The CEO of Balfour Beatty has stepped down amid emboldened concerns about the firm’s ability to turn impressive profits through 2014. The announcement came at the same time as a trading update, which warned that the group will likely deliver far lesser pre-tax profits than previously anticipated in March, owing predominantly to ongoing uncertainties in parts of the UK’s construction business.
Whereas analysts originally expected the business to turn a £190m pre-tax profit, the group now expects closer to the £145m £160m mark.
“Today’s trading update is once again disappointing. The Board is committed to rapidly addressing the root causes. As a result, action is being taken to improve operational delivery in the UK construction business,” Balfour Beatty Executive Chairman Steve Marshall said in a statement.
Balfour Beatty’s UK profits are projected now to be £30m less than previously anticipated
Balfour Beatty’s UK profits are projected now to be £30m less than previously anticipated, with both the mechanical and engineering (M&E) and major buildings project businesses having each taken a serious hit. These circumstances, combined with cost increases and delays, have forced the group into a major strategic review.
For one, Chief Executive Andrew Naughton has stepped down “with immediate effect”, leaving Steve Marshall in charge until a successor is decided upon.
“Andrew has served the Group for the last 17 years in a wide variety of roles. I would like to thank Andrew personally and on behalf of the Board for his major contribution. We wish him well for the future,” said Marshall.
What’s more, the Balfour Beatty board has been exploring ways to simplify the company’s structure and streamline operations.
One important strategic consideration is the potential sale of the engineering and design firm Parsons Brinckerhoff. Acquired in 2009, the firm has posted impressive results and grown in stature since then, owing to growth in the design and build market.
Balfour Beatty maintains that its combined professional services and construction businesses have “not delivered material competitive advantage for the Group”. Therefore, deciding on how best to realise the value of Parsons Brinckerhoff will rank high on the Board’s agenda moving forwards.