Analysts give latest Balfour statement a cautious welcome

Balfour Beatty

The announcement by Balfour Beatty that it has was not a surprise to many analysts.

The latest profit shortfall of 拢20m relates to differences between Balfour鈥檚 assessments of its contracts and the assessment of KPMG. The additional 拢50m difference is a result of a downward revision on forecast profit from current contracts that were performing poorly.

Balfour also announced the directors鈥� valuation of the existing investments portfolio has increased to 拢1.3bn, while the firm has cancelled a proposed share buyback of up to 拢200m.

The announcement today follows a string of profit warnings between November 2012 and September 2014.

Leo Quinn, who has been installed as chief executive, has been tasked with turning Balfour鈥檚 fortunes around.

How do industry analysts view the challenge facing Balfour? 

Joe Brent, head of research at Liberum, said: 鈥淲e believe that Balfour Beatty construction, over time, can get back to earning 2% margins.

鈥淲e do not expect Leo Quinn to be in a position to announce medium term targets at the results in March but still see significant recovery potential (although the 鈥榞o-it-alone鈥� road was never going to be smooth or easy).鈥�

Stephen Rawlinson, broker at Whitman-Howard, said the update 鈥減uts the company back on a good track if it stops taking bad risks and potentially brings forward the plans of predators to move soon.鈥�

Commenting on the cancellation of the share buyback, Rawlinson said: 鈥淲e are not surprised at this decision and the return was always intended to be a sweetener rather than a sensible use of cash as this time.  Cancellation of the cash back is exactly right for the business and is the best decision in our view at this time.鈥�

Commenting on the revaluation of the investments division, Kevin Cammack, at Cenkos Securities, said: 鈥淎t a stroke, Leo has sent a message to suitors of the Investments division that the starting price is 拢1.3bn not 拢1bn and it is in no rush to sell.鈥�

Cammack said he was impressed by 鈥淟eo Quinn鈥檚 confidence in proclaiming that nothing in KPMG鈥檚 list of remedial recommendations was not either acknowledged, actioned already or in his words 鈥渆minently fixable鈥�.鈥�

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