Balfour Beatty unceremoniously sacked its chief executive yesterday after a year in charge as the UK’s biggest builder blundered into another profit warning and announced a strategic U-turn.
The latest alarm bells over the outlook sent shares in the builder of the 2012 Olympic aquatic centre slumping 20 per cent, or 57.2p, to 228.6p as Balfour said its order book had shrunk from £13.4bn to £12.9bn. Pre-tax profits are now expected to come in between £145m and £160m.
The company has been blighted with difficulties in its UK arm in recent years and warned of another £30m blow to profits as the turnaround of the division is taking longer than expected.
Balfour has also put up for sale its US project management business Parsons Brinckerhoff, which it bought for £380m in 2009. The builder hoped to create a “one-stop shop” for construction and design, but has concluded that the move has not generated a “material competitive advantage”.
The decision to sack the chief executive Andrew McNaughton, who took the reins in March last year, was taken in an board meeting over the weekend. The executive chairman, Steve Marshall, said Mr McNaughton would leave with 12 months’ basic pay – £603,000 – after “17 brilliant years”.
But he called the trading update “once again disappointing” and said the board committed to “rapidly addressing the root causes”. The group blamed a number of “legacy contracts” for the woes as well as tough market conditions for its mechanical and electrical engineering business.
Mr Marshall said of Parsons: “The business has grown and is more profitable since we bought it and its reputation is very high indeed. We would be very surprised not to have a number of offers for the business.”
Joe Brent, at Liberum, said of the sale: “The risk is that this business, which is a people business, could unravel.”
The business traces its roots back to 1909 when builder George Balfour opened up an office with accountant Andrew Beatty in the City of London. The company – which has worked on projects such as the construction of the Channel Tunnel and Hong Kong’s Chek Lap Kok airport – saw global revenues pass the £10bn milestone last year.