Grontmij N.V. Investor presentation. Financial results 2011, strategic review and comprehensive financial solution. April 2012

What network did Grontmij have a strong network?
What divestments were restructured?
Who is responsible for countries , business lines and Alignment of strategy and incentives?

Transcription

1 Grontmij N.V. Investor presentation Financial results 2011, strategic review and comprehensive financial solution April 2012

2 Disclaimer This presentation is being communicated only to persons who have professional experience in matters relating to investments and other persons should not rely on or act upon this presentation. By attending the meeting where this presentation is made, or by reading the slides, you agree to be bound by the following limitations. This presentation is being supplied to you solely for your information and use as of the date of today. The information may not be further distributed or passed on to other people or published or reproduced in whole or in part by you. This presentation has been prepared by and is the responsibility of Grontmij N.V. The information may be subject to updating, completion, revision and amendment and such information may change materially. No representation or warranty, express, or implied is or will be made by Grontmij N.V., its advisors (including ING Bank N.V., acting through its corporate finance division, and Nordea Bank Denmark A/S) or any other person as to the accuracy, completeness or fairness of the information or opinions contained therein and any reliance you place on them will be at your sole risk. Without prejudice to the foregoing, neither Grontmij N.V., its advisors (including ING Bank N.V. acting through its corporate finance division, and Nordea Bank Denmark A/S), its associates, or any other person accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from the use of this presentation or its contents or otherwise arising in connection with this presentation. This presentation is for information purposes only and are not intended to constitute, and should not be construed as, an offer to sell or a solicitation of any offer to buy the securities of Grontmij N.V. (such securities, the Securities), including in the United States or in any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of such jurisdiction. The Securities have not been and will not be registered under the US Securities Act of 1933, as amended (the US Securities Act) and may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act. There will be no public offering of Securities in the United States. No action has been taken by Grontmij N.V. that would permit an offer of bearer depository receipts for ordinary shares or other such securities in Grontmij N.V. or the possession or distribution of this presentation or any other offering or publicity material relating to such bearer depository receipts or Securities in any jurisdiction where action for that purpose is required. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed, should inform themselves about, and observe, such restrictions. This announcement is not for release, publication or distribution, whether directly or indirectly and whether in whole or in part, into or in the United States, Australia, Canada or Japan. This presentation includes statements that are forward-looking in nature. By their nature, forward-looking statements involve risks, uncertainties and assumptions because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of Grontmij N.V. and are provisional only and for indicative, preliminary and illustrative purposes only. Actual results and developments and projected or targeted results may differ materially from those expressed in such statement and from historical trends, depending on a variety of factors. Such factors may cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Grontmij expresses no view, estimate or assessment whatsoever on the likelihood that targets will be achieved. Grontmij reserves the right, but does not have any obligation, to amend or change projections, assumptions or targets if it deems it appropriate to do so. This presentation is not a prospectus. Any offer to acquire Securities pursuant to the proposed offering will be made solely on the basis of information that will be contained in the prospectus which will be made generally available in due course in the Netherlands via the website of (Dutch residents only). This presentation contains certain non-ifrs financial measures. These financial measures may differ from similarly titled measures used by other companies. This presentation contains information sourced from third parties about the markets in which the Company competes, including market growth, market size and market segment sizes. There is no guarantee that this information accurate or complete and not misleading. 1

3 Contents Current situation and market outlook Strategy : Back on Track Financial highlights 2011 Comprehensive financial solution Summary 2

4 Summary Annual results Total Revenue: +11% to 933.5m (2010: 841.3m) EBITA 1 excluding non-recurring items: -30% to 25.0m (2010: 35.6m) Net loss of m (2010: net profit 17.3m) Grontmij introduces new two-pillar strategy: Back on Track Focus on restructuring Realising profitable organic growth Fully underwritten 80m rights offering Irrevocable pre-commitment from certain major shareholders representing c. 48.5% ING and Nordea, acting as Joint Global Coordinators and Joint Bookrunners, provide a volume underwriting commitment for the remainder New medium term debt facility for an amount of 180m Additional short term working capital facility of 10m Provides headroom for adverse market conditions and business cyclicality 1. Excluding non-recurring costs ( 61.0m) and results from Equity Accounted Investees (EAI) 3

5 New Executive Board Michiel Jaski (1959) Frits Vervoort (1962) Gert Dral (1955) CEO since December 2011 (formally appointed 9 March 2012) Technical background (MEng, MBA) Various management positions at Shell 10 years EB at ARCADIS responsible for EU business CFO since December 2011 (formally appointed 9 March 2012) Financial background (MSc) Previous international positions at Vendex and Elsevier 7 years CFO and EB at Vedior Member of EB 2003 January 2010, and since June 2011 Technical background (BEng) Several positions within Grontmij since 1976 Executive Board supported by strong country director team 4

6 Key underlying reasons for the current situation Ginger acquisition 2010 Highly leveraged Transparency Acquisitions UK acquisitions 2008 Done at the peak of the market Insufficient performance Focus & Adaptation Unanticipated changing market conditions Operational efficiency Mainly in the Netherlands and the UK Management focus Financial control 5

7 France: Increased attention by new management Up until January 2012, limited integration into the Group 24 January 2012: New MD appointed Budget 2012 France reviewed by management Monitoring & Testing performs in line with expectations Restructuring plan Planning & Design / headquarters in preparation, supported by KPMG 6

8 Grontmij at a Glance Country oriented organisation Strong European network 4 Business Lines Planning & Design Transportation & Mobility Water & Energy Monitoring & Testing 9,000 people Core countries: The Netherlands France Denmark Sweden Belgium UK Germany Other: Poland, Turkey & Hungary 7

9 Our markets: Moderately positive market outlook Annual growth % Netherlands France Denmark Sweden Belgium UK Germany Planning & Design Transportation & Mobility Water & Energy Monitoring & Testing 3 6 Other smaller countries show positive market outlook Source: Global Insight December 2011; Euroconstruct November 2011; Industry reports; Company annual reports; BCG analyses 8

10 Our position: Generally good competitive position Comp. pos 2012/ 2015 market Netherlands France Denmark Sweden Belgium UK Germany Planning & Design Transportation & Mobility Water & Energy Monitoring & Testing 9

12 New strategy : two pillars, six actions 1 Restructuring a b c d Cost improvements Operational efficiency Selected divestments Governance & control 2 Realising profitable organic growth e f Focus on Europe Focus on five selected growth segments 11

13 Targeted additional cost savings a Breakdown of targeted cost savings Key observations 13% 36% 51% ICT Real Estate Support Expected one-off cash impact of -/- 12m Targeted cumulative cost savings of 36m Total annual cost reduction of 15m from 2015 onwards Additional restructuring necessary in France: Expected one-off cash impact in 2012 of -/- 3m Targeted cost savings of 1m in 2013 and 3m thereafter 12

14 Operational efficiency: Improvement possible 1b 1 Steering on working capital 2 Project management excellence 3 Commercial excellence TWC 1 (EoY 2010) of TR (%) ATKINS ARCADIS Jacobs Grontmij WSP SWECO Total revenue below indirect cost level (% in 2011) NL 5 DK UK average revenue/fte ( K) ARUP 90 Atkins 89 Halcrow 86 WSP 75 Grontmij 62 Mouchel 1. Trade Working Capital is equal to accounts receivable work in progress accounts payable 2. Total revenue of projects with a gross margin below the indirect cost level of the OpCo Source: 2010 annual reports 13

15 Three operational improvement initiatives 1b Three operational initiatives Targets 1 Steering on working capital ~ 2.5% Working capital improvement 1 by Project management excellence Create right tooling, steering and behaviour Commercial excellence Clear bid/no-bid procedures and focus on higher price realisation ~ 1 2% EBITA Margin improvement in Working capital as % of total revenue 14

16 Restructuring Selected divestments 1c Portfolio review has identified certain non-core assets and activities: Blue collar maintenance work and services; TR 1 (2011) ~ 29m Other services; TR (2011) ~ 16m Non-core assets (real estate development, waste management); TR (2011) ~ 20m We will continue to review our portfolio on a regular basis going forward Governance & control Group Steering as one company Improve reporting and financial processes Executive Board directly responsible for countries, business lines secondary Alignment of strategy and incentives 1d France Enhance governance and restructure Planning & Design / headquarters Improve reporting and financial controls 1. TR = Total Revenue 15

17 Realising profitable organic growth 2 Focus on current European home markets Five group growth segments are identified Business Line 1 W&E Five group growth segments Energy Expertise countries T&M Highways and roads T&M Railways: light rail P&D Sustainable buildings Rest of World only for off shoring or on project basis against stringent criteria M&T Monitoring & asset management 1. W&E = Water & Energy, T&M = Transportation & Mobility, P&D = Planning & Design, and M&T = Monitoring & Testing 16

18 Conclusion: a two-pillar strategy with clear targets 1 Restructuring a b c d Cost improvements Operational efficiency Selected divestments Governance & control 2 Realising profitable organic growth e f Focus on Europe Focus on five selected growth segments Target EBITA margin 6 8% on TR in 2015 Target revenue 3 5% organic growth per year Target TWC of 15% of TR by

20 Key financials 2011 EUR (m) FY 2011 FY 2010 % change Organic growth Total revenue % -1.3% Net revenue % -2.8% EBITA % % EBITA 2 excl. non-recurring items % -25.5% Operating result % Net income % EPS (cont. and discont. operations) % Total revenue 1 up by 11% to 933.5m, with organic decline of 1.3% Underlying EBITA 2 down by 30% to 25.0m (2010: 35.6m) EBITA margin of 2.7% Net loss for the full year of 55.9m (2010: net profit 17.3m) Avg # outstanding shares (thousands) 21,106 19, % EBITA margin -0.5% 4.2% EBITA margin excl. non-recurring items 2.7% 4.2% # employees (average FTEs) 8,672 8, % 1. Excluding revenues of Telecom division sold on 18 October Excluding non-recurring costs ( 61.0m) and results from Equity Accounted Investees (EAI) 19

21 Key financials 2011 (2) Trade working capital Improved to 165.5m (2010: 171.0m) Remained flat on rolling 12-months basis (% / total revenue) Year-end impact of seasonal peak in cash collection and delayed payments: ~ 20m Net debt Total net debt of 177.9m (2010: 198.3m) Financial lease liabilities of 4.8m (included in net debt) Outlook 2012 EBITA (excluding non-recurring items) not expected to exceed 2011 Limited cash flow generation due to restructuring measures Additional cash-out related to comprehensive financial solution of 10-12m and additional restructuring in France of 3m 20

23 Sound financial policy to support strategy 1 Funding requirements completely covered by committed credit lines Primarily to fund working capital requirements and business seasonality Potential acquisitions, when appropriate in the longer term future, will be funded from Grontmij s cash flow 2 Net Debt/EBITDA target of x 3 Interest cover: EBITDA covers at least 8 times interest expenses 4 Dividend policy 1 Target cash dividend pay-out ratio: 35 50% Dividend pay-out when net debt/ebitda is below 2.0x for two consecutive quarters and expected to remain below this level as a consequence of dividend payment Company intends to make distributions to shareholders to a level of 30m in total, provided this allows the company to remain below a net debt/ebitda ratio of 1.5x, including the cash impact of these distributions 1. Shall be discussed and explained at the Annual General Meeting (AGM) of shareholders 22

24 New capital structure allows focus on the business Financial stability necessary to execute restructuring Full focus on the business will enable us to realise profitable organic growth A sustainable capital structure is essential for the confidence of customers, investors and employees Debt financing 180m + 10m New debt facility provides Grontmij with financial flexibility going forward The debt facility enables Grontmij to execute its business plan and focus on its operations New debt facility is subject to the successful completion of the rights offering Equity financing 80m New equity issue to strengthen capital structure Rights offering to enable all current shareholders to participate Irrevocable pre-commitment from shareholders representing 48.5% of the offering ING and Nordea provided a volume underwriting commitment for the remainder 23

25 New debt facility: Terms & conditions New debt facility to provide Financial flexibility Headroom for adverse market conditions Amount Senior debt facility of 180m with tenor of 4 years Short term working capital facility of 10m Main conditions Successful completion of 80m rights offering No dividend payment, unless net debt/ebitda is below 2.0x for two consecutive quarters Share pledge on subsidiaries as security Pricing grid based on leverage ratio Interest coverage covenant (EBITA/net interest), 1.75x by year-end 2012, gradually increasing to 4.0x by the end of 2014 Net debt/ebitda covenant as shown in table below: March June September December x x 3.50x 3.50x 3.00x x 2.75x 2.75x 2.50x Net Debt / EBITDA covenant development,

26 Rights offering Fully underwritten 80m rights offering Rights offering with tradable subscription rights Irrevocable pre-commitments from major shareholders representing 48.5%, to participate in rights offering pro rata: Darlin N.V. Delta Lloyd Deelnemingen Fonds N.V. Delta Lloyd Levensverzekering N.V. ING AM Insurance Companies B.V. Kempen Oranje Participaties N.V. Optiverder B.V. ING and Nordea, acting as Joint Global Coordinators and Joint Bookrunners, provide a volume underwriting commitment for the remaining 51.5% (subject to customary conditions) Timeline Annual General Meeting of Shareholders to be announced for 9 May 2012 Rights offering envisaged to be completed by mid

28 Summary Grontmij introduces new two-pillar strategy: Back on Track Focus on restructuring Realising profitable organic growth Fully underwritten 80m rights offering Irrevocable pre-commitment from certain major shareholders representing c. 48.5% ING and Nordea, acting as Joint Global Coordinators and Joint Bookrunners, provide a volume underwriting commitment for the remainder New debt facility for an amount of 180m Additional short term working capital facility of 10m Provides headroom for adverse market conditions and business cyclicality Target EBITA margin 6 8% on TR in 2015 Target revenue 3 5% organic growth per year Target TWC of 15% of TR by

29 Appendices 28

30 Grontmij history originated in the Netherlands 1913 Doedo Veenhuizen, a farmer by trade, starts a company focusing on cultivating wasteland, helping farmers protect against flooding and reclaiming land The name 'Grontmij' was soon coined, originating from the letters in the Dutch words for soil improvement (GRondverbetering) and reclamation company (ONTginningMaatschappIJ) 1915 The company became an N.V. (Limited Liability Company) 29

31 Key figures 2011 Selection of customers Employees 9,000 Countries 10 Total revenue million EBITA excl. non-recurring items 25.0 million Market capitalization3 112 million 1. Excluding revenues of Telecom division sold on 18 October Excluding non-recurring costs ( 61.0m) and results from Equity Accounted Investees (EAI) 3. Per year-end 2011 Four business lines Planning & Design Transportation & Mobility Water & Energy Monitoring & Testing 30

32 Services & Competences Active in various stages of the life cycle Project definition Conceptual design Functional program Feasibility study Investment plan Program management Design management Project management Financial, organisational and legal management support Technical specs Engineering Detail engineering Work drawings Calculations Samples, surveys Data Supervision Quantity survey Construction management (Turn-key) contract management Maintenance scheme Monitoring & control Facility management Consultancy & Design Project Management Engineering Contracting Asset Management 31

33 Deploying the most advanced tunnel-building technology Josaphat Tunnel - Belgium Redevelopment of the 1st floor of the Eiffel Tower Reducing pressure on the highway Essingeleden route - Stockholm 32

34 Country managing directors John Chubb (UK) Leif Bertilsson (Sweden) Durk ten Wolde (NL) Søren Larsen (Denmark) Ina Brandes (Germany) Maciej Chrzanowskí (Poland) Erwin Malcorps (Belgium a.i.) Miklós Lukács (Hungary) Jan Bosschem (France) Kerem Sadiklar (Turkey) 33

35 Supervisory Board Jan Zegering Hadders (1946) Current chairman Appointed 2005, reappointed 2009 Financial background; former CEO ING Netherlands Jan van der Zouw (1954) Nominated to be appointed to chairman Appointed 2012 Former Chairman of Executive Board Eriks Group N.V. René van der Bruggen (1947) Appointed 2010 Currently CEO of Imtech N.V. Philippe Montagner (1942) Appointed 2010 Several senior management positions at Bouygues S.A. Currently non-executive member of the Board of Bouygues S.A. 34

36 Financial reporting and disclosures going forward Primary reporting on country level Grontmij performance driven by countries as main building blocks Reporting on an EBITA basis, with exceptional items Increased transparency Improved comparability y-o-y basis Stringent criteria for exceptional items classification Restructuring items should be formalised in a restructuring plan Substance criteria: > 10% of EBITA on a country level Exceptional in light of business activities Material change of accounting principle Financial covenants disclosure 35