Two years after the transition of ownership and recapitalisation, Ballast Nedam is back on track. The organisation is confidently adhering to the chosen strategy and is determined to reap the benefits from 2018 onwards. 2017 ended without a positive result, so the company took many profitable actions in 2018, e.g. acquisitioning new projects and controlling costs. We remain on course to become the most cost-efficient and competitive player in the Dutch market.
In 2017, the organisation was still suffering from a few legacy projects that were acquired during the crisis. These projects have now largely been completed. Furthermore, Ballast Nedam took the opportunity in 2017 to prepare its organisation for future growth, which resulted in a general cost deficit for 2017. The upcoming years are promising and the strategy of selective tendering and reduction of tender costs with strong control fits the organisation very well. Ballast Nedam is continuously exploring opportunities in the international markets in close collaboration with its shareholder Rönesans.
In 2017, the transition of Ballast Nedam continued by enhancing the operational organisational structure and further realising a cost reduction plan. A juridical restructuring plan was implemented to align the legal structure with the amended operational structure. Ballast Nedam took this opportunity to strengthen its organisation for present and future growth.
Enhancing the order portfolio with solid projects is one of the objectives. To achieve this, skilled staff was hired to add knowledge and experience to the Tendering department.
Ballast Nedam continuously modifies its organisation to provide a healthy, safe and motivating working environment for all our employees, whilst at the same time focussing on attracting new employees who have the expertise we need to be more efficient and competitive. Ballast Nedam will continue to invest in training and development programmes for its human capital.
Rönesans provided operational, commercial, financial and technical support to Ballast Nedam in 2017 as shareholder and showed its intention to support the company’s future operations. At the same time, we aim to further capitalise on the Rönesans Group’s experience and capabilities.
The approach of selective tendering, disciplined pricing and careful monitoring through periodic reporting has continued. This strategy, together with more efficient cost control and profitable new projects in 2017, has led to an overall gross margin increase from -0.36% to 3.13%.
A critical approach to the selection of projects is crucial. Projects are selected only if Ballast Nedam can add value and be distinctive in order to generate higher profitability. As a result of these selective decisions, the organisation ran fewer tenders but with a higher “hit rate”. The acquired new projects strengthen Ballast Nedam’s belief in its strategy.
The success of the critical and selective tendering approach is reflected in the organisation’s order book. The order book increased with ten percent to € 624 million. High-quality profile projects were newly acquired, such as the Transferium Deutersestraat in ‘s-Hertogenbosch, the KLM Crown Lounge at Schiphol, the upgrading of the port of Saint Lucia, the Mall of the Netherlands, the A24 Blankenburgverbinding and the extension of the P3 parking garage at Schiphol. For the Regions business unit, selective tendering also resulted in strong new acquisitions, such as the renovation of the former V&D store in Utrecht, 119 apartments in Utrecht, a new hotel at the Westergasfabriek area in Amsterdam and a construction team agreement for West Beat in Amsterdam (a mixed-use project).
Many projects were completed to the clients’ satisfaction, such as Natuurbrug Zeepoort, the Sportcampus in The Hague, Laan van Spartaan (the tallest modular building of the Netherlands), the Oudorp shopping mall in Alkmaar, the expansion of the NATO Allied JFC Brunssum headquarters, the maintenance of 163 homes in Leiden, the Hoornbeeck College in Rotterdam and phase three of the Beach Resort Ouddorp Duin.
The Development division, whose portfolio includes approximately 5,000 residential units in projects such as Food Center Amsterdam, Groene Loper Maastricht and Spoorzone Delft, is a division with bright prospects as a result of the robust growth of the Dutch housing market. The most significant projects in 2017 were Eindhoven-Berkelbosch, Leiden-De Leidse Schans, Utrecht-De Paleistuinen and Vleuten-Centrumplan.
The acquisition of the Rotterdam Building, bought for € 37.3 million, in December 2017 further strengthened the Development division.
Cash and cash equivalents increased to € 121 million (2016: € 111 million).
During the 2017 financial year, new loans amounting to € 29 million were obtained. € 20 million of these loans were related to the acquisition of the Rotterdam Building. Shareholder Rönesans strenghtened equity by contributing € 52 million as share premium (€ 10 million of which was previously a subordinated shareholder loan that was converted to share premium). This resulted in a stable solvency ratio of 2.94% (2016: 3.3%). In addition, Ballast Nedam has established a variety of bilateral bonding lines and a syndicated bonding facility from various financial institutions.
Furthermore, Ballast Nedam has further executed its strategy to gradually dispose of non-core assets that no longer serve as primary factors in our core activities. Transactions in 2017 include the sale of the Merici Hotel and the interest in Concrete Valley and Wâldwei.com B.V.
The current cash position of the company will be declining towards the end of 2018 due to losses from legacy projects and largely due to the existing financing package consisting of € 58 million in bilateral loans, which matures on or before December 31st, 2018. Furthermore, Ballast Nedam is negotiating a refinancing plan of the bilateral loans with several banks and an extension of certain bank Guarantee Facilities. Negotiations are in the final stage and will probably be completed before the end of the second quarter of 2018.
Rönesans Holding will continue to support and enable Ballast Nedam to complete the contemplated refinancing of at least the existing loans and the bank guarantee facilities referred to above.
Ballast Nedam acknowledges that its actions affect the present and the future. This is a responsibility that is carefully dealt with and integrated in the business operations by us joining the Sustainable Development Goals Charter issued by the United Nations. By joining the Charter, sustainability has become essential not only for ambition but also as a framework for action. This framework is used for further shaping CSR policy.
The Development division of Ballast Nedam collaborates on the fulfilment of the objective of the Netherlands to be natural gas free in 2050, by deciding to focus only on suitable developments. This means that new housing will no longer be provided with a connection to natural gas, which will significantly contribute to reducing the consumption of fossil fuels.
With the newly established Ballast Nedam Renewables business unit, Ballast Nedam contributes to the world’s need for renewable energy. Four years after the partial sale of Ballast Nedam’s offshore activities, Ballast Nedam returned to the market of sustainable (wind) energy.
Ballast Nedam is continuing its strategy to operate as one integrated construction and infrastructure company. The further development and professionalisation of the technical installation activities within the projects contracts is part of that strategy. In 2017, we continued to further shape the M&E (mechanical and electrical) activities of Ballast Nedam by integrating all skills and knowledge in the different phases of a project, from concept to realisation.
Ballast Nedam will continue to work on the improvements achieved in 2017, and will stay focused on the measures taken and on the realisation of its business plan. The selective tendering philosophy will be continued, and at the same time there will be a focus on further reducing tender costs with strong controls.
The Board of Management and the shareholders are pleased that Ballast Nedam has recovered from a difficult period and are positive that 2018 and 2019 will bring growth and profit.
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