VolkerWessels reports EBITDA of
€ 269 million, in line with latest outlook

Jan de Ruiter, Chairman of the Management Board

“We reported FY 2019 EBITDA of € 269 million, which is in line with the Q3 2019 outlook. All our divisions contributed positively to this result. Especially in Construction & Real Estate Development, Energy & Telecoms Infrastructure, Germany and in the UK, our operations reported solid results. As already indicated in our nine month update, weather-related issues caused our North American operations to end below the result of last year. Dutch Infrastructure reported a substantial increase in EBITDA relative to last year. However, excluding the impact of OpenIJ, the results of Infrastructure were lower than in 2018.

2019 was a year of mixed developments, especially in the Dutch Infrastructure segment. We made progress on the OpenIJ project and our new Infrastructure leadership team has started. On the other hand, we are disappointed by the general underperformance of the Dutch Infrastructure segment, which is in part due to the unresolved issues with respect to nitrogen deposition. Apart from the Dutch Infrastructure segment and the weather-related underperformance in North America, we are pleased with our results for the year. Our net cash position at year end improved to € 563 million which is an increase of € 197 million compared to the end of 2018. In 2019 we have realised a further reduction in our strategic working capital of € 40 million bringing the total reduction over the last three years to € 180 million.

Our EBITDA margin (before applying IFRS 16) at 4.1% is 10 bps below last year, which is below our medium term objective. Rising labour costs and underperformance in the Dutch Infrastructure segment negatively impacted our margin development. Our order book at the end of the year remains high at € 8.9 billion which is in line with 2018 (however with a different composition).

We very much regret the fatal accident of a colleague in our Canadian operations. Creating and safeguarding a culture in which working safely is embedded is an ongoing process. Safety is one of our core values which is reflected in the way our employees act and feel. We work safely or we do not work at all. Every injury is one too many, our Incident Frequency rate for the group decreased to 4.1 from 4.4 in 2018.

Especially during the 2nd half of the year we experienced increased margin pressure as a result of the PFAS and nitrogen deposition issues in the Netherlands. The issues surrounding nitrogen have not been resolved as yet. It is clear that after the summer the call for action has become very loud and the Dutch government promised that an interim solution would be announced before 1 December 2019. In December a new, higher, standard was communicated in relation to PFAS and PFOS and this will bring some relief but is not a total solution. On nitrogen deposition, the measures that have been announced, so far, will have limited impact especially on new large integrated infra projects. More decisive action is clearly needed in order to unlock a large number of projects, especially in infra. Reduced demand is depressing margins whilst certain buyers are adding to this effect by delaying projects in order to obtain lower prices going forward. We expect that the infra market will continue to see the impact of this re-balancing between demand and supply during 2020.

Last week we announced the launch of our in-house developed NoNOx filter which enables us to lower our nitrogen deposition up to 99% during the construction phase of projects. With this innovative solution, we are taking our part in making our sector more sustainable. However, the nitrogen deposition during the user phase needs a political solution and is outside our control.

The percentage completion of OpenIJ at the end of the year is approximately 80%. During the 4th quarter VolkerWessels’ share of the loss provision for OpenIJ was reduced by € 4 million, lowering the total addition for 2019 to € 4 million (year end total provision € 111 million). The managerial target for the final project result is estimated between - € 110 million and - € 77.5 million (VolkerWessels’ share).

Looking forward, we expect our 2020 financial performance to be in line with 2019.

On October 8, 2019 we received a letter of interest from the majority shareholder Reggeborgh for all shares of VolkerWessels. The independent members of the Supervisory Board and the members of the Management Board, following a careful review of alternatives and of the different stakeholders’ interests unanimously concluded that the offer is in the best interest of VolkerWessels and its stakeholders. Accordingly we decided to support the offer. The offer memorandum was formally published on December 23, 2019 and the offer period will expire on February 28, 2020, subject to certain conditions. Post the announcement of the offer on November 12, 2019 Reggeborgh started to purchase shares in the open market and now holds 75.1% of our shares at the close of business on February 12, 2020.”