Koninklijke BAM Groep nv (BAMNB) Earnings Call Transcript & Summary

Good morning, everyone. And welcome to the Analyst Meeting and audio webcast for the Royal BAM Group Full Year Results 2019. My name is Rob Van Wingerden. And with me today is Frans den Houter, our CFO. Also here is our Manager Investor Relations, Michel Aupers. Two things to mention upfront. First, as you will see, we have increased the disclosure in our press release and presentation slides to give you more insights into our performance and prospects. Second, as you know, I will shortly be passing on the helm of BAM. And for now, it's business as usual. I will do all I can to support Frans and the executive committee in the coming months. I will present the highlights for 2019 and the operational review. Frans will take you through the financial review, our strategy and outlook before we take your questions. Looking at the group operational result, 2019 was a year of 2 halves. The first half was overshadowed by the project losses we announced in July, resulting in a revised outlook for the year of 1%. Our second half was strong with an adjusted result margin of 2.7%. In terms of businesses, we saw strong performance at Dutch and Irish Construction and Property and our U.K. activities. All these businesses made margins of 2.5% to 4%, and BAM PPP had an excellent year, growing its own future cash flows and generating future revenues for BAM companies. On the other hand, there was a disappointing performance at Construction Germany, BAM International and the Dutch Civil engineering. As mentioned earlier, we are taking urgent actions to improve these businesses by strengthening management, reviewing product market combination and continuing to be highly selective on tendering and improving project execution. Below the results, the adjusted results, we had some restructuring costs and noncash impairments. So the net result for the year was EUR 11.8 million. Our proposed dividends of EUR 0.02 cash per ordinary share is a payout ratio of 46% of that net result, 46%. Our order book at the end of 2019 was in line with the end of 2018 while we continue to focus on quality above volume. 2019 was a good year for our trade working capital and cash position. Overall, the economies we are operating in are in good shape, although growth momentum is somewhat weakening. At the same time, interest rates are low, which is positive for governments, consumers and commercial clients of BAM. This is supportive for our residential property development activities. In the Netherlands, the demand for homes remains high, but growth is mitigated by the low supply of land positions and slow permitting process. Looking to Civil engineering, markets remain highly competitive and the risk/reward ratio is a concern and needs to be improved. The implementation of new legislation regarding nitrogen and PFAS is impacting our order backlog while the longer-term impact of Brexit is unknown. Supply chain pressure is still present but seems to decrease slightly. There is clearly positive momentum for sustainable solutions, which provides opportunities for our products assessed only 100 -- to the A List, and BAM is 1 of the 5 only in the new certified. This makes BAM one of the first fully certified international construction companies, which is important for an increasing number of clients. BAM's concrete 3D printing solution, which has been developed in the Netherlands is now also introduced to some clients in the U.K. Now we are going to discuss the different business lines, starting with Construction and Property. And this picture shows the new landmark building Forum in Groningen, which recently opened its doors. On this slide, you see the performance per country in Construction and Property. This is a new disclosure in order to give you more insight into our underlying performance. We delivered margins of 3% to 4% in the Netherlands, the U.K. and Ireland. And in the Netherlands, nitrogen and PFAS had little effect so far in terms of our results and order book in 2019. Brexit uncertainty contribute to a decline in our U.K. construction order book in 2019. On the other hand, we won new framework agreements for public sector construction projects. We continue to monitor the situation as the U.K. goes through Brexit transition. The disappointing performance in Germany resulted in a loss of EUR 57.5 million. In the second half, there were additional costs on projects in execution and some impairments of older claims. The new management team is improving order intake processes and project execution. At BAM International, the result included the loss on the earlier mentioned large project in the Middle East and excess company-tied costs. Discussions with the client in the Middle East are ongoing. However, the timing and the amount of settlement remain uncertain. We have installed new management and are streamlining this business to reduce its cost base. The margin in Belgium was low, but the result improved in the second half of 2019. We are realigning our construction activities in Belgium to serve our clients better. Let's look at the Dutch property activities. The Dutch residential market continues to do well. House sales in the Netherlands were up by 5% for the year as we had guided you in August. We are one of the leaders in Dutch property development. We maintain a strong pipeline of our own developments in major cities. One example is the CROSSOVER project at Amsterdam Zuidas, which consists of 130 homes and 12,000 square meter commercial development. The gross investment in property reduced by EUR 33 million to EUR 531 million. This includes several smaller value adjustments of property positions for a total of EUR 8.2 million. This picture shows the Thames Tideway Tunnel, a super sewer project being executed by BAM Nuttall and our tunneling experts from Germany. The adjusted result before tax of EUR 3.6 million include additional costs of EUR 22 million in the first half. The performance in the second half was stronger overall with a contribution of EUR 23 million. Our Dutch Civil engineering had a difficult year. The result on several smaller midsized projects deteriorated. Compared to '18, OpenIJ developed more favorably. The second casing was emerged successfully and the banks resumed funding. The loss provision on OpenIJ was reduced by approximately EUR 4 million in the fourth quarter, lowering the total loss for the year to EUR 4.1 million and making the cumulative loss -- difficult word, EUR 111 million. This project is now 80% complete. Results in the U.K. improved during the second half as expected in a generally positive marketplace. Civil engineering in Germany also improved significantly in the second half, helped by a partial compensation of the extra cost of the loss-making project mentioned in July and the claim settlement. BAM International showed, on the other hand, a significant loss due to undercoverage of overhead and a legal dispute on a completed project. We conclude that the overall performance of Civil engineering was not satisfactory and we are taking actions to improve. In our Civil engineering business, going forward, we are adjusting our product market focus in some important areas. In the Netherlands, we have been talking to public clients -- public sector clients, for several quarters on how to improve the risk/reward balance. As things stand, we are extremely cautious about getting the risk/reward balance when tendering, especially for projects where our share will be above EUR 150 million. For tunnel projects, we are only tendering for projects in our home markets. In the U.K., we are increasingly focusing on clients which offer 2-stage tenders. BAM International is lowering its cost base and focusing on near-shore projects. We announced in the first half that we exit the market for offshore wind foundation. We do see market opportunities where we can bring sustainable solution and leverage synergies within BAM. Moving to PPP. On this slide, you see the M11 Gorey to Enniscorthy, a project of BAM Ireland and PPP. This was completed ahead of schedule during 2019. In the last decade, BAM PPP has showed solid growth and predictable performance. We started in the United Kingdom and now have a strong presence in all our home countries. BAM PPP delivered an exceptionally strong performance with an adjusted PBT of EUR 27.2 million, coming not only from the existing portfolio but also from 3 refinancing transactions. In PPP, we added 2 new projects to the portfolio, with the final close of Cross River Rail in Australia and Silvertown Tunnel in the United Kingdom. This week, we announced the financial close of Dendermonde Prison project in Belgium, a good start of the year for BAM PPP. In addition, 2 contracts were completed and 1 project was transferred to our joint venture partner, PGGM. Our portfolio now consists of 40 operational projects, of which 35 with an ex-equity stake and 9 under construction. The PPP portfolio also provides recurring operations and maintenance revenues of approximately EUR 150 million per year for other BAM companies. We decided to provide more information regarding the future cash flows over -- in BAM PPP related to our equity stakes. These are underwritten by governments or government-backed organizations in stable countries with a solid debt reputation, like, for instance, U.K., Netherlands, Ireland and Germany. This additional information gives you extra insights into the underrealized value of the portfolio. The table on this slide shows the valuation of the portfolio at various discount rates. Using a discount rate of 11%, we arrive at an underrealized value of EUR 69 million. Using a discount rate of 5%, we arrive at EUR 162 million. This is in addition to the book value of EUR 80 million. The graph below shows the future cash flows of our equity stakes over the coming years. Overall, our equity stakes will result in more than EUR 400 million of cash flows up to the year 2051. Important to note, the graph only shows the cash flows from the equity stakes. BAM PPP is an integral part of the group, providing stable project management and investment returns, and the resource -- and is a resource of EPC and maintenance contracts. Over to you, Frans.

Thank you, Rob. And good morning, everyone. So let me start with explaining the income statements. The adjusted PBT for the year totaled EUR 74 million, which makes an adjusted profit before tax margin of 1%. There are noncash impairments pretax of EUR 18.5 million. The majority relates to the impairment of intellectual property for the gravity-based foundations for offshore wind turbines as also reported in the first half year. The remaining part is the impairments and value adjustments on a handful of property positions as also mentioned by Rob. The income tax line for the full year of EUR 38.7 million is significant compared to the PBT. This is best explained by a EUR 24.6 million noncash impairments on deferred tax assets related to performance of the Dutch and German fiscal entities. All in all, the net results attributable to shareholders was EUR 11.8 million. On cash flow. We report a strong business cash flow of EUR 141 million, driven by a positive net cash result and a strong trade working capital improvement. The adoption of IFRS 16 has no impact on the cash flows of the company. The positive effect of the implementation on the line item group net cash result was EUR 105 million. And there was a negative impact on the line item investment intangible assets for EUR 105 million. The main driver for our strong cash flow is the positive development of trade working capital, which I will discuss on the next slide. The cash from trade working capital improved significantly due to the lower accounts receivable, partly offset by lower accounts payable. There were also the benefits of the advanced payments of a few new contracts and the restart of funding of OpenIJ. Important to note, on average, BAM's payment performance to suppliers has been stable. We are rolling out a company-wide credit management tool. In addition, we remain focused on minimizing the dispute resolution times. Our trade working capital efficiency was minus 10.4% versus minus 8.8% last year, with a strong performance in the fourth quarter. As a company, we are comfortable with the level of around minus 10%. This brings us to our financial position. Our cash position increased by EUR 110 million to a total of EUR 854 million. In 2019, we divested some leveraged property position, which partly explains the movement in interest-bearing debt. Taking this into account, our net cash increased by EUR 182 million to a total of EUR 583 million, excluding leases. Our strong cash position is also illustrated by the fact that we did not use our EUR 400 million credit facility throughout the year. Our capital ratio declined to 16.5% versus the end of 2018. Without the impact of IFRS 16, this would have been 17.6%. The underlying movements in equity is also partly due to the noncash impact of interest rate changes and ForEx movements. Furthermore, as I explained in the first half, we took the opportunity to partly derisk our pension obligations, which resulted in a negative equity movement of EUR 29 million. This slide is labeled Resilience Through Financial Strength and it's another new disclosure which helps you better understand the financial strength of the group. It shows our weekly net cash position over the past 5 years. Basically, this slide illustrates 3 main trends. First of all, the seasonality on an annual basis. There is a seasonal cash peak at the year-end of each year as projects are completed, claims are settled, clients spend their budgets and the activity level of our construction companies is relatively low. Mid-year, our cash position is substantially lower. Secondly, the volatility of our cash position during the year is significant. And the third point and most important is the strong upward trend of our average net cash position over the last 5 years. As such, BAM deleveraged substantially, and we are a resilient company. Now let's have a look at our strategy, building the present, creating the future. For 2020, our top priority is to improve the profitability of the underperforming activities. We remain committed to our strategic objectives, and we focus on improving tender quality and derisking the company and continue to review our product market combinations. The performance culture within all parts of BAM is maturing, which is a key success factor for 2020 and beyond. As part of our strategy, we introduced a stage-gate process for tendering. This year, we have extended the stage-gate process to the execution of projects as well, which completes and totally covers our core processes. This uniform project approach will be applied consistently by all our operating companies, allowing the sharing of knowledge and lessons learned, risk management and quick adoption to changing circumstances. Combining this with our external review of product market combinations will improve the predictability of the performance. On this slide, we show the overview of our performance versus our strategic targets. On people, ensuring a safe environment is vital. After no fatalities in 2018 and in the first 3 quarters of 2019, BAM deeply regrets 2 fatalities in the last quarter of 2019 in Belgium. BAM continues its efforts to increase safety, not only in the company but also in the industry as a whole, especially by giving it consistent management attention and emphasizing the behavioral aspects. On planet, we continue to develop more sustainable solutions for our clients. The inclusion in the CDP's climate change A list that Rob mentioned earlier is a strong recognition of our efforts to reduce emissions and to achieve a net positive impact on environment and people in the long term. On profit, we already covered in the financials. On this slide, you see residential development in Amsterdam for 59 riverfront residences, which are overlooking the Amstel river. Now we come to the developments of our order backlog and the outlook. As Rob mentioned, our order book at the end of 2019 was in line with the end of 2018 while we continue to focus on quality above volume. Looking at the Netherlands, we still need a permanent solution for nitrogen and PFAS, which is causing uncertainty and delays regarding permitting and awards of some new projects. The longer-term impact of Brexit is unknown. But in that respect, it is clearly positive that the U.K. government firmly supports investments in infrastructure, such as the HS2 rail project. In Dutch Construction and Property, we see a solid demand for new homes. However, growth in the short-term is mitigated by the limited supply of land positions and slow permitting process. Although interest remains low, the affordability of homes is under pressure. In Germany, the underlying market is stable but competitive. In International, the oil and gas remains subdued. In Civil engineering, we conclude that most governments are willing to invest, but that we should continue to focus on projects with a favorable risk/reward balance. The order backlog of BAM Nuttall is strong, also due to the award of the Silvertown Tunnel project. In PPP, we see opportunities in projects in Belgium, Germany and Ireland. All in all, for 2020, we expect an improvement of the adjusted result before tax margin compared to 2019. We are cautious with our outlook, given the fact that it's early in the year and the uncertainties I just mentioned. Also, the volatility caused by the outcome and timing of claims recognitions can have an effect.

Thank you, Frans. And now we will take your questions.

Tijs Hollestelle, ING. Let me see. Can you give us an update on the 5 largest infrastructure projects? And I'm not meaning, let's say, the sea lock, but the infrastructure project that will have a potentially big impact on the 2020 and 2021 results. And also, the same for the European nonresidential business. So International, I'm not that interested in. But for infra and nonresidential, the biggest, most important project for the current 2 years?

Well, as you know, we do not really disclose specific projects. All in all, we can say that the bigger projects that play the part in the first half of 2019, we are in discussion with our clients to discuss claims. In the meantime, we have to recognize the cost. And there is some result reported in this presentation on the project in Germany. But the outcome of these negotiations and also the timing is difficult to say. So to go into projects 1, 2, 3, 4, 5 is not what we normally do, also for the interest of the commercial process.

Okay. And is it unfair to say that, I mean, obviously, your top priority is to improve profitability. But there's not much you can do because the orders you won last year or 2 years ago, things that start building a couple of months ago are already there. So the only thing you can do is try to reel in even better contracts, which then improve the results 2, 3 years from now. There's -- I mean, if things are not right, right now, you cannot really change that.

Yes. There are the older and bigger projects, you're right. So that's a matter of putting the right management on it, the right reporting systems on it, the right governance on it, the hands-on mentality, the performance culture type of things. So really be on those projects. But there are also smaller projects we take in and probably start generating the first results already this year. So it's a mix of the size of the projects and the influence you can have. So for a part, you're right, but then it's about putting the right management and scrutiny on it and action on it, performance culture. And for the smaller projects, you have already the opportunity to gain from a good process and result this time. But there is some delay in effect, that's right.

Yes. Maybe then I was not really referring to the big projects which already have been provisioned for. But what are the big projects you currently think are just okay but will start somewhere in the near future and have a big impact on the results potentially?

Well, there are some order -- some big projects coming in. The Silvertown thing is a big project, But yes, if you -- I don't know them by heart, but if you read the press releases, we announce them all the time. There are some bigger ones and smaller ones. So if you run through them, then you have a pretty good picture with the projects that came in. And I can only say...

Yes. But so -- but for you guys, you understand much better the difference in complexity and potential risk in these projects because, yes, I see those press release, it's is a huge list, EUR 7 billion of orders every year, overall.

Yes. But we don't publish them all.

Luckily not. But it's kind of an advertising it, always regionize. But for us, it's not -- yes, I'm not saying that much of a -- how dangerous it potentially can be.

All these projects pass our tender stage-gate process. So that's the gatekeeper to make sure the risk/reward balance on these projects is right, and we're not looking for size. So the 5 largest projects, yes, that doesn't mean a lot. We just focus on the risk/reward balance that is intrinsic in the tender.

And together with the uniform project approach that covers also your first question, the projects that are already in hand. We go -- we have now totally covered the whole sort of uniform project approach, including risk management, the ability to adapt to new circumstances, for instance, PFAS is now in there. We immediately put in the gate, make sure that the responsibility for PFAS will not be ours because we cannot handle that. Those kind of things. I'm sure. I realize I'm not fully answering your question, but then I think we have to take it a little bit offline and then see which particular project you want to know a bit more about when we go through the list we published and see if we can help you in that way.

Maarten Verbeek, The Idea. The project losses, so you mentioned in this press release are the same as what you mentioned in the first half. However, at the same time, you also mentioned that on one hand, you had a first partial settlement of the civil project in Germany. And on the other hand, you also mentioned that in the second half, there were additional cost on projects in execution in Germany. Could you give more color to these 2 statements?

Yes. So that's correct, there. So we had a small upside on one of the German projects that was involved in the profit running. And on the other side, we see on a number of other projects, smaller cost increases and extension of time that resulted in deterioration of the project results.

Could you quantify them, maybe?

Sorry? Can you quantify? Well, if you look in H2, German Construction and Property, we had a EUR 15 million, 1-5 million euro additional loss over the second half year. And that's a combination of deterioration of projects but also some additional overhead costs that we experienced there. So it's a mix.

You mentioned, going forward, we are pleased with the trade working capital of around about minus 10%. However, when I look at the 2 divisions, they differ quite materially. On one hand, there is certainly a good, somewhat better, result for Construction and Property. But lately, we have seen a very depressed trade working capital efficiency ratio for Civil engineering. If you simply would bring your civil back to the 10% that we used to have in the past as well, then your ratio would be clearly ahead of the 10%. So why are you still satisfied with the 10%? And are you not a little bit more ambition?

I'm not sure if we had ever 10% on civil because that's traditionally a lower minus. So that's for one. And Construction and Property is traditionally above 10%.

Yes.

So these are the normal numbers. Since we started this trade working capital in 2016, when we are at minus 6%. We now grew it to where we are now. So I'm not very familiar that we had minus 10% on civil.

So yes, I agree with that. And I think also, it's important to note that in many civil jurisdictions where we work, it's very difficult because you deal with pay-when-paid clauses. So governments would like to see contractors have paid the supply chain before they can invoice the client. And that means somewhat lower number in trade working capital efficiency. But it's often hand-in-hand with a somewhat increased margin. So you also need to look in a balanced margin trade working capital efficiency.

With the outlook statement, you only have stated you expect to improve your profitability because also you still might expect certain claims. Are that claims or additional costs which are still linked to projects for which you already have taken provisions, extra cost? Or do you also see some new projects which might be a bit tricky going forward?

No. I think we just mentioned it as a phenomenon, maybe -- it's not tied to a particular project because if we would see issues, then we would have taken the provision. So it's a general, let's say, effect of IFRS 15, which we have to take into account. But at this moment, we don't see any additional claims coming in.

Luuk Van Beek, Degroof Petercam. One question on Brexit, where you sound a bit more cautious than some other companies that I talk to. And most are then very positive on the infrastructure side, where you see additional government spending. You've always said government is important for us also on the nonresidential side with hospitals and schools and so on. Do you also see some stimulus measures there? Is that a part is lagging? And the second element that some other companies mentioned is that the new government brings more clarity so that the things that were on hold are now released. Is that something that you recognize?

Yes. I think on the infrastructure, there are promising messages. But let's see how Boris really behaves. He's a bit, let's say, unpredictable. But those are my words. So let's wait and see. But the messages are promising, especially on the infra side. On the Construction and Property side, we are a bit more cautious, especially in the London area. There are messages in the newspapers that people -- that companies are leaving the U.K. and coming to Netherlands, which is maybe then may not be bad news after all. But -- so there is a bit of a difference between infrastructure and Construction and Property, and it's all not bad news. It creates some uncertainty. We are not pessimistic.

Okay. And then on Germany, which was relatively difficult this year, also with some additional losses in H2. Can you discuss how things are developing there? Also in Berlin, the markets, I think, are becoming more difficult. What's the outlook for Germany?

So I think in Germany, the focus is on, as we said, getting the performance in that area also up to standards. So we have new management in place. And they're with full energy doing deep dives in running projects, and also, we are determining with even more focus in the key areas where we are, what are the right tenders for BAM to tender them.

Okay. And finally, on your capital ratio, where you obviously have a target of 25%, which is under pressure partly because of accounting changes. Are you still comfortable with the aim to improve that by profit retention? Or do you think that the 25% target is maybe taking into account the accounting elements a bit overly ambitious? Can you comment on that?

So our current level, 16.5%, we're comfortable with. In terms of operating the business and dealing with clients and supply chain, the targets corrected for IFRS 15 and 16 is to be around 21%. And indeed, with the performance of the company, we plan to grow the solvency further in the right direction.

Yes, the group overheads for 2019 was positive, contributing to the adjusted profit before tax. Can you give some more clarity on what exactly was this EUR 5.6 million? And how we're looking for next year?

Yes. So basically 2 elements in there. We had a small over-recovery on our running costs that we normally charge out that we always charge out, and there were 2 smaller provisions in the balance sheet for costs that turned out to be lower that we c release to the P&L. So that basically are one-offs. So normally, it should be around 0 with a bit of an uptick this year.

Okay. Yes. And then maybe on BAM International, we are still struggling right now. So as of this moment, you're not seeing an uptick in oil and gas, for instance. Can you elaborate on the plans for next year? What are you planning to do there?

Yes. So we have also there a new management in place, which is really focusing on, again, getting the performance of the company in the right place. It's about also resizing the company. So recognizing that the markets there are not so favorable. We have to assume a smaller company for the coming years. We focus in tendering very much on near-shore projects, and as such, resize the company and make it more healthy is the way forward.

Martijn den Drijver, ABN AMRO. I just want to come back to the question about the capital ratio, but then from a more obsession point of view. Just normal solvency, so equity divided by assets, excluding IFRS 16, went down by 110 basis points. You just mentioned that you're comfortable in terms of your commercial position and your suppliers. But if you take that this question in relation to the convertible, which matures in June 2001 -- '21, excuse me. Just want to hear your thoughts on how you're going to, between brackets, solve that one? That would be my first question. You want to do them one by one or...

Well, you can give them all, and then we can pick and choose.

Yes. Then I'm a little bit puzzled by your comments, Frans, you said, if I recall correctly, EUR 15 million, 1-5, additional losses in the second half in Germany?

Yes, correct.

I can't reconcile that with what's in the press release. You had EUR 57.5 million. It was EUR 54.5 million in the first half. That's an additional EUR 3.5 million. So where does the EUR 15 million come from? That's one. And the settlement, the civil project Germany. Is there any indication that you can provide of how much that is? That would be very helpful. And then the fourth one on the Middle East. If you could give a breakdown between the underrecovery part and the legal dispute, so that we can have a bit more sense on how that business is developing.

Okay. Well, I think just to answer them in order of appearance. First on the solvency, yes, the convertible is, of course, on the radar. It will expire May 2021. So as we said, in the coming year, we will come with more disclosure on how we bring that forward. For now, the focus is on having all the opportunities on the table, and it's important to note, of course, that stakeholders' interests are very clearly considered. So for now, there's not much news to report there.

Just a follow-up. Are you allowed to refinance using the RCF?

In CRE, I have to check. And with that, you can...

We'll wait.

Yes. Okay. Then maybe your second question, I have to check, in my mind, the numbers are 43 -- minus EUR 43 million and minus EUR 57 million, so it's minus -- around minus EUR 15 million deterioration in H2. And that's a mix of those 3 elements, but I'll come back on that.

When you go to the slide, you can hardly object. When you see around EUR 45 million loss in Germany, you can be [indiscernible].

So it's confirmed then. You asked about the settlement in Germany. While those as Rob always usually said, were bumpy, unpredictable. So yes, we've seen small favorable settlements there in the second half of 2019. Yes, doing any predictions going forward on that would be too early. So that is always in discussion with the client and timing can vary. The legal disclosure in the Middle East, we don't provide a breakdown on it. It's just an old court case that we lost, where we have provisioned for. But the amount that came out was bigger than we anticipated.

Okay. Just a follow-up on that, should we just say roughly 1/4 -- 25% on legal dispute and the rest for the underrecovery?

Sorry. Small?

25% related to the legal dispute and 75% to the underrecovery? Just...

It's a single-digit number.

Christophe Beghin, Kempen. Can you give a bit of flavor of what we can expect from cash-out next year for the loss provisions that were taken in this year?

So the cash-out for the loss provision, that depends very much -- it's a bit related to the previous question on settlement discussions with clients and timing and also, of course, new claims from ongoing business. So we take an overall view on the portfolio on that. So there's no specific cash-out we forecast on current loss provisions. It's a portfolio effect, that's what I'm saying.

Can you give a clear split up in the net cash position of today? What is prepayment? What is real net cash of BAM?

So the net cash position of EUR 271 million, you mean? How that's split down? So I think, first, it is good to correct -- sorry? Yes. So it's first good to correct for the leases here, taking IFRS 16 out, you come to an amount of EUR 583 million, as we say in our cash position overview. Then correcting for interest-bearing debt, you come to an EUR 854 million position overall. And that is basically driven by net results and trade working capital. Those are the big drivers behind the cash improvement over the year.

Can you mention the level of prepayments? At the end of '18, those were EUR 172 million, what's the amount at the end of '19? Secondly, looking at your PFI portfolio, should I assume that the start of the table, the 11% is what you currently have in mind and that the other ones are just sensitivities?

What table you are on now, Andre?

The discount rate. 11%.

Oh, the discount rate for the PPP you mean. Yes. So maybe to answer the second one, yes, we give the table with a purpose. So we leave it up to the analyst to take a view on discount rate.

But what was the discount rate that you used in '18 because [indiscernible]

No, I saw the -- yes -- I understand the question. So the model we used to calculate the directors' evaluation there, it was the old way to do it. We basically don't use that model anymore. We thought it was outdated, and the new methodology we choose is to give more transparency to analysts and stakeholders and to say, here are the cash flows. So you have a very clean view on the portfolio of PPP stakes. And then we leave it to the market to decide what discount rate they use. On your other question, I need to come back on that. I don't know if that number. I think it's important to mention that on the trade working capital, which it has an effect on the AP, AR balance was very favorably developed. So both lower accounts receivable, partly offset by lower accounts payable, leading to a significant improvement there.

So no real exceptionals included in those numbers?

No, if you compare year-on-year, of course, of course, OpenIJ is a big one, where we started the financing earlier this year. So that's one to take into account.

A question on covenants. Where are you on the covenants?

Comfortable because we have not used our RCF, so we...

Can you mention the levels? Normally, you would be able to...