ARCADIS Shows Excellent Performance Despite Crisis
ARNHEM, The Netherlands, March 8, 2010 /PRNewswire-FirstCall/ --
- Net Income From Operations up 6% to EUR 74.3 Million; per Share to EUR 1.18
- Proposed Dividend EUR 0.45 per Share, Same as Last Year
- Gross Revenues Increased 3% to EUR 1.8 Billion, Organic Decline was 6% Resulting From Crisis
- Malcolm Pirnie Contributes Well and Offers Numerous Synergy Opportunities
- Margin at 10.2% Above Target Level of 10% Thanks to Cost Saving Measures
- Growth Infrastructure Softens, Recovery Begins in Environment, Buildings Bottoming out
ARCADIS (EURONEXT: ARCAD), the international design, consulting, engineering and management services company, in 2009 again showed an excellent performance despite the crisis. Net income from operations rose 6% to EUR 74.3 million. Per share this is EUR 1.18 against EUR 1.16 in 2008. Gross revenues rose 3% to EUR 1.8 billion, partly due to the merger with Malcolm Pirnie. Although gross revenues declined organically by 6%, the margin was maintained above the target of 10%. Government investments kept the infrastructure market at a good level, with growth softening due to pressure in municipal markets. In the environmental market the margin target was reached despite an organic revenue decline caused by reduced private client spending. The crisis was felt most in the buildings market, especially commercial properties, resulting in a strong revenue decline and lower margins. Order intake in the second half of the year indicates a gradual recovery in the environmental market and a bottoming out in buildings. Effective working capital management pushed cash flow from operating activities up to EUR 152 million.
It is proposed to keep the cash dividend unchanged at EUR 0.45 per share. This represents a pay-out of 40% of net income from operations with 10% more shares outstanding.
Through the merger in early July 2009 with Malcolm Pirnie (1,700 employees, gross revenue $392 million), active in water and environment, a top 10 position was reached in the United States and in the global water market. At year-end 2009, Bohemiaplan was acquired (70 employees, gross revenue EUR 3.5 million) strengthening infrastructure in the Czech Republic.
CEO Harrie Noy said: "All of our people deserve compliments for the excellent results that were achieved. Through a strong focus on clients and markets with growth potential and strict cost management, we have been able to cope well with the crisis until now. This is also attributable to our strong market positions and balanced portfolio in terms of geographies, clients and business lines. The merger with Malcolm Pirnie - the largest in our history - was an important milestone. As of this year, Water is our fourth business line which allows us to capitalize on the expected strong growth in the global water market."
Key figures
Amounts in EUR million, unless otherwise noted
Fourth quarter Full year
2009 2008 Change 2009 2008 Change
Gross revenue 484 485 0% 1,786 1,740 3%
Net revenue 322 312 3% 1,218 1,162 5%
EBITA 35.5 44.6 -20% 121.6 131.8 -8%
EBITA recurring 1) 35.5 44.6 -20% 123.8 131.8 -6%
Net income from operations 2) 23.5 22.2 6% 74.3 70.0 6%
Ditto per share (in EUR) 2) 0.35 0.37 -4% 1.18 1.16 2%
Average shares outstanding
(in millions) 66.4 60.2 10% 63.1 60.5 4%
1) Excluding effect share participation plan Lovinklaan Foundation; see analysis below
2) Before amortization and non-operational items
Fourth quarter
In last year's fourth quarter, two energy projects were sold in Brazil. Excluding the proceeds from that sale, gross revenues increased 2%. The contribution from acquisitions - especially Malcolm Pirnie - was 13%. After a positive currency effect in the first nine months of 2009, it was 4% negative in the fourth quarter, especially because of a weaker dollar. The organic revenue decline stabilized at 7%.
Excluding the proceeds from the sale of energy projects in 2008, net revenues (revenues generated by own staff) rose 6%. The contribution from acquisitions was 15%; the currency effect was 5% negative. The organic decline of 4% is an improvement versus the previous quarter when it was still 6%.
In Brazil and the Netherlands some large contracts with significant subcontracting were completed as a result of which gross revenues declined more strongly than net revenues. The Netherlands, Poland, France and to a lesser extent Germany showed organic growth. The strongest decline occurred in England and with RTKL as a result of the poor real estate market. In the American infrastructure and environmental market and in the Belgian market for industrial services, activities also declined organically.
Last year's EBITA included a contribution from the sale of energy projects of EUR 6.8 million. Excluding that effect, EBITA declined 5%. Acquisitions delivered an increase of 10%; the currency effect was 3% negative. The organic decline of 12% was mainly the result of the poor real estate market and less profits from Belgium and Brazil. In the Netherlands, the strong performance continued, while in England the effects of the restructuring became visible. The contribution from the sale of carbon credits in Brazil was EUR 0.1 million (2008: EUR 0.6 million). The restructuring charges were EUR 0.2 million. The margin (EBITA as a percentage of net revenues) came out at 11.0% (2008: 14.3% and excluding the sale of energy projects 12.5%).
Financing charges were EUR 4.1 million. This is lower than the EUR 5.5 million (excluding effects of derivatives) in 2008, due to lower market interest rates, less working capital, and exchange rate differences on loans in Brazil. The low tax rate of 24.7% was mainly the result of a tax benefit on option costs and a tax credit in the United States.
Net income from operations rose 6% to EUR 23.5 million, compared to EUR 22.2 million in 2008. That last amount included EUR 2.2 million from the sale of energy projects. The profit increase was the result of a good contribution from Malcolm Pirnie, lower financing charges and a lower tax rate.
Full year
Gross revenues increased 3%, net revenues 5%. The currency effect was 1% positive, the contribution from acquisitions 8%. Organically, gross revenues declined 6%. As a result of less outsourcing, the organic decline in our own activities was limited to 4%.
The poor real estate market caused a strong decline in revenues in the United Kingdom and with RTKL while as a result of reduced demand for environmental services from private sector clients also in the United States revenues declined organically. This was partly offset by growth in the Netherlands, Poland, France and Chile, especially in infrastructure.
EBITA includes EUR 2.2 million one-off costs for the share participation program from the Lovinklaan Foundation (major shareholder in ARCADIS) which have been earmarked as non-recurring. Recurring EBITA declined by 6% to EUR 123.8 million (2008: EUR 131.8 million). Acquisitions contributed 8%; the currency effect was 2%. Without the contribution from the sale of energy projects in the fourth quarter of 2008 of EUR 6.8 million, EBITA declined organically by EUR 14.2 million or 11%. Of this, EUR 3.1 million was caused by a lower contribution from the sale of carbon credits due to slow procedures and EUR 7.8 million by restructuring charges. The remaining decline resulted from lower profits in the buildings market in the United Kingdom, the Middle East and RTKL, which was partly offset by a strong performance in the Netherlands and solid results in the United States.
The margin (on a recurring basis) was 10.2% (2008: 11.3%). Corrected for the sale of energy projects in 2008 and the reduced contribution from carbon credits in 2009, the margin declined from 10.8% in 2008 to 10.4% in 2009. The best performance was in infrastructure where the underlying margin improved to 10.8% (2008: 10.1% excluding energy projects). Due to the impact of the crisis, the margin in environment declined to 12.3% (2008: 13.7%) of which 0.8% was from fewer carbon credits, and in buildings to 6.0% (2008: 8.7%).
The unwinding of derivatives in early 2009 had a favorable effect on financing charges of EUR 7.5 million. Excluding the effects of derivatives, financing charges declined to EUR 11.1 million (2008: EUR 17.7 million). The reasons were the same as mentioned for the fourth quarter. At 33.4% the tax rate was lower than the 34.3% in 2008, especially as a result of the earlier mentioned tax benefits which totaled EUR 2.0 million on an annual basis. The contribution from associated companies was slightly higher. Minority interest declined sharply due to a lower profit contribution from Brazil (where ARCADIS holds 50.01% in ARCADIS Logos) as a result of fewer carbon credits, no contribution from the sale of energy projects and less operational profits.
Net income from operations rose 6% to EUR 74.3 million. The difference with the 6% decline in recurring EBITA is the result of lower interest rates, a lower tax rate and a lower minority interest.
Cash flow, investments and balance sheet
The cash flow from operational activities at EUR 152 million was very high (2008: EUR 81 million), especially as a result of effective working capital management. EUR 80 million was invested in acquisitions, of which EUR 5 million was for after payments on earlier takeovers. The acquired goodwill amounted to EUR 92 million and the identified intangible assets were EUR 10 million. In addition, EUR 12 million was invested in associated companies and other non-financial assets, predominantly for Brazilian energy projects.
Balance sheet total increased to EUR 1,315 million (2008: EUR 1,058 million). Excluding Malcolm Pirnie (with higher working capital), working capital as a percentage of gross revenues was 11.0% (2008: 11.2%). Despite investments in acquisitions, net debt only increased slightly to EUR 174 million (2008: EUR 171 million). Balance sheet ratios remained strong. The ratio of net debt to EBITDA (according to bank covenants) was 1.0 (2008: 1.3), the interest coverage ratio was 10 (2008: 7). The first redemption of long term debt is not until 2011.
Developments per business line
Figures noted below concern gross revenues for the full year 2009 compared to the same period last year, unless otherwise noted.
- Infrastructure
Gross revenues increased 19%. The currency effect was minus 1%. The contribution from acquisitions of 14% mainly came from the water activities of Malcolm Pirnie. Organic growth amounted to 6% for gross and 4% for net revenues. The difference was caused by subcontracting in a large energy project in Brazil that was completed in the fourth quarter. In Europe, government investments created strong growth in the Netherlands, Belgium, Poland and France. In the second half of the year, organic growth weakened somewhat due to pressure in the U.S. municipal market while the impact of the stimulus package was still limited. In Brazil and Chile, growth slowed as private investments were reduced.
- Environment
Gross revenues declined by 2%. The currency effect was 2% and the contribution from acquisitions 8% (LFR, SET and environmental activities from Malcolm Pirnie). Organic decline was 12%, but in net revenues limited to 4% due to less outsourcing. Private clients spent less on environmental work or postponed projects as a result of the crisis. In the second half of the year activities stabilized. In part this resulted from winning some large GRiP(R) contracts in the United States with a total value of $200 million. In Europe, revenues grew, mostly because of more work for governments. In Brazil, revenues for industrial clients declined, while in Chile work for mining companies generated growth.
- Buildings
Gross revenues were 14% lower, with a currency effect of 1%. Organic decline was 14% in gross and 15% in net revenue. The commercial property market was hard hit by the crisis with the largest impact for ARCADIS in England and with RTKL, where activities strongly declined. Services for industrial clients in Belgium also suffered from the recession, while in facility management, growth occurred due to the focus on cost savings. RTKL was successful in landing new projects in the Middle East and Asia, which resulted in strong growth of backlog in the fourth quarter. Public sector demand remained at good levels. In the United States, project management work for schools and government buildings grew.
Outlook
The first signs of economic recovery are visible, especially in the United States. However, the recovery is still fragile and there is still significant uncertainty as to when and to what extent this will influence the different markets in which ARCADIS is active.
The infrastructure market is likely to remain robust in 2010 because governments will continue to invest to stimulate recovery. In Europe, multiyear investment programs provide a solid backlog. In the Netherlands, this includes an upgrade in rail as well as road projects such as the A2 tunnel through Maastricht, in Poland it concerns trans-European connections, while in Belgium and France large design-build projects are planned. In the United States, the stimulus package will start to have an effect in 2010. Synergies with Malcolm Pirnie will create more work, also internationally. Climate change drives demand for water management. In Brazil and Chile, investments will increase again, in part due to large sports events.
In the environmental market regulation and sustainability provide a solid basis. Clients use the recession to focus on their core business, while outsourcing portfolios of contaminated sites for clean-up. In the United States, this led to a number of large contracts and higher backlog. ARCADIS and Malcolm Pirnie have both been selected for global environmental programs of the U.S. Army. Through vendor reduction and our advanced remediation technology we can increase market share. In Europe we recently signed a five-year contract for environmental services in 10 countries with ARCADIS as the preferred supplier. Demand for consultancy on energy savings, carbon footprint reduction and climate change grows.
The buildings market appears to be bottoming out. In the second half year of 2009, contract cancellations strongly declined, while in the fourth quarter, for the first time since the start of the crisis, backlog increased. The commercial market stabilized at a low level, without expectations for a recovery in the short term. RTKL will continue to offset declines in the U.S. and European markets with projects in Asia and the Middle East. Demand from the public sector, including schools and healthcare, will remain at a good level, although the public debate about healthcare in the United States may lead to a slowdown in projects. Facility management can grow further, because it meets the demand for costs savings.
CEO Harrie Noy concludes: "Our backlog is healthy and compared to year-end 2008, increased by approximately 5%. In infrastructure the strong growth of recent years is softening, especially as a result of pressure in the local government market. In environment, the good order intake indicates a gradual market recovery with opportunities for growth. In buildings, activities appear stable with possible recovery in the second half of 2010. Because we have adjusted our capacity and some large projects with high levels of subcontracting are completed, also in the coming quarters revenues will decline organically. Maintaining margins remains a priority, by absorbing price pressure through cost savings and a strong client-focused approach. The integration with Malcolm Pirnie creates synergy opportunities and as of 2011, operational benefits. We continue to look for acquisitions to realize our strategic goals. Although the crisis also impacts our business, themes like sustainability, climate change, urban renewal, mobility, water and energy offer a lot of potential. Because of uncertainties about economic recovery, it is too early to give a specific outlook for 2010."
About ARCADIS:
ARCADIS is an international company providing consultancy, design, engineering and management services in infrastructure, environment and buildings. We aim to enhance mobility, sustainability and quality of life by creating balance in the built and natural environment. ARCADIS develops, designs, implements, maintains and operates projects for companies and governments. With 15,000 employees and EUR 1.8 billion in revenues, the company has an extensive international network that is supported by strong local market positions. Visit us on the internet at: http://www.arcadis.com
This press release has been drafted in the period between preparation and approval of the annual accounts of ARCADIS NV. The figures in this press release for the full year 2009 have been derived from the annual accounts of ARCADIS NV which were not yet public at the moment this press release is issued. These annual results were audited and the auditor has issued an unqualified report. The annual accounts have not yet been adopted by the General Meeting of Shareholders. The figures related to the fourth quarter 2009 in this press release are unaudited.
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Amounts in EUR millions, unless Fourth quarter Full year
otherwise stated
2009 2008 2009 2008
Gross revenue 483.5 485.4 1,785.8 1,739.9
Materials, services of third
parties and subcontractors (161.1) (173.1) (568.2) (578.0)
Net revenue 322.4 312.3 1,217.6 1,161.9
Operational cost (281.2) (261.4) (1.073.2) (1,008.7)
Depreciation (6.6) (6.3) (24.5) (23.3)
Other income 0.9 - 1.7 1.9
EBITA 35.5 44.6 121.6 131.8
Amortization identifiable
intangible assets (1.9) (4.0) (7.2) (12.2)
Operating income 33.6 40.6 114.4 119.6
Net finance expense (4.1) (8.7) (3.6) (23.6)
Income from associates - (0.2) - (0.1)
Profit before taxes 29.5 31.7 110.8 95.9
Income taxes (7.3) (11.6) (37.0) (32.9)
Profit for the period 22.2 20.1 73.8 63.0
Attributable to:
Net income (Equity holders of
the Company) 22.1 17.3 72.8 57.3
Minority interest 0.1 2.8 1.0 5.7
Net income 22.1 17.3 72.8 57.3
Amortization identifiable
intangible assets after taxes 1.1 2.5 4.5 8.1
Lovinklaan employee share
purchase plan 0.3 2.6 0.2
Net effects of financial
instruments 2.4 (5.6) 4.4
Net income from operations 23.5 22.2 74.3 70.0
Net income per share (in euros) 0.33 0.29 1.15 0.95
Net income from operations per
share (in euros) 0.35 0.37 1.18 1.16
Weighted average number of
shares (in thousands) 66,354 60,197 63,097 60,519
ARCADIS NV
CONDENSED CONSOLIDATED BALANCE SHEET
Amounts in EUR millions December 31, 2009 December 31, 2008
Assets
Non-current assets
Intangible assets 342.7 249.3
Property, plant & equipment 84.8 66.5
Investments in associates 26.2 15.7
Other investments 0.2 0.2
Other non-current assets 19.8 14.8
Derivatives 1.2 3.8
Deferred tax assets 18.0 12.2
Total non-current assets 492.9 362.5
Current assets
Inventories 0.5 0.8
Derivatives 0.1 0.2
(Un)billed receivables 555.1 538.5
Other current assets 35.9 32.0
Corporate tax assets 6.2 6.5
Cash and cash equivalents 224.5 117.9
Total current assets 822.3 695.9
Total assets 1,315.2 1,058.4
Equity and Liabilities
Shareholders' equity 351.7 207.6
Minority interest 16.8 12.3
Total equity 368.5 219.9
Non-current liabilities
Provisions 28.4 26.7
Deferred tax liabilities 10.8 6.0
Loans and borrowings 342.1 266.8
Derivatives 0.8 16.9
Total non-current liabilities 382.1 316.4
Current liabilities
Billing in excess of cost 158.8 182.7
Corporate tax liabilities 7.4 18.7
Current portion of loans and
borrowings 5.6 4.9
Current portion of provisions 6.0 4.4
Derivatives 2.7 0.1
Accounts payable 128.9 133.2
Accrued expenses 21.3 12.3
Bankoverdrafts 12.0 6.2
Short term borrowings 14.9 3.6
Other current liabilities 207.0 156.0
Total current liabilities 564.6 522.1
Total equity and liabilities 1,315.2 1,058.4
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Amounts in Share Share Hedging Cumulative
Capital premium Reserve translation
reserve
EUR millions capital
Balance at
December 31,
2007 1.0 36.4 (29.8)
Profit for the period
Exchange rate differences (10.4)
Taxes related to
share-based compensation
Other comprehensive
income (10.4)
Total comprehensive
income for
the period (10.4)
Dividends to
shareholders
Stock split 0.2 (0.2)
Own shares purchased for
granted options
Share-based compensation
Options exercised
Expansion ownership
Balance at December 31,
2008 1.2 36.2 (40.2)
Balance at December 31,
2008 1.2 36.2 (40.2)
Profit for the period
Exchange rate
differences 11.8
Effective portion of
changes in fair value of
cash flow hedges 0.1
Taxes related to
share-based compensation
Other comprehensive
income 0.1 11.8
Total comprehensive
income for the period 0.1 11.8
Dividends to
shareholders
Share-based
compensation
Additional
paid in capital 0.1 70.6
Options exercised
Balance at December 31,
2009 1.3 106.8 0.1 (28.4)
- TABLE CONTINUED -
Retained Total Minority Total
earnings shareholders' interest equity
Amounts in EUR millions equity
Balance at December 31, 2007 180.1 187.7 11.5 199.2
Profit for the period 57.3 57.3 5.7 63.0
Exchange rate differences (10.4) (2.8) (13.2)
Taxes related to share-based
compensation (0.7) (0.7) (0.7)
Other comprehensive income (0.7) (11.1) (2.8) (13.9)
Total comprehensive income
for the period 56.6 46.2 2.9 49.1
Dividends to shareholders (24.8) (24.8) (1.2) (26.0)
Stock split - -
Own shares purchased for
granted options (9.1) (9.1) (9.1)
Share-based compensation 6.0 6.0 6.0
Options exercised 1.6 1.6 1.6
Expansion ownership (0.9) (0.9)
Balance at December 31, 2008 210.4 207.6 12.3 219.9
Balance at December 31, 2008 210.4 207.6 12.3 219.9
Profit for the period 72.8 72.8 1.0 73.8
Exchange rate differences 11.8 3.7 15.5
Effective portion of changes
in fair value of cash flow
hedges 0.1 0.1
Taxes related to share-based
compensation 3.1 3.1 3.1
Other comprehensive income 3.1 15.0 3.7 18.7
Total comprehensive income
for the period 75.9 87.8 4.7 92.5
Dividends to shareholders (27.1) (27.1) (0.2) (27.3)
Share-based compensation 9.3 9.3 9.3
Additional paid in capital 70.7 70.7
Options exercised 3.4 3.4 3.4
Balance at December 31, 2009 271.9 351.7 16.8 368.5
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in EUR millions Full year
2009 2008
Cash flow from operating activities
Profit for the period 73.8 63.0
Adjustments for:
Depreciation and amortization 31.7 35.5
Taxes on income 37.0 32.9
Net finance expense 3.6 23.6
Income from associates - 0.1
146.1 155.1
Share-based compensation 9.3 6.0
Sale of activities and assets, net of cost (1.9) (1.0)
Change in fair value of derivatives -
Change in working capital 51.3 (18.3)
Change in deferred taxes and provisions 5.9 (7.6)
Dividend received 0.3 0.5
Corporate tax paid (45.7) (38.7)
Interest received 3.4 6.3
Interest paid (16.2) (21.8)
Net cash from operating activities 152.5 80.5
Cash flow from investing activities
Net change in (in)tangible fixed assets (24.4) (26.6)
Acquisitions/divestments of consolidated companies (78.5) (73.2)
Net change in associates and other investments (6.4) 0.4
Net change in other non-current assets (3.0) (0.9)
Net cash used in investing activities (112.3) (100.3)
Cash flow from financing activities
Proceeds from options exercised 3.4 1.6
Proceeds from issue of shares 5.8
Purchase own shares (9.1)
Change in borrowings 77.7 93.9
Dividends paid (27.3) (26.0)
Net cash from financing activities 59.6 60.4
Net change in cash and cash equivalents less bank
overdrafts 99.8 40.6
Exchange rate differences 1.0 (0.6)
Cash and cash equivalents less bank overdrafts at
January 1 111.7 71.7
Cash and cash equivalents less bank overdrafts at 212.5 111.7
December 31
ATTACHMENT TO PRESS RELEASE ANNUAL RESULTS 2009 OF ARCADIS NV
Geographical information
Amounts in EUR millions or %
Gross revenue (1)
2009 2008
Netherlands 423 404
Other European 331 378
countries
United States 868 791
Rest of world 164 167
Total 1,786 1,740
Geographic mix (gross revenue)
2009 2008
Netherlands 24% 23%
Other European 18% 22%
countries
United States 49% 45%
Rest of world 9% 10%
Total 100% 100%
1) Based on origin of production
EBITA, recurring (1,2)
2009 2008
Netherlands 31.6 24.5
Other European 16.2 28.3
countries
United States 68.4 56.0
Rest of world 7.6 23.0
Total 123.8 131.8
Margin, recurring
2009 2008
Netherlands 11.0% 8.9%
Other European 6.0% 9.5%
countries
United States 11.8% 11.3%
Rest of world 9.6% 25.0%
Total 10.2% 11.3%
1) Based on origin of production
2) After allocation of corporate costs
Information about business lines
Gross revenue
2009 2008
Infrastructure 766 646
Environment 632 643
Buildings 388 451
Total 1,786 1,740
Activity mix (gross revenue)
2009 2008
Infrastructure 43% 37%
Environment 35% 37%
Buildings 22% 26%
Total 100% 100%
Margin, recurring
2009 2008
Infrastructure 10.8% 11.4%
Environment 12.3% 13.7%
Buildings 6.0% 8.7%
Total 10.2% 11.3%
SOURCE ARCADIS NV
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