Arcadis Nv S/Adr

Good day and welcome to Arcadis Q4 and full year 2023 result conference call. Please note this call has been recorded and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. Only two questions allowed per time. If you require assistance at any time, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Christine Dish, to begin today's conference. Thank you.

Thank you, and good morning and good afternoon, everyone, and welcome to this analyst meeting. We are here to discuss Arcadia's fourth quarter and full year 2023 results, which were released this morning and are also made available on our website. With us on the call are Alan Brooks, our CEO, and Virginie Duperra, our CFO. We will start with a presentation by Alan and Virginie, which will be followed by Q&A. We would like to call your attention to the fact that in today's session, management may reiterate forward-looking statements, which were made in the press release. Please note that any of these risks related to the statements, which are more fully described in the press release and on the company's website. And now let's go over to you, Alan.

Thank you, Christine. And yes, good morning, good afternoon, everybody. and welcome to our full year and fourth quarter results call. Okay, this has delivered a record quarter and full year performance, delivering gross revenues of over €5 billion. Our net revenue for the full year reached a record high of €3.8 billion, a 25% increase year-on-year, driven by strong performance of the acquired businesses, IBI and DPS, but also strong performance of the remaining business, which is reflected in an organic growth of 9% for the year. Net revenue was exceeded by order intake of 3.9 billion, setting us up well for the future, and we still see continued strong client demand across our key markets, with an outstanding result in North America. Our operating EBITDA margin improved to 10.4%, 9.8% in 2022 and in line with our strategic target of being over 10%. We now have successfully completed the integration of Arcadis IBI and Arcadis DPS. These were both finalized by the end of last year. This is driving revenue and cost synergies for the group and again resulted in significant project wins over the quarter. I am pleased to report that we have successfully delivered on all the key targets we set out in our 2021-23 strategy cycle, maximising impact. And last November, we launched our new strategy for 2024-26, accelerating a planet-positive future. I will share more on this shortly. But first, I'd like to take a look at some of our most important growth end markets. and the areas where we are seeing Arcadis truly stand and differentiate from our competitors. The first of these is climate adaptation, where there is an urgent need to make communities more resilient to rising sea levels and flooding. We have a long history of designing and delivering flood alleviation schemes globally, and in both Europe and North America, we are working with government agencies and local municipalities using data to help model risk and demonstrate the economic and environmental benefits of flood protection. In the UK, for example, we are helping the Environment Agency demonstrate value for money from England's £5 billion flood and coastal risk management programme. Combining our sector knowledge with detailed analysis of past Arcadis projects, we have modeled a benefits register aligned with the UN Sustainable Development Goals. This serves a dual purpose and reporting mechanism for sustainability and flood alleviation. The results are impressive. For example, we identified a 500% increase in the benefits that would result from one project alone. This use of data not only improves project delivery, but also provides a compelling evidence base to target future funding and build stakeholder support. The second project I'd like to talk to you about, you can see here is water optimization. In North America, for example, we have a long standing relationship with the US Army Corps of Engineers, providing environmental remediation services, spanning safe water and land use. In 2023, this work included our appointment as part of a $200 million shared capacity framework to provide architecture and engineering works on several projects across the Great Lakes and Ohio River Division. Our scope of works covers nature-based solutions such as ecological restoration and the design of both water management and transportation infrastructure. It also includes digitally enhanced water management services which will be implemented alongside flood reduction and dam safety engineering. This will bolster long-term resiliency for communities across the region. Finally, as well as cementing our position in the two growth markets I've just discussed, the integration of our acquired businesses has helped to reposition Arcadis in new future-proof markets, including semiconductors and life science manufacturing facilities. Let's have a closer look. Over the last 12 months, we have focused on integrating Arcadis RBI and Arcadis DPS both operationally and commercially into Arcadis. In May, we combined Arcadis RBI's buildings business with our architecture firm to create a 2,000-strong architecture and urbanism division, a global leader in urban planning, design, and building of resilient communities and spaces of tomorrow. By connecting talented professionals across multiple disciplines with our places GBA experts, we are diversifying our services to our clients and securing new opportunities. This growing talent and expertise is why last month Arcadis debuted at number two in the 2024 World Architecture 100 list. A remarkable achievement for the business and a direct outcome of our successful M&A strategy. Our intelligence GBA is now fully established with a team of over a thousand colleagues, many of them highly experienced technologists and digital advisors. We are starting to see new synergy wins already, most notably through the cross-selling of intelligence digital products like TravelIQ with our mobility clients in North America. One example which you can see here on the slide is our ongoing transport management work for the Nevada Department of Transportation. We are working on several multi-year advisory contracts, combining mobility and digital solutions that will improve accessibility, safety and sustainability on highways across the state. We have also fully integrated IBI's infrastructure team into our GBAs, and in Q4 completed the integration of DPS into our Places GBA for advanced industry sector. We now have 3000 strong team with design, process engineering and construction management expertise across multiple markets, including pharmaceutical, novel therapies and medical technology facilities. This team brings a wealth of new capabilities to Arcadis and limitless synergy opportunities. One example of our work here is with large blue chip clients across both the US and Europe to drive sustainable outcomes in advanced industrial facilities. This brings together our mobility, architecture, resilience and places expertise. And our teams are currently working with eight of the top 25 semiconductor companies in the world, including projects in Albany, Texas, Ireland and Malaysia. Taken together, the scale of these wins and new offerings demonstrates just how transformational the last few years have been for Arcadis. The transformation is also evident in our strong set of results for 21 to 23. As you can see here, we have achieved what we set out to do, and this has been reflected in our net revenue CAGR of 7.6% and operating margin of 10.4%. We have delivered all our key financial targets and made significant progress against our non-financial targets, including our commitment to achieve net zero greenhouse gas emissions within our global operations by 2035. As I mentioned on Capital Markets Day in November, Arcadis is now a stronger business than it was back in 2020 when we announced our previous strategy. We now have in place an attractive range of market-leading positions, an efficient global business model, growing our existing global excellence centres in the Philippines, India and Romania, and a service offering that spans the full asset lifecycle, from concept and design to decommissioning or retrofit and reuse. This is all underpinned by 36,000 highly talented people. They are our greatest strength. And this platform positions as well for the future and is the foundation to take our business forward over the next three years strategy from 24 to 26. Our new strategy is focused on one mission to accelerate a planet positive future by addressing our clients needs and making a profound impact on the world. You'll remember that I spoke about this during our capital markets day. But in summary, our strategy is centered on three strategic focus areas. Firstly, partnering with our clients on sustainable project choices. Second, creating value through digital and human innovation. And finally, investing in future focus skills and an inclusive workplace powered by our people. Let me just take a moment to describe what these mean. Starting with sustainable project choices, we will deliberately focus on projects that align with our strategy to accelerate a planet-positive future. At the same time, we will enhance our profitability by prioritising higher margin projects. Our key clients will be an important driver of growth here, often representing larger and more profitable projects where clients expect the same service and quality in different parts of the world. something we are very well positioned for. Throughout 2024, we will build on the success of our key client program and develop it further. This will allow us to target a broader group of clients, including those from the new growth markets and introduce more tailored and target-driven approach. We will broaden and deepen these client relationships across our GBAs. We are also developing new commercial models, that will enable us to participate in shared value creation with our clients. For instance, through incentive based pricing or upside sharing models. When it comes to digital and human innovation, Arcadis is a smart, digitally enabled organization. We combine deep asset knowledge with cutting edge innovation, data and technology to anticipate and advise clients on the best solutions. Our intelligence GBA is critical here primed to leverage these capabilities to support clients across the entire project lifecycle. Over this new strategy cycle, we will invest in digital products to support smart cities and advance the energy transition, foster greater GBA collaboration, and expand our offering to provide greater value and cost savings to our clients. And within our own operations, we will double down on digitalization, standardisation and automation of our operating procedures, driving efficiencies both internally and for our clients. And finally, if we are serious about our commitment to accelerating a planet-positive future, we can't do it without the ingenuity of our people. My commitment is to empower our people to shape their future and advance their careers. In 2024, we are investing in becoming a skills-powered organisation. This will prioritise our people's expertise, continuous learning and adaptability over traditional structures. It will ensure the long-term resilience of our people while enabling us as a business to future-proof and attract and retain the best talent. We will know where our skills are and align them to our projects wherever our clients need us. Our GECs will also be crucial to our success. We will expand their reach, improve the quality and speed of service delivery, and whilst at the same time create efficiencies. Over the next three years, we will be doubling the GEC's relative contribution to our projects, integrate them further into our business, and increase recruitment and explore new locations for growth. I've shared our strategic objectives, and now I'm just going to take a moment to discuss how these translate into targets for 2026. We expect to deliver an organic net revenue growth of mid to high single digits over the cycle, an operating EBITDA margin of at least 12.5% in 2026. For our leverage ratio, we maintain the same range of between 1.5 and 2.5 times net debt over operating EBITDA, and our shareholder returns profile will remain stable as well. On the right of the chart, you can see a summary of our non-financial targets. We will reduce our scope one and two emissions by 70% by the end of 2026 and reduce our scope three emissions by 45% by the end of 2029. Other top priorities include our net promoter score with our employees to remain in the top quartile. and increasing our gender diversity to more than 40% of women in the workforce. Our goal is to build on the strong foundations of the last strategy cycle and focus on new growth accelerator markets. With a collective mission of accelerating a planet-positive future, together with our own ESG commitments, we're already well underway towards achieving our targets, partnering with our clients on sustainable project choices, combining digital and human innovation and harnessing the power of our people to deliver our clients' aims and ambitions. And with that, I will hand over to Virginie, who will take you through our financial results for Q4 and the full year 23 in a little more detail. Thank you.