excess of £260 million.   In the period we completed the acquisition of Parsons Brinckerhoff which was substantially funded by a rights issue and, in addition, had net cash on acquisition of $188 million (£114 million).  

Business performance

There has been a strong overall performance in the building sector in both the UK and US.

Balfour Beatty Construction in the US has continued its strong performance from the first half and while the business has been working through the order book as previously indicated, there have been recent encouraging contract wins in Texas, Georgia and the Carolinas totalling US$400 million.

There has been a good overall performance in UK construction services, in a difficult market, with good contract wins in the education sector including construction contracts for schools and academies schemes in Hull, Lincolnshire, Stoke-on-Trent and West Sussex, partially offset by a reduced volume of work in our regional building business.

Balfour Beatty WorkPlace, our UK facilities management business, performed well and has a strong order book and good prospects of further work. 

There have been strong performances in our UK major and regional civil engineering businesses, with good progress on a number of major road projects including the M25.  This strong performance was partially offset by a reduction in our smaller ground engineering business. 

As anticipated, there have been reduced volumes in Balfour Beatty Utility Solutions at the end of the regulatory cycle, although we anticipate new orders ahead of AMP5, the new asset management plan period, starting in April 2010.  In August 2009, we were selected as an alliance partner for the delivery of South West Water's K5 capital programme, which commences in April 2010.

There has been a good performance in Hong Kong, with a number of recent wins resulting in the order book increasing 30% in the period.  In the Middle East, performance has been steady. The market for new construction work in Dubai remains difficult, while payments for completed building work remain slow.  We are continuing to win building services work across the region.

The Rail businesses have been affected by reduced volumes in the UK and Germany, as previously indicated. Good operational progress has been made on the extension and upgrade of the East London Line and, after a slow start to the year, the order book position in Germany and Sweden is now strong.

In infrastructure investments, we reached financial close for the £176 million Carlisle Northern Development Route PPP concession contract in July and were appointed preferred bidder by Blackburn with Darwen and Bolton Councils for their £450 million PPP Building Schools for the Future (BSF) programme in October. Our bidding activity remains strong and we are currently bidding for a number of UK PPP projects including BSF schemes in Ealing, Derby, Hertfordshire and Oldham.

Balfour Beatty Communities is performing as expected and we continue to seek other opportunities to leverage our PPP expertise in the US market.

As is well understood, we have businesses in a large number of diverse markets, both geographically and by sector, which operate at different points in the economic cycle.  Where individual businesses are seeing reductions in their markets, they have taken prompt action to reduce cost. In addition, we have taken action across businesses to restructure our UK Rail and Mechanical and Electrical businesses in the period and our highways maintenance business earlier in the year, in order to ensure that we remain as cost effective as possible.

Acquisition of Parsons Brinckerhoff

On 17 September, the Company announced that it had entered into an agreement to acquire Parsons Brinckerhoff (PB), one of the world's leading professional services companies, for a cash consideration of US$626 million (c.£380 million).  

Balfour Beatty shareholder approval for the acquisition and associated rights issue to raise £353 million, net of expenses, was obtained on 7 October 2009 and the rights issue was successfully completed on 23 October 2009. PB's general meeting was held on 21 October 2009 and strong support of the acquisition was obtained with acceptances from around 98% of those eligible to vote, significantly in excess of the required 75%.  

Formal completion of the acquisition took place on 27 October 2009, from which point PB was consolidated into the Group's results although, given the seasonality of the business, it is not expected to have a significant impact on the 2009 results, other than cash flow.  As described in the prospectus, there will be substantial cash outflows in the first year due to a number of factors, including additional tax charges, the unwinding of certain working capital positions and project settlement costs and the exceptional transaction and integration costs.

A joint integration team has been formed to ensure the smooth transition of PB into Balfour Beatty and to ensure that the enlarged Group maximises the opportunities available to it in the coming months and years. 

Outlook

At the end of September 2009, the order book was in line with that reported at the half-year and coverage for next year is at a similar level compared with this time last year. With the addition of Parsons Brinckerhoff's order book of US$1.95 billion (£1.2 billion), the confirmed order book total for the Group is therefore now around £13.7 billion.  

We remain confident of making good progress in 2009. 

ENDS

Enquiries:

Duncan Murray

Balfour Beatty plc

Tel. [phone]

Notes to Editors:

Balfour Beatty (www.balfourbeatty.com) is a world-class infrastructure group operating in construction services, professional services, support services and infrastructure investments.

We work in partnership with our customers principally in the UK, the US, South-East Asia and the Middle East, who value the highest levels of quality, safety and technical expertise.  

Our key infrastructure markets include transportation (roads, rail and airports); social infrastructure (education, specialist healthcare, and various types of accommodation); utilities (water, gas and power transmission and generation) and commercial (offices, leisure and retail).  We deliver services essential to the development, creation and care of these infrastructure assets including investment, project design, financing and management, engineering and construction, and facilities management services.  

Balfour Beatty employs more than 53,000 people around the world and its strong financial position offers continuing flexibility to make appropriate investments in long-term growth opportunities.

 

END

 

 

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