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

Ladies and gentlemen, on behalf of Gavin van Boekel, I'd like to welcome you and also those listening on the webcast to the presentation of our semi-annual figures. As usual, we're starting with a short film, which will give you an impression in a few minutes of how we implement our sustainability ambitions as also expressed in our bold statements. [Presentation]

So that was Robert Koolen, our Director of Sustainability [indiscernible] who are both very active in the field of reusing materials or matching materials and biodiversity, respectively. All of which are in line with our vision, creating a healthy living environment. And the effort of colleagues such as [indiscernible] in the field of biodiversity are becoming increasingly important in today's social context, and we aim to be truly distinctive in our sector in this respect. So we are very proud that Heijmans was referred to as a frontrunner in benchmark study, the VBDO Association of Investors for Sustainable Development, in which [indiscernible] listed companies were researched on promoting diversity. And based on our vision of being creators of the healthy living environment, we have been working for years to improve biodiversity. And the aim is to improve biodiversity in the broader sense, for instance, when building roads, such as the A27 motorway and [indiscernible] all the landscaping of the National Military Museum is just there. You heard [indiscernible] talk about that, where it is located. But also, the new area development initiated by Heijmans property [indiscernible]. Initiatives are taken to lead an area better off in terms of biodiversity than we founded. And this is also recognized externally. For instance, [ Maanwijk ] has been designated as the first park inclusive neighborhood in the Netherlands, and I can give you many more examples, and it's great that our initiatives are recognized and appreciated in the market. And this gives us as a management and Robert and [ Tyson ] and other Heijmans colleagues -- give us all an additional incentive. Wouldn't surprise you that such a change in a building company from building exclusively to also being mindful of biodiversity and circularity, doesn't happen just like that. And while we're on the subject of our ambition on reusing materials and producing in a sustainable way, maybe the right time to reflect on the future of the clean asphalt plants and the media attention that there has been over the recent months and days. The basic idea of reusing materials, in my view, is a good idea. After all, we cannot just keep using new raw materials. We would be exhausting the earth. Asphalt is a product whose raw materials have been used for years, but research has shown that when asphalt is reused, benzene is released. When applying a high percentage of recycled asphalt, the chances of exceeding benzene [ extract ] is increased. In other words, it's not about the production of new asphalt but about recycled asphalt, which is about 35% to 40% of the asphalt market. In other words, it is a negative side effect of circular application of asphalts, whereas asphalt precisely is a products that can be reused several times during its lifetime. Today, a number of asphalt plants no longer comply with the benzene standard on recycling asphalt. And as a result, AsfaltNu, which is a joint venture between Heijmans and BAM, and a number of advisers has taken the initiative to find a technical solution that will reduce harmful emissions. And the solution was found in designing an active carbon filter. This active carbon filter was tested on the basis of a pilot installation at the asphalt plant in and it proved to work. And they built it to work. And the filter is now being applied full scale at the asphalt plant in [ Den Bosch ]. The measurements have shown that this filter is satisfactory with regard to both the emission of benzene and also the emission of polycyclic aromatic hydrocarbons. And we also see the odor nuisance decreased substantially. With these positive results, solution seems within reach. But because all asphalt plants have their own design and they promote standardized plants and facilities, it takes time to introduce activated carbon filters at the plants. After all, this has been redesigned for each plant. And the shareholders of AsfaltNu, Heijmans and BAM, have made extra financial resources available to invest in these active carbon filters in order to be able to produce recycled asphalt within the specifications and regulations. Now before I proceed to the financials, I'd like to focus on safety, which, obviously, is our #1 priority. In March we were shocked by a fatal accident involving a subcontractor during pile driving work on an Infra job to install noise barriers at the N3 [ work ] motorway in Dordrecht. The [indiscernible] we were faced with the danger in our sector and the nonnegotiable need to focus on safety. Our thoughts are with the victim's family. Even if the incident frequency figure shows a downward trend, the number of accidents, many of them with very limited injuries, is still far too high. With 35 accidents in H1, the number of accidents resulting in absence from work is simply too high, which is why we continue to talk and engage with our people about safety and safe working. What is encouraging is that last week, we processed recertification for the Safety Ladder Level 4 at Infra, which [indiscernible] than last year. The auditors were positively surprised by the open and casual discussions with our people about safety. Working safely is open for discussion at all levels of the organization. Here, You see a picture of the bus stations at [indiscernible], Rotterdam. Mid-June, the new bus station is actually open with this renovated bus station. [indiscernible] has taken another step in creating a vibrant center for Rotterdam staff. Their plan is the third public transport hub in Rotterdam, one of the largest bus stations in the Netherlands. The bus station has been completely prepared for sustainability and to make sure that in 2030, we can drive clean buses for 100%. Now the numbers, the [indiscernible] press release reads, "Heijmans is in good position for the current market." I'm not telling you anything new when I say that the market is challenging and that we are too are facing the consequences of changing macroeconomic conditions such as rising inflation and mortgage interest rates, not the deduction of mortgage interest, that would be great, but in keeping mortgage interest. Rising raw material prices, limited availability of labor and materials, and we also see stagnation in the supply chain. And of course, the longstanding issues such as the still unresolved nitrogen situation, the lack of planning capacity for the housing market and possibly new item now, the government is considering restricting middle segment brands. And institutional investors seem to be making a plead. But thanks to our operational flexibility, the resilience of our people and by keeping our focus on our own strategy, Heijmans is performing well, and we have confidence in the future. We continue to follow our strategy of margin over volume. And by doing what we can, we have no loss-making works in our portfolio. We remain selective in accepting works. Our people are agile and able to respond to the difficult market conditions, and I'm proud of that. With an increased order book of EUR 2.2 billion, there is enough work for us in the different markets, and the prospects for our sector remain good. And of course, nowadays, there's a shortage of people in the market. But to date, we're still able to respond to that situation. No work has been discontinued, but a number of works have been finished a bit late. Before the summer, Heijmans gave all its employees up to the -- and including the middle management level, a one-off contribution to provide a little relief on the rising cost of living. And also, we adjusted the work-related travel allowance due to rising fuel [ prices ]. If I then look at Heijmans' key figures, they are simply robust. What is striking is that we are on course with revenue results, and we can then have a very strong cash position. All sectors have made a positive contribution to results performance and are within the targeted EBITDA ranges for the production companies in France and are building between 4% and 6% of real estate property at 6% and 8%. Of course, it has to be said that last year, particularly in infrastructure, we've had an exceptionally good year with the completion of a number of somewhat larger works. These works made an extra positive contribution to our performance within the margin of 5% in the first half year. Infra is also performing at a good level. Despite the dividend payout of 40% of net result and the acquisition of Dynniq Energy, net cash increased from EUR 44 million a year ago to EUR 101 million halfway through the year. Based on this strong cash position, it was decided in July -- in April to withdraw their compress, and our solvency remains at a good level. Gavin is going to elaborate on this later on. It's noteworthy that despite our strict hiring policy and acceptancy policy, our order book continues to develop positive to a level of EUR 2.2 billion, which is well above the level of a year ago or a year-end of last year. Our workforce remains stable with 4,843 employees, including 100 colleagues from Dynniq Energy. However, we do continue to see the labor market as one of our greatest challenges, and this applies to the entire sector by the way. I'd briefly like to focus on the Wintrack II situation. As previously indicated, Heijmans Europoles B.V. lodged an appeal against the judgment issued on 3 May 2021. The appeal concerns where the TenneT was entitled to terminate the Wintrack contract. The judgment of 7 April of this year continued on the interim decision of May last year in the sense that the question of whether the contracts will lawfully dissolve out of court was not raised again. And its ruling of April 2022, the arbitrators ruled in brief that TenneT must still pay Heijmans Europoles a portion of the unpaid work and that Heijmans Europoles did not repay any installments. The advancement -- advanced payment for compensation claim by TenneT has been dismissed. Arbitrators also decided that the appeal must be completed first before any compensation can be determined in a specific procedure to that effect. And the appeal can take a couple of years. And the financial impact of this situation will be explained by Gavin in detail. I can't, unfortunately, say more about the situation, partly in the light of the appeal that has been filed. Now I'd like to give the floor to Gavin, who will be elaborating on the performance of Heijmans and financial.

Let me start with a wonderful picture of a Noorderhaven project in Zutphen. You're looking at pure 21 new housing development of Heijmans in the most beautiful part of Noorderhaven in Zutphen. Right on your doorstep is an expansive river landscape of the IJssel and lively center of Zutphen just around the corner. We're building 77 houses, and they're all benefiting from the location in the city, and also the greenery of the entire development includes 1,100 homes. Now our property sector. Our revenue and our profit increased as compared to last year. Revenue rose slightly. And because the margin also rose, our profit increased [ 100% ]. Increase in revenues is explained by price effects. In otherwise, the increase -- the prices of property [indiscernible] transfer costs. Volume was held back by the persistent sluggishness that we have noticed in the designation of new and the zoning of existing development locations. In Rotterdam, the Hart van Zuid project, we achieved a new milestone with the expansion of the [ Zuidplein ] shopping center and the completely renovated bus [ terminal ]. I just talked about that. And also in Rotterdam, the residential complex, Havenkwartier hub, other district on the southern quay, is taking shape with the completion planned for 2023. The Spaarndammerhart project is Amsterdam won the Amsterdam new building prize 2022, which is a public prize, public award for buildings in Amsterdam after previously winning Abe Bonnema Architecture Prize, which I reported on in February when I talked about the annual results 2021. With 1,031 homes sold, we sold [ 50% ] few homes than last year. We see that due to the high speed of selling homes, there were very few homes for sale beginning in 2022. In addition, the phasing of home sales this year in line with the property projects is likely to be high in the second half of this year. However, underlying demand remains strong for the long term. The rising mortgage rates may cause a temporary dip in price effects in the short term. By the way, it's good to see that corporations are investing again. The shop window at property [indiscernible] is smaller, primarily as a result of high revenue rate at the [ home ] itself. The current housing market, we see that anything we put on the shop window was quickly sold. However, you also see the interest in Heijmans projects is declining. In 2021, we saw an average of more than 10 seriously interested potential buyers of home. And in 2022, this number drops to an average of 5 candidates. That said, you only need 1, and our stock of completed homes that remains unsold will remain 0 in the first half of the year. It's good to see that the total land bank has remained stable. We continue to look for new development locations and land bank at the very least of this current level. And to this end, we again made commitments in the first half of the year that will be implemented later this year or over the coming years. Despite the turbulent macroeconomic context, we remain positive. And we based this on a further increase as our order book to EUR 676 million of work that has already contracted, an increase of 14% compared to year-end 2021, partly due to the development in [indiscernible] Rotterdam podium in [indiscernible] and further expansion of Almere, New Brooklyn. The government has expressed the ambition to build 100,000 homes per year over the coming year. However, we see that this ambition will not be achievable due to lack of planning capacity, slow issuance of permits and also lengthy procedures in terms of spatial planning. Given the need for new homes, decisiveness and central government guidance remains crucial. In this context, we find it simply incomprehensible that the process has been started to reverse residential serving of Zuidplaspolder. And we will continue to discuss this with the municipality and the provincial authorities. This has led to a down -- to an impairment of the lands there. Almere, New Brooklyn, I'll refer to again. On this [ citra ] in Almere, we're realizing the diverse open district of New Brooklyn, where the houses are for sale or for rent, a mix of single-family houses with garden-split levels and flats. New Brooklyn is located in the Almere Port and focuses on people who love the city and also urban atmosphere but also greenery. All facilities from shopping to [ terrace ] are all within walking distance, but you can easily take the train or the car to Amsterdam. Architecture space on the well-known [ borough ] Brooklyn in the city of New York, which it resonate's. Building & Technology. In Building & Technology, we saw a 12% increase in revenue. While the revenue increased, EBITDA remain constant due to the slightly eroding margin related to price increases in the procurement market. Margin decreased by 20 basis points, primarily due to the impact of higher procurement cost on our ongoing projects. Rising procurement costs are mainly felt within housing. And given the high volatility of some very , we're pleased with the way we've been able to cope with this situation as well as the level of insight that we have as an organization to identify this impact frequently. Due to the continued demand for housing, the figures in residential building remain at a satisfactory [ rate ]. Despite the pressure on the procurement market, interaction with housing corporation has intensified. Number of requests from these corporations in particular is increasing for both new builds and renovations. In addition, we work towards the official handover to the IIBO timber frame factory in Heerenveen to Heijmans at the beginning of July. This is where in 2023, Heijmans timber frame houses will be industrially manufactured, which until then we have produced at the [ BD ]. Heijmans services also continues to perform at a high level. We see the market slowly picking up again after COVID, and we're also taking further steps in digitization, for example, beyond the ISO initiatives of Heijmans for the cleaning company, CSU, which is an award ISO [ 27001 ] certificate, proving that it complies with the strict global requirement on information security and safety. Data-driven system in office buildings is used to measure occupancy and sensor-based cleaning. In Rotterdam, we renovated a former tax office, Laan op Zuid 45, 16 stories, which already complies with the new standard circulating that all office buildings must have an energy label C or better as of 1st January 2023. At present, more than 40% of the office market satisfies this standard, which means that there's still enormous amount of work to be done to improve sustainability. And the major renovation of Palace Het Loo has also been completed. The palace is now open for the public. The order book is up 7% versus first half year last year, and the order book is well diversified. I briefly commented on Palace Het Loo. Heijmans contributed to the renovations of the palace. The palace was closed for public in 2018. And mid-April this year was reopened again. The underground extension will be opened later. Heijmans provided the mechanical installations amongst other things. The renovated palace had to meet contemporary standards in terms of climate control and safety, but at the same time, it had to retain its 17th century grandeur. Higher [ climate class ] means that the palace can once again have art. Revenue at Infra, as previously indicated, is more in line with 2020. And also, the underlying EBITDA, excluding the release of the Wintrack II provision, was more in line with 2020. Including this release, the first 6 months 2022 EBITDA is significantly high than in recent years. As a reminder, 2021 was an exceptionally good year for Heijmans infra work -- a number of major works that were completed such as motorway A1 Azelo and the Quebec [indiscernible]. Looking at the margin levels at 2020 and 2022, we remain nicely in the middle of the strategic range of our target margin of 4% to 6% EBITDA. As just mentioned, our infrastructure results, both in the first of this half year and last, are largely impacted by Wintrack II. Last year, after first half year, we took a provision of EUR 34 million as a precaution, of which EUR 19 million was released this year. This leaves us with a provision of EUR 15 million at the end of the first half year 2022. Adjusted for the impact of Wintrack II, EBITDA for the first half year and the years 2020, 2021, 2022, respectively, EUR 70 million, EUR 37 million, EUR 50 million, respectively. Therefore, also in terms of EBITDA result, first 6 months, 2022 is in line with first 6 months 2020 regardless of Wintrack II. Milestone for this year include good progress at Piet Heintunnel in Amsterdam. Target completion is Q4 of 2022 and the awarded performance contract of [ eastern ] scale storm search barrier, Zeeland, maintenance for the next 9 years. Widening the A1 motorway between Apeldoorn and Twello has definitively been awarded to Heijmans [indiscernible]. Work on the road will start in Q4 2022, and completion date is Q2 2025. For Heijmans, this project has a value of approximately EUR 150 million. At Infra, you also see the benefits of a differentiated order book and a better project management. We are not aware of any loss-making projects at the moment. For example, asset management operations just [indiscernible] in non-residential building, where we carry a long term maintenance and that grew, and there was a better balance between large and small projects. These recurring activities now account for 30% of Heijmans' total revenue. In the first half year, we also completed the acquisition of Dynniq Energy, which will be fully integrated into the Heijmans' Infra energy business in 2023. With this acquisition, we're strengthening our position in energy infrastructure sector, which has good growth prospects due to planned investment volumes as a result of the energy transition, so we're even better positioned to respond to this growth. In June, the government reported that the priority would be given to improving and maintaining existing infrastructure. The minister wrote to the house of representatives that there are not enough experts to carry out a [ mandatory ] nitrogen calculations and therefore, it has to choose which infrastructure projects will take priority and which will have to wait. However, extra financial budgets are needed to keep our roads and infrastructure in good conditions. The order book in infrastructure is up by 17%, which gives us confidence for the revenue in 2023. Nitrogen remains a significant factor in the sector. Good legislation is needed soon in order to prevent the construction industry to deal with unpleasant interruptions, and we're also eagerly awaiting the ruling of the Council of State with respect to new nitrogen calculation method with the Director of General Public Works and Water Management, which is expected later this year [indiscernible]. We see it here, Heijmans is renovating the tunnel, which after 20 years of use and some 30,000 vehicles a day was due for a thorough overall renovation. The tunnel connection center of Amsterdam to the Zebra [indiscernible] and the [ A10 ] Ring Road were carrying out major maintenance on the structural parts and installations and systems in the tunnel and is under their control, so all being replaced. The work is expected to be completed in the fourth quarter. Now profit and loss. I'll highlight a few items. You see here that underlying EBITDA per business stream, but also Heijmans as a whole is robust and continues to be very positive. The impact of the Wintrack II project on both first half year 2021 and first half year '22, as mentioned, is considerable. It concerns changes and provisions. The downward -- the impairment of land positions at the end of first half 2022 amounts to EUR 4 million as compared to EUR 1 million a year ago. This EUR 4 million is fully attributable to the surplus [ port ] of location that I referred to earlier on. Here, an evaluation of the land has taken place. This type of decisions by the government, therefore, has a direct impact on valuation because land positions have to be valued individually. The tax rate, which is significantly higher, I'll be discussing in the next slide. The tax rate for the first 6 months was 23% slightly lower than the nominal tax rate of 25.8%, and this relates to unrecognized losses from the past that are now being recognized. The expectation is that at the end of 2022, all unrecognized losses can be recognized. And therefore, it's currently expected that the tax rate will trend upwards to eventually reach the nominal tax rate in 2023. Effective tax rate for financial year 2022 will be similar to the first half of 2022. Net cash increased in the first 6 months this year as compared to last year by EUR 57 million to EUR 101 million. This is driven by strong operational results, combined with strict working capital management. And also in the first 6 months, our working capital was negative for all 6 months due to continued strong [ pre-financing ] and rapid payments of receivables, most likely driven by still-negative euro [ to dollar ]. For the second half of the year, we do expect an impact on our net cash, on the reduction of the SME payment terms in [ 40 ] days. However, in anticipation of this legislation, we have reduced our payment terms somewhat so that the final impact is not expected to be very material. Investment level had increased, mainly driven by the acquisition of Dynniq Energy. Solvency dropped to just below 29%, affected by the early and full redemption of cum pref shares. This redemption has the impact of over 200 basis points on the total solvency. We consider the level of 28.9% solvency to the level of [indiscernible]. We expressly made this consideration when opting of the voluntary and full redemption of the cum prefs. And finally, it may be worth mentioning that our syndicated loan has not been used since November 2019. Project [ Oranje Loper ]. What you see here is a colorful spaghetti of cables in Amsterdam. This is a gigantic job. One of the most beautiful [ house ] in the world. The [ Orange Loper ] means that we're replacing cables and pipes and monumental bridges that have not been replaced since the 1940s. Thousands of cyclists, walkers and tram passengers and motorists were unaware of this, but underground is an enormous tangle of cables in all colors, thicknesses and different materials. Gas, water, electricity, telephony, Internet, a whole world underground needs to be [ renovated ]. It is estimated that the work will be completed in the first quarter next year. An extra special aspect of this daring feat is that we are transporting all the material by water instead of by road, a logistical feat in one of the busiest parts of the Netherlands. Now I'd like to say a few words about sustainability. As we mentioned at the beginning of this presentation, sustainability is an important theme within Heijmans. It's not simply a project. It's something that we embed in the DNA of the construct. Colleagues such as Robert [indiscernible] and many others are working day in, day out to give substance to this topic. Let me give you some specific examples. We believe in wood frame construction as a worthy alternative to concrete. Wood is now more durable than concrete. To accelerate our growth, we fully acquired IIBO timber frame factory in the beginning of July, and we can already process [indiscernible] concrete as we did at [indiscernible] in Amsterdam and also the headquarters of Rabobank in [ Utrecht ]. Our ambition is to be carbon neutral as per 2023. We'll be doing this in 4 ways. We talked about this in the video. Our mobility, our equipment, our construction sites and our [ cities ]. We're going to take a number of big steps in the right direction. As of the 1st of January 2023 and for years, we will only be able to choose of these contract for electric cars. Currently, these contracts for fuel cars will be shortened. The goal is to have emission-free lease fleet by the end of 2025. We invested in [indiscernible], a hydrogen powered asphalt transport trucks for infra works. And as of 1 July, we use electric generators in all our works as wherever possible. And if it's not possible, we need diesel generators, we use [ HEL ] fuel, which has a 90% lower carbon dioxide emission than diesel. In a construction work, we use material transport, which we explained in more detail during the annual earnings in February. Here, we show which materials are using in construction, broken down into primary, secondary and renewable materials. But we're also reflecting on the [indiscernible] with the building [indiscernible] demolished. Which parts could be reused? Which parts can be recycled? And what needs to be taken into waste incineration or landfill? And obviously, we are actively trying to keep the latter as small as possible. And then finally, we're working at biodiversity and a healthy living environment through green label, among other things, as Ton mentioned in the beginning. Speaking of Ton, back to you.

To talk about the government project. This is a picture of [indiscernible] between [ Gorinchem ] and Waardenburg. We will be working with several contractors on a major dike reinforcement project on the northern side of the Waal River. This involves 23 kilometers of dike from the Dalemsewal in [ Gorinchem ] to the junction with the A2 motorway at Waardenburg. The project is done in sections, dike section, cluster dike section so that the dike will be as accessible as possible to people who live there. In 2026, the dike has to be a flood-proof again. This is a project that is part of overall section project. As I said before, all sectors contributed positively to results, and Heijmans is in a good position in [indiscernible] market. And yes, we, too, are facing a challenging labor market. And we must anticipate in response by training and employing asylum seekers and paying extra attention to good labor market communication. We also have to deal with price increases of material for subcontractors, which means we cannot and will not accept larger work or works with a longer implementation period without indexation agreements. And if this is simply not possible or if the contractual framework is not reasonable, then unfortunately, we will have to say no to our customers. Current market conditions require that we have our eyes on the ball with an agile hands-on organization. An organization that is preparing for the future, is willing to invest in the future. And Heijmans in the built-up environment, Heijmans wants to play a significant role in making our projects more sustainable, in line with our vision, makers of a healthy living environment. We want to be able to earn a good living, and we are responsible for healthy Heijmans over the next 3 years, starting in 2023, the year in which Heijmans will be celebrating its 100th anniversary. Now, let's take a look at the whole of 2022. We continue to maintain our outlook with a slightly rising sales revenue and an underlying EBITDA equal to that achieved in 2021. EUR 106 million plus the EUR 90 million, release of TenneT has an EBITDA of approximately EUR 125 million. Growing order book gives us great confidence. It is well spread and is a substantial portion of recurring business and a good mix of larger and smaller projects. It would be good if the government were to put major infrastructure works out for tender again to build new road, for instance. But with the ruling of the Council of State, we believe that infrastructure will have to start focusing on renovating and replacing. Infrastructure in the government will have to release a budget for that. The long-term prospects for us are to remain good. The demand for housing is and remains high despite that currently rising mortgage interest rates that are causing a slight cooling in the housing market. The underlying market demand for affordable homes remains considerable, and temporary cooling in the housing market has only helped us for the longer term. And in addition, there's a major task in the energy transition, the High Water Protection Programme, not to mention the major replacement and renovation assignments for roads, bridges and flyovers as in Dutch infrastructure. All in all, we look at the future with confidence. It is attractive, although we are aware of macroeconomic channel [ difficulties ] today. And those at Heijmans, we're well positioned for the future on basis of a strong balance sheet and a well-filled order book. Thank you for your attention for now, and we'll now give you the opportunity to raise questions. Might be interesting to say that the background that you see on the slide right now is a typical district of Rotterdam, Katendrecht for Heijmans building, the [ harbor ] quarter. Building of 200 energy-efficient and future-proof owners-occupied homes with industrial design, green inner gardens, courtyards and a unique location in the harbor district, the residents will reap the benefits of the tranquility and dynamism of Rotterdam. You have the floor.

Tijs Hollestelle, ING. Should I kick off? There's time? Well, it's a great press release. So I don't really have major questions. But of course, you always do have some questions. The acquisition that you made this market for the energy transition, indeed requires a lot of investment, EUR 31 million revenue. In the press release, you say that the company is slightly profitable. How come? I can imagine that the market conditions have been favorable for a couple of years already.

True. But it is a company that was acquired from the [ INTECH ] assets, and there were quite some challenges, some legacy challenges that they had so really -- we acquired it for its potential in the market. Capacity is also an important element here.

Do you have an analysis of the growth because you are combining it with your existing operations?

Well, this will be complementing our operations. We can offer the entire sector of energy infrastructure, which is a good and positive thing.

How much is the combined revenue now on an annual basis?

I couldn't tell you off the top of my head. We're looking at this. We've got energy now. We've got several aspects thereof. It all depends on how big you make it.

So this is part of the offering to customers?

Yes.

Another question about wage costs. What are the wage costs -- the increase of the wage cost that you agreed for this year and next year.

If you look at wage costs, obviously, we have to keep in mind the collective agreement. We have a new one, which is 5% compared to 2 years. So we have to act on that. But apart from our initial salary increases, but I'm not going to comment on that. And then we have a smaller contribution, EUR 250, that we gave to all the employees for people up to middle management.

That's an answer to my question. And what is approximately your gas bill per annum?

The impact of higher energy prices, if we see that more -- mainly the cost of fuel and the buildings is about EUR 3 million. So that's quite manageable.

My last question. I can't really see this very well, but the provision for Wintrack in the balance sheet is in the nonfinancial liabilities in working capital. Long-term liabilities, nonfinancial. You see it here, EUR 89 million year-end, decrease of 75 -- I'm sorry, I can't read the small print.

But you are wearing glasses, Tijs. Are you not?

In these 6 months, you didn't see a negative impact of working capital? There's nothing out of the ordinary?

No, all 6 months are negative.

I just want to hear your opinion on the housing market. You already mentioned that you predict that it's cooling off. What do you expect the impact for Heijmans will be like? Will the margins go down? Will the top line go down? Do you plan to offset it with more social housing, et cetera? What's your opinion there?

First of all, you see that the sale of homes in the first half year is lower than the first half year, and that really has to do with our own pipeline. And you also see the spatial procedures getting permits and licenses. That takes much more time than is sometimes desirable, let me put it that way. In that sense, I would say that there's some cooling off. As a consequence of increasing interest rates, well, that's just the way it is. That's life. It's healthy because we have mortgage interest rates of 1%, 1.5% for 30 years, which, in my view, is not in line with the market. Now it's about 3.5%. Of course, it shouldn't continue to rise to 10% or 12% like 20 years ago, but 4%, 6%, I've said that before, that would be in line with market. It would be a good interest rate for mortgage. What is positive is that we see that in the period, the years 2010, 2014, that housing corporation is hardly invested. But now clearly, we do see the corporations are investing, and that is positive. It's positive for our building business. On the other hand, we see that there's an enormous underlying demand for housing, and we see the visitors to website used to be 10, now it's 5, but that is on average across the Netherlands. So you have to put it into perspective. There are always areas and projects that have an enormous excessive demand. What is positive is that often more than the asking price is something that is decreasing. That simply isn't healthy. So in the long term, I'm not unhappy that there's a cooling off of the housing market. And the good thing is that, that also means a relaxation in the building price, quite apart from the macroeconomic prices. I'm just not considering them. But ordinarily, we would say, there's some relaxation here. So not really that concerned, and the demand remains very high in the Netherlands.

Recession.

Well, recession. I'm not an economist. Let me highlight that. It's a recession if in 2 quarters, you have negative growth. But on the other hand, if you noticed, if you look at the situation, I mean, everybody has a job . There's a very low unemployment rate. What's more? We're clamoring for workers. Companies nowadays have good operating results. So is this really a recession? Or are we just convincing each other that there's a recession? There's a lot going on in the world, Ukraine, Russia. What's going to happen with gas, too? All -- they're all happening. And obviously, all this has an impact on purchasing power, increase in gas prices, fuel prices, cost of living. That is why we said, "Okay, we want to make a contribution for our staff up to the middle management level to alleviate the increase in cost." But so far, we haven't seen the recession. And once again, I'm not an economist, but we are paying attention to this. We are preparing. We have scenarios and analyses of what could happen. That's simply part of good entrepreneurship. So far, we're well positioned. But this doesn't only concern the housing market. If we look at all the markets that we operate, in the energy transition, in the high water protection market, the renovation market, what we need to do, we operate in segments quite a part of whether there is or is not a recession. We are operating in sectors that are going to be invested in over the next few years.

Online from Andre Mulder, Kepler, First, a question about Wintrack. EUR 90 million, how did you get that number?

Well, we have a provision of EUR 34 million last year in the ruling. And by the way, the ruling is online, so you can find the ruling. So we took a provision at the time. The redress costs claimed by TenneT, they were not awarded. So those costs have been released. And that's one thing with a provision of EUR [ 15 ] million that we have, we believe that, that would be sufficient for the overall situation. And we have said, we've said it last time, I believe that this provision is one thing, but the cash outflow could also be bigger because it is quite substantial impact in lawsuit.

Any idea what the negative extreme is?

No, we didn't disclose that. And I'm not disclosing anything on that.

And have you've been in touch with TenneT over the past few months?

No. No, we're awaiting the appeal procedure.

Working capital now, it is too favorable right now. Can you more or less estimate what a normal level would be for working capital?

What you do see is that the working capital has to effect first on the payment side. In the past, we paid very quickly because there was a negative [ durable ]. Now that interest rates are increasing, it wouldn't surprise me that the [ data set ] people would comply with the payment terms, it could have some impact there. And on the other hand, the SME payment period will be enforced, which means that we have to pay SME within 30 days. Those are 2 effects that we'll be facing. So that will put some pressure on the positive working capital. But on balance, Andre, I think that we have a very positive working capital.

Question. Half-year figures is a good point in time to look at your cash position, the end of the year is always too positive? Can you more or less give us an indication what excess cash would be? Also taking into account what you just said about working capital?

I think that's a difficult question because we don't know exactly what the impact will be at least of the debtors. And the SME [ debit ] orders, that depends on behavior. On SMEs, well, we can sort of make an estimation of the SME, but we have lots and lots of supplies in building. I wouldn't want to give you a number because it's very difficult to give you an estimate, but it will be significantly positive. I don't see any risks in those two factors, but it could decline somewhat.

Two questions about the backlog. One, can you estimate the time spread of the backlog? What the percentage this year will be and next year for infrastructure, I suppose, it will be somewhat longer?

In infrastructure, by nature, we have longer-term projects, such as the A1 motorway, which is a project for 3 years, the next few years. And in general, at Heijmans, we have projects that are of shorter duration. But what you do see by and large is that over the past few years, particularly, let me take infra as an example, we transitioned from larger works to a better balance between larger, smaller works and asset management. And as a consequence, the duration of the order book is shortened. And I think you would tend to see that the EUR 2 billion as compared to a couple of years ago, will be shorter in time than [indiscernible]. So we are happy with this number, EUR 2.2 billion. This is a number that is increasing, but also the duration will be shortened.

And if we look at the development of the order book? The declined revenue in infra, would that be less in the second half, particularly in 2023 that you see this turnaround because of the increase of the order book?

No, no, no. I think last year, we said we had EUR 750 million at infra. We said, next year, it will be much more in the direction of 2020. And that is indeed the case. I don't see this turnaround yet, perhaps next year but not January. For 2023, yes, we'll be well positioned. So it's a temporary dip, as I pointed out a couple months ago. And this is how it seems to be developing.

Any last questions?

Maybe one more to Infra. Regarding the revenue and the order book, do you expect an impact because of the nitrogen issue because you mentioned the A1 with 3-year duration, do you expect that will really work for 3 years? Or do you see hesitance in giving out new projects with road works from the government there.

Everything depends on what the Council of State rules. So that's one thing. The way I see it, but it is more a personal view, I don't believe that irrevocable permits for construction will be withdrawn. I don't think that, that will be the case. And I genuinely hope that with respect to housing projects that here -- that we remain sensible and that we can continue to work. Obviously, if you build a new road, you have to deal not only in the building phase but also in the operational phase. There's a negative impact on nitrogen because there's still a lot of fossil fuel driving around. In 5 or 10 years' time, the situation will be substantially different. And in the case of a housing project, we do have nitrogen emission to a limited extent during the building phase, which is why we're transforming -- transitioning to electrical materials. But in the operational phase, when people live there, there may be a shift of nitrogen, and it has already been there because people already live there and have cars. So in that sense, I don't hope that we will be slowing down the housing market because that will put much more pressure on the housing market and also the affordability. So in that sense, I hope that the Council of State will take that into account and understand that the situation would be different for constructing roads and also renovation, replacing roads, that permits have to be issued in order to be able to invest in that because our road network was built in the '60s and '70s, and it is high time to have maintenance. Just look at the [indiscernible] bridge or the bridge at Gorinchem, which was closed off for some time, and I hope that this will have less effect to the housing market. I expect, the way I look at it now, but I don't know, I'm not 100% sure, that we will only be impacted to a limited extent in infrastructure. It also has to do with the fact that in infrastructure, the order book is different, more recurring, less focusing on the really large projects.

Now I remember my question. It's also about [ infra ]. You always managed to point out what is going on. If I look at last year, underlying 2x 37 and the completion of large projects. I understand that you prefer not to disclose what these large projects entail. But for instance, in the A1 motorway, you mentioned EUR 150 million over a period of 3 years, which is about EUR 50 million a year, so that is manageable. I believe you are rather conservative in taking profit, recognizing profit at the beginning. Revenue recognition is according to the law. Once the project is completed after 2, now 3 years, and the release and the result of the project has gone well, that is what we see, in about 6 months, it could be EUR 5 million to EUR 10 million higher. Is that the way I should look at it?

Also because these large works in the earlier stages, there's a lot of engineering, there's a lot of uncertainty. And therefore, we have decided that the first 20% -- in the first 20% of the work, we don't take a profit, we don't recognize profit. And this is a matter of being prudent, something we've learned from the past, so to speak. So that's one thing. And the second thing is, we're always rather reticent, particularly in larger works, to recognize profit during the project because at the 11th hour upon completion, things can happen. So we have become a bit more prudent than we were in the past.

Just to give you some details, we -- I appreciate the risk, but not the -- we evaluate this but not -- actually, towards the end of the project, if everything goes well, you have more money available. Yes. In these projects, that would be a couple of million of euros.

Will the same thing happened with the Piet Heintunnel, 31st of December?

No, I don't think it will be completed this year. We have some guidance that slightly increasing revenue is same EBITDA. I think that, that is enough information. Everybody is conservative. No, I'd like to leave it at that, and that is all I want to say.

And I also had a question about holding costs that were also slightly higher than expected. A couple of million, but it does make a difference. Does that include cost of the acquisition or the press or what?

As I pointed out earlier on in answer to your question, we are being faced with EUR 3 million higher costs on an annual basis for energy. All the office cost or housing cost, we have several offices across the country, they are attributed to the holding.

Are there other questions in this room? Are there other questions on the webcast? No? So thank you for your attention, and we'll be seeing each other in over 3 months' time or in 6 months' time. Thank you.