Royal Heijmans N.V. 2023 Remuneration report

This report, which must be regarded as a report in the sense of Article 2:135b Dutch Civil Code and in the sense of principle 3.4 of the Dutch Corporate Governance Code, explains the implementation of the remuneration policy for the Executive Board and the remuneration policy for the Supervisory Board. The policy was adopted by the Annual General Meeting of Shareholders (hereinafter: the AGM) on 15 April 2020 and is applicable in 2023. The remuneration policy of both the Executive Board and the Supervisory Board is published on the company’s website and is briefly explained below.

The report is structured as follows:

1. Basic principles of the remuneration policy for the Executive Board and Supervisory Board

2. Main points of the remuneration policy for the Executive Board

3. Implementation of the remuneration policy for the Executive Board in 2023

4. Main points of the remuneration policy for the Supervisory Board

5. Implementation of the remuneration policy for the Supervisory Board in 2023

6. Evaluation of remuneration policy and intentions for 2024

7. Advisory vote Annual General Meeting of Shareholders

1. Basic principles of the remuneration policy for the Executive Board and Supervisory Board

Heijmans’ mission is to create a healthy living environment. The company wants to be a trendsetter when it comes to innovation and works towards that mission on the basis of a distinctive vision and in-depth knowledge and skill. This strategy is aimed at making business processes better and smarter and at social responsibility with the aim of improving sustainability. This creates long-term value for all stakeholders and, in the form of sustainable homes and sustainable construction processes, makes a significant contribution to employment and the economy for society as a whole.

In order to determine and implement this strategy, Heijmans must be able to attract, motivate and retain expert directors and supervisory directors of the right calibre. The remuneration policy lays down the basis for that and as such is instrumental in realising the strategy and value creation. A basic principle of the remuneration policy is that it must not provide unwanted incentives for such things as behaviour focused on personal interests or taking risks that are in conflict with the company’s risk profile. In this light, part of the remuneration, namely the long-term variable remuneration and the Share Matching Plan, is focused on long-term commitment. Heijmans endorses the principles and best practice provisions relating to the remuneration of directors and supervisory directors as referred to in the Dutch Corporate Governance Code and follows those in its policy and in this report.

Following the drawing up of the policy, each year the Supervisory Board reviews the policy to assess whether it needs to be adjusted.

For the Remuneration Policy of the Supervisory Board and Executive Board, also see: https://www.heijmans.nl/nl/over-heijmans/corporate-governance/codes-statuten-en-reglementen/

2. Main points of the remuneration policy for the Executive Board of Heijmans N.V.

2.1 Remuneration level

Heijmans offers the members of the Executive Board a remuneration package that is balanced and fair, both from an internal perspective, in the sense that the remuneration reflects the required competencies and responsibilities relative to other job levels, and from an external perspective, in the sense that the remuneration is comparable to the pay for a comparable board position at similar companies. The Supervisory Board includes both the internal and external reference points in its determination of the remuneration level. The external reference point is the benchmark that has been carried out for the formulation of the policy. The internal reference point is determined by the remuneration level of, in particular, the layer below the Executive Board. The internal reference point is taken into account in the sense that a connection is made between the objectives for variable remuneration that apply to members of the Executive Board and members of the management layer below it. The remuneration of the management layer reporting to the Executive Board is determined on the basis of a benchmark that is also used to maintain a proper remuneration ratio between board members and management.

Scenario analyses were carried out and taken into consideration when formulating the remuneration policy.

2.2 Remuneration package

• an annual salary;

• a contribution to the accrual of a pension provision;

• short-term variable remuneration that rewards predetermined performance objectives achieved on an annual basis;

• long-term variable remuneration that rewards predetermined performance objectives achieved over a three-year period;

• the opportunity to participate in the Bonus Share Matching Plan, which encourages the accrual of an equity interest and encourages commitment to the company.

In addition, each member of the Executive Board receives an expense allowance and insurance contributions. They are also provided with a lease car.

2.3 Variable remuneration

Both the short-term and long-term variable remuneration are paid in cash. The short-term and long-term variable remuneration each amount to 50% of the annual salary if predetermined performance targets have been fully achieved in the relevant year. If the targets have been exceeded, the payment can rise to a maximum of 75%. If the performance remains below a predetermined minimum level, the payment is zero.

Conditions for the allocation of variable remuneration:

• If the company suffers a net loss in the year to which the variable remuneration relates, the unconditional allocation is deferred. If the company suffers another net loss in the following year, the right to variable remuneration lapses;

• The Supervisory Board has the right to a final review of every award of variable remuneration for reasonableness and fairness and may adjust the award.

• The entire variable remuneration is subject to a claw-back clause, which provides that any variable remuneration awarded can be reclaimed if it emerges after the fact to have been awarded on the basis of incorrect information.

2.4 Bonus for long-term participation in shares

Members of the Executive Board are free to choose to participate in the Bonus Investment Share Matching Plan aimed at motivating directors for the longer term and bind them to the company. As part of this plan, they can invest up to 50% of (the net equivalent of) the short-term variable remuneration they receive in any given year in (depositary receipts for) shares in Heijmans. The (depositary receipts for) shares are blocked for three years after purchase. Provided they hold these (depositary receipts for) shares for three years and are still in office at the end of this period, the company will award one bonus depositary receipt, a so-called matching share, for every depositary receipt invested in. The matching shares are blocked for two years after they have been awarded.

3. Implementation of the remuneration policy for the Executive Board in 2022

The Remuneration and Appointments committee consists of Ms Martika Jonk, Chair, and Ms Ans Knape-Vosmer. The Remuneration Committee held six meetings in 2022, at which the usual annual items such as remuneration for the Executive Board members, the targets in the context of the variable remuneration, the variable remuneration itself and the Bonus Investment Share Matching Plan were discussed. Current (legal) developments in the field of remuneration in general were also topics of discussion.

The current remuneration policy was approved by the AGM in 2020. In accordance with Art. 2:135b of the Dutch Civil Code, the policy should be submitted to the AGM in 2024 at the latest (whether or not in amended form). The committee started reviewing the remuneration policies of both the Supervisory Board and the Executive Board in late 2022. In 2023, there was frequent and intensive contact between the committee and the Supervisory Board on the Supervisory Board remuneration policy and between the committee, the Supervisory Board and the Executive Board on the Executive Board remuneration policy. The Supervisory Board decided in early 2024 on the remuneration policy for the Supervisory Board and the Executive Board to be presented to the AGM.  

In its application of the Executive Board remuneration policy in 2023, the Remuneration and Appointments Committee assessed how the Executive Board implemented the company’s strategic, financial and sustainability objectives.

The assessment of the targets set takes into account not only general, economic circumstances, but also construction industry-specific circumstances, such as the nitrogen issue, which is outside the company’s sphere of influence.

On the advice of the Committee, the Supervisory Board has decided to award both short-term and long-term variable remuneration to the members of the Executive Board. This award is explained in more detail in section 3.3 of this chapter.

3.1 Table with an overview of remuneration by component

The gross fixed and variable remuneration paid in 2022 and 2023 and the amounts to be paid in 2024 to the members of the Executive Board are as follows:

• 1The gross fixed remuneration to be paid to the members of the Executive Board in 2024 will change subject to the approval of the remuneration policy by the General Meeting of Shareholders on 30 April 2024.

The breakdown of the expenses per member of the Executive Board is as follows:

For a more detailed explanation of the above table, see note 6.29 to the Financial Statements of this report.

3.2 Fixed Remuneration

In 2023, the fixed remuneration of the members of the Executive Board was not adjusted compared with 2022.

The accrual of Ton Hillen’s old-age, survivor’s and orphan’s pension is in accordance with the conditionally indexed average salary sector pension fund scheme, in which pension is accrued on the gross fixed remuneration up to € 68,005 and payment starts at the age of 67. For the portion of the salary that exceeds this amount, up to € 128,810, this Executive Board member participates in a defined contribution scheme. Mr Hillen also receives compensation for the discontinuation of the early retirement top-up and the pension accrual on the salary part that exceeds € 128,810, as well as compensation of € 50,232 for the loss of indexation in the Delta Lloyd average pay scheme. In 2023, he received pro rata compensation (until the age of 62) for the discontinuation of the early retirement top-up. This compensation scheme has thus stopped. In deviation from what is stated above, Gavin Van Boekel receives fixed compensation for the accrual of a self-managed pension scheme.

There are no early retirement pension schemes for the members of the Executive Board.

The expense allowance, including car costs, social contributions and the costs of the Share Matching Plan, are reported in the table in Section 3.1 of this chapter. For a more detailed explanation, please see the notes to the 2023 Financial Statements under Related parties.

3.3 Variable remuneration

The variable remuneration recognises the achievement of the predetermined performance targets over the year to which the report relates or over a period of three years. For both the short-term and the long-term variable remuneration, half of the award depends on quantitative financial objectives that are essential for the implementation of the strategy and half depends on the qualitative objectives that reflect progress in the implementation of the strategy.

At the start of each year, the Supervisory Board sets a minimum, target and maximum level for the various objectives. At the end of the year or at the end of the three-year period respectively, it is assessed to what extent these targets have been achieved and what amount is awarded on that basis.

The Supervisory Board selects the most relevant of the financial performance criteria at that time from a list of four included in the remuneration policy. The levels are determined in hard amounts or percentages. The qualitative criteria are derived from the ‘Better, Smarter and More sustainable’ strategy and are determined in consultation with the Executive Board, whereby the Supervisory Board specifies the targeted level of progress and what it applies as the minimum and maximum.

The Supervisory Board assesses the extent to which the qualitative short-term and long-term targets have been achieved on the basis of a written substantiation for each objective submitted by the Executive Board. That substantiation can be a KPI, bold statement, a description of the status of a particular target with illustrative examples or a combination of these. Because the information on certain targets qualifies as business-sensitive information, this report does not include a description and score for every qualitative target.

3.3.1 Short-term variable remuneration (annual remuneration)

For the year 2023, the Supervisory Board chose the underlying EBITDA and the average net debt as the most relevant short-term financial targets. The target levels are included in the accompanying table, which shows that the achievement of these targets was between on-target and maximum, resulting on balance in a pay-out on the financial targets of 31.9% of the fixed agreed annual salary.

The short-term qualitative targets are focused on the implementation of the Better, Smarter and More sustainable strategy, with a number of specific targets, such as reducing the number of accidents, increasing the number of internal appointments to key positions, the production of timber-frame homes in the context of developing industrial-scale construction and the reduction of CO₂ emissions.

The Supervisory Board has assessed performance in relation to the above-mentioned qualitative targets on the basis of KPIs, other statistical information and explanatory information provided by the Executive Board, among other things. The Supervisory Board noted that the safety targets were not achieved and that for a number of targets, including the percentage of women in key positions and the number of timber-frame homes produced, the score was low. On the other hand, the score was high for internal appointments to key positions and the reduction of CO₂ emissions. On balance, the qualitative targets were achieved at a minimum level, which resulted in a pay-out of 20.1% of the agreed fixed annual salary.

The financial and qualitative performance achieved resulted in a total pay-out percentage of 52% of the agreed fixed annual salary.

3.3.2 Long-term variable remuneration (three-year remuneration)

Award 2021-2023

The objectives for the long-term variable remuneration for the period 2021-2023 were assessed after this period.

A single financial target applied to 2023 in the above-mentioned three-year period:

A rolling average growth rate of 5% in the earnings per share over three years.

This target was achieved at a maximum target level, which on balance results in a pay-out of a total of 37.5% on the financial target.

One qualitative target was set for the three-year period 2021-2023, namely that 50% of all externally published bold statements from 2018 with a deadline on or before 2023 have been realised.

The Supervisory Board has determined on the basis of, among other things, KPIs, other numerical information and explanations by the Executive Board that the score for this target is 69%, which means it has been realised above the maximum.

On balance, the above results in a pay-out on the qualitative targets of 37.5% of the agreed fixed annual salary.

The financial and qualitative performance achieved results in a total pay-out percentage of 75% of the fixed agreed annual salary.

The following applies to the above table. The Supervisory Board sets the on-target level for each target and the extent to which these targets were or were not met is determined at the discretion of the Supervisory Board. This methodology does not change the composition of the long-term variable remuneration: this can be a maximum of 75% of the agreed fixed salary and the financial and qualitative targets each still account for 50% of the overall target.

3.4 Bonus Share Matching Plan

As part of the Bonus Share Matching Plan, the Executive Board members are given the opportunity to use a maximum of 50% of the short-term remuneration awarded to them to buy depositary receipts for shares in Heijmans. The so-called matching shares are awarded after three years provided that the participant is still in office at that time. Ton Hillen has participated in the plan since taking office, Gavin van Boekel did so for the first time in 2022. Both members of the Executive Board purchased depositary receipts for shares in 2023.

Once the matching share have been awarded unconditionally, these are then subject to a lock-up period of two years.

In April 2022, Ton Hillen was awarded 13,000 matching shares pursuant to his purchase in April 2020. The lock-up period of these matching shares expires in April 2025. In April 2023, he purchased 6,000 depositary receipts for shares. These shares will be matched in April 2026, provided the conditions are met. Gavin van Boekel purchased 4,750 depositary receipts for shares in April 2023, which will be matched in April 2026, provided the conditions are met.

3.5 Remuneration ratios and result development

The table below shows the data in accordance with Article 2:135b(3)(e) Dutch Civil Code.

Pay Ratio

The term remuneration ratios according to best practice 3.4.1 sub iv of the Dutch Corporate Governance Code is understood to mean the ratio between (i) the total annual remuneration of the CEO and (ii) the average annual remuneration of the company’s employees. The table below shows the remuneration ratios in accordance with the aforementioned best practice for the financial year 2023 and the four preceding financial years. The pay ratio for 2023 can be expressed as 1:18.2 (2022: 1:18.5).

For comparison purposes, the pay ratios for the financial years 2019 through 2022 have been recalculated based on the calculation methodology of best practice 3.4.1 sub iv of the Dutch Corporate Governance Code.

The Remuneration and Appointments Committee takes the pay ratios into account in the proposals it puts to the Supervisory Board in relation to the individual pay packages for Executive Board members.

4. Main points of the remuneration policy for the Heijmans N.V. Supervisory Board

The remuneration policy for the Supervisory Board as it applied in the 2023 financial year was adopted by the AGM on 15 April 2020. The aim of the policy is to enable the company to attract experienced and expert supervisory directors. That requires a competitive pay package. In accordance with best practice 3.3.1 of the Dutch Corporate Governance Code, the remuneration of supervisory directors must also reflect the time commitment and responsibilities of their position. With the supervisory directors’ independent position in mind, their remuneration does not depend on the company’s results and the internal pay ratio is less relevant.

In order to attune the remuneration to the time commitment and responsibilities:

• the chair and vice-chair of the Supervisory Board receive a higher fixed base compensation than (ordinary) members;

• supervisory directors receive compensation for the work they do in committees on which they serve, in addition to the base compensation that all members receive;

• committee chairs receive higher committee compensation than ordinary committee members.

In accordance with the remuneration policy adopted on 15 April 2020, the following amounts apply with effect from 2023 (incl. indexation as at 1 January 2022):

This remuneration is adjusted annually as of 1 January on the basis of the Statistics Netherlands (CBS) all-items consumer price index.

For the Remuneration Policy of the Supervisory Board, also see: https://www.heijmans.nl/nl/over-heijmans/corporate-governance/codes-statuten-en-reglementen/

5. Implementation of the remuneration policy for the Supervisory Board in 2023

In the 2023 financial year, the Supervisory Board members received a fee in accordance with the policy set out in Section 4 of this report. The allocation of duties was as follows in 2023:

• Sjoerd Vollebregt, Chair of the Supervisory Board.

• Ms Martika Jonk, Vice-chair of the Supervisory Board and member of the Audit and Risk Committee. Chair of the Remuneration and Appointments Committee.

• Ms Ans Knape-Vosmer, member of the Supervisory Board and member of the Remuneration and Appointments Committee.

• Arnout Traas, member of the Supervisory Board and Chair of the Audit and Risk Committee as of 13 April 2022.

• Allard Castelein, member of the Supervisory Board and member of the Audit and Risk Committee.

From 2019 through 2023, the members of the Supervisory Board were compensated as follows:   

6. Evaluation of the remuneration policy and intentions for 2024

The Remuneration and Appointments Committee reviewed the remuneration policies for the Executive Board and the Supervisory Board approved by the AGM in April 2020. A thorough review of the Supervisory Board and Executive Board remuneration policies was started at the end of 2022. The committee did a good deal of preparatory work and submitted a proposal to the Supervisory Board for the adjustment of the remuneration policies for the Supervisory Board and Executive Board. Both the Supervisory Board and the Executive Board consider it important that the remuneration of both bodies is in line with social developments in the field of remuneration and, as regards the remuneration of the Executive Board, with sustainable long-term value creation. The remuneration policies of both the Supervisory Board and the Executive Board must be submitted to the AGM every four years, in accordance with Article 2:135a of the Dutch Civil Code. As the current policy was adopted by the AGM in 2020, the revised policy will be submitted to the AGM for approval on 30 April 2024.

Intentions for 2024

The remuneration of both the Supervisory Board and the Executive Board was benchmarked against a reference group. This showed that the current remuneration of both the Supervisory Board and the Executive Board is below the median. As a result, the basic premise for both boards was that remuneration should move towards the median of the reference group. The composition of the Executive Board’s remuneration will be adjusted to bring it more in line with the market. The agenda for the AGM on 30 April 2024 provides further details on the proposed changes.

Subject to the approval of the revised Executive Board remuneration policy by the AGM on 30 April 2024, financial and qualitative targets for short-term and long-term variable remuneration will apply for 2024. Short-term financial targets may include underlying EBITDA and average net debt. Short-term qualitative targets should contribute to the company’s foundation or strategy execution. Examples might include targets in the areas of safety (TRIR), sustainability (reduction of CO₂ scope 1 & 2 emissions) and embedding Van Wanrooij’s management.

Long-term financial targets may include earnings per share (EPS) and total shareholder return (TSR). As with short-term objectives, long-term qualitative objectives should contribute to the company’s foundation or strategy execution. These could include targets in the areas of sustainability (reduction of CO₂ scope 3 emissions, meeting the Water Framework Directive) and producibility (development and production of concept homes). Targets are not disclosed in advance due to the sensitivity of the information involved. The remuneration report for the 2024 financial year will report on the extent to which the targets have been achieved.

7. Advisory vote Annual General Meeting of Shareholders report for previous financial year

The 2022 remuneration report was presented to the AGM for an advisory vote on 3 April 2023, in accordance with the provisions of Article 2:135b Dutch Civil Code, with the proposal to adopt the 2022 remuneration report. The AGM subsequently adopted the 2021 remuneration report by a majority of 99.79% of the votes cast. In accordance with Article 135b(2) Dutch Civil Code, the company has taken this outcome into account in the preparation of this remuneration report in the sense that it has deduced from the outcome that the report was satisfactory and that it established that no questions were raised, or comments made, in response to the remuneration report during the AGM.

Rosmalen, 8 March 2024