Balfour Beatty Plc, Britain’s biggest builder, said first-half earnings figures will be clipped by newly discovered issues with mismanaged construction contracts. The stock fell almost 10 percent, the most in nine months.
Pretax profit for the six months through June 26 was 120 million pounds ($185 million) to 150 million pounds lower than previously estimated, London-based Balfour said Thursday. Two-thirds of the shortfall relates to the U.K. market and the rest to operations in the U.S. and Middle East.
Balfour Beatty has been restructuring under new Chief Executive Officer Leo Quinn after poorly managed and undercharged contracts weighed on earnings and drove down its share price. The company halted a 200 million-pound share-buyback in January and revised down its outlook, while continuing to scrutinize so-called legacy contracts.
“Legacy challenges remain,” Quinn said in a statement. “We are making encouraging progress on the group’s transformation.” Net cash for the half-year will “exceed 200 million pounds,” the company said.
Shares of Balfour Beatty fell as much as 9.7 percent -- the most since Sept. 29 -- and were trading 18.70 pence, or 8.2 percent, lower at 209.70 pence as of 8:07 a.m. in London.
A external review by KPMG found a tendency to underestimate contract expenses, together with poor cost-forecasting and weak administration in construction, Balfour said in January.
The builder, said it has made “good progress” toward cutting annual costs by 100 million pounds, plan to publish first-half earnings on Aug. 12.