Implenia successfully on track

Strategy vindicated, operating result and group profit significantly increased, substantially higher dividend, confidence for 2011

Dietlikon, 10 March 2011 – In financial 2010, with sales rising slightly, Implenia posted a record operating result (+14.8%) and group profit (+11.5%). Switzerland's leading construction services company was thus able to increase its earnings power for the fifth year in a row. Much of this success was due to Implenia's integrated business model, which involves close cooperation across the Group's three divisions, and the measures taken to improve processes and efficiency. The acquisition of Sulzer Immobilien AG significantly strengthened Implenia's project development portfolio in line with Group strategy. The company also focused on streamlining its balance sheet, which is reflected in the positive trend for invested capital. Sustainability was given a high priority during the year under review, forming a key consideration in actual project work. Its full order books mean the Group can look forward to the future with confidence. The Board of Directors is proposing to the General Meeting that it approves an almost 30% increase in the dividend to CHF 0.90 (previous year: CHF 0.70), which would once again be paid out in the form of a par value reduction.

In 2010 Implenia generated consolidated revenue of CHF 2388 million, which is 4.8% more than in the previous year (2009: CHF 2280 million). Operating income before net financial costs and taxes came to a record CHF 77.7 million (2009: CHF 67.6 million), and group profit to CHF 52.5 million (2009: CHF 47.1 million). These disproportionately large improvements of 14.8% and 11.5% respectively can be explained by higher revenue, strict cost management, and a consistent focus on profitable orders. The good operating performance also delivered a new record EBITDA margin for Implenia of 4.7%.

On a like-for-like basis, free cash flow would have gone up to CHF 107.1 million (2009: CHF 92.7 million). After taking account of the acquisition of Sulzer Immobilien AG, which was entirely financed from cash flow, Implenia's free cash flow for the last financial year still stood at a healthy CHF 39.9 million. This successful result is testament to the strict management of net working capital, as well as a disciplined approach to investment.

At the end of the financial year, Group-wide order books remained on a high level at CHF 3070 million (2009: CHF 3445 million).

Solid balance sheet: healthy equity position, long-term funding secured on attractive terms

At the end of the year under review, net cash holdings came to CHF 149.5 million (2009: CHF 85.9 million). The marked increase is due to the influx of liquidity from the Group's first ever bond issue in mid-April 2010. With this CHF 200 million issue, which carries a coupon of 3.125% and has a term of six years, Implenia has made the most of the attractive capital market environment to secure long-term funding for its onward development. The Group's equity capital stands at CHF 495.5 million as at 31 December 2010 (end-2009: CHF 426.3 million), while its equity ratio of 29.5% is around the same level as in the previous year (2009: 30.9%).


Real Estate Division

The Real Estate Division (General Contracting, Project Development, Engineering) recorded a good business performance in 2010, increasing its revenue by 5.8% year-on-year to CHF 1310 million (2009: CHF 1239 million). EBIT before one-off costs was slightly below the previous year's CHF 38.9 million at CHF 36.3 million. Order volumes were maintained at a high level of around CHF 1.7 billon. The General Contracting business achieved a record result for the second half-year thanks partly to the robust state of new building activity. This was not quite enough, however, to make up for the decline in volumes and earnings within the conversions sector in the first six months. Reuss Engineering AG, which specialises in engineering and sustainability issues, continued to expand its business and improve profitability. The real estate segment (Project Development) repeated the previous year's good result. The acquisition of Sulzer Immobilien AG, which includes around 230,000 m2 of well-located property in Winterthur and a total of 15 development projects, represents a strategic milestone in the expansion of Implenia's project development activities.


Infrastructure Construction Division

The Infrastructure Construction Division recorded good operating results, with EBIT before one-off charges of CHF 25.1 million (2009: CHF 24.6 million). This gives a stable EBIT margin of 2.1%, which must be counted a success given how tough price competition is on the market. Revenue increased 6.9% to CHF 1201 million (2009: CHF 1123 million). Production output went up 4.1% to CHF 1345 million (2009: CHF 1293 million), though the early and pronounced winter fall-off in business left its mark, especially in December. At CHF 712.3 million, the order book at end-December 2010 was 13.7% lower than the year-back figure (2009: CHF 825.4 million), but it is still at a high level.


Industrial Construction Division

The new Industrial Construction Division, which was established at the start of 2010 with two business areas, Tunnelling and Prime Building, improved turnover by 16.1% to CHF 166 million (2009: CHF 143 million). Production output went up 5.5% to CHF 350 million (2009: CHF 331 million). In Tunnelling, construction of the NEAT tunnel sections and other Swiss projects used capacities to the full. The NEAT project reached a real milestone during the year under review with the cut-through of the Gotthard Tunnel. The Prime Building sector, which offers consultancy services at the international level for challenging real estate projects, is performing to plan. In addition to existing projects, Prime Building has been able to acquire new consultancy contracts in Russia. The order book for the division as a whole stood at CHF 695 million at the end of the year, compared with CHF 821 million at the end of 2009. The volume of tunnel construction work in Switzerland is slowly returning to pre-NEAT levels.


Committed to sustainability

Implenia has made sustainability an integral part of its business strategy. During the year under review it identified specific priority areas that are particularly relevant to the Group. This led to the definition of ten sustainability projects that are now being actively implemented. Consequently, Implenia should be in a position in 2012 to produce its first ever sustainability report.


CoCom investigation in Aargau

On 10 June 2009 the Swiss Competition Commission (CoCom) launched an investigation into illegal constraints on competition in Canton Aargau. Once it became known that its Aargau office could have been involved, Implenia assured CoCom of its full support. In the wake of internal investigations that have now been completed, personnel changes have been made. The employees involved have been moved on or given written warnings. Implenia is committed to free and unfettered competition. This stance is set out in Implenia's internal Code of Conduct and forms part of the company's regular training programme. Any infringements of the Code of Conduct are punished.


Changes in Group Management

Peter E. Bodmer, Co-Head of the Industrial Construction Division, has decided to find a new challenge outside Implenia. His date of departure and details of who will succeed him will be announced at the appropriate time. The Board of Directors thanks Mr. Bodmer for his outstanding work and wishes him all the best for the future.


Two new Members of the Board of Directors

The Board of Directors is asking the coming General Meeting to elect Moritz Leuenberger and Theophil Schlatter to the Board of Directors. Moritz Leuenberger is one of the most high-profile champions of sustainable development and is known internationally for his work in this area. Theophil Schlatter has many years of industrial and financial experience in an international environment. Implenia is thus taking another step towards a consistent sustainability-focused strategy while also strengthening the Board's industrial and financial expertise.


Consultative vote on the remuneration report

Following recommendations by ETHOS, the Board of Directors has decided to put the remuneration report to a consultative vote by the General Meeting.


Proposal to increase dividend

Owing to the record results achieved in 2010 and the continuing positive outlook, the Board of Directors is recommending that the General Meeting approves another dividend increase – once again in the form of a par value reduction – from CHF 0.70 per share in the previous year to CHF 0.90 per share.


Outlook for 2011

Against a background of stable construction activity, and with full order books, which increased by another CHF 116 million in the first two months of this year, Implenia expects a positive business performance in 2011. The Group will be sticking rigorously to its successful strategy: an integrated business model with cross-disciplinary cooperation; stronger pre- and post-construction activities; selective, risk-appropriate development and expansion of international business; and the industrialisation of processes. All this is creating a platform from which Implenia can further expand its leading market position and its status as an attractive employer while asserting itself in an environment notable for its tough price competition.