Emerging markets drive revenue growth
Year-to-date gross revenues up 30% with strong contribution from acquisitions
Organic growth gross revenues year-to-date 4% higher; net revenues 4% higher
Operational margin improved quarter over quarter to 9.9%
Quarterly EBITA up 35%, net income from operations increased 46%
Working capital program drives €69 million improvement in cash flow from operations over last year
Outlook 2012 maintained: higher revenues organic and from acquisitions, income 20 - 25% higher

November 1, 2012 - ARCADIS (NYSE EURONEXT: ARCAD), a leading international consultancy, design, engineering and management services company, has announced strong third quarter 2012 results. Gross revenues increased by 34% to €650 million on the back of strong organic growth in emerging markets and a growing contribution from acquisitions, including EC Harris, Langdon & Seah, ETEP and BMG. In the third quarter, organic gross revenue growth amounted to 1%, and net revenue growth to 3%, with strong growth in emerging markets being partly offset by challenging market conditions in Europe and increasingly also in the United States. Infrastructure was again the strongest growth segment, led by operations in South America. Profitability improved as evidenced by the quarter-over-quarter increase of the operational margin to 9.9%, in part fuelled by Langdon & Seah and margin improvements in EC Harris.

For the first nine months gross revenues grew 30% to €1,878 million. Organic growth was 4% (in net revenues also 4%). Net income from operations rose 33% to €73.7 million.

Strategically, the company made two further steps during the quarter. Mid-July, it acquired Swiss-based environmental consultancy BMG (50 employees, revenues €9 million), gaining a premier position in the Swiss environmental market and global access to several major multinational chemical and pharmaceutical clients. In early August, we completed the acquisition of ETEP (300 people, revenues €20 million), the largest water engineering and consultancy company in Brazil. Combined with ARCADIS Logos, we are now the undisputed leader in the fast developing Brazilian water market.

CEO Neil McArthur said: "Our strategy to grow our presence in emerging markets is clearly paying off. Our continued organic growth was derived from our strong performance in South America and the Middle East. EC Harris demonstrated growth, combined with further margin improvement. This was also the case with Langdon & Seah, despite slowing growth in Asia. More synergy wins with both acquisitions were booked during the quarter, in total now amounting to more than €50 million. In mature markets, conditions are still challenging, with the US and some European markets showing further signs of a slowdown. We continue to focus on margin improvement and were able to close in on our target margin level of 10%, achieving 9.9% in the quarter. Our programs to improve working capital and cash flow are starting to pay off and we were able to significantly improve our cash flow in the quarter."

Geen Nederlandse tekst, jammer, maar er zit nu ook een Engelsman (red.XEA.nl)

Third quarter
Gross revenues grew 34%. There was a positive currency effect of 7%, mainly due to a stronger dollar against the euro. Acquisitions, most notably EC Harris and Langdon & Seah, contributed 26% to growth. Organically, gross revenues rose 1%, less than in the previous quarter reflecting a slowdown in mature markets.

Net revenues (revenues generated by own staff) rose 41%. Currencies contributed 6%, and acquisitions 32%. The organic growth of 3% mainly came from the emerging markets in South America. In Europe markets did not improve. In the United States, market conditions toughened somewhat as government spending was further reduced.

The difference in growth between gross and net revenue reflects reduced subcontracting following the completion of the Floriade project in the Netherlands.

(Recurring) EBITA rose 35% to €42.7 million. The currency effect was 8% positive, while acquisitions on balance contributed 36%, fuelled by stronger profit contributions from both EC Harris and Langdon & Seah. Organically, EBITA declined 9%. While South America further improved its contribution, these were more than offset by declines in Europe and the US. Restructuring and integration costs during the quarter amounted to €4.6 million (2011: €2.0 million) mainly directed at integration of EC Harris and ongoing capacity adjustments in Europe. Adjusted for this, EBITA declined organically 1%. Operational EBITA rose 40% to €47.4 million (2011: €33.8 million).

The margin (recurring EBITA as a percentage of net revenue) came out to 8.9% (2011: 9.4%). Corrected for reorganization and integration charges the operational margin was 9.9%, compared to 10.0% in 2011, and well ahead of the margin in the second quarter of 2012 of 9.2%.

Financing charges amounted to €5.0 million (2011: €6.1 million), lower than last year due to lower debt and lower interest rates. The tax rate was 26.3% (2011: 30.7%). Net income from operations rose 46%.

Cash flow from operating activities during the quarter amounted to €64 million (2011: €31 million) with the improvement mainly coming from strong working capital management. Working capital as a percentage of gross revenue improved and came out to 16.8% (2011: 17.9%).

First nine months
Gross revenues were 30% higher than last year. The positive currency effect was 5%, while the contribution of acquisitions on balance was 21%. The organic increase in gross revenue amounted to 4% almost entirely resulting from strong growth in South America and Asia.

Net revenues rose by 33%. The currency effect was 5%, the effect of acquisitions and divestments on balance 24%. Organic growth amounted to 4%.

EBITA was €114.0 million, up 6% from last year. Excluding the effect of the sale of AAFM last year and the acquisition cost of L&S this year, recurring EBITA was up 18% to €118.2 million. The currency effect was 7%, the contribution from acquisitions was 20%. The deconsolidation of the Brazilian energy business had a negative impact of 12%. Organically, recurring EBITA rose 3%. Reorganization and integration costs amounted to €11.3 million (2011: €10.5 million). Operational EBITA rose 31% to €129.5 million (2011: €99.0 million).

Financing charges were €15.5 million (2011: €18.4 million). The tax rate of 28.0% (2011: 27.0%) is based on the expected tax rate for the full year. Net income from operations rose 33%.

Developments by business line

Figures noted below concern gross revenues for the first nine months of 2012 compared to the same period last year, unless otherwise mentioned.

Infrastructure (26% of gross revenues)
Gross revenues grew 24%. The currency effect was 0%, the contribution from acquisitions (EC Harris) 12%. Organically gross revenues increased 12%, net revenues 18%. The strong organic growth in Brazil and Chile more than offset declines in most European countries. In addition to work in the energy and mining markets, South America is now also experiencing growth in public infrastructure projects with metro projects in Chile, and airport projects in Brazil. In France, our involvement in large infrastructure projects continued to drive growth. Recently a large metro project in Toulouse was added.

Water (15% of gross revenues)
Gross revenues increased 13%. The currency effect was 7%, the contribution from acquisitions (EC Harris, ETEP) was 6%. Organically, gross revenues were flat, while net revenues declined 5%. Order intake developed positively. The water-for-industry program continues to grow in significance, also outside of the US. With the addition of ETEP in Brazil, our position in that market has significantly strengthened, also creating opportunities for synergy with our US water activities in technology exchange.

Environment (33% of gross revenues)
Gross revenues rose 14%. The currency effect was 8%. Organically, gross revenues grew 6%, net revenues 2%. In the US, the public sector environmental market is in decline, although at the beginning of the quarter the Moody's Airforce base contract was won. Private sector growth in the US is slowing somewhat. Strong growth continued in South America and especially Chile where demand for environmental services to the mining industry remained solid. In Europe the government market is still under pressure, resulting in less environmental impact assessment projects, while private sector work is picking up slowly.

Buildings (26% of gross revenues)
Gross revenues grew 94%, net revenues 98%. The currency effect was 6%, the contribution from acquisitions 95%. Organically gross revenues declined 7%, net revenues 5%, mainly resulting from a slowdown in the Netherlands on the back of poor conditions in public sector markets. RTKL continued to do well in the Middle East and Asia. In most European countries activities declined due to government austerity. EC Harris and L&S saw growth during the quarter, while revenue synergies were more than €50 million.

Outlook
In the Infrastructure market we have a basis for sustained growth. We remain positive about opportunities for growth in South America. Although the mining sector started to cool somewhat, the transportation sector and investments for the soccer World Cup and Olympic Games generate new growth opportunities. Our backlog for work in Middle East bodes well for growth in Qatar, among other countries. In the US and the Benelux market conditions remain more challenging given public sector declines. The market outlook for the United Kingdom and France is more positive as both countries continue to invest in large infrastructure projects.

In the Water market stabilization is within reach. The backlog in our US water business is healthy after a strong order intake (YTD 7%). The program to provide water services to industrial clients is successful. In Brazil, the combination of our water business with that of ETEP has elevated us to the number one position in that market. This also allows us to develop enhanced business solutions for our Brazilian clients via technology exchange from our US water practice. In Europe we expect the water market to be stable. The water management market is still difficult due to lack of public funding.

In the Environmental market demand for environmental services from private sector clients is stable. In Europe and the US, public sector environmental work is in decline. Demand in South America remains stable and we expect to be able to expand our position. Economic sentiment will play an important role in client decisions to invest in new projects.

In the Buildings market our position has been considerably strengthened due to the mergers with EC Harris and L&S, with synergy opportunities created in Europe, US, the Middle East, Latin America and Asia. Within the generally challenging market environment in Europe, the Dutch market stands out as weak, while the UK market remains solid. The Asian market is cooling, but we are confident growth will continue but at a lower pace in the short term. Our strong position in the Middle East offers significant opportunities for growth.

CEO Neil McArthur concluded: "Government investments in Europe and the US remain under pressure and in the private sector investment decisions may be affected by the continuing economic uncertainty. Nevertheless, we see that the emerging markets (South America, Asia and the Middle East) and synergy opportunities with the companies added to ARCADIS in the last year offer opportunities for growth. Our backlog is up 3% compared to year-end 2011. Where market conditions allow we focus on generating revenue growth, in situations where demand is softer, we aim for margin retention and improvement. Further strengthening of our capabilities through add-on acquisitions stays on the agenda. Based on the backlog situation, initiatives in the global business lines, and despite weaker economic developments in some geographies for full year 2012 we expect increased revenues both organically and from recent acquisitions. We expect net income from operations to increase by 20 - 25%. This is barring unforeseen circumstances."