Sector review At Construction and Property, revenue of €2,048 million was 14% ahead of the first half of 2018, due mainly to residential property development in the Netherlands and construction in Ireland. The sector result for the first half of 2019 was a loss of €13.3 million, compared to a profit of €52 million in the same period last year. This fall was driven by the project losses in Germany and at BAM International, as announced on 8 July, with a combined impact of €72 million. The overall contribution from property development was €30.2 million (2018H1: €27.1 million), primarily driven by the Netherlands. Dutch home sales were stable at 1,379 homes (2018H1: 1,366). Based on BAM’s project pipeline an increase of homes sold of approximately 10% is anticipated for full year 2019. The gross investment in property reduced by €31 million to €533 million compared to full year 2018. In Germany, there was a loss in the first half of 2019 of €45 million due to the earlier mentioned additional project costs. BAM has ongoing discussions with clients for partial recovery of this amount. BAM International reported a loss of €23 million for the first half of 2019. This was due to the project in the Middle East. The additional costs at this project arose from design changes requested by the client. Discussions with the client are ongoing and BAM is confident that a satisfactory agreement will be reached, however the amount and timing are uncertain. There were solid contributions from the UK and from Ireland, adjusted for the €6 million loss related to the latter’s share of the International project. Belgium was profitable, although at a lower level than in the first half of 2018.
In Civil engineering, revenue in the first half of 2019 was €1,430 million (2018H1: €1,481 million) with the main reduction of approximately €65 million due to the deconsolidation of ‘Argen’ joint arrangements in Germany. The adjusted result in the first half of 2019 was negative €19.1 million (2018H1: negative €7.8 million). The decline related to a large civil project in Germany as announced on 8 July, resulting in a loss of €22 million. BAM is in discussions with the client regarding scope, design responsibility and timely decision making by the client, and the completion timetable has been extended by 18 months. Although BAM has received favourable rulings from independent arbitrators, concluding on the corresponding financial compensation is typically a lengthy process in the German market. There were additional costs of €7.5 million at the OpenIJ project in the first half of 2019, which mainly related to precautionary measures taken to support the immersion of the second caisson and the weather related issues mentioned in the first quarter. The immersion of the second caisson is proceeding according to schedule. The Dutch civil market remains challenging, and BAM is focused on improving the risk/reward balance for future projects. The result in Belgium improved, and steps are being taken to make the performance more
predictable. In the UK, BAM Nuttall had a slow start of the year and a recovery is foreseen for the remainder of 2019.
PPP delivered a good result of €10.8 million from the existing portfolio in the first half of 2019. The result in first half 2018 of €13.8 million had benefited from the transfer of one project to the PGGM joint venture; there were no such transfers in 2019. In July, the Pulse consortium which includes BAM reached financial close on the Cross River Rail project in Brisbane, Australia.