Implenia well on track, increased profit based on underlying performance
Implenia improved its underlying performance compared to the previous year and significantly exceeded its target for 2021 with EBIT of CHF 114.8 million. The strong, high-quality order intake shows our clients’ high level of trust in Implenia. The company’s transformation is well advanced and planned portfolio adjustments are almost complete. With an attractive portfolio of services geared toward partnership-based cooperation with customers, all Divisions are well positioned to further increase their profitability with complex, profitable projects.
André Wyss CEO
“The strong, high-quality order intake shows our clients’ high level of trust in Implenia. The increase in underlying performance of 24% demonstrates the consistent execution of our transformation.”
André Wyss, Implenia has significantly exceeded its 2021 target of EBIT over CHF 100 million. How do you assess the 2021 financial year?
Implenia achieved reported EBIT of CHF 114.8 million, with all Divisions and relevant markets contributing positively to the result. Based on improvements by Divisions Buildings and Civil Engineering, our underlying performance at EBIT level rose by 24% to CHF 76.5 million (2020: CHF 61.5 million). Consistent execution of the transformation led to one-time effects that had a positive impact on the result. Due to the strategic focus on large and complex projects, the order book increased to an all-time high of CHF 6,881 million (2020: CHF 6,386 million). Revenue decreased less than expected to CHF 3,765 million (2020: CHF 3,989 million) despite portfolio adjustments and longer project duration.
How is Implenia progressing with the transformation?
The execution of the transformation is far advanced. Implenia continues to focus on integrated construction and real estate services in Switzerland and Germany and offers tunnelling and related infrastructure projects in other markets. With a clear focus on profitable, complex projects, and by strictly applying Value Assurance, the Group was able to acquire several strategically relevant assignments with significantly improved risk and margin profiles in 2021. This shows that clients trust Implenia and that the company is well positioned with its expertise and experience along with its services and competencies. Meanwhile, Implenia adequately managed the impact of rising material costs by ensuring close cooperation between the operating units and the global procurement organisation.
The acceleration and intensification of strategy implementation was prompted by, among other things, write-downs on projects. There were no further write-downs in 2021, so risk management seems to be working?
Many of our projects run for 10 years or even longer. Such large and complex projects always bring risks. With Value Assurance we have introduced a comprehensive approach to risk assessment that defines how projects are selected and assessed from a technical, financial and legal perspective. It is applied through periodic reviews throughout the entire life of a project.
And the Divisions control this process?
It depends on the construction project’s size, complexity and risk profile. We have four levels of Value Assurance Committee, starting with branch-level committees, then business units and national companies, and then finally at the highest level decisions are made by the CFO, the Head of Legal and me, together with the business. Every project manager has to complete a checklist for new projects, and this determines the level at which the proposal is evaluated.
Are existing projects also being assessed according to this system?
Yes. Risk management continues with contract management, followed by periodic reviews throughout the whole construction period up to the conclusion of the project. An early warning system based on benchmark figures flags up potential irregularities and risks, which helps make the financial side of the project highly professional.
In June 2020 Implenia outsourced half of its development portfolio to Ina Invest. How is the cooperation with Ina Invest going, and what is happening with Implenia’s remaining real estate portfolio?
The cooperation with Ina Invest is proving successful in all areas, from acquisition to development and other real estate services, to execution. Last year, Ina Invest was able to expand its portfolio even more than planned.
Division Real Estate reported EBIT for 2021 that was higher than expected and already in line with the years prior to the Ina Invest transaction. The Division invested further in its attractive real estate portfolio in 2021, and continues to develop it. Based on its increasing services offering, the Division expects higher earnings from services and from the participation in Ina Invest as well as from the business with further clients. Given the maturity of its own Real Estate portfolio, the Group anticipates a significant contribution to profit in 2022.
So Division Real Estate is well positioned to make a significant contribution to the Group’s profits in future. How are the other three Divisions positioned?
Division Buildings put in a strong underlying performance in 2021, and completed its planned geographical transformation. It expanded its expertise in the rapidly growing areas of general planning, consulting and construction for healthcare and R &D facilities.
Division Civil Engineering also saw a significant improvement in its underlying performance, excluding the positive one-off effects of divestments and restructuring. The business units Tunnelling and Special Foundations contributed positively to the result. Local branches of business unit Civil in Sweden, Norway, Austria and Romania were ramped down as planned to purely complete current projects. The market presence of business unit Civil in Switzerland was further adjusted according to strategy.
As part of the transformation, Division Specialties is adjusting its business units in line with strategy: The strategic businesses contributed positively to EBIT and improved their underlying performance compared to the previous year. Other non-strategic businesses didn’t achieve their planned profitability. The Division’s reported EBIT was positively influenced by one-time effects from divestments. In 2022, the Division plans to continue developing and scaling businesses with high potential, selling non-strategic businesses, and expanding its portfolio with specialised planning and engineering services.
How did the cash situation and equity develop in 2021?
In the second half of 2021, cash flow clearly showed a positive development. In November, we successfully issued a CHF 175 million bond, securing the full refinancing of the convertible bond ahead of its maturity in June 2022. The successful placement further strengthens our financing structure. Equity increased to CHF 346 million, compared to CHF 303 million as of 31 December 2020. Total assets remained around the same level as the prior year at CHF 2,988 million (2020: CHF 2,943 million). The equity ratio as of 31 December 2021 was 11.6% (2020: 10.3%). Adjusted for the temporary effect of the CHF 175 million bond, the equity ratio stood at 12.3%. Reducing total assets, especially net working capital, remains a high priority. Implenia intends to achieve this mainly through an accelerated cash conversion cycle and the consistent implementation of the asset-light strategy. Implenia aims for an equity ratio of over 20% mid-term, based on an improved underlying business, including increasing earnings from services and expected dividends from participations. The equity ratio shall also be improved by potential outsourcing of further non-core businesses and asset-heavy activities.
What goals have you set for Implenia in 2022?
Implenia has set itself an EBIT target of more than CHF 120 million for 2022 resulting from a further improved underlying performance. The estimated share of positive one-time effects from the transformation is less than 20%. As communicated in autumn 2021, we want to strengthen our equity by at least CHF 80 million in the current year. With execution of the transformation so far advanced, all Divisions are ready to meet the target.
“As a result of portfolio adjustments and a strategic focus on profitable, complex projects – and thanks to Value Assurance – all Divisions are well positioned to increase their profitability still further.”