James Moore: Balfour's reputation gets a battering after shake-up problems

Outlook. Plus: Few crumbs of comfort for Greggs shareholders; No pause for breath in bosses' huge payouts

Is there more trouble brewing for the economy? When companies like Balfour Beatty and Greggs start issuing profit warnings you might think so. The former is a construction industry stalwart, the latter an apparently rising star which has expanded rapidly thanks to its "value proposition".

Both hard-won reputations took a knock yesterday. But in both cases, the economy may be more catalyst than cause.

Balfour is the more-established blue chip, and it might have the bigger problem. This was, after all, a company which was a byword for reliability. Not necessarily a superstar, but certainly a reliable performer which would at the very least meet, if not exceed, expectations.

Not any longer. It's well known that construction isn't the happiest of sectors, but two profit warnings from a company that almost never wrong-footed the City, indicates that there is something amiss with the business as much as there are problems in its chosen markets.

That could be seen from the trading statement, in which there was a nod to tough conditions, but also an admission that an internal shake-up has produced problems. Don't they always. It may, in part, explain other issues cited: poor management of contracts and problems with sub-contractors. When you're busy fighting your corner in the midst of a shake-up, the job you're actually supposed to be doing sometimes takes second place.

Balfour used to operate like a sort of mini-conglomerate, with a multitude of businesses that were all expected to deliver on the targets they were set. It's an unfashionable way of doing things, and centralising would seem a good way of generating efficiency gains. They certainly aren't showing through.

The road back is going to be a hard one for Balfour. It operates in competitive markets, where those that hire it are very much focused on the bottom line.

Confidence in the company will have taken a severe hit. It's a sort of City old wives' tale that profit warnings, like troubles, come in threes. Balfour is going to have its work cut out if it doesn't want to prove there's more than a grain of truth in that.

It's also going to have its work cut out in soothing the fears of customers, who might start to get nervous if there are too many repeats.

Few crumbs of comfort for Greggs shareholders

Of the two, Greggs is perhaps the bigger surprise. In theory it ought to be holding its own. Businesses with a reputation for keen pricing have offered some rare sparks of optimism amid the gloom on the high street. Think Sports Direct, Aldi, Dunelm Mill, etc.

It appeared Greggs was among them, as its outlets expanded beyond their Northern heartland, with its famed sausage rolls contributing to waistlines in the Midlands and the South and beyond.

A bout of indigestion has seen its light dimmed. Victory over George Osborne, the Chancellor, in the battle over his "pasty tax" was the high point of the reign of former chief executive Ken McMeikan, who left to join food distributor Brakes just as the breaks were applied to Greggs.

The company cited the weather in its surprisingly nasty surprise trading statement yesterday but his successor, Roger Whiteside, was honest enough to admit that there's more to it than what has become a catch-all excuse for almost any retailer facing tough trading.

The hard message for shareholders to swallow is that things aren't going to improve quickly. Greggs customers are being squeezed. The very poorest have gone, and they are not being replaced by wealthier bargain hunters, who have been pouring through the doors of the retailers mentioned above. That's, in part, because there are other people out there willing to offer cheap eats and draw in the punters with eye-catching offers.

To compete, Greggs might just have to swallow some margin. It may also have to tweak its recipe. That means more outlets near stations and other places where there are still people, unlike its traditional, high street outlets. If Greggs can attract at least some of the Starbucks crowd at a more sensible price then it'll be at least halfway home.

No pause for breath in bosses' huge payouts

One of the sillier statements you often hear made in the governance community is the characterisation of a vote against a company's board being a sign of "failure".

Issues such as pay, so it is said, should really be handled behind the scenes and only in extremis should a vote be used.

As such, many fund managers have said privately that they will probably be taking the foot off the gas in the wake of the shareholder spring to allow companies "time to respond".

It is this sort of thing that has given the fund-management community a bad name. Executive remuneration at Britain's biggest public companies has barely paused for breath despite six years of financial crisis, recession and soporific stock markets.

Just yesterday there were two more examples. Alfredo Saenz, the chief executive of Santander, stepped down amid a row over whether he should be banned from running the bank. The striking thing about the announcement was the £74m pension pot he departed with.

Then there was the one-off award of "career" shares to the boss of Randgold Resources. It's true that the latter attracted a sizeable shareholder vote against – 39 per cent – but both are, in their own way, indicators that the culture of excess in boardrooms carries on despite the "shareholder spring". Institutions take note.