Infrastructure firm Balfour Beatty plc (LSE:BBY) impressed the market with today’s financial results and £100 million share buyback announcement, but the FTSE 250-listed contractor also provided some positive insights into its HS2 exposure.
Or lack thereof, as it seems.
Prime Minister Rishi Sunak declared last October that the fraught rail project’s Manchester leg will not go ahead in order to recoup £36 billion worth of spiralling construction costs.
Attention swiftly turned to the contractors heavily involved in the project, including, alongside Balfour Beatty, Costain Group, Galliford Try and Kier Group.
But Balfour used today’s earnings call to reiterate previous comments that the partial cancellation of HS2 will have little to no impact on it.
“The group's order book was unaffected by the government's decision in October 2023 to cancel HS2 Phase 2, as this stage of the project had yet to be contracted,” Balfour stated.
“The group continues to expect to deliver material volumes of HS2 work across the balance of the decade and is awaiting results for its bids submitted in November on four new packages of HS2 work covering overhead catenary and track installation.”
Balfour also suggested that the Phase 2 cancellation could benefit it, since those £36 billion in savings are, at least according to Sunak, going to a new ‘Network North’ project to improve roads, buses and railways.
“With Balfour Beatty holding material market positions with both Network Rail and National Highways, Network North could introduce new opportunities for the group,” said Balfour.
Today’s bullish share price performance, with Balfour shares surging 10%, suggests that the market concurs, although the future of HS2 and redirected project funding are not set in stone.
With an upcoming election heavily skewed to Labour’s favour, the prospect of yet another HS2 policy shift should not be discounted.