Last year was a momentous one for Heijmans in many ways. The grand celebration of our centenary was one wonderful milestone. It was with pride and gratitude that we were also able to add the Royal predicate to our company name. This is a crowning achievement for us and for the many generations who went before us. We have worked with passion and conviction to make the Heijmans mark visible right across the country in those 100 years. And as creators of the healthy living environment, we are now determined to continue doing so. In addition to all of this, the acquisition of Van Wanrooij’s development and construction business was another significant milestone for Heijmans in 2023.
Good performance
The ongoing instability on the world stage also had a negative impact on confidence in the economy last year. Uncertainty about energy prices, fluctuating interest rates, the reliability of the supply of materials and the rising cost of living determined the mood in both boardrooms and among consumers. In our industry, we were also confronted with persistent political uncertainty on topics relevant to us in the construction industry and the housing sector.
We have exerted ourselves with passion and conviction to make the hand of Heijmans visible throughout the country over those 100 years. As creators of the healthy living environment, we are determined to continue doing so.
In that light, Heijmans performed well in 2023, thanks to the efforts of all our employees, who helped us achieve these results. For example, we managed to limit the expected decline in the number of new-build homes sold. Calculated in terms of the numbers of homes sold, we saw only a very slight decline compared with 2022. However, due to lagging effects from lower sales in previous years, Property Development‘s revenue and result were substantially lower. But thanks to the strong figures we achieved at Building & Technology and Infra, Heijmans still posted organic revenue growth of 10% with an unchanged result. Underlying EBITDA increased by € 21 million to € 147 million, including Van Wanrooij. That includes the release of the € 14 million provision in the so-called Wintrack II case, as a result of the positive final ruling by the Board of Arbitration. We have now been able to close this matter in a positive way. We are optimistic about the immediate future. Our order book increased further to € 2.8 billion and contains a lot of excellent high-quality contracts. We are particularly proud of our long-term relationships with regular clients in the Non-Residential and Infra sectors, which have resulted in a growing share of recurring business.
100 years of the Heijmans mark
The Heijmans mark is on full display in the Dutch built environment. We know how to adapt flexibly and effectively to market conditions and external influences. It is thanks to that adaptability and agility that Heijmans can look to the future with confidence. With entrepreneurship, a focus on solutions and innovation, we work in a targeted way on creating a healthy living environment. This is teamwork par excellence, to which all Heijmans employees contribute. We succeed in engaging the right people with an eye for each other. They find it stimulating to have a positive impact on society and value Heijmans as a committed and social employer. We devoted extensive attention to all these characteristics that are so typical of Heijmans during the festivities around our anniversary. There was only one conclusion at the closing party with our colleagues and their partners: Heijmans is as solid as a house and the yellow heart beats in many people.
In addition to Heijmans‘ centenary in 2023, we also celebrated another milestone. It was also 50 years ago that Heijmans formalised employee participation. An important moment that we reflected on last year. After all, the Works Council is a valuable delegation of all Heijmans colleagues and an important body for the Executive Board in its connection with the organisation. They are an extra pair of eyes and ears to safeguard the Heijmans culture.
Safety
At Heijmans, we have long been committed to making work in the construction industry safer. Broad awareness of this and a shared sense of urgency are our top priority. On the so-called Safety Culture Ladder (SCL), we have now reached level 4 (of 5 in total) for the whole of Heijmans - excluding recently acquired companies - for which we have received the corresponding certification. Naturally, we are proud of this, but there is still work to do. We were deeply affected by a traffic accident with one fatality on the Gorinchem - Waardenburg (dyke reinforcement) consortium project in 2023, and this reminded us once again of the absolute necessity for us to continue to improve safety. We are therefore putting all our focus on preventing dangerous situations, with the emphasis on behaviour, plus the tightening of and compliance with procedures.
Housing market developments
We saw the first signs of recovery in the housing market back in the fourth quarter of 2023. We are counting on the construction of good, sustainable and affordable housing to increase again in the near future. After all, the growing housing shortage and demographic projections leave us with no other choice. Heijmans is well equipped to deal with a strong recovery in the housing market. The acquisition of industry peer Van Wanrooij as of 5 September 2023 strengthens our position in the housing market. As a result, our working inventory in property development land holdings has almost doubled from approximately 15,000 to around 30,000 new-build homes. At Heijmans and Van Wanrooij, we will initially focus on understanding and learning from each other‘s business models and success factors. In 2024, we will focus on more cooperation and reciprocal knowledge exchange. For the time being, Van Wanrooij will continue to serve the housing market as a stand-alone company within Heijmans.
With the opening last autumn of our own timber-frame housing production plant in Heerenveen, we can also take another step towards modular and industrial-scale construction for some of our projects. This will enable us to deliver future-proof, sustainable and affordable homes quickly and on a large scale in the coming years. Affordability and sustainability remain important principles when developing homes. The Horizon concept has unprecedented possibilities in terms of choice and variation. There is no single formula for success, and not every area needs the same range of homes. We therefore take into account the housing wishes and needs of different target groups. However, one thing all our housing projects will have in common is that we will always look at the opportunities for nature-inclusive and climate-adaptive construction. We are increasingly successful at this; this makes a significant contribution to a healthy living environment for people, animals and nature.
Infrastructural projects
Heijmans also sees attractive opportunities and possibilities in the area of infrastructural project, which enable us to leverage our extensive expertise and experience. From a government perspective, the construction of new roads is increasingly giving way to the replacement and renovation of existing infrastructure. With our Infra business area, we successfully competed for various replacement and renovation projects last year. We are confident that demand for our expertise and quality in this field will remain high for the foreseeable future.
We recently completed several infrastructure projects with good results. The renovation of the Piet Hein tunnel, for example, and the major maintenance works on the Zwanenburg runway at Schiphol Airport. Other long-term projects fall within the broader framework of the government‘s flood protection programme and the energy transition, and as such continue to receive our full attention. One example is the sustainable reinforcement of the Lauwersmeer dyke, in which we are using emission-free equipment as much as possible. For energy company TenneT, Heijmans is working on the expansion and reinforcement of the Dutch high-voltage grid. We want to continue to expand our activities in the energy chain and are also looking at growth opportunities, like our acquisition of Dynniq in 2022. To this end, in addition to the design, construction and maintenance of energy systems, we are now also focusing on their operation in cooperation with partner companies.
Improving sustainability and social responsibility
We take our social responsibility extremely seriously. Improving sustainability plays a leading role on this front and has now been an integral part of our strategy for several years. This is visible in every aspect of our work. In 2023, we also managed to make progress on the crucial themes of climate, circularity, biodiversity and nature-inclusive construction.
We want to remain at the forefront of the ongoing green transition, and this is one of the reasons why we invested € 12 million in Infra-related electric equipment last year. We welcome the increasing focus on sustainability in tender principles according to the Most Economically Advantageous Tender (Dutch: EMVI). This is essential if we are to make the required investments in sustainable construction economically viable too. In addition, we are seeing an increase in the generation of data throughout the chain and that certainly includes data on every aspect of sustainability. We find this development encouraging, as it will enable us to realise our sustainability ambitions.
Our ambition is to work entirely emission-free by 2030, i.e. without emitting CO2 as referred to in scope 1 & 2. That is quite a task, and not something we can achieve alone. For instance, the availability of electric construction equipment is still inadequate, with grid congestion also an inhibiting factor for further investment. However, we are at the front of the queue as soon as deliveries are available again, and we are looking for creative solutions to convert our own equipment and make it more sustainable and to provide our building sites with charging capacity. A growing number of clients rightly set sustainability requirements when commissioning their projects.
We are directly affected by global climate change in our operational areas. We are seeing periods of extreme water surplus alternate with increasing drought and rising temperatures. This obviously has a major impact on the built environment and the way we build. For example, we are increasingly looking at ways to capture and store water, as we did in the Hart van Zuid project in Rotterdam. This is helping us to transform a ‘petrified’ city into an adaptive city. In this crucial area, we prefer to look for cooperation, as we did for instance in our recent affiliation with the WaterBank platform.
Political choices
The political landscape of the last few years has not been conducive to spatial development in the Netherlands. We hope that a new government will make clear choices about where we can live, where economic growth takes place, and where agriculture and nature have a place. The Netherlands needs a clear spatial framework, including solution-based policies for the nitrogen emissions problem. As far as Heijmans is concerned, progress is being made in drawing up a clear policy for public housing and spatial planning. It is fundamental that we quickly have concrete suburban planning capacity for housing construction, so that we can make rapid progress on the enormous challenge of building at least 900,000 homes, which is a task that we, as the construction sector, need to realise by 2030 at the latest. We call on society to become more selective about objecting to every initiative, which is stifling construction, plus we should be acting more in the interests of society as whole rather than the interest of individuals. We also call on politicians to make haste to speed up and make the building permit process more efficient. This is also essential if we are to address the serious housing shortage. We would like to continue to make a pro-active contribution on this front.
The scarcity in the housing market remains, the result of years of government policy that focused on inner-city construction, primarily of apartment complexes. This government policy has resulted in a one-sided supply of mostly large-scale, inner-city projects with long construction times and difficult business cases. Increasing suburban town planning capacity and shortening spatial planning procedures are essential to arrive at a structural solution to the scarcity in the housing market. There is certainly a demand for affordable housing, but we should not lose sight of the need to increase the supply of homes to boost housing market mobility. In say seven to ten years’ time, today’s first-time buyers will want to move up on the property ladder. This is why our plea is to build for these starters, but not to lose sight of mobility in the housing market in the near future.
Completion of 2018 – 2023 strategy
In 2023, we completed our 2018 - 2023 strategy. As part of this strategy, we formulated a number of so-called bold statements, themes with which we wanted to set a clear marker on the horizon and achieve real movement. We measure our progress on these fronts using the three axes that make up our business strategy: better, smarter, more sustainable. The goal was to achieve 100% movement on all bold statements and to achieve at least half of the ambitions formulated in those statements. We had managed to achieve 69% of our targets by the end of 2023.
Focus on the future
Well before we were supposed to complete the 2018 - 2023 strategy, we set to work on formulating a new vision of the future as the basis for a recalibrated strategy that runs through 2030. Heijmans wants to make a meaningful contribution to the development of the Netherlands. Our refined strategy is based on five strategic pillars: Well-being, Sustainability, Connection, Makeability and Team. Each pillar zooms in on what Heijmans wants to achieve over the period to year-end 2030, how we will do this, and with whom. This also makes it clear in which areas Heijmans wants to take the lead to work with other players to create a healthy living environment. Due to our acquisition of Van Wanrooij, we need more time to quantify the new principles. We expect to complete that process in the second quarter of 2024, and we will then share the results with the market.
Outlook 2024
Thanks to our strong positioning, we expect to outperform the outlook for the market as a whole. We start 2024 with a well-filled order book, which is growing again with rising profit potential. The outlook for Building & Technology and Infra is certainly favourable. Thanks to the pick-up in housing sales especially in suburban areas, and our confidence in a healthy housing market, we are also optimistic about Property Development and Van Wanrooij. The acquisition of Van Wanrooij has given us an even stronger position in this market. Partly due to this acquisition, we will record higher revenue in 2024, with the € 2.5 billion mark in sight. We are targeting an underlying EBITDA margin of at least 6.5%.
We are looking forward to continuing our work on the creation of a healthy living environment in 2024, together with all our colleagues, our clients, suppliers, subcontractors and partners. We want to create an environment where people can live, work and connect pleasantly. Because that is the purpose of everything we do. Our yellow heart will also continue to beat in the year we turn 101. That‘s a wonderful thought!
Ton Hillen
CEO Royal Heijmans N.V.
8 March 2024