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
4 © 2009 ARCADIS 17 September 2014
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
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
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
11 © 2009 ARCADIS 17 September 2014
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
Volatility Uncertainty
Complexity Ambiguity
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
Volatility Uncertainty
Complexity Ambiguity
A. Cloud Computing
B. Big Data and the
Internet of
EVERYTHING
Revolu
tionary
– T
echnolo
gic
al
A
B
September 2014 17
Volatility Uncertainty
Complexity Ambiguity
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
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
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
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
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
mrq = Most Recent Quarter (as of 30/06/2014)
ttm = Trailing Twelve Months (as of 30/06/2014)
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
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 © 2009 ARCADIS 17 September 2014
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