Hello, and welcome to the Analyst and Media Conference on Implenia's half year results 2024 . We are delighted to be able to present our results to you again here in Connect, and we also welcome the stream attendees to the presentation. My name is Silvan Merki, I am Implenia's Chief Communications Officer, and I will be accompanying you through the event today. Our presentation will be held in German. For all those who are attending via the stream, you can select the English language.
You may then ask your questions here in the room, in the stream's chat, or even by phone, in German or in English. But before we start, I would like to draw your attention to the disclaimer shown here. Today, we shall present the following: First, you will receive a business update from our CEO, André Wyss, on the half year results, and our CFO, Stefan Baumgärtner, will then take you through the financial figures.
This will be followed by a market outlook. Jens Vollmar, Division Head Buildings, and Marc Brülhart, Head of Region Northwest at Buildings, will briefly explain our Value Assurance process using a current project as an example. At last but not least, we will be able to answer your questions. Now I'll hand over to André for the first part. André, the floor is yours. Thank you very much, Silvan. Hello, everyone. Good morning. Implenia has had another strong half year. We achieved a good EBIT level and solid sales growth.
We have further increased the equity ratio, and we can confirm our targets for 2024 as expected. But now to the details. Foreign currency effects are low this year, which is why we show all the figures directly and inclusively. Civil Engineering increased its order backlog to a new high of CHF 4.6 billion. This shows that our range and expertise are in demand on the market. Sales were slightly below the previous year's level, and the EBIT, at the end of the first half of the year, already reached CHF 12.2 million.
And due to the otherwise strong seasonality of the business, this result exceeded our expectations. Many years of experience and extensive expertise in large and complex infrastructure projects position the division optimally on the market. Implenia is making an important contribution to sustainable mobility and energy infrastructure in Europe. One example is the Sofia Metro Station in Stockholm, the impressive Rogfast Tunnel project in Norway, or the Sisikon Tunnel as part of the new Axen Road on Lake Lucerne.
These projects are technical masterpieces that confirm our experience and expertise in large, complex infrastructure projects. Specialties was able to further increase its order backlog. At CHF 81 million, sales were well above the previous year's level. EBIT also showed continuous growth to CHF 1.6 million, and the division continues to expand its high-margin areas. One example of this is the new Incera business unit, which specializes in consulting and planning for building physics, acoustics, sustainability, and energy.
Specialties is involved in numerous attractive projects, for example, at Frankfurt Airport, the Elbe Bridge in Wittenberg, or at the headquarters of the Raiffeisen Bank in Lucerne. But before I hand over to Stefan Baumgärtner for the financial update, here's a short video that will give you an insight into our current projects of our four divisions.
Implenia is building three high-performance data centers for Green on the Metro-Campus Zürich. Data and digital processes are used continuously to optimize the construction timetable. BIM-to-Field ensures that data from the planning stage is implemented directly on the construction site. Together with his team, he ensures that deadlines and budgets are met, quality is assured, and any changes to the plan are handled flexibly. Such skills are particularly in demand here. A huge project is currently underway to build an additional 30 kilometers of Metro line, as well as 18 new stations.
Sofia Station is one of them. Located around 100 meters below the surface, it will be one of the deepest subway stations in the world. We are building a total of six kilometers of tunnel and the subway station with an elevator shaft for eight high-speed elevators. Each individual task requires specific expertise and precise execution. It's a once-in-a-lifetime project for all of us with incredible team spirit. Everyone can contribute with their expertise, and together, we are successful.
A very green neighborhood is currently being built on a 60,000 square meter site in the heart of Geneva's international district. The pioneering Green Village site will be completely finished by 2030. The future is taking shape impressively at Frankfurt Airport. Terminal 3 is currently one of the largest, purely privately funded infrastructure projects in Europe. From 2026, around 19 million passengers will arrive and depart each year from Terminal 3.
[Foreign language] Grüezi miteinander. Hello, everyone. I am pleased to present the figures for the first half of 2024. As André already mentioned, the foreign currency effects in this half year were lower than in the previous years. These effects had a slightly negative impact. Adjusted for currency effects, the order backlog totaled CHF 7.1 billion Swiss francs, and thus remains very high. Currency-adjusted sales totaled around CHF 1.8 billion. This is an increase of 2.7% compared to the previous year. We achieved a currency-adjusted EBIT of CHF 51.3 million, excluding real estate sales.
The P&L or income statement shows the reported results, including foreign currency effects. In the first half of 2024, we once again achieved a good EBIT of CHF 50.5 million, and we're therefore slightly above the previous year level. All divisions generated the result through positive EBIT contributions. In relation to sales of CHF 1.7 billion, this results in an EBIT margin of 2.9%. Due to the early refinancing and the bond maturing in October 2024, the financial result increased slightly. Tax expenses have returned to a normalized level.
Implenia achieved a net profit of CHF 26.4 million, which is a good result, considering the seasonal nature of the business and the current market environment. In the first half year of 2024, the free cash flow totaled -CHF 208.6 million, excluding the purchase price paid for Wincasa. Advance payments from customers also fell as a result of the high interest rates, which had an impact on free cash flow. We expect the situation to improve slightly as a result of falling interest rates. Cash and cash equivalents were lower due to seasonal factors.
In addition, we paid the second installment of the purchase price for Wincasa, totaling CHF 71.6 million, and made significant land purchases amounting to around CHF 45 million. When comparing the cash flow from operating and investing activities with 2023, it should be noted that the 2023 presentation was influenced by the Wincasa acquisition. We continue to expect a sustained positive free cash flow each year from the profitable operating business of all divisions.
At the end of June, cash and cash equivalents totaled CHF 218.1 million, and were thus, as usual, seasonally lower, but at the same level of the previous year. The issue of the CHF 175 million bond led to a temporary increase in short-term fixed term deposits. CHF 125 million of this amount is intended for refinancing the bond maturing in October. We continue to make targeted investments in our own attractive real estate portfolio, our Land Bank. The other current liabilities include the obligations expiring in October 2024 and expiring in June 2025.
Due to the payment of the second installment of the Wincasa purchase price, current liabilities decreased compared to the end of 2023. Non-current financial liabilities increased by the amount of the new bond. With the positive consolidated result, we further strengthened equity to over CHF 600 million, which corresponds to a year-on-year improvement of 20%. As a consequence, this results in an improved equity ratio of 20.5%, excluding the temporary impact of the fixed term deposits...
For more than three years, we have consistently generated an EBIT of over CHF 40 million in the seasonally weaker first half of the year. It should also be emphasized that Implenia achieved strong free cash flows in the second half of the year. In addition, we have almost doubled our equity ratio in the last three years.
Implenia expects continued sustainable financial development, thanks to its strong operating business. For the 2024 annual financial statements, we confirm the profitability target of around CHF 130 million EBIT, supported by a strong operating business in a challenging market environment. In the medium term, we are still aiming for an EBIT margin of over 4.5% and an equity ratio of 25%. And so back to André for the market outlook.
Thank you, Stefan.
Thank you, Stefan. The megatrends of population growth, urbanization, and energy transition are driving demand for complex property and infrastructure projects. Implenia's range of services and expertise are geared precisely to making the best possible use of these opportunities. We expect a positive trend in total construction output in Switzerland, but also in Europe. Only the German market for residential construction remains challenging, particularly due to inflation and also higher financing costs. Our strategic focus on large and complex project pays off.
So we are not very affected by the low demand for smaller residential property developments in Germany. We see positive growth forecasts for the civil engineering division in all of our geographical markets. And now follows a brief excursus. As aforementioned, value assurance is our most important process for ensuring value creation in our projects. This concerns financial and contractual parameters, as well as quality and adherence to deadlines. It is a holistic approach that goes beyond conventional risk management, by also covering cultural and organizational aspects.
Since mid-2019, all our projects have gone through the value assurance process, from selection and tender preparation to finalization. Jens Vollmar and Marc Brülhart will give us an example of the process. Jens, Marc, the floor is yours. Thank you very much, André. We are very happy, delighted, to take over the part, the application of our value assurance approach today. So we have DBM, that is the biomedical building of Basel.
The first reason is that it is a very big project, and it really exceeds in all the competencies of employee, and we have the laboratory and also the research buildings, and it also underlines the strategic approach from Implenia. Here is a short introductory video about the project. ...
Implenia, as a total contractor, is planning and building a new laboratory building for the University of Basel's Biomedicine Department. An eight-story facility for cutting-edge medical research and teaching with laboratories, offices, and seminar rooms is being built on the Life Science campus.
[Foreign language] Implenia hat langjährige Erfahrung im Bau von Immobilien für Forschung und Medizin. Beim komplexen Projekt DBM bringen unsere Spezialisten bis zur Übergabe im Jahr zweitausendneunundzwanzig ihre umfassende Expertise ein.
The building meets the highest architectural, technical, and hygienic standards. With space so tight at the city center, smart logistics and planning are absolutely crucial.
[Foreign language] Durch den Einsatz neuester digitaler Methoden wie BIM, Lean und Virtual Reality sichern wir Kosten, Qualität und Termine. Doch es hört nicht auf beim Bau. Die Daten sind auch später im Betrieb sehr wichtig für unsere Kunden.
First-class building infrastructure to maintain Switzerland's status as a leading research location. Implenia, expertise and research infrastructure.
[Foreign language] Im Vergleich zu gewissen anderen Projekten. So compared to other projects, this project had a competence-oriented award criterion, and that was very important for us, and the customer awarded this important project to Implenia, primarily because of our experience and references. A few years ago, for example, Implenia founded and implemented a specialized organization that deals exclusively with the planning and construction of healthcare and laboratory buildings. The Value Assurance project, which every single one of our projects goes through in this standardized way.
Each project is categorized by independent Value Assurance team during the evaluation, based on the exposure level in one of our four classes. So we have, in each class, a Value Assurance committee consisting of one business, one finance, and one legal person, and all decisions must be unanimous, and in the event of disagreement, the project is escalated to the next higher, exposure level. And during all project phases, there are several Value Assurance meetings in which the committee makes decisions, and there are, for example, for the tender approval meeting, that's when we gather together.
There are at least two, but there could be more, many more meetings. Marc, who employs the specialists for healthcare and laboratory buildings in this unit, will now explain the specific application using the DBM as an example. Marc, the floor is yours. So the project, this is how the DBM project worked in practice. So due to its size, complexity, technical requirements, and contractual requirements and contractual constellation, project was categorized as a class one project. Accordingly, the committee is made up of the head of Buildings Division, CFO, the general counsel, and the CEO.
The independent Value Assurance team was involved in the project on various occasions during the tender phase. For example, there was a mid-tender review to assess the construction costs and the opportunities and risks, post-specific opportunities and risks. Here you can see in all phases the various standardized templates that are completed by both the project team and the Value Assurance team. These serve as an example, clearly, and also the people taking then the decisions and helps them to have a quick overview of the parameters of the project.
The market evaluation phase, we focus more on the strategic fit of the potential project, and then that ensures that minimum criteria are met. We want to know what to invest and on which premises. The tender phase focuses on the detailed calculation of risks and opportunities, and evaluates the possible contractual risks. This is a very important phase because the success of the project depends on these prior definitions. The focus of the realization phase ensures that the early identification of risks remains, and deviations, as well as the mitigation of risks, are also taken into consideration.
With the Value Assurance team, we are always in a very narrow exchange, and we are able then to mitigate any kind of risk that may come. This is what the templates are intended for. The strategic fit was given, and the necessary specialized skills were available in-house at Implenia. And so during this phase, it was very important for us to utilize the expertise of our various internal units and not external help. And we had to use, or we want to use as our internal units, such as master builder, specialist foundation engineering, also construction logistics.
And we also had to ensure that the expected margin would be at least within the target range, in line with the opportunity risk profile of the project. After three providers were pre-qualified, our focus during the tender phase was on the detailed construction costs, the EBIT, and the cash flow calculations, as well as assessing the opportunities and risks of the project. So, it's very important that to us that each project generates pre-calculated cash flows, positive ones, and EBITs over its entire term.
And based on our experience with similar projects, these have been plausibility checks, and adequate risk provisioning had been factored in. And there was also an in-depth contract review that took place. So, due to the recent outbreak of the war in Ukraine, and also the ongoing COVID-19 pandemic, issues such as inflation regulations were particularly relevant for such long-term projects. And once we had been awarded the contract for the project, a process began with tracking at various levels.
And on the one hand, there's a project level where the commercial manager of the project team continuously monitors sales and construction costs, as well as cash flow and margin development. Monthly delimitation discussions are held with the finance business partner at regional management level, and the Implenia group's financial planning and analysis team regularly conducts a supplementary result delivery assessment, and the independent value assurance team will carry out a deep dive project review this year.
Thank you very much. Yeah, I can also confirm all this as I belong then to this team. And I can say that we are on track with this project. So we have thus given you a deeper insight how value assurance is lived in concrete terms in the project, and we are convinced that the process will continue to make a significant contribution to achieve the operational and financial targets. And so back to you, André. T
hank you very much, Jens and Marc. I hope that we were able to give you an overview how a project is treated and dealt with in Implenia. The successful first half year of the year lays a strong foundation for achieving our goals for 2024. I have decided then to ... take on new challenges here at Implenia. The group, following the transformation, is optimally positioned. It can continue to grow profitability, profitably on a sustainable basis and is ready for the next strategic phase.
The board of directors has appointed Jens Vollmar as CEO of Implenia, with effect as of the 1st of April, 2025 . I look forward to continuing to work with you until the next spring, when I will seamlessly hand over my responsibilities as CEO to Jens Vollmar. Also, in the division then of Civil Engineering, there will be a change in management. Christian Späth will step down from his role at the end of August 2024, and take on a new external challenge.
Erwin Scherer, also an internal candidate, will take over the position of Head of Division Civil Engineering and member of Implenia Executive Committee as of the first of September. I thank Christian Späth for his great commitment, and I wish Erwin Scherer a good start in his new role. The successful first half year lays a strong foundation for achieving our goals for 2024. With a lot of variety, diverse and specialized skills, many years of experience, and also our discipline Value Assurance approach, we demonstrate that we can deliver the most demanding projects reliably and profitably.
I thank you for your attention. Now back to Silvan. Many thanks, André. I would like to draw your attention to the next date. On the 26th of February, 2025 , we will present the 2024 annual results of Implenia, and we will hold our annual general meeting on the 25th of March, 2025 . If you have any further questions following this event, please get in touch with the already known contacts. And now let's move on to the questions and answers session. I would like to ask then our CEO and CFO to come here.
So we have the possibility then to ask questions via the chat, or by phone, or here in the room. So who would like to ask the first question? Please state your name very briefly, for which organization you work, and then please pose your question. Thank you very much. My name is Martin Huser from the Zurich Cantonal Bank. I have three questions, actually, and I will ask them one after the other. So in the financial results, or let's say in the P&L, I noticed that there is an essential contribution for the EBIT, and those were, let's say, working communities.
So as far as I understand, these have not been fully consolidated, so the EBIT contribution went from CHF 11 million to CHF 31 million. What were the reasons for this successful business with this working communities? Were they just individual projects, or was it something more vast? Stefan, I think that is a perfect question for you. Thank you very much, Martin. Well, yes, of course, the working communities are very important and also constitute part of our projects.
Yes, in the last half year, we had very good contributions that were generated from these very large committees, and some of these projects have even been concluded with a positive result. Okay, best thanks. All right, so thank you very much. Perhaps another question to the CFO. So the market value of the Land Bank, what is, what is the value, or can you tell me more about the delta, the variation? Maybe I'll answer to the first part. So the Land Bank, we don't have it evaluated regularly, especially not every semester, because it demands great effort and very, also costly.
And so I think it we just bought it for CHF 45 million. So it hasn't been accurately then assessed or evaluated, just to let you know. Just to add something, so there are significant purchases that are done in the first half year, and the difference is not much greater than per end of 2023. Thank you very much. The last question. Das Marktumfeld in der- The market environment in Switzerland, especially then in construction, with Steiner, for example, is becoming stronger. Can you tell me, is the market environment a bit calmer, more relaxed, or are there more opportunities?
Steiner, I mean, you know, we are always... We don't really like it when there are competitors or partners that get any problems. We really don't want that. We prefer to have strong partners. As far as the market environment goes, that's not going to have a direct influence on us. The market environment is quite tense, especially in residential construction, but that's not our strategy. We don't go on to residential and smaller constructions or smaller buildings. We go on to bigger projects and... or also bigger customers, for example, where the cyclical behavior isn't so typical. And so, so it's more of a subproblem for us.
You cannot then, let's say, compare it to others, mid-sized, middle-sized, or medium-sized competitors, companies. To whom can I give the microphone now? Who would like to ask the next question? Dominik? Yeah, Dominik. Yes, Dominik Feldges from the NZZ newspaper. Yes, perhaps to just relate to the first one, what are your expectations for the construction industry in Europe? There is a lot of optimism in the European economy, especially industries such as automobile and machining and pharmaceutical, among other things.
I mean, they are all laying off employees and also burdenings of, in the, let's say, public treasuries and administrative. Even in Switzerland, there's more than a loss of CHF 1 billion for hospitals that needs to be covered in one way or another. So perhaps is our, let's say, era of wonderful construction business over in Europe? Or perhaps you will give that or hand that over to your successor. I also looked at the margins and also growth rates of very important competitors, as they have been mentioned by the ZKB, Zürcher Kantonalbank.
So you see those 4.5% that you are endeavoring or that you are aiming for, they are attainable according to your forecasts, of course. If you compare your competitors, Strabag and others. Why are you not even further than that? Thank you very much for both questions. So for the first one, regarding the market, I think you never listened to me over the past six years that the market would pose a problem for us, for our growth. We are very optimistic about the market. There's no need to speak about the German market with the smaller residential projects.
That has always been a project, but that's not our strategy. Infrastructure is very positive, in my opinion, also bigger complex infrastructure projects. If you look at the results and the figures of it. It is very positive, especially when in terms of infrastructure. And we are going to keep our strategy, maintain our strategy for the infrastructure. Maybe there will be a flattening of the curve, but we continue to grow. It's not that we just run after every project.
We can choose which project we want to adopt or we want to carry through, and that is something very positive, and that is in the case in all markets where we are present. So we are very optimistic as far as the market goes, where we are active. The entire market, especially small residential buildings, I think that will probably still be faced with problems for a certain time. You know, urbanization and population growth continue to increase, and people need to find some places to live, but I think that has more to do with politics. Our percentage, 4.5%, well, that is the portfolio of a company.
If you have a portfolio with concessions or consensus or incoming streams, well, you can attain such a result much faster than if you only have a pure construction activity. With our construction business, you cannot go beyond four point five, especially if the market situation does not change. But I am convinced that the margins will grow or will increase, especially with greater projects, if we are able then to accomplish them. We have to be able to do so.
So our portfolio will continue to change, will continue to develop, and we have always said, we are always looking at the targets pro and in the past and forward and and backwards, and we will continue to expand our activities. Once you have constructed one hospital, you have a certain margin, and if you have done several, then you have more margins and even a greater margin in the end. And so those are the three components, or let's say, the elements on which we base our work and which we work. And, as I said, I am very optimistic, especially in the long term.
So thank you very much. Another question here at the front. Olga Fritsch, Zürcher Kantonalbank. I have three very brief questions. One to Wincasa, you said that the EBIT was 1.8 million, I think you said. Can you tell me how that developed versus the previous year? And then also, then the dissolution of reserves. Can you perhaps tell us, give us some background info, what it's about here, and also regarding real estate activities, the CHF 48 million. Can you tell us then more about the transactions, more details about the transactions?
So Wincasa, yes, so very makes us very happy. Integration was a great success, also concluded, and the expectations had been fulfilled. And the synergies, we have been able to use them and attain them, and so we are right just on track. And at the moment, we don't see any other obstacles that would impair our success. And so you will hear more about that over the years. And then the we don't have an EBIT margin, but you can look at a business case and presume that the it's just, it's the same level as business case, if not even better.
Utilization of reserves, we regarding the project, we were able to conclude some projects, and so we were able then to expand our reserves. Regarding the real estate portfolio, there are two transactions mainly, but there although there are some smaller or minor ones to include, and then some that we purchased outside Zurich. So one is in Morges, and one in the urban area of the city of Zurich, and also another external one, a smaller one. And there are always some smaller transactions that we don't care to mention, but there are two major transactions, one in Morges and the one in Zurich.
T hank you very much. Who would like to have the microphone for the next question? Otherwise, well, you can just continue to think about questions. Rayan Rivera from Finanz und Wirtschaft. Is André now a professional, then, let's say, board of directors with various mandates? Yes, I'm going then to retreat from my operational activities, but only at the end of March 2025 , and then I look forward to also attend then the general meeting. And then afterwards, I am going to concentrate on existing and new mandates.
Okay, thank you very much, Rayan, for this question. Who would like to have the microphone here in the room? Yes, here in the front. Yeah, Marc Possa. Yes, Marc Possa from zCapital. I have a question regarding the classification in those four classes. Can you perhaps give us an impression of where the pondering, the weight takes place, and the impact of artificial intelligence so to improve the quality of the projects, and so that you can also expand or increase your margin? And that's a very, very good question. We speak about this at the board of directors.
So let's start with artificial intelligence. Absolutely. So it's based on data, so we need as much data as possible in order to be able to use AI. We're already doing that, but you know that as long as the data are still on Excel sheets or PowerPoints, we were unable to then, let's say, include or enter this data from there. You can, you know, make a comparison with external data because of certain obstacles. You know, it's also a question of how much are we ready then to reveal. If you go now to the four classes or the category, we had risk management.
We said CHF 2 million, CHF 1.5 million, CHF 1 million, and under CHF 1 million. That was one criteria. Another criteria is, do we have or have we already executed such a project? If we have, okay, if we haven't, when a project has a certain size, it automatically becomes a class one. Also in a region where we have never worked before, that will be a class one project. It has to do with the complexity, of course, and the criteria are quite difficult to recognize insofar, you know, to know in which class it will or in which class it will be categorized.
We do some fine-tuning when we notice that a project that is going to become class two, but we think that it should be a class one project, then we need to adjust our criteria. We don't do that at the beginning of the year; we do that, you know, over time. You can imagine then, a class one, for example, someone who goes to the CFO, to CEO and general counsel, it's, probably the class two, and then the class four are the very small projects, and we don't have that many, just to mention. Does that answer your question?
I think someone was raising his hand once again. Just another little, additional question. Can you quantify how many projects you have and how many have not, let's say, reached your, expected, then, goals? Yes, we do so-called tracking. You can imagine that certain projects have not been concluded yet, but we have a forecast for those. And I can tell you right now that the realized margin, the is very close to the calculated margin. That is, that explains why our margin is continuously improved. And of course, you're right, the realized margin is, of course, more important.
The calculated margin has increased over the three years, not significantly, but still it has increased, and we track everything very precisely and at every phase of the project. But until now, we don't have any data that we were able to present, because for the simple reason that there aren't that many projects that have been concluded yet. Thank you very much for this answer. So you can continue then to pose your questions in the chat or even give us a call. So who would like the microphone here in the room? Johannes from AWP.
You said that when Wincasa had fulfilled the expectations, and you have attained the synergies. So can you remind me, how high were those synergies? I should know it, right? No, we have divided everything, what was in 2024 and what must be achieved in 2027. So, CHF 5 million for 2024 per year, especially on the cost side, and 2027 going forward, CHF 10 million synergies. And then there are also the turnover that we have not even taken into account. Yes, so this is, you know, calculated very conservatively. And as I said before, we are right on track.
So, Johannes, does that answer your question? Thank you very much. Who would like to have the microphone here in the room? I see a hand. The gentleman at the back of the room. Erhard Lee from Burghof Invest. Erhard Lee from Burghof Invest. I am very, very curious to know what you're going to do with your participation with INA Invest. It's about 40 or 14 percent? I'm sorry, acoustically, I didn't hear him. No, it's very stable. There was just a slight change with the merge, very minimal one. It's a strategic participation.
We don't have any intention whatsoever of deviating from our strategy. We are very happy with the development so far. Of course, last year, it wasn't a very easy year for the real estate industry, and that impacted INA Invest, of course, but the collaboration, the results are very pleasing, and we see that INA Invest is increasing again, being positive, and we're very happy, and we're going to keep it that way. Very good. Okay, I don't have any further questions or any calls. Is there someone else here in the room who would like to ask a question?
Well, everything seems to be very clear. Yes, absolutely. So one last opportunity to ask a question if you wish to do so. Okay, if that's not the case, then we have come to the conclusion of our Q&A session. So those who are participating here in Connect, we would like to invite you then to a nice lunch. Otherwise, thank you very much. Thank you for your participation to today's conference, and we wish you all a lovely day. Thank you very much.