SHARES in infrastructure group Balfour Beatty slumped yesterday after it warned of a £35 million shortfall within part of its UK construction arm.
It now plans to review the size and footprint of the mechanical and electrical (M&E) engineering operation. The update, which saw shares fall 10.5p to close at 225p, came just two months after the company issued a profits warning as well as the departure of chief executive Andrew McNaughton.
Balfour Beatty blamed design changes, project delays, rework on projects and contractual disputes for the latest downturn in engineering services. It proposes to offset the shortfall through the proceeds of selling more of its public private partnership (PPP) projects this year.
The rest of Balfour is trading in line with expectations and the group said it remains on track for profits of between £145m and £160m.
The troubled engineering services business, based in Cheshire, worked on projects including the aquatics centre at the London 2012 Olympics site.
Westhouse Securities’ Alastair Stewart, who put his “neutral” rating on the stock, noted the shortfall would be broadly offset by PPP disposals.
“However, we believe this will not impress investors and could feed the impression Balfour Beatty is selling the family silver to pay for problems in the comparatively small M&E business,” he said.