Balfour orders reach £8.8bn

War chest grows to £350m with further acquisitions expected Birse and Mansell names retained as their brands still carry value.

Balfour Beatty's forward orderbook stands at £8.8bn. The latest figure represents a rise of 16% since the start of the year.

Announcing the group's latest interim results, chief executive Ian Tyler said: "It is pleasing to report another period of robust profit and earnings growth, supported by a strengthening of our cash position."

Balfour's figures (six months to 30 June 2006) show that net cash stands at £350m, which is £50m more than at the same time last year. The pile would have been higher but for Balfour's recent acquisitions. The group spent a total of £70m during 2006 on three acquisitions, one of which was Birse.

Tyler said that the current war-chest will be used for further acquisitions. Asked if a £1 bid for Amec Infrastructure could be expected from Balfour, he said: "They have gone in a different direction to us. I follow some of analyst Mark Howson's logic [for the £1 valuation]."

Balfour's turnover in the first half of 2006 ran to £2.8bn (£2.3bn). Pre-tax profit was trimmed back to £39m as a result of exceptional charges running to £21m.

The largest element within the exceptionals was the £17m goodwill write-off against Balfour's acquisition in 2001 of an American business called National Engineering and Contracting Company. Performance has been unsatisfactory. A new head, Mick McCarry, has been brought in to sort things out.

Balfour's civil and specialist engineering services division has an orderbook of £4.4bn. Profit (before exceptionals) was 41% higher at £24m, thanks largely to higher contributions in both the utilities and road maintenance businesses.

Balfour's UK civils business, now with Birse on board, should have a turnover of £700m in the full year. The Birse buy has "much improved geographical and sector coverage," said Tyler.

"We are keeping the business intact and the Birse name stays," he added. "I see no reason to throw the name away, nor its people, nor its processes. The group's weakness was down to scale - Birse was carrying a lot of corporate costs. To break out, it needed extra resources."

Balfour's other major UK acquisition, Mansell, also earned praise from Tyler. "It had a cracking year and margins are coming up to 3%. We'll be there soon," he said. "Mansell is a high-quality business. Its brand carries value."

[Contract Journal, 23 August 2006, p 8]