Report of the Supervisory Board
The Supervisory Board has taken note of the report of the Executive Board for the 2022 financial year. The financial statements have been audited by EY (Ernst & Young Accountants LLP), which issued an unqualified auditor’s report on 17 February 2023. The auditor's report has been added to the financial statements to the Heijmans 2022 annual report as appendix 11.3. We recommend that the General Meeting of Shareholders adopt the 2022 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 € 1.01 on (depositary receipts for) ordinary shares.
Position and key developments 2022
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. The Articles of Association of Heijmans N.V. are available on the 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 aspects such as how the Executive Board executes the strategy with a view to (long-term) value creation, the realisation of both financial and sustainability goals, the risks associated with business activities, the structure and operation of the internal risk management and control systems, the process of financial reporting, compliance with legal and regulatory requirements, shareholder relations (for more on this subject see chapter 8.3 ‘Corporate Governance’ and other sections of this annual report), the activities of the Executive Board with respect to the culture within the company, the operation of the reporting procedures related to abuses and irregularities and the social aspects of business operations that are relevant to the Company.
Accents and activities in 2022
After the effects of the pandemic diminished in early 2022, the world was faced with the war in Ukraine in February 2022. This war, which is above all an immense human tragedy, resulted in a number of macroeconomic effects hitting the economy. Inflation has risen globally, largely due to rising energy prices, interest rates have increased, consumer trust has fallen, and raw materials prices have climbed significantly. The availability of materials and manpower also came under pressure. The second half of the year saw a change in the housing market, partly due to the rising mortgage interest rate. Throughout 2022, the Executive Board regularly made thorough assessments of the impact of the aforementioned issues on Heijmans. This enabled Heijmans to take measures to mitigate or prevent any negative consequences in a timely manner. Heijmans is in a good position, and due in part to the undiminished efforts of its employees was able to close 2022 very successfully.
The Executive Board regularly updated the Supervisory Board on the developments related to nitrogen emissions and nitrogen-related regulations, and developed scenarios to map out the potential consequences for Heijmans of any changes in regulations and court rulings.
In 2022, the Executive Board continued to build on the improvement in its working capital, its capital ratios and the robust expansion of its risk management systems. The Supervisory Board monitored the efforts of the Executive Board, and provided the management with support on this front. Furthermore, the Supervisory Board continued to devote constant attention to the ‘focus, discipline and excellence' programme. The 'margin over volume policy', the continued professionalisation of the organisation and improvements to the company’s internal processes were also discussed extensively in the meetings of the board. The Executive Board also frequently consulted the Supervisory Board on safeguarding a healthy risk/return ratio in the management of (new) projects, while maintaining a healthy spirit of entrepreneurship.
The theme of safety is a permanent agenda item in meetings of the Supervisory Board, and is discussed extensively. For example, these discussions cover the number and kind of accidents and the IF figure, but also the environmental safety at projects and structural safety. Both the Supervisory Board and the Executive Board feel an innate motivation to elevate safety to a higher level for our own and temporary employees, and for the environment in which Heijmans operates. The Board has intense discussions on safety figures, different perspectives and measures to further improve the safety programme.
For Heijmans, the past few years have been marked by a recovery in profitability and the improvement of our balance sheet ratios. In 2021, this financing was extended to 31 December 2025, with an improvement and updating of the financing conditions. The cumulative financing B preference shares, the so-called cumprefs, were an important part of the capital structure. In the review of the dividend of these shares per 1 January 2019, a repayment mechanism was agreed with the goal of redeeming the shares and withdrawing them at some point. After repayments charged to the premium reserve on 26 April 2022, Heijmans agreed on 28 April 2022 with the holders of these shares that Heijmans would voluntarily redeem the remaining share premium reserve as per that date. The company acquired all 4,510,000 cumulative financing B preference shares issued at that time on 13 July 2022, after the Extraordinary General Meeting of Shareholders agreed to this on 12 July 2022. Also after agreement by the Extraordinary General Meeting of Shareholders, the shares acquired were withdrawn from the issued capital. No more cumulative financing B preference shares have been issued since that date.
Given the financial results over 2022, the Executive Board has proposed to issue a dividend for ordinary shares of € 1.01 per (depositary receipt for a) share. The Supervisory Board has agreed to this proposal.
Heijmans’ strategy is focused on long-term value creation. In line with good governance practices, each year the Executive Board reviews the strategy. In 2022, this was also the case for the long-term ‘Better, Smarter and more Sustainable’ strategy developed in 2018. This involved using KPIs to assess the progress made on the strategic goals. In mid-2022, the Executive Board started the process of recalibrating the current strategy through to the end of 2023, with the goal of presenting the recalibrated strategy in mid-2023. The Supervisory Board will be intensively involved in this process. The Supervisory Board will discuss subjects that touch on strategy and long-term value creation in practically all of its meetings, which will result in intensive dialogues that will make a constructive contribution to the recalibration. The Supervisory Board will monitor the implementation of the strategy. A number of the strategy’s themes will as mentioned be discussed in every meeting with the Executive Board. The Supervisory Board has also been informed on progress in the areas of safety, compliance & risk, renewal, product development and innovation, for example through presentations by knowledge carriers during meetings with the Supervisory Board and the Executive Board.
The Supervisory Board was kept abreast of the developments in the field of Corporate Governance, including the proposal to update the Corporate Governance Code, the implementation of the Diversity at the top Act, and relevant new and upcoming national and European legislation on ESG-related matters. For more information, please see section 8.3 ‘Corporate Governance’ of this annual report.
Frequency of meetings and attendance
In 2022, the Supervisory Board held six regular meetings and seven extra meetings in the presence of the Executive Board. The regular meetings were preceded by internal consultations within the Supervisory Board. A number of these meetings were held entirely digitally, and some meetings took place in a hybrid format.
Both Ms. Jonk and Mr. Castelein were absent from one meeting. They made use of the option to discuss the items on the agenda with the Chair prior to the meeting and were given the opportunity to express their views. All members of the Remuneration and Appointments committee attended all meetings of said committee. Mr. Castelein did not attend one of the meetings of the Audit and Risk committee.
The meeting in June took place at a location in the Hart van Zuid development in Rotterdam. Prior to the meeting in November 2022, the Executive Board and the Supervisory Board paid a visit to the timber-frame production facility in Heerenveen, the factory for the construction of prefabricated timber frames that Heijmans acquired in 2021. The expansion of this facility will be completed in the summer of 2023. The Executive Board, together with a delegation from the Supervisory Board, also paid a visit to the New Amsterdam Court House, which Heijmans built.
The Company’s external auditor attended the meeting in which the financial statements for 2021 were discussed. The Supervisory Board is normally represented at two consultation meetings of the Works Council each 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.
The important resolutions of the Supervisory Board in 2022 included the following:
Approval of the decisions of the Executive Board to adopt and change the operational and financial objectives of the Company;
Approval of the 2022 business plan and budget of Heijmans N.V., which outlines the parameters of the strategic principles of the policy;
Approval of the specification of the criteria for the short-term and long-term variable bonuses of the members of the Executive Board;
Approval of the Executive Board’s proposal to change the agenda on the authorisation to issue ordinary shares;
Decision to nominate Mr. Castelein as a member of the Supervisory Board at the Extraordinary General Meeting of Shareholders on 12 July 2022;
Approval of the Executive Board’s proposal for the appropriation of the result of Heijmans N.V. for the financial year 2021, comprising the payment of a dividend on ordinary shares;
Approval of the Executive Board’s decision to redeem and purchase all outstanding cumulative financing B preference shares;
Approval of the Executive Board’s decision to acquire Dynniq Energy B.V. and the investment in associated with that;
Nomination of a new external auditor to the General Meeting of Shareholders on 3 April 2023 for the financial years 2024 and 2025.
Mr. A.G.J. (Ton) Hillen, Chairman of Executive Board / CEO: General affairs, Property Development, Building & Technology, Infra, HR & Management Development, Procurement and Innovation;
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 is that supervisory boards are collectively responsible for their own performance, with self-assessment being defined as a best practice. The self-assessment for 2022 was carried out on the basis of an extensive questionnaire that was completed by all members of the Supervisory Board and, in parts, by the members of the Executive Board. The resulting report was discussed extensively by the Supervisory Board and between the Supervisory Board and the Executive Board. The evaluation for 2022 showed that the two boards unanimously agree that there is an open, respectful attitude among the Supervisory Board members and between the boards, where the goal is always to find improvements for the company. The evaluation was also used for a broader assessment of the company and to answer the question of how the Supervisory Board and the Executive Board can further advance their goal to bring Heijmans to full maturity. In line with the use of the self-assessment, the decision was made to have the 2023 self-assessment led by an external party.
The composition of the Heijmans Supervisory Board is diverse in terms of gender, background and experience. Pursuant to the Dutch Management and Supervision Act in force until 1 January 2022, larger companies were obliged to strive for a composition of at least 30% female and 30% male members on the Supervisory Board, insofar as the seats on the board are filled by natural persons. Two of the five members of the current Heijmans Supervisory Board are female, representing 40% of the total. As per 1 January 2022, the ‘diversity in de top’ (diversity on the boards of companies) legislation came into force. This includes an appointment quota. The current composition of the Supervisory Board meets the new legal requirements. Based on the new legislation, the diversity policy and plan of approach pertaining to the Executive Board and Supervisory Board has been included in the governance report. For further background information about the members of the Supervisory Board, see chapter 3 ‘Management’ of this annual report.
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 section ‘Corporate Governance: Codes, statuten en reglementen’.
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.
The Audit and Risk committee also discussed the valuation of land holdings, the functioning of the SAP ERP system, the company’s tax position and the issue list. In addition, the committee discussed integrity and compliance, Risk & Audit Management and the reports provided by the Risk & Audit Manager, cybersecurity and privacy.
After the summer of 2022, the committee started preparations for the selection process for a new external auditor. EY, the current auditor, was appointed for the financial years 2022 and 2023, after which a mandatory rotation is required. The intention is to propose the new auditor for the financial years 2024 and 2025 at the General Meeting of Shareholders of 3 April 2023. This approach will allow for a rigorous transfer of duties between the two auditors.
Up until 13 April 2022, the members of the Audit and Risk committee were Mr. R. Icke (Chair), Mr. A.E. Traas, and Ms. M.M. Jonk. From that date, the members were Mr. A.E. Traas (Chair) and Ms. M.M. Jonk. As per 28 July, Mr. A.S. Castelein was appointed to this committee. Expertise in financial reporting and the auditing of financial statements is embedded in the committee, as Mr. Traas trained as a chartered accountant. In 2022, the committee met with the Executive Board on four occasions. The external auditor also attended a number of meetings. The committee also consulted 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 Mrs. M.M. Jonk (Chair), and Mrs. 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.
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 discussions on the remuneration of the Executive Board members are based on the remuneration policy adopted by the General Meeting of Shareholders on 15 April 2020. The committee recommended not reviewing it in the agenda for the General Meeting of Shareholders, but to start the review of the remuneration policy of both the Executive Board and the Supervisory Board at the end of 2022. In the course of 2023, when the recalibrated strategy is established, there will be an opportunity to review whether adjustments are needed to the remuneration policy in light of the new strategy. The committee has commissioned the support of an external party for this review. In line with section 2:135a of the Dutch Civil Code, the remuneration policy will be presented to the General Meeting Shareholders in 2024 at the latest.
In its meetings, the committee discussed the remuneration of the Executive Board members. The remuneration for 2022 was in line with the aforementioned remuneration policy, for which we refer to the 2022 remuneration report in appendix 11.5 ‘Remuneration policy’ of Heijmans’ 2022 annual report.
The committee also discussed and advised the Supervisory Board on subjects including the targets set for the variable remuneration, the variable remuneration itself, the Bonus Investment Share Matching Plan and the fixed remuneration of the Executive Board members in 2022.
Finally, the committee also drew up the 2022 Remuneration report and discussed this with the Executive Board and the Supervisory Board. These discussions included the outcome of the advisory vote of the General Meeting of Shareholders with respect to the 2021 Remuneration report.
As Mr. G.A. Witzel, a member of the Supervisory Board since April 2020, stepped down as of 12 November 2021, the Supervisory Board decided to open a vacancy. The committee immediately started the procedure for the recruitment of a new supervisory director and commissioned an executive search agency for same. Following a careful procedure, at the end of May 2022 the Supervisory Board made a choice and decided to nominate Mr. A.S. Castelein for appointment as a member of the Supervisory Board for a term of 3.5 years at the Extraordinary General Meeting of Shareholders of 12 July 2022. The Works Council approved the nomination and the Extraordinary General Meeting of Shareholders has approved the appointment.
Composition of Supervisory Board
The Supervisory Board currently has five members. According to the retirement schedule, no members were due to retire from the board in 2022. Mr. A.S. Castelein was appointed to the Supervisory Board for a term of 3.5 years at the Extraordinary General Meeting of Shareholders on 12 July 2022, this being until the end of the annual General Meeting that will take place in 2026. You will find the current composition of the Supervisory Board, together with the particulars of the members and principal and other positions they hold in chapter 3, Management, of this annual report. All Supervisory Board members qualify as independent, as meant in Article 2.1.8 of the Dutch Corporate Governance Code.
Heijmans can look back at an excellent year, in which the Company continued to work on its strategic objectives and further strengthened the foundations of the Company. Both the Supervisory Board and the Executive Board continued to focus fully on the strict selection policy, optimal cost structure and social safety and sustainability. Everyone worked on improving the company’s results in a broad sense. The macro-economic circumstances created an extra challenge, which also goes for the nitrogen emissions problem. However, Heijmans is resilient and flexible, and can use its innovative capabilities to find solutions. The basis for structural success lies in a solid organisational structure, team excellence and professional and skilled employees who can find the right balance between entrepreneurship, return and risk. This is why in 2022 the Supervisory Board and the Executive Board once again devoted a great deal of attention to the Company’s HR policy and the development of its human capital.
Both the Supervisory Board and the Executive Board realise that the pandemic was very demanding on people, both at work and in their personal lives. Even the return to business as usual requires adjustment and effort, and our employees once again showed flexibility and commitment. The Supervisory Board therefore has a great deal of respect for the management and the good results recorded in 2022, but most of all for the employees who made this possible. Their hard work is the foundation of Heijmans’ good results!
The Supervisory Board wishes to express its gratitude to the Works Council, all employees and the Heijmans Executive Board for their significant contributions in the year under review.
Rosmalen, 17 February 2023
Sjoerd S. Vollebregt, chair
Martika M. Jonk, vice-chair
Ans J.W.M. Knape-Vosmer
Arnout E. Traas
Allard. S. Castelein