LONDON (Reuters) - Balfour Beatty (L:BALF) said it expected 2014 profit in its troubled construction unit would be reduced by another 70 million pounds after a review found a deterioration in project performance.
The British company said it had cancelled a proposed share buyback of up to 200 million pounds and is to review its dividend policy in March in order to maintain a strong balance sheet.
Balfour issued a string of profit warnings in 2014 and lost its chief executive following the mismanagement of a number of UK contracts.
The group said in September that profits at the unit would be 75 million pounds less than expected after taking writedowns on engineering contracts in London and a number of costly setbacks on building and infrastructure projects.
"I was never in doubt that there was a great deal of work to be done to restore the group to strength," said new CEO Leo Quinn. "Balfour Beatty is a large organisation which had become too complex and too devolved.
"The key is that these issues can be put right and we now have clear action plans in hand."
Many of the problem contracts relate to work undertaken during the recession at wafer thin margins, as Balfour chased volumes, which have since failed to meet savings targets or budget forecasts as they approach completion.
The latest downgrade comes after auditors KPMG reviewed the contract portfolio.
Balfour said on Thursday that excluding the UK construction services UK unit there had been no net material change in underlying trading across the group.
It said the mechanical and engineering joint venture in the Middle East continued to operate in challenging markets, whilst the highways maintenance business in Support Services has performed strongly.
