Balfour Beatty
2026 Half Year Results Presentation
12th August 2026
Balfour Beatty
Philip Hoare, Group Chief Executive
Myles Westcott, Chief Financial Officer
Jim Ryan, Head of Investor Relations
Questions From
Aynsley Lammin, Investec
Jonny Coubrough, Deutsche Numis
Robert Chantry, Berenberg
Andrew Nussey, Peel Hunt
Joe Brent, Panmure Liberum
Graham Hunt, Jefferies
Introduction & Key Highlights
Philip Hoare, Group Chief Executive
Good morning, everyone. I am Philip Hoare, Group Chief Executive of Balfour Beatty, and it
gives me great pleasure to welcome you to our half year results announcement for 2026. I am
joined today by Myles Westcott, our new CFO, who has been with us just a few months but is
already having an incredible impact on our business. I know we will all look forward to hearing
from Myles a little bit later as he gives us the detail of the results announcement.
Before we start, what a fantastic video. I just love watching images like that of Balfour Beatty,
because it really typifies the fantastic people that we have within our organisation, the depth
and breadth of quality that we possess. It goes to the complex projects that we are delivering
around the world, and of course, it goes to the pride that we have in terms of delivering for our
customers.
I wanted to start with a huge thank you to all of our Balfour Beatty colleagues. For those of you
that are listening now or in the future, thank you so much for your hard work and your
commitment, because it is down to you that I am able to stand here today and talk about our
company and the future. Thank you.
Now let us get into the first half year results. Look, I am really pleased with our first half
performance. We have delivered profitable growth and strong cash performance across the
business. As I talked about last March, we anticipated the conclusion of the US monitorship and
that happened as planned on 6th June. A really important milestone for our company that allows
us now to really get on and focus on delivery for the servicemen and women of the US.
What that means overall when you look at it from a margin perspective, is that our profit from
operations in our earnings-based businesses increased to 2.9%, up from 2.2% in the previous
half year. When you carry forward that strong first half performance and look to our outlook for
the full-year 2026, we have slightly upgraded our guidance on PFO, which you will have seen
within our numbers.
Of course, our £200 million share buyback that I announced in March is well on track, and so
overall, we look to return £267 million to our shareholders over the course of this year.
Now, turning to the future and thinking about momentum in the organisation. Our order book
remains substantial at £23 billion, and I will talk some more about the details of that in a
moment. This gives us really strong visibility into the future and confidence about where we are
heading as a business.
Finally, we are well positioned in the growth markets that we have selected. Again, I will give
you some more colour on that. I am really pleased with first half performance. It has been
strong. It has allowed us to slightly upgrade our guidance for the full year. Of course, I am really
positive about the momentum that we carry into the future.
Well positioned in chosen growth markets
Let me talk about those markets for a moment. Now, of course, we operate across a number of
geographies and different market areas, but we have specifically selected these markets for the
future growth of our business because either we can see significant scale-up opportunity or they
are large, resilient markets like UK transport.
We are focused around UK Energy, both on Power Transmission and on Energy Generation, in
UK Defence, UK Transport, and in US Buildings. We have seen some really good, positive
momentum in those markets in the first half of the year. I just wanted to share some of the
highlights of that with you.
Firstly, within UK Power Transmission, momentum continues to build. We have shared this
graph with you on the left-hand side of the screen before, and it is one I really like because not
only does it show where that growth is going to happen between now and 2030, but it also
indicates that we have 25% market share. What we see is and what we aspire to do is to
maintain that market share as that market continues to grow.
The first half has been really positive from that perspective. 24% growth in revenue year-onyear. Our order book now stands at £2.1 billion. That is up from £1.6 billion at the end of last
year. That pipeline of opportunities where work has been awarded but we are not yet in the
construction phase remains at £6 billion to £8 billion. If you remember before, I have described
the part A and the part B of that works, where part A is all about design development and
getting to the right cost profile for those works. Part B is when it goes into construction and
enters our order book.
When I talk about momentum, we have seen that now begin to move. In the first half of the
year, we were awarded Netherton Hub with SSEN. That is a £325 million scheme, which was in
part A and has now transitioned into part B. We have also been awarded a new substation on
top of the work we are already doing at Bramford to Twinstead for National Grid. We are doing
the overhead lines. We have now been awarded the substation work that goes alongside that.
And we have secured further routes to market through a new framework with National Grid that
will take us into the future.
Look, really positive momentum underpinned by the further wins that we have had in this growth
market.
Turning now to UK Defence. Look, we are really well differentiated in this space, and I will
outline some of that in a moment. The key thing that has happened in the first half of this year is
the publication of something called the Defence Investment Plan.
The Defence Investment Plan does a few things. Firstly, it sets out with greater certainty the
level of investment in UK Defence infrastructure over the course of the period from now to 2030.
You can see the percentages increase in spending there that happens. Really what that does is
drives greater certainty for us in terms of the opportunities that are there in the market. But it
went beyond that and also then set some guidance around what it looks like through to 2035
and an increase in UK Defence spending to 3.5% of GDP.
Again, this is positive from our perspective because it gives a longer term view of an already
important investment market.
Additionally, on top of that, it pointed to a number of things. The first one of those is that having
defence as a UK growth engine, so using that investment to create new jobs, to think about not
just defence as a national security point, but also as something that is going to drive economic
growth across the UK.
UK capability is being prioritised. Again, this is good news for Balfour Beatty, because as a UK
domiciled business that allows us to really think about the Team GB approach to delivering
defence in the UK. And clearly, we will be working closely with our clients in this space to really
build out those deep and trusted relationships.
Finally, speed of delivery is important, isn’t it? It is about being able to build on the programme
as it stands and deliver that into the future. Procurement reform that supports that is incredibly
important.
Now, alongside that, we are incredibly well-differentiated in this market. Our strong track record,
our extensive capability that we have, our ability to transfer skills from the complex nuclear
environment into defence sets us apart. Then when you take into account the recent
investments that we have made, both in security cleared staff and in a ring-fenced IT system
that allows us to operate in that defence space, we are incredibly well-positioned.
Finally, having a robust balance sheet, a strong relationship with UK government, and the fact
that we are a UK domiciled company, puts us in a great position to really capitalise on the
growth that we see in the defence space.
So larger market, improved policy environment that should speed up delivery, and momentum
building across the programmes of work in the defence space.
Turning now to the US. I just wanted to touch on a few factors, and I might cast your minds
back to March when we talked about some new growth areas that we saw within the US overall.
Look, it has been a great start to the year for US Construction. Our revenue is up 19% on the
half year 2025, and we have really begun to do something that is critically important in that
market, which is about leveraging the great capability we have in one area or with one customer
and taking that and spreading it across the US.
As an example, we have been targeting Wells Fargo, the banking group in the US, where we
have had a 20-year relationship working with them. We are now on a national framework with
Wells Fargo, which has meant that we have now started delivering work for them in each of the
geographic areas that we operate in. So really simple, a customer we know well, doing work
across the US. We are now working with them across the US.
In particular, I wanted to highlight the aviation and data centre market. I spoke to you last time
about those being important market verticals for us. Important because we have got great
capability, but also because we see significant growth in the medium to long-term. The aviation
market, $140 billion worth of construction between now and 2029. We have a great track record
delivering across seven airports in the US.
In the first half of the year, we won another significant mandate with Raleigh-Durham Airport for
$361 million. We are now focused on that as a vertical within the US market.
Data centres, you cannot pick up anything these days and not read about data centres and
what is happening. Data centres are not new for us. We have been working with key clients for
over 20 years delivering data centres. Actually, we are putting increasing focus on, again, taking
a relationship and a customer that we know well and working with them across the breadth of
the US.
We made great progress in the first half of the year, a $350 million set of wins, taking and
expanding our capability beyond the Northwest into Virginia. We have secured a further $1
billion worth of work that has been awarded but not yet contracted that we are in the process of
moving through into our order book. So I see significant momentum occurring in that market
overall.
What I wanted to do there was just give you a snapshot of some of the great momentum that
we are seeing in the organisation in the first half of the year. But what I am going to do now is
hand over to Myles and let him take you through the details of the financials.
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Financial Review
Myles Westcott, Chief Financial Officer
Thanks very much, Philip. Good morning, everyone. I am delighted to be here at such an
exciting time for Balfour Beatty. Since joining in May, I have spent much of my time getting to
know the business and meeting colleagues from across the Group. Even in the short time I
have been in role, it has been clear to see the depth of expertise we have, delivering such an
impressive portfolio of complex projects, together with an embedded culture of disciplined
governance and risk management.
Whilst I will of course bring a fresh perspective, I have joined a business with strong foundations
and real momentum. I am very much looking forward to getting to know Balfour Beatty even
more in the coming months and working closely with Philip and the wider team to deliver our
next chapter of profitable growth. Which leads me nicely on to the financials and the strong first
half results, which I will now take you through.
Headline numbers. Revenue grew by 8% to £5.6 billion, which was a 10% increase, if you
exclude foreign exchange movements. This was largely due to increased volumes in US
Buildings and UK Power Transmission. Profit from the earnings-based businesses increased by
42% to £153 million, as Support Services grew strongly, driven by Power, and US Construction
returned a profit, compared to the loss we reported a year ago.
Group profit for the period increased by 44%, which, when combined with the effect of the
ongoing share buyback programme, resulted in earnings per share increasing by 51% to 21.7p
per share. As usual, our interim dividend is one third of last year’s full dividend, which equates
to 4.7p, a 12% increase.
The order book increased slightly in the period to £22.9 billion and the Directors’ valuation of the
infrastructure portfolio remained around £1.1 billion. Cash performance was once again very
strong and included significant working capital increases in the US and in Power. As a result,
net cash stands at £1.7 billion and average net cash for the period was £1.6 billion.
Overall, a positive first half, and I will take you through each of the elements in a bit more detail
now.
Starting with Construction Services, which is much improved compared to the first half of last
year. Operational performance in UK Construction was strong in the first half, delivering PFO
margin of 3.4%. This represents an improvement of 50 basis points after you exclude the oneoff insurance recovery booked in the first half of last year.
In the US, Buildings continued to deliver profitable growth, driving a 19% increase in US
Construction revenues. And in Civils, the business delivered a much-reduced loss, with the
Texas highway project, which has been a drag on profitability, expected to achieve final close
out shortly. As a result, US Construction delivered £22 million of PFO, compared to a first half
loss in the prior year.
At Gammon, revenue dropped by 6% on a constant currency basis due to the reduced activity
at Hong Kong International airport, where Terminal 2 has recently opened. Margin percentage
was lower than prior year, which is largely due to timing, as we progress commercial close-outs
on a small number of projects.
Moving to Support Services, which has once again shown healthy revenue growth and
achieved strong margins. Power Transmission volumes have continued to grow, driving the
10% increase in Support Services revenue in the period.
Moving to PFO, the division has delivered a very strong first half performance, growing profit to
£66 million with a 9.1% margin. This includes margin improvement across both Power and
Transportation, and also a change in mix, with Power now contributing a higher proportion of
the division’s volumes.
It is also worth noting that we are seeing less seasonality in Support Services than in recent
years, which is likely to lead to a more even split between the first and second half profit this
year.
Moving to the order book, which we have maintained at around £23 billion. This gives us really
strong visibility over the next few years and allows us to plan ahead and invest confidently.
As Philip mentioned, we have secured the Netherton Hub contract with SSEN, which will be
delivered by the UK Construction division. The ability to provide earthworks and civil
infrastructure capabilities is a great example of the Group’s differentiated end-to-end offering
which sets us apart in the sector.
The US is slightly down, mainly due to Civils, where we are commencing delivery of the three
highway projects announced in recent periods. In US Buildings, new secured orders include the
data centres and aviation contracts which Philip mentioned earlier.
Gammon order book increased by 15%, including the contract award for a railway station in
Hong Kong’s Northern Metropolis Development Area. We expect this to be a strong demand
channel for Gammon in the medium term, with related projects already making up 30% of the
order book at half year.
Finally, within Support Services, we secured a £315 million highways maintenance contract in
Warwickshire. In addition to the order book, we continue to have a significant pipeline of further
work for which we have been selected, including the £6 billion to £8 billion of power projects
which we are currently in the design phases of. We expect to convert the majority of these
schemes to order book in the next 18 months, as we move into the construction phase.
Moving now to our Infrastructure Investments business, where the important news in the first
half was the conclusion of the monitorship. The pre-disposal loss, which was in line with the
prior year, was once again primarily due to costs incurred in relation to that monitorship.
We also disposed of two US assets in the first half, both of which were completed at or above
the Directors’ valuation.
Moving to that Directors’ valuation of the Investments portfolio, and taking the bridge from left to
right, we invested £15 million in the period in new and existing projects. Sales proceeds from
the two disposals totalled £12 million. And we received £17 million in distributions from the
portfolio.
The unwind of the discount increased the valuation by £36 million and the foreign exchange
movement was a £12 million benefit, as the US dollar strengthened. After those movements,
the Directors’ valuation of the portfolio is maintained at around £1.1 billion.
Looking at cash now, which is another area where performance has been strong throughout the
first half, with average cash in the period of £1.6 billion and a closing balance of £1.7 billion.
Let me touch on four of the items here to add a bit more colour. Firstly, operating cash flow of
£151 million represents strong underlying cash conversion across the Group and is an
important focus for all of our businesses.
Moving to working capital. As you know, for most of the work we do, we tend to be paid in
advance, and as a result, we have a strong negative working capital position. This grew in the
first half, largely due to new project starts in the US, together with the rising demand in power.
For pensions, as we set out back in March, and as agreed with the trustees of our largest
pension fund, we have made a £30 million contribution, with no further contributions expected.
Finally, the share buyback programme is progressing well. We are on track to complete the full
£200 million by the year end.
Finally, turning to the outlook for the full year, where we have updated our guidance in three
areas. For the earnings-based businesses, given the strong start to the year, we are now
expecting to deliver low double-digit PFO growth, which is slightly ahead of our previous
guidance.
No change in our guidance for Infrastructure Investments. For net finance income, given the
strong cash position, we are increasing our guidance to a range of £35 million to £40 million. No
change to the P&L tax charge, which will be close to statutory rates.
Finally, cash. Following the very strong first half, we are upgrading the guidance for average net
cash to a range of £1.5 billion to £1.7 billion.
In summary, we have had an encouraging first half of the year in terms of both profit and cash,
which, when combined with our strong order book and momentum in our growth markets, gives
me confidence in the Group achieving the guidance set out today.
With that, I will hand you back to Philip.
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Conclusion
Philip Hoare, Group Chief Executive
Obviously, we are pleased with our first half performance. What I wanted to do now is just
spend a few moments talking about future momentum and how we see the development of
Balfour Beatty and the unlocking of that next chapter of growth.
Firstly, I guess to start, just to remind you of our strong and diversified portfolio as a Group. Our
focus on our core geographies in the UK, the US, and in Asia, the real sense of driving growth
across those focused growth markets that we are operating in UK Energy, UK Defence, UK
Transport, and US Buildings. Then the new profitable growth framework that we have put in
place under Evolve, Energise, and Explore.
I guess what I wanted to particularly pick out through here is the end-to-end capability, which I
think is a real differentiator for us as an organisation. The ability to bring design and engineering
through project management into construction management, on into construction, and then on
to O&M, underpinned by our ability to bring project finance to those key projects is something
that really sets us apart from the competition. As we grow and develop, we look to strengthen
those connections across that part of our organisation to enable us to get really close to our
customers and help them deliver their demands as they move forward.
Then, of course, the whole thing is underpinned then, isn’t it, by the strength of our order book
at £23 billion and our Investments portfolio at £1.1 billion. Overall, this really positions us to
grow well into the future with lots of momentum to come in terms of the value of our business.
Let me just talk to you all a little bit more detail about the profitable growth framework and what
this means in terms of long-term value creation for our stakeholders.
Firstly, as a reminder, Evolve, Energise, and Explore. Evolve is all about strengthening the core
of our business. It is about making sure that we are driving margin improvement across every
aspect of our organisation. It is about making sure that the robust governance processes that
we have in place help us drive operational excellence from the selection, the winning, and then
the delivery of the projects that are in our care. Of course, it is about advancing our people
strategy, making sure that we can attract and retain the best talent that this industry has to offer.
Turning to Energise. This is all about accelerating profitable growth. We have picked a number
of key areas there. Firstly, for me, this is about really being close to our customers,
understanding their demands, making sure that we are agile enough to be able to respond to
that. The deeper those relationships are, the better our business will be. It is absolutely about
driving growth in the US, and I will come on to that in a moment. Then accelerating growth in
those UK growth markets that we have indicated.
Finally, Explore is about shaping what is next. It is about scanning that horizon. It is thinking
about technology and adjacencies that will enable us to grow faster and stronger as an
organisation.
Of course, you have got to measure all this, don’t you? In terms of how we are looking at that
from a long-term value creation perspective, at the forefront will always be safety. It is about
returning everyone home safe at the end of every day. We have a big responsibility around
sustainability and where our clients demand that, bringing the best sustainable solutions that we
can to the projects that we are operating.
It is absolutely about being focused on our customers and recognising that their feedback to us
is important in terms of how we shape our business into the future.
And of course, being an employer of choice. As I said, our ability to attract and retain talent is
the future of our company, and therefore, incredibly important that we get this right so we can
bring the best people to the best projects to support our customers.
Finally, if we get all of that right, then actually the outcome will be that we will drive and continue
to drive profitable growth across the organisation.
We have made real momentum on this programme in the first half of the year. I just wanted to
highlight some of the areas that we are focused on.
The first ones under Evolve, strengthening the core, is all about driving margin improvement.
We have plans progressing in every aspect of our business and each of our functions in terms
of unlocking that future margin potential in our business. You would have seen that earlier this
year, I reshaped our UK operations to be really focused on those growth markets, and of
course, the customers that we serve in each of those growth markets. It is about getting that
focus in terms of how we will drive the business forward into the future.
I have also invested significantly in leadership capability. Not only is this promoting people from
within the organisation, it is about new hires into our company and it is fundamentally thinking
about how we support the training and development of our key leaders. I have launched a new
Executive Leadership Development Programme in conjunction with London Business School
and MIT, which is all about upskilling and upgrading our leaders to be able to best support the
markets that we are operating in.
Finally, and something that is really close to my heart is the development of a One Balfour
Beatty culture. This is all about taking and evolving our culture to the next level where we are
collaborating super effectively across the company. We are able to bring the best of Balfour
Beatty to our customers wherever they are in the world. This will have important ramifications
for how we grow the business into the future.
On Energise, it really is about getting close to our customers and putting customer first in terms
of how we deliver. We have a new global programme going on across our business that is really
thinking about how we get laser-focused on our customers.
Finally, over the first part of the year, we have been working on an accelerated US growth plan,
which will enable us to grow in those areas we are already operating in, as well as focusing on
a number of market verticals, which we have already described.
Finally, on Explore, the shaping what is next. We have made an investment of £10 million in Pi
Labs. This is all about connecting new technology that is going to help us drive productivity and
efficiency at the frontline on the projects we serve. This is a really exciting development for
Balfour Beatty because the way that we connect people, data and technology into the future will
be key to driving those productivity and efficiency gains that our customers need.
Finally, we have begun to assess priorities across the UK and the US in terms of adjacencies
that will help strengthen our market position.
Overall, we are making great momentum. Evolve, Energise, and Explore has landed well and
truly in our organisation, but it is fundamentally all about creating long-term value for all of our
stakeholders.
Let me now summarise where we are. We have a really powerful platform for growth,
demonstrated through the strong first half momentum we have in the business and the slightly
upgraded guidance that we have given for the second half of the year. But well beyond that, I
think in terms of the momentum we have in the organisation.
Our order book is significant and of high quality. We are really well-positioned in the growing
markets that we have chosen because of their long-term growth potential and the ability to bring
our great depth of expertise to those customers. We have absolutely retained the disciplined
governance processes that have enabled us and afforded us the opportunity to grow. Our
robust balance sheet, along with our consistent capital allocation framework, can give you
certainty about where the company is headed.
Finally, under Evolve, Energise, and Explore, we really do have fantastic momentum into the
future.
When I take all of those things together, I have a high degree of confidence in our ability to
create long-term value and sustainable returns for all of our shareholders and stakeholders.
Thank you very much. Myles and I now look forward to your questions.
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Questions and Answers
Aynsley Lammin, Investec
Just two from me, please. When we look at the Support Services margin over 9%, is that
sustainable from here on out? Is it the mix has improved and therefore we should expect that
for the full year and into next?
Secondly, with the US monitorship finished now, when you look at that US military asset, it is
quite a big chunk of the investment portfolio. What is your view on that? If you were to sell it,
would you recycle it into more investments or any other options you would think about there?
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Philip Hoare, Group Chief Executive Officer
Yes, certainly. Perhaps if I take the monitorship question first and come back to you on Support
Services.
Just in terms of the monitorship, I mean, ultimately our main goal firstly was to end the
monitorship, and so obviously pleased to have done that. Where we are now, it is really
important that we embed and sustain what we have done in terms of improving the quality of
the business. Our focus remains on delivering a great service for the American servicemen and
women that live in those properties. That is our immediate focus.
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Myles Westcott, Chief Financial Officer
Okay. On the Support Services margin, look, we are delighted with the strong start to the year.
9.1% is an excellent performance, which was actually a margin increase in both the Power and
the Transportation divisions within Support Services.
Going forward, the momentum we have got will continue. Whether we will stay at 9.1% by the
full year? I am not so sure, but we will get close to 9%.
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Jonny Coubrough, Deutsche Numis
Could I ask a follow-up question on Power? As you move from part A to part B on these
contracts, how will the terms and conditions change and the risk that you take on?
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Philip Hoare, Group Chief Executive Officer
Yes, certainly. This is a well-trodden path and actually one of the things that we are really keen
on is this model because what happens during part A is that we are absolutely an intrinsic part
of the design and development of those projects. That means that by the time we come to
submit the final price for those works, that is something we have a high degree of confidence in.
We really welcome the model and I guess progressing with our clients on that.
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Jonny Coubrough, Deutsche Numis
On US Civils, I think you said, Myles, that it delivered a much reduced loss in the first half, so
still loss-making. Can we take it that Buildings is doing a 2% management fee margin on a run
rate basis?
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Myles Westcott, Chief Financial Officer
Between Civils and Buildings, we had a big step-up in performance from the first half of last
year to first half of this year. You will recall the Texas highway project has been a drag on
profitability, so that has got us to where we are now. Between the two divisions, we would
expect a pick-up in that margin as we approach the full year. Yes, US Buildings long-term, we
have talked about it before, 1.5% to 2% is where it should end up.
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Jonny Coubrough, Deutsche Numis
Last one from me is just on the three E’s and exploring adjacencies. Could this mean adding an
additional growth market to your existing ones? Can that be done organically, or do you think
that would involve acquisitions?
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Philip Hoare, Group Chief Executive Officer
Yes. Look, our absolute focus is on organic growth. You have seen the momentum that we
believe we can see in those markets and those chosen growth markets moving forward. That is
our priority.
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Robert Chantry, Berenberg
Thanks for the presentation. Three questions from me, all on the US. Firstly, following up from
Jonny’s question. Could you just help us frame the longer term margin dynamics in the US
after, I guess, moving away from Civils and towards Buildings principally in terms of the risk
taken on in that 1.5% to 2% Building margin and how you manage that?
Secondly, US data centre market. Any indication on the progress year-on-year and the
percentage of a book that it is in the US and any differences in economics you receive
compared to more traditional areas?
Thirdly, I am not sure this is the correct phrasing to ask it, but in terms of capacity utilisation in
the US, in terms of the teams. Is there a battle for talent given how buoyant the broader market
are? Is there any bottlenecks given the 19% growth? Effectively, how busy are the team and
how much more is there to go with the team you have got there in the US?
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Philip Hoare, Group Chief Executive Officer
Okay, great. I will take all three of those, but if you want to chip in, Myles, please do. I guess in
terms of the longer term dynamics of the market, and we have already talked about Buildings
margins being between 1.5% and 2%, and you can see, look, our overall mix is about 90:10, so
90% of our revenue is from the Buildings market and 10% from Civils. That is broadly the mix
that I would like to maintain as we move forward, obviously, with some growth in there overall.
From a UK data centres perspective, so if you look at our overall order book, 6% of our order
book in the US is in data centres. I do expect that to increase, and I expect that to get into
probably a double-digit percentage in terms of how that looks moving forward.
The key thing about our US business is the ability to remain agile. If I look back at our order
book five years ago, we were at double-digit and strongly double digits on commercial and
residential, and we are not because the market changed. It is about being able to take our
capability and flex that across the Buildings market environment, which I think we are very
adept at doing. I guess just to be clear, it will be important not to be overweight on data centres.
We will make sure that the balance remains in our business.
Finally, just the question on capacity. Look, talent is always a challenge and our ability to attract
and retain the best talent in the industry will be a constant challenge for us now and into the
future. We have a great employee value proposition. Look at the incredible work that we are
doing, and therefore, we remain an attractive brand for people to want to join.
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Andrew Nussey, Peel Hunt
Couple of questions as well, please. First of all, when we look at working capital as a
percentage of revenue, it increased to negative 19% versus negative 17%, which obviously is
significantly higher than the long run average. You gave us a feel for the drivers behind that, but
those drivers do not look like they are going to change anytime soon. What are your thoughts
over perhaps the medium term in terms of how that might shape?
Secondly, in Support Services, the drop-through from that revenue increase was very
significant. Again, you gave some reasons behind it. But were there any one-offs in there that
might impact the margin next year and going forward?
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Myles Westcott, Chief Financial Officer
Thanks very much. Look, firstly, working capital. As you say, very strong performance, around
about 19% of revenue. We have talked in the past about 15% to 18% being the level we would
settle at. That is still the case. That is why we are holding our average cash, i.e., increasing our
guidance, so our average cash is around about £1.6 billion by the year end.
You are also aware these are mobilisation payments on our contracts. If the style of contract
continues and the growth continues, then we are going to continue with that sort of 15% to 18%
negative working capital. That cash is needed to deliver the programmes. Yes. Whilst we may
see some further inflows, given the growth that Philip set out, there will also be outflows to
deliver the programmes. Sorry, second question?
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Philip Hoare, Group Chief Executive Officer
The second question was on the drop-through.
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Myles Westcott, Chief Financial Officer
Thank you. That is on Support Services. It was a great first half, 9.1%. It was great performance
by the teams. In the second half, we have got some of these early start contracts. The dropthrough, we will see an increase in PFO in the second half, but I just would not say 9.1% is the
new normal yet.
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Andrew Nussey, Peel Hunt
Were there any one-offs?
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Myles Westcott, Chief Financial Officer
No. Just good performance.
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Graham Hunt, Jefferies
Just two questions for me, please. On US Civils, you talk about some highways projects starting
up there. Should we be happy about that? Can you give us some confidence that they are going
to be margin-accretive? You said 90:10 is the target for that US business in terms of Buildings/
Civils. Why is that? You have got peers of yours are doing much better in the civils market from
a margin perspective. Could you not have ambition to do a bit more there? That is the first
question.
Second question, just on your investment portfolio. That has been steady around that £1 billion
level for quite some time now. How are you thinking about that going forward? The rest of your
business has grown quite a lot. We have been talking in past quarters about the UK PPP
market potentially coming back. We have had a bit of a change of government set up. What is
the latest you are hearing on that side?
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Philip Hoare, Group Chief Executive Officer
Yes. Great. Okay. Just taking US Civils first. We talked about our strategy previously in US
Civils, which is following the issues that we had in Texas, we did scale back our business to the
point where we felt really comfortable about moving forward. We have secured three new wins
over the course of the last 18 to 24 months. All three of those projects are mobilising really
successfully. You would expect us to give extra diligence and put extra controls around that to
give us that confidence. I have been to those projects myself and I am confident about our
ability to be able to deliver them moving forward.
I do think it is important, though, isn’t it, to ensure that we can provide that confidence and that
outcome before we race ahead and look to build greater depth in Civil. I would say making good
progress, I am confident on performance, but I will keep a close and steady eye on that as we
move forward.
Same thing. I guess that answers the 90:10 mix question as well. Just thinking about the
investment portfolio. Look, we continue to see positive comment and traction in terms of what
the UK PPP market looks like. We are actively engaged with the new Lower Thames Crossing
limited that has been established to set up that venture and that vehicle moving forward. We are
in active discussion with UK government around both that portfolio, but also UK reservoirs
programme and other things that then may drop through from a PPP perspective.
What I would say is some traction, still some time to go before we see that being actively
realised. But Balfour Beatty is at the heart of the discussion.
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Joe Brent, Panmure Liberum
A couple of questions from me. Firstly, could you just highlight the three biggest pipeline items
that you are most excited about for the Group?
Secondly, just following up on the negative working capital point. I think you are guiding to
average cash being flat in the second half. Does that suggest that you get lower negative
working capital in the year rather than in the medium term?
Finally, can you just give some indication of the size of the Texas loss in the first half?
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Philip Hoare, Group Chief Executive Officer
If you take the second two, I will take the first one.
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Myles Westcott, Chief Financial Officer
Okay.
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Philip Hoare, Group Chief Executive Officer
I guess just in terms of the three biggest pipeline opportunities that I am excited about, I mean,
to be honest, I am excited about our whole pipeline because there are some tremendous
projects that sit within it. We talked a moment ago about PPP in the UK, but Lower Thames
Crossing, we have made a meaningful start working with our customer to begin to deliver that
programme, and I am looking forward to that getting into full scale delivery, which will obviously
happen soon.
The conversion of the £6 billion to £8 billion, we are working really closely with SSEN to bring
those projects into that construction phase, and alongside that, the opportunities of National
Grid.
When I turn to the US, we have got some really good long-term relationships with customers,
particularly in the entertainment sector around Disney and Universal. There are some really
exciting opportunities coming up in that space too, which will draw on our 35-year track record
of working with those customers. So something hopefully we can all enjoy in the future.
............................................................................
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Myles Westcott, Chief Financial Officer
Okay. On working capital, yes, we expect to stick around the £1.6 billion average. To do that
19% negative working capital, we do pro rata the year’s turnover. I do not know whether that will
mainly decrease. But yes, that 15% to 18% is the long-term expectation for this year if it is 17%
to 19%. Yes, that is what you could imply from holding the average cash. But we do pro rata it
to do the calculation.
Texas loss in the first half, far reduced from last year. You will understand, I am not going to
give you a specific number. We are very pleased with the overall performance of the US
Construction sector, and we do expect that margin to pick up a little in the second half, as that
drag on profitability falls away.
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Jim Ryan, Head of Investor Relations
Okay. We are finished in the room. Actually, we have two analysts on the iPad, so I am going to
read them through.
Alexander Craeymeersch, Kepler Cheuvreux. Three questions. You mentioned there are
several end markets where momentum is accelerating. Your PFO is up close to 55%. Does that
make low double-digit growth for 2026 a bit conservative? Considering the order book does not
seem to be accelerating as fast as revenue, do you see the pipeline running ahead of that order
book? And how much do you expect to convert into orders in the second half?
On Evolve, Energise, and Explore, you mentioned your investment in Pi Labs, a VC focused on
build environment technology. What type of technology are we looking at here?
............................................................................
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Philip Hoare, Group Chief Executive Officer
Okay. Do you want to go first?
............................................................................
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Myles Westcott, Chief Financial Officer
Yes. Look, those 40% and 50% earnings growth numbers need to be taken into the context of
that significantly reduced loss in US Civils, which took that US Construction, I think it was over
£30 million swing from first half of last year to this year. Once you strip that out and normalise it,
you can see why low double-digit growth is the right place for us to guide, which is slightly
ahead of the guidance we provided in March.
............................................................................
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Philip Hoare, Group Chief Executive Officer
Just taking the question on pipeline first. Look, I believe we have got really strong momentum
when we look ahead at our pipeline. When you look at order book, which is more than 2 times
our annual revenues, but as we look forward in terms of that future pipeline of opportunity, we
have got a number of projects in that phase where they have been awarded but not yet
contracted. And as Myles said earlier, we expect the power elements of that to transmit into our
order book over the course of the next 18 months or so.
Also, I talked about data centres, $1 billion there awarded but not contracted. Things like the
publication of the Defence Investment Plan, we saw an immediate momentum swing in terms of
new opportunities coming to the market as a consequence. We were anticipating them, but
actually the process started to flow as soon as that plan had been published. So really good
momentum in terms of the pipeline.
Then in terms of the three E’s. Pi Labs, as you said, an investment fund focused on between 10
and 20 organisations that are bringing new technology into our space. That ranges from direct
frontline productivity improvements in terms of recording and capturing data and to thinking
about how new technologies will be used across the broad spectrum of what we do. I think
some really exciting developments there and look forward to sharing more of that in the future.
............................................................................
..........
Jim Ryan, Head of Investor Relations
Okay. Thank you. Then from Dan Cowan at BNP Paribas. You have talked about exploring
market adjacencies in the UK and the US. Can you add a bit more colour? Any particular areas
you are looking at? He goes on to say, would you be looking to acquire existing players or
expand organic capability, which we have touched on.
............................................................................
..........
Philip Hoare, Group Chief Executive Officer
Yes. Okay. As I said, our first priority is organic growth. We have got significant opportunity to
do that. I know everyone wants me to answer the question about M&A. Look, organic growth is
our number one priority. As we move forward, we would look at bolt-on M&A where it enhances
our capability, or our ability to enter an adjacent market. We are right at the early stages of that.
And Myles and I will look forward to talking to you more about it in the future.
............................................................................
..........
Jim Ryan, Head of Investor Relations
Okay. Thank you. That is all the questions on the iPad. I will hand over to Alex, the operator, to
see if there is any calls on the phone line.
............................................................................
..........
Operator
Thank you. At this time, there are no questions on the conference call, so I will hand it back to
the room.
............................................................................
..........
Philip Hoare, Group Chief Executive Officer
Okay, great. Look, thank you very much for joining us here in the room and online as well. We
really appreciate you spending some time with us. What I hope we have left you with is a sense
of real momentum in Balfour Beatty. Strong first half year performance. Slightly upgraded
guidance for the remainder of the year. But really importantly, great momentum and a powerful
platform for growth into the future.
Again, thank you very much for being with us, and we will see you next time.
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END
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