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 mechanical and electrical services, Civil engineering, Property 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 the NYSE Euronext Amsterdam, with its registered seat and head office in Bunnik, the Netherlands. 

On 17 February 2016 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 of shareholders on 20 April 2016.

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. As the financial data of the Company are included in the consolidated financial statements, the income statement in the company financial statements is presented in condensed form in accordance with section 402, Book 2 of the Netherlands Civil Code.

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) Application of new and revised standards
The Group has applied the amendments for the first time for their annual reporting period commencing 1 January 2015 in connection with the ‘Annual Improvements to IFRSs – 2010-2012 Cycle’ and ‘2011 – 2013 Cycle’ and ‘Defined Benefit Plans: Employee Contributions – Amendments to IAS 19’. 

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. 

(b) 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 2015 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. In July 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. 

Following the changes approved by the IASB in July 2014, the Group does not expect any impact from the new classification, measurement and derecognition rules on the Group’s financial assets and financial liabilities. 

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 new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition of credit losses. 

The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is yet to assess the full impact of IFRS 9.

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 intends to prepare a detailed impact analysis in 2016 to identify the effect of this standard on its financial statements and plans to implement this standard on the required date. 

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 intends to prepare a detailed impact analysis in 2016 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. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

(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 combines 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 Construction and mechanical and electrical services, Civil engineering, Property and PPP as operating segments.

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:

 

2015

2014

Closing exchange rate

   

Pound sterling

 0.73681

0.78247

     

Average exchange rate

   

Pound sterling

 0.72653

0.80502

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 fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs that is expected to benefit from the synergies of the 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 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 objectives 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’. 

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.

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. Contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. 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.

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 estimated 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.

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.

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.

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.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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. Generally the Group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.

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 to equity 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.

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 post-employment obligations
Other post-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 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.

Contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. The stage of completion is measured by dividing the actual costs by the total forecasted costs.

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.

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 estimated 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.

(b) Property development
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. 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 
Revenue in connection with service concession arrangements comprises construction and exploitation activities. Revenue from construction activities is recognised in conformity with the revenue recognition principles of construction contracts. Revenue from exploitation activities depends on the availability of the underlying asset (PPP receivables). Due to the nature of the contractual arrangements the projected cash flows can be estimated with a high degree of certainty.
In case the concession payments depend on the availability of the underlying asset, revenue consists of:

  • The fair value of the contractually agreed upon services rendered; and
  • the interest income related to the capital expenditure in the project. 

Revenue is recognised in the period in which the related services are rendered. Interest is recognised in the income statement within ‘finance income’ in the period to which it relates.

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 Interest income

Interest 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. Interest income on impaired loan and receivables is recognised using the original effective interest rate.

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. There 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. These risks are not exceptional or different in nature from those that are customary in the industry. 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. 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. 

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 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 British 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 subordinated and 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 2015, 83 per cent (2014: 80 per cent) of the interest on the Group’s debt position was fixed. The part not covered consists almost entirely of project financing. 

If the interest rates (Euribor and Libor) had been an average of 100 basis points higher or lower during 2015, the Group’s net result after tax (assuming that all other variables remained equal) would have been approximately €0.3 million lower or approximately €2.1 million higher (2014: approximately €0.1 million lower or approximately €1.5 million higher). If the interest rates (Euribor and Libor) had been an average of 100 basis points higher or lower during 2015, the Group’s fair value cash flow hedge reserves in Group equity (assuming that all other variables remained equal) would have been approximately €24 million higher or approximately €24 million lower (2014: approximately €25 million higher or approximately €25 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

2015

2014

       

Non-current assets

     

PPP receivables

9

279,074

 303,978 

Non-current receivables

11

96,108

 82,320 

Derivative financial instruments

19

979

 229 

       

Current assets

     

Trade receivables – net

13

806,492

840,436

Retentions

13

126,142

 94,002 

PPP receivables

9

5,263

 3,948 

Other financial assets

11

6,726

 6,039 

Derivative financial instruments

19

6,200

 3,376 

Cash and cash equivalents

14

637,212

 624,330 

   

1,964,196

 1,958,658 

Non-current receivables predominantly concern loans granted to associates and joint ventures active in the sector Property. 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 2015 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

           

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 

-

Derivative financial instruments
(forward exchange contracts)

 (7,179)

 (259,286)

 (254,502)

 (4,784)

 - 

Derivative financial instruments
(forward exchange contracts)

 20,167 

 265,139 

246,833 

 18,306 

 - 

Derivative financial instruments
(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 

           

2014

         

Subordinated loan

124,500

145,054

7,763

137,291

-

Non-recourse PPP loans

205,985

304,683

141,319

35,748

127,616

Non-recourse property financing

160,578

170,608

66,631

103,111

866

Other non-recourse financing

9,351

10,403

1,299

4,357

4,747

Recourse PPP loans

63,760

69,291

26,447

36,171

6,673

Recourse property financing

70,695

74,301

33,269

40,796

236

Other recourse financing

6,937

8,305

944

3,556

3,805

Finance lease liabilities

22,319

23,069

9,539

13,242

288

Derivative financial instruments
(forward exchange contracts)

(3,605)

(388,848)

(270,802)

(118,046)

-

Derivative financial instruments
(forward exchange contracts)

11,821

384,607

271,078

113,529

-

Derivative financial instruments
(interest rate swaps)

44,160

65,391

12,557

28,486

24,348

Other current liabilities

820,637

820,637

820,637

-

-

 

1,537,138

1,687,501

1,120,681

398,241

168,579

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 €500 million (2014: €500 million) respectively
€153 million (2014: €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 loan (notes 17 and 18). At year-end 2015, the capital ratio was 21.2 per cent (2014: 19.2 per cent).

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

             

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 

             

2014

           

PPP receivables

9

 303,978 

 - 

 - 

 - 

 303,978 

Other financial assets

11

 84,885 

 - 

 - 

 - 

 84,885 

Derivative financial instruments

19

 - 

 - 

 3,605 

 - 

 3,605 

Trade and other receivables

13

 946,508 

 - 

 - 

 932,169 

 1,878,677 

Cash and cash equivalents

14

 624,330 

 - 

 - 

 - 

 624,330 

             

Borrowings

18

 - 

 664,125 

 - 

 - 

 664,125 

Derivative financial instruments

19

 - 

 - 

 55,981 

 - 

 55,981 

Trade and other payables

23

 - 

 820,637 

 - 

 2,032,769 

 2,853,406 

   

 1,959,701 

 1,484,762 

 59,586 

 2,964,938 

 6,468,987 

             

Of the sum of the balance sheet items of €6.5 billion at year-end 2015 (2014: €6.5 billion), 55 per cent (2014: 53 per cent) qualifies as financial instruments. 

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 bankers 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

A master netting agreement is applicable to a part of ‘cash and cash equivalents’. At 31 December 2015 a positive balance of €437 million has been offset against a negative balance of €111 million (2014: positive balance of €708 million offset against a negative balance of €377 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.

(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 received.

(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 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 to determine 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 may arise in case the actual future cash flows are less than expected.

5. Segment information

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

Revenue and results 

Construction and M&E services

Civil engineering

Property 

PPP

Other including eliminations 1

Total

2015

 

 

 

 

 

 

Construction contracts

 2,875,896 

 3,769,595 

 295,610 

 163,200 

 - 

 7,104,301 

Property development

 - 

 - 

 167,883 

 - 

 - 

 167,883 

Service concession arrangements

 74,803 

 - 

 - 

 22,178 

 - 

 96,981 

Services and other

 23,540 

 16,375 

 10,796 

 - 

 3,066 

 53,777 

Revenue from external customers

 2,974,239 

 3,785,970 

 474,289 

 185,378 

 3,066 

 7,422,942 

Sector revenue

 291,239 

 139,723 

 - 

 - 

 (430,962)

 - 

Revenue

 3,265,478 

 3,925,693 

 474,289 

 185,378 

 (427,896)

 7,422,942 

 

 

 

 

 

 

 

Operating result

 (21,788)

 43,824 

 (18,656)

 3,275 

 (17,347)

 (10,692)

Finance result

 3,877 

 5,209 

 (7,543)

 12,067 

 (2,605)

 11,005 

Share of result of investments

 1,269 

 1,446 

 7,283 

 3,030 

 - 

 13,028 

Result before tax

 (16,642)

 50,479 

 (18,916)

 18,372 

 (19,952)

 13,341 

Income tax

 

 

 

 

 

 (2,309)

Net result

 

 

 

 

 

 11,032 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

Construction contracts

 2,715,380 

 3,761,839 

 249,828 

 235,766 

 - 

 6,962,813 

Property development

 - 

 8,921 

 215,138 

 - 

 - 

 224,059 

Service concession arrangements

 60,201 

 - 

 - 

 21,725 

 - 

 81,926 

Services and other

 17,990 

 12,055 

 12,264 

 - 

 2,913 

 45,222 

Revenue from external customers

 2,793,571 

 3,782,815 

 477,230 

 257,491 

 2,913 

 7,314,020 

Sector revenue

 222,600 

 165,989 

 - 

 - 

 (388,589)

 - 

Revenue

 3,016,171 

 3,948,804 

 477,230 

 257,491 

 (385,676)

 7,314,020 

 

 

 

 

 

 

 

Operating result

 (36,326)

 (23,239)

 (54,734)

 23,481 

 (13,908)

 (104,726)

Finance result

 6,030 

 4,107 

 (6,493)

 13,918 

 (5,493)

 12,069 

Share of result of investments

 21 

 4,626 

 (14,504)

 (19,820)

 (106)

 (29,783)

Result before tax

 (30,275)

 (14,506)

 (75,731)

 17,579 

 (19,507)

 (122,440)

Income tax

 

 

 

 

 

 15,499 

Net result

 

 

 

 

 

 (106,941)

 

 

 

 

 

 

 

1 Including non-operating segments

 

 Balance sheet disclosures

Construction and M&E services

Civil engineering

Property 

PPP

Other including eliminations 1

Total

2015

           

Assets

 1,571,753 

 2,330,648 

 956,521 

 503,632 

 (604,357)

 4,758,197 

Investments

 2,952 

 9,401 

 70,866 

 8,796 

 2,037 

 94,052 

Total assets

 1,574,705 

 2,340,049 

 1,027,387 

 512,428 

 (602,320)

 4,852,249 

             

Liabilities

 1,210,368 

 1,766,965 

 1,239,327 

 358,162 

 (628,358)

 3,946,464 

Total equity

 - 

 - 

 - 

 - 

 905,785 

 905,785 

Total equity and liabilities

 1,210,368 

 1,766,965 

 1,239,327 

 358,162 

 277,427 

 4,852,249 

             

2014

           

Assets

 1,460,675 

 2,312,193 

 1,041,893 

 604,631 

 (558,015)

 4,861,377 

Investments

 1,927 

 9,979 

 73,888 

 7,144 

 1,669 

 94,607 

Total assets

 1,462,602 

 2,322,172 

 1,115,781 

 611,775 

 (556,346)

 4,955,984 

             

Liabilities

 1,125,462 

 1,812,914 

 1,315,086 

 482,908 

 (611,102)

 4,125,268 

Total equity

 - 

 - 

 - 

 - 

 830,716 

 830,716 

Total equity and liabilities

 1,125,462 

 1,812,914 

 1,315,086 

 482,908 

 219,614 

 4,955,984 

1 Including non-operating segments

 Other disclosures

Construction and M&E services

Civil engineering

Property

PPP

Other including eliminations 1

Total

2015

           

Additions to property, plant and equipment and intangible assets

 13,583 

 48,352 

 196 

 3 

 8,901 

 71,035 

Depreciation and amortisation charges

 15,438 

 49,793 

 788 

 9 

 4,499 

 70,527 

Impairment charges

 500 

 3,487 

 36,376 

 - 

 763 

 41,126 

Share of impairment charges in investments

 - 

 - 

 (2,040)

 - 

 - 

 (2,040)

             

Average number of FTE

 7,110 

 14,274 

 193 

 95 

 244 

 21,916 

Number of FTE at year-end

 7,099 

 13,658 

 189 

 90 

 212 

 21,248 

             

2014

           

Additions to property, plant and equipment and intangible assets

 14,540 

 40,968 

 652 

 8 

 3,113 

 59,281 

Depreciation and amortisation charges

 17,399 

 60,256 

 1,308 

 51 

 3,788 

 82,802 

Impairment charges

 1,000 

 511 

66,107

 - 

 - 

67,618

Share of impairment charges in investments

 - 

 - 

27,247

 20,993 

 - 

48,240

             

Average number of FTE

7,396

15,383

155

103

288

23,325

Number of FTE at year-end

7,214

15,383

146

98

296

23,137

1 Including non-operating segments

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

Construction and M&E services

Civil engineering

Property 

PPP

Other including eliminations 1

Total

2015

           

Netherlands 

 1,226,712 

 1,096,102 

 339,548 

 89,304 

 (276,413)

 2,475,253 

United Kingdom 

 1,193,422 

 1,138,539 

 55,414 

 16,709 

 (20,808)

 2,383,276 

Belgium 

 266,243 

 521,799 

 78,775 

 691 

 (32,503)

 835,005 

Germany

 512,022 

 285,425 

 - 

 4,291 

 (3,487)

 798,251 

Ireland

 - 

 279,156 

 552 

 74,383 

 (94,163)

 259,928 

Other countries

 67,079 

604,672

 - 

 - 

(522)

 671,229 

 

 3,265,478 

 3,925,693 

 474,289 

 185,378 

 (427,896)

 7,422,942 

             

2014

           

Netherlands 

 1,164,625 

 1,271,872 

 322,429 

 119,513 

 (226,639)

 2,651,800 

United Kingdom 

 1,041,935 

 1,113,928 

 77,710 

 16,029 

 (29,096)

 2,220,506 

Belgium 

 269,786 

589,958

 73,997 

 25,372 

 (41,561)

 917,552 

Germany

 493,098 

 289,477 

 - 

 3,436 

 1,206 

 787,217 

Ireland

 - 

 284,041 

 3,094 

 93,141 

 (85,921)

 294,355 

Other countries

 46,727 

 399,528 

 - 

 - 

 (3,665)

 442,590 

 

 3,016,171 

 3,948,804 

 477,230 

 257,491 

 (385,676)

 7,314,020 

1 Including non-operating segments

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

2015

2014

     

Netherlands

 2,171,428 

 2,262,260 

United Kingdom

 1,051,901 

 899,941 

Belgium

 557,575 

 614,477 

Germany

 536,912 

 530,099 

Ireland

 234,612 

 253,938 

Other countries

 829,279 

 871,031 

Other including eliminations

 (529,458)

 (475,762)

 

 4,852,249 

 4,955,984 

     

Capital expenditures 

2015

2014

     

Netherlands 

 37,633 

 27,276 

United Kingdom 

 8,103 

 5,525 

Belgium 

 4,408 

 7,521 

Germany

 11,012 

 10,116 

Ireland

 736 

 488 

Other countries

 9,143 

 8,355 

 

 71,035 

 59,281 

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

       

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 

       

2014

     

Land and building rights

-

420,330

420,330

Property development

-

402,446

402,446

Amounts due from customers

366,959

55,531

422,490

Assets

366,959

878,307

1,245,266

       

Non-recourse property financing

-

(160,578)

(160,578)

Recourse property financing 

-

(70,695)

(70,695)

Amounts due to customers 

(665,071)

(55,774)

(720,845)

Liabilities

(665,071)

(287,047)

(952,118)

       

As at 31 December

(298,112)

591,260

293,148

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

 

Construction 
contracts

Property 
development

Total

       

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)

       

2014

     

Costs incurred plus recognised results

13,303,614

180,598

13,484,212

Progress billings

(12,936,655)

(125,067)

(13,061,722)

Amounts due from customers

366,959

55,531

422,490

       

Costs incurred plus recognised results

8,615,849

484,742

9,100,591

Progress billings

(9,280,920)

(540,516)

(9,821,436)

Amounts due to customers

(665,071)

(55,774)

(720,845)

As at 31 December 2015 advance payments in connection with construction contracts and property development amount to €245 million (2014: €287 million) respectively €4 million (2014: €3 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 is stated below:

 

Non-current

Current

Total

2015

     

PPP receivables

 279,074 

 5,263 

 284,337 

(Non-) recourse PPP loans

 (233,035)

 (14,523)

 (247,558)

 

 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 

       

2014

     

PPP receivables

303,978

3,948

307,926

(Non-) recourse PPP loans

(239,227)

(30,518)

(269,745)

 

64,751

(26,570)

38,181

Net assets and liabilities

(9,172) 

772 

(8,400)

As at 31 December

55,579

(25,798)

29,781

7. Property, plant and equipment

 

Land and buildings

Plant and equipment

Construction in progress

Other assets

Total

As at 1 January 2014

         

Cost

206,157

599,417

11,501

125,657

942,732

Accumulated depreciation

(91,523)

(404,456)

-

(90,329)

(586,308)

 

114,634

194,961

11,501

35,328

356,424

           

Additions

11,269

29,266

1,008

14,793

56,336

Acquisition of subsidiaries

202

454

-

33

689

Disposals

(6,037)

(9,343)

(348)

(1,607)

(17,335)

Reclassifications

607

7,672

(10,201)

535

(1,387)

Impairment charges

(1,200)

-

-

-

(1,200)

Depreciation charges

(6,725)

(56,775)

-

(16,086)

(79,586)

Exchange rate differences

352

1,090

9

388

1,839

 

113,102

167,325

1,969

33,384

315,780

           

As at 31 December 2014

         

Cost

207,469

581,748

1,969

131,622

922,808

Accumulated depreciation

(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

 (92,742)

 (397,132)

 - 

 (83,930)

 (573,804)

 

 108,968 

 143,702 

 8,247 

 31,242 

 292,159 

Asset construction in progress mainly comprises plant and equipment.

The fair value of property, plant and equipment at year-end 2015 is €374 million (2014: €413 million).

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:

 

2015 

2014

     

Land and buildings

 6,000 

6,000

Furnitures, fixtures and equipment

 11,536 

20,649

Other assets

 23 

8

 

 17,559 

26,657

 8. Intangible assets

 

Goodwill

Non-integrated 
software

Other

Total

As at 1 January 2014

       

Cost

688,996

13,566

25,246

727,808

Accumulated amortisation

(295,679)

(9,081)

(19,765)

(324,525)

 

393,317

4,485

5,481

403,283

         

Additions

 504 

 2,258 

 183 

 2,945 

Disposals

 (3,280)

 - 

 (43)

 (3,323)

Reclassifications

 - 

 - 

 508 

 508 

Impairment charges

 - 

 - 

 (511)

 (511)

Amortisation charges

 - 

 (1,892)

 (1,324)

 (3,216)

Exchange rate differences

 9,491 

 - 

 73 

 9,564 

 

 400,032 

 4,851 

 4,367 

 409,250 

As at 31 December 2014

       

Cost

 697,435 

 15,526 

 25,285 

 738,246 

Accumulated amortisation

 (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

 (301,207)

 (12,686)

 (20,536)

 (334,429)

 

 406,133 

 7,130 

 2,789 

 416,052 

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. The organisational restructuring that the Group is 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.

The carrying amounts of goodwill allocated within BAM’s reportable segments are as follows:

 

2015

2014

     

Construction and M&E services

160,931

156,681

Civil engineering

229,232

227,381

Property

15,970

15,970

 

406,133

400,032

The increase of goodwill relates to the increase of the exchange rate of the British pound sterling compared to the prior year with an effect of approximately €9 million compensated by the goodwill impairment charge of approximately €3 million.

The impairment charge of €3.3 million arose in two CGUs in Belgium following a decision to significantly reduce the activities of these operations as the Group saw insufficient opportunities for further development. No class of assets other than goodwill was impaired.

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 (€73 million) and BAM Nuttall (€88 million) are deemed significant in comparison with the Group’s total carrying amount of goodwill. For each of these CGUs the key assumptions rate used in the value-in-use calculations are as follows:

 

            BAM Construct UK

            BAM Nuttall

 

2015

2014

2015

2014

         

Discount rate (post-tax)

8.3%

8.1%

8.3%

8.1%

Growth rate:

       

- In forecast period (average)

3.8%

4.0%

(1.1%)

0.4%

- Beyond forecast period

2.0%

2.0%

2.0%

2.0%

Profit before tax margin

       

- In forecast period (average)

2.0%

2.1%

2.2%

2.2%

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 carrying amount by approximately €314 million (2014: €298 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 carrying amount by approximately €197 million (2014: €173 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 Belgium, representing a goodwill amount of €16 million, with a limited headroom.

9. PPP receivables

 

2015 

2014 

     

As at 1 January 

 307,926 

411,383 

Receivables including interest issued 

 218,514 

248,693 

Disposals

 (144,941)

(207,899)

Progress billings

 (63,820)

(33,046)

Transfers to assets held for sale 

 (39,391)

(117,401)

Exchange rate differences

 6,049 

6,196 

As at 31 December 

 284,337 

307,926 

     

Analysis of PPP receivables:

2015 

2014 

     

Non-current

 279,074 

303,978 

Current

 5,263 

3,948 

 

 284,337 

307,926 

PPP receivables consist of the amounts receivable with regard to service concession arrangements in the Netherlands, Belgium, Germany, Ireland, United Kingdom and Switzerland (note 38). 

The decrease in receivables issued is related to the transfer of one project to assets held for sale and the divestment of two projects to the joint venture BAM PPP/PGGM partly compensated by progress on the construction of the PPP projects. 

The average duration of PPP receivables is 22 years (2014: 24 years). Approximately €272 million of the non-current part has a duration of more than five years (2014: €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 6.8 per cent (2014: 6.8 per cent). At year-end 2015, the fair value of the non-current part is approximately €322 million (2014: approximately €353 million). 

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:

 

2015

2014

     

Associates

 24,914

26,433

Joint ventures 

 69,138

68,174

As at 31 December

 94,052

94,607

10.1 Investment in associates

Set out below are the associates of the Group as at 31 December 2015 that are individually material to the Group.

Nature of investment in associates in 2015 and 2014:

 

Principal activity

Country of 
incorporation

  % Interest 

     

2015%

2014%

         

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

 

2015

2014

2015

2014

2015

2014

             

Current assets

 108,558 

 106,995 

 13,355 

 12,957 

 8,376 

 7,831 

Non-current assets

 861,161 

 889,175 

170,617

 179,685 

91,528

 96,259 

Current liabilities

 (21,727)

 (22,762)

(12,368)

 (12,085)

(7,305)

 (6,718)

Non-current liabilities

 (893,153)

 (923,936)

(171,142)

 (180,149)

(91,987)

 (96,775)

Net assets

 54,839 

 49,472 

 462

 408 

 612 

 597 

             

Revenue

 50,923 

 48,330 

578

 568 

920

 913 

Net result

 10,347 

 11,055 

 51 

 46 

 20 

 22 

             

Net assets

 54,839 

 49,472 

 462 

 408 

 612 

 597 

Share in equity

10.54%

10.54%

33.33%

33.33%

25.00%

25.00%

Carrying amount

 5,780 

 5,214 

 154 

 136 

 153 

 149 

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.

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.

 

2015

2014

     

Share in net result

1,846

 8,542 

Share in equity

5,196

 6,141 

The Group’s share in the net result of associates includes a reversal of impairment amounting to €1 million (2014: nil).

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

 

2015

2014

     

Share in equity associates that are material to the Group

 6,087 

 5,500 

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

 5,196 

 6,141 

 

 11,283 

 11,641 

Recognised as provision for associates

 122 

 969 

Recognised as impairment of non-current receivables

 13,509 

 13,823 

 

 24,914 

 26,433 

Dividend received from associates amounts to €5.8 million in 2015 (2014: €3.8 million). Cash and cash equivalents of a number of associates are subject to restrictions. These restrictions mainly concerns 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 2015 that is individually material to the Group.

Nature of investment in the joint venture in 2015 and 2014:

 

Principal activity

Country of
incorporation

    % Share 

     

2015   

2014   

         

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.

 

2015

2014

     

Current assets

 89,712 

 81,315 

Non-current assets

 1,028,237 

 787,233 

Current liabilities

 (242,707)

 (62,384)

Non-current liabilities

 (1,034,736)

 (970,911)

Net assets

 (159,494)

 (164,747)

     

Of which:

   

Cash and cash equivalents

 75,003 

 50,258 

Current financial liabilities

 (25,298)

 (21,360)

Non-current financial liabilities

 (1,028,129)

 (970,911)

     

Revenue

 41,093 

 40,458 

Net result

 5,105 

 6,981 

Other comprehensive income

 17,912 

 (30,615)

     

Of which:

   

Finance income

 62,073 

 46,180 

Finance expense

 (57,576)

 (43,097)

Income tax

 (4,222)

 (894)

     

Net assets

 (159,494)

 (164,748)

Share in profit rights

20%

20%

Carrying amount

 (31,899)

 (32,950)

Negative cash flow hedge reserve not recognised

 9,126 

 10,046 

Share in equity

 (22,773)

 (22,904)

The Group’s share in the joint venture BAM PPP/PGGM is based on its share in the members’ capital. Contractually, the Group has a 20 per cent share in profit rights. 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 2015 €1 million reversal (2014: €8 million) of losses was not recognised. At year-end 2015 unrecognised losses amounted to €9 million (2014: €10 million).

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

 

2015

2014

     

Share in net result property development joint ventures

 7,417 

 (19,362)

Share in net result other joint ventures

 1,629 

 (21,455)

Share in equity property development joint ventures

 21,912 

 8,551 

Share in equity other joint ventures

 (47,605)

 (49,262)

Revenue of property development joint ventures amounts to €94 million (2014: €80 million) and property development recognised in the balance sheet amounts to €134 million (2014: €149 million) of which an amount of €72 million (2014: €104 million) externally financed (share of the Group).

The Group’s share in the net result of joint ventures includes a reversal of impairment amounting to €1 million (2014: €48 million charge).

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

 

2015

2014

     

Share in equity joint venture BAM PPP/PGGM

 (22,773)

 (22,904)

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

 21,912 

 8,551 

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

 (47,605)

 (49,262)

 

 (48,466)

 (63,615)

     

Recognised as provision joint ventures

 21,151 

 34,306 

Recognised as impairment non-current receivables

 96,453 

 97,483 

 

 69,138 

 68,174 

Dividend received from joint ventures amounts to €7.5 million in 2015 (2014: €7.7 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 2014

 

127,891

4,027

131,918

Loans granted 

 

72,572

-

72,572

Loan repayments

 

(42,199)

-

(42,199)

Additions

 

-

33 

33

Disposals

 

-

(1,495)

(1,495)

Impairment charges

25

(11,446)

-

(11,446)

Reclassifications

 

(57,896)

-

(57,896)

Exchange rate differences

 

(563)

-

(563)

   

88,359

2,565

90,924

Of which current:

 

(6,039)

-

(6,039)

As at 31 December 2014

 

82,320

2,565

84,885

         

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 

The fair value of non-current receivables at year-end 2015 amounts to €124 million (2014: €109 million).
The effective interest rate is 1.9 per cent (2014: 2.2 per cent).

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

12. Inventories

 

2015 

2014

     

Land and building rights

 429,299 

 420,330 

Property development

 310,912 

 402,446 

 

 740,211 

 822,776 

Raw materials

 16,169 

 18,076 

Finished products

 2,358 

 2,271 

 

 758,738 

 843,123 

Land and building rights are considered to be non-current by nature within the ordinary course of business. The majority of the investments in property development is considered to be current by nature.

Movements of cumulative impairments in the property portfolio is as follows:

 

Notes

2015

2014

       

As at 1 January

 

 458,640 

 404,179 

Impairments charges

25

 37,325 

 59,706 

Reversal of impairment charges

25

 - 

 (5,245)

As at 31 December

 

 495,965 

 458,640 

Property development includes the following completed and unsold property:

 

2015

 

2014

Unsold and finished property

Number/m²

Carrying

amount

 

Number/m²

Carrying

amount

           

Houses ¹

 84 

 19,236 

 

 103 

 20,418 

Commercial property - rented

 52,845 

 88,080 

 

 54,287 

 92,130 

Commercial property - unrented

 26,712 

 21,954 

 

 28,265 

 45,409 

   

 129,270 

   

 157,957 

           

¹  Of which 64 houses (2014: 72 houses) rented in anticipation of sale

         

Other inventories were not subject to write-down in 2015 nor 2014.

13. Trade and other receivables

 

Notes

2015

2014

       

Trade receivables

 

 831,728 

 865,881 

Less: Provision for impairment of receivables

 

 (25,236)

 (25,445)

Trade receivables - net

 

 806,492 

 840,436 

Amounts due from customers

6

 425,690 

422,490

Amounts due from related parties

36

 5,353 

 9,349 

Retentions

 

 126,142 

 94,002 

Amounts to be invoiced work completed

 

 71,651 

 66,773 

Amounts to be invoiced work in progress

 

 245,789 

244,197

PPP receivables

9

 5,263 

 3,948 

Other financial assets

 

 7,994 

 8,122 

Other receivables

 

 73,856 

85,939

Prepayments

 

 123,546 

 103,421 

   

 1,891,776 

 1,878,677 

Trade and other receivables are due within one year, except for approximately €19 million (2014: €21 million). The fair value of this non-current part is approximately €18 million (2014: approximately €21 million) using an effective interest rate of 0.4 per cent (2014: 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 2015 a part of the trade receivables amounting to €173 million (2014: €166 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: 

 

2015 

 

2014 

 

Trade 
receivables 

Provision for impairment

 

Trade
receivables

Provision for
impairment

           

Not past due

 431,587 

 (104)

 

 518,625 

(501)

Up to 3 months 

 165,836 

 (1,484)

 

 127,445 

(2,684)

3 to 6 months 

 36,478 

 (957)

 

 27,924 

(1,174)

6 to 12 months 

 24,438 

 (1,135)

 

 26,149 

(4,054)

1 to 2 years 

 21,455 

 (1,152)

 

 76,330 

(9,161)

Over 2 years

151,934

 (20,404)

 

 89,408 

(7,871)

 

831,728

 (25,236)

 

 865,881 

(25,445)

           

Less: Provision for impairment of receivables

 (25,236)

   

 (25,445)

 

Trade receivables - net

 806,492 

   

 840,436 

 

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

 

2015

2014

     

As at 1 January

 25,445

 16,588 

Provision for impairment

 16,691 

 16,925 

Unused amounts reversed

 (6,601)

 (5,079)

Receivables written off during the year as uncollectible

(10,466)

 (4,542)

Disposals

 - 

 (406)

Reclassifications

155

 1,929 

Exchange rate differences

12

 30 

As at 31 December

25,236 

 25,445 

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

 

2015

2014

     

Cash at bank and in hand

618,381

 623,457 

Short-term bank deposits

18,831

 873 

Cash and cash equivalents (excluding bank overdrafts)

637,212

 624,330 

Cash and cash equivalents are at the free disposal of the Group. The short-term bank deposits ultimately mature 7 March 2016. 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 €181 million (2014: €163 million) respectively €8 million (2014: €21 million).

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:

 

2015

2014

     

Cash and cash equivalents

637,212 

624,330

Bank overdrafts

(3)

-

Net cash position

637,209 

624,330

The average effective interest on short-term bank deposits is 1.3 per cent (2014: 6.4 per cent). The deposits have an average remaining term to maturity of approximately 43 days (2014: approximately 17 days).

15. Share capital

 

Number of
ordinary
shares

Number of
treasury
shares

Number of
ordinary
shares
in issue

 

Ordinary
shares

Share
premium

Total

               

As at 1 January 2014

 269,424,089 

 - 

269,424,089

 

26,942

806,326

833,268

Dividends

 1,574,868 

 - 

1,574,868

 

157

5,886

6,043

As at 31 December 2014

 270,998,957 

 - 

270,998,957

 

27,099

812,212

839,311

               

Repurchase of ordinary shares

 - 

 604,975 

 (604,975)

 

 - 

 - 

 - 

As at 31 December 2015

 270,998,957 

 604,975 

 270,393,982 

 

 27,099 

 812,212 

 839,311 

15.1 General

At year-end 2015, the authorised capital of the Group was 400 million ordinary shares (2014: 400 million) and 600 million preference shares (2014: 600 million), all with a nominal value of €0.10 per share (2014: €0.10 per share).
All issued shares have been paid in full.

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. 

In 2014, the number of issued ordinary shares increased by 1,574,868 due to dividend payment in shares. 

16. Reserves

 

Hedging

Remeasure-
ments of post-
employment
benefits

Translation

Total

         

As at 1 January 2014

(119,174)

(213,420)

(78,882)

(411,476)

         

Reclassification to the income statement due to divestment

       

 - Fair value of cash flow hedge

81,699

-

-

81,699

 - Tax on fair value of cash flow hedge

(26,239)

-

-

(26,239)

         

Cash flow hedges

       

- Fair value movement

(27,188)

-

-

(27,188)

- Tax on fair value movement

9,700

-

-

9,700

         

Remeasurements of post-employment benefit obligations

       

- Movement in remeasurements

-

(59,697)

-

(59,697)

- Tax on movement in remeasurements

-

10,540

-

10,540

Exchange rate differences

-

-

25,211

25,211

 

37,972

(49,157)

25,211

14,026

         

As at 31 December 2014

(81,202)

(262,577)

(53,671)

(397,450)

         

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)

         

Remeasurements of post-employment benefit obligations

       

- Movement in remeasurements

-

47,579

-

47,579

- Tax on movement in remeasurements

-

(10,553)

-

(10,553)

Exchange rate differences

 - 

 - 

 26,243 

 26,243 

 

 4,094 

 37,026 

 26,243 

 67,363 

         

As at 31 December 2015

 (77,108)

 (225,551)

 (27,428)

 (330,087)

Of the positive movement in the hedge reserve in 2015, €3 million is a consequence of disposals and settlements of existing contracts. In addition, the hedge reserve is positively affected with €1 million due to the fact that the long-term interest in 2015 is higher than in 2014. In 2015, the hedging reserve includes a negative amount of €5 million with regard to assets held for sale. 

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 €39 million (2014: €39 million) in the hedging reserve relates to joint ventures. 

The positive movement in the reserve for remeasurements of post-employments benefits is linked to adjustments in financial assumptions. This reserve will not be reclassified to the income statement.

The positive movement in the translation reserve in 2015 is linked to the increase in the value of the pound sterling, consistent with 2014. 

17. Capital base

 

2015

2014

     

Equity attributable to the shareholders of the Company

902,147

 827,394

Subordinated loan

124,335

 124,500

 

1,026,482

951,894

18. Borrowings

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 

       

2014

Non-current

Current

Total

       

Subordinated loan 1

 125,000 

 (500)

 124,500 

Non-recourse PPP loans

 200,221 

 5,764 

 205,985 

Non-recourse property financing

 98,132 

 62,446 

 160,578 

Other non-recourse financing

 7,844 

 1,507 

 9,351 

Recourse PPP loans 

 39,006 

 24,754 

 63,760 

Recourse property financing 

 48,324 

 22,371 

 70,695 

Finance lease liabilities 

 13,570 

 8,749 

 22,319 

Other recourse financing

 6,695 

 242 

 6,937 

 

 538,792 

 125,333 

 664,125 

       

Up to 1 year

   

 125,333 

1 to 5 years

   

 466,441 

Over 5 years

   

 72,351 

     

 664,125 

1  After deduction of amortised finance costs.

18.1 Subordinated loan

The principal sum of the subordinated loan amounts to €125 million (2014: €125 million) with a duration to 30 July 2017. The loan has been extended in 2015 for one year to 30 July 2018 for an amount of €108 million. Interest payments are not subordinated. The subordinated loan has an interest rate that is based on the  Group’s recourse leverage ratio and is equal to Euribor plus a margin, which can vary between a minimum of 400 and a maximum of 675 basis points until 30 July 2017, after which a minimum of 550 and a maximum of 825 basis points is applicable. At year-end 2015, the margin was 400 basis points (2014: 450 basis points).

To hedge the interest risk on the subordinated loan, interest rate swaps were contracted with a duration to 30 July 2017. The interest rate swaps fix Euribor at 1.7 per cent (2014: 1.7 per cent). Including the margin and the amortised borrowing costs, the interest for the subordinated loan amounts to 6.3 per cent (2014: 6.5 per cent).

The subordinated loan will be contractually repaid in July 2017 for an amount of €17 million and in July 2018 for an amount of €108 million.

18.2 Committed syndicated credit facility

The committed revolving credit facility has a size of €500 million and a maturity date of 30 January 2018. As at 30 January 2016 the level of the credit facility will be reduced to €442.5 million, and to € 412.5 million as at 30 January 2017. 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 2015, the Group did not use the facility (2014: not used).

As at 30 June 2015 the Group did not use the facility (30 June 2014: €185 million). Variable interest rates apply to the draw-downs on this facility with a margin between 175 and 300 basis points. As at 31 December 2015 the margin was 175 basis points (2014: 200 basis points).

18.3 Non-recourse PPP loans

These relate to PPP projects in the Netherlands, the United Kingdom, Belgium and Ireland. Of the non-current part, approximately €110 million has a term to maturity of more than five years (2014: approximately €65 million). The average term to maturity of the PPP loans is 18 years (2014: 21 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 6.4 per cent (2014: 7.3 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 €256 million in total (2014: €308 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.

18.4 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 2.1 years (2014: approximately 2.3 years).

Interest on these loans is based on Euribor/Libor 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 €60 million (2014: €60 million).

The carrying amount of the related assets is approximately €175 million at year-end 2015 (2014: approximately €200 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.

18.5 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 1.8 years (2014: approximately 1.8 years).

18.6 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 1.8 years (2014: approximately 1.6 years).

Interest on these loans is based on Euribor/Libor 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 €42 million (2014: €43 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 €115 million at year-end 2015 (2014: approximately €94 million). Additional securities exist in the form of a guarantee provided by the Group, in several 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.

18.7 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:

 

2015

2014

     

Up to 1 year

4,684

9,330

1 to 5 years

10,433

14,121

Over 5 years

-

195

 

15,117

23,646

Future finance charges on financial leases

(666)

(1,327)

Present value of financial lease liabilities

14,451

22,319

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

 

2015

2014

     

1 to 5 years

9,973

13,404

Over 5 years

-

166

 

9,973

13,570

Up to 1 year

4,478

8,749

 

14,451

22,319

18.8 Other financing

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

18.9 Bank overdrafts

In addition to the non-current committed syndicated credit facility (note 18.2), the Group holds €153 million in bilateral credit facilities (2014: €153 million). At year-end 2015 as well as 2014 these facilities were not utilised.

18.10 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 2015 as a result of not adhering to the financing conditions of project related financing.

Terms and conditions for the subordinated loan and the committed syndicated credit facility are based on the Group as a whole, excluding non-recourse elements. The ratios for these financing arrangements (all recourse) are the leverage ratio, the interest cover, the solvency ratio and the guarantor covers. The Group complied with all ratios in 2015.

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

 

Calculation

Requirement

2015

2014

         

Leverage ratio

Net borrowings/EBITDA

≤ 2.50

 (2.55)

(2.78)

Interest cover

EBITDA/net interest expense

≥ 4.00

 8.88 

6.84

Solvency ratio

Capital base/total assets

≥ 15%

29.3%

28.3%

Guarantor covers

EBITDA share of guarantors

≥ 60%

72%

73%

 

Assets share of guarantors

≥ 70%

96%

91%

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. In addition, capital base (as part of the solvency ratio) is adjusted for the hedging reserve and remeasurements of post-employments benefits, among other things.

18.11 Other information

The Group’s subordinated loan is part of the capital base. Repayment obligations are subordinated to not subordinated obligations. The requested return of this loan relates to the margins of the debt capital market to a (very) limited extent only. 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 the loans do not differ significantly from their fair values. 

The effective interest rates are as follows:

 

2015

   

2014

 
   

Pound
sterling

   

Pound
sterling

 

Euro

   

Euro

 
           

Subordinated loan

6.3%

-

 

6.5%

-

Committed syndicated credit facility

1.9%

-

 

2.2%

-

Non-recourse PPP loans

6.2%

6.9%

 

7.5%

6.8%

Non-recourse property financing

2.9%

4.8%

 

2.9%

3.8%

Recourse PPP loans

3.6%

-

 

4.2%

-

Recourse property financing

2.7%

-

 

2.6%

-

Finance lease liabilities

3.6%

-

 

3.9%

-

Other non-recourse financing

3.1%

-

 

3.0%

-

Other recourse financing

3.2%

-

 

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

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

         

Total borrowings

 125,333 

 466,441 

 72,351 

 664,125 

Fixed interest rates

 (43,494)

 (153,063)

 (13,558)

 (210,115)

Hedged with interest rate swaps

 (21,413)

 (241,217)

 (58,081)

 (320,711)

As at 31 December 2014

 60,426 

 72,161 

 712 

 133,299 

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

 

2015

2014

     

Euro

 516,923 

 583,013 

Pound sterling

 80,399 

 81,112 

 

 597,322 

 664,125 

19. Derivative financial instruments

 

 2015  

 

 2014  

 

Assets

Liabilities

Fair value

 

Assets

Liabilities

Fair value

               

Interest rate swaps

 - 

 30,521 

 (30,521)

 

 - 

 44,160 

 (44,160)

Forward exchange contracts

 7,179 

 20,167 

 (12,988)

 

 3,605 

 11,821 

 (8,216)

 

 7,179 

 50,688 

 (43,509)

 

 3,605 

 55,981 

 (52,376)

               

Of which current:

 6,200 

 16,749 

 (10,549)

 

 3,376 

 8,269 

 (4,893)

19.1 Interest rate swaps

At year-end 2015, interest rate swaps are outstanding to hedge the interest rate risk on the subordinated loan, the (non-) recourse PPP loans and a number of property financing loans with a variable interest rate. Total borrowings amount to €597 million (2014: €664 million), of which an amount of €464 million (2014: €454 million) carries a variable interest rate. Of the borrowings with a variable interest rate an amount of €364 million (2014: €321 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 €31 million negative (2014: €44 million negative). Except for one interest rate swaps (2014: two), the duration exceeds one year. The maximum duration of the derivative financial instruments is 27 years.

The fixed interest rates of these swaps vary from 0.6 per cent to 6.3 per cent at year-end 2015 (2014: 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 2015, all recognised derivative financial instruments provide an effective compensation for movements in cash flows from the hedged positions. Therefore, the movements in 2015 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 2015 were €251 million (2014: €369 million). The fair value amounts to €13.0 million negative (2014: €8.2 million negative).

The terms to maturity of these contracts are up to a maximum of 1 year for the amount of €234 million (2014: €263 million), between 1 and 2 years for the amount of €17 million (2014: €95 million) and between 2 to 4 years nil (2014: €11 million).

20. Employee benefits

 

2015

2014

     

Defined benefit asset

 74,684 

17,786

     

Defined benefit liability

 121,335 

157,886

Other employee benefits obligations

 30,396 

29,321

 

 151,731 

187,207

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. As stipulated in 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 covered by external insurance companies and relates to defined contribution schemes. 

At year-end 2015, the (twelve-month average) coverage rate of the industry pension fund for construction is 111 per cent (2014: 115 per cent). The industry pension fund for metal & technology has a coverage rate of 99 per cent at year-end 2015 (2014: 103 per cent). The coverage rate of the industry pension fund for railways is 109 per cent (2016: 116 per cent). 

With effect from 2006, a 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 2015, the Group decided, while taking into account the employee representation bodies, to decrease the BAM supplementary scheme, resulting in a net one-off gain amounting to €2.8 million. In addition, a group of active participants turned inactive during 2015 and were transferred to the part of the insurance contract not classified as a defined benefit scheme. This resulted in a settlement without a result impact.

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 and future accumulation in the schemes was closed at the end of October 2010. 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 at 1 January 2012 and led to supplementary contributions in 2015 to the amount of approximately €36 million (2014: €25 million).

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 2014 nor 2015.

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.

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.

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

 

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)

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 

 (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)

 

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

Total

             

As at 31 December 2014

           

Defined benefit liability 

 48,646 

 3,486 

 1,404 

 61,001 

 43,349 

 157,886 

Defined benefit asset

 - 

 17,786 

 - 

 - 

 - 

 17,786 

 

 48,646 

 (14,300)

 1,404 

 61,001 

 43,349 

 140,100 

             

Present value of obligation

           

As at 1 January 2014

376,020

773,365

2,571

69,987

90,540

1,312,483

Service cost

1,740

-

38

386

1,510

3,674

Interest expense

13,360

36,082

72

2,241

3,558

55,313

Remeasurements

99,682

108,159

451

11,164

34,131

253,587

Plan participants contributions 

233

-

8

-

544

785

Benefit payments

(9,818)

(34,215)

-

(4,056)

(6,561)

(54,650)

Changes and plan amendments

(22)

-

-

-

(1,081)

(1,103)

Disposals

-

-

(4)

-

-

(4)

Exchange rate differences

-

54,849

-

-

-

54,849

As at 31 December 2014

481,195

938,240

3,136

79,722

122,641

1,624,934

             

Fair value of plan assets

           

As at 1 January 2014

334,294

769,366

1,579

19,240

73,914

1,198,393

Interest income 

12,013

36,422

46

603

2,946

52,030

Remeasurements 

86,963

101,899

56

493

4,477

193,888

Employer contributions

9,884

25,820

53

2,548

4,387

42,692

Plan participants contributions 

233

-

8

-

544

785

Benefit payments

(9,818)

(34,215)

-

(4,056)

(6,561)

(54,650)

Administration cost

(1,023)

(1,853)

(6)

-

-

(2,882)

Changes and plan amendments

-

-

-

-

(415)

(415)

Disposals

3

-

(4)

(107)

-

(108)

Exchange rate differences

-

55,101

-

55,101

As at 31 December 2014

432,549

952,540

1,732

18,721

79,292

1,484,834

             

Present value of obligation 

 481,195

938,240

3,136

79,722

122,641

1,624,934

Fair value of plan assets

432,549

952,540

1,732

18,721

79,292

1,484,834

As at 31 December 2014

48,646

(14,300)

1,404

61,001

43,349

140,100

             

Amounts recognised in the income statement

           

Service cost 

1,740

-

38

386

1,510

3,674

Net interest expense

1,347

(340)

26

1,638

612

3,283

Changes and plan amendments 

(22)

-

-

-

(666)

(688)

Administration cost

1,023

1,853

6

-

-

2,882

 

4,088

1,513

70

2,024

1,456

9,151

             

Amounts recognised in other comprehensive income

           

Remeasurements:

           

- Return on plan assets, excluding interest income

(86,963)

(101,899)

(56)

(493)

(4,477)

(193,888)

- (Gain)/loss from change in demographic assumptions

(3,820)

205

-

(1)

(1,477)

(5,093)

- (Gain)/loss from change in financial assumptions

107,320

46,312

499

10,688

36,513

201,332

- Experience (gains)/losses 

(3,818)

61,642

(48)

477

(905)

57,348

Exchange rate differences

-

(2 )

-

-

(2)

 

12,719

6,258

395

10,671

29,654

59,697

Income tax

(3,180)

(1,243)

(135)

(2,232)

(3,444)

(10,234)

Remeasurements, net of tax

9,539

5,015

260

8,439

26,210

49,463

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

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

           

Average duration (in years)

15

24

12

13

24

The significant actuarial assumptions per country were as follows:

 

Netherlands

United
Kingdom

Belgium

Germany

Ireland

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%

           

2014

         

Discount rate

1.90%

3.70%

1.40%

2.10%

2.20%

Salary growth rate

0 - 1.90%

2.05 - 3.40%

1.90%

2.00%

2.25%

Pension growth rate

0 - 2.00%

2.05 - 3.10%

-

2.00%

0 - 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 €115 million (increase by approximately €140 million).
  • If the expected salary increase is 0.5 per cent higher (lower), the pension liability will increase by approximately €14 million (decrease by approximately €7 million).
  • If the expected indexation is 0.5 per cent higher (lower), the pension liability will increase by approximately €61 million (decrease by approximately €51 million). 
  • If the life expectancy increases (decreases) by 1 year, the pension liability will increase by approximately €30 million (decrease by approximately €24 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

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 

             

2014

           

Equity instruments (quoted)

-

314,555

-

-

47,799

362,354

Debt instruments (quoted)

-

482,097

-

-

28,614

510,711

Property (quoted)

-

32,007

-

-

2,513

34,520

Qualifying insurance policies (unquoted)

432,549

-

1,732

18,721

367

453,369

Cash and cash equivalents

-

123,880

-

-

-

123,880

 

432,549

952,539

1,732

18,721

79,293

1,484,834

Plan assets do not include the Company’s ordinary shares. The Group applies IAS 19.104 for the valuation of the plan assets in the Netherlands 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 2016 are expected to be significantly lower than 2015.

21. Provisions

 

Warranty

Restructuring

Rental
guarantees

Associates and
joint
 ventures

Other

Total

             

As at 1 January 2015

 67,083 

 56,876 

 5,265 

 35,275 

 22,251 

 186,750 

Charged/(credited) to the income statement:

           

 - Additional provisions

 15,691 

 40,075 

 142 

 1,435 

 4,102 

 61,445 

 - Unused amounts reversed

 (5,295)

 (12,095)

 - 

 (311)

 (633)

 (18,334)

Used during the year

 (13,652)

 (43,622)

 (1,853)

 (15,126)

 (5,436)

 (79,689)

Reclassifications

 (931)

 - 

 - 

-

 931 

 - 

Other movements

 - 

 - 

 - 

-

 6 

 6 

Exchange rate differences

 - 

 - 

 - 

 13 

 13 

As at 31 December 2015

 62,896 

 41,234 

 3,554 

 21,273 

 21,234 

 150,191 

Provisions are classified in the balance sheet as follows:

 

2015

2014

     

Non-current

 84,933 

 114,638 

Current

 65,258 

 72,112 

 

 150,191 

 186,750 

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 27 per cent of the provision is current in nature (2014: approximately 31 per cent).

The provision for restructuring concerns the best estimate of the expenditure associated with reorganisation plans already initiated. Approximately 87 per cent of the provision is current in nature (2014: approximately 82 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 2015 mainly relate to the Back in Shape programme and other restructurings predominantly in the Netherlands.

The provision for rental guarantees consists of commitments arising from rental guarantees issued to third parties (predominantly in Germany), taking into account expected income from subleases. These obligations in Germany relate to two properties. Approximately 55 per cent of the provision is current in nature (2014: nil). 

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 €0.1 million (2014: €1.0 million) relates to associates and €21.2 million (2014: €34.3 million) to joint ventures. 

Other provisions include the dividend guarantee amounting to of €8.5 million (2014: €9.2 million) in connection with the disposal of the Group’s interest in Van Oord in 2011. Amounts provided for the liquidation of the old project development activities, claims and legal obligations in Germany and continuing rental commitments resulting from (temporarily) unused premises are also included. Approximately 59 per cent of the provision is current in nature (2014: approximately 15 per cent).

The non-current part of the provisions has been discounted at an interest rate of approximately 3 per cent (2014: approximately 3 per cent).

22. Deferred tax assets and liabilities

 

2015

2014

Deferred tax assets:

   

- To be recovered after more than twelve months

 245,145 

 235,946 

- To be recovered within twelve months

 6,570 

 6,546 

 

 251,715 

 242,492 

Deferred tax liabilities:

   

- To be recovered after more than twelve months

 20,454 

 19,806 

- To be recovered within twelve months

 10,505 

 6,100 

 

 30,959 

 25,906 

     

Deferred tax liabilities (net)

 (220,756)

 (216,586)

     

The gross movement on the deferred income tax account is as follows:

   
     
 

2015

2014

     

As at 1 January

 (216,586)

 (177,632)

Income statement charge/(credit)

 (17,247)

 (27,062)

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

 11,427 

 (13,242)

Change of income tax rate

 (125)

 30 

Transfer to assets/liabilities held for sale

 1,635 

1,190 

Exchange differences

 140 

 130 

As at 31 December

 (220,756)

 (216,586)

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

Fair value
gains

Employee 
benefit 
obligations

Other

Total

             

Deferred tax assets

           
             

As at 1 January 2014

2,077

172,466

12,448

18,184

46,256

251,431

(Charged)/credited to the income statement

111

 37,303 

 78 

 (3,447)

 (23,876)

 10,169 

(Charged)/credited to other comprehensive income

 - 

 - 

 2,023 

 10,356 

 - 

 12,379 

Changes in enacted tax rates

 - 

 - 

 - 

 (30)

 - 

 (30)

Transfer to assets held for sale

-

-

(1,190)

-

-

(1,190)

Reclassifications

 -

 (4,000)

 - 

 - 

 4,000 

 - 

Exchange rate differences

 124 

 - 

 196 

 105 

 178 

 603 

As at 31 December 2014

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 

 

 

Construction
 contracts

Accelerated
 tax
 depreciation

Fair value
gains

Employee
 benefit 
assets

Other

Total

             

Deferred tax liabilities

           
             

As at 1 January 2014

38,802

13,147

779

1,505

19,566

73,799

Charged/(credited) to the income statement

 (18,190)

 525 

 - 

 2,676 

 (1,904)

 (16,893)

Charged/(credited) to other comprehensive income

 - 

 - 

 (83)

 (780)

 - 

 (863)

Exchange rate differences

 - 

 577 

 1 

 155 

 - 

 733 

As at 31 December 2014

 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 

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 2015 amount to approximately €985 million (2014: €895 million). These unused tax losses relate to the years 2009 up to and including 2015 and include an amount of €395 million (2014: €395 million) owing to the liquidation of old property development activities in Germany. The increase in the unused tax losses in 2015 is mainly caused by the impairments on property as well as the restructuring costs incurred as part of the Back in Shape programme. 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 €815 million (2014: €765 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. The estimated financial impact of the Back in Shape programme which includes the changes in the organisation structure and the corresponding changes in activities that take place at the Group, has been taken into account in the forecasted taxable profits.

Tax losses to a minimum of €567 million (2014: €635 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 (2014: €44 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

2015 

2014 

       

Trade payables

 

 903,640 

 816,490 

Amounts due to customers

6

 714,428 

 720,845 

Amounts due to related parties

36

 35,506 

 46,387 

Social security and other taxes

 

 118,622 

 147,617 

Pension premiums

 

 8,224 

10,672 

Invoices due for work completed

 

 147,233 

 146,434 

Invoices due for work in progress

 

 571,698 

 540,412 

Other financial liabilities

 

 3,372 

 4,147 

Other liabilities

 

 150,137 

164,257 

Accrued expenses and deferred income

 

242,961 

 256,145 

   

 2,895,821 

 2,853,406 

24. Employee benefit expenses

 

Notes

2015 

2014 

       

Wages and salaries

 

 1,095,178 

 1,174,242 

Social security costs

 

 173,097 

 219,779 

Pension costs - defined contribution plans

 

 80,578 

 85,374 

Pension costs - defined benefit plans

20

 7,922 

 9,151 

Other post-employment benefits

 

 1,659 

 2,015 

   

 1,358,434 

 1,490,561 

Wages and salaries include restructuring costs and other termination benefits of €21.5 million (2014: €50.4 million).

At year-end 2015, the Group had 21,248 employees in FTE (2014: 23,137). The average number of employees in FTE amounted to 21,916 (2014: 23,325).

25. Impairment charges

 

2015 

2014

     

Property, plant and equipment

1,452 

1,200

Intangible assets

3,298 

511

Other financial assets

(949)

11,446

Inventories

37,325 

54,461

Impairment charges

41,126 

67,618

Share of impairment charges in investments

(2,040)

48,240

 

39,086 

115,858

In 2015, impairment charges in connection with inventories relating to land and building rights are €23 million and €14 million to commercial property development. Impairment charges in connection with inventories in 2014 solely related to land and building rights. The share in the reversal of impairment charges in investments 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

2015 

2014

       

Impairment charges

25

39,086 

115,858

Restructuring costs

21

27,980 

 60,178

Pension one-off

20

(2,815)

 - 

Other exceptional costs

 

10,588 

 8,614

   

74,839 

184,650

Other exceptional costs consist of consultancy fees of €11 million (2014: €9 million) directly related to the Back in Shape programme and have been included in ‘other operating expenses’ in the income statement.

27. Audit fees

The total fees for the audit of the consolidated financial statements 2015 amount to €4.6 million (2014: €4.3 million).

Expenses for services provided by the Company’s independent auditor, PricewaterhouseCoopers Accountants N.V. (‘PwC’) and its member firms to the Group are specified as follows:

 

2015 

 

2014 

 

PwC 

Member
firms

Total

 

PwC 

Member
firms

Total

               

Audit fees

  3,084 

 713 

 3,797 

 

 2,835 

 727 

 3,562 

Audit-related fees

 443 

 468 

911

 

 377 

 432 

 809 

Tax advisory fees

 58 

 158 

 216 

 

 93 

 69 

 162 

Other non-audit fees

 10 

 201 

 211 

 

 92 

 329 

 421 

     

 5,135 

     

 4,954 

28. Finance income and expense

 

2015 

2014 

Finance income

   

- Interest income - cash at banks

 2,348 

 3,178 

- Interest income - other financial assets

 1,925 

 2,475 

- Interest income - PPP receivables

 23,077 

 30,231 

- Other finance income

 7,145 

 10,085 

 

 34,495 

 45,969 

     

Finance expense

   

- Subordinated loan

 7,416 

 7,574 

- Bank fees - subordinated loan

 500 

 500 

- Committed syndicated credit facility

 196 

 3,718 

- Bank fees - committed syndicated credit facility

 4,688 

 3,747 

- Non-recourse PPP loans

 14,198 

 18,778 

- Non-recourse project financing

 4,511 

 5,789 

- Other non-recourse financing

 287 

 181 

- Interest expense - bank overdrafts

 642 

 1,026 

- Finance lease liabilities

 915 

 1,329 

- Recourse property financing

 2,056 

 2,031 

- Recourse PPP loans

 2,109 

 2,726 

- Other recourse financing

 787 

 899 

- Interest expense - other liabilities

 335 

 1,046 

- Fair value result - forward exchange contracts

 (1,827)

 497 

 

 36,813 

 49,841 

Less: capitalised interest on the Group's own projects

 (13,323)

 (15,941)

 

 23,490 

 33,900 

     

Net finance result

 11,005 

 12,069 

Included in the finance expense is an amount of €7 million (2014: €10 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

 

2015 

2014 

     

Current tax

 19,556 

11,563 

Deferred tax

 (17,247)

(27,062)

 

 2,309 

(15,499)

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:

 

2015 

2014 

     

Result before tax

 13,341 

(122,440)

     

Tax calculated at Dutch tax rate

 3,338 

(30,611)

Tax effects of:

   

- Tax rates in other countries

 (4,250)

3,428 

- Income not subject to tax and previously unrecognised tax losses

 (10,287)

(2,426)

- Remeasurement of deferred tax – changes in enacted tax rates

 (125)

30 

- Tax filings and previously unrecognised temporary differences

 4,541 

4,595 

- Tax losses no(t) (longer) recognised

 10,662 

16,271 

- Results of investments and other participations, net of tax

 (4,040)

(6,979)

- Other including expenses not deductible for tax purposes

 1,349 

193 

- Impairment of goodwill

 1,121 

Tax charge/(gain)

 2,309 

(15,499)

     

Effective tax rate

17.3%

12.7%

The weighted average tax rate applicable was -6.8 per cent (2014: 22.2 per cent). The difference is attributable to a different spread of results over the countries.

In 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. Exempt results of investments and other participations also influence the tax burden.

In 2014, the tax gain was influenced predominantly by tax losses which are not measured (anymore), as well as exempt results of investments and other participations, net of tax.

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 will be further reduced to 18 per cent as at 1 April 2020.

30. Earnings per share

 

2015 

2014 

     

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

 270,957 

270,395 

     

Net result attributable to shareholders

 10,180 

(108,172)

Basic earnings per share (in €)

 0.04 

(0.40)

     

Net result from continuing operations attributable to shareholders

 10,180 

(108,172)

Basic earnings per share from continuing operations (in €)

 0.04 

(0.40)

     

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:

 

2015 

2014 

     

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

 270,957 

270,395 

     

Net result attributable to shareholders

 10,180 

(108,172)

Diluted earnings per share (in €)

 0.04 

(0.40)

     

Net result from continuing operations attributable to shareholders (diluted)

 10,180 

(108,172)

Diluted earnings from continuing operations per share (in €)

 0.04 

(0.40)

     

Net result from discontinued operations attributable to shareholders (diluted)

 - 

Diluted earnings from discontinued operations per share (in €)

 - 

31. Dividends per share

The Company proposes to declare a dividend over the financial year 2015 of 2 eurocents in cash per ordinary share or in shares, at the option of the shareholders (2014: nil). Based on the number of ordinary shares outstanding at year-end 2015, a maximum of €5 million will be distributed as dividend on the ordinary shares. As yet, the dividend proposal has not been deducted from retained earnings under equity.

In line with the Group’s dividends policy the Company has not paid a dividend over the financial year 2014 following the net loss.

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. 

32.2 Guarantees

In the ordinary course of business guarantees are issued to (prospective) clients and contracting parties. These contingent liabilities are not recognised in the balance sheet. It is not expected that any material risks will arise from these contingent liabilities.

Guarantees are issued either by the Company (parent company guarantees) or by banks and surety companies (bank guarantees, deposits and surety bonds). These guarantees could be forced to settle under the arrangement for the full guaranteed amount in case of non-compliance with or without the intervention of an independent third party.

The parent company guarantees issued amount to €156 million (2014: €176 million). Guarantees issued by banks and surety companies amount to €1,776 million (2014: €1,760 million). Guarantee facilities amount to €2.4 billion (2014: €2.5 billion).

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:

 

2015 

2014

     

Property, plant and equipment

 232 

970

Land

 121,272 

166,384

 

 121,504 

167,354

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 2015 the costs associated with operating leases amount to €69 million (2014: €64 million).

The future aggregate minimum lease payments are as follows:

 

2015 

2014

     

Up to 1 year

 64,507 

59,182

1 to 5 years

 114,167 

112,827

Over 5 years

 23,245 

21,927

 

 201,919 

193,936

The Group leases office buildings and equipment to third parties under non-cancellable operating lease agreements. The lease agreements vary in duration, escalation clauses and renewable options. The carrying amount of the leased assets amounts to €23 million at year-end 2015 (2014: €22 million). The lease income, including lease bonuses, is recognised as revenue in the income statement. In 2015 the income associated with operating leases amount to €1.7 million (2014: €1.8 million).

The future aggregate minimum lease income is as follows:

 

2015 

2014

     

Up to 1 year

 1,562 

1,143

1 to 5 years

 7,298 

6,205

Over 5 years

 6,629 

5,182

 

 15,489 

12,530

34. Business combinations

No material acquisitions have taken place in 2015 nor 2014.

35. Assets held for sale and discontinued operations

 

2015

2014 

     

PPP receivables

39,391

 117,401 

Deferred tax assets

1,635

 1,190 

Trade and other receivables

367

 2,730 

Cash and cash equivalents

421

 5,722 

Assets held for sale

41,814

 127,043 

     

Borrowings (non-current)

35,470

 106,859 

Derivative financial instruments

6,538

 4,761 

Borrowings (current)

3,983

 15,325 

Trade and other payables

471

 1,821 

Liabilities held for sale

46,462

 128,766 

At year-end 2015, the assets and liabilities held for sale related to the planned disposal of one PPP project (2014: one) to the joint venture BAM PPP/PGGM. Other comprehensive income related to this project amounts to €3.9 million (2014: €2.8 million).

During 2015 the Group transferred two operational projects (2014: seven projects), to the joint venture BAM PPP/PGGM and, after deduction of costs, realised a net result of €5.2 million (2014: €24.5 million). The total consideration received amounted to €41.7 million, of which €35.0 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 2015 nor 2014.

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 €125.6 million (2014: €99.9 million) and related to the purchase of goods and services for €5.2 million (2014: €7.8 million).

The 2015 year-end balance of receivables arising from aforementioned transactions amounts to €5.4 million (2014: €9.3 million) and the liabilities to €35.5 million (2014: €46.4 million).

36.2 Loans to related parties

At year-end 2015, the Group granted loans to related parties (mainly relating to associates and joint ventures) for the amount of €76 million (2014: €72 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:

 

2015

 

Gross
salary

Other
short-term
 benefits

Post-
employment
 benefits

Share-based
 payments

Other
benefits

Crisis levy

Total

               

R.P van Wingerden 1

 620 

 350 

 46 

 371 

 8 

 - 

 1,395 

T. Menssen

 470 

 265 

 38 

 266 

 8 

 - 

 1,047 

E.J. Bax 2

 470 

 265 

 52 

 111 

 - 

 - 

 898

 

 1,560 

880

 136 

 748 

 16 

 - 

3,340

 

2014

 

Gross
salary

Other
short-term
 benefits

Post-
employment
 benefits

Share-based
 payments

Other
benefits

Crisis levy

Total

               

R.P van Wingerden 1

 508 

 - 

 64 

 - 

 8 

 54 

 634 

T. Menssen

 470 

 - 

 30 

 - 

 8 

 48 

 556 

E.J. Bax 2

 313 

 - 

 35 

 - 

 - 

 34 

 382 

 

 1,291 

 - 

 129 

 - 

 16 

 136 

 1,572 

1 Appointed as Chairman of the Executive Board with effect from 1 October 2014
2 Appointed as a member of the Executive Board with effect from 1 May 2014

Other short-term benefits relate to the short-term incentive (‘STI’) as 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 (67 per cent) and non-financial performance targets (33%). 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% 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% of base salary. The Supervisory Board determined the pay-out for 2015 at 56.5 per cent (2014: nil).

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.

Share-based payments relate to the Performance Share Plan and Phantom Share Plan. Additional information is disclosed in note 37.

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

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) the Supervisory Board for services is shown below:

 

2015

2014

     

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 2015, 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, 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 Group 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 2015 for the members of the Executive Board and for all other participants is shown below:

 

As at
1 January
2015

Granted

Vested

Forfeited

As at
31 December
2015

           

R.P. van Wingerden

-

114,319

-

-

114,319

T. Menssen

-

74,281

-

-

74,281

E.J. Bax

-

74,281

-

-

74,281

Other participants

-

342,094

-

-

342,094

 

-

604,975

-

-

604,975

The fair value per share of the 2015 grant, for the Participants, in connection with the TSR performance part amounted to €2.61 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:

 

2015

Share price at grant date (in €)

3.74

Risk-free interest rate (in %)

0.01

Volatility (in %)

48.23

   

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

In 2015, an amount of €302 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 2015 for the individual Executive Board members
is as follows:

 

As at
1 January
2015

Stock
dividend

Vested

Forfeited

As at
31 December
2015

           

R.P. van Wingerden

218,361

-

-

-

218,361

T. Menssen

130,331

-

-

-

130,331

E.J. Bax

54,064

-

-

-

54,064

 

402,756

-

-

-

402,756

In addition, 189,204 shares are allocated to retired Executive Board members at year-end 2015.

The fair values per share of the conditionally granted shares outstanding amount to €4.93 and €4.81 for the 2013 respectively 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:

 

2015 

2014

     

Risk-free interest rate (in %)

(0.26)

0.01

Volatility (in %)

49.31 

47.77

Assumed dividend yield (in %)

2.00 

2.00

In 2015, an amount of €772 thousand (2014: nil) was charged to the income statement arising from the Phantom Share Plan. As at 31 December 2015, the liability amounts to €1,035 thousand (2014: €265 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 €1.1 billion in 2015 (2014: approximately €1.3 billion), which represents approximately 15 per cent of the Group’s revenue (2014: 17 per cent).

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

(in € million)

2015   

 

Construction 
and M&E services 

Civil
engineering

Property

Total

Assets

         

 - Non-current assets

 

-

57.7 

-

57.7 

 - Current assets

 

119.2 

763.7 

105.3 

988.2 

   

119.2 

821.4 

105.3 

1.045.9 

Liabilities

         

 - Non-current liabilities

 

1.3 

12.7 

52.3 

66.3 

 - Current liabilities

 

123.2 

795.6 

40.6 

959.4 

   

124.5 

808.3 

92.9 

1.025.7 

           

Net balance

 

(5.3) 

13.1 

12.4 

20.2 

           
           
 

2014   

 

Construction 
and M&E services 

Civil
engineering

Property

Total

Assets

         

 - Non-current assets

 

-

39.6 

-

39.6 

 - Current assets

 

96.3 

491.6 

131.1 

719.0 

   

96.3 

531.2 

131.1 

758.6 

Liabilities

         

 - Non-current liabilities

 

1.4 

7.7 

62.9 

72.0 

 - Current liabilities

 

100.6 

512.9 

50.6 

664.1 

   

102.0 

520.6 

113.5 

736.1 

           

Net balance

 

(5.7) 

10.6 

17.6 

22.5 

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

100%

Group company

Education

Ireland

No

2016

25

Irish Courts Bundle

100%

Group company

Justice

Ireland

No

2017

25

Gent Universiteit

100%

Group company

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

100%

Group company

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

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

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 €72 million (2014: €59 million).

The Group has approximately €45 million (2014: €27 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 €1.5 billion (2014: approximately €0.9 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 2015, predominantly relating to education, amount to €3.1 million (2014: €3.6 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 €0.9 million (2014: approximately €0.8 million), are recognised in the income statement.

42. Events after the reporting period

No material events after the reporting period have occurred.

Name

Company