Annual figures 1999
- 30% annual profit growth forecast for 2000-2002
- 1999 result slightly higher
- heavy losses in Germany, but improvement in sight
- excellent results in other sectors
Rijswijk – Net profit of HBG, Hollandsche Beton Groep nv, increased in 1999 to NLG 138 million [NLG 132 million], which equates to NLG 4.06 per share [NLG 3.93]. As forecast at the time of publication of the half-year figures, profits were adversely affected by the very heavy losses in Germany. The HBG group companies in all other sectors – particularly in the Netherlands, the United Kingdom and Ireland and in the dredging sector – achieved very good results.
The operating result before tax was considerably improved, and amounted to NLG 200 million in 1999 [NLG 150 million].
Shareholders will be invited to declare a dividend on the ordinary shares amounting to NLG 1.60 [NLG 1.55] per ordinary share of NLG 2.00. The dividend may be taken, at the shareholder’s option, either entirely in ordinary shares chargeable to the tax-free share premium reserve or entirely in cash. Preferences should be made known via banks or stockbrokers in the usual manner by 24 May 2000 at the latest.
Turnover rose to more than NLG 11 billion [NLG 10.4 billion].
The number of employees fell to 20,266 [22,854], mainly due to reorganisations and the disposal of business units.
Cash flow remained at a good level, amounting to NLG 343 million [NLG 343 million], or the equivalent of NLG 10.09 per ordinary share [NLG 10.21].
Based on the greatly improved situation in Germany, the strong position in the market and the good diversity and quality of the order book, which stands at around NLG 10.5 billion, HBG expects to see an increase in the net profit – barring unforeseen circumstances – of between twenty and thirty per cent for the year 2000.
Beyond the current year, the Group foresees further improvements in the United States and, above all, in Germany, so that considerable profit growth of thirty per cent per annum can be expected for 2001 and 2002.
Schürmann Complex, Bonn
On 14 March 2000, the Court at Bonn ruled that HBG bore partial responsibility for the damage which occurred to the Schürmann Complex when the River Rhine overflowed its banks in December 1993.
This complex was originally intended as the parliament building. HBG was taken to court by the German Ministry of Buildings, which is claiming damages of DEM 370 million plus interest, in September 1997.
HBG believes that the court ruling does not take sufficient account of the client’s responsibilities, and will be appealing against the judgement. The court has not yet awarded damages. This will not be considered until the appeal procedures have been concluded, which will take several more years. HBG puts a much lower figure on the cost of the damage. HBG does not see any need to form a provision and, in the event that the company is ultimately obliged to pay compensation, it will be claiming on its insurance.
Results, turnover and prospects per sector
Construction turnover in the United Kingdom grew to more than NLG 3 billion [NLG 2.8 billion], or 28 per cent [27 per cent] of group turnover, partly owing to the appreciation of sterling. The result showed a sharp rise to NLG 85 million [NLG 45 million], which corresponds to a net margin of 2.8 per cent [1.6 per cent]. HBG Construction [non-residential building, property development and private finance projects] made a very good contribution to profits, partly as a result of the benefits from the previous clustering of the general construction companies. Nuttall [civil engineering and roads] matched the excellent profit contribution of preceding years.
The United Kingdom is expected to show moderate economic growth in 2000, but it is still unclear whether construction volume will also increase. Developments so far in the general construction sector justify the expectation that turnover and results of HBG Construction will remain on a par with 1999. The completion of millennium projects and the decline in capital expenditure by the water industry mean that Nuttall is unlikely to be able to match the record turnover of 1999, although the result will remain excellent.
In the Netherlands, construction turnover rose to NLG 2.3 billion [NLG 2.0 billion]. This equates to 21 per cent [20 per cent] of group turnover. The result showed a sharp improvement to NLG 80 million [NLG 49 million], equivalent to a margin of 3.5 per cent [2.4 per cent]. This improvement in results was mainly provided by the excellent performance of HBG Bouw en Vastgoed in the property development, housing and non-residential building sector. The results in the civil engineering sector, too, in which HBW and HWZ [civil engineering and roads, respectively] are active, were at a higher level. The result was lifted by recalculation of the provision for project maintenance as a result of the clustering of business units. As of 1 April 2000, HBW and HWZ are to be merged into a new group company HBG Civiel.
The climate in the Netherlands continues to be every bit as favourable to the construction industry. Although this means that international competition is intensifying, the Dutch group companies will certainly be able to profit from the high level of investment. The combined turnover of HBG Bouw en Vastgoed and HBG Civiel will be comparable in 2000, as will the net profit.
The market situation in Germany continues to give cause for concern, and forced the German group companies to adopt a highly selective tendering policy. In line with earlier forecasts, turnover in Germany fell to NLG 2.1 billion [NLG 2.4 billion], or 19 per cent [23 per cent] of group turnover. The loss in Germany in 1999 rose to NLG 158 million [NLG 53 million loss, excluding NLG 169 million in respect of goodwill written off].
The result in the general construction sector was adversely affected by losses on contracts at two offices of Wayss & Freytag Schlüsselfertigbau. It has been decided to close the North/East Region office and to carry out a further reorganisation in the Central/West Region. Müller-Altvatter and Raulf reported results close to break-even.
The general construction activities in Germany will be amalgamated into a new group company HBG Bau, in which three existing group companies – Raulf [included in the consolidation again], Wayss & Freytag Schlüsselfertigbau and Müller-Altvatter – will be merged. This will assure good positioning in the marketplace.
The situation in the civil engineering market, too, led to sharp losses at Wayss & Freytag Ingenieurbau. Since the transfer of the American subsidiaries, this group company includes the remaining international activities of Wayss & Freytag.
HBG does not expect the situation in the German construction market to pick up until beyond the year 2000, and the Group is likely to make a loss of around NLG 40 million in 2000. The organisation has now been substantially slimmed down and is well positioned to take full advantage of the forecast improvement in the market. The German group companies are expected to contribute to profits from 2001 onwards. This upturn will make a significant contribution to the projected profit growth for the Group of thirty per cent per annum.
Construction turnover outside the three home countries rose to NLG 2.1 billion [NLG 1.9 billion], or 19 per cent [18 per cent] of group turnover. At NLG 52 million, the result was almost the same as for the previous year [NLG 54 million]. As in preceding years, the profit contribution from the Irish group company HBG Ascon was very good. The HBW subsidiaries Galère and CEI Construct, both active in the Belgian market, achieved a good result. Interbeton’s result was very good. The activities in the United States returned a small profit.
In the international market, the prospects in the United States, Ireland and Belgium are very good. In the United States in particular, turnover and profits are set to increase strongly. The market for projects of interest to Interbeton, especially in Africa and the Far East, is promising.
HAM’s turnover in the world dredging market increased to NLG 730 million [NLG 707 million], which, like last year, amounts to 7 per cent of group turnover. HAM achieved a record profit of NLG 105 million [NLG 70 million]. The 1999 result was boosted by the early completion of several contracts. With a forecast net margin of approximately 11 per cent on turnover in 2000, HAM continues to be the benchmark in the dredging industry.
The growth in world trade is stimulating the development and improvement of the infrastructure in coastal regions. This creates a very favourable climate for the dredging industry. On the basis of the composition of the fleet and capacity utilisation, the healthy order book and the good market prospects, HAM expects to achieve very good results in the years ahead.
HBG classes the activities of Tebodin [consultancy and engineering] and HCG [process installations and equipment manufacture] as industrial activities. The Group’s turnover in this sector increased in 1999 to NLG 630 million [NLG 595 million] – as in the previous year, accounting for approximately 6 per cent of group turnover. The profit on the industrial activities rose to NLG 18 million [NLG 7 million], representing a margin of 2.8 per cent [1.3 per cent].
In the industrial market, Tebodin sees scope for further increases in both turnover and results. Given the strength of the order book and the organisational changes which have been made [diversification and specialisation at the regional offices plus extra emphasis on high-grade products and services], HCG is forecasting a higher turnover and an improvement in the result.
With effect from the 1999 financial year, the German property development activities have been accounted for under Miscellaneous. The property development portfolio is being rapidly run down. This activity makes a loss, but is expected to show a strong improvement in the years ahead.
Arno C. Pronk, HBG Public Relations