Implenia's earnings power improves sharply

EBIT +38.4%, fourfold increase in group result, positive outlook

D i e t l i k o n, 16 February 2008 – Implenia, the leading Swiss construction services group, significantly improved its earnings power in 2007, the second year since it was created from the merger between Zschokke and Batigroup. The preliminary figures for the 2007 financial year, which Implenia has had to publish ahead of schedule following the hostile takeover offer from the hedge fund Laxey, show that operating profit and net profit have improved sharply while sales have remained more or less the same at CHF 2.771 billion (previous year CHF 2.810 billion). Operating earnings (EBIT) were 38.4% higher at CHF 65.75 million. EBIT under IFRS, i.e. after integration costs, depreciation of intangible assets and special costs relating to Laxey's hostile approach, more than doubled to CHF 38.67 million (CHF 17.04 million). The Group result of CHF 25.53 million is almost four times higher than the previous year's CHF 6.14 million. This is a further indication of how quickly Implenia has recovered from the work required to integrate Zschokke and Batigroup, including all the associated changes to structures, processes and holdings. Incoming orders are up 13.4% on the previous year at CHF 2.611 billion, suggesting that this year will see another good performance, especially since the industry as a whole is expecting the economic environment to remain helpful.

The healthy state of construction activity in 2007 certainly contributed to Implenia's positive performance. However, margins in the construction industry are still under great pressure. «In this challenging environment, made even more difficult for Implenia by integration work and the uncertainty caused by Laxey's attack, our managers and every single employee have performed very impressively. This is reflected in our equally impressive results,» says Chairman of the Board of Directors Anton Affentranger. «The pleasing results for the 2007 financial year confirm that the decision to merge the two former industry leaders was correct.»

The continuing industrialization of construction processes has contributed significantly to Implenia's greater efficiency. From the strategic point of view, the successful expansion of high-margin real estate project development work and the rapid expansion of foreign activities point the way to Implenia's future. The company has already scored some notable initial successes in the international arena.

Infrastructure Division – marked improvement in profitability
The Infrastructure Division benefited from organizational measures that were systematically implemented during the year under review. These aimed at getting closer to customers and improving the use of the company's own resources. The industrialization of construction processes also had a significant positive effect on the division's profitability, as did merger synergies within the Infrastructure business. While there was a healthy increase in unconsolidated gross sales to CHF 1.275 billion (previous year CHF 1.204 billion), EBIT operating earnings rose sharply to CHF 21.46 million (CHF 8.84 million). The division’s greater strength is also reflected in the significant expansion in the order book to CHF 506 million (CHF 397 million).

Tunnel and Total Contracting Division confirm leading position
Although the enormous potential for orders brought by the NEAT project is declining as construction work progresses, the tunnelling business is still looking to the future with confidence. It won two important contracts worth CHF 400 million to build part of the Durchmesserlinie project in Zurich, and is about to start on the NEAT tunnel section between Faido and Sedrun. By contrast, the Total Contracting business reached the end of the largest ever single contract with the completion and handover of the rail infrastructure in the Lötschberg Tunnel. While the division's unconsolidated gross sales fell slightly as a result to CHF 370.21 million (previous year: CHF 402.6 million) operating EBIT went up to CHF 22.10 million (CHF 20.72 million). The order book increased substantially from CHF 680.0 million to CHF 756.0 million.

Real Estate – new integrated structures pay off
Unconsolidated gross sales in the Real Estate Division were practically unchanged at CHF 1.331 billion (CHF 1.339 billion), while operating earnings (EBIT) rose to CHF 29.4 million (CHF 21.1 million). The division's consolidated results would have been better if it wasn't for the effect of legacy issues on Reuss Engineering's results. However the required corrective action has been initiated and will take effect during this financial year. In the project development business alone the division's portfolio has an investment value of CHF 2 billion. Its total order book is worth CHF 1.349 billion.

Global Solutions Division – first strategic successes
As planned when Implenia was founded, Implenia Global Solutions has been created as a new division to manage and coordinate all of the group's foreign activities. The implementation of this strategy already led to some initial successes during the year under review. As well as attractive individual projects like the general planning of stadiums in the Russian Olympic city of Sochi, in December a joint venture was established with the Russian property developer «Russian Land», which will take over the planning, implementation and subsequent management of all Russian Land’s development and construction projects. The joint venture, called Russian Land Implenia, recently took charge of its first project with the planning and entire project management of the major CHF 700 million «New Holland» development in St. Petersburg.

Confident outlook
2008 should be a year in which Implenia proves itself. The company expects the helpful economic environment to persist. But materials and energy costs have been rising for a long time now on a broad front and this, combined with higher duties, will make cost management even more challenging. On the other hand, this will also be the first year without special merger-related costs. «We are confident,» says CEO Christian Bubb, «that despite the challenges and despite the continuing fierce competitive pressure, we will achieve another good result.»

The dispute with the British hedge fund Laxey Partners Ltd., whose compulsory purchase offer expires at the end of February, continues to be an unwelcome distraction for Implenia. However, encouraged by the unequivocal decision taken by the extraordinary general meeting of shareholders last December, Implenia's Board of Directors will continue to do everything it can to resist Laxey's hostile takeover attempt, which has almost certainly been conducted through illegal means. At Implenia's request the Federal Banking Commission (FBC) is investigating possible illegal buying of Implenia shares. This investigation will be completed shortly, and the Board believes that the result will be a positive one for Implenia. Once again the Board of Directors of Implenia is urging shareholders not to accept Laxey's offer.

Contact:
Aloys Hirzel
Hirzel. Neef. Schmid. Konsulenten
Tel. +41 79 693 33 25
E-mail aloys.hirzel@konsulenten.ch