Dutch group cuts value of Irish property by €21m

DUTCH BUILDING and civil engineering giant, Royal BAM, took a €21 million hit on the value of its Irish properties so far this year.

The Netherlands-based group also signalled that its biggest Irish subsidiary, BAM Contracting, will have to cut back as its main business is showing signs of a sharp decline. The contractor paid its parent a €12 million dividend last year.

BAM has operations in five markets, Ireland, the Netherlands, Belgium, Britain and Germany.

The group said yesterday that overall net profit tumbled to €77 million from €242 million in the nine months ended September 30th, as its property unit made a loss and margins tightened in its other divisions.

In a statement yesterday, the group said that it wrote €21 million off the value of its Irish properties during the third quarter of the year. It based this on revenue forecasts for sales and lets.

BAM’s property arm has a number of commercial properties and sites in Dublin and Cork, where it has a warehouse in Albert Quay and a development in Blackpool.

The group said that its main Irish subsidiary, BAM Contractors, made a profit despite falling construction revenues. The firm won the €150 million contract to build the extension to the Luas light rail system from Tallaght to Saggart in Dublin.

“Circumstances in the Irish market are extremely difficult and the market volume in both the private sector and the public sector remains very low, which is reflected in a sharp decline in the order book,” the group said.

“BAM Contractors is therefore forecasting significantly reduced revenues for the next few years and will modify its organisation accordingly,” its statement added.

Recently filed accounts show that last year, BAM Contracting grew profits 30 per cent to €19 million on the back of a turnover which was down over 2 per cent at €460 million.

The Irish company increased dividend payments to its Dutch parent by 66 per cent to €12 million. Its turnover accounted for around 5 per cent of BAM’s total group revenues for 2008 of €8.8 billion.

Sales at group level were down 5 per cent for the first nine months of the year at €6 billion from €6.35 billion in 2008.

Overall, BAM said it still expected 2009 group revenues of €8.3 billion. It predicted that it would make a full-year net profit of at least €100 million.

Last August, it predicted that 2009 profits would come in at between €100 million and €120 million.

On a quarterly basis, BAM group reported a third-quarter net profit of €23.5 million on revenues of €1.86 billion.

Analysts in a Reuters poll were expecting a third-quarter net result of €28 million on revenues of €2 billion.

The group said that margins were suffering in the contracting and public-private partnership businesses across all its markets, partly as a result of increased tender costs. In the Netherlands, its property business lost €68 million, €44 million of which was due to a writedown in the value of its property holdings.