Balfour Beatty finds an extra £13.5M in PPP hospital sale

Balfour Beatty chairman Steve Marshall delivered on his promise to investors on Monday, as the business revealed another £75M profit shortfall, that gains on the first of its PPP disposals would be above expectation.

The company's 50% interest in Pinderfields and Pontefract Hospital PPP project in West Yorkshire has been sold for £61.5M generating a gain on disposal of £42.2M and exceeding a revised director’s valuation by £13.5M or 28%.

The uplift on anticipated sale proceeds had been signalled by  Marshall when he unveiled the contractor’s latest profit warning.

The PPP sale announcement closes a decidedly mixed couple of weeks for the business. The shock new losses for the Construction Services division were the definite low point. But the group has now, with the Pinderfields sale started its programme to release and recycle equity from its £1051M PPP portfolio which had been revised up in value by 46% by the directors in June. 

Balfour Beatty has also reported some major contract wins including a joint venture deal with AMEC and Jacobs worth between £240M and £336M to construct a new nuclear waste reprocessing plant at Sellafied and its appointment by Magnox to deliver the £34M Solid Intermediate Level Waste Encapsulation contract at Hunterston A.

Marshall said this week that he would be leaving the business once a chief executive has been appointed to fill the vacancy left by Andrew McNaughton who stepped down in May this year. That appointment is expected “within weeks”. A new non executive chairman has already been lined up.

Following revelation of the latest profit shortall, Britain’s biggest contractor has called in management consultant KPMG to undertake a detailed review by the end of the year of the Construction Services contract portfolio including new wins. The consultant will be looking in detail at Balfour Beatty’s performance in its core skill area of contracting, focusing on commercial controls, “cost to complete”, contract value forecasting and reporting on a series of troubled projects mostly in the London building market.

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