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Balfour Beatty issues £50m construction profit warning

Balfour Beatty has announced that its UK construction business is expected to deliver “significantly lower profits” in 2013 than expected, as group chief executive Andrew McNaughton takes personal control of the construction business.

In a statement to the City, the firm downgraded the forecasts made in full-year results in March by £50m, due to “extremely tough conditions” which have “deteriorated significantly” in the second half of 2012.

The construction and infrastructure giant booked a £37m construction loss in March after an extensive restructure in 2012.

Changes in procurement trends were said to have persisted, with clients imposing tough conditions on contractors and subcontractors working under “considerable financial strain”.

Poor performers included the regional UK construction business, as well as the building part of the major project business.

The UK construction business has been undergoing substantial restructuring to reduce costs, and the statement added that this review, coinciding with poor market conditions, had resulted in “specific instances of poor operational delivery”.

Mr McNaughton was said to be implementing an “immediate” action plan, personally addressing operational issues.

Trading in other business was broadly in line with expectations, with a £10m profit deterioration in rail operations in Germany and some weakness in professional services in Australia, offset by outperformance in investments and professional services in US transport, Asia and the Middle East.

Balfour insisted its balance sheets remained strong, even after the £50m profit hit.

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