Royal Bam, the Dutch parent company of UK Bam Construct and Bam Nuttall, has reported significant losses in the UK with the publication of its results for the first half of 2014.
Royal Bam made no profits from its operations during the period and reported a zero per cent margin.
The group made a loss of €3.8 million (£3m) in the UK on a turnover of €927m (£741m), compared with profits of €9.1m (£7.3m) on turnover of €861m (£688m) in the first half of 2013.
Group turnover in the first half of the year increased by 5 per cent to €3.38bn (£2.7bn), from €3.23bn (£2.58bn) in the first half of 2013, due to the sale of commercial properties.
Revenue of €3,382 million (£2.7bn) was up by €150 million (5%) compared to € 3,232 million (£2.58bn) for the first half of 2013 - mainly attributable to the divestment of commercial properties in the property sector.
Civil engineering was sharply lower due to the combined losses of €68 million on two projects in the UK and Germany announced on 7 July 2014, which Bam said were “mostly offset by strong results on some other projects.” German and UK civil engineering activities were loss-making in the first half of 2014 because of the two projects.
Royal Bam said unexpected problems at a mid-sized UK civil engineering project which was bid for in 2012 had led to the loss - attributed to a combination of adverse ground conditions and bad weather. Deterioration of a large civil engineering project in Germany was also attributed to adverse ground conditions - technical solutions have been implemented to keep the project on schedule but these are “more costly than anticipated.”
The group also saw a loss of €6.8 million in the Netherlands, predominantly due to Construction and M&E services activities, where revenue was down by 16% compared to the first half 2013. The construction and M&E services order books in Belgium and Germany fell due to order phasing, while the UK order book grew by 15%, part of which related to foreign exchange movements.
However, growth in revenue of 4% to €1,862 million in the civil engineering sector during the period was mainly due to the UK, while the total order book for the civil engineering sector grew 7% to €5.4 billion.
The strengthening of the pound versus the euro during the first half of 2014 also had a positive impact on the revenue and closing order book as reported in euros.
Royal Bam said it had already started to undertake some of the improvement actions announced on 7 July alongside news of its losses on the UK and German projects. Other actions are still in the preparation phase, which will be completed early in October. At this stage, the final actions are expected to include:
- A cost reduction programme to deliver annual savings of at least €100 million by the end of 2015.
- Restructuring and streamlining of the operating company structure.
- A programme to improve working capital by at least €300 million by the end of 2015.
- Continuation of the current property divestment programme.
- Investigation of all other opportunities to further strengthen BAM’s financial position, including divesting other assets.
- Intensification of programmes to improve tendering procedures and execution of projects.
BAM will give a detailed presentation of the actions, their costs, benefits and timing early in October.
The group's total order book closed at €10.7 billion on 30 June 2014, up from €10 billion at year-end 2013.
Commenting on the results, Nico de Vries, Chairman of Royal BAM Group said:
‘The results for the first half of 2014 show a mixed performance. In our two operational sectors, we continue to work through orders booked under very difficult market conditions - especially in the Netherlands. The two civil engineering projects with major losses which we announced on 7 July are stable; other projects delivered strong results, supporting the overall sector result for the first half. “
Mr de Vries also announced his decision to retire from the Executive Board with effect from 1 October in order to allow his successor Rob van Wingerden to take complete responsibility for the actions to improve performance and lead the next phase in BAM’s development.
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