This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.guardian.co.uk/business/2013/apr/29/balfour-beatty-profits-warning
The article has changed 4 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| Balfour Beatty feels chill from construction slowdown | Balfour Beatty feels chill from construction slowdown |
| (about 7 hours later) | |
| Britain's struggling construction sector suffered another blow on Monday as building firm Balfour Beatty issued its second profit warning in six months. | Britain's struggling construction sector suffered another blow on Monday as building firm Balfour Beatty issued its second profit warning in six months. |
| The company, whose shares tumbled nearly 14% in early trading, blamed the declining construction sector and poor management in its UK division for the announcement, which will wipe £50m off profits in the current financial year. | The company, whose shares tumbled nearly 14% in early trading, blamed the declining construction sector and poor management in its UK division for the announcement, which will wipe £50m off profits in the current financial year. |
| It comes less than a week after the latest GDP figures showed construction output was one of the weakest areas of the UK economy, falling 2.5% in the last quarter. A list of major Balfour Beatty projects underlines the UK building industry's reliance on government-backed schemes, with the company's signature building achievements of recent times including the Olympics Aquatics Centre, the revamp of Blackfriars rail station in London and the widening of the M25 motorway. | |
| The company told shareholders: "The UK construction market has been a challenging environment in which to win and execute work. Market conditions which deteriorated significantly in the second half of 2012 continue to be difficult. | The company told shareholders: "The UK construction market has been a challenging environment in which to win and execute work. Market 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 on to contractors." | "Change in procurement trends, which we have previously highlighted, have persisted, allowing customers to impose increasingly stringent conditions on to contractors." |
| It revealed that new chief executive, Andrew McNaughton, who joined last month, will take charge of the UK division after an internal review found significant failings and "specific instances of poor operational delivery". The review scrutinised nearly 1,000 contracts at Balfour Beatty's regional UK operations, including social housing and road contracts, and found problems with several deals, ranging from overruns to overspends. Most of the problems were linked to contracts in south England. | |
| Balfour Beatty was keen to stress that the profit warning was due to its UK division, highlighting that operations in Asia, the Middle East, US, Australia and Germany were in line with expectations – although there will be a £10m dent to profits from its German railway operations. | Balfour Beatty was keen to stress that the profit warning was due to its UK division, highlighting that operations in Asia, the Middle East, US, Australia and Germany were in line with expectations – although there will be a £10m dent to profits from its German railway operations. |
| Analysts at Oriel Securities were unimpressed, accusing the company of reacting slowly to trends such as government delays in school building plans and a lack of power projects. "This is somewhat disappointing given comments from peers like Kier Group that UK construction markets had not worsened over the past six months. It will cast a negative shadow over most of the sector today, but we think a lot of this is Balfour specific, being slow to react to these trends," said Oriel. Andy Brown, analyst at Panmure Gordon, said: "While we know that the UK market is a tough place it appears that the business review has thrown up operational issues. Clearly these need to be resolved swiftly to ensure investor confidence can return." | |
| A previous profit warning in November last year was also blamed on the poor UK construction sector, with a dearth of major construction projects and new public sector contracts unlikely to materialise until 2014 or 2015. The profit warning came as MPs on the public accounts committee warned that the government's £310bn plan for boosting UK infrastructure is beset with uncertainty about funding. Arguing that investment in power generation, roads and railways is "crucial" for economic growth, the report said: "We are not convinced that a plan requiring £310bn of investment is credible given the economic climate, the cutbacks in public finances and the difficulty in raising private finance." | |
| With no new major projects on the horizon, Balfour Beatty's UK operation has already been revamped, with 650 job losses. The company, which reported a 7% fall in 2012 profit last month, has been restructuring its British construction business to reduce costs, and plans to sell most of its businesses in mainland Europe in favour of seeking growth in Australia and elsewhere. | |