HBG: Operating result [EBIT] of at least 4% as from 2003

15 February 2002 11:19 - Royal BAM Group nv

Operating result [EBIT] in 2003 more than doubled to at least €200 million.

Programmes of change will produce a structural improvement in profitability, amounting to approximately €135 million annually from 2003 onwards, as a result of:

  • Improved operational performance: approx. €70 million
  • Savings from strategic sourcing and supply chain management: approx. €40 million
  • Reduced overheads due to changes at the corporate centre and introduction of service units at national level, including general savings: approx. €25 million
  • Change in the organisational structure of the Group – from a geographical organisation of group companies to a divisional one.
  • Strategic decisions involving acquisition or disposal of activities only after improvement in results in the Construction & Property and Civil Engineering sectors.
  • Medium term: evaluation of the portfolio of activities with a view to market leadership in those markets and market segments that are strategically important to HBG.
  • Operating result in 2003 more than doubled to at least €200 million

Rijswijk – HBG’s strategic reorientation will result in an EBIT margin of four per cent in 2003. This corresponds to more than a twofold increase in the operating result [EBIT]. At a meeting for investment analysts in Amsterdam, Mr C.J.A. Reigersman – President of the Board of Management of HBG, Hollandsche Beton Groep nv – announced the launch of a ‘full potential programme’ for HBG aimed at raising profitability as rapidly as possible. The planned action should produce an EBIT of at least €200 million in 2003.

Efficiency improvements and cost cutting

The three-track programme includes action aimed at ‘commercial and executional excellence’ and designed to generate a structural improvement in profitability of around €70 million. A second element of the programme should lead to a reduction in costs of around €40 million through strategic sourcing and supply chain management. The third aspect of the programme concerns a sharp reduction in overheads of around €25 million per annum achieved by reorganising duties and responsibilities at holding company level and in individual group companies. This will also involve general savings at all business units within HBG.

First task: to improve results

At the end of September 2000 HBG embarked on a strategic reorientation. This exercise began with an in-depth analysis of the business in which HBG’s performance was compared against that of similar companies with international operations. Based on the results of the study, the Board of Management has decided that Group strategy should be aimed at achieving a structural EBIT margin of at least four per cent. The study has also shown that the Group needs to improve the results of the business units active in construction & property and civil engineering [together accounting for more than 85 per cent of turnover] before decisions can be taken with regard to further strategic acquisitions or disposal of activities.

The Group’s organisational structure has also been changed as part of the strategic reorientation. HBG will henceforward be directing the group companies according to activity instead of on a geographical basis. Within the overall EBIT target of 4 per cent, a specific EBIT margin has been set for each sector: construction & property: 3.6 per cent; civil engineering: 4 per cent; dredging: 10 per cent; consultancy & engineering: 7 per cent.

Market leadership in strategically important markets

Based on the Group’s strong position in the various construction markets, HBG will be concentrating on expanding activities offering increased added value, such as property development and private finance initiative [PFI] projects. In the medium term, the portfolio of activities will be evaluated on the basis that group companies need to be among the market leaders in their specific markets. Where there is no prospect of rapidly occupying such a position [either through organic growth or through acquisitions], HBG will withdraw from the market concerned. It will be HBG’s objective to continue to occupy a strong position in the world dredging market with group company HAM, and all possible scenarios for further growth and development of this activity will be explored. The studies which have been made confirm that the existing activities of HBG in the consultancy & engineering market – carried out by group company Tebodin – offer good profitability. The Group expects to be able to further strengthen its international market position and achieve further growth in this area by entering into strategic alliances.

2000 results

HBG will announce the results for 2000 on 21 March. On 4 September 2000, the Board of Management already announced substantial provisions which would mean a net loss in the order of approximately €68 million.

Further information:

Arno C. Pronk, HBG Public Relations, telephone +31 70 3722121.