Balfour Beatty Plc named Andrew McNaughton as new chief executive officer as the profitability of the U.K.’s largest construction company is declining amid a lack of building work in the country.
McNaughton, currently chief operating officer, will take over as CEO from Ian Tyler on March 31, the company said in a statement yesterday. McNaughton, a chartered civil engineer, joined Balfour Beatty in 1997.
The new CEO faces the challenge of defending profitability as the number of major building projects that require higher-margin services dries up in the U.K. and the company’s business in the U.S. struggles to recover. Balfour in November forecast that profitability will drop “slightly” as it hasn’t been able to negotiate lower prices with suppliers to reflect market conditions, prompting the stock to slump 18 percent, its worst tumble since October 1998.
McNaughton was appointed to the Board in 2009 and had been “instrumental in developing the group’s global strategy to move into higher growth sectors and geographies,” the company said. He became deputy CEO in July 2012.
“Andrew is the obvious choice and knows the business well and should have the operational skills” to deliver announced cost savings, said Joe Brent, a London-based analyst at Liberum Capital. “Some investors may have hoped for an external appointment.”
Balfour said in November that its order book decreased by 4 percent to 14.4 billion pounds ($23.2 billion) in the three months through September.
Today, the company said its order book stood at 14.2 billion pounds at Nov. 30, adding that the year-end figure will probably rise to about 15 billion pounds, helped by a 1.2 billion-pound National Grid contract and a tunnel order won in Hong Kong.
The stock today dropped 0.2 percent to 289.50 pence, valuing the company at 2 billion pounds. The shares had risen 3.4 percent in 2012, while the U.K. FTSE 100 benchmark index gained 5.8 percent.