Builder BAM rebounds from Dutch downturn-UPDATE 2

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Thursday August 26, 2010 11:07:08 PM GMT

* H1 revenue down 15 percent to 3.43 bln euros

* H1 net profit up 21 percent to 50.6 million euros

* Gives no 2010 profit forecast citing market uncertainty

* Shares up 6.3 percent, lead indices

(Adds analyst comment, detail, shares)

By Greg Roumeliotis

AMSTERDAM, Aug 26 (Reuters) - Royal BAM, the largest Dutch construction group, posted a 21 percent rise in first-half net profit on Thursday as it cut its property losses and improved margins in public-private partnerships (PPPs).

Contractors in the Netherlands have had to keep a laser-sharp focus on margins to remain profitable. Construction output in the country shrank 9.8 percent year-on-year in the second quarter, Eurostat data released last week showed.

BAM reported a higher year-on-year net profit of 50.6 million euros even though revenue dropped 15 percent to 3.43 billion euros by selling 70 percent more homes and getting partial reimbursement for tendering costs in PPP projects.

BAM's net result was also buoyed by an interest charge that was about a third less than last year, while its order book increased by 12 percent over the first six months of the year, mainly thanks to new contracts in Britain and Belgium.

"Bottom line results were ahead of estimates, especially because of a better than expected interest line. The development of the order book is strong. All-in-all strong results," SNS Securities analysts wrote in a note.

BAM shares were up 6.3 percent at 0803 GMT to 3.86 euros, making them the biggest gainer on Amsterdam's bourse. Europe's STOXX 600 Construction and Materials index, was up 1.15 percent.

BAM has tried to limit its exposure to residential construction and development, and focus on more infrastructure projects to bring its operating profit margin, at 1.1 percent in 2009, in line with the 5.6 percent industry average.

Dutch construction and property have been hit hard by the economic crisis, with volumes set to decline further, peer Ballast Nedam said in July. But Heijmans beat earnings expectations on Monday as restructuring paid off.

Reiterating its 2010 outlook of turnover at around 8 billion euros, BAM would not give a profit forecast, saying its home markets faced a lot of uncertainty. The Dutch residential market appeared to have stabilised, albeit at a low level, it added.

BRITISH SCHOOLS

BAM, which raised 240 million euros in a rights issue in June, plans to invest 150 million euros of this in PPP projects, at a time when Britain's coalition government has decided to freeze the last government's 55 billion pound Building Schools for the Future (BSF) scheme.

In the first half, BAM was made preferred bidder in two BSF schemes in Somerset and Camden. The British Education Secretary has informed BAM that these two contracts will proceed, although their scale was still under discussion, the company said.

The British market is characterised by continuing uncertainty over the consequences of the government spending cuts, BAM said. Outside the Netherlands, Britain was BAM's only market where the net result in the first half increased.

Net result and margins fell in Belgium, Ireland and Germany, where austerity is adding to pricing pressure. In Germany, Europe's largest economy, construction revenue declined due to the harsh winter and postponement of some projects, BAM said.

BAM's profit from its 21.5 percent stake in dredger Van Oord increased year-on-year in the first half by 2 million euros to 11.3 million euros. BAM plans to sell the stake to pay down debt but said on Thursday that no transaction was expected this year.

BAM trades at 7 times 12-month forward earnings, whereas Heijmans trades at 6.5 times and Ballast at 13.6 times, according to Thomson Reuters StarMine, which weights analysts' forecasts according to their past accuracy and timeliness. (Editing by Karen Foster and David Cowell)

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