Koninklijke Heijmans N.V. (HEIJM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to our conference in Amsterdam, here in Amsterdam and to our listeners by webcast to the explanation of the Heijmans 2021 annual figures with Gavin van Boekel, who has been working at Heijmans nearly half -- for half the year, and we'll present the figures together with me at Heijmans. And we're doing very well. Heijmans had an excellent year-end has laid a solid foundation for 2022. As usual, we'll start with a brief video of our operations, what are we working on, which challenges do we face and which opportunities did this offer for Heijmans. We face challenges in many respects, consider CO2, the energy transition and all this together often makes for a complex situation. Safety and health is where it all begins. We have to do this together; client, principal, supervisor, employee throughout the chain. Everything is getting safer. We're very happy about that. You can see that we're in the midst of a massive transition and all those challenges converge in residential development. So we need to be very careful. We have space, we have materials. We have energy. At Heijmans I believe that we're perfectly capable of providing expertise and connecting the different areas. Heijmans wants to be the sustainable builder and to pioneer and seek out the best solutions. And our team aims to leave each construction site richer and better than we found it. Technology is a way to develop areas in a healthy way for the future. Data provides insight, so you see what happens. And because we store that data now, we can compare them. In addition, you can also develop other services such as predictability and materials used to remain applicable for an infinite period in construction. So we need to take on a different role and not only think about piling the stones, but also think about what happens to them afterwards. And we to stack them in such a manner that we can take them with us later on to the next project. These are all driven people ready to meet the new challenges that face us in the energy transition, larger residential challenges and area development. And let's not forget, making things more sustainable and seeking out good solutions that contribute to our ambition to be the makers of a healthy living environment. Before we talk about the figures, I'd like to say something about safety. In 2021, we made progress in reduced accidents and the decrease was over 20%. What we're also seeing is that the accidents are becoming less serious. Of course, that's no guarantee for the future. It's an observation. Our IF figure, injury frequency figure is not declining along with the decline in the number of accidents. And we've now reached Level 4 on the safety ladder in Infra, which means that safety has progressed from reactive to proactive dispositions. We aim this year in property and Building & Technology to get the Level 4 certification as well. The next step is to embed this more broadly in the construction chain and to work together with other parties in introducing safety as a criterion. And when we concluded our road work on A12, that was a milestone so that people could do their work safely. Our client valued safe work over traffic flow. And both the client and the principal and the contractor and the surrounding communities consider this to be very positive. This picture reflects the innovation of the Polde runway at Schiphol. We managed to renovate that in 17 weeks. And a bit further down you see the Quebec project, which is an additional flyover for aircraft over the A4. We successfully completed this in 2021. And together with the double lane system, aircraft can get to the runway at the west of the motorway more safely and faster. Now financial highlights. In 2021, Heijmans performed very well and achieved a margin of 6.1%. This revenue increased together with rising profit in which all sectors contributed well. By now, all sectors are performing well above the target bandwidth of 4% to 6% for the production companies and 6% to 8% for property. That reveals something about how robust our sector is, throughout the firm, predictability has improved. Remarkably, our strict tender policy and our decision to work based on a balanced folio is bearing fruit. I'm delighted to say that recurring business keeps increasing such as with asset management and infra. Large projects remain our core business with a volume of approximately 20% to 30% of our revenue. We deliberately opt for margin over volume. In Building & Technology, for example, our revenue was EUR 130 million less than in 2020, but the absolute profit increased. I've said this before. Nothing is easier than working to access that market. But the main question is what's the earning capacity and what's the corresponding risk profile. And I can say that Heijmans' earning capacity in 2021 progressed well with a balanced risk profile and achieved a robust level. At Heijmans we did not have major loss-making projects in our portfolio, and that's the foundation for the excellent results in the past year. At the same time it's also the reason why we had the good foundation for 2022. We're well positioned and have delivered this good performance despite corona and the corresponding higher absenteeism. Our people were very flexible and continued working, many of them from their home or on construction sites, and that merits huge compliments. We also have a very robust cash position and a higher solvency of 30.1%. Based on these improved parameters in the past year, we extended our financing to 2025. We did not have to use this throughout the year, but Gavin will tell you more about that in a moment. In addition, of course, we're delighted that for the second year in a row, we were able to provide our shareholders with the prospect of a dividend, maintaining our policy principle of a 40% payout so that we aim to distribute a dividend of EUR 0.88 per share, which is a dividend yield of approximately 6% with respect to the closing share price of 2021. Some of you know that in 2016, I boarded this train with a EUR 110 million loss. At the time, I had to announce that we were divesting the foreign companies. At that period, we needed to survive [indiscernible] projects and focus on lowering our debt position. This indicates our financial trajectory in recent years. Revenue increased step by step and then by leaps and bounds. In 2022, after a year of stabilization, I expect a modestly increased revenue. Margins have grown and we can assert that all sectors are operating within their target margin. Underlying EBITDA has doubled in the past 5 years, and our net result this year will equal EUR 50 million. What's nice about this, in my view, is that once again, we're a predictable company that in the past 2 years has been generating dividend for our shareholders as well. Our task now is to keep up this upswing. Before I hand you over to Gavin, who will talk about the achievements in the sectors, I'd like to talk about 2 other topics briefly. Heijmans aims to be a successful employer. And we aim to be the best employer in the construction industry. When I see the outcomes of the Employee Commitment Survey in 2021 with an 83% response and Net Promoter Score of plus 25 the sector on average scores plus 16 and other industries plus 12. I'm proud to tell you this. It attests to the huge commitment of our people, and it's good to know that we have received a lot of feedback that enables us to move to the next level in developing our company. I'd also like to say a bit about TenneT. As already mentioned, during the half year figures as Heijmans erred on the side of caution by taking a EUR 34 million provision in the Wintrack II project, and that position has not changed in the second half of the year. The arbitration in the Wintrack II case is ongoing. In the ruling last year, the arbiters ruled that TenneT lawfully dissolved the agreement extrajudicially and Heijmans Europoles has appealed this, there is not yet a final ruling in the ongoing proceedings. So we cannot make any substantive remarks nor can we give you an idea of when we expect a ruling in these proceedings. I'll hand you over to Gavin to elaborate on the sectors.

Let me start with property development. Our revenue and profit have increased with respect to last year. Revenue by 14% because the margin increased our profit increased by 20%. We sold 2,682 homes, 18% more homes than the year before. The increase was particularly visible in sales to individuals, private people and housing cooperatives. And it's good to see that they're investing again. The homes without added costs for buyers remained stable year-on-year, but that's a distorted impression because in 2021, we sold more apartments and fewer ground-level homes. We managed to mitigate the higher procurement prices and margins in property development increased by 40 basis points. Thanks to the good sales figures, the total land bank diminished, which positively impacted long-term cash flow. We're looking for new development sites and aim to keep our land bank at least at its precedent level. And what's available in property is lower mainly because of the high turnover because we sell, whatever becomes available, quickly. As for the order book, that remains strong and continued to rise up to EUR 595 million, a 10% increase, in part because of our developments in Rotterdam [indiscernible] Hart van Zuid and the ongoing expansion of Almere in New Brooklyn. Lack of planning capacity, slow release of permits and procedures concerning spatial planning that drag on remain challenging on this market. Recently, the Didam ruling of last November increased that challenge. Authorities are no longer automatically free to sell land to whichever party they want to or to develop the area with whichever party they want. How this ruling will affect the speed of area development will become clear in the months ahead. The photo shows a nice example of one of our projects in Amsterdam. What used to be this [ Bindomershull ] Heijmans has delivered 80 homes, both social housing, free rent housing and owner-occupied homes, which was the mix that the city wanted. And I'm pleased to tell you that this photograph on the [ Zydercare ] award last year, which was the most important housing award for the city of Amsterdam, and they commended how the designers managed to align the Amsterdam school and the surrounding streets with the design of this building. Now Building & Technology, in building technology, we saw a hybrid pattern. Although revenue declined, EBITDA increased both percentage-wise and in absolute numbers. This corresponds with our deliberate strategy of considering margin over revenue that Ton mentioned. This includes Building & Technology and consequently, all corporate flows within the strategic EBITDA bandwidth that we, as the Executive Board, have determined. The increased profit was partly because there were some disappointments in 2020 on project NACH the Court of Amsterdam, which is nearby. But there's also an improved EBITDA underlying combined with strong growth in recurring business, which achieved EUR 250 million last year. Several large contracts were extended last year and new ones were added in part at Schiphol and ASML, which leads to a strong undercurrent in Building & Technology. Our Services company remained strong despite corona. The order book is up by 10%, although we still see some caution on the office and shop market. As for residential construction, last year we renovated and made more sustainable, 1,100 homes, and we do this while the residents are living there, which is not a panacea. For example, if you need to replace an entire roof. Residential satisfaction figures are favorable, and we expect this to increase given the renovation and increased sustainability challenge that we support. In The Netherlands this is a photograph of the Dutch senate, Heijmans and other parties handled the long-term renovation of the Binnenhof compound. You see a building information modeling person examining the space. That's a digital model that we built and delivered for the existing situation throughout the Binnenhof compound, and we use this to fathom how to streamline the construction renovation process. Now Infra, our Infra company had an excellent year. In addition to the revenue rising to EUR 738 million, so an increase of 11%. The percentage margin remained stable despite our cautious provision of EUR 34 million for the Wintrack II project. As Ton told you, this provision was taken in the first half of the year and did not change in the second half of the year. Some projects concluded successfully, such as the A1 motorway between Apeldoorn in Project Quebec, a second flyover for aircraft at the south of Schiphol. Corona benefited us because of the reduction of traffic on the A4 motorway made our work more efficient. And in Infra, we also see the benefits of a differentiated order book and better project management. For example, at asset management operations increased as with nonresidential construction. We had long year implementation, and there was a better balance of smaller and larger projects, nor are there any large loss-making projects known to us at this time. In addition, in 2021, we continue to enhance our focus on greater sustainability, and we will keep investing there. In terms of material, for example, we purchased only stage 6 engines only if no electric alternative was available. And via participation in [ Milliner and Fonski ], we also started investing in sustainable asphalt transport through hydrogen trucks. Our order book in Infra is declining a bit in part because of some large projects of the Department of Public Works, which had been deferred to the future because of the nitrogen issues. At the same time, because of the combination of large and small projects and the increased asset management at Infra our order book will be a bit shorter in duration. This photo shows the A79. The main challenge here for us was not simply renovating all the asphalt and making 118 kilometers of newer and more solid asphalt, but the soil underneath, which contained a lot of explosives and even rare animal species. Now our profit and loss statement. I'll walk you through some of the items. Underlying EBITDA was up by 25% from EUR 85 million to EUR 106 million. The adjustment of EBITDA, joint ventures is striking because there's a negative correction here, even though the previous year, it was a positive correction, which means that the sum of our joint ventures was positive in 2021 and negative in 2020, and this was impacted mainly by the project NACH at the court in Amsterdam. Ordinarily, the lines correction, EBITDA and joint ventures and the result joint ventures and associated participations can basically offset each other. That was the case in 2020. This is not the case in 2021, and that's because we took an impairment of EUR 5 million at AsfaltNu. That's the joint venture that we started together with BAM last year in which we engaged in joint asphalt production, and that relates to the changed financial outlook. As a consequence of exceeding the benzene norms, additional investments need to be made to ensure recycling asphalt within the applicable standards. The tax rate was higher than in 2020 when taxes were almost [ nil ], but at the same time, it was lower than the nominal tax rate of corporate tax in The Netherlands because once again, we were able to realize unrecognized tax losses from the profit, and that increased from EUR 40 million to EUR 50 million despite the higher tax rate. What you also see is the dichotomy in the net profit between H1 and H2, driven mainly by the Wintrack case. And that's why it was EUR 10 million, and EUR 40 million in H2, which is an excellent result. Now the tax rate for 2021 was 8.5%, which was significantly lower than the nominal rate had been. And this was largely related to the consistent profitability. The nominal tax rate had been 25.8%. And the impact of this change was EUR 8 million after this upward revaluation the remainder of the result was limited. So unrecognized tax losses, EUR 17 million with a potential recognition impact of EUR 4 million. And it's -- we expect that the tax rate upward will trend to a nominal tax rate in 2023. On the one hand, you can offset the tax loss carryforwards for unlimited periods. But on the other hand, 50% of the loss capacity, over EUR 1 million is offsetable in any individual year. This means that from 2022, there's a partial cash out, so that based on the old rules, we through 2025, we didn't have to pay any taxes. Our net cash flow increased by EUR 54 million to EUR 91 million. This was driven by high operating results combined with strict working capital management. In 2021, our working capital was negative throughout the year because of the continued strong prefinancing and rapid payment of debtors. And the latter is most likely driven by the negative Euribor. Solvency continued to improve, exceeding 30%, meaning that our balance sheet is robust. In part because of this and based on the robust outlook that we'll tell you more about in a moment, we think it's responsible in keeping with our dividend policy to propose an EUR 0.88 dividend to the AGM. Our syndicated loan was extended in early 2021 at improved conditions, although in 2021, like in 2020, this was not used throughout the year, in part because of the strong performance in the coming months in keeping with the agreements that come [ prep ] B shares will roughly be [ halved ] to EUR 15 million to EUR 16 million if the AGM accepts our proposal for a dividend payment. Clearly, we're well within our confidence with these figures throughout 2021. Now I'd like to tell you a bit about the European Union taxonomy and Green deal, which is very ambitious in becoming more sustainable and to the transparency was subscribed to by all stakeholders. At present 2 of the 6 sustainability topics have been elaborated and we have to report on our eligibility. So what part of our revenue is eligible for climate mitigation and climate adaptation. At present, this holds true for 82% of our revenue. 11% of our revenue is not eligible, and that's primarily the work that we do for Schiphol. The other 7% of the revenue is what our specialists are doing for external parties. And it's not always clear whether the comprehensive operations that they do part of, is or is not eligible because based on the current development framework that cannot be defined yet. So to be prudent, we have not taken along this revenue as eligible and that brings us to the 82%. Now if we look at the climate impact, we see that in 2021, Heijmans reduced CO2 emission by about 6% to about 28 tonnes, correcting for the asphalt centers that together with the BAM centers converged in AsfaltNu. The reported decline in CO2 is, therefore, much higher, but the underlying decrease of 6%. CO2 emissions within Heijmans is calculated based on Scope 1 and 2, that's a direct CO2 emission and the CO2 emission of energy and heat that we procure. As for Scope 3, which is the indirect emission of CO2, we formulated separate ambitions, such as the CO2 emission of buildings that we -- homes that we constructed and sustainable procurement of materials. Our target remains to produce CO2 neutral in 2024, and we will focus mainly on the CO2 of our fleet, material, construction sites and buildings. Back to Ton.

Thank you, Gavin. And this shows a railway underpass in Amsterdam, where we built a wall in between that consists of 75% recycled concrete. And that's new secondary materials come from our Buiksloterham project, where we're basically demolishing, purging and preparing for construction in various lots on the Northern bank of the [ end ]. This exemplifies matching materials where we apply the materials being released into other projects. And that's the future. You can't do that if you've got one project in Amsterdam and another in [ Mastef ], but wherever you can match you need to try to do so, and that's an excellent leap forward. In recent years based on improving, making it smarter and more sustainable, we have made Heijmans more robust and improved our vitality and predictability was essential combined with healthy earnings capacity and managed risk profile. In addition, we deliver increasingly digital services, such as Beyond Eyes in which we support companies to achieve a healthy, safe and sustainable work environment where employees can be at their best. And we've also made our dykes and flyovers and bridges more sustainable. That's our challenge to renovate and renew these in the years ahead. Now material flow analysis. Builders of a healthy living environment, we aim to build increasingly sustainably. One nice example is to use material flow analysis to gain insight into the materials to be applied in their impact on the surroundings, the environment. We analyze the origins of materials to be applied such as primary raw materials, secondary raw materials and renewable raw materials, trying to use primary raw materials as little as possible and improving the life cycle to increase the value chain by increasing the percentage of reuse at the right hand, you see the life cycle, where you try to get as high as possible in the chain. This is one of the reasons why we're starting to build timber frame homes. The home will be far less to 65,000 kilograms in timber frame homes. In addition, in producing these timber frame homes Heijmans will continue to build in concrete, so we'll pursue a 2 track policy. And we expect that these homes will be more affordable as well, thanks to industrialization. What is essential, however, is that the legislations remain uniform and the local authorities streamline their ambitions. Now I'll tell you about outlook. As indicated, the excellent results from the previous year established a solid foundation for 2022. With a well-filled and high-quality order book, we're well positioned for the years ahead, and we expect for 2022, a slight increase in revenue with a comparable underlying EBITDA. In addition, 2022 will be devoted to recalibrating our strategy. In addition to focusing on people and profit, we will, given the social trends, highlight planet by putting a sustainability and circularity higher on our agenda. Nowadays, of course, labor is in short supply, but we're still able to fill our vacancies. We do notice that in some positions, it's harder to find candidates. What does help us is that Heijmans is financially robust and with the vision of making a healthy living environment is well profiled as an attractive employer. The government plans are ambitious and a lot of funding has been allocated for the residential market, energy transition and the sustainability challenges. The main question is how this will carry over to concrete plans. In addition to financial means from the state budget, what's important is to be decisive and take good decisions. Underlying the prospects for our sector remain good and Heijmans is well positioned in growth markets such as renovation and maintenance, residential, high water protection programs in Infra and the energy transition, which heavily impacts all sectors. We remain in focus to be able to benefit from these opportunities and to anticipate potential threats as a consequence of the increased dynamics on international markets. With good reason, we say that there's a good foundation for 2022 based on the order book, we're confident that our revenue can continue to grow. And in that sense, all lights are green to continue improving underlying EBITDA. At the same time, we see that some macroeconomic factors and political cases may elevate the risk. I mentioned inflation with potentially higher mortgage interest. As a result of inflation, the ongoing uncertainty about nitrogen issues and the recent ruling by the council of state in the Didam ruling. In that context, we've decided with an equal guidance to continue the underlying EBITDA as is, but if we are able to meet the stated risks safely a higher result might be in the making. And if the government ambitions and envisage plans are taken on decisively, then I'm confident about our 100-year anniversary in 2023. Now I'll take questions who would like the floor.

Tijs, you have the floor from the ING.

Well, I don't have a lot of comments to be quite honest. For example, if I look at the convergence of nonresidential and residential construction, so that division has a slightly lower revenue but higher margins then the implicit risks in residential construction are low. You're highly experienced. They're large projects, but not a lot of mistakes to be made there. The margin that you reported was lagging a bit behind average. So I'm delighted to hear your increase in additional services, asset management and the like, but I assume that you would like to continue playing a role there in building complex nonresidential buildings in both public and private sectors. Isn't this the main point of consideration for you at this stage?

I don't think so. If you look at the portfolio, it's true that residential construction is the area in which we're 70% to 80% principal of properties. So we're able to mitigate with respect to the increase in cost and the homes with no added cost for buyers. And as Gavin explained, we have a strong undercurrent in service business, new contracts as well as recurring business and an excellent margin profile. And it's with good reason that we value margin over volume. And that's especially the case in 2021 in nonresidential large projects. So there's EUR 130 million lower revenue is mainly there. And we expect that it will rebound in the year ahead to the level it was in the past. So you have enough projects that you think those are right for us. We're not taking on external risks because your implementing people need to have something to do. That sounds like a very specialized role. Is the question answer. You see that people who are in nonresidential can certainly build foundations in infra or residential or they can take on concrete work there. So we're becoming an increasingly integrated company, where we exchange internally. So I see in nonresidential in 2022, a clear increase -- but we've also said at Infra that the larger projects due to nitrogen will come later on. And now we see the reverse that we expect lower revenue in Infra and so we're deploying those people to nonresidential and residential projects. So it's nice that we can do that. And in nonresidential we also see increasing principles that want to team up with us because of market pressure. And we appreciate that because it means that over there we are able to mitigate the risk much sooner as well.

I've been keeping an eye on that for years. Of course, it's all a bit volatile. How you see those final figures on the balance sheet. Let's see where are they? So you make between 2,000 and 2,500 of those homes, you build them. What's in my mind is 2,000 before the financial recession. Those numbers were much higher and the margins were even higher. So I understand that it's -- the residential market is still in some dynamics but you've got land positions that you purchased 10 or 15 years ago at a lower price, but -- for land, but you had quite a few impairments. How are you going to get that land bank, it's sufficient firepower for the long term.

I think I've said previously, if you look at the entire portfolio order book, we get part of our new business through tenders and part through joint projects. We see the transition in the neighborhoods built in the 1960s in Amsterdam and Rotterdam South and the Southwest of The Hague, which a week or 2 ago was accepted by the council. That's a huge transition. And then we have our land bank, and there are a few years, certainly during the recession when Heijmans was not exactly thriving, that we did not purchase new land positions. And now once again, selectively, we're reinforcing our land positions. We certainly want to expand our land positions at the right places under the right conditions with a manageable risk profile, but we will be growing there. That's what we see. For the time being, our land bank is sufficient to operate.

Roughly what percentage of your homes is built via the land bank?

Well, I can't say specifically because it varies so much. Sometimes it's an option, another time it's a one-to-one agreement. And then another time, it will be a position that you hand in to get a construction claim. And then it's just a small piece of land, but you do get a larger position. So it's not a like-for-like situation, but we can certainly say that by 2025, we're not concerned about the period until 2025, but I see a long pipeline between us.

So the 108 million, those are land positions and construction rights that you've assessed conservatively on the balance sheet.

Well, I can't revalue the impairments that I took. Of course, that happens in practice, but that's in your earnings. Well, if we input that land and build residences on it, of course, then we'll achieve profits again.

And still because in the past, the standard practice, not only with you was simply to buy everything there was.

And if you consider it strategically, of course, you want to purchase a position at a good price, so that you have insights into what's happening so that you can develop and build, but it's also your stock in trade and you know that better than anybody else that in some cases, it's worthwhile to go for something where you know that if you do your work well, it might take time, but we can get in an expensive land position that might be worth gold in 7 or 8 years because Heijmans is now capable of doing this a bit more.

Or is that something that you say that's behind us?

I'm not saying it's behind us, but I am saying that in the past, we purchased some huge sites and the challenge was to gain a grip on the entire side. For example, the [ Meresutchronio ] we don't do that anymore. But trying to acquire it as strategically within a larger area to complete their area development. Yes, that is what we want. And it's always a choice between the size of the location and the time frame within which we expect development to do justice to its value. So it's -- you have to consider many factors. So the time frame, the amount of the purchase price, the conditions, that's what doing business is about. And you said it -- I've been in the property business for many years. We have an Executive Board that considers very carefully what's happening here. So essentially not very much has changed compared with 5 or 10 years ago, perhaps the market.

I think that something has changed fundamentally. We're far more selective. And our horizon isn't as long as it was and mainly -- especially we're purchasing smaller locations.

Yes, but the opportunity to purchase things is still there.

Well, we're a company where we deal with existing properties and land positions. And what we see are good opportunities, we engage in manageable investing there.

I'm Luuk Van Beek. I have 2 questions. You said your company did very well last year. You were busy getting everything in order and curtailing risks? Are there any large projects aside from the EC and that you're working on? Or do you say all we need to do is remain alert to everything that's happening around us?

No, we're always working on projects. So we are still getting involved in larger projects. We don't have any loss-making projects in our portfolio. I did say something about TenneT earlier that's ongoing. And all the tenders within a certain category are watched by us at the Executive Board, and we do what we can do. We're not afraid to say no. And we balance earnings capacity and risk that needs to be manageable. We're not going to accept excessive losses, we're not going to take the risk of excessive penalties, and we -- but we continue to do business.

Well, that's what I meant. Are there new markets you'd like to venture on to or new approaches you'd like to take?

Well, we're becoming smarter and more sustainable, and we're focusing on data-driven services, and we're continuing to monitor dykes and flyovers so that we gain data and offer new services. That's one thing. And look at Beyond Eyes where we can measure what's happening and we can also measure the occupancy level. Those are services that we sold during the corona crisis, if you can call it that, and that turns into a business model as well. So we continue making this company smarter, and we have the [ hive ], that's a building next to our head office, where everybody is working on making things smarter. We have data analysts there and they're together from all sectors to strengthen each other and develop new services and also market them.

As for making things more sustainable, the timber frame construction, you're focusing on that. Can you -- if you've seen in recent years that the timber prices are volatile. And if you unlock that, do you know that you can deliver that at a competitive cost price?

Well, timber and many other things have increased in price in recent years and because of the residences that we build are from Heijmans' wood. If we have cost increases, we've also seen increased returns in the past year and still do. It's true that we acquired a factory, where we own the land and the structures. And in June, we'll be taking over the people and the machines there. What's nice there is that we've signed a letter of intent with another party, where we're finding ways to plant trees, grow them and then harvest them and reuse them in our timber structure homes. So we want to achieve a circular chain. It takes time, but we're clearly working on that. And we want to build CO2-neutral homes, so you'll need to develop things like this. And the timber frame structure is well positioned for making things more sustainable, but I also think that the concrete industry will become more sustainable as well. That's why we're focusing on that 2 track policy.

I'm [ Leon Tinderval ] from ABN AMRO. In the outlook, you mentioned the impact of inflation nitrogen, the Didam ruling. Next to me, it was just mentioned what's the story about the increase in the cost of timber with respect to the cost of the residences that you're building?

Now to zoom in on the costs. It's not only timber. There's more that's increased in price.

How are you navigating controlling cost prices because CO2 is increasing as well. That relates to the increased cost price. Can you tell us a bit more about how you feel about that? And how will that impact your margins?

Well, there are a lot of elements there, and I'm not going to get bogged down in numbers. In recent years, for example, as a consequence of the nitrogen issues, we acquired a few major infra projects. So that means that at present, we don't run the risk of inflation. We're dealing with short-cycle projects and recurring business. So we're much closer together, and that makes it much easier to manage risk to mention one thing. On the other hand, of course, if you look at the delays, I think that the budgets of the Ministry of Finance will need to be increased, but that won't reflect badly on us. I mentioned something about the residential market and how the cost prices at the homes and the selling prices are in sync. We all saw that. And that's basically nice. On the other hand, it's also concerning as far as the affordability and progression in the residential market goes. So it's a double-edged sword. And there are other larger projects with -- where you're working with government principals where they reach agreements concerning indexation. So we believe that we can mitigate that. There's a good reason why we said, in any case, we'll consider comparable underlying EBITDA for the next year. But if we're able to mitigate these issues properly, we also see an increasing risks as being possible. We're not excluding that.

I have another question about your land bank positions. If you look at the letter that the province of North Holland send to The Hague about nitrogen, there's a very clear link there. There's a -- our residential construction ambition is being curtailed. How have you reflected this in your own land bank positions? Have you already considered that specifically? Is there an impact?

Well, first of all, we look at that every day, but I think you need to consider it from a broader scale, there's a housing need, and we need to talk about where we want housing construction, where do we want economic growth and where do we want to preserve the nature explicitly, even in areas outside the city, where there's a lot of nitrogen emission, for example, in the poultry or pork industries, you can take a look at that. And perhaps you could achieve a win-win situation there. So don't get into tunnel vision. On the other hand, we'll see a trend of building only inside cities, but the sites inside cities are usually smaller and they're more stakeholders and very extended processes and we need to accelerate to address the housing needs. So I often argue that it's a good thing that we have a housing construction minister. And I think Hugo de Jonge is very zealous about taking this on board. And he sees that we need to be selective, and that takes us into a situation where in the 1990s, we had the VNO, which was followed by the VNX. First, it was a policy framework and then means were allocated and sites were designated. Now we've got the NOVI and the question isn't whether but when it will come as for the NOVEX, and that's what we're looking forward to. Additional questions. Any more questions?

Andre Mulder, Kepler. Was there any contact with TenneT?

Well, yes. We have other projects with TenneT, but that's not really what you're asking. No, it's pending before court. We're waiting for the court to decide. That's the way it is. I can't tell you anymore. I certainly don't want to have a bad influence on the legal proceedings. I'd like to move forward, but that's the way it is.

Did you call or did they call?

Well, we see each other, and then we talk about it, but we didn't discuss possible solutions in the Wintrack II case. That's what you're asking.

Now what about the cash? Is the cash burning a hole in your pocket?

Well, it's not burning a hole in my pocket. I'm frugal, but I'm looking to Gavin as well, who is speaking off mike.

Well, life shows that construction doesn't always move up. It's good to be frugal and think about how you can spend your cash as efficiently as possible. We constantly think about that.

What do you consider to be excess cash? How much does it have to increase for you to think that there's too much?

I can't think of an amount off the top of my head. It depends on what we do with the excess cash. If there's a wonderful opportunity for an acquisition or another good idea, I'll take a look at it, but I haven't expressed that in quantitative terms yet.

Any other questions? Perhaps by the chat. Tijs. Let's take Tijs' question first.

I'm taking a look at the cash flow of that -- I'm looking at the EUR 22 million in working capital and long-term provisions because the working capital is negative -- is a negative impact on cash, right? Separate from the land bank and the long-term provisions, what about those?

Well, there is another tenant there. Yes, that's where it is. For the time, we're assuming that if there is a cash out, it will be 1 year or more.

And there's nothing else in there?

No. Only the work capital.

And your CapEx of EUR 26 million is up. Yesterday, a different construction firm had a considerable forecast for this year and wanted to invest electric equipment and so on. What do you expect in the years ahead? Those are the major chunks.

If you look at the figure for 2021, there are 2 parts. One is the sustainability challenge we face and connected to that from years before that. We didn't have the financial leeway for true investments. So we're catching up in our investments. And that demand also concerns purchasing the new factory for timber structures in [ Hiderfane ] that Ton mentioned. But if you carry that forward, we expect that to continue. On the one hand, we're going to acquire the machines from that factory, but we'll also expand there. On the other hand, we'll continue focusing on making things more sustainable. What can we do in our fleets of company vehicles as well as passenger cars and vans. So I expect that to increase, to be honest.

[ Robert Young ] from the webcast. There's a question.

What is the added value in the strategic land positions?

Looking at the land positions, where at a certain point, you develop the area yourself and are in charge yourself, you're at the helm. You're in control of that area development. And of course, it needs to be aligned with government regulations when you're operating in inner cities. And most of our land positions are outside cities or along the urban periphery. But if you're operating inside cities, the development process covers a much longer time frame and you see more stakeholders because in the -- it's a far more complex and costly development project. That's why we operate both inside cities and outside cities in our developments. Not everybody wants to live in the city. Some families would like to live outside the city. And if I look at things today, we spoke a lot about the Phoenix neighborhoods and see how people are living there. It's a good quality of life, and that's what we see from the surveys. Okay. That was it for the chat questions. Any other questions?

One more question from Andre Mulder.

I have a question about dividend. Suppose you reached the same EBITDA this year if your earnings might decline a little bit what dividend should we expect? Do you consider the absolute amount or the 40% share?

I just told you how I see the outlook, I gave you some guidance as a consequence of macroeconomic factors and political factors, I'm a bit cautious, but if we manage that properly, I don't exclude it being higher. That was my off-the-cuff reaction. But if the results were a bit lower, I don't exclude distributing a dividend, but I'm not going to make forward-looking statements now. As for more than 40%, our policy is 40%, and I think that's a good policy at this time. Okay. If we've taken all the questions, I'm looking around the room, I'd like to conclude this meeting. Thank you all for listening, and thank you to the listeners on the webcast, and see you again soon, I would say. Thank you.