ARCADIS has reported solid results for the first quarter of 2005. Net income rose to â¬ 5.5 million, an increase of 21% compared to the same period last year. Gross revenues rose 8% to â¬ 223 million. The decline of the U.S. dollar exerted a negative currency effect of 1 to 2% on both gross revenues and net income. The solid results were primarily the result of organic growth and the effect of earlier measures to improve margins.
Commenting on these developments, CEO Harrie Noy said: "I am pleased that our organic growth came out well above our 5% target. This results from the continued positive development in the environmental market, maintained growth in the buildings market and recovery in the Dutch infrastructure market. In that market we saw the first signs of recovery, which led to an improvement in our backlog. Our policy to improve margins is yielding results. As a result of the restructuring which was completed in the Netherlands last year, as well as the ongoing transition in the buildings segment to management and consultancy services with higher added value, the margin has clearly improved."
Beginning from the first quarter of 2005, the Company's results are reported under IFRS (International Financial Reporting Standards). The comparable figures for 2004 have been adjusted on this basis. The consequences of IFRS for ARCADIS and the adjustments to the Company's reported net income for 2004 on a quarterly basis are specified in an attachment to this press release. The table with main figures also includes the net income from operations. This is net income as defined by IFRS, corrected for non-operational items (amortization intangible fixed assets, adjustments related to pension plans and costs of options).
2005 first quarter gross revenues increased by 8%. The contribution from acquisitions was 2%. This was offset by a negative currency effect of 1% and a decline of 1% resulting from the proceeds of the sale of parts of the company in the first quarter of 2004. Organic growth was 8%. The main contribution came from the United States and South America, while in Europe the activities in France grew strongly. In the Netherlands, the modest organic growth from the fourth quarter of 2004 was continued, which indicates a gradual market recovery.
Operating income in the 2005 first quarter was 25% higher. On a recurring basis (so excluding the non-recurring effects in 2004) the increase was 13%. Acquisitions and divestments on balance yielded 2% growth, while the currency effect was a negative 2%. The relatively small contribution from acquisitions was mainly the effect of the amortization of identifiable intangible assets under IFRS. The organic increase in operating income was 13%, mainly through revenue growth in combination with margin improvement.
With an increase of 21%, net income rose somewhat less than operating income. This can be mainly attributed to the lower contribution from non-consolidated companies as a result of the completion of a number of contracts for energy projects in Brazil. It is expected that in the course of this year new contracts will be signed. Because in net income from operations the amortization on acquisitions is excluded, this rose by 30%.
Developments per market segment
The figures mentioned below relate to gross revenue developments and, unless otherwise noted, discuss the comparison between the first three months of 2005 and the same period last year.
Gross revenue growth was 11%. Of this growth, 8% came from acquisitions completed last year. Organic growth was 6%, a considerable improvement compared to 2004, when there was an organic decrease. In almost all countries, activities increased. The recovery in Brazil and Chile that started last year, continued strongly. In France, ARCADIS is involved in several rail projects which contributed to strong growth.
With 10%, organic growth continued at a good level. In the United States, growth was still solid but somewhat down from 200