Balfour Beatty issues £75m profit shortfall warning

Steve Marshall
Steve Marshall

Balfour Beatty has issued its fifth profit warning this year which warned that its construction business is likely to show a £75 million profit shortfall at the end of the year.

The contractor has appointed auditor KPMG to conduct an independent review of its construction arm Construction Services UK, but added that trading for the rest of the group remained in line with expectations.

Shares fell to 182p, a 20 per cent drop from Friday’s closing price of 224.80 per cent.

A company statement said the review will focus on commercial controls, on “cost to complete” and contract value forecasting and reporting at project level.

Balfour Beatty also revealed that its search for a new CEO was at an “advanced stage”. Former chief executive Andrew McNaughton stepped down in May following a third profit warning in three months. It issued another one in July.

Earlier this month Balfour agreed the £820m sale of US design consultancy Parsons Brinckerhoff to Canadian firm WSP global, a move that thwarted a potential £3bn mega-merger with Carillion, and last week was appointed by Magnox to deliver a £34m Solid Intermediate Level Waste Encapsulation (SILWE) contract at the Hunterston A former power station in North Ayrshire.

Steve Marshall, executive chairman of Balfour Beatty said: “This latest trading statement is extremely disappointing; the Board has appointed KPMG to undertake a thorough review across the contract portfolio within Construction Services UK. There has been inconsistent operational delivery across some parts of the UK construction business and that is unacceptable. Restoring consistency will take time and it has our full focus.

“The Board is committed to delivering shareholder value and we are progressing against the priorities we set out over the last few months, including the sale of Parsons Brinckerhoff and the announcement shortly of a new CEO. The Group’s other operating divisions are trading as expected and the Board continues to believe the standalone strategy will deliver value in the medium term.”

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