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  • Location: NOORD-BRABANT 
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    ANNUAL REPORT


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD 2 Annual Report 2015 - Heijmans


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Annual Report 2015 - Heijmans 3


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    The annual report of Heijmans N.V. for 2015 is available in electronic form on the Heijmans website, www.heijmans.nl Contacts: Marieke Swinkels-Verstappen, mswinkelsverstappen@heijmans.nl and Robert Koolen, rkoolen@heijmans.nl Publication date: 26 February 2016 This annual report is also published in English. In case of differences between the Dutch and the English version, the former shall prevail. Reverse: Timmerhuis, Rotterdam


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    Contents Message from the Chair 6 Executive Board 11 Heijmans’ 10-year record in key figures 12 Profile and business model 17 The Heijmans share 23 Strategy: the contours of tomorrow 28 Financial situation 37 Strategy implementation in 2015 47 Health and safety 55 Knowledge intensity 61 Procurement and chain integration 65 Sustainable business conduct and projects 69 Corporate Governance 75 Conduct, integrity and dilemmas 80 Risk management 87 Supervisory Board 102 Report of the Supervisory Board 105 Remuneration report 111 Statement by the Executive Board 114 Financial statements 117 Appropriation of result 199 Independent auditor’s report 200 Appendices 208 Glossary 226 Abbreviations 227


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    MESSAGE FROM THE CHAIR Construction in 2015: divergent markets The past year featured diverse challenges in the various market segments that were reflected in two different aspects: recovery and growth on the one hand, and decline and contraction on the other, with severe margin pressure. While the residential and property development sector is recovering after more than seven years of crisis, the infrastructure sector experi- enced particularly difficult market conditions in 2015 and had to cope with the risks and results of previously acquired projects. The infrastruc- Bert van der Els ture market in the Netherlands is relatively stable in terms of volume, CEO Heijmans N.V. but also features intense competition. New types of contract were introduced which increased the responsibilities placed upon contractors such as Heijmans. Heijmans, as well as its competitors, has experienced difficulties in pricing these risks properly in combination with often complicated conditions involving numerous stakeholders. Another important factor is that contractors and customers had to find a new balance with respect to how they collaborate, which requires fairness and trust as well as contractual agreements. The new vision of the market recently established in a covenant between several large customers such as the Directorate-General for Public Works and Water Management and the Central Government Real Estate Agency is a positive development. 6 Annual Report 2015 - Heijmans


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD For Heijmans, this development meant that the the Ministry of the Interior and Kingdom Relations show performance in the Netherlands of the Infra segment, that Heijmans is able to realise both integrated projects which was brought under single management in 2014 and multi-year service and maintenance projects for and fully centralised in 2015, has been unsatisfactory. customers. Service, management and maintenance This had a serious effect on the net result of Heijmans in increased further last year and this is now a major 2015, which amounted to a net loss. Further centralisa- activity for Non-Residential. tion and strict project management has shown cautious- ly positive results as from the second half of the year. Infra: result below standard but also good progress The result did improve in the second half of 2015, As already mentioned, Infra had an very difficult year in supported by the strategy focusing on tightening our 2015. Nonetheless, the poor result is not indicative of all core processes, but this was still not enough. Due to the activities at Infra. In Germany and Belgium, losses on five to ten larger integrated projects taken on Heijmans has realised excellent results in previous in previous years, the result at Infra over the whole of years, and was able to do the same in 2015. Regional 2015 was very negative. infrastructure projects and the asset management activities in the Netherlands showed an improved result Residential: recovery and growth, Heijmans benefits and margin compared to 2014. Important highlights The market for property development and housing included the opening of the A4 motorway to road traffic projects grew last year. Heijmans is well positioned to at the end of the year and the delivery of projects such benefit from this growth. Previously the number of as the Parking Garage St.-Jan in ‘s-Hertogenbosch. The homes sold had declined from more than 3,500 in 2008 innovative road joint BrainJoint was successfully applied to just over 1,000 in 2012-2013. Last year, the number and launched in the market in 2015. increased to around 1,800. This growth placed particular demands on our execution, quality and staffing. But this Improvements and results is where our strength lies. By combining its ability to The Improve the Core programme was refined during execute and its creative qualities, core competences that the past year. Improved processes for tendering, Heijmans has managed to retain despite the long crisis procurement and project management were imple- in the housing market, Heijmans was able to make mented. In some cases, it was decided earlier in the progress here. This is shown by the number of homes process, not to tender for a project due to its risk profile. sold, but also by innovative concepts such as the small There were also some large projects offered during the and movable Heijmans ONE home, inner-city develop- past year that were however not acquired since the price ments like Rotterdam-Katendrecht and Utrecht- did not adequately reflect the risk profile. The effects of Kanaleneiland and the ‘home control’ for all our policy of margin before volume can be seen in our owner-occupied homes in 2015. order book for large projects. The Fit for Cash pro- gramme also brought about a clear improvement in the Non-Residential: poor market, opportunities for past year. For the coming year, improving our result is service and maintenance the top priority for the Board. Further centralisation of At Non-Residential we noticed the effects of the late- tasks and decision-making with respect to the risks of cyclical nature of the installation sector. Further our business will continue unabated. centralisation was introduced at this business segment with respect to tender management, projects and Poor operating profit margins and the necessary processes. The reorganisation announced at the end of operational improvements that have to be implemented 2014 was completed in 2015. As a result of these at Infra have led to the Executive Board’s proposal to measures, the result of Non-Residential remained at appoint a fourth member. This will add further operating break-even despite the poor new-build market. Projects knowledge and management in this market to the like the Timmerhuis, Eurojust, the National Military Executive Board. Museum and the Ministry of Security and Justice and Annual Report 2015 - Heijmans 7


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Finance: the aim of sound finance remains from innovations and sustainability ambitions. This The poor operating performance has obviously put the means that centralisation and consistency will be relationship between results and our use of credit under further applied in tendering, project and procurement pressure. The solvency ratio of 26% is adequate, but the management and commerce and thus create room to financial ratios are an item of attention, despite the renew. This cannot be achieved without continuing focus sound financial position at year-end. Heijmans aims to on safety and striving to avoid accidents of any kind. have a solid financing of its business. In this context, the financing provided by the banking consortium was Thanks to the energy and dedication of the Heijmans extended in early 2016 until mid-2018, thus creating the employees, much work was done in 2015 to address the conditions for working on further recovery in the coming various challenges that we face. This will form the basis years. for further implementation and realisation of the results of our strategy in 2016. Strategy: 'to improve and renew' continues to be the guiding principle for the coming years Bert van der Els Heijmans’ strategy, with focus on 'improve and renew', Chair of the Executive Board of Heijmans NV will be continued and in 2016 will focus on further 26 February 2016 strengthening our core processes and also profiting 8 Annual Report 2015 - Heijmans Turfmarkt 147, Den Haag


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Annual Report 2015 - Heijmans 9


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD 10 Annual Report 2015 - Heijmans


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    Executive Board Executive Board Ir. L.J.T. (Bert) van der Els (1954), Chair From left to right: Dutch nationality; appointed Chair of the Executive Board of Heijmans Mark van den Biggelaar N.V. with effect from 18 April 2012 and as Vice-Chair and Member of the CFO and executive director Executive Board on 28 April 2010 and reappointed on 16 April 2014 for Bert van der Els a term of four years. He was previously Group Director for Non- Chair of the Executive Board Residential Building and Technical Services at Heijmans. Prior to Ton Hillen joining Heijmans, he was employed by Burgers Ergon, Yokogawa Executive director and ABB. He was managing director of Burgers Ergon starting in 1999. Additional positions: member of the Supervisory Board of PSV N.V., member of the board of supervision of Brabant C Fonds. Mr. M.C. (Mark) van den Biggelaar MiF (1968), CFO Dutch nationality; appointed as CFO and Member of the Executive Board of Heijmans N.V. on 1 September 2009. Prior to joining Heijmans, he was employed by Samas N.V., ABN AMRO Bank N.V., Koninklijke Nedlloyd N.V. and Randstad Holding N.V. At Samas N.V. he was CFO and a member of the principal board from 2007 to 2009. Ing. A.G.J. (Ton) Hillen (1961), member Dutch nationality; appointed as member of the Executive Board of Heijmans N.V. on 18 April 2012. He has held various positions at Heijmans since 1992, and has been Group Director for Property Development and Residential Building at Heijmans since 2008. Prior to joining Heijmans, he was employed by BAM and Anton Obdeijn Projectontwikkeling. Additional positions: member of the board of supervision of Stichting Waarborgfonds Koopwoningen (SWK). An overview of the portfolio division, duties and responsibilities is given on page 107. Annual Report 2015 - Heijmans 11


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    REPORT OF THE EXECUTIVE BOARD Heijmans’ 10-year record in key figures Revenue (in) € x million) Result after tax (in € x million) 100 4.000 3.500 3.000 50 2.500 2.000 0 1.500 1.000 -50 500 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -100 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Order book (in € x million) Net margin (in %) 3.500 4,0% 3.000 3,0% 2,0% 2.500 1,0% 2.000 0,0% 1.500 -1,0% 1.000 -2,0% 500 -3,0% 0 -4,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -5,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average number of employees Average capital invested 12.000 1.200 10.000 1.000 8.000 800 6.000 600 4.000 400 2.000 200 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 12 Annual Report 2015 - Heijmans


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    PR❖ ✁✂✄ ☎ ✆✝✞✟TEGY ✞✄❘❖✞✝ ❖ ✝☞✄ CORPORA✝✄ ❚❖✠✄✞✡✟✡☛✄ ✁✡✟✡☛✁✟✂ ✆✝ATEMENTS APPENDICES: ✄❊✄☛✌✝✁✠✄ ✍❖✟✞✎ 2015 2014 2013 2 2012 3 2011 2010 2009 2008 2007 2006 Key figures Result x € million Revenue 1,979 1,868 2,001 2,318 2,361 2,680 3,079 3,631 3,732 2,942 Operating result -29.0 -63.5 11.9 -87.2 -35.7 48.4 -6.5 -13.6 88.2 117.2 Result after tax -27.3 -47.3 1.9 -87.7 -37.6 15.7 -40.4 -34.1 56.4 82.5 Capital (€ x million) Assets 1,190 1,205 1,203 1,366 1,554 1,600 1,853 2,220 2,205 2,130 Average capital invested 318 372 423 541 636 683 722 824 960 952 Equity capital 266 259 313 315 416 455 426 371 462 442 Net debt 10 31 66 149 103 178 223 331 366 497 Cash flow (€ x million) Operating 10 46 -10 -45 -6 74 -5 80 259 -30 Investment -9 -10 -3 -26 42 -34 30 0 -88 -39 Financing 51 -23 8 8 -19 -131 -183 63 -126 77 Cash flow 52 13 -5 -63 17 -91 -158 143 45 8 Ratios in % Return on average capital -9.1 -17.1 2.8 -16.1 -5.6 7.1 -0.9 -1.7 9.2 12.3 invested Result after tax: - as % of equity -10.2 -18.3 0.6 -27.8 -9.0 3.5 -9.5 -9.2 12.2 18.7 - as % of revenue -1.4 -2.5 0.1 -3.8 -1.6 0.6 -1.3 -0.9 1.5 2.8 Solvency on the basis of 26.1% 27.0% 31.5% 27.9% 31.0% 32.6% 26.6% 19.7% 23.9% 23.8% capital base No. of shares x 1,000 At year-end 21,407 19,461 19,349 17,328 16,956 16,851 16,851 24,073 24,073 24,073 average 20,661 19,420 18,111 17,191 16,917 16,851 12,504 8,156 24,073 24,073 1 Data per share x €1 Equity 12.87 13.34 17.28 18.32 24.53 27.00 25.28 15.41 19.21 18.35 Operating result -1.40 -3.27 0.66 -5.07 -2.11 2.87 -0.39 -0.56 3.66 4.87 Result after tax -1.32 -2.44 0.10 -5.10 -2.22 0.93 -3.23 -4.18 2.34 3.43 Dividend - - 0.15 0.25 0.35 0.35 - - 1.45 1.45 Share price information x €1 At year-end 8.18 8.95 10.51 7.05 8.19 15.05 12.21 3.40 25.83 41.66 High price 13.36 14.20 10.78 9.68 23.90 15.25 21.18 27.52 47.19 43.75 Low price 5.77 7.83 6.85 5.25 6.58 10.70 9.49 3.36 22.97 35.49 Other data Order book 2,094 2,287 1,643 2,026 2,192 2,188 2,597 3,004 3,248 3,196 (* € x million) Employees 6,808 7,198 7,617 8,242 8,384 8,839 9,980 11,311 10,119 9,162 (average number of FTE) 1. The data per share are expressed in terms of the weighted average number of ordinary shares. Dividend per share is based on the number of ordinary shares at year-end. The weighted average number of shares for 2009 has been adjusted due to the issue and the reverse stock split; the number for 2008 has been recalculated accordingly, as has the earnings per share. 2. After adjustment due to change in accounting policy for joint arrangements 3. After revision due to a change in accounting policy for defined benefit pension schemes Annual Report 2015 - Heijmans 13


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Operating result (in € x million) Return on average capital invested (in %) 160 140 20,0% 120 15,0% 100 80 10,0% 60 5,0% 40 20 0,0% 0 -5,0% -20 -40 -10,0% -60 -15,0% -80 -100 -20,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Operating margin (in %) Equity (in € x million) 6,0% 500 4,0% 400 2,0% 300 0,0% 200 -2,0% 100 -4,0% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -6,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Solvency on basis of capital base (in %) 45% 35% 25% 15% 5% -5% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 14 Annual Report 2015 - Heijmans N381 Venekoten - Drentse border


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Annual Report 2015 - Heijmans 15


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD 16 Annual Report 2015 - Heijmans


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    Profile and business model Vision Construction is more than ever a profession in which development and realisation are important. Customers require perfectly executed solutions delivered on time that are aesthetically appealing and tailored to suit the user. Often, in circumstances that are complicated. This requires a high level of knowledge and expertise. Heijmans is building these spatial contours. The environment is increasingly being determined by the scarcity of space, raw materials and other resources. This requires improved processes, efficiency, cooperation and integra- tion of systems. Mission Statement Our mission is to play a leading role in making building smarter and more efficient by adding value in the areas of energy, materials and spatial quality in the collaborations we enter into, the processes we operate and the products we generate. In this endeavour, we take responsibility for achieving renewal, entering into partnerships, and providing customers with the best insight. To realise and continue our strategy designed to achieve margin growth, Heijmans aims to realise an EBIT margin in realisation and execution of between 3% and 4%. Our target margin in development is around 8%. Strategy and ambition Our aim is to be the best and thereby the most innovative construction company. We will achieve this through striving for continuous improve- ment of our core activities through the bundling of our procurement, consistency in sales and tender management and strong project management. The objective is to achieve higher margins with good management of risks. Based on this continuing improvement, we can further increase our market share in existing markets by adding value. In addition, our goal is to improve our position by increasing our differentiating qualities and innovating. Our ambition is defined by our drive to improve and renew. Annual Report 2015 - Heijmans 17


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Added value Business model ❍✏✑✒✓✔✕✖ ✗✑✖✘✑✕✙✚✑✖✛✏✖ ✑✘✖✏✜✢ ✣✤ ✖✏✔✥✦✛✑✕✙ ✢✧✥ ✖✧✜✚✘✑✧✕✖ Heijmans focuses on three different operating areas: ✘✧✙✏✘✛✏✥ t✑✘✛ ✑✘✖ ★✔✥✘✕✏✥✖ ✔✘ ✔✕ ✏✔✥✜✤ ✖✘✔✙✏ ✑✕ ✘✛✏ ✗✏✖✑✙✕ residential, non-residential and infrastructure. Heijmans ★✥✧✦✏✖✖ ✔✕✗ ✥✏✔✜✑✖✑✕✙ ✔✕✗ ✓✔✑✕✘✔✑✕✑✕✙ ✘✛✏✖✏ ✖✧✜✚✘✑✧✕✖ operates in the Netherlands, Germany and Belgium. ✘✛✥✧✚✙✛ ✘✛✏ ✑✕✘✏✙✥✔✘✑✧✕ ✧✢ ✩✕✧t✜✏✗✙✏ ✔✕✗ ✩✕✧t✪✛✧t✳ Within these operating areas, we are active in various Our work starts on the drawing board and extends to market segments and for various customer groups, include management, maintenance and service. We including businesses, governments and consumers. combine knowledge and creativity to create innovative products and concepts that we apply on a broad scale. The operating areas are organised in the business The local execution can vary, but everything is created segments Residential (Property Development and from the same expertise. Heijmans positions itself as an Residential), Non-Residential and Infra (Roads and Civil). innovative player in the market. These unique qualities In addition, knowledge and acquisition of public-private are reflected in the pioneering role of Heijmans in the partnerships (PPP) are organised centrally. field of innovation. Examples are the housing concept Heijmans ONE, the standard application of intelligent Central management leads to optimal use of coopera- home control technology, the 3D printed steel bridge tion synergy, scale, knowledge and expertise. In addition, MX3D, Bike Scout or the development of innovative the company as a whole offers an integrated proposition asphalt products such as self-healing asphalt and the to customers, from idea to realisation, maintenance and sustainable asphalt Greenway LE. management. The business model thus reflects the increasing demand from customers in the consumer, Business model INPUT THROUGHPUT OUTPUT OUTCOME Resources Process Performance Effect Suppliers Heijmans Customers End users Sub-contractors Partners Products Mobility Materials Governments Service Comfortable Systems Banks homes Technology Financiers Workspaces Capital Governments Banks Financiers Architects Builders ... Note Heijmans delivers added value by active chain management with the aim of achieving efficiency and integration of this chain and increasing the level of knowledge and competence within the company through innovation and integration. To do this, Heijmans works together with partners and uses the various capital flows in the chain. Continuous improve- ment is achieved through central direction of tender management, project management, procurement and sales and setting central improvement targets for these areas. Heijmans is increasingly using LEAN planning techniques, central and and uniform processes and systems. The business model reflects the demand from customers for integrated solutions in which design and engineering, realisation, maintenance and management as well as funding are combined. However, the business model is also designed to provide singular solutions such as risk-bearing development, construc- tion and service and maintenance and management. This adds value for customers, which is expressed in return and customer satisfaction. 18 Annual Report 2015 - Heijmans


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD business-to-business and business-to-public segments units. By improving its processes, efficiency and for a combination of design, engineering, realisation, financial ratios every day, Heijmans creates oppertuni- maintenance, service and even finance. For end users ties in which to launch innovative ideas and show its such as housing consumers, this bundling of specialisa- colours in the market. Heijmans ONE, Bike Scout and the tions makes it possible to tailor the product exactly to 3D printed steel bridge are good examples of this. meet customer demands. Business segments and activities In the business model, the delivery of added value through active chain management is a central priority. Residential Heijmans distinguishes two separate processes here: Property Development firstly, the more risk-bearing and initialising property In the Netherlands, Property Development focuses on development process together with public-private area development and property development of both partnership with a corresponding risk profile. Secondly, large and smaller-scale projects in inner-city and the executive activities in relation to residential construc- out-of-town areas and acts as an initiator, developer tion, non-residential and infrastructure. Elements of the and seller of mainly residential properties, both at risk-bearing activities are ‘finance’ and the management ground floor and apartments for either purchase or of capital flows, in contrast to the activities in which rental housing, including social rental housing. This is realisation and potentially the maintenance of building carried out by the property development business, works are the central issue. which consists of three locations with one central management. High-level knowledge of area develop- Continuous improvement in both these processes is ment is bundled in one area development organisation achieved through central direction of tender manage- in which accounts of large customers are incorporated, ment, project management, procurement and sales and meaning we can benefit from both new-build contracts setting central improvement targets for these areas. and (inner-city) transformation assignments. Heijmans is increasingly using uniform processes, methods and systems here. The business model reflects Residential Building the demand from customers for integrated solutions in The core activity of Residential Building is to build which design and engineering, realisation, maintenance homes of different types. Activities primarily consist of and management as well as funding are new-build, however also involve the restoration, combined. However, the business model is also designed redevelopment and renovation of existing housing stock. to provide singular solutions such as risk-bearing The transformation of buildings, such as the radical development, construction and service and maintenance renovation of the Parooltoren in Amsterdam, also forms and management. This adds value for customers, which part of the activities of Residential Building. is expressed in return and customer satisfaction. Maintenance and service are increasingly becoming part of the project portfolio. Residential Building operates History from three regional offices with central direction. There Heijmans’ history goes back to 1923, when Jan are also construction activities in Belgium, which Heijmans started his paving company in Rosmalen. include a number of residential and care complexes, as Heijmans was already an innovator in those days, as it well as the construction of the Elisabethzaal, a mul- was one of the first companies to use bituminous road ti-functional concert and congress hall in Antwerp. surfacing. He had ample opportunities for growth in the post-war reconstruction period, with the restoration and The integration of the activities of Property Development construction of roads and airports. The first business and Residential Building leads to both conceptual acquisition occurred in this period and marked the creativity and knowledge of realisation. This results in beginning of a period of huge growth and versatility. residential concepts such as Heijmans ONE, Huismerk Heijmans obtained a listing on the Amsterdam and Wenswonen. But also in standardisation of the Exchanges in 1993. This gave the company a new source underlying operating processes and cooperation with of capital, which enabled further growth and acquisi- partners and procurement. This enables us to realise tions. The company changed its strategic course both complex inner-city transformation projects and radically in mid-2008, and now focuses strongly on more repetitive new-build. adding value based on the integration of its business Annual Report 2015 - Heijmans 19


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Non-Residential Infra Belgium focuses mainly on road construction, Non-Residential realises complex large-scale buildings maintenance contracts, cabling and pipe works and in the market segments of health care, government and integrated contracts. The organisation has two compo- semi-public sector, commercial property and the nents: Heijmans Infra (Belgium) and Van den Berg, high-tech clean industry (including laboratories) and which specialises in service and new-build contracts in data centres. Non-Residential designs, realises and the field of energy, water and electricity infrastructure. maintains high quality electrotechnical and mechanical engineering installations. Our unique quality is the Our German operating company Oevermann specialises integrated approach to construction and installation in road construction, mainly for the German autobahn technology, and increasingly our contracts include network and non-residential construction. Within long-term management, maintenance and technical Heijmans, there is a cross-border sharing of technologi- installation services. Examples include the Timmerhuis cal expertise, application of specialist material and in Rotterdam and the new offices for the Ministry of procurement strength in both road construction and Security of Justice and the Ministry of the Interior and general construction. Franki, a German subsidiary, Kingdom Relations in The Hague. Heijmans is responsi- strengthens the integrated quality of Infra in the ble for realisation and long-term maintenance of both Netherlands with its specialist foundation techniques. these buildings. The geographical distribution according to revenue and Infra activities in 2015 is as follows: The activity of Infra concerns the installation, mainte- nance and improvement of infrastructure, with a primary focus on mobility, water and energy. This involves mobility for road users and the road networks Revenues in 2015 by activity in the Netherlands, Belgium and Germany, but also on the design of public space. This may involve roads and underground infrastructure, or also installations and PROPERTY DEVELOPMENT technical services (such as lighting, camera and reference systems) in and around roads and the related 278 public space. Infra also focuses on civil engineering RESIDENTIAL BUILDING works: location-linked infrastructure above and below The Netherlands 295 ground, such as viaducts, tunnels, cables, pipelines, energy supplies, sluices, water purification and so on. Belgium 92 The focus is on the design, realisation and management NON-RESIDENTIAL and maintenance of the constructions as well as their 421 installations. In the Netherlands, the Infra organisation is active in all these segments and fields. INFRA The Netherlands 690 Belgium 116 Germany 319 20 Annual Report 2015 - Heijmans Wijnhavenkwartier, The Hague


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    REPORT OF THE EXECUTIVE BOARD The Heijmans share Share capital The composition of the share capital of Heijmans N.V. as at 31 December 2015 is as follows: Authorised share Issued capital capital Shares (x 1,000) 2015 2014 2015 2014 Ordinary shares 35,100 35,100 21,407 19,461 Cumulative financing 7,000 7,000 4,510 6,610 preference shares B Protective preference 8,000 8,000 - - shares 50,100 50,100 25,917 26,071 Ordinary shares The shares are held by the Heijmans Share Administration Trust ('SA Trust'). The nominal value per ordinary share is €0.30. The SA Trust has issued 21,406,873 depositary receipts for shares as at 31 December 2015, which are quoted on the Stock Exchange of Euronext Amsterdam. The voting rights on ordinary shares are vested in the SA Trust. Each ordinary share entitles the holder to 30 votes. Holders of depositary receipts for shares wishing to vote at a shareholders’ meeting are granted an unconditional proxy by the SA Trust. Parking Garage St.-Jan, 's-Hertogenbosch Annual Report 2015 - Heijmans 23


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD The movements in the number of ordinary shares and depositary receipts for shares and a summary of the key figures per ordinary share/depositary receipt are presented in the table below: The number of issued ordinary shares and depositary receipts for shares increased during 2015 as a result of the issue of 1,946,000 depositary receipts for new ordinary shares by means of an accelerated book-build issue on 20 May 2015. Shares (x 1,000) 2015 2014 2013 2012 2011 In issue on 1 January 19,461 19,349 17,328 16,956 16,851 Issue of share capital 1,946 - 1,759 - - Stock dividend - 103 262 372 105 Matching shares Share Matching Plan - 9 - - - In issue on 31 December 21,407 19,461 19,349 17,328 16,956 Average in issue for the year 20,661 19,420 18,111 17,191 16,917 Earnings per share* (x €1) -1.32 -2.44 0.10 -5.10 -2.22 Dividend per share (x €1) - - 0.15 0.25 0.35 Pay-out ratio % - - 150% - - * Per average share in issue Heijmans N.V. is listed on Euronext Amsterdam. Heijmans market listing 2015 2014 2013 2012 2011 Closing price (in €) 8.18 8.95 10.51 7.05 8.19 High price (in €) 13.36 14.20 10.78 9.68 23.90 Low price (in €) 5.77 7.83 6.85 5.25 6.58 Dividend yield at closing price (in %) - - 1.4% 3.5% 4.3% Market capitalisation at year-end (in € x million) 175 174 203 122 139 Average daily turnover (in no. of shares) 161,793 82,132 90,358 76,045 106,867 Cumulative financing preference shares B On 28 June 2002, 6,610,000 cumulative financing B preference shares were issued at a price of €10 per share. The nominal value per ordinary share is €0.21. These shares are not quoted on a stock exchange, and no depositary receipts are issued for them. With effect from 1 January 2014, the yield is 7.9%. The dividend will be revised as at 1 January 2019 and every five years thereafter. The Company has the right to repurchase or cancel these financing preference shares B at any time. On 15 April 2015, the General Meeting of Shareholders authorised the Executive Board for a term of 18 months to repurchase up to 40% of the financing preference shares B in its own capital. This means that the out- standing amount on these shares can be reduced by 40% through the repurchase and subsequent cancellation of the financing preference shares B. The Heijmans Executive Board has implemented its previously expressed intention of repurchasing and cancelling these shares, and in mid-July 2015 2,100,000 preference financing shares B were 24 Annual Report 2015 - Heijmans


  • Page 25

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD repurchased. The decision to reduce the share capital (by cancellation) took effect on 18 September 2015. Since that time, the number of outstanding cumulative financing B preference shares is therefore 4,510,000. Issued share capital and equity holdings The issued capital and the associated voting rights changed in 2015 as a result of the issue of 1,946,000 depositary receipts for new ordinary shares and the cancellation of 2,100,000 preference financing shares B. One cumulative financing B preference share entitles the holder to 1.278 votes. The voting right associated with ordinary shares is 30 votes per share. The composition of the issued capital and associated voting rights as at 31 December 2015 was as follows: Issued capital (Potential) Voting right % Number (based on nominal value) Number % Ordinary shares 21,406,880 87.1% 642,206,400 99.1% For which depositary receipts 21,406,873 87.1% 642,206,190 99.1% issued For which no depositary receipts issued 7 0.0% 210 0.0% Depositary receipts 21,406,873 87.1% 642,206,190 99.1% Cumulative preference shares 4,510,000 12.9% 5,763,780 0.9% Total year-end 25,916,880 100.0% 647,970,180 100.0% To the extent the Company is aware, and also on the basis of the WMZ (Major Holdings in Listed Companies Disclosure Act) register maintained by the Netherlands Authority for the Financial Markets (AFM), the following investors had a 3% or greater interest in Heijmans as at 31 December 2015: 31 December 2015 31 December 2014 Potential voting Potential voting Holdings in Heijmans Capital (%) right (%) Capital (%) right (%) Kempen Capital Management N.V. 6.4% 0.4% 6.1% 0.8% Delta Lloyd Levensverzekering N.V. 6.4% 0.4% 12.5% 5.0% FMR LLC 6.1% 7.0% 8.1% 9.9% Delta Lloyd Deelnemingen Fonds N.V. <3% <3% 5.6% 6.8% ASR Nederland N.V. <3% <3% 5.2% 6.3% Van Lanschot Participaties B.V. <3% <3% 4.9% 1.0% 18.9% 7.8% 42.4% 29.8% Other holdings 81.1% 92.2% 57.6% 70.2% Total 100.00% 100.00% 100.00% 100.00% Annual Report 2015 - Heijmans 25


  • Page 26

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Based on the information provided by banks and custodians and information services, the distribution of share owner- ship can be illustrated as follows: Institutional Private Unknown 60% 50% 40% 30% 20% 10% 0% Year-end 2015 Year-end 2014 The (estimated) shareholdings of institutional investors probably declined slightly during the 2015 financial year. This is mainly due to the fact that a number of large investors in previous years have reduced their holdings in Heijmans. The ownership of the Company’s shares is relatively well distributed. The geographical distribution of shares and depositary receipts held by institutional investors is as follows: The Netherlands United Kingdom United States Other 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Year-end 2015 Year-end 2014 Approximately 39% of the depositary receipts for ordinary shares held by institutional investors are held in the Netherlands. This figure is lower compared to year-end 2014 (40% in the Netherlands) with a higher relative holding for institutional investors. It is estimated that 95% of the depositary receipts for ordinary shares held by private investors are held in the Netherlands. Share price movement The closing price for the ordinary share at the end of 2015 was €8.177. This is a decline of 9% compared to the price at the beginning of 2015. The AScX Index, which includes Heijmans, increased by more than 30% in the 2015 calendar year. The figure shows the price movement of Heijmans shares in 2015 compared to both the AScX Index and a peer group as prepared by Euronext in the ‘AEX Constr. & Mat. Composition’. 26 Annual Report 2015 - Heijmans


  • Page 27

    P✫✬✭✮✯✰ ✱ ✲✴✫✵✴✰✶✷ ✫✰P✬✫✴ ✬✭ ✴✼✰ ❈✬✫P✬✫✵✴✰ ✶✬✸✰✫✹✵✹❈✰ ✭✮✹✵✹❈✮✵✯ ✲✴A✴✰✺✰✹✴✲ ✵PP✰✹❆✮❈✰✲✻ ✰✽✰❈✾✴✮✸✰ ✿✬✵✫❆ Price movement of Heijmans shares compared to AScX Index and peers 225 200 175 150 125 100 75 50 25 0 -15 15 15 -15 4 15 5 15 5 15 15 -15 5 c-1 c-1 r-1 g- v- l-1 ay p- n- b- n- ar t No Au Ap De De Oc Se Fe Ju Ju Ja M M Heijmans BAM AscX AMX AEX AEX-Construction Financial schedule 2016 ❀❁❂ ❃❄❅❅❄❇❉❋● ■❏❑❅❉▲▼◆❉❄❋ ◗▼◆❂❙ ❁▼❯❂ ❑❂❂❋ ❙❂◆ ❃❄❱ ❲❳❨❩❬ Date: Event Time 13 April 2016 General Meeting of Shareholders 14:00 hours 11 May 2016 Trading update before market opening 17 August 2016 Publication of half-year figures for 2016 before market opening 2 November 2016 Trading update before market opening Annual Report 2015 - Heijmans 27


  • Page 28

    REPORT OF THE EXECUTIVE BOARD Strategic direction ❭❪❫❴❵❛❜❝ ❫❝ ❞❡❫❢❣❫❜❤ ✐❥❪ ❦❧❜✐❧❡♠❝ ❧♥ ✐❧❵❧♠♠❧♦♣ ❛❜❣ ♦❪ ❛♠❪ ✐❥❪♠❪♥❧♠❪ designing and initiating the spatial world in which we live. A fast-mov- ing environment in which complex regulation, increasing assertiveness from users and stakeholders and dealing with scarcity of spatial quality are the major challenges. Our aim is to be the best and thereby the most innovative construction company in our field. To produce the most suitable design and content in the built-up environment and thus create added value for our customers and their end users. Improve and renew: top priority for restoring our financial result We will achieve this through striving for continuous improvement of our core activities through the bundling of our procurement, consisten- cy in sales and tender management and strong project management. This forms the basis of our strategy. Through this continuous improve- ment we can reduce costs, increase efficiency and further increase the contribution to earnings from our market share in existing markets by adding more value. This will enable us to sell new products and services in these markets and serve new markets and new customers. 'Improve and renew' defines our ambition. 28 Annual Report 2015 - Heijmans A4, Delft-Schiedam


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Annual Report 2015 - Heijmans 29


  • Page 30

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Social trends and stakeholders then also contribute to intelligent designs and exploita- The Company engages in dialogue with its stakeholders tion. Making property future-proof is therefore a on a regular basis. The stakeholders are the groups and significant trend. individuals that directly or indirectly affect – or are affected by – the company’s realisation of its goals: Government withdrawal and different contract types principals/customers, employees, shareholders and The withdrawal of the government is an important other capital providers, suppliers and subcontractors, the development affecting the entire industry. Contract industry, governments, knowledge and educational types are changing and operating responsibilities and institutions, and social groups. The following market risks are being delegated. Important contract types in trends and developments were observed last year: recent years is the DBMFO and Design & Construct model, both of which have come about due to the Improvement in the housing market withdrawal of the government and the transfer of risks The housing market turned a corner in 2015 with a and performance. This development is mainly visible in strong development in demand and there is now the business-to-public segment and particularly in the increased pressure on supply. While this development is infrastructure sector, and to a lesser extent in the nation-wide, it is most noticeable in the regions around non-residential market. the four large cities. There is still heavy pressure on prices in the non-residential and infrastructure markets, Sustainability: energy and materials and these projects present a challenging risk profile. Sustainability continues to be an important issue, but mainly concerns the control of energy costs and Chain integration efficiency. Innovative usage of materials and upcycling Partly due to large integrated works that involve design, are leading to the development of new and more realisation and extend to maintenance and manage- future-proof construction materials. In the field of ment, construction business increasingly also involves a innovation, materials renewal as well as energy is role as chain and system integrator. An example of this therefore seen as an important focus for the future. One is the National Military Museum in Soesterberg, where example of this is MX3D, the printed steel bridge in Heijmans is fulfilling all these roles. Cooperation with Amsterdam. A joint venture in which Heijmans is a suppliers, partners and customers is an important participant. precondition for successful project completion. Chain cooperation also presents opportunities for further From ownership to use and performance optimising quality aspects that are important to the end Housing expenses are becoming an increasingly users. A clear development towards increased knowledge important issue for residential consumers, particularly intensity is also visible. The profile of employees at large the costs of energy and the investment needed for this. If construction companies is changing. This is, partly due this can be offered as a performance, so that consumers to the ageing population, moving from a focus on do not have to purchase their own solar panels, this is realisation to a focus on knowledge. becoming a more frequent preferred option. For development customers as well, entering into perfor- Transformation and renovation mance agreements, either as part of a PPP contract or As a result of the crisis and the vacancies this created in not, is becoming an important trend. Under these offices in recent years, the sector and its customers are arrangements the contractor is rewarded or paid during turning their attention to re-use and transformation. the contract period on the basis of the agreed perfor- Many office buildings no longer meet the needs of mance. This is placing increasingly high demands on functional use, and moreover demand for this is still the available expertise, for which the contractor is declining. One solution is the redesignation of buildings increasingly taking responsibility. and thereby revitalisation of the inner-city areas in which these buildings are located. Examples of such Analysis of the most material issues projects are Katendrecht in Rotterdam, Parooltoren and The analysis of the most material issues concerns the Trouwgebouw in Amsterdam and the Wijnhavenkwartier analysis of those aspects that are most crucial for in The Hague. With an improving housing market, this Heijmans’ business operation and strategy. Naturally transformation and the related renovation is becoming this involves aspects associated with financial perfor- increasingly attractive, since it contributes to bringing a mance, however it goes beyond financial performance diversified housing supply up to standard. Technical indicators alone. Given Heijmans’ ambition and the developments in the area of sustainability and energy market in which it operates, continuous improvement is 30 Annual Report 2015 - Heijmans


  • Page 31

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD HIGH PRIORITY Being financially sound Satisfied Making our own customers business sustainable Branding Strategy implementation and image Knowledge intensity Product quality Compliance with Distinctive Stakeholdermanagement legislation and Continuous improvement Attractiveness character regulations as employer Collective innovation and co-creation Health and safety at work Transparency BUSINESS IMPACT > Procurement and Internal communication chain integration Development of sustainable products Sustainable energy Socially responsible business practices Flexibility Environmental disturbance Contribution to knowledge development in the sector LOW PRIORITY SOCIAL IMPACT > HIGH PRIORITY Issue (part of materiality analysis) Material issue (based on material analysis, included as reporting item) essential. Its projects are large, and this requires a For a description of the process of materiality analysis, streamlined organisation with central direction and see the Heijmans website under ‘About Heijmans’, in the standard working processes. Furthermore, the margin ‘Corporate Governance’ section. profile is such that management of working capital is of obvious importance. Heijmans has reflected this Integrated dashboard necessity in a strategy of continuous improvement. The Based on the above analysis, an integrated dashboard aim of optimising business processes via working capital has been created that shows the most material aspects management, tender and project management, and the critical performance indicator that represents procurement and sales is to continuously improve the the performance, thus providing an overview of progress core throughout the organisation. Strengthening the of the implementation of the organisation’s strategy. core processes (internally known as ‘Improve the Core’) This dashboard is shown on the following page and is creates a basis for renewal in order to add value, by explained in more detail in the various sections of this applying innovation for both existing customers and annual report: new customers, as well as new segments. The success of the organisation, its service provision and product development can then be measured by the satisfaction of its customers. Delivering the performance needed for this requires continuity in the business operation that is expressed in health and safety aspects, and increasingly in terms of knowledge. Annual Report 2015 - Heijmans 31


  • Page 32

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Dashboard of most material issues in 2015 See page 37: See page 47: FINANCIAL POSITION STRATEGY Revenue Order book IMPLEMENTATION (in EUR x million) (in EUR x billion) qrs✉s ⑥⑦⑧⑨⑧ ②③④ ❶❷⑥ Number of Lean projects 52 2014: 94 2014 2015 2014 2015 Net result (in EUR x million) ✈✇① ⑩❶⑨ Solvency on the basis of capital base Spending on innovation (in EUR x million) 4.2 2014: 3.6 Number of 27⑤ 26❸ patents applied for 2014 2015 2014 2015 See page 47: Homes delivered with no Complaints received snagging items at Group level: SATISFIED CUSTOMERS AND USERS 50 ❹ Target 2015, 2016 and following: 100% 342 annual See page 55: HEALTH AND SAFETY Absenteeism in 2015 (in %) Procurement IF figure spend sub- contractors with ➃➄➅ ➆➅➇➄➅➈➉➊➋➌➍ VCA certification ➎➅➉➏➐➑➒ 982014: ❼➁➂ ➀ →➣↔ ↕↔➙➣↔➛➜➝➞➟➠ Belgium Germany The Netherlands 2014: 5.6 Target 2015, 2016 and following: 100% Target 2015: < 4 - Target 2016 and following: <3 ➓➅➈➒➊➋➔ 0 Number of Number of accidents fatal including The Netherlands 2014: ❺❻❼❺ accidents subcontractors Target for the Netherlands 2015 2014: 2 2014: ❽❾❿ 2016 and following: <4% Target 2015, Target 2015: <83 2016 and following: 0 Target 2016 and following: <80 32 Annual Report 2015 - Heijmans


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    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD See page 61: See page 65: KNOWLEDGE INTENSITY PROCUREMENT Training level (in %) AND CHAIN LBO/VMBO MBO HBO WO INTEGRATION Procurement spend The Netherlands 9 46 41 4 preferred suppliers 46% Belgium 31 50 14 5 Germany 67 10 17 6 2014: Target 2015 The Netherlands 10 47 39 4 2016 years and following: 50% See page 69: SUSTAINABLE BUSINESS CONDUCT AND PROJECTS CO2 emissions (in tonnes) The Netherlands 55,269 The Netherlands 2014: ➧➦➤➢➢➫ Belgium 13,766 Target for the Netherlands 2015: 57,105 Target for the Netherlands 2016 and following: 6% reduction compared to 2012 Germany Total amount of residual material in tonnes Separation of residual material on site 73 ➩ 2014: ➡➢➤➥➦➥ 2014: ➥➧➨ Target 2015: 18,702 - Target 2016: 26,290 Target 2015: 65% - Target 2016 and following: 70% Reuse of residual material after removal 92 ➩ Procurement spend at preferred suppliers with framework contract and signed sustainability declaration 89 ➩ 2014: 90➨ 2014: ➢➫➨ Target 2015, 2016 and following: 90% Target 2015, 2016 and following: 100% A complete overview of performance indicators and notes is provided in the appendices to this annual report, page 220. Annual Report 2015 - Heijmans 33


  • Page 34

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Strategy implementation 2015 Procurement The steps established for procurement are described in Improve detail in the section titled 'Procurement and Chain In 2012, Heijmans announced the start of an extensive Integration’ (page 65). internal programme designed to improve the company’s core processes known as ‘Improve the Core’. An approach Commerce was subsequently developed in four areas - tender A programme designed to achieve professionalism, management, project management, procurement and uniform commercial processes and effectivity was commerce – with the aim of achieving uniform processes started in 2014. Last year, the emphasis was on the and a sharper focus. In addition, improvement processes development and implementation of business intelli- are in place in specific areas of attention in the business gence, so that information on customers could be operation, including safety and working capital shared. This process also led to the company-wide management. designation of customer groups and priorities, so that an agenda and basis for account management were Tender management established. In combination with the tender manage- In 2013 the basis was laid for the standardisation of ment programme, the initial phase of project selection tender management through the analysis of best and project choices was also considered. Criteria for practices, the introduction of a uniform project sheet, the decision-making were formulated and insight into the definition of project risk categories and the development conversion of efforts made with respect to order intake of standard working practices. The aim was selective and was provided. The programme establishes the relation- disciplined acquisition of opportunities arising in the ship between existing activities, but also in particular the market, thus increasing hit rates and also taking on the view of customers and sales as a company-wide and most suitable projects, as well as the timely recognition professional activity. of relevant risks. The tender management process has been further developed on the basis of the initial LEAN6Sigma experiences, with the training of 400 employees that The LEAN6Sigma improvement programme which aims collaborate in the tender process. Ambassadors and to achieve continuous improvement of business ‘owners’ have also been designated who oversee agreed processes and the development of a culture of improve- processes and the use of tooling. The communication of ment in the organisation was initiated in 2010. In best practices has led to increasing practical experience practical terms, improvement projects were initiated in and advice with respect to tender management. These this programme, which led to actual improvements on good examples are also useful for project management, the basis of quantitative information (measurement) since they provide much insight into approach, experi- and awareness of improvement (knowledge). Since 2014 ence and the standardisation of processes in whatever LEAN6Sigma has been focussing more on the LEAN experience of realisation. methodology to further reduce the time taken to complete projects and thus strengthen the process Project management management. This was expanded in 2015 with an Project management has received extensive attention in internal introduction training. LEAN techniques are used the past two years, and will be further developed in to reduce completion times and wastage for several 2016. In 2015, when the focus was mainly on improving dozen tender projects. 52 projects were initiated in 2015, tender management, full attention was devoted to the 29 of which have now been completed. From 2016 the training of employees and the sharing of best practices LEAN6Sigma methodology will be integrated more into in the field of project management. Approximately 365 the Improve the Core programme. Longer running employees were trained and a further 145 employees projects as at year-end 2015 will be included in the received specific training with respect to contract Improve the Core improvement programme. management. The ‘project start-up’ (PSU) was imple- mented, which tests whether the start of execution of a Fit for Cash project is in line with the starting parameters (design, The ‘Fit for Cash’ working capital programme is designed planning, team contract agreements and so on) of the to increase awareness of the importance of the develop- tender phase. ment of the cash position among employees. This requires good cooperation between project realisation, invoicing, and debtor and creditor management. Close coordination and up to date management information 34 Annual Report 2015 - Heijmans


  • Page 35

    PROFILE & STRATEGY REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD are crucial for this. The ‘Fit for Cash’ programme has change process and involves much more than taking been in operation since 2013 and since then actual tooling into operation. It affects the organisation, culture improvements have been made in the primary processes and discipline of employees. for tendering, contract management, project preparation, execution until procurement and creditor management. GO! Safety programme The repetition of this effect leads to awareness and The section ‘Health and Safety’ gives a detailed account improvement. The ‘Fit for Cash’ manual was issued and of the content and targets of the programme and the distributed to employees in 2015. The contents of this measures taken in 2015. were then discussed in working meetings, and this has led to further improvement measures. The manual was Renew also used in training courses, workshops and is issued to The improvement measures in place create the potential new employees. Fit for Cash has been a fixed agenda for renewal. Heijmans appointed a Chief Technology item in employee development interviews since 2015. Officer in 2014. The Technology department, which is Fit for Cash is embedded in the Improve the Core promoting, improving or initiating innovation under his processes and is included in the internal audit scripts. leadership, has two aspects. Firstly, the department Lastly, a study has been made within the programme of deals with the international marketing and sales of improvements that can be achieved in the initial phase innovations. Full attention will be devoted to forming of construction projects, since it is in this phase that partnerships and professionalisation in 2016 in this construction costs have to be translated into actual respect, as was the case in 2015. Secondly, Technology contractual payment instalment schedules. contributes to the further encouragement and develop- The programme has also led to a critical reassessment ment of innovation internally and attention to this of investment in material, specifically focusing on subject. This will be developed further through product utilisation rates and added value. management. After several years in which conceptualis- ation was the main focus and innovations were mainly applied in the tender projects, a start was made in 2015 on centralising and further professionalising this business development process. The development of 52 NUMBER OF product management has an important part to play LEAN PROJECTS here. This has led to a slimmed down innovation 2014: 94 portfolio with products and ideas that can be brought to the market via partnerships or licences both nationally and internationally. Work was also done in 2015 on the uniform design and implementation of company-wide innovation criteria and the forming of a strong network ERP platform whereby innovations can be realised in the chain. 2015 Heijmans is working on the introduction of a uniform saw the further development and readying for market of ERP system based on SAP. The aim is to achieve uniform innovations including BrainJoint, Heijmans ONE and administrative processes that optimally support efficient interactive pavements, so that Heijmans can gain a business operation and the integrality of Heijmans. market position here in addition to its tender processes. Processes must also further strengthen the control of the operation. Processes run automatically: from the recording of hours by employees and the issue of instructions to service employees up to and including the signing off of deliveries for projects, procurement orders and invoicing. The new ERP system will also lead to acceleration of the process from realisation to invoice generation. It will therefore contribute to management of working capital and the timely availability of management information. The system was introduced at Infra in 2014, and at the material management division and Residential Building in 2015. Preparation for implementation at Non-Residential was also started last year. This implementation entails a substantial Annual Report 2015 - Heijmans 35


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    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD " A ➭➯➲➳➵➸➺➭➵➻➯➲ ➭➯➼➽➾➲➚ ➻➳ ➾➵➵➸➾➭➵➻➪➶ ➾➳ ➾ sustainable investment if it looks beyond EPC norms or CO2 emissions. One essential aspect in our opinion is that the company’s offering of products and services actually meets a social need. The company must fulfil its social role in society. Heijmans is a good example. The main challenges we see for Heijmans concern the scaling up of innovations from individual pilot projects to a higher scale, and returning to profitability.” Bouwe Taverne (left) and Ingmar Schuurmans, The Dutch Association of Investors for Sustainable Development (VBDO) Read the interview at heijmans.nl/en 36 Annual Report 2015 - Heijmans


  • Page 37

    Financial position Key points in 2015 The net result in 2015 was €27 million negative (versus €47 million negative in 2014). The revenue of just under €2.0 billion was slightly higher than in the previous year (2014: €1.9 billion) mainly due to strong grows at Property Development and Residential Building and the German operations. The underlying operating result came to €5 million negative (2014: €12 million negative) with an improvement in the second half of the year compared to the previous year (2015: €6 million positive versus 2014: €5 million negative). Write-down of real estate and land holdings of €12 million significantly affected the net result. The improvement in the underlying operating result was mainly due to the positive developments at Property Development and Residential Building Netherlands (collectively €10 million better than in 2014) and Infra Germany (improvement of €5 million). Operations in Belgium had a satisfactory year, contributing €7 million to the underlying operating result. However, as in the previous year the result was heavily affected by the negative result of the Infra operations in the Netherlands. A loss of €26 million was reported here, compared to a loss of €22 million in 2014, with both years heavily influenced by the processing of risks and results from projects acquired in 2012-2013. The conditions in this market, which is relatively stable in terms of volume but features a high level of competition, are only gradually improving. A positive factor is that the regional infrastructure and asset management activities, in which road construction has a prominent share, showed an improve- ment in the second half of the year. Annual Report 2015 - Heijmans 37


  • Page 38

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD The improvement measures introduced, namely the core processes as part of our strategy of 'improve and different costing for design and staff costs, changes to renew' was a top priority in 2015, not only at Infra but in the management of the design and preparation process, all the Heijmans business segments. The drive for improvements to contract management in combination further improvement and standardisation of the core with professionalisation of the cooperation with activities of tender management and project manage- customers, strict management and documentation of ment, procurement and sales should lead to a result in go/no-go decisions and start-up reviews by the Executive 2016. Board, were all effected and further refined in 2015. In addition, the Dutch infrastructure activities were brought In this context, the Executive Board and the Supervisory under single central leadership in 2015 and additional Board announced their intention in early 2016 to extend centralisation was achieved in the form of uniform the Executive Board with a board member who will focus processes and combination of departments and teams. specifically on the infrastructure operations. In combina- tion with further continuation and prioritisation of the The operating result at Non-Residential was at break- improvement programme in 2016, this organisational even last year, as previous year. While the services measure should lead to results. It will also allow the activities generated an increase in revenue and contribu- board to devote sufficient attention to the opportunities tion to earnings, the results from projects were still too presented by the improvement in the housing market. low. Moreover, the financial effects from the announced reorganisation will be realised later in time. The capital ratios at year-end 2015 are sound, with a solvency ratio of 26% (2014: 27%). The order book at All the measures showed cautious initial results in the year-end 2015 stood at €2.1 billion, compared to €2.3 second half of 2015, but their net contribution to the billion at year-end 2014. result was ultimately not sufficient. The improvement of Summary income statement (in € x million) 2015 2014 Difference Revenue 1,979 1,868 6% Underlying result -5 -12 58% Adjustment to operating result of joint ventures -9 -9 Write-down of real estate and land holdings -12 -14 Restructuring costs -3 -29 Operating result -29 -64 Financial income and expense -10 -5 Result of joint ventures and associate investments 9 7 Result before tax -30 -62 Tax expense 3 15 Result after taxes -27 -47 38 Annual Report 2015 - Heijmans


  • Page 39

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Revenue Underlying operating result Revenue increased slightly to almost €2.0 billion (2014 The underlying operating result consists of the operat- €1.9 billion). The increase was mainly due to the growth ing result, corrected before operational result joint in the housing market and therefore the Property ventures, excluding any adjustments of the measure- Development and Residential Building segments. ment of property and land holdings, impairment of Revenue at Residential Building last year amounted to goodwill, restructuring costs and other extraordinary €387 million, compared to €299 million in 2014. The items. The underlying operating result in 2015 came to construction and infrastructure operations in Germany €5 million negative (2014: operating result €12 million also generated an increase in revenue. Revenue at negative). The analysis by segment is as follows: Non-Residential showed a small increase. The analysis of the revenue by segment in 2015 is as follows: Underlying operating 2015 2014 Difference result (in € x million) Revenue (in € x million) 2015 2014 Difference Property 9 4 Development Property Development 278 179 55% Residential 5 0 Residential Building 295 210 Building Netherlands Netherlands Residential Building 92 89 Residential 1 2 Belgium Building Belgium Residential Building total 387 299 29% Residential Building 6 2 Non-Residential 421 388 9% total Infra Netherlands 690 759 Non-Residential 0 0 Infra Belgium 116 128 Infra Netherlands -26 -22 Infra Germany 319 260 Infra Belgium 7 11 Eliminations -4 -6 Infra Germany 7 2 Infra total 1,121 1,141 -2% Infra total -12 -9 Other/elimination -228 -139 Group/other -8 -9 Underlying Total revenue 1,979 1,868 6% operating result -5 -12 7 The growth in the housing market led to a much better The operations in both Germany and Belgium generated result at both Property Development (2015: a stable contribution to total revenue last year. The €9 million compared to €4 million in 2014) and share of the foreign activities in total group revenue in Residential Building (2015: €6 million compared to €2 2015 was 27% (2014: 26%). The geographical distribu- million in 2014). Despite the crisis, Heijmans continued tion of revenue in 2015 is as follows: to invest in the retention of conceptual ability and creativity, so that integrated area development has developed further as one of its core activities. There was Revenue in % 2015 2014 also strict direction at Residential Building to focus on tightening processes and the management of failure The Netherlands 73% 74% costs. Virtually all the Heijmans homes are offered to customers with virtually no snagging items. The Belgium 11% 12% operations can also be conducted efficiently and the cost Germany 16% 14% base can be kept low through close cooperation between the two segments. Total 100% 100% Annual Report 2015 - Heijmans 39


  • Page 40

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD The result of Non-Residential in 2015 was nil, as was the performance in Belgium therefore remained at an case in 2014. Revenue was up slightly compared to the excellent level. In 2014 a larger integrated project previous year, partly due to the acquisition of relatively concerning the R4 Randweg Gent significantly contrib- more service, management and maintenance contracts. uted to the result in that year. This project was delivered The reorganisation announced at year-end 2014 was in 2015. effected with some delay in 2015. The low propensity to The result in Germany of €7 million in 2015 was clearly invest by government and semi-public bodies has higher than the result in 2014 (€2 million), mainly due reduced the size of the market for new-build construc- to positive development at Oevermann. In addition to tion. Renovation, but also especially service, manage- higher volume with reasonably profitable projects for ment and maintenance on the other hand are increasing the non-residential operations, several organisational in size. changes in recent years have made strong contributions to the improved result. The infrastructure operations in the Netherlands were substantially loss making in 2015. The loss was more or Operating result less entirely due to five to ten previously acquired larger The operating result in 2015 came to €29 million integrated projects. These were progressing towards negative, against an operating loss of €64 million in delivery with difficulty, with particularly civil engineer- 2014. In addition to restructuring costs and write-downs ing aspects demanding a great deal of attention. The of real estate and land holdings, this includes an underlying problem has several dimensions: The central adjustment to the operating result from joint ventures issue is that new contract types have been introduced because the results from certain operating joint ventures which have increased the responsibilities shifted to form part of the presented underlying operating result contractors such as Heijmans. Heijmans, as well as its but are recognised in the financial statements as result competitors, has found it difficult to properly price these from associates. The breakdown is as follows: risks in combination with complex stakeholder manage- ment. Furthermore, improvements to contract and design management in the initial phases are needed Operating result (in € x million) 2015 2014 and have been implemented for new projects. The net revenue from these difficult projects in 2015 was Underlying operating result -5 -12 approximately €100 million, representing around 14% of the total Infra revenue in the Netherlands. We expect Adjustment to operating result of joint -9 -9 ventures this group of projects to represent around 10% of the revenue Write-down of real estate and land -12 -14 from infrastructure in the Netherlands in 2016. In holdings addition to various company-wide measures, all the Restructuring costs -3 -29 Infra activities were brought under single management in 2015, and additional centralisation has been achieved Operating result -29 -64 in the form of uniform processes and the integration of departments and teams. The measures have shown cautious initial results in the second half of 2015, but their net contribution to the result was ultimately not Impairment sufficient. The improvement of core processes as part of Heijmans assesses its property and land holdings on a our strategy of improvement and renewal was a top regular basis. The result was particularly affected by priority not only for Infra but for all the Heijmans write-downs of property holdings outside the Randstad business segments in 2015 and will continue to be a top urban area. The impairment of the land and property priority in 2016. The drive for further improvement and holdings amounts to €12 million, as a result of delays to standardisation of the core activities of tender manage- planning development or rescheduling of plans by ment and project management, procurement and government bodies. commerce should lead to a result in 2016. Restructuring costs The result of the Infra operations in Belgium of As a result of certain small-scale organisational €7 million was lower than in the previous year (2014: changes, the restructuring costs amounted to €3 million €11 million). This decline in the result was already in 2015 (2014: €29 million). forseen at the beginning of the year, and the 40 Annual Report 2015 - Heijmans


  • Page 41

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Financial income and expense Capital and financing ➹➘➴ ➷➬➷➮➱✃❐✃ ❒❮ ❰➘➴ ❮❐➬➷➬Ï❐➷➮ ❐➬Ï❒Ð➴ ➷➬Ñ ➴ÒÓ➴➬✃➴ ❐✃ ➷✃ The condensed statement of financial position at 31 ❮❒➮➮❒Ô✃Õ December on the basis of capital invested is as follows: Financial income and expense Condensed statement (in € x million) 2015 2014 difference of financial position 31/12/ 31/12/ in € x million 2015 2014 difference Interest income 3 3 Non-current assets 380 364 16 Result of sale of 0 3 associate Working capital -72 -37 -35 investment Invested capital 308 327 -19 Financial income 3 6 -3 Equity 266 259 7 Impairment of loan -1 -2 Provisions 32 37 -5 Other interest -15 -11 Net interest-bearing 10 31 -21 expense debt Interest expense -16 -13 -3 Financing 308 327 -19 Balance -13 -7 -6 Capital invested: non-current assets The analysis of the non-current assets is broadly as Capitalised interest 3 2 1 follows: Financial income and Non-current assets 31/12/ 31/12/ expense -10 -5 -5 in € x million 2015 2014 difference Property, plant and 90 95 -5 ➹➘➴ ❐➬ÏÖ➴➷✃➴ ❐➬ ❰➘➴ ❮❐➬➷➬Ï❐➷➮ ➴ÒÓ➴➬✃➴ Ï❒ÐÓ➷Ö➴Ñ ❰❒ ×ØÙÚ equipment ❐✃ ÑÛ➴ ❰❒ ➷ ✃➮❐Ü➘❰➮➱ ➘❐Ü➘➴Ö Ñ➴Ý❰ ➮➴Þ➴➮ ÑÛÖ❐➬Ü ❰➘➴ ➱➴➷Öß ➷✃ Intangible assets 112 114 -2 Ô➴➮➮ ➷✃ ➷➬ ❐➬ÏÖ➴➷✃➴ ❐➬ Ð➷ÖÜ❐➬✃ ÑÛ➴ ❰❒ ➷ Ï➘➷➬Ü➴ ❰❒ ❰➘➴ credit agreement concluded by Heijmans with the Other non-current 178 155 23 banking consortium in early 2015. assets Carrying amount of Tax expense non-current assets 380 364 16 The effective tax rate in 2015 was 10%, and was affected by a number of non-deductible items. For instance, the interest expense on the cumulative financing preference The item ‘Property, plant and equipment’ primarily shares is not deductible. The same applies to the includes company buildings and lands, machinery, so-called mixed costs such as representation and vehicle installations, large equipment and other non-current expenses. assets. Investment in the reporting year amounted to €17 million (2014: €18 million). The majority of the other non-current assets consist of long-term receivables from joint ventures in which Heijmans participates, including the PPP National Military Museum. Annual Report 2015 - Heijmans 41


  • Page 42

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Capital invested: working capital Receivables at year-end 2015 amounted to €267 àáâãäåæ çèéäêèë èê ìíèâîíåï ðñòó ôèõ ëáôíâ êöèå èõ èê million, compared to €311 million at year-end 2014. 31 December 2014. The analysis of the working capital is broadly as follows: Land holdings declined to €172 million (2014: 183 million). Working capital 31/12/ 31/12/ The division of land holdings into types is as follows: (in € x million) 2015 2014 difference Strategic land 172 183 -11 holdings GEOGRAPHICAL SPREAD OF LAND HOLDINGS Residential properties 76 82 -6 (in € million) NORTHERN in preparation and PROVINCES under construction Strategic land portfolio 14 2014: 17 Other inventory 18 24 -6 RANDSTAD Land in Strategic land operation 6 Work in progress 4 -17 21 portfolio 25 2014: 7 2014: 30 Accounts receivable 267 311 -44 Land in operation 51 Payables -609 -620 11 2014: 51 Working capital -72 -37 -35 BRABANT AND GELDERLAND Strategic land There were large movements in the receivables balance, portfolio 3 2014: 4 ZEELAND mostly as a result of the ‘Fit for Cash’ programme. AND LIMBURG Land in Working capital also increased from the balance of operation 57 Strategic land 2014: 57 portfolio 3 ‘Works in progress’ as a result of, on average, less 2014: 3 favourable payment schemes mainly in relation to Infra Land in operation 13 projects as well as contractual discussions, as a result of 2014: 13 which invoicing could not yet take place. Among ‘Payables’ the balance of the ‘Creditors’ item was more or less unchanged compared to year-end 2014. The level of working capital fluctuates significantly during the year. Fluctuations may be project-specific and related to payment schemes, or may be due to discussions regarding the progress of a project. The construction sector features a seasonal pattern impacted by higher levels of activity in the second and fourth quarters. This is particularly visible in the Infra and Non-Residential segments. Moreover, large integrated projects often involve contractual discussions on the part of both the customer and the contractor that are financially settled in the fourth quarter of the year. Working capital is usually at its lowest level at the end of the year. Higher requirements for working capital during the year lead to a higher capital requirement, which Heijmans meets by using a revolving credit facility. 42 Annual Report 2015 - Heijmans


  • Page 43

    úùø❋ ✁ý ùýúøùü ø❋ ü❘ý ÷øùúøùûüý þøÿýù❚û❚÷ý ❋ ❚ û❚÷ û✁ ✂üûüý✄ý❚ü✂ ûúúý❚❆ ÷ý✂☎ EXECUTIVE BOARD Financing: equity Financing: net interest-bearing debt ❊✆✝✞✟✠ ✡☛☞✌✞✍☛✎ ✏✞✡✟✝✌✑✑✠ ✝✍✒✓✌✍✔☛✎ ✞✍ ✟✓☛ ✡☛✕✖✡✟✞✍✔ Net interest-bearing debt (interest-bearing debt less cash year and at 31 December 2015 amounted to €266 and cash equivalents) stood at €10 million at year-end million (2014: €259 million). The analysis of the 2015 (2014: €31 million). Adjusted for the cumulative changes in equity is broadly as follows: financing preference shares (€45 million) the position at year-end 2015 is a net cash position of €35 million Change in equity (2014: €35 million), since €21 million in cumulative (in € x million) 2015 2014 difference financing preference shares was repurchased in 2015. Result after -27 -47 20 Interest-bearing debt 31/12/ 31/12/ tax (in € x million) 2015 2014 difference Dividend -2 2 Share issue 21 21 Non-current 103 95 8 Changes in pension 17 -5 22 Current 32 10 22 valuation Tax effect of results -4 1 -5 Gross debt 135 105 30 recognised in equity Cash and cash -125 -74 -51 Result of cash flow -1 1 equivalents hedges Change in equity 7 -54 61 Net debt 10 31 -21 The solvency ratio on the basis of the capital base, which Significant elements contributing to a positive develop- is the equity plus the cumulative financing preference ment of net interest-bearing debt were, in addition to the shares, stood at 26% at year-end 2015 (2014: 27%). management of working capital via the ‘Fit for Cash’ programme, our focussed investment policy and the recovery in the housing market. At both Property 31/12/ 31/12/ in € x million 2015 2014 difference Development and Residential, the strong growth was accompanied by a positive development of cash flow. Through strict observance of pre-sale percentages prior Equity 266 259 7 to the beginning of construction works, turnover growth Cumulative preference 45 66 -21 does not involve an increase in working capital. During shares the year, net interest-bearing debt was clearly higher as Capital base 311 325 -14 a result of the seasonal pattern in working capital. The analysis of the gross debt is broadly as follows: Total assets 1,190 1,205 -15 Gross debt (in € x 31/12/ 31/12/ Solvency 26% 27% million) 2015 2014 difference Given the development of both the operating results and Cumulative financing 45 66 -21 the net result in 2015, it has been decided that no preference shares dividend will be distributed on ordinary shares and Project finance 12 7 5 depositary receipts for ordinary shares. Other financing 78 32 46 facilities Gross debt 135 105 30 Annual Report 2015 - Heijmans 43


  • Page 44

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD ✗✘✙ ✚✛✜✢✣✤✥✦✙✢ ✧✥✜★ ✩✣✜✥✜✤✣✜✪ ✦✘✥✦ ✫✬✣✪✣✜✥✭✭✛ ✥✮✫✯✜✦- The poor operating performance has obviously put the ✙✢ ✦✫ ❡✰✱✲ ✮✣✭✭✣✫✜ ✳✥✚ ✬✙✢✯✤✙✢ ✧✛ ❡✴✵ ✮✣✭✭✣✫✜ ✦✫ ❡✰✶✴ ratio between profitability and debt usage under million as of 1 April 2015. €50 million of this committed pressure. Heijmans' credit agreement originally was to facility was used at year-end 2015. Throughout 2015 end on 31 March 2017. (including year-end) Heijmans complied with all Against this background, Heijmans made a timely start financial covenants. Every six months, measured on 30 on extending its bank financing for the coming years. In June and 31 December each year, the following cove- early 2016 Heijmans agreed on an extension of the nants have to be measured in this respect: the interest syndicated credit facility until 30 June 2018. The cover > 3, measured as the EBITDA compared to net syndicated facility has been increased, so that as at 1 financing expenses and the leverage ratio < 3, measured April 2016 the commitment amounts to €256 million as the net debt compared to the EBITDA. with the inclusion of an existing uncommitted current account overdraft. The financial covenants have been adjusted so that the interest coverage ratio will be measured on a quarterly basis with effect from 2016. This ratio must be at least 4 with effect from the fourth quarter of 2016. It was agreed with the banks that from mid-2017 there will also be testing of the average 2.1 ORDER BOOK leverage ratio, whereby the average debt in the previous (in EUR x billion) year may not be higher than 2.5 times the EBITDA. This 2014: 2.3 extension and the adjusted conditions suit the plans of Heijmans for this funding period, in which the perma- nent improvement of the net debt/EBITDA ratio is an important priority. As a result of the application of IFRS 11, most of the According to the definitions in the financing agreement, project finance assigned to projects executed in coopera- the EBITDA, the net financing expenses and the net debt tion with third parties are no longer proportionally as reported in the financial statements have to be recognised in the consolidated statement of financial adjusted in certain respects. The main adjustments position, but are recognised on the basis of the equity concern the inclusion of associates that as a result of the method as per 2014. introduction of IFRS 11 with effect from the 2014 financial year are no longer proportionally consolidated, The other financing facilities mainly concern current the designation of the cumulative financing preference account overdraft facilities at credit institutions and shares (and the related financing expense) as equity some financial leases. rather than debt; exclusion of so-called ‘non-recourse PFI’ project finance (and the related financing expenses and project results); and finally, for the EBITDA certain expenses may be recognised as ‘non-operating’, including write-downs as a result of land holdings, reorganisation expenses and adjustments in connection with the valuation of pensions. This is the reason that the underlying operating result plus depreciation and amortisation is used as the basis for the calculation. See note 6.19 to the financial statements. 44 Annual Report 2015 - Heijmans


  • Page 45

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Cash flow Order book ✷✸✹ ✺✻✼✽✹✼✾✹✽ ✺✿✾✸ ❀❁✻❂ ✾❃✿❃✹❄✹✼❃ ❅✾ ❇✿✾✹✽ ✻✼ ❃✸✹ ✷✸✹ ✻✐✽✹✐ ❇✻✻❉● ❂✸❅✺✸ ✾❃✻✻✽ ✿❃ ❍■❏❑ ❇❅❁❁❅✻✼ ✿❃ ▲✹✿✐▼✹✼✽ ❅✼✽❅✐✹✺❃ ❄✹❃✸✻✽ ✿✼✽ ❅✾ ✿✾ ❀✻❁❁✻❂✾❈ 2015, was lower than at year-end 2014 (€2.3 billion). Of the total revenue forecast for 2016, approximately 64% is in the order book (2015: 65%). The composition of the Cash flow (in € x order book at year-end 2015 and the comparative million) 2015 2014 difference figures for 30 June 2015 and 31 December 2014 were as follows: EBITDA - underlying 14 11 Restructuring -16 -7 Order book 31/12/ 30/06/ 31/12/ expenses in € x million 2015 2015 2014 Interest paid/received -11 -6 Property Development 284 280 234 Tax expense 0 -2 Residential Building 286 270 275 Movement in working 22 50 Netherlands capital and other Residential Building 135 122 120 Cash flow from Belgium operations 9 46 Residential Building 421 392 395 total Sale of associates 0 7 Non-Residential 517 549 661 Investments in -17 -18 property, plant and Infra Netherlands 834 879 959 equipment Infra Belgium 135 103 95 Proceeds from 6 13 property, plant and Infra Germany 155 239 181 equipment Infra total 1,124 1,221 1,235 Loans granted to joint 2 -12 Other/elimination -252 -252 -238 ventures and associate investments Total order book 2,094 2,190 2,287 Investment cash flow -9 -10 Outlook Share issue 21 0 We expect the improvement seen in the second half of Dividend paid 0 -2 2015 to continue in 2016. The improved housing market and the order book create a good starting position for Other 0 1 2016. However, market conditions continue to be challenging across the line. Further improvement to the Movement in net debt 21 35 -14 result and margin through continuing improvement of the core activities as a result of uniform processes and central management continues to be the top priority. With its strategic focus on 'improve and renew', Heijmans expects, other than in case of exceptional circumstances, to make clear progress in 2016 and close the year with a positive underlying operating result. Annual Report 2015 - Heijmans 45


  • Page 46

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD “ W ◆ ❖P◗ ◆ ❙❯❱❲❳❨P ❩❖❬❳ P◗❖❭❪ ❫❱❴ ❬❵❱❛ P◗◆P ❵❱P ❳❜❳❯❫P◗❖❵❝ ❨◆❵ ❞❳ ❢❳❣❖❵❳❢ ❖❵ ◆❢❜◆❵❨❳❤ ❥❱❦❳ P◗❖❵❝❭ ❱❵❩❫ ❞❳❨❱❦❳ ❨❩❳◆❯ ❢❴❯❖❵❝ P◗❳ ❨❱❵❭P❯❴❨P❖❱❵ ❙◗◆❭❳❤ OMA, Heijmans and we achieved a successful outcome because we were prepared to go for the solution that was best for everyone.” Léon Wielaard, Municipality of Rotterdam Read the interview at heijmans.nl/en 46 Annual Report 2015 - Heijmans


  • Page 47

    Residential: Property Development and Residential Building ❧♠♥♦ ♣q♠r ♥♠s ♠ ♥♦rt✉✈ rq✇t①qr♣ ②✉ ♦③q ④♠r⑤q♦⑥ ⑦③②♥ ♦rq✉⑧ s♠♥ ✉♠♦②t✉♠⑨⑩ s②♦③ ♦③q ✈rq♠♦q♥♦ ⑧q①q⑨t❶④q✉♦ ②✉ ♦③q ❷t❸r ⑨♠r✈q ✇②♦②q♥⑩ s③qrq ❶rq♥♥❸rq ②✉ the market and demand increased sharply. Contrary to the market in the pre-crisis period, there is greater than ever demand for influence on product development and customers continue to be critical with respect to quality in relation to price. The composition of products is also changing, partly due to demographic developments such as the ageing population and individualisation. In addition, apart from the increasing demand for housing, there is pressure with respect to affordability, especially for young people looking to buy a home. Rental therefore continues to be attractive. Investors have been offering more affordable rented accommodation in recent years to cater for this demand, especially since the housing associations focused more on their core activity in 2015 and the management of their core portfolio. For them, making their stock more sustainable is a more topical theme than new-build. For Heijmans, this has led firstly to the development and realisation of investment rented accommodation, also in the lower-cost segment and secondly an increase in renovation, management and maintenance to make the existing portfolio more sustainable. Heijmans continues to focus on the private owner-occupier market, consisting of apartments and ground-level dwellings. Annual Report 2015 - Heijmans 47


  • Page 48

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Based on these market trends, Heijmans is developing Property Development and Residential Building are – in concepts such as the movable Heijmans ONE. This accordance with the Heijmans business model - central- concept enables young people to afford to buy their own ly organised and managed business units that serve the home and gives an extra boost to transformation areas market in close cooperation. Around 60% of the via ‘placemaking’. Heijmans is also committed to production volume of Residential Building originates energy-efficient homes and technological implementa- from the Property Development portfolio. Product tion of ‘home control’ in all ground-level owner-occupied innovations are addressed collectively, as are design and housing, enabling control of comfort, energy, security (pre-) engineering, so that concept and realisation and care. Light, energy and comfort can be managed reinforce each other in an optimal price to quality ratio. centrally and even remotely. All the ground-level Intensive cooperation with partners and suppliers in the owner-occupied homes developed and built by chain is crucial for this. Targeting maximum customer Heijmans since mid-2015 feature this technology as satisfaction, for instance by leaving no snagging items, standard. Bright House is a housing concept developed and further standardisation of processes is important for to generate more energy than is needed. The Huismerk this model. The standardisation of process, design and home is designed specifically for the more affordable execution choices in collaboration with supplying segment. The 500th example of this type of home was partners for the Heijmans Huismerk is a good example delivered last year in Eindhoven. of this. Apart from these products, Heijmans notes that area In an improving market, controlled growth of Residential development is now focusing on city suburbs as well as Building is crucial in Heijmans' view. The policy of inner-city locations. New locations between the inner ‘margin before volume’ should also lead to sound price/ city and its outskirts are gaining in popularity to quality ratios in this segment and further reduction of address the increasing demand for housing. An example failure costs and fewer snagging items. Flexibility is of this is the ‘Parijsch’ housing development in important in this improving market and requires that Culemborg where Heijmans will develop 900 homes in the organisation is able to adapt to the dynamics, in the coming years. This area will cater for some of the terms of both capacity and knowledge, expertise and housing demand in the city of Utrecht. procurement strength. Both business segments were scaled back as a result of the economic crisis, meaning Heijmans is a partner with many municipalities in the that there was room for growth again in 2015. The development of this type of new location, whereby years knowledge and expertise in area development were of expertise will be deployed to add value to the retained during this period, so that area development is development on the basis of an vision of the area, while an important driver of the development of the project Heijmans can keep its invested capital to a limited level. portfolio. Moreover, through the combination of property develop- ment and construction Heijmans can test these ideas for The number of homes sold increased last year to a total feasibility at an early stage and increase its power of of 1,791 (2014: 1,347). A further positive is that the realisation. Area development is thus encouraging private market showed an even stronger development in further acquisition and development of new residential 2015, with relatively higher sales to private customers areas within the project portfolio. In addition, the (1,120 homes, 63% in 2015 versus 711 and 53% in 2014). improving market is presenting opportunities to further Depending on the type of project, home sales normally develop land positions of the existing land portfolio and lead to revenue from construction within 3 months (in thus reduce the capital requirement. A further develop- the case of Heijmans Huismerk) and 3 years (in case of ment of renovation and transformation in urban areas is large-scale transformation). Last year the total also visible. Many governments want to improve the Residential order book at both Property Development spatial quality in old urban neighbourhoods, especially and Residential Building increased by 21% and 7% now that the market is improving. Furthermore, this respectively. type of urban renewal leads to more social and spatial cohesion, better security, improved facilities and so on. For Heijmans, this has led to projects such as the Kanaleneiland in Utrecht and the Fenixloodsen on Katendrecht in Rotterdam. 48 Annual Report 2015 - Heijmans


  • Page 49

    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Property Development The unconditional commitments leading to future property purchases declined to €99 million in 2015 Property Development (in € x million) 2015 2014 (2014: €110 million). The contingent commitments, that may potentially lead to property purchases at a later Revenue 278 179 date, declined to €113 million (2014: €140 million). The majority of these commitments (€84 million at Underlying operating result 9 4 year-end 2015) have only a limited cash impact on Underlying operating margin 3.2% 2.2% materialisation. This relates mainly to commitments to acquire land when the building permit is obtained and/ Order book 284 234 or a sales percentage is achieved. ❹evenue increased by nearly €100 million in 2015 to Residential Building €278 million (2014: €179 million), also with a further (Netherlands and Belgium) improvement in the underlying operating result in 2015 €9 million compared to €4 million in 2014). Controlled Residential Building - total (in € x million) 2015 2014 further growth, although lower in percentage terms than in 2015, is likely to occur due to the increase in the order Revenue 387 299 book to €284 million. Controlled growth is considered to Underlying operating result 6 2 mean growth that is operationally (in terms of prepara- tory works and execution via Residential Building) Underlying operating margin 1.6% 0.7% achievable by the existing organisation, whereby the Order book 421 395 capital requirement and risk is limited by means of strict adherence to certain pre-sale percentages before construction works can commence. Residential Building Netherlands A key feature of the strategy and portfolio of Property Development is area development in which creativity Residential Building - NL (in € x million) 2015 2014 and practical effectiveness come together. Heijmans is for instance developing and realising the transformation Revenue 295 210 of Katendrecht in Rotterdam and Kanaleneiland in Utrecht. These are projects in densely occupied and Underlying operating result 5 0 spatially complex urban areas in which the appearance, Underlying operating margin 1.7% 0.0% the experience and the public space as well as a long-term commitment are factors needed to achieve Order book 286 275 successful realisation. The average sale price to private customers increased slightly in 2015 to €229,000 In the improving housing market, Residential Building (purchasing costs payable by vendor), (2014: €221,000 was able to further improve its result in 2015. The purchasing costs payable by vendor). Homes in the underlying operating result came to €5 million, against higher segment showed a particularly positive price a nil result in 2014. Revenue increased to €295 million development. With its innovative concepts, Heijmans is compared to €210 million in 2014. The order book also reflecting demand in the market and the wishes of increased slightly to €286 million, against €275 buyers. The Heijmans ONE concept launched in 2014 million at year-end 2014). The reason for this modest attracted much media interest in 2015 thanks to its increase in a rapidly improving market was the further nomination for the Dutch Design Award and the focus on ‘margin before volume’ and therefore a strict International INDEX Award. An agreement of intent has acceptance policy. As for Property Development, the been concluded with Wonen Limburg for the delivery of focus in the coming years will be on controlled growth, the first 30 Heijmans ONE homes. so that failure costs can be kept to a minimum. Heijmans assesses its land and property holdings on a regular basis. In 2015 – due to the improving housing market – there were clear signs of activity from the land bank, which has led to various strategic land holdings coming into development. Annual Report 2015 - Heijmans 49


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    PROFILE REPORT OF THE CORPORATE GOVERNANCE FINANCIAL STATEMENTS APPENDICES: EXECUTIVE BOARD Residential Building Belgium Residential Building - B (in € x million) 2015 2014 Revenue 92 89 Underlying operating result 1 2 Underlying operating margin 1.1% 2.2% Order book 135 120 ❺❻❼ ❽❼❾❼❿➀❼ ➁➂ ➃❻❼ ❽❼➄➅➆❼❿➃➅➇➈ ➉➀➅➈➆➅❿➊ ➇➋➃➅❾➅➃➅❼➄ ➅❿ Belgium amounted to €92 million in 2015 (2014: €89 million). The result declined to €1 million compared to “The Rotterdam Museum has for €2 million in 2014. As in the Netherlands, the order some time been looking for a book grew strongly from €120 million at year-end 2014 to €135 million at year-end 2015. Since 2014 residential building that suits the image and building activities in Belgium have been centrally ambition of a modern museum in managed and the operations of the various companies Rotterdam. Our old location was in Kortrijk and Bilzen have been integrated. Last year saw the start of the development of 80 apartments and beautiful to look at, but it was rather commercial space in Wondelgem near to Gent. The hidden and in a relatively Elisabethzaal project for the international congress and inaccessible part of the centre. Our concert hall in the centre of Antwerp is progressing visitors therefore had some satisfactorily. difficulty in finding us. A new Non-Residential: Non-Residential building completely designed for Non-Residential focuses on large integrated works the museum was not financially involving both technology and construction. The types of contract vary, with contracts being awarded increas- realistic, but the Timmerhuis offers ingly on the basis of MEAT criteria. Non-Residential an excellent alternative.” distinguishes five market segments: hospitals/health care, semi-government buildings, data centres, high-tech Paul van de Laar, Director of the Rotterdam Museum clean and commercial property. Non-Residential is centrally organised with a number of regional branches from which services are provided. The number of projects and customers declined last year. There were fewer (new-build) projects in the market in 2015, as a result of the still declining demand for office and retail projects. Price-setting was also under pressure, partly due to the imbalance between risk, contract type and price. In response to these market conditions, Heijmans has decided to pursue a strict ‘margin before volume’ policy in which risk, price and segment are all factors to be considered. Apart from new-build, steady growth in the proportion of service and maintenance projects and contracts is an important objective in the order book. This segment has suffered from overcapacity in recent years, but after several bankruptcies in the sector leading to the retendering of various projects, market conditions appear to have been restored. As a result of the selective acquisition policy, 50 Annual Report 2015 - Heijmans

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