Financial press release - Grontmij reports improved operating margin in 2014 driven by cost reductions, and reduced net debt

Weak start in the Netherlands in 2015 impacting outlook

De Bilt, 25 February 2015 - Grontmij N.V., a listed consulting & engineering company with strong European presence, today announces its fourth quarter and full year 2014 results. Markets within Europe remained fragile, with limited recovery in Grontmij`s main markets in the Netherlands and moderate improvements in most other countries. Driven by a successful execution of the cost reduction programme, Grontmij managed to improve its EBITA margin to 3.8% at year end 2014 (FY 2013: 3.2%). However, the improvement was hampered by the lack of growth with an organic decline on net revenue of 2% and a write down in the fourth quarter in Denmark on one of the 2011 hospital projects. As a result of the additional equity that was issued at the beginning of 2014 with support from our large shareholders and tight cash control, net debt for covenants at year end reduced to € 22.0 million (FY 2013; € 57.1 million), resulting in a leverage ratio of 0.8x. Grontmij continues the divestment process of the remaining French business and intends to conclude this process in 2015. Outlook 2015 and beyond will be impacted by market developments, especially in the Netherlands, where we expect a weak start of the year.

Key points full year 2014

• Total revenue FY 2014 € 658.6 million (FY 2013: € 690.5 million), with organic decline of 3.9%, mainly driven by Sweden (- 12.9%) and the Netherlands (- 4.5%). Organic decline on net revenue was 2.0%

• EBITA excluding exceptional items for FY 2014 increased by 13.2% to € 25.1 million (FY 2013: € 22.1 million), with improved profitability in most countries. In Denmark results were disappointing due to a write down in Q4 on one of the 2011 hospital projects (€ 2.1 million); Exceptional items of € 13.9 million (FY 2013: - € 1.8 million) mainly related to the cost reduction programme and the costs for the refinancing; EBITA margin on total revenue excluding exceptional items at 3.8% (FY 2013: 3.2%)

• Net result for the full year - € 20.6 million (FY 2013: - € 14.8 million), strongly influenced by the above mentioned exceptional items (€ 13.9 million) and the loss on discontinued operations (France: - € 12.3 million, FY 2013: - € 13.0 million)

• Trade working capital on continuing operations at the end of 2014 increased to € 81.8 million (FY 2013 € 78.8 million). Trade working capital as % of total revenue was 12.4% at year-end (versus 11.4% at the end of 2013), also affected by growth in Belgium and Germany

• Net debt based on continuing operations per 31 December 2014 at € 41.3 million (FY 2013: € 40.6 million), including € 19.8 million related to the Convertible Cumulative Preference Shares (`Cumprefs`) and € 24.1 million of net debt in FY 2013 recorded under discontinued operations. Net debt for covenants per end Q4 2014 was € 22.0 million (FY 2013: € 57.1 million), resulting in a leverage ratio of 0.8x

Highlights rebalanced `Back on Track` strategy 2014 - 2016:

• Cost reduction programme was executed according to plan. Measures taken in 2014 represent an annual run rate of € 16 million against the actual cost base of 2013 (and excluding 2015 - 2016 inflation), with a one-off cash out in 2014 of € 7 million and an expected cash out of € 5 million in 2015

• OPEX improvements: in 2014, Grontmij worked on embedding the five key processes in all our operating countries. Despite good progress Grontmij is still confronted with write downs on older projects highlighted by the write down in Denmark in Q4 2014 of € 2.1 million

• Portfolio optimisation:
  France: Grontmij continues the divestment process of the French operations, a highly complex process also affected by severe conditions in our French markets. It is likely that following a potential sale transaction, Grontmij will incur a transaction-related loss. We intend to complete the French divestment process in 2015
  Non-core assets: In 2014, Grontmij sold its 24% stake in and associated receivables on `Ruimte voor Ruimte` sustainable development partnerships for net proceeds amounting to € 8.9 million. In January 2015 Grontmij announced the sale of its Dutch surveyor activities and the Dutch share in Infraflex temporary staffing agency with a limited effect on Grontmij`s financial results. In January 2015 it was decided to terminate the divestment process of Naarderbos Golfcourse, due to a lack of interest

• Accelerate improvements NL: Good progress was made in the Netherlands in 2014, with the five OPEX processes and a key account management programme implemented and significant cost reductions realised. EBITA margin excluding exceptional items improved to 4.3% (FY 2013: 2.2%). The business in the Netherlands, especially Infrastructure and the municipal market, shows limited recovery and a weak start of the year is expected

• Realising profitable growth: Grontmij continues to build Europe and invest in four long term attractive growth segments, being: Water, Energy, Highways & Roads, and Sustainable Buildings. Light Rail was abandoned at the end of 2014 due to the more limited growth opportunities across Europe

• Strategic targets: Grontmij maintains the strategic EBITA margin target of 6 - 8%. Achieving the target in 2016 will be challenging given the dependence on market improvement across Europe and specifically in the Netherlands. The 3-5% total revenue growth target will not be met in 2015, but is more likely to be achieved from 2016 onwards if and when markets improve. Trade Working Capital (TWC) has improved over the past years. We see room for further improvement of TWC and lower the target from 13% to 12% of total revenue at the end of 2016 based on current business mix.

Michiel Jaski, CEO Grontmij N.V: `In 2014, Grontmij has made steps in the right direction to improve its operational and financial performance. Our operating margin has increased, we have realised a significant reduction of net debt and at year-end, and we exceeded our long-term goal for trade working capital. Grontmij is also moving forward with the divestment of the remaining French activities: a process we intend to complete in 2015. Our performance also shows that there is a still a way to go. Markets in some of our European operating countries remain difficult, thereby putting pressure on our businesses, affecting our revenue growth and slowing down the necessary margin improvement. However, as a Group we also need to remain focused to improve predictability of our results and reach the aspired levels of operational excellence. In 2014 Grontmij has taken additional measures to become more cost efficient, and we will continue to do so. Looking forward we see a mixed economic outlook and still tough conditions, especially in our Dutch markets. Next to continued cost reduction and improvement of operational excellence, growth will be driven by a full dedication to serve our clients in the best possible way, a clear focus on our four Growth Segments: Water, Energy, Highways & Roads and Sustainable Buildings combined with relentless sales activity.`

To the full financial press release Grontmij 2014 Full Year results on our website.

Note to the editors

For more information please contact:
Grontmij N.V., Michèle Negen, Investor Relations Manager, T +31 888 11 58 84

www.grontmij.com
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www.linkedin.com/company/grontmij

Grontmij is a leading European company in the Consulting & Engineering industry with world class expertise in the fields of energy, highways & roads, light rail, sustainable buildings and water. Our leading principle is Sustainability by Design. This enables our professionals to support clients in developing the built and natural environment. Established in 1915, Grontmij is listed on the NYSE Euronext stock exchange.

Grontmij financial press release full year 2014

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Source: GRONTMIJ N.V. via GlobeNewswire
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