19 Aug 2010 |
Cost reductions and improving forward orders in difficult markets
Improvement in forward order book, pressure on pricing Progress on cost reductions and non-core divestments Ginger acquisition on plan Outlook: second half year better than first half year 2010
Sylvo Thijsen, CEO Grontmij N.V.: ‘The second quarter of 2010 was consistent with the first quarter, with the underlying performance of the business beginning to stabilise and the forward order book starting to improve. The new required IFRS treatment of the Ginger S.A. (‘Ginger’) acquisition and refinancing costs (€ -2.6 million), combined with further restructuring to reduce the cost base (€ -4.4 million), and no comparable result on divestments (€ -0.5 million), resulted in non-recurring costs of € -7.5 million in the first six months of 2010 compared to income of € 3 million in the first six months of 2009 – a total difference of above € 10 million. All of these actions are designed to strengthen and grow the business for the future. Despite the weaker trading conditions, Grontmij’s net debt was reduced through the proceeds of planned divestments of non-core assets.
The acquisition of Ginger continues on plan, with the launch of the public offer for the remainder of the Ginger shares on 23 July.
The forward order situation started to improve in the second quarter in all business line areas, the effects of which will begin to show at the end of this year and the beginning of next year, although the local markets in Planning & Design suffer from cuts in government spending. There were also increasing instances of cross border contract awards in line with the new focus for organic growth through the three business lines.
There was some recovery in the Nordic region, after a poor start in the first quarter. The slight improvement in the Benelux region improved EBITA margins compared to 2009, as the benefits of cost reductions begin to show. Trading in the UK remained slow, although the AMP5 order book (fifth Asset Management Plan) continued to strengthen in comparison to AMP4.
Overall, our markets remain uncertain, especially in building related services, and so we will continue to take necessary action on our cost base, and manage our working capital and cash tightly. We will continue to vigorously pursue organic growth opportunities through the cross border business lines, and we will build further on these through the integration of the Ginger acquisition. With the stabilisation of our business in the Nordic region, the cost reductions and the expected pick up in the regulated water business in the UK we expect a stronger second half in 2010 for the organic business, to be further supplemented by the consolidation of Ginger’.