25th Mar 2015 07:57
LONDON (Alliance News) - Balfour Beatty PLC Wednesday reported a wider loss for 2014 as it booked another writedown against its struggling construction business, and it moved further to shore up its balance sheet by scrapping its dividend as Chief Executive Leo Quinn admitted it will take another two years to turn the business around.
The construction and infrastructure investments company reported a pretax loss from continuing operations of GBP304 million for 2014, compared with the GBP49 million loss it reported for 2013, as it booked a further GBP118 million write-down against its UK construction business and a GBP53 million impairment in its German rail business.
Balfour Beatty has been going through a tough few years after its UK construction business ran into severe difficulties after it won contracts that proved unprofitable and overly risky. It fended off a takeover attempt by rival Carillion PLC last year, a deal that collapsed when Balfour refused to halt the sale of its US asset management arm Parsons Brinckerhoff, and is now embarking on a major restructuring. In December, Balfour also rejected a bid from John Laing Infrastructure Fund Ltd for its public-private partnership portfolio portfolio, saying the GBP1 billion offer undervalued the assets.
Balfour's shares fell by a third in 2014, after it issued a string of profit warnings and in September initiated a review of the UK construction services business. The review is being undertaken by KPMG.
It said the GBP118 million writedown it has now booked against the construction arm followed an assessment of existing risk provision by its board.
Balfour has already cancelled a share buyback programme and re-phased its pension fund payments to help preserve cash on the balance sheet, and Wednesday said it has also decided not to pay a dividend for 2014. It said it hopes to reinstate a dividend at "an appropriate level" by March 2016.
"Over the next two years we should work through the severe legacy of "problem" construction projects. However, in tackling the cultural change required to ensure these issues are behind us, we face major short-term challenges," CEO Quinn admitted.
He said the company's transformation plan will be key to the turnaround, and it's initially targeting cost cutting of GBP100 million and cash flow improvements of GBP200 million over the next two years.
It is hoping that its investments portfolio will give it financial flexibility as it provides a reliable income and as it sells maturing assets into a "strong market".
Balfour said it has already strengthened its balance sheet with GBP219 million net cash in 2014, and its net assets rose to GBP1.23 billion at the end of the year, from GBP1.04 billion a year earlier, including the GBP306 million reduction in the pension fund deficits to GBP128 million.
By Steve McGrath; [email protected]; @stevemcgrath1
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Balfour Beatty