HIJ2 Arcadis NV

Arcadis Q2 and Half Year 2024 Results: Continued growth and improved operating margin as 2024-2026 strategy implementation commenced

PRESS RELEASE

Arcadis Second Quarter and Half Year Results 2024
Continued growth and improved operating margin as 2024-2026 strategy implementation commenced

SECOND QUARTER RESULTS

• Net revenue of €991 million, solid organic growth of 6.0%¹⁾
• Strong order intake of €1.1B resulting in organic backlog growth of 5.6% year-on-year
• Improved operating EBITA margin²⁾ to 11.5% (Q2’23: 9.7%³⁾) driven by operating leverage and improved project portfolio
• Free cash flow of €8 million (Q2‘23: €-26M), net working capital % of 12.7% (Q2‘23: 12.2%³⁾)

Amsterdam, 25 July 2024 – Arcadis, the world’s leading company delivering data-driven sustainable design, engineering, and consultancy solutions for natural and built assets, sees continued growing client demand across all its business, resulting in net revenue of €991 million, organic growth of 6% and an improved operating EBITA margin of 11.5% (Q2‘23: 9.7%³⁾).

Alan Brookes, CEO Arcadis, said: “Arcadis has delivered a strong first half year of its strategy cycle 2024-2026. Sustained client demand across all our Global Business Areas and specifically in solutions across Energy Transition, Water, Technology and Mobility resulted in strong revenue growth and order intake in the quarter. Operating leverage, an improved project portfolio and cost control allowed us to further improve our margin and deleverage our balance sheet. Meanwhile, we achieved the first milestones in our strategy implementation through the roll out of our Skills Powered Organization, the advancing of the Arcadis Energy Transition Academy and expansion of the Global Excellence Centers. Our deep asset knowledge, global expertise and complementary set of services are key success factors allowing us to further drive continued profitable growth and to better serve our clients.”

KEY FIGURES*

in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Gross revenues	2,512	2,477	1%		1,282	1,260	2%
Net revenues	1,959	1,886	4%		991	945	5%
Organic growth (%)1)	5.2%	10.6%			6.0%	9.0%
Operating EBITDA2)	271	241	13%		141	120	17%
Operating EBITA2)3)	217	184	18%		114	92	24%
Operating EBITA margin (%)2,3)	11.1%	9.7%			11.5%	9.7%
Net income3)	112	69	62%
Net income for operations per share (in €)3,4)	1.40	1.14	23%
Net working capital (%)3)	12.7%	12.2%
Free cash flow5)	-88	-134			8	-26
Net debt3)	1,016	1,193
Order intake	2,194	2,039	8%		1,066	976	9%
Backlog net revenues	3,386	3,249	4%
Backlog organic growth (%, yoy)1)	5.6%	5.4%
Backlog organic growth (%, ytd)1)	6.7%	5.0%
Voluntary employee turnover6)	11.3%	12.6%

* 2023 and 2024 half year results as presented in this press release are unaudited
1) Underlying growth excl. impact of FX, acquisitions, footprint reductions, winddowns or divestments
2) EBIT(D)A excluding restructuring, integration, acquisition, and divestment costs
3) 2023 revised to reflect the adjustments to the provisional opening balances of acquired entities recognized 30 June 2023 (in accordance with IFRS 3.49)
4)Net income before non-recurring items (e.g. valuation changes of acquisition-related provisions, acquisition and divestment costs, expected credit loss on shareholder loans and corporate guarantees and one-off pension costs)
5) Free cash flow: cash flow from operations adjusted for capex and lease liabilities
6) Voluntary employee turnover excludes the Middle East as these operations are being wound down

REVIEW OF THE SECOND QUARTER 2024: PROFIT & LOSS ITEMS AND BACKLOG
Net revenues totaled €991 million, increasing by 6.0% organically, driven by all Global Business Areas (GBAs). Revenue and backlog growth was particularly strong in US and Europe with demand for our solutions across Energy Transition, Water, Technology and Mobility accelerating. The improved operating EBITA margin of 11.5% was driven by operating leverage, an improved portfolio and the materialization of cost synergies following a successful integration of IBI and DPS. Furthermore, we expanded our Global Excellence Centers workforce by 21% year-on-year to over 4,700 people, continued to invest in our key talent with the launch of our Skills Powered Organization, advancing of the Arcadis Energy Transition Academy.

REVIEW OF THE HALF YEAR 2024: PROFIT & LOSS ITEMS AND BACKLOG
Net revenues totaled €1,959 million, increasing organically by 5.2% driven by all GBAs. The operating EBITA margin increased to 11.1% (H1‘23: 9.7%³⁾). Non-operating costs were €14 million, driven by portfolio optimizations such as the ongoing wind-down of the Middle East operations, merging of offices and other restructuring activities. Net finance expenses were €23 million (H1‘23: €28 million). Net income from operations increased by 23% to €126 million (H1‘23: €102 million³⁾), or €1.40 per share (H1‘23: €1.14³⁾). Order intake increased by 8% year-on-year to a record level of €2,194 million, outperforming total revenue growth of 4% and resulting in a book-to-bill of 1.12x. We see a significant pipeline of opportunities driven by allocation of stimulus funding across Arcadis’ key markets. Excluding the Middle East, the operating EBITA margin performance was 11.1% in the first half of 2024.

OPERATIONAL HIGHLIGHTS

RESILIENCE

(37% of net revenues)
in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Net revenues	727	678	7%		373	346	8%
Organic growth1)	8.6%	12.6%			9.0%	11.4%
Operating EBITA2)	93	76	23%
Operating EBITA margin (%)	12.8%	11.2%
Order intake	809	779	4%		361	356	1%
Backlog net revenues	1,048	999	5%
Backlog organic growth (%, yoy)1)	8.5%	14.1%
Backlog organic growth (%, ytd)1)	8.3%	10.9%

Solid demand across our Resilience solutions led to strong results in our key markets, including the US, the UK, the Netherlands and Germany. We continued to see significant growth in our Energy Transition solutions and relating advisory services. Our leading position in the Water sector resulted in significant project wins, underscoring our skills and ability to deliver high-value projects. Furthermore, we became more selective in our bidding processes, which resulted in increased discipline around order intake and was yet reflected in our margin performance. We continued to make investments in industry leading talent, including through our Arcadis Energy Transition Academy.
  
PLACES

(38% of net revenues)
in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Net revenues	751	760	-1%		377	372	1%
Organic growth (%)1)	0.8%	5.0%			2.7%	2.7%
Operating EBITA2) 3)	77	69	12%
Operating EBITA margin (%)2,3)	10.3%	9.0%
Order intake	850	792	7%		467	385	21%
Backlog net revenues	1,575	1,574	0%
Backlog organic growth (%, yoy)1)	0.1%	-2.6%
Backlog organic growth (%, ytd)1)	5.1%	2.2%

Places showed good revenue growth driven by Germany, the UK, Ireland, the Netherlands and Canada. Demand for datacenters design remained strong, while our semiconductor clients’ demand picked up on the back of CHIPS Act funding. We see good opportunities in our project pipeline as stimulus fund allocations across our solutions portfolio are beginning to come through.

MOBILITY

(22% of net revenues)
in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Net Revenues	434	403	8%		218	204	7%
Organic growth1)	7.7%	13.5%			7.1%	11.3%
Operating EBITA2)	45	38	20%
Operating EBITA margin (%)	10.5%	9.4%
Order Intake	491	423	16%		218	212	3%
Backlog Net Revenues	642	560	15%
Backlog organic growth (%, yoy)1)	16.0%	3.7%
Backlog organic growth (%, ytd)1)	10.3%	3.9%

Mobility showed continued strong revenue growth in our key markets Australia, North America and Europe. Our global expertise resulted in significant multi-year project wins in H1’24, which are to contribute to order intake in the second half of 2024 and to our business performance in 2025 and beyond. Margin improvement resulted from double-digit US growth generating operating leverage, and improved performance with large government clients in the UK.

  
INTELLIGENCE

(2% of net revenues)
in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Net revenues	47	45	4%		24	23	1%
Organic growth1)	4.3%				1.7%
Operating EBITA2)	5	4	8%
Operating EBITA margin (%)	10.0%	9.6%
Order intake	44	45	-2%		20	23	-13%
Backlog net revenues	121	115	5%
Backlog organic growth (%, yoy)1)	6.1%
Backlog organic growth (%, ytd)1)	-2.3%	0.2%

Intelligence saw good growth in North America and UK, particularly driven by improved Enterprise Decision Analytics (EDA) sales. In addition, Intelligence was instrumental in generating significant synergy wins for large Key Clients, which were mostly recorded with Mobility and Places, as we continue to focus on leveraging our digital tools and our existing Key Client relationships. Meanwhile, we accelerated our digital strategy by making key hires and driving our digital product roadmap.

BALANCE SHEET & CASH FLOW
Days Sales Outstanding (DSO) was 66 days at the end of H1’24 (H1‘23: 65 days³⁾). Net Working Capital as a percentage of annualized quarterly gross revenues was 12.7% (H1‘23: 12.2%³⁾), with a strong June performance driving up the receivables position. Free cash flow in the quarter was a positive €8 million resulting in €-88 million for the half year (H1‘23: €-134 million), in line with seasonal trends and including the first interest payment of €24 million on our Eurobond issued February 2023. Net debt decreased to €1,016 million (H1‘23: €1,193 million³⁾) leading to a Net Debt / Operating EBITDA ratio of 1.9x (H1‘23: 2.4x).

COST SYNERGIES REALIZATION ON TRACK
Following the finalization of the successful integration of Arcadis IBI and Arcadis DPS which was finalized by the end of 2023, the cost synergy realization is well on track with €20 million to be implemented by the end of 2024, mostly through further rationalization of workplaces and optimization of overheads, insurance & support.

2024-2026 STRATEGY "ACCELERATING A PLANET POSITIVE FUTURE"
On 16 November 2023 Arcadis presented its 2024-2026 Strategy “Accelerating a planet positive future” and its 2026 financial targets; these include: organic net revenue growth of mid to high single digits over the cycle, operating EBITA margin of 12.5% in 2026, Net Debt / Operating EBITDA of 1.5-2.5x with an Investment Grade credit rating and a dividend payout ratio of 30-40% of Net Income from Operations.
  
ARCADIS KEY FINANCIAL METRICS*

in € millions	Half Year				Second Quarter
Period ended 30 June 2024	2024	2023	change		2024	2023	change
Gross revenues	2,512	2,477	1%		1,282	1,260	2%
Net revenues	1,959	1,886	4%		991	945	5%
Organic growth (%)1)	5.2%	10.6%			6.0%	9.0%
Operating EBITDA2)	271	241	13%		141	120	17%
Operating EBITDA margin (%)2)	13.9%	12.8%			14.2%	12.7%
EBITA	204	167	22%		108	81	33%
EBITA margin (%)	10.4%	8.9%			10.9%	8.5%
Operating EBITA2)3)	217	184	18%		114	92	24%
Operating EBITA margin (%)2)3)	11.1%	9.7%			11.5%	9.7%
Net income3)	112	69	61%		54	28	94%
Net income from operations (NIfO)3)4)	126	102	23%		61	52	19%
NIfO per share (in €)	1.40	1.14	23%
Avg. number of shares (millions)	90.0	89.7			90.1	89.8
Net working capital (%)3)	12.7%	12.2%
Days sales outstanding (days)3)	66	65
Free cash flow5)	-88	-134			8	-26
Net debt3)	1,016	1,193	-15%
Order intake	2,194	2,039	8%		1,066	976	9%
Order intake organic growth (%)1)	7.2%	10.7%			8.6%	11.2%
Book-to-bill6)	1.12	1.08			1.08	1.03
Backlog net revenues	3,386	3,249	4%
Backlog organic growth (%, yoy)1)	5.6%	5.4%
Backlog organic growth (%, ytd)1)	6.7%	5.0%
Voluntary employee turnover7)	11.3%	12.6%

* 2023 and 2024 half year results as presented in this press release are unaudited
1)Underlying growth excl. impact of FX, acquisitions, footprint reductions, winddowns or divestments
2)EBIT(D)A excluding restructuring, integration, acquisition, and divestment costs
3)2023 revised to reflect the adjustments to the provisional opening balances of acquired entities recognized 30 June 2023 (in accordance with IFRS 3.49)
4)Net income before non-recurring items (e.g. valuation changes of acquisition-related provisions, acquisition and divestment costs, expected credit loss on shareholder loans and corporate guarantees and one-off pension costs)
5)Free cash flow: cash flow from operations adjusted for capex and lease liabilities
6)Book-to-bill: order intake / net revenues
7)Voluntary employee turnover excludes the Middle East as these operations are being wound down

FINANCIAL CALENDAR

• 31 October 2024         –         Q3 2024 Trading Update
• 13 February 2025         –         Q4 & Full Year 2024 Results
• 7 May 2025                 –         Q1 2025 Trading Update
  
  

All IR investor events: https://www.arcadis.com/en/investors/investor-calendar

ARCADIS INVESTOR RELATIONS
Christine Disch | +31 (0)615376020 | christine.disch@arcadis.com

ANALYST WEBCAST
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ABOUT ARCADIS
Arcadis is the world’s leading company delivering data-driven sustainable design, engineering, and consultancy solutions for natural and built assets. We are more than 36,000 architects, data analysts, designers, engineers, project planners, water management and sustainability experts, all driven by our passion for improving quality of life. As part of our commitment to accelerating a planet positive future, we work with our clients to make sustainable project choices, combining digital and human innovation, and embracing future-focused skills across the environment, energy and water, buildings, transport, and infrastructure sectors. We operate in over 30 countries, and in 2023 reported €5.0 billion in gross revenues. www.arcadis.com

REGULATED INFORMATION
This 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.

DISCLAIMER
Statements 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.

Attachments

• Arcadis Q2 and Half Year 2024 Results Presentation
• Arcadis Q2 and Half Year 2024 Results Press Release
• Arcadis Q2 and HY 2024 Interim Financial Statements