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Amey provision drags down Ferrovial profit

Ferrovial slumped to a £46m loss in the first half of 2018 following Amey’s provision for its Birmingham roads deal, according to its interim results.

The Spanish group’s earnings before interest and tax for H1 fell to -€52m (-£46m), down sharply from €305m (£270m) in the first half of 2017.

The main reason for the slump was a €237m (£208m) provision that Ferrovial subsidiary Amey was forced to make for its roads maintenance contract with Birmingham City Council.

The company took the hit after the High Court ruled in June that Amey had not fulfilled the scope of works under its 25-year PFI contract, following a three-year dispute.

Excluding the provision, Ferrovial said its EBIT for the six months to the end of June was €185m (£164m).

Revenue in the UK also fell from €1.33bn (£1.18bn) to €1.16bn (£1.03bn) following the completion of a number of projects, including the M8 road in Scotland, which produced a £48m loss in the group’s 2017 accounts.

Following losses on the Birmingham roads and M8 contracts, the company said it was focusing on improving contracts with low margins and withdrawing from non-profitable jobs.

However, new work in the consulting and rail sectors is forecast to contribute more revenue in the second half of 2018, with the firm expecting margins to improve as the year goes on.

Ferrovial’s construction order book in the UK was worth €9.35bn (£8.3bn) as of 30 June, having received a €472m (£419m) boost from a contract with the Welsh Government to deliver enhancements and renewals on Wales’ rail network.

The group also benefited from Carillion’s collapse having acquired its contracts to electrify the Midland and North-east railway lines, which it said will contribute €180m (£159.8m) in revenue.

It also expects to take on 100 per cent of the CarillionAmey maintenance contract for 50,000 houses used by armed forces personnel by the end of September.

Ferrovial subsidiary Cintra Global is currently preparing its technical and financial proposal for the £1.1bn Silvertown Tunnel contract ahead of submission on 31 January next year.

The company is up against Hochtief PPP Solutions for the PF2 contract, which includes a 25-year operating concession.

The preferred bidder is expected to be announced in May 2019.

Ferrovial owns Heathrow Airport and said construction of a third runway was “on track” after MPs voted in favour of it last month.

The group is now carrying out a second consultation before it submits its development consent order in 2021, with the runway scheduled to open in 2026.

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