MIDAS SHARE TIPS: Across the world, governments are pledging to spend more on infrastructure – they could do with help from the private sector, companies such as BBGI
Build Back Better is one of the Government’s central ambitions, as we emerge from the Covid pandemic. Boris Johnson has already pledged to spend £100billion on infrastructure investment in the next financial year, with better schools, hospitals, roads and railways all on his radar.
The Prime Minister is not alone. Across the world, governments are pledging to spend more on infrastructure, to improve transport links and ensure that citizens have access to the services they need. But the costs are eye-watering. The world already spends around £1.8trillion every year on infrastructure and experts believe that figure will need to rise by almost 50 per cent over 15 years just to keep pace with economic growth.
Yet most governments, including our own, are grappling with huge deficits, following the pandemic. They could do with some help from the private sector, companies such as BBGI, a global infrastructure business, specialising in essential assets such as roads, schools, hospitals, fire and police stations. The stock is £1.66 and should enjoy steady gains over the coming years, alongside generous dividends. Joint chief executives Duncan Ball and Frank Schramm report annual results this week and are expected to announce strong figures, alongside a target dividend for 2021 of 7.33p, putting the shares on a yield of 4.36 per cent.
Road to riches: BBGI’s big infrastructure projects include a bridge in Vancouver
The company floated in 2011 with 19 assets. Today, there are 50, spread across the UK, Europe, America, Canada and Australia.
Here, the group’s portfolio includes the Gloucestershire Royal Hospital, Mersey Gateway Bridge, Lisburn College in Northern Ireland and ten fire stations in Staffordshire.
Overseas, there are schools in Germany, roads in Norway, prisons in Australia and some eye-catching projects in Canada, such as the Golden Ears Bridge in Vancouver.
The assets are wide-ranging but they all provide essential services, they are all built and operated for central or local governments and the average contract is more than 20 years long.
Crucially too, BBGI’s remuneration depends not on how much the roads and buildings are used but on whether they are available. This differentiates the group from many other infrastructure firms and tends to mean that annual earnings – and therefore dividends – are predictable, during good times and bad.
Partnerships between government bodies and private sector operators have had a bad rap in recent years but Ball and Schramm, both infrastructure veterans, pride themselves on looking after their assets and making sure customers are satisfied.
Last year, for example, Gloucestershire Royal Hospital became the local hub for Covid-19 patients. Wards were repurposed, waiting areas were converted to create extra space and changing areas were set up for medical staff. BBGI oversaw the entire programme and continues to monitor works, as the hospital slowly returns to normal.
The group has earned some environmental credentials too. The Kicking Horse Pass in the Rocky Mountains is prone to heavy snowfalls in winter but salt granules, the traditional way of making roads safe, can contaminate local waterways. BBGI has started spraying the road with brine solution instead, which works as well but does not pollute surrounding areas.
Looking ahead, prospects are bright. Infrastructure is in demand, Ball and Schramm have a reputation for reliability and the group has a rich pipeline of potential investments.
In some cases, BBGI bids for projects that are yet to be built. In others, assets are acquired from cash-strapped contractors. Either way, the group is highly selective, turning away far more projects than it bids for and only pursuing those which conform to strict financial, operational and environmental criteria.
Midas verdict: BBGI’s motto is: boring is beautiful. But boring can also yield rewards. Ball and Schramm have delivered consistent dividend and share price growth since flotation and aim to continue doing so. For investors in search of low-risk shares in an uncertain world, BBGI, at £1.66, is a long-term buy.
Traded on: Main market Ticker: BBGI Contact: bb-gi.com or phone +352 2634791