Half year results 2019

Further improvement result

21 August 2019, 07:16

Highlights:

  • Underlying EBITDA (excl. IFRS 16) improves in first half: € 25 million (first-half 2018: € 20 million), with all business units making a positive contribution;
  • Revenue lower in first half: € 730 million (first half 2018: € 780 million);
  • Number of homes sold comparable with last year: 1,061 homes sold in first half of 2019 (1,065 homes sold in the first half of 2018);
  • Net result after taxes € 15 million (first half of 2018: € 8 million);
  • Order book increases to € 2.1 billion at end-June (year-end 2018: € 2.0 billion);
  • Net debt (excl. IFRS 16) € 23 million at end-June 2019 (end-June 2018: € 14 million).
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Ton Hillen, Chairman of the Executive Board/CEO Heijmans:

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"We continued the positive start we made in the early part of the year. There is generally enough work in all the markets in which we are active, but making the right decisions in terms of order intake remains crucial. Despite the lower revenues, caused by the delayed construction start of several inner city property development projects, we managed to further improve our result. This was partly thanks to our selective intake policy. The underlying EBITDA, excluding IFRS 16, increased by 25% to € 25 million and the net margin doubled to 2%. In addition to the improvement of our underlying EBITDA, this was due to the fact that over the past few years we have managed to significantly reduce our financing expenses. We are on the right path to once again making Heijmans a robust company. On the basis of our balanced mix of activities, which are developing in line with expectations, we are looking forward to the second half of this year with confidence."

Developments first half of 2019

Property Development

Property Development recorded revenues of € 206 million in the first half of 2019, which were lower than in the first half of 2018 (first half 2018: € 245 million). The underlying EBITDA came in at € 11 million (first half 2018: € 13 million), while the margin as a percentage of revenue remained stable at 5.3%. The pipeline of new projects is well-filled and the order book remained at a healthy level of € 451 million at end-June (year-end 2018: € 435 million). The decline in revenue is largely due to longer throughput times at a number of mainly inner city projects, which means construction starts later and revenues from these projects are recorded at a later date.

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Heijmans sold 1,061 homes in the first half of 2019, which is comparable to the number of homes sold in the year-earlier period (first half of 2018: 1,065 homes). A total of 564 of these homes (53%) were sold to private buyers (in the first half of 2018, this figure was 561 homes), while 497 (47%) were sold to investors and housing corporations. The housing sales prices continued to increase in the first half, due to the pressure on availability, which put further pressure on the affordability of homes for private buyers.

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Heijmans closed a cooperation agreement for the redevelopment and repurposing of listed site Hooge Riet in Ermelo.

In the spring of this year, Heijmans announced the start of the Porseleinhaven project in Loosdrecht. The transformation of Fenixloodsen I in Rotterdam is approaching completion and all commercial spaces have now been filled. The municipality of Rotterdam has awarded Heijmans the contract for the new-build Parkbuurt project at the Oedevlietsepark, where Heijmans will build a wide range of different types of homes (a total of 137). Rotterdam, Feyenoord Stadium and Stichting Gebiedsontwikkeling aan de Maas (of which Heijmans is one of the partners) also signed an agreement on the Feyenoord City area development project. Heijmans closed a cooperation agreement for the redevelopment and repurposing of listed site Hooge Riet in Ermelo. The listed building will be converted to include a range of attractive apartments, while various types of homes are planned for across the park.

Building & Technology

Building & Technology delivered a solid performance in the first half of this year, as revenues increased to € 390 million (first half of 2018: € 349 million) and underlying EBITDA increased to € 11 million (first half of 2018: € 6 million).

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Heijmans’ residential building activities recorded an increase in both revenues and result. The order book was also well-filled at € 493 million (year-end 2018: € 508 million). With its Heijmans Huismerk and Heijmans Wenswonen formulas, Heijmans enables its clients to respond to the need for a combination of quality, comfort and affordability. Heijmans recently added a new type of home to its portfolio, primarily in response to the growing demand of one-person and two-person households. These are homes with a bay size of 3.60 or 3.90 metres. These homes will be built at projects in Culemborg (14) and Pijnacker (37). Heijmans recently made a start on the realisation of the Land van Dico project in Uden and the Greenville project in Leidsche Rijn in Utrecht.

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The new-build project for the headquarters of the European Medicines Agency (EMA) in Amsterdam’s Zuidas business district is progressing well.

Heijmans’ non-residential building activities are on track and recorded an increase in both revenues and result. The technical services (maintenance and management) delivered a solid performance, with growth and healthy margins. The order book (of non-residential building activities) stood at the healthy level of € 731 million at end-June 2019 (year-end 2018: € 694 million). The New Amsterdam Court House project is making progress. The new-build project for the headquarters of the European Medicines Agency (EMA) in Amsterdam’s Zuidas business district is progressing well. Heijmans has won a contract from the Hanzehogeschool in Groningen for the maintenance of all the educational institute’s buildings. And over the past few months, Heijmans has been working on building the project organisation and the start-up of the work for the Schiphol main contract – Terminals 1 and 2 plus piers.

Infra

Heijmans’ selective acquisition policy is paying off in the form of improved margins and a better balance between large projects and regional projects, asset management and specialised activities. Revenue came in at € 297 million in the first half of 2019, slightly lower than the year-earlier period (first half of 2018: € 312 million). The underlying EBITDA amounted to € 7 million (first half of 2018: € 6 million).

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In April, Heijmans won the contract from Hoogheemraadschap Hollands Noorderkwartier (HHNK) for the repair and maintenance of (‘polder’) roads and cycle paths in the management area to the north of the North Sea Canal (a total of around 1,400 kilometres). In addition, it was announced that the Dutch Ministry of Public Works and Waterways (Rijkswaterstaat) had awarded Heijmans the contract for variable maintenance of a number of motorways in the eastern section of the province of Noord-Brabant. For the coming four years, Heijmans will be working on the energy grid in the North and Centre districts of Amsterdam for grid operator Liander. Heijmans also won the contract to modernise and maintain Liander’s medium-voltage units in the province of Noord-Holland and parts of Zuid-Holland for the coming 10 years. The consortium for the Zuidasdok project, in which Heijmans is a 15% partner, is currently in discussion with the client regarding the future steps in this project. In Utrecht, Heijmans is putting the final touches to the waste water treatment plant (RWZI) expected to be opened in October of this year. The renovation work on the Koningstunnel in The Hague is also well underway. As a result, it will be opened to traffic shortly.

Strategy

Over the past few months, Heijmans took a number of steps aimed at putting its strategy 2023 – better, smarter, sustainable - into operation. For instance, Heijmans announced that from next year it plans to reduce packaging to the minimum and set additional requirements for any essential packaging. From 2021 onwards, we will only accept 100% recyclable or renewable packaging. This will apply to both construction projects and to our own business operations. Heijmans will also advocate the creation and use of single-material packaging flows, which means that Heijmans will no longer allow packaging in which different materials haven been integrated on the construction sites where it is active. Heijmans will work with suppliers and sub-contractors on this initiative.

Heijmans has signed an agreement with the Jheronimus Academy of Data Science (JADS) aimed at promoting the exchange of knowledge in the field of data science and making the built environment ‘smarter’. Heijmans wants to use this initiative to give a significant boost to digitalisation and data-driven services. Examples of this include the digital monitoring of the locking process and shipping traffic at the Beatrixsluis lock in Nieuwegein and BeSense (a smart sensor system that provides data on occupancy, usage and comfort levels in offices and other working environments). BeSense is developing steadily, and we are seeing a growing client portfolio and expansion into a full-service product for smart and efficient building management. Heijmans’ Bikescout, which uses LED lights to warn drivers of approaching cyclists, has also been installed in front of the Centraal Beheer head office in Apeldoorn. These developments all make a significant contribution to Heijmans’ ambition to create a healthy living environment.

Financial results

Revenue

Revenue came in at € 730 million in the first half of 2019, lower than the level seen in the year-earlier period (first half of 2018: € 780 million). Revenues increased at Building & Technology, while revenues at Property Development and Infra declined slightly. At Property Development, this was largely due to the longer throughput times at a number of projects, mainly inner city projects, which means construction starts later and the expected revenues from these projects are recorded at a later date. At Infra, Heijmans operates on the basis of a selective acquisition policy.

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Underlying EBITDA

The underlying EBITDA continued to improve in the first half of 2019 and came in at € 25 million (first half of 2018: € 20 million). The underlying EBITDA for the first half of 2019, including the application of IFRS16, came in at € 36 million. All Heijmans’ business units made a positive contribution to the company’s underlying EBITDA.

Net result

The net result in the first half of 2019 was better than in the same period last year and came in at € 15 million (first half of 2018: € 8 million). This resulted in earnings per share after taxes of € 0.71. In addition to the improvement in the underlying EBITDA, the reduction of Heijmans’ financing costs played a prominent role in the improvement of the net result.

Capital position, net debt and financing

Net debt stood at € 23 million at end-June 2019 (end-June 2018: € 14 million). The average debt utilisation declined further, which in turn led to a drop in financing expenses. Property developments inventory position remained more or less the same, as a drop in the number of strategic land holdings was more or less offset by a rise in the number of houses under construction. Heijmans remains strongly focused on strict working capital management and cash management, as a basis for healthy business operations and continued debt reduction. Thanks to the efforts to improve operational results and working capital utilisation, Heijmans has managed to significantly reduce the use of its financing facilities in recent years. This has substantially reduced the company’s net interest expenses.

At end-June 2019, solvency stood at 27% (incl. IFRS16: 25%), compared with 25% at year-end 2018. Heijmans remains focused on the continued de-risking of the company, and as part of this effort has installed a selective acquisition policy, project management aimed at increasing the predictability of projects, and the controlled completion of previously acquired high-risk projects.

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Heijmans is awarded with the contract for variable maintenance of a number of motorways in the eastern section of the province of Noord-Brabant.

As a result of the introduction of IFRS 16 ‘Leases’ with effect from 1 January 2019, any assets that are rented or leased (operationally) need to be recognised on the balance sheet, together with a lease obligation of a comparable size. This results in an increase in the net debt (for accounting purposes) and a higher balance sheet total. The latter led to a reduction of around 2% in solvency. Depreciations of the leased assets result in higher depreciations and higher EBITDA (movement within the operating result). In addition, Heijmans now recognises an interest expense on the lease obligation. The consequences of IFRS 16 are not taken into account for the calculation of the financing covenants. See also section 7 ‘Selected notes’ for a more detailed explanation of the impact of IFRS 16.

Order book

The order book is well filled and stood at € 2.1 billion at end-June 2019 (year-end 2018: € 2.0 billion) and includes a good spread of projects. The biggest contribution to the order book came from, among other things, the project for the renovation of high-rise ward sections F and G for the Academic Medical Centre in Amsterdam and the supplementary contract from the Dutch Ministry of Public Works and Waterways for the widening of the Apeldoorn – Azelo section of the A1 motorway.

Outlook

Heijmans is on track to record a good result for 2019. For the full-year 2019, we expect to increase the result on slightly lower revenues while maintaining healthy margins. The long-term outlook for the housing market remains positive and offers opportunities for continued growth. The speed at which supply and demand are being matched in the housing market is currently still too slow, which is driving up prices and puts pressure on affordability. Longer throughput times at a number of property developments mean that Heijmans will record the expected revenue from these projects at a later date. However, Heijmans has a well-filled pipeline. Building & Technology is developing positively and is focusing on controlled growth with healthy margins. At Infra, margin over volume remains a high priority, with the aim of delivering a stable performance at lower revenues, continued improvement of the predictability of projects, risk management and a balanced range of projects. Heijmans expects its net debt position at year-end 2019 to stand around the same level as at year-end 2018.

Trading update

On 30 October of this year, Heijmans will publish a trading update before the opening of the stock exchange.

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