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Balfour Beatty acquires Cowlin Group, a leading UK Regional Contractor, for £52 million

Further step in established strategy of expanding Balfour Beatty’s regional presence in the UK

KEY POINTS

• Provides strong, profitable presence in building construction markets in South and Southwest England and in Wales
• Excellent fit in terms of geography, culture and project type
• Strong, well-respected brand with a quality reputation and a large secured order book
• Core activities in long-term partnerships and frameworks with high levels of repeat business
• Experienced management with a strong track record of successful growth
• Mature, established supply chain structure and proven risk management
• Earnings enhancing in 2008 and beyond*

* The statement as to earnings per share enhancement does not constitute a profit forecast and should not be interpreted to mean that Balfour Beatty's future earnings per share will necessarily exceed or match those of any prior year.

Commenting on the acquisition, Balfour Beatty Chief Executive, Ian Tyler said:

“The acquisition of Cowlin Group adds to our leading position in regional UK building markets by establishing a strong base in an area where we currently have only a limited presence. It is well-established in its regional design and build, construction and refurbishment markets and has a strong management team which has made excellent progress in growing the business over recent years.”

Balfour Beatty, the international engineering, construction, services and investment group, announces today that is has acquired Cowlin Group, the leading UK regional building business, for a cash consideration of approximately £52 million from its current management. Cowlin Group has positive net cash balances in excess of £20 million.

Rationale and Key Benefits

The acquisition is in line with Balfour Beatty’s strategy to extend its UK regional building and civil engineering businesses. The operations which make up Balfour Beatty’s leading presence in these markets deliver amongst the Group’s best and most reliable margins, and the markets themselves have positive growth momentum. Cowlin will provide a strong, established presence in the south and southwest of England and in Wales, markets where the Group currently has little coverage.

The acquisition is expected to be earnings enhancing in 2008 and beyond*.

Cowlin Construction

Cowlin Group, which trades as Cowlin Construction, is a building and refurbishment contractor based in Bristol, serving South and Southwest England and Wales. It operates through four main regional offices in Bristol, Cardiff, Plymouth and Yeovil and has wide sector coverage with particular expertise in education, healthcare, leisure, residential, commercial and industrial property. Much of its business is done through long-term frameworks and partnership arrangements.

The business was established in 1834. It has approximately 300 staff and 150 directly employed operatives. In healthcare, it constructs general hospitals, special care units and research and teaching facilities. In education, it has an extensive portfolio of work for local education authorities and universities. In commercial and industrial property, it is active in office developments, business parks, industrial units and headquarters buildings. It has over 50 years’ experience in the luxury residential market.

It also has a specialist timber frame division based in Wales.

Performance

In the year ended 30 September 2006, Cowlin had revenues of £186 million and profit before tax of £5.3 million. Net assets at 30 September 2006 were £5.8 million, while its confirmed order book exceeds £200 million with a further £130 million of prospective work under final negotiation.

The Market

UK construction and building markets are growing significantly, underpinned by government spending on infrastructure and by buoyant private sector investment. With its strong relationships with both public and private sector customers, Cowlin is well positioned to take advantage of this growth, as are Balfour Beatty’s other regional construction and infrastructure businesses.

* The statement as to earnings per share enhancement does not constitute a profit forecast and should not be interpreted to mean that Balfour Beatty's future earnings per share will necessarily exceed or match those of any prior year.

ENDS

Enquiries to:

Tim Sharp
Tel: 020 7216 6884
www.balfourbeatty.com

Notes to Editors

1. Balfour Beatty is the UK’s leading building construction company. It currently operates through:
   
   Balfour Beatty Construction – the £750 million per annum revenue major projects building business active in education, healthcare, defence and industrial and commercial property markets. Amongst its current major projects are the £530 million Birmingham Hospital, the £180 million Stobhill and Victoria Hospitals in Glasgow and major PPP schools schemes in Birmingham, Stoke, Bassetlaw, Rotherham and North Lanarkshire.
   
   Mansell – the £750 million per annum revenue regional building company with a wide range of long-term framework partners and specialist expertise in new build and refurbishment. It is a leader in the fast-growing affordable housing market.
   
   
2. Balfour Beatty strengthened its regional businesses by the acquisition of Mansell for the building business in 2003 and Birse for the civil engineering business in 2006, both of which have been successfully integrated into the Balfour Beatty organisation.
   
   
3. Balfour Beatty is the UK leader in building services through Haden Young, the mechanical and electrical contractor, and Balfour Kilpatrick, the electrical services company. These two businesses have combined annual revenues of approximately £500 million.
   
   
4. Balfour Beatty is a leading player in the UK facilities management market through Haden Building Management which has annual revenues of approximately £300 million.
   
   
5. Balfour Beatty is a world-class engineering, construction, services and investment business, well positioned in infrastructure markets which offer significant long-term growth. We work in partnership with sophisticated customers who value the highest levels of quality, safety and technical expertise. Our skills are applied in appropriate combinations to meet individual customer need. Its financial position, with significant net cash and with strong operating cash flows, offers continuing flexibility to add additional capacity and expertise to the business mix and to make appropriate investments in PPP and other long-term growth opportunities.