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

Welcome to the Royal BAM Group's Half Year Results 2026. [Operator Instructions] I will now hand over to Michel Aupers to begin the presentation.

Good morning, everyone and welcome to the Royal BAM Group conference call. My name is Michel Aupers, Investor Relations Manager. I'm pleased to have you with us today. The meeting is hosted by our CEO, Ruud Joosten; and our CFO, Henri de Pate, who will take you through the key highlights of BAM's first half 2026 results. The presentation slides are available on our website. After their remarks, we will take your questions. I would like to draw your attention to the disclaimer shown here. Ruud, over to you, please.

Thank you, Michel, and good morning all. On the current slide side on this slide, you see the construction of the narrow water bridge, landmark infrastructure project linking Northern Ireland and Ireland across Carlingford Lough. The bridge will improve connectivity, support tourism and create new opportunities for communities on both sides of the border. It's a good example of the expertise we bring to important civil engineering projects in our U.K. and Ireland division. Now I would like to start with the key points of the first half year of 2026. We are pleased to report a strong performance in the first half year of '26. Revenue increased by 3% to EUR 3.5 billion. supported by both divisions. Adjusted EBITDA increased to EUR 240 million, up 36% compared to the first half year of last year. The margin also improved to 6.9%. These results reflect the strength and quality of our portfolio with higher profitability across both divisions. Our net result increased by 25% to EUR 127 million, reflecting earnings per share of EUR 0.49. We also maintained a strong financial position with a cash position of EUR 750 million and a robust solvency of 22.9%. The order book remained at a high level of EUR 12.6 billion. We continue to focus on the quality of order intake, disciplined contract selection, and a healthy balance between risk and reward. We also continue to make steady progress on our strategy. In the Netherlands, we strengthened our residential development pipeline by acquiring a strategic land position in Veldhoven and completing the acquisition of Gebroeders Blokland. We also secured several defense projects in the Netherlands including facilities in Den Helder, Wezep and Eindhoven. This is in line with Dutch government's ambition to meet NATO requirements, which is expected to lead to further investments in defense, including nonresidential construction,. In the United Kingdom, recent project wins included social infrastructure, particularly in the education sector as well as civil engineering works. Innovation and industrialized construction are becoming increasingly important enablers for our strategy delivery. A good example is the plug-and-play compact substation we recently introduced in the Netherlands. This can facilitate a faster rollout of a substation infrastructure needed for the energy transition. Safety is fundamental to the way we work at BAM. It is with deep sadness that we report the passing of a subcontractor's employee at one of our sites in May. Our thoughts are with his family, friends and colleagues. We are closely working with the authorities and will carefully consider any findings that can help us further improve our safety practices. This tragic loss reminds us why we must keep investing in our safety culture so that everyone who works for or with BAM can return home safely every day. Looking ahead, we continue to see strong demand across our markets. This is supported by the energy transition, investment in infrastructure and defense, and the need for sustainable and affordable house. For the full year 2026, BAM expects to deliver an adjusted EBITDA margin of at least 6.5%. Let's continue to the next slide where I will highlight the performance of our Dutch division. On this slide, we see the new stairways linking Schipol's future bus station with the railway station below. This milestone marks an important step in the redevelopment of Schipol transport hub helping improve accessibility and accommodate growing passenger numbers. We are delivering this project in close collaboration with Schipol, the regional transport organization, and ProRail, demonstrating our long-term partnerships with our clients help bring complex projects like this forward. The activities in the Netherlands performed strongly. Revenue increased by 3% and adjusted EBITDA increased by 25% to EUR 138 million, reflecting the substantial margin improvement of 8.2%. The performance was supported by good operational execution across Construction & Property. Residential Construction and Property Development also made a strong contribution. In the first half year, we sold 935 homes, 35% more than in the same period last year. For the full year, we expect home sales to be broadly in line with 2025. Civil Engineering also delivered a substantially higher contribution supported by continued growth in activity levels and strong project performance, including in energy transition projects. Here you see Darlington station, one of the most significant recent investments on the East Coast mainline. The expansion includes 2 new platforms, a new step free foot bridge and enhanced passenger facilities, providing greater capacity and improved connectivity across Northeast England. Rail infrastructure in the U.K. is an important growth market for BAM. The projects like this show the role we can play in delivering better, more reliable transport infrastructure. In the United Kingdom and Ireland, we also delivered strong performance. Revenue increased by 4%, supported by sustained high activity levels. We are pleased to report a 48% increase in adjusted EBITDA to EUR 98 million. The adjusted EBITDA margin improved to 5.7%, helped by further profitability improvements in Construction U.K. and good operational progress across the portfolio. Civil Engineering U.K. also performed well in the first half year. The result was supported by some claims settlements and by high-quality order book in rail and energy transition-related projects. In Ireland, the result included additional costs related to the delivery of the National Children's Hospital. Most of the project has now been handed over to the Children's Health Ireland organization. Demand in our core markets remains supported by continued investment in essential infrastructure, including energy, transport, water, health care, education and defense. I will now hand over to Henri, who will take you through the financials in more detail.

Thank you, Ruud, and good morning, everyone. On this slide, you see The Margin, the residential tower with an Amsterdam Zuidas redevelopment. With its distinctive architecture and transparency side, the building is part of the transformation of the former Bijlmerbajes site into a vibrant and sustainable mixed-use neighborhoods with BAM development. I will now take you through the income statement in a bit more detail. Revenue for the first half came in on a level of EUR 3.5 billion, 3% higher than last year, with both divisions contributing to this growth. Adjusted EBITDA increased to EUR 240 million compared with EUR 176 million in the first half of 2025. This brought the adjusted EBITDA margin to 6.5%, up from 5.2% a year earlier. These results reflect consistent delivery across the business and show the progress we are making in executing our sales. Depreciation and amortization were EUR 89 million mainly reflecting our continued investment in areas such as sustainable digital and modular solutions, as well as the electrification of our equipment. The final result came to EUR 6 million. And the effective tax rate was 18% compared to 10% in the first half of 2025, when a lower rate mainly reflected a higher revaluation of deferred tax assets. For the full year 2026, we expect an effective tax rate in the 15% to 17% range. This resulted in a net result of EUR 127 million, 25% above the first half of 2025. And earnings per share came out on a level of EUR 0.49, a EUR 0.10 improvement versus last year. Let's now move on to cash flow. Our operational performance translated into a cash flow from operations of EUR 211 million, resulting in a very strong cash position of EUR 750 million at the end of the period. Working capital showed an outflow of EUR 150 million. This reflects the normal seasonal pattern in the first half of the year as well as investments totaling EUR 61 million in development positions. It's good to see that trade working capital efficiency somewhat improved to minus 12.5% versus the minus 11.9% at year-end 2025. Cash flow from investing activity was minus EUR 110 million. This is mainly related to the acquisition of Gebroeders Blokland, capital expenditure and investments in joint ventures. Cash flow from financing activities was minus EUR 135 million, and this included a payment of EUR 77 million in cash dividends, EUR 32 million related to the share buyback program. And together with the dividend, this brought total distributions to shareholders to 55% of the 2025 net income. Let's now look at our financial position. Our net cash position after lease liabilities of EUR 300 million is substantially higher than the comparable period last year. Shareholders' equity was slightly higher versus the full year of 2025. Our solvency is 23.9%, slightly below the level of full year 2025. We had a strong net result in the first half of the year of EUR 127 million. But in the first half year, we also distributed EUR 109 million to shareholders via dividend and share buybacks. Now back to you, Ruud.

Thank you, Henri. I would like to conclude with the market trends and outlook for the full year '26. Shown here is the new police headquarters in the Hague, which we delivered this July, bringing around 2,200 officers and staff together in a single location, designed as a flexible and future-ready workplace. It's also the first police building in the Netherlands to achieve a BREEAM excellent design certification. We are pleased that our order book remained at the high level of EUR 12.6 billion, while we continue to talk strongly on order quality, selective tendering and risk management in a market where we have proven competitive advantage. The debt order book increased by 7% to EUR 6 billion, supported by strategic project wins and development acquisitions, including Veldhoven, the Matser site next to the Rabobank headquarters in Utrecht, the [indiscernible] , and TenneT's 2-gigawatt Gamma converter station. Overall, these contracts highlight the strength and resilience of our batch order book. Our order book in the U.K. and Ireland decreased to EUR 6.1 billion, mainly due to the timing of major civil project awards with a number of major project awards expected to come through in our U.K. and Ireland division in the second half of the year. Recent project wins in the United Kingdom include Royal School Wolverhampton, Our Cultural Heart Phase 2 in Huddersfield and River Tees Academy in Grangetown. Now we have a look at the market trends. In the Netherlands, market conditions remain favorable, supported by ongoing public and private investments in the energy transition, infrastructure renewal, structural housing shortage, building modernization and defense. At the same time, we continue to see uncertainty related to grid connection, constraints and broader market conditions. This underlines the importance of clear planning, decisive decision-making cooperation between public and private partners. In United Kingdom, demand is reported by investment in energy security, infrastructure and defense. The government's 10-year infrastructure plan is ambitious and recently approved planning and infrastructure bill has the potential to accelerate approvals from major projects. In Ireland, the EUR 275 billion national development plan is expected to provide a significant boost to the construction sector. Trading opportunities in utilities, water, energy and transport programs. Delivering complex infrastructure projects and new homes is essential for creating thriving communities. But it requires stability clear planning and commitments beyond short-term political agendas. We continue our disciplined approach to contract and risk management which remains a fundamental priority in our strategy to enhance financial performance and predictability. For full year 2026, BAM expects to deliver an adjusted EBITDA margin of at least 6.5%. Today's results give us confidence. They show a business that is performing well, making clear choices and building momentum through our strategy. Now we will take your questions.

[Operator Instructions] Our first question is from Simon Van Oppen from Kepler Cheuvreux.

First question from my side. It seems that CapEx has come down quite significantly year-over-year. Can you please comment on this development? And what should we expect for, let's say, the remainder of this year and going forward?

I think we are still investing in CapEx on the same level like we did in the last years. Hence, also the higher depreciation, which is reported also in our half year figures. So the CapEx level will be on a level of around EUR 80 million, EUR 85 million for the whole year.

And what has driven the, let's say, decrease versus H1 last year?

Well, I think -- there we'll always be focused on doing the right things with regard to do investments in our equipment. A big part of that was also related to our sustainability agenda. And I think we are already there in terms of the electrification of all kind of equipment. And then you will see, over time, a more stabilizing line with regard to CapEx.

Okay. That's helpful. And second question on Construction & Property in the Netherlands. If you exclude the contribution of Blokland in H1, it seems that revenue has actually come down roughly 3%. And you're also flagging in the press release in the Dutch residential markets, you're seeing some affordability pressures from higher interest rates that is affecting parts of the market. Can you please comment on this development and also why revenues, excluding Blokland seemed to have gone down in H1?

Yes. With regard to your revenue and excluding Blokland, and I think it's important to emphasize that are consolidating Blokland since April, so at the end of the first quarter. So the contribution in terms of revenue was quite limited in the first half. So if you take that out, then the revenue levels are more or less comparable with same period in 2025. So no decline.

Okay. Maybe last question from my side. If we look at revenue in the other, including eliminations line, it was EUR 49 million negative in H1 versus minus EUR 32 million last year. What is driving this increase as it seems to have gone up proportionally more than your revenues?

Yes. We are always focused on internal collaboration as well. So using the capabilities within the company. And that means if that's going, let's say, in the right direction, then your internal elimination will grow as well to avoid double counting. So that's the only reason to see an increase in that number as well. So yes, from my point of view, a very positive development.

Our next question is from Martijn den Drijver from ABN.

I have a few questions. I'll start with the Netherlands. In Construction & Property, the 8.6% EBITDA margin is obviously a very strong performance. I had to look it up in my Excel model, but nowhere in any time period have you achieved that level of EBITDA margin. You also guide for better home sales in H2. So my question is, is that 8% plus levels sustainable going forward? And if not, why not?