Good afternoon, ladies and gentlemen, and a warm welcome to our Capital Markets Day 2022. My name is Bettina Schneider, and I'm responsible for Treasury and Investor Relations at Bilfinger. Thank you for spending some time today with us. Still virtual, but we are already today looking forward to the time when we can meet in person again. I'm here today in Frankfurt together with our Interim CEO and CFO, Christina Johansson, and our COO, Duncan Hall.
We have prepared the following agenda. Christina will first comment on the preliminary figures for 2021 and the outlook for 2022, which we have published this morning. Christina and Duncan will present Bilfinger's sustainability commitment, and afterwards, Duncan will have a deeper look into our sustainable industrial services portfolio.
A summary and a confirmation of our midterm targets will conclude the presentation part, which will then be followed by a Q&A session. For those who have registered, you have two possibilities to ask questions. If you want to pose questions via the telephone line, please dial in already when the presentation is almost closed and use the dial-in number and the access code you received from our technical provider, Chorus Call, in the calendar entry after registration.
If you want to pose your question in a written form, you will find a corresponding window below the streaming window in your webcast. If you have any technical difficulties, please use the phone number also written below the streaming window in the webcast. Finally, please be informed that this session is recorded. With this, I would like to hand over to Christina.
Thanks, Bettina. Ladies and gentlemen, also a warm welcome to our Capital Markets Day 2022 from my side. Unfortunately, this time in a virtual format. However, we hope for a more relaxed COVID situation next year and are very much looking forward to all opportunities to meet in person again. I'm very pleased to present the good numbers, the preliminary figures for the business year 2021. With 2021, Bilfinger has delivered on our full year outlook the fourth time in succession, building trust.
The years of transition and major restructuring are behind us, and we can continue to work on rebuilding the track record. Orders received reached the EUR 4 billion mark, paving the way to another year of significant growth in 2022. Revenues grow organically by 11% to slightly above EUR 3.7 billion, with a strong recovery, especially in our European business.
EBITDA adjusted reached EUR 137 million, with a margin above 3% as expected. The anticipated strong cash conversion in the Q4, in addition to positive one-time tax effects, resulted in a reported free cash flow for the year of EUR 115 million, thus surpassing the already good cash flow of the previous year, 2020.
For Bilfinger, the year 2021 was a year of further progress towards our 2024 targets. The cost reduction and agility measures of the last years became effective, visible on a significant improvement in our gross margin. In 2021, all four quarters delivered a positive contribution to EBITDA adjusted as well as to EBITDA reported, and this despite our seasonality in the business. Working capital further improved.
Furthermore, we can announce that the process and system harmonization rollout has now been completed, and the major restructuring are in final stages. Already in August last year, we have, together with the supervisory board, decided to allocate the available funds, including the EUR 458 million for Apleona, by the following, a balanced and shareholder-friendly approach.
This is still in line with our long-standing financial policy. In October 2021, we initiated an early debt redemption of EUR 109 million for tranches of our promissory note loan. This saved us an interest expense of around EUR 3 million per annum. In addition to the regular dividend for the financial year 2021 of EUR 1 per share, we now propose a dividend payout of EUR 3.75 per share to the AGM in May 2022.
This corresponds to a distribution of EUR 150 million to our shareholders. On top of that, we will initiate a share buyback program with a volume of up to EUR 100 million, starting in summer 2022 after the AGM has approved a corresponding authorization. Our strong balance sheet and positive free cash flows in the coming years will also enable us to invest several hundred million EUR in organic growth and bolt-on acquisitions, all to strengthen Bilfinger's market position.
I would also like to highlight our sustainability commitment, which has been taken forward in 2021. For the first time, we are able to report our CO2 footprint for Scope 1 and Scope 2. Furthermore, we commit on the target to become net zero in Scope 1 and two by 2030 the latest.
In addition, we see a significant revenue growth potential in our sustainable industrial services portfolio, which Duncan will present later on. Let me now give you a short overview of the key financial figures for 2021. Coming to page six. Markets remain generally positive and orders received reached the EUR 4 billion mark, paving the way to another year of significant growth in 2022.
Revenues were significantly up by 11% organically, reflecting the strong recovery, especially in the European business, the largest part of Bilfinger, and the two segments, E&M Europe and Technologies. The international business, which is mainly North America but also a small part of Middle East, however, is a bit lagging behind Europe. A good EBITA adjusted of EUR 137 million with a margin above 3% is in line with the expectations.
This was supported by gains from real estate disposals also in the Q4. The underlying purely operational margin for the year 2021 would have been 2.9% or EUR 107 million. Net profit increased to EUR 130 million. The strong result is based on good performance as well as on positive tax effects that mostly realized at the very end of the year. Turning to page seven.
Reported free cash flow was very strong at EUR 115 million, with a very good underlying cash conversion in quarter four as planned, and even surpassed the good prior year level as cash inflows from tax refunds, particularly in December, of in total EUR 29 million, as well as inflows from real estate disposal. In total for the year, EUR 57 million contributed to this number.
A major impact, however, also came from the strong development of the working capital in the last quarter of the year. With 67 days of sales outstanding, DSO, we established a new record low. Also, based on this positive development, we will propose a dividend of EUR 1 per share to the AGM on May eleventh, in addition to the proposal of the already mentioned special dividend of EUR 3.75 per share.
The positive development of revenue and earnings is expected to continue in 2022. We anticipate a significant revenue growth for the group. Furthermore, we expect operational improvements in the EBITA margin. From now on, we measure the performance on the basis of EBITA reported and the corresponding margin, and no longer on the basis of adjusted values, evidence of the transformation and restructuring phase now being completed.
Free cash flow will be at the good level of the reporting year, which was influenced by positive cash effects, especially from real estate disposals. These effects will be offset by increased operating cash flows and less outflows from special items in 2022. Let me now hand over to Duncan on the current market developments.
Thanks, Christina. Hello, everybody. A particular hello to all the Bilfinger employees who are tuning into this. You've seen a very quick glimpse, and we're going to show you what the future holds as well, but you can be really proud of the progress that we have made and that we will continue to make. Just very briefly into the markets. We'll start off with E&M Europe. We're still seeing good, strong recoveries across all of our main areas.
In the chemical and petrochem, the demand for our combined services continues to increase. In addition, the renewables that we'll talk about later, including nuclear, continue to increase in demand. Within oil and gas, the recovery continues. Demand is continuing to increase and is levelling out but will not quite yet reach the previous positions that we had back in 2019.
It is certainly very stable and has benefited from the increase in the oil price this past 12 months. In our international markets, projects are starting to emerge. It's been a bit of a slower recovery within the U.S., as we've seen. Certainly within the Middle East, there are mega projects now starting to emerge, and within North America we're starting to see sustainable services as well come through, especially from our European-based businesses that operate in North America as well.
Hydrogen will have a very big part to play in the Middle East in transportation of energy back to Europe, where we will see the advantages of that in both what happens in the Middle East and then releasing it back into the European market. In our Technologies area, the strong emergence, as previously mentioned, of energy transition projects is excellent and really benefiting us.
The nuclear resurgence that's emerged after the EU inclusion of the green taxonomy has meant that we're starting now to plan for more nuclear projects in Europe in the next decades. Pharma and biopharma continue with a strong trend. Post-COVID, there was the uplift with COVID, with some projects coming through with the vaccination program, b ut also after that, we're now starting to see supply chain shortening and when you look at finish and fill, for instance, within that environment, starting to come back to Europe, and we expect that to continue up the manufacturing chain and start to see more manufacturing being based back in Europe over the coming years.
A very strong position within our markets continuing to grow, which is reflected in our strong order books at the end of the year. Thank you. Back to you, Christina.
Thank you, Duncan. Coming back to page 11. Orders received of the Bilfinger Group full year increased organically by 9%. Q4 remained on good prior year level. This was also based on a very good development in E&M International in the last quarter. Order backlog shows a strong organic increase of 12%, and book-to-bill stood at a good 1.07 in full year and represents a solid base for further revenue growth in 2022.
We continue with page 12. The full year revenue of the group grew organically by 11% to just above EUR 3.7 billion. We see a strong recovery, especially in Europe. International business is still a bit lagging, but we clearly saw an improvement in the last quarter of 2021 also in North America.
EBITA adjusted was at a very good EUR 137 million, which reflects the strong operational development and was additionally supported by EUR 30 million of gains from non-operational real estate disposals. This corresponds to an adjusted EBITA margin of 3.7% compared to 0.6% in the prior year period.
Without the one-time effects from the real estate, the adjusted EBITA margin in 2021 would have been at 2.9%. Reported EBITA amounted to EUR 121 million after adjustments of EUR 16 million, which were in line with our plan. Coming to gross profit and gross margin on page 13. We have seen a substantial recovery to EUR 387 million in the full year. Last year was obviously impacted a lot by COVID, especially in quarter one and three.
If we would compare the achievement in 2021 with the last, so to speak, normal year, 2019, we have almost 1% improvement here. We ended up with a gross margin of 10.4%. This number is purely operational and does not include any one-time effects. In the Q4, gross margin was, however, slightly below prior year and prior quarter. This is also a reflection of the lower seasonality in our quarterly earnings.
We hereby confirm our target again to achieve above 12% gross margin by 2024. This improvement will come from growth in higher margin businesses as well as from better contract execution. Now on SG&A expenses on page 14. The adjusted SG&A expenses were again on very good level, clearly below the targeted run rate of EUR 300 million despite top line growth.
This is still supported by one-time effects due to COVID-19, such as less travel expenses. The adjusted SG&A ratio measured against the revenue was 7.6%. We also here confirm our target of a ratio of less than 7% by 2024. We will achieve this by increasing our revenue without growing SG&A expenses at the same rate. Let us now have a brief look on the development of our three business segments.
Starting with the largest one, Engineering and Maintenance Europe on page 15, the segment delivered significant growth at a good margin level in a generally positive market environment. For the full year, orders received increased organically by 3%. In quarter four, we have noticed a decrease of 11% compared with the strong prior year quarter. Book-to-bill was still 1.0. Revenue went up by organically 12% compared to prior year.
The segment's adjusted EBITDA improved substantially to EUR 131 million, a success from improved sales mix as well as increased utilization rates. For 2022, we expect slightly growth in revenue after the very strong and fast recovery in 2021, and a significant improvement of EBITDA reported margin that in 2021 was 4.6%. We expect operational performance to remain stable.
The margin lift comes from the absence of restructuring expenses. Looking at the E&M International on page 16, we can see a substantial increase in orders received with an organic improvement of 117% in quarter four, and 48% for the full year, both against a very weak prior year. Order backlog increased organically by 42%. We report a significant revenue growth organically +10% for the full year, but lower than originally anticipated for 2021.
Adjusted EBITDA remained negative at EUR -14 million, but with a positive result in the Q4 of the year. Here, better capacity utilization and strategic progress are showing some effects. For 2022, we anticipate continued significant growth in revenue. Key factors to achieve this will be the progress in expanding the service business in North America, as well as increasing success on smaller and medium-sized project wins.
We also expect a significant improvement of EBITDA reported to at least break even due to higher capacity utilization. Coming to the third segment, Technologies on page 17. Orders received at Technologies decreased organically by -15%. The prior year figure was largely supported by a higher amount in call-off orders for the Hinkley Point C nuclear power plant project in the United Kingdom.
A book-to-bill ratio clearly above 1, as well as growth in order backlog of 10% are evidence of the healthy demand experienced by this segment. Revenue also grew organically by 14%. The segment's adjusted EBITDA was EUR 20 million, and the margin improved to a very solid 3.6%. For 2022, we expect a significant growth in revenue as well as further significant improvement in EBITDA reported against the EUR 90 million in 2021.
Turning to page 18. Net profit for Bilfinger increased to EUR 130 million, driven by the improvement in EBITDA and also supported by tax refunds of EUR 46 million. Adjusted for special items and with the application of a normalized tax rate, adjusted net profit improved to EUR 89 million. Reported free cash flow increased to a strong EUR 115 million, and even surpassed the good prior year level.
Cash inflows from tax refunds, particularly in December, of in total EUR 29 million contributed to this number. Inflows from real estate disposals for the total year amounted to EUR 57 million. A major effect came, as expected, from progress in working capital management. The DSO days improved to 67 days, and now established as the new benchmark level for Bilfinger. Excuse myself.
Finally, ROCE improved to 7.4% in 2021, i s to be compared with the 6.9% in 2020. However, in 2020, we had impact from the PPN at the owner sale. Before we leave the finance part, I would like to provide you with our group outlook on the full year 2022. The positive development of revenue and earnings is expected to continue. We expect significant growth in revenue. We anticipate that we will see further earnings improvements in all three segments in Bilfinger.
Bilfinger is now focusing on reported EBITDA as the key earnings indicator. This, as the major efforts to transform the organization, have been completed. Here, we expect a significant increase for 2022. The absence of restructuring charges will also significantly increase the EBITDA margin. The gains from real estate and property disposals we benefited from in 2021 will be offset by improved operational earnings in 2022.
We anticipate free cash flow in 2022 to be at the good level of 2021. That was significantly positively influenced from real estate disposals and tax refunds. This effect will be offset by increased operating cash flows and less cash out from special items in 2022. That brings us to the end of our first agenda point. Let me now move to the stage and present the Bilfinger sustainability commitment.
Have a seat.
The Bilfinger sustainability commitment: people, planet, customers, and governance. Our sustainability commitment is derived from the latest materiality analysis. It covers the most important non-financial factors according to our stakeholders. We define targets that are reflected in internal reporting, target setting, and also driven by the management. We have now set new targets, especially in the category of environment.
With this Bilfinger commitment, we directly support 10 out of the 17 UN Sustainable Development Goals. Being a people's business, it is not a surprise that this area enjoys special attention at Bilfinger. Five out of the 10 relating to people. As important is also the focus on helping our clients to make their business more sustainable. We have embarked on the journey to contribute our part to limit global warming, and want to be net zero latest by 2030.
We started with reporting on greenhouse gas emissions Scope 1 and 2, but also defined our roadmap going forward. We will now also take the next step and include Scope 3 reporting step by step, and we'll develop a concept for science-based targets. Obviously, what you cannot measure, you cannot manage.
Our Scope 1 and Scope 2 CO2 footprint amounts today to 60,000 tons. The biggest impact in Bilfinger come from fleet and offices. All regions and divisions will now develop their roadmap to reduce their emissions. This will be consolidated to group targets in the next step. I now hand over to Duncan for comments in regard of the further topics within ESG.
Thanks, Christina. Hello again, everybody. Bilfinger employees will be very familiar with me talking about safety and compliance in the business. Before I start on that, I just want to send out a reminder, not only to our employees, but ideally to everybody listening about COVID. It's still upon us. If you feel able, please, please get the vaccination. If you aren't able to get the vaccination, please test even more. If you're ever symptomatic, please get a test.
Stay isolated until you get a result. This thing is still with us. It's still very severe. We can get through it. We're getting to the end of it, but please help each other. Help yourself to be safe, protect yourself, protect your colleagues, and most importantly, protect your family. When it comes to safety and compliance, we continue to deliver across both of these areas.
Why do we do that? It's because we have best-in-class systems, but also truly engaged leadership and employees. They understand what it is. It is part of our DNA. We've said this before, but it's well-established processes, systems, and delivery. We know we can always do more, and we will continue to do more. We're on a very positive track, and we're going forward in a way that we are very proud of.
The main topic of what I'm going to talk about today is sustainable industrial services. I'm going to give you some insights into what we're doing already. This is real examples, live projects that we're doing today. Not ones we've done in the past, not ones we're thinking about in the future, projects that are in action today.
We'll largely focus on Europe as this is our biggest market in sustainable services at this time, and it is the most advanced. To start with, we're going to show a video of our people in action already doing sustainable services. I hope you enjoy it. That's great. It reminds me of what is by far the best part of my job, which is getting out in our business and meeting our employees, our professional employees, proud of what they do, showing me what they can do, and engaging with our customers in all of these technical areas that we're delivering on. It's fantastic. It really is. What are we going to talk about today? Truly, this, on today's agenda, is the need for change.
We're going to show you the customer and market drivers, then where we're going to focus in our strategic areas and how we're going to deliver the targets that we're going to promise. We're going to focus upon generation, distribution, and consumption. Part of those areas that Christina touched on from the ESG agenda. Let's start off with the market drivers. There's been many market drivers over the past number of years when it comes to fossil fuel exit, moving out of coal, carbon credits, people having to buy them to offset, stricter regulations as well from emissions coming through.
The most noticeable change from our perspective has been very recently, the last couple of years, with the strong ESG financing drive from the financing community to get their companies that they are investing in moving quicker into carbon reduction areas and demonstrating that with actions today, not promises for tomorrow. We've really seen this accelerate the drive from our customers as we come through.
Where have we seen that in the markets that we're working in? These are just three areas that we work in, as you know. In chemical and petrochemical, one of the main areas, and it's a nice one this, where it's also the drive into renewable area, but also reuse, where you use the existing infrastructure. We're seeing refineries build sustainable fuel plants next to the existing infrastructures.
They can use the same services, they can use the same gases, they can use the same steam networks, and hence, there's a real environmental life cycle in there, as well as moving forward into a more carbon efficient future. In the oil and gas areas, we want to ensure that through smart maintenance, we can extend the life of the existing assets to give time for these companies to use their earnings to switch into the renewable areas that they are moving into with that transition as they move across.
In energy and utilities, we're going to see the hub and spoke, so big plants producing large amounts of electricity, but also small, localized renewable efforts. That's going to create the need for services right across Europe, real local demand for those renewable power plants to be built and local competent service providers to keep them running at all times. All of these have different impacts and different times. Some are right now, some are midterm, some are long-term, and we're here to serve all the way through those areas.
Let's get into what are Bilfinger going to do about this. Now, I'm going to take my time on this slide. It looks pretty blank right at this moment in time, but it will fill up as we go through. I wanna take you through where in the sustainable industrial areas in energy transition we are now seeing our revenues increase now and into the future. We'll focus largely on the new emerging areas, but also touch on a couple of our established sectors.
We'll take you through, as I said before, production, transportation and storage, and consumption. Let's start with production. You produce energy in only a few number of ways: hydro, solar, wind, gas, nuclear. The big play for growth for us in the future is going to be nuclear. We're already seeing this come through. We have strong orders already, as people know, from Hinkley Point and other investments that have been happening.
With the EU taxonomy changes that were announced back in January, we're already starting to see those discussions move forward. We have a very strong established sector in hydropower that will also grow further as we move forward. Transportation storage. This is where hydrogen comes into play. Hydrogen is not a source of energy. It's a transportation and storage medium, just like batteries.
Yet you produce hydrogen from solar, from wind, using electrolysis, and then you take that hydrogen and use it either immediately, locally to where you're producing it, or you need to transport it somewhere else through a medium, through pipelines, or as you'll see later, LOHC, liquid organic hydrogen carriers, and then you can use it as an energy source somewhere else. Just like batteries.
In batteries, we're seeing demand significantly outweigh supply at this moment in time. This is our biggest immediate market that we're seeing right across Europe. Carbon capture, we also put within the transportation storage area, mainly especially around the storage, so carbon capture and storage. This is going through its own mini transition as well. Right at this moment in time, it's about reducing the amount of carbon dioxide in the atmosphere.
It will also transition to being a feedstock, a raw material of the future for sustainable fuels like methanol, where we will use carbon dioxide in an environmental life cycle, not to increase carbon footprint. That will be very good going forward for the economies. Then consumption. This covers all of our industrial areas, which is why you see the green all the way around this. Fundamental to this, what we all need to do is reduce our energy consumption.
Get more energy efficiency, hence carbon reduction coming through. This will happen with big gains and with small gains. The big gains, as we'll show you later on, are around when you change out in industrial environments, the bigger reactors. This only happens when they're at their end of their life. You don't change these before they get to the end of their life.
They're a big investment. To make sure we continue to meet our criteria and make gains in carbon reductions until those big step changes happen, we need to do the small gains as we move through. That's where we can help our customers as well. We'll also touch upon a very established area for us already, commercial heat and storage, where we're involved in district distribution of heat and cooling systems, and also storage systems, again, local to power stations.
We can equalize demand and use renewable power in a better way. There's the overview. Now let's take you through the most exciting piece, which is what we're doing right now. We start with nuclear. You should be aware, and we've talked about it previously, you know, we have a strong position in new build. You see the example here in Hinkley Point.
In decommissioning, another example here, RWE in Germany. Also in waste handling, where we safely can retrieve caskets of waste, thousands of caskets of waste here, stored in the Asse mine 500, 700 meters below the earth. This is going to take decades, engineering to begin with, and then that safe removal.
Our customers trust us in doing this. We have very, very high standards to meet in every single one of these areas, whether it's new build, whether it is decommissioning, or whether it's waste handling. It is highly technical demanding, and the HSEQ levels that we deliver with our customers every day ensure that we can safely work in this environment. As we said before, the market is starting to really grow again.
It's growing not only in the new build area, but also in future research when it comes to small modular reactors and also fusion. We're very well positioned with our history, our present project portfolio, to continue to serve this sector into the future. Hydrogen, very much in the news. It's probably talked about more than any other source at this moment in time. We are already starting to see the expansion to emerge.
We're seeing projects, as you can see here, in production, in transportation, and in storage. The middle one we can see here from Hydrogenious, who's our partner when it comes to liquid organic hydrogen carriers. What do they do? They absorb hydrogen in a liquid form.
You can then safely transport it, and then you can release it back out into its natural form as hydrogen and used into storage or into a different energy form. We're going to hopefully deliver skid units with Hydrogenious, where that will release them in Europe when transportation potentially from the Middle East and other areas of Europe.
When it comes to the production of hydrogen, our focus is in two areas, small to mid-scale plants, where we are looking at being the integrator of choice for OEMs, agnostic in the electrolyzers we use. We will help customers select the best technology for their requirement, and then we will integrate that into their system. We'll also work on the larger projects, where we have our specialist teams that will come in across Bilfinger and bring those skills together to deliver.
It's not just about electrolyzers and new build. We also have existing skills, and part of this as well is conversion of existing gas pipelines to hydrogen pipelines, so we can again reuse the present infrastructure we have. We also have great skill in gas drying technology, and we're transferring that today already into hydrogen applications in a very similar way, where we are drying hydrogen with glycol to then go into underground storage caverns.
That can again be reused in periods when it's required. Store over the summer, reuse over the winter. Carbon capture. A key part is, first of all, as we said before, to reduce the amount of CO2 that is in the environment. That is absolutely fundamental, and that's what we're doing right now. After that, we can start using it as a raw material.
The first example you can see on this page is one where we have already been capturing and then using the CO2 for growing tomatoes, in this case. It needs a lot of tomatoes to use that CO2, but you can see it can be used and it can be recycled. Porthos, the project that we're working with in the Netherlands, where we're taking CO2 from a large industrial complex, compressing it, moving it through pipelines to the Port of Rotterdam.
It will then go down to sub-sea caverns and be stored there. It can then be extracted again in the future and hopefully used for sustainable fuels for the future. A great cyclical economy. We're very familiar with the process in engineering technology. It is a transfer from our existing waste areas and applies to all of our present customers. Everybody has this demand.
It can come in the form of small projects, but also the mega projects. This is an area that we see significant growth as we move forward. Battery plants. I already briefly mentioned that this is the market where we're seeing the most immediate activity. Demand is outweighing supply at this moment in time. We're mainly focused upon raw material refinement and processing.
This looks like a chemical plant. That is what we're doing. Again, very familiar technology, familiar experience, and one we are very good at. We're working with existing customers and with new customers. The example you can see on this page, we have some existing ones, but also some new ones. One customer here, very fast-moving. We're looking at getting plants on the ground very quickly. Two are already underway in two different countries.
More are planned where we're doing the EPCM for this. Supply of both the piping, structural steel, the electrical work, as well as the installation of equipment and electrical items. Why do we see this as a big market? There's 2 elements. There is a very high level of processing in Europe. There are raw materials mined in Europe. There's a huge demand. The estimate is EUR 4 billion will be invested in the battery value chain over the next 3 years in Europe alone.
It's not only the processing plant that I talked about that we'll get involved in, also the specialist water treatment modules required for this, which is again, a lovely crossover from our existing pharmaceutical business where we already do skid units like that. As I say, very familiar ground to us as they're very similar to chemical plants, and we're seeing success already.
The last strategic area, before I just remind us of some of our existing areas, is around energy efficiency and carbon reduction. This covers all sectors, and this is about reducing consumption and emissions. Fundamentally, we actually do need to reduce the amount of energy used across the planet.
As I say, there are big gains and small gains. Big gains come when customers look at replacing a large reactor or similar column on one of their assets. This doesn't happen until you reach the very end of those life cycles. These have 15, 25, 35 year lifetimes. You don't shorten those. When you do that, you can make the optimizations that you see on the bottom with 50% reductions of gas and significant reductions of CO2.
Until you can make those gains, we need to work with our customers on ensuring they and us can continue to make the progress in reducing energy, reducing carbon emissions with small gains and smaller projects as we go around. One of the big ones is heat losses. If you can reduce heat loss, you fundamentally reduce the amount of energy that you use. How do we do this?
This is a little bit different than we do in other areas 'cause it's bit more engineering led. We do a lot of laying out the journey of how a customer can deliver their net zero targets. What are the projects they should be doing, the timelines they have, the lifespans they have of their major kit, small gains, big gains, coming to deliver their overall program.
We analyze the performance, and then we detail those projects that we need to support that improvement and it goes through. As usual, what we also are capable of doing is putting that down through sub-project specifications and delivering those projects on the ground as needed. We will engineer them, we will design them, we will build them. The last example is then really to reflect upon what we already do. We've been very established in hydropower and commercial heat for a number of years. These are always very, very good projects. The hydro projects last across quite a number of years, very technically demanding.
The particular one you can see in the middle there is in the Swiss mountains, and these are my favorite projects to go and see because you always get a great view with them, as well as seeing people really proud of the technical solutions that they're delivering in very demanding circumstances.
My final slide to end on here, what will this mean for us? Well, presently, we do about EUR 500 million in sustainable services, and we believe we will double these in the next three years. It may happen quicker, yeah, if people can transition, but we believe we will double them in the next three years. Key to this will be small and mid-size projects. It's not all about big projects, especially at the front end. We are now starting to see these projects emerge and happen right now.
It's with existing customers and it's with new customers, and we are an integrator positioned to support all of those requirements. We are not using just one technology. The demand is there right across Europe. When we see those larger projects come in in specialist areas, we have a team in place that can bring together the excellence of Bilfinger under one Bilfinger to deliver that to a customer.
We have our execution and plans in place, competitive tendering, the tools and organization to deliver, and most importantly, agile resources in place. Hopefully I've shown you there's a very clear market for sustainable services right now. Customer demand is accelerating, and Bilfinger are mobilized to meet the challenge. Thank you very much. Christina, back to you.
Thank you, Duncan. Very exciting. Let me now summarize. We at Bilfinger are well positioned for growth, despite, or I would prefer to say, or even because of changing markets. ESG, energy transition, and also digitalization offering additional opportunities for Bilfinger. Challenges of our customers are strong business drivers for us, and we also target to enhance our company profile with one or another M&A activity.
Our M&A strategy is set up to go for selective bolt-on acquisitions in the next 2-3 years. Funding through a very sound balance sheet and increasingly positive cash flows. The key for these acquisitions will be strong synergies and an immediate successful integration of the targets. 2021 was another building block to reach our 2024 targets communicated in 2020. Growth will be organic and also through one or another bolt-on acquisition.
Further earnings and cash improvement will come step by step. We are convinced that we will be able to achieve these targets for 2024. That means the EUR 5 billion revenue, the 5% sustainable EBITA, the ROCE 8%-10%, and the free cash flow reported above EUR 200 million. We are confirming again after closing 2021 our midterm targets that we set in February 2020.
All this will ensure a coming back also to an investment grade rating at Bilfinger. Shareholders will benefit from our dividend policy, 40%-60% of our net profit. This is our commitment. We thank you for your attention and are now looking forward to take your questions. Thank you very much.
Ladies and gentlemen, we're now happy to take your questions. You have the possibility to ask your questions via webcast in written form or via the dial-in, the phone line. If you were registered, you received the dial-in data via the invitation in your calendar from Chorus Call. If you're in the line now and you would like to register for a question, please press star one. If you'd like to remove, please press star two. Please set your webcast then on mute to avoid any acoustic feedback.
We have a first question in the webcast. This question comes from Gregor Kuglitsch, UBS.
How much of the EUR 5 billion sales comes from M&A yet to be completed? Why will gross margins increase over next three years?
Thank you. I will start with these two questions. I think you can expect for the next coming years similar organic growth numbers as we saw in 2017, 2018, and 2019. Which means, the revenue organically will increase, around about 6% on a yearly basis. That would obviously, with the starting point that we had in 2021, will not bring us up to the EUR 5 billion. The difference there is what we are looking for to find with good targeted acquisitions. Why will gross margin increase over the next three years? I think a lot of the recipe we have already seen, in the years, the last years.
It is a constant hard work, first of all, to grow in the right areas, in the areas that have got an overall, a very good gross margin above the average of Bilfinger. That would obviously be in areas like nuclear, in some energy transition, and in pharma and biopharma. It also means hard work to further work on our utilization rates and make sure not only that we have solid utilization rates, year by year improving, but also that we, during the year with the seasonality we have in the business, trying to optimize that.
I would see these two as the most important tools continuously to get to the 12%. Of course, there is also in project business always the opportunity to be more profitable in the execution, more reliable. I think we have made big steps forward, with Bilfinger, but there is always opportunity to improve also claim management, contract management, and execution. I hope that would answer the question, number one.
All right. The next question comes from Craig Abbott, Kepler Cheuvreux. Remind us how inflation-protected you are via inflation clauses?
I start off with the inflation question, and I'm sure Duncan is also happy to assist me here. I think we are in the environment that we are experienced right now. We are in a quite favorable position at Bilfinger. We obviously have a large amount of frame agreements, and most of these frame agreements have an escalation clause that we can use when wages and salaries are increasing.
In that sense, we are covered, much better covered than many other industries. On the projects, we obviously need to make sure that we are increasing the prices as we are feeling the inflation rate. This might be a challenge, but I think the biggest challenge is to make sure that we are driving hard to get these price increases.
Many of us have, for the last 15 years, not been operating in an environment with inflation, and we have to now change the behavior and make sure that we can compensate this. The good thing is that most of our projects are lasting for up to 12 months.
That means that the implications over this time will be possible, I would say, for 12 months to have a fairly good estimate about what inflation rate we are expecting. If the projects would go on for 5 or 10 years, it would be much more challenging. The fact that we are on this journey of improving our gross margin also committed to go further. We had the 10.4% in 2021.
That is to compare with a 9.5% gross margin in 2019, which was probably the last normal year to be compared with, as 2020 obviously was a special year in regard of volumes. We have taken a step forward with 1%, and we also very much committed in 2022 to go further, to improve, beyond the 10.4% that we achieved last year. That also shows that we are confident that we can compensate the effects of inflation, and get the price increase required, obviously also working on further efficiency on our end side.
There was a second question from Craig Abbott, Kepler Cheuvreux. How severe are the labor constraints to growth that were mentioned in this morning's press release?
I think it is the biggest challenge, at least when I look into the next coming years, and there are always challenges. I'm presently less concerned for us in regard of inflation or supply chain issues. But the constraints on supporting our growth with more resources is a challenge, and I can hear from almost every colleague in other companies the same.
It hasn't become easier, after Corona, if we allow ourselves to speak about after Corona. It has become even more challenging to find the right resources, but also to retain resources. It's not the right attitude to complain about this. We just have to work hard on it. We have to work on different ways of retaining our people and gaining additional staff, and we do that.
We are obviously operating with a lot of people still from Eastern Europe working and supporting the ISP business in Western Europe. We are working hard on increasing the number of people in education, apprentices, in Europe in the future. And we also have to be working hard at making sure that we are retaining the good people, the committed people we have in the organization. Yes, it is a challenge, and it is required to support the growth, but we are also here confident that we find ways to find the people we need and retain the people we need.
The next question comes from Christian Stocker, UniCredit, and was partly addressed already. I still will read it. You see many projects of small to mid-size. Do you see problems evolving from disturbed supply chains and skilled labor shortage? How will you tackle the current high inflation? Can you pass them on to clients?
Duncan?
I think as Christina was saying previously, in the bulk of our framework contracts, we have clauses in there that means we have pass on when wage inflation happens on an annual basis. Also, I think we need to reflect upon, actually, we operate with a strong set of intelligent customers as well, that also do recognize the need to attract labor to their assets, not just to Bilfinger as well.
It is very much working together to ensure not only is it, Bilfinger an attractive place to work, but as well there's fair rates of pay compared to market areas that we see, in the different areas across Europe. When it comes to supply chain, we tend not to be so impacted. We just deliver largely the commodity items.
That would be basic pipe work, some secondary steel work, insulation, scaffold, which comes out of our main stock. The OEMs, so main equipment suppliers of reactors, pumps, valves, is generally ordered by the customers, and that's where most of the problems we've seen in the supply chain have happened.
That is actually easing at this moment in time, except for probably in the electronics area. It hasn't impacted us. It's just put a bit of a delay on projects. Some projects haven't started because of it. Others have been delayed in their execution because of those OEM supply chain shortages. Not a big impact from our perspective.
Very good. We can come to the next question from John Campbell, Bank of America. Is there any incremental information you can provide on the Rock Tech Lithium announcement last week? Of the 2021 property disposal gains, how much was achieved in Q4? Can you provide an update on cost inflation, supply chain trends in E&M International particularly?
Good. I will start off. I think we have clearly three different questions here. Starting off with the announcement from last week on Rock Tech. I don't think at this point in time that we can provide any additional information to the press release. So far, there is a letter of intent. We do some engineering work, b ut of course, we hope that Rock Tech will be able to proceed here and realize their plans.
We are also expecting and looking forward to a sizable project here going forward. Looking at the property disposal gains and the question how much of the EUR 30 million that I was mentioning for the full year impact is coming in quarter four. There is EUR 10 million coming in quarter four.
I think we announced when we in November presented quarter three, we said quarter three had an effect of EUR 18 million, quarter four, obviously, then another EUR 10 million, and in total, in 2021, EUR 30 million impact. In regard of cost inflation and supply chain trends, and especially in regard of E&M International, I have to say, or maybe to add to what we have already said, we feel the inflation rate in two countries much more than in the other ones.
That is in the U.S., where we, earlier than in Europe, and to a larger extent, feel inflation rates, and also the fact that when we are recruiting people, obviously, it is more expensive to recruit new people.
The second country I want to mention is in Europe, and that's Poland, where the inflation rates also recently have gone up very, very fast, and also the impact on raising wages and salaries is, it's obviously above the level what we see in the rest of Europe. It is maybe harder than to retain and recruit people in North America, and also the same in Poland. Thank God, we also see that it's not only about the salary.
We also in America also see many people that see the improvement and the excitement in making sure that we are realizing projects. Here, obviously, we can't only provide a good salary. We need to be in line with the market, but we also need to provide interesting, exciting project opportunities for many of these people.
In Poland, a similar approach. We have to pay more to get these resources, and we need to try to make sure that we, either through energy, through efficiency savings or price increases, can cover this. But yes, E&M International and here in North America is a bigger challenge, both in regard of supply chain and cost inflation.
We have also, and I mentioned in the finance presentation, that we, in North America, have had a bit of a delay of ramping up after the first COVID waves in 2020. Many reasons for that, but we're also seeing projects being delayed due to supply chain issues among our clients. Not losing the project, but projects starting off a bit later than expected.
The next question comes from Stephan Bonhage, Metzler. How do you assess the chances and risks arising from the current geopolitical tensions, especially when looking at Bilfinger's oil and gas business in Europe?
I think, first of all of us would like that the escalation is going backwards and we will not have the next steps happening in Europe. If I look at Bilfinger, especially then with the focus on present discussions in regard of Russia and Ukraine, I can say that our footprint in these two countries, the amount of sales that we are generating, but also the number of people we have is very, very small.
So, both Ukraine and Russia are not representing high sales or high staff numbers. Looking at Bilfinger's oil and gas business in Europe, we are obviously a very strong player in the North Sea, both on the Norwegian and the U.K. side. Very successful, very much appreciated, and I would also dare to say that we recently have been gaining market shares in these markets.
Of course, we are all aware that oil. I would like to split oil and gas. Speaking about oil, it will probably not come back to the volumes in the North Sea that we saw in 2019, which was the peak year. We have also seen a very fast ramp up already in the second half of 2020.
Obviously, the very, very high oil price that we have seen for a very long time now, being even over $90 a barrel, has also helped this ramp up. We are actually expecting that oil will be a major part, if we want or not, going forward in the portfolio of energy resources. Simply because it will take time to replace it.
We are not back at the level we saw in 2019, but it has been a very, very strong ramp up, helped by the strong oil price. I don't know if that answered the questions, Mr. Bonhage. Otherwise, please let me know if you want to have any other feedback.
The next questions came again from Craig Abbott, Kepler Cheuvreux. How much further margin scope within your 2024 target do you see in E&M Europe? The outlook for 2022 reads as if the adjusted margin more or less on par with 2021, excluding the restructuring charges. Can you comment?
I think it's a very good question. I mean, it's the largest segment E&M Europe within the Bilfinger group, and we have had a really good improvement if I once more compare 2019 achievement with 2021. Really good. Honestly, the top line is already back in 2021 in this segment. Of course there was also in 2020 a drop in volumes, especially in oil and gas, on the frame agreements in 2020.
We already saw from September 2020 a very, very solid ramp up. If I compare apples with apples and take the divestments into account that also have happened, we actually are very close in the top line in 2021 in E&M to the number we had in 2019. We have made good growth turnover recovery and also good improvements in the margins.
Yes, you are absolutely right. There is not so much scope to improve, but I think we mentioned that the reported margin in 2021 for E&M Europe was 4.6%. That shows that there were some restructuring and some platform costs still as adjustments, and we are now committed to keep that without having these costs. There are still a couple of steps to be taken. We should also not forget when I mentioned further improvement in the gross margin. On the energy side, E&M Europe is also involved in, for example, the nuclear business, and therefore also benefit from an improvement in the mix.
Further improvement, yes, but it's probably out of the three segments, the one that is the furthest in the development, and also the one then that obviously is closer to the final targets, or at least the targets we have for 2024. Further improvement, further growth, but not as much as we are expecting out of Technologies and E&M International.
There are currently no further questions. I repeat, for the phone line, please press star one if you'd like to pose a question via the phone line, and star two to remove. Also, the chat function is still open, and we really appreciate that you make so nicely use of that version. We wait another few seconds.
If you want to pose a question, please do. I think there are no further questions. As you all know, please, yeah, at any time call us, write us an email, contact us whenever there is more. We have just started to sell, to tell this story about our sustainability position. We know that we are in a much better position now to also report more detailed figures.
We all were waiting for that, especially you as our bank partners, as our analysts, as our fund managers. Don't hesitate to also pose more detailed question directly to us. For today, we would now conclude the session, and now I hand over to Christina.
Thank you, Bettina. Thank you very much to all of you. We are very proud of what we in one Bilfinger achieved together in 2021, and we are very excited about what we can achieve with a positive outlook on our markets and industries in 2022. ESG, energy efficiency, energy transition all create additional new opportunities for Bilfinger.
We are looking very positive into the future. Thank you very much for attending today's presentation, and thank you very much for joining us on the journey so far and hopefully also on the journey in the continuous years. Thank you very much. Wish you a good day.