Balfour Beatty issues profits warning

<p>Shares in the company dropped by over 20 per cent after it issued a profits warning.</p>

Shares in Balfour Beatty opened over 20 per cent down after the company issued a warning on its profits.

The UK's biggest construction group saw stakes fall by 22.63 per cent when it opened on Monday (September 29th) morning. It represented its fifth profit warning since 2012 and comes after the company decided against a £3 billion merger with rival Carillion. Alongside its profits warning, Balfour also stated that executive chairman Steve Marshall would be standing down but only when a new chief executive was found.

Balfour announced that there will be a further shortfall in its construction services division with the company expecting a drop of £75 million in the coming period. Accountants KPMG has been appointed to review the construction group's portfolio.

The construction group is now looking to recoup a significant windfall by selling US-based design consultancy Parsons Brinkerhoff. This is expected to be issued in October and Balfour anticipates the sale will generate £200 million, which will be returned to shareholders in the form of a share buyback programme.

It add that the transaction would be "subject to the board's assessment of the trading environment at the time".

Mr Marshall said: "This latest trading statement is extremely disappointing; the board has appointed KPMG to undertake a thorough review across the contract portfolio within Construction Services UK.

"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."

Balfour's latest trading update comes after the company was selected by Magnox to deliver the £34 million Solid Intermediate Level Waste Encapsulation (SILWE) contract at Hunterston. The former nuclear power station in North Ayrshire will be subject to Magnox's continued goal of safely storing level waste and decommissioning these facilities.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.