International infrastructure specialist Balfour Beatty sprang a pleasant surprise with underlying profits coming in higher than expected.
Broker Panmure Gordon had expected headline first half profits to decline from £138m last year to around £131m, but in fact they rose 12% to £154m. Reported profit before tax, which includes exceptional items, edged up 2% to £93m from £91m.
Underlying earnings per share (EPS) rose 28% to 18.8p from 14.7p the year before, while basic EPS improved 20% to 12.2p from 10.2p.
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Revenue rose 6%, or 1% excluding the impacts of acquisitions and currency movements, to £5,535m from £5,222m.
Margins were up in the Professional Services division but margin pressure remains in Construction Services. The group said cost increases in Support Services are not expected to be repeated in the second half.
At the end of June the group had net cash, excluding net borrowings of its public/private partnership (PPP) subsidiaries, of £34m, down from £292m a year earlier.
The PPP subsidiaries had net borrowings of £352m, up from £294m a year earlier.
With £5bn of orders won in the first half the order book is stable at £15.0bn.
Divisional performanceThe Professional Services division saw revenue creep up 1% to £845m from £840m in the first half of 2011, while profit climbed 11% to £42m from £38m the year before.
The division's underlying operating margin improved to 5.0% from 4.5% the year before, while the order book edged up 1% from a year earlier to £1.6bn, with the decline in the UK offset by growth in North America and the Middle East.
In Construction Services, revenue rose 7% to £3,504m from £3,270m the year before but underlying profit slumped 21% to £53m from £67m.
The order book slimmed down 9% to £8.3bn from £9.1bn at the end of June 2011, while the underlying operating margin reduced from an already thin 2.0% to 1.5%, although the group is sticking with its prediction of full-year underlying margin of around 2% for 2012 in anticipation of a pick-up in fortunes for the rail business.
The Support Services division grew revenue by 9% to £828m in the first half of 2012 from £757m in the corresponding period of 2011. Underlying profit slumped to £10m from £25m, with the underlying margin collapsing to 1.2% from 3.3%. However, the order book grew 5% to £5.1bn.
Profitability was hit by start-up costs but is expected to recover in the second half of the year.
Infrastructure Investments contributed £80m to pre-tax profits, up from £34m the year before, due to the successful disposal of two infrastructure investment assets.
Dividend and outlookThe interim dividend has been hiked by 6% to 5.6p from 2011's interim pay-out of 5.3p. "The increase in our interim dividend, consistent with our progressive policy, reflects our confidence that we are well-placed to take full advantage of the global growth in infrastructure markets," said Ian Tyler, Balfour Beatty's Chief Executive.
The group said it is on course to meet its expectations for the full year and is making good progress on the early stages of its growth strategy in key industry verticals.
JH
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