Balfour Beatty cuts debt by selling another stake in M25 operator

The infrastructure construction specialist sold a 7.5% stake for £62m cash, making an expected £32m profit, to funds managed by Dalmore Capital. Following a 12.5% sale to Dalmore at an identical price per share of £103m earlier this month, Balfour now has a 20% stake in the M25-operating public private partnership.

Balfour said as a result of the two-tranche stake sale, it now expects group profit before tax and year end net cash in 2017 will be above its previous guidance issued on 12 December, which included cash being in line with last year.

Taking account of both transactions, profit from infrastructure investments disposals for 2017 is now expected to be £85m, up from £53m indicated on 21 December and market consensus of £16m. Year-end net cash still expected to be around £103m higher than 2016 since the proceeds from the sale of this 7.5% tranche will not be received until 2018.

Balfour has also arranged a potential further sale of another 5% stake in Connect Plus to funds managed by Equitix and Dalmore, with this arrangement lapsing on 13 May 2018 and subject to a number of conditions. This would realise a further profit on disposal of roughly £21m and cash proceeds of £41m.

In the last calendar year the 7.5% interest in Connect Plus contributed profit before tax of £5m to group results.

House broker Numis said it believe the disposal will be used toward gross debt removal.

"We believe this is sensible as it underpins the balance sheet as a major differentiator to peers, but also to paves the way to future cash proceeds to be progressively used for shareholder return."