In 2000, at 160 million euros, profit was up 43.2%, with net profit continuing to grow at a strong pace, representing a compound annual growth rate of 34% in the last five years
The performance of operating figures record construction backlog, volume of pre-sold real estate inventories and concession order book ensures the Groups growth in coming years and guarantees results in 2001 and 2002
Ferrovial consolidates its position as the leading Spanish construction company all set for the best years in the sector (2000-07 Infrastructure Plan), the leading residential developer and the world leader in concessions in terms of the volume of investment.
It continues to pursue its internationalization strategy and foreign sales account for 32% of the total. The target is for them to represent 50% in 2004
Without relinquishing its construction vocation, businesses other than construction contribute 66% of total operating profit, as against the 24% they represented in 1996
Gross investments amounted to 2 trillion euros in the last three years
In business year 2000 Ferrovial obtained its best results ever, thanks to the continuation of its internationalization and diversification strategy, founded on principles of profitability and not forgetting its vocation as a construction firm.
Ferrovial obtained 159.2 million euros in attributable net profit in business year 2000, 43.2% more than the preceding year. This performance, due to the positive performance of margins, sales and the backlog in all its areas of business, maintains the strong growth rate of the last few years and represents compound annual growth of 34% in the last five years. The companys target for 2001 is for net profit to grow at over 15%.
Internationalization and diversification, the bases of sound growth
In his first appearance as Chairman of Ferrovial before the companys shareholders, Rafael del Pino y Calvo-Sotelo underlined “the companys continuous sound growth, in volume and profitability, which has made us one of the major European construction groups in terms of sales volume, net profit and stock market capitalization. This growth he went on- was largely based on two clear lines of action, on which we have been working for some time, namely the internationalization strategy and the progress made in diversification; hence, without relinquishing our vocation as a construction company, which has made us the leader in the domestic market, the rest of our businesses already account for 66% of operating profit, as compared to the 24% they represented in 1996“.
For his part, Santiago Bergareche, the Groups Chief Executive Officer, emphasized “the leading position achieved by Ferrovial in three of its main businesses: construction, residential development and concessions, where the volume of investment committed (1.4 billion euros) make us world leaders. This situation -he added- serves to prove the progressive success of the companys expansion strategy and is the product of the hefty investments made in recent years. Ferrovial has made large investments in the last three years, when it invested nearly two trillion euros“.
Business guaranteed for the next two or three years
In his speech to shareholders, Rafael del Pino y Calvo-Sotelo stressed that “2000 was a good year for Ferrovial, when our main figures once again reached record highs and the performance of our operating figures record construction backlog, volume of pre-sold real estate inventories and the concession order book- strengthens our leadership and guarantees the growth of the Group in coming years“.
“Moreover, we have continued to further our internationalization strategy based on the development of our concession business -mainly directed at OECD countries- and expansion through the acquisitions of leading streamlined companies in markets with good growth prospects“. An example of this line of action is the acquisition of a control stake in Budimex, the leading Polish construction group, with a clear end in view: “to position ourselves strategically in a market with strong future growth -he went on- which will enable us to offset the construction cycles in the domestic market“. This strategy has enabled Ferrovial to obtain 32% of its revenues from businesses conducted outside Spain. The target for the year 2004 is for 50% of sales to come from abroad.
Apart from its increased profitability and its greater international presence, in business year 2000 Ferrovial also made considerable progress in its diversification process. “Ferrovial has always maintained powerful inertia in its construction business, with large cash flows that enable us to finance other businesses that are synergic to our core business and, thus, to obtain balanced results, despite the cycles. We are also -he remarked- in an unusual situation, as we are the leaders in the Spanish residential business and the world leaders in the concession market, with committed investments in excess of 1.4 billion euros. Today, two-thirds of our operating profit comes from the concession and real estate businesses“.
Construction: the expansionary cycle continues
In construction, Ferrovial is once again the leading Spanish construction firm in terms of both business volume and profitability. “This is the position from which we will be facing the coming years of the cycle of growth, driven by the 2000-2007 Infrastructure Plan, which guarantees a large volume of investment and strong growth rates in the sector“.
Amongst the operations conducted abroad is the acquisition of a control holding in Budimex, the leading Polish construction group.”The growth prospects in this market -which will receive funds to develop its infrastructures when it joins the European Union- and the introduction of Ferrovials management practices will make a significant contribution to the Groups results in coming years“.
The weight of diversification: concessions, real estate, services and telecommunications
In the concessions division, important contracts were won in business year 2000, amongst them the R-4 motorway in Madrid and the Scut del Algarve in Portugal and Bristol airport, the largest in the South West of the United Kingdom, and Niagara Falls airport in USA.”The future contribution of this division to the Groups revenues and results will be decisive since only 7 of the 18 airports we manage are currently in operation. In this market, we will continue to take advantage of the business opportunities that arise in the privatization of transport infrastructure in Europe and North America and we will culminate our growth in airport management“.
“In the real estate market he commented- we continue to make a bid for an active risk management policy, with very rapid asset turnover, apart from pursuing diversification and seeking new marketing formulae, such as housing sales through El Corte Inglés stores“.
The acquisition of Grupisa, one of the leading Spanish companies in the sector of integrated infrastructure conservation in Spain, was the most important operation in the service division. “Moreover, we intend to develop business in another segment with good growth prospects: integrated building maintenance, where we already manage over 2000 properties“. Lastly, “our strategy in the telecommunications market will continue to be aimed at creating value on our current investments and at actively seeking further opportunities in broad band and mobile telephony, in Spain and abroad“.
Progress in all business divisions
In his speech to shareholders, Santiago Bergareche, the CEO of the Ferrovial Group, reviewed the progress made in all the business divisions of the Group, which obtained consolidated sales of 3.59 billion euros, a 36% increase on the previous year. “In 2000, the businesses conducted outside Spain contributed 32% of total turnover, as against 14% in 1999, largely as a result of the purchase of the Polish firm Budimex and the contribution of the concession business abroad, mainly the ETR 407 motorway in Canada“.
The construction division obtained 2.97 billion euros in revenues, an increase of 34.2%, and its backlog reached a record figure of 5.28 billion euros.
In the concession division, sales rose by 43% to 257 million euros and growth rates were high, thanks to the large increases in traffic on the ETR 407 motorway in Canada and the Costa del Sol motorway in Malaga. Ferrovial manages 18 toll motorways, 12 airports and over 130.000 parking spaces.
Sales and profit also rose sharply in the real estate division, where pre-sold inventories amounted to over 600 million euros -the first time any real estate company has registered this figure- nearly 40% more than the previous year. Moreover, this figure guarantees a good part of the sales and profit figures forecast for this business in the next two years.
For its part, the service division doubled its sales in 2000 to 194 million euros, on the back of the contracts obtained in recent years and the purchase of Grupisa, a leading company in the infrastructure maintenance business.
Lastly, Bergareche underlined the interest in the telecommunications sector, where Ferrovial has holdings in Ono, Uni2 and Wanadoo, after the agreement to spin off the residential Internet business from Uni2 and add it to France Telecoms portal.
“Every year the contribution of all these businesses other than construction -he pointed out- is carrying increasing weight and today they already account for 66% of the Groups total operating profit“.
Ferrovials CEO also referred to the “increasing investment effort made in the last three years, when nearly 2 trillion euros were invested“. In 2000 Ferrovial invested 602 million euros, which largely went to the construction division (the purchase of Budimex in Poland) and real estate (investments in land). Large investments were also made in services (the purchase of Grupisa) and concessions, although the biggest outlays in the latter division will occur in business year 2001, after the purchase of Bristol airport and the adjudication of the concessions R-4 and Scut Norte Litoral, the second shadow toll motorway recently contracted in Portugal. Owing to the high level of shareholders equity, 1.05 billion euros, the gearing to equity ratio, which was of 39% as of 31 December 2000, implies that there is still a margin to increase the Groups level of indebtedness.
The bid for value creation
“Growth, always following criteria of profitability -he said at the end of his speech- is one of Ferrovials prime objectives and the selective steps taken in the diversification and internationalization of our businesses, together with the investments made in the last few years, allow us to maintain strong profit growth and to move ahead with a view to becoming a company with business practices and returns of the highest international standards“.
“Together with this capacity for ongoing growth -he ended- Ferrovial continues to make a firm bid for transparency in information, which lends us credibility and inspires confidence amongst our shareholders, employees and clients and which also forms part of our commitment to the creation of value“.
