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Bouygues takes £123m hit following EfW problems

Problems on two UK energy-from-waste schemes have contributed to a €140m (£123m) hit to Bouygues Construction’s operating profit.

The French-based company issued a profit warning on Thursday evening before holding a conference call with investors at short notice.

Deputy chief executive Philippe Marien (pictured) revealed that problems on two EfW schemes in the UK, as well as litigation on a data centre in the Republic of Ireland, meant operating profit for the nine months to 30 September would be €140m (£123m) lower than the same period last year.

This would put the division’s operating profit at around €455m (£400m) for the first nine months of 2018, based on the €595m (£523m) it made in 2017.

Bouygues SA’s shares were down 11 per cent by midday Friday on the Paris Stock Exchange following the news.

Bouygues SA flagged the UK issues in its half-year results published in August, but was forced to issue this week’s profit warning after problems “deteriorated recently”, Mr Marien said.

He said that equipment malfunctioned during the testing and commissioning of the two plants, which led to delays and extra costs, including compensation for the client.

As a result of the problems in the UK, Bouygues Energies & Services (E&S) has decided to pull out of the EfW sector and will not bid on future projects.

Under the contracts on the two UK schemes, Bouygues E&S had been lined up to operate the plants once they were online.

Responsibility for this has now been transferred from Bouygues E&S to Bouygues Construction subsidiaries Alpiq and Kraftanlagen, which both specialise in energy plant technology.

Bouygues SA also announced yesterday that operating profit for another subsidiary, Colas, would be €25m (£22m) lower after as a result of strike action and bad weather in France.

For the overall construction business – which includes Bouygues Cosntruction, Bouygues Immobilier and Colas – full-year operating profit was expected to be lower for 2018 than 2017, whereas the company had been forecasting an increase.

“Of course, that news is disappointing, but current operating margin is expected to be at a good level and only be down by a few dozen basis points,” Mr Marien said.

The deputy chief executive added that no further deterioration in its trading was expected for the fourth quarter.

Bouygues UK recently replaced its CEO and chief financial officer after it made a return to profit in its last financial year.

The company has won a number of large contracts in the higher education sector in 2018, including a £250m physics laboratory for Cambridge University and an innovation centre at Cardiff University as part of a £300m campus redevelopment.

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