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 to 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 a 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 reflects 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 Infosys also contributed to our adjusted EBITDA.
Later on, Frans will come back to the Infosys deal in more detail.
Our adjusted EBITDA was held back by schools' projects in Denmark and challenges in construction in the UK, including Co-op Live in Manchester. Co-op Live is nearing completion, and in Denmark, three of the four projects were handed over, with the final one set for completion in the first half of this year. This will mark our exit from non-residential 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 an earnings per share of 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 remaining focused on the quality of our order intake. We are pleased to propose a dividend of 25 cents 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 buyback. This is also supported by the cash proceeds of the Infosys 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 2024.
In early 2024, we advanced our strategy Building a Sustainable Tomorrow, centered around three 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 Light yards 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 Infosys, 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 VLV-Net, 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. Another 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 at 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 2024 via dividend, EUR 30 million, and via buyback of shares of EUR 15 million. Now, let's look at the performance of our two 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 watertight within one day. Division Netherlands reported an adjusted EBITDA of EUR 161 million, reflecting a margin of 5%. In the construction and property segment, there was a strong contribution from the residential sector.
There is 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 non-residential activities contributed well. The civil engineering activities continue to perform strongly, with a 14% increase in adjusted EBITDA. I'm very pleased with the development of this segment over the last four years because profitability and predictability improved substantially. Our Dutch backlog improved to EUR 5.3 billion. Moving on to the UK division and Ireland. On this slide, you see the work we are executing to protect projects 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 and supply chain issues related to the delayed opening of Coop Life 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%. All the highlights in 2024 are a backlog of EUR 30 billion, a solvency of 23%, and a liquidity position of EUR 0.8 billion. These numbers confirm the success of implementing our strategy and were delivered by good performance of nearly all business activities. Also, our performance supported 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 ambitious environmental targets, with several of our KPIs exceeding expectations.
Our scope one and two emissions are down 17% compared to baseline in 2015, and as such, we are on track to reach our 80% reduction target by 2026. Our scope three measurement over 2024 totals 2,093 kilotons, a reduction of almost 500 kilotons year-on-year. This number translates into a reduction of 37% versus our 2019 baseline. End of next week, BAM will release the annual report 2024, where we will report our sustainability performance fully compliant with the CSRD requirements. Now, let's zoom in on some details of our income statement. Revenues were up by 3%, driven by the division in the Netherlands as residential home 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 Infosys 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 two tranches in 2025. Infosys contributed EUR 50 million to the adjusted EBITDA, including EUR 20 million of earnout for successfully securing new projects in line item order and EUR 31 million reclassification of hedge reserves following the agreed divestments reported in the line item Infosys. Finally, there is a non-cash 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 two effects support a good conversion to net result 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 cash flow performance for 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. We report over 2024 a trade working capital efficiency of -11.7%. We reiterate our guidance that based on our current view and our current business, we forecast that the current level of trade working capital efficiency of around -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 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 remained solid at EUR 0.8 billion, which is comparable to the position of last year. On the next slide, you see our financial position. As explained, trade working capital efficiency landed at -11%. Solvency adherent was 23%, which is an excellent achievement taking into account the impact of our Infosys impairment and the distribution of EUR 92 million to shareholders. Back to you, Ruud.
Thank you, Frans. I would like to conclude with the market trends and our outlook for the 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 Artist 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 while we continue to focus strongly on order book quality and selective tendering in 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 and construction in the UK improved and are now well above the levels of end 2023. Now, over to some market trends. In the Netherlands, the residential market remained strong, driven by stable consumer confidence due to salary increases and 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 non-residential market is cautiously optimistic, and in civil, there are many attractive growth opportunities driven by the energy transition and the transport market.
We are closely monitoring the recent 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 and order book will allow us to adapt where needed. The 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 be 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 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, and we are entering the final stage of the de-risking of our portfolio, which is a fundamental priority within our strategy to enhance our financial performance and predictability. For 2025, BAM expects to deliver an adjusted EBITDA margin of around 5%, which is in the middle of the target range for the strategic period 24-26. Now, we will take your questions.
Yes, Martijn. Go ahead.
Thank you, Ruud. Martijn Den Drijver, ABN AMRO. I have three questions, and I'll take them one by one. One is more general and then two about the division performance. The guidance for 2025 of around 5%, if you were to exclude Infosys, which you have in your adjusted EBITDA, and you exclude, I don't know, EUR 80, EUR 90 million for Manchester Co-op and another EUR 10 million for the Danish school 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.
You know, 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 a more detailed outlook. This is already, from our conservative way of giving outlooks, a big step forward to give you already an outlook at this moment in the year. 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 a wise percentage based on where we are today. Of course, we will come back later in the year with a more detailed look.
Okay, that's fair. My second question is regarding 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 there. I can help there. Of course, we are held back here by Danish schools. If I look at the Dutch result, the Dutch result, all businesses did a very good job and supported also by very good house sales in the last quarter, 11% more homes sold in the 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. Yeah, these results are in the Dutch results. So I think that's the main reason. Frans, maybe you can give some more color.
Yeah, no, I think it's a perfect summary. Indeed, Civil performed well, 7.3%, EUR 10 million up almost versus last year, so really happy with that. Residential performance underneath was also good, 11% more houses sold. So yeah, the delta is to be found in Denmark.
Only Denmark because H2 2023, you also had the Danish schools as well.
Yeah, I mean the majority of the impact is coming from Denmark.
Okay, clear. 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, while 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?
Now, 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 de-risking portfolio for the total company. Clearly, Coop Life 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. It's not the only one. It's also a fact that commercial construction in the UK, construction real estate, is under pressure. So it's not the most easy market. It's not only Coop Life, but the vast majority of these numbers is caused by Coop Life.
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.
Yeah, we should think about this. Yeah, we expect to close that very soon, and indeed in H1, it will be concluded.
Okay, thank you for now.
Good morning, everyone. 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, is there more room to improve it? What trends you currently see that support that development?
Yeah, 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. The investments by the British government are continuing. So the new government and the new Labour government didn't change that investment program at all. So there is a long-term, very strong investment program going on on electrifying the UK, and that's a big driver for the growth in the order book in 2024.
The same thing you see in the Dutch market as well, where we also reconfigured our strategy from fully focusing on big road projects or civil engineering projects for the Dutch government, much more now focused on electrification. 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. Indeed, TenneT, the national provider, where we have a number of big projects going on to electrify this country and support the grid. 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 focusing on timely delivering these projects.
Cost is also important, of course, but much more in balance with quality and time. That's what we like as BAM, these kind of long-term projects, very well detailed with the customer. 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. Those are the key drivers for 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 contracts that we have with the government to support them in that investment as well. I think that there are a few key drivers for long-term success in infra.
Basically the same theme in the UK and Ireland and the Netherlands when it comes to drivers beyond civil engineering.
Absolutely. 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 continuing big time. 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. Both divisions, we see a step up in EBITDA, but also in revenue. It's nice to support your bottom line, of course. Also good to mention small strategic moves in the Netherlands, where we divested BAM Foundation Technique and did an acquisition of VLVNet, which is a company that's active in mobile networks. So also some smaller strategic moves to further strengthen our position there.
One last question before I pass on the mic. You already talked about 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? Yeah, I think it should be a balanced development. Of course, we have to 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.
Indeed, selective tendering, growing the business in a balanced way, and of course, 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. The strategy, of course, is to de-risk that portfolio, finalize these bleeders, and then slowly but steadily increase the attractive portfolio of the company that fit the sustainability strategy. 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. It's a kind of long marathon because some of these projects take eight, nine, 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, can still deliver EBITDA and some returns to the shareholder. I'm really happy, of course, with the order book development in these segments, especially it's going very fast in 2024 with the EUR 3 billion addition, which gives us a lot of comfort in the fact that we made the right decisions. Okay, thanks a lot.
Thijs Holstele, ING. Yeah, 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?
Yeah, I think about half a year ago we made some remarks about that list of 23 projects coming down to more or less four projects to be solved or finalized, maybe is a better word. We see good progress on a couple of them. We mentioned Brisbane, for example, a metro in Brisbane that's now at 70%-80% of completion. Another big one that we finalized was the sluice in Zeebrugge that was opened in the last quarter by the two kings of the two countries. So that's also a big one out of the portfolio. Another big one is the NCH, the National Children's Hospital in Ireland, that we are also in the final stage of. So yes, that 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.
That's the FLC project in Denmark. 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 Fehmarn Belt tunnel between Germany and Denmark. Good news, of course, was by the divestment of Wayss & Freytag, we decreased our percentage from 25% to 12.5% of this project. 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 project in our portfolio. That's more comfortable than, of course, than a list of 23.
Yeah, yeah, I mean, more specifically, sometimes these long-term projects also see, let's say, the need for an adjustment in the profitability in between. That was basically my question. Fehmarn Belt is there for a couple of years, but is there an event this year that there is maybe a reset in the?
Yeah, that's very difficult to say. Let's be fair, we have 12.5% of the project. So we are also not, let's say, the only one managing this project. We are not the leading partner in this joint venture. There's Fancy from France, a 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 Q4, we had a big success in drifting one of the elements, two of the elements that are now finalized into, let's say, a pre in a harbor situation, so ready for immersion. So that can be key elements.
I think a 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 kind of, for a lot of people, more an academic project. We need to see these elements going into the sea. I think a lot more enthusiasm will start from both countries. So we are on it. We have very good people from our infra team, the Dutch infra team, into that project. 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.
Yeah, that's also exactly what I'm asking for. That would be helpful indeed.
Yeah, absolutely.
A second question, and it's more or less the same as Martin is asking. I know that BAM is coming from far, so a lot of things have improved. The overall, let's say, if you take the Dutch and the UK division, the margin stability, predictability, which was one of your strategic topics a couple of years ago, is achieved. But we are, of course, diving into it. I also find it very difficult to make an assumption about the performance. Maybe I should ask it the other way around. When we were here in August, you guys didn't give us that much feel for what we have to put in for these subdivisions in the UK. My question is basically, do you, at that point in time, do you have the insights yourself, but you're just not, you're choosing not to share it with us?
There are a few questions. I'm looking at you as well, Frans, because I thought that Q2, we gave some more insights more than ever, I think, in the development of these projects. You even gave some numbers.
At that moment, exactly. Exactly. I don't fully agree with that one.
o, I think how we at least try to be predictable is on the bottom line. So we give guidance on the full company. And of course, we have a good view in August towards year-end, where's the bandwidth and where are the pluses and the minuses. Yeah, we didn't guide on the overperformance in ventures and Ireland, for example, either. But of course, we have clearly a bandwidth to come to also the update of the outlook and delivered in line with that, even on the upper side. So in our view, we are predictable as a company, and we never give guidance per segment because there's always pluses and minuses.
Yeah, so if you put yourself in my seat, let's say the - 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 that is not happening, and then there will be kind of a disappointment on the overall performance. Because I think that the stock is still building track record, so investors are still quite nervous about this volatility.
Yeah, so we have in August, we have reasonably good visibility towards year-end how the segments will land within a certain bandwidth. Based on that pluses and minuses, we come to guidance overall for the full company and delivered on that. Yeah, and then it can be that infra is maybe a bit higher than 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, yeah, 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 also the introduction of REIT towards 2025 on the outlook for the market, yeah, gives us the confidence also to come with the outlook today for this year.
Yeah, okay.
With underlying volatility, as always.
Yeah, and for instance, if 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 yeah.
Well, we give, I think, a pretty comfortable outlook also for infra UK with the order book situation and the projects that we are looking at. So we see more and more for the total company for all segments, less volatility going forward. But we always try to underpromise and overdeliver 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 finalizing the list of these problems and then 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. CoopLife will be out.
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 will always be surprises, but then they are small.
They're small. Yeah.
That's our road, I think, for the coming period. 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 CoopLife that we never did before and the numbers there. We gave you also the list of the remaining problem projects. 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.
Okay, perfect. And one final follow-up on the, what is it, the Wooden House Factory in the Netherlands that is still ramping up, I guess. So that is the business model is that you need kind of utilization rate in order to break even. So how is it going at the moment and what is your pipeline? So when do you expect to reach break even?
Yeah, 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 a 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. We are ramping that up this year. Now we have to transform, of course, our portfolio from concrete to woods, which is also a 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.
Project by project, we will 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 in these houses. The pipeline is there because in the past, we had a pipeline for semi-industrial housing based on concrete. Now we are transforming that pipeline into the flow concept. 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 sometimes in one day. Step by step, we are doing this.
I'm really happy with the quality of how we're doing this. And yeah, that will lead to higher flow homes year-on-year for the coming couple of, for the coming three years.
Yeah, that's helpful. It's not a massive issue for you. You just do that gradually.
Gradually phasing it.
The commercial guys from property development are slowly pushing it.
Because you mentioned indeed max capacity as we announced to the market, 1,000 houses, but that will take several years to get to that level. It's not that we turbo boost that. It's just a very realistic plan step by step. 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 how good they are. That helps us on the commercial side.
Yeah. Okay, thank you.
Maarten Verbeek , The Idea. Firstly, you mentioned final stage of de-risking. We've talked about it. What do you see as the main uncertainty, the main risk still there?
Yeah, 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 deraillers is crucial.
Can you 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?
Like I said before, by the end of the year, I see one of these projects left. We talked already about FLC. I think that's the big one in our portfolio going forward. I cannot be more specific than that, I think. For the rest, of course, we have a pretty good order book development over 2024 with EUR 3 billion more. I'm not worried about revenue for the next couple of years. The whole issue is, of course, what kind of revenue do you take in? What's the quality? What's the quality of the contract? What's the margin development? Do we have the resources and skills to deliver these projects in time? That's the trick. We are very confident with the existing portfolio that we can do that going forward. In the meantime, yeah, the de-risking phase is then coming to an end indeed.
You still believe that NCH will be completed mid this year?
Yeah, NCH is a project I visited two 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. They will, together with the national organization, install a lot of equipment that we are not involved with, like MRIs and scanners and all kinds of medical equipment that need to go in and, of course, be tuned before the real opening of the hospital. That will happen in phase one, that handover to these people that will come in.
We know from experience that the doctors always have a lot of questions and remarks about what's the best way of working and operating a hospital. That will happen from April onwards. Our plan is to hand over our work, our final work in the summer before summer of 2025. 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. 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 and we don't design it. 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, best children's hospital in the world. But yeah, if the customer keeps on changing stuff, then it will be later.
Is there a chance the same will happen what we have seen with CoopLife that it was postponed and then CoopLife was handed over in the second quarter, then all kinds of concerts 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 will be the other way around. I think it will 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. That's a different contract. Again, it's only design, it's only built. If they change again, stuff, we will do that just on a paid level after that contract ends. The date of handing over the hospital is really, really important. Yeah, work after that moment is then on account of the customer.
Maybe it's also coming a little back to your question, Thijs, on predictability. Really in Q2, we gave more insight on the key project list, but today is 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. I think we've proven to be predictable as a company in all of this with still then sometimes a little bit of volatility on the segment level. I think that's where you have to find a link to the previous discussion. Then also related to this, because you have done a great job in de-risking, 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. Indeed, another EUR 20 million knockoff on the provisions year-on-year. You see another movement there. You see the movement from the long term to the short term. Clearly also there, I think the position on the provisions confirm, yeah, we're in the de-risking 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 cash flow model. I wouldn't put too much value to it, but I think another step down would be realistic.
But do you have a certain ratio we could use related to this?
I think if you take off another, I don't know, EUR 20 million, EUR 30 million, then at some point you are also here, 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 come down, reflecting what we are trying to do with this company.
Okay. And then lastly, you also mentioned a further focus. We have seen one or two divestments and acquisitions. Are there still bits and pieces you are considering to divest? And where do you think the white spots are for BAM to strengthen its position?
I think in general, the de-risking phase is coming to an end. Investors, 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 which segments because that would not really help our position, I think. Strategy is to look for technology lags we have helping us in the sustainability world or in the telecom world, like the acquisition that Frans mentioned, to really give us the opportunity to grow in these segments. That's on the M&A side. We can also always looking, of course, at increasing or improving our land bank for the AM organization to be able to build these flow houses. You can call it M&A or not, but it's also kind of investment, of course, in our company if you buy positions.
We do that all the time. Every week we look at proposals together to go for good positions in the Dutch market for property. For me, that's the same as M&A as well. These are also acquisitions. That's, of course, a priority. Looking at the market for residential in the Netherlands, that can be a growth driver for us for the next five to 10 years, I think.
Leontine de Waa l, ABN AMRO.
Hi.
You already shed light on the 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 on that?
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. That had a big impact on prices for everybody. You cannot deny that. Of course, I think everybody would be extremely happy when that war stops anyhow on a human level, but also for economics. That is an impactful one. On the other hand, of course, we are active in Northwestern Europe. We're not so much impacted by, let's say, developments in the Pacific at this moment in time or that, let's say, a little bit more away from us than some other, let's say, multinationals have been active in the global markets.
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, for example, the wind energy from sea, getting it into the grids, into the two grids where we are very active as well. It's a balanced picture, I think.
Yeah. Thank you. Maybe one follow-up question, totally different topic. What's your stance upon the simplification of legislation? I'm specifically pointing at the omnibus announcement of Ursula von der Leyen. It concerns the CSRD 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?
Yeah, 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 will be published in a week from now. I'm extremely proud of chapter six where we go into the sustainability reporting. So 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. Indeed, as Ruud is saying, we're proud of what we have achieved in the annual report again this year, chapter six and the assurance we have obtained, but also the progress. You mentioned EU taxonomy. If you look at aligned revenue, for example, I think there's a very good model to understand how green is your company and how are you working on that. It's good to have an objective measurement which CSRD is trying to provide. So we follow, of course, what regulations will do in the coming period, but we are happy with CSRD as it is. I think really good that there's an objective framework in the making.
How much difficulty will it give you when, as a result of the simplification, the supply chain has no obligation yet to come up with specific data or inputs which might be needed?
It's a fair point because specifically for your scope three 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. I think it will 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 to make our industry greener.
Okay.
I think we're not against simplification of CSRD, but we are, of course, very proud of 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 a missed opportunity for the European economy. I think it's better to support companies who are investing in proper sustainability and also in proper sustainability reporting than taking five steps back or 10 steps back even. So that's our position. For now, we are really happy where we are and we will continue to improve our reporting based on our sustainability profile. That's based on the energy transition projects we are in, but also the wooden houses that were clear choices. Reporting follows. We will continue with that.
Thank you.
Thank you. I have some follow-up or additional questions. Martjin Den Drijver , ABN AMRO again. 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 it would be fair to assume that you're going to continue with that consistency? So at least another EUR 50 million next year. Ceteris paribus.
Of course, it's a decision by the supervisory board. I think last year, if possible, we look at opportunity for buybacks. It also has to do with, in our eyes, undervalued share. That makes this a very nice investment case also for our shareholders to do this. Of course, that can change.
What would make it change?
I think the question underneath is about cash, right? Or the reference to cash. I think that is where we focus on. We said 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. Indeed, we make a very good step this year, also looking at trade working capital, stabilizing. That really helps. The elements you provide are there. CapEx is in a good place. This year also clearly mentioned that the decisions on dividend and buyback also supported by the cash coming from the investment, which is planned for 2025.
Yeah, because you're still going to get the cash inflow from it.
Yeah, but the cash out on the buyback and on the dividend is also in 2025. So that's why we connect those two as well.
Okay. Second question is on Ireland. Forgive me for providing a couple of numbers. H1 2023, 3.7%. H2 2023, 5.8%. H1 2024, 5.9%. H2 2024, 12.7% EBITDA margin on lower revenues, on lower year-on-year. Now, please tell me, is there some miracle going on in Ireland?
The Irish miracle.
Is there using the information provided by my colleague here to my left, cash outflow from provisions was minus EUR 30 million. The delta in provisions is EUR 10 million. That sounds like a release of provisions. Is that release of provisions linked to this miraculous performance in Ireland, or is this a level we should be accounting on going forward?
Yes, I think several things are going on in Ireland. I think a couple of years ago, we started to go into Ireland with the new management. 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, indeed risking the company. 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. That's really helpful for the results. We had some deals coming through in, let's say, improving our portfolio in 24. That also helped. There was also a positive development in the NCH file, giving us some more confidence in that file as well.
I think that is the combination of things that are leading to this number. Yeah, maybe there's not one miracle. Indeed, it's a mix of things. Rita is giving a few. Maybe I want to add that, yeah, 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 referred to, the revenue was coming down. So we did always say, hey, New Children's is a huge hospital. There was a lot of revenue in there. That will slowly fade out and we will have to transform the portfolio to a 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.
That was done also, very proactively. That also helps.
Okay. 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 at half year. And mortgage rates have come down slightly, not enough. That's our blessing to blame the banks. So what are your expectations for the housing sales? What are you seeing? Should we pencil in the same type of number, or do you think that strengthening can continue?
Yeah, I think we had, well, I think I know we had an 11% increase in 2024. So I'm aiming at least at these kind of numbers for this year. I'm a bit hesitant and I'm doing that because not that we cannot build them or develop them or sell them. But again, it has to do with permitting and being a bit, let's say, linked to the discussion on, let's say, the political situation in the Netherlands. Can we make strong decisions on empowering, for example, local governments, provinces to speed up house builds? 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.
We need speed in permitting. We need the availability of out-of-the-city lands to make big numbers possible. Until that moment, the percentages of increase will be small. It's a profitable business for BAM on the development side, on the construction side. There is no big issue for this company going forward. 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. 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, yeah, 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 a cooperation between infrastructure, Binnenlandse Zaken, and the Ministry of Homes, of home building, to get this done in a faster way. Until that moment, maybe we can look at these kind of percentages of increase, but not the doubling of the number where I would like to go for BAM.
Is the mix of your inner city versus suburban rural also a factor in this, or are you happy with the mix? 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 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. For example, in this city to find 400, 500, 600 homes opportunities, yeah, it's more difficult, of course, which is easier if you would say, let's go to outer Almere and build 10,000 homes. That's what we need to have in this country. Otherwise, we'll never get to these numbers that we need. There you need real top-down decision-making coming from Den Haag to make this possible. I think we're pushing that now for years as BAM and also with my colleagues in construction. That's what needs to happen for this country.
Thanks.
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 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.
Yeah, I think that's absolutely true. We have the way we construct, we do it in an electric way, but also the nitrogen impact of the 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 a very small part of the problem. 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.
Yeah, which might be part of the solution, absolutely.
More rapidly.
Yeah, that's true. 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.
Thank you.
Thank you. Any other questions?
Maybe one last question. Maybe to wrap up the whole conversation. Maybe a bit broader question. I mean, you know, nearing the end of that restructuring, de-risking phase, repositioning BAM, readjusting the activities you're doing, what's the long-term vision of where the company should be past that? I mean, you gave that already in your strategy update a little bit, but going forward, what kind of company should BAM be in, let's say, two and a half, three years when you really pass that restructuring, de-risking phase?
Yeah, I think our, let's say, our trajectory is more like a nine to ten year strategy where we have three years of indeed de-risking, heavily focused on de-risking that finalized last year. You're seeing 2024 already that, yeah, still some de-risking 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 de-risking to transform, for example, from concrete to these wooden houses. You can say that as kind of transformation. But going forward, yeah, the expand part of the business is getting full focus. You see the first signals, very important signals in our order book. When you see an increase of EUR 3 billion in a year in the segments where we want to be, yeah, that's a clear signal of the opportunity we have to grow this business.
We want to be the most sustainable contractor in Northwest Europe. We want to grow the business, of course, after de-risking much faster than we do today and in a profitable way. With increased margins going from these 4%- 6%. And that should be the end result of our next strategic phase. By the end of 2026, that's the strategic target.
Okay, clear. Thanks.
Okay, before I close the meeting, I want to take a minute, a moment to thank Frans because this is his last endless meeting for BAM. I'd like to thank you for your leadership and dedication over the past seven 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 for the next period.
Thank you, Ruud. Maybe 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 enjoyed 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. 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 these past seven years. Above all, Henry, I want to wish you success. I'm very proud. You will succeed me, and I'm confident you will do great. 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'd like to let you know that our AGM is now planned for May 8th. 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 answer your questions. We hope to welcome you to our next conference call for our first half-year results 2025 on July 24th. Thank you and have a good day.