Balfour Beatty profits warning cites challenging construction sector

Building and infrastructure firm Balfour Beatty has issued its second profits warning in six months, with the announcement that its UK construction business is expected to deliver significantly lower profits than expected this year.  The company said the UK construction market has been a challenging environment in which to win and execute work, adding: “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 onto contractors.”

Profits from operations in Balfour Beatty’s UK Construction business will be £50 million less than expected reflecting continued struggles for the construction industry, which, according to ONS figures published last week, was the worst performing sector, declining by 2.5 per cent in the first quarter.

Balfour Beatty includes high-profile projects such as the London 2012 Aquatics Centre and recently won the £17m Bishop’s Court commercial scheme for Henderson Global Investors in the Spitalfields regeneration area said that its subcontractors “continue to operate under considerable financial strain.”

The firm added that its UK construction business has been implementing organisational restructuring to streamline the business, it also indicated that poor performance in some areas of its construction business were being addressed, with the CEO Andrew McNaughton taking charge of the UK construction business personally, to address operational issues.

However the company said that its balance sheet remains strong with trading in our other businesses broadly in line with expectations.

By Sara Bean