- Underlying EBITDA all business areas within strategic bandwidth
- Net result € 30 million (vs. € 10 million H1 2021)
- Order book rises to € 2.2 billion
- Cash position continues to develop positively
- Acquisition of Dynniq Energy completed end-June
- Heijmans reiterates outlook for full-year 2022
Ton Hillen, Heijmans CEO:
“Heijmans delivered a solid performance in the first six months of this year. We are fundamentally in good shape, especially in the current market situation. All our business areas delivered healthy performances in the first half of 2022. As a result, our revenue and profit development remains in line with the outlook we issued for the full year. At a time when we are aware of the challenging macroeconomic conditions, this is a compliment to our organisation. We continue to focus on the ratio of risk appetite to earning capacity. We have a well-filled order book. We continue to focus on margin rather than volume, and with that in mind, we can also note that the order book remains at a satisfactory level in terms of quantity. The fact that almost 30% of our turnover is recurring and not project-based increases predictability and helps us to reduce our risk profile.
Heijmans sets great store in being a good employer, being engaged and having a reputation as a social and human company. This is why, in times of sharply increased energy prices and inflation, our employees up to middle-management level received a one-off compensation payment in June. We also adjusted our work related travel allowance. We are careful with our people and want to offer an attractive working environment. It is important for our people that there is already clarity in the sector about the new collective labour agreement, which will take effect on 1 January 2023. The pressure on the labour market is clearly increasing, but in that context Heijmans is managing well and staff turnover is at a manageable level. We are seen as an attractive employer with attention for a healthy living environment and we are working with a great deal of conviction to be the most attractive employer in the construction and infrastructure sectors.”
Looking back in terms of safety in the first six months of this year, we are not satisfied. Especially since we were shocked in early March by a fatal accident involving the employee of a subcontractor on an Infra project on the N3 road near Dordrecht. Our thoughts are still with the family. We were again confronted with the danger in our sector and the non-negotiable need to focus on safety.
Safety remains a priority: we work safely or we don't work at all. With additional efforts within our organisation, supported by our Quality & Safety department, we will put even more emphasis on this in the second half of 2022. The greatest challenge to achieving the goals we have set is to increase proactive safety awareness and safe behaviour.
Acquisition of Dynniq Energy
In mid-May, Heijmans announced the acquisition of Dynniq Energy, subject to the suspensive condition that the ACM would grant approval based on a merger decision. Dynniq Energy is a specialist in the design, construction and improvement of high, medium and low-voltage power stations for network operators and household power connections. The approval was granted on 16 June and Heijmans completed the acquisition process on 23 June. This acquisition strengthens Heijmans’ position as an integrated player in the market for the construction and maintenance of energy infrastructure. The acquisition has been consolidated in the H1 2022 balance sheet. See section of 6.5 of the selected notes for more detailed information.
Energy infrastructure is one of Heijmans Infra’s strategic growth pillars. The Netherlands is facing a major energy transition and this is leading to accelerated demand for the reinforcement of electricity networks and the construction of heat networks. In addition to energy transport, we are seeing increased demand from inner-city areas for reinforcement, capacity in network expansion and the availability of energy. Heijmans is already active on a multidisciplinary basis in the field of electricity transport and distribution and the acquisition of Dynniq Energy puts us in an even stronger position in this sector.
As reported in previous press releases, we have lodged an appeal in the Wintrack II case and the provision of € 34 million taken in H1 2021 as a precautionary measure has now largely been released (€ 19 million). A provision of € 15 million remains. We provide additional information on this subject in section 6.4 of the selected notes.
Accelerated electrification of passengers cars
As creators of a healthy living environment, Heijmans has expressed its ambition to be CO2 neutral as of 2023. We will achieve this in four ways: our mobility, our equipment, our building sites and our offices. We are taking another step in the right direction with our own mobility. As of 1 January 2023, employees will only be able to choose a lease contract for an electric car. We will shorten current lease contracts for fossil fuel-driven cars. Our goal is to have an emission-free lease car fleet by the end of 2025.
We reiterate our previous outlook for 2022. We expect to be able to continue the performance seen in H1 for the rest of this year. We expect revenue to increase slightly. We expect to see growth in Property development and Building & Technology, but Infra revenue is set to decline due to the lower level of large infrastructure projects. In addition, we expect our underlying EBITDA to come in at a similar level to last year, without the € 19 million release from the Wintrack II provision.
The long-term outlook for our sector remains positive, given the significant investments required to resolve the housing shortage, offer protection against rising sea levels and changing climate conditions, and to shape the energy transition. For the housing market, accelerating production is only possible if a complex of factors can be turned around, such as the nitrogen issue, the addition of planning capacity, the acceleration of spatial planning and the retention of manpower in the construction industry.
In the short term, geopolitical and macro-economic conditions - including the availability of equipment and labour and rising raw material prices - are a challenge for the entire sector. To navigate this safely, we are on the ball, so to speak, and we are an agile organisation that can steer hands-on where necessary. Thanks to our well-distributed and well-filled order book, Heijmans is in a good position for 2022, even in a more volatile market.
The extra effort and agility of our people gives us confidence in the future, on the way to Heijmans' 100th anniversary in the spring of 2023.
Developments per segment
Property development recorded continued growth in both revenue and margin. Results in the second half of the year will depend on the issuance of permits for several larger projects.
Heijmans sold 1,031 homes in H1 2022 (compared with 1,209 in H1 2021), with a sharp increase in the number of B2B sales (598 in 2022 compared with 339 in 2021), but a decline in B2C sales (433 in 2022 compared with 870 in 2021), as few projects went on sale in H1 of this year. In addition to its role as an integrated area developer in residential districts such as The Hague Southwest, the Overvecht neighbourhood in Utrecht and the Van Deyssel neighbourhood in Amsterdam, Heijmans also invests in land holdings for its own land bank to ensure that its portfolio remains at a healthy level in the future.
In Rotterdam, Heijmans achieved a new milestone in the Hart van Zuid project, with the expansion of the Zuidplein shopping centre and the completely renovated bus terminal. Also in Rotterdam, the Havenkwartier residential complex on the southern quay on Katendrecht is taking shape, with completion planned for in 2023. In Almere, in July Heijmans started the total area development of New Brooklyn, where almost 170 homes will be built in the period to Q2 2024. In June, the Spaarndammerhart project in Amsterdam won the Amsterdamse Nieuwbouwprijs 2022 (the public prize for new buildings in the city), after previously winning the Abe Bonnema Architecture Prize.
The Park Vijfsluizen new-build project in Vlaardingen has entered the next phase. Heijmans is developing a sustainable, low-traffic residential area with approximately 400 sustainable and future-proof houses and apartments in a green setting at the site of the former Shell sports park. Heijmans has signed a partnership agreement with the Eindhoven housing corporation Woonbedrijf to build around 450 sustainable and affordable homes per year for the next 10 years, together with two consortium partners.
Given the need for new homes, decisiveness and direction from central government remain crucial. In that context, it is incomprehensible that the residential zoning on part of the Zuidplaspolder is considered to be reversed, and we will continue to discuss this with both the municipal and the provincial authorities. For the time being, however, this has led to a downward revaluation of the land.
Building & Technology
Following a decline in revenue last year, we noted a strong recovery at Building & Technology in the first half of this year, with a rise of more than 10% in revenue. Due to the continuing demand for homes, the figures for Residential Building remain at a good level, despite the pressure on the procurement market in terms of both availability and pricing. Heijmans Services also continues to perform at a good level.
The new-build plan of the Eindhoven-based housing corporation Woonbedrijf to build 735 student homes on the TU/e campus has entered the next phase. As the environmental permit has been granted, we can now move on to the next step: the start of the construction works in 2022. The planned completion date is the summer of 2024.
Other milestones included the reopening of Het Loo Palace to the public - following extensive renovation - and our activities as part of the maintenance house of chip machine manufacturer ASML. In Heerenveen, we worked towards the official handover of the IIBO timber frame manufacturing facility to Heijmans in early July, which completed the acquisition.
In Rotterdam, we renovated the former tax offices at Laan op Zuid 45 (surface area: 54,000 m2 over 16 floors), which already complies with the new standard stipulating that all office buildings must have energy label C or better as of 1 January 2023. Currently, more than 40% of offices meet this standard, which means that there is still an enormous amount of work to be done to improve the sustainability of existing office stock.
Beyond Eyes, a joint initiative of Heijmans and cleaning company CSU, has now gained ISO 27001 certification, which proves that it complies with the strict global requirements for data protection. The data-driven system is used to measure occupancy and for sensor-based cleaning in office buildings to improve the working and living environment.
After the exceptional year 2021, in line with expectations the Infra sector area delivered a performance in H1 2022 that was more in line with H1 2020.
Some H1 milestones include the solid progress delivered on the Piet Hein tunnel in Amsterdam (planned completion Q4 2022) and the performance contract awarded for the Oosterscheldekering Delta Works in Zeeland (maintenance for the next nine years). The Gorinchem-Waardenburg dyke reinforcement project is on schedule.
In close cooperation with Schiphol Airport, the Aalsmeer runway was renovated and provided with a new layer of asphalt with Heijmans’ Flightflex® and the runway lighting was completely renewed, all in a period of just 13 weeks.
The Ministry of Public Works and Waterways has awarded Heijmans the definitive contract for the widening of the A1 motorway betweenApeldoorn and Twello. Work on the road will start in Q4 2022 and the opening of the road is scheduled for Q2 2025. For Heijmans, this project has a value of around € 150 million.
In June, the government made it clear that priority will be given to improving and maintaining the existing infrastructure. The infrastructure minister wrote to the House of Representatives stating that there are not enough experts to carry out the mandatory nitrogen calculations and it will therefore be necessary for the authorities to choose which new infrastructure projects take priority and which will have to wait. Keeping the state of our roads and our infrastructure up to standard will require extra financial budgets. This means that work is increasingly shifting from new road construction to replacement and renovation.
Revenue came in at € 864 million in H1 2022, compared with € 881 million in the same period last year. As already anticipated at the start of the year, we saw a substantial decline at Infra, as the volume of large projects declined. This was due to a combination of a relatively high project volume in the first half of last year and a decline in market volume, as the construction of larger new infrastructure projects in particular was hampered by the progress in the nitrogen dossier. Building & Technology recorded an increase in revenue, which was driven by a higher level in this sector area’s residential building activities. The non-residential building and property development activities operated at a comparable to slightly higher level than last year.
Underlying EBITDA increased to € 67 million in H1, compared with € 35 million in H1 2021. Building & Technology and Property development operated at a comparable to slightly higher level than last year. It should be noted that at Infra, Heijmans set aside a provision of € 34 million in H1 2021 for the Wintrack II project, while €19 million of this provision was released in H1 2022 following the ruling of the Arbitration Board in April. However, with a 4.9% EBITDA margin (excluding Wintrack II), Infra continues to perform at a healthy level, within the targeted bandwidth of 4-6%. Property development and Building & Technology also operated within their target bandwidths in H1 2022. Property development came in at 7.1% (bandwidth 6-8%) and Building & Technology ended at 4.0% (range 4-6%).
Heijmans’ net result rose to € 30 million in H1 2022, from € 10 million in H1 2021. This difference was also largely due to the impact of the Wintrack II provision. Extraordinary expenses were € 2 million higher than last year due to the write-down of a land holding in the GOM Zuidplaspolder area development (€ 4.0 million). The effective tax rate was 23%, which was higher than in previous years. For a more detailed explanation of Heijmans’ tax position, see section 6.6 of the selected notes.
On balance, Heijmans' order book increased by € 173 million in H1, with increases in all sectors. The total order book continued to increase in 2022 to stand at the healthy level of €2.2 billion at the end of H1. The recent acquisition of Dynniq Energy added € 15 million to the order book.