Constractor giant will sell off PFI under new strategy

Contractor Balfour Beatty is to sell off £300m of PFI investments and set up a £750m infrastructure under revised strategy unveiled this week.

The strategy, which has been devised to make the best of the £400m acquisition of infrastructure consultant Parsons Brinckerhoff last year, will see Rob Gregor, formerly Head of European Infrastructure at AMP Capital Investors, set up a fund to invest in early stage infrastructure projects.

Balfour currently has a stock of £1bn PFI schemes on its books, however the move will see the firm gradually sell these holdings when they get beyond their construction stage, with £300m sold within five years. Profits will be invested in new assets, with shareholders also taking a cut through an “incremental” increase in the dividend.

Balfour, which turned over £10.3bn in 2009 will take a 10% stake in the infrastructure fund it is setting up, as well as charge a fee for the management. It has recruited the former Laing chief executive, Andy Friend.

The firm said the changes, coupled with an increasing focus on professional services through the work of Parsons Brinckerhoff, will see its profit margin rise to 4% over the next few years.

However, Balfour told analysts that the UK market was likely to “under-perform” following the comprehensive spending review, though globally it saw little difference in workloads for the next five years compared to the last five years.

Sara Dawes, xxx, at Cenkos, said the change of strategy increased the value of the firm. “The presentation might have been better dubbed ’Infrastructure Investments – new strategy”, because that was the real headline. It is flagging a real strategic shift in its Investments division.”

The news came at the same time as the contractor agreed a deal to wipe out its pension deficit by paying out £48m a year for eight years.


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