The positive developments of 2003 continue: the first half-year of 2004 showed a further improvement in EBIT (from Euro 6 mln to Euro 15 mln). This result was realised in spite of more difficult market circumstances.
This improvement is even more pronounced if the following one-off factors (totalling Euro 16 mln) are taken into account in the comparison with the first half of 2003:
- In the operating result of 2003 a one-off pension fund result was included;
- In the first half-year of 2004 an amount of Euro 7 mln was written off on the value of two prefab concrete factories (impairment).
For the full year 2004 the Board of Management expects an EBIT of circa Euro 22 mln (2003: break-even). Turnover decreased from Euro 801 mln to Euro 500 mln, mainly because of the termination of the activities in the United Kingdom. The decrease in turnover of the International division is part of Ballast Nedam’s strategy to reduce the future scale of these activities. The reduced turnover in the infrastructure market reflects the conclusion of a few large projects in the Netherlands and a conservative policy towards accepting new projects. This is dictated by the low price levels in the tender market. The lower turnover in Building and Development is caused by a delay in the launch of a number of projects. This will be made up in the second half of 2004.
The policy to put profit before turnover, even in the current difficult market circumstances, has resulted in higher margins in both Infrastructure and Building and Development. It must be noted that the improved margin at the Infrastructure division is mainly caused by good results on some long-term projects that are now being completed.
The Building and Development division has strengthened its project development capacity. Because of the division’s firm risk management practices, vacancy risks for offices and homes developed by the company are almost completely absent. The service and maintenance activities have been amalgamated in the Bouwborg formula.
In the first half of 2004 the valuation of two prefab concrete factories was adjusted. In the face of the continuing surplus capacity and price pressure in the market for ‘standard’ products, the bookvalue of these companies was lowered by Euro 7 mln. Early 2004 the operating company Durisol (wood fibre concrete products) was divested.
In May 2004, the Industry & Supply division was split up after which the companies were transferred to the Infrastructure and Building and Development divisions. This will strengthen the commercial synergies between the Industry & Supply companies and their internal clients. This will also lead to further cost reductions. For the purpose of comparison, the financial results for Industry & Supply will be reported separately in the 2004 figures.
Due to further rationalisations, the total number of Ballast Nedam employees was reduced by an additional 260 in the first half of 2004 of which circa 200 in the Netherlands.
The last of the final three large projects will be finalised in early 2005. These projects are developing according to plan. The remaining international activities contribute positively to Ballast Nedam’s result.
In the autumn of 2003 Ballast Nedam’s British division Ballast Plc. stopped trading and is now in administration. Ballast Nedam provided parent company guarantees for three ongoing PFI projects. These guarantees have now all been settled. Creditors have no recourse on Ballast Nedam N.V.
Net tax costs in the first half of 2004 were nil because of the capitalization of a deferred tax asset of Euro 5 mln. This tax benefit compensates the tax costs in the first half of the year. All carry forward tax losses up to 2003 have now been recognised.
In accordance with earlier reports by Ballast Nedam, the liquidation of Ballast Plc is expected to result in an additional Euro 100 to 130 mln tax losses in the Netherlands that can be carried forward without limitation