Half year results 2018
Heijmans continues improvement
15 August 2018, 06:00
- Turnover increased to € 780 million in first half of 2018 (first half 2017: € 646 million).
- Underlying EBITDA improves in first half: € 20 million (first half 2017: € 9 million), strongest growth in the property development and residential building activities;
- Number of homes sold in line with last year: 1,065 homes sold in the first half of 2018 (1,106 homes in the first half of 2017);
- Net profit after tax € 8 million positive (first half of 2017: loss of € 9 million from continued operations, excluding proceeds from sales of foreign activities);
- · Order book increases to € 2.2 billion at end-June 2018 (year-end 2017: € 1.9 billion);
- Net debt further decreased to € 14 million at end-June 2018 (end-June 2017: € 45 million).
Key figures *
|x 1 € million||H1 2018||H1 2017||2017|
|Underlying EBITDA Netherlands **||20||9||30|
|Result after tax||8||20||20|
|Earnings per share (in €)||0,39||0,92||0,91|
|Order book Netherlands||2.203||2.121||1.898|
|Number of FTE Netherlands||4.485||4.501||4.442|
* Unless otherwise noted, the key figures are presented for all operations. In the consolidated home statement (see attached sheets) the results of the continued and discontinued operations are shown separately.
** Underlying EBITDA is the operating result before depreciation including operating result joint ventures, excluding write down on property assets, restructuring costs, book result on safe of subsidiaries and other extraordinary items.
Ton Hillen, Chairman of the Executive Board /CEO Heijmans:
"By continuing the positive start to this year over the past few months, we delivered a solid performance in the first half of 2018. The housing market promises a great deal of potential for Heijmans. Despite increased purchase prices, we managed to improve the margin in our property development and residential building activities. Our non-residential building activities developed in line with our plans and are growing again, including our project business. We are seeing a controlled progression at Infra and we will continue to work on improving predictability. The Arbitration Board for the Building Industry has now rendered a final judgement in the case related to the Wilhelmina lock project in Zaandam. Heijmans booked an additional € 5 million loss on this project, but remains within the previously defined bandwidth. We are now discussing with the client to arrive at well-balanced agreements. In the spring of this year, we renewed our financing agreements with our banks, which resulted in an extension to 1 July 2022 under improved terms."
Developments first half 2018
Property Development is developing positively with a strong position in the housing market, in inner city area development as well as suburban and peripheral areas. Property Development recorded revenues of € 245 million in the first half of 2018, higher than in the first half of 2017 (first half of 2017: € 186 million). Underlying EBITDA increased to € 13 million (first half of 2017: € 8 million). Maintaining a healthy pipeline of new development projects requires a great deal of attention on our part.
The time between decision-making on projects and the actual commencement of work is generally getting longer. In addition to this, we are seeing an increase in the urgency to make new areas in the Netherlands available for the development of homes. Scarcity in a tight procurement market also has an impact and is pushing up costs as well. To address this issue, Heijmans works with preferred suppliers as much as possible and involves them right from the tender and development phase. This approach enables Heijmans to respond to both the scarcity of available resources and increasing purchase prices.
Despite the challenges, Heijmans is confident about the housing market and expects positive developments, providing potential for controlled growth. This is underlined by demographic factors and the persistent strong demand for new homes. The number of homes Heijmans sold in the first half of 2018 was comparable to the same period last year, and amounted to 1,065 homes. A total of 561 (53%) of these homes were sold to private buyers (total home sales in the first half of 2017: 1,106, of which 565 to private buyers). The average purchase price for private buyers, excluding VAT continues to develop positively. Our order book remains at a good level and amounted to € 451 million at end-June (year-end 2017: € 420 million).
In the spring of this year, Heijmans won a contract from the municipality of Utrecht for the development of 48 owner-occupier homes in the Leidsche Rijn Centrum. In June, Heijmans announced that together with project developer De Maese it is to develop Het Parc in Amstelveen, a 2.6-hectare site close to the A9 motorway where weare now working with the municipality on the redevelopment plan for this area. A development consortium in which Heijmans is a partner was recently selected for exclusive follow-up talks on the Feijenoord City area development project. The consortium will be responsible for the development of the surrounding area of the planned new stadium. In the period under review, Heijmans started the sale of homes in a number of projects, including Land van Dico in Uden, Noorderhaven in Zutphen, Spaarndammerhart (‘De Verbinding’) in Amsterdam and Greenville in Leidsche Rijn.
Building & Technology
Building & Technology covers activities in the field of residential building, multi-functional high-rise residential construction, non-residential projects and technical services, which have been managed by a single centralised management team since the start of this year. The joint turnover of Building & Technology amounted to € 349 million in the first half of 2018 (first half of 2017: € 257 million), while the joint underlying EBITDA was € 6 million (first half of 2017: € 1 million).
Dura Vermeer and Heijmans in building consortium for European Medicines Agency new-build projectExplicit role during the Maintain phase
Heijmans’ residential building activities recorded strong growth in both turnover and result, and the operation has a healthy order book. New property developments over the past year are now translating into an increase in the number of residential building projects. Heijmans Huismerk and Heijmans Wenswonen, for which Heijmans works with a number of fixed co-makers and via a standardised operating process, give the company a strong position in a market marked by scarcity. These concept homes make it possible to respond to the need for quality, comfort and affordability, and at the same time safeguard a controlled process from development to delivery. The increase in turnover helped to improve capacity-utilisation and thanks to numerous process improvements in recent years after-care costs remain at a low level.
Production at Residential Building is running at full capacity, with a large number of projects now well underway. These include the residential complex on Bananenstraat in Rotterdam, a residential building project in the Zuidpolder plan area in Eemnes, the construction of luxury homes in the final phase of the Buitenplaats van Ruytenburgh project in Vlaardingen, and the homes in the expansion area Parijsch Zuid in Culemborg. In June, Heijmans and housing corporation Mitros signed a contract for 121 social rental apartments in the sub-plan Terwijde Blok B in the Leidsche Rijn project in Utrecht. The homes will be gas-free and highly energy efficient. In Oostenburgereiland in Amsterdam, Heijmans is set to develop a residential complex for the Stadsgenoot housing corporation, together with an adjacent hotel for the Inntel Hotels group.
With newly acquired projects over the past period, the non-residential building activities are on track to contribute to the total results of the Heijmans group. Turnover increased in the first half of 2018 and also the project business is showing growth. The Technical Services business (maintenance and management) recorded healthy turnover growth and generated a solid return. The non-residential order book is also developing as planned. In the spring of this year, construction started on the new-build project for the European Medicines Agency (EMA) in Amsterdam’s Zuidas business district and the realisation of this project is now at full speed. In June of this year, Heijmans, as a partner in a consortium, signed a contract with Japanese company SEKISUI S-Lec for the expansion of the company’s production facility in Roermond, which produces polymers for laminated glass. Heijmans is responsible for all electro-technical, installation and structural building activities in this project.
At Infra, Heijmans’ focus remains on improving predictability in projects and achieving a healthy balance between large-scale projects and regional projects, asset management and specialist activities. Turnover amounted to € 312 million in the first half of 2018 (first half 2017: € 301 million), the underlying EBITDA € 6 million (first half 2017: € 1 million). The outcome of the arbitration proceedings related to the Wilhelmina lock project in Zaandam had a significant impact on this result. The Dutch Arbitration Board for the Building Industry ruled in its final judgement that Heijmans is entitled to additional compensation of € 8 million from the province of Noord Holland for the execution of a more expensive design for the locks. The compensation is much lower than the original sum Heijmans claimed. As a result of this, Heijmans has recognised an additional loss of € 5 million on this project. This provision is within the previously defined bandwidth (see annual report 2017, section 6.29). Heijmans and its client are currently working out definitive agreements in more detail and Heijmans will be able to resume execution once we have finalised these agreements.
At the end of June, Heijmans received the definitive contract for phase 1 of the expansion of the Apeldoorn – Azelo section of the A1 motorway. Earlier in the spring, the Province of Friesland awarded Heijmans the contract for the additional doubling of the N381 road between the towns of Donkerbroek and Oosterwolde. In the project on the A9 motorway, we reached a key milestone by obtaining the availability certificate for the Gaasperdammer tunnel to the Dutch Ministry of Public Works and Water Management (Rijkswaterstaat) on schedule. We are making solid progress on the N23 road project and this is moving towards its scheduled delivery at the end of 2018. At the end of June, His Royal Highness King Willem-Alexander and Her Royal Highness Queen Máxima visited this project. Work on the A1-A27 road project is progressing as planned.
Revenue amounted to € 780 million in the first half of 2018, higher than last year (first half 2017: € 646 million). Turnover increased in all segments, with growth most marked in the housing market which benefited both the property development and residential building activities.
|x 1 € million||H1 2018||H1 2017||2017|
Building & Technology
|Underlying EBITDA Netherlands||20||9||30|
|Correction operating result joint ventures
Write down on property assets
|Operating result Netherlands||13||7||14|
|Operating result discontinued operations incl. bookresult||-||31||31|
Share of profit of associates and joint ventures
|Result before tax
|Result after tax||8||20||20|
Underlying EBITDA continued to improve in the first half of 2018 and increased to € 20 million (first half 2017: € 9 million). Property Development (underlying EBITDA € 13 million) and Building & Technology (underlying EBITDA € 6 million) made the largest contribution to this growth.
Net profit amounted to € 8 million in the first half of 2018, an improvement compared to the same period last year (first half 2017: a loss of € 9 million from continued operations, excluding the proceeds from the sale of foreign operations).
This translates into earnings per share after taxes of € 0.39.
Capital position, net debt and financing
At the end of June 2018, net debt stood at € 14 million (end-June 2017: € 45 million). Heijmans continues to focus on strict working capital management and cash management, as a foundation for healthy operations and continued debt reduction. As a whole, pre-financing is sound. Solvency amounted to 24% at end-June 2018. Heijmans aims to further de-risk the company, with the focus on a selective acquisition policy, project control focused on increasing the predictability of projects and the controlled completion of previously acquired high-risk projects. The reinsurance of the pension claims of Stichting Pensioenfonds Heijmans N.V. with Zwitserleven has also contributed to a further de-risking of the company. In addition to reducing risks, this offers Heijmans and the 2,200 participants in the pension fund the certainty of a future-proof and affordable pension scheme. The reinsurance of these claims had a negative impact on Heijmans’ equity and a negative impact of approximately 2%-point on the company’s solvency. This was taken into account in the determination of the new financing covenants.
The implementation of IFRS 15 ‘Revenues from contracts with clients’ resulted in a 2%-point drop in solvency, due to an increase in the balance sheet totals. The implementation of IFRS 15 had only a very limited further impact on the financial results, as did the implementation of IFRS 9 ‘Financial Instruments’. The changes in IFRS standards have no impact on the calculation of the covenant ratios. See section 8.3.1 of the addenda to this press release for a detailed explanation of IFRS 15 and IFRS 9.
Heijmans to construct two new-build projects on Oostenburg Island in AmsterdamEstimated value of € 35 million
Based on the progress made in the recovery of our profitability and debt reduction, in the spring of this year Heijmans was able to renew the financing agreements closed in February 2017 to arrive at long-term financing. In May of this year, Heijmans and its banking syndicate, comprising ABN Amro, ING, KBC and Rabobank, reached agreement on an extension of its financing facility through to 1 July 2022 with improved terms. At Heijmans’ request, the total commitment was reduced by € 12 million to € 144 million and will be reduced to € 121 million in the period through to 30 June 2019. This is related to KBC’s full exit from the syndicate. In effect, the reduction of € 12 million means that KBC’s first two repayment instalments, which were originally planned for the second half of 2018, have been repaid earlier. There were no changes to the security package. The interest rate margin has been improved and a number of performance-related agreements have been made that could result in further phased improvements in this margin.eijmans’
The Interest Cover Ratio (>4) and Leverage Ratio (<3) remain unchanged. Heijmans met these amply in mid-2018. The Average Leverage Ratio has been adjusted downward to a maximum of 1.5 from the previous 2.5 through Q1 2019 and a maximum of 1.0 in the subsequent quarters. At end-Q2, the Average Leverage Ratio stood at 0.3.
A new addition to the agreements is the Solvency Ratio, under which the Guaranteed capital must be at least 20% of the balance sheet total in 2018 and 2019, and at least 22.5% in the subsequent years. This ratio is only assessed at year-end.
The order book amounted to a healthy level of € 2.2 billion at end-June 2018 (end 2017: € 1.9 billion). The order book increased across the board, especially at Infra and Building & Technology. The largest contribution to the order book came from the A1 Apeldoorn – Azelo and N280 Roermond projects at Infra, and the non-residential building projects EMA and Laan op Zuid in Rotterdam.
Heijmans is well on track to record a solid performance for the full-year 2018, with every business unit contributing to a positive result and a further improvement in the net debt position. Heijmans expects growth in almost all segments. The biggest challenge at Property Development will be filling its pipeline. Building & Technology is growing and is focused on achieving a healthy balance between taking advantage of market potential and safeguarding controlled growth, returns and the quality of the organisation. At Infra, the focus is on continued improvement of predictability, risk management and a healthy balance in the projects, with the aim of achieving stable growth.
On 31 October of this year, Heijmans will publish a trading update before the opening of the stock exchange.