Arcadis NV (ARCAD) Earnings Call Transcript & Summary

Good morning, and good afternoon, everyone. And on behalf of the executive leadership team, welcome to our 2020 Capital Markets Day. An event which will be held in a format we could have not imagined a year ago, but has now pretty much become a modus operandi. Thanks very much for joining us today. We're really pleased to see that there is strong interest from all stakeholders in our story. As it's customary with these type of meetings, let me ask your attention for the usual disclaimer related to any forward-looking statements we could be making today and how they need to be interpreted. Let me now first introduce the team you will be meeting today. Virginie Dupérat, our CFO, who joined Arcadis just 2 months ago, and who will be talking to you from Paris; then Mary Ann Hopkins, who is making the most significant sacrifice, she is connecting from Washington, D.C., where it is now shortly after 3:30 a.m.; Stephan Ritter joins us from Cologne, Germany; and Alan Brookes from Manchester, the U.K. Welcome, everyone. And finally, Jacoline Blokland is with me here in the studio in Rotterdam, where we are obviously observing the appropriate social distancing rules. Secondly, let me now guide you through the agenda for today. After a quick introduction of Arcadis, I will spend some time reflecting on the past 3 years, talk about the commitments we made in November of 2017 and how we performed relative to these commitments. I will then turn it over to Mary Ann, who will explain what we consider to be the most significant global market trends impacting Arcadis and how these market trends translate to very significant opportunities and demands our clients will have in the immediate future. I will thereafter explain how these megatrends, the associated client demands and other relevant factors fed into the development of our strategy and how we arrived at the outcomes as well as the major consequences resulting from this. We do expect all of this to take approximately 40, 45 minutes. After, we will allow you a short, about 10-minute break. And after the break, Stephan Ritter will take the stage to speak to you about the significance of sustainability and digital leadership and our new strategy. Ellen Brookes will then follow Stephan to explain how our strategic direction will be put in action as it relates to the major business areas, which we intend to go -- to focus on going forward. And I suspect that thereafter, you will be interested to hear how all of these translates into the financial framework and what our direction is on capital allocation. And Virginie will share this with you. Finally, I will be back to wrap it all up before we will give you the opportunity to ask questions. Our presentation after the break is also expected to take about 40 to 45 minutes which means that we have about 40, 50 to 55 minutes available for the Q&A. Okay. With these formalities now out of the way, let me get started. We normally start our meetings with a safety moment. But since I do not need to tell you where the emergency exits are, I will now refer to more of a combined value safety moment. And this moment has all to do with the current pandemic and more specifically, how we, as an organization, have responded to this extremely challenging situation. It is probably an understatement to say that our world has changed. I, for one, could have never imagined that we would have to convert 27,000 people to working from home on a moment's notice. We achieved this in just under 2 weeks and without any major disruptions to our projects. And while we did so, our people really didn't miss a beat. They continue to focus on our clients and how to best serve them. They went beyond the call of duty as our clients also needed services they never imagined they would need. And 8 months into this, we are still just doing exactly that. And I find it quite remarkable that we recently delivered our third quarter results, which are arguably stronger than what we have seen in a long time. And for that, I owe my fellow Arcadians a big thank you. Okay. Let me now quickly explain where we operate, who our clients are and what services we provide to them, whereby I do realize that this will likely be well-known to many of you. We do provide services to our clients in 4 different businesses: Infrastructure, Water, Environment and Buildings, with a global footprint, which we manage and report our performance in 3 segments: the Americas, Europe, the Middle East and the U.K. and Asia Pacific, with CallisonRTKL being our separate architectural entity. Also, as you know, reported separately. Our client base is roughly divided 50-50 between public and private. So from all these 3 dimensions, geography, businesses and clients, we're very diversified, something which has proven to be very valuable during the current pandemic. Back on the type of service we provide. They're also described as professional services to distinguish our work from the typical blue-collar construction work, which is something we do not do. This distinction is relevant as the risk profile associated with our type of services is obviously very low, something which is also reflected in the monetary value of an average Arcadis project, which is roughly about EUR 100,000. It's furthermore noteworthy that although we are the fourth largest global pure-play engineering design and consultancy firm, we still only capture less than 1% of the annual spend in our industry. And finally, we're obviously very pleased to see that our strong ESG resume has been recognized by Sustainalytics recently with the first place in our industry in terms of industry risk rating. Just a little bit more detail on the type of services we provide, as you can see on this slide. Firstly, most of our work is so-called local-for-local, which means working for local or regional clients. That said, these clients do value our local face and presence, but they also do expect us to bring our global reach to their projects so that they can benefit from the enormous amount of experience we have gathered globally. Secondly, if you think about the global trends in the world, in particular, population growth, urbanization and climate change, I think it becomes very clear that these trends do impact all the 4 businesses in which we operate, and that is actually a strong interconnection between these 4 businesses and the resulting impact. And more about these trends later. I do realize that you're all obviously very interested in understanding our strategy for the next 3 years, but please bear with me for a few minutes as I look back. When we shared our current strategy with you in November of 2017, we introduced the 3 pillars. We said what our areas of focus would be in each of them and how we would hold ourselves accountable for specific goals. And let me speak about the focus for each of these pillars first. We did acknowledge at that time that we had an opportunity and actually a necessity to create a more inclusive culture with high employee engagement and also a necessity to significantly reduce our voluntary turnover. We wanted to create a people-first culture and become employer of choice. We also explained that we wanted to become more agile and efficient in how we would utilize innovation and did identify a need to upscale our capabilities to become the digital front-runner in our industry. We aimed for a controlled growth. You might recall that I actually spoke about the quality of earnings as opposed to just growth of our top line. And we also communicated the importance of supporting those sustainable development goals we identified as applicable to our work. And finally, in the focus and performance pillar, we identified the opportunity to become more focused on the right countries and regions as well as on providing the right type of services to the right clients, and on the obvious opportunity to improve our project performance and increase the utilization of our global excellence centers. And on the next slide, I will once again highlight the commitments we made at the time as well as to share our actual performance against these commitments. We took our recent Q3 performance as a cutoff and are proud to share that for virtually all criteria, we've met the commitments made, except for return on capital. And obviously, also not on dividend over 2019, which, as you all know, we canceled earlier this year due to the COVID pandemic. When looking at the first pillar, our people are increasingly more engaged and are also increasingly staying with Arcadis, which is what we want. We did meet our revenue growth targets, specifically with our key clients, which was and/is an area of focus. We upskilled our digital capabilities. And although not necessarily a stated goal at that time, we also launched Arcadis Gen at the beginning of this year. Almost 80% of the service we provide do actually support 1 or more of the 5 sustainable development goals we have identified. And finally, we're obviously very pleased with our improved financial performance in terms of higher operating EBITA margin percentage, lower net working capital and DSO and significantly improved free cash flow and leverage ratio. So where does that leave us as we are about to start our next 3 year cycle? Well, first of all, with a much stronger foundation, our improved performance, our stronger balance sheet, the fact that we have resolved long-standing and painful legacy issues and have institutionalized, but not quite exhausted our Make Every Project Count program, which focuses on better project execution, the broader use of our global excellence centers and our key client program all support that conclusion. Our sharpened focus on key regions and markets, a very strong ESD resume and the additional opportunity of the Make Every Project Count program and the GCs as well as the key client program, positions us very well for the megatrends in the world and for the opportunities these megatrends provide to us. And speaking about megatrends, this is the time where Mary Ann Hopkins will share our vision on these trends with you. A very good and early morning to you, Mary Ann, and welcome to the Capital Markets Day.

Yes. It's good to see you, Peter, virtually.

Same here. With the events of about 2 weeks ago, just a question for Mary Ann, and I'm specifically now talking about the elections in the U.S., which took place on November 3. I'd be curious to Mary Ann, I'm sure the same is true for the audience to hear from you how the new administration is going to impact our business?

Yes. That's a great question, Peter. We're actually very optimistic about the Biden administration and for a couple of reasons. One, he stated that he's going to make climate change a priority of his new administration, and he wants the U.S. to become a leader in decarbonization, which will really support the energy transition market in the U.S. And the second reason is that he's focused on economic recovery, and he believes that infrastructure and construction can support that recovery, and he actually specifically called out green infrastructure so we're hoping for a stimulus in the first half of 2021.

Well, you could almost say, Mary Ann that actually the Biden administration sort of helped to develop the 4 megatrends you're going to talk about next. So please take it away.

Yes. Thank you, Peter. And I would like to add my greetings to everybody watching. In this section, I'm going to discuss the global megatrends that are most impacting our markets and influence the evolution of our strategy. So when we started to develop our strategy, one of the first things we did was to identify trends and then assess how they are impacting our markets today and how they'll impact them in the future. And we identified 4 trends as being the most important: urbanization, digitalization, climate change and societal expectations. And I should point out that these trends aren't all that different from the ones that impacted our last strategy cycle, but they have evolved. And in analyzing them, we concluded that each one is clearly driving client needs for smart and sustainable solutions, which really aligns to the core strength of Arcadis. So let's look at each trend one by one. So starting with urbanization and population growth, it can put tremendous pressure on cities, its citizens and the environment. And you can really understand these pressures when you look at the numbers. 3 million people are moving to cities every week, and that's going to result in approximately 70% of the world's population living in cities by 2050. And to give you some perspective on China, just within 2 or 3 years, they expect to have 221 cities with greater than 1 million inhabitants. So in order to accommodate this population growth, there needs to be a significant investment. Over 60% of the land to become urban has yet to be developed. And from a mobility standpoint, the increased congestion is creating complex challenges for many cities. So what does that mean to our markets and clients? Well, the pace of urbanization, like I said, can negatively impact the inclusivity and livability of cities, if it's not managed in a sustainable way. So this is driving a response for smart and sustainable solutions. For example, the mobility market is becoming more connected, optimized and sustainable and, there's an increased demand for both light rail and high speed rail. And then the buildings market, for example, is also increasingly relying on smart, inclusive and sustainable practices to not only lower the operating costs for owners, but also deliver climate responsive and healthy buildings. So how are we responding? More and more often we're responding with -- to these multifaceted inordated challenges with smart city initiatives. As an example, Arcadis is right now supporting the Smart City program in Mesa, Arizona and providing program management services for the installation of their advanced metering infrastructure. And once installed, both the city and its citizens are really going to benefit from optimized utility usage and management. The next megatrend, climate change is already severely impacting our way of life. And this is only going to increase unless it's addressed. So I think we all know some of these impacts that the sea levels are rising and the coastal areas are losing ground. Temperatures are increasing. We saw that the last decade was the hottest on record. It's causing severe droughts, it's also causing wildfire destruction like we saw in the U.S., in Australia last year. There's an increase in the number and severity of storms. And while there's water scarcity in many parts of the world, there's too much water in other parts of the world, causing inland flooding. So how is this impacting our markets? Well, I think we all know that there's a global imperative to combat climate change. And our government and industry clients must make significant investments to both mitigate future climate change and then adapt to its inevitable impact. So one of the largest efforts to mitigate climate change is the energy transition from fossil-based fuels to renewables. And there's already over $1 trillion committed investment here. And this is going to continue to grow as more cities and countries commit to carbon neutrality. In our markets, we already see demand for decommissioning existing power plants and for design and installation services for renewables projects. Adapting to climate change will also require significant investment around the world. In the U.S. alone, it's estimated that $400 billion is needed to protect communities and infrastructure from rising sea levels. And we fundamentally have to change how we live, invest and build in these communities. Arcadis is a leader in client resiliency and well positioned to address these challenges. As an example, we're currently supporting this Louisiana Coastal Protection Authority by developing their 2023 update to their comprehensive master plan for sustainable coast. And when this plan is completed, it will provide a 50-year strategy for restoring and protecting this coastal region. The third megatrend, digitalization, is all around us. It's connected the world. It's put services directly in the hands of users. And it's put data at the center of some of the most successful companies' business models. And we see this with technology companies becoming some of the highest market cap companies in the world. But it's really not their size that matters, it's their influence. They have fundamentally changed how we shop, consume news, work, socialize and even hold virtual meetings like we're doing today. And as an example, our shopping habits have been transformed, and e-commerce sales continue to outpace in-store sales. This is impacting some of our markets by driving the need for new warehouses, distribution centers and more efficient and sustainable transportation options for all of these goods. Also impacting our market is the amount of data that is being acquired, processed and stored, which is creating an explosive demand for data centers. And increasingly, these data centers are incorporating green energy solutions. Well, it's not only impacting kind of the infrastructure demand, digitalization in our industry, it's also spurring investments in digital services and products. And more and more, we see that our clients' expectations around solution delivery are aligning more closely with their personal experience with technology. So what does this mean? It usually means that they want data and insights right at their fingertips. We see this especially in the asset management field, where the expectation is that asset data is going to be collected in real time. It's then going to be analyzed using advanced analytic techniques, such as the Internet of Things, and it will be applied to provide insights and decision-making. And then it's all going to be wrapped in an enterprise approach that allows clients access anytime and anywhere. Arcadis Gen, our digital incubator, offers several digital asset management projects, which directly address this client need. As an example, Icon Water in Australia used our enterprise decision analytics tool to develop a comprehensive analytics-led approach for all of their maintenance and investment decisions. And this was the first application of its kind in the Australian water utility. And Stephan will go into a little bit more detail about Arcadis Gen later. The fourth last megatrend, societal expectations, has probably evolved and accelerated the most recently. Stakeholders are demanding companies and government act with integrity, and create a, sustainable and inclusive future. So how are governments stepping up to this? Well, the European Union has created the European new deal and that's going to provide EUR 1 trillion in sustainable investment in the next decade. And we have countries like China who have committed to carbon neutrality, in this case, by 2060. And this is going to create the world's largest market for low-carbon technology and drive innovation. But this change is not going to be led all by governments. Investments -- investors, excuse me, are increasingly supporting or seeking to put their money in ESG-related funds and 120 of the world's largest companies supported the world economic forums efforts to develop a core set of common metrics for nonfinancial factors, known as stakeholder capitalism metrics. And finally, publicly held companies such as Amazon are pledging and increasing awareness in social justice reform. So what does this mean for our markets? Well, this expanding ESG agenda of governments and business is going to drive significant investment in 2 areas of strength for Arcadis, the environmental remediation market, and the green technology and sustainability market. The remediation market continues to grow and addresses decade-old contamination issues. But also increasingly emerging contaminants like PFAS. So far this year, we've booked over EUR 100 million in PFAS-related gross revenues, and we still have over EUR 700 million in future opportunities in our pipeline. The green technology and sustainability market is also growing significantly. And this is a market where it combines the subject matter expertise and environment and sustainability with digital technologies, like analytics and the Internet of Things. And you can think of this example market such as the smart -- or in the intelligent water market and the smart cities market. And this is a real area of strength for Arcadis, as evidenced by benchmarking firm Verdantix, recognizing Arcadis for a second year in a row as a leader in digital, environmental, health and safety. So in conclusion, our summary, the 4 megatrends of urbanization, climate change, digitalization and societal expectations, continue to move our markets and clients' needs towards the core strength of Arcadis offering and are increasingly putting sustainability at the core of everything we do. And with that, I'll turn it back over to Peter.

Yes. Thanks very much, Mary. And thanks for a very clear explanation as to what is happening in the world, how that creates and influences these megatrends and how that, in turn, then creates opportunities for Arcadis, which we're already capturing as we speak. So thanks very much. So after this explanation by Mary Ann, let me now take these megatrends and explain how they have been used as the basis for our strategy. How they were combined with other major data points and factors such as client developments and requirements, competitive landscape, internal capability assessment and geopolitical issues and ultimately culminated in our new strategy, maximizing impact. And in doing so, I will bring a very significant effort over the past 6 months back to about a 15-minute presentation. As I said, we obviously started with the 4 megatrends, which are impacting societies, are impacting our clients and which do indeed provide the many opportunities Mary Ann spoke about. And we then added what we see as the major expectations our clients will have from our case. And in addition to be expected largely core capabilities, which we obviously need to demonstrate at all times, our clients now increasingly expect us to help them in designing resilient assets, which can, for example, withstand the potentially detrimental impact of climate change or advise them on their energy transition. They also expect us to deliver our services and products in a digitalized way, which, in turn, allow them to scale them where applicable. And finally, they expect us to put ourselves in their shoes to really understand what the end users desire. And obviously, a very relevant question when looking at these megatrends and client demands is how Arcadis can benefit from it? And I'm convinced, as already mentioned before, that we are in a great position to do exactly that. And I believe we are in this excellent position because of our much stronger foundation. But also because of the global expertise and experience we have in the business, which are most impacted by the megatrends. Businesses which will inevitably see very significant investments to make them more sustainable, to make them more resilient and to make a more future-proof. And Arcadis, obviously has a very rich resume, one which combines extensive and deep asset knowledge with a strong ability to proactively integrate sustainability requirements into the design. And in addition, we already now see the growing demand for digital products and services through the launch of Arcadis Gen. With the many opportunities available to us, it will obviously also be again important for us to make choices and to focus our business even further, just as we have done in the past 3 years. And let me use the next couple of slides to explain what this entails. Our purpose as an organization is actually quite simple and hasn't changed. It is to develop human centric solutions that improved quality of life, and to propel our ability to meet the increasing demand we see, we will use the power of 3. Three elements which will allow us to maximize impact. The first element, which will maximize impact is through embedding sustainability in literally everything we do, including in every solution we offer to our clients. And the second element, which will allow us to maximize impact, is through digital leadership, enabling us and our clients to make data-driven decisions in the creation of efficient and resilient assets. And our last element for maximizing impact is to further advance the focus we already applied in the past 3 years and to scale our solutions for global application. And let me unpack each of these further. As I've mentioned before, projects totaling just under 80% of our revenues contribute already to one or more of the 5 sustainable development goals we have identified. Whereas this is significant? It's not enough. We do need each and every project to be designed and delivered with the certainty that we have considered all relevant sustainability requirements and with the necessity to clearly, and in a very tangible manner, articulate to our clients how our solutions have contributed to a more sustainable world. And we do need to do this in a consistent and deliberate way, effectively leveraging the tremendous capabilities and experiences we have available within Arcadis globally. In addition, we will need to become a leader in creating a diverse, equitable and inclusive culture, reflective of the societies in which we operate, and allowing our people to bring the whole self to work and to continue to get back to communities, like we do today, for example, with our shelter program. We have come a long way in the past 3 years in establishing ourselves as digital front runner. And also here, we will do more going forward. Arcadis Gen has taken off and is an ideal springboard for us to broaden and grow the delivery of digital products and to offer Software as a Service. And in doing so, create recurring revenue streams. The upskilling of our employee base through expedition DNA has been truly exemplary. And these improved capabilities will now enable us to drive innovation more efficiently with a strong focus on the opportunity for scaling and for global application. And we will continue to invest in the creation of a common Arcadis technology platform as well as in selected opportunities to enhance our capabilities. The recognition as a leader in providing digital EHS services, as explained by Mary Ann just now, indicates that we are on the right path. And the third, a last opportunity is to maximize impact through focus and scale. By once again being selective about countries and regions, about clients and projects, which provide us with the right to play and an opportunity to win. We have created significantly more transparency around the right data we need to make the right decisions, as for instance, evidence through our key client program. We, however, still have additional opportunity available to further leverage and grow the capabilities we already successfully deployed during the current strategy cycle, such as Make Every Project Count and the global excellence centers. And finally, our focus is also being reflected in our decision to consolidate our current 4 businesses into 3 global business areas: resilience, places and mobility. And to summarize what I just explained, here is an integrated view for you. The 4 megatrends a distinct impact on the requirements our clients have, which put the onus on Arcadis to satisfy these requirements to the best of our ability. Our strategy will use the strong foundation we have created to accelerate our impact in 3 ways: through the offering of sustainable solutions in all we do by providing the digital leadership required to be efficient and relevant. And thirdly, through focusing on the right opportunities and to use our technology and organizational platform to simplify, to consolidate and to scale. The consolidation of -- or the consolidation to 3 global business areas will be a phased approach, which will be delivered through 2021. And ultimately resulting in full global responsibility for delivery to our clients in these respective global business areas. In addition, we believe that it is also our responsibility to ensure that we satisfy all stakeholders. And let me now explain why I think this is not as difficult as it might sound or as it might have been in the past. I think it's fair to say that I can't recall a time in my life, during which the interest of all stakeholders have converged as much as they have now. Virtually everyone is convinced about the necessity to combat climate change, to solve inequality, to create sustainable solutions and to act in a socially responsible way and balance the impacts on the planet with the opportunity to make a profit while protecting people. And these consistent expectations all stakeholders seem to have are shown at the bottom of this slide. And with that as a truly strong aligned foundation, I'm actually convinced that it is not too much of an ask to also satisfy the more unique needs each stakeholder group individually might have. This concludes the first part of our presentation. I do hope that you found it insightful and interesting. We will now actually show a brief video of summarizing what we have shared with you so far. [Presentation] [Break]

Welcome back. I hope that you are as eager as we are to continue, and we're going to pick up the pace. So first, Stephan Ritter is going to explain once again why sustainability and digital leadership really matter; thereafter, Alan Brookes is going to share with you how we take strategy in action, and he will share some wonderful real project examples with you; Virginie will then talk to you about the financial framework and the capital allocation; and then I'll come back to wrap it up. Good morning, Stephan, also welcome to you into the Capital Markets Day.

Hello, Peter.

You've been responsible, Stephan, for innovation for the last 3 years. And so what the audience probably wants to know is, what has gone really well? And where do we have opportunities to further improve?

Yes. Let me start with a positive. I think we created a very clear strategy, clear framework and a common language to provide a lot of clarity of our digital and innovation agenda over the last few years. And at the same time, provided our 28,000 people in Arcadis, the opportunity to proactively engage through expedition DNA, and that created again, a lot of clarity, but as well a lot of energy and enthusiasm in the organization. So from a cultural perspective, I think we've done really well. The opportunity to improve is, I think, connects the business strategy more closely with our technology approach. And that's, of course, something that we will be addressing in this strategy and in the years to come.

Well, it's up you now to explain why digital leadership and sustainability are so important to our strategy. So please go ahead.

Thank you very much, Peter. So my name is Stephan Ritter, Chief Innovation Officer at Arcadis, and I have the pleasure to talk to you about 2 of the main themes of our next 3-year strategy, which is sustainability and digital leadership. And let me start with sustainability. So why is sustainability so relevant? It is relevant for us because it is relevant for our shareholders and stakeholders. It's -- our user expectations, client expectations are shifting, and you can see in the example below that our clients don't just expect us to respond to their needs, but they expect us to be progressive, to be provocative, to be challenging them so we can together develop strategies and concepts how our clients can become better in sustainability and as well help their clients to become more sustainable companies. Investors increasingly demand ESG progress, as you very well know, and people are choosing sustainable companies. So a purpose-driven organization like Arcadis does drive loyalty and reduces turnover quite significantly and as well enables us to attract talent in a better way. So why is Arcadis so well positioned to lead in the sustainability space? It's quite simple. Our DNA is built on sustainability. It's in our roots, founded in 1888 as the Association for Waste Land Redevelopment; it's in our logo, the fire salamander requiring balance; it's in our name, Arcadis is derived from Arcadia, the finest place on earth to life; and it's in our purpose and has been for a long time, improving quality of life. So sustainability is very much who we are, and our DNA is built on sustainability. On the timeline below, you can see a few data points that I will partially talk about in the next few slides. So how are we delivering on our purpose? 3 areas of focus: business operations, people and communities; as well as client solutions, of course. We embed ESG best practices into our operations and report transparently on our performance, very much our license to operate. We cultivate a workforce that is diverse, inclusive and empowered, and we continue to empower our people to engage responsibly in their communities. And the biggest impact we have is through our clients, providing solutions that address our clients' greatest challenges, of course, is the area where we have the biggest impact and where we can differentiate. So let's go through the 3 areas in a little bit more detail. We are leading in ESG rankings, and Peter already mentioned, we ranked #1 in our industry from Sustainalytics, and as well, top 5% in our industry from EcoVadis, a more client-focused rating agency. And for the years to come, we will continue to lead ESG rankings within our industry. From an inclusion and engagement perspective, our voluntary staff turnover has reduced over the last 2 years, down to 9.4% this year, which is, of course, a little bit as well COVID-related. And we'll, in the next 3 years, have the ambitious target to reduce our staff turnover to below 10%. Women in workforce as a percentage of the total workforce, we have improved and will continue to improve to a level of above 40%. And of course, women in workforce is not the only measure of diversity, but it's one of them and an important one. And yes, we will continue to engage with our people, enable our people to give us feedback on what can be done better and having a good understanding of how our people engage with us as an organization. And when you talk about sustainable business operations, of course, you need to talk about emissions reductions. We've reduced our emissions by 33% over the last few years and set ourselves clear targets for the years to come. Reduced emissions aligned with a 1.5% science-based target before 2030 and be carbon-neutral in our operations from this year by investing in high-quality-certified abatement and compensation programs. When we talk about people and communities, let me start with the World Business Council for Sustainable Development. We've been a contributor since 2014, and Peter has been a member of the Executive Committee since 2019. Being part of those associations is very important so we can share our thought leadership, but as well learn from what other companies in our industry, but as well in other industries are doing. What is even more important is how we engage and empower our people. And we've been doing this through expedition DNA, an engagement program for 28,000 Arcadians that give them an opportunity to proactively contribute to our strategy. We launched it about 3 years ago to drive the cultural movement towards our digital and innovation agenda, and we're now expanding it towards sustainability to accelerate our sustainable development. 2 examples how we interact with the communities: Local Sparks, where we help our people who want to engage locally in their communities; and UN-Habitats, a partnership that we've had for 10 years that we are very proud of, with 120 global missions having 2,200 Arcadians participating. On expedition DNA, Local Sparks as well as you UN-Habitat, I would like to share that this would not be possible without the Lovinklaan Foundation, and I do want to take this opportunity to give a bit thank you to the Lovinklaan Foundation. As I said at the beginning, the biggest impact we have is through sustainability-driven solutions with our clients. Let me give you 3 examples. Arcadis is holding a patent on sustainable soil remediation, TISR, that helps multiple clients across the world to reduce their life cycle cost by up to 50% compared to conventional technologies. We're designing bicycle connections in Los Angeles, one of the most polluted cities and congested cities in the world, of course, to allow people to move more safely, healthier as well as more environmentally-friendly. And we are designing sustainable offices. In this case, at the Triodos Bank in the Netherlands, where we enable the client to design bio-based with reused materials, energy-neutral and with closed water circuits. With that, I would like to conclude my presentation around sustainability and would like to continue with sharing a little bit of our thoughts around digital leadership. And again, digital leadership is very much a continuation of our journey so far. We have 3 areas that we will focus on: building a technology platform, rethinking the way we work and positive disruption. So we continue to invest in our technology foundation to digitize our core business and to build digital solutions and products. We continue to rethink the way we work, developing and engaging our people and partners to develop innovation towards end users and clients. And we focus -- continue to focus on positive disruption by building scalable SaaS products that connect the asset knowledge of Arcadis with scalable business models, and we do that through Arcadis channel. So again, let's go through these 3 pillars in a little bit more detail. So through a consistent enterprise and data architecture, through common security standards and the ability to provide those services and the hosting in the cloud, we invest into a common technology platform. That foundation allows us to enable standardization and automation. It allows us to enable to capture data that we create every day to connect it with client data, install the data in a way that we can accelerate scalability and value creation. And that acceleration allows us to differentiate in the market space in 2 ways: to deliver digital solutions, so we can deliver improved client experiences at margins that are beneficial for Arcadis; and secondly, through delivering scalable products in order to deliver recurring and scalable revenues and as well evolving our business model. When we talk about rethinking the way we work, we always talk about how we can grow our people. And we grow our people by providing them with the clarity that we have on the creating a common framework, the same language so everybody can contribute and, of course, as well, build the capabilities of the future and the strategic workforce of the future. And we do that through expedition DNA as one tour with a very high participation rate, as I, mentioned before. Let me talk a little bit about innovation. When we talk innovation as a process, we look at it from 3 lenses: desirability; viability; and feasibility. And it really starts with very clearly identifying what is actually the problem we are trying to solve. Once we have identified that needs, that problem, we then start developing a solution that makes sense from a business perspective for our client as well as for Arcadis. And once that is clearly scoped, we think about what is the technology and what -- is it doable from a technology perspective. Secondly, innovation can never happen in isolation. It requires co-creation with clients, with end users, with ecosystem partners. And 1 good example that many of you know is our collaboration with Texstars, where we basically helped 20 startups to be more successful, and they helped us to be more successful. And then as well with a company of 28,000 people, you want to as well capture the creativity, the ideas, the entrepreneurship of our people. And we do that through the innovation framework, and then applying the 3 lenses I just talked about, very consciously decide which ones do we invest in and which ideas do we want to scale globally. Another area of focus is, of course, the increase of efficiency and productivity. We do that through the standardization of core services and functions through putting the global excellence centers in a leading position as well as making sure that we use and reuse data for improved client solutions. Now let me talk a little bit about Arcadis Gen. Arcadis Gen we created at the beginning of this year, very much in order to act as a catalyst to accelerate our dual transformation, in order to develop new business models faster and scale them globally and position ourselves more closely to technology and startup ecosystems, in the end, of course, with the purpose of driving differentiated client and shareholder value and delivering recurring and scalable revenues. When you look at the product examples that I'm showing below, Mary Ann has already talked about a great enterprise decision analytics example in Australia. Let me talk about maybe 2 more. Applied insights, for example, applied insights is a platform that allows the development of data analytics applications that help clients to optimize their investments, specifically in a constrained environment, which we currently have. Second example is enterprise asset management, where we fundamentally help clients to streamline their processes to understand the data of their processes, to collect their data, to move that data into information and knowledge and then better decision-making how to run the assets. In this particular case for U.S. rail clients where we're able to reduce cost by 40%, but then that client could reinvest into their operations and into better rail services for their clients. So with that, I would like to conclude my presentation, and I'd like to hand it back over to Peter. Thank you.

Thanks very much, Stephan. I think it was a very clear story, explaining how our heritage and our pedigree is rich, how sustainability is not something we need to tell people to do, it is in our DNA, it is in the passion of our people and also for sharing the tremendous work which has been done to create that digital leadership over the last couple of years, and we will greatly benefit from that foundation. So thanks very much.

Thank you.

So welcome, Alan. How are you this morning?

Very well. Thank you, Peter.

So we're going to move on to strategy and action and allowing you to explain why global business areas are important. But before we get there, I know that people in the U.K., just like people in the Netherlands, love to talk about the weather. So what have you seen in terms of weather changes over, say, the recent period?

Well, correct. I'm here in Manchester this morning. And of course, we've seen rain once more and perhaps linked to that is floods. And I think we've had flood alerts already this week. That's not untypical right now, but it is quite a change. And I think we can see the climate change coming through. And I think, therefore, it's going to be really important, not just in the U.K., but around the world, where the changing weather patterns are going to influence the decisions that we have to make and I'm sure will be a key part of our strategy going forward.

Yes. I think that we can probably all relate to that. So with that, Alan, please get started. You have some great information to share and particularly the project examples, things we already do for a living, I think, will be very meaningful to our audience. So please go ahead.

Thank you, Peter. So let's have a look at turning our strategy into action. We've already heard today from Mary Ann, and we've looked at the mega trends that we can see around the world: urbanization; digitalization; societal expectation; and, of course, climate. We've then looked with our clients to see what the changing needs are of our clients around the world impacted by these megatrends. And through the strategy process, we started to develop our solutions and look where we have real expertise and experience, and then we can use this to accelerate our profitable growth in the future. So let's have a look at the 3 global business areas that Peter referred to: resilience; places; and mobility. It would be quite easy to say that resilience is environment, water and energy; places is buildings; our mobility is infrastructure. But actually, it's so much more than that. These global business areas can connect us across the world to the work that we do and our expertise. And as you will see on the chart, we've now started to develop our solutions to address these megatrends and our clients' changing needs. If we look at where our expertise is in the world, then we can see, for example, in America, we have really strong resilience expertise, and we see demands for this in Europe. So we can move our expertise and target our markets and clients in other parts of the world. The same in places, real strength in Europe and the U.K. and of course, in CallisonRTKL, and we can bring this to bear and target other parts of the world. And of course, the same in mobility. Mobility has strength in parts of Europe, Asia, Australia, and we can then use that to develop our target markets. This is not to do everything everywhere, this is to develop our solutions into the target countries. So then if we start to have a look next at resilience as a megatrend and a global business area, what we see is that we've got expertise, yes, in water and environmental, but also in energy transition. We see the regulations coming in around the world from different governments and obviously, environmental pressures. We're developing our solutions, looking at our target markets through the strategy period and connecting and collaborating to accelerate that profitable growth. Let's have a look then at the megatrends that we see. So for example, not surprisingly, we can see governments targeting 0 emissions. We can see the demand for increasing environmental stewardship, and we've seen this, if you like, with the people asking more for us to take care of the planet. And we see urbanization causing pressure on our cities and on our water supply. So what we've been doing is talking to our clients, looking at the solutions that we can develop and how we can help them by focusing where we're strong and building out into our target markets. Let me give you some examples. So for example, Amsterdam has already targeted to say they want to be natural gas-free by 2040. They turn to Arcadis and said, "Help us on a program to achieve this goal." So we start to look at our sustainable solutions around energy transition, and we start to then develop a new program to help the client move to achieve that natural gas-free target of 2040. As I'm sure you can understand, that's a small example, but a hugely scalable example across the world, and we can target this in other cities. A second example I could give you is in remediation. So we see, as was referenced earlier, PFAS as a contamination of our soil through firefighting substrates. We've got huge strengths in America that we've already used to target Australia. And the PFAS strengths that we have, we've already identified the target markets in Europe. So we take the expertise, we look at the target markets with our client need and then we can grow across the world. The last example here I would give you is Tarrant Regional Water District in America. They've come to us and said, "Actually, we need a safe water supply. Can you help us understand how to optimize this?" So we've looked at our solutions and our technology solutions for real time reporting, we've looked at our asset management skills and capabilities and really produced a real-time energy consumption optimization tool and deliver this to the client so that technology can make a difference. But again, we can see there are other companies and clients around the world that will need these skills. Let's have a look now at our second global business area, places. This is typically where we all live and work. So our homes, our schools, our hospitals, the rail and bus depots, if you like, transportation hubs. Places has got huge skills around the world already in Arcadis, but what we've recognized is the changing needs and the need to target our new solutions into other parts of the world to achieve that profitable growth. So let's have a look at what we're seeing as the trends. We've already seen that buildings generate 40% of the annual global emissions, so many clients are understandably worried about this and asking how to improve. In digitalization, we've already seen smart buildings, this market growing 4x faster than the industry average. And then in urbanization, the population growth, combined with the pressures this brings on transportation on the way we live and work, has caused clients to say, "How can I improve?" So again, we take our global expertise we see in the world, and then we bring to bear in a focused way on target markets and clients to deliver that increased growth. Let me give you some examples in places. So first of all, like clients in America, in San Francisco, building a really tall residential tower. As I just said, buildings are 40% of the global emissions. So how can we improve this? How can the clients really improve the way that they deliver a high-rise tall tower? Well, we analyzed this really carefully, we looked at the construction process and we've reduced the construction waste by 75%. We brought in gray water as a reuse within the building and this has achieved a LEED gold standard for a residential tower. Quite an achievement, but you don't have to think too hard to say, well, this is a very scalable solution right across the world. Then if we look at another example, in Costa Coffee, we have a client who has many coffee shops, something I'm sure we're all used to. But they said to us, "How can we manage our rollout program better? How can we manage the refurbishment of our shops better?" So we've introduced our solutions to them in digital cost management, in project management and created new technology solutions. What we've done is integrated the cost process into a real-time data platform. This allows the client instant access to the costs and the program so we can make better, more informed decisions faster. Again, a very scalable solution, but 1 that will also accelerate our own growth as we demonstrate this to other clients. The last example I'd like to share in places is the university. There are many, many universities around the world, and it's not uncommon that they have a broad portfolio of buildings of different ages. In the University of Manchester, the client asked us class to look at the life cycle of the buildings, the asset modeling, if you like, as how they use the buildings and how could they then improve sustainability, something many clients are clearly focused on right now. So what we've done is created an asset life cycle and technology solution for them to look at how they can improve the use of the buildings, improve the refurbishment program and, where buildings are no longer fit for purpose, how can they repurpose those buildings to a better use? Now there are many, many universities around the world, so I'm sure this is a really good target market to accelerate our growth. So finally, let's have a look at mobility. Mobility is how we move people and goods around our cities, around our countries and the world. We use roads, we use rail, we use ports and we use airports. All target markets for Arcadis. We have really strong expertise in different countries that we can bring to bear in target markets for our future growth. Let's have a look at what we're seeing as the trends. Well, first of all, we see climate, extreme weather conditions. I'm sure we've all, in different parts of the world, seen the impact of climate on the way that we move around. In digitalization, we see clients looking to optimize the energy efficiency of public transport. We have an example here in the U.K. of HS2, the largest infrastructure project in Europe, where we're supporting design innovation to support the reduction in the carbon emissions to more than 40%. We see traffic congestion in our cities. We see increasing demand in urban areas. So let me give you some examples. In Georgia, we see congestion is a problem, and commuter times are lengthening. So by focusing and standardizing the way that we approach the work with this client, we can automate what they're doing and what they're using. We've got mobility management as a solution that we've already been developing. And what this has done for the client is allowed him to analyze better and deliver safety improvements whilst actually cutting the congestion and reducing commuter times. The second example here is a major U.K. client in Transport for London. They have 9 underground lines and above-ground transportation systems. This is a client where we've led with Arcadis Gen. Stephan referred to our enterprise asset management tools. Well, this client has asked us to look at how we can improve their asset management. What does this mean in reality? Well, by a single integrated system for all their transport lines, we can optimize the maintenance when it's done and how it's done. And by optimizing this, we reduce the downtime for the client and improve their cost efficiency. This new technology solution is something that can be rolled out to any major transportation system around the world. So a great benefit. The last example I'd like to share in mobility is back to Amsterdam. Again, looking at the commuter experience. Our clients, if you like, are looking to say, well, their own clients need an improved experience, and how can we achieve that? Well, we've developed a solution, which is Mobility as a Service. This is an app and we're all used to using apps, but it looks back on past data. It looks at the existing situation and then recommends on the app to the customer the best routes that they can take. This is real technology as a solution using our core skills. But by bringing those skills to bear from around the world, we can target markets and increase and accelerate our growth. And so if we put all of that together, what we're really looking at is accelerating Arcadis's ability to address these client needs that result from the megatrends which we're seeing. For our clients, it optimizes access to our global capabilities and experience, delivering best-in-class solutions to them in an efficient way and introducing products and digitalization in what we do. For Arcadis, it means that we're more focused. We can actually target clients and countries where we have a right to play and the ability to win. We do not try and do everything everywhere. We increase the opportunity to standardize and automate and digitalize what we do. We can then increase our performance improvements, building on the work we've already done with our initiatives like Make Every Project Count, like our use of our Global Excellence Centers and the benefits that we've already seen from our key client program. This will mean that we're more focused, that we can bring the megatrends and address them in the changing client needs, and truly in a collaborative way, accelerate the profitable growth of Arcadis. And with that, Peter, I'd like to hand back to you.

Well, thanks very much, Alan. I'm not sure that there's much I can add to this great summary other than probably saying that the message you have clearly conveyed is that the capabilities we have through the consolidation into 3 global business areas will put us in a really great position to address the megatrends we see in the world. And you have done so with project examples, which everyone can clearly relate to. So thanks very much. Good morning, Virginie.

Good morning, Peter.

I think everyone who has moved to a new company knows that, that comes with some special moments. And you moved to Arcadis back in September, which obviously, gave you the special moment, but you did so in a very special situation. So maybe tell us a little bit about how the integration has gone so far? And whether you have actually seen any surprises since joining 2 months ago?

Thank you, Peter. Maybe if I need to choose something, I would say that really, I'm amazed by Arcadians' adaptability and their ability to work so efficiently in full virtual mode to maintain a true team spirit. And that in spirit, I'm able to fill it, even me even being alone and even if my onboarding has almost been the entirely virtual, I can feel that heat of everyone around, and that's just fantastic, I think.

All right. Thank you. Well, this is the moment to allow you to present how everything we've shared so far translates into financial numbers, which is obviously also of interest to the audience. So please go ahead.

Thank you, Peter. And let me turn, yes, maybe to the context of the presentation. I'd like to come back first on what we've been achieving over 2017-2020 plan. Over the last cycle, executing our strategic priorities allowed us to improve our performance. So looking first to the left chart. Net revenues grew in line with GDP across the cycle, resulting from solid client demand, a successful setup of our key clients' program and the emergence of more digital solutions. In parallel, we focused on improving our project delivery and launched MEPC program. We proved to be very voluntary in using our Global Excellence Centers and addressed underperforming businesses and existing legacy issues. With that, over the cycle, operating EBITA grew from 7.6% to 8.6% quarter-to-date, as you can see on the middle chart. Moving now to the right chart. DSOs significantly improved, down to 82 days. And net working capital percentage is at 16.6%, resulting from management increased attention and a change in the group incentive schemes to add operational focus on free cash flow generation. As such, cash generation increased over the period. During that cycle, we used our cash in return to our shareholders, as you can see, and we also did some opportunistic M&A while we identified building blocks to add to our capabilities. It's also worth mentioning that a large amount of cash has been used to clear some legacy issues such as ALEN, including EUR 65 million in H1 2020. The focus then has been to strengthen the balance sheet; reduce the net debt amount, which is EUR 195 million end of Q3 2020; and consequently, deliver a low leverage ratio and remain far below covenants. This allows to start this new 3-year strategic plan with a robust balance sheet. With this brief summary of the group achievements in terms of financial over the last strategic cycle, I think we can turn to the financial objectives we set to ourselves for the 2021-2023 plan. As explained by Mary Ann, the group is well placed to benefit from promising market trends and growing client demand end markets, focusing on continuing our successful key client program as well as enhancing value proposition with sustainable solutions, globally leveraged and more digitized. We expect to be able to deliver net revenue organic growth of mid-single-digit over the cycle. We will support this revenue growth with operational efficiencies. We will focus, first, on achieving full speed return from Make Every Project Count program; secondly, on benefiting from the geographic footprint refocus we have undertaken; moreover, we will further increase Global Excellence Centers' utilization and use this capability to streamline work processes and ensure the highest quality level across the organization; finally, we will simplify and streamline our organization, embedding some of the savings achieved during 2020 to face COVID crisis as more structural savings while defining Arcadis' new normal. For us, this will notably mean achieving our carbon neutrality commitment, reducing our travels, but also delivering a different setup of our office footprint and reduce it by 30% over the plan. The combination of all these elements should lead us to deliver an annual EBITA margin above 10% by the end of the plan. On top of these net revenues and EBITDA targets, we intend to keep our focus on reducing further our DSO, which should decrease below 75 days. Net working capital's strict management should allow to get below 15%. And consequently, return on net working capital should be in the range of 40% to 50%. As a summary, maintaining our focus on cash and efficient working capital management, the targets we set today to deliver an organic mid-single-digit net revenue growth over the cycle; and an annual EBITA margin we expect to be above 10% at the end of this strategic cycle; combined to these cash management targets will allow the group to deliver sustainable cash generation. With this, our capital allocation should be framed as follows: first, we will invest EUR 40 million to EUR 60 million per year over the cycle, mainly on technology and digital capabilities, building on our investment on our ERP and accelerating the development of our technology platform, while embracing new ways of working, as explained earlier by Stephan. Secondly, we intend to go and investing on small= to medium-sized bolt-on M&A operations. And as such, we would consider opportunities, which should allow us to expand our global footprint in line with our strategic priorities, but also those which would strengthen our position as digital frontrunner. Finally, we confirm our intent of a dividend payout ratio of 30% to 40% for this strategic cycle, complemented with share buyback to avoid dilution and eventually add additional returns when appropriate. While keeping a disciplined leverage of 1 to 2 above the cycle, the group shows its ability to generate sustainable value creation. And with this, I will hand you back to Peter for the wrap-up session.

Thank you very much, Virginie, for a very clear, comprehensive presentation. And also thank you very much for becoming an Arcadian so quickly. So I want to take a moment to thank the entire team for delivering our new strategic plan. I trust that this presentation has helped you to understand how we plan to capture the right opportunity for Arcadis and how we plan to create profitable growth by taking advantage of these significant global megatrends. I will now wrap this up with a final summary of our commitments, which build on what Virginie just shared as well as some final closing comments. Just as we did 3 years ago, we want the commitments we hereby make to all of our stakeholders to be a mix of financial and nonfinancial targets and ultimately, let them culminate in fully integrated reporting. I'm not going to dwell on the financial targets as Virginie went over those just a minute ago. Suffice it to say that virtually all are a further improvement compared to where we are today. We simply aim for predictable and sustainable profitable growth while satisfying the interest of all of our stakeholders. In terms of nonfinancial targets, we want to further advance our course to be an employer of choice through low -- continued low voluntary turnover and continued higher engagement. And we'd like to do so by creating a more diverse and inclusive culture, one which truly reflects the societies in which we operate. Finally, it goes without saying that we commit to further lowering our carbon footprint, but more importantly, that we plan to, in a more tangible way, define how the work we deliver to our clients contributes to a better and more sustainable world. I realize that we have shared a lot of information with you, but let me please summarize the main takeaways for you. Looking back over the past 3 years, I believe that we have come a long way. Our performance has steadily improved even during the unprecedented current period during which the world is grappling with the impact of the pandemic. Our voluntary turnover is significantly lower. Our EBITDA margin percentage has increased. And a lower net working capital and strong free cash flow, and particularly this year, brought the leverage ratio down to the lower end of our target range. We have resolved a few, at times painful, long-standing legacy issues. So it is fair to say that we're starting our next 3-year cycle from a very strong foundation. Then looking ahead, it becomes very obvious that the combination of population growth and urbanization, climate change and social -- societal expectations, excuse me, require very significant measures for the world to take in order to create a sustainable future in which the environment and economic developments are balanced and inequality will be something of the past. We clearly have the capabilities, the skills, and the experience to support our clients in creating the necessary solutions. Our new strategy sets the course for us to maximize our impact by delivering resilient and future-proof solutions. For the past 3 years, we've focused on laying the groundwork, and now we will accelerate our strategic progress. We will further leverage our global scale and consolidate our expertise by concentrating on 3 global business areas: resilience, places and mobility that all offer the solutions that our clients need. And in creating these solutions, the consistent central themes that all stakeholders demand is the requirement to deliver sustainable solutions and to act in a socially responsible way by demonstrating ESG advocacy and leadership in all we do. Or to say it differently, that Arcadis will weave the orange sustainability threat through all of our solutions, whereby it goes without saying that digitalization will be the most significant enabler. We deliver services which do need to benefit societies in the broadest possible sense and the citizens who make up these societies, and provide them with so-called human-centric solutions. And who to better provide these services than my fellow Arcadians through the power of an increased global collaboration between the 28,000 men and women who make up this company. Through the pandemic, we have demonstrated that our strong focus on where we can win, combined with the technical skills and agility of our people as well as the improved operational efficiency, creates a very strong performance. And last, but not least, the stronger foundation we have now created, the undistracted focus of our employees on projects for which we have a right to play and an opportunity to win, has enabled us to significantly strengthen our balance sheet, and the current very unique circumstances have reminded us once again about the value of this. Building on the strong foundation, the strategic plan includes raising the targets combined with clear capital allocation that will result in sustainable cash and value generation. And all of this gives me great confidence that we are in an excellent position to maximize impact for all stakeholders. Thank you.

Thanks, Peter, and of course, every one of our executive leadership team for your presentation. Before we start in a minute with the Q&A, I would like to briefly explain the Q&A procedure. [Operator Instructions] We aim to answer as many questions as possible in the next 45 minutes. In the case it will not be possible to address your questions in this live event, please reach out to us, to Christine or myself, and we will follow-up. Now it's time for the first question. I see that Hans Pluijgers from Kepler Cheuvreux has a first question.

Yes. If I can ask a few questions, 2 questions. I will limit myself to 2, although I have a lot more. It was a very interesting presentation, so a lot of new things. But first, looking at, of course, the financial targets. Your growth, your top line, your net sales growth target, mid-single digits per year. How should we interpret this, first of all? So are you talking about, say, 5% or, let's say, between 3% and 5%? Could you a little bit give more granularity on that? And especially how do you see it in light of the current, let's say, yeah, pandemic and uncertainty visibility? Are you already -- let's say, you will see it really as an average? Or really each year, you would expect to reach it already in 2021? Maybe more granularity on that, how you see it especially for next year? And then secondly, on capital allocation. Yes, you already indicated that you will do somewhat more on M&A. And that, in principle, you would distribute additional cash when appropriate. Would you give some more granularity what do you mean with appropriate? Is that meaning that you distribute any cash below 1x net debt to EBITDA? Or with the exception, of course, if you have M&A in the pipeline? So maybe just a bit more feeling on that, how precisely that we should see that?

Okay. Thanks, Hans. Peter, 2 questions. One about top line growth and the other one about cash allocation.

Yes. Thanks very much, Hans. I will ask Virginie in a minute to address the question on capital allocation. Your question on top line growth, I think has all to do with how we feel about the megatrends and our ability to capitalize on the megatrends. When we speak about the definition we have used, mid-single-digit growth, then that is intended to be mid-single-digit growth on an annual basis. And we believe that when we look at the outlook, and we look at the megatrends and our ability to capture our fair share of the markets, that is a realistic target. You added something about the corona pandemic. Needless to say that, that still creates uncertainties for all of us in the market. But in spite of these uncertainties, we still feel comfortable with our net revenue target. And with that, I'll ask Virginie to answer the second question.

Yes. Thank you, Peter, and many thanks for your questions. In terms of capital allocation, yes, for sure, what we mean by saying when appropriate when we discuss about additional share buyback, we really want to keep flexibility to be able to take any opportunistic M&A operation we would see on the market. Meaning that we're not going to commit to give back an extra amount on top of the 30% to 40% and the anti-dilution effect of any share buyback, but we'll be flexible on our cash. We expect, as you can see, to deliver sustainable both in terms of revenue, sustainable margin and, for sure, the cash generation with good management of our working capital and internal management should follow and be consistent with what it has been over the past months and year. So at one point of time, we might have some additional cash to return back to our shareholders, but we don't want to obey our capability of being very opportunistic if something significant happens to be encountered in the market.

Okay. Thanks, Virginie. Thank Hans. I see that a next question is coming from Quirijn Mulder from ING.

Can you hear me?

Yes, I -- we can hear you, and we can see you, Quirijn.

Okay, perfect. Okay, 2 questions. First of all, with regards to the COVID-19 and also the third quarter results, and given the length period to prepare for a Capital Markets Day and a strategic update, can you give me an idea what has changed in your Capital Markets Day because of the completely turnaround, let me say, the completely changed situation from the, let me say, mid of March because of COVID-19 on your capital markets on your strategic update? So maybe you can give me some much more details on what happened since then and what you have changed there. My other question is you are looking at the 40% to 50% return on net working capital. What's the reason not to use the normal return on capital employed? And certainly, given in the light of that you are looking for -- for M&A activity -- for more M&A than in the last couple of years, and given the goodwill which is accompanied with that development and the -- and your total asset basis, which is, in my view, the base for -- to make the returns? That were my questions.

Thanks, Quirijn. Two questions, Peter, for you.

Yes. Thanks, Quirijn. We'll follow the same sequence on this question as we did with regards to the question from Hans. I will take the first part, and then I'll defer the second part to Virginie. Trust me, the rest of the team will get an opportunity later. I'm sure that there will be more questions, which will be directed your way. But let me first address the question Hans asked about -- or that Quirijn asked, sorry, about to what extent the corona crisis has impacted our strategy. And when we started the development of the strategy, it coincidentally, was at the same time as corona hit us all, so back in March when we started in all earnest to develop the strategy. And as we learned more, we, of course, made some tweaks to our strategy to include anything which we feel is significant and/or sustainable. But I would be lying if I would suggest that our strategy, because of corona has, all of a sudden, become a totally different strategy than what we would have had without corona. Couple of comments to illustrate that. First, I would say that whereas at the beginning of the corona crisis, there were some people thinking and saying, "Well, because of this crisis, the focus on sustainability will probably be something of the back burner now for some time." That is not what we have seen. In fact, on the contrary. I think we have learned from this crisis that we were much more vulnerable as societies than we wanted to be. We have now seen that a virus can bring economies on a global scale to its knees. So the whole drive and necessity to create much more resiliency in the broadest possible sense in societies has probably only been amplified because of the corona crisis. Second one, and I suspect that Virginie will talk about it a little later, is that we have indeed seen that the crisis also created a different view on certain things like, for instance, working from home. And I've actually commented before that it is quite conceivable that we will find a new normal, which is in between what we had before corona and what we have today. And it will not be close to what we have today, whereby almost anyone and everyone is exclusively working from home. But it will also not be where we were in the past, that people almost exclusively came to office. It will probably be something in the middle. And that, of course, creates some opportunities for us to embed sustained savings and cost reduction. So that is probably how I would answer your first question, Quirijn. And we'll turn to Virginie for the second one.

So let's say that I think that as far as return on working capital is concerned, you're right. We could have chosen something else. But first, the competition is increasingly using this metric, and we wanted to offer the capability of being compared to our peers, which we recognized is important for our investors and the people following us. Secondly, if we think about assets and the type of investments we undertake at the moment, for sure, a lot of what goes around technology is not only about CapEx. You will have a lot of OpEx investments to go in and to sustain what we want to achieve in the strategic cycle. So it might be a kind of not sufficient focus. This is why we base more what we want to say in terms of working capital. We'll calculate a return on investment. And for sure, we don't put any money on the table if it doesn't bring enough return. And with the margin, we expect to get our return on net assets will probably be sustainable on each and every CapEx we will undertake. But based on the fact that a lot of what we invest is CapEx but a lot of OpEx also next to that, we thought it was not the most appropriate indicator for us.

Thanks. Virginie. Thanks, Quirijn. I see that the next question is coming from Henk Veerman from Kempen.

And thank you for the very clear presentation. I have a lot of questions as well, but I'll restrict myself to 2 questions. So firstly, on the -- coming back to the mid-single-digit organic sales growth targets. During the last Q3 results, you also announced the proactive downscaling of your activities in the Middle East. How should we look at your target in relation to this downscaling of the Middle East, which is about 4% of the group? Is it also -- does it also imply that you may be also looking at alternative scenarios for these activities? Do you maybe plan a divestment of the subsidiary in the Middle East or maybe a management buyout? That's my first question. And then my -- my second question is on your EBITA margin. I think you already elaborated on it on the building blocks to get there. But I mean, if we look at the situation today and also before COVID started, your margin -- profitability margin was quite significantly below that of competition which they are about 9% currently, adjusted EBITA margin. And now you guide for 10%, which is clearly above or at the upper range versus competition. What makes you so confident that you can turn around the situation? And I mean we already heard something about the Excellence Centers, so some offshoring of activity. But when you look at the operations, really on the operational side, so the dynamic between the sales and your personnel, how can you make your organization more profitable? Can you elaborate a bit more on that?

Thanks, Henk. 2 questions, but one very long question, but we will address it. One about the top line for the Middle East and the other one about how do we achieve our EBITA margin.

Yes. This time, I will still follow the same pattern, Henk. I will take your second question first, probably do an introduction on your first question, then turn it over for the second part of the first question to Virginie, particularly on how we would treat the declining revenue in the Middle East going forward. Building blocks. Building blocks still create the margin growth, which we expect to see. It'd probably be good to kind of separate them in a few different building blocks. The first one is the building blocks you all know and those -- that is building blocks, which indeed includes the use of our Global Excellence Centers even further than we do today. It also includes our key client program further, and it continues to include our Make Every Project Count program to further improve our project performance. So that is a building block, which has been successfully deployed over the last 2 years. And because of that success, we like it, and we will continue to deploy it. Secondly is when we commit to revenue growth, that is another opportunity, of course, to create bottom line growth as well, provided that you control yourself in terms of growth of indirect costs, but that is typically what happens in an organization like ours. And with this model, when you get more volume, it typically has a positive impact on your margin. Thirdly, we will try to capture some of the sustainable savings, the operational efficiency Virginie spoke about. So we do expect going forward that we will need less space. We still expect that in the future, we will probably travel less than we do today. So that is the third one. And then the fourth one, we are also, of course, increasingly delivering global -- sorry, digital products and services, which we expect to come at a higher margin as well. So we are comfortable and confident that these 4 building blocks will contribute to the revised EBITA margin percentage we have shared with you. Then on the Middle East, just going back to what we did share for everyone's benefit when we announced with our Q3 results that we were reducing our footprint in the Middle East. We also, at that time, explained that, that will be an effort which will take a number of years. The impact next year will be relatively small because of the work we have in backlog. We also mentioned that we would continue to honor our contractual obligations. And of course, we will do so. So we will definitely deliver the work, which is still in backlog. And then how we would go forward with implying or introducing and including the Middle East is something I'll ask Virginie. But one more thing before I forget, and that was -- no, that was actually the question I wanted to defer to Virginie. So Virginie, please go ahead.

Thank you, Peter. So yes, I think we want to consider our organic growth. First, for sure, at constant currency rate, as you can imagine, but also at constant perimeter. The Middle East, let's say, will be a kind of perturbation or change in what we could see in our revenue growth. So we will restate the impact to calculate this growth. We don't expect, as Peter said, that this has a major impact for 2021 because there's still a backlog, which is significant to execute in 2021. But for sure, we expect a decrease in terms of new order intake. And consequently, this will -- probably will have an impact starting somewhere in H2 2021.

Yes. I think I missed one part of your question. So let me take that now. You also asked if we would consider something like a management buyout or a takeover. Yes, with our announcement a couple of weeks ago, that is something which we now have an ability to pursue. If you look at what is happening in the Middle East and what some of our competitors have done before, the chances that we will do something different than what most of our competitors have done -- have been able to do are not very high. So a takeover is, in my view, somewhat unlikely. A management buyout for part of the organization might be possible and is being pursued as we speak.

Thanks, Peter. Thanks, Henk. I do see that we have more questions. The next then is Luuk Van Beek from Degroof Petercam.

My first question is on the digital investments. Can you -- you mentioned EUR 40 million to EUR 60 million. How does that compare to what you spent in the past years? And also, is that capitalized or is it mainly expensed through the P&L? And my second question is on the -- basically, the cleaning up of the company that you've done over the last years, focusing on the most attractive services and clients. Is that process now largely completed, apart from the Middle East? Or is that something that will continue to a significant extent in the coming years? And on the reverse of that, have you seen any white spots in your matrix basically that you would like to fill up now with more M&A?

Thanks, Luuk. Two questions, Peter, one about the digital investments and the other one about our business.

What was the second one, Jurgen?

The second question was about -- that we have cleaned up our businesses. And do we see somewhere white spots where we can grow? And can we elaborate on that?