Ladies and gentlemen, welcome to Indra's full-year 2021 results presentation. I would like now to hand over to Mr. Ezequiel Nieto, Head of Investor Relations. Please, sir, go ahead.
Thank you. Good evening, ladies and gentlemen. Thanks, everyone, for joining us today on our 2021 full-year results presentation. I'm Ezequiel Nieto, Head of Investor Relations, and as usual, let me refer you to the disclaimer on slide number three that sets out the legal framework under which this presentation must be considered. Conference call will be led by our Co-Chief Executive Officers, Cristina Ruiz and Ignacio Mataix, and our Corporate General Manager and CFO, Javier Lázaro, and the intended duration will be around one hour. Now, let me turn the call to Cristina, Co-Chief Executive Officer of Indra. Cristina, the floor is yours.
Thank you, Ezequiel. On behalf of Ignacio and myself, good evening, everybody. Welcome to our conference and thanks for being with us this evening. Let's move to slide four for the review of the main highlights of these results. I would like to start by saying that our 2021 results have been historical. We have set a number of record heights, mainly in backlog revenues and free cash flow. We have managed to upgrade our guidance twice for all our targets, finally delivering well ahead on all metrics. Both Transport and Defense and Minsait 2021 revenues are at historical highs, both showing double-digit growth versus 2020.
2021 EBIT margins reached 7.5%, surpassing the 2019 levels of 6.5% before the pandemic, while 2021 net income grew 18% versus 2019, also before COVID. Free cash flow totaled EUR 289 million, a new record level well above our 2021 guidance of more than EUR 114 million. Javier will elaborate on this at the final part of the presentation. As a consequence, net debt has been reduced to EUR 214 million, a ten-year low, taking net debt EBITDA ratio down to 0.8 x versus 2.5 x in December 2020. Finally, as you know, we have a reinstatement of dividends after seven years without a shareholder remuneration. Now, I turn the call to Ignacio to follow with the presentation.
Thank you, Cristina, and good afternoon to everyone. If we turn to slide number five, we show our revenues performance both for the full-year and for the fourth quarter of 2021. On the left side of the slide, 2021 revenues went up by 11% in reported terms, 13% in local currency, and 11% in organic terms, pushed up by the strong growth delivered by both divisions. Forex dragged down EUR 41 million in the cumulative period. On the right hand, fourth quarter 2021 revenues grew both 15% in reported terms and local currency vis-à-vis the fourth quarter of 2020. Organic growth was 14%, and there was no Forex impact in the quarter.
Now, as we move to slide six, we display the revenue breakdown by region, where you can see that we grew all across the board with Spain representing 15% of revenues. Spain and Latin America printed 9% increase in local currency, while Europe and EMEA delivered a double-digit growth. Now turning to slide seven, we see the group operating margin and EBIT evolution in both periods. In this slide, it is worth noting the improvement in margins compared to 2019, thanks to the revenue growth and efficiency measures put in place, despite the impact that the pandemic is still having in the recognition of milestones in some projects and the negative effects on the supply chain.
Our 2021 reported EBIT reached EUR 246 million, excluding the capital gain from the sale of the facilities and the provision of the real estate plan, compared to EUR 221 million in 2019 before the pandemic, equivalent to 7.2% EBIT margin in 2021 versus 6.9% in 2019. For its part, EBIT in the fourth quarter reached EUR 74 million, excluding the provision of the real estate plan, versus EUR 70 million in the fourth quarter 2020, excluding the action plan provisions, and vis-a-vis EUR 94 million in the fourth quarter of 2019, equivalent to 7.2% EBIT margin in the fourth quarter of 2021, vis-a-vis 7.9% in the same quarter of 2020 and 10.3% in the same quarter of 2019.
This lower profitability in the fourth quarter was explained by the higher annual variable remuneration linked to the achievements of the targets, the increase in the total workforce associated with higher activity in both divisions, and some salary inflation, as well as by occasional lower contribution for Eurofighter. Now I turn back to Cristina to follow on the presentation.
Thank you, Ignacio. Turning now to slide eight, please find the evolution of our headcount with the breakdown by division. Our total final headcount at the end of December 2021 increased compared to both June 2021 and December 2020. Backed by the strong level of demand that we are seeing in our main market and the integration of the workforce from the bolt-on acquisitions. At the bottom of the page, we display the evolution of the numbers of employees non-assigned to projects, which is low, very low at this moment. As you already know, we managed to reduce it compared to December 2020, thanks to efficiency plan that we successfully put in place. Moving to slide nine, we have compiled the main highlights regarding the ESG performance, which has also strong performance. You can see several achievements.
Let me highlight most of the relevance. First, we have been named as the world's most sustainable company in the technology sector, according to the Dow Jones Sustainability Index. With companies we've become a world leader in sustainability in the software and services technology, and is the only company in the sector that has managed to remain in the Dow Jones Sustainability Index for 15 consecutive years. We have also become one of the leading companies against climate change according to the Carbon Disclosure Project Index, which recognize Indra as one of the most transparent companies and with the best environmental practice.
Finally, we have renewed our Top Employers Institute certificate, which includes an amount of companies providing the best work environment, achieving the highest ratings in terms of workplace ethics and values, and making considerable progress in several aspects of this achievement. Now on slide 10, let's talk about the delivery of the guidance 2021 and our outlook for the 2022. As you can see, we clearly overachieved twice the revenue guidance in all metrics. Well ahead of the target in September, especially in cash flow, which stood at EUR 307 million compared to more than EUR 140 million expected. For its part, revenues achieved EUR 3.431 billion in constant currencies versus more than EUR 3.300 billion forecasted.
A reported EBIT stood at EUR 246 million, excluding the capital gain from the sales of the facility and the provision of the real estate plan, compared to more than EUR 230 million. On the right side of the slide, we saw our guidance for 2022 based on the same methods as last year. We expect revenue in constant currencies to be above EUR 3.550 billion. Reported EBIT in absolute terms above EUR 270 million, and 2022 free cash flow of more than EUR 170 million. Now I turn the call to Ignacio to follow up with the presentation.
To Cristina. Now on slide number 11, let me present the main highlights of Transport and Defense. As we have already said, 2021 has been a very strong year for the division. Our backlog is now at all-time high, pushed mainly by defense, thanks to all multi-year contracts in Spain, international, a new push in Eurofighter and a new set of APM contracts. Revenues were also at historical highs with a very strong contribution of defense, which grew 22%, while we started to see the recovery of both air traffic management and transport. We also delivered on our commitment to achieve double-digit EBIT margins for the full-year, despite the impact that the pandemic is still having on the supply chain and the milestones recognition of some international projects.
Finally, let me mention the significant de-risking of three problematic projects in transport, where we managed to achieve sizable collections, approx. EUR 100 million, that have impacted very positively the free cash flow generation of the fourth quarter, as Javier will mention later on. Now let's move to slide number 12, where you can see the backlog and order intake evolution of our Transport and Defense division. Backlog in Transport and Defense went up by 6% in reported terms, while backlog over the last 12 months revenues increased to 3.7 x in 2021, vis-a-vis 3.25x in 2020.
Order intake in 2021 was down by 15% in local currency, dragged by the declines registered in Defense and Security, 23% in local currency, explained by the strong order intake that took place in 2020, where we signed sizable contracts like the Lanza 3D radars, the F-110 frigates, 8x8 vehicle, NH90 helicopter, and some others. Also because finally, the Future Combat Air System Phase 1B was not signed before the year-end. For its part, order intake in Transport and Traffic remained stable at 2020 levels. If we move to slide 13, we show revenue breakdown of the two business of our Transport and Defense division.
2021 revenues went up by 12% in local currency versus 2020, pushed by the growth registered in both Defense and Security, which was 22% in local currency, and Transport and Traffic, which was 4% in local currency. It is worth mentioning that both air traffic management and transport grew by 4% in the year. Compared to 2019 before the pandemic, revenues have grown 7% in local currency in 2021. In the quarter, we also posted some growth, increasing by 13% in local currency vis-a-vis the fourth quarter of 2020, boosted by the growth recorded in Defense and Security, which was 34% in local currency. Compared to the fourth quarter of 2019, revenues have grown 16% in local currency in the same quarter of 2021.
If we move now, please, to slide number 14, the operating margin and EBIT transformed on defense. The profitability in the Transport and Defense division stood close to pre-pandemic levels, thanks to the sales growth and efficiency measures of the action plan. Although it continued to be affected by the COVID impact in the recognition of milestones in some projects, as well as some delays in the supply chain. Therefore, 2021 EBIT was EUR 141 million, excluding the capital gains from the sales of San Fernando de Henares facilities and the provisions of the real estate plan, compared to EUR 145 million in 2019, equivalent to 11.2% in 2021, vis-a-vis 12.2 in 2019.
On the bottom of the right graph, EBIT in the fourth quarter stood at EUR 52 million, excluding the provision of the real estate plan already mentioned, compared to EUR 64 million in the same quarter of 2019, equivalent to 12.1% margin, vis-à-vis 17% in the same quarter of 2019. This lower profitability in the fourth quarter was explained by the higher annual variable remuneration linked to the achievements of the targets, the increase in the local workforce, and some salary inflation, as well as by an occasional lower contribution of Eurofighter. I turn now again the call to Cristina.
Thank you, Ignacio. On the slide number 15, you can see the main highlights of Minsait. I think that it's fair to say that our 2021 results are historic and it has been a year with remarkable achievement. Result-wise, our backlogs and revenues were at record highs. We managed to grow organically our revenues at 11% versus 2020. Meanwhile, our EBIT margin has been the highest in our history, almost 5%, and is the result of the entire transformation of the division pushed by the execution of all our existing plans, the change of mix and the revenue growth. At the same time, we went on managing very actively our pyramid, keeping a very low number of unassigned employees.
We have also been very proactive in M&A in 2021 with six bolt-on acquisitions that will reinforce our key strategic fields: cybersecurity, payments, mix, digital, and data analytics. Good news is also that we have signed the two first contracts coming from the next generation European funds, and we expect some more in the coming next quarters. Finally, on the cost side, we have increased our ambition, and we have launched an additional real estate plan that I will explain in the following slides. In summary, 2021 has been a great year and an excellent starting point to 2022, where we expect more profitable growth backed by the strong level of demand that we are seeing in our main markets, where macro recovery is already taking place.
On the slide 15, we display the new real estate action plan launched during the fourth quarter of 2021. This plan is more ambitious than the initial one. A sizable part of our employees are going to partially work from home remotely because of the new post-COVID working habits. The new plan, together with the former one, will allow us to reduce more than 100,000 sq m between 2021 and 2023. Most of this transformation is mainly focused in Spain, but also includes some contribution from Latin America. For this new plan, we provision EUR 7 million in the fourth quarter of 2021 and expect run-rate savings of EUR 11.5 million from 2023 onwards. Both plan together once complete will deliver total saving of EUR 24 million per year.
Now let's move to slide 17. Backlog in Minsait went up 1% in the reporting term, while backlog over the last 12 months to the revenues ratio stood at 0.75 x in 2021 compared to the 0.83 x in 2020. Ordering intake increased 8% in local currency, with all the verticals showing growth: energy and industry, 22%, public administration and healthcare, 7%, and financial services, 6%. Except for telecom and media, -13% due to the renewal of contracts in America that took place in 2020. Now moving to slide 18, we saw the revenue breakdown of Minsait.
Sales grow by 13%, local currency, with all the verticals registering growth due to the good moment of the demand that we are experiencing in the current environment. It stood out the strong growth posted in public administration and healthcare, 28% in local currency, and energy and industry, 13% in local currency. In the fourth quarter, demand also remained very strong, and we grew 17% in local currency with solid growth in all the verticals compared to the fourth quarter 2019. Revenues have grown 17% in local currency in the fourth quarter 2021. Let's move now to the slide 19 and to present insight profitability. On this page, we can see the clear improvement of margin versus 2019.
Thanks to the higher level of sales, the efficiency measures, and the savings delivery from the action plan turning into the improvement of margin in all the vertical. This is reflected in our 2021 EBIT, which stood at EUR 104 million, excluding the capital gain from the sales, the facilities and the provision of real estate plan, compared to the EUR 776 million in 2019 before the pandemic, equivalent to an EBIT margin of 4.9% in 2021 versus 3.8% in 2019.
For this, it's EBIT in the fourth quarter 2021 reached EUR 22 million, excluding the provision of real estate plan versus EUR 13 million in the fourth quarter 2019 equivalent and an EBIT margin of 3.7% in the fourth quarter 2021 versus 5.6% in the fourth quarter 2019. As we said before, this lower profitability in the fourth quarter has explained by the higher annual variable remuneration linked to the achievements of the target and an increase in the workforce and some salary inflation. Now I leave the floor to Javier for the financial review.
Thank you, Cristina, and good evening, everyone. Let's start the financial review with the evolution of free cash flow. Slide 20, please. On the top strip of slide, you can see the very strong free cash flow generation during the fourth quarter of 2021, with a total of EUR 284 million, which includes, by the way, around EUR 100 million received from delayed payments associated to some of the more problematic projects of our T&D division, namely the high-speed train from Medina to Mecca and the Riyadh underground ticketing system, among other late collections.
Down on the slide, you can see cumulative free cash flow for the last 12 months, which reached historical levels of over EUR 300 million excluding the extraordinary items that we take into account when giving the guidance. If we exclude the extraordinary inflows that coming from the delayed collections, which actually we should have received in previous years, our, let's call it, underlying free cash flow, we have stood at around EUR 180 million-EUR 190 million for the year, which is on the high end of the 50%-60% EBITDA conversion ratio that we believe our free cash flow should tend to over time.
If we move to slide 21, we wanted to spend a couple of minutes analyzing the return on capital of our operations. We have discussed in the past, Indra runs a very tight ship when it comes to capital deployment. If we consider the position at the end of 2014, we have the total capital then of EUR 1.6 billion. Add to that the almost EUR 600 million that we have employed in acquisitions since that day, you can clearly appreciate the effort that the company has done during the subsequent period. Even if we take into account the write-offs that we did in 2015 and also in 2020 in the context of COVID.
Of the less than EUR 1.1 billion of total capital employed today at the end of last year, at the end of December, intangible assets, be it goodwill from acquisitions or intellectual property, make up the bulk of it, with working capital, including both trading as well as public entities receivables, contributing negatively to the equation. This strict capital management policy, together with the growing profitability of the group, is pushing our total return on capital employed to levels in the mid to high teens, which is remarkable due to the still relatively low levels of profitability in relation to our peers, and provides obviously room for further improvement as our profitability continues to grow.
On page 22, we have a bridge for the net debt, which I think is self-explanatory and we can skip. I would like to spend a couple of minutes on page 23, analyzing the evolution of working capital. First of all, on the left-hand side of the chart, we have included our usual analysis of the three main components of our trade working capital items. Sticking to the usual accounting definition, which limits working capital to those items with an expected life of 12 months or less.
December 21 figures for accounts receivable are affected, in this case, by a large reclassification of around EUR 150 million of advanced payments that have moved from short-term to long-term, reflecting the fact that some of the customer advances in our balance sheet correspond to works that will be carried out over a period of time which is longer than 12 months, as is typically the case, for example, in some of the larger defense contracts. This reclassification is not entirely consistent with the criteria that we have been using in the past, and follows a recommendation from our auditor.
Should we have followed the same criteria, total net working capital as a multiple of days of sales would have shown a slight improvement in the year, standing at -10 days of trading or sales in 2021 versus -9 at the end of last year. To avoid confusion with any potential future reclassifications of any of the different components of working capital, we will also provide from now on the aggregate of both the short and the long-term elements of our working capital. Here, we show that at the right-hand side of the page. We will also, please, you can also look at the results presentation for the historical series of this short plus long-term aggregation.
You will appreciate that they are very similar patterns, whether you look at the short term only or both short term and long term, with, in any case, a moderate improvement in 2021 versus 2020.
If we move to slide 24, we show there the evolution of net debt and leverage ratios. You can see the net debt amounted to EUR 240 million, which is the lowest in the last 10 years, as we have already said. The level of debt translates into a net debt to EBITDA ratio of 0.8 x compared to 2.5 times in December 2020. This is again the lowest in a long period of time, as you can see on the page out there. As always, we maintain a level of non-recourse factoring at EUR 187 million. Now just to finish, to finalize this presentation, let's look briefly at our debt structure on the slide 25.
On the left-hand side, as normal, you can see the composition of our gross debt. We have a wide variety of financial sources. Financial instruments, corporate convertible bonds and facilities and the loans, et cetera. In addition, we have in total around EUR 1.2 billion of cash on the balance sheet. Or actually we can also look at that as EUR 600 million if we put aside the cash that we need to eventually repay the corporate and convertible bonds that are maturing in a relatively short period of time, in late October 2023, October 2024. We also have available facilities of EUR 86 million, which aren't drawn, and we could use to complement our cash needs if needed, which obviously doesn't seem to be the case.
On the right-hand side, you can see cost of debt stabilized and the rest of the metrics that we normally discuss, including we have added for this presentation, the average life both at the end of 2021, at the end of 2020 of our debt, if we were to exclude the bonds, which as we said, we have enough cash to kind of put aside to pay for. You can see how, despite the fact that the year has passed since 2020, the actual numbers actually show a moderate improvement. That is a testament to the efforts in refinancing the debt and maintaining a longer maturity. That's pretty much it. Thank you very much for your attention, and let's move on with the Q&A session.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. Thank you. The first question comes from Varun Rajwanshi from JP Morgan. Please go ahead.
Hi. Good evening. Thanks for letting me on. I have two questions. First, on your growth expectations by different segments for 2022, so by defense, air traffic management, transport and Minsait divisions, can you give us some, you know, qualitative expectations for this year? Secondly, on margin evolution, what impact from the pandemic in terms of, you know, delays in milestone recognitions and supply chain issues are you modeling for 2022? Because these issues should reverse at some point in time. Thanks.
Okay. Thank you. I mean, looking 2022, I think for Transport and Defense, we expect to grow like mid-single-digit. On Defense and Security, I think we expect to grow more than mid-single-digit. I think we have a very relevant contract, which is the Future Combat Air System, which we were not able to sign at the end of the year. It's still pending. I would say final growth will depend slightly on that. Could be double-digit depending on how we sign or when we sign that contract, which we expect to do by, I would say, mid-year.
On air traffic management, we expect to post at least low single-digit, continuing the growth we had in 2020, which was around 4%, and hopefully growing ahead, you know, pre-COVID levels. I think we have a strong contract signed in the year with EUROCONTROL and also with ENAIRE. I mean, things have started to be normalized in the Middle East and also, we're expecting in Latin America still. On transport, I think we expect to be more or less flat, or maybe a slight growth.
I think we are posting a slow growth because we are looking more to a still growing profitability and looking very, very carefully into the margins of that vertical. I mean, coming back I think to the second question, I think we have modeled certain milestones. Still, I mean, things are not as smooth as pre-pandemic, so still we are having some issues on projects on a daily basis. Yes, we have some, you know, headwind on supply chain with some increased costs, which we are trying to offset as much as possible.
Okay. In the Minsait side, we expect to grow at least mid-single- digits with more or less the following dynamics. In digital division, double-digit growth due to the various strong demand that we have today in this kind of project. Besides, we have done several small bolt-on acquisitions.
Thank you.
Thank you. The next question comes from Laurent Daure from Kepler Cheuvreux . Please go ahead.
Yes. Thank you. Good evening, and congratulations for the solid figures. I have a couple of questions. The first is, if there was, again, some news about the government possibly increasing its stake, could you remind us about the board composition between independent and non-independent and, following the changes in shareholders, how the board could look post the next AGM? My second question is on the IT side. You did very well last year in proprietary solution and digital. First, I'd like to know which solutions are really driving the growth. I would have thought that this business carries much higher margin than the other part of IT. I would have expected your, maybe your IT margin to move up further. Do you manage to offset wage inflation with prices?
My final question will be again on the impact of COVID. Do you have an update on the business in Transport and Defense that have not been recognized yet because of international air traffic at the end of December, and that we could see in the coming releases, maybe this year or next year? Thank you.
Ladies and gentlemen, please hold your lines. We are reconnecting our speakers. Please, Mr. Laurent, hold your question, and you will be reminded to ask it again. Okay? Thank you.
Hello? Hello, Lydia?
Please, Mr. Laurent, go ahead with your question.
Okay. I'm gonna go ask again the three question I had. The first was on the board composition at this point of time, and maybe how it will look after the different moves in your shareholder structure to be sure that independent board member will still have the control or if there's a risk of the government taking the control of the company. The second question is on the good growth you had in proprietary solution. Was wondering which solution are really driving the growth. I would have expected digital and proprietary solution to drive your IT margin higher than what you have recorded, as it is said to be carrying higher margin than the rest of IT. My final question was on defense side.
At the end of 2021, was just wondering if you had the figures of the business that could not have been recognized yet because of the pandemic and the inability to travel, and if you were to expect this to be recognized 2022 or later on. Thank you.
Yes. Well, trying to answer your question on the board. There is, as you know, one seat which is free, so one available seat. What, you know, normal procedure is that a shareholder which has a percentage which is more than 7% or 7-point-something percent, could ask for a board seat. So we will see in the next weeks if there is a request for that. After that, you know, the CNR, which is the committee of the board, will have to assess that and present to the board any candidates for that.
Okay.
Sorry. Potentially, do you see a risk of the independent board member to be losing the control of the board and that maybe the government comes again with the OPA or risk? I mean, this is a major concern for investors at the moment.
Well, I think nothing changed. There is a majority of independent board members, and there is a board seat available, and nothing changed therefore.
Okay. The second question about proprietary solutions, we have payment system, and we have some solution around IoT and energy and industry with they are working really well in the market with double-digit growth. In general, what we call digital and proprietary solution have more or less four to five points above in margins than the rest of the services that we have today in Minsait. Good evolution in terms of growth and also in terms of margins. That help us to push the change of mix that we are working on it in the last years. Okay. The third question-
Yeah, third question, Cristina, on the milestone on defense. I think, I mean, my colleagues have sometimes said around EUR 50 million-EUR 100 million maybe on delays. The issue here, Laurent, is that it's difficult to recover. Things tend to drive, you know, to the left. It's very difficult to recover milestones and continue the following milestones. Things unfortunately slip a little bit, and you are not able to recover 100% of that. Okay. We do not expect that we are going to recover, you know, a lot of that during the year. They will slip to 2023, and so on, no. We will recover some. D ifficult to say because, still, like I was saying, we still have issues in a number of countries in which we still have, you know, milestones we cannot fulfill because people cannot fly.
Okay. Maybe just a clarification, that will be the last one for me. For Cristina, I understand your comment on digital and proprietary solution. It does mean that the rest of IT is barely making money still today?
No, no. We win money in all the verticals and all the segment of offers that we have as today, you know, sourcing and services and also in digital. In digital and proprietary solution, we have better margins than in the other, but as today, we win money in all the line of offering that we have as today.
Okay. Thank you.
Welcome.
Next question, please.
Thank you. The next question comes from Bosco Ojeda from UBS. Please go ahead.
Hi. Good afternoon. If I could come back to the situation of the board and the strategy. I mean, you have seen speculation of a dissent in the board, the speculation on M&A. I wonder if you could clarify your M&A strategy, whether possibilities of acquiring assets like ITP Aero is still in the table or not. Maybe it's a good occasion to also ask if at some point we could have the presence of the chairman, given all the situation around the investor calls. On operations, I wanted to ask more about the inflation impact. What do you see at the moment, and what will happen next year? Also the next generation funds, so what could be the size in the long run of these funds? Thank you.
Okay, Bosco. I think, again, we have to say that there is no big change. I think we'll continue to do M&A on bolt-on acquisitions. In the meantime, we will continue looking into possibilities in Transport and Defense, which are not that easy and slightly different type of acquisitions. I don't think nothing has changed from yesterday. Our strategy continues the same.
About the next generation funds, we have some good news that we have signed already two contracts recently. One's about to digitize the consulate with the Minister of Foreign Affairs, and the other with implementation and services security center with Telefónica for the central administration in Spain. During 2022, we have very good expectation to win more contracts around this fund. Please bear in mind that it's not easy. The contracts are not being assigned directly to Indra. I mean, there are always competition in this contract and this is moving slower than we expected.
I mean, there are some delays in the bids and the government are going slower than we expected at the beginning of the year before, no? In terms of inflation, we are a little bit worried about this inflation, but we have the elements to manage it. We have an inflation in cost of salary cost of 3%, but we have had already this inflation in salaries in 2019. We have more or less the same rate of increase in salaries, and we managed it to the end of the year to save this situation.
First of all, we are increasing prices for our clients because we have a high demand on certain kind of profiles and we are increasing the price in some projects that we have a very good demand. Revenue growth also help us with the operating leverage to manage the situation. In the cost side, we have put in place some measures that we have been doing during the last years. Managing the pyramid with restructuring all the time the profiles that we cannot assign to the projects. We have also increased our exposure to nearshore and offshoring. This is working better than in the past.
We are hiring a lot of vocational trainees and juniors that we have there have just finished in the university. We are trying to manage the pyramid as we are going doing in the past. We expect to manage the situation of inflation without many impact in the P&L.
Okay. Thank you.
Thank you. Next question, please.
Thank you. The next question comes from Carlos Treviño from Santander. Please go ahead.
Hello. Thank you for taking my questions. Two, if I may. The first one, what you have just commented, Cristina, that you are expecting a 3% increase in salary costs this year. I would like to ask, well, for the company as a whole, how much do you expect the workforce could grow this year? My second question is related to Eurofighter project. One of the topics impacting the profitability in Q4 was a lower contribution from Eurofighter. How do you expect Eurofighter contribution in 2022 related to 2021? Also, I would like to ask you for the FCAS projects, and how do you think that is going, but also revenues this year, even assuming the contract is still to be signed?
Also, if the profitability in the FCAS projects could be compared to the profitability, historical profitability in the Eurofighters in this first stage of the project. Thank you.
Carlos, I'll let Cristina start, but we couldn't follow you too much on the final part of your question after Eurofighter contribution in 2022 compared to 2021.
There was a follow-up on the expected contribution from the FCAS projects in 2022. Even assuming that, as you had commented before, you are still planning on signing a contract and also on the profitability of these projects, if we can compare the FCAS profitability at this early stage of the project with the historical profitability of the Eurofighters or still will be well below those levels.
Okay. Thank you. It's understood. I will let Cristina start.
Okay. As I said, we estimate more or less an inflation of 3% in salaries. The growth of the employees will be around 2,000 people in the budget, more or less. Okay. In any case, it depends on the demand, I mean, and the kind of demand that we get during the year. We will grow less than the revenues, that's for sure. Okay.
Okay.
Thank you.
Coming back to the question of Eurofighter. I think we expect 2022 lower contribution than 2021. We have almost delivered the units for the Middle East. We have a little bit of a valley in 2022. We'll have to catch back with the orders in Germany and Spain, which, I mean, since you sign until you start delivering the units, you have a couple of years delay, no? We'll have a little bit of a valley 2022. Regarding FCAS, as I was saying, we expect, we're expected to sign FCAS by the year end.
You know, there is a, let me call it, dispute between Dassault and Airbus on certain agreements. We have now French elections. We expect that to happen in the second quarter. Therefore, I mean, the contribution of FCAS will be lower than we were expecting, you know, a few weeks ago. On profitability on FCAS, I would say, you know, in the initial phases of these programs, which are more engineering-oriented, have traditionally lower margin that you would expect in a manufacturing project in which you have a stable production of units, no? Because you get at the end your learning curves in manufacturing allow you to have better margins. I would say you would expect less of a margin on FCAS on the engineering phases compared to production on Eurofighter. Is that a fair answer?
Yes. Thanks. Very clear. Thanks a lot.
Thank you. Next question, please.
Thank you. The next question comes from Ben Castillo from Exane BNP Paribas. Please go ahead.
Good evening. Thanks very much for taking my question. Just to come back on Minsait, you know, strong end to the year in Q4 with revenues up, you know, mid- to high-teens%, but the operating margin well below your recent run rate. I know you said some of that's due to variable comp. I'm just keen to get your sense on how much that was variable, how much of that is a higher fixed cost base? And does this inflationary environment that we're now in alter the midterm profitability ambitions of the Minsait business? Any commentary there would be helpful. And then, secondly, lastly on the potential increase of the state's involvement, to the extent you can, you know, how do you communicate that message to your investors? How do you view a potential additional involvement or higher investment from them? Thanks.
In Minsait, in the last quarter, we have worse margins compared with the fourth quarter of 2020 due to, as I explained, the higher annual variable remuneration, the bonus that we have given to the employees this year because they have hit the targets in this year. We have also an increase of workforce due to the acquisition and due to the higher activity that we have at the end of the year. The revenues have been very good, but in line with the rest of the year. Due to the demand, we don't have any problem of that. I mean, the big difference in margins is the high level of remuneration bonus that has been a very good year, and we have paid more to the employees for that. Okay?
Okay. Coming back to the second question, if we understood well, I think we are giving, you know, the official message, which is what we know, which is, you know, a message that SEPI delivered to the CNMV, which is, well, they are going to increase the stake by, I think, 10%, which is not done, but reaching up 28%. According to the statement, which was filed, this confirms the, you know, the government support of all Indra business, not only the defense business, as well as, you know, the current governance. That is, you know, the official message we're giving, delivering to the investor, which is what we know.
Okay. Thank you.
Next question, please.
Thank you. The next question comes from Nicolas David from ODDO BHF. Please go ahead.
Yes. Good one, good evening, and thank you for taking my question. First one would be a very quick follow-up on the previous question regarding Minsait profitability. I appreciate the detail. I mean, if you take Q4 margin, it's down 240 basis points year-over-year. Could you give us a sense of if this bonus variation was maybe costing two-thirds or 90% of that, or only 50% of that? Would be really appreciative of some color regarding that. Also regarding the trend for H1 versus H2 2022 profitability from Minsait, do you expect it, I would say, those underlying salary inflation trends to impact more negatively your profitability in H1 than in H2?
Do you expect it to be even during the year? Second question still regarding Minsait is, should we be aware of some exceptional revenue in Q4 because Q4 was really, really strong in terms of top line? Should we be aware of some exceptional revenue that boosted the growth, or it's really an underlying performance and you are building to some very strong growth in Q1? I have then another question. I'm struggling to reconcile your revenue growth guidance at group level for 2022. I mean, your guidance is above 3.5% growth at constant currency, while you seem to expect above 5% growth both for T&D and Minsait. What kind of approach are you taking there?
Is it only the FCAS contract, or do you have something else in mind? Last question is just a housekeeping question, what would be the level of exceptional charges to expect in 2022? Thank you very much.
Yeah.
The higher level of variable bonus for the whole company, not only for Minsait, that is, but mainly for Minsait because it's where we have more employees. In total in the year for the annual variable amount plus the long-term bonus is around EUR 55.14 million . It's very important for the last quarter, not only for Minsait, but for the whole company, but mainly for Minsait. That's a bigger impact in the revenues of the last quarter of the year. In EBIT guidance for Minsait in 2022, Minsait we expect improve to be in between 5%-6%. In for the whole year.
It's important to highlight that the profitability will start at low levels in the Q1 due to the workforce increase plus salary that we have already done. Okay. Along the year, we will expect this with efficient plan execution, with managing of the parameters and the growth leverage that we get, we will be around 5%-6%, but we expect it lower. As it happened before in 2019, it was the same case, and at the end of the year, we got a very good result. For 2022, we expect more or less the same. Okay. The last question was around the-
Yeah. Revenue guidance.
Revenue guidance.
I think you're probably looking at numbers on constant currency for the previous year. The actual growth for constant currency for this year is around 5%. We are guiding for a 5% growth in sales.
Okay, that's clear. Okay, yeah, because it was EUR 3.431 billion. Okay, constant currency compared to 2020. Okay, it's clear on this one. I also have a question regarding exceptional item. Thank you. Potentially, so.
No, no, there is nothing exceptional. If the underlying performance is good and there is nothing exceptional in the last period, the demand is good, and we expect the same kind of level of revenues for the next quarters this year.
Is that okay, Nicolas?
Yes, I have a last question regarding the exceptional item below the line. I mean, at first level.
Below the line.
No, nothing. It was
For 2022.
I mean.
It's like, should we expect the traditional restructuring, like the EUR 20 million-EUR 30 million restructuring below operating profit? Sorry, my question wasn't clear. Should we expect at group level to have some exceptional charges below the operating profit and leading to your EBIT guidance?
In 2022, we don't consider any exceptional thing below EBIT. I mean, around EBIT, it was all current business. I will say there's nothing exceptional. We have the restructuring level that we have done before, the same level that is here.
Exactly.
There's nothing exceptional for the 2022.
If there is anything exceptional, it would be exceptional by definition. If and when it happens. As a principle, there's nothing, it's just business as usual.
In the guidance, there is nothing.
It's the same level of restructuring that we normally do.
Mm.
Okay.
Around 5%.
Okay. Very clear. Thank you very much, and congrats for the, those very strong results.
Thank you. Next question, please.
Thank you. Ladies and gentlemen, just a reminder. In order to ask your question, please press zero one on your telephone keypad. The next question comes from Manuel Lorente, from Mirabaud. Please go ahead.
Hi, good evening. My first question is on the SEPI situation. I was wondering whether you have managed to talk with the SEPI in order to address how are they going to proceed in the coming weeks, months, especially regarding, as they were stating in their statement, that they were planning to build the stake without any meaningful impact on share price, which intrigues me.
Okay. That's the only question or?
That's my first question, yeah.
Okay. Well, I mean, this is an official statement. We have no knowledge of how it's going to be done, so we have had no contact on that. I think we basically don't know.
We don't know. We don't have that information. We don't know.
Are you planning to ask them?
Okay. That's the second question. Are we planning to ask them? What I think it should be-
I believe it was implicit in the first one, but.
No, no, okay. I mean, we will have to make up our mind, and you know, the board will have to think through this and take whatever decisions we need to take, no? I think that's the next days or weeks work.
Okay.
I'm sorry not to answer your question because we don't have an answer for that.
My second question is on the guidance then. I believe that Cristina was stating that they, she expects, margins on Minsait to be on the 5%-6% range this year. Assuming the low range of the guidance, which implies roughly 40 basis points of margin improvement versus 2021, that would imply that T&D will be roughly stable this year. That's the correct way to see the guidance? All the margin improvement for this year should come from Minsait?
I think that's absolutely right. I think we are looking into, you know, stable margins in Transport and Defense for 2022.
On Minsait side then, how are you modeling this year? I mean, the majority of the margin improvement comes exclusively from the Angola elections. Do we have any other moving parts to bear in mind or does the guidance itself reflect Angola in any way?
Okay. As you know, we win the contract of Angola, and it's a relevant contract, but it's a multi-year contract. It's not like the last year, the last one that we win before. We will have two to three years of contract with an important amount. I mean, it's if I remember well, it is EUR 120 million in two to three years. Okay? With very good margins, but it's not spectacular. I mean, we are not going to improve only based on Angola contract. We have to continue in doing change of mix, increasing price of our best offer to clients. We will managing the costs and the pyramid, and we have to get the efficiencies every year to get to manage the increase of salary. It will be a result of everything. I mean, it's not only Angola. Okay.
I see. Probably my final question on guidance then. It is fair to say then that from the very key relevant aspect that the market was expecting for this year, we have Eurofighter with lower contribution versus 2021. FCAS with a very limited contribution this year because of delays. Next-gen generation projects, very limited contribution this year because of delays. Elections, very limited contribution this year because of the multi-annual nature of the contract. That should be the correct way to analyze these very relevant moving parts and key drivers for the profitability of the group for this year?
I think it's correct. Your three first statements are correct. I mean, with caveat that FCAS can be anything. It's not dependent on us. We might see better than we expect or worse, so it can be anything. Cristina, maybe on elections.
Allocations will be better than the year before because of annual. That is clear. Not only. We are not going to improve only due to allocations, as I said. We expect the leverage because of growth in public administration due to the next generation funds. Again, it's not easy. It's something that we have to win during the year. Good expectation, but we have to do it. I mean, it's not assigned directly to Indra or something like that. The amount would be significant, but not huge. I mean, that's my point. Some of our growth and some of the leverage that we get comes from next generation annual allocation. That's clear, too. Okay?
Remember, we still have some restrictions on 2022. I mean, that will continue to affect, you know, revenues.
Just my final question, sorry. Given the pretty strong free cash flow generation and with the current net debt levels, why are you not launching any more, let's say, friendly shareholder remuneration type of plan? I mean, and you're saying that on the M&A front, we should expect nothing relevant, just bolt-on. I don't know. With the current capital structure, don't you think that there is room for being a little bit more friendly on this front from to shareholders?
Okay. If we have a good year in 2022, we will consider it. I mean, something that we have in mind. I mean, it could be possible if we have a very good year, as we have seen.
It's not a matter of having a very good year. It's a matter that you already have had a very good year this year.
We're actually-
You are also referring that part of the margin erosion this year has come because a very significant increase on the variable side remuneration of the employees of Indra, which is great, and I'm very happy for that. What about the shareholders?
Manuel, we have considered it, okay? We are thinking on that, and the board will take it, this into account and consider it very clearly. Okay?
Okay.
Is that okay, Manuel? We are considering it.
Okay.
Yes, okay.
Okay.
Thank you. Next question, please.
Thank you. The next question comes from Germán García from JB Capital. Please go ahead.
Yes. Good afternoon, and thank you for taking my question. I'd like to know what your midterm expectations are in terms of margins, EBIT margins. In the past, you stated that for Transport and Defense, 12% would be reasonable, and in IT, 6%-7%. I would like to know if you can reconfirm those midterm targets. Thank you.
Okay. Yes. In Minsait, we think that in the medium term, we can hit 7% EBIT doing the things that we are doing today. I mean, in T&D, Ignacio ?
I think in Transport and Defense, 12% should look reasonable.
Okay. Thank you very much.
Thank you. Next question, please.
Thank you. The next question comes from Fernando Lafuente from Alantra Equities. Please go ahead.
Hello. Good afternoon. Just one quick question from me, please. Can you give us? Maybe this one is for Javier. The gross CapEx figure for the quarter pre any potential cash in from disposals. Also in relation to your net debt position and your expectations of free cash flow, the working capital, what should we expect from working capital in 2022, if there's gonna be any reversion from the positive impact that we've seen in 2021? Maybe linking this with the previous question on the solid financial position, you said you were considering a potential improvement in shareholder remuneration, whatever it could be done in terms of buybacks or higher dividends. Would you also be considering making acquisitions, both bolt-on acquisitions, as you have done recently or bigger ones? Thank you so much.
Fernando, the CapEx was EUR 18 million for the fourth quarter. Working capital for 2022 should worsen a little bit. I think this year we were a bit lucky that it got a bit better than the year before. We were expecting a bit of a worsening of the situation. This improvement was mostly done on the back of the freeing up of all that capital that we had tied up with a problematic project. We think that is done already. There is a bit more that could come, but probably not that very material. In 2022, we should expect a reversal of that, of this position and a slight worsening of the situation.
With respect to shareholder remuneration, as you said, we are actively considering, and as Ignacio and Cristina mentioned that before, actively considering other ways of remuneration, namely obviously the potential share buyback. The dividend we already announced what it was going to be, and that's more complicated for a number of reasons to change. We are considering that actively. When it comes to M&A, we are continuing to look at M&A in the same way that we've always done. Mostly bolt-on acquisitions. Last year, we did a total of around nine transactions, and I say around because there were a few minor investments in little stakes of companies that were around EUR 1 million. So pretty much nothing, no? That was the kind of deals that we do.
Those are the deals that we're looking at, and we're looking at a number of them. We always have a portfolio, as you know well, and this year we will execute on a number of those situations. We don't have anything on the table at the moment that is material from a leverage point of view, for example. Sorry, and then just to clarify, I said EUR 18 million CapEx for the fourth quarter. It's actually EUR 7 million. Apologies for that.
Thank you so much.
Thank you. I think we have one last question.
Thank you. The next question comes from Carlos Treviño from Santander. Please go ahead.
Yes. Thanks for the opportunity for this follow-up. Just for Ignacio, a follow-up on your comment that you are expecting in T&D stable margins in 2022. If we consider that you are expecting higher growth in defense than in transport on traffic, and that in transport, some problems with low profitability are now over, well, perhaps I was expecting to see a bit of improvement. Which will be the reason for this stable margins with this business mix? It will be the lower contribution for Eurofighter or anything else we would have to consider?
No, no, I think you're right. I think first is lower contribution from Eurofighter. Okay? So that is probably the bulk of the difference. It's true that transport projects, I think, they are improving. I mean, we had a lot of collections, cash collections, but still we have some issues on some projects that are not finished. So I think they have improved, but they are not completely finished. So I think we have some headwind on that, on a number of transport projects which are finishing or we are trying to finish during 2022 and maybe some of them 2023.
I mean, you know, these projects sometimes are long-term, five, six, seven years. Despite I think the portfolio has improved substantially and a lot of collections from Saudi Arabia, from Mecca-Medina projects and some others, still we are working in the portfolio to improve or to close those projects that don't give profit at least, no? Right. They don't drain profit, but they don't bring profitability.
Thanks, Ignacio.
Okay. I think there are no more questions, so thank you very much to all of you on behalf of the Indra team, on behalf of Javier, Cristina, and myself, and looking forward to the next one. Thank you very much, and good afternoon.