The Supervisory Board has taken note of the report of the Executive Board for the 2023 financial year. The financial statements have been audited by EY (Ernst & Young Accountants LLP), which issued an unqualified auditor’s report on 8 March 2024. The auditor’s report has been added to the financial statements to Heijmans’ 2023 annual report as appendix 20.3. We recommend that the General Meeting of Shareholders adopt the 2023 financial statements and discharge the members of the Executive Board for their management of the company. We approve the Executive Board’s proposal to pay out a dividend of € 0.89 on (depositary receipts for) ordinary shares.
Position and tasks of the Supervisory Board
Role and powers of the Supervisory Board
The Supervisory Board supervises the strategy of the Executive Board and the general course of business at the Company and its affiliated enterprise and provides the Executive Board with advice. The Supervisory Board not only focuses on the effectiveness of the Company’s internal risk management and control systems and the integrity and quality of its financial reporting, but also on its policies regarding sustainability and safety. In the performance of its duties, the Supervisory Board acts in the interests of the company and its affiliated companies and in doing so takes into account the legitimate interests of the Company’s stakeholders. The Supervisory Board also takes into account the social aspects of business operations that are relevant to the Company. The Articles of Association of Heijmans N.V. and the Regulations for the Supervisory Board of Heijmans N.V. include rules with respect to board meetings and resolutions. Both of these documents are available on the Royal Heijmans N.V. website in the section ‘Corporate Governance: Codes and regulations’.
Specific areas of supervision
The supervisory board’s supervision of the Executive Board includes:
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How the board implements the strategy aimed at sustainable long-term value creation;
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the achievement of both financial and sustainability objectives;
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the risks associated with business activities
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the design and operation of internal risk management and control systems;
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the financial reporting process;
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compliance with legal and regulatory requirements;
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the relationship with shareholders - see among other things section 15.3 of the Management Report;
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the activities of the Executive Board as regards the culture within the company;
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the operation of the reporting procedure with regard to abuses and irregularities, and
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the social aspects of doing business relevant to the company.
Accents and activities in 2023
100 years of Heijmans
On 3 April 2023, Heijmans turned 100 years old. Heijmans celebrated this milestone with all employees through to the summer, including radio broadcasts made especially for Heijmans employees, a beautiful anniversary book and, as a highlight, a grand party on 3 June in the Brabanthallen congress centre. For Heijmans, its employees are its most important capital. Together, they have made Heijmans into the company it is today: a social and strong company that is working full steam ahead to achieve its objectives.
That Heijmans plays a special role has not gone unnoticed. During the anniversary celebrations, it was announced that King Willem-Alexander had granted Heijmans the right to use the Royal predicate from now on, and the predicate was handed over to Ton Hillen. Only organisations that are highly significant in their field and of national significance are eligible for this honorary title. The Royal recognition is an endorsement of the craftsmanship and entrepreneurship of all employees and crowns the work of Heijmans and all the generations that have contributed to it. This characterises Heijmans’ past and is the basis for the future. The Supervisory Board believes that the pride, commitment and the yellow heart of all employees are the driving force behind Heijmans and that inspires great confidence.
Macro-economic context
The macroeconomic effects triggered in 2022 by the war in Ukraine were partly still felt in 2023. While inflation, which rose sharply in 2022, eased slightly in 2023 due to lower energy prices, consumer confidence remained at a lower level. Despite increased mortgage rates and a one-sided supply of homes, about the same number of homes were sold in 2023 as in the previous year. Certain materials and raw materials fell in price and labour availability increased. By analysing all these developments in time, Heijmans was able to anticipate them and take timely measures to prevent or mitigate any negative effects. The end of 2023 saw major unrest in the Middle East, which also led to instability. Overall, 2023 was marked by very challenging market conditions which also led to bankruptcies in the sector.
Refinement of the strategy
Heijmans’ strategy is aimed at sustainable long-term value creation. In mid-2022, the Executive Board started reassessing the current strategy, which had been formulated for the period up to year-end 2023. The Supervisory Board was closely involved in this process. Topics touching on strategy and sustainable long-term value creation are discussed in almost every Supervisory Board meeting, leading to constructive dialogues. In the trading update for the third-quarter of 2023, the Executive Board provided a qualitative explanation of the refined strategy under the heading Together towards 02030. Further quantification will follow in the first half of 2024, once the acquisition of Van Wanrooij has been fully processed. The Supervisory Board oversees the implementation of the strategy. Furthermore, the Supervisory Board took note of progress in areas such as safety, compliance & risk, renewal, product development and innovation, including presentations by knowledge carriers during meetings with both Boards.
Nitrogen emissions problem
The Executive Board has kept the Supervisory Board constantly apprised of developments in the field of nitrogen (regulations) and has developed scenarios to show the possible consequences for Heijmans of amended regulations and court rulings. Despite the absence of a structural solution from the government, we can conclude that Heijmans was not significantly affected by this issue in 2023, despite the delay in the construction of large-scale infrastructure projects.
Safety
The topic of safety is a fixed agenda item at meetings of both boards. All aspects of safety are discussed at Supervisory Board meetings. These include the number and type of accidents, the IF figure and the measuring methodology, but also, for example, environmental safety in projects and structural safety. Furthermore, the board discussed safety perception and culture were extensively because they are crucial to improving safety performance. Both the Supervisory Board and the Executive Board believe it is necessary to raise safety to an even higher level, both for our colleagues own and for temporary colleagues and for the environment in the construction chain in which Heijmans operates. Despite all efforts, the results are not yet good enough. We will therefore continue with intensive discussions on other approaches and measures to further improve the safety programme.
Acquisition of Van Wanrooij
In June 2023, Heijmans announced the acquisition of Van Wanrooij Bouwontwikkeling. On 5 September 2023, the acquisition was completed after Heijmans had received approval from the Dutch Competition Authority (ACM). Through this acquisition, Heijmans has further strengthened its position in construction and property development. The Executive Board involved the Supervisory Board right from the first contact between Heijmans and the owners of Van Wanrooij. What followed was an intensive process in which the two boards had many and in-depth discussions about the strategic rationale, the terms of the transaction and its financing. The Supervisory Board is delighted that, after a thorough process, Heijmans was given the opportunity to acquire Van Wanrooij. This fulfils one of its strategic objectives, namely to further strengthen its position in property development and residential building. The Supervisory Board supports the Executive Board in its decision to allow Van Wanrooij to operate independently for two years, so the two companies have the opportunity to learn from each other and to draw up and implement a sound integration plan.
Financing
In connection with the acquisition of Van Wanrooij, the financing arrangement that Heijmans agreed with the banking consortium ABN AMRO, Rabobank and ING Bank was amended in 2023. Part of the purchase price was paid in cash, partly from the positive cash position and partly by extending the bank financing by € 140 million. This extension consists of a € 60-million extension of the existing Revolving Credit Facility to € 177.5 million, which has also been extended to five years from 5 September 2023, plus a Term Loan of € 80 million to be repaid over four years. The Supervisory Board believes that Heijmans has a healthy financing arrangement as a result of the agreements reached.
Arbitration ruling on Wintrack II
In 2023, the Wintrack II file was concluded in Heijmans’ favour. Heijmans had been involved in this case since September 2018, when TenneT terminated the contract between Heijmans Europoles B.V. (HEP) and TenneT for the purpose of constructing new high-voltage pylons (project name Wintrack). This was followed by arbitration proceedings in which it was ruled in May 2021 that TenneT had lawfully terminated the contract. Heijmans then set aside a provision for reasons of prudence. In April 2022, the proceedings in the first instance were concluded with a final ruling. Based on that ruling, in which the court, among other things, found that TenneT had to pay outstanding instalments to HEP, Heijmans released part of the provision. This was followed - in brief - by appeal proceedings on the question of whether TenneT had been lawfully allowed to terminate. In October 2023, a final ruling was issued in favour of Heijmans. In short, this amounted to a finding that TenneT should not have been allowed to terminate the contract.
Start-up of timber-frame housing production plant in Heerenveen
In November 2022, the Supervisory Board visited the timber-frame housing production plant that Heijmans acquired in late 2021. This acquisition underlines Heijmans’ ambition to build in a CO₂-neutral manner and marks the company’s next step towards industrial and modular construction. In 2022, a lot of hard work went into expanding the plant so Heijmans, as creators of the healthy living environment, can start using timber-frame construction technology on a large scale. The new plant was officially opened on 5 October 2023. Meanwhile, the first homes built according to the Heijmans Horizon concept have rolled off the conveyor belt and been installed. At the end of October 2023, the Supervisory Board again visited the now substantially expanded production plant and was impressed, not only by the production process but above all by the ambition of the employees. Thanks to this production plant, Heijmans is making great strides in the field of industrial-scale construction.
Result development
In 2023, the Executive Board continued to build on improving working capital and capital ratios and robustly building the risk management system. The Supervisory Board monitored and supported the Executive Board’s efforts. The ‘margin over volume policy’ and the continuous further professionalisation of the organisation and improvement of internal processes were discussed extensively in the meetings. Frequent back-and-forth meetings were held with the Supervisory Board on securing a healthy return/risk ratio while maintaining healthy entrepreneurship when managing (new) projects. Both boards are satisfied with the shift in the portfolio. Heijmans is in good shape. It is a robustly performing and predictable company. The reduced revenue of Property Development as a consequence of a disappointing housing market was compensated by the higher revenue from Infra and Building & Technology. Thanks in part to the unflagging efforts of its employees, Heijmans ended the year 2023 successfully.
Dividend
In view of the financial results for 2023, the Executive Board proposed to pay a dividend on ordinary shares of € 0.89 per (depositary receipt for a) share. The Supervisory Board agreed with this proposal.
Corporate governance
The Supervisory Board is aware of developments in the field of corporate governance. These include the effect of the updated Dutch Corporate Governance Code coming into force in 2023, the introduction of the Diversity at the Top Act and relevant new and forthcoming (European) regulations in the field of ESG. In the context of the latter, both the Supervisory Board and the Executive Board have concerns about the pressure that reporting requirements place on the company. Meetings of the Supervisory Board have discussed how to implement ESG compliance in a controlled way, taking into account the interests of all stakeholders.
For more information on governance, please see section 15.1 Corporate Governance of the Management Report.
Frequency of meetings and attendance
In 2023, the Supervisory Board held seven regular and eight interim specific meetings with the Executive Board. The regular meetings were preceded by internal Supervisory Board deliberations and were physical meetings. The remaining meetings took place entirely digitally. Ms Knape-Vosmer had to excuse herself for one meeting. She discussed the agenda items and her views on them with the chairman in advance. All members were present at both the meetings of the Remuneration and Appointment committee and the Audit and Risk committee.
The June meeting was combined with a working visit to the Vijfsluizen project in Vlaardingen. Prior to the meeting in late October 2023, both boards visited the timber-frame housing production plant in Heerenveen.
The Company’s external auditor was present at the meeting in which the 2023 financial statements were discussed. The Supervisory Board also met with the external auditor in the absence of the Executive Board. As usual, the Supervisory Board is represented in the consultation meeting of the Works Council twice a year. Members of the Supervisory Board regularly consult with members of the Executive Board, depending on their specific tasks. This is particularly true for the Chair of the Supervisory Board and the Chairs of the Board’s committees, i.e. the Remuneration and Appointment committee and the Audit and Risk committee.
Resolutions
The important resolutions of the Supervisory Board in 2023 included the following:
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Approval of the decisions of the Executive Board to adopt and change the operational and financial objectives of the Company;
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Approval of the 2023 business plan and budget of Royal Heijmans N.V., which outlines the parameters of the strategic principles of the policy;
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Approval of the specification of the criteria for the short-term and long-term variable remuneration of the members of the Executive Board;
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The nomination for reappointment of Ms M.M. Jonk and Mr Sj.S. Vollebregt as supervisory directors at the General Meeting of Shareholders on 3 April 2023;
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Approval of the Executive Board’s proposal for the appropriation of the result of Royal Heijmans N.V. for the 2022 financial year, comprising the payment of a dividend on ordinary shares;
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Approval of the Executive Board’s decision to acquire Van Wanrooij Bouwontwikkeling and the associated investment;
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Approval of the Executive Board’s decision to issue 2.3 million ordinary shares (on the basis of the power of issuance approved by the AGM) on 5 September 2023 and the placement of the depositary receipts for shares with the seller of Van Wanrooij
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Approval of the Executive Board’s decision to amend the company’s financing arrangement in connection with the acquisition of Van Wanrooij;
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Approval of the Executive Board’s proposal to submit an amendment to the Articles of Association to an Extraordinary Meeting of Shareholders.
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Executive Board
The Executive Board has two members. Their areas of attention are as follows:
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Mr. A.G.J. (Ton) Hillen, Chairman of Executive Board / CEO: General affairs, Property Development, Building & Technology, Infra, HR & Management Development and Innovation;
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Mr. G.M.P.A. (Gavin) van Boekel, member of Executive Board / CFO: Finance & Tax, Risk office, Investor relations, IT, Heijmans Energy, Legal Affairs, PR & Communications, Procurement, Sustainability, Pensions and Facilities.
Supervisory Board self-assessment
One of the principles of the Dutch Corporate Governance Code states that the Supervisory Board is collectively responsible for its own performance and lists self-evaluation as a best practice. The 2023 self-evaluation was carried out with the help of an external party. A comprehensive questionnaire was submitted to all Supervisory Board members. Individual interviews were then held with all members of the Supervisory Board, Executive Board and the Secretary. The subsequent findings were discussed extensively among the Supervisory Board members and between the Supervisory Board and Executive Board. The 2023 evaluation showed that the Supervisory Board, also compared to the benchmark, is functioning properly. The increasing size and complexity of the company, internal and external dynamics require the Supervisory Board to be alert. The Supervisory Board must evolve along with all the above-mentioned developments to be able to deal with them. In 2024, together with the Executive Board, we will examine how the Supervisory Board can best fulfil this role.
Diversity
The composition of Heijmans’ Supervisory Board is diverse in terms of gender, background and experience. The Diversity at the Top Act came into force on 1 January 2022. Among other things, this envisages a gradual entry quota for supervisory boards. This means that for a balanced composition, the supervisory board of a listed public limited company must consist of at least one-third women, and at least one-third men. When appointing a new supervisory director, the balance of the m/f ratio on the board must be taken into account. If the board is not balanced, a new appointment will have to contribute to that balance. The General Meeting, the Works Council and the Supervisory Board are then obliged to take into account the diversity quota when making recommendations and nominations.
The Supervisory Board consists of five members: two women and three men. Based on this current composition, the Supervisory Board complies with the new statutory regulation. The diversity policy and plan of action based on the Diversity at the Top Act that applies to the Executive Board and Supervisory Board is included in the management report. For further background information on all members of the Supervisory Board, please see section 15.6, Management and Supervision, of the Management Report.
Committees
The Supervisory Board has appointed two committees: the Audit and Risk committee, and the Remuneration and Appointments committee. The Board has drawn up Regulations for each committee, establishing the role of the committee in question, their composition and how they carry out their tasks. These regulations are available (in Dutch) on the Heijmans website in the ‘Corporate Governance: Codes, statuten en reglementen’ section.
Audit and Risk Committee
The Audit and Risk committee comprises three members of the Supervisory Board and its tasks cover a number of financial areas and risk management. The discussions of subjects in the Audit and Risk committee serve as preparation for the discussion of these subjects by the full Supervisory Board. These subjects include the interim report, the financial statements, the budget, the external auditor’s reports, the external auditor’s audit plan, other financial reporting, the functioning of internal risk and control systems, the relationship with and the evaluation of the external auditor, the pension plans and the development of the financing requirements and debt position, as well as the relationship with the company’s financiers.
In addition, the Audit & Risk committee discussed the IT project portfolio, evaluations of acquisitions, the company’s fiscal position and the issue list. The committee also discussed integrity and compliance, Risk & Audit management, the Risk & Audit manager’s reports, cybersecurity and privacy. A fixed item on the agenda relates to discussing developments in the field of ESG regulations and how Heijmans can proactively respond to these. Concern was also expressed about the high reporting pressure and the capacity required in that respect.
The current auditor EY has been appointed for the financial years 2022 and 2023, after which the legally required rotation must take place. At the AGM on 3 April 2023, KPMG was appointed as external auditor for the financial years 2024 and 2025. Preparatory work related to the handover from EY to KPMG started in good harmony in 2023.
The audit and risk committee consists of Ms M.M. Jonk, Mr A.E. Traas (chairman) and Mr A.S. Castelein. Expertise in financial reporting and auditing is embedded in the committee, as Mr Traas is trained as a Chartered Accountant. In 2023, the committee met four times with the Executive Board. The external auditor also attended a number of meetings. The committee also consulted with the auditor in the absence of the Executive Board.
When relevant, managers with responsibility for finance, auditing, risks and compliance attended the meetings of the Audit and Risk committee, together with the CEO and the CFO. Relevant items requiring approval from the full Supervisory Board were submitted to the full Board together with a recommendation from the Audit and Risk committee.
Remuneration and Appointment Committee
The Remuneration and Appointment committee consists of Ms M.M. Jonk (Chair), and Ms J.W.M. Knape-Vosmer. In preparation for the Supervisory Board, the committee focuses on the remuneration of the members of the Executive Board and draws up the selection criteria and appointment procedure for members of the Supervisory Board and the Executive Board. At least once a year, the committee also assesses the performance of the members of the Executive Board and draws up a succession planning for the Executive Board. In this context, the committee conducts individual performance interviews with the members of the Executive Board at least once a year.
Remuneration
The committee held six meetings in the year under review. The members also consulted with each other regularly in the course of the year.
The remuneration policy for both boards adopted by the AGM on 15 April 2020 is applicable in 2023. In 2022, the committee recommended that the policies for both the Supervisory Board and the Executive Board be reviewed in 2023, with the aim of putting both policy documents on the agenda for the AGM in April 2024. The remuneration policy will be submitted for approval no later than the AGM in 2024 in accordance with Article 2:135a of the Dutch Civil Code. This timing dovetailed with a reassessment of the company’s strategy so that careful consideration could be given as to whether the policy needed to be adjusted in the light of that strategy. The committee used the support of an external party for the review. There was intensive contact on the remuneration policy between the committee and the Supervisory Board and between the committee, Supervisory Board and Executive Board. In early 2024, the Supervisory Board decided that the remuneration policy for both boards would be put on the agenda for the AGM. In this regard, please also see the 2023 Remuneration Report.
In its meetings, the committee considered the remuneration of the members of the Executive Board in the year under review. The remuneration for 2023 is in line with the remuneration policy adopted in 2020; please see the 2023 Remuneration Report in Appendix 20.5 Remuneration Report in Heijmans 2023 annual report.
In addition, the committee held discussions with and advised the Supervisory Board on, among other things, the targets in the context of the variable remuneration, the variable remuneration itself and the Bonus Investment Share Matching Plan.
Finally, the committee prepared and discussed the 2023 Remuneration Report with both the Executive Board and the Supervisory Board. This took into account the outcome of the advisory vote of the General Meeting of Shareholders regarding the 2022 Remuneration Report.
Appointments
Supervisory Board
At the conclusion of the AGM on 3 April 2023, Ms M.M. Jonk and Mr Sj.S. Vollebregt were due to retire in accordance with the retirement schedule after a term of more than four years and after two terms of four years, respectively. Both were nominated for reappointment for four and two years respectively. The Works Council supported both nominations.
The Supervisory Board nominated Mr Vollebregt for reasons of continuity. A number of Supervisory Board members had been appointed relatively recently at the time of the AGM and the reappointment gave the Board the opportunity to conduct a timely and careful search for a candidate to fill the vacancy arising once Mr Vollebregt steps down in 2025.
Even after these reappointments, the composition of the board meets the statutory quota for a balanced composition (see section on Diversity).
Composition of the Supervisory Board
The Supervisory Board currently consists of five members. In accordance with the retirement schedule, as described above, two supervisory board members were due to retire in 2023.
The current composition of the Supervisory Board with personal details, main and ancillary positions is included in section 15.6 Management and Supervision, of the Management Report. All members of the Supervisory Board qualify as independent within the meaning of best practice 2.1.8 of the Dutch Corporate Governance Code.
In conclusion
Last year was a good year for Heijmans in a number of ways. The company achieved 69% of the targets set out in the bold statements formulated in 2018 for the period to 2023. Heijmans also realised its strategic goals, in part through the acquisition of Van Wanrooij, which further strengthened its position in construction and property development. As in previous years, both the Supervisory Board and the Executive Board continued to focus on a strict selection policy, optimum cost structure, physical and social safety, and sustainability. Heijmans worked hard to improve results in a broad sense. The changing housing market created additional challenges. However, Heijmans is resilient and flexible and uses its innovative potential to find solutions. The basis for structural success lies in a sound organisational set-up, team excellence and the development of human capital, while maintaining the right balance between entrepreneurship, returns and risk.
The Supervisory Board has great respect not only for the Executive Board and the good financial results for 2023, but especially for all the employees who made this possible. This is the foundation for Heijmans’ good results!
The Supervisory Board would like to thank the Works Council, all employees and the Heijmans Executive Board for their significant contribution during the past reporting year.
Rosmalen, 8 March 2024
Sjoerd S. Vollebregt, chair
Martika M. Jonk, vice-chair
Ans J.W.M. Knape-Vosmer
Arnout E. Traas
Allard S. Castelein
Jan Slagman
“Together with Heijmans, we continue to improve. Take recycled window glass or the reuse of hinges and locks. We are happy to give credit to Heijmans, because over the past few years they have been the ones who challenged us to make an even more sustainable window frame.”