Positive signs mixed with caution at Balfour Beatty

In a half-year trading update, the UK construction firm has announced a better-than-expected order book while acknowledging the uncertainties arising from government cuts.

Balfour Beatty, the UK-based international infrastructure group, announced as part of a half-yearly trading update yesterday that its “high-quality order book is expected to be ahead of the £14.1 billion (€16.9 billion; $21.3 billion) reported for 31 December 2009”.

However, the update also noted: “There remain uncertainties in some parts of our markets, particularly with regard to government funding of infrastructure investment.”

Since the UK general election in May, Balfour Beatty’s shares have fallen 20 percent on fears that it would be negatively impacted by the new coalition government’s spending cuts.

On Monday, it was announced that the £55 billion Building Schools for the Future (BSF) programme initiated by the previous government would be scrapped. A report in the Telegraph newspaper said that three BSF contracts worth £200 million, in which Balfour Beatty was preferred bidder, had been put under review.

In its update, Balfour Beatty stressed that it operates in “a diversity of markets and geographies” and is not, by implication, reliant on the UK. The firm was recently named preferred bidder for the multi-billion-dollar Denver Eagle P3 commuter rail project in the US.

Balfour Beatty said it has achieved preferred bidder status on five projects altogether so far this year.

The firm described its cash position as “robust”, with average net cash in excess of £400 million for the first half of 2010 (excluding net debt in PPP subsidiaries) compared with £224 million in the first half of 2009.

Balfour Beatty will announce its half-year results up to 26 June 2010 on 11 August.