Implenia AG (IMPN) Earnings Call Transcript & Summary

Good morning, and welcome to Implenia's Media and Analyst Conference regarding our 2021 Annual Results. We are glad to have you here in our call. My name is Silvan Merki, Chief Communications Officer of Implenia. We will hold our presentation in English, and you are kindly invited to ask your questions via chat function already now and also after our presentation. We are looking forward to answering your questions after the presentation. Before we start, I would like to first draw your attention to our disclaimer. You will find our media release and the slides we're going to present today already published on our website, implenia.com. And now let us begin with our presentation. I'll hand over to Implenia's CEO, André Wyss. André?

Thank you, Silvan. Good morning, everyone, and also welcome from my side. 2021 has been a good year for Implenia. We have made significant progress in our strategy execution and are far advanced with the transformation. We strengthened the underlying performance and are on track to become a sustainable, strong and profitable company. Based on our strategic focus, we acquired a number of large and complex projects with an improved risk and margin profile. Market environment continues to be favorable. The megatrends, urbanization and investments in mobility and infrastructure support our growing core markets. Last but not least, we have taken the important steps to enhance efficiencies. On the one hand, by improving our processes and operations, and on the other hand, by further optimizing our overhead expenses. All of the actions we are taking support our vision to become an integrated leading multinational construction and real estate service provider. Looking at the structure of today's presentation, I will start with a business update. Our CFO, Marco Dirren, will then walk you through the details of our financials. Afterwards, I will present the outlook and changes in the leadership. And finally, we look forward to answering your questions. I start with our business update. Implenia achieved an EBIT of CHF 114.8 million, exceeding the profitability target of over CHF 100 million. All divisions and relevant markets contributed positively to this result. The underlying performance increased by 24% to CHF 76.5 million. mainly driven by operational improvements in the division's Buildings and Civil Engineering. Transformation measures, primarily in divestments of noncore and nonstrategic businesses led to positive onetime effects. We will provide a detailed overview of this in the finance update. In comparison to last year, the group revenue decreased by 6% to around CHF 3.8 billion due to a more selective project acquisition, longer project durations in the order book and ongoing divestments of noncore businesses. Having said that, the revenue is at the level above our initial expectations. With the strategic shift to larger and more complex order intakes, the group's order book climbed to an all-time high of around CHF 6.9 billion. All acquisitions strictly adhere to our risk management framework that we are calling Value Assurance and which ensures a better quality of our order book. This shows that clients trust Implenia and that the company is well positioned with its expertise and experience along with its services and competencies. Now moving on to the performance and recent project wins of each of the divisions. Our Division Real Estate achieved an EBIT of CHF 42.1 million. In 2020, the underlying performance was positively impacted by the Ina Invest transaction, where the division realized extraordinary transaction gains and also transferred half of its real estate portfolio. Compared to 2020, the current market value of our owned real estate portfolio increased, which was driven by development progress and favorable market condition. With this year's result, the division is almost back at EBIT levels prior to the Ina Invest transaction even with a reduced portfolio. This is remarkable and above expectations. The division continues to develop and expand an attractive real estate portfolio and expects increasing income of service fees from its asset management offering. The partnership with Ina Invest is very well established. Implenia is providing nearly all services across the value chain from acquisition, to service development and execution, to the portfolio and asset management. Through the spin-off, we also have a participation of CHF 149 million in book value that generated recurring income. Looking ahead, the division is expected to contribute substantially to the group result in 2022 due to the maturity of certain projects in their portfolio. Details of Implenia's real estate portfolio show that it is very well structured and diversified. The geographical locations are strategically well positioned in the metropolitan regions of Lake Geneva and Zurich. The 2 recent acquisitions in the Metropolitan region of Frankfurt are a first step towards the expansion into the German market. The market segments show a focus on residential use, which is highly attractive with persistent strong demand. The portfolio has a book value of CHF 149 million, which is the amount reflected in our balance sheet. Based on the most recent valuation, the portfolio has a current market value of CHF 410 million. It will amount to an estimated market after completion of the development of around CHF 2.3 billion. 3 sustainable highlight projects of the divisions are the revitalization of Rue du Valais in Geneva and Bestandeshallen in the Lokstadt or the greenfield development in Unterfeld, Baar. Division Buildings delivered a strong performance in 2021, achieving an EBIT of CHF 32.4 million with an improvement of the underlying business by 24%. The revenue decreased by 13% to CHF 1.8 billion, and the order book decreased by 8% to CHF 2.8 billion. This is mainly driven by the strict focus on profitability and the strategic shift towards large scale and complex projects, resulting in a significantly improved order book quality. Following the successful acquisition of BAM Swiss, the division expanded its competence in planning, consulting and realization for health care and R&D facilities. Moving ahead, Buildings is now in the position to focus completely on its core business in Switzerland and Germany while continuing to improve the underlying performance and drive profitable growth. Buildings won several large projects throughout Switzerland, and we are very satisfied with the many key acquisitions of our growing business in Germany. With the acquisition of BAM Swiss, Implenia is now the sole total contractor for the Cantonal Hospital Aarau, the future largest hospital in Switzerland. Coming to the Division Civil Engineering, which achieved an EBIT of CHF 51.8 million, with a solid underlying performance of CHF 25 million. The division managed the transformation of its business towards a positive EBIT contribution with a significant increase in their profitability. Tunneling and special foundations have positively contributed to the result while the restructuring measures and ramp-downs proceeded as planned. The division's revenue remained at the level of prior years with around CHF 2.1 billion. The order book increased further to CHF 3.9 billion and is of better quality due to the strict project selection and the focus on large complex projects. Going forward, the division is well positioned for future success. With the presence of civil engineering in the Semmering base tunnel due to recent flagship project wins like the TELT connecting Lyon and Turin or the Brenner base tunnel, Implenia is now part of all large European tunnel projects. Our Division Specialties achieved an EBIT of CHF 8.8 million. Post the order book of CHF 154 million and revenue of CHF 209 million declined in line with our expectations and mainly as a result of the recent divestments. The strategic businesses contributed positively to the EBIT and improved the profitability by 12% year-over-year. Nonstrategic businesses incurred losses due to the ongoing multi-year portfolio transformation. In the coming years, the division plans to further adjust the portfolio of nonstrategic areas while developing and scaling businesses with high potential. Our Division Specialties recently won projects by targeting solutions in innovative industry niches such as Facade technology or sustainable construction site logistics. Now I will present selected deep dives on our transformation, innovation and sustainability. The strategy we communicated in March 2019 with our 4 strategic priorities remains valid. Because of the necessary write-downs in 2020, we decided to sharpen and accelerate our strategic priorities, portfolio and profitable growth until 2023. Before we go into the details of each of the strategic priorities, I will give you an overview on where we stand in our transformation journey. In October 2020, we announced the just mentioned strategy acceleration, along with extraordinary write-downs and restructuring measures. Due to the shift towards profitability rather than growth, we anticipated a revenue decline of approximately 20% until 2023. In 2021, the transformation is now far advanced. We have an improved underlying performance, won large and complex projects and are solidly financed. In 2022, all divisions are expected to contribute to the positive underlying performance. As announced in November last year, we aim to improve our total equity by over CHF 80 million, which is mainly driven by the underlying performance. In total, we strive for an EBIT of over CHF 120 million, including less than 20% positive onetime effects from transformation. In 2023, the EBIT margin is expected to be at the level of approximately 3.5%, and the transformation will be completed. The underlying performance shall further improve while significant onetime effects have faded out. We anticipate to see annual recurring savings of CHF 50 million. With a further improved total equity and reduced total assets, we pursue to be on track towards a sustainable mid-term equity ratio of over 20%. Let's have a look at the details of our 4 strategic priorities, starting with portfolio. The adjustments of our geographical footprint is broadly accomplished. The focus remains on an integrated offering in Switzerland and Germany while tunneling and related infrastructure is offered also in other markets. All of our relevant markets contributed for the first time this positive EBIT to the 2021 result, which can be seen as proof for a successful portfolio transformation. The sale or ramp down of noncore and nonperforming businesses is well advanced. A lot of activities have been completed in the first half of 2021. I will focus on the progress we achieved in the second half of the year. In Buildings, we sold a unit in Austria. In Civil Engineering, the market exits of civil and special foundations in Austria, Sweden, Norway and Romania have been completed and ongoing projects are being finalized or were handed over to new owners. In the Division Specialties, we ramped down Modernbau in Germany and sold the business of GCM to a better owner. In 2022, we aim to further improve profitability in the subunit Civil and Specialties. Our efforts will continue to externalize asset-heavy activities and to refocus selected businesses to become more asset light. We are evaluating solutions, and we'll execute them in the best interest of the company. Additionally, we proceed with scanning and investing in new businesses in order to generate higher margins. The majority of portfolio adjustments is already completed. We have achieved a lot in a short amount of time and are very satisfied with the progress. Moving on to our second strategic priority, profitable growth, where we focus mainly on 2 initiatives: Firstly, the opportunities and risk management with Value Assurance is company-wide fully implement. More of this on the next page. Secondly, we are well on track with implementing our operational excellence and cash management initiatives. Our functions will become more efficient by rightsizing as well as selected outsourcing and automation. Lean construction, BIM and other digitalization methods have been rolled out and are now part of our employees' standard toolbox. Our Value Assurance is an integrated process from project selection to execution in order to drive profitability. The process starts in the pre-project phase, where strict selection criteria, thorough cost estimates and risk assessments, jointly with business, legal and finance are applied to all project acquisitions. During the project execution phase, we have implemented quarterly project reviews with tight cost control and continuous feedback sessions. Early warning indicators have been defined which spot irregularities on projects. Claims and litigations are managed proactively throughout the realization phase. The Value Assurance framework gained traction. Our order book is of better quality with an over 1 percentage point improved precalculated gross margin. At the same time, we improved transparency and also strengthened collaboration and leadership during project execution. Since October 2020, we have had no major surprises on write-downs, which is a clear proof to implementor processes are effective. Moving to our third strategic priority, innovation. Fundamental changes in the construction and real estate industry as well as the needs of our customers help us driving innovation forward in a targeted manner. Our 3-fold innovation strategy combines open innovation, innovation M&A and our innovation hub, which is an incubation platform, fostering entrepreneurship. The first promising product is an high-strength EPS tunnel element enabling significant cost and efficiency savings in tunnel construction, now showcased in the Semmering base tunnel. A patent is pending and market introduction is expected in the second half of this year. Another example is the implementation of advanced reality capturing use cases. For example, automated quality checks on our project sites and as a service to clients. Our efforts in the field of digital construction, BIM and efficient processes are recognized and were awarded with the Lean Construction Project Award by the German Lean Construction Institute. Our fourth strategic priority, talent and organization with its 2 key initiatives, change and talent management. Change management focused on leadership development. We launched a tailor-made program together with ETH Zurich and University of St. Gallen to further improve the way we collaborate. Going forward, the employees will continue to be supported during the transformation journey. Talent and succession plans and feedback poll service were implemented. We will continue to focus on performance management, diversity and inclusion. Based on the 5 Implenia values and with the global rollout of internal You Matter campaign, we continue to focus on employee engagement through mutual recognition. A milestone strengthening our core value collaboration was the consolidation of our offices in the Zurich region to our new headquarters, Implenia Connect in Opfikon. The new innovative work environment fosters closer and more intense exchange among the employees of our divisions and functions. We are very proud of the achievements and recognition of Implenia as a long-lasting industry leader in ESG ratings. Our continued effort of the last 10 years in the field of sustainability is being rewarded. There are 5 sustainability priorities at Implenia, which are the fundament of the 12 ambitious targets for 2025. One target is the reduction of our group-wide CO2 emissions by 3% per annum. Other targets focus on environmental protection, safety culture or social commitment. We were awarded with an excellent AAA rating from MSCI with 84 points by Sustainalytics and a silver metal from Ecovadis. Implenia continues to be at the forefront of change towards a more sustainable industry. One example of a sustainable real estate and buildings project is the Lokstadt in Winterthur a brownfield development, which is based on the 2,000-watt society. Let's have a look at the short video showcasing how we implement the 2,000-watt construction site. After that, our CFO, Marco Dirren, will walk you through the financials and guidance. [Presentation]

Let me walk you through the financials of 2021 and thereafter, close with the guidance for 2022. Starting with the income statement, Implenia was able to exceed the EBIT guidance of over CHF 100 million for the reported year with an EBIT of CHF 114.8 million and an EBIT margin of 3.1%. Compared to the last year, we had strong improvement of the underlying performance, and we're able to mitigate most material price increases in our businesses. In addition, the execution of our strategy led to positive onetime effects of around CHF 38 million. The financial cost increased compared to the last year due to the renegotiation of financial agreements in half year 1 and the successful bond placement in half year 2. Taxes were back on a normal level after a positive amount in 2020 due to deferred tax income. Our net result for 2021 stood at CHF 64 million. Let me share with you the onetime effects from transformation in the middle section and focus on the underlying performance of the divisions on the right side of this slide. The Division Real Estate is almost at levels prior to the Ina Invest transaction and is, therefore, exceeding expectations. The Division Buildings increased the underlying performance to CHF 33.9 million. Notably, the related EBIT margin of 1.9% increased by almost 50%. The negative onetime effect of $1.5 million was driven by the exit from Austria. Civil Engineering achieved an underlying performance of CHF 25 million. This is the second time in a row a significant increase in their profitability. The underlying EBIT margin increased by more than 2 percentage points to a level of 1.2%. Furthermore, the transformation of the division contributed with positive onetime effects of around CHF 27 million. Within the Division Specialties, strategic businesses delivered an underlying profitability increase of 12% and contributed positively to the reported EBIT. Yet as mentioned before, it is difficult to compare performance year-over-year. With a loss incurred by the nonstrategic businesses, the multiyear transformation with portfolio adjustments is still in progress. Accordingly, the positive onetime effects were largely related to divestments. Overall, we increased our underlying EBIT margin by over 30% to a level of 2%, especially our 2 largest Divisions Buildings and Civil Engineering have significantly contributed to this underlying margin improvement. Before we continue with the balance sheet, let's touch upon our successful bond placement of CHF 175 million in November 2021, which strengthened our financing structure and fits well into our maturity profile. With this transaction, we secured the refinancing of the convertible bond in the same amount maturing in June this year. The proceeds from the bond will be used exclusively for the refinancing of the convertible bond. With our capital market instruments, the syndicated facility agreement and uncommitted bilateral guarantee lines, we are solidly financed with a well-diversified mix. Our core banks and lenders remain committed to provide financing. Now I would like to walk you through the asset side of our balance sheet. Cash and cash equivalents continue to trail at a high level, especially due to a strong cash flow in the second half year. Real estate transactions were above previous year's level due to continuous investments in our real estate portfolio. Driven by a higher-than-expected production output, other current assets were above previous year. Looking at our noncurrent assets, goodwill was below last year's level, mainly due to the impact of divestments and FX in 2021. Furthermore, as a result of our asset-light strategy, rights of use from leases and other noncurrent assets are both reduced compared to the last year. Excluding the temporary impact of the bond, we reduced total assets by almost 5% to CHF 2.8 billion. I continue with the equity and liability side of the balance sheet. Trade payables decreased in line with the revenue decrease. The increase in other current liabilities was driven by the reclassification of the convertible bond which matures in June this year. The noncurrent liabilities were on previous year's level. All in all, total liabilities added up to around CHF 2.6 billion. With an equity of CHF 345.9 million, our equity ratio was at 12.3%, excluding the temporary effect of the early refinancing. Let me show you on the next slide more details on the equity. Our equity improved by CHF 43 million based on the strong net result of CHF 64 million. I would like to emphasize that our real estate portfolio is reflected at cost in our balance sheet, which does not include potential future revaluation gains. The market value, as we have explained before, is significantly higher. After deducting customary tax expenses, the relevant additional equity credit from our real estate portfolio would lead to an equity of CHF 515.6 million and an equity ratio of 18.3% per end of 2021. Notably, this technical revaluation gain of the real estate portfolio has increased significantly since 2020, largely due to our more mature portfolio. With regards to the decrease of the total assets, we are not yet fully satisfied. The reasons for the higher than anticipated asset base or the early refinancing of the convertible and the production output, which was higher than initially planned. Based on our strong underlying business, we reiterate our mid-term ambition for an equity ratio of over 20%. Let's have a look at the consolidated cash flow statement. Indicated in the top line, we're able to significantly improve our free cash flow compared to previous year by over CHF 175 million. The cash flow from investing activities as well as financing activities were impacted by the bond issuance. Our net cash position, excluding lease liabilities improved compared to the half year levels and stood at CHF 67 million. In the first half year of 2021, our cash flow was heavily impacted by the ongoing transformation. As you see on the bottom of the slide, in the second half year of 2021, we've had a strong cash flow of more than CHF 250 million. This demonstrates not only the distinct seasonality in general, but also did we substantially compensate the extraordinary cash outflow from the first half year. While we expect a positive development of the free cash flow in 2022, the usual seasonality of our industry will remain notably in the first half year of 2022. This leads us to an update on the transformation program, which we announced in October 2020 and the key metrics we aim to achieve by 2023. The FTE reduction is proceeding according to plan. The majority of restructuring provisions had either been used or released so far. The remaining restructuring provisions will be sufficient to cover outstanding redundancy costs. The reduction of SG&A expenses is on track too, and we expect to fully realize annual recurring savings of CHF 50 million by 2023. As mentioned before, with regards to the reduction of total assets, we have not proceeded as fast as planned. The refinancing of the convertible bond will have a temporary effect of CHF 175 million until June 2022. The higher-than-expected production output led to an increase in work in progress. The acceleration of the cash conversion cycle and hence, a reduction of our net working capital remains a top priority for the group. We have the clear focus to further strengthen the financial position of the company, yet the equity ratio is still at low levels. We have achieved a lot in 2021, and we will continue to execute on our strategic priorities to act in the best interest of our shareholders. As communicated, we aim to strengthen the equity by at least CHF 80 million in 2022. Therefore, Implenia's Board of Directors proposes to the Annual General Meeting on March 29 to refrain from paying a dividend. I would like to conclude my presentation with the financial guidance. For the full year 2022, we expect a reported EBIT of more than CHF 120 million. We are well advanced in our transformation journey and expect a strong underlying performance of all divisions. Hence, for 2022, we expect that less than 20% of the reported EBIT will come from positive onetime effects of the transformation. We continue to actively manage the material price increases and supply chain risks. Thanks to the joint efforts of our project teams and our procurement organization, we are confident that we continue to effectively mitigate significant EBIT effects in 2022. Our mid-term target is an EBIT margin of 3.5%. Our ambition for an EBIT margin of 4.5% remains valid. And with this, I hand back to André.

Thank you, Marco. Before we move to our Q&A session, I will provide a brief overview of our outlook and leadership changes. Megatrends and industry shifts continue to be promising. High demand for living space in urban areas as well as required investments in mobility and infrastructure provide attractive growth opportunities for Implenia's integrated offering. With our strategic focus and our expertise, we are in an excellent position to benefit and be part of the ongoing industry shifts. Because of this and the sustained investment backlog, the market outlook remains attractive for all Implenia relevant markets and segments. Today, I'm announcing changes to our Board of Directors and the Implenia Executive Committee. Our Board member Ines Pöschel will not stand for reelection at the AGM of March 29. She has been a member and Chair of the Nomination and Compensation Committee since 2016. Judith Bischof will be proposed as a new member of the Board. Stefan Baumgärtner will become CFO and the member of the Implenia Executive Committee starting May 1, 2022. He has been CFO and a member of the Executive Committee of the EMS Group since 2017 and previously held senior positions at RUAG Space and Sulzer. Stefan Baumgärtner succeeds Marco Dirren, who will leave the company at his own request, following a handover at the end of June. Implenia would like to thank Ines Pöschel and Marco Dirren for their contribution. Matthias Jacob will focus on the successful development of the Strategic Market Germany as head Buildings and Country President and steps down from the Executive Committee as of March 1. He will continue to be part of the group's senior management team. The Implenia Executive Committee will be reduced to 8 members as shown here. Based on the presented results and outlook, we are convinced that we are firmly on our way to realizing our vision. Implenia is well positioned and on track to become a strong and profitable company with a substantially improved risk profile. Thank you for your attention. I now hand over to Silvan to facilitate the Q&A.

Thank you, André. Before we answer your questions, a quick note that we will have our Annual General Meeting on March 29 and will present our half year results on August 17. If you have any questions after this event, please do not hesitate to get in touch through the usual channels. So now we are looking forward to answering the first question, and we have already a first one in our chat. The first question is from [ Georgio Miller from The Market ]. [Foreign Language]. And for our English colleagues, which business units that are no longer part of the core business are still available for divestment. How much revenue do these account for? I give to André?

Thank you for the question. The popular adjustments are well advanced. We achieved a lot so far in a very short amount of time, as mentioned before. We will continue to evaluate options in the Divisions Specialties, which goes multiyear transformation and Civil Engineering. The revenue impact will, however, not be significant.

[Operator Instructions] We have a next one in our chat. It's given by Martin Hüsler from ZKB. Real estate, just to understand did the EBIT of CHF 42 million include only realized gains? What was the share of revaluation effect?

Yes. Thank you, Martin. So we have no extraordinary onetime effects in the Division Real Estate. It's all underlying business as expected and as normal. Underlying business remains service-related to development business and certainly also some revaluation gains when the property is sold. So it's the normal business.

Another question by Martin Hüsler. Did you sell the aggregates position you own Africa? What was the profit contribution?

No, we did not divest our African business. And no, we have no plans at the moment. However, we continue to monitor the performance of the organization and also the strategic fit, and we'll take a decision if we come to a conclusion. Thank you.

We have another question in the chat by [ Helvetia from Roger Jacob ]. Yes, like this. Which onetime effects are expected in 2022 if it's possible to answer this?

Yes, thank you for the question. It is possible to answer this. We communicated the guidance today so we are confident to achieve an EBIT of above CHF 120 million, and we also said it will be less than 20% positive onetime effects. We expect all divisions to contribute to the result also in 2022. We also mentioned that the transformation is very well advanced. So onetime effects are mainly from restructuring and potential portfolio adjustments. Thank you.

Alexandra Bossert from UBS. When do you expect to be able to fund CapEx from operating cash flow, respectively? Will operating cash flow be positive in 2022?

So that's a perfect question for the CFO. Marco?

Thank you, André. So we do expect in the first half year a normal seasonality, which is just standard for our business. That means that we have a cash trend of around CHF 200 million to CHF 250 million, but it's always depending. And it has shown this year it's on significant cash in or cash out of large projects. And those cash in and cash outs are very difficult to accurately forecast. In half year 2, however, we expect a positive cash generation from the underlying performance as well due to the seasonality. We have a lot of upcoming finalization of large projects, especially in the civil engineering area like our 4-lane tunnel but as well in buildings, and we expect a substantial impact on our cash flows from those projects. In 2021, at the end of the year, we have received high prepayments which is a good development because we are trying to get prepaid from post finance to prefinance. Yet the effect on 2022 full year cash flow depends on the business development, as I mentioned before. The cash conversion cycle, although remains a top priority for all divisions, we have developed a substantial progress there. And we do not expect major cash out from restructuring provisions or project-related provisions, which will be partly used in the future. So that is to a certain extent part of our business.

Thank you, Marco. We have a question by [ Pam Pomren from Doddle ]. You calculate an adjusted EBIT of CHF 77 million, CHF 38 million below the reported EBIT. However, according to your operating cash flow statement, the positive impact from the sale on current assets and subsidiaries was CHF 63 million last year. Can you please explain?

So I think that's also a good question for you, Marco.

Thank you, André. So certainly, we had a positive EBIT impact of our sales. That's part of our transformation and portfolio adjustments, but it's not only EBIT impact, it's as well a cash impact we have a divestment in the investing cash flow, and that was higher than the EBIT contribution. So mainly towards the end of the year, we were able to sell GCM, and that's almost 60% effect out of that and others such as in [ Stansstad ] and [indiscernible] earlier in the year.

Thank you, Marco. Jean-Marc Mueller from JMS Invest AG. How can equity increase by CHF 80 million and an EBIT of CHF 120 million? What are your assumptions for financial result and taxes? Thank you.

So we will continuously work to strengthen the equity during the entire year. We aim for an increase in total equity by over CHF 80 million in 2022, and we communicated this in November 2021 already. It's driven by maturity of certain projects of our Real Estate division and currently very favorable market condition, we expect also significant contribution from real estate in 2022. However, the underlying business is coming from all divisions. And that as a result, we are confident that we can achieve the over CHF 120 million EBIT as well as the CHF 80 million equity increase.

Thank you, André. Another question by [ Pam Pomren from Doddle ]. One year ago, you wrote in your full year presentation that you are targeting EBIT margin of 4.5% in the midterm. Today, you are saying that this is a long-term target. Can you please explain why you now expect this target to be achieved later than planned?

So we have already been successful in increasing the profitability and are confident to sustainably improve our margins year-over-year. 3.5% is a recurring margin target and strong income from recent levels. Production output expected are above anticipated levels. The ambition of 4.5% remains valid, and we are adjusting our expectations only in terms of timing.

[indiscernible] has the next question. Can you please explain the positive one-off effects of CHF 38.3 million in more detail? How do these relate to the result from the sale of noncurrent assets and group companies of CHF 62.9 million, which can be found in the cash flow?

I think that's a good question for Marco.

Thank you, André. So we had a positive onetime effect. That was mostly due to our portfolio adjustments from divestments, and that's part of our transformation. And to some extent, related to restructuring provisions as well and almost entirely in the civil engineering area. The vast majority of that positive onetime effects were divestments of buildings, Austria -- from Buildings Austria, sorry, we had a negative onetime effect and others that refers to releases of restructuring provisions on group level, and we have transparently disclosed that in our annual report.

Thank you, Marco. [indiscernible] again. Looking at the 2023 targets, you have already achieved the targeted head count reduction of 7,700 employees. There is still a large need for adjustment of around, I think, 50 -- CHF 500 million in the reduction of total assets already taking into account the bond issue. How will this reduction be achieved? Can you quantify more precisely the production output that had a negative impact in 2021?

So again, that's best question for you, Marco.

Thank you, André. So excluding the proceeds from the bond, as you rightly mentioned, we have managed to reduce our total assets by 5.9%, which is a good achievement and a good start for our long-term business. Net working capital reductions or fluctuations, volatility correlates strongly with our production output and -- which was not reduced as we have anticipated, and that's why the net working capital was higher than anticipated originally. We have taken many net working capital measures. They are already in place. The effect, as I mentioned before, on our long-term business and long-term projects as we move towards larger and more complex projects will only show gradually with a certain time lag, and this is in the nature of our business. Examples we try to manage our work in progress that we do to accounts receivables management, standard net working capital activities. We do as well accelerate our cash conversion cycle, and we continue to strive for an asset-light strategy. And both of those components remain a top priority for the group. And net working capital is -- as mentioned before, is one of our STI targets. So all management, people in our company are striving to optimize the net working capital because it's part of their bonus regime. And we will further investigate the impact of our net working capital measures. We do monitor that closely. And if needed, we adjust to actually walk towards the target of 2023, and that needs to be confirmed later in time when we see more what the effects of our activities will result into.

But I think it's fair to say we are pleased with the increase in the equity, but we are not yet satisfied with the reduction of the balance sheet. So we will work on it.

Thank you both. [ Johannes Rinkman, RVP ] [Foreign Language]. So in English, the first question is how strongly do the material shortages effect Implenia's business?

So thank you for the question. Yes, we are confident that we continue to effectively mitigate the impact from material price increases. It's a high visibility on EBIT effect in 2022. Measures in 2021 have proven to be very effective. So we are quite well positioned. The adjusted framework agreements, examples like price cap on steel, price increases on steel are capped, while Implenia will benefit if steel price goes down. So we have a fairly low exposure to price increases on steel and we have a lot of planning security. The impact we forecast for the full year 2022 is included in our guidance and is expected also to be less not so significant.

The second question that I translate also for everybody is Implenia affected by the war in the Ukraine anyway?

So we are certainly very concerned about the war itself as it relates to all the people. But in terms as it relates to Implenia, we are less concerned. So as it refers to sanctions, we have little exposure with suppliers. For example, for wood in Ukraine, but also very little amounts purchased from Russia. We have already taken measures and already secured contingents from other regions. So we have sufficient stocks blocked for Implenia. More actions are normally not covered in framework agreements. But again, we see little exposure. However, if the conflicts endures longer than 2 to 3 months. We may face some price increases, for example, on diesel. At the moment, I believe we are well positioned. We have not seen a significant impact on our business.

Thank you. [ Pam Pomren from Doddle ] has another question. You defined ambitious greenhouse GHG reduction targets, but have not yet calculated and published these figures for the last 2 years. How do you track progress?

Yes. Thank you, [ Mr. Pomren ]. So our sustainability targets go up until 2025. We have updated our sustainability report also today. And we will update the greenhouse gas emissions in the course of this year of 2022.

[indiscernible]. They hold out the prospect of a positive development in free cash flow in 2022. Does that mean that you expect positive free cash flow overall? Is it then correct to assume that this would imply an improvement in operating cash flow of more than CHF 100 million since disposal proceeds of this magnitude were generated in 2021 alone?

Marco, again, good question for you.

Thank you, André. So as I mentioned before, net working capital management remains a top priority for the whole group and for all management. We are working very hard to optimize the cash conversion cycle. And last but not least, on free cash flow, we do not guide.

It is still possible to enter questions in the chat function. We have a next one by Patrick Appenzeller from Research Partners. How many one-offs are included in depreciation? And how is the result from associated companies composed?

That's also a question for you, Marco.

Thank you. So we do not have one-offs in our depreciation. That's partly related to the income from minority shareholding in Ina Invest, partly related to our footprint of our business. So for example, our projects where we define are active and may need divestments of project-related associates. So one example is the exit from the region in [ Grisso ] beginning of this -- of last year, sorry.

One next question by [indiscernible] Bank, regarding the current Ukraine-Russia conflict, do you see a potential impact of Implenia's business especially regarding building material as price and availability?

Thank you very much. But I believe we have answered that question before. As I said, little export for the moment.

We would have time for some more questions. You might enter them into the chat function still. We currently have none in line so far. If no further questions are arriving, then we would also close the chat and close the Q&A session. So I guess, we do so. Thank you very much. And with this, we are finished with our question-and-answer session and with our presentation, and I can hand back to André for the closing of the session.

Yes. Thank you, Silvan. I would like to thank everybody for participating in today's media and analyst conference. So I wish you all a very nice day, and goodbye. Thank you.