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1. Company Snapshot

1.a. Company Description

Balfour Beatty plc finances, designs, develops, builds, and maintains infrastructure in the United Kingdom, the United States, and internationally.It operates through three segments: Construction Services, Support Services, and Infrastructure Investments.The Construction Services segment provides civil engineering, building, ground engineering, mechanical and electrical, refurbishment, fit-out, and rail engineering services.


The Support Services segment designs, upgrades, manages, and maintains water, gas, and electricity networks, as well as rail and highways.The Infrastructure Investments segment is involved in the acquisition, operation, and disposal of infrastructure assets, such as roads, hospitals, student accommodation, military housing, offshore transmission networks, waste and biomass, and other concessions.This segment also develops and finances public and private infrastructure projects.


The company serves government departments and agencies, regulated utilities, and private sector organizations.Balfour Beatty plc was founded in 1909 and is based in London, the United Kingdom.

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1.b. Last Insights on BBY

Recent news suggests that Balfour Beatty's financial prospects may not be as attractive as previously thought, with a fair value estimate of £7.55, implying a 38% undervaluation. The company's CEO, Leo Quinn, is set to step down in September, which may lead to uncertainty and potentially impact the company's performance. Additionally, the lack of significant news on major projects or acquisitions, such as the $70m construction projects in Florida secured in December 2024, may be a negative driver. The company's recent recognition as a top-performing US construction company by ABC may not have a direct impact on its current performance.

1.c. Company Highlights

2. 2024 Full Year Results Summary

Our 2024 financial results reflect a strong year, marked by robust financial performance and strategic progress. Revenues increased by 4% to GBP10 billion, driven by strong execution across our Construction Services and Support Services segments. EBITA rose by 7% to GBP410 million, while EPS reached 43.6 pence, up by 9%. The company continues to generate significant cash, with a GBP1 billion cash reserve, the highest in five years, and a GBP18.4 billion order book, up 12% year-over-year. This solid financial foundation enables us to pursue growth initiatives, including share buybacks and dividend returns, while maintaining a disciplined approach to capital allocation.

Publication Date: Apr -08

📋 Highlights
  • Strong Financial Performance: - The company reported a near GBP1 billion cash balance, a GBP18.4 billion order book, and a 10-year margin improvement from 2% to 2.9%. The business delivered underlying profit before tax of GBP335 million, up 14%, with revenue at GBP9.8 billion, up 4%. EBITA was GBP1.1 billion, up 7%, and EPS reached 43.6 pence, up 10%. The company returned GBP107 million to shareholders through buybacks and increased the dividend by 9% to 20 pence.
  • Cultural Transformation: - The company has undergone a significant cultural shift since 2014, with a focus on self-help and operational excellence, avoiding reliance on shareholders. This transformation is evidenced by an 84% employee engagement score, a 50% reduction in safety issues since 2021, and an attrition rate below 10%. The company has invested GBP80 million in training and apprenticeships, reinforcing its long-term success.
  • Market Position and Strategy: - The company maintains a strong market position with a GBP18.4 billion earnings backlog and GBP1.3 billion investment portfolio. It is well-positioned in the UK infrastructure market, with a market cap of under GBP2.3 billion despite generating nearly GBP2 billion in annual earnings. The company is selectively pursuing growth opportunities in the US and Singapore, focusing on low-risk, high-return projects.
  • Future Growth Outlook: - The company is confident in its ability to return to growth in 2025, supported by a strong order book and margin improvements. It expects Construction Services to grow 5% in the UK, driven by major projects like HS2 and the East Coast Tunnels, while the US Buildings segment is projected to continue expanding. Support Services are anticipated to grow 5-10% due to increased power volumes.
  • Shareholder Returns: - The company has returned approximately GBP1 billion to shareholders over the past five years through buybacks and dividends. It plans to continue this commitment, aiming to return at least another GBP1 billion over the next five years. The company's focus on disciplined capital allocation and returning value to shareholders remains a key priority, underpinned by its strong financial position and growth outlook.

Financial Highlights and Future Outlook

Overall, our strong order book, improving margins, and disciplined capital allocation strategy position us well for sustained growth. The company’s financial and operational momentum, coupled with a focus on long-term value creation, reinforces our positive outlook for the coming year.

Valuation Snapshot

The company’s valuation metrics highlight its attractive position in the market, with a trailing P/E ratio of 11.9 and a P/B ratio of 1.89, reflecting its strong financial health and growth potential. Additionally, the dividend yield of 2.91% underscores its commitment to returning value to shareholders, while the free cash flow yield of 11.64% signals robust cash generation capabilities.

3. NewsRoom

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What Recent Analyst Updates Mean For Balfour Beatty’s Story and Valuation

Nov -25

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Balfour Beatty Receives Five ABC Eagle Awards Across Florida

Nov -17

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How Recent Developments Are Shaping the Balfour Beatty Investment Story

Nov -07

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Balfour Beatty Awarded Best Projects Awards by Engineering News-Record

Sep -30

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Balfour Beatty (LON:BBY) Is Due To Pay A Dividend Of £0.042

Sep -15

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Balfour Beatty’s new CEO starts work

Sep -11

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Balfour Beatty appointed as exclusive contractor for Rolls-Royce nuclear project

Sep -10

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Taylor Wimpey (LSE:TW.): A Fresh Look at Valuation After a Year of Share Price Pressure

Sep -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.24%)

6. Segments

Construction

Expected Growth: 5%

Balfour Beatty's 5% growth in Construction is driven by increasing infrastructure spending, urbanization, and government initiatives. Strong demand for transportation, energy, and social infrastructure projects, coupled with the company's strategic focus on digitalization, sustainability, and operational efficiency, contribute to its growth momentum.

Support

Expected Growth: 6%

Balfour Beatty plc's support is driven by increasing infrastructure spending, urbanization, and government initiatives. The company's diversified portfolio, strong order book, and strategic partnerships also contribute to growth. Additionally, investments in digital transformation and sustainability efforts enhance operational efficiency and attract environmentally conscious clients, further supporting the 6% growth level.

Infrastructure Investments

Expected Growth: 8%

Balfour Beatty's 8% growth in Infrastructure Investments is driven by increasing government spending on transportation and energy projects, rising demand for sustainable infrastructure, and strategic acquisitions. Additionally, the company's focus on digitalization, innovation, and operational efficiency has improved project delivery and enhanced margins.

7. Detailed Products

Construction Services

Balfour Beatty provides construction services for infrastructure, buildings, and complex projects, including highways, rail, airports, and commercial developments.

Support Services

Balfour Beatty offers support services, including facilities management, maintenance, and repair services for buildings, infrastructure, and public spaces.

Infrastructure Investments

Balfour Beatty invests in and operates infrastructure assets, such as roads, bridges, and public-private partnerships.

Professional Services

Balfour Beatty provides professional services, including project management, engineering, and consultancy services for infrastructure and construction projects.

8. Balfour Beatty plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Balfour Beatty plc is medium due to the availability of alternative construction services and products.

Bargaining Power Of Customers

The bargaining power of customers for Balfour Beatty plc is low due to the company's strong brand reputation and long-term contracts.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Balfour Beatty plc is medium due to the company's dependence on a few large suppliers for materials and equipment.

Threat Of New Entrants

The threat of new entrants for Balfour Beatty plc is low due to the high barriers to entry in the construction industry, including regulatory hurdles and capital requirements.

Intensity Of Rivalry

The intensity of rivalry for Balfour Beatty plc is high due to the competitive nature of the construction industry, with many established players competing for contracts and market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 42.51%
Debt Cost 5.40%
Equity Weight 57.49%
Equity Cost 7.95%
WACC 6.86%
Leverage 73.96%

11. Quality Control: Balfour Beatty plc passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
ACS

A-Score: 6.9/10

Value: 5.8

Growth: 6.6

Quality: 4.4

Yield: 7.5

Momentum: 9.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Balfour Beatty

A-Score: 6.5/10

Value: 5.8

Growth: 6.1

Quality: 4.5

Yield: 4.4

Momentum: 9.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
HOCHTIEF

A-Score: 6.1/10

Value: 5.3

Growth: 6.6

Quality: 4.8

Yield: 5.6

Momentum: 10.0

Volatility: 4.3

1-Year Total Return ->

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Stock-Card
Webuild

A-Score: 5.9/10

Value: 7.0

Growth: 6.6

Quality: 2.9

Yield: 5.0

Momentum: 8.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Budimex

A-Score: 4.5/10

Value: 2.4

Growth: 4.8

Quality: 5.4

Yield: 8.8

Momentum: 2.0

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
Arcadis

A-Score: 4.3/10

Value: 4.7

Growth: 6.3

Quality: 5.8

Yield: 3.1

Momentum: 1.0

Volatility: 4.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

7.07$

Current Price

7.07$

Potential

-0.00%

Expected Cash-Flows