Things are going from bad to worse at infrastructure company Balfour Beatty (LSE: BBY). Another profit warning has sent the shares into free fall. It seems that Balfour has got its maths wrong with lots of its construction contracts – 25 in all.
Profits are being hit by rising labour and material costs and the worrying thing is no one at Balfour seems to know what’s going on – it has brought in a team of outside accountants to investigate.
In fact, things will probably continue to get worse before they get better. The shares are currently trading on a dividend yield of 6.6%, but don’t assume that this dividend will definitely be paid, as the company’s finances are looking a bit dodgy. Trying to forecast this year’s profits and work out the company’s valuation is anyone’s guess.
That said, fresh management and a clean slate could see this company become an interesting investment in the months ahead.
What’s more, rival firm Carillion may bid again next year as there are some decent businesses within Balfour. (Carillion must be pleased its recent advances were spurned, though.)
I’d expect Balfour shares to keep on falling in the near future, but it might be worth keeping an eye on this one.
Verdict: one for the watch list