Higher project costs force BAM to lower full-year outlook
July 09, 2019 – BAM is set to report a loss for the first half this year and is predicting that its before-tax margin for 2019 will be half of last year’s figure.
The company had been aiming to improve on last year’s before-tax margin level of 2.1% but its full-year outlook for 2019 has been lowered to an adjusted result of around 1%.
There have been higher than expected costs of approximately €65m (£58m) for a civil project and a small number of construction projects in Germany and of about £25m on a BAM International project. Part of these costs will be recovered, but this is unlikely to happen before the end of the year. As a result BAM will report a loss for the first half of this year when it presents the detailed figures on 22nd August.
Royal BAM Group CEO Rob van Wingerden said: “At an early stage of our Q2 reporting cycle we lower our guidance for the full year to an adjusted result before tax of around 1 per cent. Previously our outlook was to improve this margin above the 2018 level of 2.1 per cent.
The higher than expected costs on the German and BAM International projects were partly caused by scope changes and project delays for which BAM is not responsible, said van Wingerden. “BAM is in discussion with clients for compensation, which can be lengthy processes. The recognitions of our claims are currently not foreseen in 2019.”
He added: “We sincerely regret that these developments cast a shadow over the strong performance of our other activities and result in a lower profitability. 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.”
The company said that there is continuing solid performance in the UK, Ireland, PPP and Dutch construction and property parts of the business.