Balfour Beatty has appointed KPMG to undertake a review of its UK contracts after it issued a fresh £75m profit warning today.
Executive chairman Steve Marshall has said he will step down from the board once the search for a new group CEO has concluded and a replacement executive chairman is found.
Today’s profit warning, the firm’s fifth in less than two years, is made up of shortfalls across the UK construction business.
The breakdown of the profit warning is: £30m in engineering services; £20m in large London contracts; £15m within regional construction; and £10m within major infrastructure projects.
KPMG’s review will focus on commercial controls, on ‘cost to complete’ and contract value forecasting and reporting at project level. It is expected to report back to the board by the end of the year.
Of its engineering services profit shortfall, Balfour Beatty said it has “continued to experience programme slippage, resource and skills shortages, poor operational delivery and cost inflation pressures”.
The total number of problem contracts has increased to 25, from the 21 previously disclosed. Of these, it said 19 are due to reach operational completion in 2014.
In regional construction the firm highlighted “continued difficulties in the South-west and Wales regions”.
It said: “We continue to take steps to reduce our exposure in these regions, where we are in consultation with our employees in regards to office closures.”
Trading was in line with expectations in Scotland, the North and the Midlands.
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.
“The board is committed to delivering shareholder value and we are progressing against the priorities we set out over the last few months, including the sale of Parsons Brinckerhoff and the announcement shortly of a new CEO.
“The group’s other operating divisions are trading as expected and the board continues to believe the standalone strategy will deliver value in the medium term.”
More to follow