6.22 Interest-bearing loans and other financing liabilities

Heijmans has various financing arrangements in place, both at group and project level. In terms of size, the most material is the syndicated bank financing facility. This facility was expanded and extended in 2023 with a view to and immediately prior to the acquisition of Van Wanrooij. The original financing facility of € 117.5 million was committed until the end of 2025. The new financing facility has been extended by € 140 million to € 257.5 million and runs until 1 September 2028 and consists of the following components:

• Term Loan amounting to € 80 million repayable on a straight-line basis over four years, with € 75 million remaining at the end of 2023 (see 6.22a).

• Revolving credit facility in the amount of € 177.5 million, € 30 million of which is in the form of a current account facility (see 6.22b).

Established securities

At the time of the refinancing in 2023, no changes were agreed to the collateral package provided to financiers. These securities are recorded in pledges, with an intercreditor agreement regulating in what situations and in what way securities can be recovered. As long as Heijmans continues to comply with the banking covenants, including the financial covenants (see 6.22c), these situations do not arise.

The securities established consist of pledged receivables, bank accounts and any insurance proceeds. This criterion only applies insofar as Heijmans is the 100% owner of the companies concerned and, measured by revenue, at least 95% of the revenue must be represented by the subsidiaries that co-sign the financing facility (the so-called guarantor cover). Finally, the financiers have established mortgage securities on a number of historical land holdings with a carrying amount of € 42 million at year-end 2023. These securities will be released as the land holdings are developed.

The total breakdown of interest-bearing loans and other financing liabilities is shown below:

x € 1,000

x € 1,000

6.22a Term loan

As a result of the acquisition of Van Wanrooij, Heijmans moved from a net cash position to a net debt position on balance. In concrete terms, this meant that Heijmans had to use the syndicated bank financing facility again after several years. For a construction company, the extent to which it has to drawn on financing very much depends on the working capital development, which can fluctuate greatly in the course of a single year due to seasonal patterns. The refinancing related to the acquisition involved two distinct components: a Term Loan and a revolving credit facility, as the revolving credit facility offers more flexibility to cope with the fluctuations in working capital. For the part expected to be drawn down throughout the year, Heijmans concluded an acquisition financing facility in the form of a Term Loan.

The Term Loan was provided in equal parts by ABN Amro, ING and Rabobank. The Term Loan had a size of € 80 million at acquisition and is repayable quarterly on a straight-line basis over four years. Heijmans made the first repayment on 31 December 2023, bringing the outstanding amount at year-end 2023 to € 75 million, less € 1 million in capitalised financing expenses. In terms of interest conditions, the three-month Euribor base rate plus a margin surcharge depends on the outcome of the leverage ratio and lies between 2.0% and 3.0% (margin grid). If the Leverage ratio is less than 0.5 - which was the case prior to the acquisition - the lowest step of the grid applies. In 2023, as well as in 2024, the outcome of the Leverage ratio is expected to be in a range of 0.5 to 1.5. The margin in that case will be 2.25% or 2.50%. Heijmans may make voluntary early repayments on the Term Loan at any time.

6.22b Revolving credit facility

The revolving credit facility amounted to € 177.5 million at year-end 2023. This amount is fully committed until 1 September 2028 on the understanding that from 30 September 2027 the total commitment will be reduced in four quarters on a straight-line basis to € 150 million. Of this facility, € 30 million has been provided in the form of a committed current account facility with ING Bank. ABN Amro Bank and Rabobank (each) provided € 52.5 million of the remainder of the revolving credit facility, while ING Bank provided € 42.5 million. A feature of the revolving credit facility (and thus the current account facility) is that the facility can be used according to need. The revolving character ensures that repaid amounts are available again in the future within the limits of the total commitment, enabling Heijmans to absorb working capital fluctuations during the year.

In terms of interest conditions, the basic interest rate is one-month Euribor plus a margin that depends on the outcome of the leverage ratio and lies between 1.9% and 2.9%. In 2023, and expected also in 2024, the margin premium will be 2.15% or 2.40%. The unused portion of the revolving credit facility is subject to a commitment fee linked to the margin payable. The revolving credit facility can be voluntarily reduced prematurely at any time.

• The margin grid is linked to a bonus/malus system of plus or minus five basis points on the basis of four sustainability criteria. In effect, Heijmans is raising its sustainability ambitions by committing to improvements in terms of reducing (CO₂) emissions, the number of accidents (drop in IF rate), the average CO₂ emissions of the homes it delivers, and increasing the share of electric cars in its total fleet. Heijmans had achieved two of the four criteria by year-end 2023, which means the company obtained a malus of 2.5 basis points and that at the start of 2024 the applicable margin was set at 212.5 basis points for the revolving credit facility and at 222.5 basis points for the Term Loan. The targets that were not achieved in 2023 was the CO₂ reduction for Heijmans as a whole and the safety aspect. Heijmans’ target was a 25% reduction in CO₂ emissions compared to 2020 in terms of absolute emissions, and this came in just slightly lower at 24.6%. The IF rate as a measure of safety was higher in 2023, while Heijmans was targeting a reduction.

• It should be noted that at the time of the acquisition of Van Wanrooij, Heijmans did not yet have sufficient insight into Van Wanrooij’s score in terms of the agreed sustainability criteria. For that reason, it was agreed that Heijmans has until the annual results for 2024 to map out these scores, and on that basis to agree adjusted sustainability objectives with the banks, including Van Wanrooij's contribution.

6.22c Bank covenants related to the syndicated facility

The syndicated facility is subject to several covenants, consisting of information obligations, general obligations and minimum financial requirements (so-called financial covenants). If Heijmans fails to meet these financial covenants, the facility is repayable on demand. The financial covenants are measured on the basis of the reported figures based on IFRS. Certain matters are subject to adjustments, for instance if project financing is on a non-recourse basis. The covenants will also be adjusted for IFRS 11, which means that Heijmans will not use the equity method for joint ventures but will instead report financial results on the basis of proportionate recognition.

The covenants are subject to a solvency ratio, which is measured at the end of each year to check whether this meets the required minimum of 21%. This is the solvency ratio reported in the annual report on the basis of capital base. As the cumulative financing preference shares B were fully redeemed (in 2022), the capital base is the same as group equity. The covenants are also subject an interest cover ratio, calculated at the end of each quarter and a minimum value of five is required. In addition, a leverage ratio is also calculated each quarter and this must not exceed three. The interest cover ratio is calculated by dividing EBITDA (earnings before interest, tax, depreciation and amortisation) by net interest expenses, with both criteria calculated over the past 12 months. The leverage ratio is obtained by dividing net debt by EBITDA, with both criteria calculated over the past 12 months. The definitions of these items include several adjustments to the reported figures, as agreed with the bank consortium in the credit agreement. Significant adjustments compared with the net debt for accounting purposes are an increase in respect of the net debt from joint ventures and certain project financing arrangements where there is no recourse against Heijmans. Significant adjustments compared with the EBITDA for accounting purposes are related to the capitalised interest, results related to business units that have been sold off, fair value adjustments, restructuring costs and EBITDA results from joint ventures. The main adjustment to the net interest expense for accounting purposes is related to the exclusion of interest expense on non-recourse project financing. Heijmans operated well within the agreed covenants throughout the year.

Compliance with the covenants is actively monitored within Heijmans. Based on the 2024 business plan and its solid financial starting position at year-end 2023, the Group expects to be able to continue operating well within the covenants in the year ahead, the key parameters here being the developments in terms of EBITDA and net debt. Changes in the net debt position are a function of fluctuations in working capital, which are due to seasonal effects and fluctuations driven by specific projects. The working capital requirement is generally higher during the course of the year than at year-end, and this can lead to an increase in net debt by as much as € 25-75 million. Heijmans funds these fluctuations in working capital via the headroom offered by the revolving credit facility.

6.22d Project financing

Project financing arrangements have been entered into in connection with specific (property development) projects. This pertains to property development projects at both Heijmans Property Development and Van Wanrooij Projectontwikkeling for a total amount (pro rata share of Heijmans) of € 12.2 million. This item also includes the recognition of a liability to a joint venture producing asphalt. The project financing repayment schedules are usually related to the progress on projects. Project financing generally expires no later than the date of completion and/or sale of the projects. Recourse is limited to project assets only, including future positive cash flows from these projects, as well as the contracts and mortgage collateral related to the project / project company in most cases. In principle, Heijmans N.V. (or group companies belonging to it) does not issue parent company guarantees for the payment of instalments and/or interest for any of project financing facilities. However, this is the case for a project financing facility in a limited partnership that Heijmans acquired with the acquisition of Van Wanrooij. At year-end 2023, Heijmans’ share in these financing facilities amounted to € 1.5 million and this is expected to be repaid in full in the course of 2024.

6.22e Cumulative preference financing shares B

In 2022, Heijmans effected a phased redemption of the cumulative financing B preference shares, the outstanding amount of which still stood at € 31 million at 31 December 2021. On 14 April 2022, € 15 million was redeemed based on the redemption agreements linked to the result appropriation for the previous financial year. Based on the strong balance sheet ratios and in the context of a more efficient allocation of capital, Heijmans subsequently proceeded to effect a voluntary, penalty-free redemption of the remaining share premium reserve on 28 April 2022 (upon the announcement of the first quarter results) amounting to € 16 million. The repurchase and cancellation of the cumulative financing B preference shares required the approval of the general meeting of shareholders, which was granted on 12 July 2022. On 13 July 2022, Heijmans fully redeemed the cumulative financing B preference shares by paying the nominal value and settled all remaining interest obligations. The shares concerned were subsequently cancelled, upon which the financing structure lapsed.

6.22f Other liabilities

The other liabilities pertain to financing arrangements provided by related parties in a number of specific land holdings. As security for these financing arrangements, amounting to € 1.4 million (2022: € 2.2 million), Heijmans has provided guarantees in respect of repayments/payment of interest.

6.22g Average interest rate

• ** The disclosed percentage is exclusive of amortised refinancing costs and fees.

6.22h Movements in interest-bearing liabilities

The movements in the interest-bearing liabilities were as follows:

x € 1,000

x € 1,000