5 - Revenue

Revenue from contracts with customers

Unica Groep B.V., along with its subsidiaries, operates across nine distinct Clusters. The group's activities are further segmented into three primary business areas:

• Building Projects

• Building Services

• Specialty clusters

These business areas represent the cash-generating units for goodwill impairment testing.

In the table below, a detailed breakdown of revenue from contracts with customers, categorized by operating areas, is provided.

Assets and liabilities arising from contracts with customers

The table below presents a detailed breakdown of the Group's contract balances:

Revenues are generated almost exclusively in the Netherlands and none of the customers has a share of 10% or greater. The backlog of contracts with customers totaled €859 million and €683 million as of December 31, 2023 and December 31, 2022, respectively. The majority of the contracts will be realized within the first year.

Contract assets and liabilities and contract receivables and payables can be shown as follows:

Performance obligations

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognizes revenue when it transfers control over a good or service to the customer.

Information about the Group’s performance obligations is summarized below:

Accounting policies

Revenue recognition

Revenues from contracts with customers are considered for recognition and measurement when the contract has been approved by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. To recognize revenues, the Group applies the five step IFRS 15 approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied.

Revenue is measured based on the consideration to which the Group expects to be entitled in a contract with a customer and is recognized when control is transferred excluding amounts collected on behalf of third parties. It is also presented net of rebates and taxes.

The Group applies the revenue recognition criteria to each nature of the revenue transaction as set out below:

Revenue from projects (engineering services, installation and implementation)

Revenue from building projects, arise from the installation and renovation of technical systems within premises and usually involves a single performance obligation that is recognized over-time. The majority of these contracts, including change orders, are fixed price contracts. A large proportion of contracts follow the input method, based on time or material costs expended, with an allocable share of overhead costs. Thereby, revenues are recognized based on current progress in relation to the forecast of costs and revenues at the end of the work. These forecasts also take into account estimates of potential additional revenues and costs.. The typical life cycle of building projects is between 0.5 to 3 years.

Revenue from contracts (service, maintenance and technical management)

Revenue from building services arises from the management and maintenance of technical installations in buildings and the provision of ancillary services. Depending on the nature of the services provided, revenue is recognized either on a time and material basis, using the input method, or on a straight-line basis. Contracts for these services are usually for an initial term of one year with provisions for annual renewal, and are predominantly on a fixed price basis. A small proportion of our contracts have a performance commitment related to the use of the installations themselves.

Revenue from other services

Other services primarily relate to to asset operations (data centers and ATES installations) and, to a minor extent, trading. These services are often connected to building projects or building services.

Variable consideration

If the consideration in a contract includes a variable amount, the Group estimates to its best knowledge and information the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Variable consideration includes bonuses and penalties, for which penalties are considered to be negative variable considerations.

Contract modifications

A change to an existing contract for a project is a modification. A contract modification may result in a change of the scope of the contract, the price of the contract, or both. A contract modification exists when the Group and the customer approve the modification either in writing, orally, or implied by customary business practices, making the modification enforceable. Within the Group's operations, modifications largely pertain to variation orders or claims that do not yield additional distinct goods or services. Consequently, such modifications are accounted for as cumulative catch-up adjustments once the 'highly probable' threshold under IFRS 15 is met.

Variation orders are changes that result from by client instructions, which establish enforceable payment rights while the price alteration remains undetermined. Contract claims towards customers, on the other hand, relate to events where the Group determines enforceable rights to client compensation, although these rights are not yet approved by the customer. Claims typically encompass a higher level of uncertainty due to the absence of explicit customer instructions for a change. Therefore, the risk of significant revenue reversal associated with claims is considered higher. As a result, satisfying the 'highly probable' threshold of IFRS 15 presents a greater challenge for claim amounts.

Contract balances

Contract assets, often referred to as ‘Unbilled receivables,’ are transferred to receivables when the rights become unconditional, which usually occurs when the Group issues an invoice to a customer.

Contract liabilities, often referred to as ‘Deferred revenue’, relate primarily to the Group receiving payments in advance for services or goods to be provided in future periods. All current contract liabilities outstanding at the beginning of the year were recognized as revenue during the year.

Warranty

The Group extends warranties covering general repairs for defects present at the point of sale. Provisions associated with these assurance-type warranties are recognized upon the sale of the product, completion of the project, or delivery of the service to the customer. The initial recognition of these provisions is based on historical experience. The Group annually reviews and if necessary revises the estimate of warranty-related costs. This provision also encompasses exceptional disputes and claims involving the Group.

Significant financing

The Group's contracts with customers do not typically include a significant financing component.

Source of estimation uncertainty

Percentage of completion

Design, construction, and implementation contracts primarily pertain to new builds and building renovations. Revenues from these activities are ordinarily recognized using the input method (percentage of completion) on a cost-to-cost basis or based on time expended if it better represents progress, as this closely aligns with the stage of completion (milestones). Any change orders that occur during these operations are reviewed at initiation to determine whether they expand the initial scope of work or extend the timeline or add contractual value to the original scope.

The provision of operating and maintenance services, performed over time, involves revenue recognition through the input method based on the percentage of completion derived from the incurred costs. Additionally, the Group maintains a limited number of performance-based contracts, extending across single or multiple years. In such cases, the input method is applied to compute the percentage of completion and revenue, taking into account an aggregate of all contractually linked activities.