Combined independent auditor’s report on the 2017 financial statements and Sustainability Information

Our conclusions

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 engagements relating to sustainability reports’. Dutch Standard 3810N is a subject specific standard under 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 engagement scope
The consolidated financial statements comprise:

  • The consolidated statement of financial position as at 31 December 2017;
  • The following statements for 2017: 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 2017;
  • The company income statement for 2017;
  • The notes comprising a summary of the accounting policies and other explanatory information.

The sustainability information in scope comprises:

  • Reasonable assurance – Non-financial information in the following paragraphs/chapters: Material themes (pages 36-43), Business conduct and transparency (page 88) and Safety (KPI: IF BAM, KPI: number of serious accidents, Only KPI’s: Safety Behaviour Audit) in paragraph Social Performance (pages 76-93);
  • Limited assurance – All other information reported in the paragraphs/chapters Strategy (page 22-33), Business Model (pages 11-21), Stakeholder engagement and material themes (pages 34-43), Social performance (pages 76-93), Environmental performance (pages 94-107), Sustainability reporting processes and methods (pages 265-269), GRI Disclosure (pages 271-275) and Charters, memberships and certifications (pages 276-277).

Limitations in our scope

Unexamined prospective information
The sustainability information includes prospective information, such as ambitions, strategy, plans, expectations and estimations. Inherently, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the sustainability information.

Unreviewed references to external sources
The references to external sources or websites in the sustainability information are not part the sustainability information in scope. We therefore do not provide assurance on this information.

Our scope for the group audit of the financial statements
Royal BAM Group nv is the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Royal BAM Group nv.

Our group audit focused on the significant group entities located in BAM’s home countries (the Netherlands, Germany, United Kingdom, Ireland and Belgium) and BAM International with its various activities abroad. We have performed extensive audit procedures ourselves for group entities located in the Netherlands, thereby focusing on the key risk areas. Apart from focusing on significant group entities, we also reviewed and selected projects on a risk basis, thereby taking into consideration the size and nature of projects, as well as the countries in which projects are being executed.

For the foreign BAM home countries, we involved EY component auditors, who are familiar with local laws and regulations and who applied full scope audits. In order to take responsibility as group auditor in line with current auditing standards, we visited our component auditors in United Kingdom, Ireland, Germany and Belgium and furthermore, we discussed the outcome of audit procedures with all component auditors.

For BAM International, for purpose of the 2017 audit, we visited Tanzania and Dubai as key locations ourselves to perform audit procedures. For the Middle East business and Costa Rica, BAM has involved a local audit firm who we also visited and we reviewed their work. We concluded that we can rely on their work performed in relation to the audit of the consolidated financial statements of Royal BAM Group nv.

As a result of the above mentioned procedures, we have covered all entities and foreign locations that are material to the consolidated financial statements of BAM. In addition, we have performed analytical review procedures and made inquiries with management 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 group entities, 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.

Reporting criteria

The information in the scope of our engagements needs to be read and understood together with the reporting criteria, for which BAM is solely responsible for selecting and applying, taking into account applicable law and regulations related to reporting. The criteria used for the preparation of the Report and thus relevant for our examination are described below. We consider the reporting criteria used relevant and suitable for our assurance engagements.

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.

Corporate financial statements, Report by the Executive Board and the Supervisory Board:

Part 9 of Book 2 of the Dutch Civil Code.

Sustainability information including the CO2 emission data 2017:

Sustainability Reporting Standards (‘comprehensive’ option) of the Global Reporting Initiative (GRI) and the applied supplemental reporting criteria as disclosed on pages 265-269 of the Report.


Materiality

General
The scope of our assurance procedures is influenced by the application of materiality. Our assurance engagements aim to provide assurance about whether the financial statements and the sustainability information are free from material misstatement. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements and the sustainability information. The materiality affects the nature, timing and extent of our assurance procedures and the evaluation of the effect of identified misstatements on our conclusions.

Financial statements

For the audit of the financial statements our considerations regarding the materiality are as follows.

Materiality

EUR 33.5 million (2016: EUR 35.0 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 size of the business. For this reason we considered revenues to be a more appropriate benchmark to determine the materiality. The percentage applied is 0.5 per cent, which is at the lower end of an acceptable range.


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 EUR 1,650,000, 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.

Sustainability Information
Based on our professional judgment we determined materiality levels for each part of the sustainability information and for the sustainability 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 organisation.

Based on our professional judgment, we determined the materiality for each of the identified key performance indicators at 5 per cent deviation, with the exception of the safety KPI’s, which has been determined at 3 per cent deviation.

Our key audit and review matters

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

These matters were addressed in the context of our assurance procedures for the financial statements and the Sustainability Information as a whole and to conclude thereon. All these matters have been audited or reviewed by us with satisfactory results and we believe these have been properly disclosed where applicable. For the interest of the reader, we highlight the most important elements we focused on in 2017.

Compared to 2016, we excluded key audit and assurance matters on ‘Auditor transition, including the audit of opening balances’, ‘IT controls and procedures’ and ‘Business conduct, integrity and transparency’. The first Key Audit Matter is no longer applicable as this is not an initial audit. We no longer consider the other two items Key Audit Matters as in 2017 BAM has initiated improvements in these areas.

 

Other information included in the integrated report

In addition to the financial statements and our auditor’s report thereon, the integrated report contains other information that consists of:

  • Key figures;
  • The Executive Board Report;
  • Report from the Supervisory Board;
  • Remuneration Report;
  • Other information pursuant to Part 9 of Book 2 of the Dutch Civil Code;
  • Chapter 7 Royal BAM Group nv shares
  • Chapter 8 Appendices

Based on the following procedures performed, we conclude that the other information:

  • Is consistent with the financial statements and does not contain material misstatements
  • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code

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 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the financial statements or in our review of the sustainability information.

The Executive Board is responsible 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 other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements

Engagement
We have been appointed in the shareholders meeting on 22 April 2015 as auditors of Royal BAM 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 provided the following services:

  • Agreed upon procedures on debt covenants and other financial ratio’s
  • Assurance on other items than the consolidated financial statements of Royal BAM Group nv (such as local statutory audits, or assurance over the CO2 prestatieladder)
  • Assurance on sustainability information as described in the section ‘Our scope’ of this report.

All other non-prohibited services provided have been pre-approved by the Audit Committee.

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.

The Executive Board is also responsible for the preparation of the sustainability Information in accordance with accordance with the Sustainability Reporting Standards of the GRI (Comprehensive option) 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 sustainability information are included in paragraph 8.1 Sustainability reporting processes and methods (pages 265-269) of the Integrated 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 sustainability 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 company’s (financial) reporting process.

Our responsibilities

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

Our audit of the financial statements and our audit of the non-financial information in Material themes, Business conduct and transparency and selected KPI’s in Safety (see Our scope) have been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud.

Our review of the sustainability information is aimed to obtain a limited level of assurance. The procedures performed to obtain a limited level of assurance 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 review engagements is therefore substantially less than the assurance obtained in audit engagements.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of the financial statements and sustainability information. The materiality affects the nature, timing and extent of our assurance procedures and the evaluation of the effect of identified misstatements on our conclusion.

We apply the ‘Nadere voorschriften kwaliteitssystemen’ (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 applicable legal and regulatory requirements.

A further description of our responsibilities is included in the Annex to the combined auditor’s report.

Utrecht, 20 February 2018
Ernst & Young Accountants LLP

Signed by W.H. Kerst

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 Dutch Standards on Auditing and the Dutch Standard 3810N ‘assurance engagements relating to sustainability reports’, ethical requirements and independence requirements.

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

  • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining 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.
  • 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.
  • Concluding on the appropriateness of Executive Board’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to 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. 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 an the company to cease to continue as a going concern.
  • 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 Sustainability Information included the following:

  • Performing an external environment analysis and obtaining insight into relevant social themes and issues and the characteristics of the organisation.
  • Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information, including 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 sustainability information, including obtaining a general understanding of internal control relevant to our review engagement Identifying areas of the sustainability information where material misstatements, whether due to fraud or error, are likely to arise, and performing further procedures aimed at determining the plausibility of the sustainability information responsive to this risk analysis. These procedures consisted amongst others 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 as disclosed in the sustainability Information, carrying out internal control procedures on the data and consolidating of data in the Sustainability Information.
  • Visits to multiple sites and offices of BAM’s Operating Companies in Belgium, United Kingdom, The Netherlands, Germany and Dubai to evaluate the source data, data collection and the design and implementation of control and validation procedures at local level.
  • Reviewing relevant internal and external documentation, on a limited test basis; and
  • Performing an analytical review of the data and trend explanations submitted for consolidation at group level.
  • Evaluating the presentation, structure and content of the sustainability information as a whole, including the disclosures, in relation to the reporting criteria used.

In addition to the procedures mentioned above, for non-financial information included in the paragraphs Material themes, Business conduct and transparency and for the information on Safety (KPI: IF BAM, KPI: number of serious accidents, KPI: Safety Behaviour Audit) in paragraph Social Performance we performed the following procedures to obtain reasonable assurance:

  • Obtaining a more detailed understanding of the systems and reporting processes and internal controls, including where relevant to our assurance engagement, testing the design and existence of the relevant internal controls during the reporting year.
  • Conducting more in-depth analytical procedures and substantive testing procedures on the relevant data.
  • Evaluating relevant internal and external documentation, on a test basis, to determine the reliability of the information in the sustainability 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 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.

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 on the financial statements 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 those matters that were of most significance in the audit of the financial statements and the assurance engagement of the sustainability information of the current period and are therefore the key audit and review matters. We describe these matters in our combined auditor’s report and assurance 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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