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Balfour Beatty sells two PFI assets for £58.5m

Balfour Beatty has sold two PFI assets for £58.5 million – £21.9m above directors’ valuations.

The sales come after the group reported a £50m profit warning after problems in its construction division, leading to a major management shake-up which sees chief executive Andrew McNaughton take direct control of the UK business.

It has sold its 50 per cent interests in four PFI schools projects in Birmingham, Bassetlaw, Stoke and Rotherham to its co-shareholder, Innisfree, for combined proceeds of £42.5m, generating a gain on disposal of £24.4m.

Balfour Beatty has also completed the sale of its 50 per cent interest in the Tameside Hospital PFI to a subsidiary of HICL Infrastructure Company Ltd, its co-shareholder, for £16m, generating a gain on disposal of £9m.

Balfour Beatty set out a strategy in 2010 to sell off more PPP investments.

Chief executive Andrew McNaughton said: “Balfour Beatty’s ability to deliver long-term projects has enabled us to deliver superior returns from our equity investments while delivering a first-class service to the public sector.

“The transactions we have completed demonstrate the quality and liquidity of our portfolio and are in line with our strategy to generate income from our Infrastructure Investments business through disposals, thereby releasing cash for future investments and delivering value for our shareholders.“

Directors valued its portfolio, which has been built up since the 1990s through financing and developing greenfield infrastructure assets, at £734m in December 2012.

The firm said it has been managing the portfolio more actively since 2010, generating additional cash from disposals and reinvesting in areas that align with the group’s target geographies and market sectors.

Panmure Gordon analyst Andy Brown said it was positive news after the recent UK construction warning, but said as the group had already flagged its intention to sell more equity today’s news does not impact forecasts.

He added: “The share price may struggle to make decent progress over the next few months. The trading backdrop remains challenging and clients are using their buying power more effectively; also, investors are always concerned about warnings coming in threes.”

Balfour’s share price was 15 per cent down today on the start of last week, to 215 pence.

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