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

Good morning, everyone. I'm Michel Aupers, Investor Relations Manager at Royal BAM Group. Welcome to everyone joining this analyst meeting here in Amsterdam or in the audio webcast. The meeting is hosted by our CEO, Ruud Joosten; and our CFO, Frans den Houter. They will give a short presentation on key points of BAM's results for the full year 2024. Afterwards, we will take your questions. I will draw your attention on the disclaimer here. Ruud, over to you.

Thank you, Michel, and good morning, all. Here in the room is also Henri de Pater. In March, he will succeed Frans den Houter as CFO. Here you see the completed Destiny Bridge, the centerpiece of the Cross Tay Link Road project in Scotland, which will ease congestion, unlock development, and create smoother journey for drivers, residents and visitors. Let's start with the key points over the full year. I'm pleased with our performance in 2024, which reflect the success of our growth strategy and our core strength in the energy transition, transportation and Dutch residential markets. Nearly all the BAM's activities performed strongly highlighting the resilience and effectiveness of our business model. We reported an adjusted EBITDA of EUR 333 million, reflecting a margin of 5.2%. The divestment of Invesis also contributed to our adjusted EBITDA. Later on, Frans will come back to the Invesis deal in more detail. Our adjusted EBITDA was held back by schools projects in Denmark and challenges in Construction UK, including Co-op Live in Manchester. Co-op Live is nearing completion and in Denmark, 3 of the 4 projects were handed over with the final one set for completion in the first half of this year. This will mark our exit from nonresidential construction in Denmark. Now I would like to go to the key performance indicators. In 2024, our revenues increased by 3% and we have reported a net income of EUR 82 million, reflecting on earnings per share EUR 0.31. We maintained a strong financial position by focusing on projects with an attractive risk reward balance along with effective cost and working capital management. This resulted in a robust solvency and liquidity position. It's great to see that our order backlog increased by 33% to EUR 13 billion. A substantial part of our recent project wins aligned with our strategic objective to expand in sustainable solutions while remain focused on the quality of our order intake. We are pleased to propose a dividend of EUR 0.25 per share over 2024, reflecting an increase of 25% versus last year. In addition, BAM intends to return EUR 50 million to its shareholders through a share of buyback. This is also supported by the cash proceeds of the Invesis transaction. We also welcome the decision of the Dutch Public Prosecution Office to conclude the investigation into BAM International with a favorable outcome, bringing clarity to the organization and allowing us to focus fully on the future of our company. Now let's take a look at our strategic progress in '24. In early '24, we advanced our strategy, building a sustainable tomorrow, centered around 3 pillars; focus, transform and expand with sustainability and people as key drivers. Let me give you a few examples of our strategic agenda. We prioritize profitable projects and long-term partnerships like Lightyards in Eindhoven, 242 homes, as an example, and a new high voltage station for Schiphol Airport. At the same time, we are streamlining our portfolio, selling our remaining stakes in Invesis, allowing us to focus on core activities. In this context, we're also excited about foundation technology to be divested from the Netherlands organization. We are driving innovation and sustainable solutions with our new factory for affordable wooden Flow homes, and we successfully delivered our first homes last year. We foresee significant opportunities ahead. We continue to expand in energy and infrastructure illustrated by the substantial order intake of multi-year project wins in our civil engineering businesses. We are investing in new technologies and we are actively seeking opportunities. We've announced the acquisition of WL Winet, which will strengthen our position in telecom solutions with mobile networks. Also, safety remains a top priority for our company. This is why we've initiated an ambitious program to further improve safety for all our employees and the employees of our supply chain partners. We are pleased to report continued advancement in our goal of being a leading company in sustainability. This is demonstrated by receiving the prestigious CDP climate A rating for the sixth consecutive time. Now the testament to our commitment is the validation of our enhanced emission reduction targets and our net-zero ambition by 2050 by the Science-Based Targets Initiative. Taking a look to some financials. BAM is a resilient company and our strong balance sheet and financial performance enabled us to return EUR 92 million to our shareholders in '24 via dividend EUR 30 million, and via and buyback of shares of EUR 50 million. Now let's look at the performance of our 2 divisions. On this slide, you get an impression of the installation of our wooden Flow homes on a site in the Cruquius. These elements are delivered in one piece and the house can be wind and water tight within 1 day. Division Netherlands reported an adjusted EBITDA of EUR 161 million, reflecting a margin of 5%. The construction and property segment, there was strong contribution from the residential sector. There's a clear shortage of homes in the Dutch residential market, and we sold 1,854 homes, which is an increase of 11% compared to last year. Also, our Dutch nonresidential activities contributed well. The civil engineering activities continue to perform strongly with the 14% increase in adjusted EBITDA. I'm very pleased with the development of this segment over the last 4 years, because the profitability and predictability improved substantially. Our Dutch backlog improved to EUR 5.3 billion. Moving on to the UK Division in Ireland. On this slide, you see the work we are executing to project of the community in Aberaeron in Wales against flood for generations to come. The division United Kingdom and Ireland reported an adjusted EBITDA of EUR 114 million, reflecting a margin of 3.7%. Construction UK reported an adjusted EBITDA loss of EUR 48 million. This figure includes project delays in supply chain issues related to the delayed opening of Co-op Live in Manchester. Our other businesses in the division UK and Ireland performed very well. Civil engineering UK had an exceptionally strong year supported by the high activity level, especially in rail and projects related to the energy transition. BAM Ventures also showed a strong performance and the result in Ireland improved substantially. Our order book increased by an impressive 58%. Now, Frans will take you through the financials.

Thank you Ruud, and good morning, everyone. On this slide, you will see our new office in Kilsyth, which we opened last summer, creating a dedicated hub in Scotland. This morning, we reported an adjusted EBITDA of EUR 333 million, which translates into a margin of 5.2%. Other highlights in 2024 are a backlog of EUR 30 billion, the solvency of 23%, and a liquidity position of EUR 0.8 billion, these numbers confirm the success of implementing our strategy and was delivered by good performance of nearly all business activities. Also, our performance reported BAM to return EUR 92 million to shareholders in 2024, and we did not utilize our revolving credit facility. We also report substantial progress in delivering on our ambition environmental targets with several of our KPIs exceeding expectations. Our Scope 1 and Scope 2 emissions are down 17% compared to baseline 2015, and as such, we are on track to reach our 80% reduction target by 2026. Our Scope 3 measurement over 2024 totals 2,093 kiloton a reduction of almost 500 kiloton year-on-year. This number translates into a reduction of 37% versus our 2019 baseline. End of next week, BAM will report -- will release the annual report 2024, where we were we will report our sustainability performance fully compliant with the CSRD requirements. Now, let's zoom in, in some details of our income statement. Revenues were up by 3%, driven by the division Netherlands as residential homes sales recovered. Our adjusted EBITDA was 10% higher compared to last year. At the end of December, we announced that BAM will divest the remaining 50% stake in Invesis to our joint venture partner, PGGM. Let me give some more background regarding the financials of the intended divestment, which is expected to be finalized in the coming weeks. The divestment will result in cash proceeds of EUR 105 million, circa EUR 0.40 per share, and to be paid in 2 tranches in 2025. Invesis contributed EUR 50 million to the adjusted EBITDA, including EUR 20 million of earnout for successfully securing new projects line item order, and EUR 31 million reclassification of hatch reserves following the agreed divestments reported in the line item Invesis. Finally, there is a noncash impairment of EUR 107 million, which principally reflects the impact of increased interest rates. Depreciation and amortization totaled EUR 128 million, which is 5% higher compared to last year. As a result of our increased investments in sustainable and modular solutions, including the continued electrification of our plant and equipment. We report restructuring cost of EUR 12 million, which relates to several smaller improvement programs in both divisions. Income tax in the P&L is only EUR 5 million resulting in an effective tax rate of 6%. This attractive low tax rate is supported by the future tax benefits arising from the liquidation losses of operations, and by the revaluation of the deferred tax assets for tax losses as part of our yearly reassessment. These 2 effects report a good conversion to net results this year. For the coming years, based on our current knowledge, we expect an effective tax rate in the range of 17% to 19%. Bottom-line BAM reports a net income of EUR 82 million reflecting an earnings per share of EUR 0.31. Now let's go to the cash flow. Our flow performance -- our cash from operations was EUR 284 million in line with our performance of last year. Cash flow from working capital contributed EUR 3 million in 2024 and as anticipated trade working capital efficiency has bottomed out, and we report over 2024 a trade working capital efficiency of minus 11.7%. We reiterate our guidance that based on our current view and our current business, we forecast at the current level of trade working capital. Efficiency of around minus 11% is a good proxy for the coming years. The cash out on provisions and pensions totaled EUR 30 million, and the cash on investing activities was EUR 108 million. Cash flow from financing activities of minus EUR 172 million included the payment of cash dividend, the share buyback and the remainder of the cash flow from the financing relates to leases. Our liquidity position remains solid at EUR 0.8 billion, which is comparable to the position of last year. On the next slide, you see our financial position and as explained, trade working capital efficiency landed at minus [ 11.7% ]. Solvency at the end was 23%, which is an excellent achievement taken into account the impact of our Invesis impairment and the distribution of EUR 92 million to shareholders. Now back to you, Ruud.

Thank you Frans. I would like to conclude with the market trends and our outlook for full year 2025. Here we show you one of our projects in Belgium, we realized the new entrance of Rubenshuis, museum of the world famous artists in Antwerp. I'm very pleased with the development of our order book, which increased by 33%. In 2024, our book to bill ratio was an impressive 150%, and the fourth quarter alone added EUR 2.9 billion. This is why we continue to focus strongly on order book quality and selective tendering and key markets where we have a proven competitive advantage. The increase of our order book was supported by all our businesses. For instance, it's especially good to see that the order book in Ireland in construction UK improved and are now well above the levels of end 2023. Now over to some market trends. In the Netherlands, the residential market remains strong, driven by stable consumer confidence due to salary increases in the continuing high employment rate. The government has the ambition to build more homes, which is illustrated by the Housing Summit 2024 Initiative aimed at improving procedures to expedite residential construction. The nonresidential market is cautiously optimistic, and in Schiphol there are many attractive growth opportunities driven by the energy transition and the transport market. We are closely monitoring the region nitrogen rulings and assessing our portfolio accordingly. While a few of our projects will require further review, we welcome the government's prominent attention to this topic and look forward to greater clarity soon. At this time for BAM, ongoing projects continue as planned, and we expect that our diversified portfolio in order book will allow us to adapt where needed. Construction market in the United Kingdom is expected to grow. Energy remains a focus of the UK government, which has recently issued the Clean Power Action Plan to speed up planning decisions to help the energy chain gear up for delivery. Furthermore, negotiations have begun with the shortlisted bidders for the small modular reactor program and BAM participates in this program with Rolls-Royce. The new hospital program in the UK will put on a more sustainable and delivered footing. In the first half year of 2025, further announcements from the UK government are expected, including the long awaited 10-year infrastructure plan and the outcomes of the strategic defense review and the spending review. The construction market in Ireland is also a forecast to grow, and there is solid market demand for transport and social infrastructure. In 2025, the total capital investment will be almost EUR 15 billion. The country's highest annual spend to date. We continue our disciplined contract and risk management approach. We're entering the final stage of the derisking of our portfolio, which is a fundamental priority within our strategy to announce our financial performance and predictability. For 2025, BAM expects to deliver a logistic EBITDA margin of around 5%, which is in the middle of the target range for strategic periods in '24 and '26. Now, we will take your questions.

Martijn...

Go ahead.

Martijn den Drijver for ABN AMRO. I have 3 questions and I'll take them one-by-one. One is a more general and then 2 about the division performance. The guidance 2025 of around 5% if you were to exclude Invesis, which you have in your adjusted EBITDA and you exclude, I don't know, EUR 80 million, EUR 90 million from Manchester Co-op and another EUR 10 million for the Danish schools projects. In fact, your underlying EBITDA margin was closer to 6% because the Danish schools will not be repeated in 2025, and I sincerely hope Manchester Co-op is the same. So why would you guide for around 5% whereas your underlying performance was actually 6%? That was my first question.

Yes, our strategic range is 4% to 6% as we presented that a year ago in Feb '24. Normally at this moment in the year, we are not going into, let's say, a more detailed outlook, so this is already, let's say, from our conservative way of giving outlooks a big step forward to give you already an outlook at this moment in the year. So that's why I think it's prudent to go for this percentage. It's in the middle of the range, and it's early in the year we still are living in turbulent times, so we thought it was in wise percentage based on where we are today and of course we'll come back later in the year with, let's say, a more detailed outlook.

My second question is regards the Dutch division, in fact, civil engineering did well, construction and property also, but overall, the adjusted EBITDA margin was 5.0%. Last year, it was 6.0%. Okay, there's a little bit of a delta between the houses sold, but I was just wondering if you could provide a bit more color as to why that performance on a year-to-year basis was down, even though the housing market, as you said, yourself is strengthening is strong. So what causes that year-on-year delta?

Now, let me start and then you can help there of thought, but of course, we are held back here by the Danish schools if I look at the Dutch result let's, the Dutch result all businesses did a very good job and supported also by very good house sales in the last quarter, 11% more home sold in a year, but also indeed infra and the specials also did a very good job, so indeed held back by the schools in Denmark that we now are concluding and yes, these results are in the Dutch results. So I think that's the main reason, but -- and Frans maybe you can give some more color.

I think it's a perfect summary indeed, Schiphol performed well at 7.3%, EUR 10 million up almost versus last year, so really happy with that. And then residential performance underneath is also good there, 11% more houses sold. So yes, the delta is to be found in Denmark.

Only Denmark because H2 2023, you also had the Danish schools as well.

Yes, I mean, the majority of the impact is coming from Denmark.

And then my final question on the UK, I was just slightly surprised by the fact that UK construct had the same loss in the second half, as in the first half. Well, if my memory serves me well that was not supposed to be the case. So what happened there? And is this the final assessment or are we still in some sort of phase where more could come from that project?

Of course, you're right, it was not -- that loss was not, let's say desirable at all. I think it's based on the fact that we are finalizing our derisking portfolio for the total company. Clearly, Co-op Live in Manchester was one of these projects, and we decided to finalize that as soon as possible during the second half of the year so we're now in loss, let's say, conversations, but we expect this to be closed very, very soon. And that's a big reason for the loss in construct UK is not the only one. It's also effect that commercial construction in the UK construction real estate is under pressure. So it's not the most easy market. So it's not only Co-op Live, but the vast majority of these numbers caused by Co-op Live.

Just one follow-up. You mentioned conversations are ongoing, so there's still a bit of a question mark as to H1 2025, and then we can close the book. Is that the way we should think about this?

Yes, we expect to close that very soon and indeed in H1, it'll be concluded.

Tim Ehlers from Kepler Cheuvreux. Maybe starting with civil engineering I think the margin is very reassuring and great news. Could you maybe elaborate a little bit on the drivers behind that margin expansion and also the sustainability of it, if that's the base margin going forward there's more room to improve it and what trends you currently see that support that development?

Yes, I think we made the right decision some years ago to invest strongly in the energy transition segment of the infrastructure markets, especially in the UK we in fact said goodbye to the highway projects and went for, let's say, a set of 12 to 15 customers really focusing on rail projects. And indeed, the energy transition market and the investments by the British government are continuing. So the new government and the new labor government didn't change that investment program at all. So there is a long-term, very strong investment program going on electrifying the UK And that's a big driver for the growth in the order book in 2024. But the same thing you see in the Dutch market as well, where we also reconfigured our strategy from fully focusing on, let's say big road projects or civil engineering projects for the Dutch government, much more now focused on electrification. And we also work for commercial customers that are electrifying their grids. Then we have the local grids that need to be upgraded, where we have very strong positions. And in the TenneT, the national provider where we have a number of big projects going on to electrify this country and support the grid. And that will give us for a very long period, a very nice order book position. These contracts are good. They are long-term, they're based on mutual respect and they're based on quality. Customer is very much, let's say, focusing on timely delivering these projects. Cost is also important of course, but much more in balance with quality and time and that's what we like as BAM, these kind of long-term projects very well detailed with the customer and yes, and of course we are learning from station to station, for example, these land stations that we're building in Holland, but also in the UK. The learning curve is helping us there as well, so that are the key drivers for a long-term business and profitability. Maybe to mention also, railways, of course, also a good part of our sustainability strategy is to support rail. Both in the Netherlands, but especially also in the UK, a big program to invest in the railway system of the UK also in Ireland. Very long contacts that we have with the government to support them in that investment as well. I think that are a few key drivers for long-term success in infra.

So basically the same theme in the UK and Ireland the Netherlands when it comes to drivers and civil engineering.

Absolutely. And of course, we're extremely happy that we took the decisions for these segments. Of course, it was based on the investment in the electrification of both economies, and that's still a continuing big time. And these are long-term big contracts and we are learning of course, because we do this now for several years. So that's really helpful in getting on that learning curve and improving margins and delivering in time.

Really nice combination in both divisions. We see a step up in EBITDA, but also in revenue, really trends. Yes, it's nice to support your bottom-line, of course. And also, good to mention small strategic moves in the Netherlands where we divested BAM Foundation technique and did an acquisition of WL Winet which is a company that's active in mobile networks. Yes. So also, some smaller strategic moves to further strengthen acquisition there.

And then one last question before I pass on the mic. You already talked about a good development there as well on the top-line. If I look at the order book, which looks very promising and assuming that the new orders you take in are also good margin business, so that they are in line with your strategy. Is it fair to assume that maybe not only next year, but in general going forward, we'll see now an acceleration of the top-line to some degree, obviously not plus 10%, 15% but with that also margin expansion plus top-line growth?

Yes, I think to be balanced development of course we have to, let's say, deliver this project also in high quality and in time. Many of these resources and skills are scarce in the market. You talk about electricity, for example, high voltage knowledge is scarce at this moment in time, as you can imagine. So indeed, selective tendering, growing the business in a balanced way and of course, yes, improving the quality of the portfolio at the same time, our results in the negative sense were mostly affected by big bleeders in the past, so that the strategy, of course is to derisk that portfolio, finalize these bleeders and then slowly but steadily increase the attractive portfolio of the company that fit sustainability strategy. And that's a long-term story. We made some major steps, I think over the last couple of years. Four years ago, I think we presented a list of 23 high-risk projects. Now one-by-one we are solving them. And it's a kind of long marathon because some of these projects take 8, 9, 10 years, but we are getting there step-by-step. Sometimes it's painful, but in the meantime, we're very happy that we, based on our right strategic choices, we can still deliver EBITDA and some returns to the shareholder. And I'm really, yes, happy of course with the order book development in these segments, especially it's going very fast in 2024 with EUR 3 billion addition, which gives us a lot of yes, comfort in the fact that we made the right decisions.

Tijs Hollestelle, ING. Yes, follow-up on Tim's question. Do you see any important, let's say, milestone events for the legacy projects this year, which could lead to, let's say, deviations in the expected profits?

Yes, I think in a half year we made some remarks about that list of 23 projects coming down to more or less 4 projects to be solved or finalized, maybe is a better word. We see good progress on a couple of them. We called -- we mentioned Brisbane, for example, in metro in Brisbane, that's now at 70%, 80% of completion. Another big one that we finalized was the [ sluice in Sassafras ] that was opened in the last queue by the 2 kings of the 2 countries. So that's also a big one out of the portfolio. Another big one is the NCH, the National Children Hospital in Ireland that we are also in the final stage of so yes, that our, that our will be clear milestones to, let's hope by the end of this year, more or less, we'll have a situation where we have one of these projects left, and that's the FLC project in Denmark. So we're not out of Denmark, we are out of construction in Denmark, but we're not out of Denmark because we are finalizing together with our JV partners, the tunnel, the Fehmarnbelt between Germany and Denmark. Good news of course, was by the divestment of ice and flight that we decreased our percentage from 25% to 12.5% of this project. But still, it's very transparent, I think, to the whole world now that by the end of this year, this will be a remaining high-risk projects in our portfolio but that's more comfortable than of course, than a list of '23.

Yes. I mean, more specifically, sometimes these long-term projects also see, let's say, the need for an adjustment in the profitability in between. So that was basically my question. So Fehmarnbelt is there for a couple of years, but is there an event this year that there is maybe in a reset in the...

Yes, that's very difficult to say. We, let's be fair, we have to 100% of the project. So we are also not, let's say, the only one managing this project. We are not the leading partner in the joint venture. There's [indiscernible] from France, they are very professional and very strong company and a lot of experience in these big projects, but of course, it's still in the beginning phase. I think they did a very good job in building a huge factory for the 90 elements we need to build to -- build the tunnel in the end, the concrete factory that's done. In the Q4, we had big success in drifting one of the elements -- 2 of the elements that are now finalized into, let's say, pre in the harbor situation, so already for immersion. So that can be key elements. I think big moment will be during summer when the first of these elements will be immersed into the sea I think when that will happen in a successful way, I think a lot more confidence will be around this project. Till that moment, it's more on for a lot of people, more on academic project, and we need to see these elements going into the sea. And I think a lot more enthusiasm will start from both countries. So we are on it, we are very good people in the -- from our infra team, the Dutch infra team into that project. And we'll -- of course, we will inform you when these things will happen, these big moments. But you will see it in the press as well, because for Denmark, it's a key project.

That's was exactly what I'm asking for. So that, that will be helpful. And then a second question, and it's yes, more or less the same as Martijn is asking. So I know that BAM is coming from far, so a lot of things have improved. The overall, let's say if you take, it the Dutch and the UK division had the margin stability, predictability with one of your strategic topics a couple of years ago is achieved. But yes, we of course, diving into it, I also find it very difficult to make an assumption about the performance. And maybe I should ask it the other way around. So when we were here in August, you guys didn't give us that much feel for you what we have to put in for these subdivisions in the UK. And my question is basically do you -- at that point in time, do you have the insights yourself, but you're just chosen not to share it with us?

Well, there are a few questions. Well, I'm looking at you as well. Because I thought that Q2, we gave some more insights, more than ever, I think in the development of these projects even gave some numbers at that moment in time. So I don't fully agree with that one [indiscernible].

No, I think how we, at least try to be predictable. It's on the bottom-line. Yes. So we give guidance on the full company, and of course we have a good view in August towards year-end, whereas the bandwidth and where are the pluses and the minuses. Yes, we didn't guide on the off performance in ventures in Ireland, for example, either. But of course, we have clearly bandwidth to come to yes, also the update of the outlook and delivered in line with that, yes, even on the upper side. So in our view, we are predictable as a company and we never give guidance per segments because there's always pluses and minuses.

Yes. So if you put yourself in my seat, let's say the minus 24, because in August, all of us, basically what we have to put in a normal situation would be plus 10 or so, or maybe 0 to be cautious, but then the exceptional profitability in the infra business, is that also something you were expecting? Because otherwise you can be in a situation that is not happening and then there will be, yes, kind of a disappointment on the overall performance and because I think that the [ stock ] is still building track record, so investors are still quite nervous about this volatility.

And so we have - in August, we have reasonable good visibility to our year-end and how the segments will land within a certain bandwidth. And based on that pluses and minuses we come to guidance overall for the full company and delivered on that. And then it can be that infra's may be a bit higher, then we anticipated maybe we took a little bit more pain on some settlements that we needed to do construct UK. And in Denmark as discussed, but overall, yes, we are where we plan to be today. But I do understand that you find it difficult to peel that off into segment forecasting, but that's why, yes, the also the introduction of route towards 2025 on the outlook for the market gives us the confidence also to come with the outlook today for this year with underneath volatility as always.

And for instance, that is the -- I mean, we have seen the massive improvement in the Dutch infra business for a couple of years, so I feel much more comfortable to, let's say, maintain a certain high margin. But for the UK, I would say it would be much lower this year, next year back to its normal margin, but yes.

Yes. Well, we gave I think a pretty comfortable outlook also for infra UK, with the order book situation and the projects that we are looking at, shall we see more and more for the total company for all segments, less volatility going -- coming forward, but we always try to earn the promise and over deliver. Because we know how nervous it is also for you to be confronted with all over these years with big deceptions and negative impacts. So that's why I think it's indeed a long marathon of yes, finalizing the list of these problems. And there are more and more getting more predictability on the strategic segments that we have left in the portfolio. I think a big step is saying goodbye to the Danish business because that's one of the derailers for the Dutch results that will be out. Co-op Live will be out. So more and more sitting here together, we can focus on the remaining segments and be more predictable there because we will not go into negative projects again in these segments. Of course, there'll always be surprises, but then they're small. That's our road I think for the coming periods, and still, I can imagine a bit of frustration what happens underneath the hood. I think we gave some more guidance there and some more info in August going into, for example, some details on Co-op Live that we never did before, and the numbers there, and we gave you also the list of the remaining problem projects. So let's say in our world, we took a step in giving a lot more transparency, but that will, of course, be easier when we can really talk about the future of our strategic segments.

And one final follow-up on the digits, the wooden house factory in the Netherlands that is still ramping up, I guess, so that is the business model. Is that you need to kind of unique utilization rate in order to run break-evens? How is it going at the moment and what is your pipeline? So when you expect to reach break-even or?

Yes, I think it's going very well. I think it's a very extremely good concept. IT is always extremely important in projects like that because it's more in digital platform that we created where customers can pick several options that will be produced in an automatic way that works. First houses are delivered. So that's already a very big step with the factory that works. And we are ramping that up this year. And now we have to transform, of course, our portfolio from concrete to wood, which is also our long-term development. The first houses are now delivered to customers. People are extremely happy because the look and feel in a wooden house is really good, also from an atmosphere and air quality and energy feel in the wooden house is really nice. So I have big expectations there, but it will go slowly and one project-per-project, we will, let's say push our wooden house concept into the Dutch market, but in a slow and very high quality way so that our customers can be really happy and feel comfortable into these houses. So the pipeline is there, because in the past, we had a pipeline for, let's say, semi-industrial housing based on concrete, and now we are transforming that pipeline into the flow concept. So that's why we went slowly with this whole idea. And not to promise thousands of houses coming through that factory, because that's not how it works. It's a commercial technology game between the developers of the company and the people who produce the Flow homes in the factory and the people on site who construct the houses in sometimes in 1 day. So step-by-step, we're doing this. I'm really happy with the quality of how we're doing that. And yes, that will lead to higher Flow homes year-on-year for the coming couple, or for the coming 3 years.

Yes, that's helpful. So it's not a massive issue for you, so you just do that gradually the commercial guys from property development are slowly pushing it. Talked to lot to the...

Because you mentioned indeed max capacity as we announced to the market a thousand houses, but that will take several years in our plan to get to that level. It's not that we turbo boost that, it's just a very, yes, I think realistic plan step-by-step. And it really helps. It's great to have also clients now being able to visit these houses because they are there and they can really experience and feel yes, how good they are. And that helps also on the commercial side.

Maarten Verbeek, The Idea. Firstly, you mentioned final stage of derisking we've talked about it. What do you see yourself as the main uncertainty, the main risks still there?

Yes. For this company, the main risks are always related to big projects. That's what you see also on our results let's be honest, so finalizing these derailers is crucial.

Be more specific, because we do know the projects, the NCH and the Brisbane one. Where do you see the biggest uncertainty still in these projects?

Well, like I said before, by the end of the year, I see one of these projects left. So yes, we talked already about FLC, so I think that's the big one in our portfolio going forward. So I cannot be more specific than that, I think and yes, for the rest of course, we have a pretty good order book development offer '24 with EUR 3 billion more, so I'm not worried about revenue for the next couple of years. So the whole issue is of course, what revenue do you take in, what's the quality? What's the quality of the contract, what's the margin development? And do we have the resources and skills to deliver these projects in time? That's the trick. And we are very confident with the existing portfolio that we can do that going forward. And in the meantime, yes, the derisking phase is then coming to an end indeed.

You still believe that NCH will be completed mid this year?

Yes, NCH is a project I visited 2 weeks ago, it's an amazing hospital. We are now finalizing some details there to hand it over to the customer. It's also a very complicated process of handing it over to the customer because the first thing that will happen is that the National Health System will take the hospital over, so you can also say in simple words, the doctors, and they will, together with the National Organization will install a lot of equipment that we are not involved with, like MRIs and scanners and all medical equipment that need to go in and of course, tuned before the real opening of the hospital. That will happen in H1, that hand over to these people that, that will come in. And we know from experience that the doctors always have a lot of questions and remarks about yes, what's the best way of working and operating in hospital, that will happen from April onwards. And then our plan is to hand over our work, our final work in the summer before summer of '25. All depending again, and I have to say that, and I'm very frustrated by that, of course, is the list of changes that are made by the customer because we are still confronted by lists of changes in the design of the hospital. Yes, and that delays the delivering of this project. That's the whole reason for the delay of finalizing this project because we only built that hospital. We don't design it. So yes, if there are no changes anymore in the design, we will hand over the hospital before summer 2025. I've been there. It looks amazing, by far the most, let's say the best children hospital in the world. But yes, if the customer keeps on changing stuff, then it'll be later.

Is there a chance the same will happen what we have seen with Co-op Live that it was postponed and then Co-op Live was handed over in the second quarter, then all kinds of concepts were organized, but still, you had a lot of costs thereafter. Is it feasible that this also could happen with the NCH?

No, I don't think so. I think it'll be the other way around. I think it'll be opportunity for BAM because of this contract that there can be revenue coming through these changes after. I've seen that in other hospitals in our portfolio as well. So that's a different contract again, it's only design or it's only built. So if they change again stuff, we will do that just on a paid level after that contract end. So the date of handing over the hospital is really, really important. And yes, work after that moment is then on account of the customer.

Maybe it's also coming a little back to your question, Tijs on predictability. So really in Q2, we gave more insight on the key project list, but today's really a different state coming from maybe 20 projects in parallel that we needed to manage and get control and be predictable to a handful today most of them in final stage and then only one left at year-end. Yes, I think we've proven to be predictable as a company and all of this with still then sometimes a little bit of volatility on the segment level. So I think that's where you have to yes, find a link to the previous discussion.

Then also related to this, because you have done a great job in derisking, and that's also what we can see within the balance sheet, the level of provisioning that has come down. What kind of level is a fair level going forward?

Now, I'm glad you asked that question. So indeed, another EUR 20 million knockoff on the provisions year-on-year, and you see another movement there. You see the movement from the long-term to the short-term. So clearly also there, I think the position on the provisions confirm. Yes, we are in the derisking phase predicting provisions is very dangerous. Predicting cash is difficult, predicting provisions even more. I think we can maybe similar step downwards for the coming years just for your cashflow model. I wouldn't put too much value to it, but I think another step down would be realistic.

But do you have certain ratio we could use relate to [indiscernible].

No, I think if you take off another, I don't know, EUR 20 million, EUR 30 million, and at some point, you are also your same as trade working capital on a normalized level, I would say. So it's not going to be huge, but if you look over the past years, the longer line provisions year-after-year have gone down reflecting what we are trying to do with this company.

And then lastly, you also mentioned a further of focus we have seen 1 or 2 divestments and acquisition. Are there still bits and pieces you are considering to divest and where do you think the white spots are for BAM to strengthen this position?

Yes, I think in general, the de-risking phase is coming to an end. Invesis of course was a real big step for us by the end of the year, big strategic move. For the rest, we never comment on M&A activity in what is -- in which segment, because that would not really help our position, I think. Strategy is to look for yes, technology lacks we have, helping us in the sustainability world or in telecom world with like the acquisition that Frans just mentioned, to really give us the opportunity to grow in these segments. And that's on the M&A side. We can also always looking, of course at, yes, increasing or improving our BAM Bank for the AM Organization to be able to build these Flow houses. Yes, you can call it M&A or not, but it's also, kind of, investment of course, in our company, if you buy positions, and we do that all the time. So every week we look at proposals together to go for good positions in the Dutch market for property. So for me, that's the same as M&A as well. Also -- that these are also acquisitions and that's of course an priority. Looking at the market for residential in the Netherlands, yes, that can be a growth driver for us for the next 5 years to 10 years, I think.

Leontien de Waal from ABN AMRO. You already shed a light on main risks in front of you, but what can you tell us about the impact of geopolitical developments concerning procurement raw material prices? What's your stance upon that?

Yes, I think as citizens, of course, we're all concerned and we're all looking at these developments sometimes surprised, I guess. I think the Ukraine war had a big impact on inflation, and that had a big impact, of course, on our raw materials and also on labor later on so that had a big impact on prices for everybody so you cannot deny that. So of course, I think everybody would be extremely happy when that war stops anyhow, for on the human level, but also for economics. So that is an impactful one. On the other hand, of course, we are active in Northwestern Europe. So we're not so much impacted by, let's say, development in the Pacific at this moment in time, or let's say a little bit more away from us than some other, let's say multinationals are being active in the global markets. So yes, I think there is that worry for inflation. I think that can have an impact on the construction markets, of course. And of course, there is the energy -- the second one I would like to mention is the energy world market where we are extremely active in the electrification of the grids in both countries, of course that can be influenced by global developments as well, but what I see now is both governments being strongly invested in the upgrade of the grids and getting the, for example, the wind energy from sea getting it into the grids, into the 2 grids where we are very active as well. So it's a balanced, it's a balanced picture, I think.

Maybe one follow-up question totally different topic. What should stands upon the simplification of legislation? And I'm specifically pointing at the omnibus announcement of Ursula von der Leyen, it concerns the CSRD U.S. taxonomy -- EU taxonomy simplification. How does that impact BAM? Might it help you to play down ambitions a little bit or are you staying on the course?

Yes, maybe Frans is responsible for the reporting on CSRD and I think he did a great job looking at our annual report, I think it'll be published in a week from now, and I'm extremely proud of Chapter 6, where we go into the sustainability reporting. So a Frans, maybe you can explain a bit more, but we are not holding back on that one.

No, I think above all, we are committed to our sustainability strategy and the fundamental belief that, that is the future for the sector and for BAM, and that we want to be front running and we think indeed, as we just saying, we are proud of what we have achieved in annual report again this year, Chapter 6, and the assurance we have obtained, but also the progress you mentioned EU taxonomy if you look at aligned revenue, for example. Yes, I think there's a very good model to understand how green is your company and how are you working on that and it's good to have yes, an objective measurement which CSRD is trying to provide, so we follow, of course, what regulations will do in the coming period. But yes, we are happy with CSRD as it is and I think really good that there's an objective framework in the making.

And how much difficulty will it give you as a result of the simplification? the supply chain has no obligation yet to come up with specific data or input which might need.

It's a fair point because specifically for your Scope 3 determination, you really need input and data from the supply chain, but above all, we need to commit as a sector with our partners to improve our emission profile. So I think it'll be indeed difficult if that data will be delayed or will be of less value to get to your numbers. But above all, we hope that the constructive dialogue will remain yes, to make our industry greener.

Yes, I think we are not against simplification of CSRD, but we are of course very proud on the progress we made, and it's part of our strategy. So we are not, let's say, saying let's get rid of CSRD and let's go 10 steps back. I think that would be missed opportunity for the European economy. And I think it's better to support companies who are investing in proper sustainability and also in proper sustainability reporting than taking 5 steps back or 10 steps back even. So that's our position. And for now, we are really happy with where we are and we will continue to improve our reporting based on our sustainability profile, and that's based on the energy transition projects we are in, but also the wooden houses that were clear choices and then reporting follows. And we will continue with that.

I have some follow up or additional questions, Martijn den Drijver from ABN AMRO. On the share buyback, EUR 50 million, EUR 30 million a year before, would it be fair to assume, given that you're guiding for roughly the same or higher EBITDA margins trade working capital, stable CapEx roughly stable, that would be fair to assume it's going to continue with that consistency, so at least another [ EUR 50 million ] next year? [indiscernible]

Yes, of course. It's a decision by the Supervisory Board. And we said, I think last year, if possible, we look at opportunity for buybacks. It also has to do with the -- in our eyes the value chair so that gives -- make this a very nice investment case also for our shareholders to do this, of course. But that can change, so...

What would make it change?

But -- yes, I think the question underneath is about cash, right? Or the reference to cash. And I think that is where we focus on and we set in our strategy when we launched the current strategy to the market, we want to improve the conversion and the connection between the free cash flows and the net result and if we make a very good step this year also looking at trade working capital stabilizing that really helps. And the elements you provide yes, CapEx is in a good place, but this year also clearly mentioned that the decisions on dividend and buyback also supported by the cash coming from the Invesis divestment, which is planned for 2025.

Yes, because you're going to still going to get the cash inflow from Invesis.

Yes, but the cash out on the buyback and on the dividend is also in '25, so that's why we connect those 2 as well.

Second question is on Ireland forgive me for providing a couple of numbers. H1 '23, 3.7%, H2 '23, 5.8%, H1 '24, 5.9%. H2 2024, 12.7% EBITDA margin. On your lower revenues year-on-year. Now, please tell me, is there some miracle going on in Ireland?

The Irish miracle.

Or is they are using the information provided by my colleague here to my left cash outflow from provisions was minus 30, the delta in provisions is 10. That sounds like a release of provision. Is that release of provisions linked to this miraculous performance in Ireland or is this a level we should be go counting on going forward?

Yes, I think several things going on in Ireland. I think a couple of years ago we started to go into Ireland with the new management and we reorganized especially management layers, new culture into the company. We brought in a manager from the UK. I think he did a fantastic job, completely changing the culture, and indeed, also going with us in this new strategy in derisking the company. And now you see the first results of that also in the cost structure of the company. You can see that as well, I think, in the percentages. So that's really helpful for the results. Then we had some yes, deals coming through in let's say improving our portfolio in '24. So that also helped. And there was also a positive development in the NCH file, giving us some more confident in that file as well. I think that is the combination of things that are leading to this number. [indiscernible]

There's not one miracle indeed. It's a mix of things. And Ruud is giving a few, maybe I want to add that. Yes, there are a number of settlements in Ireland, so that is at the end of the project, we have a bit of uplift there, while in the period that you refer to, the revenue was coming down. So we did always say, New Children is a huge hospital. There's a lot of revenue in there that was slowly fade out, and we will have to transfer the portfolio to more diverse nature. So lower revenue tail end projects with some settlements that boost the percentage, but also management focusing on cost. So we also said, okay, let's restructure the company to its new profile a bit smaller. And that was done also very proactively. And that also helps.

Just one suggestion. Do the same thing with BAM construct UK please. And then my final question is on the housing sales in the Netherlands, we've seen that lists of people wanting to buy houses were going up. That's what we discussed in half year. And mortgage rates have come down slightly, not enough. That's our thing to blame the banks, so what are your expectations for the housing sales? What are you seeing in? Should we pencil in the same type of number or do you think that strengthening can continue?

Yes, I think we had -- well, I know we had an 11% increase in '24 so I'm aiming at least at this numbers for this year. I'm a bit hesitant and I'm doing that because not of that we cannot build them or develop them or sell them, but again, it has to do with permitting and yes, being a bit let's say linked to the discussion on, let's say, the political situation in the Netherlands on like, can we make strong decisions on empowering, for example, local governments provinces to, yes, speed up house builds and that's still a big issue. So longer term that demand is much higher than I think our capacity to build. So I'm really positive long-term for the Netherlands, especially when we have this Flow concept in our hands that we can industrialize the construction of these houses. But we need speed in permitting. We need the availability of out of the city lands to make big numbers possible. And till that moment, yes, the percentages of increase will be small, and it's a profitable business for BAM on the development side, on the construction side. So there is no big issue for this company going forward, but it's more like, it can be really, really, really good. Of course, if we can speed up, accelerate the construction and the selling and development of the homes in the Netherlands, which is I think one of the most social, let's say, biggest problems of this country at this moment in time. So I'm really happy with the fact that the minister is getting the parties together in this summit of a couple of weeks ago in really driving this subject. But you need a more, let's say, yes national approach here with also the Prime Minister probably involved to really get this going, because you also need infrastructure. If you build homes, you need the grid to build homes, otherwise it doesn't work. So it's an cooperation between infrastructure [indiscernible] and then the Ministry of Homes of home building to get this done in a faster way. Until that moment, yes, maybe we can look at this percentages of increase, but not the doubling of the number. And where I would like to go to for BAM.

Is the mix of your inner city versus suburban rural also a factor in this? Or are you happy with the mix? And your other listed competitor has shown a pretty detailed overview of how the land bank is positioned. Is yours similar to that or is it more a more geared towards inner city?

No, it's similar, but like we said, if you want an acceleration, you need to go out of city for the big numbers, because inner city is very, very difficult in a country like the Netherlands. So for example, in this city to find 400 or 500, 600 homes opportunities, yes, it's more difficult of course, which is easier in if you would say, let's go to outer Almere and build 10,000 homes, and that's what we need to have in this country. Otherwise, we'll never get to these numbers that we need. And there you need the real top-down decision-making coming from Den Hague to make this possible. And I think we're pushing that now for years as BAM, and also with my colleagues in construction. And that's what needs to what needs to happen for this country.

Maybe one follow-up question on the former one. I would say given the developments around nitrogen and the big issue we have in the Netherlands, there might be room for your Flow concept to speed it up a little bit. You've been talking about it as a quite a gradual development, but I would say if you have this concept, it would be partly a solution to the nitrogen issue as the emissions are lower.

Yes, I think that's absolutely true. So we -- the way we construct, we do it in electric way, but also the nitrogen impact of these Flow homes is also in their usage low. I don't think construction in general is the big problem in nitrogen in this country, to be honest. We are part of the problem, but we are very small part of the problem. So there are other sectors in the country that have much more impact on nitrogen, and that's more political decision-making.

I agree. But then you have the solution, which might be able to scale more rapidly?

Absolutely, it's part of the solution absolutely. Yes, that's true. So we have that availability, but the general picture on nitrogen is not determined by the construction segment or the construction industry, but by other big sectors. Any other questions?

One last question. Maybe it's good to wrap up the whole conversation, maybe a bit broader question. I mean, nearing the end of that restructuring, derisking phase, repositioning BAM, readjusting the activities you're doing, what's the long-term vision of where the company should be past it? I mean, you gave that already in your strategy update a little bit, but going forward, what kind of company should BAM be and let's say 2.5 years, 3 years when you really pass that restructuring, derisking phase?

Yes, I think let's say our trajectory is more like a 9-year to 10-year strategy where we had 3 years of indeed derisking heavily focused on derisking that finalized last year. You've seen '24 already that yes, that had some still some derisking was going on. Longer-term, full focus will be on that expand part of the strategy so focus, transform, expand. We are now at the second step from derisking to transform for example, from concrete to these wooden houses. You can say that as transformation, but going forward, yes. The [ ex-BAM ] part of the business is getting full focus and you see the first signals, very important signals in our order book. And when you see an increase of EUR 3 billion in a year in the segments of where we want to be, yes, that's a clear signal of the opportunity we have to grow this business. So we want to be the most sustainable contractor in Northwestern Europe. We want to grow the business of course after derisking much faster than we do today, and in a profitable way. So with increased margins going from this 4% to 6%, and that should be, let's say, the end result of our next -- of this strategic phase, so by the end of '26, that's the strategic target. Okay. Before I close the meeting, I want to take a minute, a moment to thank Frans because this is his last analyst meeting for BAM. I'd like to thank you for your leadership and dedication over the past 7 years. Your contributions have had a great impact from strengthening the balance sheet and laying the foundations for the next phase of our future growth. It's been a pleasure working with you, and I wish you all the best in the next period.

Thank you, Ruud. Maybe I use the opportunity for a few final words as I'm looking at the analyst in the room, I want to thank you for showing interest in the company and the sector and the dialogues we had in the various phases. I joined them and they were important. I want to thank the people in BAM for working so hard on the transformation we've been through and realizing the strategy, building a sustainable tomorrow and I was proud to be part of that. I want to thank clients and shareholders listening in for their confidence in the company. I want to thank you, Michel for being our wingman from the investor relation side for this past 7 years. And above all, Henri, I want to wish you success. I'm very proud you will succeed me and I'm confident you will do great. And then finally, you Ruud, it's been a pleasure to be in the Executive Board and an honor to be together leading this company for the past years. Thank you very much.

Thank you, Frans. Best to you. And we stay in touch. Ladies and gentlemen, this brings us to the end of the meeting. To finish, I like to let you know that our AGM is now planned for May 8. On this day, we also plan to publish our trading update for the first quarter. Therefore, we will not organize a conference call, but we are always available to answers -- to answering your questions. We hope to welcome you to our next conference call for our first half year results 2025 on July 24. Thank you and have a good day.