Balfour Beatty's new £180m of cash - how the money will be used

Balfour Beatty’s issue of new shares last week, at a discount of just 5% to the trading price on the Stock Exchange, has given the group an additional £180m to play with. CJ asked the group to explain:

So what was the thinking behind the move?

The past six years have been good for Balfour. A 20% profit growth, year on year, divides equally between two parts: organic profit growth and new additional profits from acquisitions.

Balfour thinks there are more opportunities sitting all around it.

How many acquisitions has Balfour made of late?

Twelve since the start of 2007, and all funded from the group’s cash-flow, with a bit of help from the funds raised by a couple of disposals - one being the group’s stake in the Devonport ship yard.

Balfour’s latest acquisition, an American PPP which provides military housing facilities, gobbled up £180m of cash. It depleted Balfour’s cash resources and left it reaching the year-end with less cash-in-hand than it is used to holding.

With an additional £180m in the bag, what might Balfour do next?

It now has the flexibility to buy without having to go into debt.

Also, it can move ahead as a “big project contractor”. This status calls for groups offering a strong balance sheet – in the UK Balfour has to provide letters of credit in order to win such awards, while in the US it is asked for security bonding.

Was it difficult to raise such a sum of money in today’s financial market?

No, the share offer was oversubscribed.