Notes to the consolidated financial statements

1. General information

Royal BAM Group nv (‘the Company’ or ‘BAM’), its subsidiaries (together, ‘the Group’) and its share in joint operations offers its clients a substantial package of products and services in the sectors Construction and property, Civil engineering and Public Private Partnerships (‘PPP’). The Group is mainly active in the Netherlands, Belgium, the United Kingdom, Ireland and Germany. The Group is also involved in specialist construction and civil engineering projects in niche markets worldwide.

The Company is a public limited company, which is listed on Euronext Amsterdam, with its registered seat and head office in Bunnik, the Netherlands. 

On 20 February 2017 the Executive Board authorised the financial statements for issue. The financial statements as presented in this report are subject to the adoption by the Annual General Meeting on 19 April 2017.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code, as far as applicable. 

The consolidated financial statements have been prepared under the historical cost convention, unless otherwise stated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

2.1.1 Changes in accounting policies and disclosures

(a) Changes in accounting policies
The Group has amended the accounting policy for remeasurements of post-employment benefits, which is no longer presented within the reserves and instead is included in the retained earnings. Presentation within the retained earnings is more in line with IAS 19 Employee Benefits (where however a free choice was given). The Group will continue to recognises remeasurement gains and losses arising on defined benefit pension plans in OCI in accordance with IAS 19 Employee Benefits. 

(b) Application of new and revised standards
The Group has applied the amendments for the first time for their annual reporting period commencing 1 January 2016 in connection with the ‘Annual Improvements to IFRSs – 2012-2014 Cycle’.

The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. 

There are no other IFRSs or IFRIC amendments as per 1 January 2016 that have a material impact on the Group.

(c) New standards and interpretations in issue but not yet effective
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for financial years beginning on or after 1 January 2018, with early application permitted. The Group plans to adopt the new standard on the required effective date. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The new hedging rules align hedge accounting more closely with the Group’s risk management practices. As a general rule it will be easier to apply hedge accounting going forward as the standard introduces a more principles-based approach. The new standard also introduces expanded disclosure requirements and changes in presentation. 

The Group has performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Group in the future. Overall, the Group expects no significant impact on its balance sheet and equity except for the effect of applying the impairment requirements of IFRS 9. 

The new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition of credit losses, resulting in a negative impact on equity. The Group will perform a detailed assessment in 2017 to determine the final extent. 

IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18, ‘Revenue’ and IAS 11, ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The Group will implement this standard on the required date. 

The Group has performed a detailed impact analysis in 2016 to identify the areas for which the Group expects this standard will have impact upon. The Group has identified the areas within the different entities and will proceed in 2017 to perform a full contract by contract analysis to complete the preparations for the implementation as per 1 January 2018. The Group expects to use the retrospective method for implementation. As a result of the impact analysis, the Group does not expect major changes in the method of revenue recognition as Percentage of Completion over time generally still applies. The Group expects some impact on the timing of revenue recognition, for example due to claim recognition, the separation of performance obligations within one contract and the treatment of site mobilisation costs. Guidelines, processes and forms will be adjusted to comply with the new IFRS 15 standard, as expanded information will be needed for disclosure purposes.

IFRS 16, ‘Leases’ was issued by the IASB on 13 January 2016. Under existing rules, lessees generally account for lease transactions either off-balance if the lease is classified as operating lease or on balance if the lease is classified as finance lease. IFRS 16 requires lessees to recognise nearly all leases on balance which will reflect their right to use an asset for a period of time and the associated liability to pay rentals. The lessor’s accounting’ model largely remains unchanged. The standard is effective for annual periods beginning on or after 1 January 2019, with earlier adoption permitted if IFRS 15, ‘Revenue from Contracts with Customers’ also has been applied. As disclosed in note 33.2, the Group has several operating lease contracts for buildings, equipment and company cars for which the accounting will in principle change from off balance to on balance. The Group will start with a detailed impact analysis in 2017 to identify the effect of this standard on its financial statements and plans to implement this standard on the required date. 

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

2.2 Consolidation

(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in the income statement.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in the income statement or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in the income statement. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the profit or loss.

(d) Associates
Associates are all entities over which the Group has significant influence but not control, accompanying a shareholding of between 20 and 50 per cent of the voting rights or based on the representation on the board of directors. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition. 

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to the income statement, where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in the income statement and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the income statement.

Profits and losses resulting from transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. When necessary amounts reported by associates have been adjusted to conform with the Group’s accounting policies. 

(e) Joint arrangements
Investments in joint arrangements are classified as either joint ventures or joint operations depending on the contractual rights and obligations. 

Joint ventures are joint arrangements whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the joint venture. The parties to the arrangement have agreed contractually that control is shared and decisions regarding relevant activities require unanimous consent of the parties which have joint control of the joint venture. 

Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Joint operations are joint arrangements whereby the Group and other parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the joint operation. The Group recognises its share in the joint operations’ individual revenues and expenses, assets and liabilities and includes it on a line-by-line basis with corresponding items in the Group’s financial statements.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Board. The Executive Board considers the business from a sector perspective and identifies as from 2016 Construction and Property, Civil engineering and PPP as operating segments. In previous years Property was considered as a separate sector, but since these activities are highly interrelated with our construction activities, this is no longer considered to be a separate sector.

Furthermore, construction activities of several operating companies that were fully reported in the Civil engineering segment in previous years, are now reported in the Construction and property segment. All changes mentioned follow changes in internal organisation and reporting.

2.4 Foreign currency translation

(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘euro’ (€), which is the Group’s presentation currency.

(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within ‘exchange rate differences’, except when deferred in other comprehensive income as qualifying cash flow hedges. 

(c) Group companies
The results and financial position of the group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • assets and liabilities for each balance sheet are translated at the closing rate at the date of that balance sheet;
  • income and expenses for each income statement are translated at average exchange rates; and
  • all resulting exchange rate differences are recognised separately in equity in ‘other comprehensive income’.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange rate differences arising are recognised in ‘other comprehensive income’.

(d) Exchange rates
The following exchange rates of the euro against the pound sterling (£) have been used in the preparation of these financial statements:

 

2016

2015

Closing exchange rate

   

Pound sterling

0.85940

 0.73681

     

Average exchange rate

   

Pound sterling

0.81301

 0.72653

2.5 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition or construction of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Other costs are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Land improvements

10%-25%

Buildings

2%-10%

Equipment and installations

10%-25%

IT equipment

10%-25%

Furniture and fixtures

10%-25%

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.7).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other operating expenses’ in the income statement.

2.6 Intangible assets

(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the amount of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in business combinations is allocated, at acquisition date, to the cash-generating units (CGUs) or groups of CGUs expected to benefit from that business combination. Each unit to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(b) Non-integrated software
Non-integrated software is stated at cost less accumulated amortisation and impairment losses. 

Amortisation on non-integrated software is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives (between 4 and 10 years).

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.

(c) Other
Other intangible assets relate to market positions, including (brand) names and the management of acquired subsidiaries and are stated at cost less accumulated amortisation and impairment losses. Amortisation on other intangible assets is calculated over their estimated useful lives.

The assets’ useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.

2.7 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

2.8 Assets and liabilities held for sale and discontinued operations

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. For this to be the case the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. Non-current assets (or disposal groups) classified as held for sale are measured at the lower of the asset’s carrying amount and the fair value less costs to sell. Depreciation or amortisation of an asset ceases when it is classified as held for sale. Equity accounting ceases for an investment in a joint venture or associate when it is classified as held for sale.

A discontinued operation is a component of the Group that either has been disposed of or is classified as held for sale, and represents a separate major line of business or geographical area of operations or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations. Results from discontinued operations that are clearly identifiable as part of the component disposed of and that will not be recognised subsequent to the disposal are presented separately as a single amount in the income statement. Results and cash flows from discontinued operations are reclassified for prior periods and presented in the financial statements so that the results and cash flows from discontinued operations relate to all operations that have been discontinued as of the balance sheet date for the latest period presented.

2.9 Financial assets

2.9.1 Classification

Management determines the classification of its financial assets at initial recognition. The classification depends on the purpose for which the financial assets were acquired. 

The Group classifies its financial assets in the category ‘loans and receivables’ and ‘derivative financial instruments’ (note 2.12). Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than twelve months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘PPP receivables’, ‘other financial assets’, ‘trade receivables – net’, ‘retentions’ and ‘cash and cash equivalents’ in the balance sheet.

2.9.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

2.10 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

2.11 Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the income statement.

2.12 Derivative financial instruments and hedging activities

Derivatives are only used for economic hedging purposes and not as speculative investments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and if so, the nature of the item being hedged. The Group designates the derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (‘cash flow hedge’).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of the derivative financial instruments used for hedging purposes are disclosed in note 19. Movements on the hedging reserve in other comprehensive income are shown in note 16. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than twelve months and as a current asset or liability when the remaining maturity of the hedged item is less than twelve months. 

The effective portion of changes in the fair value of cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within ‘finance income/expense’.

Amounts accumulated in equity are reclassified to the income statement in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ‘finance income/expense’. The gain or loss relating to the effective portion of forward foreign exchange contracts is recognised in profit or loss within ‘operating result’.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within ‘finance income/expense’.

2.13 Inventories

Land, building rights and property developments are recorded at the lower of cost and net realisable value. The Group capitalises interest on finance raised to facilitate the development of specific projects once development commences and until practical completion, based on the total actual finance cost incurred on the borrowings during the period. When properties are acquired for future redevelopment, interest on borrowings is recognised in the income statement until redevelopment commences.

Raw materials and finished goods are stated at the lower of cost and net realisable value. Cost is determined using the ‘first-in, first-out (FIFO) method’. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.14 Construction contracts

A construction contract is defined as a contract specifically negotiated for the construction of an asset.

On the balance sheet, the Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case.

Pre-contract costs are expensed as incurred until it is virtually certain that a contract will be awarded, from which time further pre-contract costs are recognised as an asset and charged as an expense over the period of the contract. Amounts recovered in respect of pre-contract costs that have been written off are deferred and amortised over the life of the contract.

For further guidelines regarding construction contracts see paragraph 2.24 revenue recognition under (a).

2.15 Trade and other receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.16 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the consolidated balance sheet, bank overdrafts are shown within ‘borrowings’ in current liabilities.

2.17 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. When share capital is repurchased in order to prevent dilution as a result of the share-based compensation plan, the consideration paid, including directly attributable costs, net of tax, is deducted from equity. Repurchased shares (treasury shares) are presented as a deduction from total equity. When treasury shares are sold or re-issued subsequently, any amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

2.18 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.19 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method (in case not attributable to property development projects).

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

The subordinated convertible bonds are separated into liability and equity components based on the terms of the contract. On issuance of the subordinated convertible bonds, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity. 

Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the subordinated convertible bonds, based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised.

2.20 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income respectively directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. 

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.21 Employee benefits

(a) Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited in other comprehensive income in the period in which they arise.

Current service costs of defined benefit plans are recognised immediately in the income statement, as part of ‘employee benefit expenses’, and reflect the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. 

Past-service costs are recognised immediately in the income statement. Interest expenses are included in the ‘employee benefit expenses’.

For defined contribution plans, the Group pays contributions to administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Other employment obligations
Other employment obligations comprise jubilee benefits, retirement gifts, temporary leaves and similar arrangements and have a non-current nature. These obligations are stated at present value.

(c) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

2.22 Share-based payments

(a) Performance Share Plan
The Group operates an equity-settled share-based compensation plan. 

The fair value of the employee services received in exchange for the grant of the shares is recognised as cost with a corresponding credit entry of equity. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. The total amount to be expensed is determined by reference to the fair value of the shares granted:

  • including a market performance condition based on the Company’s share price;
  • excluding the impact of any service and non-market performance vesting conditions; and
  • including the impact of any non-vesting conditions.

At the end of each reporting period, the Group revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement within ‘personnel expenses’, with a corresponding adjustment to equity.

In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognising the expense during the period between service commencement period and grant date.

These shares contain a dividend right, to which the same conditions apply as to the performance shares and are re-invested.

(b) Phantom Share Plan
The Group operates a cash-settled share-based compensation plan. 

The fair value of the employee services received in exchange for the grant of the shares is recognised as cost with a corresponding credit entry of liabilities for the period until the date on which the Executive Board members are unconditionally entitled to payment. The valuation of the liability is re-assessed on every reporting date and on the settlement date. Any changes in the fair value of the liability are recognised in the income statement within ‘personnel expenses’.

Phantom shares become unconditional three years after the date of grant, while the percentage of phantom shares that become unconditional depends on the market performance condition based on the Company’s share price.

These shares contain a dividend right, to which the same conditions apply as to the phantom shares and are re-invested.

Upon vesting date, unconditional phantom shares are locked up for another two years. Cash distribution takes place at the end of the lock-up period. 

2.23 Provisions

Provisions for warranties, restructuring costs, rental guarantees and associates and joint ventures are recognised when: (a) the Group has a present legal or constructive obligation as a result of past events; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) the amount has been reliably estimated. 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

Restructuring provisions are recognised when a detailed formal plan has been approved, and the restructuring has either commenced or has been announced publicly. Restructuring provisions comprise lease termination penalties and employee termination payments. Future operating losses are not recognised.

If the Group’s share in losses exceeds the carrying amount of the investment (including separately presented goodwill and other uninsured receivables), further losses will not be recognised, unless the Group has provided securities to the associate or joint venture, committed to liabilities or payment on behalf of the associate and joint venture. In that case, the excess will be provided for. 

2.24 Revenue recognition

(a) Construction contracts
When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract by reference to the stage of completion. The net contract position as per period end is included on the balance sheet. See paragraph 2.14.

The outcome of a construction contract can be estimated reliably when all the following conditions are satisfied:

  • total contract revenue can be measured reliably;
  • it is probable that the economic benefits associated with the contract will flow to the Group;
  • both the contract costs to complete and the stage of contract completion at the end of the reporting period can be measured reliably; and
  • the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates.

The Group uses the ‘percentage-of-completion method‘ to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total forecasted costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured. 

A variation order is an instruction by the customer for a change in the scope of a project to be performed under the contract. Regarding variation orders the following basis for valuation is applied:

  • it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and 
  • the amount of revenue can be reliably measured. 

In the normal course of business the Group recognises amounts receivable in connection with claims for (un)completed work due from the principal and/or insurance claims as reimbursement for certain loss events on projects. Project related claims on the principal are recognised when:

  • negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and
  • the amount that is probable will be accepted by the customer can be measured reliably.

In some markets, given local circumstances and practices with our principals, historic data on receiving comparable claims is also taken into account when assessing the probability of receiving a claim. 

Insurance claims can be recognised only if it is virtually certain that the amount recognised will be reimbursed.

(b) Property development
The Group develops property, which it sells in the ordinary course of business and has entered into contracts to sell certain of these properties on completion of construction. The Group has concluded that these pre-completion contracts were not, in substance, construction contracts. 

Sale of property development are recognised in respect of contracts exchanged during the year, provided that no material conditions remain outstanding on the balance sheet date and all conditions are fully satisfied by the date on which the contract is signed. Construction and other expenditure attributable to such property are included in inventory property development until disposal. Rental income from incidental operations in connection with property development is recognised in the income statement on an accruals basis.

Known and expected losses are recognised as an expense immediately on completing a development once such losses are foreseen. The profit on disposal of property developments is determined as the difference between the sales proceeds and the carrying amount of the asset at the commencement of the reporting period including additions in the period and any residual commitments.

When the buyer is able to specify the major structural elements of the design of property development before construction begins and/or specify major structural changes once construction is in progress (whether it exercises that ability or not), revenue is recognised in accordance with construction contracts.

When the Group transfers control and the significant risks and rewards of ownership of the work in progress in its current state as construction progresses to the buyer, revenue is recognised in accordance with ‘construction contracts’. This may be the case in house-building projects as from the moment that the land and buildings, if any, have been legally transferred to the buyer.

(c) Service concession arrangements 
Under the terms of IFRIC 12 ‘Service concession arrangements’ comprise construction and/or upgrade activities, as well as operating and maintenance activities. The consideration (concession payments) received is allocated between construction/upgrade activities and operating/maintenance services according to the relative fair values of the respective activities. 

Revenue from construction and/or upgrade activities is recognised in conformity with the revenue recognition principles of construction contracts (IAS 11). Revenue from operating and maintenance activities is recognized in conformity with revenue from services (IAS 18).

The financial assets relating to service concession arrangements (‘PPP receivables’) are subsequently measured at amortised cost. Interest is calculated using the effective interest method and is recognised in the income statement as ‘finance income’.

(d) Services and other
Sales of services are recognised in the accounting period in which the services are rendered, by reference to stage of completion of the specific transaction and assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Sales of goods are recognised upon delivery to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

When the outcome of a transaction cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Other revenue includes, among other items, rental income under an operating lease and (sub)lease of property, plant and/or equipment. When assets are leased out under an operating lease, the asset is included in the balance sheet based on the nature of the asset. Lease income on operating leases is recognised over the term of the lease on a straight-line basis.

2.25 Finance income and expenses

Finance income is recognised using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues unwinding the discount as interest income. Finance income on impaired loan and receivables is recognised using the original effective interest rate.

Finance expenses comprise interest expenses on borrowings, finance lease expenses, gains and losses relating to hedging instruments and other financial expenses. Interest expenses on borrowings and finance lease expenses are recognised in the income statement using the effective interest method.

2.26 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

The Group leases certain property, plant and/or equipment. Leases of property, plant and/or equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in ‘borrowings’. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and/or equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

2.27 Government grants

Government grants are not recognised until there is a reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be reviewed.

Government grants that are receivable as a compensation for expenses or losses already incurred are recognised in the income statement in the period in which they become receivable.

2.28 Research and development

Research and development costs, which predominantly relate to projects, are considered to be part of contract costs. Other research and development costs are charged to the income statement as incurred.

2.29 Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. These are material items of income and expense that have been shown separately due to the significance of their nature or amount.

2.30 Statement of cash flows

The statement of cash flows is prepared using the indirect method. The net cash position in the statement of cash flows consists of cash and cash equivalents, net of bank overdrafts. 

Cash flows in foreign exchange currencies are converted using the average exchange rate. Exchange rate differences on the net cash position are separately presented in the statement of cash flows. Payments in connection with interest and income tax are included in the cash flow from operations. Cash flows in connection with PPP receivables are included in the cash flow from operating activities. Paid dividend is included in cash flows from financing activities. The purchase price of acquisitions of subsidiaries are included in the cash flow from investing activities as far as payments have taken place. Cash and cash equivalents in the subsidiaries are deducted from the purchase price.

Non-cash transactions are not included in the statement of cash flows.

3. Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. Risk is inherent to any business venture and the risk to which the Group is exposed is not unusual or different from what is considered acceptable in the industry. The Group’s risk management system is designed to identify and manage threats and opportunities. Effective risk management enables BAM to capitalise on opportunities in a carefully controlled environment. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by group treasury under policies approved by the Executive Board, which has the overall responsibility for risk management in the Group and the Enterprise Risk Management Framework. Group treasury identifies, evaluates and hedges financial risks in close collaboration with the group companies. The Executive Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk
A substantial part of the Group’s activities takes place in the United Kingdom and, to a limited extent, in other non-euro countries. The Group’s results and shareholders’ equity are therefore affected by foreign exchange rates. Generally, the Group is active in these non-euro countries through local subsidiaries. The exchange risk is therefore limited, because transactions are denominated largely in the functional currencies of the subsidiaries. The associated translation risk is not hedged. Due to the translation effect the decrease of exchange rate of the pound sterling in 2016 has on Group level reduced the reported revenue, results, equity and closing order book for the UK companies. Based on the value per end of 2016 of the Group's UK subsidiaries, an increase or decrease of 10% of the exchange rate of the pound sterling, will have an effect on the Group's equity of approximately €32 million.

A limited number of group companies are active in markets where contracts are denominated in a different currency than their functional currency. Group policy is that costs and revenues from these projects are mainly expressed in the same currency, thus limiting foreign exchange risks. The Group hedges the residual exchange risk on a project-by-project basis, using forward exchange contracts. This involves hedging of unconditional project related exchange risks in excess of €1 million as soon as these occur. The Group reports these hedges by means of cash flow hedge accounting. Additional exchange risks in the tender stage and arising from contractual amendments are assessed on a case-by-case basis. 

Procedures have been established for proper recording of hedge transactions. Systems are in place to ensure the regular performance and analysis of the requisite hedge effectiveness measurements for hedge accounting. 

With regard to financial instruments, the Group predominantly faces an exchange rate risk for current account balances in pound sterling. This risk is covered by forward exchange contracts. The residual effect of the exchange rate risk with regard to financial instruments in pound sterling and other currencies on the Group’s result and equity, is limited. 

(ii) Interest rate risk
The Group’s interest rate risk is associated with interest-bearing receivables and cash and cash equivalents, on the one hand and interest-bearing borrowings, on the other. If the interest is variable, it presents the Group with a cash flow interest rate risk. If the interest rate is fixed, there is a fair value interest rate risk. 

The Group mitigates the cash flow interest rate risk to the extent possible through the use of interest rate swaps, under which interest liabilities based on a variable rate are converted into fixed rates. The Group does not use interest rate swaps under which fixed-rate interest liabilities are converted into variable rates in order to hedge the fair value interest rate risk. 

The analysis of the cash flow interest rate risk takes into account cash and cash equivalents, the debt position and the usual fluctuations in the Group’s working capital requirements. In addition, alternatives are being studied and hedges are being considered. Under Group policy, cash flow interest rate risks with regard to long-term borrowings (mainly PPP loans) are largely hedged by interest swaps. As a result, the Group is not entirely insensitive to movements in interest rates. At year-end 2016, 82 per cent (2015: 83 per cent) of the interest on the Group’s debt position was fixed. The part not covered consists almost entirely of property financing. 

If the interest rates (Euribor and Libor) had been an average of 100 basis points higher or lower during 2016, the Group’s net result after tax (assuming that all other variables remained equal) would have been approximately €0.1 million higher or approximately €1.0 million higher (2015: approximately €0.3 million lower or approximately €2.1 million higher). If the interest rates (Euribor and Libor) had been 100 basis points higher or lower during 2016, the Group’s cash flow hedge reserves in Group equity (assuming that all other variables remained equal) would have been approximately €12 million higher or approximately €12 million lower (2015: approximately €24 million higher or approximately €24 million lower). 

(iii) Price risk
The price risk run by the Group relates to the procurement of land and materials and subcontracting of work and consists of the difference between the market price at the point of tendering or offering on a contract and the market price at the time of actual performance. 

The Group’s policy is to agree a price indexation reimbursement clause with the customer at the point of tendering or offering on major projects. The Group also endeavours to manage the price risk by using framework contracts, suppliers’ quotations and high-value sources of information. If the Group is awarded a project and no price indexation reimbursement clause is agreed with the customer, the costs of land and materials, as well as the costs for subcontractors, are fixed at an early stage by establishing prices and conditions in advance with the main suppliers and subcontractors. 

While it is impossible to exclude the impact of price fluctuations altogether, the Group takes the view that its current policy reflects the optimum economic balance between decisiveness and predictability. The Group occasionally uses financial instruments to hedge the (residual) price risks. 

(b) Credit risk
The Group has credit risks with regard to financial assets including ‘PPP receivables’, ‘non-current receivables’, ‘derivative financial instruments’, ‘trade receivables – net’, ‘retentions’ and ‘cash and cash equivalents’. 

‘PPP receivables’ and a substantial part of the ‘trade receivables – net’ consist of contracts with governments or government bodies. Therefore, credit risk inherent in these contracts is limited. Furthermore, a significant part of ‘trade receivables – net’ is based on contracts involving prepayments or payments proportionate to progress of the work, which limits the credit risks, in principle, to the balances outstanding. 

The credit risk arising from ‘PPP receivables’ and ‘trade receivables – net’ is monitored by the relevant subsidiaries. Clients’ creditworthiness is analysed in advance and then monitored during the performance of the project. This involves taking account of the client’s financial position, previous collaborations and other factors. Group policy is designed to mitigate these credit risks through the use of various instruments, including retaining ownership until payment has been received, prepayments and the use of bank guarantees. 

The Group’s ‘cash and cash equivalents’ are held in various banks. The Group limits the associated credit risk as a result of the Group’s policy to work only with respectable banks and financial institutions. This involves ‘cash and cash equivalents’ in excess of €10 million being held at banks and financial institutions with a minimum rating of ‘A’. The Group’s policy aims to minimise any concentration of credit risks involving ‘cash and cash equivalents’.

The carrying amounts of the financial assets exposed to a credit risk are as follows:

 

Notes

2016

2015

       

Non-current assets

     

PPP receivables

9

 296,395 

279,074

Non-current receivables

11

 90,138 

96,108

Derivative financial instruments

19

 -   

979

       

Current assets

     

Trade receivables – net

13

 915,067 

806,492

Retentions

13

 112,607 

126,142

PPP receivables

13

 62,338 

5,263

Other financial assets

11

 720 

6,726

Derivative financial instruments

19

 983 

6,200

Cash and cash equivalents

14

 738,577 

637,212

   

 2,216,825 

1,964,196

Non-current receivables predominantly concern loans granted to property and PPP associates and joint ventures. These loans are in general not past due at the balance sheet date. Triggering events for impairments are identified based on the financial position of these associates and joint ventures, which also include the value of the underlying property development positions. For a part of these loans property developments positions are held as securities generally subordinated to the providers of the external financing. 

Impairments are included in ‘non-current receivables’ and ‘trade receivables – net’ (notes 11 and 13). None of the other assets were overdue at year-end 2016 or subject to impairment. The maximum credit risk relating to financial instruments equals the carrying amount of the financial instrument concerned.

(c) Liquidity risk
Liquidity risks may occur if the procurement and performance of new projects stagnate and less payments (and prepayments) are received, or if investments in land or property development would have a significant effect on the available financing resources and/or operational cash flows. 

The size of individual transactions can cause relatively large short-term fluctuations in the liquidity position. The Group has sufficient credit and current account facilities to manage these fluctuations. 

Partly to manage liquidity risks, subsidiaries prepare monthly detailed cash flow projections for the ensuing twelve months. The analysis of the liquidity risk takes into account the amount of cash and cash equivalents, credit facilities and the usual fluctuations in the Group’s working capital requirements. This provides the Group with sufficient opportunities to use its available liquidities and credit facilities as flexible as possible and to indicate any shortfalls in a timely manner. 

The first possible expected contractual cash outflows from financial liabilities and derivative financial instruments as at the end of the year and settled on a net basis, consist of (contractual) repayments and (estimated) interest payments. The composition of the expected contractual cash flows is as follows:

 

Carrying 
amount

Contractual
 cash flows

< 1 year

1 – 5 years

> 5 years

           

2016

         

Subordinated convertible bonds

112,491

144,688

4,375

140,313

 -   

Non-recourse PPP loans

274,348

332,434

67,990

50,167

214,277

Non-recourse property financing

85,678

89,025

36,757

52,268

 -   

Other non-recourse financing

7,922

8,543

2,227

5,686

630

Recourse PPP loans

50,103

51,176

37,368

13,808

 -   

Recourse property financing

68,745

72,342

11,473

60,869

 -   

Other recourse financing

5,550

6,090

170

5,920

 -   

Finance lease liabilities

6,807

7,357

2,729

4,260

 368 

Derivatives (forward exchange contracts)

4,030

5,137

3,484

1,653

 -   

Derivatives (interest rate swaps)

19,688

23,570

4,304

11,218

 8,048 

Bank overdrafts

2

2

2

 -   

 -   

Other current liabilities

932,818

932,818

932,818

 -   

 -   

 

 1,568,182 

 1,673,182 

 1,103,697 

 346,162 

 223,323 

           

2015

         

Subordinated loan

 124,335 

 142,242 

 7,138 

 135,104 

 -   

Non-recourse PPP loans

 194,787 

 250,975 

 13,368 

 56,836 

 180,771 

Non-recourse property financing

 116,034 

 128,974 

 25,232 

 103,742 

 -   

Other non-recourse financing

 7,921 

 8,223 

 1,577 

 6,611 

 35 

Recourse PPP loans

 52,771 

 54,865 

 8,634 

 46,231 

 -   

Recourse property financing

 80,083 

 83,894 

 36,948 

 46,866 

 80 

Other recourse financing

 6,937 

 8,227 

 225 

 4,397 

 3,605 

Finance lease liabilities

 14,451 

 14,387 

 4,585 

 9,802 

 -   

Derivatives (forward exchange contracts)

 12,988 

 5,853 

 (7,669)

 13,522 

 -   

Derivatives (interest rate swaps)

 30,521 

 44,590 

 9,256 

 22,881 

 12,453 

Bank overdrafts

 3 

 3 

 3 

 -   

 -   

Other current liabilities

 907,012 

 907,012 

 907,012 

 -   

 -   

 

 1,547,843 

 1,649,245 

 1,006,309 

 445,992 

 196,944 

The expected cash outflows are offset by the cash inflows from operations and (re-)financing. In addition, the Group has committed syndicated and bilateral credit facilities of €400 million (2015: €500 million) respectively €163 million (2015: €153 million) available.

3.2 Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group’s aim is for a financing structure that ensures continuing operations and minimises cost of equity. For this, flexibility and access to the financial markets are important conditions. As usual within the industry, the Group monitors its financing structure using a capital ratio, among other factors. 

Capital ratio is calculated as the capital base divided by total assets. The Group’s capital base consists of equity attributable to the shareholders of the Company and the subordinated instruments (notes 17 and 18). At year-end 2016, the capital ratio was 19.7 per cent (2015: 21.2 per cent). For the strategic objectives regarding the capital ratio, see chapter 4.1 Financial performance of the Executive Board Report.

Under the terms of our borrowings facilities the group is required to comply with financial covenants. For information on these financial covenants see note 18.

3.3 Financial instruments by categories

The Group has three categories of financial instruments. A significant number of these are inherent to the Group’s business activities and are presented in various other balance sheet items. The following summary indicates the values for which financial instruments are included for each relevant balance sheet item:

   

Financial instruments  

 

Notes

Loans and 
receivables

Financial 
liabilities

Hedging

Non-financial 
instruments

Total

             

2016

           

PPP receivables

9

 296,395 

 - 

 - 

 - 

 296,395 

Other financial assets

11

 92,044 

 - 

 - 

 - 

 92,044 

Derivative financial instruments

19

 - 

 - 

 983 

 - 

 983 

Trade and other receivables

13

 1,091,497 

 - 

 - 

 843,045 

 1,934,542 

Cash and cash equivalents

14

 738,577 

 - 

 - 

 - 

 738,577 

             

Borrowings

18

 - 

 611,646 

 - 

 - 

 611,646 

Derivative financial instruments

19

 - 

 - 

 24,701 

 - 

 24,701 

Trade and other payables

23

 - 

 932,818 

 - 

 2,071,610 

 3,004,428 

   

 2,218,513 

 1,544,464 

 25,684 

 2,914,655 

 6,703,31

             

2015

           

PPP receivables

9

 279,074 

 - 

 - 

 - 

 279,074 

Other financial assets

11

 98,488 

 - 

 - 

 - 

 98,488 

Derivative financial instruments

19

 - 

 - 

 7,179 

 - 

 7,179 

Trade and other receivables

13

 945,891 

 - 

 - 

 945,885 

 1,891,776 

Cash and cash equivalents

14

 637,212 

 - 

 - 

 - 

 637,212 

             

Borrowings

18

 - 

 597,322 

 - 

 - 

 597,322 

Derivative financial instruments

19

 - 

 - 

 50,688 

 - 

 50,688 

Trade and other payables

23

 - 

 907,012 

 

 1,988,809 

 2,895,821 

   

 1,960,665 

 1,504,334 

 57,867 

 2,934,694 

 6,457,560 

3.4 Fair value estimation 

The fair value of financial instruments not quoted in an active market is measured using valuation techniques. The Group uses various techniques and makes assumptions based on market conditions on balance sheet date. The valuation also includes (changes in) the credit risk of the counter party and the credit risk of the Group in conformity with IFRS 13. 

One of these techniques is the calculation of the net present value of the expected cash flows (discounted cash flow projections). The fair value of the interest rate swaps is calculated as the net present value of the expected future cash flows. The fair value of the forward exchange contracts is measured based on the ‘forward’ currency exchange rates on balance sheet date. In addition, valuations from banks are requested for interest rate swaps. 

Financial instruments valued at fair value consist of only interest rate swaps and foreign exchange contracts. In line with the current accounting policies the derivatives are classified as ‘level 2’. 

It is assumed that the nominal value (less estimated adjustments) of ‘borrowings’ (current part), ‘trade and other receivables’ and ‘trade and other payables’ approximate to their fair value.

3.5 Offsetting financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

A master netting agreement is applicable to a part of ‘cash and cash equivalents’. At 31 December 2016 a positive balance of €344 million has been offset against a negative balance of €0.5 million (2015: positive balance of €437 million offset against a negative balance of €111 million).

4. Critical accounting judgements and key sources of estimation uncertainties

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 

The critical judgements including those involving estimations assumptions concerning the future, that the Group has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements are addressed below. 

(a) Contract revenue and costs 
When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue and costs are recognised over the period of the contract by reference to the stage of completion using the ‘percentage-of-completion method’ to determine the appropriate amount to recognise in a given period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

In determining the stage of completion the Group has efficient, coordinated systems for cost estimating, forecasting and revenue and costs reporting. The system also requires a consistent judgment (forecast) of the final outcome of the project, including variance analyses of divergences compared with earlier assessment dates. Estimates are an inherent part of this assessment and actual future outcome may deviate from the estimated outcome, specifically for major and complex construction contracts. However, historical experience has also shown that estimates are, on the whole, sufficiently reliable. See paragraph 2.24 for further explanation regarding the valuation of construction contracts.

(b) Claims receivable
In the normal course of business the Group recognises amounts receivable in connection with claims for completed work due from the principal and/or insurance claims as reimbursement for certain loss events on projects. Project related claims on principals are recognised when it is probable that the claim amount will be received. Insurance claims can be recognised only if it is virtually certain that the amount recognised will be reimbursed. See paragraph 2.24.

(c) Income tax 
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which such determination is made.

Deferred tax assets are recognised for tax losses carry-forwards, temporary differences and tax credits to the extent that the realisation of the related tax benefit through future taxable profits is probable. Estimates are an inherent part of this process and they may differ from the actual future outcome.

(d) Pension obligations 
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds (AA) that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension obligation.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in note 20.

(e) Impairment of land and building rights and property development
The valuation of land and building rights and property development is based on the outcome of the related calculations of the land’s net realisable value. These calculations are based on assumptions relating to the future market developments, decisions of governmental bodies, interest rates and future cost and price increases. In most cases the Group uses external valuations (by rotation) to benchmark the net realisable value. Partly because estimates relate to projects with a duration varying from one year to more than thirty years, significant changes in these assumptions might result in an impairment.

(f) Impairment of goodwill 
Goodwill is tested annually for impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations are determined using discounted cash flow projections and require estimates in connection with the future development of revenues, profit before tax margins and the determination of appropriate discount rates. An impairment loss is recognised if the carrying amount of an asset of CGU exceeds its recoverable amount.

5. Segment information

The segment information reported to the Executive Board is measured in a manner consistent with the financial statements. 

Revenue and results 2
 

Construction
and
Property

Civil 
engineering

PPP

Other
including
eliminations 1

Total

2016

         

Construction contracts

 3,520,728 

 2,752,838 

 175,230 

 - 

 6,448,796 

Property development

 355,922 

 - 

 - 

 - 

 355,922 

Service concession arrangements

 94,828 

 - 

 21,442 

 - 

 116,270 

Services and other

 15,085 

 36,922 

 - 

 3,095 

 55,102 

Revenue from external customers

 3,986,563 

 2,789,760 

 196,672 

 3,095 

 6,976,090 

Sector revenue

 137,809 

 109,358 

 - 

 (247,167)

 - 

Revenue

 4,124,372 

 2,899,118 

 196,672 

 (244,072)

 6,976,090 

           

Operating result

 (46,027)

 88,418 

 35 

 (9,487)

 32,940 

Finance result

 (3,716)

 611 

 12,220 

 (1,795)

 7,320 

Share of result of investments

 3,046 

 1,797 

 4,849 

 10,135 

 19,827 

Result before tax

 (46,697)

 90,826 

 17,104 

 (1,147)

 60,087 

Exceptional items

 (50,187)

 7,439 

 - 

 164 

 (42,584)

Adjusted result before tax

 3,490 

 83,387 

 17,104 

 (1,311)

 102,670 

           

2015

         

Construction contracts

 3,541,329 

 3,104,162 

 163,200 

 - 

 6,808,691 

Property development

 463,493 

 - 

 - 

 - 

 463,493 

Service concession arrangements

 74,802 

 - 

 22,178 

 - 

 96,981 

Services and other

 34,336 

 16,375 

 - 

 3,066 

 53,777 

Revenue from external customers

4,113,961

 3,120,537 

 185,378 

 3,066 

 7,422,942 

Sector revenue

 88,276 

 139,723 

-

 (227,999)

 - 

Revenue

4,202,237

 3,260,260 

 185,378 

 (224,933)

 7,422,942 

           

Operating result

 (34,255)

 38,626 

 3,275 

 (18,338)

 (10,692)

Finance result

 (1,624)

 3,167 

 12,067 

 (2,605)

 11,005 

Share of result of investments

 8,198 

 1,800 

 3,030 

 - 

 13,028 

Result before tax

 (27,681)

 43,593 

 18,372 

 (20,943)

 13,341 

Exceptional items

 (42,814)

 (22,983)

 (298)

 (8,744)

 (74,839)

Adjusted result before tax

 15,133 

 66,576 

 18,670 

 (12,199)

 88,180 

1 Including non-operating segments.
2 The comparative figures have been adjusted to the new identified segments.

Besides combining the Construction and Property sectors, construction activities in Ireland, BAM Belgium and BAM International have been reclassified from Civil Engineering to Construction and Property. In 2015 these reclassifications amounted to €665 million revenue and €6.9 million result before tax. Revenue from property development includes both revenue from development of residential and commercial property. In earlier years only revenue from commercial property was reported here. Revenue from residential property was shown under revenue from Construction contracts. Comparative figures 2015 have been adjusted accordingly.

Balance sheet disclosures 2     

 

Construction
and
Property

Civil 
engineering

PPP

Other
including
eliminations 1

Total

2016

         

Assets

 2,973,794 

 1,945,160 

 488,956 

 (681,682)

 4,726,228 

Investments

 67,519 

 6,978 

 9,144 

 2,225 

 85,866 

Total assets

 3,041,313 

 1,952,138 

 498,100 

 (679,457)

 4,812,094 

           

Liabilities

 2,853,054 

 1,435,740 

 395,599 

 (711,609)

 3,972,784 

Group equity

 188,261 

 516,398 

 102,500 

 32,151 

 839,310 

Total equity and liabilities

 3,041,315 

 1,952,138 

 498,099 

 (679,458)

 4,812,094 

           

2015

         

Assets

 2,817,753 

 2,023,813 

 503,632 

(587,001)

4,758,197

Investments

 76,327 

 6,892 

 8,796 

 2,037 

 94,052 

Total assets

 2,894,080 

 2,030,705 

 512,428 

(584,964)

4,852,249

           

Liabilities

 2,695,471 

 1,503,833 

 358,162 

(611,004)

3,946,464

Group equity

 198,609 

 526,872 

 154,266 

 26,038 

 905,785 

Total equity and liabilities

 2,894,080 

 2,030,705 

 512,428 

(584,964)

4,852,249

1 Including non-operating segments.
2 The comparative figures have been adjusted to the new identified sectors.

Other disclosures 2     

 

Construction
and
Property

Civil 
engineering

PPP

Other
including
eliminations 1

Total

2016

         

Additions to property, plant and equipment and intangible assets

 14,367 

 43,917 

 10 

 8,603 

 66,897 

Depreciation and amortisation charges

18,214

39,868

 12 

 6,354 

 64,449 

           

Average number of FTE

 9,031 

 11,010

 89 

 240 

 20,370 

Number of FTE at year-end

 8,944 

 10,213 

 86 

 243 

 19,486 

           

2015

         

Additions to property, plant and equipment and intangible assets

17,277

44,854

3

8,901

71,035

Depreciation and amortisation charges

18,144

47,875

9

4,499

70,527

           

Average number of FTE 3

 9,715 

 11,861 

 95 

 245 

 21,916 

Number of FTE at year-end

 9,700 

 11,246 

 90 

 212 

 21,248 

1 Including non-operating segments.
2 The comparative figures have been adjusted to the new identified sectors.
3 Fulltime equivalent.

Revenues from external customers by country, based on the location of the projects 2  

 

Construction
and
Property

Civil
engineering

PPP

Other
including
eliminations 1

Total

2016

         

Netherlands

 1,405,372 

 1,173,733 

 106,739 

 (154,410)

 2,531,434 

United Kingdom

 1,319,918 

 856,780 

 17,040 

 (8,605)

 2,185,133 

Belgium

 496,006 

 262,960 

 584 

 (16,434)

 743,116 

Germany

 424,413 

 304,718 

 2,426 

 351 

 731,908 

Ireland

 257,993 

 17,697 

 69,883 

 (64,561)

 281,012 

Other countries

 220,670 

 283,230 

 - 

 (413)

 503,487 

 

 4,124,372 

 2,899,118 

 196,672 

 (244,072)

 6,976,090 

           

2015

         

Netherlands

 1,400,519 

 1,094,690 

 89,304 

 (109,260)

 2,475,253 

United Kingdom

 1,234,235 

 1,138,889 

 16,709 

 (6,557)

 2,383,276 

Belgium

 562,205 

 282,698 

 691 

 (10,589)

 835,005 

Germany

 512,119 

 285,425 

 4,291 

 (3,584)

 798,251 

Ireland

 236,154 

 43,554 

 74,383 

 (94,163)

 259,928 

Other countries

 257,004 

 415,004 

 - 

(779)

671,229

 

 4,202,236 

 3,260,260 

 185,378 

(224,932)

7,422,942

1 Including non-operating segments.
² The comparative figures have been adjusted to the new identified sectors.

Revenues from the individual countries included in ‘other countries’ are not material.

Total assets and capital expenditures in connection with property, plant and equipment and intangible assets by country are stated below:

Total assets 1

2016

2015

     

Netherlands

 2,126,703 

 2,171,428 

United Kingdom

 967,485 

 1,051,901 

Belgium

 640,398 

 557,575 

Germany

 575,318 

 536,912 

Ireland

 267,826 

 234,612 

Other countries

 786,150 

 829,279 

Other including eliminations

 (551,786)

(529,458)

 

 4,812,094 

4,852,249

     

Investments 2

2016

2015

     

Netherlands

29,374

 37,633 

United Kingdom

 5,834 

 8,103 

Belgium

 6,083 

 4,408 

Germany

 12,336 

 11,012 

Ireland

 2,323 

 736 

Other countries

 10,947 

 9,143 

Total assets

66,897

 71,035 

1 Geographical allocations based on the location of the assets.
2 Gross invesments in tangible and intangible assets based on geographical location.

6. Projects

Construction contracts and property development
A major part of the Group’s activities concerns construction contracts and property development which are reflected in various balance sheet items. An overview of the balance sheet items attributable to construction contracts and property development is stated below:

 

Construction
contracts

Property
development

Total

       

2016

     

Land and buidling rights

 - 

 386,795 

 386,795 

Property development

 - 

 242,727 

 242,727 

Amounts due from customers

 389,131 

 7,533 

 396,664 

Assets

 389,131 

 637,055 

 1,026,186 

       

Non-recourse property financing

 - 

 (85,678)

 (85,678)

Recourse property financing 

 - 

 (68,745)

 (68,745)

Amounts due to customers 

 (770,470)

 (33,456)

 (803,926)

Liabilities

 (770,470)

 (187,879)

 (958,349)

       

As at 31 December

 (381,339)

 449,176 

 67,837 

       

2015

     

Land and building rights

 - 

 429,299 

 429,299 

Property development

 - 

 310,912 

 310,912 

Amounts due from customers

 417,859 

 7,831 

 425,690 

Assets

 417,859 

 748,042 

 1,165,901 

       

Non-recourse property financing

 - 

 (116,034)

 (116,034)

Recourse property financing 

 - 

 (80,083)

 (80,083)

Amounts due to customers 

 (669,297)

 (45,131)

 (714,428)

Liabilities

 (669,297)

 (241,248)

 (910,545)

       

As at 31 December

 (251,438)

 506,794 

 255,356 

The breakdown of the balance sheet items ‘amounts due from customers’ and ‘amounts due to customers’ is as follows:

 

Construction
contracts

Property
development

Total

       

2016

     

Costs incurred plus recognised results

 11,759,866 

 60,856 

 11,820,722 

Progress billings

 (11,370,735)

 (53,323)

 (11,424,058)

Amounts due from customers

 389,131 

 7,533 

 396,664 

       

Costs incurred plus recognised results

 9,707,580 

 545,941 

 10,253,521 

Progress billings

 (10,478,050)

 (579,397)

 (11,057,447)

Amounts due to customers

 (770,470)

 (33,456)

 (803,926)

       

2015

     

Costs incurred plus recognised results

 12,734,666 

 143,952 

 12,878,618 

Progress billings

 (12,316,807)

 (136,121)

 (12,452,928)

Amounts due from customers

 417,859 

 7,831 

 425,690 

       

Costs incurred plus recognised results

 7,856,248 

 561,038 

 8,417,286 

Progress billings

 (8,525,545)

 (606,169)

 (9,131,714)

Amounts due to customers

 (669,297)

 (45,131)

 (714,428)

As at 31 December 2016 advance payments (as included in amounts due to customers) in connection with construction contracts and property development amount to €267 million (2015: €245 million) respectively €7 million (2015: €4 million).

PPP
The joint venture BAM PPP PGGM Infrastructure Coöperatie U.A. (‘joint venture BAM PPP/PGGM’) invests in PPP markets for social and transport infrastructure in the Netherlands, Belgium, the United Kingdom, Ireland, Germany 

and Switzerland. BAM PPP continues to be fully responsible for issuing new project tenders, rendering services with regard to asset management for the joint venture and representing the joint venture in transactions. PGGM provides the majority of capital required for existing projects.

An overview of the balance sheet items attributable to PPP projects (excluding joint ventures) is stated below:

 

Non-current

Current

Total

2016

     

PPP receivables

 296,395 

 62,338 

 358,733 

(Non-)recourse PPP loans

 (224,866)

 (99,585)

 (324,451)

Amounts due from customers

 71,529 

 (37,247)

 34,282 

Net assets and liabilities

 (7,904)

 (32,429)

 (40,333)

As at 31 December

 63,625 

 (69,676)

 (6,051)

       

2015

     

PPP receivables

 279,074 

 5,263 

 284,337 

(Non-)recourse PPP loans

 (233,035)

 (14,523)

 (247,558)

Amounts due from customers

 46,039 

 (9,260)

 36,779 

Net assets and liabilities

 (9,269)

 3,976 

 (5,293)

As at 31 December

 36,770 

 (5,284)

 31,486 

7. Property, plant and equipment

 

Land and
buildings

Plant and
equipment

Construction
 in progress

Other
assets

Total

As at 1 January 2015

         

Cost

 207,469 

 581,748 

 1,969 

 131,622 

 922,808 

Accumulated depreciation and impairments

 (94,367)

 (414,423)

 - 

 (98,238)

 (607,028)

 

 113,102 

 167,325 

 1,969 

 33,384 

 315,780 

           

Additions

 12,663 

 30,387 

 6,721 

 14,873 

 64,644 

Disposals

 (8,304)

 (10,886)

 (1)

 (3,782)

 (22,973)

Reclassifications

 (784)

 1,536 

 (446)

 406 

 712 

Impairment charges

 (1,263)

 (189)

 - 

 - 

 (1,452)

Depreciation charges

 (6,765)

 (45,724)

 - 

 (13,981)

 (66,470)

Exchange rate differences

 319 

 1,253 

 4 

 342 

 1,918 

 

 108,968 

 143,702 

 8,247 

 31,242 

 292,159 

           

As at 31 December 2015

         

Cost

 201,710 

 540,834 

 8,247 

 115,172 

 865,963 

Accumulated depreciation and impairments

 (92,742)

 (397,132)

 - 

 (83,930)

 (573,804)

 

 108,968 

 143,702 

 8,247 

 31,242 

 292,159 

           

Additions

 3,808 

 40,579 

 5,083 

 12,457 

 61,927 

Acquisition of subsidiaries

 280 

 491 

 - 

 133 

 904 

Disposals

 (10,751)

 (6,274)

 (14)

 255 

 (16,784)

Reclassifications

 (2,052)

 2,722 

 (3,370)

 (473)

 (3,173)

Impairment charges

 (2,213)

 - 

 - 

 - 

 (2,213)

Depreciation charges

 (6,726)

 (40,920)

 - 

 (12,659)

 (60,305)

Exchange rate differences

 (699)

 (1,228)

 (8)

 (407)

 (2,342)

 

 90,615 

 139,072 

 9,938 

 30,548 

 270,173 

           

As at 31 December 2016

         

Cost

 193,604 

 573,197 

 9,938 

 124,610 

 901,349 

Accumulated depreciation and impairments

 (102,989)

 (434,125)

 - 

 (94,062)

 (631,176)

 

 90,615 

 139,072 

 9,938 

 30,548 

 270,173 

Asset construction in progress mainly comprises plant and equipment. Property, plant and equipment is not pledged as a security for borrowings, except for leased assets under finance lease agreements. 

Property, plant and equipment includes the following carrying amounts where the Group is a lessee under a finance lease:

 

2016

2015

     

Land and buildings

 - 

 6,000 

Property, plant and equipment

 11,112 

 11,536 

Other assets

 13 

 23 

 

 11,125 

 17,559 

8. Intangible assets

 

Goodwill

Non-
integrated
software

Other

Total

As at 1 January 2015

       

Cost

 697,435 

 15,526 

 25,285 

 738,246 

Accumulated amortisation and impairments

 (297,403)

 (10,675)

 (20,918)

 (328,996)

 

 400,032 

 4,851 

 4,367 

 409,250 

         

Additions

 - 

 6,376 

 15 

 6,391 

Disposals

 - 

 - 

 (918)

 (918)

Reclassifications

 - 

 (714)

 - 

 (714)

Impairment charges

 (3,298)

 - 

 - 

 (3,298)

Amortisation charges

 - 

 (3,328)

 (729)

 (4,057)

Exchange rate differences

 9,399 

 (55)

 54 

 9,398 

 

 406,133 

 7,130 

 2,789 

 416,052 

As at 31 December 2015

       

Cost

 707,340 

 19,816 

 23,325 

 750,481 

Accumulated amortisation and impairments

 (301,207)

 (12,686)

 (20,536)

 (334,429)

 

 406,133 

 7,130 

 2,789 

 416,052 

         

Additions

 - 

 3,922 

 1,071 

 4,993 

Disposals

 (3,639)

 (62)

 (2)

 (3,703)

Reclassifications

 - 

 1,031 

 - 

 1,031 

Impairment charges

 (176)

 - 

 (657)

 (833)

Amortisation charges

 - 

 (3,398)

 (746)

 (4,144)

Exchange rate differences

 (22,933)

 (474)

 (23,404)

 

 379,385 

 8,149 

 2,458 

 389,992 

         

As at 31 December 2016

       

Cost

 678,186 

 24,114 

 7,301 

 709,601 

Accumulated amortisation and impairments

(298,801)

 (15,965)

 (4,843)

 (319,609)

 

 379,385 

 8,149 

 2,458 

 389,992 

Goodwill acquired in business combinations is allocated, at acquisition date, to the cash-generating units (CGUs) or groups of CGUs expected to benefit from that business combination. In 2015, the organisational restructuring that the Group was implementing through its Back in Shape programme has resulted in the merger of a number of CGUs in the Netherlands and Belgium, all within the segment Civil engineering. This has effectively reduced the associated number of CGUs with two CGUs. In 2016 a part of one of the CGU’s in Belgium has been integrated in to another CGU in Belgium, because of a change in the management and organisational structure of the activities.

The carrying amount of total goodwill is €379 million (2015: €406 million). 

The decrease of goodwill relates to the sale of one of our CGU’s and an exchange rate effect. The change in exchange rate of the pound sterling compared to the prior year had an downward effect of approximately €23 million.

CGUs to which goodwill has been allocated are tested for impairment annually or more frequently if there are indications that a particular CGU might be impaired. The recoverable amount of each CGU was determined based on value-in-use calculations. Value-in-use was determined using discounted cash flow projections that cover a period of five years and are based on the financial plans approved by management. The key assumptions for the value-in-use calculations are those regarding discount rate, revenue growth rate and profit before tax margin.

Goodwill relates to 16 CGUs, of which BAM Construct UK (€62 million) and BAM Nuttall (€75 million) are deemed significant in comparison with the Group’s total carrying amount of goodwill. For each of these CGUs the key assumptions used in the value-in-use calculations are as follows:

 

BAM Construct UK

BAM Nuttall

 

2016

2015

2016

2015

         

Discount rate (post-tax)

7.8%

8.3%

7.8%

8.3%

Growth rate:

       

- In forecast period (average)

1.9%

3.8%

2.3%

(1.1%)

- Beyond forecast period

1.5%

2.0%

1.5%

2.0%

Profit before tax margin

       

- In forecast period (average)

2.6%

2.0%

2.8%

2.2%

- Beyond forecast period

3.1%

2.2%

3.5%

2.5%

         

Growth rate used to estimate future performance in the forecast period is the average annual growth rate based on past performance and management’s expectations of BAM’s market development referenced to external sources of information. The profit before tax margin in the forecast period is the average margin as a percentage of revenue based on past performance and the expected recovery to a normalised margin deemed achievable by management in the concerning market segment.

For BAM Construct UK, the recoverable amount calculated based on value in use exceeded the carrying amount by approximately €432 million (2015: €314 million). The sensitivity analyses indicated that if the growth rate of BAM Construct UK is reduced by 50 basis points, the profit before tax margin is reduced by 50 basis points or the discount rate is raised by 50 basis points in the forecast period, all changes taken in isolation, the carrying amount of this CGU would still exceed the recoverable amount with sufficient and reasonable headroom.

For BAM Nuttall, the recoverable amount calculated based on value in use exceeded the carrying amount by approximately €257 million (2015: €197 million). The sensitivity analyses indicated that if the growth rate of BAM Nuttall is reduced by 50 basis points, the profit before tax margin is reduced by 50 basis points or the discount rate is raised by 50 basis points in the forecast period, all changes taken in isolation, the carrying amount of this CGU would still exceed the recoverable amount with sufficient and reasonable headroom.

The sensitivity analyses indicated that if the growth rate is reduced by 50 basis points, the profit before tax margin is reduced by 50 basis points or the discount rate is raised by 50 basis points in the forecast period, all changes taken in isolation, the recoverable amounts of the other CGUs would still be in excess of the carrying amounts with sufficient and reasonable headroom, except for one CGU in Germany, representing a goodwill amount of €12 million, with a limited headroom.

9. PPP receivables

   

2016

2015

       

As at 1 January 

 

284,337 

 307,926 

Receivables issued

 

 189,785 

 195,437 

Finance income

 

20,679

 23,077 

Disposals

 

 (87,313)

 (144,941)

Progress billings

 

 (35,048)

 (63,820)

Tranfers to assets held for sale

 

 - 

 (39,391)

Exchange rate differences

 

 (13,707)

 6,049 

As 31 December

 

358,733

 284,337 

       
       
 

Note

2016

2015

       

Non-current

 

 296,395 

 279,074 

Current

13

 62,338 

 5,263 

   

 358,733 

 284,337 

The increase in receivables issued is related to progress on the construction of the PPP projects partly compensated by divestment of two projects to the joint venture BAM PPP/PGGMs. 

The average duration of PPP receivables is 23 years (2015: 22 years). Approximately €263 million of the non-current part has a duration of more than five years (2015: €272 million). 

The interest rates on PPP receivables are virtually the same as the interest rates (after hedging) of the related non-recourse PPP loans. The contractual interest percentages are fixed for the entire duration. The average interest rate on PPP receivables is 5.9 per cent (2015: 6.8 per cent). At year-end 2016, the fair value of the non-current part is approximately €315 million (2015: approximately €322 million). The fair value of the non-current part is based on the value of the hedge of the corresponding loan.

There are no renewal and/or termination options, the assets will flow to the Grantor at the end of the concession period.

PPP receivables are pledged as a security for the corresponding (non-) recourse PPP loans included under ‘borrowings’. 

10. Investments 

The amounts recognised in the balance sheet are as follows:

 

2016

2015

     

Associates

 22,339 

 24,914 

Joint ventures 

 63,527 

 69,138 

As at 31 December

 85,866 

 94,052 

10.1 Investment in associates

Set out below are the associates of the Group as at 31 December 2016 that are individually material to the Group.

Nature of investment in associates in 2016 and 2015:

 

Principal activity

Country of 
incorporation

  % Interest 

 

 

 

2016%

2015%

 

 

 

 

 

Infraspeed (Holdings) bv

Exploitation of rail infrastructure

Netherlands

10.54%

10.54%

Justinvest bv

Lease and exploitation real estate

Belgium

33.33%

33.33%

Rabot Invest nv

Lease and exploitation real estate

Belgium

25.00%

25.00%

 

Set out below are the summarised financial information for the associates that are material to the Group, including reconciliation to the carrying amount of the Group’s share in the associates, as recognised in the consolidated financial statements. This information reflects the amounts presented in the financial statements of these associates adjusted for differences in the Group’s accounting policies and the associates.

 

Infraspeed (Holdings) bv

         Justinvest nv

          Rabot Invest nv 

 

2016

2015

2016

2015

2016

2015

             

Current assets

 101,675 

 108,558 

 13,746 

 13,355 

 8,508 

 8,376 

Non-current assets

 830,001 

 861,161 

 161,340 

 170,617 

 86,573 

 91,528 

Current liabilities

 (22,909)

 (21,727)

 (12,639)

 (12,368)

 (7,266)

 (7,305)

Non-current liabilities

 (856,112)

 (893,153)

 (161,943)

 (171,142)

 (87,167)

 (91,987)

Net assets

 52,655 

 54,839 

 504 

 462 

 648 

 612 

             

Revenue

 56,509 

 50,923 

 840 

 578 

 922 

 920 

Net result

 9,772 

 10,347 

 44 

 51 

 36 

 20 

             

Net assets

 52,655 

 54,839 

 504 

 462 

 648 

 612 

Share in equity

10.54%

10.54%

33.33%

33.33%

25.00%

25.00%

Carrying amount

 5,550 

 5,780 

 168 

 154 

 162 

 153 

Infraspeed (Holdings) bv is classified as an associate based on significant influence by the Group through board membership.

Set out below are the aggregate information of associates that are not individually material to the Group.
These associates mainly comprise the Group’s share in structured entities for property development projects.

 

2016

2015

     

Share in net result

 13,839 

 1,846 

Share in equity

 2,832 

 5,196 

In 2015 the Group’s share in the net result of associates included a reversal of impairment amounting to €1 million.

Reconciliation with the carrying amount of the Group’s share in associates, as recognised in the consolidated financial statements, is as follows:

 

2016

2015

     

Share in equity associates that are material to the Group

 5,880 

 6,087 

Share in equity associates that are not individually material to the Group

 2,832 

 5,196 

 

 8,712 

 11,283 

Recognised as provision for associates

 411 

 122 

Recognised as impairment of non-current receivables

 13,216 

 13,509 

 

 22,339 

 24,914 

Dividend received from associates amounts to €5.8 million in 2016 (2015: €5.8 million). Cash and cash equivalents of a number of associates are subject to restrictions. These restrictions mainly concern the priority of loan repayments over dividend distribution.

10.2 Investment in joint ventures

Set out below is the joint venture of the Group as at 31 December 2016 that is individually material to the Group.

Nature of investment in the joint venture in 2016 and 2015:

 

Principal activity

Country of
incorporation

    % Share 

     

2016

2015

         

BAM PPP PGGM Infrastructure Coöperatie U.A.

Asset management

Netherlands

50.00%

50.00%

Set out below are the summarised financial information for the joint venture that is individually material to the Group, including reconciliation to the carrying amount of the Group’s share in the joint venture, as recognised in the consolidated financial statements. This information reflects the amounts presented in the financial statements of the joint venture adjusted for differences in the Group’s accounting policies and the joint venture.

BAM PPP PGGM Infrastructure Coöperatie U.A.  

 

2016

2015

     

Current assets

 130,286 

 89,712 

Non-current assets

 1,841,165 

 1,028,237 

Current liabilities

 (306,107)

 (242,707)

Non-current liabilities

 (1,962,276)

 (1,034,736)

Net assets

 (296,932)

 (159,494)

     

Of which:

   

Cash and cash equivalents

 97,106 

 75,003 

Current financial liabilities

 (41,426)

 (25,298)

Non-current financial liabilities

 (1,949,552)

 (1,028,129)

     

Revenue

 44,082 

 41,093 

Net result

 9,673 

 5,105 

Other comprehensive income

 123,982 

 17,912 

     

Of which:

   

Finance income

 102,561 

 62,073 

Finance expense

 (94,025)

 (57,576)

Income tax

 (2,511)

 (4,222)

     

Net assets

 (296,932)

 (159,494)

Share in profit rights

10%/20%

20%

Carrying amount

 (42,828)

 (31,899)

Negative cash flow hedge reserve not recognised

 20,032 

 9,126 

 

 (22,796)

 (22,773)

he Group’s share in the joint venture BAM PPP/PGGM is based on its share in the members’ capital. Contractually, the Group predominantly has  a 20 per cent share in profit rights. The Group has a 10 per cent share in profit rights within two joint ventures, resulting in a carrying amount of €18 million. In addition, the Group bears the risks in the operational phase until completion of the projects which are acquired by the joint venture.

If the Group’s share in losses exceeds the carrying amount of the joint venture, further losses will not be recognised, unless the Group has a legal or constructive obligation. In 2016 €11 million (2015: €1 million reversal) of losses was not recognised. At year-end 2016 unrecognised losses amounted to €20 million (2015: €9 million).

Set out below are the aggregate information of joint ventures that are not individually material to the Group. 

 

2016

2015

     

Share in net result property development joint ventures

 1,352 

 7,417 

Share in net result other joint ventures

 1,777 

 1,629 

Share in equity property development joint ventures

 34,726 

 21,912 

Share in equity other joint ventures

 (64,886)

 (47,605)

Revenue of property development joint ventures amounts to €58 million (2015: €94 million) and property development recognised in the balance sheet amounts to €127 million (2015: €134 million) of which an amount of €65 million (2015: €72 million) externally financed (share of the Group).

In 2015 the Group’s share in the net result of joint ventures included a reversal of impairment amounting to €1 million.

Reconciliation with the carrying amount of the Group’s share in joint ventures, as recognised in the consolidated financial statements, is as follows:

 

2016

2015

     

Share in equity joint venture BAM/PGGM

 (22,796)

 (22,773)

Share in equity property development joint ventures that are not material to the Group

 34,726 

 21,912 

Share in equity other joint ventures that are not individually material to the Group

 (64,886)

 (47,605)

 

 (52,956)

 (48,466)

Recognised as provision for joint ventures

 26,782 

 21,151 

Recognised as impairment of non-current receivables

 89,701 

 96,453 

 

 63,527 

 69,138 

Dividend received from joint ventures amounts to €7.2 million in 2016 (2015: €7.5 million).

The financial years of many joint ventures run from 1 December up to and including 30 November to ensure timely inclusion of the financial information in the Group’s financial statements.

11. Other financial assets

 

Notes

Non-current
receivables

Other

Total

         

As at 1 January 2015

 

 88,359 

 2,565 

 90,924 

Loans granted

 

 14,899 

 - 

 14,899 

Loan repayments

 

 (3,759)

 - 

 (3,759)

Disposals

 

 - 

 (75)

 (75)

Reversal of impairment charges

25

 949 

 - 

 949 

Reclassifications

 

 2,292 

 (110)

 2,182 

Exchange rate differences

 

 94 

 - 

 94 

   

 102,834 

 2,380 

 105,214 

Of which current:

 

 (6,726)

 - 

 (6,726)

As at 31 December 2015

 

 96,108 

 2,380 

 98,488 

         

Loans granted

 

11,892

-

11,892

Loan repayments

 

(11,799)

-

(11,799)

Disposals

 

 (362)

 (123)

 (485)

Impairment charges

25

 (1,152)

 (338)

 (1,490)

Reversal of impairment charges

25

 1,775 

-

 1,775 

Reclassifications

 

(12,141)

 (13)

(12,154)

Exchange rate differences

 

 (189)

 (189)

   

 90,858 

 1,906 

 92,764 

Of which current:

 

 (720)

 - 

 (720)

As at 31 December 2016

 

 90,138 

 1,906 

 92,044 

The fair value of non-current receivables at year-end 2016 amounts to €96 million (2015: €124 million). 

The effective interest rate is 2.1 per cent (2015: 1.9 per cent).

Category ‘Other’ mainly comprises shares in (unlisted) investments over which the Group has no significant influence.

12. Inventories

 

2016

2015

     

Land and building rights

 386,795 

 429,299 

Property development

 242,727 

 310,912 

 

 629,522 

 740,211 

Raw materials

 14,031 

 16,169 

Finished products

 1,880 

 2,358 

 

 645,433 

 758,738 

Land and building rights are to be presented as current on the balance sheet within the ordinary course of business, however by its nature, the realisation will be non-current. The majority of the investments in property development is considered to be current by nature.

The impairments during 2016 relating to the property portfolio are as follows:

 

Note

2016

2015

       

Impairment charges

 

 54,974 

 37,325 

Reversal of impairment charges

 

 (7,165)

-

 

25

 47,809 

 37,325 

Of the net amount of impairments and reversals, €44 million relates to property developments in the Netherlands. Of this, €13.7 million results from the strategic divestment of 47 positions in North East of the Netherlands. The rest is attributable to municipality changes in zoning and lowering rental prices for retail property.

Property development includes the following completed and unsold property:

 

2016 

 

2015 

Unsold and finished property

Number/m²

Carrying
amount

 

Number/m²

Carrying
amount

           

Houses ¹

 33 

 11,613 

 

 84 

 19,236 

Commercial property - rented

 45,031 

 54,832 

 

 52,845 

 88,080 

Commercial property - unrented

 26,980 

 25,876 

 

 26,712 

 21,954 

   

 92,321 

   

 129,270 

           

¹ Of which 31 houses (2015: 64 houses) rented in anticipation of sale.

Other inventories were not subject to write-down in 2016 nor 2015.

13. Trade and other receivables

 

Notes

2016

2015

       

Trade receivables

 

 943,630 

831,728

Less: Provision for impairment of receivables

 

 (28,563)

(25,236)

Trade receivables - net

 

 915,067 

 806,492 

Amounts due from customers

6

 396,664 

 425,690 

Amounts due from related parties

36

 13,173 

 5,353 

Retentions

 

 112,607 

 126,142 

Amounts to be invoiced work completed

 

 78,407 

 71,651 

Amounts to be invoiced work in progress

 

 222,489 

 245,789 

PPP receivables

9

 62,338 

 5,263 

Other financial assets

 

 1,485 

 7,994 

Other receivables

 

 53,797 

 73,856 

Prepayments

 

 78,515 

 123,546 

   

 1,934,542 

 1,891,776 

Trade and other receivables are due within one year, except for approximately €33 million (2015: €19 million). The fair value of this non-current part is approximately €33 million (2015: approximately €18 million) using an effective interest rate of -0.2 per cent (2015: 0.4 per cent).

The concentration of credit risk with respect to trade receivables is limited, as the Group’s customer base is large and geographically spread. As at 31 December 2016 a part of the trade receivables amounting to €193 million (2015: €173 million) is past due over one year but partly impaired. These overdue payments relate to a number of customers, predominantly in the public sector outside the Netherlands where a limited default risk exists. Simultaneously, the duration to reach final agreement, including legal proceedings, on invoiced variation orders and claims with these customers has further increased in the year. Management assessed that the provision for impairment, taking all facts and circumstances into account, is sufficient. None of the other assets were subject to impairment.

The ageing analysis of these trade receivables is as follows: 

 

2016 

 

2015 

 

Trade
receivables

Provision for
impairment

 

Trade
receivables

Provision for
impairment

           

Not past due

 561,006 

 (491)

 

 431,587 

 (104)

Up to 3 months 

 118,395 

 (917)

 

 165,836 

 (1,484)

3 to 6 months 

 21,926 

 (392)

 

 36,478 

 (957)

6 to 12 months 

 49,569 

 (3,960)

 

 24,438 

 (1,136)

1 to 2 years 

 41,174 

 (575)

 

 21,455 

 (1,152)

Over 2 years

 151,560 

 (22,228)

 

151,934

(20,404)

 

 943,630 

 (28,563)

 

831,728

 (25,236)

           

Less: Provision for impairment of receivables

 (28,563)

   

 (25,236)

 

Trade receivables - net

 915,067 

   

 806,492 

 

Movements in the provision for impairment of trade receivables are as follows:

 

2016

2015

     

As at 1 January

 25,236 

 25,445

Provision for impairment

 14,850 

 16,691 

Unused amounts reversed

 (4,213)

 (6,601)

Receivables written off during the year as uncollectible

 (5,394)

(10,466)

Disposals

 (1,073)

 - 

Reclassifications

 (716)

155

Exchange rate differences

 (127)

12

As at 31 December

 28,563 

25,236 

The creation and release of provisions for impaired receivables have been included in ‘Other operating expenses’ in the income statement.

Retentions relate to amounts retained by customers on progress billings. In the United Kingdom and Germany in particular, it is common practice to retain a previously agreed percentage until completion of the project.

14. Cash and cash equivalents

 

2016

2015

     

Cash at bank and in hand

 737,545 

618,381

Short-term bank deposits

 1,032 

18,831 

Cash and cash equivalents (excluding bank overdrafts)

 738,577 

637,212 

Cash and cash equivalents are at the free disposal of the Group. Cash and cash equivalents include the Group’s share in cash of joint operations and in PPP entities as part of the conditions in project specific funding agreements and amount to €223 million (2015: €181 million) respectively €15 million (2015: €8 million).

The average effective interest on short-term bank deposits is 2.9 per cent (2015: 1.3 per cent). The deposits have an average remaining term to maturity of approximately 11 days (2015: approximately 43 days).

For the purpose of the consolidated statement of cash flows, cash and cash equivalents include cash at bank and in hand and short-term bank deposits, net of bank overdrafts. Cash and cash equivalents at the end of the reporting period as reported in the consolidated statement of cash flows is reconciled to the related items in the consolidated statement of financial position as follows:

 

2016

2015

     

Cash and cash equivalents

738,577

637,212

Bank overdrafts

 (2)

(3) 

Net cash position

738,575

637,209 

15. Share capital and premium

 

Number of
ordinary
shares

Number of
treasury
shares

Number of
ordinary
shares
in issue

 

Ordinary
shares

Share
premium

Total

               

As at 1 January 2015

 270,998,957 

-

270,998,957

 

 27,099 

 812,212 

839,311

Repurchased shares

 - 

 604,975 

 (604,975)

 

 - 

 - 

-

As at 31 December 2015

 270,998,957 

 604,975 

270,393,982

 

 27,099 

 812,212 

 839,311 

               

Repurchase of ordinairy shares

 - 

 588,170 

 (588,170)

 

 - 

-

-

Dividends

 815,771 

 - 

 815,771 

 

 82 

 (82)

 - 

As at 31 December 2016

 271,814,728 

 1,193,145 

270,621,583

 

 27,181 

 812,130 

 839,311 

15.1 General

At year-end 2016, the authorised capital of the Group was 400 million ordinary shares (2015: 400 million) and 600 million preference shares (2015: €600 million), all with a nominal value of €0.10 per share (2015: €0.10 per share). All issued shares have been paid in full (only ordinary shares).

The Company granted Stichting Aandelenbeheer BAM Groep (‘the Foundation’) a call option to acquire class B cumulative preference shares in the Company’s share capital on 17 May 1993. This option was granted up to such an amount as the Foundation might require, subject to a maximum of a nominal amount that would result in the total nominal amount of class B cumulative preference shares in issue and not held by the Company equalling no more than ninety-nine point nine per cent (99.9 per cent) of the nominal amount of the issued share capital in the form of shares other than class B cumulative preference shares and not held by the Company at the time of exercising of the right referred to above. The Executive Committee of the Foundation has the exclusive right to determine whether or not to exercise this right to acquire class B cumulative preference shares. Additional information has been disclosed in section Other information.

15.2 Ordinary shares

To prevent dilution as a result of the (equity-settled) share-based compensation plan introduced in 2015, 604,975 of the Company’s own shares were repurchased on 10 December 2015 for a total consideration of €3.1 million, at a price of €5.11. At 28 April 2016 another 588,170 of the Company’s own shares were repurchased for a total consideration of €2.5 million, at a price of €4,27.

In 2016, the number of issued ordinary shares increased by 815,771 due to dividend payment in shares. 

16. Reserves

 

Hedging

Translation

Total

       

As at 1 January 2015

(81,202)

(53,671)

(134,873)

       

Reclassification to the income statement due to divestment

     

 - Fair value of cash flow hedge

 3,809 

 - 

 3,809 

 - Tax on fair value of cash flow hedge

 (952)

 - 

 (952)

       

Cash flow hedges

     

- Fair value movement

 1,303 

 - 

 1,303 

- Tax on fair value movement

 (66)

 - 

 (66)

       

Exchange rate differences

 - 

 26,243 

 26,243 

 

 4,094 

 26,243 

 30,337 

       

As at 31 December 2015

 (77,108)

 (27,428)

 (104,536)

       

Reclassification to the income statement due to divestment

     

 - Fair value of cash flow hedge

 12,667 

 - 

 12,667 

 - Tax on fair value of cash flow hedge

 (3,538)

 - 

 (3,538)

       

Cash flow hedges

     

- Fair value movement

 (12,354)

 - 

 (12,354)

- Tax on fair value movement

 3,180 

 - 

 3,180 

       

Exchange rate differences

 - 

 (65,671)

 (65,671)

 

 (45)

 (65,671)

 (65,716)

       

As at 31 December 2016

 (77,153)

 (93,099)

 (170,252)

Due to a change in accounting policy, the remeasurements of post-employment benefits are no longer included in the reserves, but have been restated to the retained earnings. The comparative figures have been adjusted accordingly.

The positive movement in the hedge reserve in 2016, €9.1 million as a consequence of disposals and settlements of existing contracts was fully offset by the negative effect of €9.2 million due to the fact that the long-term interest in 2016 is lower than in 2015. 

The hedging reserve may be subsequently reclassified to the income statement. Based on the remaining duration of the derivative financial instruments, reclassification will take place between 1 and 30 years. An amount of €57 million (2015: €39 million) in the hedging reserve relates to joint ventures. 

The negative movement in the translation reserve in 2016 is linked to the decrease in the value of the pound sterling, in contrast to 2015 whereas an increase in the value of the pound sterling was realised. 

17. Capital base

 

2016

2015

     

Equity attributable to the shareholders of the Company

 834,250 

 902,147 

Subordinated convertible bonds

 112,491 

 - 

Subordinated loan

 - 

 124,335 

 

 946,741 

1,026,482

18. Borrowings

2016

Non-current

Current

Total

       

Subordinated convertible bonds 1

112,491

-

 112,491 

Non-recourse PPP loans

 211,571 

 62,777 

 274,348 

Non-recourse property financing

 50,959 

 34,719 

 85,678 

Other non-recourse financing

 5,917 

 2,005 

 7,922 

Recourse PPP loans 

 13,295 

 36,808 

 50,103 

Recourse property financing 

 59,403 

 9,342 

 68,745 

Finance lease liabilities 

 4,329 

 2,478 

 6,807 

Other recourse financing

 5,550 

 - 

 5,550 

Bank overdrafts

 - 

 2 

 2 

 

463,515

 148,131 

611,646

       

Up to 1 year

   

 148,131 

1 to 5 years

   

 279,540 

Over 5 years

   

 183,975 

     

 611,646 

       

2015

Non-current

Current

Total

       

Subordinated loan 1

125,000

(665)

124,335

Non-recourse PPP loans

187,673

 7,114

194,787

Non-recourse property financing

 85,694

 30,340

116,034

Other non-recourse financing

 6,621

 1,300

 7,921

Recourse PPP loans 

 45,362

 7,409

 52,771

Recourse property financing 

 44,847

 35,236

 80,083

Finance lease liabilities 

 9,973

 4,478

 14,451

Other recourse financing

 6,693

244

 6,937

Bank overdrafts

 - 

 3 

 3 

 

 511,863 

 85,459 

 597,322 

       

Up to 1 year

   

 85,459 

1 to 5 years

   

 398,448 

Over 5 years

   

 113,415 

     

 597,322

1  After deduction of finance costs to be amortised.

18.1 Subordinated convertible bonds

In June 2016, the Group placed €125 million subordinated unsecured convertible bonds to repay the existing subordinated loan of the same amount. 

The bonds have an annual coupon of 3.50 per cent, an initial conversion premium of 32.5 per cent and are convertible into ordinary shares of Royal BAM Group nv with a nominal value of €0.10 each. The coupon is payable semi-annually in arrear in equal instalments on 13 June and 13 December. The Bonds were issued at 100 per cent of their principal amount and, unless previously redeemed, converted or purchased and cancelled, the bonds will be redeemed at their principal amount on or around 13 June 2021. Upon exercise of their conversion rights, holders will receive shares at the then prevailing conversion price. At 31 December 2016 the conversion price is €5.2245. The Group will have the option to call all but not some of the outstanding bonds at their principal amount plus accrued but unpaid interest from 28 June 2019, if the value of the shares underlying a bond exceeds €130,000 for a specified period of time. The bonds are trading on the Open Market (Freiverkehr) segment of the Frankfurt Stock Exchange.

All payment obligations to the bondholders are subordinated to the payment obligations towards our senior debt holders.

At 31 December 2016 the fair value of the liability component of the subordinated convertible bonds amounts to €116 million. The fair value is estimated by discounting future cash flows using a market rate for an equivalent non-convertible instrument.

More details of the subordinated convertible bonds are published on the website. 

The reconciliation of the subordinated convertible bonds to the consolidated statement of financial position and the consolidated statement of changes in equity is as follows:

  Allocated to: 
 

Face value

Liability
component

Equity
component

       

Gross proceeds

 125,000 

 114,253 

 10,747 

Transaction costs 1

 (3,233)

 (2,955)

 (278)

Net proceeds

 121,767 

 111,298 

 10,469 

Tax effect equity component

   

 (2,617)

Effective interest method

 

 1,193 

 

As at 31 December 2016

 

 112,491 

 7,852

1  Transaction costs include fees and commissions paid to advisors, bankers and lawyers.

18.2 Subordinated loan

The principal sum of the subordinated loan amounted to €125 million and was repaid in June 2016 with the proceeds of the subordinated convertible bonds. The subordinated loan had an interest rate that was based on the Group’s recourse leverage ratio and was equal to Euribor plus a margin, with a minimum of 400 and a maximum of 675 basis points until 30 July 2017, after which date the margin would increase by 150 basis points. At the date of repayment, the margin was 400 basis points (year-end 2015: 400 basis points).

The interest risk on the subordinated loan was hedged by interest rate swaps, that fixed Euribor at 1.7 per cent. Including the margin and the amortised borrowing costs, the interest for the subordinated loan amounted to 7.1 per cent (2015: 6.3 per cent).

18.3 Committed syndicated credit facility

In November 2016 the Group renewed its committed revolving credit facility agreement for an amount of €400 million. The new facility agreement has a term to maturity of 5.3 years and runs until 31 March 2022. The credit margin and commitment fee have been improved.

The facility can be used for general corporate purposes, including the usual working capital financing. As a result of this flexible use, the level of draw-downs fluctuates throughout the year. At year-end 2016, the Group did not use the facility (year-end 2015: not used).

As at 30 June 2016 the Group did not use the facility (30 June 2015: not used). Variable interest rates apply to the draw-downs on this facility with a margin between 150 and 275 basis points. As at 31 December 2016 the margin was 150 basis points (2015: 175 basis points).

18.4 Non-recourse PPP loans

These relate to PPP projects in the Netherlands, the United Kingdom, Belgium and Ireland. Of the non-current part, approximately €180 million has a term to maturity of more than five years (2015: approximately €110 million). The average term to maturity of the PPP loans is 17 years (2015: 18 years).

The interest rate risk on the non-recourse PPP loans is hedged by interest rate swaps. The average interest rate on PPP loans is 5.5 per cent (2015: 6.4 per cent). Interest margins of these loans do not depend on market fluctuations during the term of these loans.

The related PPP receivables amount to €338 million in total (2015: €256 million) and represent a security for lenders. These loans will be payable on demand if the agreed qualitative and quantitative conditions regarding interest coverage, solvency, among other things, are not met.

18.5 Non-recourse property financing

These loans are contracted to finance land for property development and ongoing property development projects. The average term of non-recourse property financing is approximately 1.5 years (2015: approximately 2.1 years).

Interest on these loans is based on Euribor plus a margin. Interest margins of these loans do not depend on market fluctuations during the term of these loans. For several property financing loans, the interest is (partially) fixed. The principal sum of these financing loans is €40 million (2015: €60 million).

The carrying amount of the related assets is approximately €225 million at year-end 2016 (2015: approximately €175 million). The assets are pledged as a security for lenders. These loans will be payable on demand if the agreed qualitative and quantitative conditions relating to interest and capital repayments, among other things, are not met.

18.6 Recourse PPP loans

Equity bridge loans relating to PPP contracts are recognised under recourse PPP loans. The interest rate risk on the recourse PPP loans is hedged by interest rate swaps.

Recourse PPP loans relate directly to the accompanying assets, but also have an additional security in the form of a guarantee provided by the Group, in several cases supplemented by a bank guarantee.

The average term to maturity of the recourse PPP loans is approximately 1.1 years (2015: approximately 1.8 years).

18.7 Recourse property financing

Recourse property financing is contracted to finance land and building rights and property development. The average term of recourse property financing is approximately 1.7 years (2015: approximately 1.8 years).

Interest on these loans is based on Euribor plus a margin. Interest margins of these loans do not depend on market fluctuations during the term of these loans. For several property financing loans, the interest is (partially) fixed. The principal sum of these financing loans is €14 million (2015: €42 million).

Recourse property financing relates directly to the accompanying assets, that constitute a security for lenders. The carrying amount of the accompanying assets amounts to approximately €125 million at year-end 2016 (2015: approximately €115 million). Additional securities exist in the form of a guarantee provided by the Group, in some cases supplemented by a bank guarantee. These loans will be repayable on demand if the agreed qualitative and quantitative conditions relating to interest and capital repayments, among other things, are not met.

18.8 Finance lease liabilities

Finance lease liabilities mainly consist of financing arrangements for buildings and equipment. The maturity of the finance lease liabilities is as follows:

 

2016

2015

     

Up to 1 year

 2,643 

4,684

1 to 5 years

 4,311 

10,433

Over 5 years

 403 

-

 

 7,357 

15,117

Future finance charges on financial leases

 (550)

(666)

Present value of finance lease liabilities

 6,807 

14,451

The present value of the finance lease liabilities is as follows:

 

2016

2015

     

1 to 5 years

 3,971 

9,973

Over 5 years

 358 

-

 

 4,329 

9,973

Up to 1 year

 2,478 

4,478

 

 6,807 

14,451

18.9 Other financing

Other loans relate to financing of property, plant and equipment.

18.10 Bank overdrafts

In addition to the non-current committed syndicated credit facility (note 18.3), the Group holds €163 million in bilateral credit facilities (2015: €153 million). At year-end 2016 as well as 2015 these facilities were not utilised.

18.11 Covenants

With regard to the various finance arrangements, the Group is bound by terms and conditions, both qualitative and quantitative and including financial ratios, in line with the industry’s practice.

Terms and conditions for project financing, being (non-) recourse PPP loans, (non-) recourse property financing loans, are directly linked to the respective projects. A relevant ratio in property financing arrangements is the loan to value, i.e. the ratio between the financing arrangement and the value of the project. In PPP loans and recourse property financing arrangements the debt service cover ratio is applicable. This ratio relates the interest and repayment obligations to the project cash flow. No early payments were made in 2016 as a result of not adhering to the financing conditions of project related financing.

Terms and conditions for the committed syndicated credit facility are based on the Group as a whole, excluding non-recourse elements. The ratios for this financing arrangement (all recourse) are the leverage ratio, the interest cover, the solvency ratio and the guarantor covers. The Group complied with all ratios in 2016.

The set requirements and realisation of the recourse ratios described above, can be explained as follows:

 

Calculation

Requirement

2016

2015

         

Leverage ratio

Net borrowings/EBITDA

≤ 2.50

(3.84)

 (2.55)

Interest cover

EBITDA/net interest expense

≥ 4.00

8.62

 8.88 

Solvency ratio

Capital base/total assets

≥ 15%

29.0%

29.3%

Guarantor covers

EBITDA share of guarantors

≥ 60%

106%

72%

 

Assets share of guarantors

≥ 70%

99%

96%

An increased recourse leverage ratio of a maximum of 2.75 is permitted under the terms and conditions and applies to the second and third quarters of the year. The capital base in our financial covenants (as part of the solvency ratio) is adjusted for the hedging reserve and remeasurements of post-employments benefits, among other things.

18.12 Other information

The Group’s subordinated convertible bonds are part of the capital base. Repayment obligations are subordinated to not subordinated obligations. 

The non-recourse PPP loans relate directly to the associated receivables from government bodies. Therefore, the interest rates are influenced marginally by market adjustments applying to companies. The terms of property loans are relatively short, as a consequence of which interest margins are in line with the markets. Therefore, the carrying amounts of these loans do not differ significantly from their fair values. 

The effective interest rates (including hedging instruments) are as follows:

 

2016 

 

2015 

  Euro 

Pound
sterling

  Euro 

Pound
sterling

           

Subordinated convertible bonds

6.1%

-

 

-

-

Subordinated loan

7.1%

-

 

6.3%

-

Committed syndicated credit facility

1.8%

-

 

1.9%

-

Non-recourse PPP loans

5.0%

6.9%

 

6.2%

6.9%

Non-recourse property financing

3.4%

-

 

2.9%

4.8%

Recourse PPP loans

2.5%

-

 

3.6%

-

Recourse property financing

2.2%

-

 

2.7%

-

Finance lease liabilities

4.6%

-

 

3.6%

-

Other non-recourse financing

3.1%

-

 

3.1%

-

Other recourse financing

3.1%

-

 

3.2%

-

The Group contracted interest rate swaps to mitigate the exposure of borrowings to interest rate fluctuations and contractual changes in interest rates.

The Group’s unhedged position is as follows:

 

Up to 1 year

1 to 5 years

Over 5 years

Total

         

Total borrowings

 148,131 

 279,540 

 183,975 

 611,646 

Fixed interest rates

 (8,238)

 (169,054)

 (127,883)

 (305,175)

Hedged with interest rate swaps

 (100,708)

 (39,546)

 (54,552)

 (194,806)

As at 31 December 2016

 39,185 

 70,940 

 1,540 

 111,665 

         

Total borrowings

85,459

398,448

113,415

597,322

Fixed interest rates

(23,248)

(53,378)

(56,479)

(133,105)

Hedged with interest rate swaps

(25,336)

(283,325)

(55,438)

(364,099)

As at 31 December 2015

36,875

61,745

1,498

100,118

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

 

2016

2015

     

Euro

 557,211 

 516,923 

Pound sterling

 54,435 

 80,399 

 

 611,646 

 597,322 

19. Derivative financial instruments

 

 2016 

 

 2015  

 

Assets

Liabilities

Fair value

 

Assets

Liabilities

Fair value

               

Interest rate swaps

 - 

19,688

(19,688)

 

 - 

 30,521 

 (30,521)

Forward exchange contracts

 983 

 5,013 

 (4,030)

 

 7,179 

 20,167 

 (12,988)

 

 983 

 24,701

(23,718)

 

 7,179 

 50,688 

 (43,509)

               

Of which current:

 983 

 4,354 

 (3,371)

 

 6,200 

 16,749 

 (10,549)

19.1 Interest rate swaps

At year-end 2016, interest rate swaps are outstanding to hedge the interest rate risk on the (non-) recourse PPP loans and some property financing loans with a variable interest rate. Total borrowings amount to €612 million (2015: €597 million), of which an amount of €306 million (2015: €464 million) carries a variable interest rate. Of the borrowings with a variable interest rate an amount of €195 million (2015: €364 million) is hedged by interest rate swaps. All interest rate swaps are classified as hedge instruments. The fair value of the outstanding interest rate swaps amounts to €20 million negative (2015: €31 million negative). Except for four interest rate swaps (2015: one) with a total fair value of €0.2 million negative, the duration exceeds one year. The maximum duration of the derivative financial instruments is 26 years.

The fixed interest rates of these swaps vary from 0.6 per cent to 6.3 per cent at year-end 2016 (2015: between 0.6 per cent and 6.3 per cent). The variable interest rates of the corresponding loans are based on Euribor or Libor plus a margin.

At year-end 2016, all recognised derivative financial instruments provide an effective compensation for movements in cash flows from the hedged positions. Therefore, the movements in 2016 are accounted for in other comprehensive income. The fair value of outstanding derivative financial instruments which do not provide an effective compensation are accounted for in the income statement within ‘finance income/expense’.

The composition of the expected contractual cash flows is disclosed in note 3.1 to the consolidated financial statements.

19.2 Forward foreign exchange contracts

The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2016 were €205 million (2015: €251 million). The fair value amounts to €4 million negative (2015: €13 million negative).

The terms to maturity of these contracts are up to a maximum of 1 year for the amount of €190 million (2015: €234 million), between 1 and 2 years for the amount of €8 million (2015: €17 million) and between 2 to 4 years €7 million (2015: nil).

20. Employee benefits

 

2016

2015

     

Defined benefit asset

 62,773 

 74,684 

     

Defined benefit liability

 114,254 

 121,335 

Other employee benefits obligations

 30,454 

 30,396 

 

 144,708 

 151,731 

The Group operates defined benefit pension plans in the Netherlands, United Kingdom, Belgium, Germany and Ireland under broadly similar regulatory frameworks.

A further description of the post-employment benefit plans per country is as follows:

The Netherlands
In the Netherlands, the Group makes contributions to defined benefit schemes as well as defined contribution schemes.

The pension schemes in the Netherlands are subject to the regulations as stipulated in the Pension Act. Due to the Pension Act the pension plans need to be fully funded and need to be operated outside the Company through a separate legal entity. Several multi-employer funds and insurers operate the various pension plans. The Group has no additional responsibilities for the governance of these schemes. 

The basic pension for every employee is covered by multi-employer funds in which also other companies participate based on legal obligations. These funds have an indexed average salary scheme and are therefore defined benefit schemes. Specifically, these are the industry pension funds for construction, metal & technology and railways. As these funds are not equipped to provide the required information on the Group’s proportionate share of pension liabilities and plan assets, the defined benefit plans are accounted for as defined contribution plans. The Group is obliged to pay the predetermined premium for these plans. The Group may not reclaim any excess payment and is not obliged to make up any deficit, except by way of the adjustment of future premiums. The part exceeding the basic pension amount (top-up part), which is not covered by multi-employer funds, is carried out by external parties and relates to defined contribution schemes. 

At year-end 2016, the (twelve-month average) coverage rate of the industry pension fund for construction is 105 per cent (2015: 111 per cent). The industry pension fund for metal & technology has a coverage rate of 93 per cent at year-end 2016 (2015: 99 per cent). The coverage rate of the industry pension fund for railways is 103 per cent (2015: 109 per cent). 

With effect from 2006, the defined benefit scheme is closed for new entrants. The build-up of future pension entitlements for these employees is covered by the multi-employer funds or external insurance companies. Defined benefit schemes are closed for future accumulation and index-linked to the industry pension fund for Construction. Future build-up is solely possible for the top-up pension scheme of BAM, which terminates in 2020; it is financed by the employer based on a percentage of the pensionable salaries of the employees.

In a subsidiary of a Dutch operating company pension plan amendments were made, limiting the defined benefit obligation above a certain salary level. Above this salary level a defined contribution plan is now applicable. Future indexation will be paid from the interest income on a depot placed by an insurer. These amendments led to a reduction of the defined benefit obligation and a net one-off gain of €5.2 million.

In the context of accountability for the Group’s pension policy (to be) implemented, with regard to, inter alia, supplements and investment performance, the Group has established an accountability committee, with representation from the Central Works Council (CWC) and the Socio-Economic Committee of the BAM pensioners Associations (SEC).

United Kingdom
In the United Kingdom, the Group makes contributions to defined benefit plans as well as defined contribution plans.

Three defined benefit pension schemes are executed by separate trusts. They were closed to new participants in 2004. Entitlements in these pension schemes have been changed in 2016 by means of delinkage of pension benefits from salaries. These amendments led to a reduction of the defined benefit obligation and a net one-off gain of €13.9 million. The Group is still responsible for making supplementary contributions to recover the historical financing deficits. The plan for supplementary contributions was last revised after the most recent actuarial valuations of the funds in March 2016 and led to supplementary contributions in 2016 to the amount of approximately €10 million
(2015: €36 million). The Group recognises a net defined benefit asset because it is entitled to a return of surplus at the end of the plans' lifes.

The Group replaced the closed defined benefit pension schemes with defined contribution schemes, which are executed by an outside insurance company. Following the closure of future accumulation in defined benefit pension schemes in 2010, employees who participated in these schemes were invited to participate in the defined contribution schemes.

In addition, several defined benefit schemes are accounted for as defined contribution schemes due to the fact that external parties administering them are not able to provide the required information. These schemes have limited numbers of members, however. The Group is obliged to pay the predetermined premium for these plans. The Group may not reclaim any excess payment and is not obliged to make up any deficit, except by way of the adjustment of future premiums. The Group did not make any material contributions in 2015 nor 2016.

Belgium
In Belgium, the Group makes contributions to a relatively small defined benefit scheme that is executed by an external insurance company. The Group has also made arrangements for employees to participate in a defined contribution scheme. Due to new legislation a reservation is made for a certain revenue guarantee.

Germany
In Germany, the Group operates one defined benefit pension scheme financed by the employer. 

The Group closed two schemes to new participants and since 2006, the Group operates a defined contribution scheme, into which employees have the opportunity to contribute on an individual basis. 

Ireland 
The Group has a defined benefit scheme in Ireland, executed by a company pension fund. The multi-employer pension scheme was fully converted from a defined benefit scheme to a defined contribution scheme with effect from 1 January 2006 for new entrants. 

Employees who entered the company before 2006 remained in the defined benefit scheme. Entitlements to the scheme have been adjusted in 2016 by means of a cap on pensionable salary. These amendments led to a reduction of the defined benefit obligation and a net one-off gain of €22.5 million.

The Group is still responsible for making supplementary contributions to recover the historical financing deficits.

The plan for supplementary contributions was last revised after the most recent actuarial valuations of the funds in 2016 and led to supplementary contributions in 2016 to the amount of approximately €2 million.

Movements in the defined benefit pension plans over the year is as follows:

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

Total

             

As at 31 December 2016

           

Defined benefit liability 

 23,282 

 4,092 

 3,398 

 59,163 

 24,319 

 114,254 

Defined benefit asset

 - 

 62,773 

 - 

 - 

 - 

 62,773 

 

 23,282 

 (58,681)

 3,398 

 59,163 

 24,319 

 51,481 

             

Present value of obligation

           

As at 1 January 2016

 426,552 

 938,083 

 2,968 

 73,600 

 111,703 

 1,552,906 

Service cost

 1,288 

 - 

 40 

 265 

 1,129 

 2,722 

Interest expense

 9,668 

 32,209 

 47 

 1,503 

 2,917 

 46,344 

Remeasurements

 31,795 

 242,384 

 17,445 

 7,365 

 20,937 

 319,926 

Plan participants contributions 

 187 

 - 

 7 

 - 

 505 

 699 

Benefit payments

 (12,101)

 (36,740)

 (144)

 (4,157)

 (1,289)

(54,431)

Changes and plan amendments

 (5,248)

 (14,776)

 - 

 - 

 (21,523)

 (41,547)

Settlements

 (17,384)

 - 

 - 

 - 

 (6,136)

 (23,520)

Disposals

 (244)

 - 

 - 

 - 

 - 

 (244)

Exchange rate differences

 - 

 (145,857)

-

 - 

 - 

(145,857)

As at 31 December 2016

 434,513 

 1,015,303 

 20,363 

 78,576 

 108,243 

 1,656,998 

             

Fair value of plan assets

           

As at 1 January 2016

 390,214 

 1,012,767 

 1,654 

 18,297 

 83,323 

 1,506,255 

Interest income 

 8,930 

 35,312 

 26 

 377 

 2,226 

 46,871 

Remeasurements 

 32,988 

 208,507 

 15,329 

 378 

 165 

 257,367 

Employer contributions

 8,992 

 12,235 

 99 

 4,518 

 4,145 

 29,989 

Plan participants contributions 

 187 

 - 

 7 

 - 

 505 

 699 

Benefit payments

 (12,101)

 (36,740)

 (144)

 (4,157)

 (1,289)

 (54,431)

Administration cost

 (595)

 (968)

 (6)

 - 

 - 

 (1,569)

Settlements

 (17,384)

 (925)

 - 

 - 

 (5,151)

 (23,460)

Exchange rate differences

 - 

(156,204)

-

 - 

 - 

(156,204)

As at 31 December 2016

 411,231 

1,073,984

 16,965 

 19,413 

 83,924 

1,605,517

             

Present value of obligation 

 434,513 

 1,015,303 

 20,363 

 78,576 

 108,243 

 1,656,998 

Fair value of plan assets

 411,231 

1,073,984

 16,965 

 19,413 

 83,924 

1,605,517

As at 31 December 2016

 23,282 

(58,681)

 3,398 

 59,163 

 24,319 

51,481

             

Amounts recognised in the income statement

           

Service cost 

 1,288 

 - 

 40 

 265 

 1,129 

 2,722 

Net interest expense

 738 

 (3,103)

 21 

 1,126 

 691 

 (527)

Changes and plan amendments and settlements

 (5,248)

 (13,851)

 - 

 - 

 (22,508)

 (41,607)

Administration cost

 595 

 968 

 6 

 - 

 - 

 1,569 

 

 (2,627)

 (15,986)

 67 

 1,391 

 (20,688)

 (37,843)

             

Amounts recognised in other comprehensive income

           

Remeasurements:

           

- Return on plan assets, excluding interest income

 (32,988)

 (208,507)

 (15,329)

 (378)

 (165)

 (257,367)

- (Gain)/loss from change in demographic assumptions

 237 

 2,643 

 - 

 - 

 - 

 2,880 

- (Gain)/loss from change in financial assumptions

 32,738 

 237,052 

 32 

 6,559 

 20,609 

 296,990 

- Experience (gains)/losses 

 (1,180)

 2,689 

 17,413 

 806 

 328 

 20,056 

 

 (1,193)

 33,877 

 2,116 

 6,987 

 20,772 

 62,559 

Income tax

 298 

 (4,982)

 (722)

 (1,511)

 (2,345)

 (9,262)

Remeasurement net of tax

 (895)

 28,895 

 1,394 

 5,476 

 18,427 

 53,297 

 

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

Total

             

As at 31 December 2015

           

Defined benefit liability 

 36,338 

 - 

 1,314 

 55,303 

 28,380 

 121,335 

Defined benefit asset

 - 

 74,684 

 - 

 - 

 - 

 74,684 

 

 36,338 

 (74,684)

 1,314 

 55,303 

 28,380 

 46,651 

             

Present value of obligation

           

As at 1 January 2015

 481,195 

 938,240 

 3,136 

 79,722 

 122,641 

 1,624,934 

Service cost

 2,023 

 - 

 45 

 280 

 3,286 

 5,634 

Interest expense

 9,100 

 36,677 

 44 

 1,630 

 2,685 

 50,136 

Remeasurements

 (29,071)

 (53,706)

 (54)

 (3,989)

 (15,016)

 (101,836)

Plan participants contributions 

 229 

 - 

 7 

 - 

 516 

 752 

Benefit payments

 (10,667)

 (42,097)

 (210)

 (4,043)

 (2,409)

 (59,426)

Changes and plan amendments

 (2,815)

 - 

 - 

 - 

 - 

 (2,815)

Settlements

 (23,442)

 - 

 - 

 - 

 - 

 (23,442)

Disposals

-

-

-

-

-

-

Exchange rate differences

 - 

 58,969 

 

 - 

 - 

 58,969 

As at 31 December 2015

 426,552 

 938,083 

 2,968 

 73,600 

 111,703 

 1,552,906 

             

Fair value of plan assets

           

As at 1 January 2015

 432,549 

 952,540 

 1,732 

 18,721 

 79,292 

 1,484,834 

Interest income

 8,253 

 37,669 

 24 

 375 

 1,779 

 48,100 

Remeasurements

 (26,676)

 (27,503)

 49 

 (18)

 (109)

 (54,257)

Employer contributions

 10,571 

 35,606 

 55 

 3,262 

 4,254 

 53,748 

Plan participants contributions

 229 

 - 

 7 

 - 

 516 

 752 

Benefit payments

 (10,667)

 (42,097)

 (210)

 (4,043)

 (2,409)

 (59,426)

Administration cost

(603)

 (2,461)

 (3)

 - 

 - 

(3,067)

Settlements

(23,442)

 - 

 - 

 - 

 - 

(23,442)

Exchange rate differences

 - 

 59,013 

 - 

 - 

 - 

 59,013 

As at 31 December 2015

 390,214 

 1,012,767 

 1,654 

 18,297 

 83,323 

 1,506,255 

             

Present value of obligation 

 426,552 

 938,083 

 2,968 

 73,600 

 111,703 

 1,552,906 

Fair value of plan assets

 390,214 

 1,012,767 

 1,654 

 18,297 

 83,323 

 1,506,255 

As at 31 December 2015

 36,338 

 (74,684)

 1,314 

 55,303 

 28,380 

 46,651 

             

Amounts recognised in the income statement

           

Service cost 

 2,023 

 - 

 45 

 280 

 3,286 

 5,634 

Net interest expense

 847 

 (992)

 20 

 1,255 

 906 

 2,036 

Changes and plan amendments and settlements 

 (2,815)

 - 

 - 

 - 

 - 

 (2,815)

Administration cost

603

 2,461 

 3 

 - 

 - 

 3,067 

 

 658 

 1,469 

 68 

 1,535 

 4,192 

 7,922 

             

Amounts recognised in other comprehensive income

           

Remeasurements:

           

-- Return on plan assets, excluding interest income

 26,676 

 27,503 

 (49)

 18 

 109 

 54,257 

-- (Gain)/loss from change in demographic assumptions

 113 

 (24,355)

 - 

 - 

 2,493 

 (21,749)

-- (Gain)/loss from change in financial assumptions

 (28,647)

 (35,082)

 (80)

 (4,066)

 (13,796)

 (81,671)

-- Experience (gains)/losses 

 (537)

 5,731 

 26 

 77 

 (3,713)

 1,584 

 

 (2,395)

 (26,203)

 (103)

 (3,971)

 (14,907)

 (47,579)

Income tax

 598 

 6,813 

 35 

 921 

 2,116 

 10,483 

Remeasurements, net of tax

 (1,797)

 (19,390)

 (68)

 (3,050)

 (12,791)

 (37,096)

The average duration of the defined benefit obligations per country were as follows:

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

           

Average duration (in years)

16

22

7

13

23

The significant actuarial assumptions per country were as follows:

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

2016

         

Discount rate

1.70%

2.80%

1.45%

1.40%

1.90%

Salary growth rate

0-1.8%

0-3.6%

1.80%

1.50%

0.00%

Pension growth rate

0-1.60%

2.20 -3.6%

-

1.50%

0-1.5%

           

2015

         

Discount rate

2.30%

3.90%

1.60%

2.10%

2.20%

Salary growth rate

0 - 1.90%

2.25 - 3.15%

1.90%

1.50%

2,25%

Pension growth rate

0 - 1.70%

2.20 - 3.15%

-

1.50%

1.75%

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each country.

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

  • If the discount rate is 0.5 per cent per cent higher (lower), the pension liability will decrease by approximately €148 million (increase by approximately €165 million).
  • If the expected salary increase is 0.5 per cent higher (lower), the pension liability will increase by approximately €5 million (decrease by approximately €6 million).
  • If the expected indexation is 0.5 per cent higher (lower), the pension liability will increase by approximately €77 million (decrease by approximately €73 million). 
  • If the life expectancy increases (decreases) by 1 year, the pension liability will increase by approximately €59 million (decrease by approximately €63 million).

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

Plan assets are comprised as follows:

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

Total

2016

           

Equity instruments (quoted)

 - 

 285,359 

 - 

 - 

 48,345 

 333,704 

Debt instruments (quoted)

 - 

 648,648 

 - 

 - 

 30,495 

 679,143 

Property (quoted)

 - 

 41,309 

 - 

 - 

 3,195 

 44,504 

Qualifying insurance policies (unquoted)

 411,231 

 - 

 16,965 

 19,413 

 521 

 448,130 

Cash and cash equivalents

 - 

 98,668 

 - 

 - 

 1,368 

 100,036 

 

 411,231 

 1,073,984 

 16,965 

 19,413 

 83,924 

 1,605,517 

             

2015

           

Equity instruments (quoted)

-

305,418

-

-

49,546

354,964

Debt instruments (quoted)

-

542,208

-

-

28,865

571,073

Property (quoted)

-

47,331

-

-

2,957

50,288

Qualifying insurance policies (unquoted)

390,214

-

1,654

18,297

366

410,531

Cash and cash equivalents

-

117,810

-

1,589

119,399

 

390,214

1,012,767

1,654

18,297

83,323

1,506,255

Plan assets do not include the Company’s ordinary shares. The Group applies IAS 19.104 for the valuation of the plan assets in connection with the insured contracts.

Through its defined benefit pension plans the Group is exposed to a number of risks, the most significant of which are detailed below:

Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit.

Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

Salary growth
The plan liabilities are calculated based on future salaries of the plan participants, so increases in future salaries will result in an increase in the plan liabilities.

Pension growth
The majority of the plan liabilities are calculated based on future pension increases, so these increases will result in an increase in the plan liabilities.

Life expectancy
The majority of the plan liabilities are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan liabilities.

With regard to the funded plans, the Group ensures that the investment positions are managed within an asset-liability matching (‘ALM’) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Group’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Group monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. The Group has not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. 

Employer contributions to post-employment benefit plans for the year ending 31 December 2017 are expected to be significantly lower than 2016.

21. Provisions

 

Warranty

Restructuring

Rental
guarantees

Associates
and
joint ventures

Other

Total

             

As at 1 January 2016

 62,896 

 41,234 

 3,554 

 21,273 

 21,234 

 150,191 

Charged/(credited) to the income statement:

           

 - Additional provisions

 13,909 

 39,523 

 - 

 15,512 

 2,612 

 71,556 

 - Unused amounts reversed

 (8,895)

 (5,991)

 - 

 - 

 (8,670)

 (23,556)

Used during the year

 (9,400)

 (32,841)

 (1,471)

 (8,575)

 (3,457)

 (55,744)

Reclassifications

 11 

 - 

 - 

 137 

 793 

 941 

Other movements

 (162)

 (31)

 - 

 (1,154)

 (110)

 (1,457)

Exchange rate differences

 - 

 - 

 - 

 - 

 (68)

 (68)

As at 31 December 2016

 58,359 

 41,894 

 2,083 

 27,193 

 12,334 

 141,863 

Provisions are classified in the balance sheet as follows:

 

2016

2015

     

Non-current

 86,058 

 84,933 

Current

 55,805 

 65,258 

 

 141,863 

 150,191 

The provision for warranty concerns the best estimate of the expenditure required to settle complaints and deficiencies that become apparent after the delivery of projects and that fall within the warranty period. In reaching its best estimate, the Group takes into account the risks and uncertainties that surround the underlying events which are assessed periodically. Approximately 24 per cent of the provision is current in nature (2015: approximately 27 per cent).

The provision for restructuring concerns the best estimate of the expenditure associated with reorganisation plans already initiated. Approximately 89 per cent of the provision is current in nature (2015: approximately 87 per cent). The estimated staff restructuring costs to be incurred are recognised under ‘personnel expenses’. Other direct costs attributable to the restructuring, including lease termination, are recognised under ‘other operating expenses’. The additional provisions in 2016 mainly relate to restructurings predominantly in the Netherlands.

The provision for rental guarantees consists of commitments arising from rental guarantees issued to third parties. Approximately 88 per cent of the provision is current in nature (2015: 55 per cent). 

The provision for associates and joint ventures arise from the legal or constructive obligation in connection with structured entities for property development projects (associates and joint ventures) and the development of the hedging reserves in PPP joint ventures. An amount of €0.4 million (2015: €0.1 million) relates to associates and €26.8 million (2015: €21.2 million) to joint ventures. 

Other provisions mainly include continuing rental commitments resulting from (temporarily) unused premises. Amounts provided for the liquidation of the old project development activities, claims and legal obligations in Germany are also included. The provision of the dividend guarantee amounting to €8.5 million in 2015 related to the divestment of 21.5 per cent stake in Van Oord in 2011, has been released in 2016. Approximately 19 per cent of the provision is current in nature (2015: approximately 48 per cent).

The non-current part of the provisions has been discounted at an interest rate of approximately 3 per cent (2015: approximately 3 per cent).

22. Deferred tax assets and liabilities

 

2016

2015

Deferred tax assets:

   

- To be recovered after more than twelve months

 244,626 

 245,145 

- To be recovered within twelve months

 4,219 

 6,570 

 

 248,845 

 251,715 

Deferred tax liabilities:

   

- To be recovered after more than twelve months

 25,249 

 20,454 

- To be recovered within twelve months

 1,038 

 10,505 

 

 26,287 

 30,959 

     

Deferred tax liabilities (net)

 (222,558)

 (220,756)

     

The gross movement on the deferred income tax assets and liabilities is as follows:

   
     
 

2016

2015

     

As at 1 January

 (220,756)

 (216,586)

Income statement charge/(credit)

 2,201 

(17,247)

Tax charge/(credit) relating to components of other comprehensive income

 (383)

11,427

Disposal of subsidiary

 676 

 - 

Change of income tax rate

 (2,629)

 (125)

Transfer to assets/liabilities held for sale

 - 

 1,635 

Reclassifications

 (154)

 - 

Exchange differences

 (1,513)

 140 

As at 31 December

 (222,558)

 (220,756)

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

 

Provisions

Tax
losses

Derivatives

Employee
benefit
obligations

Other

Total

             

Deferred tax assets

           
             

As at 1 January 2015

 2,312 

 205,769 

 13,555 

 25,168 

 26,558 

 273,362 

(Charged)/credited to the income statement

 692 

 533 

 (291)

(2,259)

 6,475 

5,150

(Charged)/credited to other comprehensive income

 - 

 - 

 148 

(3,600)

 - 

(3,452)

Changes in enacted tax rates

 (180)

 - 

 - 

 - 

 (1,005)

 (1,185)

Transfer to assets held for sale

 - 

 - 

 (1,635)

 - 

 - 

 (1,635)

Reclassifications

 - 

 10,591 

 - 

 (750)

 (10,591)

 (750)

Exchange rate differences

 123 

 - 

 230 

 55 

 118 

 526 

As at 31 December 2015

 2,947 

 216,893 

 12,007 

 18,614 

 21,555 

 272,016 

             

(Charged)/credited to the income statement

 (83)

 10,683 

 (15)

 (4,958)

 (2,877)

 2,750 

(Charged)/credited to other comprehensive income

 - 

 - 

 (7,135)

 4,169 

 - 

 (2,966)

Disposal of subsidiary

 - 

 (40)

 - 

 (61)

 (750)

 (851)

Changes in enacted tax rates

 23 

 - 

 - 

 - 

 92 

 115 

Exchange rate differences

 (228)

 - 

 (408)

 (40)

 (854)

 (1,530)

As at 31 December 2016

 2,659 

 227,536 

 4,449 

 17,724 

 17,166 

 269,534 

 

 

Construction
contracts

Accelerated
tax
depreciation

Derivatives

Employee
benefit
assets

Other

Total

             

Deferred tax liabilities

           
             

As at 1 January 2015

 20,612 

 14,249 

 697 

 3,556 

 17,662 

 56,776 

Charged/(credited) to the income statement

 (3,893)

 (582)

 - 

3,999

 (11,621)

(12,097)

Charged/(credited) to other comprehensive income

 - 

 - 

 1,092 

6,883

 - 

7,975

Changes in enacted tax rates

 - 

 (980)

 - 

 (330)

 - 

 (1,310)

Reclassifications

 - 

 - 

 - 

 (750)

 - 

 (750)

Exchange rate differences

 - 

 581 

 - 

 85 

 - 

 666 

As at 31 December 2015

 16,719 

 13,268 

 1,789 

 13,443 

 6,041 

 51,260 

             
             

Charged/(credited) to the income statement

 247 

 (955)

 - 

 6,262 

 (603)

 4,951 

Charged/(credited) to other comprehensive income

 - 

 - 

 (1,682)

 (5,093)

 3,426 

 (3,349)

Disposal of subsidiary

 (175)

 - 

 - 

 - 

 - 

 (175)

Changes in enacted tax rates

 - 

 (441)

 - 

 (2,073)

 - 

 (2,514)

Reclassifications

 - 

 - 

 - 

 - 

 (154)

 (154)

Exchange rate differences

 - 

 (1,174)

 - 

 (1,869)

 - 

 (3,043)

As at 31 December 2016

 16,791 

 10,698 

 107 

 10,670 

 8,710 

 46,976 

Deferred income tax assets in a country are recognised only to the extent that it is probable that future taxable profits in that country are available against which the temporary differences and available tax losses carry-forwards can be utilised.

Tax losses available to the fiscal unity in the Netherlands for carry-forward at year-end 2016 amount to approximately €1 billion (2015: €985 million). These unused tax losses relate to the years 2009 up to and including 2016 and include an amount of 395 million (2015: €395 million) owing to the liquidation of old property development activities in Germany. The increase in the unused tax losses in 2016 is mainly caused by the impairments on property as well as restructuring costs. The legal term within which these losses may be offset against future profits is nine years.

Based on estimates of the level and timing of future taxable profits within the fiscal unity in the Netherlands for the upcoming nine years approximately €850 million (2015: €815 million) of these losses are recognised. Management estimates of forecasted taxable profits in the Netherlands are based on financial budgets approved by management, extrapolated using growth rates for revenue and profit before tax margins that are based on external market data and benchmark information, taking into account past performance. Growth rates for revenue and profit before tax margins are in line with the Group’s mid- and long-term expectations. 

Tax losses to a minimum of €593 million (2015: €567 million) are expected to remain available for the companies in Germany, which can be offset against future taxable profits in Germany. Based on estimates of the level and timing of future taxable profits per operating company and per fiscal unity, approximately €32 million (2015: €32 million) of these losses are recognised. The legal term within which these losses may be offset against future profits is indefinite. Management estimates of forecasted taxable profits in Germany are based on financial budgets approved by management, extrapolated using estimated growth rates that are considered to be in line with the Group’s mid- and long-term expectations, taking into account past performance.

23. Trade and other payables

 

Notes

2016

2015

       

Trade payables

 

 930,851 

 903,640 

Amounts due to customers

6

 803,926 

 714,428 

Amounts due to related parties

36

 44,829 

 35,506 

Social security and other taxes

 

 119,309 

 118,622 

Pension premiums

 

 15,219 

 8,224 

Invoices due for work completed

 

 152,864 

 147,233 

Invoices due for work in progress

 

 507,394 

 571,698 

Other financial liabilities

 

 1,967 

 3,372 

Other liabilities

 

 156,826 

 150,137 

Accrued expenses and deferred income

 

 271,243 

242,961

   

 3,004,428 

 2,895,821

24. Employee benefit expenses

 

Notes

2016

2015

       

Wages and salaries

 

1,070,790

1,095,178

Social security costs

 

 162,884 

173,097

Pension costs - defined contribution plans

 

 79,254 

80,578

Pension costs - defined benefit plans

20

 (37,843)

7,922

Other post-employment benefits

 

 1,129 

1,659

   

1,276,214

1,358,434

Wages and salaries include restructuring costs and other termination benefits of €28.3 million (2015: €21.5 million).

At year-end 2016, the Group had 19,486 employees in FTE (2015: 21,248). The average number of employees in FTE amounted to 20,370 (2015: 21,916).

25. Impairment charges

 

Notes

2016

2015

       

Property, plant and equipment

7

 2,213 

1,452

Intangible assets

8

 833 

3,298

Investments and other financial assets

10,11

(196)

(949)

Inventories

12

47,809

37,325 

Impairment charges

 

 50,659 

41,126

Share of impairment charges in investments

 

 - 

(2,040) 

   

 50,659 

39,086 

In 2016, impairment charges in connection with inventories relating to land and building rights are €35 million and €13 million to commercial property development. The share in the reversal of impairment charges in investments in 2015 relates to the favourable development of the associated land and building rights held for property development.

26. Exceptional items

Items that are material either because of their size or their nature, or that are non-recurring are considered as exceptional and are presented within the line items to which they best relate.

An analysis of the amount presented as exceptional items in these financial statements is given below:

 

Notes

2016

2015

       

Impairment charges

25

 50,659 

39,086

Restructuring costs

21

 33,532 

27,980

Pension one-off

20

 (41,607)

(2,815)

Other exceptional costs

 

 - 

10,588 

   

 42,584 

74,839 

Pension one-off relates to pension plan amendments in United Kingdom, Ireland and the Netherlands. Pension one-off in 2015 relates to a pension plan amendment in the Netherlands. Other exceptional costs in 2015 consist of consultancy fees of €11 million directly related to the Back in Shape programme and have been included in ‘other operating expenses’ in the income statement of 2015.

27. Audit fees

The total fees for the audit of the consolidated financial statements 2016 are listed below. 

Expenses for services provided by the Company’s current independent auditor, Ernst & Young Accountants LLP (‘EY’) and its predecessor in 2015 PricewaterhouseCoopers Accountants N.V. (‘PwC’) and its foreign member firms to the Group are specified as follows:

 

2016  

 

2015

 

EY
Netherlands 

EY foreign
member
firms

Total

 

PwC 
Netherlands

PwC foreign
member
firms

Total

               

Audit fees

 2,800 

 1,493 

 4,293 

 

 3,084 

 713 

 3,797 

Audit-related fees

 - 

 - 

 - 

 

 443 

 468 

 911 

Tax fees

-

 44 

 44 

 

 58 

 158 

 216 

Other non-audit fees

-

 153 

 153 

 

 10 

 201 

 211 

     

 4,490 

     

 5,135

The 2015 foreign member firms audit fees did not include the audit of the UK companies, as they were audited by EY.

28. Finance income and expense

 

2016

2015

Finance income

   

- Interest income - cash at banks

 1,285 

 2,348 

- Interest income - other financial assets

 1,976 

 1,925 

- Interest income - PPP receivables

 20,679 

 23,077 

- Other finance income

 7,865 

 7,145 

 

 31,805 

 34,495 

     

Finance expense

   

- Subordinated convertible bonds

 3,599 

-

- Subordinated loan

 3,585 

 7,416 

- Bank fees - subordinated loan

 665 

 500 

- Committed syndicated credit facility

 109 

 196 

- Bank fees - committed syndicated credit facility

 3,324 

 4,688 

- Non-recourse PPP loans

 13,170 

 14,198 

- Non-recourse project financing

 3,084 

 4,511 

- Other non-recourse financing

 188 

 287 

- Interest expense - bank overdrafts

 376 

 642 

- Finance lease liabilities

 717 

 915 

- Recourse property financing

 1,524 

 2,056 

- Recourse PPP loans

 1,284 

 2,109 

- Other recourse financing

 1,145 

 787 

- Interest expense - other liabilities

 658 

 335 

- Fair value result interest rate swaps

 1,795 

-

- Fair value result - forward exchange contracts

 422 

 (1,827)

 

 35,645 

 36,813 

Less: capitalised interest on the Group's own projects

 (11,160)

 (13,323)

 

 24,485 

 23,490 

     

Net finance result

 7,320 

 11,005

Included in the finance expense is an amount of €6 million (2015: €7 million) relating to interest rate swaps that was reclassified from equity to the income statement. An overview of the applicable weighted average interest rates is disclosed in note 18 to the consolidated financial statements.

29. Income tax

 

2016

2015

     

Current tax

 8,682 

 19,556 

Deferred tax

 2,201 

 (17,247)

 

 10,883 

 2,309 

Income tax on the Group’s result before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated companies as follows:

 

2016

2015

     

Result before tax

 60,087 

 13,341 

     

Tax calculated at Dutch tax rate

 15,022 

 3,338 

Tax effects of:

   

- Tax rates in other countries

 (9,414)

 (4,250)

- Income not subject to tax

 (1,040)

(5,768)

- Remeasurement of deferred tax – changes in enacted tax rates

 (2,542)

 (125)

- Tax filings and previously unrecognised temporary differences

 1,269 

 4,541 

- Previously unrecognised tax losses

 (5,565)

(4,519)

- Tax losses no(t) (longer) recognised

 13,153 

 10,662 

- Results of investments and other participations, net of tax

 (5,737)

 (4,040)

- Other including expenses not deductible for tax purposes

 5,737 

 1,349 

- Impairment of goodwill

 - 

 1,121 

Tax charge/(gain)

 10,883 

 2,309 

     

Effective tax rate

18.1%

17.3%

The weighted average tax rate applicable was 9.3 per cent (2015: -6.8 per cent). The difference is attributable to a different spread of results over the countries.

In 2016 as well as 2015, the tax burden was influenced predominantly by tax losses which are not recognised (anymore), as well as the recognition of tax losses that were previously unrecognised.

As at 1 April 2017, the main rate of corporation tax in the United Kingdom will be reduced from 20 per cent to 19 per cent, and subsequently to 17 per cent as at 1 April 2020. 

30. Earnings per share

 

2016

2015

     

Weighted average number of ordinary shares in issue (x 1,000)

 270,503 

 270,957 

     

Net result attributable to shareholders

 46,831 

 10,180 

Basic earnings per share (in €)

 0.17 

 0.04 

     

Net result from continuing operations attributable to shareholders

 46,831 

 10,180 

Basic earnings per share from continuing operations (in €)

 0.17 

 0.04 

     

Net result from discontinued operations attributable to shareholders

 - 

-

Basic earnings per share from discontinued operations (in €)

 - 

-

Allowing for dilution, the earnings per share are as follows:

 

2016

2015

     

Diluted weighted average number of ordinary shares in issue (x 1,000)

 283,643 

 270,957 

     

Net result attributable to shareholders (diluted)

 49,530 

 10,180 

Diluted earnings per share (in €)

 0.17 

 0.04 

     

Net result from continuing operations attributable to shareholders (diluted)

 49,530 

 10,180 

Diluted earnings from continuing operations per share (in €)

 0.17 

 0.04 

     

Net result from discontinued operations attributable to shareholders (diluted)

 - 

 - 

Diluted earnings from discontinued operations per share (in €)

 - 

 - 

31. Dividends per share and proposed appropriation of result

The net result for 2016, amounting to €46.8 million, has been accounted for in shareholders’ equity.

The Company proposes to declare a dividend over the financial year 2016 of 9 eurocents in cash per ordinary share or in shares, at the option of the shareholders (2015: 2 eurocents). Based on the number of ordinary shares outstanding at year-end 2016, a maximum of €24.3 million will be distributed as dividend on the ordinary shares. As yet, the dividend proposal has not been deducted from retained earnings under equity.

The dividends paid to shareholders of ordinary shares in 2016 were €5.4 million, €2.0 million in cash (€0.02 per share) and €3.4 million in shares (€0.02 per share). In 2015 the Company has not paid a dividend over the financial year 2014.

32. Contingencies

32.1 Legal proceedings

In the normal course of business the Group is involved in legal proceedings predominantly concerning litigation in connection with (completed) construction contracts. The legal proceedings, whether pending, threatened or unasserted, if decided adversely or settled, may have a material impact on the Group’s financial position, operational result or cash flows. The Group may enter into discussions regarding settlement of these and other proceedings and may enter into settlement agreements, if it believes settlement is in the best interests of the Company’s shareholders. In accordance with current accounting policies, the Group has recognised provisions with respect to these proceedings, where appropriate, which are reflected on its balance sheet. Examples of major legal proceedings are given below.

In 2005, during the construction of a drilled tunnel for the SMART North tunnel project in Kuala Lumpur, engineering firm Wayss & Freytag Ingenieurbau was faced with ground conditions that varied from the information provided by the client. Wayss & Freytag Ingenieurbau terminated the contract early 2006 as a result of the client’s failure to fulfil its payment obligations and refusal to deal with Wayss & Freytag’s claims for an extension of the construction period and reimbursement of costs. The client, in turn, also terminated the contract in January 2006. Wayss & Freytag Ingenieurbau lodged a claim against the client for more than €20 million as compensation for costs incurred. The client lodged provisional counterclaims of €5 million. An independent dispute adjudicator, in the contractually prescribed procedure, has ruled that Wayss & Freytag Ingenieurbau was entitled to terminate the contract. This verdict has been confirmed by an arbitration. The client appealed before the Federal Court, but meanwhile the parties initiated negotiations for settlement. These negotiations were successful. A full and final settlement, in line with the amount recognised, was reached in January 2017.

On 3 March 2009, during the construction of a section of the Cologne metro system, several adjacent buildings, including the building of the City Archives of the City of Cologne, collapsed. Two persons were killed as a result of this accident. Wayss & Freytag Ingenieurbau is a one-third partner in the consortium carrying out this project but was not directly involved in the work performed at the site of the accident. The customer has instituted a judicial inquiry (known as a Beweisverfahren) before the district court (the Landgericht in Cologne). As part of these proceedings, a number of specialists are investigating the cause of the accident. Only when their investigation is complete will it be possible to determine if and to what extent the consortium might be held responsible for the accident. The German Public Prosecution Service is also carrying out its own investigation to determine whether any criminal offences have been committed. The damage to property is considerable and the parties involved have claimed under several different insurance policies.

32.2 Guarantees

Bonds and Guarantees are provided in the ordinary course of business to our clients, either by the Company (parental guarantees), by banks (bank guarantees), or by surety companies (surety bonds), securing due performance of the obligations under the contracts by the subsidiaries of the Company. 

It is not expected that any material risks will arise from these securities. These securities are limited in amount and can only be called upon in case of (proven) default.

The parent company guarantees issued amount to €151 million (2015: €156 million). Guarantees issued by banks and surety companies amount to €1,695 million (2015: €1,776 million). Guarantee facilities amount to €2.7 billion (2015: €2.4 billion).

32.3 Other

Based on agreements with the Dutch tax authorities for cooperative compliance (Horizontaal Toezicht), BAM initiated enquiries into the wage tax treatment of company cars used by BAM employees in the Dutch operating companies. Based on our information to date, the vast majority of company cars is properly treated. A reliable estimate of a possible wage tax cash outflow for company cars that are not properly treated from a tax perspective cannot be made. Given all facts and circumstances, it is impracticable to estimate the financial effect of a cash outflow.

33. Commitments

33.1 Purchase commitments

Capital expenditure contracted for at the end of the reporting period but not yet incurred and conditional contractual obligations to purchase land for property development activities is as follows:

 

2016

2015

     

Property, plant and equipment

489 

 232 

Land

 104,346 

 121,272 

 

104,835

 121,504 

The conditional nature of the contractual obligations to purchase land relate to, among other items, the amendment of development plans, the acquirement of planning permissions and the actual completion of property development projects.

33.2 Lease commitments

The Group leases various office buildings, equipment and company cars from third parties under non-cancellable operating lease agreements. The lease agreements vary in duration, escalation clauses and renewable options. 

In 2016 the costs associated with operating leases amount to €57 million (2015: €69 million).

The future aggregate minimum lease payments are as follows:

 

2016

2015

     

Up to 1 year

 59,657 

 64,507 

1 to 5 years

 117,685 

 114,167 

Over 5 years

 23,401 

 23,245 

 

 200,743 

 201,919 

The future aggregate minimum lease income is as follows:

 

2016

2015

     

Up to 1 year

 116 

 1,562 

1 to 5 years

 88 

 7,298 

Over 5 years

 - 

 6,629 

 

 204 

 15,489 

34. Business combinations

No material acquisitions have taken place in 2016 nor 2015.

35. Assets held for sale and discontinued operations

 

2016

2015

     

PPP receivables

 - 

 39,391 

Deferred tax assets

 - 

 1,635 

Investments

 4,410 

 - 

Inventories

 34,553 

 - 

Trade and other receivables

 668 

 367 

Cash and cash equivalents

 614 

 421 

Assets held for sale

 40,245 

 41,814 

     

Borrowings (non-current)

 - 

 35,470 

Derivative financial instruments

 - 

 6,538 

Borrowings (current)

 - 

 3,983 

Trade and other payables

 3,986 

 471 

Provisions

 347 

 - 

Liabilities held for sale

4,333

 46,462 

At year-end 2016, the assets and liabilities held for sale related to the planned disposal of all 47 property development positions in the Northeast part of the Netherlands. In 2015 the assets held for sale related to the disposal of one PPP project to the joint venture BAM PPP/PGGM.

During 2016 the Group transferred three operational projects (2015: two projects), to the joint venture BAM PPP/PGGM and, after deduction of costs, realised a net result of €4.4 million (2015: €5.2 million). The total consideration received amounted to €19.5 million, of which €16.6 million in cash. The Group retained a 20 per cent share of its original share in these projects. 

The Group had no discontinued operations in 2016 nor 2015.

36. Related parties

The Group identifies subsidiaries, associates, joint arrangements, third parties executing the Group’s defined benefit pension plans and key management as related parties. Transactions with related parties are conducted at arm’s length, on terms comparable to those for transactions with third parties.

The following transactions were carried out with related parties:

36.1 Sales and purchase of goods and services

A majority of the Group’s activities is carried out in joint arrangements. These activities include the assignment and/or financing of land as well as carrying out construction contracts. 

The Group carried out transactions with associates and joint arrangements related to the sale of goods and services for €60.4 million (2015: €125.6 million) and related to the purchase of goods and services for €8.0 million (2015: €5.2 million).

The 2016 year-end balance of receivables arising from aforementioned transactions amounts to €13.2 million (2015: €5.4 million) and the liabilities to €44.8 million (2015: €35.5 million).

36.2 Loans to related parties

At year-end 2016, the Group granted loans to related parties (mainly relating to associates and joint ventures) for the amount of €67 million (2015: €76 million). These transactions were made on normal commercial terms and conditions, except that for a number of loans there are no fixed terms for the repayment of loans between the parties. Interests for these loans are at arm’s length. Loans to related parties are included in ‘Other financial assets’ in the statement of financial position.

36.3 Key management compensation

Key management includes members of the Executive Board and the Supervisory Board.

Executive Board

The compensation paid or payable to the Executive Board for services is shown below:

 

2016     

 

Management
fee

Short-term
incentive

Post-
employment
benefits

Other
benefits

Long-term
incentive

Total

             

R.P van Wingerden 1

 680 

408

 126 

 8 

119

1,341

T. Menssen 2

 480 

288

 39 

 8 

 95 

910

E.J. Bax 3

 480 

288

 66 

 99 

938

 

 1,640 

984

 231 

 21 

 313 

3,189

 

 

2015     

 

Management
fee

Short-term
incentive

Post-
employment
benefits

Other
benefits

Long-term
incentive

Total

             

R.P van Wingerden 1

 620 

 350 

 46 

 8 

371 

1,395 

T. Menssen 2

 470 

 265 

 38 

 8 

266 

1,047 

E.J. Bax 3

 470 

 265 

 52 

 - 

111 

 898

 

 1,560 

880

 136 

 16 

748 

3,340

Appointed as Chairman of the Executive Board with effect from 1 October 2014, re-appointed as Chairman 20 April 2016.
Re-appointed as a member of the Executive Board with effect from 20 April 2016.
Appointed as a member of the Executive Board with effect from 1 May 2014.

As at from 2016, the Executive Board receives a management fee instead of a fixed gross salary.

The short-term incentive is part of the remuneration package of the Executive Board with a target pay-out of 55 per cent with a maximum of 75 per cent. The STI is based on financial criteria (70 per cent) and non-financial performance targets (30 per cent). Performance incentive zones are defined for each of the targets. Pay-out gradually increases with performance, starting with a pay-out of 35 per cent of the target at threshold performance and potentially going up to 75 per cent pay-out at maximum performance per individual target. Performance below the threshold will result in a zero pay-out. The Supervisory Board sets the performance ranges (i.e. threshold, at target and maximum performance levels) and corresponding payout levels, with the constraint that the STI payout will not exceed 75 per cent of base salary. The Supervisory Board determined the pay-out for 2016 at 60.0 per cent (2015: 56.5 per cent).

Post-employment benefits relate to the pension costs of the defined benefit plans recognised in the income statement and are determined on the basis of the individual pension obligations. Interest results and return on plan assets are not allocated on an individual basis. Certain components of the post-employment benefits are conditional and paid if employment continues until the retirement age.

Other benefits relate to annual fixed expense allowances and insurance premiums.

The long-term incentive relates to the Performance Share Plan and Phantom Share Plan. Additional information is disclosed in note 37.

No share options have been granted to the members of the Executive Board. The members of the Executive Board do not hold any shares in the Company, except for the conditionally granted shares under the Performance Share Plan, nor have loans or advances been granted.

Supervisory Board

The compensation paid or payable (including annual fixed expense allowance) to the Supervisory Board for services is shown below:

 

2016

2015

     

P.A.F.W. Elverding, Chairman

 58 

 58 

H. Scheffers, Vice-Chairman

 52 

 52 

J.P. Hansen

47

 47 

C.M.C. Mahieu

 47 

 47 

H.L.J. Noy

 47 

 47 

K.S. Wester

 47 

 47 

 

 298 

 298 

No share options have been granted to the members of the Supervisory Board. The members of the Supervisory Board do not hold any shares in the Company nor have loans or advances been granted.

Other related parties

The Group has not entered into any material transaction with other related parties.

37. Share-based payments

In 2016, BAM’s long-term incentive plan consisted of a conditional share-based compensation plan called Performance Share Plan. This equity-settled plan replaced the cash-settled Phantom Share Plan effective from 2011 through 2014 and is applicable for members of the Executive Board and selected positions below the Executive Board (‘Participants’) whereas the Phantom Share Plan solely included members of the Executive Board. In principle, the content of the plan rules will not be altered during the term of the plans.

37.1 Performance Share Plan

Under the Performance Share Plan the number of performance shares granted is calculated by dividing the award value (expressed as a percentage of gross salary) by the average share price based on the five trading days after the Annual General Meeting (‘AGM’). 

The shares were granted on the fifth trading day following the day of the AGM and vest subject to the achievement of pre-determined performance conditions during a three-year period and provided that the participant is still employed by BAM. Participants are not allowed to divest any shareholding until the two year lock-up period has lapsed and the above minimum share ownership requirements are met, with the exception of any sale of shares during the lock-up period except to finance tax (and other levies) payable at the date of vesting. The maximum value at the date of vesting of the Performance Share Plan is capped at 2.5 times the award value.

The number of shares that will ultimately vest depends on BAM’s performance compared to ten other listed construction companies in Europe, measured over a three-year period using total shareholder return (‘TSR’), which is the sum of share price growth and dividends paid. The peer group on balance sheet date consists of Balfour Beatty, Boskalis, Carillion, Heijmans, Hochtief, Eiffage, Skanska, Strabag, Vinci and YIT. TSR is complemented with an additional financial target and a non-financial target. On top, the TSR measure will function as a ‘circuit breaker’ for the vesting part linked to the other two criteria. When BAM ranks at the bottom two places of the TSR peer group, the other parts will not payout regardless of the performance in this area.

The tables below indicate the percentage of conditional shares that could vest in connection with the pre-determined performance conditions:

TSR 

 

Financial 

 

Non-financial 

Ranking

Vesting

 

Score

Vesting

 

Score

Vesting

               

1

150%

 

Above maximum

150%

 

Above maximum

150%

2

125%

 

Maximum

150%

 

Maximum

150%

3

100%

 

Target

100%

 

Target

100%

4

75%

 

Threshold

50%

 

Threshold

50%

5

50%

 

Below threshold

0%

 

Below threshold

0%

6

25%

           

7

0%

           

8

0%

           

9

0%

           

10

0%

           

11

0%

           

At the end of each reporting period, BAM revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions (financial and non-financial) and recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Upon termination of employment due to retirement, disability or death, the same vesting conditions as described above apply. Upon termination of employment without cause in certain circumstances (e.g., restructuring or divestment), a pro rata part of the granted shares will vest on the date of termination of employment. For the performance shares, the most recent performance results will be applied to calculate the number of vested shares.

The status of the Performance Share Plan (in number of shares) during 2016 for the members of the Executive Board and for all other participants is shown below:

 

As at
1 January
2016

Granted

Vested

Forfeited

As at
31 December
2016

           

R.P. van Wingerden

 114,319 

 112,711 

 - 

 - 

 227,030 

T. Menssen

 74,281 

 68,195 

 - 

 - 

 142,476 

E.J. Bax

 74,281 

 68,195 

 - 

 - 

 142,476 

Other participants

 342,094 

 339,069 

 - 

 56,921 

 624,242 

 

 604,975 

 588,170 

 - 

 56,921 

 1,136,224 

The fair value per share of the 2016 grant, for the Participants, in connection with the TSR performance part amounted to €3.17 per share and is determined using a Monte Carlo simulation model. For the other financial and non-financial performance part, the fair value equals the share price at the date of grant, corrected for the expected value of the possibility of achieving the ‘circuit breaker’. As participants receive dividend compensation the dividend yield on the awards equals nil. 

The most important assumptions used in the valuations of the fair values were as follows:

 

2016

Share price at grant date (in €)

 4.30 

Risk-free interest rate (in %)

 0.31 

Volatility (in %)

 48.97 

Expected volatility has been determined based on historical volatilities for a period of five years. 

In 2016, an amount of €606 thousand was charged to the income statement arising from the Performance Share Plan.

37.2 Phantom Share Plan

Under the Phantom Share Plan the number of performance shares granted is calculated by dividing the award value (expressed as a percentage of gross salary) by the average share price based on the five trading days after the AGM. 

The shares were granted on the fifth trading day following the day of the AGM and vest subject to the achievement of pre-determined performance conditions during a three-year period and provided that the participant is still employed by BAM.

The number of shares that will ultimately vest depends on BAM’s performance compared to five other listed construction companies in Europe, measured over a three-year period using TSR, which is the sum of share price growth and dividends paid. The peer group on balance sheet date consists of Balfour Beatty, Ballast Nedam (until delisting), Bilfinger, Heijmans and Skanska. Participants are not allowed to divest any shareholding until the two year lock-up period has lapsed. The maximum cash distribution to the Participants at the date of vesting of the Phantom Share Plan is capped at 1.5 times the gross salary of the Participant.

The tables below indicate the percentage of conditional shares that could vest in connection with the pre-determined performance condition:

TSR Performance

Vesting

< 0

0%

0 – 5

35%

5 – 10

45%

10 – 15

55%

15 – 20

65%

20 – 25

75%

25 – 30

85%

≥ 30

100%

Upon termination of employment due to retirement, death or in the event of a restructuring or divestment, the granted shares will be reduced for a pro rata part reflecting the period between the date of termination of employment and the vesting date. 

The status of the Phantom Share Plan (in number of shares) during 2016 for the individual Executive Board members is as follows:

 

As at
1 January
2016

Stock
dividend

Vested

Forfeited

As at
31 December
2016

           

R.P. van Wingerden

 218,361 

 1,114 

 - 

 - 

 219,475 

T. Menssen

 130,331 

 665 

 - 

 - 

 130,996 

E.J. Bax

 54,064 

 276 

 - 

 - 

 54,340 

 

 402,756 

 2,055 

 - 

 - 

 404,811 

In addition, 190,169 shares are allocated to retired Executive Board members at year-end 2016. The lock-up period for the most recent phantom share plan will end at 4 May 2019.

The fair value per share of the conditionally granted shares outstanding amount to €4.09 for the 2014 grant and are determined using a Monte Carlo simulation model. 

The most important assumptions used in the valuations of the fair values were as follows:

 

2016

2015

Risk-free interest rate (in %)

 (0.79) 

(0.26)

Volatility (in %)

 52.73 

49.31

Assumed dividend yield (in %)

 2.00 

2.00

In 2016, an amount of €7 thousand (2015: €772 thousand) was charged to the income statement arising from the Phantom Share Plan. As at 31 December 2016, the liability amounts to €1,042 thousand (2015: €1,035 thousand).

38. Joint operations

A part of the Group’s activities is carried out in joint arrangements classified as joint operations. This applies to all activities and all countries in which the Group operates. These arrangements remain in place until a project is finished. In practice, the duration of the majority of the joint operations is limited to a period of between 1 and 4 years, with
the exception of joint operations in connection with land and building rights held for strategic purposes.

The Group’s share of the revenue of these joint operations amounts to approximately €1.2 billion in 2016 (2015: approximately €1.1 billion), which represents approximately 17 per cent of the Group’s revenue
(2015: 15 per cent).

The Group’s share of the balance sheets of joint operations is indicated below: 

(in € million)

 2016  
 

Construction
and Property 

Civil
engineering

Total

Assets

     

 - Non-current assets

-

60,8 

60,8 

 - Current assets

236,7 

513,4 

750,1 

 

236,7 

574,2 

810,9 

Liabilities

     

 - Non-current liabilities

42,5 

6,3 

48,8 

 - Current liabilities

216,7 

527,1 

743,8 

 

259,2 

533,4 

792,6 

       

Net balance

(22,5)

40,8 

18,3 

       
       
 

2015  

 

Construction
and Property 

Civil
engineering

Total

Assets

     

 - Non-current assets

-

57,7 

57,7 

 - Current assets

224,5 

763,7 

988,2 

 

224,5 

821,4 

1.045,9 

Liabilities

     

 - Non-current liabilities

53,6 

12,7 

66,3 

 - Current liabilities

163,8 

795,6 

959,4 

 

217,4 

808,3 

1.025,7 

       

Net balance

7,1 

13,1 

20,2 

The Group has no contingencies or capital commitments under joint operations. Transfers of funds and/or other assets are made in consultation with the partners of the joint operations.

39. Service concession arrangements

The Group operates various service concession arrangements, both in the accommodation and infrastructure areas. These activities comprise the construction, exploitation, maintenance and divestment of (a part of) concession arrangements structured through separate legal entities and are principally carried out by BAM PPP independently and/or in collaboration with third parties.

The Group has a stake in the following concession arrangements:

 

Interest

Classification

Category

Country

Operational

As
from

Concession
period
(in years)

Accommodations

             

East Ayrshire Hospital

100%

Group company

Health

United Kingdom

Yes

2000

25

Wharfedale Hospital

75%

Group company

Health

United Kingdom

Yes

2004

30

Derby Police

100%

Group company

Justice

United Kingdom

Yes

2000

30

Cheshire Police

100%

Group company

Justice

United Kingdom

Yes

2003

30

Peacehaven Schools

100%

Group company

Education

United Kingdom

Yes

2001

25

Bromsgrove Schools

20%

Joint venture

Education

United Kingdom

Yes

2008

30

Solihull Schools

20%

Joint venture

Education

United Kingdom

Yes

2010

25

West Dunbartonshire Schools

20%

Joint venture

Education

United Kingdom

Yes

2010

30

Somerset Schools

17.8%

Joint venture

Education

United Kingdom

Yes

2012

25

Camden Schools

18%

Joint venture

Education

United Kingdom

Yes

2012

25

Irish Schools Bundle 3

20%

Joint venture

Education

Ireland

Yes

2014

25

Irish Schools Bundle 4

20%

Joint venture

Education

Ireland

Yes

2016

25

Irish Courts Bundle

100%

Group company

Justice

Ireland

No

2017

25

Gent Universiteit

20%

Joint venture

Education

Belgium

Yes

2011

33

Beveren Prison

20%

Joint venture

Justice

Belgium

Yes

2013

25

Dendermonde Prison

100%

Group company

Justice

Belgium

No

2016

25

Schiphol

20%

Joint venture

Justice

Netherlands

Yes

2012

25

High Court

20%

Joint venture

Justice

Netherlands

Yes

2015

30

Ministry VROM

100%

Group company

Other

Netherlands

No

2017

25

Potsdam

100%

Group company

Other

Germany

Yes

2012

30

Bremervoerde Prison

20%

Joint venture

Justice

Germany

Yes

2013

25

University Hospital Schleswig-Holstein

50%

Joint venture

Health

Germany

No

2015

29

Burgdorf Prison

17.6%

Joint venture

Justice

Switzerland

Yes

2012

25

               

Infrastructure

             

Dundalk By-pass

6.7%

Joint venture

Motorway

Ireland

Yes

2005

28

Waterford By-pass

33.3%

Joint venture

Motorway

Ireland

Yes

2009

30

Portlaoise

33.3%

Joint venture

Motorway

Ireland

Yes

2010

30

N11/N7

20%

Joint venture

Motorway

Ireland

Yes

2015

25

M11

50%

Joint venture

Motorway

Ireland

No

2019

25

N25

50%

Joint venture

Motorway 

Ireland

No

2019

25

A59

14%

Joint venture

Motorway

Netherlands

Yes

2005

15

N31

33.3%

Joint venture

Motorway

Netherlands

Yes

2007

15

A12

20%

Joint venture

Motorway

Netherlands

Yes

2012

25

N33

20%

Joint venture

Motorway

Netherlands

Yes

2014

20

Infraspeed HSL

10.5%

Associate

Railway

Netherlands

Yes

2006

25

Lock Ijmuiden

50%

Joint venture

Lock

Netherlands

No

2019

26

A8

5%

Joint venture

Motorway

Germany

Yes

2010

30

A9

50%

Joint venture

Motorway

Germany

Yes

2014

17

A94

33.3%

Joint venture

Motorway 

Germany

No

2019

26

Liefkenshoektunnel

10%

Joint venture

Railway

Belgium

Yes

2013

38

Brabo II

80.1%

Joint venture

Tramway

Belgium

No

2019

25

The Group is also involved in (accommodation and infrastructure) concession arrangements and energy service companies through other group companies.

The Group’s equity investment in PPP projects amount to €66 million (2015: €72 million).

The Group has approximately €35 million (2015: €45 million) of obligations for capital contributions (after deduction of the PGGM share) in projects which have been awarded to the joint venture BAM PPP/PGGM. Construction revenue to be realised in connection with PPP projects amounts to approximately €0.8 billion (2015: approximately €1.5 billion).

A further description of the Group’s concession arrangements is as follows:

Accommodation

The accommodation concession arrangements relate to schools, police stations, hospitals, sport complexes, a penitentiary institution and a laboratory building. These arrangements are located in the United Kingdom, Ireland, Germany, Belgium, the Netherlands and Switzerland. The concession payments are contractually agreed and are linked to the availability of the accommodation. The actual usage of the accommodation does not affect the amount of the concession payments. Most arrangements include maintenance and facility management services.

During the concession periods, payments are based on the availability of the related accommodation and the maintenance and facility management services. The majority of the concession arrangements are subject to indexation. The part of the concession payment that relates to the services will be evaluated every five years in general, using a benchmark. There may consequently be a limited settlement with the principal as a result. However, the volatility of the revenue and result is limited.

Infrastructure

The infrastructure concession arrangements relate to motorways in Ireland, the Netherlands and Germany, a railway tunnel in Belgium, a railway line in the Netherlands and a coastal defence scheme in the United Kingdom. The concession arrangements started between 1999 up to and including 2014, for periods varying from 15 to 30 years.

The majority of the concession payments are contractually agreed and are linked to the availability of the related infrastructure. This availability is evaluated based on the contractually agreed upon criteria. These criteria cover the intensity of usage, temporary closures and maintenance. There may consequently be (temporarily) adjustments to the concession payments with the principal as a result. However, the volatility of the revenue and result is limited.

For three motorways in Ireland and one in Germany, concession payments are directly linked to the traffic volume (toll collection) and revenue and result are consequently volatile to some extent.

40. Government grants

Government grants received in 2016, predominantly relating to education, amount to €3.3 million (2015: €3.1 million).

41. Research and development

Research and development costs, which predominantly relate to projects, are considered to be part of contract costs. Other research and development costs, in the amount of approximately €0.2 million (2015: approximately €0.9 million), are recognised in the income statement.

42. Events after the reporting period

No material events after the reporting period have occurred.

Name

Company