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Click here for the press release as pdf-file
- Net income for the first half increases 43%, net income from operations 24%
- Organic gross revenue growth in the first half is 6%
- Activities grow across all market segments
- Profit improvement through growth and strong margin improvement
- Expected increase of net income from operations for full year 2005: 20 to 25%
ARCADIS (Nasdaq: ARCAF; Euronext: ARCAD), the international consulting and engineering company, today reported that it continued its solid results into the second quarter of 2005. For the second quarter of 2005, gross revenues rose 4% to € 233 million, while net income increased 62% to € 9.0 million. Excluding non-recurring effects, net income from operations rose 31%.
In the first half of 2005 gross revenues increased 6%, all of which came from organic growth. Net income rose 43%, while net income from operations (excluding non-recurring effects) rose 24%.
The favorable development is mainly the result of margin improvement. Organic growth and acquisitions also contributed positively to the development of results.
The Company completed three acquisitions in the second quarter of 2005. With the acquisition of SWK (gross revenue € 5.9 million, 50 employees) in mid-May, ARCADIS strengthened its position in the Belgian infrastructure market. In mid-June, the acquisition of AYH (gross revenue € 36 million, 340 employees) was completed in the United Kingdom. AYH specializes in project management, cost control and consulting for real estate projects. At the end of the quarter, the Company acquired Greystone Environmental Consultants (gross revenue € 12 million, 130 employees), an important step in the permitting and planning sector of the U.S. environmental market.
In addition, several divestments were completed. Mid-June, the 50% interest in Grupo EP (gross revenue 135 million, 1,700 employees) was sold, while shortly after the close of the quarter, two smaller companies were sold, both active in the donor-financed market (gross revenue € 11 million, 240 employees combined). These divestments resulted in a book profit of € 2.1 million in the quarter.
In a reaction to the results, CEO Harrie Noy said: "The development of results shows that ARCADIS is well on track. Organic growth was at a good level across almost every segment. The results reflect the benefits of measures that were taken earlier, which combined with the efforts of our staff, resulted in a solid margin improvement. The acquisitions and divestments serve to strengthen our home market positions, while we increase our focus on activities with growth potential and higher margins."
|
Amounts x € 1 million, unless otherwise stated |
Second quarter |
First half |
|
|
2005 |
2004 |
D |
2005 |
2004 |
D |
|
Gross revenue |
233 |
223 |
4% |
457 |
431 |
6% |
|
EBITA |
15.0 |
9.2 |
64% |
25.4 |
17.2 |
48% |
|
Net income |
9.0 |
5.5 |
62% |
14.5 |
10.1 |
43% |
|
Net income per share (in €) 1) |
0.44 |
0.28 |
60% |
0.71 |
0.50 |
42% |
|
Net income from operations 2) |
7.4 |
5.6 |
31% |
13.3 |
10.7 |
24% |
|
Net income f. operations per share (in €) 1,2) |
0.36 |
0.28 |
29% |
0.65 |
0.53 |
23% |
Analysis
Beginning from 2005, the Company's results are reported under IFRS (International Financial Reporting Standards). The comparable figures for 2004 have been adjusted on this basis (see attachment). The table with main figures also includes the net income from operations. This is net income as defined by IFRS, excluding amortization identifiable intangible fixed assets, adjustments related to pension plans and non-recurring items. These consist of book profits on subsidiaries sold (in 2004 and 2005) and restructuring costs (in 2004).
Second quarter
Gross revenues grew 4%. Organic growth was also 4%. The proceeds from the sale of subsidiaries had a positive effect on gross revenues of 1%. This was offset by a negative currency effect of 1%. Growth resulting from acquisitions and divestments on balance was almost zero. The somewhat lower organic growth compared to the first quarter of 2005 was caused by a decline in gross revenues in the Netherlands. This was mainly the result of less third-party work, which was at a high level in the second quarter of 2004. Backlog in the Netherlands improved considerably compared to last year, which confirms the previously announced slight recovery in the Dutch market. In almost all markets, organic growth was continued at a good level. The U.S. market is particularly favorable, while the strong recovery in the Brazilian market also continued.
EBITA rose 64%. On a recurring basis (excluding non-recurring effects in 2004 and 2005) the increase amounted to 34%. On balance, acquisitions and divestments contributed 14%, while there was no currency effect. The organic increase in EBITA was 20%. In the Netherlands, the restructuring completed last year is yielding results. The United States and Brazil also provided a solid contribution to the improvement of results.
At 31%, net income from operations rose a little less than recurring EBITA. This was primarily caused by a lower contribution from non-consolidated energy projects in Brazil. In the meantime a new contract has been signed for one of these projects, which is expected to contribute to profits starting in the fourth quarter of 2005.
First half
The increase in gross revenue was 6%, and was entirely the result of organic growth. Acquisitions and divestments on balance contributed 1%, which was offset by a negative currency effect of 1%. Developments already visible in the first quarter continued into the second quarter.
EBITA grew 48%, or 26% on a recurring basis. The contribution from acquisitions and divestments was 10%. Organically EBITA increased 16%, mainly as a result of margin improvement. The margin (recurring EBITA as % of net revenue) rose to 7.0% in the first half of 2005 compared to 5.9% in the same period last year.
Developments per market segment
The figures mentioned below relate to gross revenue developments and, unless otherwise noted, discuss the comparison between the first half of 2005 and the same period last year.
- Infrastructure
Gross revenue growth amounted to 10%, of which 7% was from acquisitions. Organic activity growth was 3%, and was particularly strong in Brazil, the United States and France. In Brazil, improved economic conditions resulted in increased investments, by both government and private sector. The favorable U.S. housing market led to significant investment in the land development market. In France, the expansion of the network of roads and railroads was the main growth driver. In Germany, the market remained difficult, while in the Netherlands a light recovery was noted, resulting in an increased backlog.
- Environment
Organic growth in the environmental market continued at a good level with a 9% increase. The main contribution came from the United States, where activities grew 11%, particularly as a result of GRiP® projects. In the second quarter, ARCADIS was selected by the U.S. Army Environmental Center for a framework contract under the GRiP® program with a contract ceiling of US$ 320 million. In Europe, gross revenue grew, particularly in Germany, Belgium, France and Poland. Activities in Brazil also increased.
- Facilities
Gross revenue in this segment grew 4%. During the quarter, the Company sold its detailed engineering activities in the United States, consistent with its focus on higher margin activities. This caused a gross revenue decline of 5%. Organic growth was 10%. Activities in facility management and project management in the Netherlands and Germany were the main contributors to this increase.
Outlook
In many countries there is a need to improve infrastructure as a prerequisite for economic growth. Increasingly, governments resort to public private cooperation to increase the speed of infrastructure investment. In the Netherlands, the market for railway improvement is growing. Together with two partners ARCADIS has established the joint venture Asset Rail to also become involved in contracting for the management and maintenance of railroads. The infrastructure market in Central Europe is growing rapidly, stimulated by money from European funds. In France, ARCADIS can benefit from the expansion of high speed railway lines. It is expected that the market in Brazil will continue to grow. In the U.S., the agreement concerning federal funding for transportation is expected to have a positive market impact, while the long-term GRiP® contracts are a solid basis for further expansion in the U.S. environmental market. In Europe there is also significant interest in this contracting method for dealing with contaminated areas. In the facilities segment, the acquisition of AYH lays the basis for further growth in management services. The selection by DSM of ARCADIS AQUMEN for the delivery of facility management services, demonstrates the Company's solid position in this growing market.
CEO Noy concludes: "The outlook for 2005 continues to be positive. ARCADIS is very well positioned in markets that offer on-going opportunities. Our policy is aimed at realising growth through synergy. Good possibilities present themselves where it comes to providing services to multinational clients, and in areas like soil remediation, railroads, bridges, tunnels and project management. At the same time, we will continue to focus on activities with higher added-value to further improve margins. The expansion through acquisitions will be continued. Barring unforeseen circumstances we expect an increase of net income from operations for full year 2005 of 20 to 25%."
ARCADIS is an international company that provides project management, consultancy and engineering services to enhance mobility, sustainability and quality of life. Infrastructure – Environment – Buildings. ARCADIS develops, designs, implements, maintains and operates projects. For companies and governments. With 9,000 employees and € 900 million in gross revenue. Present multi-nationally with a close-knit local network. Expertise and experience of international significance. Focused on providing added value to clients. Responsible and involved. Thinking and acting. Result counts.
Except for historical information contained herein, the statements in this release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, risks associated with possible changes in environmental legislation and risks with regard to the Company's ability to acquire and execute projects. These are other risks are described in ARCADIS' filings with the Securities and Exchange Commission over the last 12 months, copies of which will be available from the SEC or may be obtained upon request from the Company.
Click here for the financial tables (pdf)
Click here for the press release as pdf-file
