Balfour Beatty Issues New Profit Warning

Balfour Beatty (Other OTC: BAFBF - news) has issued a fresh profit warning associated with "legacy issues" to its UK, US and Middle East businesses.

Balfour Beatty, the civil engineering company, which has fallen victim to a string of profit warnings over the last two years, has announced an additional shortfall to 2015 pre-tax profits of between £120m and £150m.

The announcement comes after a comprehensive review last year by KPMG, the accountancy giant, which resulted in a £70m write down.

The latest announcement brings Balfour Beatty's total write downs since May 2013 to £410m.

The KMPG review highlighted a number of shortcomings in Balfour Beatty's processes, the fall out of which has led to the latest profit warning.

KPMG found issues with Balfour's bidding process, whereby the engineering firm tendered at very low margins with over optimistic cost assumptions and inadequate risk provisions - this ultimately led to a greater win rate at the expense of profitability.

Balfour Beatty boss Leo Quinn, who tool the helm in January, said: "The issues we are working through are as I set out in March and legacy challenges remain.

"However, we are making encouraging progress on the Group's transformation. The positive response of our people to change, the continuing confidence of our customers in Balfour Beatty's expertise and the first signs of improving cash performance reinforce my conviction in the Group's long-term success."

Last August, Balfour Beatty's rival Carillion (Other OTC: CIOIF - news) ended its merger interest following an offer rejection for the third time. However, it stressed that it reserved the right to bring a new offer under the terms of the City code on takeovers and mergers.