Back in Shape Capital Markets Event 8 October 2014

Transcription

1 Back in Shape Capital Markets Event 8 October 2014

2 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

3 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

4 Introduction: 1 strategy, 3 dimensions, 4 programmes Group strategy Mindset Operational exellence 3 growth paths Culture Structure Processes Back in shape by end-2015 Cost reduction Project control Working capital Divestments Capital Markets Event 8 October

5 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

6 Analysis: Cost reduction Process External help from Bain & Co. Understand the current cost base External benchmarking Internal benchmarking Management interviews Organisation survey Key findings Complex legacy structure Cost efficiency is 3rd quartile vs. external benchmarks Recognition of need to change Opportunities to improve processes Clear mandate, buy-in and opportunities for change Capital Markets Event 8 October

7 65% 82% 100% Royal BAM Group nv Analysis: Cost reduction > 100m run-rate by end-2015 Benchmark overheads FY 2013 overheads of 640m: composition Key overhead function costs (indexed) Personnel & other Countries & other BAM 2013 Industry benchmark average Industry benchmark top quartile Personnel Personnel related Other NL DE UK Other Challenging but achievable target validated by benchmarks Capital Markets Event 8 October

8 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 / later No expectation of major new losses Capital Markets Event 8 October

9 Analysis: Working capital reduction Process External help from REL Gap assessment vs. best practice Pilot scheme early 2014 in NL Being extended over most operating companies in 2 waves Key findings Low cash awareness at project level Large potential in every home country Short-term dash for cash opportunities Need to embed sustainable best practices Improvement will be driven bottom-up Capital Markets Event 8 October

10 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

11 Analysis: Working capital cash in > 300m by end-2015 > 300m Actual TWC -1% -3% -5% -7% -9% -11% -13% Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Actual TWC -11% end 2015 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

12 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

13 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

14 Changing our culture Values Ownership through engagement Financial awareness Share knowledge, use potential Close to customer, entrepreneurial Risk-reward awareness Focused, disciplined on value added Levers Selection and recruitment Promotion and development Appraisal and remuneration Raise project manager profile Take ownership, be accountable, focus on risks and rewards Capital Markets Event 8 October

15 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

16 Changing our structure: Today Complex and inefficient legacy Capital Markets Event 8 October

17 Changing our structure: Intended change Design Simplify into 2 new business lines NL, BE reduction # OpCos UK, DE, BE & INT unchanged top structure Shared services for business support and back office Estimated total 650 FTEs reduction by end-2015, mainly white-collar in NL Governance 3-strong Executive Board New Management Committee: 10 OpCo MDs plus 3 service department heads New Business Line meeting and review Closer to projects, less complexity, better cooperation Capital Markets Event 8 October

18 Changing our structure: As from 1 January 2015 Executive Board Construction & Property NL UK DE Civil engineering BE IRE NL UK DE Intl. Business line support Business line support PPP Effective outside; efficient inside Capital Markets Event 8 October

19 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

20 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

21 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

22 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

23 Changing our processes: Peer review case study German hospital project PPP project for 2 hospitals BIM modelling used Tender submitted H m 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

24 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

25 Changing our processes: Business cash scorecard Capital Markets Event 8 October

26 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

27 Implementation: teams Change Programme Office Executive Board Construction & Property NL UK DE Civil engineering BE IRE NL UK DE Intl. Business line support Business line support PPP Teams consist of BAM, Bain and REL Capital Markets Event 8 October

28 Implementation: Timing, costs and benefits Euro million H H H Beyond 2015 Cost reduction P&L restructuring cost 80m - 100m Cash costs 25m - 40m 40-60m < 15m Cost saving* > 100m Project margins Towards 2-4% Working capital reduction* > 300m Divestments > 100m > 100m > 100m * Cumulative run-rate at period-end Progress will be reported HY and FY Capital Markets Event 8 October

29 Sluiskiltunnel joint venture BAM Civiel, BAM Wegen, BAM Infraconsult, Wayss & Freytag Ingenieurbau Ministry of the Interior and Kingdom Relations, The Hague joint venture Capital Markets Event 8 October

30 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

31 Key takeaways Actions Implementing major change programme throughout BAM Group Streamlining operating companies with 2 new business lines Driving cultural change for greater financial awareness Further strengthening of tendering and project control Outcomes 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 m, mainly from 650 FTEs reduction BAM Back in Shape Capital Markets Event 8 October

32 Back in Shape programme Simpler structure Strong Simple Sharp Culture Structure Processes Capital Markets Event 8 October

33 Agenda Introduction Analysis Changing our Culture Changing our Structure Changing our processes Implementation Key take-aways Q&A Capital Markets Event 8 October

34 Back in Shape programme Simpler structure Strong Simple Sharp Culture Structure Processes Capital Markets Event 8 October