Balfour Beatty rallies as it lifts dividend, announces £100m buyback

Infrastructure group Balfour Beatty surged on Wednesday despite posting a drop in full-year profit, as it lifted its dividend, announced a £100m share buyback and struck an optimistic note on the outlook.

In the year to the end of December 2023, pre-tax profit fell to £244m from £287m a year earlier, with the company pointing to lower gains on investment disposals, as guided. Revenue was up 7% at £9.6bn.

The order book fell to £16.5m from £17.4bn a year earlier.

But shares in the firm were up 8% at 366.90p at 0900 GMT as investors welcomed a buyback and increased dividend.

The board recommended a final dividend of 8p per share, giving a total for the year of 11.5p, up from 10.5p in 2022. In addition, Balfour said it plans to buy back up to £100m of shares during the 2024 phase of its multi-year share buyback programme.

This brings the cumulative return to shareholders since the introduction in 2021 of the multi-year capital allocation framework to more than £750m.

Chief executive Leo Quinn said: "The group's reliability and resilience has again delivered a solid performance, with increased revenue and profit from our earnings-based businesses and strong operating cash flow.

"This success against a challenging economic backdrop is driven by our disciplined contract risk management across a geographically and operationally diversified portfolio.

"The board remains confident in Balfour Beatty's ongoing ability to deliver sustainable cash generation for significant shareholder returns, with growth from our earnings-based businesses in 2024 underpinned by the strength of the group's order book. Looking to 2025 and beyond, we expect our unique capabilities and complex infrastructure project experience to drive further earnings growth, with attractive opportunities being pursued in the UK energy, transport and defence markets and in the US."

Russ Mould, investment director at AJ Bell, said: "Construction and engineering can be difficult industries in which to operate if the economy isn’t firing on all cylinders. Projects can be delayed or cut back, margins can come under pressure and the pipeline for new opportunities can shrink. Combining this situation with a general election year also presents further uncertainties. It’s against this backdrop that Balfour Beatty is managing to keep its head above water and better than expected results have put a rocket under the share price.

"Resilience is the name of the game and investors like what Balfour Beatty is saying. The company is confident that the broader push to invest in infrastructure projects is playing to its strengths. It also implies that no matter who wins at the next general election - Conservatives or Labour - both parties want to ensure the UK has clean and domestically-generated energy, which means plenty of work for Balfour Beatty to chase. Overseas opportunities also seem plentiful."