A loss-making contract in Germany has tipped Bouygues Energies & Services (E&S) back into the red despite a 7 per cent increase in turnover.
The latest accounts for the UK-based construction engineering subsidiary of French group Bouygues were signed off last week (3 April).
They revealed a pre-tax loss of £6.6m in the 2023 calendar year, compared with a rare profit of £19.2m the year before.
Bouygues E&S previously posted a pre-tax profit in 2016. Its cumulative losses between 2017 and 2021 totalled £140.8m.
Turnover increased from £198.4m to £212m in the latest accounts, but the firm’s margin entered negative territory at -3.1 per cent compared with a healthy 9.7 per cent in 2022.
In their strategic report accompanying the latest accounts, Bouygues E&S’s directors said the firm’s 2023 performance was “significantly affected” by a loss-making contract in Germany, which alone accounted for an operating loss of £19.3m in 2023.
This continued into last year with a further impact of £24.6m.
They added that the company had increased its provision regarding an ongoing contract dispute.
Litigation is in progress, according to a note in the accounts, which added that the firm’s “maximum risk exposure does not exceed £80m”.
The directors said they believed the claim “can be successfully resisted by the company”.
Bouygues E&S insisted that the pre-tax loss in 2023 “is not reflective of the overall financial health of the business”.
The accounts added that the firm’s core UK operations “remain strong” with revenue of £134.9m and a profit of £9.6m in 2023.
However, UK-related turnover was down on the £153.6m recorded in 2022, while European revenue increased from £44.8m to £77.1m.
The firm’s year-end cash at hand was a healthy £101.5m, up from £85.7m at the start of 2023.
No dividends were paid out and the firm took out an £4.8m unsecured inter-company loan, repayable within 12 months.
The directors said that new orders had been secured in 2023, and Bouygues E&S “is continuously developing additional expertise and investing in new activities” in close collaboration with other Bouygues companies in order to widen the services it offers.
The average number of employees in 2022 was 255, down from 265 the previous year.
Bouygues E&S’s wage bill rose from £18.3m to £19.1m.
The firm carries out engineering, construction, servicing and maintenance of “highly technical facilities in critical and controlled environments”, its accounts said.
This includes projects for pharmaceutical facilities, laboratories, printing-press halls, data centres and energy-from-waste plants.
Bouygues E&S’s directors did not identify any material impact on the business from the ongoing Ukraine war. However, they have applied “downside sensitivities” to the firm’s cashflow forecasts out to 2026, covering the potential impact of inflation and the availability of labour and materials.
Despite the continued negative impact of the loss-making German contract, the firm said that its UK operations “performed strongly across all business lines, exceeding expectations” in 2024.
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Ben Vogel