Ferrovial reported a 22.8% increase in net profit in the first half of 2004, reaching 168.5 million euros. Practically all business areas progressed strongly in 1H04, and margins and key operating figures (backlog and traffic at toll roads and airports) increased, ensuring continued activity in the coming months.
Operating profit increased by 31.2% to 365.3 million euros, driven by growth in revenues and improved margins in construction and services. Non-construction activities accounted for 79% of total operating profit and the more recurring businesses (infrastructure and services) represented 60% (up from 46% one year ago).
Net sales totalled 3,520.8 billion euros, 46.2% more than in the first half of 2003, boosted by the contribution from the services area and growth in traffic and revenues at the toll roads and airports managed by the company. Revenues increased by 0.9% in construction and 20.5% in infrastructure concessions but declined by 3.1% in real estate; nevertheless, services division revenues increased six-fold.
International sales (1.270 billion euros) increased by 144.7%, mainly due to the addition of Amey, and now represent 36% of the total, up from 22% one year ago. The United Kingdom accounts for 22% of foreign revenues, followed in importance by Poland, Canada, Portugal and Chile.
Gross capital expenditure amounted to 208.3 million euros and was allocated mainly to the services and infrastructure divisions. The Real Estate division invested 130 million euros in land pruchases. At the end of June 2004, Ferrovial´s net debt amounted to 758.9 million euros, i.e. 41% leverage.
Construction: higher profitability and a growing backlog
Construction revenues rose a modest 0.9% to 1,679.5 billion euros; but for adverse exchange rate fluctuations, the increase would have been 1.4%. Revenues increased by 2.5% in the domestic market.
The improvements in the area´s profitability were maintained in the period, boosting the EBIT margin to 4.5%. EBIT reached 76 million euros (+6.7%).
The construction backlog increased by 3.4% to a record 6.337 billion euros, representing 22 months of activity.
Infrastructure: rapid growth in traffic and revenues
The infrastructure concessions (toll roads, airports and car parks) increased revenues by 20.5% to 288.9 million euros and EBIT by 13.7% to 133.1 million euros.
The toll road business reported revenues of 213.3 million euros (+16.5%) and EBIT of 117.5 million euros (+12.3%), driven by a surge in traffic and revenues at the Spanish toll roads (Ausol I, Ausol II, Autema, M45, etc.) and the consolidation of the Scut Algarve road in Portugal, which commenced tolling in 1Q04. (Note: For legal reasons, the earnings of 407ETR cannot be disclosed until they are approved by the company´ Board of Directors, which is scheduled to meet on 23 July).
In June, Ferrovial and Macquarie Infrastructure Group (MIG) agreed to float Cintra, their toll road concession subsidiary. As a result of the flotation, due to be completed before year-end, MIG will shed its entire stake in Cintra and Ferrovial will remain as majority shareholder. The agreement involves MIG buying 13.87% of 407ETR in Toronto before the IPO in exchange for 11.99% of Cintra.
On 10 July 2004, the independent arbitrator designated to examine the dispute over toll changes on the 407 Express Toll Route in Toronto (Canada) confirmed that, under the concession contract, the concession-holder is not obliged to seek approval from the Province of Ontario in order to modify the tolls. The decision, which was issued in accordance with the procedure agreed upon by the Province of Ontario and 407ETR, confirms the concession-holder´s position and ratifies the validity of toll increase implemented on 1 February 2004.
The airports business almost doubled revenues due to good performance at Bristol Airport (+12%) and the integration of Belfast City Airport (acquired in May 2003), which contributed 11.4 million euros. Sydney airport increased revenues by 18% and traffic by 14%, in line with the strong recovery observed in recent months: for example, Sydney´s international traffic rose 25% in June.
Revenues in the car park area increased by 20.2% and the number of parking spaces under management rose by 9.4% to nearly 200,000.
Real estate: the backlog guaranteed fifteen months´ sales
Real estate revenues fell 3.1% due to the delivery of a large number of homes in 1H03 and the seasonal impact on deliveries in 2004. EBIT amounted to 67.4 million euros.
The backlog reached 1.008 billion euros, up 9.1%, guaranteeing fifteen months´ sales. Realty brokerage, conducted through Don Piso, increased revenues by 10% to 52.7 million euros.
Services: revenues increased six-fold and operating profit eight-fold
The addition of Cespa and Amey contributed decisively to increasing the services division´s key figures: in 1H04, revenues increased six-fold (+549%) to 1.261 billion euros, and operating profit increased eight-fold to 86.6 million euros.
The division´s EBIT margin improved significantly, reaching 6.9% (vs. 5.2% in 1H03) due to positive performance in all areas (urban services, facility management and infrastructure maintenance).
The services backlog increased six-fold to 5.331 billion euros.
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