Balfour Beatty, the construction company whose projects include Crossrail and HS2, has said returning some of its £500m cash pile to shareholders is out of the question until the full impact of coronavirus on its global business is known.
Responding to reports that it had scrapped plans to announce a £200m-plus share buyback on Wednesday alongside its annual results, the chief executive, Leo Quinn, said it would “not be a smart move” when cash reserves may be needed to cover coronavirus costs. The company had £512m in cash on its balance sheet at the end of December.
“We have said we would look at the capital structure after we are clear what the implications of Covid-19 are. Liquidity is the most important thing. Given the current market uncertainty, it wouldn’t be a smart move to give the money away at the moment,” he said.
“We are maximising cash reserves in the event the virus becomes more impactful on the economy and the supply chain. We still have to pay wages to employees and to people on site.”
The company, one of the main contractors on the HS2 high-speed rail link, saidthe virus had hit its building operations and supply chain in Hong Kong, where it operates a joint venture.
Quinn said about 10-15% of its 7,000 workers in Hong Kong had failed to turn up to work since the lunar new year holiday. “We don’t know whether it is because of the lockdown in Hong Kong or the coronavirus, but the two are connected,” he said.
The company was also facing supply chain issues, he said, affecting products such as windows and curtain walls. Overall Hong Kong revenues would be down 10% in the first quarter.
He said there had been no impact so far on Balfour’s UK business, although one staff member had self-isolated after their daughter visited Italy. However, the supply chain could be affected as some components came from China and were assembled in the UK.
“What we don’t know and can’t get to is within any assembly there could be components from China that could be interrupted, but we don’t know at this time,” Quinn said. The outbreak is only a few weeks old in the UK, “so we don’t know the impact yet. All our sites and offices are operating.”
Balfour Beatty’s share price gained 15% in Wednesday afternoon trading, as pre-tax profits for 2019 rose by 12% to £138m and revenues increased by 7.7% to £8.4bn.
