Balfour Beatty cites 'changing procurement trends' in profit warning

Adam Leach is a freelance business journalist
30 April 2013

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Profits at Balfour Beatty are to be lower than expected this year with changing procurement trends and difficult market conditions highlighted as causes.

In a trading update, published yesterday, the UK construction company informed shareholders that profit for 2013 would be “significantly lower” than forecast in March. The announcement marks the second profit warning in six months. In November 2012, the company warned that UK construction was weaker than anticipated.

Yesterday’s update said: “Market conditions, which deteriorated significantly in the second half of 2012, continue to be difficult. Change in procurement trends, which we have previously highlighted, has persisted, allowing customers to impose increasingly stringent conditions onto contractors.”

A spokeswoman for the company explained to SM that the procurement trends cited in the statement referred to increased competition among bidders, resulting in greater cost pressure. The firm also stated that its subcontractors are operating under “considerable financial strain”.

While it was not in the trading update, the company has confirmed that Mike Peasland is to step down as UK chief executive to focus on the regional business, where he will act as managing director. Andrew McNaughton, group chief executive, will take on the responsibilities of leading the UK operation.

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