Balfour Beatty Drops 15% - Chairman Resigns

PUBLISHED: Sep 29 2014 @ 14:41 | Comments (0) | More info about Lou Gutheil

The share price of Balfour Beatty plc (LSE:BBY) has lost 34.40 pence today, a decline of 15.3% from 224.90 to 190.50 following the third trading update this year and the fifth in the last two years that contained profit warnings.

To be more precise, the report said that, “Internal reviews conducted in recent days have forecast a further profit shortfall due to additional losses and write-downs across a number of contracts, estimated at £75 million in aggregate, and reducing 2014 results.”

Executive Chairman, Steve Marshall described the report as “extremely disappointing,” saying that, “There has been inconsistent operational delivery across some parts of the UK construction business and that is unacceptable.”

He added the requisite declaration that the sky is not falling, saying, “Restoring consistency will take time and it has our full focus. The Board is committed to delivering shareholder value and we are progressing against the priorities we set out over the last few months.”

Apparently that is not entirely true, as Marshall tendered his resignation before the update. Or, it could be true that the Board is committed, but they have lost their confidence in Marshall as its leader.

Balfour Beatty dominated headlines during the summer as it fended off takeover attempts by Carillion (LSE:CLLN). It’s beginning to feel a bit like BBY was looking a gift horse in the mouth. BBY shares were trading around 320.00 in March before falling to the 240.00 range in May and sustaining in the 240.00 to 250.00 range during the Carillion courting process.

Although Balfour Beatty was operating without a CEO and could have used some leadership from Carillion, the board continued to rebuff the offers. Although selling off its Parsons Brinkerhoff division was one of the reasons that BBY turned a cold shoulder to Carillion (BBY said that a merger would hurt their chances of selling Parsons Brinkerhoff), it has yet to dispose of the subsidiary, but, to be fair, more news on that front should be forthcoming.

Lest I forget, they also still do not have a CEO, although the company claims to be in the advanced stages of their search. Marshall has said that he will stay on in his position until a new CEO has come on board.

Perhaps he should consider a call to Carillion. With these kinds of reports becoming a trend, the board and shareholders alike might welcome a knight in shining armor

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