Royal Imtech's (IMTEF) CEO Gerard van de Aast on Q2 2014 Results - Earnings Call Transcript

Aug.26.14 | About: Royal Imtech (IMTEF)

Royal Imtech NV (OTC:IMTEF) Q2 2014 Earnings Conference Call August 26, 2014 5:00 AM ET

Executives

Jeroen Leenaers – Director, Investor Relations

Gerard van de Aast - CEO

Hans Turkesteen – CFO

Analysts

Teun Teeuwisse – Kempen & Co.

Dirk Verbiesen – KBC Securities

Bjorn Krook - ABN AMRO

Hans Slob - Rabobank

Luuk van Beek – Petercam

Joost van Beek - Theodoor Gilissen Bankiers

David Vagman – Exane BNP Paribas

Andre Mulder – Kepler Cheuvreux

Tijs Hollestelle – ING Whole Sale Banking

Jeroen Leenaers

[Call Starts Abruptly]… in the Q&A session, I would like to mention statement – legal statement. First of all, I would like to address your special attention for the disclaimer in front of the presentation and in the press release. Furthermore this presentation is not an offer of securities for sale in the United States. The securities discussed herein have not been and will not be registered under the US Securities Act of 1933 as amended and may not be offered or sold in the United States absent registration or an exemption from registration under US Securities Act. No US person as defined under the Regulation S should be participated in this meeting and should immediately leave this call. By participating in this meeting, you are confirming to the company that you are not a US person.

Please Gerard, I would like to give you the floor.

Gerard van de Aast

Okay. Ladies and gentlemen good morning. My name is Gerard van de Aast. I am the CEO of Imtech. I will talk you through today’s announcements and what they mean and also my colleague Hans Turkesteen will speak to you a little bit later about the results and some of the details about the new financing arrangements. And after that, there will be time for Q&A.

What we have announced today is what -- we determined a decisive step for the company. Much has been written and said about Imtech’s debt and debt levels. And the announcement of today does mean a significant reduction of that debt. That happens basically through a fully underwritten rights issue of €600 million and we also announced ICT division sale for €255 million enterprise value.

In combination with that, we also announced a new agreement with financiers. And let me stress -- it is a 1, 2, 3 step process. It is really the combination of a rights issue in combination with the sale of ICT but definitely also in combination with the new terms that we have been able to agree with our financiers when it comes to step down in pricing, covenant holiday, extra liquidity and so on, and Hans will also talk about that in more detail.

The most important message of today is that with the debt issue being addressed, the company can now fully focus on operational recovery and operational improvement. To that extent, we also will implement an additional restructuring in the second half of 2014 and I will also talk you through some details of that.

Operationally, results are in line with the Q1 of 2014 and in line with the announcement we have made on that on 31 July, and Hans will talk you through some of the details there as well. The net result in the half year is significantly driven by financing costs and one-off items and our net debt ended at €1.038 billion, again in line with what we announced on 31 July.

So why is this such a decisive step forward for the company? First, the rights issue is fully underwritten, so guaranteed proceeds from the company's point of view. The underwriters – ING, Rabobank, Commerzbank and ABN Amro are acting as joint underwriters and we truly support -- we truly appreciate their support as we do appreciate the support from our other lenders by signing up to the deal. The Board of Management will co-invest in these shares and do that upfront and also on a continuing basis.

We also announced today the sale of the ICT business to Vinci at an enterprise value of €255 million and at 7 times EBITDA we feel that represents a fair price.

The new agreement with our financiers do include a step-down on pricing, a covenant holiday up to and including Q1 of 2016 and also an extension of the financing arrangements up to 2017, which should give the company the flexibility and the headroom to continue and complete its turnaround program. This all results in a significant improvement of our debt position and also a significant reduction of financing costs. Approximately €70 million to €75 million will be the reduction of those financing costs going forward.

The company is also granted a additional liquidity buffer of up to €100 million to complete and accelerate its turnaround program, also through another reorganization in the second half, and it does create stability for all stakeholders. So all in all, this gives us the flexibility and headroom to complete our turnaround program. This is in the best interest of the company. It is in the best interest of all stakeholders and it is also in the best interest of our shareholders, since what's good for the company ultimately is also good for them.

Doing all that, we also can conclude that our core value proposition is still intact. The sale of the ICT division does not have an impact on that. So the combination of electrical, automation and mechanical, delivering our services to key markets such as the building, industrial, marine, energy, water and traffic and infra market are still there. Our services are 23,000 skilled employees and our leading market positions are still intact. And we are also confident that today's announcement will remove some of the uncertainties and questions that might have surrounded Imtech in prior months.

When it comes to our strategic focus and our priorities for the period ‘14 to ’16, this is a slide that I showed to you earlier in March, where we basically said that our priorities are threefold. One, organic growth; second, operational excellence, and third, debt reduction. The debt reduction issue we deem to be addressed by what we have announced this morning and that will mean that our full focus going forward can now be on organic growth and operational excellence. And in particular, on those two items and on organic -- on operational excellence, in particular, we really need to step up and we have now the time, the flexibility and the financing to do so.

What have we been doing? When we talk about what happens at Imtech these days, it's really around two things: improvement of operations and results; second, culture change. If we look at our operational results, although definitely not good enough and not satisfactory, we have been able to improve results year-over-year. We also have been doing that on the back of significant cost reductions. We have taken out some 3000 employees in the prior period. This does exclude of course the divestment of ICT and also have driven significant reduction of overhead costs.

One item which went particularly well is the reduction of working capital, a much discussed item in the past and even if we were to exclude from that number 1.7% which in and of itself is already a good number, if you exclude from that the legacy items, it is close to zero which I think is a remarkable achievement in 18 months. And Hans will talk you through some of the details there.

And last but not least, we continue to focus on a culture change at Imtech. Much has happened at Imtech. We recognize that and we have addressed these issues by significant management changes. Over 70% of senior management has been replaced and our entire organizations go through extensive training programs.

This additional restructuring will happen in two countries basically in the Netherlands and in Germany. In the Netherlands, we will reduce headcount, in particular in indirect staff and in the industrial segment. The industrial segment reductions are related to market developments where large oil, chemical and petrochemical companies have significantly reduced their investments. Also we will take a provision for excess rental contracts. We simply have a lot of empty office space that we take one-time provision for.

In Germany, we reduce headcount further towards the end of the year when we have finished all the legacy projects and also in anticipation of a smaller organization going forward, and that is by design. And I will speak to that as well. And also in Germany and in Eastern Europe we have excess office space in particular and we take one-time charge for that.

In the marine division, headcount reductions are happening mainly in the German business of the marine division and in total we are talking some additional 750 FTE with an additional cost of €30 million and the provisions for excess office space also adds up to circa €30 million. We have social plans in place in those geographies. So we do expect that we can execute and implement these programs relatively quick. That is both the case in the Netherlands and in Germany and we would really look towards the end of the year for completion of those programs.

We are confirming our medium-term targets and maybe the idea to -- when you think about the medium-term is to think in terms of two to four years, that's what we should associate with that. We do believe that this business is capable of growing just a bit quicker than GDP. That has to do with the markets we’re in, the technology we represent and services. 4% to 6% operational EBITDA margin is the target, 90% cash conversion and given our developments on working capital, we do believe that that should be achievable. We aim for a leverage ratio over time below 2 and when we hit that, we would resume paying dividends at about 40%.

Some good new projects have been won and this then also -- and if you want to have any details on that, please let us know and we will provide those to you. And that brings me then to my last slide, which is order intake. And maybe this is a slide also to pause on for a second.

I want to draw your attention to two numbers in particular. First, if you look at the total number, and it doesn't matter if you do with or without ICT, you can see that order intake kind of matches at a 100% level the revenue. That means that our order book in all of that is not eaten away and that customers still give them -- give us their confidence. That’s at the company level.

Within that, there is another number I would like to draw your attention to, which is what happens in Germany and in Eastern Europe. There you see that it clearly is not in line with revenue and that is by design. We have reducing [ph] in order intake of around €350 million. In the last six months that number was also similar in the last six months of 2013 and what kind of emerges after all the events in Germany is a business of around €600 million to €700 million in total. That is what kind of emerges from all of this. That is by design, that is not happening. It is by design. We are adjusting our volumes, if you like, to capable staff around. We do feel that that is the right strategy to drive margin and limit risk and not drive as we did in the past just volume.

The Neue Imtech programme in Germany is full well underway and they can point at good achievements, we are certainly not there. You do see an improvement in operational performance. You do see an improvement in working capital. You also see improvement in cleaning up many of the legacy projects. The outcome has been sometimes negative, sometimes positive but all in all we have made good progress in the last six months in cleaning up more of these old items.

That brings me to the end of my introduction and then I happily turn it over to Hans.

Hans Turkesteen

Yep. I will talk you through a couple of slides that deal with the operating performance and the transactions that were announced earlier this morning. On performance, first, this sheet shows you how operational EBITDA was in the second quarter for ’14, and it also gives you some comparison to LTM numbers and performance in equal quarters for the last year. And what you can indeed see here from the facts and from the face of it is that we are indeed by far satisfied with our current operational performance. We still have issues in lot of our units. Some are doing well like for instance, the Nordic, which I think is holding up fine. Others are -- as far as we are concerned also on a good track, that relates to the traffic and infra business that has been consistently now at least well in the positive.

Our marine business, who was doing well in a couple of quarters, had a setback in the second quarter of 2014, specifically because of project losses on projects that are simply too complicated for them. Those were taken on board previously. Going forward we will not do anything like that anymore. That's also why a part of the restructuring in marine will take place in that unit in Germany. We simply will be reducing headcount to make sure that we have capacity that is sufficient and can also from a quality perspective deliver the work that is out there and if we don't engage in any frivolous adventures. But if you look at it overall, I think there are two – three units that require specific attention in the quarter. And that is Germany and Benelux like they have been over the last 18 months but this time we also have a new kid on the block there and that is our UK and Irish business which so far has always been consistently performing comfortably within the 4% to 6% margin bandwidth.

In the UK and Ireland, there are two distinct factors that drive this decline in performance. One is market related and the other is company specific is what I would say. The market related element relates to the overall market in the UK for electrical and mechanical services. That market started to decline from the first part of this year. That is also evidenced from profit warnings by some of our competitors in that UK market like Balfour Beatty and others. They've all been reporting difficult trading circumstances and on the back of that profit downgrades, that has also hit our business. Capacity has been reduced in the meantime and I think that for the future we are well set to deal with the lower level of activity.

But the more difficult thing or at least the one that have more impact relates to our business in Kazakhstan, that was being managed out of UK and Ireland. That business went run out of its license. It did apply for a new license and that license was not granted to us and the grounds for that are still as of today unclear. But in a situation like that there's nothing else that you can do to just stop the business and get out of the country. That's what we did but that that has removed a substantial or at least a sizable bit of EBITDA from the performance of our business in the UK and Ireland. So that is a very unfortunate and company specific item that happened over there.

The Benelux I think is purely market-driven where apart from the real estate market we also have seen difficult trading in the industrial segment. Specifically downstream petrochemical has been difficult for us and that is not a surprise because Shell and the likes – the other downstream operators have announced that they are reviewing their asset base in the Netherlands and that they are basically reducing CapEx as well as brownfield maintenance on these sites and that has had an impact on our business. We will – to deal with that reduced headcount there as well and that is a key component of the restructuring plan that we also announced today for the Benelux.

Germany, whilst a EBITDA loss of 8 million in one quarter cannot be anything that comes close to being satisfactory, I think if you look at it from a quarter-on-quarter basis from all the way early last year, you do see a gradual improvement by the quarter. So the business is still improving but there are still challenges ahead of the company, and that is what Gerard was also referring to. We are still milling our way out of these legacy items and legacy projects. We do need overcapacity to deal with that. So we are far from efficient and we need to address that once these issues have been dealt with by the end of that year and that’s why we’re also planning further headcount reductions in Germany some point in 2015 probably.

If you look through all this, we still remain convinced that this business in the mid term will be able to generate that 4% to 6% in margin. We think we have appropriate plans in place. We are executing these very consistently in a disciplined manner. You have setbacks every now and then like markets going down or an incident like what I was referring to in Kazakhstan. But so far we have not seen any reason to fundamentally adjust our strategy or our tactics in any of these divisions.

Another element that has had a significant impact on our net result in the first half of this year relates to one-off and financing items. They are significant and they have -- starting from operational EBITDA of minus 24 in the end of the day – triggered a net result of for more than 300 million negative in the first half year. That is very sizable and there are basically three buckets that contribute to that. The first one are the non-operational costs that you see on the top of the page. Then we have net finance result in the middle which stands at 120 million negative, and at the very bottom, you have result from discontinued operations.

To start with the last one, that €70 million – those include a €60 million write-down on the book value of our ICT business. Now we have the deal on the table with Vinci. We had a triggering event, we compared that enterprise value to what our book value is. And that gave rise to this goodwill impairment that is part of the 69 million result from discontinued operations.

At the top, the other 70 million and that is coincidence. That includes advisory costs, lawyers, financial advisors, due diligence advisors and monitoring advisors, all the people that we still carry wagers until we have completed the rights issue and the further deleveraging. That was 25 million in the first half year. A step down from last year but still a very substantial element of course. It does include 17 million of restructuring charges. It does include the previously announced NKS project loss in the Nordics that we reported on as part of Q1 as well. And it does include the cost in relation to the exit from Russia and Australia that we also reported in the first quarter. The cost of these latter two exits is 20 million, it’s basically writing down assets, cutting our losses and just getting out of these highly difficult situations where we were in there.

Then in the middle, net finance result, that does include a couple of recurring items just like one-off items. On the one-off front, it does include some 70 million of make-whole costs, fees in relation to the mid term solution and amortization of previously capitalized financing charges. And on the recruiting line, it includes cash interest of 35 million and pay in kind interest of 16 million. That latter 50 million will go significantly down once we have the deleveraging proceeds in our bank account and I will comment on that later on so that you can form yourself a view of what that might mean for the company.

The balance sheet, also pretty significantly impacted by what we have been reporting today. Equity, negative, for the first time following this net loss in the quarter -- in the half year of €300 million. Obviously if we pro forma this for the rights issue, then we will be at a comfortably positive number again. Net debt, topping at €1.060 billion this half year. Obviously the deleveraging of 800 million plus will have a significant impact there as well but where we are today this is what it is.

And last but not least I think goodwill, we did assess the carrying value of all our units, so not only ICT. We did assess the value of that goodwill in comparison to our business plans and it appeared that there is no need as of today for any impairment there, but headroom has been significantly reduced there as well. We make a full and complete disclosure of that in the detailed financial information that is part of the press release and I would recommend you to have a specific look at that so that you can form your own views on that, how sensitive we are there in terms of future impairment risk.

Perhaps last but not least, interest bearing debt of €1.060 billion. There has been quite a lot of press coverage on the trading that has taken place in our debt. Debt in itself is not a strange phenomenon. These lenders are allowed to trade in our debt. They don't need our approval for that. If a trade takes place, then the new lenders basically have the same rights and obligations as to the previous ones. From a company perspective, it is a pretty neutral event. But just for information purposes we can confirm as of today that about €100 million of bank debt has traded and some €60 million of USPP notes have traded. Some five to six lenders have sold their positions and some 15 new lenders have shown up at the table. These new lenders by the way have all signed up to the amendments that we are disclosing to the market today. So that means that they are a normal party to ongoing discussions with our lender group.

That's it on the balance sheet is what I would say and then I would like to continue with goodwill. I think no reason to go into the detail here, it is all disclosed also in the financial statements. The basic point here is yes, an impairment charge on ICT following the deal on the table with Vinci and no imminent need for write-downs in the other divisions, but performance needs to develop in line with the business plan. Otherwise we may need to take charges in the future.

Operating working capital, I think the bids that we have been pretty successful from the start, operationally we are basically at zero. At the midpoint we were about 100 million negative at year-end last year. You are all aware of normal seasonality patterns. We are approaching peak time this time of the year basically end of September is through peak time. But overall I think we are pretty comfortable with the way working capital has been developing. Specifically given all the mounting uncertainties that we were faced with over the last four to six weeks as a result of all the press speculation, that did cause concern with our suppliers. So they were asking cash on demand for not allowing any normal creditor terms there. And it did also create uncertainty with our customers where they were basically sitting on their money. Against the backdrop of all that turmoil, I think our working capital performance even at June 2014 is satisfactory from our point of view.

Then the next sheet which used to be a favorite at this session but I will be showing it probably for the last time today. The aging of receivables at Imtech I think following all the efforts that have gone into working capital management and cleaning up the legacy items, we are as of today at normal aging profile in our receivables. This is I think the normal industry benchmark both in terms of over dues as well as in terms of current receivables. And if you eliminate these specific legacy items that we will continue to track and report separately going forward, you can see that our over 180 days overdue balance is only 40 million and that equals just 1% of revenue and I think you will recognize from most of the companies that you are following that, that is not an unusual number.

So this sheet which we have been showing for the past 4 to 5 quarters will not appear on this presentation going forward anymore, because I think it's always in the normal business performance.

Then I think going into the details of what we announced today, a three-step rocket is what I would call it. First, a very sizable rights issue of €600 million, then agreed sale disposal of our ICT division and thirdly, also a fundamentally amended set of arrangements with our lending group. The three of them together do indeed provide a platform for stability and will allow us to focus on operating performance over the next two years and I will walk you through a couple of the highlights of what we have been agreeing there.

Of the rights issue proceeds of €600 million, €100 million will be retained by the company. We will use that money to fund the restructuring plan and for general corporate purposes is what I would say, so that that is the first €100 million that in the waterfall goes to the company. Out of the remaining €500 million that will all be used for debt pay-down and it includes a specific feature at that €500 million, €120 million out of it will be used for a debt buyback program under a Dutch auction which basically means that we are inviting our lenders to tender their debt to the company at a discount and then we will basically spend that €120 million using the highest discount first and then all the way until the expanded 120 million. The remainder of the proceeds will be used to pay down normal debt if you wish.

The rights issue with volume underwritten, so we have indeed firm security but it is obviously still a subject to shareholder approval. To that effect we called to EGM today for October 7 and we are where we are today convinced that also our shareholders will see that. The combination of measures that we are announcing today is in the best interest of the company, as a result also in their best interest and that they will approve this transaction. As Gerard will share [ph] the board of management will make it upfront and also ongoing investments in this rights issue, so we will put our money where our mouth is, is what I would call it. I think it's also an important signal to the market. And those are the highlights on the rights issue is what I would say.

On ICT, enterprise value of €255 million resulting from a tightly run auction process. We did announce that on April that we were going to start that process. The process has been going pretty well. So we have multiple buyers at the table all the way to the finish and out of these multiple buyers we finally selected Vinci, not only because they have put a full value on that table is what I would call it, seven times EBITDA in this industry is full value but also because they are a very responsible solution to our people that work in the ICT division. They are a good -- great and big company with a good reputation, a clearly articulated strategy and our ICT employees will find a welcome home and home in that company. So it is not only the financial impact that is favorable for choosing Vinci as the preferred bidder and ultimately the buyer but also other elements that we believe are important in our situation.

The transaction is subject to competition clearance. Vinci is a very significant company with revenues of €20 billion. So they have substantial competition hurdles, so they need to apply basically for competition clearance, whatever they do, we don't expect any issue because their ICT presence is not so big but we need probably to wait a couple of weeks, potentially months before that clearance is in the pocket as well. And then the proceeds from this transaction will be fully used to pay down remaining debt. So out of the 855 million, 100 million will go to the company, 120 million will be used for the Dutch auction and the rest will be used to fund transaction related costs and pay down existing debt all on a pro rata basis.

Then I think the third equally important feature while it's not so much about money and amounts, it is about the breathing space that we as a company will get on the back of these amendments. And it also shows to our shareholders, I think that banks have also been accommodating this process. We have shown up this 850 million in front of them and on the back of that they were willing to make some compromises to where they are today. So they accepted a very substantial step down in pricing. They did accept a covenant holiday all the way down to Q1 2016. So our covenants will only be tested as of June 2016 for the first time, in between we have room to maneuver to the maximum is when I would say. As we already said we get 100 million of additional liquidity basically to fund the restructuring program and to deal with any other corporate purposes. Everything has been extended to July 2017. So that also removes any intermediate refinancing risks or other nervousness that might be out there around the company and we really have a runway for two to three years now to recover our operating performance to industry benchmarks.

As we said the Dutch auction buyback program I think an appealing feature and not only for us as a company because it is the most effective way of debt reduction but I think also towards our shareholders. They will be appreciative of the value creation that that might result from this auction is what I would expect. And last but not least, our committed guarantee facilities have also been left in place and recommitted for the next 3 years. So I think overall also some very important qualitative amendments that would allow the company really to now focus exclusively on operating performance.

When we showed up last year first time where we had to deal with three issues at Imtech-- the fraud and its impact, overleverage and operating performance. We dealt with the fraud in 2013. I think by the announcements of today we have also take the books [ph] on the debt reduction and we can now exclusively for the next 18 to 24 months focus on getting operating performance in line with industry practice. So that is a very clear and one dimensional priority that we as a management have now and that you can also measure us on in terms of performance over the quarters to follow.

One important element that I still would like to mention on revised interest arrangements etc. Basically our interest charges will be halved going forward, not fully but a substantial cut in interest rates. And if you combine that with the 800 million of deleveraging that will probably result in somewhere between 70 million and 80 million of saving on the current rate of interest expense. My assumption would be that where we currently have 1 billion of debt running at 8% average, so triggering 80 million of finance charges. After the cash has been collected in the bank we will be running at 300 million of debt with only 5% of interest. So that brings us down to 50 million on an annual basis and that’s a saving of 65 million.

We also then have a reduction on pricing on the 800 million of guarantees that should bring 15 million in the pocket compared to today and that indeed puts us somewhere between 70 million and 80 million from the current run rate. I think an important amount – an amount that is basically also allowing the company to spend its cash on operations and also I think a sizable amount that we would like to put out to our shareholders as well, so that they also appreciate that specific element of the deal that we are announcing today.

That more or less finishes my presentation. As always I think it is important that we specifically point you at certain disclosures that we make in the financial information. That has to do with the going concern assumption underlying the financial statements. That going concern assumption is there -- is intact. It is also reviewed and confirmed by KPMG but I think we are still at Imtech operating with more than normal uncertainty is I would say. So I would like to point you at that.

Contingent liabilities, lawsuits, pending litigation, that kind of thing is something that is still keeping us busy for at least some part of the day and then also the treatment of the ICT division ahead of the deal that we announced today is also something that would require specific disclosure.

And with that, I hand it over to the Q&A.

Question-and-Answer Session

Jeroen Leenaers

Okay, thank you, Hans. First question from Teun Teeuwisse.

Teun Teeuwisse – Kempen & Co.

Yeah, Teun Teeuwisse, Kempen & Co. Few questions from me. First of all, the remaining 380 million of debt repayment, can you give an indication whether that will be your repayment of the RCF or of the senior note? Second question is on your payables. We’ve seen a strong drop in your payables and I recall – I ask this question every meeting, and every meeting you tell me that you are at a sustainable level of payables. But we have seen a strong unwind. Can you please explain what happened there and what your view is going forward, will it go back to the old levels or is this a sustainable level? And then I have a final question and I have to make a little calculation for that based on what you just said in the presentation. Because if I hear you correctly, Germany going to a 600 million to 700 million revenue business. You could say that by 2016 Imtech is about a 4 billion business. And you are targeting 4% to 6% EBITDA margin in two to four years, I’d say that 3% seems fair, so that means you’re at – that’s about 120 million of EBITDA by 2016. I just hear that you find ICT fully valued at 7 times EBITDA. So I get to a value of Imtech of say about 700 million enterprise value, and net debt left is 130 million, leaves a equity value of below 600 million and now you are asking your shareholders now to put in 600 million. On Slide 6, you specifically say that you represent the interest of all stakeholders. But it seems with this equity issue that you are more representing the interest of the banks who were fully repaid than the shareholders. And so can you please explain how you are representing the interests of the current shareholders right now?

Hans Turkesteen

I will deal with the first two questions and then Gerard will try to answer those 25 questions in one sentence I guess, we will deal with that once we get there. So on the pay down of the remaining 380 million debt that will first go to the RCF and then remaining part of it to the notes probably. Payables where they are today are at a low level and that is a result of turmoil that has been surrounding the company over the last couple of quarters and the publicity that makes people nervous. That means is we cannot get normal payment terms there. So I would expect that once the dust around Imtech has settled and once we are in stable playing grounds again that the playable level going forward should be able to arise a little bit to a sustainable level that would be somewhere between the current level and what we had been reporting in 2013 is what I would expect.

Teun Teeuwisse – Kempen & Co.

Okay. Is there a reason why you are not paying down senior notes before the RCF, because you are paying a higher interest on the senior note?

Hans Turkesteen

Yeah, that is part of the waterfall that has been agreed as part of the rights issue conditions, and that is simply something that has been part of all these negotiations and that's what it is.

Teun Teeuwisse – Kempen & Co.

And that is equally paid to all the banks participating or is it specifically repaid to the banks that are underwriting the rights issue now?

Hans Turkesteen

There is a specific priority in who gets paid when and what kind of amounts and there is always the preferential treatment for the underwriters and then all the banks follow after that.

Gerard van de Aast

Then on the question of what is in this for shareholders – I mean the calculations you make, Teun, are your calculations. I can make different calculations at different margins at different timing and you get to whole different numbers. But I think the essence is that it is very clear from where we were that something need to happen. And then as Board we can only and this is the joint Boards of Imtech, we can only act and that's our fiduciary duty in the best interest of the company and all its stakeholders. And this solution that is being presented today is both radical, it is a significant or as we call it, a decisive step forward. We honestly do believe that this decision and this solution is in the best interest of the company and ultimately therefore also in the best interest of the shareholders. It is not just a rights issue, it is as Hans was saying a three-step approach. It is a significant rights issue, it is the sale of a division at a fair value and it is significant concessions by the lenders in terms of pricing, covenant holiday, liquidity and other debt reduction items such as the auction that will bring stability that this company needs to basically solve its operational problems, because as Hans was saying, we have been dealing with three problems. One, we had to deal last year with a lot of fraud issues. Second, the financing issue and now we need the stability and also the time to deal with the last item which is the operational performance.

So long story short, the solution we present we believe is both radical, it is decisive, it is a bit of give-and-take on all sides and ultimately this is what we honestly believe is in the best interest of the company and since shareholders own the company it should be therefore in their best interest as well.

Teun Teeuwisse – Kempen & Co.

I recognize that it’s a I think a very good step for the company going forward but it seems like now your financiers are derisking themselves and the shareholders basically have a very long-term perspective of regaining some of their lost value. And have there been discussions with the banks on cutting their debt apart from the Dutch auction that you announced today?

Gerard van de Aast

It is probably fair to say that we have been looking at many alternatives and that has been a lot of speculation in the press about what alternatives might be present or might represent themselves. We always and -- let me also be very clear on that. I mean doing one thing or doing another it is not so that we as management can fill out the wishlist and order them in a catalog. That's not how it works. I mean a small detail always remains if you have a plan, you need to find people that are willing to step up. So I can dream of a rights issue of a certain size, I need to find a bank or a group of banks like we have done now that are willing to underwrite it. Then I also need a whole series of financiers and we have up to 30 financiers that are willing to subscribe to it, including all the new ones that recently joined when some debt was traded as Hans was saying. So it's not like you can sit back and say listen here is a perfect solution for everybody, order it in some kind of catalog and get on with it. That's not how it works.

So we've had a very clear plan. We communicated that plan in March. In terms of the three priorities it has become apparently clear that something needed to happen on the financial situation of the company given also all the turmoil and uncertainty that was also due to all the press coverage and what have you, this plan has been worked out by the Boards of Imtech with the support of the four underwriting banks and the support of all other financiers. We truly believe that that is in the best interest of the company and therefore also for the shareholders.

Teun Teeuwisse – Kempen & Co.

One final question on the rights issue. I assume that in determining the issue price the banks were in the driving seat here. But have you also considered issuing at a somewhat higher price than your nominal value of one cent to leave some of the equity value post rights issue with the current shareholders?

Gerard van de Aast

Well, nowhere -- I don't know where you get the one cent from but clearly that’s the nominal value – so I mean also to be clear on that, there have been all kinds of debates – couldn’t you have done this earlier and all the other stuff? Let me also remind everybody that we did have the reset -- we had to reset our nominal value to consider a rights issue in the first place. That happened in May at the shareholders meeting, then you have two month legal waiting period. So that whole thing became effective at the end of July, so little over a month or not even four weeks later we do present the full solution. We are not in the driver seat on setting whatever the issue price on the shares is going to be, what we have is a volume – a volume-based underwriting commitment and ultimately after shareholder approval that is something that the banks will set.

Jeroen Leenaers

Next question – KBC, Dirk Verbiesen.

Dirk Verbiesen – KBC Securities

Dirk Verbiesen, KBC. Question on the impact of the sale of ICT on your ongoing business in the electrical and mechanical. What we learned in the past is that certain or the significant amount of people were involved [indiscernible] have there been any arrangements that seat had to move forward –

Gerard van de Aast

That is a nonissue really and if you look at our slides, even the ones that we are using today, I don't have this clicker in front of me but you will notice that we do not any longer talk about the ICT, we talk about automation. And what we mean by that is the following -- so the knowledge that is required in terms of computer knowledge, automation knowledge in general that the several divisions need when they automate a building, a tunnel or provide a solution is all solidly within the divisions themselves. So the interdependency between let’s say Imtech marine and ICT or Imtech Netherlands and ICT or take any other division and the ICT division is completely zero. There are no joint projects. There is no joint effort going on and that is also due to the fact that our ICT division was playing at a completely different playing field. Those are the guys you want to call when you want a Microsoft solution or an SAP solution or our Unibase [ph] solution, that’s when you call Imtech ICT when you want to automate a building or a tunnel, that's when you call traffic and infra or Imtech Netherlands. So that's also why we made that point by changing it. So absolutely no issue.

Dirk Verbiesen – KBC Securities

Then a question on the guaranteed issue – new arrangements, if you compare them on a company project [Question Inaudible] are you aware of that is [Question Inaudible]

Hans Turkesteen

No, I think those will be up for renegotiation at a certain point in the future as well. And the very specific situation that we have on hand which is different from our peers is what I would guess is that out of the 800 million of guarantees 500 million is sitting in Germany, and those guarantees are all coming back from the past and they were granted on a pretty reckless basis is what I would more or less call it. They were spread all over the place. They were used to get down paying this debt, could be used for other practice at that point in time. So they do have a fairly high risk profile is what you could argue. And until the moment that we have managed ourselves out of a lot of these legacy stuff and on the back of that have also got the bank guarantee setback, I think the bank guarantee providers who are now part of a consortium in themselves who have a stop loss agreements in place amongst themselves will want a more than normal risk premium on their guarantees. Once we we’re back to normal territory I would expect that we would also get – in that area go back to normal pricing.

Gerard van de Aast

But there is a significant upside on the guarantee front through the effect that Hans is mentioning. So it is 800 million, 300 million of that let's say in the rest of the business, which is kind of – you could call it industry practice or kind of normal. But 500 million in Germany which is not kind of industry practice and not normal. Some of that is associated with legacy items, so the minute we all put in that up the more they come back. Now it might be that in Germany given business practices guarantee levels are somewhat higher but it can’t be true that they are almost double the amount of the rest of Imtech. So there is definitely a big opportunity to reduce the exposure on guarantees and once you do that and this is always a bit – well this is a bit of looking ahead, this is kind of saying that operational improvements are there and you significantly reduce guarantee exposure in total. Who knows that might be better deal we can do.

Dirk Verbiesen – KBC Securities

Final question on the debt buyback program [Question Inaudible]

Hans Turkesteen

Well also that obviously is a matter of negotiation between ourselves, the other lenders as well as the underwriters and as part of that – that discretion in the end of the day a waterfall show that where the company first gets 100 million of liquidity for itself and then the underwriters get a pay down and basically in the amount that’s allocated to this debt buyback bucket. So that is a result of negotiations between not only ourselves -- with ourselves but ourselves with other people in the end, just like Gerard was referring to the situation generally at the end. This is not a self-explanatory straightforward case. Lots of different people on the table is different heads on and in the end this compromise in terms of allocating the amounts for certain surface, that’s why it’s 120 million and not 250 million.

Gerard van de Aast

But who knows -- it might be an opportunity that has been traded at -- also in the press at percentages that seem reasonably accurate. Who knows that might – that’s 160 million of that in total that has been traded. So who knows that might be a good opportunity for us to buy that by the company and it is the fastest way and the most effective way of quick deleveraging.

Dirk Verbiesen – KBC Securities

[Question Inaudible]

Hans Turkesteen

Well, basically until the cash is in the bank the current arrangements will continue to apply. So the current interest rate should -- applies until we have ICT proceeds and the rights issue proceeds in the bank. After that moment which we expect to be late October, then the new rates will apply and then you will see the significant step-down.

Dirk Verbiesen – KBC Securities

[Question Inaudible]

Hans Turkesteen

On the balance sheet you meant -- most of that is being paid on a regular basis, so there would not be a big catch-up there from the balance sheet.

Jeroen Leenaers

Next question -- Bjorn Krook, ABN AMRO.

Bjorn Krook - ABN AMRO

I have a couple of questions. On the working capital bargains [ph], the share went 3%, ex-legacy issues you were about flat, you indicated we are around the peak, the payables are at the low point. Is it time to take away the 0% -- the negative number there?

Hans Turkesteen

It is. So what we first need to do -- we first need to make sure that what we are announcing today to the market indeed has the impact that we would expect from it, i.e. stability, no longer unrest with our employees, no longer concerned with our customers about – is this a viable business in the first place? Not polls in newspapers about - is Imtech going to make the autumn break? That is all very not helpful, so we first need to have normal stability around the company again. Once we have seen the outcome of that and that was also the answer to Teun’s question, once we have the outcome of that, we do believe that there is indeed upside on the creditor side in terms of getting back to normal payment terms and we do still believe that there is upside on the work in process and receivables as well. So once we have that visibility we may come out with a new target for working capital but I would expect that, that would only be as early as back by the full year results of ’14. But you are right we are ahead of our initial planning here. We have turmoil right now but once we have settled with that, we will put the burden higher on the company.

Bjorn Krook - ABN AMRO

On the cost saving plan, you announced today, what’s the payback period on that?

Gerard van de Aast

Well I assume that on empty real estate that, that’s immediate. So you simply take a charge for the remaining period and they could be even some – so then the charge is disappeared overnight. There could be an even upside if you're able to sub-let some of these empty buildings. On people, it is usually 12 months, what the payback period is, roughly speaking.

Bjorn Krook - ABN AMRO

The project losses that were still in the operational EBITDA for the first half year, could you put a number on that?

Hans Turkesteen

Yeah it is not something that we track and measure separately, because it is not a 100% clearly defined number. The big ones like the NKS that that are indeed also requiring our own involvement are being measured and reportedly separately. So it is a bit of a judgment call there, if you would ask me what is in there -- in that 8 million of negative operational EBITDA in the second quarter, it would be a number somewhere between 10 million and 15 million is what I would guess.

Bjorn Krook - ABN AMRO

That’s in the second quarter.

Hans Turkesteen

Yes.

Bjorn Krook - ABN AMRO

And my final question -- I appreciate that you don't want to put specific time on reaching the 4% to 6% operational EBITDA target. But can you perhaps highlight when you expect to be free cash flow positive?

Gerard van de Aast

In terms of the timing of that maybe the cash flow is something that Hans can take a stab at. But we are on a clear plan to improve the operational performance of the company. And it is moving in the right direction. It is going a bit slower than we all had hoped. And we are setting ambitious targets also for our businesses that, we are on the right track. There is not a single reason why this business ultimately should not be able to perform in that 4% to 6% bucket. It's not that we deal with the fundamental shift, for example, in our underlying business model and to use an example, we are not producers of laptops and everybody wants to buy tablets. That's not the problem. The markets are there, sometimes markets are a little bit less helpful like today in the industrial market in the Netherlands. But usually these markets are okay. The difficult question is of course always well what quarter exactly will you hit the 4%? And that remains a difficult thing. But -- and we are pushing hard to get there as quickly as we can. Sometimes you need to deal with setbacks. We had this example of Kazakhstan which -- where license didn't get renewed. These things unfortunately happened but our commitment is to make sure it is as quickly as we possibly can – I don’t know – Hans, can you add anything on –

Hans Turkesteen

Yes. Free cash flow will probably be positive earlier than before we hit the EBITDA target here. If you look at free cash flow, the first victory for various lenders, the cash coming from these two deleveraging events, I would assume late October. Then the second question is when is the restructuring cash being spent – because that's a large cash out that will have an impact on free cash flow, that probably will be spent before the end of H1 2015. And by then there should be no residual non-operating cash outflows. We should have indeed a delevered balance sheet with low interest rates and you would expect that fairly quickly thereafter we would go to a positive free cash flow territory.

Jeroen Leenaers

Okay, next question - Hans Slob, Rabobank

Hans Slob - Rabobank

I have three questions from my side, a follow up on restructuring, how much restructuring cash outflow do you expect from the old programs and the new programs let’s say in the second half and first half ’15? Secondly, could you update us on the progress you’ve made on the indirect cost base in Germany? So where do we stand and what is your, let’s say new target based upon the new restructuring program you announced today? And third question is with regard to your portfolio, would you consider to exit Spain because it’s pretty short scale and is not contributing to the results, so would that be also a possible divestment?

Gerard van de Aast

Well maybe I take a swing at the last two ones and then Hans can take the first ne. With respect to Spain, sort of very clear we are not actively pursuing any further divestments. That is not a part of our program. Now if somebody comes along tomorrow and offers me some kind of decent price for Spain, maybe as an example, I certainly will offer him a cup of coffee but that doesn't mean that we would have an active program where we would pursue divestments. But it’s only sensible since that is a relatively small unit, it is not of essence for the rest of the group that it would be un-business like if I would say, if somebody comes along with a decent offer, I would not consider it.

So that’s one. In Germany on the indirect cost base -- actually in Germany the Neue Imtech program that has been introduced in Q4 of last year is actually progressing very well. Right now in Germany there are really two activities ongoing. One is the clean-up still of the old -- the issues we had ‘13 and in particular the legacy projects we reported in March on 52 of those, 26 of those have been cleaned up. We have been able and sometimes that was a positive result but sometimes it was a negative result in the cleanup. We have been able to sell a large data center which had a significant positive impact. We have been able to conclude our sponsoring agreement with Bayern Munich. That had a negative effect. So there is a whole series of all these legacy items that we are constantly cleaning up and you need people and staff to support that work.

We would hope that towards year-end that significantly will slow down and diminish, so that's one. Secondly, also then the somewhat lower volumes that I talked about also will begin, which means that there will be another round of restructuring in particular in indirect staff in Germany towards the end of the year. To be specific about it today we kind of need the people to cleanup whatever is still there. We had -- there is some 250 people that are associated with that. So if you take the restructuring of 750 about half of that will happen in the Netherlands, half of that will happen in Germany, partly in Imtech marine about 100 and the balance will happen in Imtech Germany. And that then really has to do with a lot of reduction in indirect expenses. Also indirect expenses will come down significantly as a reduction of taking these provisions for empty real estate also in Germany and in Eastern Europe. So all of that combined will give a big boost to results in Germany going forward in 2015. And that's – by the way we do not envision -- maybe that's an important point to make – I don’t know if I mentioned it already -- we do not envision to lay off any blue collar people in Germany. And the reason for that is very simple. We are right now significantly depending on third parties and subcontractors to provide the blue collar labor and we feel that carries a certain exposure and instead of spending the money by letting people go we will retain them and simply shift a bit more towards our own labor versus hired labor. Now Hans, maybe you can address the first one.

Hans Turkesteen

Yeah, we are expecting this new program to cost about 60 million. We have currently shown 20 million on the balance sheet still from the old programs. So that gives an overall number of 80 million, this is spread 50 million in terms of headcount reduction and 30 million in terms of real estate management would I call it. On that 50 million of headcount reduction, you would – or you could expect half of it being spent in the second half of this year, half of it being spent in the first half of next year. So the full 50 million will be spent within the next 12 months. This real estate program will probably take much longer than that in terms of spending, because it depends on the specification, depends on – it’s an accounting treatment to eliminate the costs but then the cash-out to follow over time. So for your models I would basically take a straight-line 10 million a year for three years to come there.

Gerard van de Aast

And that assumes no sub-leting. So if you know anybody wants to hire rent a nice building in Warsaw or in Frankfurt or – we have lots of it.

Jeroen Leenaers

Okay, next question Luuk van Beek, Petercam.

Luuk van Beek – Petercam

At the start of the year, you are quite optimistic about the awaited Neue Imtech program would change the profile of the contracts that you would be executing in the second half of the year. Is that still your view or has it changed with the setbacks in execution in the first part of the year? This is my first question. The second question is if you can – in Q2 there were number of project losses, I think part is probably due to the character of the order book, in parts maybe to just execution. Can you comment on the extent to which that will play in the second half of the year and what measures you can take to address that? And that’s it for now.

Gerard van de Aast

Well, the Neue Imtech program in Germany is making good progress. There are different subsections of that plan focusing on working capital, on the specific item, they call it slippage, so better no slippage if you want to be correct. There is still a mix of old and new projects flowing through the project portfolio in Germany, that is also normal given the lifecycle of these projects. We do see an improvement in new projects as they come in that also has to do with our tender board procedures that we have installed. That of course is no guarantee even if you do that in a rigorous way as we do today that you will not end up once in a while with a lossmaking project. Of course that can happen even in the best run company. But we do see on aggregate an improvement and in Germany the item is not to drive volume, absolutely not. It’s more the other way around, kind of adjust the size of the organization to be capable workforce, that's more kind of what we are doing there.

So yes we are critical in acquiring new projects. We focus on specific industries where this company has a proven track record that they can deliver and can deliver profitably. We have a part of our business which is to serve this as energy contracting business which is inherently profitable in and of itself. So really the key is to kind of get rid of all these legacy project portfolio, that does take time. Sometimes you can settle it with a customer. Sometimes you have to go to court. A good example of that and just for as an example we were able to settle in Q2 – a big project in Spain that has been on the balance sheet since the 2010. Ultimately negotiations with the client failed, it went to arbitration. The arbiter awarded 11 million out of a claim of 18 million, you know but I'm happy basically with the result. It's 11 million of cash in, a project has been removed from the legacy list which was very sizable and all settlement offers prior were far less. So it does take time, we have still a number of these things on our books. Sometimes we do settle with customers. Sometimes we simply have to wait for a court verdict as they basically get resolved. It takes a bit of time. But yes, in Germany overall -- the thing we watched very closely and this is always 10 -- you watch what project results are and operating results but at the same time – and this is a big lesson of course from the past -- you watch development on working capital. That's kind of the way we measure and control the business.

And your second question was –

Luuk van Beek – Petercam

Project losses – was order book related costs and execution related –

Hans Turkesteen

Sure, well I think the majority of all this difficulty in Germany is caused by poor work from the past. So Vinci basically contract that you should never have gotten, but I think it’s also fair to say that given what has been going on in the business, with all the turmoil and people leaving and new people coming in, uncertainty, in security etc., also execution currently is a matter of attention and it is something that we are really trying to get back in – back contract again. So we are – and that also goes back to the other point -- in the end of the day if this business settles at somewhere around 600 million to 700 million that's because of two prime drivers – a) how many people do you have that indeed can do good work still? And second, how much good work is out there in the market. So it is not so that currently execution in itself is not something that we should be concerned about. The technical capabilities are 100% okay but execution and dealing with it in a professional manner is a point of attention as well.

Gerard van de Aast

There’s maybe one other interesting thing to mention which is how this kind of works and it also was reported in a Dutch newspaper, which relates to the people in Germany and what happens there. We do see a significant attrition in Germany. So there is even if you go beyond what - the measures we do in terms of reorganization you do see significant number of people leaving the business. That is something we have been predicting all along and a lot of that probably also has to do with the past. At a certain moment it catches up with people and at a certain moment they start to feel uncomfortable. However -- and I think that's good news, that’s not bad. That’s good news.

What is also encouraging is when we look at the inflow of young people into the German organization, that is excellent .To give you one small example, we had 10 openings for management traineeships and we got 600 applicants. So despite all the turmoil, despite all the excitement, despite the sometimes very bad press, especially for young people Imtech is still a very attractive place to be and maybe these young people think well, there’s so much going on, there must be opportunity and they are right, there is. But I find that an encouraging signal.

Luuk van Beek – Petercam

If you look at the market circumstances, they have become more difficult in the last six months in particular in the UK but at the same time you have not been able to renew the license in Kazakhstan which affects your Irish business. Do you see any need for future capacity reductions in those countries?

Gerard van de Aast

There is little bit going on but not major. I mean there's always a bit of restructuring happening in the company of our size. The part, Nor’easter [ph] might be a certain geography, so I can never say nothing but nothing on a big scale. The Kazakhstan business was completely if you like isolated from what happens in Ireland and what happens in the UK.

Joost van Beek - Theodoor Gilissen Bankiers

Joost van Beek, Theodoor Gilissen Bankiers. A follow up question on the larger projects currently going on, maybe you can shed some light how important in the large more complicated projects currently are in your order book and on the balance sheet, what probably the risk profile is above average? And second question relates to retaining key staff, have you specific programs to retain the key staff given the turmoil of the company right now?

Gerard van de Aast

Well, on retaining key staff we – as part of the investment program in the rights issue by management, we also will offer an attractive program additionally to what we call our executive council. And these would be the leaders of our big businesses. So that really is what is something we see as very key and very important and what was the first one –

Joost van Beek - Theodoor Gilissen Bankiers

Large projects, how big are they in the portfolio?

Gerard van de Aast

Well, one of the key characteristics about Imtech is that – and you almost -- well after all this excitement around this polishing, it is kind of counterintuitive. But Imtech is not a company with a lot of large projects. It isn’t. So projects over 5 million are rather the exception in our company than the norm. So there are relatively small amount of really large projects. They are relatively small in number, so small that the board of management pretty much all knows them and basically we have them on our radar screen. Now with the new tender processes, right from the start even before they become a project, so during the tender phase we are able to track and follow that. So there are not that many of these very large projects that that is a bit of uncommon to the business as a whole.

In fact, if you look at the amount of revenue we turnover every year and you map that against the portfolio size in terms of projects you actually see a very good spread. So the risk is inherently not that large when you look at spread over geography and size of projects. Now with that you introduce another dynamic which is if you have lots of smaller project that does require the right attention to manage those as well, but that's the kind of how this breaks up.

Jeroen Leenaers

Okay. Before we continue in Amsterdam, I would like to ask the operator if there is a question from someone on the line.

Operator

(Operator Instructions) And our first question is from David Vagman, Exane.

David Vagman – Exane BNP Paribas

Two questions on my side. First, if you could give us an update on the speed at which you expect to go through your legacy projects -- the project losses from the past? And second, concerning the additional cost savings you had announced this morning, if you could somehow split them between let’s say pure down-sizing and cost savings?

Jeroen Leenaers

Sorry, David, you question were not that easy to hear here in Amsterdam. Correct me if I am wrong although I should send via email then we will take that for you –

Gerard van de Aast

The first one I was able to hear which is project losses from the past. So second one – well when we look at projects we really have – there is actually maybe three categories at Imtech. One is what we call legacy projects, which is being reported on separately. You can track also in the financial statements and in our press release. You can track progress pretty much on what happens to these legacy projects. I don’t know what page they are on in the press release, Jeroen, maybe you can look it up. And ultimately that entire category over time should completely disappear, and I don’t know there must be a page in there.

Jeroen Leenaers

Page 10.

Gerard van de Aast

Page 10. If you turn to Page 10 in your press release, it gives you a detail on what's happening with these – is it Page 10? All right. So that category should completely disappear, that is something where you find the old, sometimes reported projects and then you get to the more regular normal business what we report in operational results. And yes, there is still a bit of a mix in there between let's say older projects and more recent projects. And of course give it a bit of time that and all the projects that have been acquired under the new procedures than the boards etc. So hard to say, I would hope that towards year-end we will make another significant step forward in cleaning up all these legacy projects. I said earlier we did about 26 of the 52 in Germany that were reported at year-end have been cleaned up in the first half, plus a number of a couple of big ones, like the one in Spain. There is a couple still outstanding in the Netherlands, there is still a couple outstanding in Germany and we will systematically report on that every quarter until it goes to zero.

David Vagman – Exane BNP Paribas

So that means that by year end we should have gone to the major let’s say problematic projects that you have in your order book?

Gerard van de Aast

Yes and no, in some of these cases, I already know that there will not be a settlement before year end if I – there is one project in there which is Dutch project. I know there's going to be a court verdict in the first quarter of ’15. So I can do whatever I want. I have to be patient or take a surety [ph] deal now but I will be patient and simply wait for the court verdict to come in the first quarter of ‘15 and then we will see what the outcome is. Sometimes you cannot influence -- my point is that if you end up in court in arbitration, these processes they work on their own rhythm and you have to be patient and wait until the verdict is there.

David Vagman – Exane BNP Paribas

And my second question was about the cost savings – the additional cost savings that you announced this morning, if you could actually give us a split between the pure down-sizing and actual cost savings?

Gerard van de Aast

Hans, you want to take a swing at that?

Hans Turkesteen

I am still not quite sure whether I get the point to be honest.

David Vagman – Exane BNP Paribas

In the sense that if you’re just down-sizing a division, you are reducing its size but it will not as such improve the profitability of the business. You’re just adjusting, optimizing the size of the division.

Gerard van de Aast

Well, what we’ve announced this morning in terms of restructuring is basically two things. We have taken significant provisions for empty real estate office buildings and other items we have rented in the past. The payback of that, once you take – that’s more bookkeeping than anything else -- once you take the charge it will disappear from your P&L going forward. So there is an immediate payback going forward. On a cash basis how that exactly works out – of course, unless we get a big discount, we will not immediately pay the cash for the remainder of the rental contract. There might even be a positive effect, then we are able to sublet some of that real estate.

In terms of the adjustments on headcount, there is another additional 30 million reflected for that and the payback period for that would be around 12 months. Implementation of that will be towards the fourth quarter of this year and in Germany it might split into the first quarter but that's not because we’re not active on the program, we simply need these people until then to cleanup all the legacy items. So then that should provide you with some guidance on where the payback then should come in.

Jeroen Leenaers

Thank you, David. Someone here in Amsterdam. Andre Mulder, Kepler.

Andre Mulder – Kepler Cheuvreux

Can you give us a bit more insight as what the covenants are as from 2016? Secondly, the result of ICT in the first half, there is a strong jump in D&A, can you explain that?

Hans Turkesteen

Yeah. The covenant holiday goes until the first quarter of 2016. So that means that covenants will be started to be tested in from June 2016. Those covenants have been set against the current business plan of the company and it will include a principal leverage ratio and interest coverage ratio. Those are the leverage – that those are the covenants that will come into play at that point.

Andre Mulder – Kepler Cheuvreux

Can you add a bit more detail in numbers?

Hans Turkesteen

No, we have specifically decided not to disclose any detail on how these covenants look like. We think that there's no obligation on this to do so. And we think that it might give rise to undue speculation which we have basically had in the past couple of months.

Gerard van de Aast

But it is in line with our business plan. So it’s not a copy of whatever was there before. And the second one was --

Andre Mulder – Kepler Cheuvreux

Second question was in ICT – on Page 32, there is the statement of results from discontinued operations, shows quite a large jump in D&A in the ICT part.

Hans Turkesteen

We will follow it offline on that one, we don’t know.

Jeroen Leenaers

Okay. Next question -- Teun Teeuwisse, Kempen.

Teun Teeuwisse – Kempen & Co.

Yeah, I have one more question relating to the negative book value of your equity. Do you see any impact on the current tendering of that and can you give a bit of a feel for how current tendering is at the moment, also regardless of the fact that you have a negative book value of the equity?

Gerard van de Aast

Well, there might be a very short-term maybe theoretical issue where not -- some customer might have certain requirements there. I would assume with 600 million of capital coming in on a guaranteed basis that that -- if at all, it is in specific circumstance an issue that that would be manageable. So we have taken all the write-downs from the ICT sale and everything in our books. So the 600 million will be kind of if you like added net to our capital. So if there is an issue maybe it will require a phone call or two to solve it, but normally I would not expect that.

In terms of the overall situation was your question regarding tendering what goes on -- we do see a steady swing of tenders. I will -- we can say that especially in – and really that's a matter of the last month, two months really that tensions have gone up a bit with customers. We get questions, we sometimes have to go and explain and it is very clear that our clients and many of them blue-chip clients that have been our clients for decades or more, they were looking also towards this date to get a clear signal about the financial status of the company. And I do believe we have delivered to them a very clear and powerful signal today and it all needs to get implemented towards the end of October but I would assume whatever issue was there has now been resolved.

Teun Teeuwisse – Kempen & Co.

Then do you expect that the order intake that you reported today sort of matched your revenue that, that will still be the case in the first quarter?

Gerard van de Aast

Yeah -- well I'm not going to make a specific prediction. Usually when this turmoil hits the company it takes a bit of time before it really catches up in the actual order intake. We have been able to manage some situations well. I cannot simply predict what it will look like in Q3 but if there was any doubt, if there were any uncertainties, if there were any kind of issues, I do believe that with the financial measures we have announced today that should be convincing and satisfying the need for information from those customers.

Jeroen Leenaers

Okay. Next question, Tijs Hollestelle –

Tijs Hollestelle – ING Whole Sale Banking

One question, could you share some detail on your share participation and the management of board of Imtech have also put in cash and participated in the rights issue, and I understand it also future long-term bonus payments are linked to an increase of the share program. Can you share any details of this?

Gerard van de Aast

Well, the detail that I can share is that is a -- it is a three-step approach really. One is we will put money in upfront. Second, we will put in money that we earn from future bonuses, there is a commitment to do that as well. That is second step. So it's not just one shot now but it is ongoing as well. And third, if all goes well shareholders will approve a plan that we also have a good return on what the money is that we put in. So we are if you like double incentivized to make this work also for shareholders, by becoming shareholders ourselves, putting our own money in, committing future earnings that we will put in. And if it works well and that would be the first step, then we also can make a good return. Beyond just a simple rise of the share price.

Hans Turkesteen

For your information, the future commitment relates to the cash bonuses, and not to the existing long-term bonus plan – new element in addition, part of the future cash bonus will need to be reinvested in the shares of the company.

Jeroen Leenaers

Okay, Bjorn Krook, ABN AMRO.

Bjorn Krook - ABN AMRO

Two follow up questions. The fall back in the order book in traffic and infra, compared to revenue, is there anything that I can read into that? And then a bit of an accounting question I see some of the debt move to current liability – is that because of the breach or something –

Hans Turkesteen

I will say to the last one – because that’s a classic favourite. Formally the covenants have been waived by our lenders since yesterday. It also was retrospective effect to June 30 but very formally as of June 30 which is the date of these financial statements, we were in breach because we didn’t have the labor in place at that point. And that is whilst under the IFRS you need to put everything as currently in your balance sheet whereas no new today everything is long-term again. That’s why it is in the short term. We had the same thing at the end of 2012.

Gerard van de Aast

The question on traffic and infra, well, this is a bit difficult. Traffic and infra has experienced, what sometimes happens, that they come in second on a number of deals, and that well sometimes happens and it's one of those six months where you look back and say well three times in a row or three out of four I came in second and in this business there is no price for who comes in second. Usually the next one you then get and then you have to be really worried if that one is profitable, that’s how it works.

Bjorn Krook - ABN AMRO

I'm looking forward to Q3 then.

Gerard van de Aast

That’s not the problem, the problem is then the profitability.

Jeroen Leenaers

Okay. Someone else, another question here in Amsterdam? Okay. I would like to hand over to Gerard for closing remarks.

Gerard van de Aast

Okay, thank you very much, Jeroen. Thank you all for a series of very good questions. I realize that what we announced today is a lot to digest all in one go. It also was for us to be honest. I do believe we have announced a series of very decisive steps related to our financial position. In and of itself as important as it is what is really the key is that we get the time that we also get the stability, the headroom, and the flexibility to really continue to work that we are doing around improving the operation of the company. In the end that is what really counts. So hopefully that is now what we can do also as a management team and spend our time focus and attention on that. Thank you for your attention, also thanking the people on the webcast and that who are with us online and have a pleasant afternoon. Thanks a lot.

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