Foreword

Looking back on 2010, Grontmij experienced a difficult and transformational year. Group performance in 2010 was characterised by difficult trading conditions especially in the United Kingdom, Denmark and Sweden. In the first half of the year, demand lagged far behind our expectations due to rapid spending reductions in these countries. The impact is reflected in the 2010 bottom line. We continued to adapt our resource base to lower levels of activities.

This resulted in significant restructuring costs. However diversification of activities – Planning & Design, Transportation & Mobility and Water & Energy – across segments and markets in Europe and around the world gives us added resilience to fluctuations and uncertainties. By the end of the first half of the year, we were starting to see some stabilisation of forward order books, especially in our growth segments of transportation and water. However, conditions for local markets in Planning & Design in Denmark and the Netherlands continued to be very challenging. Many of the major, long-term projects that had been postponed in the previous year did not materialise as – often government imposed – spending reductions kicked in at local levels. In response to the ongoing challenge in markets, we have taken firm action to position the business for growth in profitability and scale into the future. We transformed the organisational focus from regions to business lines.

In June we acquired the listed Ginger Groupe in Paris. Ginger brings us a market-leading position with its Monitoring & Testing service and lifecycle/asset management expertise. France is one of Europe’s biggest markets for our services. Furthermore, it also increases our scale significantly as it operates and has a considerable international customer base across Europe. We see the transaction as further evidence of our commitment to seize opportunity when presented and achieve our long-term targets to become the regional European player. The Group Executive Committee was reinforced by Mr J.L. Schnoebelen, the founder and CEO of Ginger.

During the fourth quarter of 2010 we continued to see strengthening market conditions in our pan-European Transportation & Mobility, Water & Energy and Monitoring & Testing business lines. The recovery in the Nordic region continued, and we saw the successful delivery of cost reductions in the Benelux region. In the United Kingdom, there was some pick up in work for the AMP5 water framework contracts. We expect this trend to continue in 2011, but are still cautious about our United Kingdom and Netherlands markets where government austerity measures will have an effect going forward.

During 2010, we made progress in our aim of becoming the leading European sustainable design, engineering and management consultancy for the built and natural environment. In January 2010, we launched our 2015 roadmap and during the reporting year, we began implementing a transformation from a geographically focused organisation towards an alignment along business lines. Significant progress was made on this implementation. The business lines reflect long-term external market drivers. We are positioning to take full advantage of changes such as climate change, population growth and urbanisation in Europe and abroad. Organising according to business lines, stimulating cross-border activity and embedding knowledge sharing – all will help us seize opportunities to generate organic growth.

Change is always challenging for our people. Due to the acquisition of Ginger, our headcount, including our flexible layer (e.g. agency staff, temporary staff) has grown to approximately 11,000 up from 8,000. While we have grown worldwide, we have also had to make tough decisions on activities and employees in Europe. It is testimony to the quality, dedication and professionalism of our employees that we have booked significant progress on implementing both the new organisational structure and made a significant start on improving knowledge sharing and increasing cross-border projects.
I am very proud and grateful for their efforts!

Outlook

In 2011 we are seeing some recovery in levels of demand in our forward order book.

Portfolio adjustments and divestments of non-core activities will help to deleverage. We will give a more specific outlook when releasing the half year (interim) results.

De Bilt, 9 March 2011

Sylvo Thijsen, Chief Executive Officer

Add to My Report Annual report, Foreword, page 5