Balfour Beatty strikes confident note on results
Construction and engineering firm Balfour Beatty said its 2007 results would be at the top end of expectations, but its richly valued shares fell as Citigroup warned on public and private sector spending growth.
Balfour Beatty, whose business includes healthcare, education, road and rail transport, privately financed projects and social housing, said yesterday its order book rose by 20 percent to 11 billion pounds and 2 billion pounds more work was at preferred bidder stage.
"Trading in the second half of the year in all parts of the group has been strong and there have also been good settlements on some completed projects... It is anticipated that 2007 results will be at the top end of current expectations," it said.
Balfour Beatty is expected to report 2007 pre-tax profit of between 176 million pounds and 196.8 million on March 5, according to a survey of eight analysts by Reuters Estimates.
But its shares, which have outperformed UK sector peers by 35 percent over the past six months, fell 2.2 percent to 461 pence by 1131 GMT, having hit 446p, as Citigroup cut its price target to 420p from 450p.
"We believe that the rate of growth in government capital formation is likely to slow. We also expect the level of investment by the private sector to slow, perhaps markedly," Citigroup analysts said.
"Balfour's relatively strong performance leaves it vulnerable to a sell-off. The rating is expensive relative to its history, to its UK peers and to its European peers."
Balfour Beatty, whose clients include British Energy, National Grid, the US Department of Defense and the US Federal Bureau of Prisons, said its UK Building performed well, while the acquisition of construction firm Centex had been ahead of expectations.
Its Engineering division also showed very strong trading and its Rail business, which includes the troubled Metronet consortium, made good progress in a largely flat market, it said.
Agencies
(China Daily 01/15/2008 page17)
