By Li-mei Hoang
LONDON (Reuters) - When Balfour Beatty (L:BALF) needed a new chief executive it called on turnaround specialist Leo Quinn to revive the business after a string of profit warnings and plunging share price that left it vulnerable to circling predators.
The 58-year-old is credited with transforming the fortunes of defence company QinetiQ (L:QQ) by disposing of its loss-making U.S. services division, buying back shares and boosting the share price by 35 percent during his five-year reign.
He arrives at Balfour next month facing a similar task, with two of his most senior executives set to leave, the shares at an 11-year low and speculation that it could face fresh takeover approaches, having rejected construction rival Carillion's (L:CLLN) advances for a third time in August.
In a letter seen by Reuters, Quinn has already told staff that he will take "early, brave decisions".
High on the to-do list is the need to stabilise Balfour's balance sheet and reset earnings expectations for a group with a debt-to-equity ratio of 1.21, against a sector median of 1.06, analysts have said.
"We expect him to cut the dividend, guide consensus down and perhaps pull the buyback," Liberum analyst Joe Brent said of a group that already provides a lower dividend yield than its peers, at 2.9 percent against 5.5 percent.
"However, he will be careful not to trash the share price, given the potential takeover interest in the company."
Balfour, which has about 36,000 employees, has suffered in the past year after losses in its UK construction business led to a string of profit warnings and a 30 percent dive in the share price.
Quinn, who started his career at Balfour as a civil engineer 35 years ago, will also have to welcome new colleagues after Finance Director Duncan Magrath and Chairman Steve Marshall leave the company.
Magrath, who has been at the company for eight years, is the third member to signal his departure from the board this year.
ONE-MAN BOARD
"It's a one-man board until Leo Quinn gets some new colleagues," said Stephen Rawlinson, analyst at brokerage Whitman Howard.
"He is arriving at a business where the chairman and finance director are leaving, two non-executive directors have gone and the suspicion has to be that the other non-executive directors want to go."
Quinn will also have to deal with the findings of accountancy firm KPMG on its UK construction business, which are expected to be announced in late January.
A number of contracts relate to work undertaken during the recession at wafer-thin margins, which have since failed to meet savings targets or budget forecasts as they approach completion.
Quinn, who was formerly CEO at banknote printer De La Rue (L:DLAR), is also likely to examine the other loss-making divisions, such as Balfour's engineering services business.
With the share price just off October's 11-year low, Balfour may also face renewed interest from Carillion and construction peers including U.S-based Bechtel and Europe's Bouygues (PA:BOUY), Vinci (PA:SGEF) and Ferrovial (MC:FER).
Recent reports have suggested that Carillion could come back with another offer once the six-month restriction is lifted on Feb 21. The last of its three attempts valued Balfour at more than 300 pence per share, compared with the 203 pence it was trading at on Monday.
Balfour has already sold its U.S. consultancy arm Parsons Brinckerhoff to WSP Global (TO:WSP) for $1.35 billion to help to cope with its losses, as well as some of the public-private assets shared with the government.
The 105-year-old group has also pledged to return up to 200 million pounds ($312.5 million) to shareholders in the form of a share buyback programme.
"We would like to think Leo will act in shareholders' interests, which means considering any approach while developing the go-it-alone strategy," Brent said.
(Additional reporting by Simon Jessop; Editing by David Goodman)