Balfour Beatty has warned 2012 profits will be lower than initially expected.

Shareholders are being told that 2013 will provide new worries for the company.

"After a small decrease in the first half in the Construction Services order book, we saw a more significant decline in the third quarter," a statement said.

"As a result, even though order intake in our other businesses was stable, the Group order book closed at £14.4bn at the end of September, down from £15.0bn at the end of June.

"Approximately half of our order book is now in our regional business, up from a third a year ago. At the same time, the supply chain is suffering which in turn, reduces our ability to negotiate terms that match the worsening market conditions. The adverse impact of these recent developments is expected to reduce profitability slightly this year.


"Looking ahead, there is reduced visibility due to smaller projects and shorter lead times, but in the absence of an immediate improvement in these emerging market conditions, we expect further decline in activity levels and pressure on margins into 2013."

The company is now restructuring. Balfour Beatty said: "Our cost efficiency programmes continued to make good progress. Phase 1, which entails savings from indirect procurement and combining transactional accounting and payroll in the UK in a single Shared Service Centre in Newcastle, will reach its run-rate savings of £30m by the end of 2012.

"Phase 2, the broader programme we announced in March 2012 with a target of £50m annual savings by 2015, is underway. The UK Construction business has made significant progress in restructuring its operations in the quarter.

"The new operating structure, which will be in place by January 2013, combines six operating companies into one, streamlining the number of locations and creating a more efficient back office with 650 fewer employees. These initiatives constitute the largest portion of the current target savings. The new operating structure will also be more flexible, agile and adaptable to change, should market conditions require."

(IT)