Strategy and policies

Batenburg Beheer N.V. consists of companies that provide services in the fields of installation engineering and technical trade. The activities of these two different segments are currently carried out by eight installation companies and five trading companies, together employing more than 1,000 people. The companies operate in the submarkets non-residential construction, industry and infrastructure, mainly in the Benelux.

Batenburg Beheer N.V. aims for sustained, profitable growth from a solid financial and independent position. Its strategy is structured from within the small-scale holding company and is discussed at regular intervals with the Supervisory Directors and managements of the operating companies. The Batenburg companies aim to excel in local markets through a flexible and customer-focused approach and the quality of the services and products they deliver. Long-term relationships, knowledge of customers' processes and possible product applications, as well as brainstorming with the customer in the engineering phase, are highly important in this respect. To achieve this, the operating companies need expert and motivated employees, a local presence and a good price/quality ratio and a solid balance sheet position.

Financial objectives

Batenburg Beheer N.V. endeavours to grow by at least 5% a year on average, with a net return on turnover of 4% and a return on average capital invested of 12.5%. At least 40% of net income is distributed annually. Batenburg Beheer N.V. wants to be a reliable and solid partner for all the company's stakeholders. From a financial perspective, this entails a solvency target of at least 40%.

Measured over time, Batenburg Beheer N.V. wants to grow by at least 5% per annum on average, by means of both organic and external growth. For the operating companies, organic growth is important to be able to absorb rising fixed costs. Organic growth can be achieved by maintaining the focus on further intensifying relations with regular principals and acquiring new customers.

Innovation in products and services also offers possibilities for increased turnover. We also seek to grow externally by acquiring companies and activities that contribute to the attainment of Batenburg Beheer N.V.'s business policy objectives. We are looking primarily for established businesses with reasonable to good returns and preferably a distinctive edge in the products and services they offer and in their market positions. The 'growth' element should always be viewed within the context of the strategy as a whole. This means that based on strategic considerations, at any given time there may also be a need to shed entities if this were to benefit the future profitability or cohesion of the Batenburg Group as whole. In 2008, turnover did not grow, in part owing to the disinvestment of a subsidiary company in mid-2007. Based on the continuing operations from 2007, growth in 2008 amounted to more than 8%.

Targeted net return on turnover amounts to 4%. This objective is not devoid of ambition. The net return achieved in 2008 was 3.9% compared to 4.0% in 2007. It should be borne in mind that returns on installation operations are usually lower than on trading operations. The Dutch installation sector remains extremely competitive and in most cases, price is the sole basis on which tenders are awarded. Pressure on returns is intensified due an increase in larger and multi-disciplinary projects, in which Batenburg Beheer N.V. operating companies act as principal contractor. On the sub-contracted parts the principal contractor earns little or no return and this depresses the average margin on the contract. In the past few years, the Trading group profited from the economic growth and achieved above average returns. 

In tandem with the net income target, the aim is for a net return on average invested capital (ROIC) of 12.5%. Realised income and the management of the available capital are both included in this target. Batenburg Beheer N.V. calculates this key indicator as the net income as compared with the average capital invested during the year under review. Due to the combination of lower net income and a rise in the capital invested in 2008, the ROIC amounted to 13.1% compared to 15.3% in 2007.

Solvency target is at least 40%, and internally there is also a clear focus on solvency based on the balance sheet adjusted for capitalised goodwill. While this internal standard raises the bar, we believe that it better reflects the company's buffer capital in economically turbulent times. The target was met in both cases. It has become apparent in recent months that Batenburg Beheer N.V.'s healthy financial position gives it a distinctive edge in the market. It ensures stability in the operational sphere and is important for customers', suppliers' and credit insurers' review of our creditworthiness. In the decentralised philosophy of Batenburg Beheer N.V. operating companies, too, should have good solvency. The installation companies have to qualify in advance and independently for tenders in which the contractor's solvency is a major selection criterion. The number of tenders for trading companies is also increasing gradually. In addition, a healthy balance sheet is a prerequisite when entering into new trading relationships at home and abroad.

Payout amounts to at least 40%. Based on the proposed dividend, 48% of net income will be distributed to shareholders (2007: 44%), which exceeds the target.

Structure

In our opinion, the above financial objectives should to be accomplished within the standards of corporate social responsibility. The Batenburg Group has a decentralised structure devolving far-reaching powers and responsibilities to the individual operating companies. They carry out their activities in a way that preserves their own identity and are individually responsible for their sustainable, profitable continuity. This stimulates entrepreneurship at the base of the organisation to the fullest extent possible. Having said that, there is "freedom in restraint". The correlation in the implementation of the strategy is stimulated through central support in such disciplines as ICT and purchasing. Cooperation and the exchange of knowledge are stimulated through central training and regular group specialist workshops and meetings.