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Balfour Beatty ends Network Rail track renewal bid

Balfour Beatty has confirmed it is no longer bidding for Network Rail’s track renewal work as it continues its shift in order book from the UK to the US.

In a trading update ahead of its full-year results, to be announced on 6 March, Balfour Beatty said its existing track renewal contract will come to an end in Q1 2014.

It said: “We anticipate the year-end order book for our continuing businesses to be broadly in line with the £13.5bn from 31 December 2012. 

“The order book has been impacted by negative foreign exchange movements, and a continuing shift in the mix of our construction order book from the UK to the US.”

The group is continuing to put in place cost reduction measures in Professional Services in Australia to mitigate the “challenging market conditions”.

It is undergoing an arbitration process over a contract dispute in Australia but does not believe a settlement will be reached in time to be recognised in its 2013 results.

Performance in its German rail business has “worsened” since the Q3 IMS, due primarily to three loss-making contracts. Balfour Beatty said that discussions with a number of potential buyers for the business were ongoing.

It expects to have average debt for the year of £350m, but said that a “strong cash performance” in December would see the actual net debt balance be below £100m for year-end.

Investec analyst Andrew Gibb said the group’s cash performance gave it “confidence that there is light at the end of the tunnel” along with improving market conditions in markets including the UK.

Investec has put its ‘sell’ recommendation for Balfour Beatty under review, but warned that the lack of a “specific outlook statement” suggested that the firm was “not out of the woods yet”.

Liberum analyst Joe Brent said: “We expect that 2013 will represent peak debt and trough earnings. The Construction outlook is improving and that should drive earnings growth (current margin 0.3 per cent) and balance sheet repair.”

Balfour Beatty chief executive Andrew McNaughton said: “I am pleased to be able to advise that the group’s trading and cash performance remain in line with previous expectations. 

“In addition, we continue to have a good order book supported by a series of recent significant contract successes from our operations around the world and have made positive progress on our previously stated strategic disposals over the past few weeks.

“As we enter 2014 we aim to maintain our focus on ensuring that the group is well positioned to take advantage of growth in our core markets.”

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