SHARES in construction group Balfour Beatty lost more than a fifth of their value today following a profit warning which saw chief executive Andrew McNaughton quit after less than 18 months in the job.
The company said profits will be significantly short of expectations, blamed on continuing difficulties in its UK construction arm.
The infrastructure firm said McNaughton had stepped down with immediate effect following the disappointing update and that it was now looking for a replacement chief executive.
The company, whose Scottish projects include the Beauly-Denny power line upgrade, also said it will consider the sale of US project manager Parsons Brinckerhoff, a business it bought for £380 million in 2009.
Shares in the company fell by just over 20 per cent to close at 228.6p, down 57.2p.
Whitman Howard analyst Stephen Rawlinson said he was concerned there was more bad news to come from the company.
“This is about poor management and failure to implement a good strategy over many years at Balfour Beatty and not the markets in which it and others operate,” he argued.
Westhouse Securities analyst Alastair Stewart said that the announcement over the possible sale of Parsons
Brinckerhoff “was arguably the most shocking” aspect of the company’s statement.
“It was supposed to be the game changer when it was bought, transforming the group into a full value chain design-construction-services provider,” he pointed out.
Chairman Steve Marshall, who appointed McNaughton as chief executive at the start of 2013, will run Balfour on an interim basis.
The decline in expectations stems from its UK construction business, with profits set to be £30m lower than previously hoped.
Marshall admitted that the latest trading update from the firm was “once again disappointing”.
“The board is committed to rapidly addressing the root causes,” he said.
“It’s going to take time to resolve these issues. My own view is that it will take a further 12 to 18 months to set our entire UK construction business on a firm recovery path,” said Marshall.
Balfour’s order book reduced in the first quarter to £12.9 billion compared with £13.4bn at the end of last year.
Increases to the professional services order book were more than offset by reductions in construction services and support services.
The warning is the latest blow to Balfour from its UK construction arm, which was responsible for a profits warning in April last year.
A turnaround strategy for the regional part of the division is showing signs of paying off.
But where it acts as a subcontractor in mechanical and electrical engineering conditions remain “extremely challenging”.
Profitability has also been impacted by poor operational delivery and commercial issues, the company added.
Balfour had said in March it expected to “make modest progress in 2014”.
The company, which is overseeing the transformation of the London Olympics Stadium into a facility for West Ham United, employs more than 40,000 people worldwide.