Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Royal Heijmans NV (FRA:HJN1, Financial) reported a significant revenue increase of approximately 30%, from EUR937 million in H1 2023 to over EUR1.2 billion in H1 2024.
- Underlying EBITDA improved substantially, rising from EUR49 million (5.2%) in H1 2023 to EUR91 million (7.5%) in H1 2024, indicating a margin improvement of 2.3%.
- The company's order book grew to EUR3 billion, up by EUR400 million compared to H1 2023, reflecting strong future business prospects.
- Residential sales increased significantly, with 1,587 homes sold in H1 2024 compared to 876 homes in H1 2023, driven by both organic growth and the acquisition of Van Wanrooij.
- Royal Heijmans NV (FRA:HJN1) is on track to achieve a net positive cash position by early 2025, ahead of the previous guidance of 2026, due to strong financial performance and accelerated loan repayments.
Negative Points
- Despite improvements, the company is not satisfied with the current safety figures, indicating ongoing challenges in reducing accidents in construction.
- Grid congestion is a growing problem, affecting the ability to connect completed homes to the energy network, which could impact future sales and delivery timelines.
- The unpredictability of spatial planning procedures poses a challenge, potentially affecting the company's ability to meet housing production targets.
- Staffing is a limiting factor in the 'connecting' segment, which could constrain growth despite strong demand and a robust order book.
- The company faces challenges in managing working capital due to the traditional seasonal pattern, which requires higher working capital during the first half of the year.
Q & A Highlights
Q: Considering residential sales, they're looking very good. The market is picking up, and estate agents are referring to an overheated housing market. Can you provide any guidance concerning housing sales for 2024?
A: It's complex due to special planning procedures and government assessments taking time. However, if current trends continue, we expect to double our range, potentially reaching around 3,000 sales, assuming we can manage all procedures.
Q: You mentioned the grid congestion problem. Looking beyond 2024, could this become a problem for achieving annual targets from 2025?
A: It's difficult to say. We don't accept the risk of connecting to the network in tenders because we can't influence it. We want homes to be sustainable and connected to the grid, not relying on temporary solutions like ICE generators.
Q: Is the performance of Van Wanrooij in the first half of 2024 equal to its performance in 2023?
A: Yes, Heijmans has grown organically by 10% in revenue and underlying EBITDA, with the rest of the growth coming from Van Wanrooij.
Q: Regarding connecting, is your capacity sufficient in terms of property, plant, equipment, and staffing?
A: In terms of equipment, we're electrifying everything. Staffing needs careful management, so we won't continue growing at the same pace. We need to embed current growth before taking the next step.
Q: Can you explain why working capital was beneficial to cash flow? Is this nonrecurring or due to the residential market's development?
A: It's a bit of both. Increased revenue and pre-financing helped, and the accelerating residential market meant homes under construction sold faster. This catch-up is nonrecurring.
Q: With more cash and no immediate plans for share buybacks, will you consider increasing the dividend payout?
A: We've increased the payout from 40% to 50% and switched to a cash dividend. We're focusing on mergers and acquisitions rather than share buybacks at this point.
Q: Regarding connecting, when will improvements from two-stage contracts and maintenance clustering carry over to financial results?
A: We're at the beginning of these contracts. The focus is on curtailing risk rather than just increasing margins. Improvements will take another year or two.
Q: Can you provide guidance on your timber frame production output level?
A: We're aiming for about 200 homes this year, focusing on learning and automating processes. We plan to scale up to 1,000 homes, but spatial planning predictability is crucial for factory scheduling.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
