Numis lifts Balfour Beatty to 'buy' after half year interims

Numis raised its rating on Balfour Beatty to ‘buy’ from ‘add’ and reiterated its target price of 294p on Wednesday after the company reported its half year results.

Balfour reported a pre-tax loss of £21m, down from £150m the same time a year ago, on revenue of £4.1bn, down from £4.2bn.

The order book was up 7% at constant exchange rates to £12.4bn and the company reinstated it dividend with a 0.9p per share payment in a sign that the turnaround plan under boss Leo Quinn is bearing fruit.

“There are a number of key positives in the interim results out today - strong cash performance (enhanced from 2017 onwards by the new deficit payment plan), while Investments and Services (ex-UK Construction) are performing as expected and Services is back into profit,” said Numis.

“Construction UK (CSUK) H1 losses should enable completion of the majority of legacy issue by end 2016, but we believe it prudent to assume it will not fully offset H1 loss in full year numbers. However, this needs to be put in context - we expect CSUK to move into profit in H2 2016 and continue to expect 2017 and 2018 recovery in line with previous expectations.”

As a result Numis said it believes Balfour is at a turning point, especially given the reinstatement of an interim dividend.

The broker added: “We retain the view that the move toward 'industry standard' margins by 2018, together with the underpinning (and potentially increasing) of value in Investments, provides significant upside on a short and medium term basis.”

Shares rose 7.35% to 262.36p at 0901 BST.