Infrastructure boom lifts Balfour Beatty, Kier Group and Costain
London-listed construction firms Balfour Beatty, Kier Group, and Costain, have all reported robust results this week as the UK’s increasing prioritisation of major infrastructure projects starts to life the sector.
Their combined order books now exceed more than £30bn and shareholders stand to benefit.
All three of the companies hiked their dividends and shareholder returns alongside their results.
Costain has doubled its full-year dividend after reporting a record increase in forward work. Balfour Beatty increased its dividend and upped its share repurchases and Kier upped its dividend by a fifth.
The announcements came the same week the UK government unveiled its Planning and Infrastructure Bill, which aims to free up the country’s cumbersome planning system and fast-track major infrastructure projects.
Balfour Beatty notes “rising tide” of work
The UK’s infrastructure sector has fallen under immense scrutiny in recent years amid massive cost overruns and delays at projects such as HS2 and Hinkley Point C.
But in an interview with Morning Wire following the company’s full-year results, Balfour’s outgoing chief executive Leo Quinn said seen an unprecedented “rising tide” of work.
“It’s a great, very encouraging place to be at this moment in time,” he told Morning Wire.
Quinn, who will step down later this year after a decade at Balfour, flagged growth in security and power transmission as a key driver of demand.
“We’re seeing a lot of work with National Grid in upgrading or re-equipping the grid to take offshore power and solar power.
“We’re seeing the build out of substations and converter stations, so generally the power area is the growth engine.”
National Grid in December laid out “unprecdented” proposals to invest up to £35bn in its electricity transmission network between 2026 and 2031. This will include a baseline investment of more than £11bn for maintenance and upgrades.
Order books swell
Meanwhile, Costain has been awarded the contract to oversee and manage the engineering, procurement and construction of the onshore CO2 gathering systems for the £4bn East Coast Cluster investment. It’s also a major partner on BP Net Zero Teesside Power and Northern Endurance Partnership joint ventures.
Costain has also benefitted from rising spending in the water sector as companies such as Northumbrian Water, United Utilities and Southern Water ramp up spending on infrastructure.
In its latest results release the company also said it had secured work with Thames Water and Severn Trent Water for the provision of programme management services through to 2032.
Kier has been appointed by Yorkshire Water to their £850m Infrastructure Works Framework and Severn Trent to design and build a replacement sewage treatment works in Worcester for £20m.
The group’s order book has also been bolstered by a contract to deliver the replacement for HMP Barlinnie, worth £684m and a place on the £814m Facilities Management framework by Pagabo to provide a range of services to various public sector organisations
Contractors are also cashing in booming military spending in Europe and the US as the Russia-Ukraine war fuels geopolitical tensions. Balfour is already a construction partner of Rolls-Royce for its expansion work in Raynesway, Derby.
Kier, in March, bagged a £118m contract to build out an army site in Suffolk, having already won a £242.7m job to build a British Army base in Hampshire in January.
The UK government has outlined a target of 2.6 per cent spend of GDP on defence in 2027.
Over the past 12 months, shares in Balfour Beatty have risen 20 per cent and Costain has returned 58 per cent compared to a 14 per cent drop for the FTSE All-Share Index.