FTSE 250 movers: Balfour Beatty surges; Direct Line tumbles as Ageas rebuffed

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."

Direct Line tumbled on Wednesday after saying it had received and rejected a second takeover approach from Belgian rival Ageas as it continues to undervalue the group.

On 28 February, the London-listed insurer said it had rejected a £3.1bn offer from Ageas. This comprised 100p in cash and one new Ageas share for every 25.24 Direct Line shares, and implied a value of 233p per share.

The latest "highly conditional, non-binding indicative" proposal from Ageas, received on 9 March, is of 120p a share in cash and one new Ageas share for every 28.41 Direct Line shares. This has an implied value of 237p a share.

"The board considered the latest proposal with its advisers and continues to believe the latest proposal is uncertain, unattractive, and that it significantly undervalues Direct Line Group and its future prospects while also being highly opportunistic in nature," it said. "Accordingly, the board unanimously rejected the latest proposal."

At 1040 GMT, the shares were down 9.6% at 204.22p.

Ageas chief executive Hans De Cuyper said: "We have made a compelling possible offer that represents a substantial premium to Direct Line's undisturbed share price.

"Our improved possible offer delivers substantial cash proceeds to Direct Line shareholders, whilst ensuring they benefit from the material value creation that we believe the combination of the UK businesses of Ageas and Direct Line will deliver."

In a research note last month after the first takeover approach, Jefferies said Ageas would likely need to make an offer of 270p to 300p a share - more in line with recent M&A valuations in the sector - in order for it to be accepted.

Intellectual property-focused investor IP Group reported a net asset value of £1.19bn in its results for 2023 on Wednesady, or 114.3p per share, down from £1.38bn and 132.9p per share in 2022.

The FTSE 250 company said despite the decrease, the return on net asset value still improved to -13% from -20% year-on-year, while the loss for the year narrowed significantly to £174.4m from £344.5m.

Market Movers

FTSE 250 - Risers

Balfour Beatty (BBY) 370.80p 9.12%
W.A.G Payment Solutions (WPS) 79.20p 5.60%
Carnival (CCL) 1,190.50p 5.54%
Moonpig Group (MOON) 179.60p 5.03%
Harbour Energy (HBR) 267.00p 4.83%
Tullow Oil (TLW) 27.70p 4.06%
Jupiter Fund Management (JUP) 91.65p 3.56%
BlackRock World Mining Trust (BRWM) 521.00p 2.96%
Breedon Group (BREE) 391.00p 2.89%
Domino's Pizza Group (DOM) 365.20p 2.87%

FTSE 250 - Fallers

Direct Line Insurance Group (DLG) 212.80p -5.76%
IP Group (IPO) 49.00p -5.04%
Tritax Eurobox (GBP) (EBOX) 54.10p -3.39%
Ferrexpo (FXPO) 53.30p -3.09%
Abrdn (ABDN) 150.15p -2.66%
Indivior (INDV) 1,631.00p -2.63%
Drax Group (DRX) 469.10p -2.53%
Future (FUTR) 600.00p -2.20%
JPMorgan Indian Investment Trust (JII) 900.00p -2.17%
Wizz Air Holdings (WIZZ) 2,233.00p -2.15%