Arcadis N.V.

Good morning, everyone. My name is Jurgen Pullens, Director, Investor Relations for Arcadis.

I'd like to welcome you to the Arcadis analyst conference call and webcast, and we are here to discuss the company results for the full-year and the fourth quarter, which were released this morning. With us are CEO, Peter Oosterveer and our new CFO, Sarah Kuijlaars.

We will start with a short presentation by Peter and Sarah, and then we will open up for Q&A. You all received the presentation this morning, but it is also available through the website arcadis.com/investors.

Just a few words about the procedures before we start. We will begin with formal remarks.

We call your attention to the fact that, in today's session, management may reiterate forward-looking statements, which were made in the press release. We'd like to call your attention to the risks related to these statements, which are more fully described in the press release.

With these formalities out of the way, I hand over to Peter.

Thanks, Jurgen, and also on my behalf welcome to everyone here in person as well as obviously people on the webcast. What we're going to do is, as Jurgen said we are going to offer some brief remarks and then of course you'll have the opportunity to ask any questions.

Let me just offer a couple of firms that the real opening comments and provide a little bit of context that in the presentation today, we're obviously going to refer back to the press release and provide you with an update and on the most significant items relative to the fourth quarter, but we are also deliberately making an effort to make a connection between our performance over 2018 and the commitments we made in late 2017, when we have the Capital Markets Day many of you were there, and as we presented to your our new strategy in the late November of 2017. We also made some commitments to you and others in the market about our performance.

And we thought that it would be prudent and transparent to know that we're a little more than a year into this journey, allowing you're insight in how we rank and rate our own performance to highlight where we believe that we've made progress and have threaded the improvements, but to also highlight where we believe further improvements are necessary. So let me just start with our performance at a glance at a relatively high level and needless to say that we will provide more detail as we go through the rest of the presentation.

Were pleased with the strong performance in what we describe as our key markets, sometimes also described as the mature markets. Particularly in North America, Continental Europe, the UK and Australia and what you will see here little while, is that the by enlarge when you look at the performance in these key markets we are already meeting the commitments we made to all of you in the Capital Market Day, so that's pleasing.

Also pleasing is to see that overall for Arcadis in 2018, we created net revenue growth of about 3%, the operating margin is not quite where we wanted to be at 7.3%. But as you might've seen from the release there has been an impact from the regions, which are not necessarily performing at the level, we expect them to perform and that's most notably Asia and Middle East and the impact of the underperformance in these regions is about 0.8%.

We are taking our firm and specific measures in these two reasons to turn around the performance and I'm going to give you some specific examples of those. In order to do what we set out to do and in order to also be prudent on our accounting side we have to take a goodwill impairment of about 40 million, which is largely driven by the Middle East.

I'm going to give you obviously an update on our noncore clean energy at this in Brazil. In short the summary would be that we made progress and that we have started the preparation for the assessment of all the assets and our intent is still to sell these assets throughout 2019.

I think there significant on positive news at the end of the day. By the time you add up all the bits and pieces is that we have significantly improved our balance sheets, so our financial housekeeping is I think I'm definitely noteworthy to mention and I have no doubt that Sarah will speak about it [length] momentarily.

And that has allowed us to propose through shareholders to maintain a dividend $0.47 per share for 2018. So let me get into the details a little dipper and then making a distinction between the key markets which reflects just short of 85% of our total revenue and the markets which we have described as our improvement areas and that is specifically, the Middle East, Asia, and to a lesser extent, Latin America, and I will further detail that here in a minute.

When you look at our performance in key markets the operating EBITDA is at 8.7 already within the bracket we have committed for 2020. As you recall from the capital markets day we committed by 2022 to have an operating EBITDA between 8.5 and 9.5 and its pleasing to see that in the key markets, again reflecting about 85% of the of the total revenue we have already gotten to that level.

In addition, we've also improved our [DSO] in those key markets both for the company as a whole, as you might've seen from plus its 80 days now, which is lower than what we are committed to do 85 for the company as a whole. A good organic net revenue growth in those key markers also by large looking at the key markets I’m pleased with the performance and the progress we've made.

Part of that progress is also been created by the measures we took such as a stronger focus on making sure we picked the right clients, the right opportunities and also better focus on executing our project in a more profitable way. We still have areas for improvement as already said before they are in the Middle East, Asia and Latin America and you can see what we have been able to do there.

I'm going to probably expand on that later to give you a little bit of additional color on each of those regions, but clearly these are the regions which through the measures we have identified should allow us to turn the performers around throughout this year. Break it down even further.

So here's an overview of the key markets and the performance in our key markets and more specifically what we believe is driving that strong performance I'm not going to read each and every visa for you can you can do this for yourself. But I'm picking up a couple of things real quickly starting in North America for those of you been following our company for some time.

You probably remember the days where North America was seen as a problem child and I can safely say that that's no longer the case. The performance continued to be very strong, continues to improve compared to the year prior to 2018 so strong performance and as you often see in our type of business if you perform well, if you offer opportunities, if you create growth than other things will fall into place as well.

And the other things are for instance the voluntary turnover which is now fairly low for a US market below 10%, the engagement of our employees which is something we measure, is up as well, so just a lot of things pointing in the right direction. Continental Europe, another contributor to the strong performance through 2018, needless to say that we benefit from the strong position we have in particularly the Netherlands, the strong position we have in infrastructure.

And increasingly we see in these markets in Continental Europe but actually outside Continental Europe as well that digital applications and digital technologies become part of what we offer to our clients. That is for instance also the case in the UK in spite of all the looming uncertainty around Brexit our performance in the UK in 2018 has been strong,there we also benefit from an increased capability through the acquisition of Simmsa relatively small acquisition we did in 2018, which is helping us offering data analytics capabilities to our clients, particularly around water and infrastructure.In Australia, if I wanted to single out a particular region which pretty much leads the pack and performance on pretty much again all our criteria then I would have to single out Australia.

You could say a captive market, but it is a very good market for us and our performance continued to be strong and in fact over last year was an improvement compared to 2017.And lastlyCallisonRTKL obviously you are aware that in July we made the decision to rethink CallisonRTKLwithin Arcadis. The time prior to deposition was a time of anxiety, ambiguity,uncertainty for employees.

That is certainly also reflected in the turnover which is higher than we wanted to see. So that's something which is clearly an area of attention for our management team and our management team has actually also decided the management team at CallisonRTKLto streamline the organizational structure and to move it into more of a regional structure.

So CallisonRTLKalways been a strong contributor to our performance and we have the expectation that with the certainty were now providing and have provided throughout last year with the decision to retain it that we would see the performance contribute again to the overall portfolio. Then I have to also obviously talk about those regions which are not meeting our expectations yet, where we have taken a number of actions to turn that performance around.

In the Middle East you will recall that in the middle of last year, shortly after the middle of last year, we informed you that we had completed our portfolio analysis, at that time we could not be very specific about the impact it would have on services and on country. The reason was that we first wanted to inform our clients about our decisions that we wanted to inform our employees about our decisions.

And we also wanted to be sure that inform our clients that we were trying to get as much of the payments we stillowedin thosecountries before making that decision visible to all of the people in the region. We have now communicated those positions we have been able to get most of the outstanding payments resolved and the decision is that we are focusing on much less companies now, we are not working in Bahrain anymore, were not working in Oman, and were also not performing lumsum daily services anymore.

Particularly in Saudi Arabia, which have been a problem child for us in the past. Were still doing certain service in Saudi Arabia, so it's not an entire pool out of Saudi Arabia, but they're very, very focused on the higher value services such as program management and cost management.

So measures taken in going through all these activities and all of these decisions which is also typically looked at the projects we still have in our portfolio, and part of what we did was have taken a right-off on these projects throughout the remainder of 2018. Then in Asia, I think some of you through the conversations we had between the last time we were here in the July of last year and this time giving you an update on some changes we made on leadership these changes have now all been put in place.

We have somebody who is responsible for Asia and Australia as a whole, and that somebody is the former CEO of Australia. The person who was with his team responsible for that outstanding performance and that growth in Australia, and Greg Steele is now responsible for both Asia and Australia.

And we also appointed a new CEO in Asia. Somebody from externally, somebody with a very strong operational focus.

He started on the 1st of September and has used the remainder of the year to really go through the portfolio to make sure that we are aware of all the issues we could potentially encounter. So it has been a disappointing year in Asia for us, it's still a profitable year in Asia, but still disappointing a year it didn't meet our expectations.

But our expectation also is that going forward through a number of additional decisions which I'm not able to completely reveal to you because we're going through the same process in Asia, as we went through in the Middle East by first informing clients, informing [Indiscernible] about certain decisions to pull out of certain services and to pull out of certain countries. So we know what our decisions are, we have made the decision but just going through the process now which is the diligence to inform all the important stakeholders plans and employees.

I think for the Latin America here as well, and not because we are and have identified additional measures, most of the measures which were already identified in the past have been put in place. You will recall that at a point in time not go on overall Brazil was an important contributor to our Arcadis portfolio with over 3,000 people.

Overtime and over the last couple of years, we've reduced that to about 850 in Brazil, so a significant reduction. We expect in our benefit from a more stable environment post elections, the elections have brought certainty and an early sign of what could well be an improvement throughout the year is a strong order intake in the last quarter of the year.

So let me give you an update on the non-core clean energy assets in Brazil, also now as island decided to break it down into two different types of assets, there is one I guess the gas plant which is the brand you see at the top of the slide the left hand corner and then there's still large gas certainty facilities. You will recall that the gas, the gas plant was completed and has been completed since July of last year that we were in negotiations with off stackers for the gas.

We now have nine complex in place for 35% of that volume and we are in what we consider to be final negotiations for the other 35% of the total volume. And then of course we still like to sell the remaining 30% and we have the opportunity to attract either one, two additional buyers but we also have the opportunity to potentially and volume to the buyers we are already secured.

So that something we will plan to decide here throughout 2019. The power purchase story is different two facilities the largest one which is down at the bottom here know what the virtual is complete is in operation is currently producing about 60% of the total capacity and that total capacity by the time we ramp it up to 100% is under contract.

So we don't need to sign any contract find any [Vegas] that contract is in place. And then the last plan [salo] is being constructed as we speak or assemble as this slide show.

The expectation is that there we will get it operational in the course of 2019 and that also on the plant we have the production already under contracts so the electricity which we will produce through this plant is under complex so also there we do not need to find buyers for electricity were going to produce. We decided also provide you with a summary of the financial side of it this shouldn't necessarily be news to you because most of this was already included in the updated we provided throughout the third quarter.

Our net exposure is €59 million. We have a provision for about 28 million for an expected credit losses and the off-balance sheet guarantee amounts to 87 million and again this is something we have communicated before.

The net investment at this point in time is valued at zero. We have 50 million of loans from external lenders which will have to be refinanced throughout this year.

We've also had an independent part verifier our business case in the fourth quarter and the verification validated opposition. And then we still expect to see a loss in the first half of the year to be breakeven throughout the second part of that.

So let me now take you back to the commitments we made in the capital markets day in a more specific way. For those of you who have seen the presentation or were either present during the capital market day this is exactly what we presented.

It includes our three strategic pillars people and culture innovation and growth and focus on performance and it also includes the commitments we made throughout the capital market day presentation. And we felt that it would be appropriate to just give you an indication as to how we see that the journey is going where we feel like we've made adequate progress and that is shown in the green color and also indicate were more progress needs to be made in order to satisfy ourselves and to also ultimately of course satisfy you.

We’re just picking out a couple of things, our engagement scores up, which is positive because the only asset we have on our people and if our people are engaged. If our people feel ownership for the result they tend to obviously perform better and will be better in the position to satisfy our clients.

Our voluntary stock turnover is not done yet, which is clearly a disappointment but as I commented before it tends to go hand in hand with performance. Good performance and good opportunities for people.

The most significant example of that as I mentioned before is North America, where we performed really well. We grow the business, we provide opportunities for people and a voluntary turnover is coming down.

On innovation and growth probably one of the most significant things there is disposable on our growth, our organic growth and then maybe even more specific as a subset of that the growth we have been able to create four our key clients. We committed that we would grow at least at GDP level and than we would do double of the GDP growth for our key clients, and were actually exceeding that at this point in time, which supports of the other actions we have taken, which is to focus on lesser clients.

That's why we identified of our 250 key clients they are both global as well as regional key clients to make sure that we continue to serve those clients well and in fact trying to do more for these claims and not let ourselves being distracted by focusing on other clients who are not necessarily contributing in a meaningful way to our financial results. Innovation, and were making really good progress on digitizing our services, changing the business models we offer to our clients.

The one I'd like to mention here is the one around being seen by an external party as a market leader in providing digital DHS services, environment, health and safety services that simply is the result of an acquisition we did in 2017. You might recall that in 2017, we did a relatively small acquisition, a company called E2 ManageTech and the growth we have seen through that company has been really, really strong and the recognition as a market leader is I think a really good reflection of their position and of their growth.

And lastly on the more financial site, I'm not going to steal Sarah, but we have in summary, improve significantly improved our balance sheet, but we still have work to do on the margin side and of course, we also have an improvement left on the return on invested capital. So with that I'm turning now over to Sarah.

Good morning everyone. So may to first start to the project, I'm please to [Indiscernible] and of course as the great example of where Arcadis does really well.

Yes, so this is a vertical for us of that are absorbing carbon dioxide and eating oxygen and really improving the quality of life. We turn now to our key metric, as Pete has highlighted, we've shown an organic growth in our revenue, so revenue is being strong and that's translated to our EBITDA of 162 million which is level compared to last year as were highlighting as fair amount of foreign exchange headwinds there and it’s great to see that we maintain that.

Our operating EBITDA has flown a little to 177 and but his is being really impacted by some purchase right offs and provisions taken in the Middle-East and Asia and which is Pete has highlighted areas that really trying to weaken and I will address in the near future. Next that we've got the operating EBITDA margin of 7.3% but that's coming through and I think it's then agree great two highlight the very strong free cash flow of 149 million.

149 million takes that forward from the previous year. Of course you manage to do that by improving our net working capital position and improvement to 15.1% and we obviously talk a bit more about break down of that to the 15.1% and the improvement to DSO today across the globe which is really held bring the cash in.

Of course that has moved into a stronger balance sheet, a stronger debt position assessment 342 million over the course that helps to improve our debt coverage ratios. Backlog net revenue is flat 2 billion there is some decline in organic growth but I think then they come back to our selectivity going forward and stripping out on the middle east organic backlog is positive at 2%.

We move forward now to Slide 12 and look at quarter by quarter progression. Here we see debt revenue progression and the growth quarter by quarter and we’re seeing strong growth in our key market and its highlighted we got really strong margins in our key markets.

Obviously the key markets U.S, UK, Europe and Australia. Most be done in the middle east and Asia and that of course we will say the whole portfolio tracks down the operating EBITDA margin but really identify the average we’re going to focus further on in 2019.

Here we flow through on our net income state we start obviously with an improvement in our EBITDA to 204 million slightly higher to get EBITDA of 1.62 say flat to last year. And then we know see the impact of goodwill imperilment of 40 million, the majority comes from the middle east, comes from we looking in our portfolio and our forward looking plans and the impact that has on the free cash flow in the good will we done in our books.

To give us a EBIT of 98 our taxes are slightly higher recalling 2017 when there was one of tax benefit from year-over-year at the higher tax rate and there we see results from the associates the other imperilment which we communicated in Q3 of 53 million. So this does lead to a net loss when we take into account those two non cash movements.

However [indiscernible] healthy and as highlighted early given the healthy balance sheet has improved our net debt is down and our confidence looking forward we paying our proposal for $0.47 for dividend. So now its focus on our improvement in our networking capital.

I think it's really positive to see first the focus in the organization on this and demonstrating that we’re addressing some of this age debt. And the improvement through the end of the year was then [indiscernible] was the 21 million that arrived on working day six in January 29, which of course would have been prove this figure.

Further I think it's also worth highlighting that where we have showing improvement is the working capital so this is really where we are pushing work in progress through the organization into a thing was [Indiscernible]. So concluding a capital to 15.1% which is well within the strategic framework we set out in 2020.

So now we see the slow cost to quarter and really strong improvement since Q2 quarter-on-quarter and it's have the nice working capital down at 15.1%, well below our 17% and the DSO outstanding reduce down to 80 days well within our strategic framework of 85 days. And again as it is worth highlighting as some of those key markets beyond that I've been calling out Australia which is the best-in-class in the group and only in terms of the results but also in terms of how they manage DSO.

I should highlight but we are not done yet this will continue to be a really important focus there for 2019 we showed we can do it and I think the challenge now is really how do we embed this into businesses we are doing for all 27,000 Arcadian's. So here we see the impact of our EBITDA and the working capital and how they generates the cash so we highlighted we got the positive improvement in networking capital there are also as a positive improvement in the other working capital funding and more one-off and cause by less fee payment in IT and some of this as higher calls and also some VAT were coming through but of course the positive impact in our end year results.

As highlighted the tax paid is slightly higher and our interest paid is relatively flat, so our cash flow from operating activities is 214 and then with the CapEx comes down to the 149 the strong cash flow I highlighted earlier. There is an increase in capital expenditure and part of that is the investment in Arcadis way and in our new ERP system and in parallel.

We are continuing to consolidate our offices around the globe, and which cause investments and we definitely plan to target a lower figure of 2019 for CapEx under 50 million I think is more reasonable. So when we report this various features are positive together with strong cash flow 149 bringing down the lower debt the spend really improves our covenant ratios and covenant ratio of two by the end of the year and the your end point is 1.7 again a very important set forward to demonstrating we are delivering the magic that we set out in the strategy framework.

In January, we also completed the a refinancing €200 million with our key call relationship banks was oversubscribed, it's been a hectic January but and everything is signed and that really gives us the foundation stability going forward with a very healthy and diversified facilities and the significant amount of this 915 committed credit facility which gives us more than that liquidity moving forward. So highlighting that our OpEx is very keen to ensure we have some sustainability KPIs of course that's really quarter as well, so that get this potential to manage those interest rates where we continue to deliver our sustainability.

So we now move to the segments highlighting the perfect example here so where we seek a design for waste water management and for private clients of course there is lot of work for public clients there is well and I think particularly in the U.S as Peter highlighted it’s the as we grow in our capability in digital and that engage with clients providing that digital road map and that capability is allowing us to win project with rang of clients and financial institutions to global industrials. So here we see a strong revenue growth in North America 6% and its worth highlighting to think about built on 2017 but also significant built on 2016.

Slight decline in Latin America but in Q4 its positive and absolutely there well set up to benefit from hopefully most ability in but also in Lat Am going into 2019. The highlight causes a North America operating at 8.8% operating margin with strong results across water and environment.

Latin America came out at 1 million loss significant improvement compared to 2017 and 2016 and again Q4 best quarter yet so a positive trajectory and it's great to see that both regions have got a strong backlog set us well for 2019. Turning to the Europe and the Middle East, let’s with the UK and the project there again digital one, digit capture to the lower crossing and also with the seams acquisition last year we manage to position fill well with some of the wash and utility company, so those companies are managing AG infrastructure, they really benefit from our enterprise decision analysis that really helps us work through them and across the water utility that also got pressure and regulators about how they are addressing there sustainability and there environmental requirement, so we’re well placed them.

The UK showed a very positive organic growth of 13% and a strong margin on Europe the revenue growth is light low 3% but a strong operating EBITDA margin 5.4% and of course led by home country Netherlands. The middle east bit of a different story, there so following strategic focus on clients, which cause then lead to a organic net revenue decline and the margins has been impacted by certain some provisions on couple of more material projects in Q4.

So backlog looks strong, taking strong UK, Europe, middle East this is by choice so being really explicit and specific about who we deal with moving forward. So now turning to Asia Pacific here to project in Australia where we played a prominent role in two metro project in Australia which are multi-billion dollar infrastructure projects in the metro..

and the metro it involved a fire stations and a tunnel and then the one in we've also used some really focusing on the customer engagement, they are customer centric of using a virtual reality which probably was a first as it and was very well receive by the client. So on Australia strong revenue growth and an outstanding EBITDA margin of 11.7%, as an outstanding DSO.

Asia is under bit more pressure and we've got more to do in Asia to manage the revenue and the margin, but I think as a lot of opportunity now with the new leases in place to focus on what we do well and where we do it well and, so that will enable us to first Asia to be even stronger in 2019. Turning now to [Indiscernible] and the project we saw from here in Berlin so I think it's very hardening and positive to see the revenue growth back positive in the second half of the year with an EBITDA of 19 again 24 from last year and it's the healthy margin but it's been healthier obviously and now we've got the stability for this new [Indiscernible] refreshed and very focused on pivotal delivering that organic growth and really delivering in line with the new strategy.

And now I hand back to Peter.

Let me now wrap it up at inside an how we think that we will continue to deliver sustainable value with an emphasis on sustainable financial values. There is not a value as we well but the emphasis here on the next slide is unsustainable tell you, what are some of the levers, we think we can pull to continue to improve that financial value, and then finally, I'm going to share with you what our priorities are for 2019, and I suspect that they won't surprise you but the think it's good to let you know what our focus is and how we plan to advance on these areas.

So first of all on providing that sustainable value and again, with the emphasis on the financial value. These are again, the commitments we made in the capital markets day so first of all our net revenue and organic, we are well on our way with 3% this year contributed to that growth as I mentioned before is to make sure that we pick the right clients.

That's why it was so important that we went through what was a somewhat liberate process to identify the top 250 clients. Those clients, we will serve pretty much in any condition and those clients, we actually like to do more for and as I mentioned, our growths for our key clients has been 10% over 2018, so that supports that whole direction of being more focused on the key clients.

In terms of operating EBITDA margin not where we want to be, we are and where we want to be in quite a number of our regions in fact 85% of our revenue or the EBIT is associated with 85% of revenue already generates the margins we would like to see next year, we still have work to do, particularly in the Middle East and Asia. The program, which we introduced to you before making every project count is starting to bear fruit, it is a contributor for margin improvement we see in the more mature key markets and that program I think is now firmly embedded its becoming part of the DNA and in our case is to continue to focus on the execution of a project and not just the technical execution.

But maybe even more sort of financial execution. The use of our global excellent census our plan this year is to grow that with about 15% so more work in the global excellent centers, which works both ways.

It will give us an opportunity the to be more competitive. And if we deliver and sell it smartly it like you will also give us an opportunity to be more financially attractive.

And then on the net working capital and DSO site that will start again with clients selection and hence the importance of making sure that we focus on the right clients, if you focus on the right clients as we for instance do in Australia that these are tends to go hand-in-hand with other performance and lastly the Arcadis Way here is our way of referencing the implementation of the Oracle system and I can safely say that now having Oracle available in a number of our regions the power of having data available is substantial and more and more people start to see how that is actually helping us to make the right choices and at the end of day perform better. So in closing, one of the things were going to focus on this year.

While we will continue to focus on our revenue growth and we intend to largely built on the very positive momentum we have in our key markets. Again, North America, the UK, Continental Europe and Australia and lethargic are doing exactly what we want them to do and we will not disturb that.

In fact we want to see more of that. For the margin improvement is equally important if not more important.

I think the quality of the earnings is definitely an area of focus. And this year we have to be very rigorous in adhering to the actions we identified in the Middle East and Asia.

So that we turn around to that performance that means that we need to continue to focus on the right clients. That means a willingness to pass on certain projects which are simply not going to give us the return and we expect to get so discipline and I can't illustrate and use that were not discipline is going to be the key here.

Leveraging making a report account we already have a lot of positive momentum and growing global excellent census as I mentioned as I was speaking about the prior Slide. And where we have opportunities to reduce the costs we will definitely capture those opportunities as well.

All of that, should of course result in the continued improvement of the balance sheet. We are pleased with the progress we made in 2018 but there is no reason for us to rest in our world they saw the improvement which would like to create in 2019.

And at last but not least, and maybe an appropriate way to finish this presentation with something we’re not necessarily proud of. It is a legacy as you were dealing with the clean energy assets, there noncore clean energy assets in Brazil.

Our focus first me, including my personal focus is on making sure that we finished last. I guess repowered facility as quickly as possible that we push and pursue any opportunity we can find together with the financial advisor we selected to find the right buyers for these assets and again as I said before, the objective is to try and sell these assets throughout this year and I will definitely pull up a nice bottle of Champagne by the time we have reached that point.

And by the time we have reached that point. So in closing thanks for your attention so far obviously we're now going to open it up for questions.

I am pleased with the progress we've made in 2018 but we still have work to do to continue the journey in 2019. Thank you very much.

Maybe a quick comment if you want to raise a question. Please use the little button on your microphone so that people who are on the webcast can hear your question as well.

A few questions from my side. A little bit look -- walking through the P&L first volatility in the sales growth are seems that's a little bit through different regions.

Quite significant growth in U.S. picking up quite significantly.

Continental Europe little bit slowing that's a big contracts in there which starting up are running of. So let’s say this is trend you expect to continue into 2019 for those two regions.

Then looking at the backlog excluding the Middle East 2% growth. But if I look at the different numbers by region, I can’t let’s say add them up because if you for example, in a bigger regions, you have quite significant growth clearly had over 2%.

So could you give maybe some more detail, let’s say the Middle East a relatively big order book? Or in that kind of little bit detail on how big the order books are by region.

And then looking at the Middle East, the goodwill, write down. Yeah, you are in what position in Q4.

When do we expect this at a certain point I think the mid yearnumbers or even before that you’ve already indicated that you expect that the Middle East will start to turn middle of this year and it was expected to profitability. Could you give some feeling on that?

Because sales is in the more pressured than I think initially expected. So can you give feeling on how do you see profits for 2019.

And then my last question on Asia, the strategic review. You should already have taken some provision there, but do you believe that’s another review is behind to and also the provisions taken there are now the most of its taken or do you still expect something maybe in Q1, maybe some additional project has to be written off.

Let me maybe start with where you're finished Hans, and address the Asia first and then Sarah can take the other, the P&L related questions. So in Asia, we as I mentioned, we changed the leadership in fact I should go probably little bit further we actually change the structure as well as simplified the structure so was not just an individual which we believe is ultimately going to make the difference.

It's actually a number of changes including simplifying the structure. And of course this individual who is now the CEO of Asia, first of all I happy to know and quite well because it's a former colleague so I at least know, where his focus will be and he's a very strong operational leader and I'm comfortable that he of course has focused on those concerns and opportunities which could potentially become the biggest concern.

So I think you're qualified by saying do you believe that by and large and I'm not probably using my word by and large you have identified all the issues then I'm pretty comfortable that indeed we did identify the bigger issues.

So I try and remember your question. So I think firstly on margin, I think it's rephrasing that there are so that's the key markets they're doing really well.

Yes, we got North America it was up there at 89%, UK, Continental Europe and Australia standing out over 11.7% yes we have to do more on Asia but that's still positive at the moment and into the Middle-East it was negative but that's really related to those projects write-downs which we believe then get to it in the much more robust position in 2019 and will and the Middle-East will contribute positively into 2019.

And I was issuing more focusing on the sales that you see some positivity for the quarter, so it was quite a pickup in growth in North America and there is slow down into slightly negative territory in Q4 in continental. That always from big we contract the case or the some bigger and bigger contracts original and we believe that's a Q4 is a good indication for let's say also the first half of 2019?

I think in Q4 the revenue there were also some write-downs on revenues the way you were reviewing what's in your run ahead how robust is that and but indeed we are positive about revenue growth in 2019.

I think the question was also probably new rewards in the last….

And North America has been pick-up to do additional growth and in…

And North America in the fourth quarter we had a very, very strong fourth quarter and it's actually a number of large contracts which could have easily fallen into January as well and then we would have probably seeing out lesser growth so nothing to be concerned about it just the timing of it.

And then in release will you expect already a profitable in 2019 in release.

Yes.

I'm ahead of the numbers of course you are growing to 75% in North America, 5% in…

The back mortgage is significantly distorted by that minus 57% in the Middle-East where you've got strong backlog in Latam positive in North America very strong in UK solid in Continental Europe and negative in Asia and then very strong in Australia, and we could and we would like in [Indiscernible].

It’s obviously there is not there is also focusing on this the percentage per se but the percentage are relative to the base of 25% of Latam is a great number but it's on a small basis. So at the end of the day it comes out as a growth or even though it actually comes out as minus $0.02 because of the large impact of the Middle-East.

Philip Ngotho, ABN AMRO. I have 3 questions to start with.

The first question is -- I'm wondering if I'm correct with this observation. But has there been a restatement of the unbilled receivables last year?

It was, last year, 487 million. It's now been restated 565 million.

Is that a correct observation? And can you explain a little bit why that restatement has taken place if that's the case?

And my other question is, I'm sure we will get more insights with the annual reports when it's published, but can you give an indication of how the level of guarantees have developed this year versus last year? And my last question from now is on ALEN.

I would like to know what's your expectation is of the cash outflow for 2019. So partly, I guess, the provision of 29 million that will be a cash outflow.

But what are the other expected cash outflows when looking at bringing their whole operations up and running? And also, why do you only project a breakeven result in the second half of the year.

Breakeven results in the second half of the year while the plants should be fully ramped up by them.

So talking on the receivables you will call that IFRS 15 came in play so that impact how we present those number much more detail in the annual report but there is nothing we safe in that but its just reflecting the IFRS 15.

But the number last year was, so if I look at the 2017 number there is 565 was not 85 last year.

When you see the details so they both had to be reflect how you represent in 15 and so you have to bring out the provision you were taking, so it does change the way we demonstrate the results. On the guarantee yes it's also in the annual report, the level is slightly up but its worked really understanding.

So the guarantee behind, lot of decisions which profile of that, the majority of the guarantee as a high number or very small guarantee supporting either projects bank guarantee, leasing for building etcetera and I think only 27 out of 100 are more than 1 million and in recent pass they have never been called. So the tightening up we need to do in 2019, we should all do equal to plate but for me there is very low risk associated to those.

But you’re taking some right now some purchase as well.

Guarantees are not being called.

So to help get a feel for size of this, by the time development big number, but the reality is that is about and don’t call me MDX, 1300 different guarantees which are with the performance guarantees on projects with an average of just over 100,000 each. So if you had one big guarantee of 200 million versus $1300 each that’s a totally different picture and that is the result of type of business we conduct whereby a lot of clients particularly in certain regions are simply asking for performance guarantees on projects.

So some of many small guarantees.

But can you give me a feeling of what level is been at 2018, how much.

It went up about 20 million.

And is that just for my understanding because I assume that if you have fixed price contracts we need to take its more often that you have a issue a guaranty. So is it reflection I expect that you might be actually taking on more fixed price contracts and risk.

It is simply the reflection of regional preferences, by the time you really break it down in great detail. You just see that in some parts of the world, particularly in North America and Europe which is where the majority of the guarantees reside the client simply expects us to provide a guarantee that again.

They are on average and the €30,000 on average.

It's gone up from 286 in 2017 to 313.

And the last question on Allen.

Finally on Allen. So of course we’re aiming for cash neutral in 2019, although we got the plants operational the only beginning now to send out invoices, and then you get the cash in.

As the Peter’s highlighted we've only got a proportion of the gas-to-gas under contract. Now there's still the final connections being made.

So unfortunately, as we've learned it takes more time than we would like in Brazil.

But those were 2 questions. One is actually, first, the cash out, just to -- you took a provision of €29 million.

So I assume that you're expecting that to be a cash outflow in 2019 once you divest the assets, right? It's a credit loss.

It’s a P&L impact relating to our existing guarantees.

But it will be a cash out, right? If you sell the assets but you have to repay part of the debt that you don't recoup?

So it would be a cash out depending on the cash price we achieve on sale.

Okay. So that's a €29 million.

But other -- what is the other expected cash outflow from getting the plants completely operational? Because now you still booked a loss in Q4.

So what is it for Q1, for Q2? And then my next question, aside from that, from just the cash outflow, how does it -- why do you only expect to breakeven in the second half of the year when they're fully operational?

And maybe, if you can share some insights on what you think the profile is once it's fully operational, the cash profile or the earnings profile?

So let me explain the operational side first to understand why it takes time, even though the operation. So the gas-to-gas plan was operational as of July of last year; operational in the sense that it was fully functional that we were taken to gas from the landfill.

And that we had the opportunity to actually transport that gas to offtakers. However, at that time as we communicated, we didn't have a contract now we have a contract for 35% .

The one and only piece which we still need to do and that's why is that that we expect to start producing or shipping to gas towards the end of this quarter is to make a connection at the client site. This gas is actually ships through cars trucks.

And so we need to make a connection with the client site which is expected to be completed by the end of March. And that is a time whereby we physically are going to deliver the gas to the client and can start to invoice to the client.

On the gas-to-electricity, that’s actually really complicated story to be perfectly honest. But we are delivering 60% of the electricity at this point in time which is being delivered to a so called clearing house.

We are waiting for the electricity company to give us the final operational permit and only when we received that operational permit, which we have been told is imminent, but we are taking a bit of a additional question if you like, because we've learned from the past only when we get the operational permit we will be able to start delivering to the grid and then we can invoice the client as well. So that's the time delay which I think is part of your question I feel that they are operational but you don't see cash coming in.

And any feeling on how it looks like once this is all, once you can deliver to the grid? So what are we talking in terms of numbers, in terms of cash generation per year or net profit?

I think because of trying to learn from the experience, we probably don't want to be too specific in that regard. And I know that gives you probably a degree of uncertainty but would rather not be specific again because everything seems to just take a little bit more time of Brazil.

But we have built in that margin as I just explained, at least in our execution of the projects that I ran and not be very specific on how much cash we would generate in the second part but the expectation is that so it will not be a long standing there.

And just on one question for clarification. If you look at your debt schedule and after the recent refinancing a notice to jump in the weighted average interest rate of 3.2%to 3.8%.

If I do a very quick and dirty calculation that would imply that the incremental cost of debt on the refinance tranche of 200 million is about 6.5% and it screens rather high, and so I'm pretty curious what the interest rate actually is on that refinance tranche.

So the refinancing deal so there hasn’t been a big shift in the interest rate so that how you got that calculation but it's with the same thing to look at bank and it's been recent terms of course sp some interest rates that have gone up but there is nothing strange unusual in that structure.

But does that mean that on the other outstanding debt interest rates also arose because otherwise it's those 60 bps jump you had in your weighted average cost of debt was caused by the refinancing then it's the only source that can drive that increase, right?

Yes, so that's a slow thing but I think we don’t see an increase in terms of interest where as going forward.

Well, that's pretty interesting then it's hard for me to understand why that increase happened from 3.2 to 3.8?

Maybe we will provide you the back of…

Yes, it's pretty interesting.

Couple of questions just from my end. When you talk about the year progresses that wasn’t in Brazil, am I right and you can correct me also what's selling behind you that it's could be also a deal in 2 tranche so or do you still okay it target to sell all the assets in one transaction?

The most likely scenario where is that we would have probably 2 different transactions because of the nature of the facilities, because one being advance I guess the gas plant and the other one being I guess to electricity. But that is not certainly you had I mean that's why we are now with our financial advisor Itau I talked to different perspective by us but I would say if I had to put my money on what the most likely outcome would be then it probably be two transactions.

As part of that discussion also is as you've seen we most likely will and say in couple of weeks from that still have 30% of the gas to gas to be put under contracts. The people we talked to could potentially have an interest in what's selling that's to another buyer but using it for either their own business and then their own business model so it did get some little complicated but the reason why we wanted to of course secure the financial advisor as part of dialogue early is to basically explore all opportunities rather than waiting to over a gas was contract an example of the gas to gas plan and then start the conversation so there is still different options are possible.

But again, my most likely scenario would be there to the gas or electricity plans will be sold to one party and the gas to gas plant to another party.

Could you more or less indicate how much of your net revenues can be allocated to top 250 clients.

Yes, if give you a specific amount, wanted to be sure that as a specific. I probably need to give separately if I give you a specific number but defiantly the majority of our revenue.

Looking at your working capital ratio also looking to 2020 targets. Shouldn't you be sharpening these target since there are still mentioned yourself we are not done yet still quite achievements to be made.

Should you be sharpening those targets.

You’re taking about the financial targets.

Yes and your network capital ratio of below 17-year-old and there is still lot of progress you mentioned yourself Sarah mentioned, we are not done yet progress so. Shouldn’t you be fine-tuning these targets.

I think that's a fair question and I think that is probably part of validating your strategic plan and the action you need to take which is something we actually plan to do throughout this year as well. So yes, I can see your point if you committed to 85 as an example of the we are already sitting at 80 why would you not type that sort.

I can guarantee you that now that we’re 80 that no one is thinking while. We can let rains go because 85 is good enough.

I can deftly guarantee it. But I can see your point, but we have not made that commitment at this point in time but at this part of the review we will undertake this year.

Will you commit to the current levels 80 and 15 net capital?

We have committed and are committing to the goals we set for the capital markets.

Now we have reached those levels and you still believe we’re not doing the same improvement, one go about these levels in 2020.

We’re still committing to the capital market. When I said we’re not done yet I was largely focusing on the improvement areas to get them to a level which is more acceptable to what we think is the right number.

Maybe follow up question on the cash flow and the reduction receivables. If you look let say to receivables especially through H2, Q4.

Where that you been collecting the most [H1] and still acquired high number of in the Middle East 265 so you have you been mainly pushing or been able to collect and more it's any easier regions already also part of that improvement in Q4 driven by Middle East please get some on that.

So the push is absolutely being a local push, because obviously some of the high levels receivables are in the regions where we have high level revenue for example the U.S is a very high contributor to that but the push is being throughout in the middle east, yes we still have some sickly receivables that we are which you can see in the DSO days but even in the Middle East, we’ve seen cash flowing through. So Middle East in itself which seems more than €200 million cash in 2018.

We highlight the 25 million half year but there’s cash moving through. Clearly it's not moving too quickly enough, which is why we're maintaining focus on that.

But the key for U.S. improved UK improved, Australia improved, all showed improvement.

And through the year KS -- as the Middle East improved compared to the end of last year because I think remember Middle East was somewhat lower at the end of last year that the DSO.

So in terms DSO days it is those, it is still high. But in terms of the absolute amount, it is lower.

Yeah, that’s also because your sales going down.

So indeed. Yes, absolutely exposure is low, but indeed the DSO days is not where he wanted to be.

Yes. Philip Ngotho, ABN AMRO.

2 follow-up questions. On ALEN, I was wondering, you indicated that there are some loans that are maturing this year, 2019, so €50 million.

Normally, what you did as well for the corporate, normally, you always renegotiate those loans 1 year ahead. So I assume you have been in talks with the banks.

Can you give us a feeling on how these talks have progressed? And why it hasn't been renewed yet?

Or are they actually not planning to renew the loans at all? And is it really just a matter of divesting?

And if you don't manage to divest, you have the take loan on your balance sheet. Then my last question is on the write-downs in Q4.

So in total, it was €11 million, majority from the Middle East. Just wondering if you can give a little bit more color on the nature of these write-downs and the projects that you took the write-downs on?

And you also indicated that you're looking to decrease the exposure to more kind of the fixed price contracts. So I'm wondering how many of these kind of projects are in the order book in the Middle East?

Or what kind of size are we talking about?

So let me take that one, first and then I’ll ask to come on the 50 million renewal loan. So, in the Middle East what we said is that we would eliminate fixed price DNE work and more specifically in Saudi.

And that simply learning from the past whereby first of all it is a highly competitive environment and secondly the behavior of the type of plans we typically serve with these type of services was unpredictable and we don’t want to be in a situation where clients are largely unpredictable. So when I say shy away from lump sum work it's like we don’t feel that we are capable of doing lump sum work but it is specifically any work and more specifically in Saudi.

Because when you for instance break it down further and you look at the behavior of the clients in the Emirates. And actually the financial performance in the Emirates than it much closer to what we see in say the more in which are [indiscernible] so we make a distinction I want to be sure that we don’t paint everyone with the same brush.

We make a distinction in countries and type of services. As far as the write-downs is concern those are number of projects which actually fall in that same category, category of lump sum work which we took on some time ago, whereby we had an expectation that at a point of time the client would be amenable to awarding us a variation orders or expansion of time anything which we felt that we were old and we now have concluded that that's probably not going to happen.

And can give you us an idea of the size of the order book in Saudi Arabia?

The size sort of back I don't have the number here but…

So by country…

Is it just Saudi?

Yes, Saudi Arabia because I'm wondering is that's the highest risk and that's where you have taken the right down. I think we've actually we have de-risk our on Saudi portfolio so a number of things simply from July last year we've not taken on any work anymore which is in this category I mean the fact that we now communicated it doesn’t mean that we are now as of this date are not taking on this work.

This was communicated internally as already as of July of last year. We took the time also to clean up any receivables we could clear up and take these right down.

So in Saudi I can with according to numbers but I can safely that our backlog has come down quite a bit.

On the loans and details historically there have been third party loan and which is already have been load over and the both happen I think in the end of Q2 beginning of Q3 and it is deeply associated to stock in those conversation with the bank to refinance in the middle of the year.

Okay, so it's to regular cause I mean you have done this more of…

We've done it in the past and but we haven't got it hasn’t really finalized.

Once again a question about the Middle-East you mentioned about cancellation of a large project. Who cancel was it you or was the counter party and co-related to that is there any chance of penalty or in the reinvestment.

And secondly that loss time you might mentioned that more or less Middle-East was bottom out in 2019 so taking up again at the end of the year with a backlog decline of 57% do you still believe that you expect to both out in the release in 2019?

The cancellation of that particular project which is not something we mentioned all the time but this in this case it was a very large project it actually was project in the Emirates or let me be a more specific in Dubai, and the client cancel this project they went back and forward and in fact they had a number of durations throughout the year were by the reduce this cost, then brought it back and then finally cancelled the project, so if there is a it was a substantial enough project for us which we had in backlog and we have to take out to actually mention a single large project. And then the second question before.

Before you answer the second question will it be in reimbursable cost you've made or whatever?

So there is a little bit of tail end on that project which was still debating with the client to get us reimburse for the remaining cost but I would not necessarily say that's material.

And my second question was about the revenue profile generally firstly mentioned do you expected the gross margin in 2019 with a 57% decline in backlog do you still believe that would to be the case?

Well, I would certainly say that we bottomed out in 18 on the bottom line and we there to be because the expectation is a service that in 2019, we will at least be positive at the bottom line. And that's clearly the expectation.

I think as I see it right now and with our selectivity, I’m still maintaining the same position that 2019 will be bottom out.

Are there any more questions? No.

Then I would like to thank you for your attendance. Thank you.