Balfour Beatty Tops Contractor League

According to data compiled by construction information specialist Glenigan, Balfour Beatty is maintaining its market share in the United Kingdom, despite increasing competition from smaller rivals.

When Balfour Beatty reports its interim results on August 17, the City will be looking for reassurance from the international infrastructure group that it can maintain a healthy order book and margins despite cuts in public spending on construction.

In the year to July 2011, Balfour Beatty ranked first, ahead of Laing O’Rourke, in a Glenigan league table that measures the success of the Top 50 contractors in winning contracts worth more than £500,000 in the UK. During that time, Balfour Beatty won 238 contracts worth a total of £2,685.2 million. (Balfour Beatty was also first in the previous year, from July 2010 to July 2011, with 228 contracts totaling £2175.8 million.) In the year to July 2011, Laing O’Rourke won 41 contracts worth a total of £2,541.1m.

Morgan Sindall was third in the Glenigan league table with 265 contracts worth £1,866.8m in the year to July 2011, Kier was fourth with 206 contracts worth £1,872.2m, and Galliford Try was fifth with 85 contracts worth £1 220.4m.

Balfour Beatty stated in May that it was continuing to adapt well to uncertainty in government capital expenditure in the United Kingdom and the United States, and that it was ‘encouraged’ by the progress made thus far. Overall contract wins during the first quarter increased its order book from the £15.2bn reported at the end of the year, and the group reported trading in line with expectations in early July.

Furthermore, the group’s UK construction order intake exceeded expectations in the first quarter, aided by work won by its regional UK building business, including novated Rok contracts and the award of a Crossrail contract to its civils business.

According to Glenigan contract data, Balfour Beatty’s tendering success rate was comparable to that of the entire year 2010. However, the figures indicate that the group’s life has become more difficult since 2009, when its success rate – as measured by the value of its contracts – was higher. Balfour Beatty won 17 significant contracts worth a total of £114.5 million in July 2011. In July 2010, there were 22 contracts worth £248.3 million.

Meanwhile, Balfour Beatty remains the top contractor in Glenigan’s road sector league table. In the fiscal year ending June 2011, the group received 41 road-related contracts totaling £1,340.5 million. Ferrovial, the closest competitor, received contracts worth £235 million.

Analysts will be looking for information on Balfour Beatty’s acquisitions as well as the group’s progress in churning its Private Public Partnership portfolio, which is the largest in the UK, in its interim results.

Balfour Beatty is the largest construction group based in the United Kingdom, with a global turnover expected to exceed £9.5 billion in 2011. Howard S. Wright, a US contractor, was acquired by the group in late June for an estimated £58 million. The transaction places Balfour Beatty as the third largest construction services provider in the US general building market, allowing it to enter the construction markets of northern California and the Pacific Northwest.

Investors are hoping that the group’s strong international spread and resilient PPP/PFI business will allow it to maintain profit growth during the UK downturn. Analysts predict that the group’s adjusted pre-tax profits will increase to £350 million in 2012 and £373 million the following year. So far this year, the group’s share price has fallen with the sector, from 315p in January to 256.5p today, valuing the company at £1,763.3m (as of close 9/8/11).

However, the group stated in May that it was benefiting from a strong order intake in the United States in 2010, and that its business in Hong Kong continues to grow, despite the fact that its market in Dubai remains subdued. It believes that the medium and long-term prospects for its infrastructure markets are still favourable.

Last Updated on December 29, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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