Net income rose by 109% to 455.8 million euros; excluding the impact of the sale of 40% of Cintra, net income would have increased 18% Ferrovial consolidated its position as Spain´s largest construction company and reinforced its international leading position with new concessions in infrastructures (its main growth engine) The backlog in construction (around 6 billion euros), real estate (955 million euros) and services (816 million euros) ensures growth for the coming years Ferrovial ended 2002 with a net cash position of 303 million euros, despite sizeable investments during the year (541 million euros) Key points for Ferrovial´s future: performance of operating profit, investment capacity and reinforcement of the markets in which it operates Ferrovial incorporates Corporate Governance best practices and focuses on improving its communication with the market. For the second year in a row, its Annual Report reflects the company´s triple focus on business, the environment and social responsibility 2002 was a historical year for Ferrovial in terms of earnings and market performance, and the company made further progress in its growth strategy, boosted by the positive performance of the markets in which it operates, a sound investment policy and its constant search for innovation and excellence in management. Ferrovial´s net income amounted to 455.8 million euros in 2002 (108.8% more than in 2001). Excluding the extraordinary gains generated by the sale of 40% of toll road subsidiary Cintra, net income would have increased by 18%. The progress in every business area, the positive performance of margins and the key operating figures guarantee activity for the coming months, and shaped growth in a year in which there were the following significant events: Ferrovial obtained the Sydney airport and N4-N6 toll road (Ireland) concessions, three of its toll roads opened for traffic in Spain and it increased its stake in the 407 Express Toll Route (Toronto). "For the second year running, Rafael del Pino, Chairman of Ferrovial, explained to shareholders, Ferrovial´s share appreciated considerably, gaining 23% (compared with a 28% decline by the Ibex 35 index). It was the second-best performer in the Ibex 35 index and the best performer in the construction sector. Since it was floated on the stock market in May 1999, Ferrovial has appreciated by 4% compared to the 41% decline by the Ibex 35 index, implying a 45% difference in yield. Ferrovial´s business performance, in line with the company´s consistent strategy, combined with its transparency, contributed decisively to this appreciation in the stock market." Operating figures and investment capacity "Ferrovial´s continued growth, he pointed out, is due to the right combination of factors: the strength of the markets in which we operate, the performance of our operating figures, a judicious investment policy and the constant search for excellence in management. Operating variables vital indicators of the company´s future performance are still strong: the construction backlog (almost 6 billion euros) is the highest in the sector and represents 19 months of activity, the real estate backlog (955 million euros) guarantees the P&L account for this area in 2003 and part of 2004, and the services backlog amounts to over 800 million euros." In the last seven years, Ferrovial has invested 2.7 billion euros; this does not include the purchase of land for the property development business. "70% of this investment was allocated to the infrastructure business and was made possible, to a great extent, by the cash flow generated by our main business, construction." Ferrovial´s substantial investments in 2002 totaled 541 million euros, 418 million of which were allocated to the infrastructure business, in particular the acquisition of 19.6% of Sydney airport and the increased stake in the 407 Express Toll Route in Canada. "Our net cash position is 303 million euros and we project that the construction business will continue to generate around 250 million euros cash flow every year, enabling us to continue investing at levels similar to recent years". International diversification and strategy Ferrovial´s investments in various businesses related to construction or its clients, "have meant our P&L account is growing and is less volatile in the long term, and the construction and real estate businesses´ inherent cyclical nature is offset by the stability of the infrastructure and services businesses. Moreover, we have managed to match cash flow from the construction business with the funding needs of the infrastructure concessions industry." Almost 50% of Ferrovial´s operating profit currently comes from the infrastructure and services sector. In 2002, progress was also made outside Spain; international revenues represented 28% of total company revenues. "Ferrovial´s strategy in the international market continues to be focused on selective growth in the OECD countries, hand in hand with the infrastructure business as it expands, and acquiring sound leading companies with growth potential". Ferrovial´s presence outside Spain is concentrated in Canada, Poland, Australia, the UK, Portugal and Ireland. In Latin America, Ferrovial is involved in managing toll roads and airports in Chile and Mexico, and in construction projects with multilateral financing. 42% of total operating profit is generated outside Spain: Canada (23%), Latin America (14%) and Europe (5%). Strong markets According to Del Pino, the world was rocked by events in 2002 but the economic deceleration will not have a negative impact on Ferrovial in the short term since our bottom line this year is supported almost entirely by our existing backlog. Nevertheless, we will not forget the importance of being leaders in efficiency in the businesses in which we operate, and we will continue to invest in strategic activities from our very sound financial position. The conditions of the markets in which we operate continue to be positive in the slack economy in general: Spain´s Infrastructure Plan continues to boost investments in civil engineering; we have strategically positioned ourselves in Eastern Europe, with a view to the imminent future expansion of the European Union; and the international private infrastructure management market continues to grow. Corporate governance and transparency Ferrovial continued to improve its corporate governance practices in Spain and elsewhere and the information supplied to the market and investors. The main novelties in 2002 were: disclosure of individual director remuneration; certification of accounts; the Audit Committee report; and the effect on Group accounts of the application of International Accounting Standards. In 2002, Ferrovial was the first Spanish construction company to form part of the Dow Jones sustainability indexes. For the second consecutive year, in addition to the financial information, the financial statements and the management reports, Ferrovial´s annual report details its policy, commitment and main actions relating to the environment and community involvement. This document follows the recommendations of the Global Reporting Initiative (GRI), a globally-accepted reporting model for sustainability reports. Dividends and Board of Directors remuneration One of the main items on the agenda to be approved by the Shareholders´ Meeting was the proposal to distribute a dividend of 0.67 euros gross per share, 63% more than in 2001. Of that amount, 0.47 euros were considered as an ordinary dividend and the other 0.20 euros as an extraordinary dividend, to be paid as a result of the gain on the sale of 40% of Cintra so that the shareholders can share, to an extent, in those extraordinary gains, even though most of them are retained at the company for development of future investments. It was proposed that the Board of Directors remuneration be based on fixed attendance fees and variable items depending on the company´s consolidated results. The Shareholders´ Meeting also authorized the proposal to oblige directors to allocate part or all of the remuneration they receive to the acquisition of company shares. This is intended to consolidate the directors´ commitment to the company by fully aligning their interests, through their remuneration, with those of the shareholders, through share performance. One of Europe´s largest construction groups Joaquín Ayuso, Ferrovial´s Chief Executive Officer, analyzed Ferrovial´s 2002 results and those of its business areas, which have enabled Ferrovial to consolidate its position as one of Europe´s largest construction groups in terms of profitability and market capitalization 50 years after the company was incorporated. Ferrovial has four business lines: construction, infrastructure, property development and services. Its investments in telecommunications are financial in nature and comprise a 10% stake in Ono, one of Spain´s largest cable operators. Construction: boosted by civil engineering and focusing on Eastern Europe According to Joaquín Ayuso, the strong investment pace in Spain linked to the 2000-2007 Infrastructure Plan, Ferrovial´s strategic positioning in Eastern Europe, our selective expansion outside Spain, and our infrastructure business enable us to be optimistic about the future of construction. Construction revenues increased 10.4% to 3.789 billion euros and the backlog again reached a record high, the sector´s largest: nearly 6 billion euros, up nearly 6% on 2001. 78% of the total backlog is in Spain and the other 22% elsewhere, especially Portugal and Poland. Our Polish subsidiary, Budimex, attained 619 million euros in revenues and, for the first time since we acquired it in May 2000, it provided positive operating income despite the current major difficulties in the Polish construction market, which has fallen nearly 10% in the last two years. Major effort was devoted to improving management at Budimex in order to make it a major source of growth and earnings in future years after the expansion of the European Union. We have practically completed its restructuring and are now waiting for the market to start recovering. Infrastructure, the main growth engine Ferrovial is one of the world´s largest private-sector transport infrastructure developers, with an investment of nearly 2 billion euros in 16 toll roads measuring a total of nearly 1,600 kilometers, 12 airports which process 40 million passengers per year, and 175,000 parking spaces. By region, 44% of investment is located in Europe, 31% in Canada, 14% in Australia and the other 11% in Chile and Mexico. Our infrastructure business, one of the company´s main growth engines, continues to provide results, as evidenced by the 30% increase in revenues to 450 million euros and its contribution to Group net income, which was the same as in 2001 despite the sale of 40% of our toll road business. In 2002, in the largest-ever airport privatization, Ferrovial obtained the concession for Sydney airport, Australia´s largest, which handles nearly 25 million passengers per year. Ferrovial has a 19.6% stake. Ferrovial also obtained the concession for Ireland´s first toll road, the N4/N6, which will link Dublin and the northwest. In 2002, three new toll roads became operational (M-45, the Estepona-Guadiaro stretch of the Costa del Sol toll road and the Artxanda tunnels) and Ferrovial acquired an additional stake in 407 ETR in Canada. Property development: industrial approach and rapid asset rotation Property revenues increased by 65% to 620 million euros and the backlog reached a record 955 million euros, 25% higher than at 2001 year-end. According to Ayuso, this total figure guarantees sales in 2003 and part of 2004 and assures future growth in this division´s bottom line. The development of first homes continues to be our core business in this market, where we continue to apply an industrial approach and in which we have increased the number of efficient distribution channels so as to provide rapid portfolio rotation. The property area is developing 19,824 homes in 24 cities in Spain, Portugal and Chile and has 400 points of sale throughout Spain. Services: consolidation and investment in new businesses and markets The services area was consolidated in 2002: revenues increased by 58% to 340 million euros and the backlog amounted to 816 million euros, 14% higher than at 2001 year-end. Ferrovial wants to continue growing in services by boosting its core areas: urban services, facility maintenance and management, and integrated infrastructure upkeepin the latter two it is market leader in Spain. Ferrovial also continues to study investments in new businesses and markets. In 2002, Ferrovial acquired Novipav, one of Portugal´s largest road upkeep companies. Focus on profitable growth Joaquín Ayuso told shareholders that sustained profitable growth continues to be Ferrovial´s priority. Investment growth in the Spanish construction sector, selective growth in diversification and internationalization, Ferrovial´s financial soundness and the investments made in recent years are the bases from which we will face new challenges. Ferrovial´s position as one of the world´s most profitable companies is also based on the ongoing search for innovation in our production and management processes, on the quality of our work and its impact on the societies and communities in which we operate, and on information transparency, which will continue to sustain our credibility in the market and among shareholders as part of our commitment to create value.