Market report: City cheers as Balfour Beatty defies gloom over outsourcing
“We are a beacon of light in a very dark sector,” is how Balfour Beatty boss Leo Quinn described the construction giant today as its shares surged by more than 10%.
UK construction outsourcing has been a dangerous space for UK investors to play in over the past two years, plagued by Carillion’s collapse last year. The industry has also been hit hard by Brexit and financial mismanagement.
Like Kier and Interserve, Balfour has not been without its troubles, namely taking on low-margin roadbuilding projects as well as heavy debts.
But this session it demonstrated it is on a solid footing and comforted investors by posting profits up 9% to £72 million on the back of a 5% gain in revenue to £3.1 billion for its half year.
Balfour also upgraded its cash forecast to £300 million and raises the dividend by 31% to 2.1p.
“The likes of Carillion didn’t go bankrupt because they didn’t have any profit,” said Quinn, a former defence industry man. “It went bankrupt because it ran out of cash. It’s really important we give confidence to customers and shareholders that profits are backed by cash.”
The shares rose 11%, gaining 18.6p to 220.4p. On the main market the FTSE 100 calmed, down just 1.93 points to 7249.97, after more than a week of heavy losses caused by worries over global trade wars.
Further down the market Aston Martin was given a much-needed boost after its biggest shareholder, private equity firm Investindustrial took an extra 3% stake in the luxury carmaker.
The move set tongues wagging in the City as Investindustrial, which has stakes in companies including Morgan Motors, furniture company OKA and women’s shoes firm Sergio Rossi, had sold a large chunk of its stake at IPO last year.
The purchase means the Italian private equity firm owns 34%. It has agreed with the Takeover Panel not to buy further shares for 12 months to avoid having to make a bid. The 105-year-old carmaker has had a rough ride since it floated in October, with a more-than 70% decline in its share price.
One broker said: “It’s a boost for Aston. Longer term it might be better going private away from the public market’s eye.” The shares were up 6.2p to 497p.
On AIM, fast-fashion retailer Boohoo was making gains after analysts at Jefferies said its recent acquisition of Karen Millen and Coast’s online businesses would boost earnings despite much caution in the City over the deal. The shares added 1.1p to 230.6p.
