Combined independent auditor’s report on the 2020 financial statements and non-financial information

To: the shareholders and Supervisory Board of Royal BAM Group nv

Our conclusions

We have audited the financial statements 2021 of Royal BAM Group nv based in Bunnik. The financial statements include the consolidated financial statements and the company financial statements.

In our opinion:

  • The consolidated financial statements give a true and fair view of the financial position of Royal BAM Group nv as at 31 December 2021 and of its result and its cash flows for 2021 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code
  • The company financial statements give a true and fair view of the financial position of Royal BAM Group nv as at 31 December 2021 and of its result for 2021 in accordance with Part 9 of Book 2 of the Dutch Civil Code

We have reviewed the non-financial information in the annual report for the year 2021 of Royal BAM Group nv (the Report). The scope is described in the section Our Scope. A review is aimed at obtaining a limited level of assurance. 

Based on our review nothing has come to our attention that causes us to believe that the non-financial information does not present, in all material respects, a reliable and adequate view of the policy and business operations with regard to corporate social responsibility and the thereto related events and achievements for the year 2021 in accordance with the Sustainability Reporting Standards (core option) of the Global Reporting Initiative (hereafter: GRI Standards) and the applied supplemental reporting criteria as disclosed in appendix 9.6 Non-financial reporting process and methods of the Report.

Based on our procedures performed according to the requirements of Part 9 of Book 2 of the Dutch Civil Code, section 2:135b sub-section 7 of the Dutch Civil Code and the Dutch Standard 720, we conclude that the other information included in the Report, including the Executive Board report and the report from the Supervisory Board:

  • Is consistent with the financial statements and does not contain material misstatements
  • Contains the information as required by Part 9 of Book 2 for the management board report, the other information as required by Part 9 of Book 2 of the Dutch Civil Code and as required by Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code for the remuneration report.

Basis for our conclusions

We conducted our assurance engagements in accordance with Dutch law, including the Dutch Standards on Auditing and the Dutch Standard 3810N “Assurance-opdrachten inzake maatschappelijke verslagen” (Assurance engagements relating to sustainability reports), which is a specified Dutch Standard that is based on the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information. Our responsibilities under those standards are further described in the section Our responsibilities in this report.

We believe the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions.

Our independence

We are independent of Royal BAM Group nv in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagements. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics). 

Our scope

Our engagements scope
The Report of Royal BAM Group nv consists of the financial statements and other information, including the Executive Board report and the report from the Supervisory Board, that provides altogether an overview of the policy, activities, events and performances related to both the financial position and the sustainable development of Royal BAM Group nv during reporting year 2021. The following information in the Report has been in scope for our assurance engagements:

The consolidated financial statements comprise:

  • The consolidated statement of financial position as at 31 December 2021
  • The following statements for 2021: the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows
  • The notes comprising a summary of the significant accounting policies and other explanatory information

The company financial statements comprise:

  • The company statement of financial position as at 31 December 2021
  • The company income statement for 2021
  • The notes comprising a summary of the accounting policies and other explanatory information

The non-financial information comprises:

  • Limited assurance – All other non-financial information reported in the paragraphs/chapters Business model (pages 9-10), Strategy 2021-2023 (pages 11-13), Stakeholder engagement and material themes (pages 14-17), Social performance (pages 30-38), Environmental performance (pages 40-45), Non-financial reporting process and methods (pages 206-207), Material themes and management approach (pages 208-211) and the GRI Disclosures as disclosed on the website of Royal BAM Group nv – hereafter: ‘the other non-financial information’

The other information comprises:

  • Key figures
  • Executive board report (chapters 1 to 5)
  • Supervisory Board report (chapter 6)
  • Chapter 8.2, 8.3, 8.4 and 8.5 Other information
  • Chapter 9.1, 9.2, 9.7 and 9.8

Limitations to the scope of our assurance engagement on the sustainability information
The non-financial information includes prospective information, such as ambitions, strategy, plans, expectations and estimates. Inherent to prospective information, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the non-financial information. 

The references to external sources or websites in the non-financial information, except for the GRI Disclosures which are available on the website of Royal BAM Group nv, are not part of the non-financial information as reviewed by us. We therefore do not provide assurance on this information.

Our conclusion is not modified in respect of these matters.

Reporting criteria

The financial statements and the non-financial information need to be read and understood together with the reporting criteria. Royal BAM Group nv is solely responsible for selecting and applying these reporting criteria, taking into account applicable law and regulations related to reporting. 

The absence of an established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.

The reporting criteria used for the preparation of the financial statements and the non-financial information are presented below.

Consolidated financial
statements
International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and Part 9 of Book 2 of the Dutch Civil Code
Company financial statements, report by the board of management and report of the Supervisory Board Part 9 of Book 2 of the Dutch Civil Code
Non-financial information GRI Standards and the applied supplemental reporting criteria as disclosed in appendix 9.6 Non-financial reporting process and methods on pages 206-207 of the Report.

Information in support of our opinion

We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion and any findings were addressed in this context, and we do not provide a separate opinion on these matters.

Our understanding of the business
Royal BAM Group nv (hereinafter: the Company or Royal BAM Group nv) offers its clients a substantial package of products and services in the sectors Construction and Property, Civil Engineering and Public Private Partnerships. The Company is structured in components and is mainly active in the Netherlands, the United Kingdom, Ireland, Belgium and Germany, and we tailored our group audit approach accordingly. We paid specific attention in our audit to a number of areas driven by the operations of the Company and our risk assessment.

We start by determining materiality and identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error in order to design audit procedures responsive to those risks and to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

In 2021 we continued to perform our procedures to a greater extent remotely due to the Covid-19 measures. We adapted our approach and procedures during the year considering the applicable restrictions per country in which Royal BAM Group nv is performing activities. 

Performing our procedures remotely limits our observations and increases the risk of missing certain signals. In order to compensate for the limitations related to physical contact and direct observation, we performed alternative procedures to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Materiality financial statement audit
For the audit of the financial statements our considerations regarding the materiality are as follows:

Materiality €35 million (2020: €30 million)
Benchmark used 0.5 per cent of revenue
Additional
explanation

Based on our analyses of the common information needs of users of the financial statements, we consider profit before tax the most appropriate benchmark to determine materiality. However, profit before tax has been volatile in recent years and is not yet at a representative level, given the nature and size of the business. For this reason we considered revenues to be a more appropriate benchmark to determine the materiality. 

 

We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements in excess of €1.75 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Our scope for the group audit of the financial statements
Royal BAM Group nv is the head of a group of entities primarily located in the Company’s home countries (the Netherlands, the United Kingdom, Ireland, Belgium and Germany), along with certain corporate functions part of Royal BAM Group nv’s headquarters. The financial information of this group is included in the consolidated financial statements of Royal BAM Group nv.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items. 

Our group audit focused on significant group entities. Entities are considered significant either because of their individual financial significance or because they are likely to include significant risks of material misstatement due to their specific nature or circumstances. On this basis, we selected entities for which an audit or review had to be carried out on the complete set of financial information or on specific items. In establishing the overall approach to the audit, we determined the audit procedures required to be performed by us, as Group auditors or by (non-)EY Global member firms operating under our instructions.

For the foreign Royal BAM Group nv home countries, we involved EY component auditors, who are familiar with local laws and regulations and who applied full scope audits. Because of the (international) travel restrictions and social distancing due to the Covid-19 pandemic, we had to restrict or were unable to visit foreign local management and foreign component auditors to discuss, among others, the business activities and the identified significant risks or to review and evaluate relevant parts of the component auditor’s audit documentation and to discuss significant matters arising from that evaluation on site. In these extraordinary circumstances we predominantly used electronic communication technology and written information exchange.

In order to take responsibility as group auditor in line with current auditing standards, and to compensate for the limitations related to physical contact and direct observation, we performed alternative procedures to obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. We intensified communication with component teams, required more granular reporting (including detailed work programs), reviewed electronic audit files of component auditors in the United Kingdom,  Ireland and Belgium, performed audit procedures centrally, and intensified communication with management and those charged with governance. For the year-end audit of specific complex projects we performed digital site visits (using webcams and drones) and involved our own quantity surveyors and internal construction experts. We concluded that we can rely on both the EY and non-EY component auditors and their work performed in relation to the audit of the consolidated financial statements of Royal BAM Group nv.

We have performed audit procedures ourselves for entities within the Group located in the Netherlands, thereby focusing on the key risk areas. 

As a result of the above mentioned procedures, we have covered all entities and foreign locations that are significant to the consolidated financial statements of Royal BAM Group nv. In addition, we have performed analytical review procedures and made inquiries with the Executive Board with respect to some smaller locations that are not material and made sure that there are no developments or exposures that should have been covered.

By performing the procedures mentioned above at entities within the Group, together with additional procedures at Group level, we have been able to obtain sufficient and appropriate audit evidence about the Group’s financial information to provide an opinion about the consolidated financial statements.

Teaming, use of specialists for the audit of the financial statements
We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of a listed client in the real estate and construction industry. We included specialists in the areas of IT audit, corporate finance, income tax, pensions, construction projects, land and building rights, share based payments and forensics.

Our focus on climate risks and the energy transition
Climate objectives will be high on the public agenda in the next decades. Issues such as CO2 reduction impact financial reporting, as these issues entail risks for the business operation, the valuation of assets (‘stranded assets’) and provisions or the sustainability of the business model and access to financial markets of companies with a larger CO2 footprint. 

Our audit procedures to address the assessed climate-related risks and the possible effects of the energy transition did not result in a key audit matter. However, we do include the impact of climate-related risks and possible effects of the energy transition in our overall audit approach due to the importance of climate objectives and issues such as CO2 reduction in the coming decades. 

We evaluated the extent to which climate-related risks and the possible effects of the energy transition are taken into account in estimates and significant assumptions as well as in the design of relevant internal control measures by Royal BAM Group nv. Furthermore, we read the Executive Board report and considered whether there is any material inconsistency between the non-financial information in sections 2.1, 2.2, 2.3, 3.2, 3.3 and 4 and the financial statements.

Our focus on fraud and non-compliance with laws and regulations

Our responsibility
Although we are not responsible for preventing fraud or non-compliance and we cannot be expected to detect non-compliance with all laws and regulations, it is our responsibility to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether caused by fraud or error.

Non-compliance with laws and regulations may result in fines, litigation or other consequences for the Company that may have a material effect on the financial statements.

Our audit response related to fraud risks
We identify and assess the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding of the Company and its environment and the components of the system of internal control, including the risk assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal control and how the Supervisory Board exercises oversight, as well as the outcomes.

We refer to section 4 of the annual report for management’s fraud risk assessment and section Risk Management of the report from the Supervisory Board (paragraph 6.1 of the annual report) in which the Supervisory Board reflects on this fraud risk assessment.

We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as the code of conduct, whistle blower procedures and incident registration. We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness, of internal controls designed to mitigate fraud risks.

As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic specialists. We evaluated whether these factors indicate that a risk of material misstatement due fraud is present.

We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance.

We identified the following fraud risks and performed the following specific procedures:  

Risks related to management override of controls and revenue recognition
Fraud risk Our audit approach

We addressed the risks related to management override of controls. In our audit approach we considered that this fraud risk would primarily impact the incorrect valuation of work in progress and revenue recognition due to over-estimation and/or under-estimation of the project results (including contract provisions). The risk predominantly relates to projects that are considered key due to their relative size and complexity.

This risk is specifically related to the over-estimation and/or under-estimation of project results (based on (component) management’s tendencies – taking into consideration managements adjustments) due to:

  • Incorrect valuation of variable considerations (i.e. variation orders, claims, penalties and bonuses); and
  • Incorrect estimation of costs to complete.

We describe the audit procedures responsive to the this fraud risk in the description of our audit approach for the key audit matter Valuation of projects and revenue recognition

 

Risks related to management override of controls and revenue recognition
Fraud risk and our audit approach

We identified a fraud risk that the Company does not comply with anti-fraud and bribery laws and regulations in jurisdictions where it does business, both as a result of active transactions and/or passive transactions in which it is involved. The Company may be subject to administrative, civil or criminal liabilities including fines and penalties, as well as suspension or debarment from government or non-government contracts for some period of time.

The risk with regard to active transactions concerns the risk that the Company e.g. makes illegal payments (bribery) to induce the recipient to act or refrain from acting. The risk particularly relates to tender processes for (larger) projects and making use of agents in the relationship with principals and settlement of variable considerations. Given the winddown of BAM International this risk is shifted from focusing on tenders to the involvement of agents in settlement of variable considerations.

Due to the size of the company Royal BAM Group nv is a very large customer for its suppliers and subcontractors. Therefore suppliers and subcontractors have an incentive to become a preferred supplier or subcontractor for work on specific projects or in general. This leads to the risk that the company or its employees accept payments (bribery) from suppliers or subcontractors.

We obtained an understanding of the entity level controls and the legal and regulatory framework of the Company and executed procedures to confirm that they have been properly implemented. 

On a periodic basis, we enquired with the Executive Board, internal audit department, risk and compliance department and legal department to understand and assess existing and potentially non-compliance matters and new constructive and legal obligations. We inspected legal and compliance management reports. We read the minutes of the Executive Board and Supervisory Board.

For the specific risks identified we involved forensic specialists to design a tailored work program to address the risks identified, containing among others the following procedures: 

  • inquiry with management, compliance officer and tender desk manager; 
  • review of minutes of local management;
  • performing analytical procedures, including data analytics;
  • performing substantive test of details regarding the tender costs and costs related to agents incurred in 2021; 
  • performing substantive test of details regarding significant contracts with suppliers in 2021;
  • review of correspondence with relevant authorities (e.g. relating to compliance with anti-bribery and anti-competition laws and regulations in jurisdictions where it does business);
  • assessment of (potential) cases identified or suspected by the Company.

We considered available information and made enquiries of relevant executives, directors (including internal audit, legal, compliance, human resources and local management) and the Supervisory Board. There are (remaining) risks inherent to doing business with agents in jurisdictions around the world as disclosed in Note 34 to the financial statements.

Our audit response related to risks of non-compliance with laws and regulations

We assessed factors related to the risks of non-compliance with laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general industry experience, through discussions with the Executive Board, reading minutes, inspection of internal audit and compliance reports and performing substantive tests of details of classes of transactions, account balances or disclosures.

We also inspected lawyers’ letters and correspondence with regulatory authorities and remained alert to any indication of (suspected) non-compliance throughout the audit. Finally, we obtained written representations that all known instances of non-compliance with laws and regulations have been disclosed to us.

Our audit response related to going concern
As disclosed in section ‘Going concern’ in Note 2 to the financial statements, the Executive Board made a specific assessment of the company’s ability to continue as a going concern and to continue its operations for at least the next 12 months. We discussed and evaluated the specific assessment with the Executive Board exercising professional judgment and maintaining professional skepticism. We considered whether the Executive Board’s going concern assessment, based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, contains all events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.

Based on our procedures performed, we did not identify serious doubts on the company’s ability to continue as a going concern for the next 12 months. 

Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

Our key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.

As a consequence of the increased debt covenant headroom and the financial performance of the company, the key audit matter ‘Going concern and compliance with debt covenants’ which was included in our last year’s auditor’s report, is no longer included as a key audit matter for this year. 

The company released its Strategic Agenda 2021-2023 in February 2021. This agenda includes a divestment plan.  The audit of the impact of this plan on the financial statements is considered a new key audit matter ‘Classification and valuation of assets held for sale and/or accounting for results from disposal of subsidiaries’.

Valuation of projects and revenue recognition
Refer to pages 49-53 (Executive Board report), pages 116-118 (Critical accounting judgements and key sources of estimation uncertainties)and pages 123-124 (Note 6. Projects)
Risk Our audit approach Key observations

The valuation of projects and revenue recognition are significant to the financial statements based on the quantitative materiality and the degree of management judgment required to account for complex projects and to apply the percentage of completion method. We therefore considered this to be a key audit matter.

Royal BAM Group nv is involved in large and complex construction projects for which the Company 

applies the percentage of completion method. The amount of project revenue, profit recognised as well as provisions for onerous contracts in a year is dependent, inter alia, on the actual costs incurred, the assessment of the percentage of completion 

of (long-term) contracts and the forecasted contract revenue and costs to complete of each project. 

Furthermore, the amount of revenue and result is influenced by the valuation of variation orders and claims. 

This often involves a high degree of judgment due to the complexity of projects, uncertainty about costs to complete and uncertainty about the outcome of discussions with clients on variation orders and claims, thereby taking into account the various parts of the world Royal BAM Group nv operates in.

Our audit procedures included an assessment of the internal control environment of Royal BAM Group nv, testing existence of relevant controls, performing physical and digital site visits (using webcams and drones), vouching project valuations and testing the Executive Board’s position against supporting documentation and Royal BAM Group nv’s accounting policy. 

For long-term contracts, we also compared the position Royal BAM Group nv is currently taking to the positions taken in previous year, to ensure consistency in the valuation and to perform back testing on this estimate.

In cases where a high amount of judgment is involved, we gained additional comfort by comparing the Executive Board’s positions to opinions from external parties such as lawyers or surveyors. 

For specific complex projects we involved our own quantity surveyors and internal construction experts to determine the reasonableness of the Executive Board’s estimations of variable considerations and costs to complete.

Overall, in our view projects have been valued in accordance with EU-IFRS, thereby taking into account the disclosures with respect to risk and uncertainty mentioned on the pages referred to above.

 

Valuation of goodwill and deferred tax assets
Refer to page 25 (Executive Board report), pages 116-118 (Critical accounting judgements and key sources of estimation uncertainties), pages 126-127 (Note 9. Intangible assets) and pages 151-153 (Note 24. Deferred tax assets and liabilities)
Risk Our audit approach Key observations

As per 31 December 2021, Royal BAM Group nv recognised goodwill (€330 million) and net deferred tax assets (€86 million).

The valuation of both goodwill and deferred tax assets is primarily based on expected future cashflows and forecasted results, among others derived from the 2022 operating plan and strategic agenda 2021-2023 as approved by the Supervisory Board, and the Executive Board’s outlook based on order intake and expected margins for new projects for 2022 and beyond.

Estimation of future cashflows and results inherently involves a high degree of judgment. We therefore considered this to be a key audit matter.

For goodwill valuation purposes, Royal BAM Group nv’s reassessment did not lead to an impairment in 2021. CGU’s with limited headroom are disclosed on page 125 of the Report. 

An impairment of €18 million of the recognized deferred tax assets related to tax losses carried forward is recognized, mainly as a result of the enactment of tax loss utilization legislation in the Netherlands.

Our audit procedures included an assessment of the Company’s assumptions underlying the estimated future 

(taxable) results for their reasonableness and consistency with operating plans, strategic plans for future years, order intake and expected margins for new projects for 2022 and beyond. We also challenged the Executive Board’s expectations of future (taxable) results, challenged risk adjustments made by the Executive Board and we assessed the historical accuracy of the Executive Board’s assumptions (back-testing) and analysed the rationale for differences between expected results and the actual results.

We involved corporate finance and tax specialists to determine the reasonableness of the assumptions and appropriateness of the models used by Royal BAM Group nv in determining the valuation of respectively goodwill and deferred tax assets.

In our view, the Executive Board’s assessment on the recognised goodwill and deferred tax assets is reasonable and within the acceptable range taken into account the requirements of EU-IFRS.

 

Valuation of land and building rights
Refer to pages 116-118 (Critical accounting judgements and key sources of estimation uncertainties) and pages 123-124 (Note 6. Projects)
Risk Our audit approach Key observations

The estimates supporting the value of land and building rights relate to terms which vary from one year to more than thirty years, due to which the estimation uncertainty is significant. We therefore considered this to be a key audit matter.

We have assessed the calculations of the net realizable values of the land and building rights and challenged the reasonableness and consistency of the assumptions used by the Executive Board. We also determined consistency with prior years and external available information such as external appraisals and plans and decisions of government bodies. 

We also compared the Executive Board’s assumptions concerning the development of prices of residential housing with independent expectations of external parties and institutions.

We involved valuation specialists to determine the reasonableness of the assumptions and models used by Royal BAM Group nv to support the value of land and building rights.

In our view the valuation applied by Royal BAM Group nv is in accordance with EU-IFRS.

 

Classification and valuation of assets held for sale and/or accounting for results from disposal of subsidiaries
Refer to pages page 13 (Executive Board report), pages 160-161 (Note 36. Sale of BAM Deutschland AG and BAM Swiss AG), pages 161-163 ( Note 37. Assets held for sale and discontinued operations)
Risk Our audit approach Key observations

The company divested BAM Swiss and BAM Deutschland and expects further divestments in the coming year(s). Divestments trigger derecognition of certain assets and liabilities and recognition of results from disposals. Anticipated divestments may impact classification of certain assets and liabilities as held for sale and may also impact the valuation of these assets and liabilities.  

Considering the transactions deemed outside the normal course of business, the complexity of these transactions and level of judgement involved, we identified this to be a key audit matter.

We have inquired group management (including the Executive Board) and local management and inspected significant contracts and agreements relating to 

(potential) divestments. We assessed the evaluation of management whether the expected transactions qualify as assets held for sale and/or discontinued operations.

We also performed substantive testing procedures to verify the proper measurement of assets held for sale at the lower of its carrying amount and fair value less costs to sell taking into consideration the agreed fixed and variable considerations. Additionally we performed substantive testing procedures to verify the valuation of results from disposal of subsidiaries and the initial and subsequent measurement of specific indemnities that were agreed upon.

Furthermore we performed procedures to determine the proper presentation and to determine the complete and accurate disclosure of information regarding results from disposal of subsidiaries and assets held for sale.

In our view the accounting treatment of assets held for sale and accounting for results from disposal of subsidiaries is applied by Royal BAM Group nv in accordance with EU-IFRS.

Information in support of our conclusion

We designed our assurance procedures in the context of our review of the non-financial information as a whole and in forming our conclusion thereon. The following information in support of our conclusion and any findings were addressed in this context, and we do not provide a separate conclusion on these matters.

Our understanding of the business
Royal BAM Group nv offers its clients a substantial package of products and services in the sectors Construction and Property, Civil Engineering and Public Private Partnerships. The Company is structured in components and is mainly active in the Netherlands, the United Kingdom, Ireland, Belgium and Germany, and we tailored our assurance approach accordingly. We paid specific attention in our review to a number of areas driven by the operations and characteristics of the Company and its external environment, including obtaining an understanding of relevant social themes and issues.

We start by determining materiality and identifying and assessing the risks of material misstatement of the non-financial information, whether due to fraud or error in order to design assurance procedures responsive to those risks and to obtain assurance evidence that is sufficient and appropriate to provide a basis for our conclusion. The risk that the non-financial information is misleading or unbalanced resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

In 2021 we continued to perform our procedures to a greater extent remotely due to the Covid-19 measures. We adapted our approach and procedures during the year considering the applicable restrictions per country in which Royal BAM Group nv is performing activities. 

Performing our procedures remotely limits our observations and increases the risk of missing certain signals. In order to compensate for the limitations related to physical contact and direct observation, we performed alternative procedures to obtain assurance evidence that is sufficient and appropriate to provide a basis for our conclusion.

Materiality non-financial information
Based on our professional judgment we determined materiality levels for each relevant part of the non-financial information and for the non-financial information as a whole. When evaluating our materiality levels, we have taken into account quantitative and qualitative considerations as well as the relevance of information for both stakeholders and the Company. 

We agreed with the Supervisory Board that misstatements which are identified during our work and which in our view must be reported on quantitative or qualitative grounds, would be reported to them.

Our key assurance matters
Key assurance matters are those matters that, in our professional judgment, were of most significance in our assurance procedures for the non-financial information. We have communicated the key assurance matters to the Supervisory Board. The key assurance matters are not a comprehensive reflection of all matters discussed.

We have reformulated the key assurance matter ‘Correct registration of safety incidents’ and how we addressed the matter as a result of the reduced assurance level Royal BAM Group nv requested on the KPI Incident Frequency BAM (‘IF BAM’) and the number of serious accidents for 2021 compared to 2020.

Correct registration of safety incidents
Refer to pages 30-33 (Executive Board report) and pages 206-207 (Appendix 9.6 Non-financial reporting process and methods)
Key assurance matter How our assurance engagement addressed the matter Key observations

Royal BAM Group nv uses and discloses own reporting criteria for the KPI Incident Frequency BAM (‘IF BAM’) and the number of serious accidents. 

The complexity of the scoping of the indicators and the decentralised organisation of Royal BAM Group nv inherently involves risk that not all reported safety incidents are correctly included in the registration process of incidents. We therefore considered this to be a key assurance matter.

Our assurance procedures focused on the definitions for the KPI IF BAM and the number of serious accidents used both on the level of Royal BAM Group nv’s perating companies and on corporate level, inquiry of responsible personnel from different levels within the organisation on how Royal BAM Group nv monitors this inherent risk and obtain a general understanding of controls that are in place to mitigate this risk. We reviewed internal documentation on a limited test basis on group and operating company level, to verify the correctness of the registered safety incidents. We have also reviewed whether the disclosures in the Report, including any inherent limitations in measurement, are adequate.

Nothing has come to our attention that causes us to believe that IF BAM and the number of serious accidents are not prepared in accordance with the reporting criteria as disclosed in appendix 9.6 Non-financial reporting process and methods of the Report.

Report on other legal and regulatory requirements and ESEF

Engagement
We were engaged by the shareholders meeting on 22 April 2015 as auditors of Royal BAM Group nv as of the audit for the year 2016 and have operated as statutory auditor since that date.

No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities.

Other non-prohibited services provided
In addition to the statutory audit of the financial statements we mainly provided the following services:

  • Agreed upon procedures on debt covenants and other financial ratios
  • Assurance on other items than the consolidated financial statements of Royal BAM Group nv (such as local statutory audits)
  • Assurance on non-financial information as described in the section ‘Our scope’ of this report

All non-prohibited services provided have been pre-approved by the audit committee.

European Single Electronic Reporting Format (ESEF)
Royal BAM Group nv has prepared the annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).

In our opinion, the annual report, prepared in the XHTML format, including the partially marked-up consolidated financial statements, as included in the reporting package by Royal BAM Group nv, complies in all material respects with the RTS on ESEF.

The Executive Board is responsible for preparing the annual report, including the financial statements, in accordance with the RTS on ESEF, whereby the Executive Board combines the various components into a single reporting package.

Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on ESEF.

Our procedures, taking into account Alert 43 of the NBA (the Netherlands Institute of Chartered Accountants), included amongst others:

  • obtaining an understanding of the company’s financial reporting process, including the preparation of the reporting package
  • obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance and the XBRL extension taxonomy files, has been prepared in accordance with the technical specifications as included in the RTS on ESEF
  • examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF.

Description of responsibilities

Responsibilities of the Executive Board and the Supervisory Board
The Executive Board is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code and for the preparation of the other information, including the Executive Board report in accordance with Part 9 of Book 2 of the Dutch Civil Code and the other information required by Part 9 of Book 2 of the Dutch Civil Code. The Executive Board and the Supervisory Board are responsible for ensuring that the remuneration report is drawn up and published in accordance with Sections 2:135b and 2:145 sub section 2 of the Dutch Civil Code.

The Executive Board is also responsible for the preparation of reliable and adequate non-financial information in accordance with the GRI Standards and the applied supplemental reporting criteria, including the identification of the stakeholders and the determination of material issues. The choices made by the Executive Board with respect to the scope of the non-financial information are included in appendix 9.6 Non-financial reporting processes and methods (pages 206-207) of the Report. 

Furthermore, the Executive Board is responsible for such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements and the non-financial information that are free from material misstatement, whether due to fraud or error. 

As part of the preparation of the financial statements, the Executive Board is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Executive Board should prepare the financial statements using the going concern basis of accounting unless the Executive Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Executive Board should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements. 

The Supervisory Board is responsible for overseeing the (financial) reporting process of Royal BAM Group nv.

Our responsibilities
Our responsibility is to plan and perform the assurance engagements in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusions. 

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit. The assurance procedures performed to obtain a limited level of assurance (review) are aimed to determine the plausibility of information and vary in nature and timing from, and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in a review is therefore substantially less than the assurance obtained in an audit.

We apply the Nadere voorschriften kwaliteitssystemen (NVKS, Regulations for Quality management systems) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and other relevant legal and regulatory requirements.

An informative summary of the work performed and communication as the basis of our conclusions is included in the Annex to the combined independent auditor’s report.

Amsterdam, 23 February 2022

Ernst & Young Accountants LLP

A.A. van Eimeren

Annex to the combined independent auditor’s report

Work performed
We have exercised professional judgment and have maintained professional skepticism throughout the assurance engagements performed by a multi-disciplinary team, in accordance with the 

Dutch Standards on Auditing and the Dutch assurance standards, ethical requirements and independence requirements. The ‘Information in support of our opinion’ section and the ‘Information in support of our conclusion’ section in the combined independent auditor’s report includes an informative summary of our responsibilities and the work performed and should be read in conjunction with the information in this annex as the basis for our conclusions.

Our audit to obtain reasonable assurance about the financial statements (consolidated and company) included the following:

  • Performing audit procedures responsive to the risks identified, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion
  • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Board
  • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures
  • Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Our review to obtain limited assurance about the non-financial information included the following:

  • Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the 
  • non-financial information. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the Executive Board.
  • Obtaining an understanding of the reporting processes for the non-financial information, including obtaining a general understanding of internal control relevant to our review.
  • Identifying areas of the non-financial information with a higher risk of misleading or unbalanced information or material misstatements, whether due to fraud or errors. Designing and performing further procedures aimed at determining the plausibility of the non-financial information responsive to this risk analysis. These further review procedures consisted of:
  • Interviewing the Executive Board and relevant staff at corporate and local levels responsible for the sustainability strategy, policies and results.
  • Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the non-financial information.
  • Determining the nature and extent of the review procedures for locations. For this, the nature, extent and/or risk profile of these locations are decisive. Based thereon we selected the locations to visit virtually. The virtual visits to multiple sites and offices of Royal BAM Group nv’s operating companies in the Netherlands, the United Kingdom and Belgium are aimed at, on local level, valuating source data and evaluating the design of internal controls and validation procedures
  • Obtaining assurance information that the non-financial information reconciles with underlying records of the company
  • Reviewing, on a limited test basis, relevant internal and external documentation
  • Performing an analytical review of the data and trends in the information submitted for consolidation at corporate level
  • Evaluating the consistency of the non-financial information with the information in the Report which is not included in the scope of our review.
  • Evaluating the overall presentation, structure and content of the non-financial information.
  • Considering whether the non-financial information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed on the other information is substantially less than the scope of those performed in our audit of the financial statements or in our review of the non-financial information.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for entities within the Group. Decisive were the size and/or the risk profile of the entities within the Group or operations. On this basis, we selected entities within the Group for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the assurance procedures and significant findings, including any significant findings in internal control that we identify during our assurance engagements. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 

From the matters communicated with the Supervisory Board, we determine the key audit and assurance matters: those matters that were of most significance in the audit of the financial statements and the assurance engagement on the non-financial information of the current period and are therefore the key audit and assurance matters. We describe these matters in our combined independent auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

 

 

 

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