- Gross revenues were a record €2.5 billion, up 26%
- Net revenues, €1.9 billion, were up 30%; organic growth reaches 4%
- Strong growth from Acquisitions, Emerging Markets and Multinational Clients
- Operational margin improved again, achieving 10% target for year
- Net income from operations was a record €105.1 million, up 29%
- Dividend proposal €0.52 per share, an increase of 11% over last year
- For 2013 a further increase of revenues and profit expected

ARCADIS (NYSE EURONEXT: ARCAD), a leading international consultancy, design, engineering and management services company, saw record revenue and profit growth in 2012. Net income from operations increased 29% to €105.1 million or on a per share basis €1.49, against €1.23 in 2011. The operational margin at 10.0% (2011: 9.7%) met target driven in part by strong margin performance of our US business, while cash flow from operations at €158.0 million (2011: €79.6 million) significantly improved. Our Leadership Balance Growth strategy targeted growth in emerging markets and in 2012 ARCADIS doubled its business in those geographies. This was achieved by a combination of acquisitions, accounting for almost two-thirds of the growth, and strong organic growth. The strongest overall growth was in the buildings business in property markets in the UK, Asia and the Middle East, while the strongest organic growth was achieved in infrastructure in especially South America. In developed markets in Europe and the US, market conditions remained challenging, mostly affecting our public sector clients in infrastructure and water business lines, partly compensated by growth from Multinational Clients in environment, water and buildings business lines.

It is proposed to the Annual Meeting of Shareholders to offer a dividend in cash or in shares of €0.52 per share, 11% above the level of last year. This represents a payout of 35% of net income from operations, in line with our dividend policy.

Strategically, several important steps were made. Our merger process with EC Harris was completed during the course of 2012 in an accelerated timeframe creating significant revenue and cost synergies. In April, our merger with Langdon & Seah was completed (2800 employees in 10 Asian countries; US$125 million in revenues), providing us with a strong foothold in the fast-growing Asian market. In July we made a step into Switzerland with the addition of BMG (50 people; €8 million in revenues), which has excellent client relationships with a number of global pharmaceutical and chemical firms. In August, we acquired ETEP in Brazil (300 people; €20 million in revenues), and became the largest provider of water consulting services in Brazil by a wide margin.

ARCADIS CEO Neil McArthur said: "Our results reflect the success of the design and implementation of our strategy. Our timely switch to emerging markets and rebalancing towards private sector and multinational clients while focusing on performance improvement and organic growth are beginning to pay off. In emerging markets we have captured strong organic growth in South America and created strong growth on the back of acquisitions in the Middle East and Asia. This helped to offset lower organic growth in mature regions such as Europe and the US, where market conditions remained difficult due to government austerity and market uncertainties. With EC Harris, Langdon & Seah, BMG and ETEP we have added companies that offer broad synergy potential, which we have already partly capitalized on in 2012."

Key figures
Amounts in € millions unless otherwise noted Fourth quarter Full year
2012 2011 D 2012 2011 D
Gross revenues 667 576 16% 2,544 2,017 26%
Organic gross revenue growth 2% 3%
Net revenues 489 402 22% 1,878 1,443 30%
Organic net revenue growth 4% 4%
EBITA 52.4 36.9 42% 166.4 144.4 15%
EBITA recurring 1) 52.4 41.7 26% 170.6 141.8 20%
EBITA operational2) 59.3 40.0 48% 188.8 139.0 36%
Operational EBITA margin 12.1% 10.0% 10.0% 9.7%
Net income 28.0 20.6 36% 89.0 79.5 12%
Ditto per share (in €) 0.39 0.30 30% 1.26 1.20 6%
Net income from operations 3) 31.4 26.4 19% 105.1 81.6 29%

Ditto per share (in €) 3) 0.44 0.39 14% 1.49 1.23 22%
Average number of shares outstanding 71.3 68.1 5% 70.4 66.5 6%

1 Excluding € 4.2 million acquisition cost Langdon & Seah (Q1 2012), €4.8 million acquisition cost EC Harris (Q4 2011), €7.4 million gain from divestment of AAFM (Q2 2011)

2 Excluding restructuring & integration costs and impact energy projects Brazil

3 Before amortization and non-operational items

Fourth quarter
In the fourth quarter, gross revenues rose 16% of which 12% came from acquisitions. Organic growth in the quarter amounted to 2%. The currency effect was 2%.

Net revenues rose 22%, with the contribution from acquisitions being 16%, and a currency effect of 2%. Organic growth was 4%, mainly from South America and the Middle East. The lower organic growth of gross revenue can be explained by the completion of the Floriade project in the Netherlands, which included significant subcontracting. In Europe, German and French activities grew, but were offset by declines elsewhere in the region. Overall the US was flat, but did see an increase in water revenues as a result of the emergency support work which followed Hurricane Sandy on the East Coast. EC Harris as well as multinational clients contributed to organic growth.

Recurring EBITA was €52.4 million, a 26% increase. The currency effect was 2%, while the contribution from acquisitions was 37% fuelled by profits from EC Harris and Langdon & Seah. Higher profits from Brazil, Chile, EC Harris, Belgium and RTKL were insufficient to offset lower results in other European countries leading to an organic EBITA decline of 13%. This also includes reorganization- and integration costs of €6.9 million (2011: €2.1 million) related to the integration of EC Harris. Corrected for these, organic EBITA declined 1%.

The operational margin (operational EBITA as a percentage of net revenues) reached 12.1% (2011: 10.0%). Results in Q4 benefited from lower management costs at EC Harris due to the benefits from continuing its partnership structure. The impact on EBITA was a gain of €7 million, of which €5 million relates to the first three quarters. It is expected that the annual gain in future years will be around €4 million. At €6.3 million financing charges were above last year (€5.0 million) due to the investments in acquisitions. The tax rate came out at 28.2% compared to 31.1% last year. Net income from operations increased 19% to €31.4 million.

Full year
Gross revenues grew by 26%, reaching more than €2.5 billion, while net revenues increased by 30% to €1.9 billion. After the merger with EC Harris in November 2011, another important merger was realized in April 2012 with Langdon & Seah in Asia. The acquisitions of BMG in Switzerland and ETEP in Brazil also contributed to the revenue increase from acquisitions and the overall growth of 26%. Organic gross revenue growth was 3% and for net revenue 4%. The organic growth was driven mainly by growth in South America, where in addition to continued demand from the private sector, public sector work is also increasing. In developed markets in Europe, revenues declined due to challenging market conditions for public sector clients. Nevertheless, France and Germany realized revenue growth on the back of a strong performance in respectively rail work and environmental consulting. US revenues were 1% higher with growth for private sector clients at strong margins, being partly offset by environmental and water services to public sector clients.

On a recurring basis, EBITA increased 20% to € 170.6 million (2011: €141.8 million). The currency effect was 6%, while acquisitions contributed on balance 16%. Organically EBITA declined 2%. EBITA was impacted by organizational adjustments due to reduced market demand, and integration of activities due to recent mergers. This resulted in €18.2 million of costs for reorganization and integration (2011: €12.7 million). Excluding these costs, operational EBITA was €188.8 million (2011: €139.0 million), an increase of 36%.

The margin (recurring EBITA as % of net revenue) was 9.1% (2011: 9.8%). Excluding reorganization and integration costs, the underlying operational margin was 10.0%. This compares to 9.7% in 2011 and reflects the business shift to more profitable emerging markets.

Financing charges were lower than last year at €21.8 million (2011: €23.4 million). On balance they were €2.4 million higher as last year's amount included €3.9 million one-off costs for the refinancing of loans. This increase was mainly caused by investments in acquisitions and somewhat higher interest rates on the debt that was refinanced in 2011. The effective tax rate was 28.1%, at the same level as 2011 (28.0%). In 2011 the tax rate was supported by the favorable impact of the non-taxable profit related to the divestment of AAFM. In 2012 the change in geographical spread, as well as the positive impact of taxes related to share based payments supported a lower tax rate.

Net income from operations was €105.1 million or €1.49 per share (2011: €81.6 million or €1.23 per share). The increase in net income from operations of 29% was higher than in recurring EBITA (+20%) due to a lower effective tax rate and lower minority interests following the acquisition of Arcadis Logos.

Cash flow, investments and balance sheet
At €158.0 million (2011: €79.6 million) net cash from operating activities was much stronger. The improvement stems from lower financing costs and tax charges paid, as well as an improvement in working capital from 15.1% in 2011 to 14.9% in 2012. Free cash flow, after regular investments in ongoing businesses, was €124.0 million (2011: €44.9 million).

Balance sheet total rose to €1,771 million (2012: €1,559 million), mainly resulting from acquisitions and exchange rate differences. Net debt (cash and cash equivalents minus interest-bearing debt) rose to €282 million (2011: €268 million). Balance sheet ratios remained strong at year-end 2012. Average net debt to EBITDA (calculated according to bank covenants was 1.5 (2011: 1.4), while the interest coverage ratio was 8 (2011: 7).

Developments per business line
Figures noted below concern gross revenues for the full year 2012, compared to the same period last year, unless otherwise mentioned. Operational margin is based on recurring EBITA, excluding restructuring & integration charges and the impact from energy projects in Brazil.

Infrastructure (26% of revenues)
Gross revenues grew by 18%, of which the contribution from acquisitions was 10%. Organic gross revenues increased by 9% and net revenues by 16%, the difference explained by reduced subcontracting in Brazil. Our strategy to grow in emerging markets paid off, with strong organic growth in Brazil and Chile from ongoing work in energy and mining, and new public infrastructure projects. This offset declines in most European countries. Our operational margin declined to 8.1% (2011: 9.2%) due to lower margins in continental Europe, which were in part compensated by improvements in EC Harris.

Water (15% of revenues)
Gross revenues increased by 16%. The contribution of acquisitions (EC Harris, ETEP) was 6%. The currency effect was 6%. Organically, gross revenues were flat, while net revenues declined 2%. The difference can be explained by higher subcontracting in the US. Compared to last year, the US market is stabilizing, supported by industrial water projects and new opportunities for local municipalities. Organic growth was strong in Chile and Brazil. The Middle East, UK and the Netherlands also generated growth in water treatment. The water management market saw lack of public funding although in the fourth quarter, ARCADIS became involved in emergency water projects triggered by Hurricane Sandy. The operational margin was 9.3% (2011: 9.4%).

Environment (33% of revenues)
Gross revenues grew 11% of which 4% from organic growth and 7% as a result of currency effects. Net revenues increased organically by 2%. The year started off strong with growth in private sector environmental work in the US, and South America, offsetting declines in US government markets. As economic uncertainty prevailed during the year, clients slowed investments in environmental issues and private sector growth decelerated. Oil and gas clients, our biggest client sector in environment, continued to contribute to growth. As a result of strong cost management, the operational margin improved to 12.6% (2011: 12.2%).

Buildings (26% of revenues)
Overall gross revenue growth was 78% and for net revenue 82%. Two strategic mergers contributed to the very strong growth. EC Harris and Langdon & Seah each grew their revenues, in part as a result of synergies. - Total synergy bookings were approximately €70 million during the year. EC Harris improved its margin through the year, delivering more than 9% EBITA for the year, putting us on track to achieve the 10% margin target already by 2013, one year ahead of plan. Langdon & Seah retained its high margin at well above average levels. In Europe and the US, revenues were under pressure, with the notable exception of London, where demand for high-end residential property increased. RTKL had a strong performance in the Middle East and Asia. Organically, gross revenues declined by 5%, the currency impact was 5% and net revenue declined organically by 4%. The contribution from performance improvement and successful acquisitions helped to increase the operational margin to 9.9% (2011: 7.0%).

Outlook
In the Infrastructure market, our involvement in many multi-year large projects, and our strong position in Brazil and Chile provide a good basis for continued growth. Although mining clients pace their investments in these countries, public sector work is on the rise. Government budget cuts in continental Europe are likely to also impact investments in large projects, which may affect our growth. Projects using alternative financing and delivery concepts, like PPP, and increased government outsourcing provide opportunities to combat this.

In the water market tight government budgets are causing revenue pressure, although in some markets, such as the US, we are able to offset this with private sector work and projects for network improvements. Flood protection work, such as related to Hurricane Sandy may offer additional opportunities. In addition, we target further expansion in selected markets in Europe and are capitalizing on opportunities in the Middle East. In South America, especially in Brazil and Chile, recent investments in water companies have considerably strengthened our position and create new avenues for growth.

The environmental market is growing slightly, driven by the private sector. In the US, we benefit from the trend that private sector firms outsource non-core activities, but we still face challenging public sector conditions. Our advanced technology allows us to bring contaminated sites to closure quicker and at lower cost. We believe that we are gaining market share, especially in complex projects and portfolios of sites and our Guaranteed Outcomes offering should help us maintain a strong position in these markets. Mining, energy and manufacturing projects drive demand for environmental services in Brazil and Chile. In Europe, demand from the private sector is picking up, compensating for a decline in government work.

In the buildings market, we now have a strong position with excellent opportunities for synergies and global growth. The commercial real estate market in Europe is in decline while the US market is starting to recover. In London, Asia and the Middle East we have a strong position where we see significant growth potential. We are well positioned to help our clients with large investment programs and provide built asset consultancy to maximize value throughout an asset's lifecycle.

Europe
ARCADIS announced the introduction of a new pan-European operating model that is directed at better serving our multinational, large national and local clients, by leveraging our best practices and capabilities. The model combines client proximity at the country level with a pan-European leadership team and shared services in support functions. These initiatives are expected to generate annual cost savings of €25 million, which should bring Continental Europe to an EBITA margin of 10% by the fourth quarter of 2014 (compared with 5% in 2012). Total restructuring charges in 2013/2014 are expected to be approximately €20 million.

CEO Neil McArthur concluded: "We have excellent potential for continued synergies with newly acquired companies and stronger positions in key growth markets. Our backlog developed in line with revenue growth and is steady at 11 months of revenue. We expect continued growth in infrastructure and buildings, a stable market in environment, and a further recovery in water. Maintaining, and where possible, improving our margin is an important priority. We have developed a clear path for margin improvement in Europe, which should help us achieve overall target levels, also in 2013. Further strengthening our position through acquisitions remains on the agenda. For full year 2013 we expect a further increase of revenues and profit. This is barring unforeseen circumstances."