HBG Annual figures 2000
- Revenues + 8.4%: from €5 billion to €5.4 billion
- Provisions of €154 million cause net loss of €67 million
- Dividend unchanged: €0.73 per ordinary share
- Order book of excellent quality at record level: €5.9 billion
- Prospects for 2001: net profit of approximately €90 million
- Drastic restructuring involving programmes for improving contract acquisition and execution, reducing overheads and coordinating purchase activities
- Improved risk management systems implemented across the board
Rijswijk – Owing to non-recurring provisions amounting to €154 million, HBG, Hollandsche Beton Groep nv, closed the year 2000 with a net loss of €67 million [1999: €48 million net profit], or €1.92 negative [€1.41positive] per share.
The provisions, which were announced at the time of publication of the half-year results 2000, relate mainly to the activities in Germany and largely affect the results of the construction and property and civil engineering activities. In the second half of 2000, an amount of €10 million was charged to the provisions of €154 million, so that €144 million is still available for utilisation.
HBG reached an out-of-court settlement with AGIV in November in the dispute brought by HBG against AGIV. As a consequence of this settlement, an amount of €18 million has been included in the financial statements as an exceptional result. This amount was set against the above provision, leaving an exceptional result in the profit and loss account of €136 million negative.
Organic growth and currency effects
HBG’s revenues in 2000 increased by more than 8 per cent to €5.4 billion [€5 billion] as a result of both organic growth [5.5 per cent] and currency translation effects [2.5 per cent]. Growth was strongest in civil engineering [particularly in Ireland, the Netherlands, Belgium and the United States], for HBG Bouw en Vastgoed [construction and property in the Netherlands] and for the dredging company HAM. The order book reached the record level of €5.9 billion at year-end 2000 [€4.7 billion]. Both the quality and the diversity of the work on order are good.
The operating result before exceptional items amounts to €85 million, which is on a par with 1999. After the exceptional result, the EBIT figure amounts to €51 million negative [€84 million positive].
Proposed dividend: €0.73
Shareholders will be invited to declare a dividend on the ordinary shares amounting to €0.73 [€0.73] per ordinary share of €0.91. 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 6 June 2001 at the latest.
Change to the percentage of completion method
With effect from the beginning of 2000 – in line with a general trend in the industry – HBG has been recognising profit on contracts according to the percentage of completion method. Previously, profits were not recognised until completion, except in the case of projects of extended duration. Losses continue to be recognised as soon as they are identified. The change in accounting policies results in the recognition of additional profit of €31 million net, which has been shown as extraordinary income in the financial statements. The implementation of the new accounting policy means that the reported results more accurately reflect progress on current projects. This enhances the greater degree of transparency which HBG seeks to introduce. Measured on the basis of completed contracts, the operating result [EBIT] for 1999 amounts to €102 million whereas, on the basis of percentage of completion, the figure is €84 million. The reduction of €18 million is accounted for by the recognition of profits on contracts completed in 1999 on which much of the production took place in 1997 and 1998.
Employees – future shareholders
The average number of employees fell to 20,081 [20,266]. There was organic growth in the number of employees of around 1,000, mainly in the United States and the United Kingdom. Reorganisations – particularly in Germany – led to a reduction of 1,200 employees.
HBG will be inviting the meeting of shareholders to be held on 23 May 2001 to approve a share option plan and also a share savings plan for employees aimed at increasing employee involvement in the Group. HBG does not at present operate a share option or savings plan.
Based on the volume and quality of the order book, among other things, the net profit in 2001 – barring unforeseen circumstances – will amount to around €90 million. At the beginning of 2001, HBG launched a 'full potential programme' with the object of raising profitability as rapidly as possible. The actions being taken should produce an EBIT result of at least €200 million, or approximately 4 per cent of the projected turnover, by 2003.
Operating result before interest and tax [EBIT], revenues and prospects per sector
The operating result [EBIT] achieved in the construction and property sector amounted to €46 million negative, including a provision of €44 million. The results of HBG Construction in the United Kingdom developed well. HBG Bouw en Vastgoed achieved a result slightly below the good level of 1999. However, a strong increase in the profit contribution from property activities made up for the very disappointing results on general construction activities. The net result of HBG Bau remained negative, but was in line with earlier forecasts. Revenues rose to €2.4 billion [€2.3 billion]. This corresponds to 45 per cent [47 per cent] of Group turnover. The order book increased by 26 per cent to more than €2.5 billion. The prospects for this sector are favourable, partly on the strength of expectations that HBG Bau will achieve a break-even result in 2001.
The combined operating results of the group companies active in the civil engineering sector amounted to €37 million negative, including a provision of €61 million. As in preceding years, Nuttall [United Kingdom] and Ascon [Ireland] made excellent profit contributions. The HBG Civiel result was at a higher level than in 1999, partly owing to good profit contributions from the Belgian business units. Although Interbeton reported a positive result, it was considerably lower than in the past. Contrary to expectations, the activities of HBG Constructors in the American market resulted in a loss. Wayss & Freytag Ingenieurbau faced setbacks from losses on several contracts outside Germany, among other things, as a consequence of which the group company reported a considerable net loss. Revenues achieved by the civil engineering activities rose to more than €2.3 billion, or 43 per cent [42 per cent] of Group turnover. The generally favourable market conditions are reflected in the strong growth in turnover and the order book. The prospects in the civil engineering sector are positive.
HBG operates in the dredging sector with group company HAM. HAM achieved revenues of €411 million [€325 million] on the world dredging market, or 8 per cent [7 per cent] of Group turnover. The operating result [EBIT] increased by 54 per cent to €57 million [€37 million], maintaining HAM’s record as one of the best performers in the dredging industry. The prospects for this sector remain as good as ever.
Revenues in the consultancy and engineering sector – achieved by Tebodin – was on a par with 1999 at a level of €133 million. Although the operating result showed a decline to €8 million, owing to a temporary fall in capacity utilisation in the Dutch market, it remains at a very good level. For 2001, Tebodin expects turnover and results to be on a level comparable to the preceding year.
Financing and balance sheet
Group equity showed a net decline of €99 million to €281 million as at year-end 2000, mainly owing to the net result for 2000 being charged to reserves and adjustments due to the introduction of the percentage of completion method.
HBG’s solvency ratio as at year-end 2000 amounted to 20 per cent. The capital ratio is calculated along similar lines to the banking industry by expressing the sum of Group equity, deferred taxation and the subordinated loan as a percentage of total assets. HBG’s target ratio is at least 25 per cent.
Gross investments in 2000 amounted to €165 million [€168 million]. This figure includes the capital expenditure on the large trailing suction hopper dredger HAM 318 [due to be launched in May 2001] and tangible fixed assets taken over in connection with acquisitions. After allowing for the disposals, amounting to €39 million [€42 million], net investments fell from €125 million to €120 million.
The capital tied up in property development fell by €34 million to €287 million. Within that figure, the United Kingdom and the Netherlands remained at a level comparable to year-end 1999, with amounts of €89 million and €66 million, respectively. The amount of capital tied up in Germany amounted to €131 million, after a write-down amounting to €44 million as part of the total package of provisions amounting to €154 million deemed necessary by the Group. The operating result on property development in Germany was also strongly negative. In the Netherlands, the operating result on the property activities was very good, mainly as a consequence of a strong contribution from advance sales and completions of owner occupied housing. In the UK market, too, good operating results were achieved on sales and completions of several commercial property projects.
The Group’s net cash and cash equivalents position [cash minus bank overdrafts] was up by approximately €72 million at €389 million as at year-end 2000, partly due to improvements in the working capital position.
Arno C. Pronk, HBG Public Relations, telephone +31 70 3722121.