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• Gross revenues 5% higher in the third quarter
• Organic growth remains at level, despite slowing growth in U.K. and  U.S.
• EBITA rises 8%, high margin maintained
• Net income from operations stable, despite a -5% currency effect and higher financing charges
• In first nine months, revenues 15% higher and net income from operations 11% higher
• Expected increase in net income from operations for full year 2008: about 10%
 

ARCADIS (EURONEXT: ARCAD), the international consulting, design, engineering and management services company, announced today that in the third quarter of 2008 it generated growing revenues and maintained profitability at a strong level. Gross revenues amounted to € 427 million, an increase of 5% of which 3% was organic. Net revenues (revenues produced by ARCADIS employees) grew 8% organically. EBITA rose 8% to € 30.3 million. Net income from operations at € 16.3 million remained at the same level as last year, despite negative exchange rate effects and increased financing charges. The decline of the U.S. dollar and British pound had a negative effect on revenues and results of 5%.

In the first nine months gross revenues grew 15%. Gross and net revenues both increased organically by 7%. All business lines contributed to the increase. EBITA increased by 17%, net income from operations by 11%. This resulted from growth in services, a good contribution from acquisitions and a slight margin improvement to 10.3% from 10.1% last year. The currency effect was 6% negative.

Early in the third quarter, the Italian environmental consultancy SET (revenues € 9 million, 35 employees) was acquired. With this step the services for our (multinational) clients and those of SET can be expanded. Early in August, Copijn (gross revenue € 6 million, 60 employees) which is a designer and contractor of landscaping projects in the Netherlands, was divested because it no longer represented a core activity.

CEO Harrie Noy about the results: "To date, the influence of the credit crisis for ARCADIS has been limited. In the English real estate market there is pressure on our services, while in the U.S. environmental market the growth rate is slowing, partly as a result of the completion of a number of large projects with a significant amount of subcontracted services. Nevertheless the organic growth of our own activities remained high at 8%, while the margin was maintained. By focussing early on cost controls and intensifying marketing efforts in areas that offer good opportunity, we have anticipated market changes. The strong commitment of our employees and internal cooperation aimed at synergy helps us capitalize on market opportunities."

Key figures   

Amounts in € millions, unless otherwise noted	Third quarter			First nine months
	2008	2007	∆	2008	2007	∆
Gross revenues	427	408	5%	1.255	1.088	15%
EBITA	30.3	28	8%	87.2	74.4	17%
Net income	11.4	12.3	-7%	40	37.1	8%
Ditto, per share (in €)	0.19	0.2	-6%	0.66	0.61	9%
Net income from operations 1)	16.3	16.3	0%	47.8	43.1	11%
Ditto, per share (in €) 1)	0.27	0.27	0%	0.79	0.71	12%
Shares outstanding (in millions)	60.6	61.1		60.5	61.2

1) Before amortization and non-operational items


First nine months
Gross revenues rose 15%, excluding currency by 21%. Acquisitions contributed 14%, while organic growth was 7%. The growth figures for net revenues are almost equal to those for gross revenues.

 

EBITA increased 17%, excluding currency impact by 23%. Acquisitions contributed 15%, organic growth was 8%. The contribution from carbon credits was almost equal with last year. The margin improved to 10.3% compared to 10.1% in 2007.

Net income from operations rose 11%. This is less than the increase in EBITA as a result of higher financing charges. Excluding the effects of derivatives to hedge interest rate and currency risks, financing charges rose to € 12.2 million (2007: € 5.2 million).

Developments per business line
Figures noted below concern gross revenues for the first nine months of 2008 compared to the same period last year, unless otherwise noted.

• Infrastructure
Gross revenues increased 3%. Acquisitions and divestments on balance contributed zero. The currency effect was minus 2%. Organic growth of 5% was negatively impacted by earlier declines in land development in the United States. Excluding this effect, organic growth was 7%. In Europe especially the Netherlands, Poland and the Czech Republic contributed, while in Brazil and Chile activities also grew strongly. In the quarter, the pace of growth in the U.S. water market increased mainly through work under the Corps of Engineers New Orleans contract, while in the U.K., a shift of project management to infrastructure projects generated growth.

• Environment
Gross revenues increased 15%. The currency effect was minus 10%, the contribution from acquisitions (LFR and Vectra) 16%, and organic growth 9%. In the quarter, growth slowed in the United States, where a number of companies experienced difficulties because of the worsened economy. Combined with the completion of some large projects with considerable amounts of subcontracting, this resulted in a slight organic decrease of gross revenues. Net revenues, however, did grow organically. This year, already $55 million in new GRiPฎ work was won. In most of Europe and in Brazil, organic growth remained solid.

• Buildings
Gross revenues increased 39%, of which 38% through the acquisitions of RTKL and APS mid 2007. The currency effect was 5% negative. Organic growth of 6% came from the expansion of management services in almost all European countries, while RTKL also contributed well as a result of growth from non-commercial projects and the international market. In England gross revenues decreased as a result of a decline in the commercial real estate market. This was partly offset by shifting capacity to infrastructure and expansion of activities in the Middle East. In the Netherlands a five year facility management contract was signed with Van Lanschot Bankiers, the first with a bank.
 
Outlook
The extent to which the worsening economy will impact ARCADIS' markets is uncertain. The infrastructure market is relatively stable. It is expected that governments in both Europe and the United States will speed up infrastructure investments to stimulate the economy. Climate change has sparked interest in water management, as exemplified by the new Dutch Deltaplan. In the United States the contract for New Orleans which has so far this year generated more than $60 million in task orders, is a solid basis in the growing water market. In Brazil, ARCADIS Logos is developing a portfolio of small energy projects, of which we expect to sell two in the fourth quarter.

In the environmental market, sustainability and regulation provide a healthy foundation. In market development, we are focussing on sectors with continued high demand such as oil and gas companies and utilities. Demand for cost effective solutions on the basis of our advanced technology, as well as vendor reduction and the outsourcing of environmental work by companies can increase market share. Interest in GRiPฎ is on the rise, not only with the U.S. Army, but also with private sector clients in the U.S. and in Europe. It is expected that environment and climate change will be put higher on the political agenda in United States.

In the buildings market, the credit crisis causes delays and postponements of commercial real estate projects especially in England and the United States. RTKL has successfully focussed on American projects outside of the commercial segment and on international projects. Project management can be utilized in the infrastructure market, but also in Middle East. The new facility management contracts provide a solid basis for further growth in this service type.

CEO Noy concludes: "Although the economy is rapidly deteriorating, themes like sustainability, climate change, urban renewal, mobility and energy offer ample opportunities. With our strong local presence, long-term client relationships and in depth know-how, we are well positioned to benefit from these developments. Our backlog is strong and our sales efforts have been intensified. Maintaining our margin by controlling costs and focusing on higher value added activities has priority. We continue to look for acquisitions albeit with prudence. Barring unforeseen circumstances, we expect for 2008 an increase of net income from operations of about 10%."

ARCADIS is an international company providing consultancy, design, engineering and management services in the field of 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 than13,500 employees and more than EUR 1.5 billion in gross revenue, the company has an extensive international network that is supported by strong local market positions.

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