Fifth profit warning for Balfour Beatty sends shares plummeting 25 percent
Balfour Beatty suffered yet another setback as shares fell almost 25 percent after it issued its fifth profit warning in less than two years following the discovery of a £75m shortfall in profits in its UK construction services business. Shares fell to 170.25p in early trading following the announcement.
With the company close to announcing a new CEO, Steve Marshall has also told the Board that, following the handover of his interim executive responsibilities to a new Group CEO and the identification of a new Non-executive Chairman, he intends to step down from the Board.
Balfour has brought in professional services company KPMG to conduct a detailed independent review of the contract portfolio within Construction Services UK. The review will focus on commercial controls, on 'cost to complete' and contract value forecasting and reporting at project level. KPMG are expected to report back to the Board by the end of the year. Trading across the rest of the Group remains in line with expectations.
Internal reviews in the last week discovered extra losses and write-downs at the UK construction operation, with London projects expected to make up some £50m of the shortfall, with these projects experiencing "programme slippage" and "poor operational delivery".
The £75 million profit reduction is split across Construction Services UK in the following way: £30 million within Engineering Services, £20 million within large London area building projects, £15 million within Regional construction, and £10 million within Major Infrastructure Projects.
Marshall said: “The company has had a series of surprises and it has been surprised itself. We have all been surprised by what has happened at this business. I and the board judge that the right thing to do to give [the board] the assurance it needs and, frankly, to give investors the assurance they need is to have an independent review.”
The company cited over-optimistic pricing of contracts, late completion, skill shortages, rising costs and poor project management as reasons for the troubles at its UK business. The number of problem contracts rose by four to 25.
The company’s net debt for the second half of the year is set to rise to £580m from £420m in the first half, although Marshall indicated the company had no problems with debt covenants agreed with its banks.
Going forward, Balfour said its priorities were to complete the sale of Parsons Brinckerhoff; simplify and refocus the Group on its core Anglo-American markets; return Construction Services UK back to peer group margins by reshaping the business and taking advantage of progressive market recovery whilst closing out legacy projects; de-risk the Group through a robust approach to risk assessment and bidding returns, including completing the withdrawal from non-core territories such as European Rail; and try to leverage near-term order book growth opportunities in other markets, including in North America and in UK Support Services and via Far East and Middle East JV's.
Environment Agency clamps down on plastic films and wraps
Businesses in the waste and construction industries must ensure they deal with waste plastic properly to stop illegal exports, the Environment Agency (EA) has warned.
The warning comes as the Agency is increasingly aware of plastic film and wrap from the construction and demolition sector being illegally exported.
Exports are frequently being classified as ‘green list’ waste of low risk to the environment, but are often contaminated with materials such as mud, sand, bricks and wood, posing a risk to the environment and human health overseas, and undermining legitimate businesses in the UK seeking to recover such waste properly.
During the last year, the EA has intercepted shipments to prevent the illegal export of this material on numerous occasions. The Agency inspected 1,889 containers at English ports and stopped 463 being illegally exported. This, combined with regulatory intervention upstream at sites, prevented the illegal export of nearly 23,000 tonnes of waste.
Those convicted of illegally exporting waste face an unlimited fine and a two-year jail sentence. But construction firms could also face enforcement action if contaminated construction and demolition waste plastic is illegally exported.
Malcolm Lythgo, Head of Waste Regulation at the Environment Agency, said it is seeing a marked increase in the number of highly contaminated plastic film and wrap shipments from the construction and demolition industry being stopped by officers.
“I would strongly urge businesses to observe their legal responsibility to ensure waste is processed appropriately, so we can protect human health and the environment now and for future generations. It’s not enough just to give your waste to someone else - even a registered carrier. You need to know where your waste will ultimately end up to know it’s been handled properly. We want to work constructively with those in the construction and waste sectors so they can operate compliantly, but we will not hesitate to clamp down on those who show disregard for the environment and the law.”
There are a number of simple, practical steps that businesses can take to ensure that C&D site waste is handled legally.
Construction businesses should check what’s in their waste
- Different waste types need different treatments and so must be correctly categorised to ensure it goes to a site that is authorised to handle it safely. Businesses can also check if their waste is hazardous as different rules might apply.
- If you are removing the waste yourself, you must be a registered waste carrier- registration can be carried out here. When a waste collector is transporting your site waste, you must check they have a waste carrier’s licence from the EA.
- You must also check that the end destination site any waste is taken to is permitted to accept it and has the right authorisations in place. Keep a record of any waste that leaves your site by completing a waste transfer note or a consignment note for hazardous waste which record what and how much waste you have handed over and where it is going.
Waste management industry must adhere to export controls
- Contaminated C&D waste plastic - including low-density polyethylene (LDPE) wrap and film - must be exported with prior consent from the EA as well as competent authorities in transit and destination countries.
- Those involved in the export of such waste must ensure that it meets the requirements set under the relevant export controls, such as being almost free-from contamination; the destination sites are appropriately licensed to receive and treat the waste; and waste is correctly managed once received.
The EA will continue to actively target those who export contaminated C&D plastic waste illegally, including any accredited packaging exporters who issue Packaging Waste Export Recovery Notes (PERNs) against such material in breach of their Conditions of Accreditation.
Businesses involved in the shipment of waste are required to take all necessary steps to ensure the waste they ship is managed in an environmentally sound manner throughout its shipment and during its recycling.
Anyone with information regarding the illegal export of waste including C&D waste plastics can contact the EA’s Illegal Waste Exports team at: [email protected] or anonymously via Crimestoppers on 0800 555 111 or via their website