EMBATTLED Balfour Beatty has sunk £304 million into the red and axed its final dividend as its new chief executive yesterday flagged up big challenges over the next two years.
The group also announced a fresh £118m writedown in its core UK construction business to add to the £70m hit disclosed in January.
Leo Quinn – who took the helm two months ago after a string of profit warnings in 2014 and the departure of former boss Andrew McNaughton last May – said the core construction division’s £391m loss reflected its “very poor performance”.
That compared with a £103m construction profit in 2013, while the statutory group headline pre-tax loss that year was £49m.
Quinn said Balfour faced major short-term challenges over the next two years, including working through the “severe legacy” of problematic construction projects. He said costs of £100m were also targeted over the period.
The group suffered “significant operational issues” in engineering services and in its London and south-west regional businesses in 2014, though Scotland, the north of England and the English Midlands performed well.
Writedowns on the construction business came after a review by KPMG which reported in January. Stripping out one-offs, Balfour reported an underlying annual pre-tax loss of £80m for last year. That compared with an underlying £131m profit a year before. The company said the final dividend had been passed to beef up the balance sheet, but that it expected a payout to be restored by March 2016.
Quinn said: “Balfour Beatty’s underlying performance has been declining since 2010, with the sharpest and most noticeable decline occurring over the last 12 months.”
He added that there had been losses on some old engineering services contracts, as well as from the German rail business the company is selling.
The group, which also has infrastructure and support services businesses, was further weighed down in 2014 by the costs of fighting an aborted proposed takeover by rival Carillion, as well as the cost of the continuing organisational shake-up.
Roger Johnston, analyst at Edison Investment Research, said: “While the turnaround in performance will not be easy to achieve, we believe that Quinn’s track record and no-nonsense approach will drag the business with him.”
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