Outlook

Markets

In the business line Construction and Property, the short-term investment sentiment deteriorated due to the Covid-19 crisis, especially from the private sector for new commercial buildings and retail space. The longer-term impact is currently difficult to forecast.

In the Netherlands, the demand for new homes continues to be larger than the supply while interest rates remain relatively low. Uncertainty regarding nitrogen and PFAS continues, which is causing delays in the issuance of building permits.

In the United Kingdom, competition has increased due to Covid-19 and the end of the UK/EU transition period. Public sector clients continue as before, with competition for key new frameworks for health and education while there is a mixed picture for the private sector. Recently, BAM was appointed major Manchester hospital project under the Procure22 Health Framework and the contract for Sky Studios Elstree, the most sustainable film and TV studio in the world.

In Belgium the public building market is stable with opportunities in health care while the private market might come under pressure due to Covid-19. In Ireland, the construction outlook remains positive. The government continuous to focus on education and health care and Ireland remains an attractive home base for multinationals. The market in Germany remains generally stable but competitive. Most governments are expected to increase their investments in infrastructure in response to the Covid-19 crisis.

In the business line Civil engineering, the Dutch market remains competitive and the uncertainty regarding nitrogen legislation and PFAS continues. BAM continues discussions with public sector clients in order to achieve an improvement in risk/reward balance of future projects. Until that is resolved, BAM remains extremely cautious about tendering for large projects.

In the United Kingdom, the expected growth across all infrastructure sectors in strengthening. In December, the Government published its Construction Playbook setting out how it will work with the construction sector to make sure public sector works are delivered faster, better and greener. As a leading player in United Kingdom construction, BAM will support the British recovery from the pandemic and its progress towards net zero carbon. There has been minimal disruption to BAM’s operations since the start of the new UK/EU trade agreement. The civil market in Belgium shows a mixed picture, with regional markets slowing due to lower spending of regional public clients and some larger projects in Flanders and Brussels. In Ireland, public sector investments in infrastructure are at a low level. Regarding Germany, the market is subdued but BAM’s existing order book is at a high level.

For BAM PPP, the pipeline of prospects and active bids remains healthy. In the longer term, BAM expects a global increase in government use of PPP/private finance models to stimulate economies and develop infrastructure assets. This will provide opportunities in new markets for the BAM PPP/PGGM joint venture.

Sustainability

Across operating companies in both business lines, sustainability is an increasingly important theme for BAM’s clients. For instance, in many markets the demand for alternative power generation, adjustments to distribution networks and zero-emission homes is sharply increasing. Instead of a construction-only focus, the demand for sustainable products and services and a trend towards lifecycle focus are on the rise.

The challenge for BAM is to improve its financial performance in the short term (2021), while simultaneously implement its sustainability strategy and achieve a net positive impact in the long term. BAM is further focusing on bringing down its own emissions and helping other parties in the value chain to reduce theirs. This is in line with BAM’s science-based CO2 reduction target (SBT) and the 2015 Paris Agreement.

The concept of circularity is increasingly gaining attention in the construction sector. Linear consumption patterns (‘take-makedispose’) of products are beginning to cause constraints on the availability of resources. The construction sector needs to develop new opportunities and realise its circular economy ambitions faster, which requires a vigorous innovation of design and construction methods.

Employees

BAM continues to face a tight labour market, especially in the field of technology, where the Company finds it increasingly challenging to find skilled people. This will be addressed in BAM’s employer branding approach, in which specifically defined key target groups are made aware of relevant job opportunities and employee stories via recruitment marketing activities. Simultaneously, BAM will continue to stimulate employee development by offering learning and personal development programmes. To understand the needs and interests of BAM’s employees, regular engagement surveys are held, and actions are defined based on the outcome of these. BAM focuses on fostering an attractive company culture to offer talent a rewarding career.

Financing and investments

BAM will redeem the outstanding subordinated unsecured convertible bonds in June 2021. Under the new strategic plan 2021-2023 (‘Building a sustainable tomorrow’), BAM will restructure its portfolio of businesses to focus on markets and projects where it can leverage its proven competitive strengths and serve the growing demand for sustainable solutions in the construction sector. The company continues to invest in strategic initiatives and project specific equipment.

Outlook 2021

Looking ahead, for 2021 BAM sees signs of recovery in its markets, although there are differences in pace per country and sector, and Covid-19 related uncertainty persists. BAM will provide its outlook for 2021 in due course.

BAM will provide its outlook for 2021 in due course.

Bunnik, the Netherlands, 17 February 2021

Executive Board

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