First time in seven years positive results; strategy of selective and strategic tendering is paying off
Strategic, operational and financial highlights in 2018
Cenk Düzyol, Chairman of the Board of Management Ballast Nedam
“Ballast Nedam is on track towards becoming the most competitive construction company in the Netherlands. Three years ago, we implemented our strategy of selective and strategic tendering, where our ambition was to enhance the volume, profitability and quality of our order intake. This strategy is now paying off. In 2018 Ballast Nedam achieved a positive underlying EBITDA of € 8.7 million which is significantly higher than we expected. The net result of € 12.3 million is – due to additional positive one-offs – even better.
Our order book has not been this full in years. Besides the size, also the quality has considerably improved. We won several solid and interesting new projects. As a result, our order book shows a higher percentage of projects with healthier profit and risk margins.
Winning interesting, high-quality and innovative projects positively impacts the spirit and motivation of our employees. This also attracts new hires, who do not back away from a challenge and wish to become part of our team to work on our groundbreaking projects. We welcome such new employees, who add knowledge, experience and skills, which we need in order to execute our projects.
2018 was also a year in which we strengthened our financial situation, further enhanced our solvency ratio and a year that we closed with a healthy liquidity position.
Our society is facing several challenges as a result of the continuous growth of our worldwide population and economic prosperity. We have expanded our focus on renewables and will continue to invest in amongst others new circular and energy efficient methods to construct and develop new places where people work safely and live and work a healthy life.”
Strategic and selective tendering, disciplined pricing and careful monitoring through periodic reporting has continued. A critical approach to the selection of projects is crucial. Only projects in which Ballast Nedam can add value and can be distinctive in order to generate higher profitability are chosen.
The order book has increased significantly – to over € 1.6 billion – despite this tender policy. In addition, the quality of the order book has increased considerably due to the policy. For example, a qualitatively better tender process, a larger percentage of projects with a lower risk profile and healthier profit and risk margins demonstrate the same. The gross profit margin increased to 3.5% (3.1% in 2017) due to more efficient cost control, selective tendering and profitable new projects in 2018.
In 2018, Ballast Nedam made investments to enhance its risk management and the quality of the design and engineering, estimations and tender departments. These investments will enable the order book to keep developing in the upcoming years and keep the organisation ready for the future.
High-quality profile projects were newly acquired in 2018, such as the A24 Blankenburg connection in the Rotterdam Region, Airside pier at Schiphol, the Galaxy Tower in Utrecht, World Trade Center in Amsterdam, Hemmathagama water supply project in Sri Lanka and The CoolTower in Rotterdam. Our regional business units also acquired several strong new acquisitions, such as the restauration of the St. Lambertus church in Nederweert and the mixed-use project ‘West Beat’ in Amsterdam. Besides commercial developments, the Development division has enlarged its residential units’ portfolio to approximately 8,000 of which 2,600 units (1,300 being Ballast Nedam’s share in the joint venture) are part of the Cartesiusdriehoek project in Utrecht, a healthy urban area.
Also, in the first three months of this year Ballast Nedam acquired several interesting new projects, such as the mixed-use 1N2 project in Amsterdam, the HES Hartel Tank Terminal Project in Rotterdam and the Feringa Building project in Groningen.
Moreover, many projects were completed to our clients’ satisfaction, such as Erasmus Medical Center in Rotterdam, government office building Rijkskantoor De Knoop in Utrecht, the renovation of the Johan Cruijff ArenA, Cycle Bridge and Wildlife Corridor in Nigtevecht, Deutersestraat Transferium in ‘s-Hertogenbosch, circular pavilion The Green House in Utrecht, Werenfridus College in Hoorn, Conscious Hotel Westerpark in Amsterdam, apartment block CalandTwo in The Hague, residential complex Havenhof in Eindhoven, expansion of SAMCO Aircraft Maintenance at Maastricht-Aachen Airport and the restoration of a Roman bathhouse at the Thermenmuseum in Heerlen. Ballast Nedam Development keeps at the front end of the energy transition and sold 1,700 houses without a gas connection in the last two years, 1,000 houses of which in 2018.
The realised revenue amounted to € 740.1 million, which is approximately the same as last year. During 2018 – due to the focus on improving the (cost) efficiency and operational excellence – cost monitoring improved with stronger reassessment and analysis of general cost components and with the deeper involvement of the central procurement department. This has led to an underlying EBITDA of € 8.7 million and a net result of € 12.3 million.
In 2018, the liquidity has improved with 20.8% to € 146.2 million. The shareholders’ equity has more than quadrupled to € 64.7 million.
During the 2018 financial year, new loans amounting to € 115 million were obtained, which have been partly used to refinance the € 45 million loans Ballast Nedam had with Rabobank eight months before its original maturity date. Rönesans as shareholder contributed € 45 million as share premium, which strengthened equity. This resulted in a solvency ratio of 11.1%. Moreover, Ballast Nedam managed to refinance its existing bank guarantee facility under favourable conditions and attracted a variety of bilateral bonding lines and a syndicated bonding facility from various financial institutions.
The new facilities will provide Ballast Nedam with additional flexibility and liquidity for its operations.
The companies within the Rönesans Group capitalise on each other’s expertise. Ballast Nedam uses the knowledge and experience of other Rönesans companies in high-rise buildings and heavy industries for its projects. Examples include The CoolTower project in Rotterdam, the Galaxy Tower project in Utrecht and the HES Hartel Tank Terminal Project in Rotterdam. Rönesans makes use of Ballast Nedam’s expertise in large-scale infrastructure, water supply and offshore projects. Being part of the Rönesans Group has made it possible to work more in international teams and supply chains. This distinguishes Ballast Nedam and makes the organisation less dependent on the local market.
The last few years were years of recovery, restructuring and reorganisation. Ballast Nedam reported on its focus to improve its (cost) efficiency and operational excellence. During 2018 again significant steps were taken towards the goal to be the most cost-efficient and competitive player in the Dutch market. The main focus remains on effectiveness, efficiency and creating added value.
In 2019, Ballast Nedam will further reap the benefits of the achievements of the last years and continue its focus on a strong order book with an increase of the turnover of more than 15%. The company believes to have created a solid basis, which enables it to achieve a higher result this year. Ballast Nedam will continue to focus on creating a bigger positive impact on the society.