Arcadis Nv S/Adr

Ladies and gentlemen, thank you for standing by. I am Vassilios, your course call operator. Welcome and thank you for joining the Arcadis conference call and live webcast to present and discuss the second quarter and half year 2024 results. All participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone anytime during the call. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Ms. Christine Dish, Investor Relations Director. Ms. Dish, you may now proceed.

Thank you. Good morning and good afternoon, everyone, and welcome to our conference call. My name is Christina Dis. I'm Investor Relations Director at Arcadis, and we are here to discuss Arcadis' second quarter and half-year 2024 results, released this morning. With us on the call are Alan Brooks, our CEO, and Virginie Dupera, our CFO. We will start with the presentation, which will be followed by Q&A, and 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 the risks related to these statements, which are more fully described in the press release and on the company's website. Now, please, over to you, Alan.

Thank you, Christine, and good day, everybody. Welcome to our Q2 and half-year results call. Arcadis has delivered another strong set of results this quarter, with a record order intake of 1.1 billion euros. This reflects growth of 8.6%. with ongoing client demand for our sustainable and digitally enabled services continuing to drive success. This has resulted in net revenues of €991 million, with solid organic growth of 6% for the quarter, highlighting our strong market position across all four global business areas. Backlog now stands at €3.4 billion, reflecting an organic growth of 5.6% year on year. We have seen a significant improvement in our operating margin. This has increased from 9.7% in the same period last year to 11.5% for the quarter. Our market-leading positions, talented team, long-standing client relationships, and complementary set of services have enabled us to continue driving profitable growth. Notably, we are seeing significant public and private sector investment in our core markets. This is expected to drive further pipeline opportunities over the coming years. We have also secured several large multi-year framework wins this quarter. I will share more detail about these shortly. but together it provides significant visibility into our backlog developments and revenue in years to come. With us, let me spotlight four key areas where we have seen significant wins and growing interest in our solutions and expertise. One Arcadis solution area where we are seeing strong growth is in water optimisation. Arcadis has a rich heritage in water, rooted in Dutch water management. This strong foundation has enabled us to become pioneers in integrating cutting-edge digital technology with water management to address critical issues such as water scarcity, aging assets, and demand for clean drinking water. In the UK market, this expertise has been applied to support successful bids as part of the AMP8 framework. This £96 billion five-year investment framework is focused on the long-term sustainability of water resources and infrastructure to meet the future demand. The level of investment represents a massive 90% increase on the previous Amp7 cycle, the largest capital investment in water and wastewater assets ever in the UK. Last quarter, we announced wins with Thames Water and South West Water, And in Q2, we have secured a five-year contract with United Utilities to replace aging assets and support their capital investment program across the Northwest of England. We now have relationships with 10 out of the 11 UK water utility companies, underscoring our commitment to delivering high value projects across the water market. And finally, when it comes to cutting edge technology, Our solutions, like Waterfinder, leverage advanced analytics and digital twins. Digital twins are virtual models of physical objects, and in the case of Waterfinder, help us to rapidly locate leaks and minimize costly, time-consuming efforts from manual surveys. Our solutions have been proven to enhance operational efficiency and sustainability by up to 30%. This year, we ranked number one in water treatment and desalination by engineering news record in the US, underlining our leadership and expertise in water optimization and preservation solutions. Now turning to our advanced industrial manufacturing solution area, we are seeing increased demand for our data center advisory services, particularly among big tech and semiconductor clients. This is being fueled by significant public and private sector investments. For example, in 2024 alone, US$22 billion have been invested in data centers globally. In the private sector, we are seeing considerable investment from major technology companies into AI and related technology. And more than half of the $52 billion subsidy for the semiconductor industry is now being dispersed under the US CHIPS Act. This includes $8.5 billion in federal funding to Intel and a further $6.1 billion to Micron. When it comes to data centers, their substantial energy requirements mean that our clean energy solutions are increasingly in demand. With the AI chips consuming three times more energy than traditional chips, the demand for more efficient solutions is only projected to grow. This market emphasis on sustainability, energy efficiency, and decarbonization combined with massive influx of capital indicates a robust and growing market for our services. Our integrated approach spanning facility design, to sustainability advisory ensures that we can address all aspects of our clients' needs. We are uniquely positioned to bring together multiple disciplines from the outset of any project or programme, from landscape architects to ecologists through to engineers and design specialists. As such, we are well positioned to help our clients achieve both operational efficiency and sustainability goals. Key wins this quarter include the design of a major multimillion dollar semiconductor facility and a new data center campus, both in the US, as well as supporting the delivery of a new multipurpose clinical research building in North America. Whilst geopolitical factors including election cycles, trade policies, and incentivization programs undoubtedly play a role in market dynamics, across our places business, we are well positioned to adapt. Our global structure and reach mean that we can readily deploy teams where demand is highest, remaining agile to respond to existing client needs while simultaneously positioning for future demand in line with recovery. So in mobility, the strength of our global rail and transit expertise continues to drive success. especially in the US, UK and Australia. We expect this to grow with significant levels of investment in public transport, including allocations through Network Rail's Control Period 7 investment plans in the UK and the Infrastructure Investment in Jobs Act in the US. Arcadis is already a beneficiary through the 16 billion US Hudson Tunnel project, where we are working as delivery partners to help improve reliability and resiliency of commuter and intercity rail transit. Forward-thinking infrastructure investment like this is critical, and we are well-positioned to capitalise, building on the best practice drawn from our work on other game-changing projects around the world, including California High Speed Rail, High Speed in the UK, and TGV in France. It is this combination of global knowledge alongside local delivery expertise that is critical when it comes to facilitating cross-border collaboration and exemplifies the benefits of our GBA approach. A recent project win in Australia demonstrates the scale of transformation that can be achieved through our work. The Australian government is investing 500 million dollars in planning a high-speed rail network and this will be pivotal for sustainable long-term growth. We are developing this business case and providing technical advisory services for a new high-speed rail link that will be key to connecting regions and communities. It will unlock growth, improve access to critical services and provide sustainable travel alternatives that will reduce emissions and cut road congestion across Australia's entire east coast. And finally, turning to our intelligence business area, we are seeing growing demand for our digital asset management solutions, driving increased alignment across all of our global business areas. For our resilience clients, including water and utility companies, digital transformation is key. It is estimated that in the US, a water main breaks every two minutes, and 1.7 trillion gallons of drinking water are lost each year due to leaking pipes. Competing pressures from rising costs and aging assets call for urgent solutions. The market potential is clear. From the total $55 billion allocated to water-related projects, through the Infrastructure Investment and Jobs Act. $43 billion has been channeled through the US Environmental Protection Agency via state revolving funds designated for water utilities. We are in a unique position to capitalize on this opportunity through the seamless integration of smart digital solutions to help optimize asset lifecycle planning. Enterprise Decision Analytics, or EDA, is one such example. It offers predictive and prescriptive analytics, modeling and optimization alongside AI machine learning and adaptive pathways. This, in essence, helps clients balance risk and cost considerations to improve overall asset performance and ultimately business returns. EDA significantly speeds up reporting and decision-making. It means that clients can do the right work on the right assets at the right time, crucially enabling them to better manage budgets and make better use of expenditure. A significant EDA win this quarter was the city of Henderson in Nevada. We have secured a three-year contract with a two-year renewal option. to implement EDA to support lifecycle planning and optimization of their half a million water and wastewater assets. These include reservoirs, HVAC, sewer mains, and water meters. This state of the art technology is key when it comes to helping clients improve financial stability, affordability, and resiliency of their assets. As well as in the water sector, EDA is being successfully used by multiple clients in the rail and transit and energy transition sectors, notably in the US and Canada. Other clients include the Nevada Department of Transport, Infrastructure Ontario and the Ministry of Transportation in Ontario. EDA's ability to help clients deliver the best value from their investment means it remains a key focus and core product in our suite of intelligent solutions. And with that, I will now hand over to Virginie, who will take you through our financial results for the second quarter and the half year 2024 in more detail. Thank you.

Thank you, Alan. And good morning, good afternoon, everyone. In the first half of 2024, Arcadis delivered a strong set of results with continued margin expansion. Our net revenue, increased 5.2% organically to 2 billion euros, driven by all GBAs. A key driver of our revenue growth in the first half was pricing, due to our increased focus on higher margin key clients and greater selectivity in our pursuit processes. Our operating EBITDA margin improved to 11.1% compared to 9.7% in the prior year period. Indeed, Our cost synergies plan is delivering 10 million in the first half. The Middle East is unwinding as planned. We see operating leverage coming from an improved project portfolio, key client program expansion, and disciplined cost management. Excluding Middle East, operating EBITDA margin was 11.1% in the first half, with the usual winding down cost offset by some releases on overuse being finally paid. Following the successful integration of Arcadis IBI and DPS, cost synergy realization is well on track and expected savings of 20 million euros will be fully delivered by the end of the year. We are also pleased to see a shift in our workforce composition with a sharp increase in global excellence centers year on year. Our networking capital percentage was slightly up at 12.7% due to a strong month of June performance driving up the unbilled position. Our working capital management remains disciplined, with day sales outstanding at 66 days. Our free cash outflow of 88 million euros is in line with seasonality patterns, outperforming last year and included the first interest payment of 24 million euros in the first quarter on our euro bond issued in February 2023. Our net debt decreased to 1 billion euros, which led to a net debt to operating EBITDA ratio of 1.9 times, down from 2.4 times one year ago. Now, let's move to the next slide to look at our order intake and backlog. In the first half, we delivered strong organic backlog growth of 5.6% year-on-year, which resulted in net revenue backlog of 3.4 billion euros. Our order intake reached a record level of 2.2 billion euros and resulted in a book-to-bill ratio of 1.12 times. These sizable multi-year contracts, won in the past six months, provide us with increased visibility of future order intake and revenues during the remainder of the year, but also the years to come. Let's now look at the financial performance per GBA in more detail. First, resilience. In resilience, we saw continuous solid demand across our solutions with 8.6% organic revenue growth. This was especially strong in key markets, including North America, UK, Netherlands, and Germany. Our globally leading position in water drove high project win rates, underscoring our skills and ability to deliver high-value projects across the weather market. In the first half, we achieved a robust margin of 12.8%, which improved significantly thanks to our strategic product selectivity, which has significantly enhanced the overall profitability of our portfolio. If we now turn to places, we delivered good revenue growth in our largest markets, Germany, UK and Ireland, Netherlands and Canada, resulting in margin improvements. Order intake saw continued positive momentum, with 21% growth in the second quarter. Demand for data center design remained strong, while our semiconductor clients' demand picked up on the back of CHIPS-AXE funding. We see good opportunities in our project pipeline, as stimulus fund allocations across our solutions portfolio are beginning to come through. Let's now move on to mobility. 7.7% organic growth was driven by continued strength in our key markets, North America, Australia, and Europe. Thanks to the powerful combination of our global knowledge and local expertise, we made significant wins, including high-speed rail in Australia, the Hudson River Tunnels in New York, and the design of Calcasieu Bridge in Louisiana, United States. all as a result of the ramp-up of government infrastructure investment programs. Margin improvement was mainly driven by the double-digit growth in the U.S., generating operating leverage, and improved performance with large governance clients in the U.K. And finally, our fourth TBA, intelligence. We saw good organic growth of 4.7%, driven by North America and the U.K., particularly from improved enterprise decision analytics sales. In addition, intelligence was instrumental in generating synergy wins for large key clients, which were mostly recorded as order intake with mobility and places. Examples illustrating this collaboration include the win for EV battery facility client in the United States, for which intelligence provides digital master planning, but also working with a major automotive client on a new innovation center in the U.S., providing a digital audit and strategy. Meanwhile, we accelerated our digital strategy by making key hires and driving our digital product roadmap. Overall, turning to the P&L, we delivered a strong operational performance with €204 million of EBITDA compared to €167 million last year. an increase of 22% year-on-year. Our net finance expenses were 23 million euros, and our effective income tax rate was 33%. Lastly, our net income from operations increased 23% to 126 million euros, or 1.40 euros per share. Let's finally turn to the free cash flow. In the first half, we saw an outflow of 88 million euros, which reflects good cash management and is in line with seasonality. The slight increase in net working capital came as a result of strong performance in June, which drove the receivable position higher. Tax paid was lower year-on-year, driven by a one-off cash outflow related to Section 174 last year in the U.S. And as mentioned previously, net interest included the 23 million euro of euro bond interest payment in the first quarter of 2024. And with this, I would like to thank you and hand you back to Haaland.

Thanks Virginie. And so let's wrap up this part of the presentation. I'd just like to say in the six months to the end of June 2024, We have delivered a strong first half year of Arcadis' 2024 to 2026 strategy cycle. Sustained client demand across all our global business areas and specifically in solutions across energy transition, water, technology and mobility resulted in continued strong revenue growth and order intake in the second quarter. Operating leverage with improved project portfolio and cost control allowed us to further improve our margin and deleverage our balance sheet while we invested in key hires and our digital roadmap in intelligence. Importantly, as public and private investment programs ramp up, our future order intake and revenue visibility is increasing. Meanwhile, we are reaching the first milestones in our strategy implementation. including the rollout of our skills-powered organisation and the expansion of both our key client programme and our global excellence centres. Looking forward, our deep asset knowledge, global expertise and complementary set of services are key success factors, allowing us to further drive continued profitable growth and for the Arcadis team to better serve our clients. And with these concluding remarks, I'll hand back to the operator for the questions and answers session. Thank you.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. Please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. In the interest of time, please limit yourself to one question and one follow-up question. One moment for the first question, please. The first question comes from the line of Kerstens David with Jefferies. Please go ahead.

Hi. Good afternoon, everybody. I've got two questions, please. Can you elaborate on the different growth rates you're seeing in order intake by GBA, particularly the very strong acceleration in places to 21%? But at the same time, you're also saying there's more discipline in resilience where order intake was only 1%. Would you expect that based on your current order backlog and these differences in order intake, you would see an acceleration in organic revenue growth in the second half of the year? And then my second question is around the significant pipeline of opportunities driven by allocation of stimulus funding. Can you quantify the pipeline? And are there any signs among your clients in resilience that are becoming more cautious ahead of the U.S. elections? Thank you very much.

Okay. Thank you. I'll start off, if that's okay. In terms of the growth on the order intake, we've seen 21% in places because what we've looked at is, first of all, the data centres that I mentioned. There's been significant investment in data centres, and that has been really showing through in the pipeline there in the order book, as well as we're seeing, and I'll comment a bit further in a moment, on the stimulus packages with the semiconductor market. So that's what's been driving it. Also, we've seen in Canada significant architectural projects coming through, which has all helped in terms of the uptake in places, giving the stronger outlook. In terms of resilience, we have looked to be more selective, and this is shown in the order intake. And we do have confidence in H2 that we are seeing continued, if you like, demand for our services in resilience and with a good outlook there. So we don't see that we would see any fall off in that sort of sense. But we will remain selective because this is what drives our performance improvements. And maybe just to talk about the pipeline and stimulus packages. What we've seen really is the start of the allocations, as I said in the presentation. I referenced two clients of ours, actually Micron and Intel, and they have received significant allocations. We're expecting to see in H2, these starting to convert as we see the move into our order book from the pipeline. So the stimulus packages, we are seeing the money flow through and really starting to get traction into projects. So we would see an uptake there as well. Finally, the comments I'd make, is our focus on our key clients. I think we are well positioned around our key clients in these areas. We've seen an uptick from 51 to 59% in key clients, and this obviously provides much more focus for us in terms of responding to their needs. So I hope that addresses your question.

Yes, thank you very much, Alan. Can I ask one follow-up, please, on the profitability in resilience based on the selective order intake? You had very strong progress in your margins, operating margins, and are already in line with your 2026 targets. Is there still room for further upside, or should we think about margin improvement more in places and in mobility from here?

Thanks, David, and maybe I'll take this one. I think that, number one, we need to really refer to energy transition when we think about the increase in our operating margin in resilience. We see the development of these solutions, and especially we've seen our German market quite booming, and that has been quite helpful. But there are still quite... large capability and large room, you know, for further development in this energy transition market. Also in climate adaptation and this type of solutions are also fueling the margin if you want. And we're probably only in the beginning in terms of what advisory solutions in resilience can be bringing.

Awesome. Thank you very much, Virginie.

Thanks, David. The next question comes from the line of Dendrivier Martin with Odo ABN AMRO. Please go ahead.

Yes, good afternoon, gentlemen, Dendrivier Martin and Driver, actually. But I've never heard it like that. Anyway, my first question is for Ellen. I understand that organic growth was mainly driven by price increases. Now, your peers have actually made some positive statements about the pricing environment. So, question 1A is, do you see further room for improvements? And 1B is, if it's mainly about pricing, why was there no better billability for the FTE increases within Arcadis, but also at the GDCs? That would be question 1.

Thanks, Martin. I think what we're looking at, we said that we'd seen significant improvements in price there. But for us, what we will continue to do is the other levers on our strategy. So looking forward, we will see more take-up, for example, as we grow the GECs that we mentioned in the strategy, standardization and automation in our business. And we'll start to really see these improvements coming through. So Pricing, selectivity, our pursuit process is all starting to bed in. We will further automate our pursuit process, then standardize and automate our work and add more to the GEC. The GECs are significantly used by mobility. We've obviously been winding down on the Middle East, as we've said. But what we will see, I believe, in the second half of the year is as these large projects in the GEC, sorry, in mobility come through, they will use more of the GEC. And as such, we will see a significant uptick there, particularly in the billability. So I feel the growth in the GEC that we're seeing now, we will see more progression as we move forward. And I think then you'll see that billability stepping up. So we're confident as we become more rigorous in the future there, and we will actually see the benefits.

My second question is for Virginie. I understand that the uptick in networking capital was mainly due to the strong growth in June. Do you think it's still feasible to go back to the 9.3% networking tapas sales that you achieved for the whole of 2023, or is that a little bit out of reach given what you've achieved now in the first half?

Thanks, Martin. Obviously, you know, I'll tell the team on a constant basis that this is the ultimate goal to start to reach. But I'm quite convinced, you know, that due to the seasonality pattern that we see, that is something which is achievable on the full year. But be where we are, you know, in the middle of the year. I'm happy. I shouldn't say that too loud, you know, because some of them might be listening in this call. but definitely we have quite achieved a strong performance and a strong discipline, and remaining around that DRO is probably something to expect. As we see also bigger projects coming in, there might be an effect on our working capital, obviously, due to the ramp-up of the volume of working capital on the face of our balance sheet. If I think to the big elephants like at Sentinel last quarter or others, obviously, you know, this can be having an impact. So very important to remain disciplined, but definitely last three weeks being super strong, then they are billing or they have been billing in the first weeks of July.

Okay. And then I'll sneak in a third one, but it's a brief one. You mentioned $20 million of savings on track. How much did you realize in the first half of that $20 million so that we know roughly what to expect in the second half?

$10 million. I said it in the voiceover, but maybe you know me. I don't articulate very well. Sorry.

Thank you very much.

Thanks, Martin.

The next question comes from the line of Kieran Mulder with ING. Please go ahead.

Good afternoon, good morning for the US listeners. from ING. Congratulations with your results. It looks like that you are nicely on track for your 12.5% by 2026 margins. I have a couple of questions. First about the Global Excellence Centers. You were looking for a so-called force hub, maybe in India or somewhere. How is the progression there? And is that anything, and the growth of the Global Excellence Centers in the first half year, is that related to the other hubs? Is there anything to tell you? And the second question about the Middle East, if I look at the text and the tables, then it looks like that the Middle East had no impact on your results. So what do you expect in the second half of 2024 for the results for Middle East?

Thank you. I'll take the first question on the GECs. We've now developed the criteria for a fourth GEC, and we've started to do the search for this. We're hoping that we will identify by the end of the year so we can mobilize this into next year. Interestingly, we've seen the growth in the GECs this year by 21%. And actually, if you look at our headcount, you will see the vast majority of our headcount increase, therefore, is actually in the GECs. And this is what we want, is actually to get more capability, more capacity in our GECs for the future. And as we ramp up into our projects, particularly the larger, big-scale projects, then we will see continued growth, we believe, in the GECs. And this is our aim for the future. Maybe, Virginia, you'd like to talk about the Middle East?

Yes, sure. Thank you, Alan. Hi, Corine. On the Middle East, obviously, the cost of winding down has not changed. So you can go on thinking about 3% of margin cost into H2. And in H1, we saw some cash in from all the values that have been paid. We are lucky enough to have a highly motivated team in the Middle East who is still going on trying to catch the old working cap that we have there. So that's the event which is offsetting the cost of winding down.

Okay, but then on my, thank you, but on the global excellence centers, what's the reason for the sharp increase in the first half year, given the fact that you, let me say 2022, 2023, you struggled somewhat in terms of growth of your global excellence centers employees?

We have, as part of the strategic plan, a new team which is absolutely, you know, working on this and who has increased the number of people getting it. And also we need to remind that injecting as a whole, you know, IBI and DPS after the acquisition has diluted the progression that we had had before in the Global Excellence Center. As much as our portfolio is now renewed and that the Arcadis DPS and Arcadis IBI teams start working on new projects that they bring in, then there is a component of GEC, and that helps also accelerating the increase on that side.

Okay, thank you.

The next question comes from the line of James Sangita with KeyBank Capital Markets. Please go ahead.

Thank you so much for taking my questions. If I can ask one on AMP8, you talked about the framework agreements that you're signing. Can you walk us through how that translates into bookings? Is that over multiple years or is it lump sum?

Yep, thanks, Sangita. Really what happens is when we win a framework, so I mentioned the voiceover, for example, we've won three framework agreements now with the water companies in the UK with a very significant spend. But actually there won't be bookings on these framework agreements simply because they won't come into effect until next year. So what we get is a unique position where all the work will come to us on these framework agreements for the services that we put forward. but we won't book anything until we've actually got an instruction or a purchase order, if you like, for want of a better expression. What we're pleased about though with some of these frameworks now is the clients have got committed expenditures so we can see full visibility and that's why we referenced in my voiceover that we got far more visibility now of what's coming, so to speak, down into the pipeline and the order book, but it's not necessarily shown in the backlog right now. That's what we were trying to get across. So a framework just means that we've got the work, we know what the expenditure is, but actually we haven't got the purchase orders, so it's not booked in our system yet.

Got it. And if I can ask one on you mentioning the strength and energy transition investments. Can you elaborate on that theme and where you're seeing the most strength? Is it building efficiency projects or is it renewable projects generation linked to the data center chip fabs or is it something else?

There's quite a broad range on the energy transition. So, for example, in Germany, we're seeing huge demand as they look to securitize their energy, which have been previously reliant, for example, on Russian gas. Then we're seeing not only schemes for renewable energy, but also upgrading the grid. In the UK, we're seeing a lot of work in energy transition to actually decarbonize the grid. And I think we're just seeing expansion of grid networks. So it's a various sort of different projects. That's why we've been building and training our resources to undertake this work. But it's across Europe in many, many countries. But Germany has perhaps been the most significant to date.

Got it. Thank you so much for taking my questions.

The next question comes from the line of Eller's team with Kepler Souvre. Please go ahead.

Yes, good afternoon, everyone. Thanks for taking my questions. I actually have a follow-up question on the pricing question asked by Martijn. Can you maybe elaborate a little bit on the potential you see going forward if there's more room for price increases? and also maybe going a bit further than just making up for inflation, but also to increase the value add. What's your take on that?

Yes, thank you, Tim. I think what we're seeing now is we've done two things. One is we've started to look at where we can improve our pricing position and stop taking on one-offs low value projects, which has obviously improved our position overall for margin. But actually, when we're looking at this, We're looking at what the scope is of what we're being asked to do and pricing more carefully and actually increasing our pricing points. But as we move forward now and we're seeing a portfolio of different services being asked for, we're also seeing that we can develop different solutions. And some of those solutions are quite unique. And so when the clients come to us, they're coming to us for specific things. And I gave a few examples in the presentation there. Really, I think now where we can be more advisory and we can bring in complementary offerings, we're seeing our position able to improve the pricing point. I think also you mentioned inflation. I think we're seeing now inflation becoming lower in parts of the world than it was a couple of years ago. And we are not anticipating any particular wage pressure in the future. So we will be focused more on really looking at how we can build out our solutions within our portfolio. And therefore, I do see opportunities if we manage carefully to continue the pricing position. That's our aim.

Okay, great. So basically, the pricing is part of your selectivity strategy, if I understand it correctly.

Yeah, so we've seen that when we acquired DPS as well. By being more selective, we can go for the larger clients where they value our services more and actually our price points improves. And that's why we've seen the margin improving.

Okay, great. But there's no opportunity to, let's say, renegotiate existing contracts and say, look, guys, there's so much demand for our services and such a scarcity. So maybe we should talk about prices again.

I think in terms of what we've been bidding, even with clients we've worked for before, and particularly we take DPS as a good example, by being more selective and going to the clients there, you are looking at what their pressure points are. And often with bigger clients and those sort of clients in those industries, you're also seeing that speed to market is of the essence. So if you are a semiconductor type client, you need to get to market quicker. So they will come to us and say, Really, how can you speed up? What's your knowledge, your deep asset knowledge? How can you speed up? And I think what we've been able to do there is move the price point even with our existing clients. And that's what we're looking at internally as well with our key clients. Why we reference our key clients more is they value us for our deep asset knowledge, our skills, and our advice. And therefore, the price point is able to be improved with those clients. And that's what we continue to work on. If you combine that with greater use of the GECs, then you get that double benefit.

Okay, clear. Thanks. Then another question on your employee growth. Well, you already mentioned that it's coming primarily from increasing usage of GECs. Could you maybe elaborate a little bit on the general path there? So do you also plan to increase the workforce in the rest of the group, or is it now really focused on growing the GECs?

Yeah, I think what we're doing here, we've continued to see a fall in our turnover rates in most of our core regions now, Europe, US, UK, we are at or below 10% turnover. So we're pleased with where we are in terms of our people position. We've seen a flat year-on-year FTE and the gain has been in the GEC. What we are looking at now, as we standardise and automate into the future, We still want significant growth in those GEC skills that we've got there and we're hiring into the GEC and that's the direction of travel for us. So what we need to do now is really keep that focus because that's where we'll gain most benefits. We are being very clear as we move forward in each GBA what skills and what capabilities we want in country and what we can have in the GEC. And this is a continuation through the rest of this year and into next year. And we would like to see that continuation of most hiring in the GEC.

Very great.

Thank you, Mr. Ehlers, for your questions. Ladies and gentlemen, we're now taking the last question. The last question comes from the line of Agarwal Himanshu with Bank of America Securities. Please go ahead. Mr. Muncher, can you hear us?

We can hear you, but you've got a bit of an echo.

The next and last question is from the line of Fairbeck Martin with the idea. Please go ahead.

Good afternoon, it's Martin of the idea. On one hand, have you ended your program of closing certain countries or certain offices on one hand, what you have seen lately, and on the other hand, when looking at your focus area on sustainable solutions, do you feel that you are underrepresented with certain skills and capabilities and looking to add that by means of acquisitions? And is it also in certain geographical areas? Thank you.

Thanks, Martin. I think we did the sort of focus and scale exercise in the last three years strategy for most of what we were looking at, but Having acquired businesses, you may have seen that we've exited Switzerland recently because that doesn't fit our portfolio. We'll always keep our business under review, but we feel we've got to our core businesses now where we can expand and we can develop our business further. If we look at M&As, the capabilities are probably more aligned to digital capabilities, growing our expertise. We're finding real connectivity with our clients, particularly our key clients, if we can use products like I mentioned, EDA and others, to actually connect with those clients, help them with their asset management, you know, and it really helps us with five-year, ten-year relationships. So we're happy at the moment with where we are with our key markets. We will grow, I think, into more digital capabilities, the use of data. I said before, clients are asking for that predictive and prescriptive analytics to advise them into the future of their operations. And this is where we see a good growth area. And obviously we'll double down in places like North America, where we still see a very strong active market, as well as the other ones that we mentioned. Thank you.

Ladies and gentlemen, with this question, we conclude our Q&A session. I will now turn the conference over to Mr. Brooks for any closing comments. Thank you.

Thank you very much. As I said, I am delighted to announce a strong first half year of our new strategy cycle. And I just want to take the opportunity to thank all my Arcadis colleagues who've worked so hard to deliver these results. I feel now we are on track to deliver further profitable growth throughout this strategy cycle. And I really want to look to the future in a most positive way. So thank you all for listening and thank you for your questions. And I wish you a good rest of the day.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for calling and have a pleasant day.