Balfour Beatty issues profit warning to City

Grant Prior 12 years ago
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Balfour Beatty issued a profit warning to the City today as the weak UK construction market continued to drag down numbers at the country’s biggest contractor.

The firm said: “The performance of our UK construction business is weaker than anticipated.

“As a result and based on the outturn for the third quarter, profitability in 2012 will be slightly lower than expected at the time of the half-year results.”

Balfour said their has been a “significant decline” in its order book as the number of major contracts has dried-up.

Balfour was bitterly disappointed when it lost out to Laing O’Rourke on the £2bn Hinkley nuclear power station job earlier this year.

The firm said: “In the UK, we are seeing further market deterioration.

“On the one hand, the business is continuing to migrate towards smaller contracts in a market with very few major projects.

“Approximately half of our order book is now in our regional business, up from a third a year ago.

“At the same time, the supply chain is suffering which in turn, reduces our ability to negotiate terms that match the worsening market conditions.

“The adverse impact of these recent developments is expected to reduce profitability slightly this year.

“Looking ahead, there is reduced visibility due to smaller projects and shorter lead times, but in the absence of an immediate improvement in these emerging market conditions, we expect further decline in activity levels and pressure on margins into 2013.”

Balfour is currently undergoing a restructuring designed to save £50m in annual costs as 650 staff lose their jobs.

The firm said: “We have been managing our business on the basis that market conditions would be tough, and this has been an effective strategy.

“We will take further action, both operationally and strategically where necessary, to mitigate any adverse impacts on our business.”

Balfour’s share price fell 16% in early trading.

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