Despite yesterday鈥檚 troubling numbers, analysts see reasons to be positive about Balfour Beatty
Balfour Beatty chief executive Leo Quinn may have described the construction group鈥檚 2014 results as , , but the City has reacted remarkably positively.
Balfour鈥檚 share price closed 6% up on the news yesterday at 拢2.44, up from Monday鈥檚 close of 拢2.31, and has only dipped a little in trading this morning, trading at around 拢2.40.
Speaking to 黑洞社区 yesterday, analysts attributed the positive share price reaction to investors backing Quinn鈥檚 turnaround strategy for the business.
Analyst Stephen Rawlinson also said he was encouraged by the 鈥渕iraculous鈥� turnaround in the company鈥檚 pension deficit, which stood at 拢128m at the end of 2014 compared to 拢434m the previous year, based on strong performance by some of its investments.
Here three other analysts share their views on Balfour Beatty鈥檚 prospects -
Howard Seymour - Numis
It鈥檚 difficult because you have so many big horrible numbers in the results and you then have got a man who has been there for twelve weeks. Over that time Quinn has managed to review 70% of the business by revenue and speaking to people in the business he鈥檚 a whirlwind. Quinn is in a situation where figures are bad but now he鈥檚 stood up and said that a lot of the problems are easily fixable and he鈥檚 put a 24 month time-frame to fix it. With regards to the pension deficit I think that the FD (finance director) has had a hard time but has fixed the liabilities of the business. You are the mercy of the market so they have employed a hedging strategy and if they hadn鈥檛 the deficit would have been 拢280m worse. It helped them get certainty.
Kevin Cammack - Cenkos
The additional provisioning they have made in the UK is not entirely unexpected. Although it鈥檚 there it鈥檚 not really a surprise, [but] they need to do more to comply with what KPMG has suggested. Passing the dividend is not a surprise either. Beneath all the headlines trading wise there probably wasn鈥檛 that much differing, the US has been a touch disappointing and you would hope for more but at the end of the day, people are looking forward not back. To be fair to Leo it鈥檚 difficult to go into a huge amount of detail when you鈥檝e only been in the job twelve weeks, it鈥檚 remarkable how quickly they have got on and put processes and plans in place to identify what they need to do.
Anthony Codling - Jefferies
The reaction of the share price would suggest that people are backing him to produce results. This is the second time they have reduced market expectations and the share price has gone up, it is usually the other way around. Investors are giving Quinn the benefit of the doubt and time to implement his plans. We were slightly surprised by the size of the downgrade. We thought there would be something, but to be honest from an investor鈥檚 point of view people are now looking at 2016/17. We鈥檙e buyers of the stock on the turnaround story, -Quinn has a strong turnaround track record, he is a charismatic guy and is successful as a leader. This is a classic turnaround where the incoming CEO tries to paint things as the worst possible picture so that when things do improve it comes from the lowest possible base.
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