黑洞社区

Balfour Beatty has said it is likely to take another 12 to 18 months to fix the problems in its 拢2.8bn turnover UK construction business after the firm announced a fresh 拢30m profit warning this week, the bulk of which was focused on its M&E business.

The managing director of Balfour Beatty Engineering Services (BBES), Phil McGuire, stepped down with immediate effect this week following what Balfour Beatty described as a 鈥渄eep and vigorous鈥� review that identified a 拢20m forecast profit shortfall in the business.

The forecast profit shortfall at 拢300m-turnover BBES constituted the bulk of the 拢30m profit warning announced to the City on Tuesday (7 May), with the remaining 拢10m forecast shortfall focused on six problem jobs in the firm鈥檚 major building projects business.

The profit warning followed a 拢50m profit warning in April 2013 which rose to 拢60m in the firm鈥檚 results for year to 31 December 2013.

Speaking to 黑洞社区 following this week鈥檚 announcements, Balfour Beatty鈥檚 UK construction chief executive Nick Pollard (pictured) said the review of the M&E business had identified 鈥渟ome operational and commercial issues on some of the M&E contracts鈥�, as well as 鈥渟ome unwarranted optimism in terms of our risk position鈥�.

He said this, combined with a 鈥渟lower than anticipated market recovery鈥�, meant the 鈥減rofit forecast for this year has been diminished鈥�.

He said he was confident the 拢20m forecast profit shortfall had captured the extent of the problems. 鈥淏ut I鈥檇 be crazy to sit here and promise there will never be a loss making project in future - construction is intrinsically a high risk business,鈥� he added.

Pollard said he would take up the BBES managing director role on an interim basis until a permanent replacement was appointed.

McGuire 鈥� who joined Balfour Beatty group chief executive Andrew McNaughton in leaving the firm this week 鈥� had been with the company for 35 years and was given the role of heading up the firm鈥檚 new M&E business stream as part of the restructure unveiled in 2012.

His departure follows a series of major changes at the M&E business in recent weeks, with three of the five regional engineering services directors replaced at the South, North-east and North-west operations, while one of Network Rail鈥檚 main project directors, Uma Shanker, was appointed to BBES in a new role as chief operating officer.

Pollard said McGuire and McNaughton鈥檚 departures were about 鈥渢aking ownership鈥� for the problems identified in this week鈥檚 trading update.

He said: 鈥淧hil [McGuire], as the managing director, was responsible for the operational controls and commercial controls inside BBES and he was the leader of that business and it was his responsibility as a leader to hold himself to account.

鈥淎nd that is the same as Andrew [McNaughton] as leader of our group - and sad though as it is, that is normal in business.鈥�

Pollard, appointed last June, said he would not be resigning as he was appointed to fix the problems in the UK construction business - a task he said would take 鈥渁nother 12 to 18 months鈥�.

鈥淚 was recruited to work through this series of issues that appear to have been long-standing ones within the business and that鈥檚 exactly what I鈥檝e been doing 鈥� helping the team work through those issues and deliver a change in performance,鈥� he said.