Good afternoon. Welcome to Bilfinger's Conference Call on the Preliminary Figures of Fiscal Year 2020. My name is Bettina Schneider, and with us today in the line are Christina Johansson, CFO, and interim CEO, as well as Duncan Hall, COO. As you all know, this would have been the day to meet in person on our Capital Markets Day Conference, one of our most preferred events of the year.
I'm sure we will come back again to this good tradition in the future. Christina and Duncan will now take you through some of the key highlights of this morning's release and provide a bit more color around financial performance in the fourth quarter 2020. They will also cover the outlook for 2021 and our midterm targets, including insights to our markets and to our growth and margin improvement drivers. With this, I hand over.
Thank you, Bettina. Ladies and gentlemen, also a warm welcome to our conference call from my side. Today, we would, as Bettina said, like to present the preliminary figures for 2020, as well as provide you with an outlook for 2021 and some words on the midterm view. The year 2020 was a special one in many ways. The COVID-19 pandemic and the temporary sharp drop in oil prices have had a significant impact on our business since March 2020.
The remainder of the year, we worked extremely hard to be able to say today, Bilfinger again delivered on its targets. Let us start on page two. In a very challenging environment, we fully achieved the guidance we had already published in May last year, a time when we were still very cautious about committing on a revised full year 2020 outlook. The revenue decreased by 20%, organically 17%, to EUR 3,461 million as expected. EBITDA Adjusted remained positive with EUR 20 million.
Free cash flow reported, in the end, a very strong number with EUR 93 million. Turning to page three. For Bilfinger, however, 2020 was by far not only COVID-19 and oil price. We were able to prove our stability and resilience, as well as resolving some major legacy issues, like Cologne Municipal Archive, the dispute with the former executive board members, both of them without any negative impact on the group's financial performance or position.
HSE processes established enabled a continued operations despite very strict requirements of COVID-19 prevention measures. Also strengthened partnerships with customers in difficult times. Last year, we also increased our flexibility in the short term in regard of being able to adjust to changes in needs and demands in the markets. We, of course, also utilized existing governmental support. In the peak of 2020, we had furlough schemes in place for 10% of our workforce. This in quarter two.
At the end of the year 2020, that number went down to 2%. 2% at the end of December being in furlough schemes, which is a little bit more than 400 people of our workforce. Also sustainable alignment and increased agility of capacities. We reduced with restructuring programs our workforce headcounts with 13% year-on-year, hitting especially U.K., Nordics with Norway, and North America. So a big impact coming from the oil and gas side. We also continued with structural improvements.
We have now almost completed our ERP rollout. We had further reduction in the number of legal entities and divestments of three entities in the Other Operations segment. We introduced a leaner and more decentralized regional structure and a global excellence team. Continuous improvement of operational efficiency and strengthening our go-to-market approach.
Last but not least, we were also very successful in growing our nuclear business, and got volumes, won volumes in Hinkley Point above EUR 500 million, but also made step forwards in the biopharma area. Coming to page four, we have the overview of our key figures in 2020, reflecting resilient business model and high cost agility. Orders received decreased by 7% organically. Definitely lower orders in oil and gas, but also a slow US project market.
Q4, however, already an increasing order book, which means organically + 3%, especially strong in Europe, our core geography. Revenue with decrease of 17% organically. Q4 still receding, but slight increase against quarter three. Adjusted EBITDA at +EUR 20 million due to high cost agility and consequent crisis management. Quarter four, EUR 42 million Adjusted EBITDA with positive contribution from all three segments. Net profit increased to EUR 99 million despite a lower Adjusted EBITDA.
A capital gain of EUR 210 million due to the mark-to-market valuation of the preferred participation note for Apleona following the announcement in December that EQT had signed a sales agreement. Q4 net profit adjusted at +EUR 24 million. Turning to page five, reported free cash flow was very strong at EUR 93 million, with very good underlying cash conversion in quarter four.
By year end, payment of virtually all tax and social security defers we benefited from as a precaution during the challenging Q2 were settled. Successfully working capital management, significant DSO improvement in quarter four. I will come back to that. Successful renewal of revolving credit facility of EUR 250 million in December, used as a backup line.
On that basis, the executive board and the supervisory board will propose a dividend of EUR 1.88 per share to the Annual General Meeting on April 15th, recovering last year's EUR 0.12 to the level of the EUR 1 floor dividend. Outlook for 2021: significant revenue growth versus 2020, substantial improvement in EBITDA Adjusted, substantial improvement in EBITDA reported, coming back to the profitability of 2019 despite volumes which are still lower than the pre-crisis level.
You might ask, what are the market views our outlook and the midterm targets are based on? I will now therefore hand over to Duncan Hall, our COO, who will now give you a detailed insight to this. Please, Duncan.
Thanks, Christina. Good afternoon, everybody. It's a shame we can't meet in person but obviously, restrictions at the moment mean that that can't happen. As with all our businesses, we need to adapt to the situations that we face, and our business this year has adapted really well to the challenges that we've seen. We'll come a bit more on to that later. Let's talk about the market. We'll cover Europe, international, and then technologies. Within Europe, we've seen a recovery towards the back end of the year and quite a stable environment since September.
In half two of this year, 2020, there'll be a lot of catch-up work that didn't take place 2021 lastly, there'll be a lot of catch-up work that didn't take place last year. This will flow over into 2022 as well. Oil and gas is stable but at a lower level. The second phase, second wave of the pandemic has had more of a challenge in the oil and gas areas than some other commercial industries. There's very positive signs in the energy transition, with significant order intake in this area, and also multiple engineering studies and some trend development projects that we're involved in.
Across the piece, we're seeing the trends that we expect to see. Deferred work and shutdowns will give us increased activity levels, especially in chemicals and petrochemicals. Energy and utilities, the energy transition is now moving from theory into practical projects, and we are seeing that order intake. Oil and gas, as I said, big shock earlier in the year. It's now stabilized. We will recover, and we'll have an increase in our revenue next year compared to what we had in 2020.
This will be supported not only by the asset integrity work that we'll catch up on, but also as investment in new areas offshore decrease, asset life extensions are becoming more and more important. We must also recognize, actually, that the gas market is a growing market. The oil market is significantly impacted, the gas market continues to grow and be a stable market. If we can move on to international.
Here, again, if you remember, we're mainly referring to the U.S. and Middle East. U.S. has seen its challenges in 2020, not only with COVID-19, but also as election years tend to do in the U.S., slowed down our rates of investment. The outlook there is improving, I think we'll see a more positive outlook in the energy investment area in the energy transition piece. In Middle East, the market still has major potential for us and including energy transition as well, where we can transfer our knowledge that we're developing in Europe at the present time.
In the specific industries that we see internationally, in North America, there has been a delay of projects within the chemical and petrochemical sector, but we're starting to see those come through already. As you say, energy and utility is strong across the globe, and it's good to see both of these markets looking very actively at exiting oil and moving more into energy transition areas. Still, there is major investment happening in oil and gas.
We'll still be involved in it, and we'll continue to deliver increased revenues when CapEx and OpEx starts to come back in North America later on this year. Moving on to our technologies area, which focuses, as you know, mainly within energy and utility and life science. Both of these markets are very strong. There is a high demand for nuclear skills, including decommissioning. In biopharma, the positive trend increases, and what's very positive for us is the increase in performance needed through efficiency and plant modifications.
This plays to our strengths of what we do in our core E&M business, not only in our project investment areas. Nuclear within our technologies division is a strong area, and as we can see, not only in the U.K., but decommissioning in Germany has been a significant increase in the market for us. Pharma, biopharma, whilst obviously with the pandemic at the moment, there is some short-term projects happening within a COVID environment which we've been involved in, the overall trend remains positive, and we continue to see those investments.
If we move on to what we see as really core part of what we do, which is safety and integrity. I'd just like to take this moment to thank our employees for their commitment and flexibility in this year of extraordinary challenges. We've seen people spend months away from their families to deliver work for their customers, to get over the restrictions on the borders, and we cannot thank them enough. Throughout all of these challenges, we've maintained a real focus upon safety and integrity.
As you can see on the left-hand graph, we continued our improvement when it comes to serious injuries, and we're having less and less and less. We are managing this through high levels of management attention and a culture of where no one gets hurt. We work with like-minded customers who value safety, and this is a premium element of what we sell. When it comes to integrity, our compliance culture and behaviors have been maintained.
As with safety, our KPIs show that we have a continuous commitment and understanding of what in our employees. Across safety and integrity, we think we are in a good place. We've got the right systems, the right leadership, the right people, and the right culture going forward. We'll come back later on to talk about growth and margin, I'll hand you back to Christina to take you through the development of the orders.
Thank you very much, Duncan. Coming back to page 11, with a view of our order situation. As I previously mentioned, orders received full year decreased by 7% organically, but quarter four showed an increase of 3%, mainly due to a good demand level in European markets, including EUR 110 million call off on contracts for the Hinkley Point C nuclear power plant in the U.K. In the North American market, the number of projects available is increasing, but at a slow pace.
We have seen the first good indications in quarter one, but it will take a bit longer than what we have seen in the recovery in Europe. Order backlog remains solid with an increase of 5% organically, book-to-bill of 1.2 in quarter four, solid base for our revenue growth in 2021. Turning to page 12, looking at revenue. Revenue 17% organically below prior year, in line with our expectation. EBITDA Adjusted at +EUR 20 million full year due to high cost agility and consequent crisis management.
The EUR 20 million corresponds to an Adjusted EBITDA margin of 0.6% compared to 2.4% in the prior year period. EBITDA Adjusted in quarter four at EUR 42 million+ . Very good results in E&M Europe and technologies. E&M positive but still under pressure. Adjusted EBITDA margin quarter four of 4.8%, just below prior year level of 5.3%. Further restructuring expenses in the amount of EUR 77 million resulted in an expected increase in special items of in total, by coincidence, EUR 77 million.
The EUR 77 million of adjustments include EUR 77 million for restructuring, EUR 13 million for IT investments, EUR 4 million capital losses with OOP divestments, and they were netted out by a positive effect of EUR 17 million from settlement with former EB members. Coming to one of the most important KPIs in our business, coming to gross margin on page 13. Full year number at 8.6%. This mirrors a very low utilization due to COVID-19 and the volatile oil price in the second quarter.
However some recovery in quarter four. You already saw this in quarter three, the strong ramp up with gratifying gross margin as high as 11.9% in quarter four, despite significantly lower revenue. This is above prior year in quarter four and close to our 12% target. Gross profit decreased to EUR 296 million after EUR 412 million in prior year. A strong ramping up in the gross profit. Looking at our SG&A on page 14. Adjusted SG&A expenses continue to improve significantly to EUR 291 million.
I remember last year's full year number, 2019, was EUR 347 million. A reduction of more than EUR 50 million between these years. Clearly below the target of EUR 300 million mid-term target, supported by some one-time effects like traveling costs, but with an underlying quarterly run rate right now of EUR 75 million. An underlying yearly EUR 300 million have been achieved. Adjusted SG&A ratio for the year 2020 with the lower revenue was 8.4%, and this with this sharp decline in revenue.
Last year, 2019, we had with a EUR 4.3 billion top line, 8% SG&A. This reflects sustainable positive effects from SG&A efficiency programs, as well as short-term impact from strict and agile cost management. Turning then to our three segments and looking first at E&M Europe on page 15. The segment that has shown the highest resilience in this difficult year and also without comparison, the largest segment. Orders received remained virtually stable on an organic basis.
In quarter four, +12% organically based on framework contracts as well as on project orders. Backlog markdowns in the upstream oil and gas business offset by project orders. Book-to-bill ratio for the full year was 1.1. Order backlog increased 9% organically. Revenue full year dominated by COVID-19 and oil price impact decreased by 13% organically. European maintenance business proved to be very resilient and agile.
As I said before, it was quarter two a struggle, but from July onwards, a clear and strong ramp up, both in revenue and above all, in profitability. However, as also Duncan said, revenue in upstream North Sea oil and gas business was still down by about 1/3 in the fourth quarter due to COVID-19 restrictions. Adjusted EBITDA, clearly positive at EUR 69 million, with a reasonable margin for the full year of 3.1%. Prior year, with higher revenues, was 4.1%.
Of course, we also benefited from government support through furlough schemes in most of our European countries. Despite lower revenues, fourth quarter performance was very strong at a 6.2% margin and above the prior year level of 5.5%. The outlook is based on the very strong ramp-up that we have seen in quarter three and quarter four. Therefore, the outlook 2021 will be, we expect a significant growth in revenue and also a significant improvement of EBITDA Adjusted.
Looking at the Engineering & Maintenance, E&M International segment on page 16. Revenue and earnings are still under pressure. Orders received full year declined by 48% organically. Lack of project awards in 2020, especially in North America, after a very strong year in terms of revenues for Bilfinger North America in 2019. Order backlog shrank accordingly to EUR 324 million, the year before comparable number EUR 455 million. Full year revenues decreased organically by 42%.
Expected to some extent, amplified by the challenging environment. Q4 still at -34% organically reflects current low order book, also not the same kind of visibility in the North American market as we have in Europe. Adjusted EBITDA negative at EUR -21 million, impacted by underutilization in the project business in North America. Slightly positive result in Q4. Capacity adjustments are showing and starting to show positive effects.
Business still needs to be stabilized and will get the full attention when it comes to 2021 by Duncan and myself. Given this starting point, our outlook for 2021 would still be a significant growth in revenue, also a significant improvement of EBITDA Adjusted, to achieve a positive result in 2021. The last and third segment are page 17, technologies. Full year orders received rose significantly by 58% organically to EUR 719 million versus EUR 456 million in the year 2019.
Important driver for this improvement were call-offs of larger parts of the contracts for the Hinkley Point C, in total for the year, close to EUR 200 million. Thereof, EUR 110 million in Q4. But Also contributions from other integrated projects such as the BP Piperack project in Gelsenkirchen in Germany. book-to-bill ratio for the full year strong at 1.4. Order backlog rose to EUR 560 million, the year before EUR 374 million. Revenue was down 7% organically, also due to the exit from loss-making activities.
Not to speak about loss-making entities, you remember we spoke after Q3 that we are rightsizing the scrubber business and we are closing the nuclear maintenance business in France. In Q4, however, revenue increased by 1% organically year-on-year. Adjusted EBITDA was again positive in Q4 at EUR 9 million. Actually, we are now seeing in technologies the last six months, the second half of 2020, all months being positive. Strategic measures have been put in place for underperforming entities.
Our Adjusted EBITDA for the year 2020 improved, but still with a loss, improved to EUR 10 million loss related to the first half of 2020. That is to be compared with a loss of EUR 28 million in 2019. Still a negative result. The outlook 2021 shows a significant growth in revenue and a significant improvement of EBITDA Adjusted to a clearly positive result in 2021. Turning to page 18, net profit increased to EUR 99 million despite a lower Adjusted EBITDA.
Mark-to-market valuation of the preferred participation note for Apleona following the announcement in December that EQT had signed the corresponding sales agreement. Capital gain of EUR 210 million being recognized in the financial results. Reported free cash flow increased to a very strong EUR 93 million to be compared with EUR 57 million in 2019. Very successful working capital improvement initiatives as well as careful monitoring of our capital expenditure.
Significant inflow of cash, especially in Q4, where again with the strong inflow from our client side but also restrictive monitoring of our capital expenditure, we in Q4 paid off all the tax and social security deferrals that we benefited from in Q2. Some of them we could have transferred and paid only in 2021, but we made the deliberate decision to settle them in 2020 as we could afford, and to safeguard our cash flow going forward. ROCE considerably improved also due to the Apleona PPN effect.
Looking at the liquidity development on page 19. Net liquidity, including IFRS 16 liabilities, improved to -EUR 57 million. It was -EUR 62 million in quarter three, mainly due to a positive adjusted operating cash flow of EUR 43 million. Net trade assets decreased in absolute terms to EUR 408 million. Prior year's number before COVID-19 was EUR 503 million. DSO improved by another eight days in the last quarter. We went down to 70 days DSOs by the end of December.
We had 78 days in September, and we were as high as 88 days in the quarter two, where, of course, a lot of uncertainty also among our clients existed. Great achievement, 70 days DSO is to be compared with 74 days in the year of 2019. DPOs were at 63 days. Obviously, in a year of COVID-19, we didn't stretch the supply side as much as we have done in previous years.
Although this job is never finished, it was good to see that our continuous working capital management efforts led to this very good DSO results, especially taking into consideration that the share of the work in progress has significantly decreased. It's mainly WIP that has been reduced, which also lowered the risk in regard of the working capital. Coming to page 20, just to clarify the effects of already mentioned valuation of the PPN for Apleona.
Relates to sale of Bilfinger's building and facility service business, now called Apleona, to EQT in September 2016. Bilfinger is entitled to a share of approximately 49% of the sales proceeds after deduction of debt. In December 2020, EQT announced the sale of all shares in Apleona to PAI Partners.
Our sales proceeds would be EUR 450 million-EUR 470 million. Capital gain with EUR 450 million, cautiousness here, which is the number we have now taken into account for 2020, would then mean that our balance sheet position, EUR 240 million, will increase to EUR 450 million and generate a capital gain of EUR 210 million in financial results. Cash inflow, EUR 450 million-EUR 470 million, will come after closing of transaction, which EQT expects to take place in the second quarter of 2021.
On page 21, I would like to give you an overview on our outlook for the year 2021. Following the decline in revenue and earnings due to the effects of the COVID-19 pandemic and the volatile oil price development in 2020, we expect a significant recovery in 2021. This development will be underpinned by growth in all three segments. We expect a significant growth in revenue and a substantial improvement in Adjusted EBITDA.
Adjusted EBITDA margin will return to the pre-crisis level of financial year, sorry, 2019. Although revenue in 2021 will improve versus 2020, it's expected to be still significantly below the level that we saw in 2019. We also anticipate a substantial improvement in the group's reported EBITDA due to significantly lower expenses recognized as special items. We currently assume around EUR 20 million of adjustments in 2021. In total, for IT mainly, but also some smaller remaining restructuring.
Free cash flow is expected to be positive but below the prior year level, despite a substantial improvement in EBITDA. This due to increased working capital requirements as a result of the planned revenue growth, but also cash out effects for restructuring measures implemented in 2020. Last but not least, a normalized level of capital expenditure, which in Bilfinger's case means EUR 60 million-EUR 70 million per year.
Looking at 2021, we assume, and all our forecasts and guidance is based on, that the COVID-19 pandemic will not have a significant impact on our business activities anymore. Also that the oil price range will be between $45 and $65 a barrel. From this starting point, we look to the future with confidence. I would now like to hand back to Duncan Hall. He will outline the fundamentals on which we intend to achieve our midterm goals. Please, Duncan.
Thanks, Christina. I actually think we all probably agree with you that 2019 feels like about 200 years ago, as we all sit here now, having been through what we've been through. One of the things actually, that without being face to face, we miss the body language, and you would have missed me nodding vigorously in the references to technologies. You know we've been on a journey there, and now it's a different one. We're in a good place.
We're moving forward, six months profitability, and still with the major revenue from Hinkley Point to come into the future. It's been a good job and deserves a little bit of added recognition. Let's talk about the cornerstones of delivery of our targets going forward, which is growth and margin improvement. I'm going to remind you of our key levers for growth, which we're seeing having a really positive impact on our market share already. I'll take you through these four areas that we focus on.
The first one is around our unique set of services, where we have a very integrated product and services portfolio. It's quite unique. It's balanced, it's what our customers want, and it's what they need on both large sites and smaller sites. We have a great range of products on maintenance, on turnarounds, on asset performance, on projects across the full spectrum.
And We have real potential to grow, not just in business line areas, but also we have white spots across all of our businesses where we are still underweight in the market, and there's real opportunity still to come. Through these service product lines, this is how we capture and keep our customers. Another area that we're moving into more, and Christina referenced one project, but it's already been building an integrated project now, is looking at the bigger ticket projects and integrated service contracts.
We are multinational and most of our customers are as well. More and more they're asking us to work across borders, whether this is in Europe, in North America or the Middle East. We have the geographic spread to enable us to do this and an excellent key account management service through our global development team. The integrated project organization that we formed this year enables us to bring together all of the skills across our business on one project.
We are no longer looking at doing projects at EUR 25 million with one business, but bringing together three or four businesses to do larger projects for our customers. Most of these are existing customers. They're there looking to work with us because they trust us and we trust them, and we're bundling those capabilities to deliver going forward. We already touched on previously the market areas that there is accelerated growth in life science, in energy transition, in nuclear.
We've aligned vertically with these, especially in the technologies area. We're also a little bit underweight in some niche areas, where we already have the skills. This isn't somewhere we need to go and find the skills. We have skills in electrical work, in inspection work, in rope access. These are really high-value services going forward that our customers and ourselves are going to look to expand as we continue to grow. The last area is our digital offering.
We have a great digital offering, delivering real efficiency, and we're working more and more that this is a core offering. It's part of our day-to-day business. This isn't a side business that people buy. This is core to our efficiency gains week in, week out. As I said, why do people work with us and keep working with us? Because we drive efficiency. These four areas are the building blocks for our growth and why customers choose to work with us. If we move on to gross margin, yet we know the levers that we need to use to deliver our increased margins.
We've got programs in place. They're well underway. The activities are happening now. This isn't theory. They're underway. As you saw when Christina took you through the gross margin areas, we are delivering results now. Half two last year, we saw a good upswing in gross margin, and we expect to continue to deliver this. Fundamental to it is a culture, a culture of always wanting to improve. It's essential that we focus on that, not only in underperforming areas, but also incremental gains across all of our contracts.
We have operational excellence programs in place across all areas of our business. We have selected lean programs to accelerate this in some areas, and we've done successful pilots of this, and there's a bigger rollout coming this year that's already underway. Part of the key elements of it is always measure it. Measure it, plan to get better, and KPIs, a standardized set across the group is what we use to make sure we see issues early, see the benefits coming through, and enable us to share tools to improve in a more factual and data-based manner.
We can benchmark where we do well on one contract against where we're not doing well on another and transfer the value and improvements that we see to improve our margin. We referenced briefly company transitions. We're getting towards the end of this program. We've only got a couple of businesses now in close monitoring, and we've seen some really good results come through, and we've got an ambition that this year we'll have no loss-making businesses at the end of the year.
That's our ambition, and that would be a great achievement. Blue collar is at the heart of what our business is built, and COVID really brought home to us the need for even more agility. We're a very flexible business, but it reminded us that we need to move even quicker. We've taken the opportunity to optimize our cost base even further with utilization measures and changing our supply mix.
We're going to go out to lower cost recruitment areas as we're seeing the shape of the market for personnel within Europe start to change, and we need to find some other areas where we can get high quality and at the right price for ourselves, our people, and our customers. Also following that is internal subcontracting. We still must maximize what we can do rather than giving it to other suppliers, which is margin capture. And th at can be of benefit to our margin and also to our customers' cost base.
Procurement, there's always still more to do, and it's recognizing that difference between sourcing and buying. We need to ensure we source the right material at the right prices, not just buy what is required. There's still more to go at. Our regional setup is helping us get that increased opportunity as we can focus more within those areas to get economies of scale in a more geographic way. The last area we touched on previously is around integrated project execution, where we formed the integrated project team, which is not a theoretical team.
This is not a group of theorists. This is practical project managers delivering excellence day in, day out. We have two projects already underway that are low triple-digit millions that are being operated within this concept. We take risk management very seriously within it. Making sure we're doing the right work and monitoring the risks and managing change as we go through is fundamental to our delivery.
Hopefully you can see progress is visible, the programs are underway, and we're well on course to deliver our targets. Christina, take us through another successful area now around SG&A.
Thank you, Duncan. On page 25, I would like to explain the structure progress we have made in recent years. We can build on this progress in our further development. We have reduced the number of legal entities as planned. By the end of 2020, we stood at 145 legal entities and have hereby reached our target of having less than 150. Group-wide ERP rollout is almost complete, and systems will be fully implemented by mid-2021.
By then, we will be in the privileged position to have harmonized our systems, and we will have 95% of our sales on this platform. We have continuously reduced, as I said before, our SG&A costs since 2016. Since 2016, we have reduced them in total by more than EUR 100 million. We confirm our aim to achieve an SG&A ratio of below 7% from 2022 onwards. On page 26, you can see that we are confirming the midterm targets we set in February 2020.
They are unchanged despite COVID-19 and the oil price. Revenue is expected to be above EUR 5 billion by 2024. We also aim to achieve a sustainable reported EBITDA margin of at least 5% and a ROCE of 8%-10%. Free cash flow is to be consistently above EUR 200 million. On this basis, we are aiming for an investment-grade rating again as a medium-term goal. Also our dividend policy will become effective, according to which we distribute 40%-60% of adjusted net profit to our shareholders.
That brings me to the end of our presentation. I hope Duncan Hall and myself have been able to provide you with an insight on our company's current situation and also the outlook. I thank you very much for your attention, and we are looking forward to your questions.
Thank you, Christina. If you'd like to ask a question to Christina or Duncan, please press zero and one on your telephone keypad. To withdraw your request, please press zero and two. First question comes from Craig Abbott, Kepler Cheuvreux. Craig, the line is open.
Yes. Good afternoon to all of you and everyone on the call. Yeah, a couple questions from my side. First of all, just looking at the dividend proposal you announced this morning. We understand restoring the base dividend of EUR- EUR 0.88, being the delta between the normal EUR 1 base and the EUR 0.12 that were paid for 2019.
I just would like to understand, looking forward with the cash proceeds from Apleona pending probably in Q2, the first part of the question is, was the proposal announced this morning, did it reflect in any way at all your expectation these proceeds coming in? Can you shed some light on what you're thinking for the use of those proceeds, including potentially M&A, which was mentioned in the Q3 conference call? Some early indications there would be very helpful.
Just on the valuation of net cash, I just wondered, I didn't see the inter-year working capital swing assumptions made that normally you do include at your year-end valuation net cash calculation. I just wondered if there's a reason for this or give us an update there? I just have two questions please, operationally. One is, do you have any concerns about rising input costs or would potential inflation clauses allow Bilfinger to pass most of those on?
We're starting to hear from various industrial players, they are seeing costs rise on a number of fronts, including, of course, also wage inflation. If you could update us there, would be great. The final question for right now is, you mentioned nuclear decommissioning in Germany, starting to see orders come in there. How big, if we look down over the next couple of years, could this opportunity for Bilfinger potentially be commercially? Thank you.
Thank you, Craig. I suggest that I cover the first two questions, and then you, Duncan, would take the third and the fourth. Looking at the dividend proposal, obviously, the dividend of EUR 1.88 is a combination of the raw dividend for 2020 and a compensation for the lower dividend in 2019. In regard of the Apleona proceeds, I understand that you would like to know how we intend to spend this money, but as this will only be included in the basis 2021 in the German books, so the impact based on HGB will be coming in 2021.
This discussion is still open. Of course, we have recently started, we know the money will cash-wise fall into the second quarter. We have started to look at this, but no decisions have been taken. We are considering all options here. And a s I think both Duncan and I would underline, we see also good opportunities to spend at least a part of it in further developing Bilfinger, looking into the M&A area. We believe that we are now stable enough and in a good position to also add one or another acquisition to the Bilfinger portfolio.
But as said, all options are open, and we will discuss this with the supervisory board during 2021. Looking at your second question, the working capital. I think if you look at the Q numbers in the presentation, it was given the fact that we are in a special year, it was a sensationally good quarter four, even if we are, I think, famous for the swings during the year. We had a good catch up in quarter three and a further improvement in quarter four.
The typical intra-year swings during the year, due to the seasonality, but maybe also a little bit due to what kind of focus the operational people are putting and the effort into the working capital. I would say that the swings are around EUR 100 million in a normal year. That would be a figure that I would feel comfortable to mention.
Mm-hmm. Thank you.
Duncan, would you like to proceed to question number three, the inflation and the cost increases that Craig raised?
No problem. Thanks, Craig. Nice to hear you.
Hi, Duncan.
It's an interesting question. I'll deal with it in two aspects. First of all, your point around rising costs. The bulk of our costs are obviously labor cost, around wages. When we're doing work, whether on a framework maintenance or whether on a project, materials are generally placed at the outset or are linked to the actual cost in a mechanism. We have very little exposure when it comes to material cost. Wages cost, as you rightly said, the bulk of our costs are covered in most of our contracts by inflationary clauses.
It is actually part of our minimum standards that when we're approving contracts, that we have escalation clauses within all of our contracts as we go forward. We are looking, though, I referenced it in the presentation, at how can we source lower cost European labor as part of supplementing what we already have as we continue to grow. We want to get, as the Polish economy continues to improve, wages in Poland are more attractive, and hence we need to find other areas where we can get equally good labor but maybe at slightly lower costs.
Our key weapon in this, to be honest, is about efficiency, where timely we can recover our costs, we can recover the wage inflation. Actually what we do very well is continue to improve efficiency so that customers aren't impacted by those wage escalations. What we try and do every year is match efficiency improvements to any cost escalation. That is always our ambition. You can't continue it forever, it is an ambition and it's why customers keep on working with us and we have long-term frame contracts.
Nuclear decommissioning. A general answer, first of all, about decommissioning. Decommissioning is never as good as managing and operating and building. There's never as much revenue in destroying something as when you build it and operate it. That's the same offshore as it is onshore. In both of those areas, yes, there is work to come. We've been very successful in 2020 in delivering a nice project in Germany in the mid-double- digit millions, and we expect that sort of level of expenditure will continue within the next 10 years.
So it's a good market. It's a market where we have very good skills to help our customers do this really safely, but it is not a major growth area. A good, steady market that uses our skills to ensure customers can decommission their assets safely.
Okay. Thank you, both of you, for the very clear answers. Thank you.
Okay. Our next question comes from Eric Lemarié from Bryan, Garnier.
Good afternoon. Three questions from my side, please. First one, you mentioned your digital offering during this presentation. Could you tell us the revenues generated today by this offering? First question. Second question, two days ago, you mentioned this plant modification you're implementing for one of your clients in the biotech industry, you mentioned your Qubicon software. Should we expect some bolt-ons within the software industry for Bilfinger going forward?
Maybe could you tell us the revenues generated by the software for Bilfinger in 2020? Last question, really, I'm curious, should we expect that you can be impacted by the recent announcement of delays at Hinkley Point? Is it not the case, or is there any type of risk for Bilfinger there? Thank you.
Thank you very much, Eric. I think I will pass all three questions to Duncan, if that's okay.
Yes, no problem. I may have to come back for some clarification on the second one, Eric, that I didn't fully catch, but I'll answer the first and third one first. I'll give you quite a trite answer when it comes to our digital offerings and revenues. It's about EUR 3.4 billion, because it is in the core of our offering. Yeah. Our whole premise here is that we are an engineering services business. We deliver OpEx and CapEx. We aren't a software business, but we use software to be more and more efficient, and that's what our customers like.
We are not looking to sell software as a major independent service to our customers. It's part of what we do. It's part of how we deliver more and more efficiency and on-time services. Coming to Hinkley Point, we are now commencing our work. Welding is underway. Yeah. The first two truckloads of pipework have left our Dortmund workshop, all boxed up, ready to go, facing the Brexit challenge of getting it over the channel. That will happen. I don't think there's any ham sandwiches in the load.
That's good. We're not impacted by the delays from a perspective of our revenue forecast. We are presently looking at the schedule, and working how we can accelerate our work to try and recover some of the delays that have happened to date. It's a challenge. We're up for it. We're working very closely with our NNB partners in the MEH Alliance on the site. We don't see that we will be impacted in any negative way from the overall project delays that have been announced recently.
Okay. I guess my second question you need to answer.
Yes
I discover actually your Qubicon software, you mentioned it, I think it was three days ago when you announced this modification plan for the corona vaccine production.
Oh, yes.
I was wondering if you would be happy to strengthen, or to muscle your software proposal to your clients.
Yeah. I mean part of the area that we've just formulated our life science division as part of technologies is all actually around bringing in our automation business far more closely aligned to our ITS biopharma business. This is where we're now seeing the likes of the software developments that we're doing in the COVID areas come through and really build some good traction in the market.
It's a good area. In terms of significant revenues going forward, it will be good revenues going forward, and will support our growth within that life science area, where we are looking for well above what we anticipate growing in the rest of the business. I hope that sort of answered the question for you.
Thank you.
Okay. Eric, fine with you?
Yes.
Good. We move on to Christian Korth, HSBC. Line is open.
Thank you very much, and good afternoon. I have a few questions around the revenue outlook and how we should think about it. I appreciate you said that you do not expect to reach the 2019 level in 2021, but by which year do you expect to reach this? Is 2022 the year to look at here? When you said significant revenue growth in 2021, are you talking about something like north of 5% or even more north of 10%? The second question is in the context of the mid-term target of EUR 5 billion revenue.
Without M&A, I think you would need an annual organic growth rate of about 10% roughly. How far should we think about M&A in the future? Could you get there even without M&A, or is it a necessity to do something here? The third question is just a double check. If you could please confirm the difference between reported and adjusted free cash flow. This includes, I understood the settlement with the former board members, and then something else that I didn't really understand, if maybe you could clarify.
The last question deals with technology. You correctly said that the division delivered positive results in the third and in the fourth quarter. I just would like to ask, do you think the division is fully back on track? Is that going to be fine going forward, or is there any further need to restructure the business or change something in the way that it operates currently? Thank you very much.
Thank you, Christian. I will try to cover this, and please feel free if I missed any detail here. Looking at the revenue outlook, clearly saying that we will have a significant improvement in 2021 versus 2020, but not yet being back on the level where we were in 2019. Of course, the missing part here is some of the decreases that we have seen in oil and gas, where I also clearly have said that we are not expecting to get back to the same level. We should also keep in mind that we have divested in 2020 some entities.
A straightforward answer, yes, 2022, I think we will be close to the level that we had in 2019. Midterm targets, I feel very confident to say that on an organic basis, we expect to get to the 5% EBITDA within this period of time, only on the basis of organic. When we look at the EUR 5 billion top line, I think it will be to a large extent organic growth. I don't think we will be able, if your number is the one that you said, 10% organic growth year-on-year, I think the number is a little bit lower.
I think it will require one or another bolt-on acquisition here. Not major acquisitions, but some bolt-on acquisitions in this period of time to also give us, I would say a bit of speed on the organic side here. The main part will be organic. What is included in the cash out on adjustments? The numbers I mentioned were the P&L impact of the EUR 77 million. If you look at Oh, the settlement.
Yes. Okay. Bettina is helping me here to clarify. The settlement that was done in the first half of 2020 gave us a cash impact positive of EUR 17 million from that settlement, obviously paid by the insurance company. It was a + EUR 17 million versus the negative IT investments, restructuring, and some smaller capital losses. Technologies division fully back on track. I have been with Bilfinger now for two and a half years, and technologies has been a very challenging segment for us.
It's always difficult to say fully back on track, even if the last six months have been positive. I would say we have stabilized technologies. We have stabilized all legal entities except one legal entity that we are trying to find a new strategic route for. And I think this remaining legal entity makes the difference between fully back on track and stabilizing.
So in principle, we are very happy with the second half performance, but one legal entity is still the remaining risk that we have here strategically. We are with very strong work here, trying to find also a new strategic position for this entity. I hope, Christian, that covered it.
Yes. I'm sorry.
Thank you. Go on.
Yes. Just maybe one last question and a clarification on significant revenue growth. Do you have a standing definition what that means?
I would say in our world, we are talking about something that is slightly better than 10%.
Great. Thank you very much.
I think Yeah. Okay. Thank you.
Okay, next question comes from Gregor Kuglitsch, UBS.
Hi. Good afternoon. Thanks for taking my questions. I have a question on cash flow and the cash flow guidance. You're obviously flagging the cash flow will be lower in the year ahead. Can you just help us out whether that already takes care of the entire EUR 70 million, I think that you flagged sort of restructuring/legacy, whatever, cash out in the net cash bridge. Is that already fully unwound in that figure, please?
Maybe related to that, if you could help us on how things, for instance, such as working capital, assuming the revenue growth that you're going for, which is, as you just said, north of 10%, so maybe EUR 400 million or EUR 500 million of additional revenues. What should we be thinking about the sort of reverse of the other way in terms of working capital? Is it a good rule of thumb to say maybe 10% of that increase? I think that's your ratio. Similarly, CapEx, which has obviously cut very significantly to only EUR 27 million.
If you could just give us a sense where that sort of normalizes, please? Sorry, that was one question on cash. I know it was three, in fact, but anyways. The second question is going back to your comment on dividends and Apleona. If you just maybe, I'm going to ask you a bit differently. What do you think the right capital structure for the business is? What kind of level of net cash do you think you should hold as a sort of going concern or your comfort level, I guess?
Finally, the third question is probably you won't answer, but if you could just give us any commentary around the ongoing speculation of takeover. Can you confirm or deny that people are doing due diligence on the company? Thank you.
Thank you, Gregor. Just a moment.
The first question was whether all the restructuring expenses are included in our cash flow guidance for 2021.
The EUR 19 million remaining, right?
Yeah. I will try to cover your questions here. The cash flow where we are saying it will be not in line with the cash flow generation that we had in 2020. Yes, we have included both the increase in working capital and that the increase in revenue will require. We have also included, I would say, a normalized capital expenditure. We have, last but not least, also included that I mentioned before that over P&L, we had EUR 77 million of restructuring in 2020, and quite a significant part of that will only be cash out in 2021.
We have an effect from the working capital based on the revenue increase. We have an impact from a normalized capital expenditure level, and we also have the restructuring cash out that will then obviously have a cash impact negative on 2021. All have been included accordingly.
Okay. Thank you.
Second question was about reversal or the increase in working capital. How much would that translate, roughly 10% was the assumption?
Yeah.
Potential of the additional sales, right? Yeah.
Yeah. It's an appropriate number, yes. Of course, the mixture that is not fully transparent yet would have an impact, depending on what kind of increase it is, but I would say it's the best number you can utilize right now. Moving on to the topic around Apleona, the money to come in in quarter two and how to utilize this. I come back to the same reply. The news came in December, and we have not yet looked into the different opportunities that we have, how to spend this money, how to use the money. It's quite an open discussion.
Obviously, as I said before, we are ready to also take on some acquisitions. We are able to successfully integrate and drive the synergies. I think as a board member, executive board member, for sure, we also have an M&A strategy here. I think right now there are also some of these targets that are interesting. It will be an interesting discussion here going forward, and I'm sure we will let you know. Right now, the decision is still open.
I think looking at the balance sheet, I think going through this transformation that Bilfinger has been going through and also partly now have a couple of years to conclude and finalize. We have all the way through had quite a conservative balance sheet. Which when you are stabilizing and you are able to generate more cash out of the business in a more reliable way, you can probably also leverage on that balance sheet a bit more than what we have done in the past.
I think there are also opportunities out of our balance sheet and our improvements in the cash flow generation to not only rely on the Apleona money for further M&A strategy. I hope that is as much as I can say right now.
Thank you.
The last question in regard on the speculations. As a matter of principle, I have to say Bilfinger does not comment on rumors and speculations. The executive board is clearly focusing on developing the company further, now getting back to pre-COVID times in regard of revenue and profitability as soon as possible, and to continue this transformation journey. No further remark to that.
Okay. Thank you very much.
Okay. All right. Thank you, Gregor. Next question comes from Stephan Bonhage from Metzler. [Non-English content] Bonhage?
Hello, do you hear me?
Yeah, now we can hear you.
Yeah. Hi, good afternoon from my side. I have three questions. The first one is on your international segment. I want to know what are your main approaches to revive this business in the current fiscal year? I think you mentioned an attractive project pipeline. Can you be more specific about that? What kind of this project pipeline could be materialized into sales? The second one is also on the pipeline in the nuclear segment. One of the sales side colleagues already mentioned the decommissioning projects in Germany.
I think this will not be the only project you are looking on. Maybe you can provide here more details. The third question is regarding your strategy in the field of renewable green energy. I think it's a quite hot market. How do you see your position here, and what are your main target markets, and how do you want to drive revenues in this field?
Thank you, Stephan. I suggest maybe, Duncan, that you start off, and I'm happy to add anything, if you would like to start to answer the three questions.
Yeah, no problem. Thanks, Stephan. The international markets, the reference there is mainly the U.S., where, yes, we've got a decent pipeline. We've already secured a significant order in January, in the low triple-digit millions, dollars that is, which is very positive. Got us off to a good start. Doesn't fully sort out our challenge over there, but it's a very positive start. What is key for us there is actually to balance our portfolio a little bit more, have a more sustainable framework contract in maintenance as we do in other parts of the world.
We are not as exposed to some of the cyclical nature that you see in the U.S. on project investments. We made good starts on that as well as some very good opportunities, where we've got bid in at the moment for significant framework contracts and also improving our margin on some of our existing ones as well by adding a new team in there who are far more experienced in this maintenance environment. On the nuclear side, yes, there are more projects.
As you will be aware, there's a significant nuclear new build program in the U.K. We are a nominated Tier 1 supplier into EDF, and discussions around Sizewell C are presently underway. Positive announcements have been made in recent times on that project getting green-lighted. The team that is executing Hinkley Point C is slated at the moment to then transfer onto Sizewell, and deliver that with high efficiency gains and hence reduced cost for EDF. We are very positive about that.
In the renewable areas, which is where, again, we've got a very focused team out of our global development organization, and we have leaders, in a number of specific verticals around renewables. Green plastics. Whether this is conversion for energy or conversion into feedstock into refineries for biofuels. Hydrogen is obviously a big area for us as well, where we're looking at green hydrogen plants as well as gray hydrogen plants. In two areas.
As a Tier 1 supplier, where we are looking to be an integrator within this, in some of the smaller investments, where we would not only look at how do you generate the electricity, but we then install also the hydrogen cells and then the storage area and the transmission medium to then get that either out into the community or transferred into the grid in some way.
There's the Tier 2 areas of where for the more significant investment areas of hydrogen, we will be operating with our integrated project team, with technology suppliers who are experts in this, and we being more of a traditional Tier 2 design and construction supply area as we do in a number of other larger projects at the moment. On top of that, there's some nice side markets where our offshore businesses, for instance, are expanding into wind.
There's some nice opportunities moving into the wind areas, where we have our allied skills to use rope access and inspection within those areas. Solar as well is a very good opportunity for us where we can use our electrical skills. Christina, you can add anything?
Well, the only thing is the first question, how to revive the business in North America. I'm a CFO, so I'm always honest. I think 2018, 2019 were extremely good years for Bilfinger in North America, thanks to some large projects. It's the classical. You get appetite for further large projects. I think for a while we were focusing too much in the project business on getting another or two others large projects. I think we have now changed. The second half of 2020, the approach has been to also have appetite to midsize and smaller projects.
In the meantime, we are not rejecting another good large project. In project business, it's very easy to run after the big ones. I think we need to focus on both. That is what we are doing right now. So w e will need some time to pick up on the project business side again in North America. We are now having a stronger focus on midsize and smaller projects again, where there are more to bid for, but also our chance of winning them is significantly higher.
So it will take some time. Order intake is a priority in North America for 2021, our expectation are that we will benefit from that, from 2022 in E&M International start to really see good top-line numbers again.
Thanks, Christina. I'd just like to take the opportunity, by the way, to come back to Eric's question as I was a little bit in the digital space, and it reminded me actually, this is what I saw as the BCAP batch process, the Qubicon area. This is where we use our BCAP. It's built in a connected asset performance of where we take a variety of inputs to predict performance, not just the straightforward control systems. That improves batch performance within the biopharma area.
You get more reliability and less reject batches. It's a very good system and we're seeing some strong interest in that. And that's really going to keep us at the forefront of that market going forward. My apologies for not recognizing the reference instantly, but it's part of our BCAP development, and now we've moved it on to calling it Qubicon.
Good. If you want to pose a question, please press zero and one, and to withdraw, please press zero and two. There are no further questions, so I think we conclude today's call. Thanks for participating, and we wish you all the best for the coming weeks and months. Stay healthy and we'll speak to you latest again in May. Thank you very much and bye-bye.
Thank you.
Thank you.