- Organic profit growth reaches 9% in first half 2003
- Former HBG businesses make good profit contribution
- Earnings per share Ã¢âÂ¬2.13 (+9%)
- Order book remains strong (Ã¢âÂ¬10.3 billion)
- Profit outlook 2003 maintained
- Integration BAM NBM and HBG on schedule
Performance in the first half of 2003
Turnover and result developed in line with expectations in the first half of 2003. Turnover rose to over Ã¢âÂ¬ 3.5 billion, up 172% on the first half of 2002. Compared with the pro forma figure for the first half of 2002 (Ã¢âÂ¬ 3.8 billion), turnover was down 8%, the net effect of reduced business volume (-7%), exchange rate effects (-3%) and acquisitions (+2%).
In the markets addressed by Construction & Property, the general construction and property sectors in the Netherlands, Germany and Belgium had to cope with weak office markets. Fortunately, our general construction companies in the Netherlands have always held strong positions in the other segments of their market. Our Belgian general construction businesses bucked the trend and have order books which are well-filled until far into 2004. The improving margin in this sector is due primarily
to the sustained recovery of the results on our housing construction activities in the Netherlands. Our UK operations again made a good contribution to results. Public-sector expenditure in the UK is holding up well, but the private-sector market is declining and PFI (Private Finance Initiative) projects will continue to support the market in the years ahead. Our activities in Germany posted a modest operating profit in the first half of 2003.
Integration in the Netherlands
The integration of the Dutch operations of BAM NBM and HBG in the Construction & Property and Civil Engineering sectors is in full swing and on schedule. BAM Wegen (roads) and BAM Vastgoed (property) have been operational since 1 July 2003. BAM Woningbouw (housebuilding), BAM Utiliteitsbouw (general construction), BAM Civiel (civil works) and BAM Infratechniek (pipes & cables) will continue to take shape in the second half of 2003.
Faced with a declining volume of work on the Dutch construction market, Royal BAM Group is obliged to reduce staffing levels in several areas within the Construction & Property and Civil Engineering sectors. These changes are expected to result in about 500 compulsory redundancies this year, out of a total workforce in the Netherlands of around 20,000.
There was no material change in Royal BAM Group´s financial position in the first half of 2003. The decrease in the cash position compared with year-end 2002 is consistent with the normal seasonal pattern. After the end of the period under review, a subordinated loan was placed with banks and institutional investors which will increase the capital base to 14.7% of total assets, compared with 12.1% as at 30 June 2003. The loan will be used to repay part of the bridging loan raised to finance the
acquisition of HBG in November 2002. After this partial repayment and assuming free cash flow of at least Ã¢âÂ¬ 100 million in 2003, the outstanding principal of this bridging loan will be Ã¢âÂ¬ 300 million. The long-term loans are mainly non-recourse loans relating to PFI projects and one loan raised for the dredging business.
Royal BAM Group is currently engaged in negotiations with a number of parties on the sale of all or part of BHD. This disposal will provide funds which can be used to repay more of the bridging loan and it will further strengthen the balance sheet ratios.
Outlook for 2003
On the basis of the information currently available, the Executive Board forecasts higher earnings per ordinary share, corresponding with a net profit of around Ã¢âÂ¬ 80 million in 2003, on turnover of approximately Ã¢âÂ¬ 7.7 billion. The Executive Board stands by its forecast that earnings per ordinary share in 2003 will by higher than the 2002 figure of Ã¢âÂ¬ 4.35. The situation regarding the investigations by the NMa (Netherlands Competition Authority)