ARCADIS REALIZES STRONG GROWTH OF REVENUES AND PROFIT
(Thomson Reuters ONE) -
* Gross revenues up 28%; net income from operations also up 28%
* Organic net revenue growth amounts to 6%
* Strong growth in Infrastructure and Environment; Water and Buildings
stabilize
* Margin remains at good level, despite price pressure mostly in government
markets
* Solid order intake leads to increase in backlog in all business lines
* Outlook 2012: increased revenues and profits, both organically and from
acquisitions
ARCADIS (NYSE EURONEXT: ARCAD), the international consultancy, design,
engineering and management services company, in the first quarter of 2012
realized strong growth of revenues and profits. Gross revenues rose 28% to ?595
million, while net income from operations also rose 28% to ?23.6 million. This
strong performance was the result of more organic growth and an improvement of
profitability in existing activities, despite continued price pressure,
especially in government markets. The merger with EC Harris, completed in the
last quarter of 2011, also contributed to revenue and profit growth. The organic
growth mainly came from the infrastructure and environmental markets, while the
water and the buildings markets stabilized with some signs of recovery.
In early April, the merger with Davis Langdon & Seah ("DLS") was announced, the
market leader in cost consulting and project management in Asia, with 2,800
employees, 2011 gross revenues of US$125 million and a normalized profit margin
well above the margin target of ARCADIS. The company has strong positions in
China (14 offices, 1,050 employees), Hong Kong/Macau (2 offices, 400 employees)
and other parts of Asia (21 offices, 1,350 employees), including Singapore,
Thailand, the Philippines, Vietnam, Indonesia, Korea, India and affiliates in
Malaysia and Brunei.
ARCADIS CEO Harrie Noy said: "We had an excellent first quarter, with an
increase in organic growth. This reflects our strong market positions and the
strength of our well diversified portfolio, both geographically as well as by
business line. We are especially growing in emerging markets, including Brazil,
Chile and China and in the US environmental market, while also in Europe private
sector demand is picking up. Thanks to the earlier restructurings and our
continued focus on cost management, the profitability of our existing business
improved. The merger with DLS strongly complements that of EC Harris and
provides us with a unique growth platform in Asia with ample opportunities for
synergy. ARCADIS now has more than 21,000 employees worldwide of which one-
third in emerging markets. As a result we are able to benefit strongly from the
growing demand for our services driven by urbanization, increasing mobility, the
need for clean water and care for the environment."
Key figures
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First quarter
Amounts in millions unless otherwise noted
2012 2011 D
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Gross revenue 595 465 28%
Net revenue 445 348 28%
EBITA 38.0 32.8 16%
Net income from operations (1)) 23.6 18.5 28%
Ditto, per share (in ?) (1)) 0.34 0.28 23%
Average number of outstanding shares (million) 68.8 66.0 4%
-----------------------------------------------------------------------
1. Before amortization and non-operational items
Analysis
Gross revenues rose 28%, of which 18% resulted from the EC Harris merger.
Deconsolidation of the Brazilian energy business had a negative impact of 1%.
The currency effect was 2%. Organically gross revenues grew 9%, also as a result
of extensive subcontracting at the completion of Floriade in the Netherlands and
in the water activities in the US.
Net revenues (revenues produced by our own staff) also rose 28%. The currency
effect was 2%; the deconsolidation effect -1%. The merger with EC Harris
contributed 20%. Organic growth was 6% and mainly came from Brazil and Chile
where the infrastructure and environmental markets yielded significant work. The
US environmental business and RTKL also contributed to growth. In Europe, growth
was achieved in France, Germany and the UK, while reduced government spending
caused declines in the Netherlands, Belgium and Poland. Also in the US
government market activities declined. EC Harris developed in line with
expectations.
EBITA grew 16% to ?38.0 million. The currency effect was 3%. The contribution
from acquisitions on balance was 8%. As a result of the deconsolidation there
was no longer a contribution from the Brazilian energy activities, while last
year the sale of carbon credits still yielded ?2.2 million. The costs for
reorganization and integration amounted to ?1.5 million (2011: ?1.7 million).
Taking into account these effects, EBITA rose organically by 11%, mainly due to
a strong recovery in the UK and higher profit contributions from Brazil, the US
and the Netherlands. In Poland a restructuring is being implemented to remedy
the loss making situation.
The margin (EBITA as a percentage of net revenue) came out to 8.5% (2011:
9.4%). Corrected for the impact of carbon credits and reorganization charges the
operational margin was 8.9% compared to 9.3% in 2011. This decline was the
result of the lower margin at EC Harris, also caused by seasonal effects. As a
result of improved profitability in our existing business, the operational
margin excluding EC Harris rose to 9.7%.
At ?4.9 million financing charges were slightly above last year (?4.6 million).
Higher interest charges resulting from acquisitions and slightly higher interest
rates were partially offset by the effect of deconsolidation of the Brazilian
energy business. The tax rate was 28% (2011: 31%). Net income from operations
came to ?23.6 million, an increase of 28%. This was clearly more than the
increase in EBITA thanks to the lower tax rate and the acquisition in mid-2011
of the remaining interest in ARCADIS Logos.
Developments by business line
Figures noted below concern gross revenues for the first quarter 2012 compared
to the same period last year, unless otherwise mentioned.
* Infrastructure (29% of gross revenues)
Gross revenues grew 37% of which 16% resulted from the merger
with EC Harris. The currency effect was zero. Organically gross
revenues rose 21%, net revenues 15%. The difference was caused
by substantial subcontracting related to the finalization of
the Floriade project in the Netherlands. Growth came mainly
from Brazil and Chile, which together now account for more than
30% of infrastructure revenues. Reduced government spending
caused activity declines in the Netherlands, Belgium and
Poland. In France, large projects produced growth; in the US
revenues in project management increased.
* Water (14% of gross revenues)
Gross revenues rose 9%. The currency effect was 3%; the merger
with EC Harris contributed 4%. Organically gross revenues rose
2%, but this was also caused by extensive subcontracting in new
projects in the US. Net revenues still saw an organic decline
of 5%. This was an improvement versus last year, mainly due to
stabilization in the US where a strategic sales push in
selected niche markets paid off. The Dutch market is picking
up, while Brazil and the Middle East also contributed to
growth. The 'water for industry' initiative is bearing fruit.
* Environment (34% of gross revenues)
Gross revenues increased 13%. The currency effect was 4%; the
deconsolidation in Brazil had a negative effect of 1%.
Organically gross revenues rose 10%, net revenues 9%. As a
result of private sector spending and expansion of our market
share, growth in the US continued at a good level. In Brazil
and Chile investments in mining and energy are yielding a lot
of environmental work. In Europe the government market is under
pressure, but private sector clients brought growth in the UK,
Germany and Belgium. In Germany a large contract with the US
Department of Defense was won.
* Buildings (23% of gross revenues)
Gross revenues rose 64%, mainly as a result of the merger with
EC Harris. The currency effect was 2%. Organically gross
revenues were down by 6% and net revenues by 2%. In many
European countries and in the US activities declined,
especially in government markets. RTKL performed well in Asia
and the Middle East, in commercial real estate and healthcare,
while in Belgium activities grew due to private sector
investments. EC Harris performed according to expectations also
by focusing on consultancy for cost reductions and performance
improvements of real estate portfolios.
Outlook
In the Infrastructure market we have a strong basis for continued growth. We are
involved in many large, multi-year projects and despite budget pressure,
governments do their utmost to continue these projects, also by using private
financing. In Brazil and Chile the market is especially favorable as a result of
investments in mining and energy, in Brazil also fuelled by the Olympic Games
(2016). The situation in local markets in Europe and the US is not expected to
improve shortly, resulting in continued pressure on prices.
In the Water market we expect further stabilization in the course of the year.
In the US our focus is on upgrades of water networks and on efficiency
improvements of existing installations. In addition, we have programs to drive
expansion with industrial clients, to further penetrate in Europe and to seize
opportunities in South America and the Middle East. As a result of flooding in
urban deltas and climate change, demand for water management is growing, but
financing of projects often still is a limiting factor.
In the Environmental market we foresee continued growth, driven by the private
sector. In the US we benefit from a strong position with industrial firms that
invest in the environment. Our client focused approach and advanced technology
help us gain market share, especially in complex projects and portfolios of
sites, also in Canada. Mining and energy are yielding significant work in Brazil
and Chile with opportunities elsewhere in South America. In Europe private
sector demand is growing, offsetting the decline in public sector work.
In the Buildings market our position has been considerably strengthened as a
result of EC Harris and the more recent merger with DLS, with many opportunities
for synergy and growth in the Middle East and Asia. The commercial property
market in Europe is stable. In the US this market is slowly picking up, but
healthcare investments are lagging. RTKL offsets this through international
expansion. The government market is under pressure, but companies are investing
and have a growing interest in international framework contracts.
CEO Harrie Noy concluded: "Despite the continued economic uncertainty,
especially in Europe, ARCADIS is in good shape. Our backlog is healthy and also
in organic terms has increased vis-à-vis the end of 2011. All business lines
have contributed to this increase. Government investments in Europe and the US
are under pressure, but private spending is increasing while investments in
Brazil, Chile, Asia and the Middle East offer ample opportunities. The merger
with EC Harris and its 'Built Asset Consultancy' approach, strengthens our
competitive position in all business lines, while the recent merger with Davis
Langdon & Seah provides us with a unique growth platform in Asia. Continued
growth in Infrastructure and Environment, and further stabilization in Water and
Buildings is expected to result in continued organic growth. Maintaining, and
where possible, improving margins is an important priority. Further
strengthening with add-on acquisitions remains on the agenda. For full year
2012 we expect increased revenues and profits, both organically and from the
recent acquisitions. 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 21,000 employees and
?2.4 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
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Source: Arcadis N.V. via Thomson Reuters ONE
[HUG#1610022]
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