We are pleased with our performance for 2021 although we still faced Covid-19 uncertainty and government measures worldwide.
In 2021, our strategy, Strong22, has again made considerable impact. It provided energy and purpose across the organisation, embedding new ways of working and a culture of innovation. Through streamlining and refocusing our activities, we have created a stable platform to accelerate growth. Strong22 has proved to be a good start for our digital maturity and service offerings. However, we learned that developing new business is more complex and we need more time to realise our growth ambitions.
We have achieved commercial success from collaborative initiatives across our business lines and have had a positive impact in enhancing societies worldwide. Our acquisitions at the end of 2020 – Novius and ITP – have proved to be successful and contributed significantly to our group in 2021.
Investments and reorganisations
In its first year of operation, our Business Line Digital delivered good results across consultancy and software activities. We have continued to pursue investments which fit our strategic objectives. As an example, in 2021 we increased our investment in Hydroinformatics Institute (H2i), a leading water information consultancy in Singapore, resulting in a majority stake. By bringing together our deep domain, data and software expertise and H2i’s advanced technology in machine learning and big data, we are creating an ambitious union with the agility to rapidly address risks associated with climate change. H2i’s rainfall detection and forecasting system has already proved vital for flood management and operations at Singapore’s National Water Agency PUB. Our collaboration will lead to opportunities to apply the system in other cities, delivering substantial benefits to residents and businesses.
We continued to invest in innovation which included our Business Line Digital, further strengthening the foundations for future success in our digital portfolios. Our technologies, particularly for the wastewater industry, deliver added value for clients enabling them to reduce costs and environmental impact of their operations. At the end of 2021, our Aquasuite water technology that monitors, analyses, visualises and controls the performance of water and wastewater infrastructure is helping thousands industrial and municipal clients avoid water losses, improve customer service, reduce OPEX costs and turn waste into renewable energy sources.
Meet Aquasuite, your AI-powered analyst and autopilot. Aquasuite’s virtual operator uses predictive analytics and machine learning to control systems and networks. It adapts rapidly to changing conditions and provides advanced decision support tools.
In 2021, aligned with our new strategy Stronger25, we further streamlined our organisation by combining three business lines into two new ones: Water & Maritime and Mobility & Infrastructure. This will enable increased collaboration and optimal use of capabilities and resources to upgrade our offering to clients and grow our business.
Multiple initiatives were launched across our business lines which are yielding commercial success. For example, our VOLT application that is a cocreation by Mobility & Infrastructure and Digital has already helped 90 municipalities in the Netherlands with predictions on the number and location of charging points for electric vehicles. By working together, we integrated sustainable mobility expertise with the latest digital technologies to provide our clients with the best solution.
Just as in many organisations, Covid-19 has forced us to challenge assumptions and to work in a different way. Activity has picked up again in markets which slowed during the early stages of the pandemic and, in some cases, has accelerated to make up for lost time.
We saw good growth across most of our markets as people and organisations adapted to the reality of living alongside Covid-19. Uncertainty and changing regulations affected the aviation market amongst others during the year, although signs of growth began to emerge. Within our organisation, the pandemic continued to disrupt working practices due to working from home. We retained our strong commitment to support colleagues with practical assistance and maintain cohesion and engagement across the community.
We celebrated the milestone of our company’s 140th anniversary in a virtual celebration spanning more than 30 countries.
One positive impact of Covid-19 was to significantly reduce our business travel, including air travel, which led to a lower carbon footprint and considerable cost savings.
We are striving to create a ‘new normal’ which embraces positive changes that happened as a result of Covid-19, particularly in respect of work-life balance, a focus on well-being, and our reduced carbon footprint connected to travel.
During the year private and public sector activity on greenhouse gas reduction gained strength and momentum. We are taking leadership ourselves and announced in 2021 that our operations will be net zero for greenhouse gas emissions by 2030. We saw increasing questions and projects connecting to net zero from clients. We have been advising building owners – including banks, hospitals, governments and industries – how to move to renewable energy and reduce their energy use. We continue to be very active in the renewable energy sector. To date, we have led the successful consent of 12GW of offshore wind energy in the United Kingdom alone and supported more than 22GW of projects worldwide. We are advising more than 15 of the 30 energy regions in the Netherlands on their plans to produce renewable energy and how to move away from natural gas. We are also supporting innovation across industries and sectors as they search for more sustainable solutions. For example, we are working with Redefine Meat on their first sustainable 3D-printed meat factory in the Netherlands. From feasibility, design and engineering to construction management, we have taken ownership to enable plant-based meat production which reduces CO2 emissions by 95% compared to beef.
We have taken responsibility for our own operations by committing to Net Zero by 2030.
Digitising physical environments
Every year, boundaries between the physical and the digital world become more blurred. Automation, data and digital technology are becoming increasingly important in how we work in our projects and how we create value for our clients. Digital twins have been a strategic focus for us for several years now. With the increased interest of markets and clients on digital topics, this yielded results in 2021, both in projects, growing our software portfolio and in our ability to shape the agenda on national and international levels. We are also actively participating in various initiatives in the Netherlands to realise digital twin systems on a national level and internationally in working groups like the SWAN community for water. We have been supporting clients in developing digital twin roadmaps and delivering digital twin software platforms, for example in the control room of Dutch water authority WBL.
Digital twins explained.
Innovating our core processes and beyond
We continue to manage our innovation portfolio through our online innovation hub where every employee can share and contribute to ideas and developments. We are innovating in our core processes to make them better, faster and more sustainable. For example, we further developed an interoperability platform that aims to centralize project data and streamline our workflows. Another focus of our innovation activities is in developing solutions with clients which, for example, in 2021 led to VOLT (described above, under Investments and Reorganisations).
We are also building our portfolio through innovations. Our new Runway Condition Reporting Tool enables airports to easily meet legislative requirements that were introduced in 2021. Alongside automation in design processes, we are exploring the use of automation in construction through our partnership with DSM (now Covestro) to develop the world’s first lightweight 3D printed fibre reinforced polymer bridge. Our first bridge was delayed by supply issues in 2021, but we are expecting it to be fitted in a park in Rotterdam in 2022. By introducing 3D printing with circular composites into infrastructure and environment, we can change the way structures are designed and made, creating new value for our clients.
In 2021 we created a digital solution automating the visualisation of subsoil data, which improves the quality of our geotechnical experts’ interpretations and saves time and money. It will lead to more sustainable futureproof design for all the projects we do and was finalist in the Going Digital Awards in Infrastructure.
We are very satisfied with our financial performance for 2021. The operating margin increased to 5.0% (2020: 4.8%) while investing significantly in software and digital technologies. The financial results of 2021 show an organic revenue growth of 1.9% (2020: -5.9%). In the end, a net result of €15.2 million (2020: €13.0 million) was reported. The order portfolio of €334 million is at a higher level than last year (2020: €303 million).
Operating income increased to €619 million, with almost all Business Lines showing growth. Most of the growth is attributable to the Business Line Industry & Buildings and the substantial contributions of our acquisitions at the end of 2020 – Novius in the Netherlands and ITP in the United Kingdom.
Our operational result (EBITA recurring) ended at €30.9 million (2020: €28.3 million). The results in 2021 were strongly driven by the Business Lines Industry & Buildings and Mobility & Infrastructure and our leading market position in the Netherlands. Furthermore, the performance of our Southern Africa Business Line significantly improved in comparison to 2020. Uncertainty, changing regulations and market conditions affected the performance of our Water Technology and Aviation business during the year, although signs of growth began to emerge.
In 2021, we recorded a 59% growth in operating income from software, although conversion of sales in technology proved slower. Our engineering, design and consultancy business showed a growth of 6% on operating income and an improved margin.
Due to ongoing government restrictions related to Covid-19, cost savings on travel and accommodation and employee expenses contributed substantially to the 2021 result. Despite the continued Covid-19 uncertainty, we were able to follow our strategic Strong22 programme and related investments. These involved mainly the costs of our transformation programmes as well as investments in our software and digital technologies.
Organic added value growth was 4.7% (2020: -3.8%). Although Sales were very good, the utilisation rate remained at almost the same level compared to last year.
The results yielded a positive free cash flow in 2021 of €9.8 million (2020: €38.3 million) (cash flow from operating and investing activities). The year-on-year difference can largely be explained by the changes in trade working capital, following the change in business volume in these years. The continued Covid-19 pandemic hardly impacted trade working capital (work in progress, trade debtors and trade payables) in 2021, which showed a normal seasonal pattern throughout the year and was below last year’s level for almost the entire year.
We were able to decrease our days sales outstanding (DSO) to an all-time low of 64 days at the end of 2021 (2020: 70 days). Our financial position remains healthy, with an equity ratio of 52% (2020: 48%) and a net cash position of € 174 million at the end of the year. We operate well within our bank covenants.
Besides the effect of the continued Covid-19 uncertainty as described above on our financial performance, there are no special events that should be taken into account for the financial statements.
We refer to the Outlook chapter and note 25 for the expected impact of the Russian - Ukrainian conflict on our financial performance.