Jolyon Wellington's questions to Balfour Beatty plc/ADR (BAFBF) leadership • Q2 2016
Question
Jolyon Wellington from JPMorgan asked for the drivers behind the confidence in moving the UK construction margin from breakeven to 2-3%, whether revenue shrinkage would be required, and how falling interest rates affect the infrastructure portfolio's valuation.
Answer
CEO Leo Quinn attributed his confidence in UK margins to bidding on higher-margin projects with a lower overhead base, noting the business is planned for flat revenue, so any growth is a bonus and no shrinkage is required to hit the target. Regarding the infrastructure portfolio, he explained that its assets have robust, often inflation-linked returns, making their valuation less sensitive to interest rate fluctuations than might be expected.