Arcadis Trading Update Q1 2020
Arcadis delivers revenue growth whilst seeing first
EBITA impact from COVID-19
Operational
- Initial focus on ensuring the health and safety of our people,
clients, and communities
- 90% of our people work from home, supporting clients using
digital platforms
- Significant pro-active measures implemented to address market
effects and contain costs
- Work for public clients largely unaffected, and in some cases
brought forward
- Arcadis business globally will be impacted by COVID-19, during
Q1 mainly Asian countries affected
Financial
- Organic net revenue growth of 3% to €658 million (gross
revenues: €872 million)
- Operating EBITA €48 million (Q1 2019: €48 million); operating
margin 7.2% (Q1 2019: 7.6%) impacted by COVID-19 in Asia
- Net working capital at 19.2% (Q1 2019: 17.4%); DSO at 95 days
(Q1 2019: 86 days); higher due to invoicing inefficiencies from
Oracle implementation in the US and COVID-19 in Asia
- Free cash flow of - €84 million (Q1 2019: - €52 million),
impacted by a large engineering software license renewal (three
years) of €24 million
- Net debt €424 million (Q1 2019: €409 million); solid financial
position and good liquidity
- Organic backlog growth at 2% quarter-to-date; no material
cancellation of projects
- Outlook: unable to accurately assess 2020 impact of COVID-19;
given all uncertainties, it is unlikely all strategic targets for
2020 will be met
Amsterdam, 24 April 2020 – Arcadis (EURONEXT: ARCAD),
the leading global Design & Consultancy organization for
natural and built assets, reports 3% organic
increase in net revenues for the first quarter of 2020. Operating
EBITA margin decreased to 7.2% (Q1 2019: 7.6%) due to COVID-19
impact mainly from Arcadis business in Asia. Arcadis has taken
significant measures to protect the wellbeing of its people,
clients and communities. Also, a series of actions
is implemented to ensure business resiliency.
CEO STATEMENTPeter Oosterveer, CEO Arcadis
comments: “For all our people and clients,
everyday life and work has been severely disrupted by the impact of
COVID-19. The prosperity and safety of our societies are being
challenged and everyone realizes that it will take time and a
significant effort to bring a degree of normality back to our life
and our business. No one can accurately predict when we reach that
point and what the ultimate impact and possible lasting changes
will be. Meanwhile, those who care for our health and our safety
deserve our unconditional support and respect.
During the first quarter, we took immediate and significant
action to protect the wellbeing of our people, clients and
communities. In a very short time frame, we enabled 90% of our
people to work from home, using digital collaboration platforms and
cloud-based engineering applications. We are performing many
projects which are vital for society, for example important
infrastructure projects like the High Speed 2 railway in the UK,
flood protection for water authorities in the Netherlands and the
US and environmental remediation work for public and private
clients in the US. We are seeing that these projects are
continuing, and in some cases even brought forward.
The effect of COVID-19 on the overall results in the first
quarter was largely limited to a lower revenue and EBITA from our
operations in Asia. As the virus spread across the globe and with
business continuity as our full focus, we took further
precautionary measures to reduce our cost and protect our cash
position. The current backlog and order intake in the first quarter
are fairly solid, and we have not seen any material impact from the
cancellation of projects. However, given the current uncertainties
we will refrain from providing guidance for the year, and it is
reasonable to assume that not all of our 2020 strategic targets
will be met. In these unprecedented circumstances I am however very
proud and impressed by the agility and resilience of all our people
across the globe. It is these capabilities and the fundamental
unchanged needs of the world at large and our clients in
particular, which gives me confidence for the future.”
KEY FIGURES
in € millions
Period ended March 31 |
|
|
|
|
|
2020 |
20191 |
change |
Gross
revenues |
|
872 |
829 |
5% |
Net revenues |
|
658 |
628 |
5% |
Organic
growth |
|
3% |
2% |
|
EBITDA |
|
76 |
75 |
1% |
EBITDA2) |
|
56 |
56 |
0% |
EBITA |
|
45 |
46 |
-2% |
EBITA margin |
|
6.8% |
7.3% |
|
Operating
EBITA3) |
|
48 |
48 |
-1% |
Operating EBITA
margin |
|
7.2% |
7.6% |
|
Net working
capital % |
|
19.2% |
17.4% |
|
Free cash
flow |
|
-84 |
-52 |
|
Net debt |
|
424 |
409 |
|
Backlog net
revenues (billions) |
|
2.1 |
2.1 |
|
Backlog organic
growth (year-to-date) |
|
2% |
4% |
|
1) 2019 figures based on IFRS 162) Excluding IFRS 16 impact,
used for net debt/EBITDA calculation3) Excluding restructuring,
acquisition & divestment costs
REVIEW OF PERFORMANCE
COVID-19 actions
Taking care of our peopleThe first priority in
dealing with the COVID-19 outbreak was to protect the health &
safety of our people and their families, clients and society.
Significant measures, in health & safety, hygiene and travel,
were taken to secure a thorough health approach, in line with WHO
recommendations and the guidance from government experts in the
various countries in which Arcadis operates.
Considering the unprecedented and rapidly
changing operating environment, Arcadis has also taken measures to
ensure business resiliency, guided by a global task force
established in early March, as well as regional and local teams of
subject matter experts. In a very short time frame, 90% of our
people were enabled to work from home, using digital collaboration
platforms and cloud-based engineering applications. As a result,
Arcadis is well prepared and organized to continue delivering on
its commitments to clients.
Operational performanceThe
impact of the COVID-19 outbreak was initially limited to the
Arcadis businesses in China and Hong Kong. Now that the virus has
spread around the world, it adversely impacts our markets and
required additional measures. In identifying and implementing these
actions, Arcadis made a distinction between immediate priorities,
preparing for the crisis impact, and recovery thereafter. The
results of our actions will be impacted by the time societies and
governments need to contain this crisis, and on support businesses
will receive from governments.
We focus on continuing to serve our clients, win projects where
possible and apply deep client intimacy to keep our pipeline of
orders filled. To further ensure business continuity, a large
number of measures have been taken to reduce cost, reducing
external advisory services and suspending all uncommitted capital
expenditure. The Executive Board and the Executive Leadership Team
will not receive a cash bonus over 2020 and for a period of six
months their salaries will be decreased by 10%. In addition, a full
hiring stop has been implemented for any new employees. Applying
for relevant government support in countries which provide for this
opportunity is currently reviewed.
Solid financial position and good
liquidityThe focus of Arcadis in the last two years has
been on reducing debt and strengthening the balance sheet. This
strategy has resulted in a solid financial position and good
liquidity. As announced before, in order to contain its cost and
protect its cash position, Arcadis has decided as a precautionary
measure to stop the share buy-back program and to withdraw the
dividend proposal from the agenda for the Annual General Meeting as
scheduled for May 6th, 2020. Arcadis does understand the importance
of dividends for its shareholders but considers this decision to be
in the best interest of Arcadis, its people, clients and
shareholders.
Revenues by segment
Americas (34% of net revenues)
in € millions
Period ended March 31 |
FIRST QUARTER |
|
|
2020 |
2019 |
change |
Gross revenues |
362 |
319 |
13% |
Net
revenues |
226 |
204 |
11% |
Organic growth |
7% |
8% |
|
Organic net revenue growth in North America of 7%, driven by all
businesses, but especially Infrastructure and Water where Arcadis
mainly works for public clients. The order intake remains solid in
the quarter and most of this work is seen as essential services and
can be executed remotely.In Latin America organic net revenue
growth was 12%, driven by environmental work in Brazil.
Europe & Middle East (46% of net revenues)
in € millions
Period ended March 31 |
FIRST QUARTER |
|
|
2020 |
2019 |
change |
Gross revenues |
352 |
347 |
2% |
Net
revenues |
302 |
290 |
4% |
Organic growth |
2% |
-1% |
|
Net revenues in the UK increased organically by 4%, mainly due
to growth in Infrastructure, Water and Environment. In Continental
Europe organic growth was 3% with strong growth in Germany. In the
Netherlands work for public clients (60% of revenues) was doing
well and some selective Infrastructure work was even brought
forward. Private clients in the Netherlands were more reluctant to
start new projects. Other countries in Europe did relatively well
but started to see some slowdown at the end of March. In the UK and
Continental Europe, most of the projects continued in April. In the
Middle East net revenues declined organically by 5% and the
uncertainty in the market increased towards the end of the quarter
due to both COVID-19 and extremely low oil prices.
Asia Pacific (12% of net revenues)
in € millions
Period ended March 31 |
FIRST QUARTER |
|
|
2020 |
2019 |
Change |
Gross revenues |
88 |
91 |
-3% |
Net
revenues |
79 |
79 |
0% |
Organic growth |
3% |
-1% |
|
Organic net revenue decline in Asia was 15%, due to the COVID-19
impact that started early January in China. In late March, all
offices in China were re-opened and the business is returning to a
more normalized situation. There were no project cancellations in
Asia, merely delays in some projects. Organic net revenue growth
for Australia was exceptionally strong with 32%, as all major
projects continued and there was a successful transition to remote
working.
CallisonRTKL (8% of net revenues)
in € millions
Period ended March 31 |
FIRST QUARTER |
|
|
2020 |
2019 |
change |
Gross revenues |
70 |
73 |
-4% |
Net
revenues |
51 |
54 |
-5% |
Organic growth |
-8% |
1% |
|
Organic net revenue decrease of 8% mostly due to the COVID-19
impact in China and the Retail practice in general. The healthcare
practice started actively supporting clients in building COVID-19
treatment centers.
Operating EBITAOperating EBITA of €48 million was in line with
last year (Q1 2019: €48 million), despite the COVID-19 impact of
approximately €5 million from our business in Asia. The operating
EBITA margin decreased to 7.2% (Q1 2019: 7.6%); in most regions the
margin improved except for Asia, the Middle East and CallisonRTKL.
Non-operating costs amounted to €3 million (Q1 2019: €2 million),
mainly relating to restructuring. EBITA at €45 million (Q1 2019:
€46 million).
CASH FLOW and WORKING CAPITAL EBITDA excluding IFRS 16 impact
was €56 million (Q1 2019: €56 million). Net working capital as a
percentage of gross revenues was 19.2% (Q1 2019: 17.4%) and days
sales outstanding increased to 95 days (Q1 2019: 86 days) due to
invoicing inefficiencies in North America by the implementation the
Oracle cloud solution and the impact of COVID-19 in Asia. The
invoicing inefficiencies will be resolved in the next quarters.
Free cash flow was - €84 million (Q1 2019: - €52 million), due to
seasonal outflow and a three years engineering software license
renewal of €24 million. Net debt of € 424 million showed the
seasonal increase during the quarter and was slightly higher than
Q1 2019 (€409 million).
BacklogBacklog at the end of Q1 2020 at €2.1 billion was at the
same level as last year, representing 9 months of net revenues.
Backlog increased organically year-to-date by 2% supported by a
book-to-bill ratio of 1.06 with good order intake in most regions.
There was a slow order intake in Asia, Australia and CallisonRTKL
(China) with improvements from China in March as they returned to
business as normal. There are no cancellations of projects with a
material impact.
Strategic priorities 2020Arcadis’ “Creating a sustainable
future” strategy launched in 2017 is based on three pillars: People
& Culture, Innovation & Growth, and Focus & Performance
with strategic targets for 2020. Given the current uncertainties
regarding the COVID-19 crisis it is reasonable to assume that not
all of our strategic targets set for 2020 will be met.
Arcadis is advancing its vision for the future against a
backdrop of market opportunities driven by global trends like
urbanization, climate change resiliency and digitalization and
stays committed to present its scheduled strategy update for the
period 2021-2023 on 19 November 2020.
Financial Calendar 2020
|
|
6 May 2020 |
Annual General
Meeting of Shareholders |
28 July 2020 |
First half year
results |
29 October
2020 |
Trading update
Q3 |
19 November
2020 |
Capital Markets
Day |
For further information please contact:Arcadis Investor
RelationsJurgen PullensMobile: +31 6 51599483E-mail:
jurgen.pullens@arcadis.com
Arcadis Group CommunicationsJoost SlootenMobile: +31 6 27061880
E-mail: joost.slooten@arcadis.com
Analyst meetingArcadis will hold an analyst meeting and webcast
to discuss the Q1’20 results. The analyst meeting will be held at
10.00 hours CET today. The webcast can be accessed via the Investor
Relations section on the company’s website
at https://www.arcadis.com/en/global/investors/investor-calendar/2020/trading-update-q1-2020/.
About ArcadisArcadis is a leading global Design &
Consultancy organization for natural and built assets. Applying our
deep market sector insights and collective design, consultancy,
engineering, project and management services we work in partnership
with our clients to deliver exceptional and sustainable outcomes
throughout the lifecycle of their natural and built assets. We are
28,000 people, active in over 70 countries that generate €3.5
billion in revenues. We support UN-Habitat with knowledge
and expertise to improve the quality of life in rapidly
growing cities around the world. www.arcadis.com.
REGULATED INFORMATIONThis press release contains information
that qualifies or may qualify as inside information within the
meaning of Article 7(1) of the EU Market Abuse Regulation.
FORWARD LOOKING STATEMENTSStatements included in this press
release that are not historical facts (including any statements
concerning investment objectives, other plans and objectives of
management for future operations or economic performance, or
assumptions or forecasts related thereto) are forward-looking
statements. These statements are only predictions and are not
guarantees. Actual events or the results of our operations could
differ materially from those expressed or implied in the
forward-looking statements. Forward-looking statements are
typically identified by the use of terms such as “may,” “will”,
“should”, “expect”, “could”, “intend”, “plan”, “anticipate”,
“estimate”, “believe”, “continue”, “predict”, “potential” or the
negative of such terms and other comparable terminology. The
forward-looking statements are based upon our current expectations,
plans, estimates, assumptions and beliefs that involve numerous
risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business
decisions, all of 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.
- Arcadis Trading Update Q1 2020
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