Business Model Design Report

Business Model of Home Markets
Final Report
Date

- 4 -
The Home Markets project consists of four phases
Project management
Communication between Project Team and Management Teams Home Markets
Project management
Communication between Project Team and Management Teams Home Markets
Key issues
Approach per
home market
Work PlanWork Plan
Planning and
Visioning
Planning and
Visioning
Financials
and orga-
nization
Market and
compe-
titors
Country
Factbases
Country
Factbases
Current situation
analysis
Current situation
analysis
Phase 1 Phase 2
Adjusted
business model
Adjusted
business model
Phase 3
ImplementationImplementation
Phase 4
Implementation
(out of scope)
Implementation
(out of scope)
Alternative
models
Benefits
and risks
Business
Model
Business
Model
Imple-
mentation
Imple-
mentation
Implemen-
tation plan
Implemen-
tation plan
Organ-
ization
Financials
This document is a partial preview. Full document download can be found on Flevy:
http://flevy.com/browse/document/business-model-design-report-685

- 7 -
Executive Summary
1. Current Situation: Profitability in the Home Markets is very modest
• The five home markets generated a 4.7% EBIT margin on average annual sales of € 163m
• Revenues are decreasing or stagnating since 2001 in all countries and for most activities
• Virtually all the profit is generated from dredging in Germany and the UK
2. Markets and Competitors: Client X does not exploit all its competitive advantages
• After a downturn, the market outlook is fairly stable with a moderate upturn on the mid term
• Client X is market leader with a decentralised business model
• Most competitors however have a more centralised, more focused approach
– the decentral approach of Client X limits economies of scale
– management is distracted by a large number of activities without strategic and
financial benefits
• Rohde Nielsen en de Boer are growing faster than Client X
• New investments in large/effective equipment require larger scale of operations and more
coordination thus centralisation

- 10 -
Twelve PMC’s (Product/Market/Combinations) have been defined for the for home
markets in scope
Activity map Home markets
SUB -BSUB-A SISTER
COMPANY
Client X
Sweden
COMPANY C
Dredging
• Local
• Intermediate
• Central
• Coast Protection (rocks)
• Coast Protection (sand)
• Outfalls, landfalls and pipelines
• Sand & Gravel supply
Others
• Harbour construction
• Foundation
• Civil works
• Bore Piling
• Munition clearing

- 13 -
Average EBIT was less than 5% of revenues
38,5 18,6
19,9 2,3 1,5 0,5 10,8
7,8
0
10
20
30
40
50
Project Cash
Flow
- Hires = Gross
Margin
- Operational
Overhead
+ Plant Result - Workshop
Result
- General
Overheads
= EBIT
24%24% 11%11%
1,4%1,4% +0,9%+0,9%12,2%12,2%
EBIT Buildup (Annual Average 1999 - 2003)
€m
0,3%0,3% 6,6%6,6%
4,7%4,7%

- 16 -
The German and UK dredging activities generate virtually all of the profit,
non-dredging and smaller countries are marginal activities
Revenue and EBIT by Product-Market-Combination ranked by EBIT Margin (1999 - 2003)
€ 1.5m in losses
Sub x
Sub A
sister company X
Client X
Company A
Central dredging
(in home markets P&L)
Revenue: € 31m
EBIT: € -0.8m
Cumulative Average Annual Revenues (€ m)
CumulativeAveragreAnnualEBIT(€m)
200150100500
12
9
6
3
0
Munition
Intermediate
Coast protection
Munition
Intermediate
Intermediate
Local
Sand & Gravel Supply
Local
Coast protection
Harbour
Civil works
Outfalls
Intermediate
Marine piling
Local
Harbour construction
Bore Piling
Foundation
one-off project channel

- 19 -
Agenda
1. Introduction
2. Current Situation
3. Markets and Competitors
4. New Business Model
5. Implementation
3.3.

- 22 -
Client X has a very decentralised business model for its European home
markets
limited support and
coordination
Activity Map Home Markets
UKGermany Finland Sweden Iberia
Products Dredging
• Intermediate
• Central
• Outfalls, landfalls, pipelines
• Local
Other Products
• Foundation
• Civil works
• Bore Piling
Country Organisation
• Marketing
• Tendering
• Operations
• Plant Management
• Workshop
• Finance/IT/HR
Central Organisation
• Tendering
• Operations
• Workshop
• Finance/IT/HR

- 25 -
Client X has a strong position in all home markets
0 20 40 60 80 100 120 140
Iberia*
Sweden
Finland
UK
Germany
Client X Others
Dredging market in the home markets by country and contractor (2003, estimated)
* Excluding activities of central fleet which are not shown in P&L Iberia home market
Position
#1
#1
#1
#1
laggard in Spain
# 1 in Portugal

- 28 -
Strategic performance has been tested on these elements
Economies of
Scale
Economies of
Scale
Economies of
Scope
Economies of
Scope
Competitive
Advantage
Competitive
Advantage
• Benchmark with European specialists
• Synergy analysis non-dredging activities
• Financial performance non-dredging activities

- 31 -
Synergy with the Core
(Intermediate and
Central Dredging)
Average
EBITMargin
-40%
-25%
-10%
5%
20%
= € 6m in average annual revenues
Coast protection
Munition Local
Sand/Gravel
CoastalHarbourCivil works
Outfalls
HarbourLocalHarbour
Bore Piling
Foundation
Local
SUB A
SUB X
sister company X
Client X
Company X
Large parts of the portfolio can be divested without jeopardising economies
of scope or profitability
Low High
Local
Support core and profitable:
• create competitive advantage
through economies of scope
Support core but not profitable:
• need to be reconsidered
Profitable but limited
support of core:
• manage at arm’s length
• or divest when time is right
Not profitable and limited
support of core:
• should be divested
Non core activities portfolio assessment
Local

- 34 -
Seven principles for the new business model have been developed
Achieve economies
of scale
Achieve economies
of scale
Optimise resources
by centralisation
Optimise resources
by centralisation
Outsource all
workshops
Outsource all
workshops
Divest non-core loss
making activities
Divest non-core loss
making activities
Maintain strong
local presence
Maintain strong
local presence
Optimise economies
of scope
Optimise economies
of scope
Exploit competitive
advantages
Exploit competitive
advantages
Share general
overheads
Share general
overheads
Reconsider other
marginal activities
Reconsider other
marginal activities
To improve
productivity
To maintain
differentiation
Consider exiting
local dredging
Consider exiting
local dredging

- 37 -
= € 6m in average
annual revenues
HH
WD
TO
BS
IP
The options differ in their gradual divestment of activities
Non core* activities portfolio assessment
Synergy
EBITMargin
-40%
-25%
-10%
5%
20%
Coast protection
Munition
Local
Sand/Gravel
CoastalHarbourCivil works
Outfalls
HarbourLocalHarbour
Bore Piling
Foundation
Local
Low High
Local
Local
Synergy
EBITMargin
-40%
-25%
-10%
5%
20%
Coast protection
Munition
Local
Sand/Gravel
Coastal
OutfallsHarbour
Low High
Local
Synergy
EBITMargin
-40%
-25%
-10%
5%
20%
Coast protection
Sand/Gravel
Outfalls
Low High
Synergy
EBITMargin
-40%
-25%
-10%
5%
20%
Coast protection
Munition
Local
Sand/Gravel
CoastalHarbour
Outfalls
HarbourLocal
Low High
Local
DD
AA BB
CC* Non core means excluding
Intermediate and Central
dredging

- 40 -
Finally in Option D only central and intermediate dredging remain, with
limited support from local offices
Activity Map Home Markets (Option D)
Country Organisation
• Marketing
• Tendering
• Operations
• Workshop
• Finance/IT/HR
Central Organisation
• Tendering
• Operations
• Workshop
• Finance/IT/HR
Further reduction
of support activities
UKGermany Finland Sweden Iberia
Products Dredging
• Intermediate
• Central
• Outfalls, landfalls, pipelines
• Local
Other Products
• Foundation
• Civil works
• Bore Piling

- 43 -
These options can be tested on financial and intangible criteria
Financial ImpactFinancial Impact
IntangiblesIntangibles
• Headcount and cost analysis
• Pro forma P&L’s
• NPV impact
• Qualitative assessment of
strategic and operational factors
RewardsRewards
RisksRisks
Options
Evaluation
Options
Evaluation
• Assessment of size and impact
of the transformation

- 46 -
Centralized plant management in options B, C and D should result in better
utilisation
0
10
20
30
40
50
Plant1
Plant2
Plant3
Plant4
Plant5
Plant6
Plant7
Plant8
Plant9
Plant10
Plant11
Plant12
Plant13
Plant14
Plant15
Plant16
Plant17
Plant18
Plant19
WeeksUtilisedperYear
Utilisation of intermediate equipment (1999-2003 average)
Plant
Need to coordinate will increase as plant is getting bigger and more efficient
Note: excludes potential benefits from rationalization of local equipment
Below 30 weeks
Ø = 31 weeks
Ø = 32 weeks
Average utilisation is conservatively estimated
to increase from 31 to 32 week per year
Actual utilisation

- 49 -
Current headcount is 777 fte
A HH WD TO BS IP RTD* Central Total
Manager 1 1 1 1 4 0 8
Operations 5 3 6 3 2 0 27
Fin/IT/HR 9 6,5 8 4 6 0 33,5
Tendering 6 7 4 1 2 0 20
Plant Man’t 1 0,5 1 0 0 0 2,5
Health/ QA 2 1,5 1 1 0 0 5,5
Office 4 6,5 2 0 3 0 15,5
Plant services 4 4 6 0 0 0 14
Other staff 38 20 45 5 4 0 112
Total staff 70 50 74 15 21 8 0 238
Direct labour 180 76 164 32 49 0 501
Workshop staff 0 - 6 - 7 0 13
Workshop labour 0 - 25 - 0 25
Total workshop - 31 - 7 0 38
Grand total 250 126 269 47 77 8 0 777
* not part of financial data and only involves staff members related to intermediate and central dreding
Headcount (FTE, 2003)

- 52 -
D implies a headcount reduction of almost 500 fte
D HH WD TO BS IP RTD Central Total Δ
Manager 1 1 1 1 1 3 8 0
Operations 1 2 1,5 0 0 2 6,5 20,5
Fin/IT/HR** 2 4 1 1 2 3 13 20,5
Tendering 2 3 1 1 2 4 13 7
Plant Man’t 0,5 1 1 0 3 5,5 -3
Health/ QA 1 0 0 0 1 2 3,5
Office 1 2 1 1 2 1,5 8,5 7
Plant services 2 3 2 0 0 0 7 7
Other staff 12 15 15 5 0 0 47 65
Total staff 21 31,5 23,5 10 7 0 17,5 110,5 127,5
Direct labour 35 55 54 32 0 0 176 325
Workshop staff - 1 - 0 0 1 12
Workshop labour - 0 - 0 0 0 25
Total workshop - 1 - 0 0 1 37
Grand total 56 86,5 78,5 42 7 0 17,5 287,5 489,5
Headcount (FTE, 2003)

- 55 -
-10
-5
0
5
10
Best option varies by country
Note:
Source: XYZ analysis
€m
Option
EBIT By Country and Option
Germany
Finland
UK
A B C D
Iberia
Sweden

- 58 -
Overall B is the best option
Risk
Reward
= € 100m Average Annual Revenue
A
B
C
D
Low High
Low
High
Note: Reward based on NPV and intangibles
Risk versus Reward for Strategic Options
• Loss of profitable business
• Loss of competitive differentiation
• Limited additional transformation effects
• NPV lower
• Some loss of competitive differentiation
• Somewhat larger transformation risks

- 61 -
Agenda
1. Introduction
3. Markets and Competitors
4. New Business Model
5. Implementation5.5.

- 64 -
Country Fact Bases
1. Subsidiary X
2. Subsidiary A
3. sister company X
4. Client X Sweden
5. Company Z
1.1.

- 67 -
This presentation summarises the results of the current situation analysis for
the German home market
First
issues
Approach per
home market
Plan of
work
Plan of
work
Planning and
Visioning
Planning and
Visioning
Financials
and orga-
nization
Market and
compe-
titors
InsightInsight
Current situation
analysis
Current situation
analysis
Phase 1 Phase 2
Adjusted
business model
Adjusted
business model
Phase 3
Implementation
plan
Implementation
plan
Phase 4
Implementation
(out of scope)
Implementation
(out of scope)
Alternative
models
Benefits
and risks
Business
Model
Business
Model
Imple-
mentation
Imple-
mentation
Implemen-
tation plan
Implemen-
tation plan
Organizati
on
Financials
Approach ‘Home Markets’ Project

- 70 -
Agenda
1. Introduction
3. Market and Competitors
4. Internal Analysis
5. Summary
2.2.

- 73 -
The EBIT margin is under pressure by lower prices and revenues
81% 82%
111% 126%
29%
1999 2000 2001 2002 2003
7,2 6,3
9
12,4
7,2
1999 2000 2001 2002 2003
Pre-tax ROCE
Cash Flow Margin
Depreciation/Sales
Net Asset Turnover
EBIT Margin
(Semi) Fixed Cost/Sales
X
Return On Capital Employed subsidiary X
(Average 1999 - 2003) 30% 27% 24% 24% 20%
1999 2000 2001 2002 2003
5% 5% 3% 5% 5%
1999 2000 2001 2002 2003
13% 9% 8% 9% 11%
1999 2000 2001 2002 2003
11% 13% 12% 10% 4%
1999 2000 2001 2002 2003
-/-
-/-

- 76 -
Return On Capital Employed is therefore lower when calculated on a cash
basis
Average Balance Sheet 1999 - 2003
• Land and buildings 0,7
• Plant & equipment + 7,4
• Intanglibles 0
• Working Capital - 1,3
• Net Assets = 6,7
• Accumulated Depreciation + 30,8
• Accumulated Amortisation + 0
• Inflation Adjustment + 12,6
• Gross Assets = 50,1
Average Balance Sheet 1999 - 2003
• Land and buildings 0,7
• Plant & equipment + 7,4
• Intanglibles 0
• Working Capital - 1,3
• Net Assets = 6,7
• Accumulated Depreciation + 30,8
• Accumulated Amortisation + 0
• Inflation Adjustment + 12,6
• Gross Assets = 50,1
Average P&L 1999 - 2003
• Turnover 53,9
• Cash Flow 13,5
• Gross Margin 8,2
• Operational/Plant/Workshop 0,3
• G&A - 2,9
• EBIT = 5,7
• NOPAT @ 1-25% = 4,3
• Depreciation + 2,5
• Gross Cash Flow = 6,7
Average P&L 1999 - 2003
• Turnover 53,9
• Cash Flow 13,5
• Gross Margin 8,2
• Operational/Plant/Workshop 0,3
• G&A - 2,9
• EBIT = 5,7
• NOPAT @ 1-25% = 4,3
• Depreciation + 2,5
• Gross Cash Flow = 6,7
Cash Generated by the Business Cash Invested in the Business
Cash Flow Return On Investment = 11.6%
Key assumptions:
Fixed asset life: 20 year for dredging and coastal protection, 10 year for marine piling and 5 year for munition clearing
Fixed asset age: 12 year for dredging and coastal protection, 9 years for marine piling and 4 years for munition clearing
25% average tax rate and 2,5% inflation per year
Source: HH Administration; XYZ analysis

- 79 -
Overview of average cash flow and EBIT margins
Cumulative 5 year Average
CF Margin per PMC
EBITmargin
EBIT Margin per PMC
Revenue
(€ x million)
CashflowMargin
0%
10%
20%
30%
40%
0 10 20 30 40 50
Local
dredging
Intermediate
dredging
Central
dredging
Marine
piling
Coastal
protection
Munitions
clearing
50%
60 0%
5%
10%
15%
20%
0 10 20 30 40 50
Local
dredging
Intermediate
dredging
Central
dredging
Marine
piling
Coastal
protection
Munitions
clearing
Revenue
(€ x million)

- 82 -
Overview of ratio’s per PMC
Revenue
Growth
CF Margin
Gross
Margin
Plant,
worksh.,
oper. overh.
result
G&A
EBIT
margin
ROCE CFROI*
Local Dredging 4% 24% 12% 5% 6% 10% 90% 7%
Intermediate Dredging - 13% 39% 25% 3% 7% 22% 58% 12%
Central Dredging 6% 35% 15% -2% 6% 7% 37% 3%
Total Dredging 1% 32% 17% 2% 6% 13% 60% 8%
Coastal Protection -16% 19% 12% -1% 6% 6% 75% 12%
Marine Piling 14% 11% 8% -2% 5% 1% 61% 12%
Munitions Clearing
Germany
-25% 27% 24% -2% 2% 20% >> 100% >> 25%
Munitions Clearing
other countries
-30% 6% -3% -2% 2% -7% << -100% << - 10%
Grand total -4% 25% 15% 1% 5% 10% 84% 12%
Grand total excl.
central
-6% 23% 15% 1% 5% 11% 97% 14%
Financial Ratio Analysis (1999 - 2003 Average)
Source: HH Administration; XYZ analysis

- 85 -
The expected upturn in the economy will not immediately result in growth for
the construction market
0%
1%
2%
3%
4%
5%
1999 2001 2003 2005 2007
An economic upturn is expected ...
• Low interest rates (but high €)
• Growth in US and UK
• More international stability
... but pressure on total construction
market remains
• Negative growth -/- 0.2% in 2004 for the
construction market as a whole (+1.5%
in nominal terms)
• Government spending on construction to
shrink 2.8% in 2004 (-/- 1.1% nominal)
due to savings programmes
• Continuing need for government to curb
spending
– tax cuts
– need to comply to €-criteria
German GDP growth (nominal)
Source: EIU; Ifo; DIW

- 88 -
Subsidiary X’ competitors are more cost focused, competitive advantage will
have to come from economies of scale and scope
B Europeans
()
A
Local Dredging
Local
Specialists
()
Strong Neutral
Client X/
HH
Central Dredging
Marine Civil Eng.
Construction
Sales
Know how
Operations
Local
Construction
Companies
Interm. Dredging
Weak
Cost focus/
large projects/
technical know how
Cost focus/
interm. projects
Cost focus/
smal projects/
local know how
Activity Maps Major Types of Competitors

- 91 -
Current indirect headcount is 60 feet
Managing DirectorManaging Director
Area Marine
Piling
Area Marine
Piling
TenderingTendering
Proj. Man’rsProj. Man’rs
SecretarySecretaryHealth/SafetyHealth/Safety
Area NordseeArea Nordsee
AreaArea
AdminAdmin
HRHR
ITIT
Organisation Structure Subsidiary X (December 2003)
Area MunitionArea Munition
TenderingTendering
TDTD
WorkshopWorkshop
ResourcesResources
ServicesServicesTenderingTendering
11
22
33
11
66
11
33
11 44 11 11
22
111,61,6
AdminAdmin FinanceFinanceAdminAdmin AdminAdmin
Resource
Planning
Resource
Planning
AdminAdmin
22
AdminAdmin
22 22
44
11
11
11
22
44
22
11
22
11
11
AdminAdmin
11
Total 60 fteTotal 60 fte
.. General overhead .. Operational and workshop overhead
-/- 1 May 2004
-/- 1 June 2004

- 94 -
Agenda
1. Introduction
5. Summary5.5.

Factbase
Subsidiary A

- 100 -
The activities of WDC range from Dredging activities to Sand & Gravel Supply
Activity map Westminster dredging
Dredging
• Local
• Intermediate
• Central
UK Ireland
Other dredging related activities*
• Reclamation dredging
• Coast protection
• Outfalls, Landfalls & Pipeline
• Sand & Gravel Supply
* Environmental dredging is also distinguished as a PMC.
There was however no turnover in that segment the last few years

- 103 -
On average, WDC has generated a 5% operating profit margin over the last
five years
7,9 4,8
3,1 0,5 0,4 1,6
1,4
0,4 1,8
0
2
4
6
8
10
Project
Cash Flow
- Hires = Gross
Margin
- Ope-
rational
Overhead
+ Plant
Result
- Workshop
Result
- General
Overheads
= EBIT* + Sand and
Gravel
Supply**
= WDC
EBIT*
29%29% 17%17%
2%2% 1%1%11%11%
EBIT Buildup (Average 1999 - 2003)
£m
0%0% 6%6%
5%5%
Note: Felixstowe at zero gross margin, EBIT excludes sundries
* Excludes Sundries
** Includes Llanelli

- 106 -
However the Returns On Capital Employed excluding central have been
relatively stable
Excluding central
dredging
Return On Capital Employed WDC (Average 1999 - 2003)
Note: Excluding PMC Sand & Gravel Supply;
Felixstowe at zero gross margin
* Implementation of Baan led to high current liabilties
Source: WDC Administration; XYZ analysis
94%
31% 50% 35% 62%
1999 2000 2001 2002 2003
4
12,6
6,6 5,2 5,3
1999 2000* 2001 2002 2003
Pre-tax ROCE
Cash Flow Margin
Depreciation/Sales
Net Asset Turnover
EBIT Margin
Other costs/Sales
X
34%
25% 30%
24%
36%
1999 2000 2001 2002 2003
4% 4% 3% 3% 4%
1999 2000 2001 2002 2003
7%
19% 19% 15% 20%
1999 2000 2001 2002 2003
23%
2% 8% 7% 12%
1999 2000 2001 2002 2003
-/-
-/-

- 109 -
Overview of the five year average profit & loss account for all PMCs
P&L by product market combination (1999 - 2003 average)
Dredging Other Total ex.
Sand &
Gravel
Total ex.
Central &
Sand & G
Total ex.
Central &
inc. Sand£ million
Local Inter-
mediate
Central* Subtotal Coast
protection
Out/land-
falls
Sand &
Gravel
Revenue 5.8 7.0 9.1 21.9 3.5 2.2 5.1 27.5 18.4 23.5
Hires 0.9 0.9 2.4 4.3 0.2 0.3 4.8 2.4
Other cost 4.3 4.9 6.6 15.7 2.3 1.6 19.7 13.0
Gross Margin 0.6 1.2 0.1 1.8 0.9 0.3 3.1 3.0
Gross Margin (%) 10% 17% 1% 8% 27% 13% 11% 16%
Project Cash flow 1.5 2.1 2.5 6.1 1.2 0.6 7.9 5.3
Cash flow margin 26% 30% 28% 28% 33% 27% 29% 29%
Operational overhead -0.1 -0.1 -0.1 -0.4 -0.1 0.0 -0.5 -0.3
Plant Operations 0.3 0.1 0.0 0.5 0.0 -0.1 0.4 0.4
Workshop result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
General Overheads -0.4 -0.4 -0.4 -1.3 -0.2 -0.1 -1.6 -1.2
EBIT 0.4 0.8 -0.5 0.7 0.7 0.0 0.3 1.4 1.9 2.2
EBIT Margin (%) 7% 11% -5% 3% 19% 2% 7% 5% 10% 9%

- 112 -
Overview of ratio’s per PMC
Revenue
Growth
CF Margin
Gross
Margin
Plant,
worksh.,
oper. res.
G&A
EBIT
margin
EBIT (£
million)
Pre-tax
ROCE
CFROI
Local Dredging 7% 26% 10% 4% 7% 7% 0.4 36% 1%
Intermediate Dredging - 21% 30% 17% 0% 6% 11% 0.8 55% -1%
Central Dredging* - 21% 28% 1% -1% 5% -5% -0.5 << -100% << -10%
Total Dredging - 16% 28% 8% 0% 6% 3% 0.7 25% -3 %
Coast protection - 5% 33% 27% -2% 6% 19% 0.7 >>100% << -10%
Outfalls, Landfalls &
Pipelines
15% 27% 13% -5% 6% 2% 0.0 9% 2%
Sand & Gravel Supply 11% Na Na Na Na 7% 0.3 21% 6%
Grand total (excl. Sand
& Gravel)
- 13% 29% 11% 0% 6% 5% 1.4 40% 1%
Grand total (excl.
Central & Sand & G)
-4% 29% 16% 0% 6% 10% 1.9 58% 3%
Grand total (excl.
central incl. Sand & G)
-1% Na Na Na Na 9% 2.2 31% 3%
*
Source: WDC Administration; XYZ analysis

- 115 -
The outlook for the economy and the construction are fairly positive
0%
1%
2%
3%
4%
5%
6%
7%
1999 2001 2003 2005 2007
An minor economic upturn is expected ...
• Growth in US, however limited growth in
continental Europe
• More international stability
... outlooks on construction market are
modestly positive
• Positive growth of 3% in 2004 and 2005
for the construction market as a whole
• Central government spending on
transport is expected to increase from
7,3 bn £ in 2003/04 to 8,4 bn £ in
2005/06
• Public finances will deteriorate in
2003/04. Observing the “golden rule” has
to lead to
– less increase in public spending
– higher taxes
UK GDP growth (nominal)
Source:

- 118 -
Low cost remains the most important customer need, intermediate and
central dredging require less local know-how
Customer needs per product market combination
Low cost
• High productivity
• Proper project design
• Low Mob/Demob costs
• Low overheads
Local market presence
Local operations
Local Inter-
mediate
Central Coast
Protection
Sand and
Gravel
Dredging Other
very important less important
Outfalls
*
* proximity of licensed area

- 121 -
Current indirect headcount is 24,5 fte
Managing Director*Managing Director*
Estimating/
Marketing
Estimating/
Marketing
QA managerQA managerHealth/SafetyHealth/Safety
Operations
Management
Operations
Management
TenderingTendering
Finance /
Administration*
Finance /
Administration*
Organisation Structure WDC (December 2003)
Office ManagerOffice Manager
11 0,50,5
0,80,8
0,50,511
Total 24,5 fteTotal 24,5 fte
MarketingMarketing
Ops
Manager
Ops
Manager
Project
Managers
Project
Managers
99
Contract
support
Contract
support
11
Crew Plan-
ning/QA
Crew Plan-
ning/QA
Survey
Manager
Survey
Manager
11
SurveyorsSurveyors
55
Plant
Services
Plant
Services
11
Super-
intendents
Super-
intendents
33
33
22
AccountingAccounting
Payroll &
data proces.
Payroll &
data proces.
2.72.7
33
Business
Dev’t
Business
Dev’t
11
General overhead
Operational overhead
Secretarial/
office serv’es
Secretarial/
office serv’es
11
5.55.5
11
0,50,5
11
11
Contract &
plant admin
Contract &
plant admin 44
* also work for Sand & Gravel and PPD

- 124 -
Country Fact Bases
1. Subsidiary X
2. Subsidiary A
3. sister company X
4. Client X
5. Company X
3.3.

- 127 -
This presentation summarises the results of the current situation analysis for
the Finnish home market
First
issues
Approach per
home market
Plan of
work
Plan of
work
Planning and
Visioning
Planning and
Visioning
Financials
and orga-
nization
Market and
compe-
titors
InsightInsight
Current situation
analysis
Current situation
analysis
Phase 1 Phase 2
Adjusted
business model
Adjusted
business model
Phase 3
Implementation
plan
Implementation
plan
Phase 4
Implementation
(out of scope)
Implementation
(out of scope)
Alternative
models
Benefits
and risks
Business
Model
Business
Model
Imple-
mentation
Imple-
mentation
Implemen-
tation plan
Implemen-
tation plan
Organ-
ization
Financials
Approach ‘Home Markets’ Project

- 130 -
Agenda
1. Introduction
2.2.

- 133 -
The return on capital employed is under pressure due to decreasing revenues
and low margins; except for 2003 where revenues have grown
10%
-6%
6%
8%
1%
1999 2002
4 4 4
2
3
1999 2002
ROCE
Cash flow margin
Depreciation/turnover
Net asset turnover
4%
-1%
1%2%
0%
1999 2002
EBIT margin
(semi) fixed cost/turnover
X
16% 17% 18%
13%
17%
1999 2002
6%6%6%6%5%
1999 2002
8%11%10%9%
10%
1999 2002
Return On Capital Employed sister company X
(Average 1999 - 2003)
-/-
-/-

- 136 -
The negative plant operational result is mainly caused by supporting equipment for
civil works because the utilisation of the main plants is on average above budget
Average plant utilization per plant
by purchasing value (average 3 years)*
Average plant operational result
per pmc (€ ‘000)
-39
51
107
116
0 0 0
-125
-48
51
-77
-158
-42
-121
-40
72
-200
-150
-100
-50
0
50
100
150
Plantresult(€’000)
Plant operations result
for main plants
Plant operations result
for other equipment
Local
Ammunition
Foundation
Harbour
construction
Inter-
mediate
Central
Bridges
BorePiling
0
13
26
39
52
0 2,5 5 8 11
Plants by purchasing value (€ mln)
Utilizationinweeks
*Except AA:
bought in 2003 plant utilization 10% above budget
Actual
Budget
Manu-Pekka
Koura2
Kuokka-Pekka2
Meri-Pekka
Kahmari1
Pulteri

- 139 -
Although cash flow margins for dredging activities are above 17%; EBIT
margins for dredging activities are between -3% and 3% (except for ammunition)
CF Margin per PMC
EBITmargin
EBIT Margin per PMC
Revenue
(€ x million)
CashflowMargin
-10%
3%
15%
28%
40%
0 11,3 22,5 33,8 45,0
Local
Ammunition
Foundation
Harbour
construction
Inter-
mediate
Central
Civil
works
BorePiling
-30%
-15%
0%
15%
30%
Local
Ammunition
Foundation
Harbour
construction
Intermediate
Central
Civilworks
BorePiling
Revenue
(€ x million)
0 11,3 22,5 33,8 45,0This document is a partial preview. Full document download can be found on Flevy:

- 142 -
Finland’s financial performance over the years results in a 1% Ebit margin, 9%
ROCE and -1% CFROI
Revenue
Growth
CF Margin
Gross
Margin
Plant,
worksh.,
oper. overh.
result
G&A
EBIT
margin
ROCE CFROI*
Local Dredging 20% 19% 12% -7% 8% -3% -9% -6%
Intermediate Dredging 3% 19% 8% -1% 5% 2% 4% -1%
Central Dredging 81% 20% 4% 3% 7% 0% 0% -2%
Ammunition -100% 37% 28% 0% 2% 26% 101%
Subtotal dredging 14% 22% 12% -1% 6% 5% 9% 2%
Harbour construction 8% 15% 11% -1% 7% 2% 19% 3%
Foundation -32% -2% -6% -3% 11% -20% -113%
Bore Piling -22% 19% 10% -10% 13% -14% -15%
Civil works -21% 11% 9% -1% 6% 2% 32% 8%
Total 0% 16% 10% -2% 7% 1% 9% -1%
*Key assumptions:
Fixed asset life: 20 year for dredging
Fixed asset age: 18 year for dredging
Source: Client X; XYZ analysis

- 145 -
The local dredging market is expected to grow in 2005 and 2006;
an increase of revenues in Estonia and Russia is expected in 2004
15.2
19.6
2.7
8.8
3.3
3.8
11.3
6.0
4.0
0.8
2.0
2.0
1.5
1.5
0
5
10
15
20
25
30
35
2004 2005 2006
Revenues (€ mln)*
€mln
Dredging Local
Civil Foundation
Harbour Quay wall
Dredging Intermediate
Dredging Central
Civil works
* Based on estimation of management company X including only projects > € 250k
15.7
25.7
30.8
5.0
1.1
4.7
1.2
0
5
10
15
20
25
30
35
2004 2005 2006
€mln
Finland
Russia
Estonia
Average expected acquiring chance is 50%
(included in revenues shown)
Revenues (€ mln)*

- 148 -
… and Harbour construction in Estonia
Dredging DemandDredging Demand
Capital DredgingCapital Dredging
Maintenance
Dredging
Maintenance
Dredging
Technical state of
ports
Technical state of
ports
Economic GrowthEconomic Growth
Major InitiativesMajor Initiatives
Harbour
construction
Impact on PMCs
Estonia
Government
Budgets
Government
Budgets
Long term drivers of demand
Impact on PMCs
Finland
Harbour
construction

- 151 -
Agenda
1. Introduction
4. Internal Analysis4.4.

- 154 -
Agenda
1. Appendix competitorsI.I.

- 157 -
Other competitors are large construction companies which use subcontracting
or have their own small dredging plants for supporting their construction projects
YY SS LL
• All construction activities
•Unit infraservices focuses on
tunneling, earth works,
harbour construction.
• All construction activities
•Unit infraservices focuses on
tunneling, earth works,
harbour construction.
•S (subdivision) Major fields
are bridge building, harbour
construction and pile driving.
•S (subdivision) Major fields
are bridge building, harbour
construction and pile driving.
•Civil engineering : rock, soil
foundation engineering,
concrete construction,
highway, marine engineering
•Civil engineering : rock, soil
foundation engineering,
concrete construction,
highway, marine engineering
•2 backhoe dredgers, one drill
barge, cutter Tursas, towable
barges (all old except one
med. size backhoe dredger)
•2 backhoe dredgers, one drill
barge, cutter Tursas, towable
barges (all old except one
med. size backhoe dredger)
•All construction equipment
•Dredging activities using
subcontracting
•Dredging activities using
subcontracting
•All construction equipment•All construction equipment
•Strong competitor using all
capabilities of the
construction company. Uses
dredging as support activity
capabilities of the
construction company. Uses
dredging as support activity
capabilities of the
construction company. No
dredging activities
capabilities of the
dredging activities
•Head office Finland
•12000 employees (2002)
•Unit infraservices 700 empl
•Head office Finland
•12000 employees (2002)
•Unit infraservices 700 empl
•Head office Sweden
•76000 employees (2002)
• Finnish subsidiary (4500
empl.);
•Head office Sweden
•76000 employees (2002)
• Finnish subsidiary (4500
empl.);
• Head office Finland
•subsidiary of L
• 500 employees (2002)
• Head office Finland
•subsidiary of L
• 500 employees (2002)
•Total revenue € 1,8 billion
•Unit infra revenue € 118 mil.
•Unit infra result € 4,1 mil.
•Unit infra revenue € 118 mil.
•Unit infra result € 4,1 mil.
•L OY € 190 mil.(2002)
•L OY € 190 mil.(2002)
ProductsProducts
EquipmentEquipment
Competitive positionCompetitive position
BackgroundBackground
FinancialsFinancials
capabilities of the
dredging activities
capabilities of the
dredging activities
•S OY € 1 bil.(2001)
•S OY result € 14mil.
•S OY € 1 bil.(2001)
•S OY result € 14mil.

- 160 -
Agenda
1. Introduction
1.1.

- 163 -
Four PMC’s (Product/Market/Combinations) have been defined for Client X Sweden
Definitions of Product Market combinations
CentralCentral
LocalLocal
IntermediateIntermediateDredgingDredging
Quay wallQuay wall
Harbour
Construction
Harbour
Construction
333
444
111
222
1. Small dredging works, local competitors,
small equipment
2. Reasonable sized dredging works, local and
foreign competitors, own large equipment
3. Large dredging works, international competitors,
central Client X fleet added with prime movers
from home market, pre-qualification tendering
4. Harbour construction of which quay wall is
the most important aspect of the work

- 166 -
Dredging is reasonable stable in size except the Gothenburg project (2003:€ 6,6 mln);
over the years revenues came from other countries due to work for sister companies
2,9
1,0
1,8
3,9
5,8
5,4
0,3
7,8
3,2
1,8
0
5
10
15
20
2001 2002 2003
Revenues by PMC (€ mln)
€mln
Dredging Local
Harbour Quay wall
Dredging Central
6,2
2,2
11,1
0,1
1,1
2,6
0,6
0,2
1,1
0,8
0,5
0,1
3,6
0,1
0,4
0,4
1
1,7
0
5
10
15
20
2001 2002 2003
Revenues by country (€ mln)
€mln
Finland
Others
UK, Ireland
Russia
Sweden
Denmark
Netherlands
Spain

- 169 -
Most plants are over 20 years old, but are upgraded; R has a bookvalue
of € 3,3 million in 2003 (66% of total bookvalue of the equipment)
= € 4 million is purchase value
Size versus age of the main equipment
Purchasevalue(inclupgrade)(€‘000)
Age (2003)
0
2,5
5,0
7,5
10,0
0 8 15 23 30
R
G*
B
*

- 172 -
Intermediate dredging is the only pmc with a EBIT margin above 0%...
PL& per product market combination (2001 - 2003 average)
Dredging
Harbour
Construction Total€ million Local
Inter-
mediate Central
Revenue 1872 5049 2707 1660 11302
Hires 128 626 32 18 805
Other cost 1337 3515 2695 1508 9050
Gross Margin 407 908 -20 134 1447
Gross Margin (%) 22% 18% -1% 8% 13%
Project Cash flow 535 1534 12 152 2252
Cash flow margin 29% 30% 0% 9% 20%
Operational overhead 58 136 5 24 223
Plant Operations 127 201 0 50 384
Workshop result 0 0 0 0 0
General Overheads 252 467 119 195 1033
EBIT -30 103 -145 -134 -192
EBIT Margin (%) -2% 2% -5% -8% -2%

- 175 -
Client X financial performance over the years results in a -2% Ebit margin, -3%
ROCE and -2% CFROI
Revenue
Growth
CF Margin
Gross
Margin
Plant,
worksh.,
oper. overh.
result
G&A
EBIT
margin
ROCE CFROI*
Local Dredging -21% 29% 22% -10% 13% -2% -3% -1%
Intermediate Dredging 18% 30% 18% -7% 9% 2% 3% 1%
Central Dredging - 0% -1% 0% 4% -5% -37% -67%
Harbour Construction -25% 9% 8% -4% 12% -8% -48%
Total 30% 20% 13% -5% 9% -2% -3% -2%
*Key assumptions:

- 178 -
The market outlook for identified new dredging projects is stable; Harbour
construction is expected to increase; (almost) all revenues come from Sweden
0,3 0,4 0,3
8,7
3,5 4,3 4,2
3,2
17,7
5,5
3,1
0
5
10
15
20
25
2004 2005 2006 2007
Revenues (€ mln)*
€mln
Dredging Local
Harbour construction
* Based on identified projects of management Sweden including only projects > € 250k
11,0
21,7
9,8
6,5
0,6
0,4
1,1
0
5
10
15
20
25
2004 2005 2006 2007
€mln Sweden
Norway
Denmark
Average expected acquiring chance is around 35%
(included in revenues shown)
Revenues (€ mln)*

- 181 -
Harbour construction is expected to increase mainly due to the development
of Swedish Harbours for Baltic trade
Dredging DemandDredging Demand
Capital DredgingCapital Dredging
Maintenance
Dredging
Maintenance
Dredging
Physical ConditionsPhysical Conditions
PrivatisationPrivatisation
Economic GrowthEconomic Growth
Major InitiativesMajor Initiatives
Harbour
construction
Impact on PMCs
Denmark and Norway
Government
Budgets
Government
Budgets
Long term drivers of demand
Harbour
Construction
Impact on PMCs
Sweden

- 184 -
Agenda
1. Introduction
4. Internal Analysis4.4.

- 187 -
Back-up
1. Competitor profiles1.1.

- 190 -
Rhode Nielsen is the main competitor in Denmark for dredging projects; Per
Aarsleff for Harbour in Sweden
P MadsenP Madsen E HöjE Höj Per AarsleffPer Aarsleff
Capital/maintenance,
dredging, Stone works, Piling
works, Pipe&Cable works,
Surveying
Capital/maintenance,
dredging, Stone works, Piling
works, Pipe&Cable works,
Surveying
•Dredging
•Piling
•Harbour construction
•Dredging
•Piling
•Harbour construction
•Infrastructure projects (incl.
marine construction)
• Foundation works
•Pipe rehabilition
•Infrastructure projects (incl.
marine construction)
• Foundation works
•Pipe rehabilition
Around 6 vessels with crane;
several barges
Around 6 vessels with crane;
several barges
1 bucketdredger, two
barges, 4 other dreding
vessels
1 bucketdredger, two
barges, 4 other dreding
vessels
•For marine construction: 11
major floating units including
two large Jack-up platforms
•For marine construction: 11
major floating units including
two large Jack-up platforms
•Small competitor in Denmark•Small competitor in Denmark
capabilities of the
construction company.
capabilities of the
construction company.
•Head office Denmark
•74 employees
•focus Northern Europe
•74 employees
•focus Northern Europe
•30 employees
•30 employees
• Head office in Denmark
•2150 employees
•general infrastructure
contractor
• Head office in Denmark
•2150 employees
•general infrastructure
contractor
•Total revenue € 8 million
•result 2002 € 0,1 million
•Total revenue € 8 million
•result 2002 € 0,1 million
ProductsProducts
EquipmentEquipment
Competitive positionCompetitive position
BackgroundBackground
FinancialsFinancials
•Small competitor in Denmark•Small competitor in Denmark
•result 2002 € 0,3 million•result 2002 € 0,3 million

- 193 -
Agenda
1. Introduction
1.1.

- 196 -
Three PMC’s (Product/Market/Combinations) have been defined for rgn X
Peninsula
Definitions of Product Market combinations
CentralCentral
LocalLocal
IntermediateIntermediateDredgingDredging
33
11
22
Small dredging works, local competitors,
small equipment
Reasonable sized dredging works, local and
foreign competitors, mid sized equipment
Large dredging works, international competitors,
central Client X fleetThis document is a partial preview. Full document download can be found on Flevy:

- 199 -
Revenues have dropped significantly in Portugal and are fluctuating in Spain
0
2
4
6
8
10
12
14
16
18
1999 2000 2001 2002 2003
Dredging Local
Portugal
Spain
Dredging Central
Spain
Portugal
Dredging Local
Spain
€m
Revenues Company X by PMC
Source: Client X Administraton; XYZ analysis
Dredging Local
Portugal
Dredging Central
Spain
Revenue growth (1999=index)
0%
50%
100%
150%
1999 2000 2001 2002 2003
Portugal
Spain (index=2001)

- 202 -
Most plants are over 15 years and already largely depreciated; except Gema
and Bellatrix which have still a book value above € 1 million
= € 2 million is purchase value
Size versus age of the equipment
Purchasevalue(€‘000)
Age (2003)
0
1000
2000
3000
4000
0 6 13 19 25
G
Ea
B
T
Es
Aa
b
multicats
tugboats
* Internal sales in 2000; Gema is older
=Main Plants
=Supporting equipment

- 205 -
Intermediate dredging has a EBIT margin of 13%, Local and Central dredging
have EBIT margins of -5% and -12%
PL& per product market combination (1999 - 2003 average)
Dredging
Total
€ million
Local Inter-
mediate
Central
Revenue 6.6 3.3 3.6 13.4
Hires 1.0 0.4 1.0 2.3
Other cost 4.7 2.2 2.9 9.7
Gross Margin 1.0 0.7 -0.3 1.5
Gross Margin (%) 15% 22% -7% 11%
Project Cash flow 2.0 1.1 0.7 3.8
Cash flow margin 30% 34% 20% 28%
Operational overhead 0 0 0 0
Plant Operations 0.3 0 -0.1 0.1
Workshop result 0.1 0 0 0.1
General Overheads 1.0 0.3 0.3 1.5
EBIT -0.3 0.4 -0.4 -0.4
EBIT Margin (%) -5% 13% -12% -3%

- 208 -
Company X’s financial performance over the years results in a -3% Ebit margin, -
6% ROCE and -1% CFROI
Revenue
Growth
CF Margin
Gross
Margin
Plant,
worksh.,
oper. overh.
result
G&A
EBIT
margin
ROCE CFROI*
Local Dredging -20% 30% 15% -5% 15% -5% -15% -3%
Intermediate Dredging 8% 34% 22% -1% 8% 13% 61% 9%
Central Dredging -11% 20% -7% 3% 8% -12% -14% -10%
Total -9% 28% 11% -2% 11% -3% -6% -1%
*Key assumptions:

- 211 -
Positive economic growth is expected in Spain and Portugal; in Spain the
public sector construction projects are expected to drop in 2006
-1%
0%
1%
2%
3%
4%
5%
1999 2001 2003 2005 2007
An economic upturn is expected ...
• International growth
• International stability
... and positive growth is expected to
continue in Spain
• Past few years strong positive growth of
construction market from major public
sector construction projects
• Growth is expected to continue until
2006. In 2006 EU structural funds will
stop
Iberian Real GDP growth
Source: EIU
Portugal
Spain

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