The chief executive of major construction and infrastructure group Balfour Beatty stepped down yesterday after it warned profits would be £30 million short of expectations this year.
Chairman Steve Marshall will take over from the departing Andrew McNaughton with immediate effect following the surprise update, which it blamed on difficulties in its UK construction arm.
The company also said it would consider the sale of US project manager Parsons Brinckerhoff, a business it bought for £380m in 2009.
Investors baulked at the news, with stocks closing the day down 20%, or 57.2p, at 228.6p.
“Today’s trading update is once again disappointing,” Mr Marshall said. “The board is committed to rapidly addressing the root causes.”
The company said that the interim executive chairman would devote a “significant amount of time” to the role and kick-off a process to appoint a successor.
It said actions taken to address problems in its UK businesses were taking effect, but at a slower pace than had been expected.
“There has been significant performance improvement in the regional construction business, but the mechanical and electrical engineering (M&E) and major buildings projects businesses have both experienced significant operational issues,” the company said in a trading statement released more than a week ahead of schedule.
“In March we highlighted that the M&E business had been impacted by adverse market conditions towards the end of 2013.
“These conditions have continued into 2014 and, taken together with poor operational delivery issues on a number of contracts and low order intake, the business has experienced an extremely challenging first quarter.
“As a result, our performance expectations for this business in 2014 are significantly lower than previously anticipated.”
Yesterday’s warning is the latest blow to Balfour from its UK construction arm, which was responsible for a profits warning in April last year.
Balfour, which has been contracted to build a major new post-graduate accommodation and outreach centre for Edinburgh University, also said the division had suffered from delays and cost increases.
The size of its order book fell to £12.9 billion in the first quarter, compared with £13.4bn at the end of last year.
Increases to the professional services work were more than offset by reductions in construction and support services.
Balfour said a strategic review had found no material competitive advantage to combining building and professional services arms within its group, and revealed it had decided to evaluate sale options.
It said any deal for the firm would make Balfour a simpler and more focused group, but would only be pursued if it provided “attractive shareholder value”.
The company which has its origins in a workshop on Dundee’s Blackness Road and is named for city-trained engineer George Balfour and business partner Andrew Beatty employs more than 40,000 people worldwide.
Its first contract was for the construction of a Dunfermline tramway in 1909.