Cash & Liquidity Management

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Treasury Technology - Using a Money Market Funds Portal at Balfour Beatty Although the market remains very volatile, we do not anticipate any change to our short term investment strategy. Our investment approach is already very conservative, and although we may consider investment in government debt in the future, we are comfortable with our current strategy. We have had a very positive experience with MyTreasury and using a MMF portal has had a very favourable impact on our treasury activities

Using a Money Market Funds Portal at Balfour Beatty

by Sarah Costello, Dealer, Balfour Beatty

Founded in 1909, Balfour Beatty is a world-class engineering, construction, services and investment group, employing 40,000 people delivering projects that directly improve lives and communities – from hospitals to highways, from railways to water supply systems, from schools to power generation and transmission lines.

Balfour Beatty is now ranked 19th in the international league table of contractors.

It builds, upgrades and manages major road systems in the UK, US, Dubai and South-East Asia, is a leading player in the development and maintenance of major and regional airports and is an international leader in the design, construction, management and renewal of rail assets and systems.

In the United States, the Group has recently acquired Balfour Beatty Construction US and Balfour Beatty Communities, which specialises in military housing PPP concessions, which means that around a quarter of Balfour Beatty’s business is now in the US.  

A significant proportion of Balfour Beatty’s business is engaged on long term construction contracts, so payments are made to suppliers at project or business unit level in accordance with project deliverables, usually using BACS payments or cheques. Our cash flow cycle is quite predictable during the course of the year so we know for how long we are able to invest cash, usually no longer than one or two months. Since our acquisition in the United States last year, we have more cash generated there than in previous years, whereas there has been some reduction in cash balances in the UK.

Treasury checks the cash position each day and we make our investment decisions accordingly. In the past, bank deposits have formed the basis of our investment strategy, with limited use of money market funds (MMFs). With a very different financial landscape to a year ago, we have made some changes to the way that we manage our short term investment activities. For example, over the past eight or ten months, we have started to use a broker to enable us to spread our counterparty risk and avoid concentrating our cash in a small group of banks. We have also significantly increased our use of MMFs, partly due to their inherent diversification, and partly due to the returns, which have been higher than bank deposits over the past six months. Furthermore, with the volatility in the market, using MMFs avoids the issue of selecting a deposit tenor and allows greater access to liquidity. While the proportion of cash which we invest in deposits or MMFs varies, we have typically invested around 75% of cash in MMFs during 2009 so far.

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