Financial results

Revenue and underlying EBITDA

In a year marked by geopolitical and macro-economic volatility, Heijmans once again managed to improve its results. Revenue increased by almost 4% to €1,812 million from €1,748 million. All business areas recorded volume growth, with the exception of Infra.

Although last year saw some margin pressure across the board due to the price increases for labour, energy and materials, the continued absence of material loss-making projects meant that all business areas ended the year with a healthy profit, in line with our strategic ranges. This was a good performance given the market conditions. The Procurement Department faced fluctuations in purchasing prices and supply problems but still managed to get critical supplies to construction sites on time. Heijmans managed to create the right focus on the tender management and contract management fronts, for example by reaching indexation agreements with clients. Heijmans also decided to be proactive in terms of making Aerius calculations, so the impact of November’s Porthos ruling on the nitrogen policy did not come as a surprise to our operations. Thanks to our ongoing efforts to embed risk management in the business areas and staff departments in recent years, we have become more resilient in the face of external fluctuations. This has made our performance more stable and predictable, which has now been boosted by around 30% recurring business. Heijmans targets underlying EBITDA margins of 4% - 6% for all its production activities and 6% - 8% for its property development activities and managed to meet these target margins in all its business areas in 2022, as it did in 2021.

Underlying EBITDA increased to € 126 million in 2022 from € 106 million in 2021. Once again, all our business areas recorded an increase in underlying EBITDA, although the increase at Infra was driven by the release of € 19 million from a provision taken in 2021 for the Wintrack II project.

Infra

One of the larger projects Infra completed in 2022 was the renovation of the Piet Hein tunnel. This 1,500-metre traffic tunnel in the heart of Amsterdam was reopened in December. Another major project Heijmans won the tender for was the renovation of Nieuwe Meer Intersection, also in Amsterdam. Heijmans is realising this project together with its TriAX consortium partners. The contract value is approximately € 350 million, and Heijmans’ share is one-third of this. Heijmans made a start on the widening of the A1 motorway near Twello in late 2022. The 14-kilometre stretch of motorway between Apeldoorn-Zuid and Twello will be widened, together with a maximum reduction in emissions. Heijmans is one of a total of six preferred suppliers commissioned to execute the expansion and reinforcement of TenneT's high-voltage grid in the Netherlands. The EU-302 Civil Works Cable Connections framework agreement, signed in December, has an initial term of eight years and a total contract value of € 800 million for the combined preferred suppliers.

For the first time ever, the Infra order book exceeded € 1 billion. In line with expectations, volume declined by about 10% to € 661 million from € 738 million, which was primarily due to temporarily lower volume in large integral projects. Volume will recover in 2023, as the work on the Apeldoorn-Twello stretch of the A1 motorway will move into full production and we have already started the Nieuwe Meer intersection project. Underlying EBITDA at Infra rose to € 55 million from € 41 million. While the 2021 results included a provision of € 34 million for the Wintrack II project, 2022 saw a release of € 19 million from this provision. Adjusted for this effect, Infra recorded a decline in underlying EBITDA, partly due to lower revenue in this business area. The EBITDA margin at Infra increased to 8.3% in 2022 from 5.6% in 2021.

Building & Technology

Heijmans started the construction of 735 student houses at the TU Eindhoven campus, after the granting of the environmental permit. In Amsterdam, Heijmans made a start on the delivery of the first residential and commercial units in the Vertical residential tower block project. In December, Heijmans' non-residential projects business celebrated reaching the highest point of the new Science Campus building in Leiden. We expect to complete this significant expansion for Leiden University in the autumn of 2023.

Earlier in the year under review, Heijmans achieved an important milestone with the reopening of Paleis Het Loo, which was opened to the public after a major renovation. Last summer, Heijmans completed its acquisition of the energy-neutral IIBO factory for timber-frame houses in Heerenveen. Acting as the accommodation partner for numerous companies and public sector institutions, the Services business unit realised various technical maintenance and management works. For instance, this work kept the production and office environments of chip machine manufacturer ASML in and around Veldhoven up and running last year.

Building & Technology saw its volume increase to € 933 million from € 789 million, with proportionate increases in both Residential Building and Non-residential revenues. Heijmans started several Residential Building projects. On the Non-residential project front, Heijmans saw the expected recovery in volume following a decline in 2021. As in previous years, the Services division recorded stable growth. Driven by the higher volume, underlying EBITDA at Building & Technology increased to € 38 million from € 34 million. This included start-up costs for the timber-frame construction plant. These amounted to around € 5 million in 2022, excluding the depreciation charge on investments made.

Property Development

Last year, Heijmans sold 76 rental apartments in the De Kuil area development project in Rotterdam to residential investor Vesteda. The vast majority (70 units) of these homes are in the mid-rental segment and are in line with the city of Rotterdam’s action plan governing allocation and maximum rents. Heijmans also sold the accompanying commercial space to Vesteda for this project. We also started the sale of new-build houses and apartments in Rotterdam (Nieuw Kralingen project), Zutphen (Pracht project) and Utrecht (Bellevue project). We also made a start on the Dreven, Gaarden en Zichten project in the south-western section of The Hague. Projects where Horizon homes produced on an industrial-scale were sold included Culemborg (47 free sector rental homes) and Bouwstroom Eindhoven (88 mid-rental segment homes). The Horizon homes are our self-built timber-frame homes.

Property Development saw its revenue increase to € 570 million from € 548 million, driven by solid construction progress on works in progress. Underlying EBITDA rose to € 42 million from € 36 million, which in turn led to an improvement in the margin to 7.4% from 6.6%. However, we noted a turnaround in the housing market from the second half of the year, prompted by rapidly rising mortgage interest rates and the impact of this on consumer confidence. This resulted in lower home sales. Ultimately, Heijmans sold 1,811 homes in 2022, with 671 of these sold to private individuals. The decline compared to 2021 (2,682 homes sold) was particularly visible in the private segment. The business segment, including housing corporations, remained stable with 1,140 homes sold. Based on the most recent NVM (Dutch association of estate agents) figures, it can be concluded that demand and price levels for energy-efficient new-build homes are developing significantly better than those for existing homes, with sharply increased energy costs expected to play a major role.

At holding company level, each year we report a balance that consists of non-recharged costs to the sectors on the one hand and intercompany eliminations to be made on the other. The balance of these costs increased to -/- €9 million in 2022 from -/- €4 million in 2021. This increase includes the higher energy costs of the Heijmans company buildings and one-off additional personnel costs as a result of additional compensation to staff to offset the increased cost of living.

Operating result

The operating result (EBIT) for 2022 came in at € 71 million (2021: € 55 million). All the business areas recorded an increase in EBIT. The operating result was influenced to a limited extent by restructuring costs due to qualitative adjustments to the organisation (€ 3 million) and movements in some real estate and land holdings (on balance a negative € 4 million). Heijmans regularly assesses its real estate and land holdings on the basis of the applicable reporting rules. This resulted in value adjustments of € 4 million, which was due to the write-down on a holding in Zuidplaspolder. This holding was impacted by a new municipal master plan, whereby various land holdings owned by Heijmans as part of a joint venture no longer appear to be earmarked for housing. As a result of this new master plan, the land was written down, as reported on the publication of the results for the first half of 2022.

Depreciation increased to €39 million in 2022, from €34 million in 2021. The higher depreciation relates to increased investments in electrically powered equipment and investments in the new timber-frame factory.

The operating result can be broken down as follows:

Financial income and expense

In 2022, the balance of financial income and expenses was a negative € 4 million (2021: negative € 5 million). Last year saw two significant changes when compared with 2021. Interest expenses were € 2 million lower, as the cumulative preference shares were fully redeemed and cancelled in the course of 2022. This was offset by a one-off financial charge of € 2 million resulting from a write-down on a receivable provided to a development consortium. Other interest expenses and interest income in 2022 were at a similar level to the previous year. Heijmans did not draw on its syndicated loan at all in 2022, as was the case in 2021. This meant that the impact of rising Euribor rates in the second half of the year was almost negligible. Interest expenses consist of project financing, capitalised fees related to refinancing costs and costs for keeping credit available, negative interest rates on cash and the interest expense for lease obligations resulting from the application of IFRS 16 'Leases'. Interest income relates to loans granted and capitalised interest from land holdings.

Result from associates

The (net) result from associates came in at € 7 million in 2022, which was slightly higher than in the previous year, which was partly due to the fact that in 2021 a write-down on the asphalt joint venture AsfaltNu had a negative impact on the result from associates.

Taxes

Pre-tax profit came in at € 74 million in 2022, which was €19 million higher in the previous year. At 18.5%, the tax rate in 2022 was slightly lower than the nominal rate, as Heijmans recognised the remaining €19 million in unrecognised tax losses. The net impact of this was about € 5 million. In 2021, the tax rate was only 8.5%, as that year too Heijmans recognised unrecognised losses based on its increased profitability and the more favourable outlook for the coming years. Because Heijmans recognised all remaining carry-forward losses in 2022, the tax rate in 2023 will be more in line with the nominal rate.

Net profit and proposed dividend

The net profit for the full year 2022 came in at € 60 million, 20% higher than in 2021, when Heijmans recorded a net profit of € 50 million. The increase in net profit was slightly lower than the increase in underlying EBITDA due to a higher level of depreciation and amortisation and a higher tax rate.

Heijmans proposes to make a dividend of €1.01 per share available for the 2022 reporting year in the form of an optional dividend. This dividend proposal is in line with Heijmans' dividend policy, which envisages an annual pay-out ratio of 40% of net profit.

Cash flow

Cash flow development was strong again in 2022. In addition to the company’s strong financial performance, operating cash flow was driven by the strong development of working capital, which improved by a total of € 39 million in 2022. This was despite the fact that a shorter statutory payment period for SMEs came into force last year. Heijmans implemented this statutory regulation in the second half of the year. This had an impact of around € 30 million on Heijmans’ balance sheet. The main positive factor in working capital development was a € 28-million reduction in the inventories/work-in-progress position at Heijmans Property development. This positive impact on working capital was due to the solid progress made in the development of land holdings. Net debt improved by € 60 million in 2022 to a net cash position of € 151 million on balance. As in previous years, cash generation exceeded retained earnings, primarily due to the reduction in the land bank

As a result of the strong operating cash flow and net cash position, Heijmans did not draw on its syndicated loan at all last year, as was the case in the previous two years. However, the financial cash flow was affected by the € 30.7-million redemption of cumulative preference shares. As this financing structure is classified as debt for accounting purposes, this redemption had a neutral impact on net debt. The good operational performance, together with the strong balance sheet ratios and cash position, underpin the dividend proposal at a level of €1.01 per share.

Equity and financing

The condensed balance sheet as at 31 December on the basis of invested capital can be broken down as follows: 

Despite the healthy profitability, solvency based on guaranteed capital fell to 29% from 30%. This was primarily due to two factors. In April and July, Heijmans redeemed and subsequently cancelled the cumulative preference shares - which were part of the guarantee equity - in two phases. At year-end 2021, the outstanding amount was still € 30.7 million, representing over 3% of Heijmans’ solvency. In addition, at year-end 2022 the balance sheet total had increased by approximately € 100 million compared with year-end 2021. This was primarily due to a further increase in the cash position, as well the fact that the level of activity in December was higher than in the previous year, resulting in a higher balance of receivables and payables.

It is clear that the improvement in net interest-bearing liabilities was due to the combination of retained earnings, resulting in the increase in equity, and an improvement in working capital. The various main components of the balance sheet are specified in more detail below.

Capital invested: fixed assets

The composition of the fixed assets can be broadly broken down as follows:

Within fixed assets, property, plant and equipment, which consist primarily of company buildings and land, machinery, plant, major equipment and other fixed assets, increased by € 14 million. In the year under review, investments amounted to € 26 million (2021: € 26 million). In addition to regular replacement and expansion investments in equipment, the primary focus of investments was in the electrification of equipment and the fit-out and automation of the timber-frame factory in Heerenveen. Other fixed assets declined in 2022, which was due to a decline in joint ventures. This was partly because Heijmans bought out a partner in a real estate joint venture, as a result of which the development position was transferred to the inventory position, and partly because of regular progress in the development of a number of Property Development consortium projects. The other non-current assets are primarily related to Heijmans’ participation in joint ventures.

Invested capital: working capital

Working capital stood at -/- € 116 million at year-end 2022 (2021: -/- € 77 million). The change was primarily due to a decline in land holdings. The change in the inventory position is explained in the next section.

Furthermore, it is clearly visible within working capital that both receivables and payables were at significantly higher levels than at year-end 2021. This is mainly a timing effect, as the year-on-year comparison shows higher revenue in December 2022. In recent years, the average receivables term had declined considerably and this effect was no longer visible in 2022. One expected factor in this is the fact that the Euribor rate has not been negative since last summer, meaning clients no longer have a financial incentive to pay more quickly than the agreed payment term. Since 1 July 2022, the mandatory payment term for small and medium-sized enterprises (SMEs) has been shortened to a maximum of 30 days from the previous a maximum of 60 days, with a one-year transition period. After the summer, Heijmans adjusted the payment terms of its relevant supplier base and brought this into line with the new legislation, which resulted in shorter payment terms for roughly half of Heijmans’ supplier base, with a total balance sheet impact of approximately € 30 million. The balance sheet impact of the new regulation is expected to be largely visible in the accounts payable position by the end of 2022.

The working capital impact of Heijmans' construction activities (i.e. the non-real estate related activities) is primarily determined by the speed of invoicing, as well as the speed with which outgoing and incoming invoices are paid. It is possible to ascertain the speed of invoicing from the item 'work in progress', which appears on both the assets and liabilities sides of the balance sheet. If this shows a credit position on balance, this means that projects are pre-financed by clients right across Heijmans. This is something Heijmans explicit strives for in order intake and we managed to maintain a pre-financed position throughout 2022. Total pre-financing increased by € 16 million, mainly due to the start up of new works at Building & Technology. On balance, Heijmans remains pre-financed at an excellent level.

The composition of working capital can be broadly broken down as follows:

Although working capital fluctuates a good deal in any given year, over the past few years Heijmans has managed to make its activities and the concomitant impact on working capital less seasonal. Working capital requirements are largely project-specific and related to clients' payment schedules. The seasonal influences in the construction sector are generally characterised by higher levels of activity in the second and fourth quarters (due in particular to lower production during the winter and summer months), as well as an increased level of notarial transfers and the settlement of extra work prior to balance sheet dates. Higher working capital requirements during the year lead to a higher capital utilisation, which Heijmans will meet, if this proves necessary, by drawing on its Revolving Credit Facility. However, given the size of its current net cash position, Heijmans did not need to draw on this financing facility in 2022.

Inventory position Property Development

In our property development activities, working capital requirements are largely determined by the inventory position, including land under development (homes in preparation and under construction).

This item excludes land holdings held in joint ventures, which are classified under associates pursuant to IFRS 11. Property development’s consolidated inventory position declined by € 12 million to € 159 million in 2022. Property development's total work inventory includes positions in the form of development rights and obligations in addition to positions in ownership and is shown below.

Strategic land holdings declined by € 29 million due to the sale of a large industrial site in Hulst, as well as to regular progress in development projects, which was not fully offset by investments in new holdings. The inventory of homes in preparation and under construction increased by € 17 million, reflecting the throughput from land operations and due to the fact that there some homes under construction that are still unsold. In historical terms, the number of these homes remained low, keeping the risk profile at Property Development relatively low. This 'completed and unsold' inventory amounted to 12 apartments at year-end 2022 (2021: 0).

In addition to ownership positions, Heijmans Property development's work inventory also includes development rights, which qualify as ‘off-balance sheet obligations’. Within this category, unconditional liabilities increased by € 11 million to € 30 million in 2022, while contingent liabilities declined by € 25 million to € 61 million. With regard to the contingent liabilities, Heijmans is rarely required to acquire land until a certain pre-sale percentage has been achieved. In addition to the contingent liabilities and unconditional obligations, Heijmans also has development rights and claims. This position increased to € 140 million in 2022, from € 117 million a year earlier, due to the addition of various positions. These are holdings for which Heijmans has the development rights without having the land holdings on its balance sheet.

Looking at the inventory position, including all off-balance sheet rights and obligations, this remained stable in 2022, both in financial terms and in terms of the number of homes to be developed. It also reveals a partial shift from (mainly suburban) land ownership to (mainly inner-city) development rights and claims.

Heijmans' ambition is to add to its land holdings in the coming years. When it does so, the focus will be on (freehold) houses in suburban areas, which will enable Heijmans make the link between the development of housing programmes and the ambition of its residential building operations to build more conceptually and on an industrialised scale.

Financing: equity

In the year under review, equity increased by € 49 million to € 317 million, from € 268 million in 2021. Besides the addition of the realised net profit of € 60 million to reserves, equity declined by € 10 million in May due to the (gross) payment of dividend in the form of a cash dividend for the 2021 reporting year. The remaining part of the dividend payment, amounting to € 10 million, was paid in the form of a stock dividend via the issue of 792,447 ordinary shares.

The composition of changes in equity can be broadly broken down as follows:

Financing: net interest-bearing debt

The net cash position improved to € 151 million in 2022, from € 91 million at year-end 2021, a net improvement of € 60 million. The full redemption of the cumulative financing B preference shares was considered 'net cash-neutral' as this financing structure qualified as debt for accounting purposes. Besides a number of project financings and leases, Heijmans had made no use of borrowings at year-end 2022. The leases had an impact of € 72 million on the net cash position at year-end 2022.

Heijmans has a so-called Revolving Credit Facility amounting to € 117.5 million available from a banking syndicate consisting of ABN Amro, ING and Rabobank. This loan, which remained unused throughout 2022, was last amended and/or extended in April 2021 and has a term through to the end of 2025 with an option in the first half of 2023 to extend the financing for an additional year.

Various covenants have been agreed as part of the financing. If Heijmans meets those covenants, the financing is freely withdrawable. In terms of financial covenants, there is a leverage ratio - based on the recourse net cash position – set at a maximum level of 3, an interest cover ratio set at a minimum level of 5 and a solvency ratio set at least 21%.

Cumulative financing B preference shares

Up until mid-2022, Heijmans N.V. used cumulative financing B preference shares placed with Beleggingsfonds de Zonnewijser and Nationale-Nederlanden Levensverzekering Maatschappij N.V. in its financing structure. The annual dividend most recently amounted to 6.21% of the principal. At the end of 2021, the outstanding amount was € 30.7 million and this was repaid in full in a number of steps in the course of 2022.

On 14 April 2022, Heijmans repaid € 15 million based on the repayment arrangements linked to the result appropriation for the previous financial year. In the context of a more efficient allocation of capital, on 28 April (upon the announcement of the first quarter figures), Heijmans subsequently proceeded with a voluntary penalty-free redemption of the remaining share premium reserve amounting to € 15 million. The repurchase and cancellation of the cumulative financing B preference shares required the approval of the General Meeting of Shareholders, which was granted on 12 July 2022. On 13 July 2022, Heijmans fully redeemed the cumulative financing B preference shares through payment of the nominal value and met all remaining interest obligations. With effect from 22 September 2022, the shares in question were cancelled, thus cancelling the financing structure.

Cash flow

The condensed statement of cash flows, based on the indirect method, is as follows:

Order book

Heijmans’ group-wide order book increased by € 300 million to € 2.4 billion in 2022, from €2.1 billion in 2021. The Property Development and Building & Technology order book remained stable. Infra accounted for almost the entire increase in the order book, as Infra saw its order book increase to more than € 1 billion.

All the business areas saw numerous small to medium-sized (< € 30 million) additions to the order book, which contributed to a well-diversified order book. Heijmans acquired three major new works in 2022. Building & Technology won the construction contract for 735 student units at TU Eindhoven (€ 84 million). Infra was awarded the widening of the Apeldoorn - Twello stretch of the A1 motorway (€ 146 million) in the first quarter, plus the reconstruction of the Nieuwe Meer intersection (one-third of € 350 million) in the fourth quarter in a TriAX consortium.

With the current state of the order book, all the business areas have plenty of work for 2023 and there is a good spread in terms of execution capacity and types of project.

Outlook

Given the good diversification and volume of the order book, the outlook for 2023 is robust. Thanks in part to the absence of material loss-making projects, and because the vast majority of projects have been granted irrevocable permits, the outlook has a largely predictable character. Total revenue is expected to increase slightly, despite a decline at Property Development due to lower residential sales from the second half of 2022. This is because Heijmans expects the volume at Infra to rebound to levels well above € 700 million and Building & Technology is also expecting growth on the back of our healthy order intake, especially at the non-residential project business. The quality of our order book remains strong, so all business areas are expected to continue to operate within the targeted strategic underlying EBITDA margin ranges of 4% - 6% for the construction business and 6% - 8% for Property Development in 2023. We therefore reiterate the outlook we gave on the publication of the third-quarter results. We expect the underlying EBITDA for Heijmans as a whole in 2023 to be at a similar level as in 2022 (excluding the Wintrack II provision).

Leading the way in sustainability

Auke van Nieuwenhuijze (44) feels especially proud when he talks about his work at Heijmans. As procurement manager, his work includes helping to develop and set up a platform for the reuse of building materials.

“A lot is happening in the construction world right now. I deal with the procurement of materials and supplier management, but we also take into account what’s important in the long term. There’s a huge and growing need to improve sustainability and Heijmans is leading the way on this front. The nice thing is that I get to work with lots of smart people, who are always on the look-out for creative solutions. I find that enormously energising.”

“One of the things I’m most proud of is setting up and developing Matchingmaterials.com. This platform brings together the supply and demand for used building materials and materials for everyone in the construction chain. For example, is includes the reuse of sand, rubble and gravel, in other words the raw materials that are released when we build a motorway or a building. But it also includes materials such as paving, lighting or internal walls. We used to call that demolition. Now it’s called harvesting, because those materials are reused.”

"Even during my first meeting with Heijmans, I had a really good feeling and that has only grown stronger over the past 15 years. I go to work smiling every day and I’m always proud to tell people that I work for Heijmans. If I see something yellow with our logo on the road, it makes me happy. Even my children have that.”

I go to work smiling every day