Shares in infrastructure group Balfour Beatty (BBY) jumped 7% after the firm posted FY25 earnings which topped forecasts. The firm also launched a new £200 million share buyback for the current financial year.
Powering ahead
Revenue for FY25 rose nearly 8% to £10.77 billion, ahead of the £10.43 billion consensus forecast. The firm cited strong growth in UK power transmission work and demand from the US construction sector.
UK construction and support services both performed above the top end of their margin targets. Total profit from earnings-based businesses rose 82% to £327 million, while pre-tax profit rose 51% to £323 million.
Cash generation increased by 58% to £1.2 billion, allowing the board to raise the dividend by 12% to 14p/share. The firm also announced a £200 million share buyback, which is more than FY25’s total return through dividends and buybacks.
Accelerating demand
CEO Philip Hoare flagged the firm’s ‘strong operational performance and momentum in chosen growth markets’ along with ‘further anticipated growth’. That was reflected a 23% increase in orders to £22.7 billion, including over £3.5 billion in new UK power generation projects.
The US buildings business is seeing increased investment in education, leisure and data centres. The company has also won work on US defence projects such as the expansion of Fort Carson army base.
We have been bullish on infrastructure stocks for several years and results from firms like Balfour Beatty reinforce our view. Margins are low, admittedly, but the business throws off vast amounts of cash which flows to shareholders.
In the UK alone, the government has a 10-year infrastructure plan and a commitment to spend £725 billion. That provides clarity for the industry, allowing contractors and suppliers to plan and invest in capability.
Compare that to the housebuilding sector where firms are forever changing their forecasts for completions. Working out how many houses to build when so many factors affecting demand are beyond their control must be a huge headache.
Read the press release here: https://www.balfourbeatty.com/investors/
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