29th Sep 2014 06:55
LONDON (Alliance News) - Balfour Beatty PLC Monday said it expects its Construction Services UK division to take another GBP75 million hit to its profit this year and said it has appointed auditors KPMG LLP to undertake a detailed independent review of the contract portfolio within the business.
Balfour said the KPMG review would focus on commercial controls, 'cost to compete', and contract value forecasting and reporting on a project level. KPMG is expected to report back to Balfour by the end of the year.
The FTSE 250 construction group said internal reviews undertaken in recent days has forecast a further profit fall for the Construction Services UK business owing to additional losses and writedowns on a number of contracts. It estimated this would be an aggregate profit reduction of GBP75 million and said it would impact on its results for 2014.
The GBP75 million comprises GBP30 million for Engineering Services, GBP20 million for large London-area building projects, GBP15 million for regional construction, and GBP10 million for major infrastructure projects.
Balfour said the work to refocus the Construction Services UK business is ongoing, with a layer of management in the business eliminated as part of a wider plan to simplify the business. Balfour also said the business will shift to a common IT platform by the end of this year.
Balfour said trading across the rest of the company remains in broadly line with expectations. It said proceeds from sales in its Infrastructure Investments arm are expected to generate out-performance against prior forecasts, partly due to robust market conditions. It said its US construction order book is continuing grow, underpinning its medium term outlook for the business.
The company said it is now at an advanced stage in the process of appointing a new chief executive. It said Steve Marshall, who is its chairman and is currently taking interim responsibility for the CEO remit, will stand down following the appointment of a permanent CEO and a new chairman.
Elsewhere, Balfour said it intends to update on the sale of its Parsons Brinckerhoff business in October and said it anticipates GBP200 million will be returned to shareholders via a share buyback programme following completion of the divestment. The buyback will also be subject to the assessment of the trading environment for the group once the completion of the deal is done, Balfour said.
Balfour also said its final dividend for the year would be assessed in light of the sale of the Parsons Brinckerhoff business.
"This latest trading statement is extremely disappointing," Marshall said. "There has been inconsistent operational delivery across some parts of the UK construction business and that is unacceptable. Restoring consistency will take time and it has our full focus."
By Sam Unsted; [email protected]; @SamUAtAlliance
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