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Balfour Beatty issues fresh profit warning Balfour Beatty issues fresh profit warning
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Construction firm Balfour Beatty has issued a fresh profit warning, citing problems with contracts in Britain, the Middle East and the US.Construction firm Balfour Beatty has issued a fresh profit warning, citing problems with contracts in Britain, the Middle East and the US.
The company, which is leading the conversion of the London Olympic stadium into a multi-use venue, said “legacy issues” will reduce 2015 pre-tax profit by up to £150m this year, with the UK accounting for two-thirds. The company, which is leading the conversion of the London Olympic stadium into a multi-use venue, said “legacy issues” will reduce 2015 pretax profit by up to £150m this year, with the UK accounting for two-thirds.
City analysts had pencilled in an annual pre-tax profit of £77m before the latest warning. Balfour now looks likely to remain in the red, after running up a loss of £304m last year. The 106-year-old business has scrapped its dividend and a share buyback and reorganised its pension fund payments. City analysts had pencilled in an annual pretax profit of £77m before the latest warning. Balfour now looks likely to remain in the red, after running up a loss of £304m last year. The 106-year-old business has scrapped its dividend and a share buyback and reorganised its pension fund payments.
Shares in the group were down 4%, at 220p, having initially slumped by 10%.Shares in the group were down 4%, at 220p, having initially slumped by 10%.
Reeling from a series of profit warnings over the past two years, the company is trying to rebuild itself under Leo Quinn, its new chief executive. Quinn, who was poached from defence company Qinetiq, which he transformed during a five-year reign, has been reviewing contracts since he took the helm in January.Reeling from a series of profit warnings over the past two years, the company is trying to rebuild itself under Leo Quinn, its new chief executive. Quinn, who was poached from defence company Qinetiq, which he transformed during a five-year reign, has been reviewing contracts since he took the helm in January.
Balfour has been hit by the mounting costs of its contracts and wafer-thin margins during the recession, following a period of rapid expansion since 2000. The company was ill-equipped to deal with the industry slump caused by the financial crisis, having become too complex, with weak controls over costs and project bidding.Balfour has been hit by the mounting costs of its contracts and wafer-thin margins during the recession, following a period of rapid expansion since 2000. The company was ill-equipped to deal with the industry slump caused by the financial crisis, having become too complex, with weak controls over costs and project bidding.
Quinn sought to reassure investors by saying: “The issues we are working through are as I set out in March and legacy challenges remain. However, we are making encouraging progress on the group’s transformation.” Quinn sought to reassure investors. He said: “The issues we are working through are as I set out in March and legacy challenges remain. However, we are making encouraging progress on the group’s transformation.”
Westhouse analyst Alastair Stewart was not convinced, however. “We suspect more is to come from these three regions,” he said. “It all looks very negative and could run and run.” Westhouse analyst Alastair Stewart was not convinced. “We suspect more is to come from these three regions,” Stewart said. “It all looks very negative and could run and run.”
Balfour employs 36,000 people in 80 countries. The company’s weak financial position makes it vulnerable to predators. Rival Carillion made three bids a year ago, all of which were rejected.Balfour employs 36,000 people in 80 countries. The company’s weak financial position makes it vulnerable to predators. Rival Carillion made three bids a year ago, all of which were rejected.