Group chief executive takes charge of UK construction business, where profit is forecast to be 拢50m less than expected
Industry giant Balfour Beatty has warned that profit at its UK construction business will be 拢50m less than expectations, following a review of the business.
In a statement to the City, the firm also said group chief executive Andrew McNaughton (pictured) would be stepping in to take charge of the UK construction business, currently led by Mike Peasland.
The firm said that its UK construction business was expected 鈥渢o deliver significantly lower profits from operations for 2013鈥� - amounting to 拢50m less than forecast in March, when the contractor announced its full-year results.
This is Balfour Beatty鈥檚 second profit warning in six months, when the firm said 鈥渢he performance of our UK construction business is weaker than anticipated鈥�.
Balfour Beatty鈥檚 share price was down 12% on early trading this morning.
The UK construction business has undergone a major restructure in the past year, in a bid to streamline its operations.
The firm said the UK construction market had been a 鈥渃hallenging environment in which to win and execute work鈥�.
The firm said its latest review of the construction business had highlighted 鈥渟ome poor performance in the UK regional construction business, and to a lesser extent the building part of the major projects business, which led to an internal review鈥�.
鈥淭his internal review has concluded that the combination of a difficult external environment and internal reorganisation has resulted in specific instances of poor operational delivery.鈥�
The firm said that Balfour Beatty group chief executive Andrew McNaughton, who took over from Ian Tyler last month, CEO, has 鈥渟tarted implementing an immediate action plan, taking charge of the UK construction business personally, to address the operational issues鈥�.
Balfour Beatty said: 鈥淢arket conditions which deteriorated significantly in the second half of 2012 continue to be difficult. Change in procurement trends, which we have previously highlighted, have persisted, allowing customers to impose increasingly stringent conditions onto contractors.
鈥淥ur subcontractors continue to operate under considerable financial strain. In these extremely tough conditions, our UK construction business has been concurrently implementing a substantial organisational restructuring in order to streamline the business for future success while reducing costs to remain competitive.鈥�
The firm said the group鈥檚 balance sheet remained 鈥渟trong taking full account of the cash impact of the 拢50 million profit shortfall鈥�.
The UK construction business reported revenue of 拢3.18bn in the year to 31 December 2012 鈥� a drop of 6% on 2011 鈥� with a loss of 拢37m, due largely to one-off restructuring costs.
The firm expects revenue for its UK construction business to fall 20% in 2013, leaving it with revenue of around 拢2.55bn, down 35% on the 拢3.89bn the firm posted in 2009.
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