Financial performance

13 4.1 ambition

In 2016, we made good progress implementing the strategy ‘Building the present, creating the future.’ We are focusing our project portfolio by disciplined, data-driven tendering and we have a pipeline with attractive opportunities. Across our business portfolio, we exited some non-core activities, completed the integration of Dutch Construction and property, and are refocusing our International infrastructure and German construction businesses. 
Despite some headwinds, we delivered a robust adjusted result for 2016 ahead of the previous year. We continued to de-risk and strengthen our financial position, and generated a strong positive cash flow. Our return on capital employed – a leading KPI for how we manage our business  – started to move upwards thanks to the higher result and lower capital.

Management summary

  • Revenue amounted to €6,976 million, 6 per cent down compared to 2015 of which more than half coming from the lower GBP exchange rate;
  • Adjusted result before tax of €102.7 million, 16 per cent up compared to 2015;
  • Order book decreased in the year by €1,300 million, or 11 per cent, to €10,200 million. More than a third part of the decrease coming from the lower GBP exchange rate;
  • Total cash flow over €100 million, predominantly coming from better working capital positions.


14 Key financial results

15 Result before tax


Revenue decreased by €447 million, or 6 per cent, in 2016 principally due to a foreign exchange rate effect of the pound sterling of 3.4 per cent. The sector Construction and Property reported an average decrease in revenue of 1.7 per cent whilst revenue in the Civil Engineering sector declined by 11 per cent. Civil sector revenue was down, mainly in the UK due to foreign exchange rate effect and at BAM International due to lower activity in the oil and gas industry.

Order book

As at 31 December 2016 the order book (orders in hand for the next five years) amounted to €10.2 billion, representing a decrease of €1.3 billion in the year (2015: increase of €1.2 billion in the year). The decrease takes into account the cancellation of a large order and a negative exchange rate effect of €445 million. Of the current order book position, €5.4 billion (2015: €5.9 billion) is expected to be carried out in 2017 and €4.8 billion (2015: €5.6 billion) in the years after. In addition, the Group has more than €2.1 billion (2015: €2.3 billion) in the order book beyond five years, mainly comprising of long-term maintenance contracts for PPP projects.

Earnings per share

The number of outstanding ordinary shares of BAM increased by 0.2 million in 2016 to 270.6 million shares as at 31 December 2016, due to stock dividend minus the repurchase of shares for the conditional performance share plan. (Diluted) earnings per share amounted to 17 euro cents (2015: 4 euro cents).

Dividend proposal

The announced dividend of 9 euro cents per share (in cash or in shares) for 2016 (2015: 2 euro cents) will be proposed to shareholders at the Annual General Meeting of shareholders to be held on 19 April 2017. The recommended dividend is in line with our dividend policy to target a pay-out ratio in the range of 30 to 50 per cent of the net result. The dividend return amounts to 2.1 per cent, based on the 2016 closing price (2015: 0.4 per cent).

16 Financial position

Cash and cash equivalents

Cash and cash equivalents was €739 million as at 31 December 2016 (2015: €637 million), of which €223 million (2015: €181 million) concerns the Group’s share of cash and cash equivalents in joint operations.


As at 31 December 2016 total borrowings amounted to €612 million (2015: €597 million) of which €368 million (2015: €319 million) concerned non-recourse debt. The increase in 2016 is driven by non-recourse debt. Non-recourse loans associated with PPP projects increased with €79 million (2015: decrease €11 million) and property development decreased in 2016 with €30 million (2015: €46 million decrease) principally due to PPP investments and project divestments in the year with consequential debt payments.

As at 31 December 2016 a net cash position is achieved of €127 million (2015: €40 million net cash position). This position comprised of cash and cash equivalents minus borrowings of
€612 million (2015: €597 million).

The Group refinanced its two credit facilities in 2016. The subordinated loan with a nominal value of €125 million was repaid following the placement of unsecured subordinated convertible bonds for €125 million. The bonds will be convertible into ordinary shares of BAM with a nominal value of €0.10 each. The bonds are subordinated to BAM’s senior payment obligations. The bonds will carry an annual coupon of 3.5 per cent payable semi-annually and a conversion price of €5.2245 which represent a 32.5 per cent premium to the volume weighted average price of the shares quoted on the Euronext stock exchange in Amsterdam between opening of trading on 6 June 2016 and pricing. The bonds will be redeemed at their principal amount on or around 13 June 2021. Upon exercise of the conversion rights, bond holders will receive shares at the then prevailing conversion price. BAM will have the option to call all but not some of the outstanding bonds at their principal amount plus interest from 28 June 2019, if the value of a BAM share exceeds for a specified period of time a price which is 30 per cent higher than the conversion price.

In November 2016 the Group has reached agreement with a bank syndicate on the renewal of the committed revolving credit facility for an amount of €400 million until 31 March 2022. This new facility replaces a facility of €417.5 million that was due 30 January 2018. The qualitative terms of the facility are material similar to the previous facility, the credit margin and commitment fee have been improved. As at 31 December 2016 the committed syndicated credit facility was not used, just as in 2015.

17 Borrowings

The recourse net debt, part of the recourse leverage ratio in BAM’s financing arrangements, mainly comprising equity bridge loans for PPP projects and property loans on a recourse basis minus cash and cash equivalents, amounted to a net cash position of €495 million as at 31 December 2016, €136 million up compared to 2015.

Capital employed

Non-current assets
On balance, non-current assets decreased in the year with €61 million (2015: increase €38 million).

As the annual depreciation was partly compensated by the net capital expenditures in the year, the carrying amount of property, plant and equipment decreased with €22 million to €270 million. The majority of the capital expenditures and disposals concerned the asset category equipment and installations in the sector Civil engineering.

Intangible assets predominantly comprises goodwill with a carrying amount of €379 million, a decrease of €27 million compared to 2015 owing to the exchange rate of the British pound sterling compared to the prior year with an effect of €23 million. Furthermore an amount of €4 million goodwill was disposed of in relation to the divestment of Heilijgers. Goodwill is tested for impairment annually and this did not result in an impairment. The sensitivity analyses indicated that for a German cash-generating unit, representing a goodwill amount of €12 million, a limited headroom remains in case of a negative change of 50 basis points on the discount rate and/or growth rate beyond the forecast period.

PPP receivables increased in 2016 to €359 million from €284 million principally due to construction progress on current PPP projects (€190 million) compensated by the transfer of two projects to the joint venture with PGGM (€87 million). In 2016, no PPP receivables were reclassified to assets held for sale to the PGGM joint venture (2015: one project with an amount of €39 million).

The carrying amounts of investments (accounted for using the equity method) and other financial assets decreased in the year with €8 million (from €94 million to €86 million) respectively decreased by €6 million (from €98 million to €92 million). The increase in other financial assets includes a reversal of impairment charges of €2 million. 

Net working capital
Net working capital (current assets excluding cash and cash equivalents minus current liabilities excluding current borrowings) as at 31 December 2016 amounted to minus €456 million (2015: minus €340 million). Gross investment in property development has been reduced with €110 million in 2016 to €630 million, as a consequence of property sales, divestments and an impairment charge of €48 million (2015: €37 million). Net investment in property development, taking into account associated borrowings, amounted to €475 million (2015: €544 million).

The further improvement of net working capital in 2016 was mainly driven by an improvement of prefinancing of our construction contracts.

Shareholders’ equity and capital base

Shareholders’ equity significantly decreased by €68 million in 2016 to €834 million as at 31 December 2016. This decrease is principally due to the unfavourable development of the remeasurements of post-employment benefit obligations (€53 million) due to lower discount rates and foreign exchange rate differences (€66 million), partly compensated by the net result for the year of €47 million.

Capital base includes the new subordinated convertible bonds of €112.5 million (2015: €125 million for the repaid subordinated loan). The difference between the nominal value of the convertible bonds of €125 million and the reported value of €112.5 million, consists of the valuation of the conversion right and transaction cost.


As at 31 December 2016 solvency is 19.7 per cent (2015: 21.2 per cent) determined by using the capital base. Given the lower capital base and the stable balance sheet total, solvency decreased in 2016. Recourse solvency, the ratio in accordance with the bank covenants, slightly decreased to 29.0 per cent as at 31 December 2016 (2015: 29.3 per cent), which comfortably exceeds the required minimum of 15 per cent.

Other significant movements in balance sheet items 

Post-employment benefits
The net defined benefit liability amounted to €82 million as at 31 December 2016, an increase of €5 million compared to 2015 principally due to changes in actuarial assumptions, specifically the discount rate used. The current year balance allows for pension one-off gains of €42 million in connection with pension plan amendments in defined benefit schemes in the Netherlands, the United Kingdom and Ireland.

Provisions, other than post-employment benefits, slightly decreased by €8 million to €142 million (2015: €150 million), mainly effected by the release of the dividend guarantee provision for the Van Oord disposal. The restructuring provision increased by €1 million to €42 million as at 31 December 2016. Additional restructuring provisions, related to both organisational changes and market circumstances, and releases of unused provisions totalled €34 million, predominantly in the Netherlands. Payments on restructurings, mainly from the Back in shape programme, amounted to €33 million. 

Deferred tax assets and liabilities
The Group has a net deferred tax asset of €223 million (2015: €221 million) principally reflecting the tax losses carry forward in the Netherlands and Germany. The valuation as at 31 December 2016 allows for estimates of the level and timing of future taxable profits for the upcoming nine years (the Netherlands) and for an indefinite period (Germany) including available tax planning opportunities.

Assets and liabilities held for sale
The assets and liabilities held for sale as at 31 December 2016 amount to €40 million (2015: €42 million) for the assets and €4 million (2015: €46 million) for the liabilities and are fully attributable to the proposed sale of all 47 property development positions in the Northeast part of the Netherlands. In 2015 the assets and liabilities held for sale were fully attributable to one PPP project, that was transferred to the joint arrangement with PGGM in 2016. 

Business line results

With effect from 2016, BAM has changed its reporting sectors to align with its implemented updated strategy. The ten operating companies now report as three sectors: Construction and Property, Civil Engineering and PPP. The Construction and Property activities are now managed and reported as one integrated business line. In addition, construction activities in Ireland, Belgium and at BAM International have been reclassified from Civil engineering to Construction and Property. Comparative figures for previous year have been adjusted. The reporting sector PPP remains unchanged.

18 Construction and Property

In Construction and Property revenue was €4,124 million, which was lower by €78 million compared to 2015 due to the impact of the pound sterling (-€157 million). Revenue rose in the UK, Ireland and the Netherlands. There was a shortfall in revenues in Germany due to project postponements and refocusing the activities on targeted regions. Revenue in Belgium reduced because of fewer property transactions.

The total sector result was €3.5 million including a property development result of €26.7 million, mainly from commercial property in the UK and Ireland. The Dutch non-residential Construction and Property restored profitability in 2016. In Germany, there was a loss of €33.3 million from lower volumes, settlements at older projects and subcontractor bankruptcies. This business is expected to be profitable in 2017. At Dutch residential Construction and Property, house sales (2,158) were broadly in line with the prior year (2,187). Despite growing demand for new build houses, development opportunities were limited by reduced planning and zoning capacity at municipalities. Margins here remained low.

The year-end order book was lower by €295 million, mostly caused by the weaker pound (€236 million), and market conditions in Dutch non-residential. The order book in the UK was slightly down on a constant currency basis. The order book in other countries was higher. 

The total investment in property reduced by €110 million to €630 million at the end of 2016. These investments were financed by €69 million recourse property loans (year-end 2015: €80 million) and €86 million non recourse property loans (year-end 2015: €116 million).

19 Civil engineering

In Civil engineering, revenue reduced by €361 million to €2,899 million, of which €94 million currency effect. This was due to lower revenue from large multi-disciplinary projects in the UK, BAM International and in Belgium. Revenue in the Netherlands grew by 6 per cent. Margins in BAM’s home markets were above 2 per cent. At BAM International, although total project results were positive, there was a loss due to lower revenue and increased tender cost linked to refocusing to selected on-shore markets. The movement in the sector order book of a decrease of €945 million mainly came from negative currency effects, the project cancellation in Belgium in the first quarter and adverse market conditions in Belgium and International oil and gas. The order book in the UK reduced. The percentage of the UK revenue for 2017 secured at year end was slightly lower compared to prior year.

20 PPP

The sector PPP had another good year providing a stable adjusted result before tax and maintaining a healthy return on equity.

The result was primarily driven by good operational project performance within the growing portfolio, successful refinancing of a number of projects and asset management profits on transfers to the joint venture with PGGM.

The continued success of the joint venture is reflected by PGGM’s decision in 2016 to further increase its commitment. The total committed funding for the joint venture is now €775 million.

Whilst no new projects were added to the portfolio this year and the number of bid decisions expected in 2017 is somewhat reduced from previous years, the pipeline of active and imminent bids remains healthy with three major tenders having commenced in the final quarter of 2016 along with a steady flow of new opportunities that are scheduled to commence throughout 2017. 

At the end of 2016 the number of PPP projects in the portfolio was 44 of which BAM PPP retains an interest in 40; for the remaining 4 projects only asset management services are provided by BAM PPP.

Two projects reached financial close in 2016:

  • A94 road (A94), Germany
  • N25 road (N25), Ireland

BAM PPP’s projects are spread across BAM’s European markets with revenue based mainly on the availability criterion. 

The ratio of accommodation to civil engineering projects is also balanced, although civil engineering projects are often greater in size.

The joint venture with PGGM made good progress during 2016, with the investment in two new projects. The joint venture provides BAM PPP with the twin benefits of a strong position from which to pursue further projects and a stable platform within which equity can be made available for new investments.

BAM PPP harnesses the strengths, experience and expertise within Royal BAM Group, coordinating the provision of lifecycle solutions for the benefit of public-sector clients. The company focuses on BAM’s European home markets where the Group has proven construction and maintenance skills and expertise.

Its strategy aims to grow the portfolio to provide short-term construction turnover, long-term Facility Management and lifecycle turnover, equity investment returns and asset management income.

The PPP markets continue to offer an attractive supply of bidding opportunities. Competition continues to be intense and is demonstrated by the increased number of competitors at the prequalification stage. The bidding opportunities are spread reasonably evenly across all of our markets with the exception of the UK. Interest in providing long term debt remains strong from both bank and institutional lenders for both primary and refinancing transactions.

BAM PPP Portfolio financial performance
At year-end 2016, shareholders equity invested by BAM PPP totaled €66 million (2015: €72 million). BAM PPP invested €10 million and transferred €12 million to the BAM PPP PGGM joint venture in 2016. BAM PPP does not invest in projects until their structural completion, with the shareholders’ equity part being financed with a bridging loan.

Committed equity is €120 million, all by the joint venture. The invested and committed equity totaled €186 million. New projects will mainly be undertaken by the joint venture.

The future asset flow is based on the expected inflow of cash from the concessions portfolio for the shareholders’ equity (dividends, interest and repayment). The discounted value of this future cash inflow is the Director’s valuation and totals €238 million (2015: €239 million).

A comparison of the directors’ valuation and the discounted value of the invested and committed equity results in an unrealised value of the portfolio of €73 million (2015: €77 million). 

Business development
The current portfolio provides BAM PPP with returns on equity investments, in addition, as at year-end 2016, to an order book of construction turnover of €785 million and Facility Management and lifecycle turnover for BAM sister companies of €3.5 billion. BAM PPP has in the pipeline 8 active bids, providing potential equity investments of €162 million, potential construction turnover of €1.4 billion and potential Facility Management turnover (excluding lifecycle) of €0.7 billion.

Directors’ valuation
The directors’ valuation is intended to illustrate movements in the value of the PPP portfolio during the year taking account of the impact of intervening transactions, through the application of a consistent methodology. The valuation is based on the forecast returns of the projects, based on current projections, and may differ significantly from the book value of the investments shown in the accounts. Cash flows accruing from projects are calculated on the basis of financial models, based on contractual terms with clients and have been approved by external lenders. The valuation is calculated using the widely acknowledged discounted cash flow basis, discounting all future cash flows to BAM PPP at an appropriate discount rate. All future cash flows are converted into euros. All projects that have reached financial close are taken into account; projects for which BAM PPP is the preferred bidder are excluded until financial close is achieved.

Discount rates
BAM PPP applies discount rates based on the company’s knowledge of the market, the agreed transfer mechanism with PGGM, through the joint venture, and the use of a simple project phase analysis.

A higher discount rate is applied from financial close through to construction completion before stepping it down once into operations due to the reduced risk and greater certainty of future cash flows. BAM PPP believes this approach is preferable to using an adjusted market risk free rate approach as we have the benefit of up-to-date market information based on our discussions and agreement with PGGM.

21 Portfolio financial performance 2016

The > table below shows the sensitivity of the directors’ valuation if all the project discount rates applied are changed simultaneously by plus or minus 1 per cent and 2 per cent.

22 Sensitivity of the directors valuation

23 Directors valuation 2016

Acquisitions and divestments

There were no material acquisitions in 2016.

On 26 January 2016 BAM Infra Nederland bv has sold its water treatment activities, which formed part of BAM Infra Milieu, to SITA Remediation bv in Utrecht. The transaction refered to the
four employees, work in progress and plant and water treatment equipment. BAM saw insufficient opportunities for further development of the water treatment activities and considered the added value of this specialisation for the Group limited. Furthermore, the transaction was in line with the streamlining of the organisation. 

On 19 May 2016, BAM Technics sa in Belgium sold its Walloon subsidiary Balteau i.e. (installations électriques) to the management. Balteau i.e. is specialised in electrical engineering, high and low voltage for public, private and industrial buildings, data cabling, fire detection, alarm systems and electric heating. The company was founded in 1983 and was part of BAM from 2008. Balteau i.e. has more than two hundred employees and an annual turnover of approximately €40 million. The transaction also included the four affiliates of Balteau i.e., Electro Gdb, TCS Pirotte, Alarme Contrôle and Service Partner. BAM saw insufficient synergies to maintain its participation in Balteau i.e. and its affiliates.

On 29 August 2016, Royal BAM Group nv reached agreement with the management of its construction and properties subsidiary Heilijgers about a management buyout. 

The decision to transfer Heilijgers (over 100 employees; revenues in 2015 €40 million) to its management was part of BAM’s strategy ‘Building the present, creating the future’. One aspect of the strategy relates to shaping the business portfolio. Among other things this includes exiting operational activities that do not offer sufficient opportunities to use scale or differentiation as critical success factors. The management buyout offers Heilijgers opportunities for further growth.

On 18 November 2016 Royal BAM Group nv has signed an agreement with VanWonen Vastgoedontwikkeling on the proposed sale of a portfolio of all 47 property development positions in the north east of the Netherlands. The intended transaction is in line with BAM’s strategy, whereby the business portfolio is being shaped and the property portfolio is being reduced to less than €500 million by 2020. In this context, BAM is adjusting the property portfolio by converting residential property positions outside the core urban areas into cash and using the proceeds to invest in equity light propositions in the core urban areas. BAM will remain active in residential and non-residential construction and the development of non-residential property in the north east of the Netherlands.