BAM to grow UK business despite construction arm loss
Aaron Morby
Dutch construction giant Royal BAM has committed to invest and grow its business in the UK despite set-backs last year.
Announcing 2020 group results, the firm reported better trading in the second half at both its UK civils and building businesses as work and orders picked up after the first Covid lockdown.
Its UK order book has recovered with major project wins for both infrastructure and building work in the last few months and the firm reported minimal disruption to operations since the start of the new UK/EU trade agreement.
But its problem University of Sheffield job where BAM was forced to tear down the concrete frame of its £65m Faculty of Social Sciences project during the summer hit the performance of the construction division which slid £2.9m into the red last year weighed down by a £30m provision.
Revenue at the division also fell 16% to £855m.
Ruud Joosten, CEO of Royal BAM Group, said in the UK competition has increased due to Covid-19 and the end of the UK/EU transition period.
Joosten said: “Public sector clients continue as before, with competition for key new frameworks for health and education while there is a mixed picture for the private sector.”
Despite this, BAM has recently secured big orders for the Salford Royal hospital project under the Procure22 Health Framework and Sky Studios Elstree, the most sustainable film and TV studio in the world.
Civil engineering in 2020 was less affected by Covid-19 lockdowns compared to construction and property, and is now the biggest of the two UK operations.
Additional costs for adapting working methods and supply chain adjustments saw profit fall 46% to £10.7m on revenue up 11% to £847m.
The civils order book jumped £700m or 24%, helped by HS2 and the SMART Motorways programme.
Unveiling Royal BAM’s new strategic plan to 2023 and progress with a major cost reduction programme, Joosten said: “BAM will focus on growing its business in the Netherlands, United Kingdom and Ireland.
“These are the markets where BAM has by far the largest scale.
“In these countries, BAM starts with top-three positions in both the Construction and Property (and the Civil engineering business lines and with a strong and growing position in Public Private Partnerships (PPP).
“In the United Kingdom, the expected growth across all infrastructure sectors is strengthening.
“In December, the Government published its Construction Playbook setting out how it will work with the construction sector to make sure public sector works are delivered faster, better and greener.
“As a leading player in United Kingdom construction, BAM will support the British recovery from the pandemic and its progress towards net zero carbon.”
The Royal BAM Group as a whole suffered a £206m loss in 2020 on revenue down 6% at £5.9bn.
Joosten said: “Today we announce our new strategy for 2021-2023, ’Building a sustainable tomorrow’.
“Under this plan, the group will restructure its portfolio of businesses to focus on markets and projects where it can leverage its proven competitive strengths and serve the growing demand for sustainable solutions in the construction sector, while substantially lowering our projects’ risk profile.
“BAM will structurally improve the profitability and predictability of the group as a client- and service-driven business. As a first step, we are on track with our cost reduction programme, with a target of €100 million annually.