Directors' Valuation of the Investments Portfolio

The Directors’ valuation decreased by 15% to £1,069 million (2024: £1,254 million). The portfolio is 65% weighted towards the US (2024: 58%). The number of projects in the portfolio decreased by 11 to 49 (2024: 60).

Movement in value 2024 to 2025

Balfour Beatty invested £29 million (2024: £28 million) in new and existing projects. During the year the Group added two new multifamily housing projects, one in Conroe, Texas and another in Newberry, Florida. 
Cash yield from distributions amounted to £31 million (2024: £34 million).

Twelve assets were sold in the period. This included ten UK PPP assets sold to the Group’s co-shareholder; a direct-let student accommodation asset in Glasgow; and one multifamily housing project in South Carolina. The total consideration of £120 million also included £2 million of contingent consideration received in relation to the University of Texas at Dallas student accommodation disposal completed in 2024.

Unwind of discount at £82 million (2024: £81 million) is a function of moving the valuation date forward by twelve months with the result that future cash flows are discounted by twelve months less.
Operational performance movements resulted in a £30 million decrease (2024: £2 million decrease). The operational performance movements in the UK were primarily due to a reduction in the valuation of the student accommodation portfolio. In the US the movement was driven primarily by lower broker valuations of US multifamily housing assets and higher than forecast independent compliance monitor costs in US military housing. 

In addition, the discount rates applied to project cash flows were increased to reflect changes in long-term interest rates and the secondary market in both the UK and US, leading to a reduction in value of £62 million. 
The foreign exchange movement was a £53 million decrease, as sterling appreciated against the US dollar (2024: £12 million increase).

Methodology and assumption changes

The methodology for valuing most investments in the portfolio remains the discounted cash flow (DCF) method. Under this methodology cash flows for each project are forecast based on historical and present performance, future risks and macroeconomic forecasts. They also factor in secondary market assumptions. These cash flows are then discounted using different discount rates, which are based on the risk and maturity of individual projects and reflect secondary market transaction experience. The main exception to the use of DCF is for US multifamily housing projects which, due to the perpetual nature of the assets and the depth and liquidity of the rental housing market, are valued based on periodic broker reports for each property. 

The valuation methodology used at the previous Directors’ valuation is unchanged. 

Discount rates applied to the UK portfolio range from 8% to 10.25% (2024: 7.25% to 10.25%) depending on the maturity and risk of each project. The implied weighted average discount rate for the UK portfolio is 9.0% (2024: 8.4%). A 1% change in the discount rate would change the value of the UK portfolio by approximately £38 million.

Discount rates applied to the US portfolio range from 6.75% to 10.5% (2024: 6.25% to 10.5%), with an implied US weighted average discount rate of 8.2% (2024: 7.9%). A 1% change in the discount rate would change the value of the US portfolio by approximately £73 million.

The portfolio remains positively correlated to inflation. A 1% change in the long-term inflation rate in the UK portfolio would change the valuation by approximately £20 million and a 1% change in the long-term rental growth rate in the US portfolio would change the valuation by approximately £70 million. 

As in previous periods, the Directors’ valuation may differ significantly from the accounting book value of investments shown in the financial statements, which are produced in accordance with UK-adopted international accounting standards rather than using a discounted cash flow approach. A full reconciliation is provided in section i) of the Measuring Our Financial Performance section on page 67 in our 2025 Annual Report. 

Portfolio valuation December 2023

Value by sector

Value by phase

 Value by income type