Beleaguered infrastructure group Balfour Beatty has issued a fifth profit warning after discovering a new £75m black hole in its UK profits.
The news has added to growing concern about the UK builder, resulting in a sharp fall in the company's shares by more than 20%.
In a statement to the market, Balfour Beatty said it had experienced “further programme slippage” and “poor operational delivery”.
The group - which is involved in motorway construction, power stations and PPP projects around the world - said there would be a further shortfall of £75m this year in its UK construction arm after two earlier profits warnings this year.
This includes £30m of write-downs in its troubled engineering services business, £20m in extra costs on London jobs, and £25m of write-downs across its regional building and major infrastructure arms.
KPMG has been appointed to carry out a forensic review of the contract portfolio within Construction Services UK.
The Big Four firm will conduct a detailed independent review into costs and controls at projects within that division, which will report before the end of this year.
Steve Marshall, executive chairman of the group said the latest trading statement was extremely disappointing: “There has been inconsistent operational delivery across some parts of the UK construction business and that is unacceptable. Restoring consistency will take time and it has our full focus.
He added that the board was progressing against the priorities they set out over the last few months, including the sale of Parsons Brinckerhoff and the announcement shortly of a new chief executive.
Marshall said he would step down once a new chairman and chief executive had been found.
The group said that trading across the rest of the company remained in line with its expectations.
Just in August this year, after repeated approaches, Balfour Beatty rejected a £2bn takeover offer from rival group Carillion.
Replies (10)
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Why don't
they just do a "Tesco"? £75m is easier to hide than £250M.
The error rate
It would allow us to form a rational judgement if we were told the error rate - is it a revised estimate on £7bn or £150m?
Who was auditing?
Who was auditing Balfour Beatty or has the black hole just popped up this financial year?
Never mind....
...there may be 75m missing, but I'm sure their carbon footprint is OK, and the sustainability of their operations will stand up to ethical scrutiny.
Wonderful things, these buzzwords.
No doubt the valuations they accrue each period were not being earnestly reviewed and built up, with no one really understanding the accounting or too frightened of the consequences. Management accountants should have a personality test, to find out a) that they are not charlatans that just want to skate on the surface in meetings, and b) they have got balls to lay the law down, no doubt in this case to aggressive contract and quantity surveying managers.
It was interesting
to hear Steve Marshall talking about inconsistencies within the Construction Industry. I thought that was common knowledge. I love it when they (you know who they are) say this will only cost £20b. £40b later and climbing someone starts looking at things.
KPMG for a forensic review
they should have chosen someone cheaper for the forensic review.
its not rocket science
It won't be complicated. I would have set them straight for £10k, a few weeks to conclude the problem. As opposed a few hundred grand by kpmg
Why Always Beleagured?
What is so extraordinary is that whenever we hear of stories like this (and Tesco) it is only ever when both profits and trading are in trouble. One wonders what potential horrors our ostensibly more successful public companies might be concealing in the nether regions of their balance sheets?
If it's not material,
is the old phrase used by many Accountants. So you could have many millions missing but if the turnover is billions who cares.