Arcadis Results Better Than Expected
By Arcadis Nv, PRNETuesday, November 10, 2009
AMSTERDAM, November 11 -
- Net income from operations in third quarter 12% higher
- Gross revenues increase 10%, organic decline stable at 7%
- Continued growth in infrastructure, environment stabilizes, buildings
weak
- Margin remains above 10% due to cost savings
- Malcolm Pirnie merger contributes positively to revenues and profit
- Outlook for full year 2009 adjusted upwards: from slight decline to
slight increase in net income from operations
ARCADIS (EURONEXT: ARCAD), the international design, consulting,
engineering and management services company, in the third quarter of 2009
produced net income from operations of EUR 18.2 million, 12% more than last
year. Gross revenues increased 10% to EUR 470 million, also as a result of
the merger with Malcolm Pirnie early in July. Organic gross revenue decline
stabilized at 7%. Continued infrastructure growth was offset by an increased
decline in buildings and a clearly reduced decline in environment. The better
than expected results were achieved by excellent performance in
infrastructure and environment, keeping the margin above 10%, while Malcolm
Pirnie also contributed well. As a result of a weaker U.S. dollar the
currency effect on revenues and profits was limited.
In the first nine months, gross revenues increased by 4% to EUR 1.3
billion aided by a positive currency effect of 3%. Due to the recession,
gross revenues declined organically by 5%. The decline in environment and
buildings was partially compensated by growth in infrastructure. Net income
from operations increased 6% to EUR 50.8 million, despite restructuring
charges of EUR 7.6 million. Good working capital management resulted in
strong cash flow.
Malcolm Pirnie, a leading U.S. consultancy and engineering company in the
water and environmental markets (1700 people, gross revenues $392 million),
with whom we merged early July, was consolidated as of the third quarter.
This merger provides us with a leading position in the fast growing water
market and a top 10 position in the U.S.
CEO Harrie Noy said: "The positive results can be attributed to our
strong market positions, strict cost controls and a strong focus by our staff
on clients. Government investments are keeping the infrastructure market at a
good level. In the third quarter we won some large GRiP(R) contracts
indicating stabilization in the environmental activities. The buildings
market remains very challenging, especially since private sector investments
have declined strongly. The merger with Malcolm Pirnie is already starting to
bear fruit in the form of numerous initiatives for top line synergy."
Key figures
Amounts in EUR million, unless Third First nine
otherwise noted quarter months
2009 2008 D 2009 2008 D
Gross revenue 470 427 10% 1,302 1,254 4%
Net revenue 318 284 12% 895 850 5%
- -
EBITA 29.8 30.3 2% 86.1 87.2 1%
EBITA recurring 1) 32.0 30.3 6% 88.3 87.2 1%
Net income 13.9 11.4 22% 50.7 40.0 27%
Net income per share (in EUR) 0.21 0.19 11% 0.82 0.66 24%
Net income from operations 2) 18.2 16.3 12% 50.8 47.8 6%
Ditto per share (in EUR) 2) 0.28 0.27 4% 0.82 0.79 4%
Average shares outstanding (in millions) 65.6 60.6 62.1 60.5
1) Excluding effect share participation plan Lovinklaan Foundation; see
analysis under third quarter
2) Before amortization and non-operational items
Third quarter
Gross revenues increased 10%. The currency effect was 1%, while
acquisitions contributed 16%, driven primarily by the merger with Malcolm
Pirnie at the beginning of the third quarter. The organic gross revenue
decline stabilized at 7%.
Net revenues (revenues produced by our own staff) increased by 12%. The
currency effect was 1%, the contribution from acquisitions was 17%. Due to
less subcontracting organic decline was 6%
Organic revenue growth was mainly seen in the Netherlands, Poland and to
a lesser extent France. Due to the poor conditions in the real estate market,
especially in England and with RTKL activities declined. In the United
States, revenues increased as a result of the merger with Malcolm Pirnie, but
organically revenues declined, albeit less than in previous quarters due to a
pick up in environmental activities.
EBITA is impacted by EUR 2.2 million in costs related to the share
participation program of the Lovinklaan Foundation, a main shareholder in
ARCADIS. Under this program, employees can buy shares in ARCADIS at a
discount. In 2009 participants have also received one-off bonus shares.
Although the costs of this program are entirely paid for by the Foundation,
IFRS requires these to be included in the profit and loss account of the
Company. This results in the earlier noted amount of EUR 2.2 million, which
has been earmarked as non-recurring. The regular cost of the current
Lovinklaan program amounts to approximately EUR 0.1 million per quarter.
There is no effect on cash flow or on the equity of the Company.
Recurring EBITA rose 6% to EUR 32.0 million. Acquisitions contributed
16%, the currency effect was limited. The organic decline of 10% was the same
as in the first half year and was partly an effect of the reduced
contribution from carbon credits due to slow procedures. Without this effect
the organic decline was 8%. This was mainly the result of profit declines in
England and in RTKL caused by poor conditions in the buildings market and a
restructuring charge of EUR 2.3 million for further adjustment of our
organization. This was offset by the continued good performance in the
Netherlands and the United States. The margin (recurring EBITA as a
percentage of net revenues) at 10.1% remained at a good level (2008: 10.7%).
Excluding the impact from carbon credits the margin was 10.3%.
Financing charges amounted to EUR 3.3 million. This is higher than in the
previous quarter due to the Malcolm Pirnie merger, but lower than the EUR 5.4
million (excluding the effect of derivatives) in 2008. This results from a
lower working capital, while in 2008 exchange rate losses on loans in Brazil
had a negative effect. The tax pressure is somewhat distorted by the cost of
the Lovinklaan program. Excluding this impact, tax pressure was at 34.6%,
slightly higher than the 32.4% of last year.
Net income from operations (which excludes the cost of the Lovinklaan
program) rose 12% to EUR 18.2 million. This is better than the development of
EBITA due to lower financing charges and a reduced minority interest due to
lower profits from Brazil.
First nine months
Gross revenues increased 4%, while net revenues were 5% higher. The
currency effect was 3%, the contribution from acquisitions 6%. Organically
gross revenue declined 5%. Due to less subcontracting, the organic decline in
net revenue was limited to 4%.
Recurring EBITA rose 1% to EUR 88.3 million. Acquisitions contributed 7%,
the currency effect was 4%. Organically a decline of 10% occurred, in part
due to a lower contribution from carbon credits. Excluding this effect the
organic decline was 7%, also caused by a restructuring charge of EUR 7.6
million. The margin (recurring EBITA as a percentage of net revenue) was
9.9%, excluding the impact of carbon credits 10.2%, comparable with the 10.3%
in 2008.
The unwinding of derivatives early in 2009 had a positive effect on
financing charges of EUR 7.5 million. Excluding the effect of derivatives,
financing charges declined to EUR 7.0 million (2008: EUR 12.2 million). This
was a result of lower market interest rates, less working capital and an
exchange rate gain on loans in Brazil which in 2008 still generated an
exchange rate loss.
Net income from operations rose 6% to EUR 50.8 million and developed more
favorably than EBITA. A higher tax pressure was offset by lower financing
charges and a reduced minority interest due to a lower profit contribution
from Brazil.
Developments per business line
Figures noted below concern gross revenues for the first nine months of
2009 compared to the same period last year, unless otherwise noted.
- Infrastructure
Gross revenues rose 17%. The currency effect was minus 1%. The
contribution from acquisitions was 10% and mainly came from the water
activities from Malcolm Pirnie, to be included in a separate business line
next year. Gross revenue organically grew 9%, net revenue 5%. The difference
results from strong subcontracting in Brazilian energy projects. Organic
growth weakened somewhat because in the United States the municipal market is
under pressure and the stimulus package is not yet showing a notable effect.
In Brazil and Chile growth slowed due to less private investments. In Europe,
government investments resulted in strong growth in the Netherlands, Poland,
Belgium and France.
- Environment
Gross revenues were level with last year. The currency effect was 6%, the
contribution from acquisitions 7% (LFR, SET and the environmental activities
of Malcolm Pirnie). The organic decline was 13%, but in net revenues limited
to 4% due to less subcontracting. In the quarter net revenues only declined
by 1% which points to stabilization of the environmental activities. This
partly resulted from two large GRiP(R) contract wins in the United States
with a total value of $170 million. In Europe gross revenue increased,
especially as a result of more government work. In Brazil, revenues for
industrial clients declined, while in Chile mining sector work grew.
- Buildings
Gross revenues were 10% lower with a currency effect of 3%. Organically,
gross revenues declined 13%, net revenues by 15%. The difference results from
growth in facility management in the Netherlands with a significant amount of
subcontracting. In the quarter the revenue decline accelerated, also because
last year still saw growth. The commercial real estate market is depressed
globally with the largest effects for ARCADIS in England and with RTKL where
activities declined strongly. Services for industrial clients in Belgium also
suffered from the recession. In addition to facility management, growth was
realized in U.S. project management for education and government buildings.
Outlook
Although the first signals of an economic recovery are visible especially
in the United States, it may take a while before the effects thereof are
noticed in markets relevant to ARCADIS. This means that the uncertainty
concerning market developments continues.
The infrastructure market is robust because governments continue to
invest to speed up economic recovery. In Europe large programs are active to
improve infrastructure. In the Netherlands this includes investments to
upgrade rail infrastructure and increase road capacity. In Poland ARCADIS is
involved in large cross country connections, while in Belgium and France
large design-build projects are planned. In the United States the stimulus
package is expected to produce effects as of 2010. Demand for water services
is growing, also due to climate change. In South America the strong growth
seen in recent years is weakening. The Olympic Games in 2016 in Brazil offer
new opportunities.
In the environmental market regulation and sustainability provide a solid
base. Although the recession has led to reduced demand for environmental
services from private clients, activities in the United States appear to be
stabilizing. The recent GRiP(R) contracts demonstrate that clients are using
the downturn to refocus on their core business. ARCADIS was also recently
selected as one of the prime contractors for the worldwide environmental
program of the U.S. Air Force of $3 billion. Due to our advanced
technologies, vendor reduction and outsourcing of environmental work by
companies, we can increase our market share. Energy efficiency and reduction
in carbon dioxide emissions are new themes that generate work.
The buildings market was hit hardest by the crisis. Both in England as
well as for RTKL, market conditions are challenging and a recovery is not
foreseen in the short term. RTKL partially compensates for the decline in the
U.S. and English commercial market through projects in Asia (mainly China)
and in the Middle East. In the U.S. the discussion about health care is
leading to delays in hospital projects. For all of our services the emphasis
remains on non-commercial segments, which benefit from stimulus funds.
Facility management appears to be a growth market, as it fills a demand for
cost savings.
CEO Harrie Noy concludes: "As a result of our timely adjustment we have
been able to reasonably weather the recession until now. Our backlog is
stable compared to the end of 2008 thanks to a good order intake across the
board, partially offset by contract cancellations in buildings. In all three
business lines we benefit from government stimulus programs. Because our
capacity has been adjusted, revenues will also be lower in the coming
quarters. Maintaining margins has priority, absorbing price pressure through
cost reductions and a strong client focused approach. This year there is no
contribution from the sale of energy projects, which last year generated EUR
2.2 million in net income in the fourth quarter. Because of the favorable
results in the third quarter, the outlook for full year 2009 has been
adjusted upwards: from a slight decline to a slight increase of 0 - 5% of net
income from operations. This is barring unforeseen circumstances."
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 more than 15,000 employees and over EUR 2.0 billion in
revenues, the company has an extensive international network that is
supported by strong local market positions. Visit us on the internet at:
www.arcadis-global.com
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Amounts in EUR millions, Third quarter First nine months
unless otherwise stated
2009 2008 2009 2008
Gross revenue 469.6 427.2 1,302.3 1,254.5
Materials, services of third
parties and subcontractors (151.6) (143.4) (407.1) (404.9)
Net revenue 318.0 283.8 895.2 849.6
Operational cost (282.0) (249.3) (792.0) (747.3)
Depreciation (6.3) (5.6) (17.9) (17.0)
Other income 0.1 1.4 0.8 1.9
EBITA 29.8 30.3 86.1 87.2
Amortization identifiable
intangible assets (3.3) (2.6) (5.3) (8.2)
Operating income 26.5 27.7 80.8 79.0
Net finance expense (3.3) (9.5) 0.5 (14.9)
Income from associates - - - 0.1
Profit before taxes 23.2 18.2 81.3 64.2
Income taxes (8.8) (5.9) (29.7) (21.3)
Profit for the period 14.4 12.3 51.6 42.9
Attributable to:
Net income (Equity holders
of the Company) 13.9 11.4 50.7 40.0
Minority interest 0.5 0.9 0.9 2.9
Net income 13.9 11.4 50.7 40.0
Amortization identifiable
intangible assets after
taxes 2.1 1.8 3.4 5.6
Lovinklaan employee share
purchase plan 2.2 0.1 2.3 0.2
Net effects of financial
instruments 3.0 (5.6) 2.0
Net income from operations 18.2 16.3 50.8 47.8
Net income per share (in
euros) 0.21 0.19 0.82 0.66
Net income from operations
per share (in euros) 0.28 0.27 0.82 0.79
Weighted average number of
shares (in thousands) 65,606 60,613 62,093 60,501
ARCADIS NV
CONDENSED CONSOLIDATED BALANCE SHEET
Amounts in EUR millions September 30, 2009 December 31, 2008
Assets
Non-current assets
Intangible assets 335.6 249.3
Property, plant & equipment 77.3 66.5
Investments in associates 22.7 15.7
Other investments 0.4 0.2
Other non-current assets 16.9 14.8
Derivatives - 3.8
Deferred tax assets 13.8 12.2
Total non-current assets 466.7 362.5
Current assets
Inventories 0.6 0.8
Derivatives 0.1 0.2
(Un)billed receivables 588.6 538.5
Other current assets 42.2 32.0
Corporate tax assets 11.7 6.5
Cash and cash equivalents 129.6 117.9
Total current assets 772.8 695.9
Total assets 1,239.5 1,058.4
Equity and Liabilities
Shareholders' equity 318.6 207.6
Minority interest 15.9 12.3
Total equity 334.5 219.9
Non-current liabilities
Provisions 28.7 26.7
Deferred tax liabilities 10.6 6.0
Loans and borrowings 341.0 266.8
Derivatives 0.8 16.9
Total non-current liabilities 381.1 316.4
Current liabilities
Billing in excess of cost 167.6 182.7
Corporate tax liabilities 5.3 18.7
Current portion of loans and
borrowings 5.5 4.9
Current portion of provisions 3.7 4.4
Derivatives - 0.1
Accounts payable 119.2 133.2
Accrued expenses 23.0 12.3
Bankoverdrafts 7.1 6.2
Short term borrowings 11.0 3.6
Other current liabilities 181.5 156.0
Total current liabilities 523.9 522.1
Total equity and liabilities 1,239.5 1,058.4
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
Amounts in EUR millions Share Share Hedging Cumulative
Capital Premium Reserve Translation
Reserve
Balance at December 31
2007 1.0 36.4 (29.8)
Exchange rate
differences 7.2
Taxes related to
share-based compensation
Other comprehensive
income 7.2
Profit for the period
Total comprehensive
income for the period 7.2
Dividends to
shareholders
Stock split 0.2 (0.2)
Own shares purchased for
granted options
Share-based compensation
Options exercised
Expansion ownership
Balance at September 30
2008 1.2 36.2 (22.6)
Balance at December 31
2008 1.2 36.2 (40.2)
Exchange rate
differences 8.0
Effective portion of
changes in fair value of
cash flow hedges (1.0)
Taxes related to
share-based compensation
Other comprehensive
income (1.0) 8.0
Profit for the period
Total comprehensive
income for the period (1.0) 8.0
Dividends to
shareholders
Share-based compensation
Additional paid in
capital 0.1 70.6
Options exercised
Balance at September 30
2009 1.3 106.8 (1.0) (32.2)
(Table continued below)
Amounts in EUR millions Retained Total Minority Total
Earnings Shareholders' Interest Equity
Equity
Balance at December 31
2007 180.1 187.7 11.5 199.2
Exchange rate
differences 7.2 (0.4) 6.8
Taxes related to
share-based compensation 0.2 0.2 0.2
Other comprehensive
income 0.2 7.4 (0.4) 7.0
Profit for the period 40.0 40.0 2.9 42.9
Total comprehensive
income for the period 40.2 47.4 2.5 49.9
Dividends to
shareholders (24.8) (24.8) (1.2) (26.0)
Stock split - -
Own shares purchased for
granted options (4.5) (4.5) (4.5)
Share-based compensation 4.6 4.6 4.6
Options exercised 1.2 1.2 1.2
Expansion ownership (0.6) (0.6)
Balance at September 30
2008 196.8 211.6 12.2 223.8
Balance at December 31
2008 210.4 207.6 12.3 219.9
Exchange rate
differences 8.0 2.8 10.8
Effective portion of
changes in fair value of
cash flow hedges (1.0) (1.0)
Taxes related to
share-based compensation 1.3 1.3 1.3
Other comprehensive
income 1.3 8.3 2.8 11.1
Profit for the period 50.7 50.7 0.9 51.6
Total comprehensive
income for the period 52.0 59.0 3.7 62.7
Dividends to
shareholders (27.1) (27.1) (0.1) (27.2)
Share-based compensation 6.9 6.9 6.9
Additional paid in
capital 70.7 70.7
Options exercised 1.5 1.5 1.5
Balance at September 30
2009 243.7 318.6 15.9 334.5
ARCADIS NV
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Amounts in EUR millions First nine months
2009 2008
Cash flow from operating activities
Profit for the period 51.6 42.9
Adjustments for:
Depreciation and amortization 23.2 25.3
Taxes on income 29.7 21.3
Net finance expense (0.5) 14.9
Income from associates - (0.1)
104.0 104.3
Share-based compensation 6.9 4.8
Sale of activities and assets, net of cost (0.8) (1.1)
Change in fair value of derivatives (0.2)
Dividend received 0.2 0.5
Interest received 4.1 4.1
Interest paid (12.8) (17.8)
Corporate tax paid (37.3) (27.0)
Change in working capital (9.9) (83.9)
Change in deferred taxes and provisions 7.5 (0.7)
Net cash from operating activities 61.7 (16.8)
Cash flow from investing activities
Net change in (in)tangible fixed assets (17.5) (18.3)
Acquisitions/divestments (78.5) (54.7)
Net change in associates and other investments (6.8) (7.6)
Net change in other non-current assets 1.2 5.1
Net cash used in investing activities (101.6) (75.5)
Cash flow from financing activities
Options exercised 1.5 1.2
Issued shares 5.8
Purchase own shares (4.5)
Change in borrowings 73.3 96.7
Dividends paid (27.2) (24.9)
Net cash from financing activities 53.4 68.5
Net change in cash and cash equivalents less bank
overdrafts 13.5 (23.8)
Exchange rate differences (2.7) 1.3
Cash and cash equivalents less bank overdrafts at
January 1 111.7 71.7
Cash and cash equivalents less bank overdrafts at
September 30 122.5 49.2
PRN NLD
For more information please contact: Joost Slooten of ARCADIS at +31-26-3778604 or outside office hours at +31-6-27061880, or e-mail at j.slooten at arcadis.nl.
Tags: Amsterdam, ARCADIS NV, Netherlands
