Half year results 2016
Improved results in most sectors, completion loss-making projects Infra still affecting results
17 August 2016, 06:00
- Revenue increased to € 946 million in first half 2016 (first half 2015: 922 million);
- Residential sales increased to 1,069 homes sold in the first half of 2016; (first half 2015: 746 homes sold). Increase in home sales to investors;
- Underlying operating result improves in the first half but still € 7 million negative (first half 2015: € 11 million negative);
- Improved results Property Development and Residential Building, Non-Residential, Belgium and Germany;
- Infra: marked improvement - in particular in regional projects and asset management - negated by € 15 million negative impact of loss-making projects;
- Net result after taxes € 12 million negative (first half 2015: € 15 million negative);
- Order book increased to € 2.4 billion linked to acquisition of projects such as the New Amsterdam Court House, Hart van Zuid and the sewage water purification plant (RWZI) Utrecht;
- Solvency ratio 25%; net debt declined to € 77 million at end-June 2016 (end-June 2015: € 108 million).
|x 1 € million||H1 2016||H1 2015||2015|
|underlaying operating result*||-7||-11||-5|
|result after tax||-12||-15||-27|
|earnings per share (in €)||-0.57||-0.76||-1.32|
|number of FTE||6.409||6.816||6.582|
* 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
“Heijmans Property Development, Residential Building and Non-Residential are all performing in line with expectations, with improved results and a healthy order book. Heijmans’ activities in Belgium and Germany are also showing a positive trend. Demand in the residential market remains high, creating opportunities for our Property Development and Residential Building operations. The new contracts for large-scale area developments are a clear sign of this potential. These include Hart van Zuid, Nieuw Kralingen and another section of Katendrecht in Rotterdam, as well as a new project in Kanaleneiland in Utrecht.
On the Dutch Infra market, we are seeing signs of a cautious recovery and the majority of our activities is performing well, but our results remain under severe pressure. We are faced with a number of loss-making infra projects from the past that we still have to complete, with the Energiefabriek project in Tilburg in particular still proving to be an issue. It is disappointing to note that the final phase towards delivery is progressing with difficulty. It will take a great effort in the coming period to bring this project to a satisfactory conclusion. In the meantime, we continue to invest in further improving our core processes to ensure that we can phase out poorly performing projects in a controlled manner and that the rest of our activities operate at healthy margins. We expect this approach to enable us to complete the year with a positive underlying operating result.”
First half 2016
Property Development, Residential Building
The Property Development activities recorded higher revenues and an improved result on the back of the growth in the Dutch housing market. Revenues at Property Development amounted to € 170 million in the first half of 2016 (first half 2015: € 126 million), while the result was € 6 million (first half 2015: € 4 million). Sales to investors were higher. Prices in this market segment improved substantially and projects generally have a healthy cash flow profile. Heijmans sold a total of 1,069 homes in the first half of 2016, with 569 of these sold to private buyers (first half 2015: 746 in total, of which 565 to private buyers). The average price for private buyers increased by almost 10% compared with 2015, to € 249,000.
Revenues from the Dutch Residential Building activities were € 152 million in the first half of 2016 (first half 2015: € 158 million), while the result was € 2 million (first half 2015: € 3 million). Overall, we see the explosive growth trend in the housing market as seen in the recent past levelling off. A lack of capacity, delays in spatial planning procedures and tighter requirements from building aesthetics committees are making it difficult to initiate the (re)development of new locations. The order book for the Dutch Property Development and Residential Building activities amounted to € 552 million at end-June 2016 (year-end 2015: € 570 million). The order book in the Netherlands is still at a healthy level and will remain so, based on newly-acquired contracts and home sales.
In Rotterdam, Heijmans and ERA Contour have become partners in the development of the New Kralingen area. The total development is for around 400 homes in the higher price segment. Heijmans recently signed a contract with IC Netherlands for the development and construction of about 350 rental apartments in Katendrecht, also in Rotterdam. The letter of intent Heijmans previously signed with the municipality of The Hague and the German investment company Patrizia for around 620 homes has now been formalised in the form of a framework agreement. Heijmans has also signed an agreement with Vesteda for the development of 235 new homes as part of the Kanaleneiland area development in Utrecht.
The Belgian construction activities delivered a stable performance and in the first half these activities recorded higher revenues and a result that was comparable to the first half of 2015. The order book declined in the first half of 2016. The realisation of the Elizabeth Center Antwerp concert hall is progressing well.
Non-Residential recorded revenues of € 162 million in the first half of 2016, a decline compared with the first half of 2015 (€ 220 million), as was expected. Heijmans maintains a very selective acquisition policy, which continues to be based on the principle of margin over volume. The result for the first half of 2016 was nil (first half 2015: € 2 million negative). The positive development in Services (primarily maintenance and management of technical installations) continued in the first half of 2016. The order book at Non-Residential increased substantially in the first half of 2016, to a healthy level of € 825 million (year-end 2015: € 517 million). The increase was largely due to the acquisition of the Hart van Zuid and New Amsterdam Court House (NACH) projects.
Financial close for Amsterdam Court HouseThis finalizes the financing for the project, which has a net present value of € 235 million
Financial close for the major area development Hart van Zuid in Rotterdam, a public private partnership between Heijmans, Ballast Nedam and the Rotterdam municipal authorities, was completed in the spring of 2016 and work on the project began immediately. The completion of this project will run into 2021 and Heijmans will remain involved in the area until after 2040 through maintenance and management. In May of this year, Heijmans signed the consortium agreement for the New Amsterdam Court House PPP project for the new court house in Amsterdam, for which financing was completed in July. The construction of the new premises for RIVM and CBG, which Heijmans is working on in combination with Strukton and Hurks, has run into delays because the design does not yet meet the vibration requirements for laboratory spaces. The correct combination of measures is to be expected this autumn.
At Eindhoven Airport, construction on a new luggage hall has commenced. Heijmans is providing the structural part of the new building. The renewed Lounge 2 at Amsterdam Schiphol Airport has been delivered and was officially opened recently. Services won the three-year maintenance and management contract for all technical installations at the European Patent Office (EPO) in Rijswijk. Heijmans will also provide structural maintenance of all buildings on the Eindhoven Technical University (TU/e) campus for the next five years, with an option for a five year extension.
The majority of the Dutch infra activities are performing in line with expectations. In particular, the regional and asset management activities, which represent 40% of the total revenues of the Dutch Infra activities, are performing well. The cautious improvement that began in the second half of 2015 is visible in the results and we have noted that market conditions are improving when winning new contracts. Revenues from the Dutch infra activities increased to € 329 million in the first half of 2016 compared to € 306 million in the first half of 2015. Despite the positive underlying developments, the H1 2016 result amounted to € 15 million negative, remaining at the same level as the first half of 2015. The overall result of the Dutch Infra activities is still suffering from the strong negative impact of losses on a number of larger, integrated projects dating back to 2012-2013. The loss provisions amounted to € 15 million in the first half of the year, with € 8 million of this amount contributable to the Energiefabriek Tilburg project. This project is currently in the pilot operational phase and the aim is to make it fully operational in the next few months. The risk profile remains high as additional work is still needed on a number of aspects to ensure optimum functioning of the installations. The completion of the remaining loss-making projects is progressing. A total of five projects have yet to be completed in 2016 and 2017, and two of these projects, including Energiefabriek Tilburg, have a high risk profile as we move towards completion.
Infra’s order book includes various large-scale integrated works with an improved margin potential and offers opportunities for the future. The order book amounted to € 787 million at end-June 2016, which is lower than at year-end 2015 (€ 834 million). On the construction of the N23 Westfrisiaweg several challenges have arisen concerning the soil condition. This can, due to among other things the delay resulting from this, affect the project. The consequences of this are currently being discussed.
The Dutch government’s Department of Public Works (Rijkswaterstaat) recently selected Heijmans, as part of the 3Angle consortium, for the public-private partnership A27/A1. In the spring, Heijmans, together with GMB, won the contract for the realisation of the new sewage water purification plant (RWZI) in Utrecht from the district water board De Stichtse Rijnlanden. This Design Build Maintain project will make use of proven technology that Heijmans previously applied in a project for the district water board in 2013.
The Belgian infra activities showed a healthy, stable picture with revenues and result in the first half of 2016 comparable to those in the same period of 2015. Revenues at the German subsidiaries Franki and Oevermann remained unchanged in the first half when compared to the same period of last year, while the result improved due to an improved result at Franki.
Based on its strategy of ‘Improve and Renew’, Heijmans has set its sights firmly on both the further improvement of its core processes and on capitalising on its innovations and sustainability ambitions. In the short term, Heijmans has given the ‘improve’ component the highest priority. The internal improvement programme ‘Improve the Core’ is focused on the tightening, uniformity and central management of four core processes: tender, project and procurement management and commerce. Heijmans has initiated a number of measures, such as changes to the pricing of design and staff costs, the management and documentation of go/no go moments and a different valuation of opportunities and threats. Heijmans applies a tight ‘margin over volume’ policy in the acquisition of new projects.
Over the past few months, we reviewed the strategy for the Dutch infra activities and translated this into a strategic plan for the period 2016 - 2018. Under the motto ‘Focus, Discipline & Excellence’, the plan combines the validation and tightening of existing measures with a clearer focus that will lead to the desired improvement in the results at Infra. Heijmans will make a start on the implementation of the plan in the next few months.
Safety remains a priority with the continuation of the GO! Programme. The (continuing) IF (Injury Frequency) rate is 3.3. This is a decline compared to 2015, but a slight increase when compared to March 2016.
In addition, via the ‘renew’ component of its strategy, Heijmans is focussing on the continuation of targeted know-how and technology development. Examples of this are the movable Heijmans ONE home, sensor-based maintenance and management of buildings, the bicycle safety system BikeScout and the development and application of various asphalt innovations, such as a rejuvenation system for asphalt and the smart road joint Brainjoint.
Revenues in the first half of 2016 increased to € 946 million (first half 2015: € 922 million). This increase was largely due to a considerable growth in revenues in Property Development and to a lesser extent in Infra. Revenues at Dutch Residential Building fell slightly, while revenues at Non-Residential declined substantially.
|result after tax||-12||-15||-27|
|x € 1 million||H1 2016||H1 2015||2015|
|underlying operating result||-7||-11||-5|
|correction operating result joint ventures||-5||-4||-9|
|write down on property assets||-1||-1||-12|
|share of profit of joint ventures and associates||4||2||9|
|result before tax||-14||-17||-30|
|income tax result||2||2||3|
|underlying operating result||-7||-11||-5|
|Underlaying operating result x €1 million||H1 2016||H1 2015||2015|
|residential - Netherlands||2||3||5|
|residential - Belgium||0||0||1|
|infra - Netherlands||-15||-15||-26|
|infra - Belgium||4||3||7|
|infra - Germany||3||1||7|
|corporate / other||-7||-5||-8|
The underlying operating result improved in the first half of 2016, compared with the same period of 2015 and amounted to € 7 million negative (first half 2015: € 11 million negative). The results improved at Property Development, Residential Building, Non-Residential and the Belgian and German operations. The result of the Dutch infra activities remained unchanged at € 15 million negative (first half 2015: € 15 million negative). The marked improvement particularly in regional projects and asset management activities was mainly offset by the impact of the Energiefabriek Tilburg project.
The value adjustments of € 1 million are related to a number of smaller property holdings. The net result improved in the first half of 2016 and amounted to € 12 million negative (first half 2015: € 15 million negative). This resulted in earnings per share after tax of € 0.57 negative.
Capital position, net debt and financing
Net debt stood at € 77 million at end-June 2016 (end-June 2015: € 108 million), primarily due to the fact that cash flow from operating activities was better than in the first half of 2015. Solvency remained solid at 25% at end-June 2016.
At the end of the second quarter, Heijmans complied with its financial covenants for its credit facility. The Interest Cover ratio (>3) was 3.6 at 30 June 2016, while the Leverage Ratio (<3) was 2.2 at 30 June 2016. We refer to the addenda for detailed information on the developments related to the financial covenants.
In line with the financing agreements reached in early 2016, a structural improvement of the ratio between net debt and EBITDA will remain a high priority for Heijmans. Via the internal programme ‘Fit for Cash’, Heijmans will continue to devote maximum focus to working capital management and the reduction of capital employed. A return to profitability and the related improvement of the operational cash flow are required to realise a structural improvement of the financing position.
The order book, at € 2.4 billion at end-June 2016, was higher than at year-end 2015 (€ 2.1 billion). The increase in the order book was largely due to the considerable increase in order intake at Non-Residential, thanks to the PPP projects NACH (New Amsterdam Court House) and Hart van Zuid in Rotterdam, and RWZI Utrecht. There was a slight increase in the order book at the Belgian Infra activities and the Germany operations, while the order book at Property Development, Residential Building and the Dutch Infra activities declined.
The majority of the operating activities are performing in line with expectations. Demand in the residential market remains high and Heijmans is in a good position to respond to that demand. In terms of underlying developments, we also see the start of a cautious improvement in the Infra market. The residential market and order book offer potential for the improvement of results in 2016. The completion and financial settlement of a number of loss-making infra projects remains a key priority and this may have negative effects on the result. Heijmans continues to focus on continued improvement of results and margin, giving the highest priority to continuous improvements of its core activities by means of uniform processes and centralised management. The strategic plan for the Dutch infra activities will help us to effect a controlled phasing out of loss-making projects, as well as a tightening and increasing focus at an operational level, leading to a healthy result. We expect this approach to enable us to close the year with a positive underlying operating result.
Heijmans will publish its trading update on 2 November before the opening of the stock exchange.