More than £150 million was wiped off the value of Balfour Beatty yesterday after the UK infrastructure services firm reported a major profits slump.
Group-wide revenues, including its share of income from joint ventures and associates, pushed through the £10 billion mark during the year.
However pre-tax profits on a statutory basis dropped 78% from £147m to £32m after the business was hit by challenging economic conditions and a significant downturn in the Australian mining and resources market.
One of the poorest performing sectors was the UK construction operation, which the company last year warned was facing a £50m profits shortfall.
However, the reality proved to be significantly worse than management had feared.
“Whilst 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,” the company said yesterday.
“In 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.
“The impact of these further deteriorations resulted in an overall £60m reduction in profitability versus expectation at the start of the year.”
Underlying profits which focus on continuing operations were 32% lower at £187m, a figure that prompted the concession that 2013 had been a “disappointing” year financially for the company.
Investors got the jitters yesterday and tens of millions of pounds was wiped off the firm’s stock as shares plunged in early trading.
Chief executive Andrew McNaughton acknowledged it had been a challenging year, but said progress was being made in positioning the business for future growth.
The company reported a stable order book of £13.4bn and said the £155m disposal of its UK facilities management business and the divestment of rail operations in Spain and Scandinavia were evidence it was executing against strategic priorities.
The firm which can trace its roots back to Dundee and continues to maintain a significant Scottish presence including through its Perth-based subsidiary Mansell Homes also said it had achieved £70m of savings last year and was on track to reach its £80m annualised savings target from 2015.
“In 2013 we faced challenging economic conditions in several markets an experienced operational issues in the UK construction business,” said Mr McNaughton.
“The remedial actions taken in under-performing areas are delivering results and have positioned us better for the future.
“Continuing to improve operational delivery and supply chain management will remain a particular focus throughout 2014.
“We are seeing evidence of improving conditions in some parts of our core US and UK markets, although the long- cycle nature of our business means that these will take time to feed through fully in our financial performance.
“Recovery in some parts of our business will largely be offset by a reversion to lower PPP investment disposal gains.”
Shares in the firm closed down 7.41% at 297.6p following trading yesterday.