Heijmans 2015: negative year result, improvement noted in second half
25 February 2016, 06:00
- Revenues increased 6% to almost € 2.0 billion (2014: € 1.9 billion);
- Underlying operating result second half 2015 € 6 million positive (H2 2014: € 5 million negative), full year 2015 € 5 million negative (2014: € 12 million negative);
- Financing extended to 30 June 2018; solvency ratio 26%;
- Increase in number of homes sold to 1,791 homes with 33% (2014: 1,347 homes);
- Net result 2015 € 27 million negative, partly due to impairment of property assets (€ 12 million);
- Result from growth markets Property Development and Residential Building (€ 15 million) improved compared to the previous year (2014: € 6 million); activities in Belgium and Germany make solid contribution to the results;
- Result Infra Netherlands € 26 million negative: previously introduced improvement measures are having an effect but this is overshadowed by the impact of a number of projects acquired in 2012-2013;
|x 1 € million||H2 2015||H2 2014||2015||2014|
|underlaying operating result*||6||-5||-5||-12|
|result after tax||-12||-39||-27||-47|
|earnings per share (in €)||-0.56||-2.01||-1.32||-2.44|
|number of FTE||6.582||7.034||6.582||7.034|
* underlying operating result is the operating result corrected for operating result joint ventures, write down on property assets, restructuring costs and other extraordinary items.
Bert van der Els, CEO Heijmans
‘The markets in which we operate remain challenging. We did, however, improve in a number of areas in the second half of the year and an increase in revenues after seven years of decline. Property Development and Residential Building both benefited from the clear growth in the market. With our executional power and creativity we are able to realise high-profile projects. However, the Dutch Infra market remains poor and margins are under pressure. The larger projects in this market are often highly complex and have numerous stakeholders. We focus very closely on the acquisition of projects with acceptable risk and realistic margins, and on a controlled realisation of these projects. We are seeing the first results of this approach, particularly in regional infra projects and asset management contracts. At the same time, we are still facing losses on a number of larger, Infra projects acquired in the past. Our Belgium and German activities are making a solid contribution to the results. At Non-Residential our service business is able to acquire an increasing number of management and maintenance contracts. We will have to make every effort to improve our core activities through stringent tender, project, procurement and commercial management. The proposed appointment of a fourth board member specifically for the Infra operations should contribute to the process of improving results at Infra.
In view of the lagging operational performance, there is clear pressure on the ratio between results and credit uptake. With this in mind, Heijmans initiated the dialogue with its banks regarding financing for the years ahead and reached agreement on the extension of the syndicated facility to 30 June 2018. Heijmans’ basic premise is to work onwards a structural improvement in the net debt / EBITDA ratio for the coming period. Growth in the housing market and the order portfolio put us in a positive starting position for 2016. Combined with the strategic efforts to improve and renew, we should be able to book a positive underlying operating result in 2016 and make clear steps forwards.”
Highlights second half 2015
Property development, Residential Building
The housing market showed a clear recovery in the past year, market growth was greatest in our four largest cities. The affordability of owning a home in these cities is also under pressure, which makes rental homes an attractive alternative. Revenues at Property Development increased by almost € 100 million in 2015 to € 278 million (2014: € 179 million) and the underlying operating result increased to € 9 million in 2015 (2014: € 4 million). At Residential Building, revenues increased to € 387 million (2014: € 299 million) and the underlying operating result amounted to € 6 million (2014: € 2 million). We increased our number of homes sold to1,791 versus 1,347 in 2014). In the fourth quarter, the number of homes sold was 754 (2014: 670 homes). Of the total number of homes sold, 1,120 (63%) were sold to private buyers, an increase of 58% compared to 711 in 2014.
Anticipating on the requirements of investors, corporations and future residents is key for these markets. For instance, since mid-2015, all owner-occupied homes Heijmans developed and built are fitted with a home control system, to provide residents with extra living comfort and insight into their energy consumption. In the second half of 2015, Heijmans signed a contract with the Culemborg municipal authorities for the construction of 900 homes in the Parijsch neighbourhood. We also signed a letter of intent with Aventicum Capital Management for the development and renovation of 252 apartments as part of the Kanaleneiland area development in Utrecht. Heijmans signed a letter of intent with the German investor Patrizia and The Hague city council for the development and construction of approximately 600 homes at the Leyweg area in The Hague. We also signed an agreement with Wonen Limburg for the delivery of the first 30 moveable Heijmans ONE homes. In early December 2015, Heijmans began the construction of 212 loft apartments in the redevelopment of the Fenix warehouses in Rotterdam. We also delivered 14 new houses and 68 apartments on Karel de Grotelaan in Eindhoven and began the management and maintenance of these homes. The 500th Heijmans Huismerk home was delivered as part of this project. The homes are part of the project to redevelop and improve the sustainability of the Genderdal neighbourhood. In Belgium, we started the construction and development of 80 homes and commercial units in Wondelgem near the city of Ghent.
Revenues at Non-Residential increased to € 421 million in 2015 (2014: € 388 million), partly due to higher revenues from service, management and maintenance projects. The underlying operating result at Non-Residential amounted to break-even in 2015, unchanged from 2014. In 2015, fewer new-build projects came onto the market due to the continuing decline in demand for commercial real estate. In addition, there is continuing pressure on pricing, due in part to the imbalance between risks, contract form and prices. In response to these market conditions, Heijmans has chosen a margin-over-volume policy, in which we carefully evaluate risk, price and segment. This has resulted in a decrease in the number of projects for which we submit a bid. In addition to new-build, Non-Residential is focusing strongly on growth in the share of service and maintenance projects and contracts. The reorganisation initiated in 2014 has been completed.
In December 2015, Heijmans delivered the multi-functional Timmerhuis in Rotterdam, which combines apartments and office space with retail, bars and restaurants and a city museum. Also in December, Heijmans signed an integral management contract with the central government’s property agency (Rijksvastgoedbedrijf) for the management and maintenance of data centres and offices at five tax authority (Belastingdienst) locations in Apeldoorn. In addition, Heijmans and the central government’s property agency also reached agreement on the management and maintenance of 19 Custodial Institutions Agency (Dienst Justitiële Inrichtingen) locations.. Heijmans also signed a maintenance contract with the ROC Leijgraaf college in Leiden. These contracts illustrate the growing importance of service, management and maintenance contracts in Heijmans’ portfolio.
The market conditions for Infra remain challenging. As noted previously, the market is poor and highly competitive. Revenues in the Netherlands declined in the past year to € 690 million, from € 759 million in 2014. Although the loss in the second half of 2015 (a loss of € 11 million) was lower than the loss recorded in the second half of 2014 (H2 2014: €17 million negative), the results remained under pressure. The introduced improvement measures, such as the different pricing of design and staff costs, adjustments to the management of the design and preparation process, improvements in contract management, in combination with the professionalisation of the cooperation with clients, tight control and documentation of go/no-go moments and discussion of projects in the start-up phase by the Executive Board, were all put into effect and further tightened in 2015. In addition, all Infra activities have been placed under a single central leadership, while uniform processes and the integration of departments and teams are reinforcing this centralisation. We are seeing the first results of these efforts, especially in regional infra projects and asset management contracts, which account for approximately 40% of the total revenues of the Dutch infra activities.
In the autumn, Heijmans and the Dutch government’s Department of Public Works (Rijkswaterstaat) signed a design & construct contract for variable maintenance on roads, viaducts and bridges in the eastern part of the Noord Brabant province. In November, Heijmans joined the consortium for the PPP project to realise the third locks at the Beatrixsluis and the widening of the Lekkanaal. At the end of 2015, the A4 Delft-Schiedam was opened to traffic and the land tunnel was taken into use.
As expected, the Belgian infra activities recorded a lower, but nonetheless positive result on slightly lower revenues. In 2015, Heijmans delivered the R4 in Ghent and began work on the N70 Sint Niklaas. Heijmans German business also made a positive contribution, particularly as a result of the positive developments at Oevermann. Heijmans is also working closely with Franki in the Netherlands, for instance on the Eurojust project in The Hague.
The order book was stable at € 2.1 billion at year-end 2015 (mid 2015: € 2.2 billion). The underlying operating result was € 6 million positive in the second half of 2015, compared with € 5 million negative in the same period of 2014. Solvency ratio was 26%.
Heijmans underlying operating result improved to € 5 million negative in 2015, compared with € 12 million negative in 2014, largely due to positive developments in the second half of the year. The positive development at Property Development and Residential Building played a considerable role in this improvement. However, the negative result from the infra activities in the Netherlands had a strong negative impact. Infra in the Netherlands reported a loss of € 26 million in 2015, compared with a loss of € 22 million in 2014. The infra market remains poor and highly competitive, while the complexity of and responsiblity for aspects such as planning, delivering quality and environment management has increased in the past few years. As a result, this has led to 5 to 10 previously acquired major integrated projects that are currently loss-making. With the civil engineering aspects demanding a great deal of attention, these projects are progressing towards delivery with great difficulty. These projects, acquired in the period 2012-2013, have a major impact on the results of Infra and therefore on the Heijmans’ results. The projects are expected to account for approximately 10% of the revenues of the Dutch infra activities in 2016.
The initiated measures have had positive impact on the results of the second half of 2015, but this is still insufficient to show a positive overall result. Improvements to the core processes, as part of our strategy to improve and renew, have been a top priority not only at Infra but at all Heijmans divisions, and that will also be the case in 2016. Efforts aimed at further improvements and greater uniformity in the core activities tender and project management, procurement and marketing, should result in continued recovery in 2016. Heijmans realised further improvements in safety in 2015 with the GO! (Geen Ongevallen – no accidents) programme. The number of accidents among employees and contract staff showed a notable decline in both absolute and relative terms.