Arcadis Results Better Than Expected
November 11 2009 - 1:30AM
PR Newswire (US)
AMSTERDAM, November 11 /PRNewswire-FirstCall/ -- - 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:
http://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 DATASOURCE: ARCADIS NV
CONTACT: 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 .
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