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Announcing its results for the year to 31 December 2013 this morning, Balfour Beatty said that following a 拢50m profit warning last April, the performance of its UK construction business had deteriorated in the second half of the year, and its profit for the full year had fallen 拢60m short of expectations.

Balfour Beatty reported global construction revenue of 拢6.6bn, marginally up on 拢6.5bn last year, but underlying operating profit, after the removal of restructuring and other finance costs, fell to 拢21m, down 82% from 拢119m the previous year.

When accounting for the finance and restructuring costs, the global construction business posted a 拢34m operating loss, compared to an operating profit of 拢58m in 2012.

The firm said the decline was 鈥渕ostly due to the performance of the UK business鈥�.

It said that after making a 拢50m profit warning last April, the profit shortfall in its construction business had risen to 拢60m after a 鈥渄eterioration at the end of the year鈥�.

It said: 鈥淲hilst there was an expectation of reduced profitability at the start of the year, in light of a declining market, we announced a shortfall of approximately 拢50m in April, resulting from further deterioration in the external environment combined with the impact of an ongoing internal reorganisation.

鈥淲hilst the UK business broadly performed in line with these reduced expectations, a further deterioration at the end of the year resulted in an actual profit shortfall of 拢60m.鈥�

Within the UK construction business, the firm said the performance of its regional business had improved, but the major projects and M&E businesses underperformed.

It said: 鈥淲hilst we have seen a better than anticipated turnaround in the regional business, there was weaker financial performance on selected major projects in the building sector.

鈥淚n our mechanical and electrical engineering business, where we predominantly act as a subcontractor, financial performance in the final quarter was adversely impacted by increasingly difficult market conditions.鈥�

It added that the performance of its UK rail business had been hit by 鈥渙perational issues on a small number of projects鈥�.

The firm added: 鈥淭he UK construction market has been a challenging environment in which to win and execute work, allowing clients to impose increasingly stringent conditions onto contractors, and as a result, placing subcontractors under significant financial pressure.鈥�

Overall, Balfour Beatty posted group revenue, including share of joint ventures, of 拢10.1bn, up 2% on 2012, with 拢155m in costs dragging down the group鈥檚 pre-tax profit to 拢32m - a fall of 78% from 拢147m the previous year.

The 拢155m in costs included 拢52m in restructuring costs, with 拢20m related to the firm鈥檚 Australian business; 拢26m related to its UK businesses - including a further 拢14m related to the UK construction business on top of the 拢34m it incurred in 2012; as well as a further 拢6m related to other non-UK businesses.

The firm also incurred 拢52m in pension curtailment charges; 拢17m in costs for implementing shared services centres in the UK and the US; and was also hit by a 拢38m goodwill impairment on its European rail business.

After stripping out the 拢155m in costs underlying pre-tax profit across the group stood at 拢187m, down 32% from 拢277m last year.

The firm said: 鈥淐ontinued difficult market conditions and operational issues in the UK construction business and a significant downturn in the Australian mining and resources sector resulted in a disappointing financial performance in 2013.鈥�