Press Release

Q1 Interim Management Statement May 2011

10 May 2011


Balfour Beatty 2011 Q1 IMS making progress

Balfour Beatty, the international infrastructure group, announces its 2011 Q1 Interim Management Statement, covering the period 1 January to 9 May 2011.

Trading and market environment

Overall, performance has been consistent with the outlook given at the time of the full-year results, and we continue to expect to make progress this year.

At the time of the full-year results in March, we highlighted some of the challenges facing our industry, particularly relating to uncertainty in government capital expenditure in the UK and the US. We are pleased to report that in the first four months of the year, our businesses have continued to adapt well to these conditions, and we are encouraged by the progress made so far.

Contract wins during Q1 have advanced the order book from the £15.2 billion year-end figure despite an adverse foreign exchange translation impact. The medium and long-term prospects for infrastructure markets in the Group’s geographies remain positive.

Operating performance

Professional Services
The order book at the end of March was modestly ahead of expectations with good wins in Power in the Americas partly offset by difficult market conditions in the UK.

Trading in our businesses in the UK and the US has been in line with our expectations. The Asian markets have been buoyant although we have had some adverse impact from the Queensland floods in Australia. Overall, operational delivery has been good and the division is on track to achieve its performance targets for the year.

Construction Services
In the UK, the construction order intake in the first quarter was ahead of our expectations. This is primarily due to contracts won by our regional UK building business, including novated Rok contracts, and the confirmation of the award of a Crossrail contract for our civil engineering business. Revenue and margin progressed in the quarter as expected.

In the US, we benefitted from the strong order intake in 2010, relating in particular to federal projects. Performance in the quarter exceeded expectations; however, as previously highlighted, the very strong margin performance we achieved in the US in 2010 is not likely to be repeated in 2011.

Our business in Hong Kong continued to grow while the market in Dubai remains subdued.

In April, our Rail division agreed to sell its UK trackwork manufacturing business. The sale follows the evolution of the procurement model over the last few years which has eliminated the competitive advantage of our owning manufacturing capability. The transaction was completed in May.

Support Services
We were awarded several major contracts in the quarter, leading to an order book level ahead of that at year-end. The majority of the increase was due to the renewal of a new facilities management contract with Royal Mail Group which we announced in March. Over the ten-year term Romec, our JV with Royal Mail, will deliver contracted services to Royal Mail Group worth £0.9bn with further variable scope for works worth up to £0.9bn. As part of the arrangement, we also purchased a business from Romec which will add mobile engineering capability to Balfour Beatty WorkPlace’s offering.

Today we announced local authority contracts worth £200 million. The contracts are notable in highlighting the changes in local authority requirements, with a marked shift towards larger, multi-activity contracts and bundling together of contracts from more than one local authority.

In April, we acquired Power Efficiency, an employee-owned energy procurement and carbon strategy consultancy, for a cash consideration of up to £18 million. The acquisition strengthens our ability to maintain large complex portfolios, monitor consumption and deliver end-to-end energy and carbon management services, which is seen as a key requirement by many of Balfour Beatty WorkPlace’s existing customers.

With AMP5 water utility revenues increasing as expected, we are making good progress overall in Support Services.

Infrastructure Investments
Performance in the period has been in line with our expectations. In the UK, we have reached financial close on Hertfordshire Schools, North West Fire and Rescue and Cambridgeshire street lighting.

We have a good pipeline of PPP projects for which we are currently bidding including opportunities in fire and rescue and police stations, waste to energy systems, roads and hospitals.

We continue to make progress towards the disposal of certain PPP assets and the sale of our interest in Barking Power.

Financial position and other matters

The financial position of the Group remains good with a strong balance sheet to support our growth ambitions. Average net cash for the first quarter remained strong at approximately £340m after the pension deficit payment in December 2010, contributions to PPP investments and bolt-on acquisitions.

Finance income in the first quarter benefited as expected from reduced net pension interest expense, largely as a result of a reduced pension deficit at the start of the year and from higher subordinated debt interest income from increased investment in PPP projects.

We announced at the time of the full-year results that as our operations have become more international, our exposure to foreign exchange has increased. So far this year, the unfavourable movement in the US dollar rate has been somewhat offset by the favourable movement we are seeing in the Australian dollar.

In 2010, our first-half results benefitted from strong profit performance in the US construction business and one-off incentive income in Balfour Beatty Management in the UK, and consequently, profit was more heavily weighted towards the first half than in prior years. In 2011, as previously indicated, we expect the split to be more second-half weighted.


Balfour Beatty is now a global business generating more than £10 billion of revenue across 80 countries in a diverse spread of sectors in the global infrastructure market. Our technical expertise is augmented by local knowledge, and the ability to manage and integrate the complex needs of our customers and stakeholders.

Over the medium and long term, we expect global infrastructure to be an attractive growth market. We have put in place a clear strategy, and the Group is well-placed to benefit from the growth in this market based on our depth of infrastructure knowledge, breadth of capability and the strength of our balance sheet.

While we do not expect, in the short term, a meaningful recovery in the UK and US infrastructure markets, we continue to expect to make progress this year.


Conference call
Balfour Beatty will host a conference call for investors at 14:30 (UK time). To join the call, please dial +44 (0)20 7138 0820 and quote confirmation code 3324151. A recording of the call and its transcript will be posted on our website within 24 hours of the event.

Analyst/investor enquiries:
Basak Kotler
Balfour Beatty plc
Tel 020 7216 6924

Media enquiries:
Duncan Murray
Balfour Beatty plc
Tel 020 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:

  1. Balfour Beatty ( is a world-class infrastructure group with capabilities in professional services, construction services, support services and infrastructure investments.

    We work in partnership with our customers principally in the UK, continental Europe, the US, South-East Asia, Australia and the Middle East, who value the highest levels of quality, safety and technical expertise.

    Key infrastructure markets include transportation (roads, rail and airports); social infrastructure (education, specialist healthcare, and various types of accommodation); utilities (water, gas and power transmission and generation) and commercial (offices, leisure and retail).

    The Group delivers services essential to the development, creation and care of these infrastructure assets including project design, financing and management, engineering and construction, and facilities management services.

    Balfour Beatty employs 50,000 people around the world.

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