Royal BAM Group nv expects significant H1 loss and announces plans to wind down BAM International
- July 9, 2020
- Category: Companies, Investment and Finance, Corporate, Europe
The extraordinary circumstances caused by the Covid-19 crisis have had a considerable impact on Royal BAM Group nv, according to its latest trading update for the first half of 2020.
The company’s performance in the first half year has also been impacted by continued losses at BAM International, the recently announced Cologne metro settlement and to a lesser extent by underperformance of the German construction and Dutch civil engineering business.
Due to these developments, the company expects a first half year adjusted loss before tax of approximately €130 – €150 million. Given the lack of a positive outlook, the Executive Committee has decided to start the process of winding down BAM International, active outside BAM’s European home markets,
Compared to the first quarter, BAM’s cash position further increased to approximately €1.2 billion. Also based on a strong order book, the results over the full year are expected to improve compared to the first half of 2020.
Frans den Houter, CFO / interim CEO, said:
‘It is clear that Covid-19 is causing unprecedented challenges for society and our industry. As a first priority, we have taken measures to safeguard a healthy and safe working environment for our people and others involved. Our various markets have been impacted very differently by Covid-19. Some were shut down completely, while others remained open. We lost approximately 35 per cent operational efficiency through the first two months of the crisis and are now getting back to 80 per cent.
“In the first quarter, we reported that the results of Dutch civil engineering and German construction, and of BAM International were disappointing. The combination of Covid-19 and the ongoing underperformance of BAM International in the second quarter, has led to a severe impact on profitability. We will immediately start the process of winding down BAM International, which was already under strategic review. This is harsh for the employees involved, however it is necessary and cannot be delayed. “
Other Royal BAM Group nv businesses continue to perform satisfactorily under difficult market circumstances, in particular Dutch construction and property activities and BAM PPP. The Group’s order book remains strong and the intended wind down of BAM International and the Cologne metro settlement will result in a significant improvement of its risk profile, the update says.
Frans den Houter continued:
“Whilst governments are re-opening their societies and productivity is recovering, our focus remains on mitigating the Covid-19 impact, cash generation, cost reductions and resolving the performance issues.
“As management we have a full focus on implementing all necessary measures to protect and improve our operations. We continue to accelerate a number of strategic initiatives and to further build on our resilience and strong cash position.’
BAM International will deliver the current order backlog in line with client expectations and contractual obligations and retain the necessary staff to complete the current project portfolio, but will not tender for new projects.
Currently BAM International has approximately 600 staff on payroll and 12 active projects around the world. BAM International reported a substantial loss in 2019 and expects to report a loss of approximately €60 million for the first half of 2020.