Balfour Beatty (LSE: BBY) said this morning that it hascancelled its planned 200m share buyback and will be reviewing itsdividend policy in March, when its full year results are out.
The decisions were made following an independent review by accountants KPMG of Balfours UK construction business, which recommended that Balfours 2014 profits be reduced by a further 70m.
It wasnt all bad news, however. Balfour announced that the Directors valuation of its investment property portfolio has risen from 1,051m last June to 1,300m. The firm said that this new valuation was consistent with an independent valuation undertaken by KPMG.
Overall, todays trading update was a mixed bag. I suspect this was a deliberate attempt by the firms new chief executive, Leo Quinn, to establish a fresh baseline from which his performance will be measured.
Shareholders may be surprised by the cancellation of the promised 200m share buyback, but todays update makes it clear that this was necessary: Balfour had net cash of just 180m at the end of 2014.
Had the firm stuck with its buyback plan, it would have had to borrow additional money to fund the share repurchases completely inappropriate given the groups current problems.
News that Balfours dividend has been placed under review should come asno surprise.
Last years 14.1p payout was uncovered by earnings, and consensus forecasts have been suggesting a cut for some time. The latest forecasts suggest the payout could be cut by 50% to 7.3p for 2014, giving a prospective yield of around 3.5%.
Is now the time to buy?
Although Balfour shares saw heavy trading when markets opened today, Balfours share price has remained surprisingly stable. As I write, the shares are actually up 1%, at 207.7p.
In my view this suggests that the news in todays announcement was broadly as expected, and that investors are prepared to back Mr Quinn in his plans to turnaround Balfours struggling UK construction business.
Its also worth noting that Balfours current market capitalisation of 1,400m is almost entirely covered by the 1,300m valuation of its property portfolio. This limits the downside risk of buying at todays price and suggests that decent gains could be possible if the construction business can be successfully rejuvenated.
In my view, now could be a good time to buy into Balfour Beatty.
However, although identifying turnaround stocks with the potential to outperform the market can be an exciting and rewarding way to invest, there are risks.
Maintaining a diversified portfolio is essential — and if you’re looking for some suggestions for stocks that are priced to buy in today’s market, I’d urge you to consider the firms featured in “5 Shares To Retire On“.
Each of these five has an enviable dividend growth record and the potential to deliver reliable long-term growth.
I can’t reveal the names of these companies here, but you can find full details in this free, no-obligation report.
To getyour copy today, click here now.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.