Ferrovial, a global infrastructure and cities company,
obtained 727 million euro in net profit in 2013, an increase of 5.1% year-on-year. Revenues expanded by 7% to 8.166 billion euro, and
EBITDA rose 0.8% year-on-year to 934 million euro.
Ferrovial business areas performed well in the year, expanding their international presence and focusing on financial discipline, supported by strong cash flow. As a result of its asset rotation strategy, the volume of company's acquisitions exceeded divestments in 2013 for the first time in five years.
The company's two main assets, 407 ETR and Heathrow Airport, performed very well: both increased EBITDA, by 9.3% and 19%, respectively in local currency terms, due to higher tariffs, an increase in traffic, and more efficient management, and both attained outstanding user satisfaction levels.
Services revenues expanded by 26% due to both acquisitions and the obtainment of major contracts. The Toll road business increased revenues by 13%, and traffic numbers performed well in North America. Construction showed a positive trend in international markets, especially in the US. In Airports, Heathrow Airport Holdings (HAH) registered growth in traffic at all airports, to 85 million passengers in total.
Ferrovial further strengthened its international footprint in 2013:
revenues outside Spain increased by 18% year-on-year to account for 68% of the total. The company ended the year with a combined Services and Construction backlog of 25.616 billion euro, a record high in which international contracts predominate once again: accounting for 66% of the total (64% in Services and 70% in Construction).
Ferrovial obtained notable contracts during the year,
such as North Tarrant Express (NTE) extension in Texas and the
completion of the motorway network in central Scotland, which was awarded to a consortium involving Cintra, Amey and Ferrovial Agroman. Other major new projects in Services include
Valdecilla Hospital in Santander and municipal services contracts in London and Liverpool. Ferrovial Agroman was awarded contracts to build toll roads in Oman and Colombia, and a new railway line in Poland.
Net cash position of 1.663 billion euro
Ferrovial maintained financial discipline, as in previous years. The net cash position (excluding infrastructure project debt) continued to rise for the seventh consecutive year, amounting to 1.663 billion euro, 12% more than in 2012 (1.484 billion euro). This notable increase came after distributing 532 million euro in dividends.
Operating cash flow (excluding infrastructure projects) totalled 1.048 billion euro, up 15%. This reflects the 489 million euro in dividends received from infrastructure projects, as well as the high cash flow in Services (359 million euro) and Construction (304 million euro).
Consolidated net debt totalled 5.352 billion euro at 2013 year-end, 5% more than in 2012, mainly in connection with investments for toll road construction in the US.
The result was that Ferrovial has further strengthened its sound financial position. The company currently has funds to invest in new assets and projects to ensure business growth and multiply future shareholder value.
Investments: 754 million euro
As a result of financial discipline, the value of investments undertaken by Ferrovial—754 million euro—exceeded that of divestments for the first time in five years.
The company made two major acquisitions in 2013 aimed at strengthening the Services business through profitable growth and international diversification. In April 2013, Ferrovial acquired Enterprise, one of the UK's leading providers of services to utilities and the public sector. After consolidating Enterprise for nine months, Amey now has a more diversified offer, 21,000 employees and revenues in excess of 2 billion euro. In March, Ferrovial entered a new segment with the acquisition of 70% of Steel Ingeniería, a mining services company in Chile.
In terms of divestments, Ferrovial reached an agreement in October to sell 8.65% of FGP Topco Ltd., the parent company of Heathrow Airport Holdings (HAH), to Universities Superannuation Scheme Limited (USS), a UK pension fund, for 392 million pounds (approximately 461 million euro). As a result of this transaction, Ferrovial now indirectly owns 25% of HAH.
In January, HAH completed the sale of Stansted airport to Manchester Airports Group (MAG) for 1.500 billion pounds, providing Ferrovial with capital gains of 137 million euro. In March, Amey sold 40% of the company that groups its PFI projects to Dutch mutual fund DIF for 37 million pounds. And in November, Budimex announced the sale of subsidiary Danwood for 57 million euro.
As part of the company's long-term strategy of funding through the capital markets and early refinancing, Ferrovial successfully completed two 500 million euro bond issues, in January (5 years) and May (8 years), both paying a 3.375% coupon. The issues were oversubscribed 11- and 6-fold, respectively. The funds raised were used to optimise the corporate debt maturities calendar, reduce its cost and practically eliminate all bank debt. The company does not have any major payments due until 2018. In May, Standard & Poor’s upgraded Ferrovial's investment grade rating to BBB.
The 407 ETR completed two 40-year bond issues for a total of 400 million Canadian dollars in 2013. Following those two transactions, about half of the toll road's debt matures at over 20 years. HAH issued bonds for over 950 million pounds. The success of these issues confirms investor confidence in the quality of Ferrovial assets.
BUSINESS UNITS
Services: record backlog
Ferrovial Services performed well in 2013, with revenues amounting to 3.656 billion euro, 26% more than in 2012, and EBITDA up 2.6% to 322 million euro. The Services backlog reached an all-time high of 17.749 billion euro. This increase is due broadly to consolidating the earnings of Enterprise as well as landing new contracts in the United Kingdom and Spain. In the fourth quarter alone, new contracts amounted to over 2.5 billion euro.
The process of integrating Enterprise and Amey is advancing on schedule. Synergies achieved to date amount to 16 million pounds in annualized terms, and the integration plan, which envisages synergies worth 40 million pounds per year, is on track.
The business in the UK obtained revenues of 2.163 billion euro in 2013, an increase of 49% year-on-year, while EBITDA amounted to 137 million, a 13% increase. The Services backlog in the UK totalled 11.188 billion euro, an increase of 50% on 2012. The backlog includes municipal services contracts in Liverpool and three London boroughs, road maintenance in East Anglia, Cambridgeshire and Gloucestershire, water infrastructure management in Yorkshire and Wales, and gas and water grid operation and maintenance for utilities Northern Gas, United Utilities and Severn Trent.
Apart from the integration of Enterprise, the year saw the unification of Ferrovial Services' activities in Spain into a single organization and the creation of a new international unit.
In Spain, revenues were maintained in line with 2012 despite the difficult economic situation. In particular,
the backlog expanded by 21% to 6.330 billion euro. That increase was the result of new contracts such as cleaning a number of clinics and hospitals belonging to the Madrid Health Service, street cleaning for Madrid city government, the contract for the Valdecilla Hospital in Santander, and onboard services on Renfe long-distance trains in Spain.
The division also landed projects outside Spain, such as two contracts for the mining industry in Chile and maintenance of the S-7 expressway in Poland. Additionally, three maintenance contracts at the Doha airport in Qatar worth 169 million euro became operational during the year; that amount is not included in the reported backlog since the companies involved are equity-accounted.
Toll Roads: revenues rose 13%
Overall,
Toll Road revenues amounted to 429 million euro in 2013, a 13% increase year-on-year. This increase is due, among other factors, to the opening of SH 130 in Texas, the toll increase on Chicago Skyway, and relative stabilization of traffic in Europe.
EBITDA amounted to 276 million euro, a 1.7% increase on the previous year.
Once again, 407 ETR in Canada (equity-accounted) performed superbly, with revenues up 9.2% and EBITDA up 9.3%, both in local currency terms. Those numbers reflect the combined effect of the toll increase on 1 February 2013, good traffic performance and improved efficiency. Average revenues per trip increased by 8.9% with respect to 2012. Based on these results, 407 ETR distributed 680 million Canadian dollars in dividends to its shareholders.
The US market continues to show positive signs. Traffic continues to recover on the Indiana Toll Road, having increased by 1.7% with respect to 2012, and Chicago Skyway revenues expanded by 11%. Traffic on SH 130, which was opened to the public in October 2012, has been rising month-on-month since March and this trend should continue as connections improve. In December 2013, heavy vehicle traffic on this road was 83% higher than in December 2012.
The general upward trend observed in Europe in recent quarters persisted, due to the economic situation. In particular, traffic recovered on the M3 and M4 toll roads in Ireland, showing a slight increase year-on-year. In the fourth quarter, the Portuguese concessions performed well, and traffic stabilized on all the Spanish toll roads, which appears to be due to a slight recovery in the economy coupled with stabilization of fuel prices.
The agreement to restructure the Ionian Roads and Central Greece projects was signed with the Greek government on 24 December 2013. Under this agreement, Ferrovial Agroman recovered all its bonds, collected all its claims, and formally severed its links with the consortium.
The slight upswing in development activity by public administrations in North America, Australia and Latin America—priority markets for Ferrovial—point to an improvement in the outlook for the Toll Road business. Consortia led by Cintra are currently competing for several contracts, among them Interstate 77 in North Carolina, the SH 183 in Texas, The Portsmouth Bypass in Ohio, the second phase of the Highway 407 East Extension project in Canada, and the East-West Link project in Australia.
Construction: international activities account for 76% of revenues
The
Construction division obtained 4.064 billion euro in revenues in 2013, a decline of 6.1%. Nevertheless, profitability increased, as EBITDA rose by 1.8% to 343 million euro due to improved margins on international projects.
The trend of previous years was maintained: cutbacks in the Spanish market as a result of the 81% decline in public procurement since 2007. The reduction in activity in Spain was offset by the positive contribution from other markets, particularly the United States. As a result, international business accounts for 76% of this division's total revenues.
The growing importance of international contracts was also visible in the Construction backlog:
of the total 7.867 billion euro, 5.539 billion euro (i.e. 70%) relates to international contracts, including notable new projects such as the NTE extension in Texas, toll roads in Oman and Colombia, the M8 in the United Kingdom, a
cable-stayed bridge in Ontario and the construction of a railway line in Poland. These come on top of existing contracts such as Crossrail in London and the 407 ETR East Extension in Toronto.
In Poland, government approval of a new road plan worth 8.5 billion euro between 2014 and 2017 augurs an increase in government tenders there in the coming months. Budimex's revenues amounted to 1.099 billion euro in 2013, reflecting the conclusion of major projects, the reduction in government tenders, and adverse weather conditions. The Polish subsidiary landed major new contracts in the year, such as construction of a railway in Gdansk, and a section of the A4 autostrada.
Webber expanded its key figures by over 15% in 2013, with revenues amounting to 690 million euro and EBITDA to 27 million euro, due to commencing contracts and to the faster pace of execution of the LBJ and NTE highways in Texas.
Airports: record passenger numbers at Heathrow
Heathrow Airport Holdings increased
revenues by 12% in 2014 to 2.652 billion pounds. EBITDA increased by 18% to 1.441 billion pounds.
Traffic performed very well at all
airports, to 85 million passengers. Passenger numbers at Heathrow increased by 3.4% with respect to 2012, to set a new record: 72.3 million. Aeronautical revenues increased by 19% due to an increase in tariffs, while commercial revenues increased by 5.9%.
Traffic increased on European routes as well as on long-haul routes to Asia-Pacific and the Middle East due to the availability of larger aircraft.
Heathrow received many accolades in 2013: it won "Best Airport of the Year" in the over 25 million passenger category at the ACI Europe Awards, and T5 was distinguished for the second year in a row as the world's best airport terminal at the prestigious Skytrax World Airports Awards. Heathrow has also attained excellent levels of passenger satisfaction.
The Scottish airports also performed well, with revenues up 8.3% at Aberdeen, while EBITDA increased by 21%.
These good results enabled HAH to distribute 555 million pounds in dividends to shareholders in 2013, including 300 million pounds in connection with the sale of Stansted.
