2018 was a year in which we experienced both strong growth and several issues. We are addressing these issues and have already made some initial progress. Our new strategy enables us to seize the attractive opportunities offered by our markets. Based on this strategy, we are adapting our organization and ensuring successful implementation with a clear multi-year plan and a strong team.
In the 2018 fiscal year, the Group reported strong growth in revenue and production output. This is primarily thanks to the results of the Infrastructure segment, but also due to the International and Switzerland segments. The Development segment also achieved another strong performance. We were also able to further expand our business internationally and now generate 46% of our revenue and employ 45% of our employees outside Switzerland.
In the course of developing the new strategy, a review of the Group's enterprise and commercial risks uncovered issues in select units and projects – particularly in Norway, South Baden and at a subsidiary of Implenia Construction Germany in Poland. The root causes include structural deficits, such as insufficiently standardized processes, a fragmented systems landscape and inadequate cross-departmental collaboration.
Already during the development of our new strategy, we began developing and implementing immediate measures to address the issues identified. In Norway, these measures include higher top management attention on individual key projects; improved project risk and control processes; and closer cross-departmental collaboration. In South Baden, we are concentrating on reducing our risk profile and on our core competencies. We are continuing to strengthen the organization by ensuring that there is a clearer understanding of our roles and responsibilities. In Poland, we have helped the management team sharpen its focus by carrying out a reorganization. We are confident that these measures will go a long way to resolving the issues in the short term, and remove them entirely in the longer run.
Progressive urbanization and increasing mobility requirements provide us with growth prospects. Today, 79% of all people in Western Europe live in cities. By 2050, this figure will have risen to 87%.1 It will therefore be imperative to address questions around city planning and the modernization of existing buildings. The demand for mobility solutions and the provision of energy, water and other goods is closely intertwined with these questions. Our home markets offer good prospects for growth in attractive metropolitan regions, as well as high demand for building and infrastructure renewal.
The construction industry faces multiple shifts. It is still heavily fragmented and we expect it to undergo further consolidation and internationalization in the years ahead. The underlying value drivers are economies of scale, risk diversification and the steady increase in necessary investments. Small firms will continue to occupy niche markets successfully in the future, and our aim is to build long-term collaborations with such providers. Moreover, the market will be characterized by stronger industrialization and more widespread use of modular components manufactured off the construction site. This development will be driven by an expected reduction in costs as well as by speedier construction projects. Digitalization will also continue to change the way of construction. Digital solutions such as Building Information Modeling (BIM) and advanced analytics will pave the way for new standards that increase process efficiency and that, in some cases, engender competitive advantages. Ultimately, more and more customers are seeking sustainable, integrated, end-to-end solutions as well as consulting services. We will help shape these changes and we will use them to our advantage.
IImplenia has various strengths that provide an ideal starting point for seizing these opportunities. In Switzerland, the Group is the leading construction and construction services company. We have proven our comprehensive expertise in the design, planning and realization of complex structures on many occasions. We have done this both in buildings, such as the Andreasturm, the Global Fund and in-house development projects such as sue&til or The Metropolitans, and in civil engineering projects, including the epochal Gotthard Tunnel project. In addition, our land reserves are attractive and offer further growth potential.
We also have an outstanding reputation in our home markets outside Switzerland, thanks, among other things, to reference projects such as the Atlas office high-rise in central Munich, the capacity expansion and safety improvements we made to an urban rail line (Roslagsbanan) in Sweden, the extension of a metro line in Lyon and the tunnel and construction work we did on a new route connecting the Norwegian cities of Os and Bergen. As a Group, we can rely on outstandingly qualified and highly experienced employees.
Our vision is to be a multinational leader in construction services.
Our mission is to sustainably develop properties and construct buildings as well as infrastructure with and for people to fit their modern living, working and mobility needs.
In order to achieve our vision and mission, to seize the opportunities in our markets, and to play to our strengths, we have developed a new strategy with four strategic priorities:
Our aim is to operate businesses that allow us to set ourselves apart from the competition. To achieve this, we will need to expand our activities in our home markets so that we can profit more from our local expertise and customer contacts. In addition, we are expanding geographically into further markets by leveraging those capabilities that are internationally competitive. In the future, our portfolio will consist of four divisions which clearly differ from each other in terms of their underlying business models and long-term strategic directions:
Our aim is to grow profitably, acquire market share, and increase our margins. To this end, we need to concentrate on activities that offer greater profitability and market share potential, for example by expanding or transforming individual business areas. Furthermore, we need to be a leader in terms of cost efficiency in order to increase our margins and generate value for our customers, employees and shareholders. We will achieve this by means of a comprehensive “operational excellence” program that focuses on multiple strategic directions. These include an end-to-end, data-based value-assurance approach (previously “risk management”), with improved project selection, implementation, and management processes; the optimization of planning and production processes via lean construction; increased centralization of purchasing activities; and the use of prefabricated items. We will also harmonize and centralize our systems and processes.
Our aim is to utilize fundamental changes in the construction industry to the advantage of our customers, employees and shareholders. To this end, we need to strengthen our focus on innovation and invest accordingly. We will continue to expand our digital construction and BIM technologies, and our new Innovation Hub will concentrate on promising future business models and digital development. We will also promote promising niche offers and develop the most attractive ones. And, last but not least, we will drive integrated project implementation and industrial design, particularly in development and buildings.
Our aim is to be an attractive employer so that we can attract, train and retain the talented people needed to address future challenges. The new strategy serves as a foundation for clear and attractive career prospects. A diagnosis of our organizational health identified multiple starting points for further improvements, including strengthening our talent management system, expanding the Implenia Academy, and defining the following five "Implenia Values":
Our strategy comprises activities in four business areas which, on the one hand, benefit from mutual synergies within the organization and across geographies and, on the other hand, differ considerably (for example, in terms of customers and technologies). To be successful, we have to combine entrepreneurship with global excellence and local relationships. To achieve this, we are reorganizing ourselves into four divisions, several global functions, and a competence center. The Development, Buildings, Civil Engineering and Specialties divisions will serve their markets successfully through a combination of entrepreneurial responsibility and bundled expertise. The global functions (Finance, HR, Legal, Marketing/Communication and IT) will support the divisions and ensure overall management of their areas. The "Project Excellence & Services" competence center will help the divisions implement projects. In order to ensure close proximity to our customers and to anchor ourselves locally, we will establish regional and national organizations that represent Implenia’s interests across all business areas.
The new organization will ensure that Implenia operates as an integrated company. It will be established officially on 1 March, 2019.
In order to achieve our long-term vision, and to successfully implement our strategy, we have begun a multi-year plan with three objectives:
To implement our strategy, we are augmenting our team of highly qualified specialists and leaders with select recruits. Adrian Wyss, Jens Vollmar, René Kotacka, German Grüniger and Matthias Jacob are experienced internal leaders with strong track records in their respective areas. Marco Dirren (new CFO) has a strong record in performance management (especially of complex projects) as the former CFO at SBB Infrastructure and in his previous international roles. Christelle Beneteau (new CHRO) brings the required leadership experience in several international organizations (e.g. LafargeHolcim, Clariant) to support the transformation of Implenia into an international company. We have also strengthened our team beyond management, for example in Marketing/Communications and Strategy.
The members and roles of Implenia’s new management team – the Implenia Executive Committee – are as follows:
André Wyss, CEO
Adrian Wyss, Head Division Development and Head Division Specialties a.i.
Jens Vollmar, Head Division Buildings and Country President Switzerland
René Kotacka, Head Division Civil Engineering
Marco Dirren, CFO
Christelle Beneteau, CHRO
German Grüniger, General Counsel
Matthias Jacob, Head Country Management and Country President Germany
1 United Nations Department of Economic & Social Affairs