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STRUKTON RECORDS SUBSTANTIALLY HIGHER OPERATIONAL RESULT IN 2010 • Revenue rose by 5% to EUR 1,437 million • The operational result rose sharply by 56% to EUR 57.6 million • The net result was a loss of EUR 15.5 million due to impairment losses • Further rise in size of order book to EUR 2.1 billion (2009: EUR 1.8 billion) • Oranjewoud nv is new shareholder of Strukton
Utrecht, 28 March 2011 Figures (in € million) Revenue Operational result Net result Cash flow from ordinary business operations Order book Equity Invested capital (recourse) Solvency (recourse) Average number of employees
2010 1,437.5 57.6 (15.5) 38.5 2,065.0 166.7 179.2 23.1% 6,159
2009 1,368.2 37.0 0.8 56.9 1,858.0 172.2 235.2 22.1% 6,232
Gerard Sanderink, Chairman of the Group Management Board: ‘The takeover means that it is now clear, as was desired, what course Strukton’s future will take; Strukton’s operations will be continued as before within the boundaries of a single company. Strukton’s strength lies in realising complex projects in complex environments. We seek to provide considerable added value, which lets us stand out in the market. It should be clear to our clients that they can rely on us, that they will get value for money and that they can expect trend-setting solutions.’ Raymond Steenvoorden, Group Management Board: ‘The focus over the past year has very much been on improving the operational results and realising free cash flows. Last year was a tumultuous year because of the sale of Strukton, and we had to deal with an extremely challenging market at the same time. We are therefore pleased that we were able to show a significant improvement in the operational result despite this. Of course, it is disappointing that we were not able to translate this into a good net result as well. Impairments of goodwill and intangible assets totalling EUR 35.9 million – because of the write-down of intangible assets and goodwill relating to the acquisitions in the past of Worksphere and Jernbaneservice (Norway) – led eventually to a net loss for us. However, the healthy operational results and the good cash flow situation are important parameters for us when considering the sustained recovery of profitability. In addition, we have also seen the opportunity to further develop a number of niche positions, which allows us to face the challenges of the future with confidence.’
Course of business in 2010 For Strukton, 2010 was dominated by the takeover. Strukton’s future course has been assured now that Oranjewoud nv has become the new shareholder. Strukton, a full-service provider for infrastructure and accommodation solutions, realised revenue of EUR 1.437 billion in 2010 (2009: EUR 1.368 billion), an increase of 5%. Around 70% of the revenue (2009: 69%) and 88% of the operational result (2009:123%) can be accounted for by the segments operating in the infrastructure sector. Strukton operates in a large number of different areas in this sector, which has turned out to be less affected by the economic recession than other sectors in the construction industry. The recovery in profitability is partly due to the fact that all the operating companies made a positive contribution to the operational result in 2010, despite the still challenging market conditions. There was a significant increase in revenue at Strukton Rail, and Strukton Worksphere grew too. Volumes at Strukton Civiel and Strukton Bouw were slightly below the level for 2009. In 2010 the operational result (EBITDA) rose by more than 56% to EUR 57.6 million (2009: EUR 37.0 million). This substantial improvement is mainly due to the activities in rail infrastructure and improved results for the construction segment. The net result for Strukton was a loss of EUR 15.5 million (2009: EUR 0.8 million profit), as a result of impairments of intangible assets totalling EUR 35.9 million. The order book volume has reached an all-time high: EUR 2.1 billion, over 11% higher than at the end of 2009 (EUR 1.8 billion). Solvency rose to 23.1% (2009: 22.1%). This is excluding PPP debts as they are non-recourse.
Course of business at Strukton companies Rail infrastructure and information systems Strukton Rail (in € millions) Revenue Operational result Employees at year-end
2010 616.1 37.2 3,162
2009 546.1 27.8 3,363
Strukton Rail realised a good result in the Netherlands despite the difficult market conditions. These days, a substantial proportion of the revenue and results is realised outside the Netherlands. The contribution to result by Strukton’s rail operations in Sweden rose substantially while results in Italy and Belgium remained also at a high level. There was also a big increase for all the product-market combinations of Strukton Systems. On the other hand, the results for Norway and Germany remained negative. Strukton Rail made changes to the size and structure of the organisation in the Netherlands in 2010. Unfortunately this was at the expense of 250 jobs, for which a provision had already been made in 2009. This reorganisation was necessary because of the sharp fall in volumes and considerable pressure on prices in the Dutch rail market. The changes to the organisation will ensure a secure future. In 2010, Strukton Rail concluded two major contracts in the Netherlands for performancebased maintenance (PBM contracts): Drenthe and Rijn & Gouwe. Furthermore, the existing contract for the Betuwe Route was renewed. Several of Strukton Rail’s business units worked on the new Hanseatic rail line between Zwolle and Lelystad. The plan is for the Hanseatic rail line to be ready for use in December 2012. Strukton Rail is also working on the Merwede-
Linge line, upgrading part of the track, the points and the overpasses, and building a number of new stations. Strukton Rail was also hard at work in other European countries. In Sweden, the company not only maintains 1,800 km of track (heavy rail, light rail and metro), it also laid new track between Fiskeby and Långsele. Moreover, Strukton Rail (in partnership with Balfour Beatty) won the five-year maintenance contract for 726 km of track in the north of the country. A major project in Norway was the renovation of the Holmenkollen Line. This light railway link in Oslo underwent thorough renovations as part of the preparations for the Nordic skiing world championships in February and March 2011. Projects worked on by Clf, in which Strukton Rail has a participating interest, included the renovation of Genua Brignole and Bologna stations. Both projects will be continuing in 2011. Clf also carried out work in the vicinity of Turin. In Belgium, Strukton Rail worked on the construction of 14 km of double track alongside the motorway between Brussels and Mechelen. This double track will improve access to Brussels’ Zaventem airport. One of Strukton Rail’s projects in Germany was to upgrade the track near Mönchengladbach. Strukton Rail also took various initiatives related to sustainable energy, such as the development of traction electronics, which reduce the amount of energy needed to run a train, and the ‘Rollende Landstrasse’ concept along the A15 motorway. The pressure on this motorway, which is already extremely busy, will only increase when the Maasvlakte 2 expansion of the Rotterdam port is completed. The Rollende Landstrasse involves heavy goods vehicles being put on the train in Rotterdam and taken by shuttle service to Valburg or Duisburg, where they disembark. The advantage of this is fewer traffic jams, less need for transfer facilities, less air pollution and lower CO2 emissions.
Civil infrastructure Strukton Civiel (in € millions) Revenue Operational result Employees at year-end
2010 392.7 13.3 976
2009 398.7 17.7 930
Strukton Civiel achieved good results in 2010. The company is reaping the benefits of its chosen strategy of realising growth both in the breadth of the supply chain (design, execution and maintenance) and in the depth (goods supplied and specialist areas). While the results for 2010 may have been lower than in 2009, they are still in line with the longterm strategy. Strukton Civiel delivered a large number of projects in 2010 and also invested substantially in tenders. These investments have led to a well-filled order book in the national segment. The regional segment is, however, showing a downward trend in investments by lower-level governmental bodies and provinces. This fall is the result of the Dutch government’s costcutting proposals. Strukton Civiel focuses on the full breadth of the infrastructure sector: planning, design, execution, maintenance and commercial operation. A good example of this is the renovation of the A2 motorway at Maastricht, in which Strukton Civiel is working with Ballast Nedam on not only the execution but on planning and design as well. Another chain project is the widening of the A15 motorway between the Maasvlakte and the Vaanplein interchange, the largest infrastructure project ever commissioned by the Directorate-General of Public Works and Water Management, in which Strukton Civiel has a role in the design, execution and
maintenance. It is expected that Strukton Civiel Projecten will start work on this in the spring of 2011. In January 2010, Strukton Afzinktechnieken sank the aqueduct for the N57 trunk road. At the same time, the company has been working on submerging the tunnel elements for the BusanGeoje Fixed Link in South Korea. Strukton Afzinktechnieken used the External Positioning System for this, which allowed it to sink the tunnel elements into position very accurately on the 60m deep seabed. Strukton Afzinktechnieken received an honourable mention for the Schreuder Prize, was nominated for the Erasmus Innovation Award and also won the Prof. Agema Prize, which is awarded once every five years for a noteworthy piece of hydraulic engineering. Strukton Worksphere and Strukton Civiel have combined forces to create the new Verkeerstechnieken company (traffic technology). They will be able to use this company to make a contribution on the infrastructure market for traffic control technology and tunnel construction techniques. Strukton Civiel also set up two new, sustainable business units in 2010: Afvalbank Nederland and Strukton Sustainable Energy. Afvalbank Nederland has been set up to deal with all Strukton’s waste flows. The objective is to separate this waste and reuse it where possible in the organisation’s own projects. Strukton Sustainable Energy deals with three forms of sustainable energy: wind energy, tidal energy and wave energy. Various pilot projects are under way focusing on tidal energy, both in the Netherlands and in Asia.
Construction and property development Strukton Bouw (in € millions) Revenue Operational result Employees at year-end
2010 189.9 0.3 367
2009 198.8 (13.2) 430
Strukton Bouw recorded a modest profit in 2010 after a number of years characterised by very disappointing figures. However, Strukton Bouw is still struggling with the aftermath of five projects from the past that were less wisely contracted and less well executed. These have had a substantial negative impact on the results in recent years and continued to generate losses in 2010. Market conditions are still very challenging in this sector, and detailed attention is therefore being paid to the cost structure. One of the measures for this is a modified organisational structure for the company, intended to ensure that Strukton Bouw can operate efficiently. The improved process management had a visible impact on the projects being carried out in 2010. This meant that while revenue fell there was still a slight profit, despite the abovementioned exceptional costs. The falling market volumes and the strong competition in this sector are pushing up tendering costs. A selective tendering policy was adopted in 2010 in an attempt to control these cost developments. This has led to us focusing on those projects where we can offer added value. Strukton has only a limited land bank. A write-down of EUR 1 million had to be recognised for this in 2010. Two important Strukton development projects currently being executed are Nieuwe Voorstad in Nijmegen and La Linea in Leiden. The Land in Zicht project in Haarlem is expected to start soon; this is a project to build 167 houses and apartments. The houses and apartments went on sale in 2010, generating considerable interest.
Work is also under way on the Conservatorium Hotel project in Amsterdam. This involves the renovation and extension of the former Rijkspostspaarbank (Post Office Savings Bank), a listed building on Van Baerlestraat. Construction of Ziggo Dome, a music venue in the Zuidoost district of Amsterdam with a total capacity of 15,600 people, was resumed in February 2011. Strukton Bouw is taking over the construction work that came to a standstill after the construction company Midreth BV applied for a moratorium on payments.
Technical services and maintenance Strukton Worksphere (in € millions) Revenue Operational result Employees at year-end
2010 238.8 6.8 1,518
2009 224.6 4.7 1,571
Strukton Worksphere achieved good results in 2010, particularly in view of the difficult market conditions, and it has invested in mobilising and starting up Public Private Partnerships (PPP projects). The costs for the learning curve have, however, had a negative impact on the results. The costs incurred in getting projects up and running are concentrated in 2010, because that is the year in which Strukton Worksphere started commercial operation of the first PPP projects, such as the Kromhout Barracks in Utrecht. Despite this, the company still managed to realise an improvement in the operational result. Strukton Worksphere operates in a difficult market but was able to take measures in good time and respond appropriately to these developments. There has now been a substantial reduction in costs and this – together with directly targeting productivity – meant an improvement could still be achieved in the result in comparison with 2009. Strukton Worksphere has been carrying out the maintenance of the Aegon head office in The Hague for many years, and completed a major renovation project on the building in 2010. For the Maxima Medisch Centrum hospital in Veldhoven, Strukton Worksphere is realising a sustainable energy storage system for cooling and heating the hospital. Strukton Worksphere has been working with the Dutch Government Buildings Agency since 2009 on a pilot project, a transition to a so-called 'control model' in which Strukton Worksphere takes over the operational management tasks. That is already done for the Ministry of Housing, Spatial Development and the Environment office building and the Hoftoren tower (housing the Ministry of Education, Culture and Science). Strukton Worksphere maintains and manages the offices of the Ministry of Finance in The Hague. This is a DBFMO contract that started in 2006 and will continue until 2033. In addition, Strukton Worksphere carried out studies in 2010 on request from the VoortgezetOnderwijs-Raad (the Dutch council for secondary education) investigating the indoor climate at secondary schools.
Strukton Integrale Projecten reached a milestone in 2010 with the financial close of the A15 Maasvlakte-Vaanplein project. The financial market has stabilised and sufficient liquidity is available to fund a project like the A15. This project involves widening the A15 motorway between Maasvlakte and Vaanplein, with no less than 85 km of extra lanes, new fly-overs and the construction of a new Botlek bridge. Strukton is now actively involved in seven PPP concession projects in the Netherlands. The cumulative capital payments into the special-purpose companies for these PPP projects have
now risen to EUR 10.8 million. The outstanding commitments as at the end of 2010 totalled EUR 17.7 million. October 2010 saw delivery of phase 1 of the Kromhout Barracks in Utrecht. Good progress has also been made on the construction of the DUO (education agency) and Tax Authority offices in Groningen. The availability certificate for phase 1 was received on 15 March 2011 – on schedule. Strukton Integrale Projecten continues to focus on selective participation in PPP projects with the maximum added value for Strukton. Extra attention is being paid to the development of new business concepts with funding. In addition, Strukton Integrale Projecten cooperates with the operating companies on the development of its own initiatives and market concepts. It also provides structural support for new types of projects and contracts, such as the so-called MEAT tenders (Most Economically Advantageous Tenders).
Sustainability In 2010, Strukton became the first group to achieve level 5 – the highest level possible – on ProRail’s CO2 performance ladder. Sustainability does not just play a significant role within the company's own business operations. The skills present within Strukton allow us to be of maximum service to our clients in realising their sustainability objectives. Strukton is constantly looking for new ways of recycling building materials. Strukton has been using gravel in new projects for some years, for example in the new N57 trunk road in Zeeland and in the underwater concrete in the Museumpark multi-storey car park in Rotterdam. In 2010 Strukton developed another cradle-to-cradle building material, called ‘green concrete’. In addition, old ballast (the gravel between railway sleepers) is recycled to create foundation blocks. In addition to the various initiatives to make its own business operations more sustainable, Strukton also seeks to use the knowledge and expertise present within its own organisation to make buildings more sustainable and to help customers reduce CO2 emissions. For example, Strukton Systems has won two contracts to build power substations for wind farms in the North Sea (DanTysk and Riffgat). Strukton Rolling Stock is working on developing traction electronics that will reduce the amount of energy needed to make a train run. Strukton Rail is also developing a concept for the storage of braking energy in vehicles.
Impairments In 2010 an impairment of intangible assets totalling EUR 35.9 million (2009: EUR 1.4 million) had to be recognised. This is largely attributable to Worksphere and Jernbaneservice. Despite the fact that the results of Strukton Worksphere developed in line with expectations in the year under review, changes in IAS 36 and changing market conditions meant that an impairment of EUR 30.3 million had to be entered in the 2010 accounts. This impairment concerned the goodwill and the intangible assets relating to the acquisition of Worksphere in 2006. An impairment totalling EUR 5.2 million was recognised for the goodwill paid in the acquisition of Jernbaneservice in Norway during 2006 to 2007. Financial result While capital requirements remained roughly constant, there has been a significant improvement in the financial result. This is largely due to the positive result on derivatives of EUR 1.1 million (a loss of EUR 0.5 million in 2009) and the financial result for PPP projects in operation, which was EUR 0.4 million as opposed to a loss in 2009.
On the other hand, there were non-recurring transaction costs of approximately EUR 0.3 million as a result of new funding. Equity and cash flows The cash flow from ordinary business operations was EUR 38.5 million in 2010 (2009: EUR 56.9 million). This cash flow is excluding the expenditure of EUR 76.3 million on construction in the ongoing PPP projects; such expenditure was classified as investment up until last year, but this year it has been included in the cash flow from operating activities. Furthermore, a restrained investment policy continued to be pursued – as a result of the 20052008 investment programme – and no acquisitions were made in 2010. When the takeover took place, the balance sheet position was strengthened by a capital injection of EUR 10 million. The new financing agreement consists of a long-term loan of EUR 60 million and a working capital facility. At the end of 2010 the cash and cash equivalents, and the amounts drawn under the working capital facility gave a combined net positive balance of EUR 108.4 million. Consequently, Strukton complied amply with the covenants agreed with the financers at the end of 2010. The reported net loss and the above-mentioned capital payment of EUR 10 million resulted in a fall of EUR 5 million in equity to EUR 167 million. The adjusted equity in 2009 was EUR 172 million. The balance sheet total excluding PPP projects fell by EUR 51 million, which caused Strukton's solvency – adjusted for the financing of PPP projects – to rise to 23.1% (2009: 22.1%). Solvency including non-recourse financing was 17.2% as a result of the slight fall in equity and the increase in the balance sheet total of EUR 23 million, as opposed to 18.2% in 2009. Takeover by Oranjewoud nv On 23 July 2010 NS and Oranjewoud nv reached agreement on the sale of Strukton. After approval had been granted, the transaction took place on 29 October 2010. From this date onwards the results of Strukton are included in the consolidated financial statements of Oranjewoud nv. Order book Strukton closed 2010 with its order book volumes at an all-time high. This is the case for both the regular order book and the order book for PPP projects, which are generally long term in nature. (in € millions) Regular order book Order book for PPP projects Total order book
2010 1,516 549 2,065
2009 1,403 455 1,858
Outlook Strukton faces 2011 full of confidence, partly because of its well-filled order book. It aims to stabilise the operational result (EBITDA) and to make further reductions in the funding requirements arising in the course of the year. Another point for attention in 2011 is the reduction of the costs of failure. The market for public private partnerships is expected to grow substantially after years of hesitation. The Dutch Rutte Cabinet has identified this as one of its priorities. Strukton has now acquired considerable experience in this market, and has consequently acquired a leading position. If Strukton is to tackle these complex projects successfully, it will need to invest further in system integration. Collaboration between the operating companies and the integration of systems, cultures and working methods are required in order to operate successfully in the chosen fields. As in 2010, Strukton will continue in 2011 with its programmes in the areas of socially responsible business practices and CO2 reductions (2% reduction per annum).
About Strukton Strukton is a full-service provider in the field of infrastructure and accommodation solutions. The focus is on the delivery of products and services aimed at mobility, transport hubs and uninterrupted operation. Strukton is a company with approximately 6,100 employees and revenue of EUR 1.4 billion in 2010. Strukton is a proactive partner covering the entire process from design through operation. It combines the specific know-how and experience of the five operating companies to give end-users a pleasurable travelling experience and enable them to live, work, relax, and learn in comfortable conditions. www.strukton.com
Editor's note For additional information please contact: Annemarie Hoogendoorn, Corporate Communications, tel.: +31 (0)30 248 6344 The full Annual Report and a related short film can be found at www.strukton.com/annualreport. This press has also been issued in Dutch. In the event of any discrepancies between the original Dutch press release and this English translation, the Dutch version prevails.