BAM reports improved profit
BAM’s results for 2016 show improved profit despite a reduction in revenue that was largely caused by the weaker pound.
The group reported an adjusted result of €102.7m (£85m) – before restructuring, impairments and a pension one-off – on revenue of €6.976bn in 2016, compared to €88.2m and €7.423bn, respectively, in 2015. The net result was €46.8m for 2016, up from €10.2m in 2015.
The construction and property divisions reported overall positive results, with Germany being refocused after loss. Civil engineering showed an improved result driven by home markets as international work was affected by the oil and gas markets. In public-private partnerships, there was a steady performance from the existing portfolio.
Order book quality is reported as improving due to tender discipline, though was at a lower level due to foreign exchange and market conditions.
Royal BAM Group CEO Rob van Wingerden said: “In 2016, we made good progress implementing the strategy ‘Building the present, creating the future’. We are focusing our project portfolio by disciplined, data-driven tendering and we have a pipeline with attractive opportunities. Across our business portfolio, we exited some non-core activities, completed the integration of Dutch construction and property, and are refocusing our international infrastructure and German construction businesses. We are executing our digital strategy by launching a start-up to develop a scalable digital construction platform and using digitalisation to enhance our primary processes. Our One BAM culture is being enhanced through learning and collaboration and employee engagement.”
He added that the group continued to “derisk” and strengthen its financial position, and generated a strong positive cash flow, mainly due to working capital improvement. “Our return on capital employed – a leading KPI for how we manage our business – started to move upwards thanks to the higher result and lower capital.”
Looking ahead, the external environment is mixed with on the one hand stable or slightly improving economic indicators and on the other hand, uncertainty on Brexit and upcoming elections, he said. “Despite these notes of caution, I am confident we will continue our positive momentum on strategy delivery in 2017.
“For 2017, we expect revenue to be slightly lower and the adjusted result before tax to be higher than the level of 2016. We anticipate a significantly lower restructuring charge compared to 2016.’
The ten operating companies now report as three sectors: construction and property, civil engineering and public-private partnerships (PPP). Construction and property activities are now managed and reported as one integrated business line. In addition, some activities in Ireland, Belgium and at BAM International have been reclassified from civil engineering to construction and property. The reporting sector PPP was unchanged.
Of the reported decrease in the total order book, €0.4bn related to currency effects and €0.2bn to a civil engineering project cancellation in Belgium in the first quarter. Other factors in the development of the order book over the year were adverse market conditions in: Dutch non-residential construction & property; Belgian (Wallonia) civil engineering; and international oil & gas. So far, Brexit has not had any material impact on the UK order book in local currency, the boadr said. The percentage of the UK revenue for 2017 secured at year end was slightly lower compared to prior year.
The 6% drop in total revenue compared to 2015 was primarily attributable to the weaker pound sterling, which accounted for €254m of the fall, with a further €45m down to divestments of non-core activities in the Netherlands and Belgium.
At Construction & Property revenue was €4.124bn, which was lower by €78m compared to 2015 due to the impact of the pound sterling (-€157m). Revenue rose in the UK, Ireland and the Netherlands.
There was a shortfall in revenues in Germany due to project postponements and refocusing the activities on targeted regions. Revenue in Belgium reduced because of fewer property transactions.
The year-end order book was lower by €295 million, mostly caused by the weaker pound (-€236 million), and market conditions in Dutch non-residential. The order book in the UK was slightly down on a constant currency basis. The order book in other countries was higher.
In civil engineering, revenue reduced by €361m to €2,899m, of which €94m was currency effect.
This was due to lower revenue from large multi-disciplinary projects in the UK, BAM International and in Belgium. Revenue in the Netherlands grew by 6%. Margins in BAM’s home markets were above 2%. At BAM International, although total project results were positive, there was a loss due to lower revenue and increased tender cost linked to refocusing to selected onshore markets. The movement in the sector order book of -€945m mainly came from negative currency effects, a project cancellation in Belgium in the first quarter and adverse market conditions in Belgium and international oil and gas. The order book in the UK reduced; the percentage of the UK revenue for 2017 secured at year end was slightly lower compared to prior year.
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This article was published on 21 Feb 2017 (last updated on 21 Feb 2017).