Balfour Beatty plc, the international infrastructure group, is providing this trading update ahead of its results for the half-year ended 28 June 2013 which will be announced on 14 August 2013.
While markets remain very challenging, we have not seen a material change in trading conditions since our Q1 Interim Management Statement of 14 May 2013, except for a further worsening in the environment for our professional services business in Australia.
The level and mix of the order book remains broadly unchanged from £16 billion at the end of March, giving us good forward visibility.
At the divisional level, Professional Services profitability will be adversely impacted by depressed activity in Australia where the environment has continued to deteriorate due to a significant number of project cancellations in the natural resources sector as well as the consequential impact on federal and state revenues and spending plans. This is expected to be partially offset by some longstanding contract settlements in the second half and improved performance in Asia and the Middle East.
In UK Construction, first-half performance has been weak as expected, and results have been further impacted by the £50 million profit shortfall announced on 29 April as well as continued weakness in the Mainland European Rail businesses which we have announced our intention to divest. Although the environment is still difficult in the UK, the losses expected in the UK construction business in the first half are expected to be recouped in the second half as the management team, led by the newly-appointed UK Construction CEO, focuses on improving operational performance. This, combined with the timing of the cost savings benefits, is expected to result in a broadly break-even position for the year as a whole.
The positive order book development in US construction has been converting into revenue, supporting our expectation of an increase in revenue in the second half.
Our Support Services business continues to grow steadily and performed well in the first half with further opportunities anticipated, particularly in highways and utilities maintenance.
We have continued to implement our PFI asset disposal programme, achieving gains totalling £45 million in the first half of the year - £5 million higher than originally expected from our planned disposals for the year.
The additional gains in Investments are expected to offset the shortfall predicted in Professional Services.
With a further unwind of working capital as anticipated, the average net debt position for the first half was in line with management’s expectation of £300 million.
Our markets continue to be very challenging, and we continue to take action to mitigate the impacts on our business. Due to the timing of these actions and the anticipated recovery in the performance of the UK Construction business, we expect our profits to be significantly more skewed to the second half than in previous years, with the full-year result remaining in line with management’s expectations.
Balfour Beatty plc
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Balfour Beatty plc
Tel. +44 (0)20 7216 6865
This document contains forward-looking statements which have been made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of risks and uncertainties that are inherent in any forward-looking statement which could cause actual results to differ materially from those currently anticipated.
Notes to editors:
Balfour Beatty (www.balfourbeatty.com) is an international infrastructure group that delivers world class services essential to the development, creation and care of infrastructure assets; from finance and development, through design and project management to construction and maintenance.
Our businesses draw on more than 100 years of experience to deliver the highest levels of quality, safety and technical expertise to our clients principally in the UK, the US, Southeast Asia and the Middle East. We continue to develop our business in key growth markets in South Africa, Australia, Canada, Brazil and India. With proven expertise in delivering infrastructure critical to support communities and society today and in the future, our key market sectors include transportation (roads, rail and aviation), power and energy, mining, water and social infrastructure such as hospitals and schools.
Balfour Beatty employs 50,000 people around the world.