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Bam Nuttall parent warns of pressure on margins in UK market

Dutch construction giant Royal Bam has revealed that operating margins at its UK civils contractor Bam Nuttall are under pressure.

First quarter margins in Royal Bam’s civil engineering division were just 0.5%, compared to 2.8% for the financial year 2010.

Revenue in the first quarter of 2011 was £725M, up on the same period in 2010, driven by a sharp increase in the UK. But this revenue was less profitable than last year.

“Revenue increased sharply in the United Kingdom in the first quarter of 2011 compared to the first quarter of 2010, although margins in the UK were under pressure,” said the company in a trading statement.

“Bam Nuttall’s order book remained stable compared to year-end 2010.”

The order book for civils work across the group stands at £4.6bn. In December the firm won the lucrative Crossrail Western running tunnels contract in joint venture with Ferrovial and Kier.

“Bam’s results for the first quarter were stable and in line with expectations, underpinned by successful execution on large projects. Results at our construction and civil engineering sectors were similar to last year, and the property sector made a small profit. Looking ahead, we maintain our expectation of a net profit level of £106M for 2011, taking account of increased pressures on margins for new orders,” said Royal Bam chairman Nico de Vries.

Vries also announced that Royal Bam has formed a joint venture with Dutch fund manager PGGM to invest in social and transport PPP markets in the Netherlands, Belgium, the United Kingdom, Ireland, Germany and Switzerland.

The initial target value to be invested is £340M. Bam’s PPP arm will transfer into the joint venture a total value of £130M of existing PPP assets.

“I am also pleased to report today an innovative joint venture agreement between Bam PPP and PGGM which will help us accelerate our growth in this important market of public private partnerships,” he said.

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