Outlook

General economic review
The economy shrank faster than was originally expected during the recession of 2009. At the start of 2010, the macro-economic outlook is still uncertain. Although Dutch producer and consumer confidence had improved somewhat in comparison with a year earlier, unemployment was still rising. In 2010, market parties will once again have to make greater efforts than in the past to obtain funding for investments and the sharply higher government budget deficit must be brought down. In the current political situation, it is difficult to assess which combination of cuts and increased charges will be chosen for that purpose. However, the positive effect of government investments in 2010 cannot be expected to increase and the disposable incomes of consumers will face some pressure.
Exports are of key importance for industry in the Benelux region. Whether these recover in 2010 depends heavily on the recovery of world trade. While growth was strongly stimulated by the rapid growth of Asian economies and American (over-)consumption, these drivers are currently far less easy to detect. A positive factor for the development of the Dutch economy and its international competitive position is that wage increases for the coming year are generally modest.

Installation group
In civil engineering and non-residential construction, production fell by about 8% in 2009. Office voids increased further as a result of cost cuts. However, the growing use of flexible hours, in which companies use different standards for the number of square metres required, also had an effect. Further shrinkage in construction output is expected in 2010, particularly in construction of new housing and offices. As a result, prices will face further pressure.
In the retail sector, the battle for the consumer's favour raged on in 2009. Consumer loyalty is sought not only through pricing but also through other elements such as store convenience, sustainability and the completeness of the range. This calls for continual innovation and investment in store concepts. We expect this picture to continue in 2010.
Investments in industry fell sharply in 2009 and may rebound slightly in 2010, on the impact of a cautious recovery in world trade, which is important for the export-oriented industries. For the time being, investments by Dutch clients are expected even then to focus mostly on the maintenance and implementation of further efficiency improvements. In the wet and rail infrastructure segments, demand for turnkey projects, in which the contract parties take responsibility for all design, realisation and maintenance, is growing. Increasingly, alliances will be formed here, with the aim of reducing failure costs and optimising value for the client.

The installation market usually responds to falling demand by reducing the flexible shell of temporary employees, the self-employed and temporary contract workers. Because manning can fluctuate sharply during a year, a minimum level for the order portfolio forms an important test point. In order to keep the order portfolio up to scratch, companies often resort to low bids for the reasonably continuous flow of (public) tenders. This behaviour had already become visible in the second half of 2009. However, the tolerances for low bids for installers are far lower than in the past, because banks are taking a notably more critical line on financing than in the past. The number of company failures among small and medium-sized installers has therefore increased in recent months. In the coming year, clients can be expected to take an increasingly critical view of the quality and continuity of the installers with which they do business.
As already mentioned, the Batenburg installation companies will adjust their market profiles in the coming period. Local enterprise and customer loyalty are still goals, but where necessary, larger or national clients and suppliers will be served more frequently on the basis of the strengths of the overall Batenburg Group. At year-end 2009, the scale of the work in hand at the installation companies was still similar to that of a year earlier. The quality of the work in hand had diminished, however, because market prices have been under pressure since mid-2009.

Technical Trading
2009 brought the sharpest fall in revenue for clients for fastening materials, such as the plate processing and automotive industries, and machine-building. At the end of the year, the order portfolio of the trading companies was slightly lower than at year-end 2008. In early 2010, the first cautious signs of recovery in the early-cyclic chip sector offered hopes that the worst period is over. Other signs of this can also be found. Prices of commodities such as copper, zinc, tin and aluminium are starting to fluctuate more, with a rising trend. On the basis of the first two months of 2010, we see a cautious revival of demand for fixing materials and clearly higher demand for electronic components and client-specific serial printed circuit boards. The buying departments of our trading companies are already seeing a sharp rise in delivery times for certain electronic components. This could restrict a potential recovery of revenue because international producers have reduced their production capacity and stocks in the past two years. At present, they cannot keep pace with the rising demand. The pattern of investment in power generation and energy networks is expected to be reasonably stable in 2010. In view of the current government policy, earlier political goals of generating 20% of total energy supplies from renewable sources in 2020 are unlikely to be achieved. The coming year will show how resilient the policies are in this regard and the rate of further investments in green energy.

Challenges for Batenburg companies
There are growth opportunities for the Batenburg companies in the supply of sustainable products and solutions, and in making ways to create more sustainable working environments transparent for clients. Other opportunities lie in the further development of the national service and maintenance network, strong profiling of the industrial automation range and cross-selling at the trading companies.
Despite rising unemployment, labour market shortages of well-qualified technical and commercial staff can still be felt. Ageing and low intake for technical training courses mean it is still important to look past the dip and to continue to devote enough attention to recruiting and retaining good staff. Investments in training and further exchanges of knowledge within the Batenburg Group therefore remain high priorities in 2010. Wage increases will be limited. In principle, the bottom line for regular increases will be reached in 2010 and the Metal and Technology CAO also offers the possibility of awarding situational extra free days ('crisis control days') instead of a one-off payout of 1.5%. This will allow for a response to manning at the individual companies.

Outlook 2010
In 2009, the installation and trading companies of Batenburg Beheer N.V. suffered from lower investment propensity in industry. This was absorbed to some extent by extra revenue in the service and maintenance field and through projects in the infrastructure market. In 2010, we expect some recovery among industrial clients, but will also face the poor outlook for non-residential construction. This will particularly affect demand for our installation services in the office market. However, we expect to be able to grow further in the retail sector. Demand for sustainable solutions is also still rising.
In 2009, the group companies steered strongly for cost awareness and working capital management, without losing sight of the opportunities for growth. This will also be the case in 2010. Costs during execution are managed through good and timely procurement and by reaching clear agreements with suppliers on prices and logistical requirements. The measures taken in 2009 also serve to produce structural annualised savings of EUR 1.4 million.
The financial position of Batenburg Beheer N.V. remained as strong as ever at the start of 2010. This provides an opportunity to pay shareholders an attractive dividend even with lower net income, and to invest anti-cyclically in a targeted manner. In the past year, we made three smaller acquisitions. In the coming year, we expect to strengthen the market position further through additional acquisitions. Other investments that are foreseen are aimed primarily at increasing uniformity in ERP systems in order to facilitate improved information exchanges.
    
In early 2010, the uncertainties were still high, with the Netherlands cautiously climbing out of the recession. In the near future, we do not foresee any developments that will promote rapid recovery of investments in our sales markets. We remain optimistic for the medium-term, but it is still too early to announce concrete expectations for 2010.

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