5,172(5,134)

Order book,
CHF m

166(161)

EBITDA,
CHF  m

30(104)

Free cash flow before
acquisitions, CHF m

3,320(3,420)

Production output
CHF m

115(108)

EBIT excl. PPA
CHF m

39%(41%)

ROIC excl. PPA

 

 

Implenia records strong results for 2016

Implenia made good use of the healthy market environment in 2016 and posted strong results for the year. EBITDA and EBIT reached new record levels. Margins were much bigger than in 2015, putting Implenia well on course to meet its announced EBIT target of CHF 140 million. The improvement in earnings was purely organic, and was due in particular to the excellent performance of our Swiss business. A successful turnaround at Business Unit Buildings contributed a lot to this. The order backlog at Group level matched the previous year’s record level. Added to Implenia’s strong market position, the greater power acquired by purchasing Bilfinger Construction, and the continuing robustness of the markets allows the Group to feel confident about business in 2017.

5,172(5,134)

Order book,
CHF m

166(161)

EBITDA,
CHF  m

30(104)

Free cash flow before
acquisitions, CHF m

3,320(3,420)

Production output
CHF m

115(108)

EBIT excl. PPA
CHF m

39%(41%)

ROIC excl. PPA

 

Swiss construction activity remains at high level

Volumes remain high in the Swiss construction sector. Despite some isolated signs of a slight slowdown, the market is intact. The construction industry is still backed by sound fundamentals: economic growth in 2016 was once again stronger than in the prior year, financing terms remain attractive and demand from institutional investors remains high owing to the scarcity of other investment options.

Switzerland’s housing market is healthy despite lower immigration and a slightly higher vacancy rate. There are only a few isolated signs of oversupply, mainly in peripheral locations. The picture for office and commercial premises was mixed in 2016. While major projects in the industrial, services and healthcare sectors had a positive effect, overcapacities in the office sector put the brakes on activity. However, office and commercial property should see a resurgence in the medium term as the economy picks up. Volumes in civil engineering last year were slightly down on 2015. Investments in the Swiss rail network by FABI, the new fund for financing and developing Switzerland’s railway infrastructure, will gather momentum in 2017.

Robust performance in foreign markets

According to forecasts by Euroconstruct, the European research institute for the construction sector, infrastructure investments in Germany increased last year. The financial situation remained tight at the municipal level, but the German federal government made up for this with its own investments and with concessions to the Federal Land, such as meeting the cost of taking in refugees. In Austria, investment in the civil engineering sector remained relatively stable during the year under review, with projects aimed at improving transport infrastructure acting as the driving force. The tunnel and infrastructure construction markets where Implenia is active in Norway and Sweden performed well. In both countries these markets are being shored up by public sector plans to develop infrastructure.

Revenue at previous year’s level

Implenia posted a consolidated revenue of CHF 3,267 million in 2016, following a figure of CHF 3,288 million in 2015. At CHF 8.0 million, positive currency effects at the revenue level were practically insignificant.

Focus on improving margins bears fruit

EBITDA, which Implenia regards as the most important metric for evaluating operational performance, climbed by 3.0% during the year under review to a record high of CHF 166.2 million (2015: CHF 161.4 million) With revenues holding steady, the EBITDA margin went up from 4.9 percent to 5.1 percent.

Excluding amortisation costs for intangible assets acquired in the wake of the Bilfinger Construction takeover (PPA), the Business Units’ EBIT also reached a new record level of CHF 115.0 million. The comparable figure for 2015 was CHF 107.7 million, so there has been an improvement of 6.8%. If Bilfinger Construction had been consolidated across the full 12 months of 2015, rather than just since March, the increase would have been 15.9 percent. Implenia has thus taken an important step on the way to its EBIT target for 2017 of CHF 140 million. The EBIT margin improved to 3.5 percent after 3.3 percent in the previous year.

The Development and Switzerland Segments delivered outstanding results. The turnaround at Implenia Buildings is particularly gratifying. Measures taken in response to its weak performance in previous years are having an effect and will allow us to exploit further potential in future. The Infrastructure Segment recorded a stable performance, but the International Segment suffered from the disappointing performance in Norway and finished down on the prior year.

Results in the Miscellaneous/Holding Segment were much the same as in 2015. 2016 was more heavily affected than 2015 by the impact of IAS 19, higher IT costs resulting from the introduction of Building Information Modelling (BIM) and the effect of a one-time correction in the valuation of the Norwegian project portfolio acquired along with Bilfinger Construction. Overall, however, these effects balanced out.

Implenia Group’s operating income came to CHF 97.9 million, which is 22.5% higher than the previous year’s CHF 79.9 million. Implenia’s consolidated profit for 2016 is CHF 64.5 million, compared with CHF 52.0 million in 2015, an increase of 23.9 percent.

Implenia creates value

Free cash flow before acquisitions came to CHF 30.1 million in 2016. This is significantly lower than the CHF 103.6 million of 2015 and is below the target figure that Implenia announced. It has not been possible to keep net working capital at the previous years’ low level.

In 2016 Implenia once again created substantial value. Its return on invested capital reached a very good 33.3%. This is higher than the figure of 29.2% recorded in 2015 and much higher than the average cost of capital of 9.5%.

Solid equity base

Cash and cash equivalents amounted to CHF 791.7 million at the end of the year. The decrease compared with the previous year (2015: CHF 877.1 million) is a result of the repayment of financial liabilities. Consequently, the net cash position at 31 December 2016 of CHF 376.3 million is almost the same as at the end of the prior year (2015: CHF 388.1 million). The reduction in cash and cash equivalents and in financial liabilities also led to a decrease in total assets to CHF 2,629 million at year-end 2016 (2015: CHF 2,731 million). With equity up to CHF 665.5 million (2015: 623.8 million), the equity ratio climbed to 25.3 percent (2015: 22.8%). Implenia thus has a solid financial basis.

Home markets in good shape

There is little potential for any surprises on Switzerland’s real estate markets in 2017. Building construction should perform well. Low mortgage rates, the scarcity of other investments and the fact that property continues to deliver good returns should keep institutional investors very interested in 2017. The market for civil works and infrastructure construction in Switzerland will feel the benefits of two state funds for the financing of the country’s rail and road systems. The “Finanzierung und Ausbau der Bahninfrastruktur” (FABI) fund for railways will already have an effect in 2017, and the “Fonds für die Nationalstrassen und den Agglomerationsverkehr” (NAF) for roads from 2018. Overall, 2017 should be another year of solid revenues and healthy orders for the Swiss construction industry.

Positive impulses in Germany and Austria

Scope for investments in infrastructure construction should increase in Germany. The new federal transport plan, worth EUR 270 billion (2016–2030) should provide a strong medium-term stimulus to the German transport sector (road, rail and water). The plan puts an emphasis on maintaining transport networks and eliminating congested stretches of major routes. The programme is likely to get into full swing from 2020, when the federal government takes sole control of building and running the motorways. Building construction should see further growth thanks to continued new build activity. The market will be driven by residential construction and by a slight increase in non-residential building work. Implenia is optimistic about business in Austria in the coming years. The country’s new 2017–2022 framework plan, part of the “Zielnetz 2025+” rail expansion strategy, was signed off in October 2016 and will give the market a boost.

Continued strong growth in Norway and Sweden

The infrastructure construction market in Norway and Sweden will remain attractive for a long time to come. Norway’s economy should perform robustly in the years ahead despite lower oil revenues. The state infrastructure plan for the 2013–2023 period is worth NOK 508 billion and includes investments in transport infrastructure (rail and road), as well as in energy and water supplies. The government’s 2017 budget, like the one for 2016, also includes additional finance. Investments in roads, bridges and tunnels alone are likely to increase by almost 15% in 2017. Close to double-digit growth in infrastructure investment is expected over the next few years. Sweden has a lot of catching up to do in terms of infrastructure investment. The “National Transport Plan 2014 2025”, worth a total of SEK 522 billion, is having a positive effect on the market, and infrastructure investment is likely to grow at close to 5% annually in the years ahead.

Full order books provide foundation for 2017

By the end of 2016, the order backlog at Group level reached a new record high of CHF 5,172 million (2015: CHF 5,134 million). This growth is purely organic; Bilfinger Hochbau’s order backlog is not included in the 2016 figure because the transaction is expected to close in March 2017. All segments reported healthy order books. The Switzerland and Infrastructure Segments maintained orders at the high level of the previous year, while the International Segment succeeded in winning new projects and increased its order backlog by 14.5 percent.

Implenia Group’s headcount at the end of 2016 was 7,976 (full-time equivalents, including temporary employees), which is almost unchanged on the previous year (end-2015: 7,960 employees).