Balfour Beatty resumes dividend payments as recovery continues

(Adds CEO, analyst comments, details, updates share move)

By Esha Vaish

Aug 17 (Reuters) - UK construction company Balfour Beatty (Other OTC: BAFBF - news) declared its first dividend for 18 months on Wednesday and said it expected to boost margins to standard levels for the sector over the next 24 months following a turbulent few years.

Balfour's CEO said some UK orders had been put on hold after the country voted to leave the European Union in a June 23 vote but said it was too soon to assess the full impact of the referendum result.

"There has been a delay in the placing of new infrastructure orders ... commerce doesn't do well in an environment which has uncertainty," Chief Executive Officer Leo Quinn told Reuters.

"We would like clarity from the government of what it's strategy is, so that we can size and shape our companies accordingly," he said.

A Markit (NasdaqGS: MRKT - news) /CIPS survey earlier this month showed that the construction industry suffered its sharpest downturn in seven years in July following the EU referendum.

Balfour overhauled its businesses after losses at its UK construction division, as well as some in the Middle East and Asia, led to multiple profit warnings that forced it to scrap its 2015 dividend, cancel a share buy back and reorganise pension payments.

Most losses were related to projects undertaken during the recession at wafer thin margins which later failed to meet savings targets or budget forecasts as they neared completion.

Balfour shares rose almost 10 percent on Wednesday to trade higher than their June 23 close after it declared a 0.9 pence interim dividend and published better than expected results.

Balfour reported underlying pretax profit from continuing operations of 7 million pounds ($9 million) for the six months to July 1. Liberum had forecast a loss of 25.1 million pounds.

Although turnaround initiatives meant there had been a much smaller negative impact from losses on historic UK projects, Balfour said they still overshadowed a strong U.S (Other OTC: UBGXF - news) . performance.

The company appeared to be at a "turning point" with its results reflecting greater discipline on profit recognition on newer projects, brokerage Numis said in a note.

Balfour said its final dividend would be about twice the interim payout and indicated that dividends would rise at least as much as earnings going forward.

It (Other OTC: ITGL - news) also said its target was to have operating margins of 1-2 percent in its U.S. construction business, 2-3 percent in its UK construction business and 3-5 percent in its support services business by 2018.

Quinn said recruitment decisions were contingent on whether stalled UK projects would go ahead, including airport expansion, new nuclear power plants and flood defences.

Balfour, which has been accelerating its exit from legacy issues related to contracts with thin margins, had completed 81 percent of its "challenging" contracts and expected to be 90 percent done by the end of this year, Quinn said.

New (KOSDAQ: 160550.KQ - news) business would limit the impact of the remaining 10 percent, which would run for another 2-3 years, he said.

"We're focused on new business we're bringing in now, which are jobs where we understand the risk,... (are) confident about the synergies and the cash flow," Quinn said. ($1 = 0.7676 pounds) (Editing by David Clarke)