Robust financials from Arup and Grontmij

Performance summaries for two major environmental consultancy players

Grontmij

The Netherlands-based consulting and engineering group reports “robust” results “in line with expectations” for the first nine months of 2008. Gross revenue grew by 10.6% over the same period in 2007 to reach €626.8 million, with organic growth contributing 7%. Earnings before interest and tax for the first nine months increased by 25.0% to €40.0 million, giving an operating margin of 6.4%.

Grontmij CEO Sylvo Thijsen comments: “Our focus on sustainable design, innovation and management services delivers strong inflow to our order book in the energy, water and environment sectors. Despite the current financial crisis and the hesitation in some parts of the real economy, our order back log is well over one year and shows on an overall basis no signs of a slowdown. We see no reasons therefore to amend our outlook for 2008. We do, however, keep close watch on our daily operations in view of the economic slowdown. If necessary, our organisation is able to respond rapidly to changing market circumstances.”

Grontmij, whose shares are quoted on the Euronext Amsterdam Stock Market, is organised around seven regional operating units: Belgium, Denmark, Germany, the Netherlands, Sweden, UK/Ireland and Central & Eastern Europe. The business is focussed on three core markets: environment, water and energy; building and industry; and transportation.

The group does anticipate “a limited effect” on total revenue due to the current financial crisis and building sector malaise, but increased sales and ongoing strong demand in the water, energy and transportation sectors will compensate, it says.

In the UK and Ireland, Grontmij reports a strong position in asset management services to the water sector, with much work in this area tied up in long-term framework contracts. It currently employs over 300 professionals in the environmental consulting business, and derives more than a third of its fee income from contaminated land projects.

Commenting on the UK business, Dennis Markey, director for the built and natural environment, said: “Engineering firms in the building and environment space have been hit both by the slowdown in the private developer market and by the reduction in demand for land remediation. However, Grontmij’s building and natural environment consultancy practice has remained robust, primarily because it provides a wide portfolio of environmental services across Grontmij’s range of key market sectors including water, sustainable energy, transportation, carbon management and CSR.”

“In the economic downturn, clients will seek to maximise both environmental benefits and bottom line profits from their investments,” he adds.

Grontmij's major breakthrough in the UK market came in 2006, through the acquisition of the Danish environmental consulting engineers Carl Bro. Other more recent acquisitions - including landscape architectural practice, Whitelaw Turkington, and sustainable buildings consultant, Roger Preston & Partners - have expanded the UK operating company’s service portfolio.

Arup

The privately-owned engineering and business consultant Arup Group Ltd has reported record turnover of £726 million for the year ending 31 March 2008, an increase of 27% over the previous year. Total profit, before tax dividends and staff profit share, jumped 69% to £81 million, equating to a pre-tax profit margin of 11%. The latest financial results mark a sixth successive year of growth in turnover and profits.

Growth has been achieved through the group's long-term strategy of “organic expansion delivered through widening business offerings and increasing geographic spread,” Arup states. This year, the group was able to return over £31 million of profits back to its employees through the profit sharing scheme.

Arup also reports a strong balance sheet, with cash reserves of over £100 million, up 54% on 2007. Group commercial director David Whittleton, said: “Our reserves are substantial, we have no borrowings, and the fact that we are privately owned means that we have no share price issues to distract us from our focus on delivering high quality work for the long-term sustainability of the firm.”

Arup also notes that internally reported mid-year results to September 2008 show that the strong performance has continued through the year with work on several major development projects in the UK and internationally. Terry Hill, group chairman, commented: “While there are now signs of weakness in some of our markets, at present the impact is limited to slowdowns and occasional project cancellations and a small increase in the working capital cycle.” Environment Analyst has learned that the firm is, however, making cutbacks among temporarily contracted staff in the UK.

• Grontmij news release
• Arup news release