Second half 2003 shows effect of cost-reduction measures at Grontmij

  • Net operating profit in first half year down 70%

  • Limited growth in turnover from consultancy and engineering services; recovery of turnkey turnover

  • Measures taken to improve results: cost-reduction by reduction of workforce and accelerated integration of Building & Installations business units

  • Savings target: EUR 10 million

  • Expectation for 2003 as a whole: considerably lower net operating profit

  • Results and turnover in first half of 2003
    Grontmij realised a net operating profit of EUR 2.1 million during the first six months of 2003, compared with EUR 6.9 million in the same period last year; a drop of 70%. The net operating profit per share works out at EUR 0.51(2002: EUR 1.79). Domestic turnover from consultancy and engineering services did not grow, while turnover from turnkey projects in the Netherlands and abroad recovered and contributed significantly to the overall increase in turnover, 15%, during the first six months. Total turnover was EUR 242 million (2002: EUR 210 million). The turnover and results from our operations in Germany and Belgium developed according to plan.

    The fall in net operating profit is due to higher personnel, pension and information technology costs and lower margins. Our consultancy and engineering offices that target the building and installations market are passing through a difficult period. These activities are being seriously affected by postponed private investments. In the public sector the pattern of investments in building, infrastructure and environmental projects is slowing. Cost of project acquisition increases, and the chance of winning bids is declining. Price pressure is making it virtually impossible to pass on these increased costs. The lead time of development projects already in the portfolio has also lengthened.

    Measures to improve results
    The plan to reduce Grontmij´s workforce in the Netherlands is currently being implemented, with the main target being to reduce the number of temporary staff. The number of FTEs will be down by 250 at the end of 2003 compared with the end of last year, which will save approximately EUR 10 million in 2004. On 1 August 2003 the number of FTEs was down by 170. The second half of 2003 will show effect of this cost-reduction measure.

    Grontmij is also restructuring its business units aimed at the building and installations market, as this market has shrunk considerably in a short time. As the demand for new offices and other business premises has come to a virtual standstill, the need for engineering and management services is also dropping.

    Forecast for 2003 as a whole
    Neither the private nor the public-sector market is likely to pick up during the second half of 2003. It is expected that the government will tighten its budgets, making investment patterns in building, infrastructure and environmental projects slower than had previously been assumed. This development will have a direct impact on the workload. In current market conditions, securing orders and reducing costs are the most likely ways of increasing yields.

    A positive point is that the fermentation unit at the Vagron waste processing plant has made progress. Thus far the fermentation process has been managed well. Moreover, contracts to improve prices have been signed with the Central Groningen Waste Management Region (ARCG).

    Assuming the market develops as outlined, and taking into account the effect of the cost-reduction measures during the second half of the year, compared with last year Grontmij expects a considerably lower net operating profit over the whole of 2003 (2002: EUR 13.9 million).

    Source: Grontmij nv

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