Balfour Beatty Faces Construction Loss Pain

The finances of the troubled infrastructure company Balfour Beatty (Other OTC: BAFBF - news) will take another battering on Thursday when it reveals the outcome of an independent probe into its UK construction arm.

Sky News can reveal the firm is expected to announce a huge new loss on the division totalling tens of millions of pounds and potentially more than £100m.

Insiders said that an emergency board meeting had got under way on Wednesday afternoon to discuss the conclusions of the investigation, which has been overseen by KPMG, the accountancy firm.

Balfour Beatty directors, led by the departing chairman Steve Marshall and new chief executive Leo Quinn, were understood to be continuing their discussions into the evening.

A source said the company would publish a summary of KPMG's report along with its response.

The construction group, which is among Britain's biggest, signalled in September that an independent review would examine "focus on commercial controls, on 'cost to complete' and contract value forecasting and reporting at project level".

It was unclear whether the new provisions to be unveiled on Thursday would constitute a formal profit warning for the current financial year, but sources said it was unlikely to announce a decision on its dividend intentions for this year.

Balfour Beatty, which has a contract to help convert London's Olympic Stadium into a new home for West Ham United FC, has already issued a handful of such alerts to the market in the last 18 months amid poor cost controls.

Its decline sparked the departure of its chief executive and finance director, with Mr Marshall also planning to leave when a successor is appointed.

The company has already taken £135m in provisions related to its UK construction arm, meaning the latest charge could take the total to somewhere in the region of £250m.

Earlier this week, Sky News revealed the appointment of Philip Harrison , the finance chief of corporate travel agent Hogg Robinson (LSE: HRG.L - news) , to the same role at Balfour Beatty.

The construction group is also fighting for its independence, following the collapse of a merger with Carillion (Other OTC: CIOIF - news) last year and a £1bn approach from John Laing Infrastructure Fund for its infrastructure arm.

Balfour Beatty and KPMG declined to comment on Wednesday.