ARCADIS CONTINUES SOLID PERFORMANCE IN 2011
(Thomson Reuters ONE) -
* Net income from operations rose 4%; gross revenues above ?2 billion
* Net revenues grew 5%, aided by an organic increase of 3%
* Growth mainly came from the US environmental market, South America and Asia
* Margin remained at a good level, despite weak government market in Europe
and US
* Dividend proposal ?0.47 per share, same as last year
* For 2012 a further increase of revenues and profit is expected
AMSTERDAM -- February 27, 2011 -- ARCADIS (NYSE EURONEXT: ARCAD), the
international consultancy, design, engineering and management services company,
in 2011, again delivered solid results. Net income from operations rose 4% to
?81.6 million. Per share this is ?1.23 compared to ?1.19 in 2010. Revenues
increased 1% to ?2,017 million, while net revenues (revenues produced by own
staff) rose 5%, also as a result of 3% organic growth. The weaker dollar against
the euro had a negative effect on revenues and profit of 3%. Despite weak
government markets in Europe and the United States, the operational margin came
to 9.7%, close to the target level of 10%. These solid results have been
achieved thanks to growth in the US environmental market, expansion in Asia and
excellent market conditions in South America, partially offset by lower results
in Europe due to reduced government spending.
It is proposed to maintain the (cash) dividend at ?0.47 per share. This
represents a payout of 40% of net income from operations, in line with the
dividend policy.
Strategically, important progress was made. The facility management business
(AAFM), no longer considered core, was sold in early June. In July, the
remaining interest in the consulting and engineering activities of ARCADIS Logos
in Brazil was acquired, while in November the merger with EC Harris (gross
revenues ?290 million, 2,600 staff members) was completed, an international
consultancy with high-end consulting and management services for buildings,
industrial facilities and infrastructure.
ARCADIS CEO Harrie Noy said: "I am glad we were able to continue to increase
revenues and profit. Our good geographical spread was key to this achievement.
Especially in emerging markets such as Brazil, Chile and China and in the US
environmental market we grew strongly. Although government work is declining,
that is more than compensated for by work for private sector clients. These good
results were achieved due to our consistent focus on activities higher in the
value chain, successful acquisitions, strict cost controls and above all, the
entrepreneurship and client focus of our staff. With EC Harris we got a leading
position in project management and related services, which will allow us to
capitalize even more on the growth opportunities in markets which are important
to us."
Key figures
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Fourth quarter Full year
Amounts in ? millions unless otherwise noted
2011 2010 D 2011 2010 D
--------------------------------------------------------------------------
Gross revenues 576 540 7% 2,017 2,003 1%
Net revenues 402 350 15% 1,443 1,375 5%
EBITA 36.9 39.7 -7% 144.4 135.9 6%
EBITA recurring( 1))() 41.7 39.7 5% 141.8 135.9 4%
Net income 20.6 22.6 -9% 79.5 73.9 8%
Ditto per share (in ?) 0.30 0.34 -12% 1.20 1.12 7%
Net income from operations (2)) 26.4 23.7 12% 81.6 78.4 4%
Ditto per share (in ?) (2)) 0.39 0.36 8% 1.23 1.19 3%
Average of shares outstanding (in mln)(3)) 68.1 65.9 3% 66.5 66.1 1%
--------------------------------------------------------------------------
1) Excluding ?7.4 million profit on the sale of 50% in AAFM and ?4.8 million
merger cost EC Harris
2) Before amortization and non-operational items (profit sale AAFM, one-off
financing charges, cost Lovinklaan and merger cost EC Harris)
3) The number of shares outstanding at year-end 2011 rose to 69.3 million
(2010: 66.1 million), especially due to the issuance of 4.16 million shares for
expansion of our Brazilian interests and merger EC Harris
Fourth quarter
In the fourth quarter, gross revenues rose 7%, mainly as a result of the merger
- in early November - with EC Harris. This merger and the acquisition of US-
based Rise (in the fourth quarter 2010) on the one hand and the sale of
AAFM[1]()) on the other hand, on balance had a positive effect on gross revenues
of 8%. The currency effect was nil. Organically gross revenues declined 1%.
Net revenues rose 15%, mainly as a result of the EC Harris merger. The
contribution from acquisitions and divestments on balance was 13%, the currency
effect nil. Organic growth came to 2%. In the US, growth in the environmental
market was offset by the decline in the water market. In South America and Asia,
growth remained at a high level, while in Europe, activities in France and
Germany increased. In the UK increased private sector spending fuelled a strong
recovery. In Poland revenues declined sharply due to the stoppage of projects.
In Brazil, our strategy is focused on consulting and engineering work. The
stakes we have in self-developed energy projects (hydropower plants and biogas
installations), which are included in a separate legal entity, are being sold.
Per year-end 2011, the ARCADIS interest in this entity has been reduced to 50%
minus 1 share, resulting in deconsolidation of these activities per year-end
2011. Reassessment of the fair value of the projects, resulted - after deduction
of operational losses - in a profit contribution of ?3.4 million.
EBITA amounted to ?36.9 million. This included ?4.8 million of merger costs for
EC Harris, which have been classified[2]()) as non-recurring. Excluding these
costs, recurring EBITA rose 5% to ?41.7 million. The currency effect was nil.
The contribution from acquisitions and divestments on balance was 7%, and mainly
came through EC Harris. Recurring EBITA included the following special items:
- the aforementioned profit contribution from Brazilian energy projects
of ?3.4 million;
- a contribution from carbon credits from Brazil of ?0.3 million (2010:
?1.8 million);
- reorganization- and integration costs of ?2.1 million (2010: ?2.0
million).
Taking these effects into account EBITA declined organically by 6%. A strong
profit recovery in the UK, and higher profits especially from Brazil and Asia,
were insufficient to offset lower results in Europe and losses in Poland.
The margin (recurring EBITA as a percentage of net revenues) reached 10.4%
(2010: 11.3%). Cleaned for the effects of energy projects, carbon credits and
reorganization charges, the operational margin was 10.0% versus 11.5% in 2010.
At ?5.0 million, financing charges were slightly above last year (?4.6 million).
The tax rate of 31.1% was higher than last year (25.4%), due to a charge of ?2.7
million related to staff share options in the US. Net income from operations
increased 12% to ?26.4 million. This is clearly more than the increase in EBITA,
due to the acquisition of the remaining interest in ARCADIS Logos in Brazil.
Full year
Gross revenues rose 1%. The currency effect was 3% negative, and the
contribution from acquisitions and divestments on balance was 1% positive.
Organically, gross revenues increased 2% (excluding the contribution from the
sale of energy projects in Brazil).
Net revenues rose 5%. The currency effect was minus 3%. The contribution from
acquisitions and divestments of 4% mainly came from EC Harris and Rise, partly
offset by the sale of AAFM. Excluding the contribution from the sale of energy
projects, organic growth was 3%. This came from South America, Asia and the US
environmental market. In Europe, France and Germany contributed to growth, while
in the second half of the year the UK recovered. As a result of lower government
spending, activities declined in the US water market, in the Netherlands,
Belgium and Central Europe.
Recurring EBITA rose 4% to ?141.8 million. The currency effect was 3% negative.
The contribution from acquisitions and divestments on balance was 2% (excluding
gain from sale AAFM). Recurring EBITA included the following special items:
- a contribution of on balance ?12.6 million from Brazilian energy
projects, while in 2010 this was a loss of ?3.2 million;
- a contribution from carbon credits of ?2.8 million (2010: ?1.9
million);
- reorganization and integration costs of ?12.7 million (2010: ?6.8
million). In several countries the organization was adjusted to meet lower
market demand, while in the US the integration of Malcolm Pirnie and in the
Netherlands that of PRC was completed.
Taking these effects into account EBITA declined organically by 3%. The strong
performance in emerging markets and the US was not enough to offset lower
profitability in Europe, especially in the Netherlands and Poland, and to a
lesser extent the UK where profit recovery occurred in the second half of the
year.
The margin (recurring EBITA as % of net revenues) was at 9.8% (2010: 9.9%).
Corrected for the special items listed above the operational margin was 9.7%
compared to 10.5% in 2010. This is a good performance given the strong
competition and price pressure mainly in European and US public sector markets.
Financing charges were ?23.4 million and excluding one-off costs for the
refinancing completed in June 2011 were ?19.4 million (2010: ?18.3 million). The
increase was caused by acquisitions and a slight increase in interest charges on
the new loans. The tax rate at 28.0% was lower than the 31.1% in 2010,
especially resulting from the non-taxable profit on the sale of AAFM, and the
deconsolidated energy projects in Brazil.
Net income from operations rose 4% to ?81.6 million. The increase was in line
with that of EBITA. Higher financing charges were offset by a lower tax rate.
Cash flow, investments and balance sheet
Cash flow from operational activities was ?80 million (2010: ?92 million). The
decline versus 2010 was in part caused by the increase in working capital as a
percentage of gross revenues to 15.1% (2010: 13.0%). Meanwhile a program has
been implemented to systematically reduce working capital. Acquisitions resulted
in a cash outflow of ?79 million, and additional after payment obligations of
?16 million. After payments on earlier acquisitions amounted to ?8 million.
Balance sheet total rose to ?1,559 million (2010: ? 1,425 million), especially
as a result of acquisitions and currency effects. Net debt rose to ?268 million
(2010: ?207 million), of which ?12 million as a result of currency effects.
Balance sheet ratios remained healthy. Net debt to EBITDA (calculated according
to bank covenants) remained at 1.4 and the interest coverage ratio stayed at 7.
Developments per business line
Figures noted below concern gross revenues for the full year 2011, compared to
the same period last year, unless otherwise mentioned. Operational margin is
based on recurring EBITA, excluding impact energy projects, carbon credits and
reorganization charges.
* Infrastructure (28% of revenues) Growth figures excluding sale of energy
projects Brazil
Gross revenues increased 8%. The currency effect was nil. The 2% acquisition
growth came from EC Harris. Organically, gross revenues grew 6%, net revenues
8%. Less government spending, especially at the local level, caused declines in
activities in the Netherlands, Belgium and the Czech Republic, while Poland saw
a strong revenue decline due to the stoppage of large projects. This was more
than compensated for by strong growth in Brazil and Chile, driven by investments
in mining and energy. Large projects generally continue and generated growth in
France. In the US and Germany, demand for project management triggered an
increase in revenues. The operational margin declined to 9.2% (2010: 11.5%), due
to price pressure in Europe and losses in Poland.
* Water (16% of revenues)
Gross revenues declined 14%. The currency effect was minus 3%, the contribution
from acquisitions 1%. Organically, gross revenues declined 12%, net revenues
7%. In the US, budget pressure led to postponement of investments at the local
government level. The effect was strengthened by the completion of the New
Orleans project with extensive subcontracting. Although also in Europe markets
are under pressure, activities in the Netherlands picked up. In Brazil, several
large projects generated growth, while in the Middle East two large assignments
were won. Work for industrial customers increased. The operational margin rose
to 9.4% (2010: 7.8%), due to the integration of Malcolm Pirnie and recovery in
the Netherlands and Brazil, where project losses occurred in 2010.
* Environment (38% of revenues)
Gross revenues rose 4%. The currency effect was 4% negative. Gross and net
revenues each rose 8% organically. Increased private sector demand and expansion
of market share led to strong growth in the US. In Brazil and Chile investments
in mining and energy generated significant environmental work. In Europe the
public sector market is under pressure which resulted in less environmental work
for infrastructure and declining revenues in the Netherlands, Belgium and
Central Europe. However, private sector demand was picking up, resulting in a
strong recovery in the UK and continued growth in Germany and France. At 12.2%
the operational margin was nearly the same as last year (2010: 12.3%).
* Buildings (18% of revenues)
Gross revenues declined 1% while net revenues grew 11%. The difference was
caused by the sale of AAFM which had significant subcontracting. The currency
effect was minus 3%. The effect of acquisitions on net revenues on balance was
15%. The main contributions came from the acquisition of Rise and the EC Harris
merger. Organically, gross revenues declined 2%, net revenues 1%. RTKL grew in
Asia and the Middle East, especially due to successes in the commercial real
estate market in China. In the Netherlands, UK and US, activities declined,
while in Belgium, Germany and France private investments generated growth. Due
to losses in the UK in the first half of the year and price pressure, the
operational margin declined to 7.0% (2010: 8.6%).
Outlook
In the Infrastructure market, our involvement in many multi-year large projects,
and our strong position in Brazil and Chile provide a solid basis for continuous
growth. Even though government budgets in Europe and the US are under pressure,
governments are making an effort to spare large projects, also by applying
private financing. In addition we can benefit from investments in public
transportation. In Brazil and Chile the market is especially buoyant as a result
of investments in mining and energy, in Brazil further driven by the Olympic
Games (2016). The situation in local markets in Europe and the US is unlikely to
improve shortly as a result of which price pressure will continue.
In the water market tight government budgets are causing revenue pressure,
especially in the US. Here, the focus lies on process optimization and
efficiency improvements of existing facilities. In addition, we are targeting
expansion with industrial clients, further penetration in niche markets in
Europe, and capitalizing on opportunities in South America and the Middle East.
Flooding in urban deltas and climate change are driving demand for water
management services. This provides many possibilities for the application of our
expertise in vulnerable coastal zones and river areas. We expect that the market
is bottoming out and that a recovery is likely in the course of the year.
The environmental market is developing positively, with continued growth, driven
by the private sector. In the US, we benefit from the trend that private sector
firms outsource non-core activities. As our advanced technology allows us to
bring contaminated sites to closure quicker and at lower costs, we are gaining
market share, especially in complex projects and portfolios of sites. The
pipeline for GRiP(®) projects is well filled. From the US, we are expanding our
activities to Canada. Mining and energy projects are driving demand for
environmental services in Brazil and Chile, with opportunities also in other
parts of South America. In Europe, demand from the private sector is picking up,
compensating for a decline in government work.
EC Harris considerably strengthens our position in the buildings market, with
many opportunities for synergies and growth in the Middle East and Asia.
Together with EC Harris we are better positioned for large investment programs
and for asset management consultancy for companies. The commercial real estate
market in Europe is stable. In the US this market is slowly recovering, but
investments in healthcare are lagging. RTKL offsets stagnation in the US market
through further international expansion. The public sector market is under
pressure, but private companies are investing again and are increasingly
interested in international framework contracts. On balance we expect our
activities to be stable.
CEO Harrie Noy concluded: "Our backlog is at a good level. Although we saw a
slight decline in 2011, the pipeline is well filled, including prospects for
large projects. Public sector investments in Europe and the US are under
pressure, but private sector spending is increasing while Brazil, Chile, Asia
and parts of the Middle East offer ample opportunities. The merger with EC
Harris and their 'Built Asset Consultancy' approach strengthen our competitive
position in all of the market segments in which we are active. Continued growth
in infrastructure and environment, recovery in water and stability in buildings,
on balance is expected to result in a continuation of organic growth.
Maintaining and where possible improving our margin is an important priority.
Further expansion through acquisitions, especially in emerging markets, is high
on the agenda. For full year 2012 we expect a further increase of revenues and
profit. This is barring unforeseen circumstances."
For more information, please contact Joost Slooten of ARCADIS at +31-202011083
or outside office hours at +31-627061880 or e-mail joost.slooten(at)arcadis.com
About ARCADIS:
ARCADIS is an international company providing consultancy, design, engineering
and management services in infrastructure, water, environment and buildings. We
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 19,000 employees and
more than EUR 2.3 billion in revenues, the company has an extensive
international network supported by strong local market positions. ARCADIS
supports UN-HABITAT with knowledge and expertise to improve the quality of life
in rapidly growing cities around the world. Visit us at: www.arcadis.com
This press release has been drafted in the period between the preparation and
adoption of the annual accounts of ARCADIS NV. The figures in this press release
for the full year 2011 have been derived from the annual accounts of ARCADIS NV
which are not yet public at the moment this press release is issued. These
annual accounts 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 2011 in this press
release are unaudited.
This press release contains forward looking statements, which are predictions
only and not guarantees. The forward looking statements are based upon our
current expectations, plans, estimates, assumptions and beliefs that involve
risks and uncertainties. Assumptions relating to the foregoing involve
judgments on matters and circumstances which are difficult or impossible to
predict accurately and many of which are beyond our control. Although we
believe that the expectations reflected in such forward looking statements are
based on reasonable assumptions, our actual results and performance could differ
materially from those set forth in the forward looking statements.
--------------------------------------------------------------------------------
[1]()) The 50% interest in AAFM (facility management) was sold early June 2011,
but was already deconsolidated per end of December 2010. Since AAFM had a lot of
subcontracting, the effect of the sale on net revenues was much smaller than on
gross revenues.
[2]()) Up to and including 2009 these costs were capitalized as part of the
goodwill, but as of 2010 these costs according to IFRS must be included in the
profit and loss account.
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originality of the information contained therein.
Source: Arcadis N.V. via Thomson Reuters ONE
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