Bilfinger SE

XETRA:GBF

Earnings Call Transcript 2020-Q4

[Bettina Schneider, Head of Investor Relations]

Good afternoon, and 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. But 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 '21 and our midterm targets, including insights to our markets and to our growth and margin improvement drivers. With this, I hand over to Christina.

[Christina Johansson]

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 '21 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 2. In a very challenging environment, we fully achieved the guidance we had already published in May last year, a time when we're still very cautious about committing on a revised full year 2020 outlook. The revenue decreased by 20%, organically 17%, to EUR 3.461 billion, as expected. EBITA 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 3. 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 Archives, the dispute with the former Executive Board members, both of them without any negative impact on the group's financial performance opposition. HSE processes established enabled a continued operation 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 market. 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 2. At the end of the year 2020, that number went down to 2%. So 2% at the end of December being in furlough schemes, which is a little bit more than 400 people of our workforce. But 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 3 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 -- or won volumes in Hinkley Point above EUR 500 million, but also made a step forward in the biopharma area. Coming to Page 4. 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 U.S. project market. Q4, however, already an increasing order book, which means organically, plus 3%, especially strong in Europe, our core geographic. Revenue with decrease of 17% organically. Q4 still receding, but slight increase against quarter 3. Adjusted EBITA positive at EUR 20 million, due to high-cost agility and consequent crisis management. Quarter 4, EUR 42 million adjusted EBITA with positive contribution from all 3 segments. Net profit increased to EUR 99 million despite a lower adjusted EBITA. 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, positive at EUR 24 million. Turning to Page 5. Reported free cash flow was very strong at EUR 93 million, with very good underlying cash conversion in quarter 4. 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 4. 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 15, 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 EBITA adjusted and substantial improvement in EBITA reported, coming back to the profitability of 2019 despite volumes, which are still lower than the precrisis 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.

[Duncan Hall, COO & Member of the Executive Board]

Thanks, Christina. Good afternoon, everybody. It's a shame we can't meet in person, but obviously, the restrictions at the moment, it means that, that can't happen. As in all our businesses, we need to adapt to the situations that we faced, and our business this year has adapted really well throughout the crisis that we've seen. But we'll come a bit more on that later. Let's talk about the markets. So we'll cover Europe, International and then Technologies. So in Europe, we've seen a recovery towards the back end of the year and quite a stable environment since September. In half 2 of this year 2020, there'll be a lot of catch-up work that didn't take place in -- sorry, 2021, actually. There will be a lot of catch-up where that didn't take place last year, and also 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 of the other ones. There's very positive signs in the energy transition with significant order intake in this area and also multiple engineering studies and sometime development projects that we're involved in. So 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 have in 2020. This will be supported not only by the asset integrity, Bettina will catch up on, but also as investment in new areas offshore decreased, asset life extensions are becoming more and more important. We will also recognize actually that the gas market is a growing market. The oil market is significantly impacted, but 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 but also as election news tend to do in the U.S. slows down our rate of investment. The outlook there is improving. And I think we'll see a more positive outlook in the energy investment area in energy transition fees. 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've seen 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 we say, energy and utility is strong across the globe, and it's good to see both of these markets were looking very actively at exiting oil and moving more into energy transition areas. But still, there is a major investment happening in oil and gas. We'll still be involved in it, and we'll continue to deliver increased revenue 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 utilities 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 strength 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 significantly increasing market for us. For the biopharma whilst, obviously, with the pandemic at the moment, there is some short-term projects happening within the COVID environment, which we've been involved in, the overall trend remains positive and we'll continue to see those investments. If we move on to what we see is really core part of what we do, which is safety and integrity. And 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 the work with our customers, to get over the restrictions on the borders and we cannot open them. And 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've continued our improvement when it comes to serious injuries, and we're having less and less and less. We are managing those through high levels of management attention and a culture of where no one gets hurt. We were in-lining customers in value safety, and this is a premium element of what we sell. When it comes to integrity, our compliance culture and behavior has been maintained. And as we've said, our KPIs show that we have a continuous commitment and understanding of what our employees. Across safety and integrity, we're 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 in margin, but I'll hand you back to Christina to take you through the development of the orders.

[Christina Johansson]

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 4 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 are seeing the first good indications in quarter 1, but it will take a bit longer than what we have seen in the recovery in Europe. Order backlog remained solid with an increase of 5% organically. Book-to-bill of 1.2 in quarter 4, 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. EBITA adjusted, positive at EUR 20 million full year due to high-cost agility and consequent crisis management. The EUR 20 million corresponds to an adjusted EBITA margin of 0.6% compared to 2.4% in the prior year period. EBITA adjusted in quarter 4, at EUR 42 million positive, very good results in E&M Europe and Technologies. E&M International, positive but still under pressure. Adjusted EBITA margin quarter 4 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 coincident, EUR 77 million. So 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 4. We already saw this in quarter 3, a strong ramp-up with gratifying gross margin as high as 11.9% in quarter 4 despite significantly lower revenue. This is above prior year in quarter 4 and close to our 12% target. Gross profit decreased to EUR 296 million after EUR 412 million in prior year. So 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, so a reduction of more than EUR 50 million between these years. Clearly below the target of EUR 300 million midterm target, supported by some onetime effects like traveling costs, but with the underlying quarterly run rate right now of EUR 75 million. So an underlying yearly EUR 300 million has 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 effect from SG&A efficiency programs as well as short-term impact from strict and agile cost management. Turning then to our 3 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 4, plus 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. And as I said before, it was quarter 2, a struggle. But from July onwards, a clear and strong ramp-up both on 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 EBITA, 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, based on the very strong ramp-up that we have seen in quarter 3 and quarter 4, therefore, the outlook 2021 will be a -- we expect a significant growth in revenue and also a significant improvement of EBITA adjusted. Looking then 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, but amplified by the challenging environment. Q4 still at minus 34% organically reflects current low order book, but also not the same kind of stability in the North American market as we have in Europe. Adjusted EBITA, negative at minus EUR 21 million, impacted by underutilization in the project business in North America. Slightly positive result in quarter 4. Capacity adjustments are showing and starting to show positive effects. But business still needs to be stabilized and we'll 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, but also a significant improvement of EBITA adjusted and to achieve a positive result in 2021. The last and third segment at 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 quarter 4. But also contributions from other integrated projects such as the BP pipe rack 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. But you remember, we spoke after quarter 3 that we are rightsizing the scrubber business, and we are closing the nuclear maintenance business in France. In quarter 4, however, revenue increased by 1% organically year-on-year. Adjusted EBITA was again positive in quarter 4 at EUR 9 million. Actually, we are now seeing in Technologies, the last 6 months, the second half of 2020, all months being positive. Strategic measures have been put in place for underperforming entities. And our adjusted EBITA 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. But still a negative result. The outlook 2021 shows a significant growth in revenue and a significant improvement of EBITA adjusted to a clearly positive result in 2021. Turning to Page 18. Net profit increased to EUR 99 million despite a lower adjusted EBITA. Mark-to-market valuation of the preferred participation note for Apleona, following the announcement in December that EQT had signed a 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 quarter 4, where we then with the strong inflow from our client side but also a restrictive monitoring of our capital expenditure, we, in quarter 4, paid off all the tax and social security deferrals that we benefited from in quarter 2. Some of them, we could have transferred and paid only in '21, but we made the deliberate decision to settle them in 2020 as we could afford and to safeguard our cash flow going forward. ROCE considerable improved also due to the Apleona PPN effect. Looking at the liquidity development on Page 19. Net liquidity, including IFRS 16 liabilities improved to minus EUR 57 million. It was minus EUR 62 million in quarter 3, 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 8 days in the last quarter. So we went down from -- 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 2, where of course, a lot of uncertainty also among our clients existed. So 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, 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, both mainly BIP 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 to 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 result. Cash inflow, EUR 450 million to 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 3 segments. We expect a significant growth in revenue and a substantial improvement in adjusted EBITA. Adjusted EBITA margin will return to the pre-crisis level of financial year 200 -- 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 EBITA 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 EBITA. And 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, and last but not least, a normalized level of capital expenditure, which in Bilfinger's case, means EUR 60 million to EUR 70 million per year. Looking at 2021, we assume, and all our forecast and guidance is based on, that the COVID-19 pandemic will not have a significant impact on our business activities anymore. But also, that the oil price range will be between USD 45 and USD 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.

[Duncan Hall, COO & Member of the Executive Board]

Thanks, Christina. I actually think we will 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. And one of the things actually that -- without being face-to-face, we miss the body language. And either 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 6 months profitability and still with major revenue, something we point to come into the future. So it's been a good job and deserves a little bit of added recognition. So let's talk about the cornerstones of delivery of our targets going forward, which is growth and margin improvement. And 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. And I'll take you through these 4 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. But 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 that's already being building-integrated project manner, is looking at the bigger ticket projects and integrated service contracts. We are multinational, and most of our customers are as well. And more and more, they're asking us to work across borders, whether this is in Europe, in North America or the Middle East. And 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. So we are no longer looking at doing projects of EUR 25 million in 1 business, but bringing together 3 or 4 businesses to do larger projects for our customers. And most of these are existing customers. They're looking to work with us because they trust us and we trust them, and we're bundling those capabilities to deliver going forward. We've already touched on previously the market areas that there is accelerated growth, in life science, in energy transition, in nuclear. And we've aligned vertically with these, especially in the Technologies area. But we're also a little bit underweight in some niche areas, and we're going to continue 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. And these are really high-value services going forward that our customers and ourselves are going to look to expand as we continue to grow. And 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. And as I said, why the people work with us and keep working with us, because we drive efficiency. So these 4 areas are the building blocks for our growth and why customers choose to work with us. If we move on to gross margin. 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. And as you saw, when Christina took you through the gross margin areas, we are delivering results now. Half 2 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. And 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 element of it is always measure it. Measure it, plan to get better. And KPIs, 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 database manner. We can benchmark where we do well on one contract against, well, 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 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, there are no loss-making businesses at the end of the year. That's our ambition, and that will be a great achievement. Great colors at the heart of our business is still. 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. And 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, part of that is internal subcontracting. We still must maximize what we can do when we -- rather than giving it to other suppliers, which is margin capture. And that can be a 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. And 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. And 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 2 projects already underway that are low triple-digit millions that have been operated within this concept. And we take risk management very seriously within it. Making sure we're doing the right work and monitoring the risks and managing changes we go through, is fundamental to our delivery. So 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.

[Christina Johansson]

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 SGA costs since 2016. Since 2016, we have reduced them in total by more than EUR 100 million. And 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 EBITA margin of at least 5% and the ROCE of 8% to 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. Then also, our dividend policy will become effective according to which we distribute 40% to 60% of adjusted net profit to our shareholders. That brings me to the end of our presentation. I hope that 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.

[Bettina Schneider, Head of Investor Relations]

[Operator Instructions] First question comes from Craig Abbott, Kepler Cheuvreux.

[Craig Abbott, Head of Mid and Small Cap Research, Germany]

A couple of questions from my side. First of all, just looking at the dividend proposal you announced this morning. I mean, we understand restoring base dividend EUR 1 to EUR 0.88 being the delta between normal EUR 1 base and the EUR 0.12 you paid for '19. But 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 any way at all your expectation of these proceeds coming in? Or can you shed light on what you're thinking for the use of those proceeds, including potentially M&A, which was mentioned in the Q3 conference call. So some early indications there would very helpful. Secondly, just on the valuation net cash. I just wondered, I didn't see the inter-year working capital swing assumptions made. Normally, you do include your year-end. Evaluation of net cash calculation, I just wondered if you could -- yes, is there a reason for this, you'll give us an update there. And then I just have 2 questions, please, operationally. One is do you have any concerns about rising input costs or would potential inflation clauses allow this thing 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. And the final question for me right now is you mentioned nuclear decommissioning in Germany, you're starting to see orders coming there. How big, if we're looking down over the next couple of years, could this opportunity for this potentially be commercially?

[Christina Johansson]

Craig, I suggest that I cover the first 2 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 floor dividend for 2020 and the compensation for the lower dividend in '19. 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 in -- based on HCB will be coming in 2021. This discussion is still open. Of course, we have recently started. We know the money will cash-wise hold into the second quarter. We have started to look at this, but no decisions have been taken. So we are considering all options here. And as I think both Duncan and I would underline, we see also good opportunities to spend at least a part of it in further devolving Bilfinger, looking into the M&A area. So 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 still -- 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 pure numbers in the presentation, it was -- given the fact that we are in special years, it was a sensational good quarter 4, even if we are, I think, famous for the swings during the year. So we had a good catch-up in quarter 3 and a further improvement in quarter 4. 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 operation 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. Duncan, would you like to proceed to question number three, the inflation and the cost increases that Craig raised?

[Duncan Hall, COO & Member of the Executive Board]

Sure. No problem. It's an interesting question, and I'll deal with it in 2 aspects. So first of all, your point around rising costs. The bulk of our costs are obviously in labor costs around wages. When we're doing work, whether on the framework maintenance or whether on the projects, materials are generally placed at the outset or linked to the actual cost in a mechanism. So 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. There's number of proving 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, how can we source lower-cost European labor as part of supplementing what we already have as we continue to grow. So 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. But our key weapon in this, to be honest, is about efficiency. Yes. Time can recover our costs, we can recover the wage inflation. But actually, what we do very well is continue to improve efficiency so that customers aren't impacted by those wage escalations. And what we try and do every year is much efficiency improvements to any cost escalation. That is always our ambition. You can't continue it forever. But it is an ambition, and it's why customers keep on working with us and we have long-term planned contracts. And 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. And in both of those areas, yes, there is work to come. And we've been very successful in 2020 in delivering a nice project in Germany in the mid-double-digit millions. We expect that, that sort of level of expenditure will continue for -- 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.

[Bettina Schneider, Head of Investor Relations]

Okay. Our next question comes from Eric Lemarié from Bryan Garnier.

[Eric A. Lemarié, Research Analyst]

Three questions from my side, please. The 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. 2 days ago, you mentioned this plant modification you're implementing for one of your clients in the biotech industry. And you mentioned your Qubicon software. Should we expect some bolt-ons within the software industry for Bilfinger going forward? And maybe could you tell us the revenues generated by the software for Bilfinger in 2020? And the last question. I'm curious. Should we expect that you can be impacted by the recent announcement of delays at Hinkley Point? Or is it not the case? Or is there any type of risk for Bilfinger there?

[Christina Johansson]

Thank you very much, Eric. I think I will pass all 3 questions to Duncan, if that's okay.

[Duncan Hall, COO & Member of the Executive Board]

Yes, no problem. I may have to come back to some clarification on the second one, Eric. I didn't fully catch that one. So 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, yes. 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. But 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. One thing is underway way. The first 2 truckloads of pipework have left our [ Donlin ] workshop, all boxed up, ready to go, facing the Brexit challenge of getting it over the channel. But that will happen. I don't think there's any ham sandwiches in the North. So 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 ultimate, and we're working very closely with our NMB partners in the MEH Alliance on the site. So we don't see that we will be impacted in any negative way from the overall project delays that have been announced recently.

[Eric A. Lemarié, Research Analyst]

I guess my second question, it was -- because I discovered actually your Qubicon software. And you mentioned it, I think 2, 3 days ago, when you announced the modification plan for the corona vaccine production. And I was wondering if you would be happy to strengthen, to muscle your software proposal.

[Duncan Hall, COO & Member of the Executive Board]

Yes. 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. And this is where we're now seeing the light of the software developments that we're doing in the COVID areas come through and really there's 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 answers the question for you.

[Bettina Schneider, Head of Investor Relations]

Okay. Eric, fine with you?

[Eric A. Lemarié, Research Analyst]

Yes.

[Bettina Schneider, Head of Investor Relations]

Good. So we move on to Christian Korth, HSBC.

[Christian Korth, Analyst]

I have a few questions around the revenue outlook and how we should think about this. So 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? And when you said significant revenue growth in 2021, are you talking about something like north of 5% or even like north of 10%? The second question is in the context of the midterm target of EUR 5 billion revenue. So without M&A, I think you would need an annual organic growth rate of about 10% roughly. So how far should we think about M&A in the future? And could you get there even without M&A? Or is it a necessity to do something here? Then the third question is just to 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 realize. Maybe you could clarify this. And the last question deals with Technologies. You correctly said that the division delivered positive results in the third and 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?

[Christina Johansson]

Thank you, Christian. I will try to cover this. And please feel free, if I miss 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, of course, some of the decreases that we have seen in oil and gas, where also we clearly have said that we are not expecting to get back to the same level. You should also keep in mind that we have divested in 2020 some entities. But 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, but 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. But I think it will require one or another bolt-on acquisition here. So 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. But 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 that -- if you look at -- the settlement, yes. Okay. Bettina is helping me here to clarify. So 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. So it was a positive EUR 70 million versus the negative IT investments, restructuring and some smaller capital losses. Technologies, division fully back on track. Given also -- I mean, I have been with Bilfinger now for 2.5 years, and Technologies has been a very, very challenging segment for us. It's always difficult to say fully back on track even if the last 6 months have been positive. I would say we have stabilized Technologies. We have stabilized all legal entities, except 1 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 1 legal entity is still the remaining risk that we have here strategically. And we are with very, very strong work here trying to find also a new strategic position for this entity. I hope, Christian, that covered it.

[Christian Korth, Analyst]

Yes. I'm sorry -- yes. Just maybe 1 last question, a clarification on significant revenue growth. So do you have extending definition of what that means?

[Christina Johansson]

I would say, in our world, we are talking about something that is slightly better than 10%.

[Bettina Schneider, Head of Investor Relations]

Okay. So next question comes from Gregor Kuglitsch, UBS.

[Gregor Kuglitsch]

So I have a question on cash flow and the cash flow guidance. So 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 sort of net cash bridge. Is that already fully unwounded in that figure, please? And 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% or maybe EUR 400 million, EUR 500 million of additional revenues. What should we be thinking about? Is it sort of reverse the other way in terms of working capital? Is this sort of a goodwill of some, say, maybe 10% of that increase? I think that's kind of your ratio. And then similarly, CapEx, which is obviously cut very significantly to only EUR 27 million. If you could just give us a sense where that sort of normalizes, please. And then -- sorry, that was like one question on cash. I know it was 3 in fact, but anyway. The second question is going back to your comment on dividends in Apleona. If you can just maybe -- I'm going to ask a little bit differently. What do you think the right capital structure for the business is? So what kind of level of net cash do you think you should hold? Is it sort of going concern or sort of -- what would be your comfort level, I guess? And then 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 like doing due diligence on the company?

[Christina Johansson]

Thank you, Gregor. Just a moment.

[Bettina Schneider, Head of Investor Relations]

The first question was whether all the restructuring expenses are included in our cash flow guidance for '21.

[Christina Johansson]

Yes. I will try to cover your questions here. The cash flow that we are -- where we are saying is 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. And 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 cashed out in 2021. So 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. So all have been including accordingly.

[Bettina Schneider, Head of Investor Relations]

Second question was about reversal or the increase in working capital management. In working capital, how much would that translate, roughly 10% of the assumption?

[Christina Johansson]

Yes. And I think that -- yes. Yes. It's an appropriate number, yes. Of course, the mixture that is not fully transparent yet would have any impact depending on what kind of increase it is. But I would say it's the best number you can utilize right now. Then moving on to the topic around Apleona, the money to come in, in quarter 2 and how to utilize this. I come back to the same reply. We have, obviously -- 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. So 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. So I think as a Board member, Executive Board member, for sure, we also have an M&A strategy here. And I think right now, there are also some of these targets that are interesting. So it will be an interesting discussion here going forward. And I'm sure we will let you know. But 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. So I think there are also opportunities out of our balance sheet and our improving -- improvements in the cash flow generation to not only rely on the Apleona money for further M&A strategy. I hope that -- that is as much as I can say right now. 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. So no further remarks to that.

[Bettina Schneider, Head of Investor Relations]

All right. Thank you, Gregor. Next question comes from Stephan Bonhage from Metzler.

[Stephan Bonhage, Research Analyst]

Hello, do you hear me?

[Bettina Schneider, Head of Investor Relations]

Yes. Now we can hear you.

[Stephan Bonhage, Research Analyst]

I have 3 questions. So the first one is on your International segment. So 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? And 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 sell-side colleague already mentioned the decommissioning projects in Germany. But I think this will not be the only project you're looking on. So maybe you can provide here more details. And 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?

[Christina Johansson]

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 3 questions.

[Duncan Hall, COO & Member of the Executive Board]

Yes, no problem. Thanks, Stephan. So in International markets, the reference there is mainly is the U.S. where, I guess, 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. It 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 contracts in maintenance as we do in other parts of the world, so we are not as exposed to some of the cyclical nature that you see in the U.S. on project investments. We've made good starts on that as well with some very good opportunities, where we've got bids 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 that 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 newbuild program in the U.K. We are a nominated Tier 1 supplier into EDF and discussions around Sizewell C are presently underway. And positive announcements have been made in recent times on that project getting green-lighted. And 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, reduce costs for EDF. And we're very positive about that. In the renewable area, this 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. And in 2 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. Then there's the Tier 2 areas of where, for the more significant investment areas of hydrogen, we will be operating in our integrated project team with technology suppliers who are experts in this. And we'll be in more of a traditional Tier 2 construction -- 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. And 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. And solar as well is a very good opportunity for us where we can use our electrical skills. Christina, you can add anything.

[Christina Johansson]

Well, the only thing is the first question, how to revive the business in North America. I mean, 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. And this is a classical. And you get appetite for further large projects. And I think for a while, we were focusing too much in the project business on getting another or 2 other large projects. And I think we have now changed. The second half of 2020, the approach has been to also have appetite to midsized and smaller projects. In the meantime, we are not projecting another good large project. In project business, it's very, very easy to run after the big ones. And I think we need to focus on both. And that is what we are doing right now. So we will need some time to pick up on the project business side again in North America, and we are now having a stronger focus on midsized 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. So our expectations are that we will benefit from that, and then from 2022 in E&M International, start to really see good top line numbers again.

[Duncan Hall, COO & Member of the Executive Board]

Thanks, Christina. I'd just like to take the opportunity, by the way, to come back to Eric's question as that was a little bit in the digital space. And it provided me -- actually, this is what I saw as the BCAP batch process, the Qubicon area. This is where we use our -- BCAP is built in a connected asset performance and where we take a variety of inputs to predict performance, not just a straightforward control systems. And that improves batch performance within the biopharma area. So you get more reliability and less reject batches. It's a very, very good system, and we're seeing some strong interest in that. I'm not sure it's going to keep us at the forefront of that market going forward. So my apologies for not recognizing the reference instantly. But it's part of our BCAP development, and now we've moved that on and calling it Qubicon.

[Bettina Schneider, Head of Investor Relations]

Good. [Operator Instructions] 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.

[Duncan Hall, COO & Member of the Executive Board]

Thank you.

[Christina Johansson]

Thank you.