Rafael del Pino, company Chairman, highlighted Cintra's distinctive features within the sector, based on its focus on growth in a stable, low-risk business
He also highlighted the company's global reach and diversified risk profile:
CEO Juan Béjar highlighted three aspects of the project portfolio:
- it currently has 21 toll road projects in seven countries;
- 72% of EBITDA is generated outside Spain
Cintra's committed equity investment in its concession companies is over 1.8 billion euro, having registered 11% annual average growth since 2000
- most of the concessions are new and, therefore, have growth potential
- Cintra's weighted stake in its concession projects is approximately 60%
- the residual term of the concessions is over 70 years
Intense bidding and a high success rate enabled Cintra to land four new projects in 2005, in Spain, Ireland, Italy and the USA, representing an estimated gross investment of 4.8 billion euro
2006: the dispute in Canada, in which all decisions to date have been in Cintra's favour, is expected to be concluded; Ausol and other mature assets may be releveraged; and bidding is expected to be intense, with tenders open in the United States, Ireland and Greece
Cintra's Shareholders' Meeting today approved the company's results and strategy "a distinctive business project within the infrastructure sector, based on a strategy of growth as the engine for creating shareholder value", stated Rafael del Pino, Cintra's Chairman.
Del Pino expressed his conviction that "despite operating in a stable, low-risk sector, the quality and potential of Cintra's asset portfolio, coupled with its technical and financial ability to take on new projects, will lead to considerable growth in the company's main figures and substantial shareholder value".
"Cintra fully attained its growth projections in 2005", he added. Financial results performed very positively, with revenues up 44% and EBITDA up 37%. "We have also been very successful in bidding for new projects, strengthening our presence in the United States by acquiring Chicago Skyway and, in 2006, the Indiana Toll Road, which is pending final award; expanding in Western Europe, with the provisional award of the Cremona-Mantua road in northern Italy, and reinforcing our leading position in car park management in Spain".
Diversified portfolio of project
"The search for projects in the best markets worldwide has turned Cintra into a multinational company with a diversified risk profile", Del Pino continued. "Cintra has one of the most geographically diversified profiles in the sector, even including international rivals, since it has substantial exposure to North America, a region we see as having great medium-term growth potential."
In fact, 72% of Cintra's EBITDA is generated outside Spain. Canada, which represents approximately 50% of the company's value and its EBITDA, is the heavyweight in Cintra's portfolio, followed by Spain (28%). "The relative exposure to projects elsewhere in the European Union and in the United States will rise as new roads are added."
"We at Cintra consider that there should not be borders when it comes to creating shareholder value. Our goal is to take on high-quality projects in countries with stable political and legal systems and developed financial markets."
With the four new projects, Cintra has strengthened its international process and reinforced its presence in the United States and Western Europe. Cintra currently has twenty-one toll road projects in seven countries in its portfolio: nine toll roads in Spain, four sections of Chile's Ruta 5, the 407 Express Toll Route in Canada, two toll roads in Portugal, another two in Ireland (the N4/N6 and the M-3 project), the Cremona-Mantua toll road in northern Italy, and the Chicago Skyway and Indiana Toll Road in the USA, in addition to the contract for the Trans-Texas Corridor, under which Cintra is a strategic partner of the State of Texas.
In car parks, Cintra has focused on growing in Spain and on the three segments into which this business is divided (off-street, on-street and private car parks), enabling it to offer end-to-end solutions and attain a solid lead in the market. In 2005, the number of parking spaces under management exceeded 238,200, nearly 15% more than in 2004.
Key financial figures
Cintra's expansion and internationalisation are reflected in the quality of its project portfolio and the rapid growth in its key financial aggregates.
Although the world's leading economies (particularly in Europe) registered slow growth in 2005, Cintra expanded consolidated revenues considerably, to almost 700 million euro, 44% more than in 2004. This is a confirmation of the trend in the last five years, in which Cintra has practically tripled its revenues, attaining over 22% average annual growth.
Growth engine: investment
Investment in new quality projects is the real growth driver at Cintra. Cintra's constant search for projects in its target markets, coupled with intense bidding and a high success rate, have enabled it to steadily increase the investment in its concessions to over 1.8 billion euro at 2005 year-end, i.e. 11% average annual growth since 2000.
The company plans to continue investing in new projects and has sufficient funding to handle future growth: at year-end, it had 211 million euro in cash, plus the cash flow from its projects and the proceeds from potential releveraging.
Key events in the year
The main events in 2005 were as follows:
- award of four new toll road projects representing an estimated total investment of 4.8 billion euro gross: M-203 in Spain, M-3 in Ireland, Mantua-Cremona in Italy (the latter two pending final award), and the privatisation of the Indiana Toll Road in the USA (early in 2006). The Indiana project establishes Cintra as a player to be reckoned with in the North American market, where it has landed the three big infrastructure development projects that have been privatised to date;
- in the car park business, Cintra obtained 33 new contracts for a total of close to 31,000 parking spaces under management, i.e. a 60% success rate in bidding for new concessions. The main new contract was to manage the car parks at the new T-4 terminal at Madrid-Barajas airport;
- Cintra took over running Chicago Skyway in January 2005, and brought the N4/N6 in Ireland into operation 10 months ahead of schedule;
- refinancing of the Chicago Skyway project, completed in August 2005, which enabled Cintra to recover 44% of its initial investment and increase the return on the remaining invested capital by close to 2 percentage points;
- in Canada, a number of interim decisions were obtained, all of them favourable to Cintra, in the dispute with the Province of Ontario over 407 ETR
In 2005, Cintra's strategy and results were acknowledged by the stock market in the form of 21% appreciation.
Average term of the portfolio: 71 years
Juan Béjar, CEO of Cintra, commenced his address to the shareholders by highlighting three key aspects of Cintra's toll road portfolio:
- most of the concessions are relatively new and "therefore have notable growth potential";
- Cintra's weighted stake in the concessions averages around 60%, "making us a core shareholder in all of them and enabling us to appoint management and apply our systems and procedures";and
- the residual term of our concessions, weighted by internal valuation, is over 70 years "by far the longest in the sector"
In 2005, Cintra attained 33 million euro in consolidated net profit under International Financial Reporting Standards (IFRS). "That figure", explained Béjar, "does not fully reflect the company's performance or value since new concessions and releveragings, which increase the net present value (NPV) of future cash flow flows and, therefore, create value, nevertheless produce book losses in the early years due to the higher financial burden."
Since the net profit figure fails to reflect business performance, EBITDA is an appropriate indicator for the various businesses.
Cintra's main consolidated figures increased notably in 2005: revenues increased by 44% and EBITDA by 37%.
In the toll road business, EBITDA increased by close to 29% on nearly 27% growth in revenues. This was due to positive performance by the main projects, all of which registered double-digit growth in EBITDA and an improvement in EBITDA margins (407 ETR +23%; Ausol +15%; Autema +13% and the Chilean toll roads +17%), as well as the opening of new toll roads projects in the early stages of operation which have greater growth potential. "The steady addition of new concessions due to Cintra's constant bidding for projects is the principal factor driving our company's future growth prospects", stated Béjar.
The car park business increased EBITDA by close to 44% in like-for-like terms.
Valuation of key assets
Just as EBITDA is a better yardstick than net profit for measuring Cintra's business performance, discounted net present value (NPV) of future cash flow is the best measure of the company's value.
"Aware of the difficulty for the market of valuing each of our assets individually", he added, "Cintra releases an updated indicative valuation of its main assets every six months. We use discounted cash flow only for assets that have been operational long enough for actual figures to support the growth projections, such as the case of 407 ETR, Chicago Skyway, Ausol, Autema, Europistas, M45, R4, Algarve and the Chilean projects. Projects that are under construction or have only recently opened (Norte Litoral, N4/N6, Ocaña-La Roda and M-203) are included at book value, which is normally lower than the discounted value of cash flow after risks have been reduced."
Based on that valuation method, Cintra's assets were estimated to be worth 6.95 billion euro at 31 December 2005, i.e. 14.15 euro per share, which is 20% more than the estimated valuation released in June 2005.
Short-term prospects and goals
Juan Béjar told shareholders that the Cremona-Mantua toll road in northern Italy will foreseeably be awarded in 2006 (the award is pending decision on the appeal by another consortium), as well as the M3 in Ireland (pending a decision on the appeal about the route due to the existence of archaeological remains).
"We also expect Cintra's revenues and EBITDA to continue growing, boosted by the entry into service of new projects: the first full year of operation of the N4/N6 in Ireland, and inclusion of the Indiana Toll Road and the Madrid-Levante road (between Ocaña and La Roda, in Spain)." Additionally, "we expect to releverage Ausol and, depending on funding needs, the car park assets or other mature projects in Spain and Chile; it will also be a year of considerable bidding activity, with tenders open in the United States, Ireland and Greece and others pending decisions in Greece and Spain."
Cintra is awaiting the decision on two projects for which it recently bid: the Alto de las Pedrizas-Málaga toll road in Spain, and the Ionian Road in Greece, which together represent a total gross investment of approximately 1.5 billion euro.
The company has detected 40 projects that are potentially of interest in its target markets which will be put out to tender between 2006 and 2008.
In the area of corporate governance, Cintra's goal is to apply international best practices.
To summarise, in addition to the commitment by the entire Board, the Company has a Board of Directors Regulation, which regulates the operations of the Audit and Control Committee and the Related-Party Transactions Committee, a Shareholders' Meeting Regulation, which includes novel mechanisms for voting and granting proxy by means of distance communication, and an Internal Code of Conduct, which seeks to ensure transparency and ethics on the part of management.
Proposed shareholder remuneration Some of the principal motions laid before the shareholders related to remuneration. The shareholders approved a dividend of 7.6 euro cent per share. It also decided to make a 1-for-20 bonus issue. In the words of the Chairman, "This proposal seeks to combine the need to finance Cintra's growth with appropriately remunerating the shareholders."