Arcadis NV

AEX:ARCAD

Earnings Call Transcript 2021-Q1

[Jurgen Pullens, Director of Investor Relations]

Good morning, everyone, and welcome to this virtual analysts' meeting. My name is Jurgen Pullens, Director of Investor Relations of Arcadis. We are here to discuss the company's trading update for the first quarter released this morning. And with us are Peter Oosterveer, CEO; and Virginie Duperat, CFO.We will start with the presentation by Peter and Virginie, which will be followed by a Q&A. [Operator Instructions] Lastly, 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 and on the company's website. With these formalities out of the way, Peter, please begin.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Okay. Thanks, Jurgen, and good morning, everyone. Thanks, again, for joining us today to discuss our trading update for the first quarter of 2021.I will start by providing you with a summary of our operational results for the first quarter, followed by some more insights in the current market developments and also talk about our order intake. And I will then turn it over to Virginie to get into further detail on our results. When looking at our performance for the first quarter, it is almost hard to imagine that we're already dealing with the pandemic for over a year and still largely working from home, finding new ways of collaborating with colleagues and with clients while growing our business at the same time. And I'm, in that context and with that as a backdrop, therefore, really proud and pleased to report that we started 2021 strong, driven by the dedication of the more than 27,000 fellow Arcadians who have continued to support our clients during the current pandemic. Our now institutionalized performance enhancements, such as Make Every Project Count and focus on our key clients, combined with the actions we identified in the early part of last year, have created further margin improvement as well as continued strong order intake in the first quarter. The order intake was driven by large infrastructure investments and a further increased focus by our clients on carbon reduction and climate change mitigation. And I will talk about some of that in more detail a little later. As you will have seen, the revenue was organically 0.5% higher than Q1 of last year, 0.8% when excluding the Middle East, and back to growth compared to the previous 3 quarters, which, of course, were impacted by COVID-19. Our operating margin improved like-for-like with 2 full percentage points to 9.2%, driven by particularly strong performance in North America and the U.K. as well as the beginning of a recovery in China now that it returns to a degree of normalcy. Our performance in the first quarter, combined with our strong balance sheet and our 3% growth in backlog, gives me confidence in our ability to create further growth throughout the year despite the still challenging circumstances. As we discussed during our Capital Markets Day, we see 4 global megatrends, urbanization, climate change, digitalization and societal expectations, across the globe, which impacts societies and also obviously impact our clients and, which as a result of that, provide many opportunities for Arcadis. In addition, we see public stimulus and regulation in especially the U.S. and Europe that also favor the variety of solutions we can offer in resilience, in mobility and in places.The EU taxonomy, which is an important enabler to scale up sustainable investments, sees energy, transport and construction, but also water supply and remediation activities, as sectors that have the biggest opportunity to contribute to greenhouse gas emissions reduction. And these are obviously the exact areas that many of our clients are in and where we can advise them on how to best mitigate their impact on the climate and allow them to meet their sustainability goals. The U.S. stimulus program focuses, amongst others, on new mobility, clean energy, electric grid modernization and EV network support. And we already see many EV-related infra opportunities globally and are increasingly advising large automotive clients on the new build or the transformation of their factories to accommodate them in meeting their sustainability ambitions. In Environment, we see a strong pipeline of opportunities for key clients such as, for example, the U.S. Federal Government, which actually also includes opportunities for PFAS remediation. In the Water sector, clients increasingly choose us as their innovation specialist. We use artificial intelligence practices to optimize the enormous water consumption that clients face across many industries. Goes without saying that sustainability has become mainstream. And for us, that includes clients who, for instance, need new data centers, which in itself is already a market growing at a 10% growth per annum, pharmaceutical, chemical clients, just to name a few. And finally, in places, we see an almost obvious increase in clients' requests, obviously accelerated by COVID, to optimize and repurpose their office space as well as optimize their operational and maintenance spend through deeper data analytics. Looking ahead, we are really well positioned to maximize our impact as well as the impact of all of our stakeholders by seizing the opportunities which really play to our strengths, allowing us to apply our global capabilities, our global knowledge and our global experiences, continue to invest in our strategic priorities and delivering the resilient and future-proof solutions that our clients need. And you will actually see a few examples of these future-proof solutions on this slide. The order intake in the first quarter was EUR 693 million, resulting in a favorable book-to-bill of 1.1 and an improvement on a like-for-like basis compared to Q1 last year. Our further sharpened focus on our key clients continues to generate more work for these key clients. For example, we won projects for a total of $24 million for the U.S. Army Corps of Engineers related to the remediation of several defense sites. In the U.K., we had a really nice EUR 3 million win from Roche to set up laboratories across U.K. hospitals. And another example, a little closer by, in Germany, we won a project where we offer our digital solutions for ground water management by making use of modeling and flood simulations.And back in the U.S., we continue to win work from significant public clients, like the departments of transportation in Alabama, Louisiana and Georgia, to help reduce congestion and improve mobility for people around major cities in these states. As we have started to implement our new strategy, Maximizing Impact, we will obviously continue to focus on creating a lower carbon future, mitigating the impacts of climate change and consistently provide digitalized and sustainable solutions to our clients. This is clearly exemplified in the work we have won from both our public and our private sector clients. Additionally, our recent wins in Infrastructure demonstrate our excellent position in capitalizing on the significant investments made in sustainable infrastructure, in particular in Europe, including U.K., but also obviously in North America. And I will now turn it over to Virginie for further detail on our financial performance.

[Virginie J. H. Duperat-Vergne]

Thank you, Peter, and good morning, everyone. Let me share with you some further comments on our performance in the first quarter.First, operating margin and free cash flow improved. In our first quarter, we delivered a net revenue of EUR 632 million, which resulted in a 0.5% organic growth. And excluding Middle East, this organic growth was 0.8%. Foreign exchange resulted in a negative translation impact of 4.5%, notably due to the weakness of the U.S. dollar, taking EUR 30 million of our top line in the first quarter.Our operating EBITA in the quarter further improved by 21% to EUR 58 million, leading to an operating margin of 9.2% in the quarter. As usual, we annually have cash outflow in the first quarter, but Q1 2021 free cash flow was a negative EUR 39 million, showing a significant improvement compared to a negative EUR 84 million end of Q1 2020. This resulted in a net debt position of EUR 107 million to be compared to EUR 424 million a year ago. To put our quarterly results in perspective, you see that we reversed the negative organic growth trend this quarter. After 3 quarters of revenue decline, we are back to organic growth despite the still challenging circumstances. As mentioned, our operating EBITA in Q1 increased significantly to EUR 58 million or 9.2%, creating one of the best first quarters in many years. Net working capital as a percentage of gross revenues was 15.3% compared to 19.2% in Q1 last year. And days sales outstanding decreased to 78 days compared to 95 days 1 year ago. And this is clearly the result of the cash program undertaken launched at the end of Q1 2020. The working capital levels are impacted by a seasonal pattern and generally are at the higher level end of first quarter.As you are used from us in a trading update, please find a few comments on the revenue developments in the segments. In the Americas, we have seen an organic growth of 3% and an FX impact of minus 10%. In this region, and especially in North America, growth in Infrastructure and Water for public clients compensated for a decline in Environment for private sector clients. And in Latin America, organic revenue growth was really strong, driven by infrastructure work in Brazil. In Europe and in the Middle East, revenue growth was 3% despite the declining footprint in Middle East. Net revenues in Continental Europe were in line with last year. Slight revenue decline in the Netherlands was compensated by growth in infrastructure work, especially in Belgium, Poland and in France.Net revenues in the U.K. increased organically due to strong growth in Infrastructure, Water and Environment, compensating for a decline in Buildings. And finally, revenue in the Middle East slightly declined, driven by our decision to reduce our footprint in this region. Moving to Asia Pacific, revenue decline was minus 4% as China recoveries did not fully compensate a decline in other Asian countries continuing to face challenges due to COVID-19. Moreover, Australia shows a decline in revenue as Q1 '20 was exceptionally strong due to the contribution of one significant project, and COVID-19 crisis resulted in a temporary delay in award of projects in 2020. Net revenues in CallisonRTKL are in line with Q4. However, like-for-like impact of COVID-19 is still highly visible. Organic net revenues declined by 18%, affecting mainly retail and commercial sectors, which were severely impacted by COVID-19, and we show small signs of recovery in Health Care sector. To conclude, return to revenue growth, in combination with good order intake and solid backlog position, demonstrates that we are on track to deliver solid organic growth for the year. And with that, let me hand it back to Peter.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes. Thank you very much, Virginie. And let me now wrap up our presentation, reminding you about the strategic targets we set for 2023, which we did present back in November of last year during the launch of our strategy, Maximizing Impact. I will also then provide a brief summary of our Q1 update before we obviously will go over to questions and answers. We are maximizing our impact in our projects, driven by our passion to improve quality of life, making the world we live in a better place for our clients, for the communities in which we work and for all of our people, obviously, as well. And we will continue to make the right choices to remain a resilient business, focusing on regions, on clients, on projects, which clearly provide us an opportunity to win while addressing the global societal challenges through sustainable, people-centric solutions.In terms of our financial targets, we simply aim for further improved predictable and profitable growth, satisfying the interest of all our stakeholders. And we feel confident about our ability to deliver on the commitments we made during the recent Capital Markets Day. In terms of nonfinancial targets, we want to further advance our course to be the employer of choice through lower voluntary turnover and higher engagement by creating a diverse, inclusive culture in which everyone can be their self. We commit to further lowering our carbon footprint to align with the 1.5-degree Science Based Targets and to achieve this as soon as possible, but in any event before 2030. We furthermore plan to develop a structure which will allow us to, in a more tangible way, define how the work we deliver on projects for our clients contributes to a better and a more sustainable world. To summarize our performance in the first quarter, I really believe we had a good start of the year, considering the circumstances. Our current performance, in combination with the strong order intake, gives me confidence that we are on track to realize further growth in 2021. The strong underlying industry fundamentals and economic expectations do support this strongly. Our much-improved balance sheet gives us the financial room to further invest in strategic priorities to grow our business and to maximize value for all our stakeholders. And with that, I'd like to hand it over to Jurgen who will, after some short instructions, open it up for Q&A. And obviously, we're happy to take any questions you might have. Over to you, Jurgen.

[Jurgen Pullens, Director of Investor Relations]

Thank you, Peter. And hereby, we would like to open our Q&A. [Operator Instructions]

[Jurgen Pullens, Director of Investor Relations]

I see a first question for Luuk.

[Luuk Van Beek, Analyst]

First, a question on the profitability. Yet the best margin, I think, a very -- quite a long time in Q1. Is this all sustainable? Or are there any cost fluctuations or temporary factors that also drove the margin in this quarter that we should take into account when forecasting the rest of the year? And my second question is on CallisonRTKL where with the Q4 results, you said that you had some spare capacity left because you expected a pickup. Now you report some hopeful signs in Health Care. But can you indicate if you still have the same expectation for the pickup going forward and are still comfortable with the spare capacity that you are keeping?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

I'll probably start, Luuk, with taking your first question or at least part of it, and then I'll hand it over to Virginie to add any color on the first one and also to speak about CallisonRTKL in detail.The improved profitability is obviously already on a trend which has started some time ago and is being created by the institutionalized performance enhancements I spoke about, and we have spoken about those almost for as long as I've been here now 4 years. And that includes, of course, our focus on much better project execution through Make Every Project Count, a deeper use of the Global Excellence Centers as well as focusing on a smaller set of key clients.And all these things have helped to improve our performance. They probably have the biggest contribution, the biggest share of the improvement. And obviously, in 2020, as we became aware of the pandemic, we added a set of actions. But I would say that the underlying institutionalized performance enhancements have contributed, laid the foundation and will continue to contribute to further margin improvement. Virginie, please go ahead on that and then maybe also take Luuk's question on CallisonRTKL.

[Virginie J. H. Duperat-Vergne]

Thank you, Peter. Yes, I think quite true for sure, we are not back to a pattern where we travel a lot and such, so we have some savings on that front. But I won't say that it becomes anecdotical, but this is not what creates the performance. The performance really comes for our capability of executing well our projects, and this is really what it is about. Then moving to CallisonRTKL, CallisonRTKL is finally delivering in this quarter a revenue which is, again, in decline, but a level of margin which is in line with full year 2020 and Q1 2020 if you restate from the impact of the project that we've been taking at year-end. So yes, we see some signs in Health Care and such, but this is not strong enough to impact our P&L and to change really the pattern of what it is.As we said before, we think that there is a future for this business. We expect this business to start picking up again. And we've not been entering in massive restructuring movements. So that also maintain, let's say, a quite low or relatively low margin for the quarters to come. Before, we see this pickup really happening on the market. But at the moment, that deliver something, as I said, end of 2020, which is in line with a rough 7%, which isn't fantastic, but it's not either a drama based on what they face in terms of a heat map of volume of execution.

[Jurgen Pullens, Director of Investor Relations]

And I see Henk.

[Henk Veerman, Research Analyst]

Peter, Virginie, also 2 questions from my side. Firstly, on the Buildings end markets where you indicate that there is still a decline, I think you mentioned it for the U.K. When you look at your backlog today, which obviously has also grown year-to-date, do you see tangible signs of a recovery in the buildings, the more cyclical buildings end markets? So that's my first question. And my second question is the focus on the key accounts. Can you maybe split your group organic growth and your group order book growth? What was that number for the key accounts?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Okay. I'll do the same as we did with Luuk's question, Henk. I'll just provide a bit of color on your first question and probably use the improvements we are seeing in China as, I think, the beginning of a trend. So the moment that we do see societies, communities going back to a degree of normalcy and then work is picking up. And we noted in our prepared remarks that the improvement in China is visible. Last year, Q1, China, of course, was the first region in Arcadis to be hit by corona. It is clearly also the first region to come out of the pandemic because of the fact that it's largely under control, and that results in business picking back up. And as you will know, most of our business in China, the Arcadis business that is, is related to buildings. In addition, what we do see, and we are no exception ourselves, is that clients are, of course, thinking about what is the building use of the future? How are we going to use buildings? How frequently will we use buildings? What purpose do we use them for? And this is an area in which we are advising our clients quite extensively, particularly those clients who happen to have a lot of real estate across the globe.So the Buildings business in the future or at least in the immediate future, I would say, it's going to show a different profile. We will continue to see new build in places where you would expect new build. That, of course, includes particularly for us China, at least for now, and then also quite a bit of focus on repurposing buildings for a different usage going forward. So Virginie, feel free to add to this one as well as to any color you can provide on the key accounts.

[Virginie J. H. Duperat-Vergne]

Okay. Thank you, Peter. I think that it's probably worth mentioning that in terms of backlog growth, you see the backlog growing everywhere. It's probably more growing in infrastructure and mobility than anywhere else. But there is still a growth in Building even if it is, let's say, moderate compared to the growth in Infra or the growth in Water and Environment. That's the -- but hence, we still see opportunities, nice projects to bid on and backlog to execute in the coming quarters. The base is not at all the same, and we have a focus on execution at the moment, which is coming from the big elements we have in backlog on Environment and Infra side. In terms of key accounts, I wouldn't say that there is no specific pattern because we've been getting some big contracts with those over the quarter. But I wouldn't see anything quite specific in terms of difference to highlight compared to the previous quarter, I would say.

[Jurgen Pullens, Director of Investor Relations]

Okay. Good to see that Hans Pluijgers has the next question.

[Hans Pluijgers, Head of Research of Benelux]

First of all, on the revenue trends and the order book, again, a little bit more, let's say, detail by private and public. Of course, in the past, obviously, you indicated that there's also weakness in private, but we're still doing quite well. Could you give maybe some flavor? Do you, let's say, see stabilization in the private market? Or do you still -- is it weakening? Could you give us maybe some flavor on, let's say, by those 2 segments compared to previous quarters? Is there some change visible? And secondly, on the working capital and the cash flow, if you give maybe some feeling on the trends in in-build receivables and in payments. Is there, let's say, any material impact to change compared to what we've seen in previous quarters?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Virginie, please go ahead.

[Virginie J. H. Duperat-Vergne]

Okay. Thank you, Peter. Maybe starting with the cash flow and all that stuff to parse his question out. Net working capital at the moment is showing an increase in in-build and in payables. But I would say there is a bit of this which is due to mechanical impact on the fact that we are closing a little bit earlier. We usually release our financial statements 1 week later to be able to reach on the 20s for sure. There has been some anticipation of closing in some entities, and the exact amount of invoicing taken in the last 1 or 2 weeks has probably not been quite reflected in the figures we show.So that's not at all the same thing when you are at Jan where you have a lot of weeks and such to really work on exact numbers. So the pattern of Q1, in my view, is not worrying at all. It just corresponds to a quite of mechanical impact that you have to anticipate a little bit of closing to release Q1 at that moment in the project business. So that's where I would see the things.As you've been saying, we've been quite able to get to a negative cash flow, which is our pattern in Q1, whatever happens, but which is quite well measured. And that also corresponds to the fact that people have been quite diligent in maintaining the fourth and collecting cash. Again, getting back to Q4 2020, end of Q4, we had received a bunch of cash that was quite significant and was supposed to be received in Jan and Feb, and this cash is quite definitely missing in Q1. And we don't have the same pattern end of Q1 to affect Q2.

[Hans Pluijgers, Head of Research of Benelux]

And any impact from payables, changes?

[Virginie J. H. Duperat-Vergne]

Payables is almost the same. You probably don't have all the payments that relates to the 1 to 2 last weeks of the month.

[Jurgen Pullens, Director of Investor Relations]

Next question for Martijn den Drijver.

[Virginie J. H. Duperat-Vergne]

Sorry, I think I didn't answer the second question, Jurgen, if I may.

[Jurgen Pullens, Director of Investor Relations]

Oh, sorry. Go ahead.

[Virginie J. H. Duperat-Vergne]

I don't want to leave that open. Yes, we were discussing, I think, between private and public clients. And that's clearly something, yes, we probably have a pattern in terms of order intake, which is going to public clients, as you can expect at the moment.Does it really mean that private clients are inactive? I'm not sure I would say so. I think that's probably also the volume of stimulus and of projects that are on the market and that we can tender on, which is quite important on the public side. But there's a saying that a private sector is not moving because there is still a lot of momentum on private client side in a lot of very interesting things.Jurgen, the floor is yours. Sorry.

[Jurgen Pullens, Director of Investor Relations]

No problem. Martijn, I see you have a question as well.

[Martijn P. den Drijver, Analyst]

My first question relates to the European operations, if you could provide a bit of color on the Dutch operations, the negative development there, how do you see developments throughout the quarter going into the second quarter? And the same for France, where you did see some positive developments, a bit more color on both countries would be appreciated. And the second question is on attrition levels and recruitments. How did attrition develop from Q4 into Q1 and then moving into Q2? And what are you seeing in terms of your efforts in recruitment? Is it getting more difficult? Is it actually becoming easier? Just a bit more color on those 2 fronts? And if possible, I have a third question, but I'll leave that up to Jurgen to decide if I can.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Okay. We'll take at least -- first, Martijn, I'll start with the second one, and then Virginie can provide color on the first one. So attrition throughout the whole of 2020, of course, developed extremely favorable to a level we have not seen in a long time, and actually, probably right or at least close enough to the ambition level we had. You will recall from the past, and particularly after I joined, I said that the attrition needed to be much lower. It was in the 15% range at that time, and we wanted it to be single digit. And we are seeing still single-digit attrition.And in fact, I looked at it earlier this morning in preparation for the call, in most regions in Q1, we've actually seen it further come down, so further decline. So for Arcadis as a whole, it's still roughly at the same level, so around the 9%, which is where it's set in Q4. With business picking up, it is going to likely be somewhat more challenging going forward to continue to hire people, and particularly in businesses which are already quite sizable and have quite a bit of promise for future growth, and that includes -- and particularly the U.K. and North America, there is an expectation that it will become a bit more challenging going forward.But I will remind you that one of the biggest levers we have available internally to potentially stem any attrition you would have is to push more work into our Global Excellence Centers. That is probably the most meaningful availability or lever we have available. And particularly in North America, we still have that opportunity, plentiful available to us. So not pressure on cost per se or not any meaningful pressure. But as business continues to develop favorably, which is our expectation, you will see, because we're not the only ones seeing a favorable outlook, you will see a bit more pressure on attrition. But it's still at a level pretty close to our ambition around the 9%.

[Virginie J. H. Duperat-Vergne]

And maybe coming back to your question, Martijn, around, let's say, the pattern in Europe and the difference between the various countries. I think that we can first probably drive a general pattern across Europe that would be to say that there is less leaves taken in Q1 2021 than there are usually. As you said, people couldn't go skiing this year. And so February breaks that you have all across Europe has been quite disappearing. So more or less, people chose to work in some of the countries and such. And that's probably explaining part of it in France, for example, and in other countries like this in the U.K. also. On top of that, in some of the countries, and that's, for example, in the U.K., there is a huge backlog to execute. Some projects really impacting the growth of the activity, and you see mobilization increasing on those projects and then the execution ramping up, which gives certain volume to execute and using Arcadis.Turning to the Netherlands, good performance, I would say, in Environment and in Buildings and probably a weaker performance in the Infra side. Here in that country, with the nitrogen law, we have difficulty to start executing some projects we have in backlog or our clients are pushing away, waiting from the law to move in the Netherlands. So we see that also on the potential order intake side.For the moment, we were more or less waiting for it to happen. We know that we have the capabilities of reorienting our team as we are now completely able to work remotely and to support teams of other countries to execute strong infra backlogs that we have, for example, in the U.K., in France or in other countries and use these experts on other projects we have. And that's probably also is a kind of answer to also your question of potential pressure on the market of hiring and such because as we -- our capability, our market risk, our capability of working more conversely and helping support each other on an international market.

[Jurgen Pullens, Director of Investor Relations]

Okay. Thank you. Thanks, Martijn. Let's first give the floor to Quirijn. And on later, we're going to come back to you. Quirijn, we can't hear you. [Technical Difficulty] Can you otherwise type in your question? Quirijn?

[Virginie J. H. Duperat-Vergne]

Maybe taking another question...

[Jurgen Pullens, Director of Investor Relations]

Yes. I do see Maarten Verbeek. You have a question as well. Maarten? Also here, we see -- Maarten, we can't hear you.[Technical Difficulty]Otherwise, please, if you have a question, Quirijn and Maarten, please write it in the chat and then we can -- I can take your question as well.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Let's try Hans. Hans has a follow-up question as well. See if Hans can get -- otherwise, we have a technical issue, I'm afraid.

[Jurgen Pullens, Director of Investor Relations]

Hans?

[Hans Pluijgers, Head of Research of Benelux]

So probably more detailed questions. First of all, in Australia, you pointed out that you see some delay in order rewarding. How do you see it going forward? Do you, based upon that, expect, let's say, a return to growth in the coming quarter already? Or can you give maybe some flavor on that?And secondly, it's already a little bit discussed, on the GECs. But could you give maybe some feeling what the growth was in that part of the business or the GECs, what sales growth was coming from that part?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes. I will then provide some perspective on both and then, again, Virginie can add an answer. Australia, as we noted, was an issue. And in fact, it already -- I think we already noted that in Q3 and with our Q4 report that -- and it seems now that it's way behind us, but Australia also dealt with COVID restriction. And that made the government redirect their attention to other things than awarding large programs, which is the business we're in, to a large extent, in Australia.So we already said halfway last year that we are starting to see or started to see that awards would slip into the new year, into 2021, and that trend has continued. So it is not like the business all of a sudden shows a very different profile with much less opportunities. It's simply timing and timing on large programs. And unlike small projects, which don't necessarily are impacted that much by significant delays, large programs, which we are, to a large extent, involved in, in Australia, tend to slip quite easily because the big programs are requiring big decisions.So it is simply a move of awards from 2020 into 2021. It actually continued in '20 -- in the first quarter. So it's nothing we are overly worried about. It is not because a lot of opportunities fell by the wayside or have been eliminated. It's just a timing issue and no more than that.And then on the GECs, we noted at the end of last year that we had, in spite of the pandemic, met our goal of increasing the GEC hours over 2020 in all regions. And that was also in the wake of the pandemic, and that was not a small achievement. We are quite proud that we were able to do it. And for 2021, of course, we have further increased the goals. And it is actually positive to see that one of the regions we've noted before is the region with probably a significant opportunity to further the use of GECs, which is North America, that they have actually for the first quarter slightly exceeded the plan for usage of GEC. So we are definitely still there on the same trajectory of using GECs more. It is now, I think, just over 11% of total, so heading in the direction we wanted to go into.

[Hans Pluijgers, Head of Research of Benelux]

And you said last year, it was about 10%, 15% growth, the GEC hours...

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

That was what we said for 2020, indeed. Yes, we -- 2020, we wanted to do 15%, 1-5 percent, more hours in the GEC, billable hours, and we achieved that in 2020.

[Hans Pluijgers, Head of Research of Benelux]

And -- but that's the same trend we're currently seeing? Or that's...

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes, we -- that is the trend we will continue to follow.

[Jurgen Pullens, Director of Investor Relations]

I see a question in the chat from Quirijn Mulder. I think the first question around the situation in Australia is already answered by Peter. But the second one is about, can you update us on the situation with regards to the nonfinancial targets, excluding attrition, Peter?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes. I think the other nonfinancial targets are the targets I did mention or at least, to an extent, mentioned in my prepared remarks, Quirijn. That, of course, includes reducing our carbon footprint and committing to the no more than 1.5 degrees centigrade Science Based Targets by 2030 or earlier. That is something we will definitely achieve.The other one is on diversity and inclusion, to get 40% females in our workforce by 2023. I am convinced we will achieve that as well. And then we have signaled already with the Capital Markets Day, that particularly on sustainability and on diversity and inclusion that throughout the 3-year cycle, we will introduce additional targets to further focus in those 2 areas.So we are on track with the targets we established, what is it, only 6 months ago. But we will continue to add new targets, particularly on sustainability and on diversity and inclusion as we progress through the current strategy cycle.

[Jurgen Pullens, Director of Investor Relations]

Thanks, Peter. First, I want to give the floor to Maarten. And then after Maarten, I go to Henk.

[Maarten Verbeek, Equity Analyst]

I think there was already a question on incidentals in the quarter, which -- to which the answer was no. I understand. However, in Q4, there was an element in the cash flow which was positive, bringing on balance the insurance captive. Did that have a role in the first quarter as well relative to Q1 2020? I can already see Jurgen nodding now, but it would be interesting to hear a little bit more about that. And with regards to the repayments of the deferred taxes and VAT, was any of that repaid in the first quarter? Those 2 were my questions.

[Virginie J. H. Duperat-Vergne]

Okay. Thank you, Maarten. I think that captive will have had an impact only the quarter where we consolidated for the first time. Then you have the movement that appears in the cash flow statement, and this is more or less where you have to say where it is. Then if we had a strong movement would mean that one way or the other, we would have send a very big use of claim facility or not, which generally does not happen because we always need to balance the cash adjustment. And now it will be purely in the company movement. So the captive should not create anything in the future. Until the moment, we might decide to close it, for example, and then get it out again, and then you would see elements coming from that. But I would analyze that as a pure, let's say, technical effect of the first consolidation impact. And then I think your second question was about deferrals of payment. And I think that this quarter, over EUR 37 million, we had to reimburse. It's probably something around EUR 8 million that has been reimbursed. And so our cash flow for sure is affected by this small movement.

[Jurgen Pullens, Director of Investor Relations]

Thank you, Virginie...

[Maarten Verbeek, Equity Analyst]

Did you say EUR 8 million?

[Virginie J. H. Duperat-Vergne]

Yes.

[Jurgen Pullens, Director of Investor Relations]

Okay. Then I go over to -- we go to Henk. And then after that, we have a question from Quirijn.

[Henk Veerman, Research Analyst]

One follow-up from my side. On the larger infrastructure wins, which you mentioned in your press release are embedded in the order book, how will that phase throughout the remainder of 2021?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Virginie, do you want to take that one?

[Virginie J. H. Duperat-Vergne]

I'm sorry, I did not hear it well. Can you repeat it for me, please?

[Henk Veerman, Research Analyst]

Yes, sure. So you indicated in your press release larger infrastructure wins. I think they also relate to -- maybe some of them also relate to, obviously, the recent stimulus and the plans in the U.S. and in Europe. Can you indicate how will that phase, these projects in the order book, how will they phase throughout the remainder of 2021?

[Virginie J. H. Duperat-Vergne]

Yes. Thank you, Henk. In the U.S. for the moment, I think we perceive the movement, there are projects that come on the table and such. But I would say it's far too early to say and predict more or less any strong hiccup or strong change in the award of these projects. So that always take quite a long time. And I think this is probably what will happen to this stimulus in the U.S. Question is really about materialization of all those contracts.But definitely, we think that it is a good opportunity and at least that we hear about it, and we are on the track to position ourselves and take our fair share. But I have no crystal ball and would be quite, I think, accelerated to give anticipation as of now of what it could do in terms of impacting our '21 order intake. In Europe, there are already a few programs because there is also a kind of potential requalification of existing program that were either launched or on the verge of being launched to get in the Green Deal or in launching programs. So that's quite different. And some of the projects that either had been awarded or were on the -- just to be awarded another discussion seems that they can be qualified from time to time. That can result in changing a little bit the proposal of such to cope with different requirements or demand.So that can be also positive in terms of future volume of work. Even if it delays a little bit from time to time, it's just the existing program, which is stemmed as is, and it's probably part of what we see as momentum in the infra in Europe, which answers to that question.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

I think if I could maybe add to a little bit of additional color. The reference you made is the reference to the press release where we did indeed speak about those infrastructure projects, which we have been able to win. And that includes, as Virginie just mentioned, HS2, which is a project we've mentioned in the past and, of course, a significant project for Arcadis, but a significant project for the U.K. as a whole as well. And that project has a lifespan which is well beyond what we typically see on our projects because this is a multiyear program for which we expect to be involved for many more years going forward.And the other one which qualifies under that reference in the press release was the work we -- actually I mentioned, for the Department of Transportation in Georgia, in Alabama and in Louisiana, which is to help our clients there reduce the congestion around the larger cities. That is probably a bit more of the typical project work with a duration which is more difficult for Arcadis. But we do like the programs like HS2 because it is almost like an annuity whereby for many years, you will get and stay engaged in a very large program, which will run for at least another, I don't know, 7 or 8 years.

[Jurgen Pullens, Director of Investor Relations]

Thanks, Peter. I see also a question from Quirijn. In terms of cost savings, the 30% lower cost, are they on plan? That's the question. Peter or Virginie?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes. I probably have to ask -- I don't know whether Quirijn is able to speak other than typing, but I'm not sure whether 30% came from Quirijn. Can you clarify where the 30% came from?

[Jurgen Pullens, Director of Investor Relations]

It's the office footprint that you mentioned in the Capital Markets Day.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Oh, the office footprint. Oh, the office footprint. Okay. If it's solely about office footprint, so that is -- thanks for clarifying, Jurgen, then, of course, that is an issue whereby you deal with, in most cases, leases which span over multiple years. So we have committed to, over the next 3 years, reduce our footprint with 30%. And that is on track. But I can't give you a specific number at this point in time, but we are still committed to reduce our footprint with 30% over the time spend of our current strategy, so 3 years.

[Virginie J. H. Duperat-Vergne]

Maybe it's worth mentioning that to deliver that, we have a plan. We know exactly what will be the bunch of savings that will come year-after-year as you can embed it in sort of those plans. And as Peter rightly said, a lot of that has been around leases. There is a huge part which is back-end loaded. But yet, we exactly know what -- and how it will come, and a small tranche will starting back in 2021 for sure.

[Jurgen Pullens, Director of Investor Relations]

Thank you.

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Thanks, Quirijn. We see that you typed in office costs now. And hopefully, we did answer your questions. So thanks for the clarification.

[Jurgen Pullens, Director of Investor Relations]

Maarten, do you...

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

I think there's probably one from Maarten, yes.

[Jurgen Pullens, Director of Investor Relations]

Yes, Maarten? I see that you are on mute. Not on mute anymore, but we can't hear you. [Technical Difficulty] Can you maybe type in the question, Maarten?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Probably...

[Jurgen Pullens, Director of Investor Relations]

Maybe someone else? Maarten, you have another question? I see you -- no? Okay. Are there any more questions? No? Then I'd like to hand it over to Peter for some closing remarks. Peter?

[Peter W. B. Oosterveer, CEO & Chairman of the Executive Board]

Yes. Thanks, Jurgen. And Maarten, we will get to you separately because there seem to be a technical glitch, not allowing you to actually speak or even type in. So I'll get back to you separately. So first of all, I want to thank you for joining us today for our Q1 trading update. We've talked about the pandemic a lot over the last, what is it, 13, 14 months now or so? And we also concluded before that we were -- and no one was really very well prepared to handle the pandemic.That being said, and as I mentioned in response to some of your questions, the improvements we identified over the 4 years since I joined have really paid dividends for us and particularly throughout the pandemic. Without these improvements, I would have probably been sitting here in a different mindset with a different mood.So clearly, the performance improvements, that includes Make Every Project Count, focus on our key clients, the extensive use of Global Excellence Centers, have helped us a lot in weathering the storm. And the additional things we did at the beginning of last year, as we became aware of the pandemic, have also provided further tailwinds.So I sit here being really proud of what we have done, again, in the first quarter. Pleased with the performance. And then I also sit here with confidence when I look forward and see what the developments in the world are and the fact that, as I mentioned in my prepared comments, sustainability is now absolutely mainstream. And we see client after client now asking for capabilities needed to help them address their sustainability challenges.So I sit here as someone who's pleased and happy with the performance we have delivered in Q1, with the foundation we created over the last 4 years, but even more with confidence about the future, looking at what the world needs and how well Arcadis is positioned to address the needs of our clients and of the world at large. So with that, I want to thank you again for joining. I also wish you to stay safe and healthy. Thanks, everyone, and we'll see you again in the next quarter.