Solid business for Balfour Beatty as firm readies for Olympic conversion

Construction firm Balfour Beatty has seen trading in line with the board's expectations from the time of the group's third quarter interim management statement on 5 November 2013.

In professional services, performance was as expected. Balfour anticipates the year end order book for continuing businesses to be broadly in line with the £13.5bn from 31 December 2012.

However, the group said negative foreign exchange movements and a shift in the company's construction order book from the UK to the US would have an impact in its order book.

The firm's underlying cash performance was in line with expectations with average net debt for the year of £350m. Balfour saw a strong cash performance in December 2013 which resulted in an actual net debt balance of under £100m at the year end.

Balfour generates 73 per cent of its revenue and about 40 per cent of operating profit from construction.

Last week Numis analyst Howard Seymour, commented:

We see last year as the trough for construction services profit margins and expect things to get better this year, but not massively.

Last week, Balfour Beatty won a £154m contract to convert London’s Olympic stadium into a facility that will be the permanent home for West Ham football club.

At the peak of construction, the project will employ 400 people.

Andrew McNaughton, chief executive, said:

During construction, our firm commitment to the use of local labour and the creation of apprenticeships will continue to benefit the local community and the wider industry.

However, not everyone was pleased as to how the deal has turned out.

A Conservative member of the Greater London Assembly has questioned why the London Premiership club is being allowed to rent the stadium without shouldering more of the burden for its redevelopment."Why is West Ham only paying one tenth of converting the stadium?” said Andrew Boff, GLA Conservatives Olympics spokesman.

West Ham is making an initial payment of £15m and then an annual rental of £2m a year.