Ballast Nedam Annual Results 2008: Results in Line With Expectations
- Operating result in line with expectations: EUR 42 million (2007: EUR
42 million)
- Higher revenue: EUR 1.4 billion (2007: EUR 1.3 billion)
- Increase in order book: EUR 1.7 billion (2007: EUR 1.4 billion)
- Net result lower: EUR 24 million (2007: EUR 27 million)
- Forecast for 2009: lower operating result of approximately EUR 25
million
Key figures
EUR 1 million 2008 2007
Revenue 1 426 1 270
EBIT 42 42
Margin 2.9% 3.3%
Profit before taxation 31 38
Net profit 24 27
Order book 1 667 1 438
Shareholders' equity 168 172
Capital ratio 17% 19%
Net financing position (41) (63)
Results in line with expectations
Ballast Nedam achieved a revenue of
result of
announced in
on higher revenue. The result was achieved in a year in which market
conditions changed substantially. The first three quarters of 2008 saw sharp
price rises from suppliers and subcontractors, with consequently
disappointing results from the construction companies. The property market
came almost to a standstill in the fourth quarter of 2008, which will have a
negative impact on the result in 2009 and beyond. The margin declined from
3.3% to 2.9%. 95% of the revenue was earned in
Financial results
Revenue
x EUR 1 million 2008 2007
Infrastructure 708 675
Building and Development 735 601
1 443 1 276
Other / elimination (17) (6)
Total 1 426 1 270
Revenue rose by 12% to EUR 1 426 million.
Infrastructure
The revenue of the Infrastructure division was
contribution to this 5% rise was the higher revenue from major projects.
The Infrastructure division again improved its operating result. The
result was in line with the forecast, and was satisfactory in view of the
deterioration in market conditions. Volumes were excellent in all segments of
the infrastructure market. The price level in the public procurement market
for traditional contracts remained unsatisfactorily low. The sharp price
rises imposed by suppliers and subcontractors depressed the margins even
further. The regional companies, which are largely dependent on public
tenders of this kind, suffered most severely from this trend. The large
projects were better able to elude these problems, and they booked an
excellent result. One factor in their favour was the good performance of
projects in new contract forms, and another was the focus on niche segments,
such as industrial construction and offshore wind farms. The price rises and
the satisfactory volume in the market enabled the specialized companies, the
prefabricated concrete companies and the raw material companies to achieve
satisfactory results.
In 2008 the strategy of strengthening the specialized companies was
implemented by enhancing the product range, expanding the positions in raw
material extraction and increasing the added value for the internal regional
companies and major projects. This strategy was achieved through the
acquisition of Hamstra B.V., a specialized drilling company, the acquisition
of Lugo N.V., with positions in future gravel extraction in
indirect participation in Antwerp Stone Terminal, a concession holder and
licensee of a terminal in
result was that the regional companies and the large projects engaged the
specialized and the prefabricated concrete companies more often at an early
stage. There was a consequent marked increase in the internal revenue of the
specialized companies and the prefabricated concrete companies.
Infrastructure has been successful in recent years in the growing market
for offshore wind farms. The heavy lift vessel Svanen achieved high
utilization on three British offshore wind farms. For the next few years the
Svanen will complete the current project of 32 foundations at Gunfleet Sands
in
German Baltic coast.
Various innovations are helping strengthen our position on this niche
market. Infrastructure has developed a frame that enables the heavy lift
vessel Svanen to pick up complete heavy windmills in the harbour, transport
them to the offshore location, and then install them on site. This
development renders unnecessary the assembly of wind turbines from multiple
modules in expensive and risky offshore time. Furthermore, the technical
feasibility of a drilled prefabricated concrete pile as an offshore wind
turbine foundation has been demonstrated. The advantages of this foundation
are reduced noise levels, because no percussion is needed, lower
manufacturing costs, and the greater price stability of concrete compared
with steel.
We foresee no reduction in volumes in the infrastructure market in the
coming years in view of the expected additional government spending. Despite
hindrance from the more limited availability of finance, we see good
opportunities in the markets for offshore wind farms in
industrial construction in the energy sector, and for international
infrastructure projects on and around waterfronts.
Building and Development
The revenue of the Building and Development division rose by 22% to
735 million
includes recovery of lost ground caused by the delays in 2007 in awarding
contracts for these projects.
The result achieved by the Building and Development division was lower
than in 2007, in line with our forecast of
Volumes in both the housing and commercial construction markets remained
reasonable in 2008. The commercial construction volume was generated largely
by semipublic and public works contracts. The market picture was extremely
variable in 2008. The first three quarters saw sustained high prices from
suppliers and subcontractors. The purchase prices stabilized in the fourth
quarter, but the property market then stagnated. The door to the housing
market closed as consumer confidence dropped and the availability of finance
dwindled. For the slightly longer term our positive outlook on the housing
market in
shortage of homes, in terms of both quantity and quality.
A number of regional construction companies produced a disappointing
performance. The regional companies bore the brunt of greatly elevated costs,
which could not be charged on in full to customers. Errors made in the
primary process in some regions were then duly magnified in a financial
sense. Organizational adjustments and changes in working methods have since
been put in place in the regions concerned. The large projects performed well
in line with expectations. Property development produced excellent results,
as did the division’s two prefabricated concrete companies.
The number of residential property completions decreased from 1 579 to 1
128, of which 452 were from in-house development. The number of homes under
construction increased from 2 532 to 3 217, of which 28% were developed by
Ballast Nedam. The unsold stock at year-end consisted of 11 residential
properties and 712 m2 of leased commercial space. There has been a policy of
restraint in recent years in entering into new land bank obligations. This
policy has achieved a 1% reduction in development potential to 14 800 homes.
Outstanding unconditional purchase obligations for land at year-end halved
from
land positions increased by
In the coming years, as in 2008, we expect a substantial fall in the
volumes of both housing and commercial construction. For housing we foresee a
similar decline in the number of homes due for completion. In the commercial
property market the proportion of semipublic and public works contracts, for
instance in the care sector, is set to increase.
Ballast Nedam Concessies
Concessies finalized contracts in 2008 for three major PPP projects. They
were the Zestienhoven Detention Centre in
and the tax authorities in Groningen, and the Kromhout Barracks in
Another contract was finalized in
to the Kromhout Barracks, which will increase the personnel capacity of this
military accommodation by 1 000, bringing the number to 3 000. The consortium
succeeded in raising a
In acquiring these projects, Concessies has made excellent progress in line
with the strategy of gaining a leading position in the semipublic and
public-private partnership market. Alongside these projects that are in the
construction phase, Concessies also has the PPP infrastructure project
Waldwei N31, which is now in the operational phase. The PPP receivables
associated with these projects have reduced slightly from
year-end 2007 to
these PPP receivables will rise to approximately
2009. In 2009 Concessies expects to participate in tenders for the A15
Maasvlakte – Vaanplein and A12
projects, and various PPP real estate projects. Ballast Nedam Concessies
works on projects for both divisions, and is proportionately consolidated on
a 50% basis in each division.
Ballast Nedam Beheer
Ballast Nedam Beheer was formed in 2008 through the merger of activities
from the two divisions. Ballast Nedam Beheer manages the maintenance and
operation of infrastructure items, real estate, and energy-related projects
alike. Beheer was involved in the successful acquisition of PPP projects and
of design & construct infrastructure projects with a long-term maintenance
management component. The ongoing Waldwei N31 road project, the N210 road
project now under construction, the real estate portfolios of Alliance
Apotheek, SEB and Belgravia, the Egmond offshore wind farm, and the CNG Net
natural gas filling stations are examples of projects under management.
Ballast Nedam Beheer works on projects for both divisions, and is
proportionately consolidated on a 50% basis in each division.
EBIT
x EUR 1 million 2008 2007
Infrastructure 20 18
Building and Development 29 33
49 51
Other (7) (9)
Total 42 42
The operating result was unchanged from 2007, at
The Infrastructure division improved its result by
20 million
result announced in
low price levels in the public procurement market. The regional companies and
major projects made a significant contribution to the improved result.
The Building and Development division achieved a lower operating result
of
were announced. The higher results on property development, major projects,
and prefabricated concrete did not compensate for the decline in the results
of the regional construction companies.
The ‘Other’ result improved by
were almost unchanged. The improvement was attributable to the settlement of
the former international activities.
Margin
2008 2007
Infrastructure 2.8% 2.7%
Building and Development 3.9% 5.5%
Total 2.9% 3.3%
On a group level, the margin decreased to 2.9% on a 12% higher revenue.
This margin was slightly below the target range of 3% to 5%. The
Infrastructure margin increased from 2.7% to 2.8% on a slightly higher
revenue. On a much higher revenue, Building and Development saw the margin
fall from 5.5% to 3.9%.
Net result
x EUR 1 million 2008 2007
EBIT 42 42
Interest income and charges (11) (4)
Profit before taxation 31 38
Income tax expense (7) (11)
Net result 24 27
The net result declined by
because of the lower result before taxation.
The result before taxation decreased to
million
consisting of
write-down of interest rate derivatives and an average higher working capital
owing to investments in plant and equipment and land positions, combined with
a higher interest rate for the short-term working capital loans. Conversely,
interest income decreased by
interest on the PPP receivables.
Tax costs fell by EUR 4 million to EUR 7 million. The effective tax
burden went down from 28% in 2007 to 23%, owing to the recognition of a EUR 3
million liquidation loss of the former German operations. The deferred tax
asset at year-end was EUR 37 million, including EUR 33 million of
carry-forward losses.
Order book
x EUR 1 million 2008 2007
Infrastructure 705 541
Building and Development 1 005 916
1 710 1 457
Other (43) (19)
Total 1 667 1 438
The order book increased by 16% from
to
fairly strong starting position in a declining market with increased debtor
risks. One factor is that the order book is largely filled with creditworthy
semipublic and public sector clients, and another is that purchase prices are
expected to fall.
In 2008 the two divisions acquired impressive, large, long-term projects,
such as the construction of the new Netherlands Ministries of Justice and the
Interior in
Medimall care centre alongside the Maasstad hospital in
Zoetermeer – Gouda highway reconstruction and the multifuel power station for
Nuon Magnum in the Eemshaven in Groningen. The client is expected to obtain
the permits for the construction of the multifuel power station in the second
half of 2009, and construction will accordingly start at that time.
Recent developments that are a perfect fit with the Ballast Nedam
strategy include the final contract award of the offshore wind farm Baltic 1
and a contract for the construction of Nieuwegein town hall. CNG Net’s
contract with public transport operator HTM in 2008 for the design,
construction, maintenance, financing and operation of a natural gas filling
station for 125 city buses, which was concluded in 2008, has recently been
followed by a collaboration agreement with Tamoil Nederland B.V. for building
at least 10 natural gas filling stations. This is an important step in
rolling out a nationwide filling station network. There were 13 operational
filling stations at the end of 2008, with a further 7 under construction.
Ballast Nedam Concessies and its partner Econcern have also acquired the
exclusive development rights for two Dutch offshore wind farms: Helmveld 493
MW and Rotterdam NW 180 MW.
Equity and cash flows
Shareholders’ equity decreased by
decrease comprised the net result of
distribution of
million
differences. The hedging reserve was for the interest rate derivatives that
substitute a fixed interest rate for the variable interest rates of the PPP
loans. These represent temporary differences over the term of the loans.
Total assets increased by
in assets and the decrease in shareholders’ equity reduced the capital ratio
from 19% at year-end 2007 to 17%. The working capital at year-end was
million
working capital was higher in the course of the year. In the next few years
total assets and working capital will continue to rise as the PPP projects
progress.
The cash flow for 2008 was
million
The operating cash flow for 2008 was
with
reduction in working capital towards year-end.
The cash flow from investing activities was
consisted largely of investments of
million
acquisitions included
intangible assets and
primarily concerned with receipts against PPP receivables. Net investments in
tangible assets of
The positive cash flow from financing activities of
consisted of the net increase of
the dividend payment for 2007 of
Net financing position
x EUR 1 million 2008 2007
Net cash 92 52
Current portion of long-term (7) (18)
loan
Long-term loans (126) (97)
(41) (63)
The net financing position improved by
Long-term loans rose by
included a
increase in the loan for land positions. The current portion of the long-term
loans was mainly concerned with the PPP loans, and decreased by
million to EUR 7 million
Project prepayments rose from
million
than at year-end.
Financing
There will be no need to refinance the long-term loans in the coming
years. The
fixed interest rate of 4.63%. Mortgages were taken out on a number of
properties in use by Ballast Nedam as security for the loan. Furthermore, the
terms of the loan involve no financial covenants. The other large loan of
33 million
This loan matures on
basis points. The land positions concerned were mortgaged as security for the
loan. The other long-term loans of
which provide no opportunity for recourse on Ballast Nedam, and for which the
interest rate is fixed by means of derivatives.
The Ballast Nedam share
There were 9 900 000 shares in issue at year-end 2007 out of the 10
million issued shares. A repurchase programme of 100 000 shares was started
in 2008 in order to cover the obligations arising from the current management
option scheme. 29 751 depositary receipts for shares were repurchased under
this programme in 2008. Ballast Nedam had 129 751 shares in portfolio at
year-end. The repurchase programme ended on
of shares in issue standing at 9 800 000. The net result per share based on
average number of shares in issue decreased from
The Ballast Nedam share price quoted at the end of 2007 on NYSE Euronext
was
The highest price of
9.37
from 39 744 per trading day in 2007 to 27 452. The AScX index, which includes
Ballast Nedam shares, dropped by 53% in 2008.
According to shareholdings reported, Navitas was the largest shareholder
at year-end 2008, with an interest of 15.4%. Other parties holding 5% or more
of the shares or depository receipts for shares in Ballast Nedam were Hurks
Group, Delta Deelnemingen Fonds,
Management. Hurks Group reported a 15.4% interest on
interest was still 10.3% at year-end.
Dividend policy
The current dividend policy is to place 50% of the net result at the
disposal of the shareholders. According to this policy, the Board of
Management, with the approval of the Supervisory Board, proposes to
distribute a dividend of
for 2007 was
of the ex-dividend listing will be
Strategy
Ballast Nedam’s three main strategic priorities in 2009 are as follows.
To increase the value of the business through further improvements in its
operating performance (‘operational excellence’) and to increase margins on a
structural basis through a change in the mix of activities: a greater
proportion of development and of management of maintenance and operation
compared with construction, and a greater proportion of operations in niche
segments (such as offshore wind farms, industrial construction, international
projects, large complex projects, high-rise construction and compressed
natural gas [CNG] stations). Achieving an improvement in the operational
performance of the regional companies is a major priority for 2009.
To strengthen the front and back ends of the horizontal value chain by
acquiring land positions and to strengthen the activities in the field of
project development, by strengthening management of maintenance and
operation, and by gaining a leading position in the PPP market. A prudent
approach will be taken in 2009 regarding investment in land positions.
To strengthen the supply companies in the vertical value chain by
enhancing the product range and expanding the specialized companies,
continuing to improve the operating performance of the prefabricated concrete
companies, and replacing and possibly expanding the raw-material concessions.
Outlook for Ballast Nedam in 2009
The market for property development stagnated in the fourth quarter of
2008. The Board of Management expects a lower operating result for 2009 of
approximately
2008 was
For 2009 the Board of Management expects the operating result of the
Infrastructure division to remain almost unchanged on a likewise unchanged
revenue.
The Board of Management expects the Building and Development division to
achieve a lower operating result on a lower revenue in view of the virtual
standstill in the market for property development, and in particular the
housing market. No improvement is foreseen in this situation in the short
term. Building and Development will accordingly adjust the cost level of
development activities, intensify cooperation with housing associations, and
accelerate the development or redevelopment of less expensive homes.
Key figures
x EUR 1 million 2008 2007
Revenue 1 426 1 270
EBIT 42 42
Margin 2.9% 3.3%
Profit before taxation 31 38
Net profit 24 27
Order book 1 667 1 438
Shareholders' equity 168 172
Capital ratio 17% 19%
Net financing position (41) (63)
The consolidated income statement, balance sheet, and cash flow statement
included in this press release are based on sections of the financial
statements prepared as at and for the year ended 31 December 2008. In
accordance with statutory provisions, the financial statements will be
published after adoption by the Annual General Meeting of Shareholders on 6
May 2009. The external auditors have issued an unqualified auditors' report
on the financial statements.
Segmentation
Revenue
x EUR 1 million 2008 2007
Infrastructure 708 675
Building and Development 735 601
1 443 1 276
Other / elimination (17) (6)
Total 1 426 1 270
EBIT
x EUR 1 million 2008 2007
Infrastructure 20 18
Building and Development 29 33
49 51
Other (7) (9)
Total 42 42
Margin
2008 2007
Infrastructure 2.8% 2.7%
Building and Development 3.9% 5.5%
Total 2.9% 3.3%
Net result
x EUR 1 million 2008 2007
EBIT 42 42
Interest income and charges ( 11) ( 4)
Profit before taxation 31 38
Income tax expense ( 7) ( 11)
Net result 24 27
Order book
x EUR 1 million 2008 2007
Infrastructure 705 541
Building and Development 1 005 916
1 710 1 457
Other (43) (19)
Total 1 667 1 438
Cash flows from operating
activities
x EUR 1 million 2008 2007
Infrastructure 43 20
Building and Development 26 (31)
69 (11)
Other (3) (15)
Total 66 (26)
Cash flows from investing
activities
x EUR 1 million 2008 2007
Infrastructure (36) (22)
Building and Development (6) (7)
(42) (29)
Other - -
Total (42) (29)
Consolidated income statement
x EUR 1 million 2008 2007
Revenue 1 426 1 270
Raw materials and subcontractors (1 077) (923)
Employee benefits (267) (260)
Other operating expenses (15) (25)
(1 359) (1 208)
Share in results of associates - 1
EBITDA 67 63
Depreciation and amortization of tangible and (25) (21)
intangible assets
EBIT 42 42
Finance income 2 4
Finance expense (13) (8)
(11) (4)
Result before taxation 31 38
Income tax expense (7) (11)
Net profit 24 27
Attributable to:
Shareholders 24 27
Minority interests - -
Net result 24 27
Attributable to shareholders:
Net result per share (EUR) 2.46 2.75
Diluted net result per share (EUR) 2.46 2.75
Consolidated balance sheet
x EUR 1 million 31 December 2008 31 December 2007
Non-current assets
Intangible assets 25 22
Tangible assets 176 158
Financial assets 36 23
Investments in associates - 1
Deffered tax assets 37 38
274 242
Current assets
Inventories 199 179
Work in progress 127 105
Receivables 295 285
Cash and cash equivalents 109 87
730 656
Current liabilities
Bank loans (17) (35)
Current portion of long-term (7) (18)
loan
Inventories (29) (15)
Work in progress (141) (130)
Trade payables (300) (211)
Income tax payable - (1)
Other liabilities (145) (156)
Current portion of (21) (24)
provisions
(660) (590)
Working capital 70 66
344 308
Non-current liabilities
Loans 126 97
Derivatives 15 -
Deferred tax liability 3 4
Employee benefits 4 5
Provisions 28 30
176 136
Shareholders' equity
Minority interests - -
Equity attributable to 168 172
shareholders
Total shareholders' equity 168 172
344 308
Shareholders' equity
x EUR 1 million 2008 2007
Issued share capital 60 60
Share premium 52 52
Other reserves 60 46
Opening balance 172 158
Exchange differences (3) -
Hedging reserve (11) -
Results recognized directly (14) -
in equity
Net result 24 27
Dividend (14) (13)
Others - -
Closing balance 168 172
Consolidated cash flow
statement
x EUR 1 million 2008 2007
Net cash, 1 January 52 62
Net result 24 27
Depreciation 24 20
Amortization 1 1
Finance expense 13 8
Finance income (2) (4)
Equity-settled share-based - -
payment transactions
Income tax expense 7 11
Share in results of - (1)
associates
Book result on fixed assets - (1)
sold
Movement in other (1) (3)
investments
Movement in other (1) 2
receivables
Movement in work in progress (11) (23)
Movement in inventories (6) (33)
Movement in provisions and (7) (10)
employee benefits
Interest paid (10) (8)
Interest received 1 1
Taxes paid (2) (4)
Movement in other working 36 (9)
capital
Net cash flow from operating 66 (26)
activities
Intangible assets
investments (2) (2)
disposals - -
Tangible assets
investments (44) (29)
disposals 3 3
Financial assets
investments (14) (6)
disposals 18 4
dividend received 1 1
Acquisition of subsidiary (4) -
Cash from acquisition - -
Net cash flow from investing (42) (29)
activities
Proceeds from long-term 43 71
loans
Repayment of long-term loans (14) (10)
Dividend paid (14) (13)
Proceeds from repurchase of - (1)
own shares
Net cash flow from financing 15 47
activities
Effect of exchange rate 1 (2)
fluctuations on cash held
Net cash, 31 December 92 52
Net cash
x EUR 1 million 2008 2007
Cash and cash equivalents 109 87
Bank loans (17) (35)
92 52
Unrestricted cash balances 75 40
Proportionately consolidated 17 12
92 52
Net financing position
EUR 1 million 2008 2007
Net cash 92 52
Current portion of long-term (7) (18)
loan
Long-term loans (126) (97)
(41) (63)
SOURCE Ballast Nedam NV