Image: bouygues-uk.com
Bouygues has issued a profit warning, revealing that its construction arm took a £123.5m (€140m) hit to its operating profit in the first nine months of 2018 as compared to a year before, after problems on two biomass power plants in the UK.
The firm said the plants experienced difficulties during the testing and commissioning phases on the plants, related mainly to malfunctions on equipment, leading to delays, additional costs and compensation paid to its clients.
The problems worsened in the third quarter of 2018, it said in the profit warning.
Meanwhile, the group warned that it was also experiencing problems elsewhere in Europe, including entering a new phase of litigation on a data centre in Ireland which was terminated by the client. The client has requested payment of the “maximum amount” of compensation on the project.
Colas Rail in France is also facing what Bouygues called a “tough situation” which worsened in the second and third quarters, with strikes at French rail operator SNCF impacting on rail works, resulting in a sharp decline in business activities with a high level of fixed costs.
To compound problems, a pipe-laying project in south west French suffered delays as a result of adverse weather conditions in the first quarter of the year. The company expended additional costs catching up.
“Given these elements, the current operating profit and the current operating margin at the construction businesses are now expected to decline in 2018 versus 2017 (by a few dozen basis points for the current operating margin), versus the previous forecast of an improvement,” the company said in a statement.
“In contrast, the building and civil works activities of Bouygues Construction and Roads Mainland France at Colas will post good results in the first nine months of 2018. The Group is therefore confident in the strengths and the good positioning of its construction businesses in a market exhibiting strong worldwide demand over the long term,” it added.
