Balfour Beatty to review its business after profit warning

City A.M. Reporter
BALFOUR Beatty said it is studying whether to close parts of its operations after issuing a profit warning yesterday, prompting its share price to dive 18 per cent.

“We are definitely in a world ... where we are having to look at desisting from certain areas of the market,” chief executive Ian Tyler said.

His comments came as the group warned it would miss its profit guidance for 2012.

The construction sector accounts for around 30 per cent of Balfour’s business. Weakness there caused by public sector cuts and falling business confidence has squeezed margins across the sector since the 2008 property crisis.

The group said it was specifically reviewing its rail construction operations in light of critically low activity levels in Italy and Spain as well as low margins in the UK and Germany.

“Unfortunately for Balfour there aren’t the big contracts which historically they have used to differentiate themselves to get a bit of margin,” said Andrew Gibb at Investec.

“They’re having to go further down the food chain in terms of looking for work,” he added.