‘Back in Shape’ Capital Markets Event | 8 October 2014 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 2 Royal BAM Group nv Introduction: Our aim today to show Our actions are sufficient for the challenges We have the resources to succeed Our customers will feel no disruption The timetable is realistic The benefits are achievable We are determined to deliver BAM Back in Shape: turn around programme Capital Markets Event | 8 October 2014 3 Royal BAM Group nv Introduction: 1 strategy, 3 dimensions, 4 programmes Group strategy 2013-2015 Mindset Culture Back in shape by end-2015 Capital Markets Event | 8 October 2014 Operational exellence 3 growth paths Structure Processes Cost reduction Working capital Project control Divestments 4 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 5 Royal BAM Group nv Analysis: Cost reduction Process Key findings • External help from Bain & Co. • Complex legacy structure • Understand the current cost base • External benchmarking • Cost efficiency is 3rd quartile vs. external benchmarks • Internal benchmarking • Recognition of need to change • Management interviews • Opportunities to improve processes • Organisation survey Clear mandate, buy-in and opportunities for change Capital Markets Event | 8 October 2014 6 Royal BAM Group nv Analysis: Cost reduction > €100m run-rate by end-2015 FY 2013 overheads of €640m: composition Benchmark overheads BAM 2013 Industry benchmark average Countries & other 65% Personnel & other 82% 100% Key overhead function costs (indexed) Industry benchmark top quartile Personnel NL UK Personnel related DE Other Other Challenging but achievable target validated by benchmarks Capital Markets Event | 8 October 2014 7 Royal BAM Group nv Analysis: Project control Older projects • • • • From tenders before mid-2013 About €4bn of current €11bn order book Risks underestimated for some projects 3 major loss makers still ongoing €4bn older projects: expected completion Order intake since mid-2013 • Quality improving … • … And scope for further improvement 2014 2015 2016/ later No expectation of major new losses Capital Markets Event | 8 October 2014 8 Royal BAM Group nv Analysis: Working capital reduction Process Key findings • External help from REL • Low cash awareness at project level • Large potential in every home country • Short-term ‘dash for cash’ opportunities • Need to embed sustainable best practices • Gap assessment vs. best practice • Pilot scheme early 2014 in NL • Being extended over most operating companies in 2 waves Improvement will be driven bottom-up Capital Markets Event | 8 October 2014 9 Royal BAM Group nv Analysis: Working capital benchmark Process stages OpCo 1 50% 100% 50% 50% 50% 50% 100% 50% 50% 50% 50% 50% 25% 25% 25% 50% 50% 25% OpCo 2 25% 25% 50% 50% 25% 50% 100% 50% 25% 100% 50% 50% 75% 50% 25% 50% 25% 25% OpCo 3 50% 75% 50% 50% 50% 75% 100% 75% 75% 25% 50% 50% 50% 25% 50% 75% 75% 25% OpCo 4 50% 25% 25% 50% 50% 50% 100% 50% 25% 75% 50% 50% 25% 50% tbd OpCo 5 50% 25% 50% 50% 25% 50% 100% 50% 25% 50% 50% 50% 25% 50% tbd OpCo 6 50% 25% 25% 50% 75% 50% 100% 50% 25% 50% 50% 50% 25% 50% 25% 50% 25% 25% Potential to improve most stages of cash cycle Capital Markets Event | 8 October 2014 10 Royal BAM Group nv Analysis: Working capital cash in > €300m by end-2015 > €300m Actual TWC -1% -3% -5% -7% -9% -11% -13% -11% end 2015 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Actual TWC ■ Receivables ■ WIP/Inventory ■ Payables 4 quarters rolling trade working capital in % of 12-months rolling revenue Improvement to come in all categories Capital Markets Event | 8 October 2014 11 Royal BAM Group nv Analysis: Divestment programme Ambition: > €100 million each year 2014 and 2015 To come from property divestments and other assets We do not envisage major change in Group portfolio/footprint Other asset sales will come from clean up of legacy structure Timing is subject to market conditions Underway, with €160 million realised already in 2014 Capital Markets Event | 8 October 2014 12 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 13 Royal BAM Group nv Changing our culture Values Levers • • • • • • • Selection and recruitment Ownership through engagement Financial awareness Share knowledge, use potential Close to customer, entrepreneurial Risk-reward awareness Focused, disciplined on value added • Promotion and development • Appraisal and remuneration • Raise project manager profile Take ownership, be accountable, focus on risks and rewards Capital Markets Event | 8 October 2014 14 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 15 Royal BAM Group nv Changing our structure: Today Complex and inefficient legacy Capital Markets Event | 8 October 2014 16 Royal BAM Group nv Changing our structure: Intended change Design Governance • Simplify into 2 new business lines • 3-strong Executive Board • NL, BE reduction # OpCos • UK, DE, BE & INT unchanged top structure • New Management Committee: 10 OpCo MDs plus 3 service department heads • Shared services for business support and back office • New Business Line meeting and review • Estimated total 650 FTEs reduction by end-2015, mainly white-collar in NL Closer to projects, less complexity, better cooperation Capital Markets Event | 8 October 2014 17 Royal BAM Group nv Changing our structure: As from 1 January 2015 Executive Board Construction & Property NL UK DE Civil engineering BE IRE Business line support NL UK DE Intl. Business line support PPP Effective outside; efficient inside Capital Markets Event | 8 October 2014 18 Royal BAM Group nv Changing our structure: OpCo finance function OpCo Finance mission • Support value creation by identifying risk and opportunities, providing information and analyses to enable the business to make the best decisions OpCo Finance Back in Shape objectives • Better in control of projects: critical decisons in project tendering and execution • Reduce working capital Changing structure • Top level FD in every operating company • Mandatory role for finance in key business decisions Structure and awareness enable processes Capital Markets Event | 8 October 2014 19 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 20 Royal BAM Group nv Changing our processes: Key areas Stage gate tendering Operational Audit 2.0 Peer review Working capital best practice BIM Virtual Construction (‘BIM’) Tender Board Better decisions, stricter discipline, consistent follow-through Capital Markets Event | 8 October 2014 21 Royal BAM Group nv Changing our processes: Stage gate tendering Stage Gate 1 Stage Gate 2 Stage Gate 3 Stage Gate 4 Stage Gate 5 Decision to tender Initial validation Approval of A-form Approval final contract If won: reality check Tender submitted Contract awarded 4 new stage gates: 2 before and 2 after A-form approval Capital Markets Event | 8 October 2014 22 Royal BAM Group nv Changing our processes: Peer review case study German hospital project • • • • • PPP project for 2 hospitals BIM modelling used Tender submitted H1 ‘14 €520m construction value JV with maintenance specialist Peer review • Done by in-house experts • Benchmark against 9 projects • Analysis: complexity; new-build vs. refurbishment; repetition factor Symmetric risk/ opportunities together with JV partner Capital Markets Event | 8 October 2014 23 Royal BAM Group nv Changing our processes: Operational audit 2.0 Current • Peer review • Limited resources Improvement • • • • • Set up an improved set of rules Maturing peer reviews Perform compliance audits Recruit external resources Effective 1 January 2015 Closing the loop Capital Markets Event | 8 October 2014 24 Royal BAM Group nv Changing our processes: Business cash scorecard Capital Markets Event | 8 October 2014 25 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 26 Royal BAM Group nv Implementation: teams Change Programme Office Executive Board Construction & Property NL UK DE Civil engineering BE IRE Business line support NL UK DE Intl. Business line support PPP Teams consist of BAM, Bain and REL Capital Markets Event | 8 October 2014 27 Royal BAM Group nv Implementation: Timing, costs and benefits Euro million H2 2014 H1 2015 H2 2015 Beyond 2015 €40 - €60m <€15m Cost reduction €80m - €100m P&L restructuring cost €25m - €40m Cash costs > €100m Cost saving* Project margins Towards 2-4% > €300m Working capital reduction* > €100m Divestments * > €100m > €100m Cumulative run-rate at period-end Progress will be reported HY and FY Capital Markets Event | 8 October 2014 28 Royal BAM Group nv Sluiskiltunnel – joint venture Ministry of the Interior and Kingdom Relations, BAM Civiel, BAM Wegen, BAM Infraconsult, Wayss & Freytag Ingenieurbau The Hague – joint venture Capital Markets Event | 8 October 2014 29 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 30 Royal BAM Group nv Key takeaways Actions Outcomes • Implementing major change programme throughout BAM Group • Costs cut by > €100m by end-2015 • Project margins of 2-4% in longer term • Cash in of > €300m by end-2015 • Divestments > €100m in 2014 and 2015 • Restructuring cost €80-€100m, mainly from 650 FTEs reduction • Streamlining operating companies with 2 new business lines • Driving cultural change for greater financial awareness • Further strengthening of tendering and project control BAM Back in Shape Capital Markets Event | 8 October 2014 31 Royal BAM Group nv ‘Back in Shape’ programme Simpler structure Strong Simple Culture Capital Markets Event | 8 October 2014 Structure Sharp Processes 32 Royal BAM Group nv Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event | 8 October 2014 33 Royal BAM Group nv ‘Back in Shape’ programme Simpler structure Strong Simple Culture Capital Markets Event | 8 October 2014 Structure Sharp Processes 34
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