Arcadis €175m share buyback programme announced

Arcadis just announced the start of a €175m SBB. At the current share price this represents a total of approximately 4m shares or 5% of the company's ordinary shares outstanding. We applaud this move which somewhat comes as a surprise. Earlier on it was repeatedly stated by the company that M&A was the preferred way of allocating capital even at Arcadis' low trading valuation. By repurchasing shares, Arcadis is creating value while remaining well within its target leverage range of 1.5x – 2.5x Net Debt to Operating EBITDA. Prior to this announcement we were banking on a leverage ratio of 1.4x (25E) and 0.9x (26E) which now will end up at an acceptable & manageable 1.8x (25E new) and 1.2x (26E new). We expect a positive share price reaction as we interpret this move also as an indication that a large (expensive/dilutive?) M&A deal is not in the cards in the short term. The fact that the new CFO only just started also underpins this scenario. Arcadis is currently trading at discounts of 40-45% to its peers. Accumulate and €51 TP reiterated.