Royal BAM Group lowers profit forecast as project costs hit €90m

Netherlands construction giant Royal BAM Group will report a loss for the first half year and has lowered its full-year guidance to an adjusted result before tax of around 1% because of unexpected project costs in Germany and elsewhere.

Half-year results will be hit by approximately €65m for a large civil project and a small number of projects in Germany, and by about €25m at an unnamed BAM International project.

BAM had hoped to improve its 2019 margin above the 2018 level of 2.1%.

Its share price opened around 23% lower in trading today.

"We sincerely regret that these developments cast a shadow over the strong performance of our other activities and result in a lower profitability," said chief executive Rob van Wingerden.

"We continue to rigorously implement the lessons learnt in our tendering for new projects, which going forward will result in a better risk reward balance. Our recently installed Executive Committee is strongly committed to improving this balance and the predictability of our business. We are confident that the acceleration of our strategic agenda will enable us to realise BAM’s targets for 2020."

It reported "continuing solid performance" in the UK, Ireland, PPP and Dutch construction and property, and said its cash position "remains solid, in line with the level of mid-2018".

Wingerden said the costs are partly down to scope changes and project delays for which BAM was not responsible.

"BAM is in discussion with clients for compensation, which can be lengthy processes. The recognitions of our claims are currently not foreseen in 2019. This also illustrates the impact of IFRS 15, resulting in the delay of revenue recognition and a higher earnings volatility."

The company will release detailed first half year figures on 22 August.

Image courtesy of BAM

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