View from the CEO

Implenia achieved an underlying performance at the EBITDA level of CHF 163.5 million in 2020 (incl. COVID-19 impact of approximately CHF -52 million). COVID-19 was not the only negative effect on business during the year under review. As announced in October, significant write-downs and re-evaluations required faster execution of the initiatives under the “Portfolio” and “Profitable Growth” strategic priorities. Consequently, reported EBITDA was reduced to CHF -4.9 million. Following these one-time effects and thanks to the measures that are now being taken, however, Implenia has shed ballast and laid the foundations for profitable growth: CEO André Wyss believes the company is well equipped for its development into a leading multinational integrated construction and real estate services provider.

Focus on core business

The significant reduction in revenue, EBITDA and net result compared with the previous year was the expected outcome of, among other things, the COVID-19 pandemic. Thanks to rapid and effective action taken to protect employees and the interests of customers and partners, contractual deadlines were met in most cases despite COVID-19, though the different rules imposed by authorities in different regions played a role here.”

“We had task forces monitoring developments and continually adjusting measures in each country and at the global level, so we could always be proactive rather than just reacting.”

Negative one-time effects, namely write-downs and re-evaluations amounting to around CHF 203 million, had by far the largest impact on results. They mainly concerned projects run by Division Civil Engineering and especially those started by the Civil sub-unit in Sweden before 2019.

”We are focusing more consistently on our core business and service portfolio, where we can generate solid margins, and on our relevant markets, with the aim of significantly improving Implenia’s risk profile. In concrete terms this means concentrating on integrated construction and real estate services in Switzerland and Germany. We also offer tunnelling and related infrastructure projects in other markets.”

Detailed information about the numbers and specific developments can be found in the  Group profile and in the  Financial report.

Portfolio and profitability

The initiatives to accelerate Implenia’s strategy execution are on schedule and on budget in all divisions. There is a particular focus on portfolio transformation, as mentioned above, and on the measures we are taking to secure profitable growth. We have already started, for example, to sell and ramp down activities that are either outside our core business or that are not profitable enough. We are also externalizing asset-heavy activities, such as our yards and equipment fleets.

”As per our strategy, we are concentrating even more strongly on activities right at the very start of the construction process, such as consulting, planning and engineering. The earlier we get involved in the process, the better the project selection and the more the quality of our order book rises.”

The most important initiative for Profitable Growth is our Value Assurance approach, which is continuously improving. Last year, this approach led us to take on projects that are more attractive in both strategic and financial terms: in the offer phase through a strong focus on project opportunities and risks up to and including contract formulation; and in the implementation phase through progressive monitoring based on regularly reviewed milestones. As a result of all this, the margin we calculate at the start and the margin we actually achieve at the end are much closer together.

”We continue to refine the relevant KPIs and so establish an early warning system to help us cope with the unexpected – early and automatically, and especially on complex major projects.”

Meanwhile, improvements in procurement and the ongoing implementation of BIM and Lean Construction have improved our Operational Excellence. Turning to digitalization, the ERP transformation programme INSPIRE was initiated in Switzerland to serve as the backbone of our harmonised digital processes. Preparations are being made for implementation in other countries. Cash management was also optimised.

You can find more information about these developments at the divisional level in the division portraits.

Innovation and talent

As well as the initiatives on Portfolio Transformation and Profitable Growth, action has been taken on the Innovation and Talent & Organization strategic priorities. Implenia has three priorities for Innovation: strengthening our intrapreneurship culture by systematically promoting ideas through the Innovation Hub; developing and expanding an external network of research institutions and start-ups; continuously screening, short-listing and validating acquisition candidates.

”Our overall aim with innovation is to promote promising internal and external ideas at all levels. We are also investing more in development, planning and engineering, and in new scalable business models, with a clear focus on industrialisation and digitalization: we want to offer solutions and products for real estate and infrastructure that can be standardised and scaled. We are making planning and control processes more efficient by systematically deploying digital tools.”

You can read more about this in  Insight “Added value through i​​​​​​​nnovation”.​​​​​​​

A central focus of the Talent & Organization strategic priority is the use of change management measures to support and develop the leadership team and employees involved in change processes.

”The aim is to get the right people with the right abilities in the right roles and to expand their skills. We are also implementing talent management measures that allow us to identify talented people systematically and help them progress.”

The operating model and organisation have proven effective even, and perhaps especially, during the COVID-19 pandemic. Operational structures were further strengthened in 2020 with an emphasis on cross-divisional and cross-functional processes. These continue to be based on our five corporate values, which were included, for example, as an integral part of the performance management process (MbO) for all employees last year.

Further information can be found in the non-financial report in the  Employees​​​​​​​ chapter.

On the road to growth

Implenia’s funding remains solid. As expected, our equity ratio temporarily fell to 10.3 per cent due to the impact on results of negative one-time effects, and because of the distribution of a dividend in kind following the Ina Invest transaction. If the upside potential of Implenia’s remaining development portfolio were included, the equity ratio would be well above 15 per cent.

”We aim to maintain an equity ratio of more than 20% over the medium term. It is clear that our operating business is sound: the underlying performance for 2020 at the EBITDA level came to CHF 163.5 million – including a COVID-19 impact of approximately CHF -52 million. Above all, the health of our order book is supported across all business areas and markets. And the flagship projects that we have managed to win in our core markets of Switzerland and Germany have helped increase the quality of orders even further. Around 80 per cent of revenue for 2021 has already been secured by the current orders.”

You can find out more in  Insight “Space for future gene​​​​​​​rations” and in  Insight “Expertise in com​​​​​​​plex infrastructure”.

The market outlook is positive despite COVID-19: according to Euroconstruct (November 2020), overall construction activity in the EC-15 countries will remain stable in the coming years. Annual growth rates of +2.7% for Buildings and +3.3% for Civil Engineering are expected for the 2021-2023 period. Major infrastructure plans in particular will benefit from public sector stimulus programmes, as well as from an investment backlog in infrastructure expansion and renewal.

”We will report our performance at the EBIT level in the future. For 2021, we expect EBIT of more than CHF 100 million, equivalent to EBITDA of more than CHF 200 million. The medium-term objective of a 4.5 per cent EBIT margin is confirmed.”

There is detailed information about our market assessments and forecasts in the  Bus​​​​​​​iness report.

Sustainably into the future

Sustainability, as one of our key corporate values, is at a primary focus of all Implenia’s divisions, functions and services. Implenia developed a comprehensive sustainability strategy twelve years ago, becoming one of the first construction companies in Switzerland to do so. This strategy has now been revised, with ambitious new targets set for 2025. Implenia defines sustainability from a holistic perspective, covering environmental, economic and social aspects.

”We are developing circular business models for the design and construction of real estate and infrastructure. And we are looking at the structures we build across their entire life-cycles – from planning and construction, to operation, to demolition or conversion. The decisions we make are based as much on the materials used as on economic factors.”

Implenia also follows a consistent labelling policy, makes its decisions and communicates transparently, and has zero tolerance for any infringement of compliance rules. Collaboration on our construction sites and beyond will be intensified, in part by involving customers and partners early and regularly, and by allowing neighbours and other important stakeholder groups to have a say in the development of construction plans.

”We believe our comprehensive, substantive sustainability strategy provides us with a good opportunity to consolidate our position as an industry leader. That, too, contributed to the fact that Implenia is well on the way to becoming a leading, multinational, integrated construction and real estate services provider.: We create and build – how we live, work and move!”

Further information can be found in  Insight “Sustainably ​​​​​​​into the future” and in the  Sustainability R​​​​​​​eport.​​​​​​​