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Rob van Gelder, Chairman of the Executive Board: “Things are slowly but surely coming back on track. The refinancing is complete. The balance sheet and solvency have been strengthened. We have thoroughly downsized and economized. The initial impacts are becoming evident.”

Revenues in the first half of 2009 declined by €234 million in comparison with the same period in 2008 to €1,488 million. The decline is primarily due to the selective contracting policy pursued in particular by Non-residential Building NL and the decline in the sale of homes by Property Development NL.

The underlying operating result in the first half of 2009 improved in comparison with the first half of 2008 (first half of 2008: €2 million versus first half of 2009: €5 million) in spite of the significant drop in the operating result of Property Development due to the slowdown in the housing market.

Financial expenses on balance rose significantly during the first half of 2009 (€35 million versus the first half of 2008: €5 million). €23 million of this is due to the impact of the one-time refinancing transaction costs and the related interest rate cash flow hedges.
The result after taxes for the first half of 2009 amounts to €- 43 million. The result of the first half of 2009 is to a significant degree negatively impacted by the one-time costs due to the organizational and financial restructuring in the amount of € 24 million and €23 million respectively.

The losses on building projects in the Netherlands and projects in Belgium have been halted. A clear improvement in the underlying operating results is discernable.

The order book at the end of June 2009 declined to €2,525 million (31 December 2008: €3,004 million) in particular due to a selective contracting policy adopted by building activities in the Netherlands and a slowdown in the inflow of new projects for Property Development NL. The order book’s quality improved in terms of gross margin.

Organizational restructuring
The first half of 2009 was to a significant degree marked by the organizational restructuring of Property Development, Residential Building, Non-residential Building and Infrastructure (Road Building) in the Netherlands. These measures were taken to streamline the Heijmans organization and to make it more responsive. In addition, the operating organization was adjusted on the basis of current and projected lower volumes.

The restructuring is on track. The number of FTEs in the Netherlands decreased considerably. As at 30 June 2009, the number of FTEs on-balance fell by 689 to 6,665 FTEs in relation to 30 September 2008. The reorganization costs comprise the costs of the Social Plan, the costs related to employees to whom the Social Plan applies and the excess office space capacity due to the restructuring. The number of FTEs is ultimately expected to be reduced by approximately 1,100.

Property development (Netherlands)
The economic situation is having a major impact on the housing market. Consumer confidence has declined due to increased consumer concerns about 1) retaining employment; 2) the fear of incurring double housing expenses; and 3) the downward trend in the value of the privately owned home. The declining sale of new homes is further reinforced by the more stringent rules applied in granting mortgages.

The number of homes sold by Heijmans in the first half of 2009 consequently lags the homes sold during the comparable period in 2008 (1,187). In total, 600 homes were sold, while at the same time 150 contracts were dissolved. Due to the decline in sales, revenues and the underlying operating result lagged considerably. The underlying operating result in the first half of the year was €4 million (first half of 2008: €31 million).

The inventory of unsold homes at 30 June 2009 is 64 (31 December 2008: 53). The inventory of unsold finished commercial property at 30 June 2009 is nil. The invested capital increased in the first half of 2009, primarily due to land and other purchase commitments dating from previous years and an increase in the inventory of unsold homes “in progress and delivered’, in relation to 31 December 2008. Reducing capital requirements is a laborious process in view of the economic conditions.

The order book at 30 June 2009 in the amount of €414 million declined in comparison to the order book at 31 December 2008 (€636 million). The current slowdown in sales has put the brakes on the development of new projects.

Residential building (Netherlands)
Building activities were split into Residential Building and Non-residential Building in 2009. The business units within Residential Building were further consolidated and Residential Building and Property Development were brought closer together as well during this process. The bundling of knowledge and activities as part of the primary process is designed to increase synergy effects and create a lean & mean organization with greater competitive strength.

Revenues and the order book in the first half of 2009 were lower than in the comparable period in 2008, due to the selective contracting policy and deteriorating economic conditions. At €7 million, the underlying operating result improved considerably in the first half of 2009 in comparison to the same period in 2008 (-/- €7 million). This is in part due to the new streamlined organization, the declining costs of raw and other materials and the declining costs of hiring subcontractors.

The order book decreased to €510 million at 30 June 2009 (year-end 2008: €640 million). Of this approximately €270 million pertains to 2009. As such, Residential Building’s order book provides a sufficient basis for 2009.

Non-residential building (Netherlands)
There is a tendency in the non-residential building sector to require the principal contractor to assume the management of the complete building process, including the technical installations.

The strategic focus of Non-residential Building is on a selective contracting policy, whereby balancing risks and margins has top priority. As a result of this policy, revenues in the first half of 2009 were lower than in the comparable period in 2008. The new organization is increasingly taking shape, as a result of which production is controlled nationally, purchasing is centralized and risk management and control systems have been brought further up to par.

The underlying operating result in the first half of 2009 improved in comparison to the comparable period in 2008. At €195 million, the order book rose slightly in comparison to the end of December 2008 (€192 million) and provides a sufficient basis for 2009.

Technical Services (Netherlands)
The higher revenues combined with the improved profitability of Technical Services produced a respectable improvement in the underlying operating result, which was €7 million in the first half of 2009 (first half of 2008: €3 million). The collaboration with other Heijmans components also resulted in an increase in projects and synergy benefits.

The order book declined in relation to the end of December 2008 due to the fact that a number of large projects recently has been delivered. In addition, there is a clear focus on contracting for service and maintenance projects that are generally smaller, but more profitable.

Infrastructure (Netherlands)
Heijmans Infrastructure revenues declined during the first half of 2009 in comparison with the same period in 2008. This is on the one hand explained by the poor weather conditions at the start of the year and on the other hand by the decline in private sector demand.
The underlying operating result nevertheless exhibits an improvement in comparison with the same period in 2008. The losses incurred by Road Building activities were reduced. Asphalt production capacity reductions and fine tuning of the organization were important contributing factors in this regard. Other activities made a respectable contribution like they did in 2008.

The Dutch government intends to invest an additional approximately €800 million in infrastructure projects in 2009 and 2010. Building activities in this sector are therefore not as severely affected by the credit crisis as the other activities. The impact of this decision will only be noticeable in the second half of 2010.

The order book declined during the first half of 2009 in comparison to the order book’s status at year-end 2008, in part due to the high production of major works such as the A2 Eindhoven Ring Road and the A2 Culemborg-Deil motorway, which are progressing well. Heijmans signed a contract for the substructure of the Vleuten – Geldermalsen section of the track doubling project between Utrecht-Lunetten and Houten in the first half of 2009. The rail section will be expanded from two to four tracks during 2010 – 2014 and the Lunetten station will be completely renovated. The contract value is approximately €87 million.

Belgium
Operating losses attributable to building and property development activities were incurred in Belgium in 2008. These losses were transformed into a practically break-even result in the first half of 2009. Infrastructure Belgium’s results remained well on track in spite of a bad start due to poor weather conditions.

The order book rose from €159 million at year-end 2008 to €175 million at the end of June 2009, in part due to the contract acquired for work on the buildings of the European Council in Brussels. The contract could go as high as €35 million and has a 7-year life.
The acquisition of the Antwerp Master Plan Brabo I Project was finalized on 5 August 2009. This project will be carried out by the THV Silvius consortium (comprising Heijmans Infrastructure Belgium and several third parties)

United Kingdom
Heijmans operates in the United Kingdom via Leadbitter. This company specializes in the development of subsidized and affordable housing and public construction projects in the care, education and recreation sectors. Approximately 80% of revenues are realized in the public sector. In contrast to the private market for owner-occupied homes, which is still clearly affected by the economic crisis, Leadbitter has profited from the strong demand for subsidized housing. Revenues and the results remained fairly well equal in the first half of 2009 in comparison with the same period in 2008. The order book declined to €296 million at the end of June 2009 in comparison with year-end 2008 (€343 million).

Germany
Operations in Germany are primarily related to infrastructure activities. Revenues in Germany in the first half of 2009 rose slightly, while the results lagged in comparison to the same period in 2008. The order book provides a strong basis for the second half of 2009.

Miscellaneous
The Miscellaneous item is related to the results for centralized services and the Group costs. Due to a lower level of activity, the revenues and results of the equipment service units declined.

Financial expenses
Financial expenses on balance rose significantly during the first half of 2009 (€35 million versus the first half of 2008: €5 million). This is for the most part explained by the impact of the one-time refinancing transaction costs and the related interest rate cash flow hedges that due to the financial restructuring can no longer be charged to shareholders' equity and instead are taken directly to the income statement.

Refinancing
On 28 April 2009, Heijmans negotiated new arrangements with its bankers concerning the existing €400 million committed credit facility. On 8 May 2009, Heijmans completed the repurchase of the private loan, the so-called USPP notes, with a nominal value of USD 125 million. Bridge financing was provided for this purpose that has since been repaid from the proceeds of the rights issue.

The rights issue was fully completed last July and the net proceeds were used to strengthen the balance sheet. The pro forma shareholders’ equity* as at 30 June 2009 is €424 million compared to €371 million as at year-end 2008. Solvency, defined as the guarantee capital divided by the balance sheet total, improved to 23.5% on a pro forma balance sheet total of €2,089 million.

The net interest-bearing debts are generally higher in the middle of the year than they are at the end of the financial year, due to seasonal patterns. The net interest-bearing debt (interest-bearing debt minus cash and cash equivalents) was €470 million at 30 June 2009 (end of December 2008: €331 million). This amount at €470 million is well within the company’s financing facilities. In contrast to Property Development NL, building activities in the Netherlands and Infrastructure reduced their invested capital.

Working capital remained fairly stable compared to the first half of 2008. In relation to the end of December 2008, it increased by €98 million in part due to seasonal patterns and in part due to an increase in capital requirements by Property Development NL.
The operating cash flow over the first half of 2009 was minus €126 million due to an increase in net working capital requirements (first half of 2008: €7 million).

Earnings per share (EPS)
The number of ordinary shares in issue on 30 June 2009 was 24,072,584. The rights issue was completed last July and the number of ordinary shares in issue is 168,508,088.

The pro forma result per ordinary share, on the basis of this new number of ordinary shares in issue, over the first half of 2009 is minus €0,26.

Extraordinary General Meeting of Shareholders (EGM)
An Extraordinary General Meeting of Shareholders will take place in Rosmalen on 23 September 2009 at 15:00 hours. An explanation concerning the appointment of Mr Mark van den Biggelaar will be provided during this meeting. Mr Van den Biggelaar replaces Mr Dick van der Kroft as the CFO of Heijmans N.V. effective 1 September 2009.

Reverse stock split
Heijmans will submit a ‘reverse stock split’ proposal for resolution to the shareholders during the SGM. The objective of the reverse split is to increase the price at which the shares are traded, thereby increasing its appeal, in particular for foreign investors. The proposal is to merge 10 shares into a single share.

Risks
A description of the key risks is included in the 2008 Annual Report and in the prospectus for the rights issue.

Prospects
Heijmans will not issue any forecasts for all of 2009. In part due to poor economic circumstances, the order book is declining, but is of sufficient size. Where necessary, Heijmans is adjusting its organization to reflect the expected reduced revenue produced by activities.
The results of Heijmans’ property development activities in the Netherlands exhibited a significant decline in the first half of 2009. Heijmans continues to be uncertain of the housing market trends for the second half of 2009.

Rob van Gelder, Chairman of the Executive Board: “The housing market is locked down. This affects us directly. We will have to patiently await the recovery.”

Statement by the Executive Board
The Executive Board states that, with due consideration to the information contained in this report, the interim financial information, drawn up in accordance with IAS 34 “Interim Financial Reporting”, to the best of its knowledge gives a true and fair view of the assets, liabilities, financial position and the result of the company for the first half of 2009 and that the semi-annual report provides a true and fair summary of the financial information required pursuant to sections 5:25d subsections 8 and 9 of the Dutch Financial Markets Supervision at www.heijmans.nl

Trading update
Heijmans will issue a trading update on 12 November 2009.

Source: Heijmans