Imtech: Disaster in Poland

Today, Imtech announced it has been severely harmed by lack of funding of its largest client in Poland and possible irregularities re projects in Poland. Imtech ordered a forensic investigation and pending the findings, the Polish mgt. has been suspended. Mgt. expects at least € 100m in already incurred costs will be written-off. The exact amount can not yet be determined so the release of the 2012 results planned for 5 Feb. and the AGM scheduled for 3 April have been postponed until further notice. No dividend over 2012.

In talks with its lenders re covenants, a waiver would be best-case:
As a result of the write-down, Imtech will no longer fulfil its covenants with lenders –avg. ratios of 3.0 maximum for net debt/EBITDA and 4.0 minimum for interest coverage. Imtech will begin consultations with its lenders. Imtech has retained Rabobank as its financial advisor for these consultations.

About the projects
The write-off of at least € 100m euro relates to 3 projects for Adventure World Warsaw and a bio power station in Warsaw (combined value € 757m). The advanced payments do not comply with the agreements re availability as the client has not secured funding. After an initial investigation, and partly based on the annual audit by KPMG, the board decided that a forensic investigation should be carried out re the circumstances under which the projects were accepted and executed. Irregularities in these or other projects in Poland can not be ruled out. Pending the investigation, the local Polish mgt. has been suspended. Mgt. also determined that a promissory note and pledged accounts re Adventure World Warsaw (circa € 200m) recognised in the 1H12 accounts under cash and cash equivalents must, according to IFRS, be reclassified under current financial assets. Most of this was recognised as an advance paymentunder work in progress for the 4 projects concerned. This advance payment was considerably higher than the incurred costs. The advance payments have not become available to Imtech. The effect of this is incorporated in the expected write-off of at least € 100m.

Net debt 2012 looks very high:
Acc. to mgt net debt at end-2012 was circa € 800m, which is affected by the situation in Poland. Excluding the Polish projects, the backlog at end-2012 was € 6.4bn. The 'lock-up period' will be extended until the date on which the financial statements for 2012 are published.

Targets 2015 suspended for the time being:
Mgt. wishes to fix the house before making new acquisitions.

Very bad for credibility and investibility, est. TP will go down:
Management made the impression that a waiver will be able to prevent a rights issue, but we do not have 100% guarantees on this yet. This would be the sole consolation re today’s news. Earnings estimates for 2012 will be cut severely, and net debt estimates will go up strongly, affecting valuation, not even taking into account a severe increase it the risk profile.