Financial performance

Management summary

The extraordinary circumstances caused by the Covid-19 crisis have had a considerable impact on our 2020 result. In addition, the Company’s performance was impacted by continued losses at BAM International, the underperformance of the German construction business (including a provision for a smaller asset, which is qualified as held for sale) and to a lesser extent by the Cologne metro settlement which led to a special market update in July 2020.

As a consequence, the Executive Committee decided to start the process of winding down BAM International, active outside BAM’s European home markets, given the disappointing results and the ambition of the Company to focus on the Western European home markets. Furthermore, the Company announced a major restructuring programme in September in order to bring organizational costs in line with the lower revenue caused by Covid-19 and selective tendering. This programme aims to reduce costs of at least €100 million annually with most savings coming from substantial headcount reductions (1,000 FTEs). The progress of this programme is on schedule.

BAM’s operational performance recovered after the disappointing first half year and the Group recorded a positive adjusted result before tax in the second half of 2020, in line with its outlook. The 50 per cent transfer of our shares of BAM PPP to PGGM, subsequent deconsolidation of the assets from the balance sheet and revaluation of the retained 50% interest in the joint venture had a major impact on the full-year result. In the same period, the Company concluded upon a deal with Heijmans to create a joint venture on asphalt plants in the Netherlands and decided to discontinue production at the asphalt plant in The Hague. Despite the above-mentioned initiatives, net income was negatively impacted by non-cash impairments and restructuring costs. BAM believes that the new strategic plan for 2021-2023 will result in a smaller but more profitable and sustainable Company, with a predictable performance, while creating a platform for future growth.

Key financial results
(x € million, unless otherwise stated)

  2020 2019
Revenue  6,809 7,209
Adjusted result before tax  34.3 74.1
Margin (%)  0.5 1.0
Result before tax  (83.9) 50.6
     
Net result attributable to the    
shareholders of the Company  (122.2) 11.8
Order book  13,760 12,659
Earnings per share   (45) cents 4 cents
Dividend proposal  0 cents 2 cents

The total year-end position on cash and cash equivalents was high. The Company drew the revolving credit facility (RCF) in March and benefited from a Covid-19-related opportunity to delay in tax payments in the Netherlands and the UK. The trade working capital efficiency improved further during the year, due to effective steering, client pre-payments and provisions for losses.

In the business line Construction and Property, the performance of the Dutch property development and residential construction activities remained very strong. Germany and Belgium operated disappointingly with losses on several projects. This was also the case in the United Kingdom, Belgium and Ireland, where some project sites were closed for several weeks resulting in revenue losses.

In the business line Civil engineering, overall performance was impacted by severe project losses at BAM International, the Cologne metro settlement and the de-risking of some major projects due to settlements. Strong positive contributions included The Hague asphalt plant transactions and a the positive effects of German claim settlement.

The figures presented in chapter 3.1 include both continued- and discontinued operations. As a consequence the results of BAM PPP are reported as discontinued operations in the consolidated income statement in the financial statements. See also note 37 of the financial statements.

Revenue

Revenue declined by 6 per cent to €6,809 million in 2020 compared to 2019, mainly by the extraordinary circumstances caused by Covid-19 (resulting in 19% lower revenues in the second quarter compared to the same period last year) and the decision to wind down BAM International. Revenue recovered in the second half-year to €3,701 million, 1.4 per cent below the comparative period in the previous year.

Result

The adjusted result before tax for the year 2020 was mainly impacted by the continued losses at several projects in the Middle East and the Cologne metro settlement in Germany. This was partly offset by the 50 per cent transfer of our shares of BAM PPP to PGGM (and subsequent revaluation of the remaining 50% shares), the settlement of some major claims of which a German claim settlement and The Hague asphalt plant transactions. The transfer of 50 per cent of BAM PPP to PGGM in December resulted in a net gain of €118 million, after a reclassification of €36 million of hedge reserves.

Analysis by business sector
(x € million, unless otherwise stated)

  Revenues Result
  2020 2019 2020 2019
Construction and        
Property  3,695  4,102  0.3  67.7
Civil engineering  2,949  2,884  11.8  20.8
BAM International    153  252  (110.3)  (38.6)
Eliminations and         
miscellaneous  (29)  (62)  (20.5)  (3)
Total sectors excluding PPP  6,768  7,176  (118.7)  46.9
         
Public-private partnerships (PPP)  53  45  34.8  27.2
Transfer of BAM PPP shares to        
PGGM - -  118.2 -
Total Public-private partnerships  53  45  153.0  27.2
Eliminations  (12)  (12)    

Result before tax
(x € million, unless otherwise stated)

  2020 2019
Adjusted result before tax,     
depreciation and amortisation charges  193.3  233.7
Depreciation and amortisation charges  (159.0)  (159.6)
Adjusted result before tax  34.3  74.1
Impairment charges  (74.7)  (18.5)
Restructuring and other exceptional costs  (44.7)  (5.0)
Pension one-off  1.2 -
Result before tax  (83.9)  50.6
     
Income tax  (38.5)  (38.7)
Result for the year  (122.4)  11.9
     
Non-controlling interests  0.2  0.1
Net result attributable to shareholders    


As a result, the adjusted result before tax declined from €74.1 million (2019) to €34.3 million. This equates to an adjusted result before tax margin of 0.5 per cent (2019: 1 per cent), which is in line with the expected positive result for the second half of 2020, as communicated by the company in July.

Net income was impacted by non-cash impairments and restructuring costs. The restructuring charge of €44.7 million in 2020 relates for a great part to our a major restructuring programme and were booked across in most operating companies. The impairments of €74.7 million includes for €60.8 million impairment of goodwill, mainly based upon the assessment as executed mid-year 2020. Another significant part of the impairment (€11.3 million) represents impairments and value adjustments on several regional land positions and a commercial development.

Income tax in 2020 included a non-cash impairment of deferred tax assets (DTA) of €50.8 million, mainly in the Dutch fiscal unity. The gain on the BAM PPP transaction was exempt from taxes.

Order book

The overall order book increased to a strong position of €13,760 million. In Civil engineering, the order book increased with €1.2 billion, of which €826 million in the UK and €340 million in Germany, offset by several other movements. Construction and Property remains relatively stable, except in Ireland, where a significant increase of €113 million is visible.

The margin on the new order intake continued to improve. Of the current total order book position, €6.0 billion (2019: €5.7 billion) is expected to be carried out in 2021 and €9.9 billion (2019: €7.0 billion) in the years after. Growth is particularly noticeable in Civil engineering.

Earnings per share

The number of outstanding ordinary shares of the Group amounted to 273.3 million in 2020, which was in line with 2019. Earnings per share amounted to minus 45 euro cents (2019: 4 euro cents).

Dividend proposal

BAM’s policy is to pay out 30 to 50 per cent of the net result for the year, subject to considering the balance sheet structure supporting the strategic agenda and the interests of the shareholders. BAM’s net result for 2020 amounts to (€122.2) million. BAM proposes not to pay dividend for 2020. This is subject to approval by the Annual General Meeting on 14 April 2021.

Cash and cash equivalents

In 2020, the Group generated a business cash flow of €512 million (2019: €141 million) driven by a positive net cash result, a strong trade working capital development and tax payments delays. Furthermore, this high cashflow is a result of a strengthened focus on cash during the year, optimal use of governmental support schemes, significant cost savings and capex reduction programme and exceptional results from working capital improvement efforts. In addition, the Company made use of the revolving credit facility (RCF), meaning a full draw of this facility.

Cash from trade working capital improved significantly due to the improved balance between accounts payable and accounts receivable and the benefit of advanced payments on a few new contracts. On average, BAM’s payment performance to suppliers was in line according to contractual terms.

Business cash flow
(x € million, unless otherwise stated)

  2020 2019
Group: net cash result  81  137
Investments (in)tangible fixed assets  (137)  (170)
Trade working capital  279  177
Net investment property  39  (1)
Net investment PPP  55  14
Other changes in working capital  195  (16)
Business cash flow  512  141
     
Dividend -  (19)
Restructuring  (9)  (5)
Pensions (additional)  (5)  (9)
Other  436  2
Change in cash position  934  110

Borrowings

As at 31 December 2020 a net cash position was achieved of €1,154 million (2019: €583 million net cash position). This position comprised of cash and cash equivalents of €1,789 million minus borrowings of €635 million. The Group had two credit facilities as at 31 December 2020 which are fully drawn: unsecured subordinated convertible bonds for €119 million and a committed syndicated credit facility of €400 million.

In 2020, the Group managed to buy back bonds with a notional value of €4.9 million in the open market. The outstanding 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 and carry an annual coupon of 3.5 per cent, payable semi-annually. The bonds will be redeemed at their principal amount on or around 13 June 2021. From 28 June 2019, BAM has had the option to call all but not some of the outstanding bonds at their principal amount plus interest, 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 (31/12/2020: €4.8334). Based on the share price as per 31 December 2020, the subordinated convertible bonds were out-of-the-money. If the bonds remain out-of-the-money, the bond holders will hold the bond until maturity and get repaid the face value. The committed syndicated credit facility will mature at 31 March 2024 and was fully drawn in March 2020 for the remainder of the year.

As at 31 December 2020, total borrowings amounted to €929 million (2019: €583 million), of which €78 million (2019: €101 million) concerned non-recourse debt. Non-recourse loans associated with PPP projects decreased significantly to €3 million (2019: €43 million) as a result of the transfer of 50 per cent of our shares in BAM PPP to PGGM. Non-recourse debt related to property development increased with €17 million in 2020 (see table 11). The recourse net debt, part of the recourse leverage ratio in BAM’s financing arrangements, mainly comprising property loans of €38 million on a recourse basis minus cash and cash equivalents, amounted to a total borrowings position of €929 million as at 31 December 2020, including the draw of the syndicated credit facility.

10 Financial position
(x € million, unless otherwise stated)

  2020 2019
Cash position  1,789  854
Interest-bearing debt  (635)  (271)
Net cash position (excl. leases)  1,154  583
     
Lease liabilities  (294)  (312)
Net cash (incl. leases)  860  271
     
Shareholders’ equity  583  628
Capital base  702  749
Balance sheet total  5,225  4,540
Capital ratio  13.4%  16.5%
     
Capital employed  1,959  1,537
Return on average capital employed  (4.2%)  3.4%

11 Borrowings
(x € million, unless otherwise stated)

  2020 2019
Non-recourse debt    
PPP  3  43
Property  71  54
Other 4 4
   78  101
     
Subordinated convertible bonds  119  120
Syndicated credit facility  400 -
     
Recourse debt    
Property  38  50
Lease liabilities  294  312
   332  362
     
Borrowings  929  583

Capital employed

Non-current assets
On balance, the non-current assets decreased in the year with €134 million (2019: increase with €243 million). The carrying amount of property, plant and equipment decreased with €24 million to €253 million. The majority of the capital expenditures concerned the asset category plant and equipment in Civil engineering.

The intangible assets predominantly contains goodwill with a carrying amount of €335 million, a decrease of €66 million compared with 2019. Goodwill is tested bi-annually and this resulted in an impairment of €61 million. The total carrying amount of intangible assets decreased with €66 million, mainly due to the above mentioned impairment on goodwill. In addition, the decrease of the GBP had an impact of minus €7 million, offset by the increase of goodwill of €7 million due to investment in Modern Homes Ireland (MHI).

The carrying amounts of joint venture investments (accounted for using the equity method) increased in the year with €121 million (from €135 million to €256 million), mainly due to the newly created JV BAM PPP. In addition, the same transaction caused a decrease to the other financial assets with €40 million (from €110 million to €70 million).

Net working capital
The net working capital (current assets excluding cash and cash equivalents minus current liabilities excluding current borrowings and current lease liabilities) as at 31 December 2020 amounted to minus €1,210 million (2019: minus €830 million).

Gross investment in property development was reduced with €27 million in 2020 to €504 million (2019: €531 million), as a consequence of property sales, divestments and an impairment charge of €11.3 million. Net investment in property development, taking into account associated borrowings, amounted to €395 million (2019: €429 million).

Shareholders’ equity and capital base

Mainly due to the negative net income of €122.2 million our equity position deteriorated to €583 million. The following non-cash elements explain the other movements in shareholders’ equity of the Group;

  • Difference in accounting treatment of the hedges on PPP and transfer of 50 per cent of the shares of BAM PPP to PGGM led to a positive impact on equity of €95 million;
  • The actuarial results decreased, mainly due to lower discount rates, with a negative impact of €2 million after taxes on equity;
  • Depreciation of exchange rates, mainly due to FX rates decrease, which was partly offset by FX gain at BAM International leading to a net impact on equity of minus €11 million.

The capital base, which includes the subordinated convertible bonds, decreased with €47 million to €702 million (2019: 749 million). The book value of the convertible bond is €119 million (2019: €120 million). The difference with the nominal value of €120 million relates to the valuation of the conversion right and transaction cost.

Solvency

As at 31 December 2020, solvency was 13.4 per cent (2019: 16.5 per cent), determined by using the capital base. The solvency ratio was mainly influenced by the full draw of the revolving credit facility, lowering the solvency by 1.2 per cent point.

Recourse solvency, the ratio in accordance with the bank covenants, decreased to 20.3 per cent as at 31 December 2020 (2019: 28.5 per cent) which comfortably exceeds the required minimum of 15 per cent.

Other balance sheet items

Post-employment benefits
The net benefit liability amounted to €31 million as at 31 December 2020, a change of €2 million compared to 2019.

Provisions
Provisions, other than post-employment benefits, increased by €52 million to €327 million as at 31 December 2020, predominantly due to the net increase of the restructuring provision of €32 million. In addition the onerous contracts provision increased with €40 million.

Joint ventures
On 23 December 2020, BAM completed the sale of a 50 per cent interest in BAM PPP to PGGM. As a result of this transaction, BAM has classified and revalued the remaining 50 per cent interest in BAM PPP as a joint venture, which is accounted for as an equity method investment. This means that as of year-end 2020, BAM PPP is no longer consolidated in the financial statements of the Company.

Deferred tax assets and liabilities
The Group has a deferred tax asset of €106 million (2019: €136 million). The decrease in the deferred tax asset was predominantly related due to the impairment of Dutch and German deferred tax assets for tax losses of €51 million and the non-recognition of tax losses of the German Construction and Property unit of €15 million. On the other hand the tax rate increase in the Netherlands for 2021 and following years led to an increase of €8 million.

Tax

In 2020, BAM recognised a tax expense of €38.5 million (2019: €38.7 million), heavily impacted by one-off items. Excluding the impairment of Dutch and German deferred tax assets of €51 million, the non-recognition of tax losses of the German Construction and Property unit of €15 million, the effects of goodwill impairment and exempt gain on the sale of BAM PPP, the effective tax rate of the Group for 2020 is 12.4 per cent (2019: 14.3 per cent), influenced predominantly by the mix of results in various countries.

On corporate income tax, taxes on wages, social security contributions and VAT, the Group paid a total amount of €577 million in 2020 (2019: €849 million). Cash tax paid is seriously impacted by government measures to allow companies to defer tax payments. In the Netherlands and the UK, BAM has opted to make use of such deferral possibility resulting in approximately €230m umpaid taxes, of which €214 million in the Netherlands and the remainder in the UK per 31 December 2020.

12 Total taxes paid in 2020
(x € million, unless otherwise stated)

   Taxes %  Revenue  %
Netherlands  219  38  2,931  43
United Kingdom  189  33  1,867  27
Belgium  24  4  553  8
Germany  122  21  801  12
Ireland  (2)  -  469  7
Rest of the world  25  4  188 3
Total  577  100  6,809 100

Construction and Property 

13 Analysis by geography
(x € million, unless otherwise stated)

  2020 2019
   Revenues

 Adjusted Result
before tax

Revenues  Adjusted Result
before tax 
Netherlands  1,629  60.8  1,612  65.6
United Kingdom   894   (3.3)  1,061  35.7
Belgium  322  (7.7)  445  3.9
Ireland  399 (5.1)  508  20.0
Germany  451  (44.4)  476  (57.5)
Sub-total  3,695  0.3  4,102  67.7
International  63  (89.3)  124  (21.4)
Total  3,758  (89.0)  4,226  46.3
         
    2020   2019
Result margin    (2.4%)    1.1%
TWC (% 4-Q rolling)    (16.3%)    (14.9%)
Order book    6,229    6,268

Revenue in Construction and Property decreased by €468 million (11 per cent) to €3,758 million, driven by the impact of Covid-19 mainly in the United Kingdom and Belgium, specifically due to the fact that some sites were forced to close for several weeks. Revenue in the Netherlands was more or less in line with 2019 and the same applied to Germany. BAM International was heavily impacted by the wind-down and disappointing progress in a few larger projects.

The adjusted result before tax for 2020 amount to minus €89 million (2019: €46.3 million), mainly due to the severe losses in Germany and negative results in Belgium.

Strong contributions included the performance in The Netherlands especially with strong performance in property, residential construction and large projects. Dutch home sales were up by 10 per cent to €3,121 million. Impairments and value adjustments of property positions had an effect of €11.3 million. This related to several regional land positions and a commercial development. Including these impairments, BAM’s gross investment in property declined by €27 million to €504 million at the end of 2020.

The disappointing performance in Germany resulted in a loss of €44 million. During the year there were additional costs on (older) projects in execution offset by an over-recovery of overhead costs. Furthermore, the German results were impacted by a provision for a smaller asset, which is qualified as held for sale. Despite the impact of Covid-19, revenue remained flat compared to 2019.

The loss of €89 million in BAM International’s construction and property activities was disappointing. This performance is mainly explained by the impact of Covid-19 and additional cost overruns on two projects in the Middle East. In addition, under-coverage of company tied costs also had a negative impact.

Covid-19 had a severe impact in Belgium; revenue dropped with 28% compared to 2019. Despite the settlement on a large claim, result was negative due to cost overruns and challenges on specific projects.

The order book in Construction and Property remained flat at €6.3 billion. The order backlog in Ireland increased strongly (+14 per cent) due to the continuing strong demand in a variety of market segments, from industrial to residential. The order book in Germany decreased with €139 million, in line with strategic initiatives.

Civil engineering

14 Analysis by geography
(x € million, unless otherwise stated)

  2020 2019
   Revenues

 Adjusted Result
before tax

Revenues  Adjusted Result
before tax 
Netherlands  1,325  21.9  1,283  (17.3)
United Kingdom   974  12.3  876  23.0
Belgium  233  (3.7)  294  5.3
Ireland  70  (5.8)  95  (4.3)
Germany  350  (12.9)  340  14.1
Other  (3)  -  (4)  -
         
Sub-total  2,949  11.8  2,884  20.8
International  90  (21.0)  128  (17.2)
Total  3,030  (9.2)  3,012  3.6
         
    2020   2019
Result margin    (0.3%)    0.1%
TWC (% 4-Q rolling)    (11.7%)    (4.5%)
Order book    7,558    6,382

In contrast to Construction and Property, the revenue in Civil engineering was more or less in line with 2019, which is remarkable given the circumstances due to Covid-19. In fact, the revenue in the Netherlands even increased with €42 million.

Despite the increase in revenue, the adjusted result before tax decreased significantly towards minus €89 million (2019: €3.6 million) due to project losses and pro-active de-risking of Civil engineering. This result included the losses at BAM International, Cologne metro settlement also impacted the result.

In line with Construction and Property, the Netherlands had a positive contribution to the result with €22 million. This result benefitted from the deal with Heijmans to create a joint venture on asphalt plants in the Netherlands and the decision to discontinue production at the asphalt plant in The Hague. Furthermore, the settlement of a major project in Germany contributed to the result. This was offset by the development of long-term maintenance contracts and one specific project.

The result in Germany was mainly impacted by the Cologne metro settlement and a project in the tunnelling division. The settlement of a major project that benefited the Netherlands also had a positive impact on Germany. The performance of the Belgium activities in Civil engineering were also disappointing from a financial result point of view. During 2020, the result on several larger and mid-sized projects deteriorated, which was partly offset by an over-recovery of overheads.

In the United Kingdom, BAM Nuttall delivered a positive result. The underlying performance of the activities remained strong, however the result in the second half-year was impacted by two provisions, which led to a positive result of €12 million.

The order book in Civil engineering increased to €7.6 billion. The overall strong order intake in the UK led to an increase of 22 per cent and a total order backlog in the UK of almost €4 billion, driven by increasing government investment in infrastructure. The order book in Germany also improved during the year, mainly due to the award of a major tunnelling project. The order backlog of BAM International declined by €270 million as a consequence of the announced winddown. The order backlog in the Netherlands remained stable.

PPP
(x € million, unless otherwise stated)

  2020 2019
Adjusted result before tax excluding  34.8  27.2
transfer of 50 per cent of the shares    
Transfer of 50 per cent of the shares to PGGM  118.2 -
Adjusted result before tax 153.0  27.2
     
Invested equity 56 80
Number of operational projects 41 40
Projects under construction 7 9
Total number of PPP projects  48  49
     


In 2020, one new project was added to the portfolio with the financial close of the Dendermonde prison in Belgium. On 31 December 2020 BAM PPP handed back the A59 in the Netherlands to the client at concession completion. At the end of 2020, BAM had 41 operational projects, of which 36 with an equity stake, and 7 under construction. The PPP portfolio also provides recurring operations and maintenance revenues for other BAM companies.  BAM PPP delivered a strong performance in 2020, with an adjusted result before tax of €34.8 million, without the transfer of 50 per cent of the shares to PGGM. However, this included €13.6 million from the partial transfer of 21 investments to PGGM in the first half year, reducing BAM’s interest in these projects from 20 per cent to 10 per cent. In addition, three projects were transferred to the joint venture with PGGM in the second half year having reached their completion dates. All the operational projects have remained available throughout Covid-19 to date.

BAM PPP and PGGM

On 23 December 2020, BAM completed the transfer of 50 per cent of the shares of BAM PPP to PGGM. As a result of this transaction, BAM has classified the remaining 50 per cent interest in BAM PPP as a joint venture, which is accounted for as an equity method investment. This means that as of year-end 2020, BAM PPP is no longer consolidated in the financial statements of our Company.  

The gain on this transaction, before the reclassification of reserves on cash flow hedging and exchange rate differences, amounts to €155 million. Fifty per cent of this gain accounts for a ‘fair value step up’ on the remaining interest in the former subsidiary from its carrying amount to fair value. This step up shall systematically be allocated as costs to the future Group’s share of the profit and losses of the entity. The reserves involved are reclassified to the profit or loss for the amount €32 million (negative) and €5 million (negative) respectively and are attributed to the transaction resulting in a total gain of this transaction of €118 million. There is no income tax on this gain.  

BAM expects that the enhanced strategic partnership with PGGM will generate significant potential to accelerate growth in existing European and new global markets.

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