EPoC 2010. European powers of construction


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Deloitte acaba de publicar el estudio EPoC 2010 que examina la situación de las principales empresas europeas cotizadas en diciembre 2010 y su posición en el mercado, su internacionalización, margen y deuda.

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EPoC 2010. European powers of construction

  1. 1. EPoC 2010 European powers of constructionJune 2011
  2. 2. EPoC is an annual publication edited byDeloitte and distributed freeDirectorJavier Parada, partner in charge of theInfrastructure Industry, SpainCoordinated byMargarita VelascoAlberto Benito BenitoEdited byCIBSContactInfrastructure Department, Deloitte MadridPlaza Pablo Ruiz Picasso, S/NTorre Picasso 28020 Madrid, SpainPhone + 34 91 514 50 00Fax + 34 91 514 51 80June 2011
  3. 3. Contents5 Introduction6 Ranking of listed European construction companies7 Top 50 European Powers of Construction – ranking by sales8 Top 20 European Powers of Construction – ranking by market capitalisation9 Internationalisation and diversification profiling of the TOP 20 EPoC11 Working abroad: Internationalisation of EPoC16 The diversification of European construction companies18 Financing the diversification21 Top 20 listed European companies – Company profiles62 European Construction and Infrastructure Group Contacts
  4. 4. Welcome to theeighth edition ofEuropean Powersof Construction
  5. 5. IntroductionSix months after the end of the year 2010, EPoC 2010examines the status of the major European listedconstruction companies at December 2010 and itsposition on key industry issues such as the level ofdiversification, level of internationalisation, constructionactivity margin or indebtedness levels.We are pleased to present European powers of While discussing the internationalisation of theconstruction (EPoC) 2010, our eighth annual publication European construction companies and how theirwhich identifies the main European construction successful attempts for diversification have positivelycompanies and discusses the situation of the impacted their revenues and margins, we cannot forgetconstruction sector. that usually diversification and international expansion come at a cost. Therefore, a discussion on indebtedness2009 and 2010 have been difficult years for the levels and diversification of both activities and locationsconstruction sector, following the 2008 credit crunch is also included in our analysis.and the subsequent economic recession. The economicdownturn has been keenly felt across the real estate We maintain a section dedicated to profiles, which insector of most European countries and it has also the 2010 EPoC edition are focused on the top 20 listedaffected construction of public infrastructure. European construction companies. We present key data regarding ownership structure, main activities andHowever, this sector is very diverse and has international presence, goals and strategic objectives.demonstrated its innovation over the years. Most of the In addition we have included an appendix for eachcompanies that we are analysing had anticipated the company that shows relevant data extracted from theexhaustion of their traditional business models, based company’s financial statements for 2010.on domestic construction either for the Public Sector orfor real estate developers, and were able to successfully We hope that you find the EPoC 2010 analysis of theexpand their business in terms of both geographical construction sector to be of interest, and that thelocations and activities performed. information presented herein helps you to understand and think over the challenges and opportunities of this sector. We welcome your ideas and suggestions about any of the topics covered. EPoC 2010 European powers of construction 5
  6. 6. Ranking of listed Europeanconstruction companies The ranking of the Top 50 EPoC 2010 by sales volume France dominates the Top 50 in terms of total sales, is headed by Vinci as in previous years. In addition, with also three companies listed within the top 5. There Bouygues and Hochtief maintain their second and third are no more listed French constructor companies in the place so there are no changes in the top 3 places of the remaining positions of the ranking. EPoC ranking. Spain has the largest presence in the top 20, placing six companies between the fourth and the seventeenth positions. Only one other Spanish company is includedFrench, Spanish and British in the top 50. With the consolidation of Hochtief in 2011, Spanish group ACS will achieve proforma salescompanies lead the EPoC of €35,539 million stepping to the number 1 proforma position in the EPoC ranking by revenue.ranking by volume of sales but The United Kingdom has the largest number ofwith certain differences in their companies in the top 50, with 13 companies, but their relative size is smaller in comparison to Spanishrelative size or French companies. The UK has a number of housebuilders, whose dynamics are different to other construction companies of the ranking, more focused on civil engineering. Number of Country Total Sales Average Sales Companies France 78,154 3 26,051 Spain 56,508 7 8,073 United Kingdom 38,284 13 2,945 Germany 29,298 3 9,766 Sweden 22,959 4 5,740 Austria 15,603 2 7,802 Netherlands 11,650 3 3,883 Finland 5,680 2 2,840 Italy 5,060 3 1,687 Portugal 4,279 3 1,426 Turkey 3,555 1 3,555 Greece 2,544 2 1,272 Norway 1,972 1 1,972 Switzerland 1,731 1 1,731 Denmark 1,114 1 1,114 Poland 1,048 1 1,048 Total 279,439 50 5,5896
  7. 7. Top 50 European Powers ofConstruction – ranking by sales Market EBITDA Ranking Company Country FY END Sales (€ m) EBIT (€ m) Capitalisation (€ m) (€ m) (a) 1 Vinci SA France Dec 10 33,376 5,052 3,429 23,694 2 Bouygues SA France Dec 10 31,225 3,701 1,760 12,122 3 Hochtief AG Germany Dec 10 20,159 1,643 715 4,451 4 ACS, Actividades de Construcción y Servicios, SA Spain Dec 10 15,380 1,500 1,077 10,773 5 Eiffage SA France Dec 10 13,553 1,852 1,041 3,806 6 Skanska AB Sweden Dec 10 12,815 735 572 6,040 7 Strabag SE Austria Dec 10 12,777 735 299 2,516 8 Balfour Beatty Plc United Kingdom Dec 10 12,288 422 240 2,637 9 Ferrovial SA Spain Dec 10 12,169 2,514 1,514 6,951 10 Fomento de Construcciones y Contratas SA (FCC) Spain Dec 10 12,114 1,435 774 2,931 11 Bilfinger Berger SE Germany Dec 10 8,007 511 343 2,852 12 Koninklijke Bam Groep NV Netherlands Dec 10 7,611 206 (30) 1,261 13 Acciona SA Spain Dec 10 6,263 1,211 527 4,667 14 Carillion PLC United Kingdom Dec 10 5,991 265 227 1,819 15 NCC AB Sweden Dec 10 5,182 236 236 1,965 16 Obrascon Huarte Lain SA (OHL) Spain Dec 10 4,910 1,005 700 2,763 17 Sacyr Vallehermoso SA Spain Dec 10 4,820 572 394 3,530 18 Peab AB Sweden Dec 10 4,004 234 158 1,791 19 Yit Oyj Finland Dec 10 3,788 256 221 2,500 20 Enka Insaat Ve Sanayi AS Turkey Dec 10 3,555 584 505 7,122 21 Taylor Wimpey Plc United Kingdom Dec 10 3,034 220 215 1,396 22 Porr Group Austria Dec 10 2,826 103 49 280 23 Heijmans NV Netherlands Dec 10 2,680 83 48 402 24 Barratt Developments Plc United Kingdom Jun 10 2,450 71 61 339 25 Morgan Sindall Plc United Kingdom Dec 10 2,386 89 64 523 26 Kier Group Plc United Kingdom Jun 10 2,315 107 102 1,186 27 Interserve Plc United Kingdom Dec 10 2,182 123 87 393 28 Impregilo Spa Italy Dec 10 2,062 282 224 896 29 Astaldi Spa Italy Dec 10 2,045 230 174 527 30 Mota Engil Sgps SA Portugal Dec 10 2,005 237 132 377 31 Veidekke Asa Norway Dec 10 1,972 98 53 797 32 Lemminkainen Oyj Finland Dec 10 1,892 65 29 491 33 Persimmon Plc United Kingdom Dec 10 1,829 150 145 1,519 34 Ellaktor SA Greece Dec 10 1,753 279 167 618 35 Implenia AG Switzerland Dec 10 1,731 82 53 415 36 Galliford Try Plc United Kingdom Jun 10 1,390 37 33 319 37 Teixeira Duarte Engenharia e Construçoes SA Portugal Dec 10 1,380 150 84 272 38 Ballast Nedam NV Netherlands Dec 10 1,359 45 18 163 39 Keller Group Plc United Kingdom Dec 10 1,246 99 50 451 40 Costain Group Plc United Kingdom Dec 10 1,191 37 34 185 41 Bauer Aktiengesellschaft Germany Dec 10 1,132 166 88 613 42 Mt Højgaard Denmark Dec 10 1,114 30 13 178 43 Interior Services Group Plc United Kingdom Jun 10 1,106 16 13 64 44 Polimex Mostostal SA Poland Dec 10 1,048 63 40 407 45 JM AB Sweden Dec 10 958 95 95 1,303 46 Trevi Group Italy Dec 10 953 137 84 554 47 Grupo Soares Da Costa SGPS Sa Portugal Dec 10 894 88 50 88 48 Bellway Plc United Kingdom Jul 10 876 60 58 923 49 Grupo Empresarial San Jose SA Spain Dec 10 852 68 25 350 50 J&P-Avax SA Greece Dec 10 791 80 80 96(a) Figures at May 2011 EPoC 2010 European powers of construction 7
  8. 8. Top 20 European Powers ofConstruction – ranking bymarket capitalisation The ranking of the Top 20 EPoC 2010 by marketVinci, Bouygues and ACS head capitalisation is headed by Vinci and Bouygues, which are also the first companies in our ranking by sales.the ranking of the Top 20 EPoC Among the rest of the companies, ACS, Enka, Ferrovial, Acciona, OHL, Sacyr and Yit climb places in comparison2010 by market capitalisation with the ranking by sales. Particularly significant is the case of Enka that reaches the fourth place helped by its diversification and the buoyant markets where the Turkish group operates. Market Sales EBITDA (€ EBIT (€ Ranking COMPANY Country Capitalisation (€ m) (a) m) (a) m) (a) (€ m) (b) 1 Vinci SA France 33,376 5,052 3,429 23,694 2 Bouygues SA France 31,225 3,701 1,760 12,122 3 ACS, Actividades de Construcción y Servicios, SA Spain 15,380 1,500 1,077 10,773 4 Enka Insaat Ve Sanayi AS Turkey 3,555 584 505 7,122 5 Ferrovial SA Spain 12,169 2,514 1,514 6,951 6 Skanska AB Sweden 12,815 735 572 6,040 7 Acciona SA Spain 6,263 1,211 527 4,667 8 Hochtief AG Germany 20,159 1,643 715 4,451 9 Eiffage SA France 13,553 1,852 1,041 3,806 10 Sacyr Vallehermoso SA Spain 4,820 572 394 3,530 11 Fomento de Construcciones y Contratas SA (FCC) Spain 12,114 1,435 774 2,931 12 Bilfinger Berger SE Germany 8,007 511 343 2,852 13 Obrascon Huarte Lain SA (OHL) Spain 4,910 1,005 700 2,763 14 Balfour Beatty PLC United Kingdom 12,288 422 240 2,637 15 Strabag SE Austria 12,777 735 299 2,516 16 Yit Oyj Finland 3,788 256 221 2,500 17 NCC AB Sweden 5,182 236 236 1,965 18 Carillion PLC United Kingdom 5,991 265 227 1,819 19 Peab AB Sweden 4,004 234 158 1,791 20 Persimmon PLC United Kingdom 1,829 150 145 1,519(a) Figures at December 2010(b) Figures at May 20118
  9. 9. Internationalisation anddiversification profiling ofthe top 20 EPoCA quick glance at the top 20 listed European On a smaller scale, Peab obtains 86% of its revenue inconstruction companies, taking into account the Sweden and is also focused in the construction businessinternationalisation level and the diversification of their from where 86% of its revenues are derived.activities, will show that EPoC could be classified intofour main categories. International construction groups The second group of companies is comprised of“Domestic” construction groups companies whose primary source of sales is theThis group comprises companies whose primary construction business outside their country of origin.source of revenue is construction within local markets.International sales account for less than 40% of total Hochtief is the most international European constructionsales made. group, with 87% of its construction revenue being earned in America and Asia/Oceania.Vinci and Bouygues are without any doubt the first twocompanies of our 2010 ranking taking into account total Contrary to Peab, Swedish companies NCC and Skanskarevenues. The international presence of both groups achieve over 40% of their revenues outside of theiris significant (€12,449 million and €9,719 million of home country. NCC works in Denmark, Finland andtotal revenues, respectively), but they still achieve over the other Baltic countries. Skanska is active in the UK,60% of revenues in France. In a similar way, although Eastern Europe and the Americas.in recent years both French giants have diversified theiractivity portfolio, their construction revenue represents84% and 74% of their total revenue figure, respectively. 100% 90% 80% Non-construction revenues / total revenues % Enka 70% ACS 60% "Domestic" International Ferrovial Conglomerates Conglomerates Acciona 50% Eiffage FCC Sacyr Bilfinger Carillion 40% OHL Balfour Beatty 30% Bouygues 20% Peab International Construction Vinci Groups "Domestic" 10% Skanska Construction Hochtief Bam Groups NCC Yit Strabag 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% International revenues / total revenues % EPoC 2010 European powers of construction 9
  10. 10. Carillion’s diversification has been oriented to provideNine of our EPoC 2010 support services and Eiffage has achieved a significant presence in energy and concession sectors. Bothcompanies obtain at least companies generate over 40% of their revenues through non-construction related activities, although given50% of their revenues from the location of such activities, they must be primarily considered as domestic.non-construction activities. Enka has reached a significant position in Russia,Eleven of them generate at least although the Turkish market still represents over 70% of total revenues. In terms of activity, Enka is the most40% abroad diversified listed European construction group. Its focus on the energy sector and trade and manufacturing causes the traditional construction business to represent less than 25% of its total revenue in 2010. Finally, the limited size of their local markets encourage International Conglomerates the Finnish company Yit, the Austrian company Strabag Finally, there is a group of companies that are highly and the Dutch company Bam Groep to carry on their diversified and have significant international sales. activities in other European countries. Ferrovial and OHL achieve almost 70% of their revenues “Domestic” conglomerates outside of Spain, with significant diversification. A third group of companies is comprised of companies Ferrovial derives more than 60% of its revenue from that have diversified their business portfolio to non-construction activities, mainly environmental non-construction activities but conduct most of their services, airports and infrastructure projects, in the business in domestic markets. UK, Poland and North America. OHL has significant construction activities in the USA, Algeria and the Spainsh companies ACS, Acciona and Sacyr have Middle East and is also especially strong in Mexico and extended their activities to foreign markets. However, Brazil where its concession business is very significant. in 2010 almost 70% of their activity was still performed in Spain. In addition to their international expansion, FCC and Balfour Beatty obtain approximately 50% of ACS, Acciona and Sacyr have diversified their business their revenues in foreign markets and non-construction portfolios. They provide environmental services such activities. FCC’s diversification has been oriented mainly as waste disposal or water treatment plants, energy- to environmental services in Austria, Germany,the related services, transportation or infrastructure projects. UK and Eastern Europe. Balfour Beatty has a strong Consequently construction revenue does not exceed presence in Asia and North America and has diversified 60% of total revenues. With the consolidation of its construction activity, providing professional services Hochtief in 2011, ACS radically changes its profile with and support services. proforma international sales of approximately 66%. Hochtief consolidation also drives ACS to the number 1 Bilfinger is present in the five continents, obtaining proforma position in the EPoC ranking by sales. approximately 58% of its revenues in foreign markets. The German group has diversified its activities to include industrial services and power services that represent almost 50% of the group revenues in 2010.10
  11. 11. Working Abroad:Internationalisation of EPoCThe limited size of the Western European market, its In this context, the major European construction groupsevolution over the last years, as well as the experience have looked abroad for growth opportunities and, as ofgained by the European companies in the construction today, our 2010 EPoC are present in the five continentssector and in other sectors where they have focused obtaining about 49% of their revenues outside of theirtheir efforts in recent years, have meant that the national borders. This trend has strengthened in recentinternationalisation of their business has become an years, and is expected to continue in the near future.attractive model that most EPoC have decided to This diversification is focused on civil engineering andpursue. other activities, excluding house building, which, due to its very nature, is difficult to export.After several years of low or no growth, investmentin the construction sector within the European Union The distribution of EPoC 2010 sales by geographicaldecreased 3.6% in 2010, with expected 2011 growth of area is as follows:only 0.2%. Millions of Euros International Total Domestic Rest of Asia / Not Company Country Sales/Total America Africa Sales Sales Europe Oceania Specified Sales Hochtief AG Germany 91.86% 20,159 1,642 977 6,891 10,642 7 - Strabag SE Austria 85.07% 12,777 1,907 10,067 246 421 136 - Skanska AB Sweden 78.00% 12,815 2,435 5,238 5,142 - - - OHL Spain 69.74% 4,910 1,496 476 2,444 172 271 51 Ferrovial SA Spain 69.06% 12,169 3,765 6,513 1,610 - - 281 Yit Oyj Finland 61.88% 3,788 1,444 2,327 - - - 17 Bilfinger Berger SE Germany 58.30% 8,007 3,358 3,030 591 509 635 (117) Bam Groep NV Netherlands 55.38% 7,611 3,397 3,878 - - - 336 Balfour Beatty PLC United Kingdom 52.64% 12,288 5,820 - 3,582 - - 2,886 NCC AB Sweden 46.32% 5,182 2,782 2,400 - - - - FCC Spain 46.00% 12,114 6,541 4,792 279 - - 502 Vinci SA France 37.30% 33,376 20,927 8,543 1,297 911 1,698 - ACS Spain 31.81% 15,380 10,488 978 2,967 - - 947 Bouygues SA France 31.13% 31,225 21,506 4,277 2,446 1,643 1,351 2 Sacyr Spain 31,00% 4,820 3,326 847 331 30 164 122 Acciona SA Spain 30.80% 6,263 4,334 987 - - - 942 Enka Turkey 28.50% 3,555 2,543 964 - 48 - - Carillion PLC United Kingdom 25.10% 5,991 4,476 - 826 586 - 103 Eiffage SA France 14.88% 13,553 11,536 1,917 - - 100 - Peab AB Sweden 14.21% 4,004 3,435 569 - - - - 49.05% 229,987 117,158 58,781 28,652 14,962 4,362 6,072 EPoC 2010 European powers of construction 11
  12. 12. The Americas - sales (millions of Euros) Balfour Beatty’s international sales are obtained mainly in the USA. Construction sales and professional services 8,000 sales were approximately €2,500 million and €1,050 7,000 million, respectively. The acquisition of Halsall in 2010, with a workforce over 300 people, opens the doors of 6,000 the Canadian market to the Group. 5,000 4,000 ACS is present in basically all the countries of the 3,000 American continent. Nonetheless, Mexico and the United States are the two countries that show the 2,000 Group’s highest sales (approximately €1,000 million 1,000 each). In the last three years, ACS has acquired the 0 American groups Schiavone, Pulice and John Picone. Hochtief AG Skanska AB Balfour Beatty PLC ACS Bouygues SA OHL Ferrovial SA Vinci SA Carillion PLC Bilfinger Berger SE Bouygues derives 7% of its total sales in the USA and Canada, amounting to €2,301 million in 2010. Most of these sales were obtained through the world’s leading road builder Colas. OHL is the sixth EPoC group with highest revenue in America and is certainly a leader in the Central/South America area. Mexico and Brazil report more than €900 The Americas million revenues each, in the International Construction Hochtief has revenue of nearly €6,900 million in the and Concession Infrastructures divisions. Americas, mainly the USA and Canada. Through its subsidiary Turner, Hochtief is the number one general American sales of Ferrovial are mainly obtained in the builder in the USA, being present in sub-segments such USA and Canada, where it obtained revenues over as healthcare, education or office properties. It also €1,400 million in 2010. The Canadian highway 407 ranks first in the green building segment. Flatiron is their ETR in Toronto had revenues of €457 million, with an brand to participate in complex infrastructure projects, EBITDA over sales of approximately 80%. This subsidiary such as bridges and roads. In 2010, the Group acquired has been accounted for using the equity method since a heavy construction contractor, E.E. Cruz, which the last quarter of 2010. operates in the New York metropolitan area. Vinci derived revenues of €944 million in 2010 from Skanska reached sales of almost €4,500 million in North the USA and Canada. More than half of this figure was America and more than €500 million in South America. obtained by Eurovia. In addition, 10% of the American Through its subsidiaries, Skanska USA Building and revenues of the Group were obtained by Vinci Park Skanska USA Civil, the Group has become a leader in the through its 445,000 parking spaces in the USA and New York City area. They have participated in projects 126,000 parking spaces in Canada. such as the PATH commuter train station that connects New Jersey with Lower Manhattan, the reconstruction Two companies generate revenues of between €500 of the World Trade Center area in New York City and the million and €1,000 million. Carillion generates over €800 renovation of the Brooklyn Bridge. million through construction services in Canada and the Caribbean area, while Bilfinger produced sales of almost €600 million in the USA.12
  13. 13. Asia/OceaniaHochtief achieved revenues in excess of €10,600 million Asia/Oceania - sales (millions of Euros)in Asia/Oceania in 2010, orchestrating its activities in the 12000region through its majority shareholding in the LeightonGroup. Hochtief holds the leading position in the 10000Australian market and this position is being used to stepup in particularly high-growth countries of Asia—such as 8000India—and in the Gulf States. Hochtief’s main activitiesin the Asia-Pacific area are infrastructure, construction 6000and contract mining. 4000Behind Hochtief, but with significant sales in the Asia- 2000Pacific area, Bouygues obtained revenues of €1,643million in this region during 2010, mainly in the Asian 0 Hochtief AG Bouygues SA Vinci SA Carillion PLC Bilfinger Berger SEcountries of the Pacific Rim. In Oceania it reportedsales of €149 million and the Middle East sales of €127million.Vinci had over €900 million revenue in this area in 2010.The presence in its shareholding structure of Qatari Diar,which controls 5.7% of the Group, certainly contributes Africa - sales (millions of Euros)to its operations in the Middle East and the rest of Asia.Carillion and Bilfinger reached sales between €500 2000million and €600 million in 2010, most of them in theMiddle East. 1500AfricaSogea – Satom is Vinci’s main brand in Africa where the 1000Group obtained revenues of €1,698 million in 2010,across the entire continent. 500Bouygues achieved sales of €1,351 million in Africaduring 2010. These sales were obtained by BouyguesConstruction and Colas in similar proportions in 0 Vinci SA Bouygues SA Bilfinger Berger SEMorocco, South Africa and some other countries,members of the African Financial Community.Bilfinger completes the top three EPoC companiesthat have obtained sales in Africa over €500 million.South Africa is one of its main markets, with Bilfigermaintaining and repairing about 70% of the country’sinstalled power generation capacity. EPoC 2010 European powers of construction 13
  14. 14. Geographic diversificationof EPoC 2010 1 1 CanadaAccionaACSBalfour B.BouyguesBilfingerCarillionFCC 6Ferrovial Chile, Argentina, 10Hochtief UruguayOHL The UK 2Vinci Acciona ACS ACS Balfour B. Balfour B. 2 Bilfinger FCC Ferrovial Bouygues The USA Hochtief Carillion 3 Acciona OHL Eiffage ACSA Sacyr FCC Balfour B. Skanska Ferrovial 4 Bilfinguer Vinci Hochtief Bouygues Skanska FCC Vinci 7 Ferrovial Hochtief Paraguay, Bolivia 14 OHL 5 ACS 11 Eastern Europe Skanska Vinci Ferrovial Iceland, Norway, Acciona Sweden, Denmark ACS 3 8 Balfour B. 8 Balfour B. BAM Mexico Brazil Bilfinger Bilfinger NCC 7 Acciona BouyguesAcciona Peab EiffageACS ACS Skanska Balfour B. EnkaBouygues Vinci FCCFCC FCC YIT Ferrovial Ferrovial 6Ferrovial HochtiefOHL OHL Sacyr 12 OHLSacyr SkanskaVinci Skanska Switzerland Vinci Strabag Vinci Balfour B 4 YIT 9 Bilfinger Ferrovial Caribbean Area Eurozone Strabag 15 ACS Vinci Acciona Azerbaijan, Kazakhstan, Balfour B. ACS Tajikistan, Turkmenistan, Bouygues Balfour B. 13 Uzbekistan, Ukraine 17 19 Carillion BAM Enka Balkan Area Bouygues Bilfinger Libya, Egypt Iran, Irak FCC Enka Bouygues Ferrovial Balfour B. Ferrovial ACS ACS Carillion Sacyr Bilfinger OHL BAM Bouygues Eiffage Vinci Bouygues Strabag Bouygues Enka Enka Vinci Carillion FCC FCC Enka 20 5 Ferrovial Ferrovial FCC Hochtief Afghanistan, Pakistan Hochtief 16 Ferrovial Colombia, Venezuela, NCC OHL Strabag Ecuador, Peru OHL Turkey Enka Vinci Vinci Peab Vinci Acciona Sacyr Balfour B. ACS Skanska Bilfinger Balfour B. 18 21 Strabag Enka Bouygues Vinci OHL Russia South Korea, Japan FCC YIT Vinci Ferrovial Enka Acciona Hochtief FCC Balfour B. OHL Ferrovial Bouygues Skanska Hochtief Hochtief Vinci NCC Vinci Vinci YIT14
  15. 15. 18 11 10 14 12 13 15 22 21 9 16 19 26 20 34 17 25 24 23 33 30 32 29 31 27 27 Australia 22 Acciona 30 China, Mongolia ACS 25 Balfour B. Eastern Africa 28ACS Arabian Peninsula BAMBalfour B. Bilfinger ACSBouygues ACS Bouygues Balfour B.FCC Balfour B. Hochtief BAM BAM 33Ferrovial OHL BouyguesHochtief Bilfinger Sacyr Enka Western AfricaVinci Bouygues Vinci Ferrovial Carillion Sacyr ACS Enka Vinci Balfour B. Hochtief 28 Bilfinguer 23 OHL New Zealand Bouygues South Eastern Asia Vinci 31 Eiffage Balfour B. South Africa, FerrovialBalfour B. Bouygues Vinci 26 MozambiqueBAM HochtiefBouygues Israel, Lebanon, Jordan Vinci ACS 34Hochtief Balfour B.Vinci ACS Bilfinger Maghreb Area 29 Bouygues Bouygues Ferrovial Hochtief Acciona Madagascar24 Sacyr Vinci ACS Vinci Bouygues Balfour B. India Vinci Bouygues 32 FCCAcciona FerrovialACS Angola, Namibia OHLBalfour B. Vinci ACSBouygues BouyguesFerrovial SacyrHochtief VinciVinci EPoC 2010 European powers of construction 15
  16. 16. The Diversification of EuropeanConstruction Companies The construction industry has a cyclical profile that is • They have diversified into activities related to long-term significantly more pronounced than that of the economy contractual management. as a whole. This is due primarily to the considerable historical dependence on investment in infrastructure • They are activities that may serve as a source of and on residential and non-residential building, the main contracts for the other business lines (construction, areas of activity of the construction industry. This cyclical maintenance, facilities, concessions). nature, causes many companies significant financial difficulties in times of recession, and is the main reason • They seek stable/predictable cash flows that enable underlying the diversification strategy implemented by high leverage of the investment to be made. a large number of European construction companies in recent years. • The activities are financially complementary to the construction business (high EBITDA margins and stable/ Although at first glance it may seem that the predictable cash flows than enable a high leverage of construction companies have diversified into a investments as opposed to more modest margins but wide range of disparate activities with no common with a large cash generating ability without leverage as denominator, a closer examination shows that these is the case with construction). activities complement the construction business with a full range of services throughout the entire infrastructure The construction industry has historically had relatively cycle. These activities have, either directly or indirectly, low margins due to the high number of companies certain of the following common characteristics: operating in the sector and to the strong competition at a both local and international level. The diversification • They share clients with the construction activity of the European construction companies is focused on (Central or Local Government). activities with higher margins and more stable/predictable cash flows. 100% 90% Non - construction revenues / total revenues % 80% Enka 70% ACS Ferrovial 60% Acciona Bilfinger Eiffage 50% Carillion FCC 40% Balfour Sacyr Beatty OHL 30% Bouygues 20% Vinci Peab Skanska 10% Hochtief BAM Strabag Yit NCC 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% EBIT/ total revenues %16
  17. 17. A review of the margins obtained by our EPoC 2010confirms this notion. The first three groups in terms ofprofitability from sales (OHL, Enka and Ferrovial) are also The construction activity ofamongst the top ten groups with the greatest revenuediversification. the major listed EuropeanSimilarly, Acciona, Sacyr, Eiffage, ACS, FCC, Bilfinger, construction companiesCarillion and Balfour Beatty present higher averageprofitability than Yit, NCC, Skanska, Peab, Hochtief, reported margins of betweenStrabag and Bam because they are more diversified. 3% and 5% in most cases inVinci and Bouygues present overall profitability fromsales of 10.3% and 5.6%, respectively, but as can be 2010.observed in the graph below their highest profit marginsare to be found in the non-construction activities. EBIT/ Sales Construction Company Other activities Total activities ENKA 15.3% 13.9% 14.2% YIT OYJ 5.8% N/A 5.8% ACS 5.3% 8.0% 7.0% OHL 4.8% 30.1% 14.3% NCC AB 4.6% N/A 4.6% VINCI SA 4.5% 41.4% 10.3% FERROVIAL SA 4.2% 17.3% 12.4% SKANSKA AB 3.9% 11.9% 4.5% BOUYGUES SA 3.8% 10.7% 5.6% AVERAGE EPoC 2010 3.7% 13.3% 6.5% HOCHTIEF AG 3.8% 0.0% 3.5% ACCIONA SA 3.7% 13.1% 8.4% FCC 3.6% 9.8% 6.4% PEAB AB 3.5% 7.2% 3.9% SACYR 3.5% 14.8% 8.2% CARILLION PLC 3.3% 4.4% 3.8% EIFFAGE SA 3.0% 13.5% 7.7% BALFOUR BEATTY PLC 2.8% 0.5% 2.0% BILFINGER BERGER SE 2.7% 6.2% 4.3% STRABAG SE 2.3% N/A 2.3% BAM GROEP NV 1.8% 0.0% -0.4% EPoC 2010 European powers of construction 17
  18. 18. Financing the diversification Construction activity generally does not requireThe diversification process significant levels of investment in property, plant and equipment or intangible assets, and needs low levels ofcarried out by some of the major working capital. These two factors, together with the traditionally low margins reflected in the constructionlisted European construction industry, which would make it impossible to meet high finance costs, mean that groups engaging solelycompanies in recent years has in construction activities have not historically required significant financing to perform their core activities.required obtaining financing However, the business diversification implemented bythat is still reflected in the certain of the large European construction groups in recent years has required significant financing, largelyconsolidated balance sheets of because the financing is focused on businesses with more predictable cash flows and, therefore, a greaterour EPoC 2010. degree of leverage. 100% 90% Non - construction revenues / total revenues % 80% Enka 70% Ferrovial ACS 60% Acciona Bilfinger Eiffage 50% Carillion FCC 40% OHL Sacyr Balfour Beatty 30% Bouygues 20% Vinci Skanska Peab 10% Bam Hochtief Strabag NCC Yit (1,000) (500) 0 500 1,000 3,000 5,000 10,000 15,000 20,000 25,000 Net Debt18
  19. 19. On analysing the relationship between the net debt of Net Debt (Millions of Euros)the large listed European construction groups and theirsales diversification levels, four categories emerge, the (1,000) 4,000 9,000 14,000 19,000 24,000detail of which is as follows: Ferrovial SA• Strabag, Skanska, NCC, Yit, Peab, Hochtief and Bam Groep are examples of groups which engage primarily Vinci SA in construction. They have very low debt levels and, on occasion, even present positive net cash positions. Eiffage SA• Bouygues and Vinci engage primarily in construction, Sacyr Vallehermoso SA with very high business volumes and a certain level of diversification that has translated into higher debt. ACS Additionally, on quantifying their absolute values, in view of their size, they are positioned in the high net FCC debt segment. Acciona SA• Balfour Beatty, Carillion, Bilfinger and Enka have managed to diversify their traditional construction OHL business without creating significant leverage. The Bouygues SA sectors on which Balfour Beatty and Carillion have focused (basically support services and professional Bam Groep NV services) do not require significant financing. The high margins of Enka have enabled the Turkish group to Hochtief AG maintain a favourable cash position. Yit Oyj• The Spanish groups Ferrovial, Sacyr, ACS, FCC, Acciona and OHL and the French group Eiffage have made Peab AB a firm commitment to diversifying their business in recent years, especially in the infrastructure concession NCC AB sector. As opposed to the construction companies engaging in the traditional building business, an Bilfinger Berger SE analysis of the level of debt of groups operating in the infrastructure sector must take into consideration Enka the fact that they are very long-term projects with predictable and stable cash flows and that, in general, Carillion Plc the significant debt from these activities does not have recourse to the group since they are based on project Skanska AB finance schemes in which the only guarantee is the asset being financed. Balfour Beatty Plc Strabag SE EPoC 2010 European powers of construction 19
  20. 20. Ferrovial is the EPoC 2010 group with the highest net Sacyr’s net debt amounted to €10,995 million at 31 debt. This debt is concentrated in its infrastructure December 2010, of which 45% is to finance its 20% businesses which are also the most profitable segments. ownership interest in Spanish petrochemical company Its airports division had EBITDA of €1,272 million in Repsol. 2010, but also contributed a negative net cash position of €14,529 million to the group’s consolidated balance ACS’s net debt of amounted to €8,003 million at 31 sheet. The motorway division contributed EBITDA of December 2010, related basically to the financing of its €630 million to the group in 2010 and net debt of 20% ownership interest in the energy group Iberdrola €5,026 million. (€4,689 million) and the acquisition of shares of Hochtief (€876 million). The remaining net debt of the Similarly, Vinci’s net debt also arises from the group’s ACS group is related mainly to infrastructure projects. non-construction businesses. Vinci Autoroutes contributed positive cash flows of approximately €3,000 FCC’s net debt (€7,749 million) is related basically to its million to the group, although it also contributed net environmental services division (€4,353 million), cement debt of €13,965 million to the consolidated balance division (€1,288 million) and energy division (€924 sheet, which is in contrast to the positive cash position million). contributed by its Contracting division. Acciona’s net debt amounted to €6,587 million at Eiffage’s Concessions and PPPs division contributed 31 December 2010 and relates basically to its energy net debt of approximately €14,000 million to the division (€5,616 million), which obtained EBITDA of consolidated balance sheet in 2010. EBITDA generated €822 million in 2010. by this segment amounted to €1,361 million in 2010. OHL’s net debt amounted to €4,420 million at 31 December 2010 and is also concentrated mainly in its concession business, which contributed net debt ofThe companies that have €3,822 million.remained focused on the Our analysis is based on the debt as recorded in the 2010 consolidated financial statements of the respectiveconstruction activity have lower EPoC companies. Consequently, the debt figures analysed do not include debt of non controlling interestsdebt than the companies that that are accounted for using the equity method, joint ventures that are not fully consolidated and PFI’s overhave further diversified their which the respective company does not have control (that in some cases may be significant).portfolio20
  21. 21. Top 20 listedEuropean companies– Company profiles EPoC 2010 European powers of construction 21
  22. 22. Vinci SA Vinci SA was incorporated in 1899 by French engineers Contracting Alexandre Giros and Louis Loucheur and in 2010 it Vinci Energies, Eurovia and Vinci Construction constitute employed 180,000 people in around 100 countries. the Contracting business of Vinci, with 163,000 employees working on 262,000 projects in around 100 Its main shareholders are institutional investors, countries. both in France (23.9%) and outside France (43.5%). The remaining shares are controlled by individual Vinci Energies is a European market leader in energy shareholders (12%), employees (9%), Qatari Diar Real and information systems. With a workforce of 32,000 Estate Investment Company (5.7%) and Financière employees in 21 countries, Vinci Energies generates Pinault (3.8%). Treasury shares represent 2.1% of the more than 30% of its total revenues (€7,102 million) total shares of the Group. outside France. Vinci SA classifies its portfolio into two main segments: Eurovia is a world leader in transport and urban Concessions and Contracting. development infrastructure. While it generates more than 90% of its revenue in Europe (primarily in France, Concessions Germany, the United Kingdom and Central Europe), The Group’s concession business, with a network Eurovia also holds significant positions in the USA (North stretching 4,385 km, represents more than half of Carolina, Florida) and Canada. With revenues of €7,930 France’s motorway network under concession. million and 40,000 employees, Eurovia has developed an integrated range of expertise in transport and urban Vinci Autoroutes is the Group’s motorway operator development infrastructure, industrial production with revenues of €4,259 million, operating profit from (Eurovia manages a network of 430 quarries, 45 binder ordinary activities of €1,923 million and a workforce of plants, 400 coating plants, 150 recycling facilities approximately 8,500 people. and 10 factories producing road equipment) and maintenance and services. Vinci Concessions manages a complete portfolio of transport infrastructure and public facility concessions in Vinci Construction is France’s market leader in around 20 countries. construction, combining building, civil engineering, hydraulic engineering and services. With revenues of €13,118 million, operating profit from ordinary activities of €584 million and 64,000 employees, its business consists of three complementary components:With a presence on five • A network of French local subsidiaries, through Vincicontinents, Vinci is still Construction France, and internationally through Vinci Construction UK, CFE mainly in Benelux, SKE inthe largest listed European Germany, Warbud, Prumstay-FCC and SMP in Central Europe, Sogea-Satom in Africa, as well as 30 localconstruction company and branches in Overseas France.increased its sales by 8% in 201022
  23. 23. • Highly technical business lines include specialised civil Sales by geographical area engineering technologies with Soletanche Freyssinet (structures, soil foundations and technologies, nuclear 911 1,698 engineering), dredging with DEME and oil and gas 1,297 infrastructure with Entreprose Contracting. 1,081• Management of complex projects with Vinci 1,470 Construction Grands Projects, operating worldwide on major civil engineering and building structures. 1,844 20,927The order book at December 2010 achieved €25,900 1,864million, 49% of which relates to France and 51%to outside France. By business line, the construction 2,284order book amounts to €14,500 million (13 monthsof average business activity), the energy order bookamounts to €6,300 million (9 months of averagebusiness activity) and the concessions order bookamounts to €5,200 million (8 months of averagebusiness activity). France Rest of Europe Central and Eastern Europe America United Kingdom Africa Key Data (December 2010) Millions of euros Germany Asia - Pacific Assets Benelux Non-current assets 36,410 Current assets 20,003 Total assets 56,413 Sales by segment Liabilities and equity Equity 13,025 5,226 Non-current liabilities 21,431 Current liabilities 21,957 Total liabilities and equity 56,413 Income statement Sales 33,376 Domestic sales 20,927 International sales 12,449 Construction sales 28,150 Non-construction sales 5,226 EBITDA 5,052 EBIT 3,429 28,150 Net profit 1,900 Net profit attributable to the 1,776 Group Contracting Concessions Other Key Data Net debt 13,060 Order book 25,900 Market capitalisation 23,694 EPoC 2010 European powers of construction 23
  24. 24. Bouygues SA Bouygues SA was incorporated by Francis Bouygues include the Gautrain rapid rail link between Pretoria and in 1952, and at December 2010 it employed more Johannesburg, which was partially handed over for the than 133,000 people with revenues of €31,225 million 2010 Football World Cup in South Africa, several luxury (€9,719 million on international markets). tourist complexes in Cuba, the Hodariyat Bridge in Abu Dhabi, the Machang Bridge and Pusan Port in South Its main shareholders are foreign shareholders (40.3%). Korea, the Tangiers ferry port and the new container In addition, other French shareholders control 22.6% of port in Morocco, and the Singapore Sports Hub, the the Group, employees control 19% and SCDM controls world’s largest sports infrastructure private-public 18.1%. partnership. Bouygues businesses are focused on two sectors: Bouygues Inmobilier operates in residential and Construction, which includes Bouygues Construction commercial property, retail parks and urban (building, civil works, energy and services), Bouygues development in France and Europe, employing 1,440 Inmobilier (property) and Colas (roads), and Telecoms/ people and achieving sales of €2,409 million in 2010. Media, including TF1 and Bouygues Telecom. Colas operates in around 40 countries worldwide, Construction employs close to 65,000 people and achieved sales Bouygues Construction operates in more than 80 of €11,592 in 2010. Founded in 1929 and acquired countries and generates nearly half of its sales outside by Bouygues SA in 2000, it has become a leader France. With 54,000 employees, sales of €9,002 million in the construction and maintenance of transport and net profit of €538 million in 2010, the Company infrastructure, urban development and recreational is primarily present in the European Union, Central and facilities. In 2010, France was the origin of 57% of the Eastern Europe, Asia-Pacific and Africa. Some of the division’s sales, North America originated 19%, Europe major projects currently underway or recently completed excluding France 16% and Africa/Indian Ocean/Asia 8%. Telecoms/Media The Group manages 43.1% of TF1, France’s leading general-interest television channel with a 24.5%Bouygues diversification audience share at December 2010. The Group is also present in pay television with channels such as Eurosportprevented it from being and employs more than 8,000 people, with total sales of €2,589 million in 2010.affected by the decrease in its Bouygues Telecom covers 84% of the Frenchconstruction activities in 2010, population with its 3G+ network and has more than 11,000,000 mobile telephone customers and 808,000which was offset by an increase fixed broadband customers. With more than 9,000 employees, the Group sales were €5,621 million inin telecom and media sales 2010.24