Julio maggi, arcadis

Lead the Strategy

Manage the Risks

Assure the Outcomes

Commercially Led Program Management

Julio Maggi | Global Head of Program Management | ARCADIS

Monday 15 September | Riyadh

2 © 2009 ARCADIS 17 September 2014

About ARCADIS

KE

Y S

TA

TIS

TIC

S

GE

OG

RA

PH

IES

$3.3bn REVENUE

125 YEAR HISTORY

22,000 PEOPLE

Worldwide

TOP IN WORLD 10

TOP IN EUROPE 3 32%

36%

36%

Emerging

Markets Europe

United States

Our Business Lines and Services

• Rail & Road Transport Solutions

• Airport Solutions

• Ports & Industrial Solutions

• Mining Solutions

• Smart Infrastructure Solutions

• Water for Industry

• Water Supply and Treatment

• Water Management

• Conveyance

• Site Evaluation and Restoration

• Environmental Construction Services

• Environmental Planning

• Strategic Environmental Consulting

• Masterplanning & Sustainable Urban Development

• Performance Driven Design

• Business Advisory

• Contract Solutions

• Commercially Led Program Management

Commercially Led Program Management works across

all Regions and Business Lines

Infrastru

cture

Water

En

viro

nm

ent

Bu

ildin

gs

24% 15% 33% 28%

* ENR Program Management Ranking vastly understated

September 2014 3


Current Major Middle East Assignments

Current Major Middle

East Assignments

Ashghal Building Affairs Program,

Doha

• PMO, Program Manager, PMC

(JV w/ Mace)

• CapEx budget: QAR Confidential

• 38 Projects: health, education,

sports, ports…and a zoo

Kingdom Tower

(Jeddah Economic Co), Jeddah

• Program & Project Manager

(JV w/ Mace)

• CapEx budget: SAR Confidential

• Tallest in the world (> 1 km) when

complete 2018

Sharq Crossing (Ashghal), Doha

• PMC (Sub to Fluor) controls,

commercial, design, risk

• CapEx budget: QAR Confidential

• 3 iconic bridges (3.6 km), 2 tunnels

(5.9 km) = 9.5 km

September 2014 5


I. A spotlight on the Kingdom of

Saudi Arabia

II. Commercially Led Program Management

III. Innovation – A Rallying Cry…

Agenda

2025 Economic Vision

• Investment underway in education,

healthcare, sports and recreation, and

infrastructure to support strong,

sustainable GDP growth consistent with

2025 Economic Vision

• Diversification of the economy – reduced

reliance on Oil and Gas generated

income

• Demographic pressure is a key driver –

population that is expanding, >50%

under the age

of 28

• Need to create a sustainable economy

driving the adoption of international

quality standards

• Currently relatively low returns from its

built asset wealth but…

• On course for a prosperous future

supported by its built asset wealth

Spotlight on Kingdom of

Saudi Arabia

Scalable, Flexible

Portfolio-Program-Project

Management is key to

realization of 2025

Economic Vision

September 2014 7

September 2014 8

“Commercially Led”

Program Management

• Clients contemplating huge

nation-building investments

• Increasingly volatile,

uncertain, complex and

ambiguous world

Focus intently up front on

Client’s risk-adjusted return

expectations and define the

intended benefits

• Lead the strategy, manage

the risks, and assure the

outcomes

• Provide stability,

predictability,

essentiality, and clarity

• Deliver exceptional value

PEOPLE; SYSTEMS;

PROCESSES…

… TO ACHIEVE INTENDED BENEFITS

September 2014 9

“Commercially Led”

Program Management PEOPLE; SYSTEMS;

PROCESSES…

WHAT ARE THE INTENDED BENEFITS?

PROJECTS

PROGRAMS

“People don’t buy

what you do.

They buy why you

do it.

“What you do

serves as proof of

what you believe.”

Simon Sinek 2013

Why we do it Create Client Value

Make a better world

How we do it • Understand and define client’s required

outcomes

• Develop KPIs to measure performance

• Implement scalable and flexible frameworks

• Deploy optimal people, systems, process

• Implement program/project controls to

provide visibility over actual performance v.

plan

• Apply rigorous commercial discipline, start

to finish

• Reporting: scalable, real time, forward

looking, actionable

• Enable intelligent decision-making

• Relentless, committed leadership focused on

strategy and tactics

• Aggressive, hands-on management focused

on tactics and operational excellence

• Identify, evaluate, define, manage and

mitigate the risks across the entire supply

chain to meet or exceed all KPIs

What we do Lead the Strategy

Manage the risks

Assure the outcomes

September 2014 10


A Rallying Cry…

Innovation

September 2014 12

Innovation in the

Construction Industry Provoke

Thought

Challenge

Assumptions

Promote

Debate

Inspire

Action

The “UNTHINKABLE” is no longer unthinkable…

Gives new meaning to the discipline and practice of

RISK MANAGEMENT

Geopolitical and Socioeconomic VUCA are disruptive

Technological VUCA is more than merely disruptive...

It’s revolutionary

September 2014 13

VUCA Geopolitical

Socioeconomic Technological

We all live and work in

a world of increasing

volatility, uncertainty,

complexity and

ambiguity

September 2014 14

Volatility Uncertainty

Complexity Ambiguity

A. BIM

B. Artificial Intelligence

C. Robotics

D. 3D Printing

Revolu

tionary

– T

echnolo

gic

al

A

B

C

D

September 2014 15



A. iWatch and Android

wear

B. Aerospace

C. Renewable Energy

D. Batteries and

Driverless Vehicles

Revolu

tionary

– T

echnolo

gic

al

A

B

C

D

September 2014 16



A. Cloud Computing

B. Big Data and the

Internet of

EVERYTHING

Revolu

tionary

– T

echnolo

gic

al

A

B

September 2014 17



The power of the

CROWD

Revolu

tionary

– T

echno

logy-E

nab

led S

ocia

l P

hen

om

ena

What does all this

technological VUCA have to

do with the construction

industry?

• Unfortunately, not much at

the moment…

Historically late adopter of

technology

• Nearly universal adoption of

CAD and communication /

collaboration tools and

technologies

• Many product innovations in

downstream supply chain

are specified, procured and

incorporated into built

assets

And yet, in our way of

working to deliver built

assets, do we

• Design…

• Procure…

• Construct…

…faster, better, cheaper?

Not really…

September 2014 18

Innovation in the

Construction Industry?

• Chronically flat / declining labour Productivity

• Little real innovation

• Relentless margin compression

September 2014 19

Productivity

Construction productivity has been flat or falling in many advanced economies Labour Productivity Index: 100 = 1989 for the United States, 1991 for Germany

Sources: OECO Labour Productivity by industry [ ] Rev. 3% [ ] industry analysis

150

1989

Rest of Economy

Construction

140

130

120

110

100

90

80

0

2000 2009 95 05

Developed Markets:

• Expensive labor wields political power and resists innovation

that would increase labour productivity (translation: kill jobs)

Emerging Markets:

• Cheap labor diminishes impetus toward innovation

Hypercompetitive marketplace.

• Tender regulations and instructions often very prescriptive,

limiting process innovation

• Low bidder wins. Increasing margin compression

restraining resources for R&D, stifling innovation

September 2014 20

It’s Not All Our Fault…

6%

54%

40%

37%

38%

25%

7%

62%

31%

51%

25%

23%

Consolidation

Organizational and financial

engineering

Overhead cost synergies

Operating cost synergies if

merged revenue not cannibalistic

Market trend toward “one-stop-

shop”

September 2014 21

Combatting Margin

Compression 2006 Revenue 2011 Revenue

2006 Revenue 2011 Revenue

ENR Top 500 Design Firms

ENR Top 400 Construction Firms

0

10

20

30

40

2007 2008 2009 2010 2011 2012

Construction Buying Engineers

Engineers Buying Constructors

E&C Transaction History (Integrated Delivery Consolidation)

September 2014 22

Construction vs

Technology

Copy write: Jason Burg on February 4, 2013

Financial & Organizational Engineering

v.

Innovation

Clients and customers reward

innovators with

• Fatter margins

Capital Markets reward fatter

margins with

• Higher valuations

Glimmers of light but…

Very little real innovation in

the Construction Industry

during the past ¾ of a

century

• Thin Margins

• Low valuations

• It doesn’t have to be this

way…

September 2014 23

Innovators are

Rewarded

“What you do serves as

proof of what you believe.”

Simon Sinek 2013

September 2014 24

Technology Direct route to Innovation and

Client Value

“People don’t buy what

you do. They buy why

you do it.”

Simon Sinek 2013 Innovators

2.5%

100

75

50

25

0

Mark

et

Sh

are

%

Early

Adopters

13.5%

Early

Majority

34%

Late

Majority

34%

Laggards

16%

Tipping Point

Innovation Diffusion Curve


Construction vs Technology

Financial Performance Comparative Analysis

Unfair Comparison? Perhaps

Instructive? Definitely

Premise

Innovators are rewarded with

1. Fatter margins by their customers and clients, and

2. Higher valuations by the capital markets

Financial Performance Comparative Ananlysis27-Aug-2014

CONSTRUCTION INDUSTRYACM KBR URS JEC FLR ARCAY WYGPY CBI average total

$USD$

Valuation MeasuresMarket Cap (intraday)5: 3,730 3,260 4,170 7,260 1,183 2,410 4,110 6,980 $4,138 $33,103

Enterprise Value (Aug 27, 2014)3: 4.33B 2.38B 5.75B 7.32B 10.06B 2.78B 4.65B 8.90B

Trailing P/E (ttm, intraday): 15.17 44.92 22.1 18.14 18.96 18.97 15.91 13.74 20.99

Forward P/E (fye Sep 30, 2015)1: 14.33 15.16 17.91 14.23 14.8 N/A N/A 11.03

PEG Ratio (5 yr expected)1: 1.8 7.5 1.22 1.62 1.37 N/A N/A 0.87

Price/Sales (ttm): 0.48 0.49 0.4 0.58 0.5 0.74 0.46 0.57

Price/Book (mrq): 1.67 1.39 1.06 1.61 3.26 3.02 1.92 2.7

Enterprise Value/Revenue (ttm)3: 0.55 0.35 0.55 0.58 0.43 0.85 0.54 0.73

Enterprise Value/EBITDA (ttm)6: 10.81 297.83 8.44 10.35 7.53 10.57 10.21 8.51

Financial HighlightsFiscal Year

Fiscal Year Ends: 30-Sep 31-Dec 3-Jan 27-Sep 31-Dec 31-Dec 30-Jun 31-Dec

Most Recent Quarter (mrq): 30-Jun-14 30-Jun-14 4-Jul-14 27-Jun-14 30-Jun-14 30-Jun-14 31-Dec-13 30-Jun-14

Profitability

Profit Margin (ttm): 3.08% -2.29% 2.13% 2.80% 2.40% 4.08% 3.03% 4.47%

Operating Margin (ttm): 3.98% -0.97% 4.10% 4.56% 4.84% 6.41% 4.69% 7.00% 4.33%

Management Effectiveness

Return on Assets (ttm): 3.47% -0.76% 3.05% 4.68% 8.52% 5.59% 5.49% 5.89%

Return on Equity (ttm): 11.38% -1.97% 7.46% 8.73% 21.01% 18.13% 13.88% 25.61%

Income Statement

Revenue (ttm): 7.87B 6.73B 10.49B 12.62B 23.61B 3.26B 8.58B 12.21B

Revenue Per Share (ttm): 80.99 45.61 146.07 96.86 146.72 45.19 34.8 113.46

Qtrly Revenue Growth (yoy): -4.80% -14.90% -8.50% 4.90% -27.00% -6.20% 9.10% 15.60%

Gross Profit (ttm): 449.99M 417.00M 574.70M 1.84B 1.37B N/A N/A 1.20B

EBITDA (ttm)6: 400.74M 8.00M 680.40M 706.98M 1.34B 263.08M 454.95M 1.05B

Net Income Avl to Common (ttm): 242.15M -153.70M 223.20M 352.85M 651.89M 133.03M 259.51M 545.82M

Diluted EPS (ttm): 2.48 0.5 2.73 3.01 3.96 1.75 1.05 4.69

Qtrly Earnings Growth (yoy): -2.10% N/A 31.30% -40.40% -51.80% 16.30% -27.70% 34.30%

Balance Sheet

Total Cash (mrq): 510.15 969 283 772.61 2.34 239.26 348.86 374.31 $437.44 $3,499.53

Total Cash Per Share (mrq): 5.13 6.67 4.09 5.81 14.87 3.29 1.42 3.46

Total Debt (mrq): 1.04B 84.00M 1.83B 830.77M 526.04M 610.89M 1.03B 2.28B

Total Debt/Equity (mrq): 45.7 3.59 44.77 18.33 13.88 76.24 49.01 82.95

Current Ratio (mrq): 1.52 1.44 1.86 1.73 1.68 1.45 1.35 0.75

Book Value Per Share (mrq): 22.79 16.17 57.15 33.84 23.14 10.96 8.38 23.91

Cash Flow Statement

Operating Cash Flow (ttm): 345.86M 414.00M 786.20M 496.53M 979.10M 238.72M 510.00M -186.46M

Levered Free Cash Flow (ttm): 187.48 664.00 508.11 331.49 757.86 175.12 304.03 683.10 $451.40 $3,611.19

Abbreviation Guide: K = Thousands; M = Millions; B = Billions

mrq = Most Recent Quarter (as of 30/06/2014)

ttm = Trailing Twelve Months (as of 30/06/2014)

yoy = Year Over Year (as of 30/06/2014)

lfy = Last Fiscal Year (as of 31/12/2013)

fye = Fiscal Year Ending

Financial Performance Comparative Ananlysis27-Aug-2014

TECHNOLOGY INDUSTRYGOOG INTC CSCO AAPL LNKD FB MSFT AMZN average total

$USD$

Valuation MeasuresMarket Cap (intraday)5: 388,420 172,040 127,030 609,980 27,390 194,980 369,800 158,030 $255,959 $2,047,670

Enterprise Value (Aug 27, 2014)3: 340.87B 168.28B 95.89B 597.23B 25.33B 183.87B 309.15B 153.07B

Trailing P/E (ttm, intraday): 30.09 16.70 16.74 17.09 139.46 82.27 16.82 533.56 106.59

Forward P/E (fye Sep 30, 2015)1: N/A 15.18 10.84 14.46 81.38 37.1 14.07 176.56

PEG Ratio (5 yr expected)1: N/A 1.81 1.5 1.34 3.19 1.23 2.21 -59.73

Price/Sales (ttm): 6 3.2 2.7 3.39 14.99 19.72 4.27 1.93

Price/Book (mrq): 4.08 2.91 2.24 5 9.61 10.62 4.13 14.9

Enterprise Value/Revenue (ttm)3: 5.23 3.12 2.03 3.35 13.71 18.36 3.56 1.87

Enterprise Value/EBITDA (ttm)6: 17.55 7.64 7.86 10.1 128.98 33.89 9.62 38.1

Financial HighlightsFiscal Year

Fiscal Year Ends: 31-Dec 28-Dec 26-Jul 28-Sep 31-Dec 31-Dec 30-Jun 31-Dec

Most Recent Quarter (mrq): 30-Jun-14 28-Jun-14 26-Jul-14 28-Jun-14 30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-14

Profitability

Profit Margin (ttm): 20.29% 19.11% 16.66% 21.64% -0.76% 23.78% 25.42% 0.22%

Operating Margin (ttm): 23.41% 25.72% 20.71% 28.84% 1.59% 43.50% 32.12% 0.76% 22.08%

Management Effectiveness

Return on Assets (ttm): 8.56% 9.77% 5.92% 15.20% 0.68% 14.92% 11.07% 1.14%

Return on Equity (ttm): 14.95% 18.22% 13.56% 31.56% -0.69% 15.51% 26.17% 1.87%

Income Statement

Revenue (ttm): 65.14B 53.91B 47.14B 178.14B 1.85B 10.01B 86.83B 81.76B

Revenue Per Share (ttm): 97.06 10.83 9.01 28.81 15.49 4.01 10.46 177.93

Qtrly Revenue Growth (yoy): 21.70% 8.00% -0.50% 6.00% 46.80% 60.50% 17.50% 23.20%

Gross Profit (ttm): N/A 31.52B 29.44B 64.30B 1.33B 6.00B 59.90B 20.27B

EBITDA (ttm)6: 19.42B 22.02B 12.20B 59.13B 196.40M 5.42B 32.13B 4.02B

Net Income Avl to Common (ttm): 13.05B 10.30B 7.85B 38.56B -14.06M 2.37B 22.07B 181.00M

Diluted EPS (ttm): 19.09 N/A 1.48 5.96 -0.08 N/A 2.67 0.64

Qtrly Earnings Growth (yoy): 6.00% 39.80% -1.00% 12.30% N/A 137.50% -7.10% N/A

Balance Sheet

Total Cash (mrq): 5,832.00 1,741.00 5,207.00 3,793.00 2,370.00 1,396.00 8,484.00 7,990.00 $4,601.63 $36,813.00

Total Cash Per Share (mrq): 86.22 3.52 10.17 6.33 19.26 5.37 10.31 17.28

Total Debt (mrq): 8.33B 13.39B 20.91B 31.04B 0 326.00M 23.22B 3.12B

Total Debt/Equity (mrq): 8.7 22.6 36.9 25.67 N/A 1.78 25.86 29.42

Current Ratio (mrq): 4.56 2.37 3.39 1.47 3.9 12.82 2.5 1

Book Value Per Share (mrq): 141.66 11.97 11.06 20.19 23.45 7.15 10.9 22.95

Cash Flow Statement

Operating Cash Flow (ttm): 20.34B 20.72B 12.33B 56.37B 465.77M 4.81B 32.23B 5.33B

Levered Free Cash Flow (ttm): 5,480.00 7,540.00 8,520.00 3,743.00 3,825.00 3,110.00 2,374.00 3,300.00 $4,736.50 $37,892.00

Abbreviation Guide: K = Thousands; M = Millions; B = Billions



yoy = Year Over Year (as of 30/06/2014)

lfy = Last Fiscal Year (as of 31/12/2013)

fye = Fiscal Year Ending

September 2014 28

INDUSTRY COMPARISON ACM FLR GOOG LNKD

selected financial performance metrics KBR ARCAY INTC FB

URS WYGPY CSCO MSFT

JEC CBI AAPL AMZN

average total average total

valuation measures:

Market Cap $millions (intraday)$4,138 $33,103 $255,959 $2,047,670 62 X

Trailing P/E (ttm, intraday): 20.99 106.59 5 X

financial highlight:

Operating Margin (ttm):4.33% 22.08% 5 X

balance sheet measure:

Total Cash $millions (mrq):$437 $3,500 $4,602 $36,813 11 X

cash flow measure:

Levered Free Cash Flow $millions (ttm):$451 $3,611 $4,737 $37,892 10 X



CONSTRUCTION TECHNOLOGY

September 2014 29

INDUSTRY COMPARISON ACM FLR GOOG LNKD

selected financial performance metrics KBR ARCAY INTC FB

URS WYGPY CSCO MSFT

JEC CBI AAPL AMZN

average total average total

valuation measures:

Market Cap $millions (intraday)$4,138 $33,103 $255,959 $2,047,670 62 X

Trailing P/E (ttm, intraday): 20.99 106.59 5 X

financial highlight:

Operating Margin (ttm):4.33% 22.08% 5 X

balance sheet measure:

Total Cash $millions (mrq):$437 $3,500 $4,602 $36,813 11 X

cash flow measure:

Levered Free Cash Flow $millions (ttm):$451 $3,611 $4,737 $37,892 10 X



CONSTRUCTION TECHNOLOGY

Q: WHY THE HUGE DISPARITY in financial performance?

A: One key difference is INNOVATION resulting in consistent CUSTOMER VALUE CREATION, and

enhanced profitability, competitiveness, and strategic investment capability; rewarded by clients,

customers and the capital markets


What Are We Going To Do

About It…?

Next Steps

Mature Industry

Slow Growth, Incremental Innovation, Low Margin… by Definition

What are we going to do about it? Do we resign ourselves to our

fate? Complain about margin compression and stubbornly soldier

on? Innovators are rewarded…

So, let’s innovate!

1. Universal adoption of BIM

to enhance design,

engineering &

procurement, facilitate

prefabrication, and

optimize facilities

management

2. Integration of BIM with

Project Controls to

enhance visibility of

performance against plan

and KPIs

3. Application of lean

manufacturing principles

to the design,

engineering, procurement

and construction process

4. Collaborate across

disciplines to improve

the product and process

efficiencies

5. Large scale application

of prefabrication where

possible

6. Refine logistics and

staging to streamline in

situ construction and

assembly of

prefabricated systems

7. Lean and scalable

program frameworks to

enable efficient delivery

of mega portfolios,

programs and projects

September 2014 32

Innovation in Action

Quick Wins

Long Range

• Partner with Technology companies and our supply and value chains

to explore and exploit application of powerful technologies to design

and construction processes, equipment, means and methods

• Promote virtuous cycle of sustainable value creation

September 2014 33

Harness Technology

Embrace

Disruption of

Business as Usual

September 2014 34

“The future ain’t

what it used to be”

The unstoppable march of

technology will make the world

of 2025 unrecognizable from the

vantage point of 2014.

Will we lead the transformation

of our mature industry into a

lean, productive, innovative and

sustainable value creator?

• How will we answer?

• How will we as individual

professionals, members of

competitive organizations, and

together as an industry face

the future, innovate to better

serve our clients and shape

our destinies?

Yogi Berra, 1925 –

Commercially Led Program Management

Julio maggi, arcadis

Engineering

Transcript of Julio maggi, arcadis