Rising costs drag on children’s hospital builder BAM’s profits

Rising costs left profits at National Children’s Hospital builder BAM Contractors trailing at €16 million last year, according to its latest figures.

Accounts that BAM is due to file shortly show that pretax profits at the Dutch-owned company fell 60 per cent in 2017 to €15.9 million from €40.6 million previous year.

However, a once-off €18 million gain, mainly due to a change in benefits offered by its pension fund, and €2 million in overpaid expenses, boosted BAM’s 2016 profits by €20 million.

The builder’s 2017 figures show that costs rose faster than the rate at which turnover grew last year.

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BAM’s turnover grew 29 per cent last year to €465 million from €360.6 million in 2016. Over the same period costs rose 33 per cent to €450 million from €340 million.

BAM is one of the Republic’s biggest builders and has the main contract for the €1 billion National Children’s Hospital, at St James’s in Dublin, along with several other State-backed projects.

The company began work on the hospital last year as well as continuing the construction of roads, including a portion of the M11 in Co Wexford, and courthouses in counties Donegal and Louth.

Microsoft pad

BAM also finished One Microsoft Place – a new Europe, Middle East and Africa head office for the tech multinational – in Leopardstown in south Dublin last year.

Theo Cullinane, BAM Contractors chief executive, said yesterday that the company benefited from the Republic's recovering building industry last year.

Nevertheless, he warned that the sector remained in a fragile state, with challenges facing house building and civil engineering, which includes the State-backed projects that form a key part of BAM’s business.

Mr Cullinane called for the Government to speed up spending the €116 billion earmarked for investment in infrastructure in the National Development Plan for 2018-2027.

He argued that margins in construction remained low while the risks that builders must take on in State contracts were too high, with the consequence that many of them were not reinvesting enough in their businesses.

Mr Cullinane argued that builders continued to under price work while State bodies were accepting below-cost bids for contracts from the industry.

“This is evidenced by recent examples of company failures and bad construction practices and the devastating effect this has on the supply chain,” he said.

Net assets

BAM Contracting’s net assets grew 14 per cent during 2017 to €78.33 million on December 31st, from €68.7 million 12 months earlier. Its balance sheet shows that assets included €162 million in cash.

Short-term liabilities of €197.4 million included €131 million owed to trade creditors, that is, subcontractors and suppliers. A €20 million sum due to its parent, Netherlands-based Royal BAM Group, accounted for most of the €22.7 million owed to longer-term creditors.

On the plus side of the balance sheet, a total of €75.1 million due for work under way or completed accounted for most of the €95.7 million that BAM’s debtors owed the company. Separately, other entities within the BAM group owed the Irish business €8 million.