* Underlying pretax profit up 14 percent to 108 million sterling
* Increases dividend by 8 percent
* Order book 12.5 bln sterling vs 12.8 bln at end 2008
* Boosted by U.S. growth, UK infrastructure contract wins
* Shares up 7.5 percent (Adds detail, CEO and analyst comment, share price)
By Lorraine Turner
LONDON, Aug 12 (Reuters) - British construction and engineering group Balfour Beatty posted a robust first-half profit and signalled a rebound in the infrastructure market, lifting its shares 7.5 percent.
"We're not seeing any hold-up in projects for their own sakes, the issue of debt markets and PFI are now pretty much behind us," chief executive Ian Tyler told Reuters.
Balfour Beatty won four contracts in the first half including a 1 billion pound ($1.64 billion) contract to widen and maintain London's M25 orbital motorway over the next 3-4 years.
"The debt markets are coming back to finance those type of projects. We've essentially had a flow of those projects now coming to fruition," he said.
The group, whose activities span engineering, construction and road and rail transport, generated 108 million pounds in adjusted pretax profit in the six months to June 27, at the top end of the consensus range provided by the company, against 95 million last year.
British peer Morgan Sindall reported a "record six months" at its infrastructure and construction units on Monday despite posting a 28 percent drop in first-half profit.
Balfour said it expected to make good progress in the second half of 2009 based on what it described as a strong first half performance, boosted by growth at its U.S. operations and British infrastructure wins.
"The group are now seeing opportunities with clients seeking infrastructure partners in the medium and long term, and it is this area we believe will provide substantial upside in the medium term," said Charlie Menegatos at Accendo Markets.
Shares in Balfour, which have gained 70 percent in the past month after tumbling to its lowest point in 2009, were 7.5 percent higher at 0823 GMT.
RAIL TO ACCELERATE
The group's focus on public sector contracts, which make up 85 percent of its orders, means it has been relatively immune to the downturn. But a growing government budget deficit has led to concerns about the group's long-term growth, with over 50 percent of its activity in Britain.
"Overall if I take the balance of our business we don't expect it to reduce because the government reduces expenditure in education for example," said Tyler. "In the foreseeable future, we see the (UK) government continuing to put new schemes out into the market," he said.
The group, which is building the Aquatics Centre for the London's Olympic 2012, reported an order book of 12.5 billion pounds which was down slightly on the 12.8 billion reported at the end of 2008.
Tyler forecast growth at the company's rail unit over the next 2-3 years, after the unit was impacted by the timing of contracts and lower volumes which dented underlying profit by 22 percent to 7 million pounds.
The company also said on Wednesday it had been selected by South West Water to work on its five-year capital programme and that it expected to receive over 100 million pounds out of the overall 590 million pound project budget.
Balfour raised its interim dividend 8 percent to 5.5 pence. (Editing by Paul Hoskins and Jon Loades-Carter) ($1 = 0.6084 pound)