RPT-UPDATE 1-Head of Dutch builder BAM steps down after turbulent first half

Thu Aug 21, 2014 7:44am EDT

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By Thomas Escritt

AMSTERDAM Aug 21 (Reuters) - The head of Dutch construction company BAM Group announced he would step down after a turbulent first half that saw the company make major losses on two large projects and its share price plunge.

Chief Executive Nico De Vries said he would leave the job to allow his successor to carry out an 18-month turnaround programme, which would involve 100 million euros ($133 million) in annual savings, including job cuts in the Netherlands and elsewhere and tighter risk controls.

"If you want to save 100 million euros in costs, that won't happen by buying fewer paper clips," he said on Thursday.

Managing board member Rob van Wingerden, a 26-year veteran of the company, will succeed him in October.

Shares in BAM - the Netherlands' biggest builder in terms of revenue and among Europe's largest - have lost around half their value in 2014 so far.

The company began the turnaround programme in July, when it announced it had made big losses on two projects in Britain and Germany, the result of having bid too keenly for the work during the severe downturn in the European industry.

It followed similar warnings from other European construction firms, including Britain's Balfour Beatty, recently the target of a merger offer by rival Carillion . Balfour's chief executive stepped down in May after it made losses on projects it bid for during the downturn.

"For outsiders it is virtually impossible to see if there are more bad projects down the road," wrote ING analyst Tijs Hollestelle in a note. "We have a neutral view on the shares because we believe it is extremely difficult to assess the underlying balance sheet strength of BAM."

The company, which has 25,000 workers globally, has not specified the scale of the job losses, or where they will be. De Vries said the company would also save money by targeting bids for contracts more carefully.

"Top management now looks at all bids and decides whether we should bid with those risks or not," he said. "We are trying to make sure projects are fully considered before they are begun," adding that there had been a tradition of improvisation in the construction industry that needed to be reined in.

BREAKS EVEN

The company said it had broken even in the first half, despite losing 68 million euros on the two unidentified projects, and said it would make a full-year profit before tax, impairments and restructuring charges of 20 million euros, less than half last year's 49.8 million.

Shares in the company fell sharply on opening on Thursday morning, before recovering to trade only 0.38 percent down at 1026 GMT.

His successor will give details of the restructuring programme in October, De Vries said, adding that the company had already incurred restructuring costs of 4.5 million euros in the first half and would continue to incur costs throughout the second half of 2014 and into 2015.

BAM, which had a turnover of 7 billion euros last year and has strong positions in Belgium, Britain, Germany and Ireland as well as the Netherlands, said it was seeing signs of recovery in some sectors, including the Dutch residential property market.

The sale of commercial properties helped push overall group revenue up in the first half by 5 percent on a year ago to 3.4 billion euros. The civil engineering business made a loss, despite some revenue growth, because of the project writedowns.

(1 US dollar = 0.7538 euro)

(Editing by Greg Mahlich and Pravin Char)