The construction giant is “well positioned” to navigate the financial impact of Covid-19, in part because it grew its order book value by 20% in the first five months of 2020, it said in a trading update.
Balfour Beatty’s project pipeline stands at £17.4bn, it said today, compared to £14.3bn as of 31 December 2019, the last period for which the company reported its full financial results.
It attributed the increase to the award of £3bn of contracts for earthworks, ground engineering, viaducts and tunnels along a 90km stretch of the planned High Speed Two rail link between London and Birmingham, as well as works at the HS2 London hub station, Oak Road Common. Balfour Beatty is to deliver the work in a joint venture with Vinci.
In the North West, Balfour Beatty is due to complete the £400m Manchester Engineering Campus Development at the University of Manchester next April, and is also carrying out highways and landscaping improvements around the Adelphi Quarter in Preston.
The statement to the London Stock Exchange today said that, to further cushion against the effects of the coronavirus pandemic, the firm set up a working group this year – the New Normal Taskforce – to gather suggestions from across the business on how to become more operationally and financially efficient.
Balfour Beatty also announced in March it would cancel its planned dividend to shareholders for the financial year 2020, although it intends to discuss this issue at the company’s rearranged annual general meeting later this month.
The majority of Balfour Beatty’s projects have remained operational throughout the period of uncertainty caused by Government-imposed restrictions. In May, 83% of the group’s sites across the UK and US were open, up from 78% in April.
However, 17% of operational sites are experiencing “significant disruption” due to the availability of employees, subcontractors or materials, according to the trading update.
The statement said: “The key driver of performance for the rest of the year will be improving current productivity, which will depend on the availability of employees, subcontractors and materials, while maintaining social distancing rules and ensuring satisfactory contractual resolution on projects impacted by Covid-19.”
The HS2 contracts in particular are expected to bolster the group’s performance in the years ahead. The scheme provides “critical visibility and impetus not only for the company, but also for the UK construction industry and its supply chain partners” Balfour Beatty said. It added that the Government’s decision to progress the first leg of HS2 demonstrates its “commitment to stimulate economic recovery”.
Leo Quinn, Balfour Beatty’s group chief executive, said: “These remain challenging and uncertain times. Our priority will always be the safety and health of all our employees, customers, partners and the public.
“[Our philosophy of] build-to-last has made Balfour Beatty a resilient organisation with a high-quality order book and a strong balance sheet.
“As we navigate the group through this exceptional year, we will maintain our focus on the longer term to ensure we are ready to capitalise fully on the significant opportunities in our chosen markets.”
The company’s share price was down 1.8% this morning.