Balfour Beatty H1 2026 Earnings Report

Balfour Beatty EPS Results

• Actual EPS: GBX 21.70
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Balfour Beatty Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Balfour Beatty Announcement Details

• Quarter: H1 2026
• Date: 8/12/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 12, 2026
• Conference Call Time: 4:00AM ET

Balfour Beatty (LON:BBY) is a leading international infrastructure group. With 26,000 employees across the UK, US and Hong Kong, we’re leading the transformation of our industry to meet the challenges of the future. Trusted by our customers to deliver sustainable solutions and strengthen communities, we finance, develop, build, maintain and operate the increasingly complex and critical infrastructure that supports national economies and deliver projects at the heart of local communities. Collaborating with governments, our customers and partners, we deliver powerful new solutions, shape thinking, create skylines and inspire a new generation of talent to be the change-makers of tomorrow.

Balfour Beatty H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong first-half performance: Revenue rose 8% to £5.6 billion, profit from earnings-based businesses increased 42% to £153 million, and earnings per share rose 51% to 21.7 pence.
• Positive Sentiment: Management slightly upgraded full-year guidance to low double-digit growth in profit from operations, raised average net cash guidance to £1.5 billion–£1.7 billion, and remains on track to complete its £200 million share buyback by year-end.
• Positive Sentiment: The order book remained strong at £22.9 billion, supported by momentum in U.K. power transmission, defense and transport, as well as U.S. buildings. The company expects to convert much of its £6 billion–£8 billion power-project pipeline into orders over the next 18 months.
• Positive Sentiment: U.S. Construction returned to profitability, with revenue up 19%, while data-center and aviation wins—including $350 million of data-center awards and a $361 million airport mandate—are expanding the growth opportunity.
• Negative Sentiment: U.S. civils remains loss-making despite a substantially reduced loss, with the Texas highway project still affecting results; management expects improvement as the project approaches final closeout but is maintaining a cautious approach to expanding the division.

Presentation

[Philip Hoare, Group CEO at Balfour Beatty]

Good morning, everyone. I am Philip Hoare, Group Chief Executive of Balfour Beatty, and it gives me great pleasure to welcome you to our half year results announcement for 2026. I am joined today by Myles Westcott, our new CFO, who has been with us just a few months but is already having an incredible impact on our business. I know we will all look forward to hearing from Myles a little bit later as he gives us the detail of the results announcement. Before we start, what a fantastic video. I just love watching images like that of Balfour Beatty because it really typifies the fantastic people that we have within our organization, the depth and breadth of quality that we possess.

[Philip Hoare, Group CEO at Balfour Beatty]

It goes to the complex projects that we are delivering around the world, and of course, it goes to the pride that we have in terms of delivering for our customers. I wanted to start with a huge thank you to all of our Balfour Beatty colleagues. For those of you that are listening now or in the future, thank you so much for your hard work and your commitment, because it is down to you that I am able to stand here today and talk about our company and the future. Thank you. Now let us get into the first half year results. Look, I am really pleased with our first half performance. We have delivered profitable growth and strong cash performance across the business.

[Philip Hoare, Group CEO at Balfour Beatty]

As I talked about last March, we anticipated the conclusion of the U.S. monitorship and that happened as planned on June 6. A really important milestone for our company that allows us now to really get on and focus on delivery for the servicemen and women of the U.S. What that means overall, when you look at it from a margin perspective, is that our profit from operations in our earnings-based businesses increased to 2.9%, up from 2.2% in the previous half year. When you carry forward that strong first half performance and look to our outlook for the full year 2026, we have slightly upgraded our guidance on PFO, which you will have seen within our numbers.

[Philip Hoare, Group CEO at Balfour Beatty]

Our GBP 200 million share buyback that I announced in March is well on track, and overall, we look to return GBP 267 million to our shareholders over the course of this year. Turning to the future and thinking about momentum in the organization, our order book remains substantial at GBP 23 billion, and I will talk some more about the details of that in a moment. This gives us really strong visibility into the future and confidence about where we are heading as a business. Then finally, we are well-positioned in the growth markets that we have selected. Again, I will give you some more color on that. I am really pleased with first half performance. It has been strong. It has allowed us to slightly upgrade our guidance for the full year. Of course, I am really positive about the momentum that we carry into the future.

[Philip Hoare, Group CEO at Balfour Beatty]

Let me talk about those markets for a moment. We operate across a number of geographies and different market areas, but we've specifically selected these markets for the future growth of our business because either we can see significant scale-up opportunity or they are large, resilient markets like U.K. transport. But we are focused around U.K. energy, both on power transmission and on energy generation, in U.K. defense, U.K. transport, and in U.S. buildings. We have seen some really good, positive momentum in those markets in the first half of the year. I just wanted to share some of the highlights of that with you. Firstly, within U.K. power transmission, momentum continues to build.

[Philip Hoare, Group CEO at Balfour Beatty]

We have shared this graph with you on the right-hand or left-hand side of the screen before, and it is one I really like because, not only does it show where that growth is going to happen between now and 2030, but it also indicates that we have 25% market share. What we see is and what we aspire to do is to maintain that market share as that market continues to grow. The first half has been really positive from that perspective. 24% growth in revenue year-on-year. Our order book now stands at GBP 2.1 billion. That is up from GBP 1.6 billion at the end of last year. That pipeline of opportunities where work has been awarded but we are not yet in the construction phase remains at GBP 6 billion-GBP 8 billion.

[Philip Hoare, Group CEO at Balfour Beatty]

If you remember before, I have described the part A and the part B of that works, where part A is all about design development and getting to the right cost profile for those works. Part B is when it goes into construction and enters our order book. When I talk about momentum, we have seen that now begin to move. In the first half of the year, we were awarded Netherton Hub with SSE. That is a GBP 325 million scheme, which was in part A and has now transitioned into part B. We have also been awarded a new substation on top of the work we are already doing at Bramford to Twinstead for National Grid. We are doing the overhead lines.

[Philip Hoare, Group CEO at Balfour Beatty]

We have now been awarded the substation work that goes alongside that, and we have secured further routes to market through a new framework with National Grid that will take us into the future. Look, I think really positive momentum underpinned by the further wins that we have had in this growth market. Turning now to U.K. defense, look, we are really well differentiated in this space, and I will outline some of that in a moment. But the key thing that has happened in the first half of this year is the publication of something called the Defence Investment Plan. The Defence Investment Plan does a few things. Firstly, it sets out with greater certainty the level of investment in U.K. defense infrastructure over the course of the period from now to 2030. You can see the percentages increase in spending there that happens.

[Philip Hoare, Group CEO at Balfour Beatty]

And really what that does is drives greater certainty for us in terms of the opportunities that are there in the market. But it went beyond that and also then set some guidance around what it looks like through to 2035 and an increase in U.K. defense spending to 3.5% of GDP. So again, this is positive from our perspective because it gives a longer-term view of an already important investment market.

[Philip Hoare, Group CEO at Balfour Beatty]

Additionally, on top of that, I think it pointed to a number of things. The first one of those is that having defense as a U.K. growth engine, so using that investment to create new jobs, to think about not just defense as a national security point, but also as something that is going to drive economic growth across the U.K.

[Philip Hoare, Group CEO at Balfour Beatty]

U.K. capability is being prioritized, and again, this is good news for Balfour Beatty, because as a U.K. domiciled business, I think that allows us to really think about the Team GB approach to delivering defense in the U.K. And clearly, we will be working closely with our clients in this space to really build out those deep and trusted relationships. Finally, speed of delivery is important, isn't it? It is about being able to build on the program as it stands and deliver that into the future. Procurement reform that supports that, I think is incredibly important. Alongside that, I think we are incredibly well-differentiated in this market. Our strong track record, our extensive capability that we have, our ability to transfer skills from the complex nuclear environment into defense, I think sets us apart.

[Philip Hoare, Group CEO at Balfour Beatty]

When you take into account the recent investments that we have made, both in security cleared staff and in a ring-fenced IT system that allows us to operate in that defense space, I think we are incredibly well-positioned. Finally, having a robust balance sheet, a strong relationship with U.K. government, and the fact that we are a U.K. domiciled company, I think, puts us in a great position to really capitalize on the growth that we see in the defense space. So larger market, improved policy environment that should speed up delivery, and momentum building across the programs of work in the defense space. Turning now to the U.S., I just wanted to touch on a few factors, and I might cast your minds back to March when we talked about some new growth areas that we saw within the U.S. overall.

[Philip Hoare, Group CEO at Balfour Beatty]

But look, it has been a great start to the year for US Construction. Our revenue is up 19% on the half year 2025, and we have really begun to do something that I think is critically important in that market, which is about leveraging the great capability we have in one area or with one customer and taking that and spreading it across the U.S. As an example, we have been targeting Wells Fargo, the banking group in the U.S., where we have had a 20-year relationship working with them. And we are now on a national framework with Wells Fargo, which has meant that we have now started delivering work for them in each of the geographic areas that we operate in. So really simple, a customer we know well, doing work across the U.S., we are now working with them across the U.S.

[Philip Hoare, Group CEO at Balfour Beatty]

In particular, I wanted to highlight the aviation and data center market. I spoke to you last time about those being important market verticals for us. Important because we have great capability, but also because we see significant growth in the medium to long term. The aviation market, GBP 140 billion worth of construction between now and 2029. We have a great track record delivering across seven airports in the U.S.

[Philip Hoare, Group CEO at Balfour Beatty]

And in the first half of the year, we won another significant mandate with Raleigh-Durham Airport for $361 million. We are now focused on that as a vertical within the U.S. market. Data centers, you cannot pick up anything these days and not read about data centers and what is happening. Data centers are not new for us. We have been working with key clients for over 20 years delivering data centers.

[Philip Hoare, Group CEO at Balfour Beatty]

But actually, we are putting increasing focus on, again, taking a relationship and a customer that we know well and working with them across the breadth of the U.S. We made great progress in the first half of the year, a $350 million set of wins, taking and expanding our capability beyond the Northwest into Virginia. And we have secured a further $1 billion worth of work that has been awarded but not yet contracted that we are in the process of moving through into our order book. I see significant momentum occurring in that market overall. What I wanted to do there was just give you a snapshot of some of the great momentum that we are seeing in the organization in the first half of the year. What I am going to do now is hand over to Myles and let him take you through the details of the financials.

[Myles Westcott, CFO at Balfour Beatty]

Thanks very much, Philip. Good morning, everyone. I am delighted to be here at such an exciting time for Balfour Beatty. Since joining in May, I have spent much of my time getting to know the business, meeting colleagues from across the group. Even in the short time I have been in role, it has been clear to see the depth of expertise we have, delivering such an impressive portfolio of complex projects together with an embedded culture of disciplined governance and risk management.

[Myles Westcott, CFO at Balfour Beatty]

While I will, of course, bring a fresh perspective, I have joined a business with strong foundations and real momentum. I am very much looking forward to getting to know Balfour Beatty even more in the coming months and working closely with Philip and the wider team to deliver our next chapter of profitable growth.

[Myles Westcott, CFO at Balfour Beatty]

Which leads me nicely onto the financials and the strong first half results, which I will now take you through. Headline numbers. Revenue grew by 8% to GBP 5.6 billion, which was 10% increase if you exclude foreign exchange movements. This was largely due to increased volumes in U.S. buildings and U.K. power transmission. Profit from the earnings-based businesses increased by 42% to GBP 153 million, as Support Services grew strongly, driven by power, and U.S. Construction returned a profit compared to the loss we reported a year ago. Group profit for the period increased by 44%, which, when combined with the effect of the ongoing share buyback program, resulted in earnings per share increasing by 51% to 21.7 pence per share. As usual, our interim dividend is one third of last year's full dividend, which equates to 4.7 pence, 12% increase.

[Myles Westcott, CFO at Balfour Beatty]

The order book increased slightly in the period to GBP 22.9 billion, and the directors' valuation of the Infrastructure Investments portfolio remained around GBP 1.1 billion. Cash performance was once again very strong and included significant working capital increases in the U.S. and in power. As a result, net cash stands at GBP 1.7 billion. Average net cash for the period was GBP 1.6 billion.

[Myles Westcott, CFO at Balfour Beatty]

Overall, positive first half, and I will take you through each of the elements in a bit more detail now. Starting with construction services, which is much improved compared to the first half of last year. Operational performance in UK Construction was strong in the first half, delivering PFO margin of 3.4%. This represents an improvement of 50 basis points after you exclude the one-off insurance recovery booked in the first half of last year.

[Myles Westcott, CFO at Balfour Beatty]

In the U.S., buildings continued to deliver profitable growth, driving a 19% increase in US Construction revenues. In civils, the business delivered a much-reduced loss with the Texas highway project, which has been a drag on profitability, expected to achieve final closeout shortly. As a result, US Construction delivered GBP 22 million of PFO compared to a first-half loss in the prior year.

[Myles Westcott, CFO at Balfour Beatty]

At Gammon, revenue dropped by 6% on a constant currency basis due to the reduced activity at Hong Kong International Airport, where Terminal 2 has recently opened. Margin percentage was lower than prior year, which is largely due to timing as we progress commercial closeouts on a small number of projects. Moving to Support Services, which has once again shown healthy revenue growth and achieved strong margins. Power transmission volumes have continued to grow, driving 10% increase in Support Services revenue in the period.

[Myles Westcott, CFO at Balfour Beatty]

Moving to PFO, the division has delivered a very strong first-half performance, growing profit to GBP 66 million with a 9.1% margin. This includes margin improvement across both power and transportation, and also a change in mix, with power now contributing a higher proportion of the division's volumes. It is also worth noting we are seeing less seasonality in Support Services than in recent years, which is likely to lead to a more even split between the first and second half profit this year. To the order book, which we have maintained at around GBP 23 billion. This gives us really strong visibility over the next few years, allows us to plan ahead and invest confidently. As Philip Hoare mentioned, we have secured the Netherton Hub contract with SSE, which will be delivered by the UK Construction division.

[Myles Westcott, CFO at Balfour Beatty]

The ability to provide earthworks and civil infrastructure capabilities is a great example of the group's differentiated end-to-end offering, which sets us apart in the sector. The U.S. is slightly down, mainly due to civils, where we are commencing delivery of the three highway projects announced in recent periods. In US buildings, new secured orders include the data centers and aviation contracts which Philip Hoare mentioned earlier. Gammon order book increased by 15%, including the contract award for a railway station in Hong Kong's Northern Metropolis Development area. We expect this to be a strong demand channel for Gammon in the medium term, with related projects already making up 30% of the order book at half year. Finally, within Support Services, we secured a GBP 315 million highways maintenance contract in Warwickshire.

[Myles Westcott, CFO at Balfour Beatty]

In addition to the order book, we continue to have a significant pipeline of further work for which we've been selected, including the GBP 6 billion-GBP 8 billion of power projects which we're currently in the design phases of. We expect to convert the majority of these schemes to order book in the next 18 months as we move into the construction phase. Moving now to our Infrastructure Investments business, where the important news in the first half was the conclusion of the monitorship. The pre-disposal loss, which was in line with the prior year, was once again primarily due to costs incurred in relation to that monitorship. We also disposed of two U.S. assets in the first half, both of which were completed at or above the directors' valuation.

[Myles Westcott, CFO at Balfour Beatty]

Moving to that directors' valuation of the investments portfolio and taking the bridge from left to right, we invested GBP 15 million in the period in new and existing projects. Sales proceeds from the two disposals totaled GBP 12 million, and we received GBP 15 million in distributions from the portfolio. The unwind of the discount increased the valuation by GBP 36 million, and the foreign exchange movement was a GBP 12 million benefit as the U.S. dollar strengthened. After those movements, the directors' valuation of the portfolio is maintained at around GBP 1.1 billion. Looking at cash now. Another area where performance has been strong throughout the first half. With average cash in the period of GBP 1.6 billion and a closing balance of GBP 1.7 billion. Let me touch on four of the items here to add a bit more color.

[Myles Westcott, CFO at Balfour Beatty]

Firstly, operating cash flow of GBP 151 million represents strong underlying cash conversion across the group and is an important focus for all of our businesses. Moving to working capital. As you know, for most of the work we do, we tend to be paid in advance. As a result, we have a strong negative working capital position. This grew in the first half, largely due to new project starts in the U.S. together with the rising demand in power. For pensions, as we set out back in March, and as agreed with the trustees of our largest pension fund, we've made a GBP 30 million contribution with no further contributions expected. Finally, the share buyback program is progressing well. We're on track to complete the full GBP 200 million by the year end.

[Myles Westcott, CFO at Balfour Beatty]

Finally, turning to outlook for the full year, where we've updated our guidance in three areas. For the earnings-based businesses, given the strong start to the year, we're now expecting to deliver low double-digit PFO growth, which is slightly ahead of our previous guidance. No change in our guidance for Infrastructure Investments.

[Myles Westcott, CFO at Balfour Beatty]

For net finance income, given the strong cash position, we're increasing our guidance to a range of GBP 35 million-GBP 40 million. No change to the expected P&L charge, which will be close to statutory rates. Finally, cash. Following the very strong first half, we're upgrading the guidance for average net cash to a range of GBP 1.5 billion-GBP 1.7 billion.

[Myles Westcott, CFO at Balfour Beatty]

In summary, we've had an encouraging first half of the year in terms of both profit and cash, which, when combined with our strong order book and momentum in our growth markets, gives me confidence in the group achieving the guidance set out today. With that, I'll hand you back to Philip.

[Philip Hoare, Group CEO at Balfour Beatty]

Thank you, Myles. We're pleased with that first half performance, but what I wanted to do now is just spend a few moments talking about future momentum and how we see the development of Balfour Beatty and the unlocking of that next chapter of growth. Firstly, I guess to start, just to remind you of our strong and diversified portfolio as a group. Our focus on our core geographies in the U.K., the U.S., and in Asia, the real sense of driving growth across those focused growth markets that we're operating in, U.K. energy, U.K. defense, U.K. transport, and U.S. buildings. Then the new profitable growth framework that we've put in place under Evolve, Energize, and Explore. But I guess what I wanted to particularly pick out through here is the end-to-end capability, which I think is a real differentiator for us as an organization.

[Philip Hoare, Group CEO at Balfour Beatty]

The ability to bring design and engineering through project management into construction management, on into construction, and then on to O&M, underpinned by our ability to bring project finance to those key projects, I think is something that really sets us apart from the competition. As we grow and develop, we look to strengthen those connections across that part of our organization to enable us to get really close to our customers and help them deliver their demands as they move forward. Then, of course, the whole thing is underpinned then, isn't it, by the strength of our order book at GBP 23 billion and our Investments portfolio at GBP 1.1 billion. So I think overall, this really positions us to grow well into the future with lots of momentum to come in terms of the value of our business.

[Philip Hoare, Group CEO at Balfour Beatty]

Let me just talk to you a little bit more detail about the profitable growth framework and what this means in terms of long-term value creation for our stakeholders. Firstly, as a reminder, evolve, energize, and explore. Evolve is all about strengthening the core of our business. It's about making sure that we're driving margin improvement across every aspect of our organization. It's about making sure that the robust governance processes that we have in place help us drive operational excellence from the selection, the winning, and then the delivery of the projects that are in our care. And of course, it's about advancing our people strategy, making sure that we can attract and retain the best talent that this industry has to offer. Turning to energize, this is all about accelerating profitable growth. And we've picked a number of key areas there.

[Philip Hoare, Group CEO at Balfour Beatty]

Firstly, for me, this is about really being close to our customers, understanding their demands, making sure that we are agile enough to be able to respond to that. The deeper those relationships are, I think the better our business will be. It is absolutely about driving growth in the U.S., and I will come on to that in a moment, and then accelerating growth in those U.K. growth markets that we have indicated.

[Philip Hoare, Group CEO at Balfour Beatty]

Then finally, explore is about shaping what is next. It is about scanning that horizon. It is thinking about technology and adjacencies that will enable us to grow faster and are stronger as an organization. But of course, you have got to measure all this, don't you? So in terms of how we are looking at that from a long-term value creation perspective, at the forefront will always be safety. It is about returning everyone home safe at the end of every day.

[Philip Hoare, Group CEO at Balfour Beatty]

We have a big responsibility around sustainability and where our clients demand that, bringing the best sustainable solutions that we can to the projects that we are operating. It is absolutely about being focused on our customers and recognizing that their feedback to us is important in terms of how we shape our business into the future.

[Philip Hoare, Group CEO at Balfour Beatty]

And of course, being an employer of choice. As I said, our ability to attract and retain talent is the future of our company, and therefore incredibly important that we get this right so we can bring the best people to the best projects to support our customers.

[Philip Hoare, Group CEO at Balfour Beatty]

Finally, I think if we get all of that right, then actually the outcome will be that we will drive and continue to drive profitable growth across the organization. We have made real momentum on this program in the first half of the year, and I just wanted to highlight some of the areas that we are focused on.

[Philip Hoare, Group CEO at Balfour Beatty]

The first ones under Evolve, strengthening the core, is all about driving margin improvement. And we have plans progressing in every aspect of our business and each of our functions in terms of unlocking that future margin potential in our business. You would have seen that earlier this year, I reshaped our U.K. operations to be really focused on those growth markets and, of course, the customers that we serve in each of those growth markets.

[Philip Hoare, Group CEO at Balfour Beatty]

It is about getting that focus in terms of how we will drive the business forward into the future. I have also invested significantly in leadership capability. Not only is this promoting people from within the organization, it is about new hires into our company, and it is fundamentally thinking about how we support the training and development of our key leaders.

[Philip Hoare, Group CEO at Balfour Beatty]

I have launched a new executive leadership development program in conjunction with London Business School and MIT, which is all about upskilling and upgrading our leaders to be able to best support the markets that we are operating in. Then finally, and something that is really close to my heart is the development of a One Balfour Beatty culture. And this is all about taking and evolving our culture to the next level where we are collaborating super effectively across the company.

[Philip Hoare, Group CEO at Balfour Beatty]

We're able to bring the best of Balfour Beatty to our customers wherever they are in the world, and I think this will have important ramifications for how we grow the business into the future. On Energise, it really is about getting close to our customers and putting customer first in terms of how we deliver. We have a new program, a global program going on across our business that's really thinking about how we get laser-focused on our customers.

[Philip Hoare, Group CEO at Balfour Beatty]

Then finally, over the first part of the year, we've been working on an accelerated U.S. growth plan, which will enable us to grow in those areas we're already operating in, as well as focusing on a number of market verticals, which we've already described. Then finally on Explore, the shaping what's next. We've made an investment of GBP 10 million in Pi Labs.

[Philip Hoare, Group CEO at Balfour Beatty]

This is all about connecting new technology that's going to help us drive productivity and efficiency at the frontline on the projects we serve. I think this is a really exciting development for Balfour Beatty because the way that we connect people, data, and technology into the future will be key to driving those productivity and efficiency gains that our customers need. Then finally, we've begun to assess priorities across the U.K. and the U.S. in terms of adjacencies that will help strengthen our market position. Overall, I think we're making great momentum. Evolve, Energise, and Explore has landed well and truly in our organization, but it's fundamentally all about creating long-term value for all of our stakeholders. Let me now summarize where we are.

[Philip Hoare, Group CEO at Balfour Beatty]

We have a really powerful platform for growth, demonstrated through the strong first half momentum we have in the business and the slightly upgraded guidance that we've given for the second half of the year. But well beyond that, I think in terms of the momentum we have in the organization. Our order book is significant and of high quality, and we're really well-positioned in the growing markets that we've chosen because of their long-term growth potential and the ability to bring our great depth of expertise to those customers. We've absolutely retained the disciplined governance processes that have enabled us and afforded us the opportunity to grow, and our robust balance sheet, along with our consistent capital allocation framework, can give you certainty about where the company is headed. Then finally, under Evolve, Energise, and Explore, we really do have fantastic momentum into the future.

[Philip Hoare, Group CEO at Balfour Beatty]

When I take all of those things together, I have a high degree of confidence in our ability to create long-term value and sustainable returns for all of our shareholders and stakeholders. Thank you very much, Myles and l. Myles and I now look forward to your questions.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

Philip, Myles.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

Right. We are going to start in the room. We do actually have some questions on the iPad as well.

[Philip Hoare, Group CEO at Balfour Beatty]

Okay, great.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

We will do iPad, then we will go to the phones. If I can ask you to put your hand up and wait for the mic to get to you, then we will get going. Thank you.

[Aynsley Lambert, Analyst at Investec]

Thanks. Aynsley Lambert from Investec. Just two from me, please. I wondered when we look at the kind of Support Services margin over 9%, is that sustainable from here on out? Is it the mix has improved and therefore we should expect that for the full year and into next? Secondly, with the U.S. monitorship kind of finished now, when you look at that U.S. military asset, it's quite a big chunk of the investment portfolio. What's your view on that? If you were to sell it, would you recycle it into more investments or any other options you'd think about there?

[Philip Hoare, Group CEO at Balfour Beatty]

Yeah, certainly. Perhaps if I take the monitorship question first and come back to you on Support Services. Just in terms of the monitorship, ultimately our main goal, firstly, was to end the monitorship, and so obviously pleased to have done that. I think where we are now, it's really important that we embed and sustain what we've done in terms of improving the quality of the business. So our focus remains on delivering a great service for the American servicemen and women that live in those properties. So that's our immediate focus.

[Myles Westcott, CFO at Balfour Beatty]

Okay. On the Support Services margin, look, we're delighted with the strong start to the year. 9.1% is an excellent performance, which was actually a margin increase in both the power and the transportation divisions within Support Services. Going forward, I think the momentum we've got will continue. Whether we'll stay at 9.1% by the full year, I'm not so sure, but we'll get close to 9%.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks. Jonny Coubrough from Deutsche Numis. Could I ask a follow-up question on power? As you move from part A to part B on these contracts, how will the terms and conditions change and the risk that you take on?

[Philip Hoare, Group CEO at Balfour Beatty]

Yeah, certainly. This is a well-trodden path and actually, one of the things that we are really keen on is this model because what happens during Part A is that we are absolutely an intrinsic part of the design and development of those projects. That means that by the time we come to submit the final price for those works, that is something we have a high degree of confidence in. We really welcome the model and I guess progressing with our clients on that.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks very much. Also on U.S. civils, I think you said, Myles, that it delivered a much reduced loss in the first half, so still loss making. Can we take it that buildings is doing a 2% management fee margin on a run rate basis?

[Myles Westcott, CFO at Balfour Beatty]

I think between civils and buildings, we had a big step up in performance from the first half of last year to first half of this year. You will recall the Texas highway project has been a drag on profitability, so that has got us to where we are now. I think between the two divisions, we would expect a pick up in that margin as we approach the full year. Yeah, U.S. buildings, long term, we have talked about it before, 1.5%-2% is where it should end up.

[Jonny Coubrough, Analyst at Deutsche Numis]

Thanks very much. Last one from me is just on the three E's and exploring adjacencies. Could this mean adding an additional growth market to your existing ones? Can that be done organically, or do you think that would involve acquisitions?

[Philip Hoare, Group CEO at Balfour Beatty]

Yeah. So, look, our absolute focus is on organic growth. I think you've seen the momentum that we believe we can see in those markets and those chosen growth markets moving forward. So that's our priority.

[Rob Chantry, Analyst at Berenberg]

Hi, Rob Chantry, Berenberg, and thanks for the presentation. Three questions from me, all on the U.S. I guess, firstly following up from Jonny's question, could you just help us frame the longer term margin dynamics in the U.S. after, I guess moving away from civils and towards buildings principally in terms of, I guess, the risk taken on in that 1.5% to 2% building margin and how you manage that? Secondly, U.S. data center market, any indication on, I guess, the progress year on year and the percentage of a book that it is in the U.S. and any differences in economics you receive compared to more traditional areas? Then thirdly, I'm not sure this is the correct phrasing to ask it, but in terms of capacity utilization in the U.S.

[Rob Chantry, Analyst at Berenberg]

in terms of the teams, is there a battle for talent given how buoyant the broader market are? Is there any bottlenecks given the 19% growth? Effectively, how busy are the team and how much more is there to go with the team you've got there in the U.S.?

[Philip Hoare, Group CEO at Balfour Beatty]

Okay, great. I'll take all three of those, but if you want to chip in, Myles, please do. So, I guess in terms of the longer term dynamics of the market, and we've already talked about building margins being between 1.5% and 2%, and you can see, look, our overall mix is about 90/10, so 90% of our revenue is from the buildings market and 10% from civils. And that's broadly the mix that I'd like to maintain as we move forward. Obviously, with some growth in there overall. From a U.K. data centers perspective, so if you look at our overall order book, 6% of our order book in the U.S. is in data centers. I do expect that to increase, and I expect that to get into probably a double digit percentage in terms of how that looks moving forward.

[Philip Hoare, Group CEO at Balfour Beatty]

I think the key thing about our U.S. business is the ability to remain agile. If I look back at our order book five years ago, we were at double digit and strongly double digits on commercial and residential, and we are not because the market changed. It is about being able to take our capability and flex that across the buildings market environment, which I think we are very adept at doing. I guess just to be clear, it will be important not to be overweight on data centers. We will make sure that the balance remains in our business. Then finally, I think just the question on capacity. Well, look, talent is always a challenge and our ability to attract and retain the best talent in the industry will be a constant challenge for us now and into the future.

[Philip Hoare, Group CEO at Balfour Beatty]

I think we have a great employee value proposition. Look at the incredible work that we are doing, and therefore, I think we remain an attractive brand for people to want to join.

[Rob Chantry, Analyst at Berenberg]

Thank you.

[Andrew Nussey, Analyst at Peel Hunt]

Good morning, Andrew Nussey from Peel Hunt. Couple of questions as well, please. First of all, when we look at working capital as a percentage of revenue, it increased to -19% versus -17%, which obviously is significantly higher than the long run average. You gave us a feel for the drivers behind that, but those drivers do not look like they are going to change anytime soon. So what are your thoughts over perhaps the medium term in terms of how that might shape? Secondly, in Support Services, the drop through from that revenue increase was very significant. Again, you gave some reasons behind it, but were there any one-offs in there that might impact the margin next year and going forward?

[Myles Westcott, CFO at Balfour Beatty]

Thanks very much. Look, firstly, working capital. As you say, very strong performance, around about 19% of revenue. We have talked in the past about 15%-18% being the sort of level we would settle at. I think that is still the case. That is why we are holding our average cash, i.e., increasing our guidance so our average cash is around about GBP 1.6 billion by the year end. You are also aware these are down payment mobilization payments on our contracts. If the style of contract continues and the growth continues, then we are going to continue with that sort of 15%-18% negative working capital. That cash is needed to deliver the programs. We will, yeah. While we may see some further inflows, given the growth that Philip set out, there will also be outflows to deliver the programs. Sorry, second question?

[Andrew Nussey, Analyst at Peel Hunt]

The second question is about the drop through.

[Myles Westcott, CFO at Balfour Beatty]

Thank you. That is on Support Services. It was a great first half, 9.1%, it was great performance by the teams. In the second half, we have got some of these early start contracts which, the drop through, we will see an increase in PFO in the second half, but I just would not say 9.1% is the new normal yet.

[Andrew Nussey, Analyst at Peel Hunt]

Were there any one-offs?

[Myles Westcott, CFO at Balfour Beatty]

No. Right. Just good performance. Mark.

[Graham Hunt, Analyst at Jefferies]

Thank you. Graham Hunt from Jefferies. Just two questions for me, please. On U.S. civils, you talk about some highways projects starting up there. Should we be happy about that? Can you give us some confidence that they are going to be margin accretive? You said 90/10 is kind of the target for that U.S. business in terms of building civils, but why is that? You have got peers of yours are doing much better in the civils market from a margin perspective. Could you not have ambition to do a bit more there? That is the first question. Second question, just on your investment portfolio, that has been steady around that GBP 1 billion level for a long or for quite some time now. How are you thinking about that going forward? The rest of your business has grown quite a lot.

[Graham Hunt, Analyst at Jefferies]

We have been talking, I think, in past quarters about the U.K. PPP market potentially coming back. We have had a bit of a change of government set up. What is the latest you are hearing on that side? Thank you.

[Philip Hoare, Group CEO at Balfour Beatty]

Yeah. Great. Okay. Just taking U.S. civils first. I think we talked about our strategy previously in U.S. civils, which is following the issues that we had in Texas, we did scale back our business to the point where we felt really comfortable about moving forward. We've secured three new wins over the course of the last 18 to 24 months. All three of those projects are mobilizing really successfully. You would expect us, I think, to give extra diligence and put extra controls around that to give us that confidence. I've been to those projects myself and I'm confident about our ability to be able to deliver them moving forward. I do think it's important, though, isn't it, to ensure that we can provide that confidence and that outcome before we race ahead and look to build greater depth in civil.

[Philip Hoare, Group CEO at Balfour Beatty]

I'd say making good progress, I'm confident on performance, but I'll keep a close and steady eye on that as we move forward. I think in terms of same thing, I guess that answers the 90/10 mix question as well. Just thinking about the investment portfolio. Look, we continue to see positive comment and traction in terms of what the U.K. PPP market looks like. We're actively engaged with the new Lower Thames Crossing Limited that's been established to set up that venture and that vehicle moving forward. We're in active discussion with U.K. government around both that portfolio, but also U.K. reservoirs program and other things that then may drop through from a PPP perspective.

[Philip Hoare, Group CEO at Balfour Beatty]

What I would say is some traction, still some time to go, I think, before we see that being actively realized, but Balfour Beatty is at the heart of the discussion.

[Graham Hunt, Analyst at Jefferies]

Thank you.

[Joe Brent, Analyst at Panmure Liberum]

Good morning. Joe Brent from Panmure Liberum. A couple of questions from me. Firstly, could you highlight the three biggest pipeline items that you are most excited about for the group? Secondly, just following up on the negative working capital point, I think you are guiding to average cash being flat in the second half. Does that suggest that you get lower negative working capital in the year rather than in the medium term? Finally, can you just give some indication of the size of the Texas loss in the first half?

[Philip Hoare, Group CEO at Balfour Beatty]

If you take the second two, I will take the first one.

[Myles Westcott, CFO at Balfour Beatty]

Okay.

[Philip Hoare, Group CEO at Balfour Beatty]

I guess just in terms of the three biggest pipeline opportunities that I am excited about, I mean, to be honest, I am excited about our whole pipeline because I think there are some tremendous projects that sit within it. We talked a moment ago about PPP in the U.K., but Lower Thames Crossing, we have made a meaningful start working with our customer to begin to deliver that program. I am looking forward to that getting into full-scale delivery, which will obviously happen soon. The conversion of the GBP 6 billion-GBP 8 billion, we are working really closely with SSE to bring those projects into that construction phase and alongside that, the opportunities of National Grid. When I turn to the U.S., we have got some really good long-term relationships with customers, particularly in the entertainment sector around Disney and Universal.

[Philip Hoare, Group CEO at Balfour Beatty]

There are some really exciting opportunities coming up in that space too, which will draw on our 35-year track record of working with those customers. So something hopefully we can all enjoy in the future.

[Joe Brent, Analyst at Panmure Liberum]

Okay.

[Philip Hoare, Group CEO at Balfour Beatty]

Yep.

[Myles Westcott, CFO at Balfour Beatty]

On working capital, we expect to stick around the GBP 1.6 billion average. To do that sort of 19% negative working capital, we do sort of prorate to the year's turnover. I do not know whether that will mean it will decrease. But yeah, that 15%-18% is the long-term expectation for this year if it is 17%-19%. Yeah, that is what you could imply from holding the average cash. But we do pro rata it to do the calculation. Texas loss in the first half, far reduced from last year. You will understand, I am not going to give you a specific number. But we are very pleased with the overall performance of the US Construction sector, and we do expect that margin to pick up a little in the second half, as that drag on profitability falls away.

[Joe Brent, Analyst at Panmure Liberum]

Thank you very much.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

Okay. I think we are finished in the room. We actually, we have two analysts on the iPad, so I am going to read them through. Alexander Craeymeersch, Kepler Cheuvreux. Three questions. You mentioned there are several end markets where momentum is accelerating. Your PFO is up close to 55%. Does that make low double-digit growth for 2026 a bit conservative? Considering the order book does not seem to be accelerating as fast as revenue, do you see the pipeline running ahead of that order book? How much do you expect to convert into orders in the second half? On Evolve, Energize, and Explore, you mentioned your investment in Pi Labs, a VC focused on build environment technology. What type of technology are we looking at here?

[Myles Westcott, CFO at Balfour Beatty]

Okay.

[Philip Hoare, Group CEO at Balfour Beatty]

Do you want me to go first?

[Myles Westcott, CFO at Balfour Beatty]

Yeah. Look, those 40% and 50% earnings growth numbers need to be taken into the context of that significantly reduced loss in U.S. civils, which took that U.S. Construction, I think it was over GBP 30 million swing from first half of last year to this year. Once you strip that out and normalize it, you can see why low double-digit growth is the right place for us to guide, which is slightly ahead of the guidance we provided in March.

[Philip Hoare, Group CEO at Balfour Beatty]

Just taking the question on pipeline first. Look, I believe we've got really strong momentum when we look ahead at our pipeline. When you look at order book, which is more than 2x our annual revenues, as we look forward in terms of that future pipeline of opportunity, we've got a number of projects in that phase where they've been awarded but not yet contracted, and we, as Myles said earlier, we expect the power elements of that to transmit into our order book over the course of the next 18 months or so. Also, I talked about data centers, $1 billion there awarded but not contracted. Things like the publication of the Defence Investment Plan, we saw an immediate momentum swing in terms of new opportunities coming to the market as a consequence.

[Philip Hoare, Group CEO at Balfour Beatty]

We were anticipating them, but actually the process started to flow as soon as that plan had been published. I think really good momentum in terms of the pipeline. Then in terms of the 3 E's, Pi Labs, as you said, an investment fund focused on between 10 and 20 organizations that are bringing new technology into our space. That ranges from direct frontline productivity improvements in terms of recording and capturing data and to thinking about how new technologies will be used across the broad spectrum of what we do. I think some really exciting developments there and look forward to sharing more of that in the future.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

Okay. Thank you. Then from Dan Cowan at BNP Paribas. You've talked about exploring market adjacencies in the U.K. and the U.S. Can you add a bit more color, any particular areas you're looking at? He goes on to say, "Would you be looking to acquire existing players or expand organic capability?" which we've touched on.

[Philip Hoare, Group CEO at Balfour Beatty]

Yeah. Okay. As I said, our first priority is organic growth. I think we've got significant opportunity to do that. I know everyone wants me to answer the question about M&A. Look, organic growth's our number one priority. I think as we move forward, we would look at bolt-on M&A where it enhances our capability, or our ability to enter an adjacent market. But we are right at the early stages of that. And Myles and I will look forward to talking to you more about it in the future.

[Jim Ryan, Head of Investor Relations at Balfour Beatty]

Super. Okay. Thank you. That's all the questions on the iPad. So I'll hand over to Alex, the operator, to see if there's any calls on the phone line.

[Operator]

Thank you. At this time, there are no questions on the conference call, so I'll hand it back to the room.

[Philip Hoare, Group CEO at Balfour Beatty]

Okay, great. Well, look, thank you very much for joining us here in the room and online as well. We really appreciate you spending some time with us. What I hope we've left you with is a sense of real momentum in Balfour Beatty. Strong first half year performance. Slightly upgraded guidance for the remainder of the year. But really importantly, great momentum and a powerful platform for growth into the future. So again, thank you very much for being with us, and we'll see you next time.

Participants

Executives

• Philip Hoare, Group CEO
• Myles Westcott, CFO
• Jim Ryan, Head of Investor Relations

Analysts

• Aynsley Lambert, Analyst at Investec
• Jonny Coubrough, Analyst at Deutsche Numis
• Rob Chantry, Analyst at Berenberg
• Andrew Nussey, Analyst at Peel Hunt
• Graham Hunt, Analyst at Jefferies
• Joe Brent, Analyst at Panmure Liberum