Contractor Balfour Beatty is to sell £300m of PFI investments and set up a £750m infrastructure fund in a new strategy unveiled this week

The move is designed to make the best of the £380m acquisition of infrastructure consultant Parsons Brinckerhoff last year.

Rob Gregor, formerly head of European Infrastructure at AMP Capital Investors, will set up a fund to invest in early-stage infrastructure projects.

Balfour has a £1bn stock of PFI schemes on its books, but will gradually sell these holdings as they get beyond construction stage. The intention is to sell £300m-worth within five years.

Alfour is flagging a real strategic shift in its investments division

Kevin Cammack, Cenkos

Profits will be invested in new assets, and shareholders will also be taking a cut through an “incremental” increase in the dividend.

Balfour, which turned over £10.3bn in 2009, will take a 10% stake in the infrastructure fund it is setting up, as well as charge a fee for the management. It has recruited the former Laing chief executive, Andy Friend, as chair of the fund.

The firm said the changes, coupled with an increasing focus on professional services through the work of Parsons Brinckerhoff, will see its profit margin rise to 4% over the next few years.

However, Balfour told analysts that the UK market was likely to “underperform” following the Comprehensive Spending Review, though globally it saw little difference in workloads for the next five years compared with the past five.

Kevin Cammack, analyst at Cenkos, said the change of strategy increased the value of the firm. “The presentation might have been better dubbed ’Infrastructure Investments - new strategy’, because that was the real headline,” he said. “It is flagging a real strategic shift in its investments division.”

The news came as the contractor agreed a deal to wipe out its pension deficit by paying £48m a year for eight years.