Mixed picture at Heijmans in persistently weak market

Gerrit Witzel, chairman of the Executive Board: "The market conditions remain difficult. Our results vary across the board, while the Infra activities in the Netherlands and Belgium continue to perform solidly, the results at Non-Residential Building are clearly under pressure. The execution in the division is not yet at the desired quality level. In the coming period, we will have to make extra efforts in Non-Residential Building. We have seen no signs of recovery in the housing market, which is important to Heijmans. House sales continue to lag. At the same time the Residential Building and the Technical Services activities continue to perform well. It remains essential that we use our solid financial position to continue to move forward even in the current difficult market conditions."



Key developments

The organic increase in turnover in the months July through September was around 3%. The total order portfolio at the end of September was more or less unchanged from the end of June.

Infra (Roads and Civil) continued to record positive results and acquired a prominent integrated project with the contract for the realisation of the A4 Delft - Schiedam together with our project partners. The project has been won based on a differentiated innovative and sustainable design. The operations outside the Netherlands continue to perform in line with expectations. The German subsidiary Oevermann is currently implementing the previously announced measures to improve results.



The housing market is not showing any signs of recovery. The reduction of the transfer tax has so far had no effect on home sales. The crisis on the financial markets had a negative impact on consumer confidence. The market also continues to feel the consequences of the restrictive measures on mortgage lending. In these difficult market conditions, Heijmans is focussing on a number of attractive market segments and regions. One example is the close cooperation with (institutional) investors. Heijmans once again sold more than 30% of its homes to investors in the third quarter. In the period July - October, Heijmans sold 323 homes compared with 495 in the same period of 2010. The number of unsold completed homes remained limited, at around 50 at the end of October. As long as the outlook on the housing market continues to be poor, the risks related to valuations and property holdings will increase. Given these difficult market conditions, Residential Building continues to book good results, while the order portfolio remains at a healthy level as well.



The prefab concrete market continues to be difficult. Persistent losses at Bestcon require firm measures. A number of options will be reviewed. Despite the progress we have made in terms of quality, the results in Non-Residential Building remain under pressure. The limited margins that can be booked in the current market leave virtually no room for setbacks, and we will have to make additional improvements to the quality of the execution. We therefore do not expect the Non-Residential Building sector to close this financial year with a profit.

The developments in Technical Services are in line with expectations, with a steady increase in activity. The order portfolio in Technical Services remained stable, due to the acquisition of a number of projects, such as the Amstelcampus project. In addition, Heijmans' strategy is aimed at maximising the Non-Residential Building activities in combination with Technical Services. The order portfolio shows a clear increase in the proportion of projects that are tendered with this combination in mind.



Strategy update

Quality improvement remains high on the agenda. In mid-2010, Heijmans launched the LEAN6Sigma programme. The aim of the programme is continuous improvement of business processes. Lean6Sigma is based on quantitative insights ('measurement') and improvement awareness in the organisation ('knowledge'). Based on this principle, Heijmans has started a number of projects- both large and small - across all of its activities, including various projects to realise the goal of zero defects. One example of a LEAN6Sigma project is the 'optimisation of engineering costs in design & construct projects in Roads and Civil. These measures should result in improved efficiency and cost savings and are aimed at the early introduction of expertise, central cost registration and integrated management of engineering issues. Heijmans has further strengthened its PPE capabilities and thus further improved the ability to participate in such projects. Heijmans has since reached the final stages in a number of preselection processes. In the third quarter, we also took the first steps regarding Smart Energy and Smart Mobility.



Financial position

The net debt position as per end of September improved compared with the end of September 2010. Heijmans' capital position remains strong with a solvency ratio well above 30%.



Outlook

Although we are obviously less positive, Heijmans expects the whole of 2011 to be profitably, barring unforeseen circumstances.