The document discusses ARCADIS, a global infrastructure consulting firm. It provides an overview of ARCADIS, including its key statistics, geographic presence, business lines, and current major projects in the Middle East. It then focuses on the concept of "commercially led program management" and its benefits. The document argues that innovation is needed in the construction industry to improve productivity and margins, and that technology can help drive such innovation.

1. 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. 2
© 2009 ARCADIS
17 September 2014
About ARCADIS
KEY STATISTICS
GEOGRAPHIES
$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

3. 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
Infrastructure
Water
Environment
Buildings
24%
15%
33%
28%
* ENR Program Management Ranking vastly understated
September 2014
3

4. 4
© 2009 ARCADIS
17 September 2014
Current Major Middle East Assignments

5. 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

6. 6
© 2009 ARCADIS
17 September 2014
I.A spotlight on the Kingdom of Saudi Arabia
II.Commercially Led Program Management
III.Innovation – A Rallying Cry…
Agenda

7. 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

8. 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

9. 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

10. 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

11. 11
© 2009 ARCADIS
17 September 2014
A Rallying Cry…
Innovation

12. September 2014
12
Innovation in the Construction Industry
Provoke Thought
Challenge Assumptions
Promote Debate
Inspire Action

13. 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

14. September 2014
14
Volatility Uncertainty Complexity Ambiguity
A.BIM
B.Artificial Intelligence
C.Robotics
D.3D Printing
Revolutionary – Technological
A
B
C
D

15. September 2014
15
Volatility Uncertainty Complexity Ambiguity
A.iWatch and Android wear
B.Aerospace
C.Renewable Energy
D.Batteries and Driverless Vehicles
Revolutionary – Technological
A
B
C
D

16. September 2014
16
Volatility Uncertainty Complexity Ambiguity
A.Cloud Computing
B.Big Data and the Internet of EVERYTHING
Revolutionary – Technological
A
B

17. September 2014
17
Volatility Uncertainty Complexity Ambiguity
The power of the CROWD
Revolutionary – Technology-Enabled Social Phenomena

18. 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?

19. •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

20. 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…

21. 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)

22. September 2014
22
Construction vs Technology
Copy write: Jason Burg on February 4, 2013
Financial & Organizational Engineering v. Innovation

23. 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

24. 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
Market Share %
Early Adopters
13.5%
Early Majority
34%
Late Majority
34%
Laggards
16%
Tipping Point
Innovation Diffusion Curve

25. 25
© 2009 ARCADIS
17 September 2014
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

26. Financial Performance Comparative Ananlysis27-Aug-2014CONSTRUCTION INDUSTRYACMKBRURSJECFLRARCAYWYGPYCBIaveragetotal$USD$ 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)3:4.33B2.38B5.75B7.32B10.06B2.78B4.65B8.90BTrailing P/E (ttm, intraday):15.1744.9222.118.1418.9618.9715.9113.7420.99Forward P/E (fye Sep 30, 2015)1:14.3315.1617.9114.2314.8N/AN/A11.03PEG Ratio (5 yr expected)1:1.87.51.221.621.37N/AN/A0.87Price/Sales (ttm):0.480.490.40.580.50.740.460.57Price/Book (mrq):1.671.391.061.613.263.021.922.7Enterprise Value/Revenue (ttm)3:0.550.350.550.580.430.850.540.73Enterprise Value/EBITDA (ttm)6:10.81297.838.4410.357.5310.5710.218.51Financial HighlightsFiscal YearFiscal Year Ends:30-Sep31-Dec3-Jan27-Sep31-Dec31-Dec30-Jun31-DecMost Recent Quarter (mrq):30-Jun-1430-Jun-144-Jul-1427-Jun-1430-Jun-1430-Jun-1431-Dec-1330-Jun-14ProfitabilityProfit 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 EffectivenessReturn 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 StatementRevenue (ttm):7.87B6.73B10.49B12.62B23.61B3.26B8.58B12.21BRevenue Per Share (ttm):80.9945.61146.0796.86146.7245.1934.8113.46Qtrly Revenue Growth (yoy):-4.80%-14.90%-8.50%4.90%-27.00%-6.20%9.10%15.60% Gross Profit (ttm):449.99M417.00M574.70M1.84B1.37BN/AN/A1.20BEBITDA (ttm)6:400.74M8.00M680.40M706.98M1.34B263.08M454.95M1.05BNet Income Avl to Common (ttm):242.15M-153.70M223.20M352.85M651.89M133.03M259.51M545.82MDiluted EPS (ttm):2.480.52.733.013.961.751.054.69Qtrly Earnings Growth (yoy):-2.10%N/A31.30%-40.40%-51.80%16.30%-27.70%34.30% Balance SheetTotal Cash (mrq):510.15969283772.612.34239.26348.86374.31$437.44 $3,499.53 Total Cash Per Share (mrq):5.136.674.095.8114.873.291.423.46Total Debt (mrq):1.04B84.00M1.83B830.77M526.04M610.89M1.03B2.28BTotal Debt/Equity (mrq):45.73.5944.7718.3313.8876.2449.0182.95Current Ratio (mrq):1.521.441.861.731.681.451.350.75Book Value Per Share (mrq):22.7916.1757.1533.8423.1410.968.3823.91Cash Flow StatementOperating Cash Flow (ttm):345.86M414.00M786.20M496.53M979.10M238.72M510.00M-186.46MLevered 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 = Billionsmrq = 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)

27. Aug-2014TECHNOLOGY INDUSTRYGOOGINTCCSCOAAPLLNKDFBMSFTAMZNaveragetotal$USD$ 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)3:340.87B168.28B95.89B597.23B25.33B183.87B309.15B153.07BTrailing P/E (ttm, intraday):30.0916.7016.7417.09139.4682.2716.82533.56106.59Forward P/E (fye Sep 30, 2015)1:N/A15.1810.8414.4681.3837.114.07176.56PEG Ratio (5 yr expected)1:N/A1.811.51.343.191.232.21-59.73Price/Sales (ttm):63.22.73.3914.9919.724.271.93Price/Book (mrq):4.082.912.2459.6110.624.1314.9Enterprise Value/Revenue (ttm)3:5.233.122.033.3513.7118.363.561.87Enterprise Value/EBITDA (ttm)6:17.557.647.8610.1128.9833.899.6238.1Financial HighlightsFiscal YearFiscal Year Ends:31-Dec28-Dec26-Jul28-Sep31-Dec31-Dec30-Jun31-DecMost Recent Quarter (mrq):30-Jun-1428-Jun-1426-Jul-1428-Jun-1430-Jun-1430-Jun-1430-Jun-1430-Jun-14ProfitabilityProfit 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 EffectivenessReturn 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 StatementRevenue (ttm):65.14B53.91B47.14B178.14B1.85B10.01B86.83B81.76BRevenue Per Share (ttm):97.0610.839.0128.8115.494.0110.46177.93Qtrly Revenue Growth (yoy):21.70%8.00%-0.50%6.00%46.80%60.50%17.50%23.20% Gross Profit (ttm):N/A31.52B29.44B64.30B1.33B6.00B59.90B20.27BEBITDA (ttm)6:19.42B22.02B12.20B59.13B196.40M5.42B32.13B4.02BNet Income Avl to Common (ttm):13.05B10.30B7.85B38.56B-14.06M2.37B22.07B181.00MDiluted EPS (ttm):19.09N/A1.485.96-0.08N/A2.670.64Qtrly Earnings Growth (yoy):6.00%39.80%-1.00%12.30%N/A137.50%-7.10%N/ABalance SheetTotal 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):86.223.5210.176.3319.265.3710.3117.28Total Debt (mrq):8.33B13.39B20.91B31.04B0326.00M23.22B3.12BTotal Debt/Equity (mrq):8.722.636.925.67N/A1.7825.8629.42Current Ratio (mrq):4.562.373.391.473.912.822.51Book Value Per Share (mrq):141.6611.9711.0620.1923.457.1510.922.95Cash Flow StatementOperating Cash Flow (ttm):20.34B20.72B12.33B56.37B465.77M4.81B32.23B5.33BLevered 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 = Billionsmrq = 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)

28. 28 September 2014
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
mrq = Most Recent Quarter (as of 30/06/2014)
ttm = Trailing Twelve Months (as of 30/06/2014)
CONSTRUCTION TECHNOLOGY

29. 29 September 2014
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
mrq = Most Recent Quarter (as of 30/06/2014)
ttm = Trailing Twelve Months (as of 30/06/2014)
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

30. 30
© 2009 ARCADIS
17 September 2014
What Are We Going To Do About It…?
Next Steps

31. 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!

32. 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

33. 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

34. 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 –

35. Commercially Led Program Management