Annual figures 1998

As previously reported, Wayss & Freytag AG made an additional write-down of DEM 150 million on the value of the company’s property development portfolio. This amount was accounted for as goodwill by HBG and charged to shareholders’ equity in 1998.

Shareholders will be invited to declare a dividend on the ordinary shares amounting to NLG 1.55 [NLG 1.45] per ordinary share of NLG 2.00. The dividend may be taken, at the shareholder’s option, either entirely in ordinary shares chargeable to the tax-free share premium reserve or entirely in cash. Preferences should be made known via banks or stockbrokers in the usual manner by 2 June 1999 at the latest.

Turnover was down – despite the appreciation of sterling and the US dollar – at NLG 10.4 billion [NLG 10.7 billion], mainly owing to the disposal of the electrical contracting activities in the Netherlands and Belgium and the selective tendering policy in Germany.

The number of employees fell to just below 23,000 [more than 26,000], mainly as result of reorganisations and the disposal of various business units.

The level of cash flow was good, amounting to NLG 343 million [NLG 338 million], or NLG 10.21 per ordinary share [NLG 10.21].

The clustering of group companies into larger units is progressing according to plan and will continue in 1999. The Group will also continue to dispose of business units that are no longer counted as core activities. In this connection, Raulf Bau-GmbH, Torkret GmbH and the participating interest in Frontier-Kemper Constructors Inc. have been deconsolidated.

Based on the good position in the market and the good diversity and quality of the order book, which amounts to around NLG 10 billion, HBG is forecasting a net profit for 1999 – barring unforeseen circumstances – that is at least on a par with 1998.

Results, turnover and prospects per sector

Construction turnover in the United Kingdom grew to NLG 2.8 billion [NLG 2.5 billion], or 27 per cent [23 per cent] of group turnover, partly owing to the appreciation of sterling. The result showed a sharp rise to NLG 45 million [NLG 10 million], thanks to a positive result for the year from HBG Construction [non-residential building and property development] while Nuttall [civil engineering and roads] maintained the excellent profit contribution of preceding years.

The UK construction market is showing slower growth with prices as keen as ever. Owing to the strong market positions occupied by HBG Construction and Nuttall, a comparable level of profit is nevertheless expected.

In the Netherlands, construction turnover rose to NLG 2.0 billion [NLG 1.8 billion]. This equates to 19 per cent [17 per cent] of group turnover. The group companies operating in the Dutch construction market – HBG Bouw en Vastgoed [property development, housing and non-residential building] and HBW and HWZ [civil engineering and roads, respectively] – maintained results at a good level. At NLG 49 million [NLG 50 million], the result remains almost unchanged.

The market in the Netherlands will not alter materially in the short term, although there are signs of a further increase in international competition on large infrastructure projects. The Dutch group companies expect to maintain their good position.

The circumstances in the German market obliged the German group companies to adopt a highly selective tendering policy. In line with previous forecasts, turnover in Germany fell to NLG 2.4 billion [NLG 3.1 billion], or 23 per cent [29 per cent] of group turnover. The group companies Wayss & Freytag Schüsselfertigbau and Wayss & Freytag Ingenieurbau were able to reduce their losses drastically as a result of the restructuring process implemented in the course of 1998. The cancellation of several major contracts meant an appreciable shortfall in the company tied costs for Raulf, together with additional restructuring provisions, with the result that Raulf – in contrast to 1997 – made a loss. Torkret [concrete repairs], a German subsidiary of HBW, also reported a negative result. The overall loss was NLG 53 million [NLG 208 million loss].

The economic situation in Germany remains difficult, but the construction industry appears to have bottomed out. HBG expects an improvement in the results, but it appears unlikely that losses will be eliminated altogether in 1999.

Construction turnover outside the three home countries rose to NLG 1.9 billion [NLG 1.7 billion], or 18 per cent [16 per cent] of group turnover. The result improved appreciably to NLG 54 million [NLG 23 million]. As in preceding years, the profit contribution from the Irish group company HBG Ascon was very good. The HBW subsidiaries Galère and CEI Construct, both active in the Belgian market, achieved good results. The result achieved by Interbeton was positive, with Wayss & Freytag International reporting a good result.

In this international market, the prospects are variable. The good outlook in the United States, Ireland and Belgium is tempered by the meagre prospects in the Far East. To strengthen the position in the interesting American market, HBG is to bring together the local activities in a new group company under the name HBG USA.

HAM’s turnover in the world dredging market amounted to NLG 707 million. Turnover in 1997 was slightly higher [NLG 785 million], but this was the effect of several large offshore projects of an incidental nature. HAM once again achieved a very good result, at NLG 70 million. In 1997, the profit was NLG 79 million, including incidental income of NLG 15 million.

In the dredging sector – in line with earlier forecasts – the effects of economic problems in several parts of the world, combined with the strong expansion of the world dredging fleet, are gradually making themselves felt. On the basis of the order book, HAM nevertheless expects to achieve another very good result in 1999.

With the disposal of HMI [electrical contracting], both turnover and results on industrial activities were down. The turnover achieved by Tebodin [consultancy and engineering] and HCG [process installations and equipment manufacture] remained at the same level and amounted to NLG 595 million. Profit on the industrial activities was NLG 7 million [NLG 25 million]. Tebodin’s profit contribution was satisfactory, but lower than normal owing to provisions for losses at a foreign office. HCG closed the year with a breakeven result. Tebodin expects an improvement in results and HCG – despite the difficult market – is forecasting a positive result.

Otherwise HBG has made provisions for reorganisation measures still to be put into effect with the object of achieving further improvements in results. The amount of these provisions exceeds the book profit on the disposal of the non-core activities, leaving a net negative amount of NLG 39 million.

Further information:

Arno C. Pronk, HBG Public Relations, telephone +31 70 3722121.