Balfour Beatty chief executive Andrew McNaughton has stepped down with immediate effect, as the company warns of a £30 million shortfall in its UK construction business.
Mr McNaughton, who was also an executive director of the board, had worked for the Group in a variety of roles for the past 17 years. Steve Marshall, Balfour Beatty’s non-executive chairman, will act as executive chairman and will lead the Executive Committee until a successor can be appointed.
The company separately announced its Q1 2014 Interim Management Statement, in which it revealed “significantly lower pre-tax profits” than expected, in the range of £145 to £160 million. This statement covers the period from 1 January to 5 May 2014.
The company said most parts of the Balfour Beatty Group are performing in line with expectations, although the UK construction business is continuing to struggle. While a number of actions taken during 2013 to improve operational issues are taking effect, this is at a slower pace than expected, leading to the profit decline. The statement said there had been “significant performance improvement in the regional construction business”, but that the mechanical and electrical engineering sector and major building projects businesses have both experienced operational issues.
The statement said: “In March we highlighted that the M&E business had been impacted by adverse market conditions towards the end of 2013. These conditions have continued into 2014 and, taken together with poor operational delivery issues on a number of contracts and low order intake, the business has experienced an extremely challenging first quarter. As a result, our performance expectations for this business in 2014 are significantly lower than previously anticipated. Furthermore, in major building projects we have experienced further cost increases and delays, mainly on specific projects we highlighted in March.”
The Group has undertaken a strategic review of its business, to explore ways to simplify the Group structure and create a more focused Group. As a result, the company is now evaluating options for the possible sale of Parsons Brinckerhoff, the Group’s multinational engineering and design firm, though the company said this would only happen if the sale provided attractive shareholder value.
Steve Marshall, Balfour Beatty’s new executive chairman, said: “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. Our recent strategic review meanwhile has concluded that a sale of Parsons Brinckerhoff could deliver attractive shareholder value and make Balfour Beatty a simpler and more focussed Group going forward.”