Balfour Beatty issues another profit warning

Balfour Beatty has revealed another profit black hole, this time of up to £150M on projects in the UK, US and the Middle East, with UK projects accounting for around two thirds of the total.

The profit warning came ahead of the group’s half year results which will be announced on 12 August. The company reported a £304M pretax loss for the 2014 financial year on turnover of £8.75bn in March.

The latest news comes after a £70M shortfall in profits was flushed out by KPMG in January following a forensic review of the business and which was intended to draw a line under problems after the contractor had had to drip feed bad news as it uncovered it.

The new profit warning brings the total since May to £410M.

Group chief executive Leo Quinn joined at the start of the year and introduced a “Build to Last” transformation programme intended to tighten up bidding and contract management.

Quinn brought in a new senior leadership team and managers have left the business. The most recent to step down was UK Construction Services chief executive Nick Pollard

"The issues we are working through are as I set out in March (when the 2014 final results were announced) and legacy challenges remain. However, we are making encouraging progress on the group's transformation, Quinn said after revealing the latest profit shortfall.

“The positive response of our people to change, the continuing confidence of our customers in Balfour Beatty's expertise and the first signs of improving cash performance reinforce my conviction in the Group's long-term success."

The Build to Last transformation programme is gaining traction, the contractor said.  New project disciplines and financial controls are being embedded, the new senior leadership team is substantially in place and good progress is being made against the £100M permanent cost reduction programme.

As a result of the actions taken under the Build to Last programme, net cash is expected to exceed £200M at the half year end – substantially better than H1 2014, “demonstrating the group's ability to maintain balance sheet strength through self-help,” it said.


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