Balfour Beatty expects 'significantly lower profits' in 2013

Balfour Beatty, the FTSE 250-listed infrastructure group, has reported that its UK construction business is expected to deliver 'significantly lower profits' from operations in 2013 than management's previous expectations at the time of its full-year results announcement in March.

It said that altogether the remainder of the business remained on track.

The company reported that the UK construction market had been a challenging environment in which to win and execute work and said that that market conditions had "deteriorated significantly" in the second half of 2012 and continued to be difficult.

Balfour Betty reported that changes in procurement trends were allowing customers to impose increasingly stringent conditions onto contractors while subcontractors were operating under considerable financial strain.

Restructuring underwayAs a result of the conditions, the group said its UK construction business had been concurrently implementing a substantial organisational restructuring in order to streamline the business for future success while reducing costs to remain competitive.

The group said that its latest monthly business reviews highlighted some poor performance in the UK regional construction business, and to a lesser extent the building part of the major projects business, which led to an internal review.

It said that the combination of these factors was expected to reduce management's 2013 full-year expectations for profit from operations in the UK construction business as a whole by approximately £50m.

Trading in the group's other businesses is 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 in professional services, specifically in US transportation, Asia and the Middle East.

As a result in aggregate, Balfour Beatty's businesses outside UK construction are on track to deliver on management's expectations for 2013 and continue to support the Group's medium-term strategy.

Our balance sheet remains strong taking full account of the cash impact of the £50m profit shortfall.

Balfour Betty's share price was down 8.16% to 226.30p at 08:18 on Monday.

MF