LONDON: Infrastructure contractor Balfour Beatty Plc has returned to the United Kingdom’s blue-chip Financial Times Stock Exchange (FTSE) 100 index, ending a 17-year absence after a post-pandemic stock surge driven by earnings beats, contract wins and shareholder payouts.
Currently trading near a record high, the nuclear power plant builder’s stock has more than tripled in value since the start of 2022.
That puts Balfour among the FTSE 350’s top 10 performers in that time.
The rally has outpaced peers such as Kier Group Plc, with investors drawn to Balfour’s substantial, consistent cash returns as the company benefits from a transformation of the UK’s energy transmission network.
Chief Executive Officer Philip Hoare told Bloomberg News that he sees the inclusion as “reflecting the progress we have made as a business, our strong market performance and investor confidence in our future”.
Balfour’s return caps an impressive turnaround for the stock, which was removed from the United Kingdom’s premier index in 2009 only months after joining.
Earnings turned negative in the early 2010s amid a pullback in government infrastructure spending.
The firm has swung from a roughly £300mil (US$398mil) loss in 2014 to consistent pre-tax profits in recent years.
“The scale of the improvement in this business has been quite dramatic and it’s taken quite a long time for investors to notice,” said Robert Chantry.
Chantry is head of UK research at Berenberg.
“It’s been a huge balance-sheet improvement, cash-return story.”
Multi-year moves toward renewables have required a reworking of UK transmission infrastructure which Balfour has been able to capitalise on.
Meanwhile, current contracts include the UK’s High Speed 2 rail line and next generation nuclear power plant Sizewell C, while the firm is also targeting defence-related opportunities.
Balfour has returned more than £1.2bil (US$1.6bil) to shareholders since 2021, including £200mil of repurchases planned this year.
That steady flow of cash has helped underpin its appeal to investors.
Indriatti van Hien, fund manager of the Henderson Smaller Companies Investment Trust, said Balfour was the fund’s top contributor over the past three years.
She said that after 13 years they are now “forced sellers” of the stock as their remit does not allow for FTSE 100 holdings. — Bloomberg
