Half year results 2020
Strong performance despite market challenges
21 August 2020, 07:16
- Revenue and underlying EBITDA more than 10% higher than last year
- Order book remains healthy at € 2.0 billion
- Strong cash position, credit facility unused
- Home sales comparable with 2019
- Impact Covid-19 effectively absorbed in H1, uncertain impact in the medium term
- Expected revenue, underlying EBITDA in 2020 at least equal to 2019
Ton Hillen, Chairman of the Executive Board/CEO Heijmans:
“Over the past few years, Heijmans has made a number of changes and made some critical choices, thanks to which the company is now in good shape. Our efforts and our change of course are now paying off. Thanks to the efforts of all our employees on our project sites or working from home, we have managed to deliver a solid performance in the first half of 2020. Revenues were higher than in the same period last year, while underlying EBITDA has also improved. Of course, the Covid-19 outbreak has affected us too, in particular because it has been more difficult to obtain materials and labour from outside the Netherlands. This has been particularly evident in the finishing phase of non-residential projects. However, no projects came to a halt, and one way or another we also managed to arrange the availability of people and materials. Nevertheless, the impact of the virus on our business operations remains uncertain. Our medium-term prospects will depend on the speed of economic recovery. Despite all the market challenges, we have a well-filled order book and I am confident about the future.”
Developments first half of 2020
The results for the first half of 2020 were better than in the first half of 2019. Revenue and profit were both higher. The number of homes sold through 30 June 2020 stood at 1,075 (2019: 1,061), with 610 of these sold to private buyers (compared to 564 last year).
In the first half of 2020, Heijmans was selected for a number of new projects, including De Leeuwenkuil (226 homes) in Rotterdam. In Eindhoven, Heijmans was designated as a partner in the Humperdincklaan area development (around 500 homes). We also saw the launch of the first phase of the Rotterdam Nieuw Kralingen (80 homes) project. And we saw the next step in the ambitions of The Hague to restructure and renew the Zuidwest district (Dreven Gaarden Zichten), for which Heijmans has closed a long-term contract with The Hague municipality and housing corporation Staedion.
Our work is much appreciated. We won the Amsterdam new-build award – a public award – for the Eerste Oosterparkstraat project. This project involved 16 new buildings, carefully integrated into the historical environment. Fenix I in Rotterdam was nominated for both the Golden Pyramid 2020 and the National Steel award 2020 (Residential building category). In Eindhoven, the De Zwerm project was also nominated for the National Steel award (in the category Characteristic steel building components).
Building & Technology
The picture at Building & Technology was mixed. Residential Building recorded a strong first half and the Services arm delivered an outstanding performance. At the same time, Non-residential projects suffered the greatest impact from the Covid-19 outbreak and subsequent restrictions. For example, the delivery of the New Amsterdam Court House project was delayed, partly due to the temporary loss of foreign employees, delayed deliveries and logistic measures. We have included the extra costs incurred in our results.
The delivery of the Zuidplein Theatre in Hart van Zuid was another outstanding milestone for Heijmans in the development of a new, multi-facetted urban centre in Rotterdam Zuid. We had already delivered the Rotterdam swimming centre at an earlier stage. In Harlingen, we realised 70 apartments in the Dukdalf project. In The Hague, we won the contract for part of the renovation of the Binnenhof parliament buildings. This involves the buildings of the Senate and the Council of State.
This spring, we installed the new temporary connection between the B and C piers at Amsterdam Schiphol Airport. The so-called B/C link is 250 metres long and comprises eight modules with an average weight of 250 tonnes each. These bridge components were put in place at the airport with minimal disruption.
Heijmans’ BeSense system is a smart sensor system for more efficient building management. Making occupancy information available proved to have additional value in recent months. BeSense not only contributes to efficiency, but also to health and safety. For instance, as part of a ‘safe return to work’ initiative, in the space of 10 days we fitted 510 sensors at the Venlo municipality’s city offices. An online dashboard enables the local authority to monitor workplace occupancy, and use that valuable information as input for the introduction of precautionary measures against Covid-19.
Infra delivered a strong performance. The order book is also well stocked again, after we reported the termination of the Zuidasdok contract in the past quarter. This contract has been settled in full with the Dutch Ministry of Public Works and Waterways (Rijkswaterstaat). The additions to the order book are mainly short cyclical works with a lower risk profile.The completion of a number of projects made a positive contribution to the results. However, there is uncertainty and cause for some concern in the longer term, as a result of the government policy in the field of nitrogen emissions. The government's concession on nitrogen emissions announced in July 2020 is a first step for the short term.
In the first weekend of July, the Minister of Public Works and Waterways, Cora van Nieuwenhuizen, officially opened the first two tunnel tubes of the Gaasperdammertunnel. Heijmans was part of the construction combination IXAS on this project, which was focused on technology and safety. In Zaandam, Heijmans renewed the complex Beatrix bridge and Wilhelmina locks. The Heijmans/Siemens Mobility combination will renovate the Piet Hein tunnel in Amsterdam starting in late 2020. The Dutch Ministry of Public Works and Waterways awarded Heijmans the contract for large-scale maintenance on the A79 motorway between Maastricht and Heerlen. We will be future-proofing this road, which is particularly important for tourism and regional traffic, making it safer, better and more sustainable.
In Utrecht, Heijmans won the performance contract for the South district of the Central region of the Netherlands. This means we are responsible for the day-to-day maintenance on roads, green areas, public lighting and keeping service areas clean. Heijmans is also set to carry out large-scale maintenance on the A6 motorway between Lelystad Noord and the Ketel bridge.
Our mission – building a healthy living environment – remains our guiding principle when making choices. Based on the strategy to deliver better, smarter and more sustainable work, we continue to focus on the long term. For Schiphol, in addition to delivering parking spaces for six thousand cars, we also provided a climate-adaptive innovation. The material used makes it possible to store water underground to prevent any disruptions above ground. In addition, Heijmans was the founding father of the Emission-free Infrastructure Network, with the aim of speeding up emission-free operations. Climate-adaptive construction should result in less flooding, less heat stress, reduce the adverse effects of prolonged drought and subsidence, and increase biodiversity.
Inner-city area development remains a spearhead of our strategy, as do partnerships with our clients. We teamed up with the municipality of Vlaardingen to develop an urban development plan for Vijfsluizen in Vlaardingen, geared towards building for the future: sustainable, circular and nature-inclusive. The design for the neighbourhood is inspired by the landscape itself: so rather than houses with greenery around them, it is the other way around. Care for the environment and climate plays a major role in this approach.
Ivana SomersA new chance for Vijfsluizen
The tender process for the renewal of the A6 was also special in several respects. Award criteria included both circularity and sustainability. Our solution for the smart phasing of the work also played a role in winning the contract. For the first time, the Dutch Ministry of Public Works and Waterways used the 'competitive dialogue light', a tendering method in which partnership is central.
In Amersfoort Vathorst, we are building innovative XS homes from rock wool and wood, with the maximum focus on sustainability, circularity and a healthy indoor climate. In addition to being highly efficient, these starter homes - built in the form of an old factory - also boast a special architectural look and feel. These XS homes, which Heijmans developed in-house, are part of Heijmans’ living concept and are also being built in the Parijsch project in Culemborg.
Revenue came in at €839 million in the first half of 2020, an increase of 15% compared to last year (first half 2019: € 730 million). All sectors saw a rise in revenue. Building & Technology recorded the strongest increase, with both the residential building activities and the non-residential activities increasing in volume by some 20%.
Although the impact of Covid-19 was present, we did not see any projects come to a halt. In some instances, we were even able to utilise additional opportunities as clients wanted to accelerate the execution of activities. This included the construction of infrastructure for electric driving and renovations of business premises that saw substantially reduced occupancy as a result of Covid-19. The 15% increase in revenue compared to last year was largely due to timing effects. The very mild winter also had a positive impact. For the full year 2020, Heijmans is aiming for revenue that is at least the same level as last year.
The underlying EBITDA improved in the first half of 2020 when compared with the first half of 2019 and came in at € 41 million (first half of 2019: € 36 million). In the Property Development and Residential Building activities, this was largely the result of increased volumes. Infra had a very good first half of the year. We have increased our ability to get in control of projects in recent years. In the six months under review, this resulted in a number of positive adjustments on projects that have been completed, and we have been able to release risk reservations.
The impact of Covid-19 on costs was largely manageable. We felt the impact of this most clearly in the larger non-residential projects that in relative terms involve more foreign work teams and deliveries.
The net result for the first half of 2020 remained unchanged compared with the previous year. This resulted in earnings per share after taxes of € 0.71. The main differences compared with last year were the improved underlying EBITDA and higher taxes. Although Heijmans still has unrecognised tax loss carry-forwards, out of prudence we recognised almost the entire tax burden on the pre-tax profit in H1. Financial expenses were also slightly lower than last year, as the syndicated loan remained unused in H1.
Equity position, net debt and financing
Net debt stood at € 43 million at end-June 2020 (end-June 2019: € 99 million). In addition to the healthy operating results, we also saw a strong working capital improvement, primarily as a result of effective receivables collection and strong pre-financing in projects. Average debt utilisation continued to decline, resulting in lower financing costs. The syndicated loan remained unused in its entirety and the cumulative preference shares declined slightly.
At end-June 2020, solvency stood at 26.9%, compared with the comparative figure for last year of 24.7%. The increase in solvency was mainly due to the addition of the net profit to the reserves. We have gradually strengthened our balance sheet in recent years to a robust level, which puts Heijmans in a good position to withstand the current uncertain market conditions. The syndicated loan of € 121 million was originally scheduled to expire on 30 June 2022. In consultation with our banking syndicate, this facility has been extended by one year until 30 June 2023 on the same terms.
As a result, Heijmans has further strengthened its financing relationships and becomes less sensitive to any fluctuations on the capital markets in the light of the current economic conditions.
At €2.0 billion at the end of June 2020, our order book remains at a healthy level and comparable to year-end 2019. There is a good spread across the sectors and a solid foundation for the remainder of 2020 and 2021. Because Heijmans has focused less on extremely large projects in recent years due to its selective tendering policy, the composition of the order book has become slightly more short-cyclical. Clients’ spending patterns will be particularly relevant to the development of the order book after 2020.
Based on a well distributed order book and strong progress in our projects, we look back on a good first half of 2020 and look forward to the full year with confidence. We expect performance (revenue, underlying EBITDA and net debt) to be at least at the same level as last year. All business units have solid foundations and the outlook for the second half of 2020 is good.
It should be noted that the situation regarding Covid-19 and possible nitrogen measures are currently difficult to predict. As a result, there is some lack of clarity for the medium term, particularly with regard to the housing sales climate and clients’ spending patterns in the infrastructure sector. However, we are an agile organisation with a solid foundation in the sub-markets in which we operate. We are continuing to build on the solid foundations of recent years. Should market conditions give us cause to do so, we will act proactively.
On 5 November of this year, Heijmans will publish a trading update before the opening of the stock exchange.