January-September results 2013


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January-September results 2013

  1. 1. January – September 2013 Results TOLL ROADS INDEX GENERAL OVERVIEW ....................................1 Business performance ...............................1 TOLL ROADS ................................................2 Assets in operation ...................................2 Assets under development ........................3 Projects out to tender ...............................4 Assets under creditor protection.................4 Events after the close ...............................4 407-ETR ..................................................5 SERVICES ....................................................6 New organisational structure .....................6 Results ....................................................6 Spain ......................................................6 United Kingdom .......................................6 International ............................................7 Backlog ...................................................7 Corporate activity .....................................7 CONSTRUCTION ...........................................8 Budimex ..................................................8 Webber ...................................................8 Ferrovial Agromán ....................................8 Backlog ...................................................8 AIRPORTS ...................................................9 HAH- Traffic performance ..........................9 Tariffs .....................................................9 Income statement .................................. 10 Revenue breakdown ............................... 10 Regulatory aspects ................................. 10 Net debt ................................................ 11 Dividends .............................................. 11 Divestments ........................................... 11 Events after the close ............................. 11 CONSOLIDATED INCOME STATEMENT ......... 12 BALANCE SHEET AND OTHER MAGNITUDES . 14 Consolidated net debt ............................. 15 Credit rating........................................... 15 2013 dividend ........................................ 15 Corporate bond issuance ......................... 15 APPENDIX I: IMPORTANT MILESTONES ........ 16 Events after the close ............................. 16 APPENDIX II: PRINCIPAL CONTRACT AWARDS ................................................................ 17 APPENDIX III: EXCHANGE-RATE MOVEMENTS ................................................................ 19 Comparable information: The principal adjustments made to facilitate comparative analysis are the elimination of fair-value adjustments (hedging, impairments and asset revaluations), disposals, the impact of the costs of the acquisition and integration of new businesses and the effect of exchange-rate movements. *EBIT For the purposes of analysis, all the comments referring to EBIT are before impairments and disposals of fixed assets. EBITDA EBIT* Net result Capex AIRPORTS CIÓN For Ferrovial, the first nine months of the year saw the culmination of several important corporate transactions, such as the acquisition of Enterprise, one of the principal services companies in the UK, the start-up of services for the mining industry with the acquisition of Steel Ingeniería in Chile, the closure of financing for the Texan toll motorway NTE 35W and the sale of Stansted Airport by Heathrow Airport Holdings (HAH). Amey, the subsidiary of Ferrovial Servicios in the UK, acquired Enterprise in April, becoming in the process one the most diversified companies in the sector in terms of products, doubling its turnover in the UK (annual turnover will be more than GBP2,000mn), and expanding its workforce to 21,000. The acquisition also facilitates Amey’s entry into the utilities services sector. Ferrovial has been awarded various contracts through consortia led by Cintra. Of particular note are a new section of the North Tarrant Express (NTE) motorway in Texas (USA), with a total investment estimated at USD1,380mn and the contract to complete the Central Scotland motorway network, worth GBP415mn, also awarded to a consortium led by Cintra. During the first nine months of the year, HAH has distributed GBP491mn of dividends, including GBP300mn related to the sale of Stansted Airport. The 407ETR also paid dividends, amounting to CAD430mn. 407ETR has since paid a fourth dividend in October, amounting to CAD250mn. Ferrovial issued two corporate bonds in the period, firstly its inaugural issuance (five years, EUR500mn, coupon 3.375%) and then a second issue (eight years, EUR500mn, coupon 3.375%). In both cases the issues were significantly oversubscribed (by 11x and 6x, respectively). The proceeds have been applied to the early retirement of corporate debt. These bond issues have enabled Ferrovial to optimise the maturity profile of its corporate debt, reduce its cost and eliminate practically all its bank debt. At end-September, Ferrovial’s net cash position, excluding infrastructure projects, amounted to EUR835mn after net investments of EUR621mn and dividend payments totalling EUR273mn. Business performance The backlog at the Services division reached a new high including the incorporation of Enterprise. Revenues in Spain remained stable in spite of the difficult economic environment. Tariff increases plus cost controls have resulted in notable growth at the EBITDA level, both at Heathrow Airport (+22%), and at the 407ETR (+11%), both in local currency terms (both assets are consolidated by the equity method). In terms of traffic, Heathrow reported 54.8 million passengers, an increase of 3.6%. Traffic on the 407ETR (+0.9%) reflected a combination of the increase in the daily average distance travelled (+0.8%) and performance in line with the same period last year in terms of the number of vehicles. On the other motorways, there were signs of recovery in the corridors. The Construction division reported a continuation of the trends seen in earlier quarters, with weaker domestic activity partially offset by international growth. Consolidated revenues reached EUR5,927mn, with EBITDA of EUR632mn. Ferrovial reported a net profit of EUR485mn. Sep-12 Chg. (%) LfL (%) 5,927.1 631.6 450.8 485.2 5,652.6 658.3 497.1 475.7 4.9 -4.1 -9.3 2.0 6.8 0.2 -4.0 -620.6 -626.4 -0.9 Sep-13 Construction Backlog Services Backlog Traffic ETR 407 (VKT´ 000) Chicago Skyway (ADT) Indiana Toll Road (ADT) Ausol I (ADT) Sep-13 Net financial Debt Net Debt Ex-Infrastructure Projects CONSTRUCTION GENERAL OVERVIEW Sep-13 Revenues SERVICES MOTORWAYS Dec-12 Chg. (mn) -6,075.5 -5,106.5 -969 Ausol II (ADT) M4 (ADT) 834.6 1,488.1 -654 Heathrow (million pax.) 1 Dec-12 Chg. (%) 8,496 15,917 8,699 12,784 -2.3 24.5 Sep-13 Sep-12 Chg. (%) 1,760,406 41,673 28,303 11,793 14,024 1,745,396 42,803 27,749 13,420 14,694 0.9 -2.6 2.0 -12.1 -4.6 25,753 25,625 0.5 54.8 53.0 3.6
  2. 2. Results January - September 2013 TOLL ROADS Sep-13 Revenues EBITDA EBITDA Margin EBIT EBIT Margin change of trend appears to be driven by a degree of recovery in domestic economic activity. Like for Like Sep-12 Chg (%) 318.3 199.6 62.7% 141.4 44.4% 293.4 226.9 77.3% 178.3 60.8% 8.5 -12.0 8.9 -11.2 -20.7 -19.8 (%) Nevertheless, the toll motorways are still losing market share. This is partly due to the improvement in traffic conditions on the alternative nontoll roads after several years of shrinking traffic; and partly due to motorists being less willing to pay tolls as a consequence of their ongoing loss of purchasing power. In addition to the above, VAT increased from 18% to 21% on 1 September 2012, which raised tariffs by 2.5%. Other individual circumstances had a negative impact on traffic at Ausol, such as the 7.5% extraordinary tariff increase that came into effect on 28 July 2012, driven by the cancellation of the compensation approved in 1999 for the drop in tariffs at the time, and the opening to traffic of the San Pedro de Alcántara tunnel on 26 June 2012. This all led to a significant loss of market share in a corridor which is still weakening as a consequence of the economic crisis, although there are now signs of an incipient improvement. On the other hand, in the third quarter the works at the Port of Algeciras had a notable positive impact on traffic, as did the increase in the number of vehicles during the holiday season. Revenues increased by 9%, inter alia thanks to the entry into operation of the SH-130 motorway in November 2012 and the significant tariff increase in January on the Chicago Skyway (+14% for light vehicles and +25% for heavy), together with more resilient traffic growth than expected. The increase in revenues was also driven by the reversal of a provision booked in 2012 for the Norte Litoral against the possibility of attracting a fine on the part of the Administration for non-availability. At Autema, the reversal of a EUR20mn VAT-related provision in the first quarter of 2012 was reflected in an 11% drop at the EBITDA level. Assets in operation In the Azores, 15 December 2012 marked the first full year of operation for the concession as a whole. Over the course of the year there has been a significant improvement, with the rate of decline slowing in every quarter. The reasons for this improvement include better weather, the positive impact of a good tourist season and the increase in heavy vehicles due to civil works. TRAFFIC PERFORMANCE There was a slight improvement in traffic in Spain in all the corridors. Traffic continued to decline, but increasingly slowly. In fact, Spanish toll roads reported in August their first increase since March 2010. This Revenues Traffic Global consolidation Sep-13 Sep-12 Chg. Sep-13 Sep-12 Chg. Sep-13 41,673 5,633 11,793 14,024 25,753 9,438 8,065 42,803 -2.6% 46.3 10.2 41.8 10.9% n.s. 13,420 14,694 25,625 9,631 8,351 -12.1% -4.6% 0.5% -2.0% -3.4% 38.3 40.8 16.6 26.2 15.9 16.1 27.9 16.1 65.1 15.8 44.9 9.7 Net Debt 100% EBITDA Margin EBITDA Sep-12 Chg. Sep-13 Sep-12 Sep-13 Share 40.5 4.0 36.3 0.4 11.5% n.s. 87.4% 39.4% 86.9% -1,075 -875 55% 65% -6.3% 27.7 32.4 -14.5% 72.3% 79.3% -445 80% 3.1% -6.1% -1.6% 11.4 22.4 5.8 11.1 24.1 13.2 2.9% -7.0% -55.6% 68.7% 85.6% 36.8% 68.8% 86.5% 81.6% -114 -154 -330 66% 85% 89% 64.8 0.6% 15.2 4.1% 31.5 42.5% 11.8 -18.1% 58.6 12.0 40.0 0.7 76.8 11.6 27.5 3.2 -23.7% 3.5% 45.5% 89.9% 118.6% 76.2% 76.6% 89.2% 87.3% 6.7% 27.1% -667 -201 -215 7 76% 95% 84% 84% Chg. Sep-13 Intangible assets Chicago Skyway SH-130 Ausol I Ausol II M4 Algarve Azores Financial assets Autema M3 Norte Litoral Via Livre Equity accounted 407 ETR (VKT) n.s. Sep-12 Chg. Sep-13 Sep-12 Sep-12 Chg. Sep-12 Sep-13 Share 1,760,406 1,745,396 0.9% 440.4 425.2 3.6% 373.0 352.7 5.8% 84.7% 82.9% -3,893 43% 2.0% -3.6% -7.1% 117.8 6.2 42.5 3.7 114.6 6.4 44.4 3.4 2.8% -2.9% -4.3% 9.9% 90.8 0.9 18.2 2.2 93.4 0.0 24.8 1.7 -2.8% n.s. -26.7% 23.3% 77.1% 14.7% 42.8% 58.0% 81.5% 0.5% 55.9% 51.6% -2,775 -257 19 -47 50% 33% 33% 50% Sep-13 Sep-13 Intangible assets Indiana Toll Road Central Greece Ionian Roads Serrano Park 28,303 18,589 27,901 27,749 19,293 30,033 2
  3. 3. Results January - September 2013 TRAFFIC PERFORMANCE (cont.) Assets under development On the M4, traffic continues to show clear signs of recovery, a reflection of the improvement in the economic situation in Ireland, and in particular in employment. Both the traffic on the corridor and the toll road’s market share improved in the second and third quarters. ASSETS UNDER CONSTRUCTION In Greece, traffic on both the Central Greece and the Ionian Roads toll road continued in steep decline as a consequence of the combination of two factors: the economic crisis and the high price of fuel. In the case of the Central Greece, the concession only has one of the planned toll booths in operation (located just after the last toll booth on the Ionian Roads). Global consolidation In North America, in Canada, the 407ETR traffic growth was (+0.9%), reflecting the combination of an improvement in the average journey length (+0.8%) and no change in the number of vehicles. Invested Capital Pending committed capital Net Debt 100% 135 186 13 44 70 148 -542 -839 -19 57% 51% 2 10 8 -102 -12 50% 25% Equity accounted Share Intangible assets NTE LBJ NTE 35W 50% Financial assets 407 East A-66 Benavente Zamora On the Chicago Skyway, in spite of the tariff increases applied on 1 January 2013, traffic performance has been more robust than expected, especially for heavy vehicles. As per the contract, the weighted average tariff increase was 17.5%, with a 14% increase for light vehicles and a 25% increase for heavy vehicles. NTE: The project is on schedule, with 71% of the construction completed and the project is expected to be finished in 2015. LBJ: The project is on schedule, with 66% of the construction completed and the project is expected to be finished in 2015, thought a small section will be operative from 2014. On the Indiana Toll Road there was a notable increase (+2.6%) in heavy vehicles on the Ticket section of the motorway, which represents around 60% of toll revenues. NTE 35W: The financing for the project was closed on 19 September, comprising both TIFIA debt and PAB bonds. The financing was rated investment-grade Baa3 by Moody’s and BBB- by S&P. On the SH-130, which was only opened to vehicles in October 2012 and for which there are thus no comparisons available, traffic is heavier in a southbound direction and on the days before public holidays. Nonetheless, northbound traffic has been improving in recent months. On On 1 April, the Texas authorities (TxDOT) introduced a temporary discount for heavy vehicles to encourage the use of all segments of the SH-130 expected to end in November 2013. Heavy vehicles now pay the same tariff as light vehicles. TxDot will cover the corresponding drop in revenues. The motorway access signage on the outskirts of San Antonio has also been improved. As a result, in September heavy traffic was 51% higher than in March. In fact, there has been an increasing monthly rise in traffic since March. 407 East: Construction work began in the first week of March. At present, 15% of the construction has been completed. Work is expected to be concluded at the end of 2015. The credit rating agencies DBRS and S&P have affirmed the project’s rating at A- with stable outlook. A66 Benavente-Zamora: The financing for the project was closed on 31 July, and construction work has already begun. CONTRACT AWARDS - In Scotland, a consortium led by Cintra has been selected as the preferred bidder to design, build, finance and operate an infrastructure project to complete the motorway network in Central Scotland. The project has been valued by Transport Scotland at some GBP415mn of new construction. In addition, the contract guarantees 33 years of revenues for operation, maintenance and investment for the consortium. Ferrovial Agromán and Lagan Construction will carry out the construction works, and share the design with Amey. Cintra and Amey will be responsible for the operation and maintenance. FINANCIAL ASSETS In the application of IFRIC 12, concession contracts are classified as one of two types: intangible assets or financial assets. Intangible assets (where the operator assumes the traffic risk) are those where remuneration consists of the right to collect the tariffs corresponding to the degree of utilisation. Financial assets (where the operator does not assume the traffic risk), are those concession agreements where the remuneration consists of an unconditional contractual right to receive cash or other financial assets, either because the entity awarding the contract guarantees the payment of certain amounts, or because the entity guarantees the shortfall between the amounts received from the users of the public service and the above-mentioned determined amounts. These are thus concession agreements where the demand risk is assumed in full by the entity awarding the contract. The project has been awarded under an Availability Payment scheme. At present, the consortium is working towards closing the financing for the project, once completed it will be included in the Construction and Services backlogs. The assets in operation classified as financial assets, where there is no traffic risk due to some kind of guarantee mechanism, are Norte Litoral, Eurolink M3, Autema and Via Livre. 3
  4. 4. Results January - September 2013 Projects out to tender announce the list of pre-qualified bidders for the RFQ during 4T2013. The project comprises the design, construction, financing and maintenance of approximately 33km of motorway. In spite of the uncertainty in the markets, there was a slight recovery in the development activities on the part of the public authorities in some of Ferrovial’s international target markets such as North America, Europe, Australia and Latin America. In North America, Cintra was pre-qualified for the SH183 Managed Lanes (Texas) on 22 August. The project consists of the design, construction, financing, operation and maintenance of approximately 23km of motorway. This is a project with no traffic risk. In Canada, Infrastructure Ontario published a “Request For Qualification” (RFQ) on 25 March 2013 for the 407East Extension Phase II project. The consortium formed by Cintra and Ferrovial Agromán presented their response to the RFQ on 6 June. Infrastructure Ontario is expected to I77 Managed Lanes (North Carolina). A consortium led by Cintra was prequalified on 30 March for the design, finance operate and maintain the Managed Lanes carriageways under a real toll regime. Assets under creditor protection Net Debt Traffic Global consolidation Sep-13 Sep-12 Revenues EBITDA Chg. Sep-13 Sep-12 Chg. Sep-13 3,540 -10.6% 6,015 -16.6% 10.3 10.4 11.3 11.8 -8.9% -12.1% 3.8 4.9 Sep-12 EBITDA Margin 100% Chg. Sep-13 Sep-12 Sep-13 Share 5.8 -34.6% 5.2 -6.4% 36.4% 46.7% 50.7% 43.9% -538 -597 54% 55% Intangible assets Ocaña-La Roda Radial 4 3,165 5,018 RADIAL 4 OCAÑA - LA RODA On 14 September 2012, the Board of the Radial 4 agreed to request protection from its creditors through the courts. On 4 October, this request for voluntary creditor protection was granted. The Ocaña-La Roda toll motorway filed for creditor protection on 19 October 2012. On 4 December the courts accepted the request. Ferrovial’s investment in this project is provisioned in full, and it does not expect there to be any negative impact whatsoever on its accounts from the resolution of the creditor protection situation. Ferrovial’s investment relating to this project is fully provisioned, such that the resolution of the creditor protection situation should have absolutely no negative impact whatsoever on the group’s accounts. The creditor protection filing triggered the early expiration of the financing contract, which matured on 31 December 2012. As a result of filing for creditor protection, the stand-still agreements with the lending banks were terminated. Events after the close Traffic is underperforming the pre-recession forecasted levels. The project is still in its initial ramp-up phase and traffic increases can be expected. The reasons that support the expected traffic increases are, the low level of uptake of corridor traffic since its opening, the long distance and discretionary usage of the corridor leading to a longer than expected ramp-up period and the significant existing and future economic and population growth in the Austin-San Antonio area. On 16 October, the rating agency Moody’s rating downgraded its rating assigned to the SH-130 motorway from B1 to Caa3, with negative outlook. The SH-130 is a 145km point-to-point motorway in Texas, which links the cities of Austin and San Antonio. It was opened to traffic in October 2012, a month ahead of schedule, and started to charge tolls in November 2012. The project’s debt is a mix of TIFIA (USD430mn) and bank debt (USD686mn). The concession has not issued any bonds. The financing has no significant debt maturities until 2023 (3% of total debt), and there is no single year when the debt maturities amount to more than 8% of the total. The final maturity is in 2046. Ferrovial has invested EUR153mn in the project. 4
  5. 5. Results January - September 2013 407-ETR NET DEBT At 30 September, the motorway’s net debt stood at CAD5,423mn. TRAFFIC On 2 October, 407ETR issued a CAD200mn bond maturing on 7 October 2053 with a coupon of 4.68%. Slight traffic growth (+0.9%), reflected an improvement in the average distance travelled per journey (+0.8%) and an unchanged number of vehicles. On 10 June, 407ETR issued another CAD200mn. These bonds mature on 11 September 2052 with a coupon of 3.98%. INCOME STATEMENT CAD Sep-13 Sep-12 Chg (%) Revenues 596.7 505.3 84.7% 459.0 546.8 453.5 82.9% 408.3 9.1 11.4 76.9% 74.7% -191.2 -219.5 EBT 267.8 188.8 41.8 Corporate income tax -70.4 -58.4 After this issuance, more than 26% of the motorway’s debt has a maturity of more than 25 years. The company has no significant debt maturities until 2015 (CAD629mn) and 2016 (CAD289mn). -20.6 EBITDA EBITDA Margin EBIT EBIT Margin Financial results At 30 September 2013, the average cost of 407ETR’s external debt was 5.0%, taking into account all its interest-rate, exchange rates and inflation. 12.4 CREDIT RATING 12.9 197.4 135.0 74.8 58.4 28.1 Contribution to Ferrovial equity accounted result (€) 53.2 35.4 DBRS: "A" (Senior Debt), "A low" (Junior Debt) and "BBB" (Subordinated Debt). 46.2 Net Income attributable to Ferrovial S&P: "A" (Senior Debt), "A-" (Junior Debt) and "BBB" (Subordinated Debt). 50.3 Net Income 407ETR TARIFFS NB: since Ferrovial’s sale of 10% of the concession in 2010, the motorway has been consolidated by the equity method commensurate with the size of Ferrovial’s stake in the concession (43.23%). The table below shows a comparison of the tariffs in 2012 and 2013 (increase effective 1 February) for light vehicles: 407ETR reported significant growth in both revenues (+9.1%) and EBITDA (+11.4%) in local currency. This positive performance reflects the combination of the tariff increase on 1 February, solid traffic and efficiency improvements. The average revenue per journey was 8.9% higher than in the same period in 2012. CAD Regular Zone Peak Period Mon-Fri: 6am-7am, 9am-10am, 3pm-4pm, 6pm-7pm 2013 2012 26.20¢ /km 24.20¢ /km 27.20¢ /km 25.20¢ /km 24.90¢ /km 22.60¢ /km 25.85¢ /km 23.55¢ /km Midday Rate 22.70¢/km 21.00¢/km On 14 February, the Board of 407 International approved the payment of an ordinary dividend of CAD0.129/share, totalling CAD100mn. Midday Rate 21.00¢/km 19.35¢/km On 24 April, the Board of 407 International approved the payment of an ordinary dividend of CAD0.168mn per share, or a total of CAD130.0mn. Weekdays 7pm-6am, Weekends and public holidays 7pm-11am 19.35¢/km 19.35¢/km The financial result deteriorated vs. the same period last year due to the rise in inflation (which had a negative impact on the inflation-linked bonds) and the fall in interest rates. Peak Hours Mon-Fri: 7am-9am (2010: 7.30am-8.30am), 4pm-6pm Light Zone Peak Period 407ETR contributed EUR53.2mn to Ferrovial’s equity-accounted results after the annual amortisation of the goodwill generated by the sale of 10% of the concession in 2010, which will be amortised over the life of the asset depending on forecast traffic levels. Mon-Fri: 6am-7am, 9am-10am, 3pm-4pm, 6pm-7pm Peak Hours Mon-Fri: 7am-9am, 4pm-6pm DIVIDENDS Weekdays 10am-3pm Weekends and public holidays 11am-7pm Off-Peak Rate Transponder: Monthly rental (CAD million) Q1 Q2 Q3 Q4 Total 2013 100.0 130.0 200.0 250.0 680.0 CAD3.00 CAD21.50 CAD21.50 Video toll per journey CAD3.80 CAD3.80 Charge per journey After the close of the third quarter and coinciding with the publication of its results, the motorway announced and distributed a fourth dividend of CAD250mn. CAD3.25 Transponder: Annual rental On 17 July, the Board of 407 International approved the payment of an ordinary dividend of CAD0.258 per share, or a total of CAD2000mn. CAD0.70 CAD0.60 (Note this is not a charge per km.) 2012 87.5 87.5 87.5 337.5 600.0 5
  6. 6. Results January - September 2013 SERVICES associated EBITDA figure, EUR14.1mn in total for the whole Division (vs. EUR3.7mn same period last year). New organisational structure Spain The reported information reflects the new organisational structure of the Services division, which inter alia, groups the business units by geography: Spain, the UK and International. Revenues EBITDA EBITDA Margin In the UK, the process of integrating Enterprise and Amey is on schedule. The design of the new organisational structure has been completed, and now the focus is on implementing the necessary actions needed to achieve synergies in the procurement and supply management areas, as well as the cross-selling between activities. In Spain, the integration of businesses into one single organisation, has been completed. EBIT EBIT Margin EBITDA at Ferrovial % in businesses under common control Backlog* Results EBITDA EBITDA Margin EBIT EBIT Margin EBITDA at Ferrovial % in businesses under common control Backlog* Chg. (%) Proforma (%) 1,053.2 127.5 12.1% 61.0 5.8% 1,053.0 134.0 12.7% 69.3 6.6% 0.0 -4.9 0.0 -1.3 n.s. -4.9 1.1 2.1 -47.6 -47.6 5,566.5 5,219.4 6.7 **Proforma, excluding costs related with Spanish restructuring. Sep-12 Chg.(%) 2,658.5 211.5 8.0% 114.6 4.3% 2,204.1 215.0 9.8% 134.6 6.1% 20.6 -1.6 23.8 11.1 -14.9 4.7 14.1 3.7 281.1 281.1 15,916.8 12,783.9 24.5 At the beginning of the year the process of integrating all the activities carried out in Spain into one single business unit was set in motion. This integration will allow cost savings and a more efficient way of servicing clients. Proforma (%) 26.6 Sep-13 Revenues Sep-12 Sep-13 Spain is now operating as a single organisation. In the intervening months the new functions and structures in areas, such as Human Resources, Finance and Legal have been set. The new Efficiency & Quality department has also been created with the objective of identifying opportunities to generate efficiencies throughout the organisation, ranging from structural issues to contracts, and the introduction of the measures required to achieve these efficiencies. *Backlogs compared with December 2012. In the year, the cost of the integration amounted to EUR 3.3mn. These costs have been excluded from the comparative figures. The cost of the complete reorganisation is estimated at around EUR5mn. **Proforma, excluding costs related with Enterprise acquisition and integration and Spanish restructuring. The Services income statement consolidates six months of Enterprise and nine months of Steel Ingeniería Chile, companies acquired in the 2013 financial year. Revenues were in line with 2012, in spite of the adverse economic context, as a consequence of a stable backlog of contracts, with no significant contracts lost in the renewal processes and the contribution of new contracts in the area of infrastructure maintenance. Enterprise contributed EUR503.8mn to revenues and EUR22.9mn to EBITDA. Steel, meanwhile, made a contribution of EUR29.9mn to revenues and EUR5.8mn to EBITDA. EBITDA was slightly lower than last year as a consequence of the costs of getting these new contracts into operation, and the lower volume of waste handled vs. 2012 (-2.6%). The income statement also includes the acquisition cost of Enterprise (EUR5.4mn) and the costs of the integration incurred to date in the UK (EUR11.9mn) and Spain (EUR3.3mn). In comparable terms, EBITDA performance was in line with revenues. In both years EBITDA includes EUR8mn corresponding to the reversal of provisions thanks to the collection of old debts. The variation reflects performance vs. 2012 excluding the acquisition costs of Enterprise, the integration costs in Spain and the UK and the exchange rate impact. The contracts awarded as joint ventures, included in the equity-accounted section, reached a total EBITDA of EUR1.1mn (vs. EUR2.1mn same period last year). Performance in the third quarter was in line with expectations: in Spain, sales volumes were stable compared with last year, with some pressure on margins due to the general economic environment. In the UK, the process of integrating Amey and Enterprise is on schedule, and performance remained positive with good contracting in roads and utilities. Finally, in the International unit various contracts in Qatar have come into operation, although their impact is not reflected in revenues or EBITDA as they are equity-accounted. United Kingdom The process of integrating Amey and Enterprise is still on schedule. Progress has been made in three key areas. Firstly, the company’s new organisational structure has been defined, both in terms of support functions (Human Resources, Finance, Systems, Legal, etc.) and concerning the business areas. Staff cutbacks associated with the new organisation are in line with plans. From the commercial point of view, contract awards continue at a good pace, with the Services backlog once again at all-time highs. Secondly, in the area of procurement, progress has been made in determining the actions required to generate efficiencies derived from the management of purchases and suppliers that, in many cases, were common to Amey and Enterprise. In the different countries where the Services division operates, awarding some contracts under the “joint venture” format has become a frequent practice, where partners keep a joint control of the project. From the accounts point of view, the stake in these projects is shown in the equity accounted section and is therefore not included in the EBITDA from Services. In order to give higher visibility to these projects, we include the 6
  7. 7. Results January - September 2013 The third aspect where progress has been made is cross-selling, with the identification of opportunities to expand the range of services offered to clients of the organisation. Joint venture contracts (equity-accounted) reached a total EBITDA of EUR2.7mn (vs EUR0.0mn same period last year). Backlog From the commercial point of view, one of the principal objectives of the past months has been to try and achieve a controlled transition, avoiding any kind of commercial or operational impact. The Services portfolio reached another all-time high in September at EUR15,917mn, increasing a 25.7% (excluding forex impact) Vs December 2012. The volume of contract awards since April has remained at a healthy level in all areas of business, with significant awards in all of them (highway maintenance in East Anglia, DBFO of the Milton Keynes treatment plant, waste collection in Northampton, water network maintenance in Yorkshire, gas network maintenance for Northern Gas Networks, etc.). The pace of contract awards in the third quarter was as robust as in the first half of the year, with total awards worth EUR923mn during the quarter. In the UK, the highlights of the contract awards during the quarter included highway maintenance in East Anglia (EUR252mn, five years), water power infrastructure in South Wales (EUR234mn, six years) and highways and street cleaning contracts in Liverpool (EUR132mn, nine years), water distribution network maintenance in Yorkshire (EUR75mn, five years), and maintenance of the gas network for Northern Gas Networks (EUR69mn, four years). UK PERFORMANCE Sep-12 Chg.(%) Proforma (%) 1,553.7 79.4 5.1% 53.4 3.4% 1,134.2 80.0 7.1% 65.6 5.8% 37.0 -0.8 44.2 28.0 -18.6 14.5 10.3 1.6 n.s n.s 10,158.6 7,467.6 36.0 39.9 Sep-13 Revenues EBITDA EBITDA Margin EBIT EBIT Margin EBITDA at Ferrovial % in businesses under common control Backlog* In Spain, the most significant awards during the quarter were maintenance of Iberia installations at Barajas Airport (EUR34mn, four years) and installations maintenance in Social Services properties in Castilla Leon (EUR20mn, 10 years). At the International unit, the awards during the quarter amounted to EUR18mn, notably the maintenance of a section of the S-7 motorway in Poland (EUR7.5mn, six years) and various contracts for services to the mining industry in Chile worth a total of EUR7.2mn. **Proforma, excluding costs related with Enterprise acquisition and integration. Amey’s 2013 accounts include six months of Enterprise. They also include the costs of the acquisition (EUR5.4mn) and the integration (EUR11.9mn) incurred to date. The comparative figures show the percentage variation excluding these costs. Corporate activity SALE OF AMEY PFIs Revenue growth in the first nine months of 2013 vs. 2012 was above all due to the contribution from Enterprise (EUR503.8mn). In March, Ferrovial Servicios closed the sale of 40% of the companies that execute long-term PFI contracts to the Dutch investment fund DIF, for GBP37mn. Prior to this sale, Amey owned 50%, and the stake was consolidated by the equity method. Amey now owns 10% of these companies. The capital gain on the transaction amounted to EUR20.4mn. At the EBITDA level, Enterprise made a contribution of EUR22.9mn before costs of integration and acquisition (EUR17.3mn). Excluding Enterprise, Amey contracts performance Vs 2012 remained positive. The operating result includes the amortisation of intangible assets arising after the acquisition of Enterprise. This goodwill basically reflects the value of the contracts in Enterprise’s portfolio at the time of the acquisition. The annual amortisation charge for this is expected to be around EUR10.6mn (EUR5.2mn to September). ACQUISITION OF STEEL On 4 March, Ferrovial Servicios closed the acquisition of 70% of Steel Ingeniería, a company that specialises in the mining sector in Chile, for an EV of EUR28.5mn (including 8.5mn of debt) thus gaining entry to this new market. Joint venture contracts (equity-accounted) reached a total EBITDA of EUR10.3mn (vs EUR1,6mn same period last year). With this acquisition, Ferrovial Servicios starts operations in Latin America and advances its international expansion after the recent contract awards in Poland and Qatar, as well as the recent acquisition of Enterprise in the UK. International sep-12 Chg.(%) Proforma (%) 51,5 4,7 9,1% 0,1 0,2% 16,9 0,9 5,6% -0,3 -1,8% 205,3 394,0 n.s. n.s. n.s. n.s. 2,7 0,0 n.s n.s 191,7 96,9 97,8 sep-13 Revenues EBITDA EBITDA Margin EBIT EBIT Margin EBITDA at Ferrovial % in businesses under common control Backlog* ACQUISITION OF ENTERPRISE On 8 April, Ferrovial Servicios closed the acquisition of the British company Enterprise, after receiving the approval of the European competition authorities, for a price of EUR473.9mn. Enterprise is one of the principal British companies in the field of services to utilities and the public sector. Not only does this deal increase turnover at Ferrovial Servicios but it expands its product offering in certain business areas. This new business unit includes the activities in countries other than Spain and the UK. The breakdown of revenues by country is as follows: Chile (EUR29.9mn), Portugal (EUR17.0mn) and Poland (EUR4.2mn). The integration of Enterprise into Amey will generate cost and revenue synergies estimated at around GBP40mn from 2015 onwards. 7
  8. 8. Results January - September 2013 CONSTRUCTION Sep-13 Sep-12 Webber posted strong revenue growth in local currency terms (+26%), reflecting the execution on the NTE and LBJ motorways. The backlog contracted (-1.5% in local currency terms) due to the high level of execution on these toll roads, although there were also significant new awards: Highway projects such as the US-290, Denton, the I-10 and the NTE 35W. Like-for-Like (%) Chg. % Revenues 2,942.5 3,168.7 -7.1 -5.9 EBITDA 221.0 7.5% 197.7 6.7% 8,496.1 240.7 7.6% 210.5 6.6% 8,699.4 -8.2 -5.9 -6.1 -3.6 -2.3 -0.4 EBITDA Margin EBIT EBIT Margin Backlog* Ferrovial Agromán Sep-13 Revenues *Backlogs compared with December 2012. EBITDA The dynamics behind the drop in revenues (-5.9% in comparable terms) is the same as in the past few years: a significant decline in activity in Spain, offset by the growth in other international markets, principally the US. International turnover represented 76% of the Division’s revenues. EBITDA Margin Revenues EBITDA EBITDA Margin EBIT EBIT Margin Backlog* 799.6 1,096.6 -27.1 45.7 -28.8 4.2% -24.3 -23.5 -4.2 -0.9 27.4 36.2 1,193.9 Like-for-Like (%) EBITDA EBITDA Margin EBIT EBIT Margin Backlog* 425.4 16.5 3.9% 12.8 23.3 24.0 20.0 -3.9 -0.1 6,113.2 6,217.2 Dec-12 6,850.3 6,837.4 0.2 168.2 284.2 -40.8 718.1 867.2 -17.2 759.5 710.6 6.9 8,496.1 8,699.4 -2.3 Total Chg. % The backlog contracted 2.3% (-0,4% LfL) in comparison with December 2012. The high level of execution was offset by the award of new contracts, notably the NTE Extension (EUR735mn). Ferrovial’s capacity to handle complex projects such as the LBJ and NTE motorways in Texas is positioning the company as a reference in the US market. The International backlog reached EUR6,175mn and is now much larger than the domestic backlog (EUR2,321mn, -12%), accounting for 73% of the total. 23.5 3.0% 1,288.3 -1.7 9.8% Industrial 26.3 27.4 2.9% 1,238.6 -1.3 161.6 9.6% Non-residential work Like-for-Like (%) 524.3 20.4 3.9% 15.3 -4.1 155.0 Residential work Webber Revenues -3.3 178.5 10.8% Sep-13 The increase in contract awards will be reinforced by the EU’s new recently approved budget: Poland is to be the principal beneficiary of structural and cohesion funds, and as a consequence of this the Polish government has announced a highway plan for 2014-2017, with tendering expected to start at the beginning of 2014. Chg. % -5.9 168.0 Civil work The backlog stands at EUR1,144mn, 0.9% lower than in December 2012, reflecting a change of trend in the award of new projects. Notable contract awards included the construction of the S8 motorway (RozaWroclaw), the Lubin ring road, the Gdansk city tram and the A4 motorway (between Krzyz and Debica). Sep-12 -0.3 Backlog The period was notable for the finalisation of large projects, the impact of the contraction in public-sector tendering in the previous year and the bad weather. Sep-13 -1.7 Profitability remained at similar levels to 2012, thanks to the combination of the margins generated by the US projects and the reversal of provisions on the completion of projects in Spain that are not being offset by provisions required at the start of new projects. 3.3% 1,144.3 1,646.8 Revenues (-0.3% in comparable terms) reflect the combination of the evolution of the Spanish market (-26%), where there were particularly significant contractions in civil works driven by the cuts in public-sector tendering (-45% in 2012). These cutbacks in the Spanish market were offset by the positive contribution made by other international markets, particularly the US, on works related to new motorways in Texas, as well as contributions from projects in the UK (Crossrail) and Canada (407 East Extension). -28.1 4.1% 1,618.6 10.4% Backlog* -26.4 32.5 3.4% Chg. % Like-forLike (%) EBIT Margin Budimex Sep-12 Chg. % EBIT Activity in Poland continued to decline, although with some slow down versus previous quarters, thanks to the new works awarded in 2013. On the contrary, Webber posted strong growth thanks to the execution of the NTE and LBJ motorways. Sep-13 Sep-12 -1.5 8
  9. 9. Results January - September 2013 AIRPORTS Sep-13 Sep-12 Chg. % 8.9 8.6 3.6% Europe 26.6 25.3 5.2% Long Haul 29.0 28.4 1.8% Total The HAH contribution to Ferrovial’s equity-accounted result amounted to EUR253.4mn, and includes the capital gain on the sale of Stansted Airport (EUR137.2mn). Note that the division’s net result excluding one-offs was positive (EUR46.2mn). 64.5 62.3 3.4% UK HAH- Traffic performance The positive growth of traffic through Heathrow (+3.6%) reflected an acceleration of the trends observed earlier of increasing load-factors and larger aircraft. Load-factors reached 77.0% in the first nine months of 2013 vs. 75.8% in 2012 and the average number of seats per flight was 202.3 vs. 196.6 in 2012. Tariffs The maximum increases in aeronautical tariffs applicable for the regulatory years 2012/2013 and 2013/2014 came into effect on 1 April in 2012 and 2013 respectively. Traffic growth was even stronger during the summer thanks to the absence of the negative impact of the Olympic Games on the summer of 2012 (estimated at a loss of 720,000 passengers). The following table sets out the tariff increases applied at Heathrow Airport in April 2012 and April 2013, which support the revenue growth in 2013: The decline during the period of the Olympic Games was more pronounced on short-haul flights, and this was reflected in a sharp increase in European traffic during the third quarter of 2013. During the first nine months of this year, European traffic increased 5.7% to 22.8 million passengers. The acquisition of bmi by British Airways made a significant contribution to these results, as load-factors on the old bmi routes are now in line with those of BA. Domestic traffic grew 4.4% to 3.7 million passengers, with this increase due in part to Virgin Little Red starting domestic flights at the beginning of the summer. 2013 Regulation +10.4% Heathrow 2012 +12.7% RPI+7.5% Long-haul traffic growth was positive (+0,8%) in most regions: Asia Pacific increased 5.5% to 7.8 million passengers, boosted by new routes and frequencies. Traffic with the Middle East increased by 4.6% to 4.4 million passengers, driven by larger aircraft and the increase in the number of passengers using different airlines. Heathrow won the “best airport in 2013” for the category of airport with more than 25 million passengers in the ACI Europe Awards. T5 had earlier been nominated as the best airport terminal in the world by Skytrax World Airports Awards for the second year running. Traffic performance by destination (excluding Stansted in both years) was as follows: GBP Traffic Revenues EBITDA EBITDA Margin Sep-13 Heathrow Sep-12 Chg. Sep-13 Sep-12 Chg. Sep-13 Sep-12 Chg. Sep-13 Sep-12 Chg. (bps) 54.8 53.0 3.6% 1,741 1,544 12.7% 981 786 24.9% 56.4% 50.9% 548 91 86 6.1% 53 48 8.7% 57.8% 56.4% 137 0 2 -92.0% -4 10 n.s. 1,832 1,631 12.3% 1,030 845 22.0% 56.2% 51.8% 448 Heathrow express Holding Heathrow total Glasgow 5.7 5.5 2.8% 69 66 4.8% 25 25 1.5% 36.3% 37.5% -117 Aberdeen 2.6 2.5 3.3% 44 43 2.4% 16 16 1.4% 37.3% 37.6% -38 Southampton 1.3 1.3 2.2% 9.6 9.4 2.8% 20 134 20 129 1.1% 3.4% 6 48 6 47 -4.6% 0.6% 30.0% 35.7% 31.9% 36.7% -181 Non Regulated 64.5 62.3 3.4% 1 1,967 2 1,762 n.s. 11.6% 1 1,079 0 892 n.s. 20.9% 54.8% 50.6% 422 Adjustments HAH total 9 -99
  10. 10. Results January - September 2013 Income statement Aeronautic. GBP GBP Sep-13 Sep-12 Chg. % LfL (%) Revenues 1,966.9 1,762.3 11.6 11.6 EBITDA 1,078.6 892.0 20.9 20.9 Heathrow 391.3 403.3 -3.0 EBIT 687.3 488.7 40.7 40.7 34.9% 27.7% 0.5 0.5 -347.9 -93.2 15.7 141.2 n.s. n.s. Corporate income tax 174.6 104.0 67.9 n.s. Result from discontinued operations 452.5 190.8 137.2 -85.3 Net income (100%) 642.8 436.0 47.4 222.9 Contribution to Ferrovial equity accounted result (€) 253.4 268.7 -5.7 222.9 1.5 1,201.8 1,026.3 17.1 396.5 374.4 5.9 368.6 361.6 1.9 1,762.3 11.6 5.9 -2.7 1.9 4.6 1.0 -11.5 0.5 -18.7 1,201.8 17.1 396.5 5.9 368.6 1.9 Heathrow’s next regulatory period (Q6) starts on 1 April 2014. After a period of dialogue with the airlines present at the airport during 2012, Heathrow put forward a Full Business Plan in January 2013, establishing a plan for investment and operations that would enable it to continue transforming the airport. The plan is focused on service quality and improving the passenger experience. At the same time, it included operating efficiency targets, always allowing an adequate return on investment. The CAA published its Initial Proposal on 30 April, with a formula for the annual review of the tariff per passenger of RPI (inflation) -1.3%. 1.9 1,966.9 2.5 DEFINITION OF THE DEVELOPMENT OF HEATHROW AIRPORT FOR THE NEXT FIVE YEARS 5.9 Others 12.5 In September 2013, the RAB reached GBP14,318mn (vs. GBP13,471mn in December 2012), reflecting investments made (GBP1,000mn) and the inflation impact (GBP285mn), offset by amortisation during the period (GBP440mn) and a small amount for adjustments and changes in the consolidation perimeter. 17.1 Retail 11.3 RAB is used in the calculation of HAH Group’s gearing levels. LfL (%) Aeronautic 8.8 10.9 REGULATORY ASSET BASE (RAB) Revenue breakdown Chg. % 11.9 11.3 Regulatory aspects At 30 September 2013, the average cost of HAH’s external debt was 5.93%, including the cost of all the hedging for interest rates, exchangerate movements and inflation. Sep-12 5.2 9.4 Heathrow’s commercial revenues increased (+5.9%). Net retail income per passenger reached GBP6.18 (2.3% increase), although growth rate was impacted by the higher proportion of European passengers with lower propensity to spend in Heathrow retail outlets. At Corporate income tax, the improvement is due to the reductions in the rate od corporation tax from 23% to 21% from 1 April 2014 and from 21% to 20% from 1 April 2015, as result the Group´s deferred tax balaces have been re-measured. Sep-13 22.2 Commercial revenues (+5,9%). The rate of growth through the year is likely to have been impacted by the shift in mix towards European traffic, passengers that showed a lower propensity to spend in retail outlets. The deterioration in the financial result in comparison with September 2012 was principally due to the deterioration in the market value of Heathrow’s portfolio of derivatives, mainly the inflation hedges (GBP145mn vs. +GBP258mn in 2012), with no cash impact, after the increase in expectations of future inflation in the UK since December 2012. Nevertheless, the movement in this variable in the second quarter had a positive impact on the market value of the portfolio, which in the first quarter posted a loss of GBP422mn. GBP 3.2 -4.2 Aeronautical revenues increased 18.3% at Heathrow due to the combination of traffic growth (+3.6%) and the tariff increases (+12.7% in April 2012 and +10.4% in April 2013). Average aeronautical revenues per passenger rose 14.3% to GBP20.60 (2012: GBP18.03). In addition, since the second quarter of 2013 growth has recovered thanks to the “K factor” and the lower real tariff revenues in the 2011/12 financial year. Revenues grew 11.6% and EBITDA 20.9% as a consequence of the 17.1% increase in aeronautical revenues, driven by the tariff increases (+12.7% in April 2012 and +10.4% in April 2013 at Heathrow) and the increase in passenger traffic (+3.4%); retail revenues increased by 5.9% and the Other revenues element by 1.9%. EBITDA jumped 21%, boosted by cost reductions (-2.1%), reflecting the combination of a reduction in general expenses (which were higher in 2012 due to the Olympic Games) and an increase in personnel and rental expenses. 11.6 TOTAL 343.4 23.8 Total airports 13.1 EBT 5.9 35.3 Other & adjustments 7.2 -672.1 Financial results 358.0 LfL (%) Aberdeen -3.0 Impairments & disposals 18.3 Sep-13 Glasgow 50.6% EBIT margin % 1,130.3 Sep-13 Other LfL (%) Southampton 54.8% Depreciation EBITDA margin % Sep-13 Retail LfL (%) Heathrow responded to the Initial Proposal with new plans, which include increasing operating efficiency to GBP427mn and a revised estimate of the number of passengers. The CAA was presented with two different plans, the first, the Revised Business Plan with lower investment (GBP2,000mn) in response to the CAA’s proposal of lower returns. The second, the Alternative Business Plan, includes an investment programme of GBP3,000mn. The CAA published its Final Proposal on 3 October. This proposes an annual tariff increase of RPI +0%, assuming an investment plan of 10
  11. 11. Results January - September 2013 GBP2,885mn. The CAA’s proposed real cost of capital is 5.6%, which does not correctly reflect the risks and cost of the debt required to develop one of the most important privately-funded infrastructure investment plans. Net debt Continuing to invest in Heathrow would improve the passenger experience of the airport, would maintain Heathrow competitive with other European airport hubs and would help the UK to compete as one of the principal international business centres. GBP Dec-12 Chg. % Senior loan facility 496.5 587.7 -15.5% Subordinated Heathrow is reviewing the Final Proposal carefully and considering its investment plan in exhaustive detail before responding to the CAA before the deadline of 4 November. The final decision is expected to be published on 4 January 2014. Sep-13 753.3 717.0 5.1% 11,043.6 11,315.2 -2.4% 330.1 337.2 -2.1% Securitized Group Non-Securitized Group -40.5 -26.2 n.s. 12,583.0 12,931.0 -2.7% Other & adjustments Total AIRPORTS COMMISSION The British government has created an Airports Commission, led by Sir Howard Davies, to determine how to maintain the UK’s position as an international aviation hub. The Commission has been charged with evaluating the various options for covering the UK’s international connectivity, recommending the best way of achieving this and ensuring that the needs are met as quickly and practicably as possible. Dividends In the first nine months of 2013, HAH has distributed GBP491mn of dividends, including GBP300mn related to the sale of Stansted Airport. In 2012, HAH paid dividends of GBP240mn to its shareholders. There is a clear basis for opting for the growth of Heathrow, and on 17 July, Heathrow presented to the Commission various options for the construction of a third runway at the airport, to the northeast, to the southeast or to the north of the present airport; the three possibilities have been designed to take into account the possible future construction of a fourth runway. Divestments SALE OF STANSTED AIRPORT The process of selling this asset initiated in August 2012 was completed on 18 January 2013 with the announcement of the sale of Stansted Airport to MAG (Manchester Airport Group), for GBP1,500mn (EBITDA 2012 GBP94mn, RAB 2012 GBP1,343mn). The deal was closed on 28 February, generating capital gains of GBP351.4mn (100%), and a contribution to Ferrovial’s net result of EUR137.2mn. A third runway at Heathrow is the quickest, most practical and economically efficient of meeting the UK’s needs for international connectivity. All of the options proposed would increase capacity at Heathrow, which could eventually operate 740,000 flights and process 130 million passengers a year. Events after the close A third runway at Heathrow would be cheaper to put into operation than the construction of a new international airport. The estimated costs of the options presented range between GBP14,000mn and GBP17,000mn, of which approximately between GBP9,000mn and GBP11,000mn would be related to the development of the airport infrastructure, and between GBP5,000mn and GBP7,000mn to funds for the community, the environment and to improving access. The infrastructure development would include the construction of the third runway, new access for aircraft to the runways, additional passenger terminal capacity and connections to the existing infrastructure, including walkways for passengers in transit and baggage handling infrastructure. FERROVIAL SELLS AN 8.65% STAKE IN HAH Last 22nd of October Ferrovial, which indirectly owns 33.65% of HAH, reached an agreement with Universities Superannuation Scheme (USS), to sell an 8.65% stake in HAH for GBP392mn (EUR463mn). The transaction was completed on 24 October 2013 upon the receipt of funds. Capital gain of EUR86mn is expected to be accounted before 2013 year end. Once the deal is closed, Ferrovial’s indirect stake in Heathrow Airport Holdings. thus falls to 25%. Ferrovial remains the major shareholder in FGP Topco Ltd. and its only industrial partner. The Commission is expected to complete a preliminary report by the end of 2013 and publish its final conclusions in the summer of 2015. However, whatever the recommendation made regarding increased capacity, it would take a considerable time to implement, even supposing an immediate political consensus in support of the recommendations. HEATHROW PLACES £750 MILLION STERLING BOND TO REFINANCE EXISTING DEBT Heathrow announced last 24th of October that it had successfully placed a £750 million sterling Class A bond with a 2046 maturity and a fixed annual coupon of 4.625%. The transaction was significantly oversubscribed and supported by a broad range of high quality predominantly UK based institutional investors. As a result, the bond was priced well inside initial price guidance. Heathrow plans to use the proceeds of the bond issue to repay shortterm loan facilities and an existing bond maturing in November 2013. Heathrow last issued a long-dated sterling bond in May 2011. 11
  12. 12. Results January - September 2013 CONSOLIDATED INCOME STATEMENT Before Fair value Adjustments Fair value Adjustments Before Fair value Adjustments Sep-13 Fair value Adjustments Sep-12 5,927 5,927 5,653 5,653 7 7 13 13 Total income 5,934 5,934 5,665 5,665 COGS 5,302 5,302 5,007 5,007 632 632 658 658 10.7% 10.7% 11.6% 11.6% Period depreciation 181 181 161 161 EBIT (ex disposals & impairments) 451 451 497 497 7.6% 7.6% 8.8% 8.8% 22 22 -11 -11 472 472 486 486 8.0% 8.0% 8.6% 8.6% -258 -297 -256 -213 6 -5 -41 -23 Revenues Other income EBITDA EBITDA margin EBIT margin Disposals & impairments EBIT EBIT margin FINANCIAL RESULTS -321 Financial result from financings of infrastructures projects -256 Derivatives, other fair value adjustments & other financial result from infrastructure projects -5 63 11 17 -280 -213 -11 -15 Financial result from financings of other companies -41 -23 Derivatives, other fair value adjustments & other financial result from Other companies -19 52 33 -57 28 -29 Equity-accounted affiliates 355 -38 317 188 124 312 EBT 507 25 532 377 141 518 Corporate income tax -60 -18 -78 -50 -5 -56 Net Income from continued operations 447 7 454 326 135 462 447 7 454 326 135 462 32 0 31 9 4 14 478 7 485 336 140 476 Net income from discontinued operations CONSOLIDATED NET INCOME Minorities NET INCOME ATTRIBUTED 12
  13. 13. Results January - September 2013 REVENUES FINANCIAL RESULT Sep-13 Sep-12 Chg. % -255.6 -212.9 -20.1 Sep-13 Toll Roads Services Others Total Chg. % Like-for-Like (%) Infra projects 2,942.5 318.3 2,658.5 7.9 5,927.1 3,168.7 293.4 2,204.1 -13.6 5,652.6 -7.1 8.5 20.6 n.s. 4.9 -5.9 8.9 23.8 Other -41.2 -22.9 -80.1 Net financial result (financing) -296.8 -235.7 -25.9 Infra projects 5.6 -15.4 n.s. Other 33.4 -29.1 n.s. Derivatives, other fair value adjustments & other financial result 39.0 -44.5 n.s. Financial Result Construction Sep-12 -257.8 -280.2 8.0 6.8 EBITDA The financial result improved 8.0%, reflecting the combination of the following: Sep-13 Construction Toll Roads Services Others Total Sep-12 Chg. % 221.0 199.6 211.5 -0.4 631.6 240.7 226.9 215.0 -24.3 658.3 -8.2 -12.0 -1.6 n.s. -4.1 Net financing charges increased 26%. This was principally due to the increase in financial expenses for infrastructure projects, in turn mainly due to the increase in the level of debt associated with projects coming into operation (SH-130). Financial expenses at the other companies also increased, principally due to the accelerated amortisation of the origination commissions on bank loans cancelled with the proceeds of the bond issues (EUR16mn). Like-for-Like (%) -5.9 -11.2 11.1 0.2 The financial result for derivatives and others is determined by the impact of the improvement in Ferrovial’s share price on the derivatives contracts hedging the share option schemes. AMORTISATION This increased 13.0%, like-for-like, in comparison with the same period last year to EUR181mn. EQUITY-ACCOUNTED RESULTS EBIT Sep-13 Sep-13 Construction Toll Roads Services Others Total Sep-12 Construction -1.0 -0.6 n.s. Services 11.6 9.5 22.7 56.9 (before impairments and disposal of fixed assets) Sep-12 Chg. % Like-for-Like (%) 197.7 141.4 114.6 -2.9 450.8 210.5 178.3 134.6 -26.3 497.1 -6.1 -20.7 -14.9 n.s. -9.3 -3.6 -19.8 4.7 Toll Roads Airports Total -4.0 Chg. % 53.3 34.0 253.4 268.7 5.7 317.3 311.5 -1.9 The companies consolidated by the equity method made a post-tax contribution of EUR317mn (vs. EUR312mn in 2012). Note in particular the contributions from the 407ETR (EUR53mn) and HAH (EUR253mn), with the latter principally a reflection of the capital gain on the disposal of Stansted Airport (EUR137mn). *For the purposes of analysis, all the notes refer to EBIT before impairments and disposals of fixed assets. IMPAIRMENTS AND DISPOSALS OF FIXED ASSETS This heading principally includes the EUR20mn capital gain on the sale of Amey’s joint-ventures. TAXATION The effective tax rate excluding the equity-accounted results stood at 36.4%. NET RESULT The net result reached EUR485mn (vs. EUR476mn in 2012). 13
  14. 14. Results January - September 2013 BALANCE SHEET AND OTHER MAGNITUDES Sep-13 FIXED AND OTHER NON-CURRENT ASSETS Consolidation goodwill Intangible assets Investments in infrastructure projects Property Dec-12 17,795 16,638 Derivative financial instruments at fair value CURRENT ASSETS 1,921 221 7,478 40 495 4,129 1,841 1,333 1 312 195 1,506 162 5,391 1,487 116 6,755 35 507 4,304 1,668 1,334 1 148 186 1,609 158 5,580 Assets classified as held for sale Inventories Trade & other receivables Trade receivable for sales and services Other receivables Taxes assets on current profits Cash and other financial investments Infrastructure project companies Restricted Cash Other cash and equivalents Other companies Derivative financial instruments at fair value 2 391 2,560 1,931 540 90 2,427 338 43 295 2,090 11 2 394 2,204 1,647 437 120 2,971 237 25 212 2,734 8 23,186 22,217 EQUITY 6,092 5,762 Capital & reserves attributable to the Company´s equity holders Minority interest DEFERRED INCOME 5,814 277 468 5,642 121 356 11,429 11,117 128 1,364 7,457 6,324 1,133 207 1,147 1,127 5,197 105 1,166 6,996 5,825 1,171 203 1,080 1,567 4,982 1,358 1,262 96 89 3,400 2,782 124 493 350 1,229 1,168 61 65 3,272 2,648 75 549 415 23,186 22,217 Plant and Equipment Equity-consolidated companies Non-current financial assets Receivables from Infrastructure assets Financial assets classified as held for sale Restricted Cash and other non-current assets Other receivables Deferred taxes TOTAL ASSETS NON-CURRENT LIABILITIES Pension provisions Other non current provisions Financial borrowings Financial borrowings on infrastructure projects Financial borrowings other companies Other borrowings Deferred taxes Derivative financial instruments at fair value CURRENT LIABILITIES Financial borrowings Financial borrowings on infrastructure projects Financial borrowings other companies Derivative financial instruments at fair value Trade and other payables Trades and payables Deferred tax liabilities Other liabilities Trade provisions TOTAL LIABILITIES & EQUITY 14
  15. 15. Results January - September 2013 2013 dividend Consolidated net debt The Company's Board of Directors has declared an interim 2013 dividend of 0.40 euro gross per share.The dividend will be paid on 10 December 2013. The net cash position excluding infrastructure projects reached EUR835mn (EUR1,488mn in December 2012). This reduction reflects the following: the acquisition of the UK company Enterprise in April for EUR474mn, together with additional net investments amounting to EUR147mn; the payment of the supplementary dividend on 23 May (EUR0.25 per share) totalling EUR183mn; the payment in January 2013 of the withholding tax corresponding to the dividend paid on account in December 2012 (EUR85mn). All these have been compensated by dividends received from projects for a total of EUR373mn (EUR202mn from Airports, EUR153mn from Toll Roads and EUR17mn from Services), as well as cash generated from the different business units. It is foreseen that the Board of Directors would propose to the 2014 Ordinary General Shareholders meeting for approval a complementary dividend in the range of 0.25 to 0.30 euro gross per share Corporate bond issuance Ferrovial has issued two corporate bonds in 2013. In January the group made its inaugural issue which was very wellreceived by the market, and was 11x oversubscribed. The EUR500mn five-year issue was closed at 240bp over midswap, with a coupon of 3.375%. Net project debt stood at EUR6,910mn. The variation was principally due to the investment in motorways under construction in the US. This net debt includes EUR1,399mn of net debt related to motorways under construction (NTE, LBJ and NTE 35W). It also includes EUR1,135mn related to the radial motorways (R4 and OLR) which are now under creditor protection. On 28 May Ferrovial issued a second bond, which again attracted considerable interest and was 6x oversubscribed. This was an eight-year EUR500mn issue at 200bp over midswap, also with a coupon of 3.375%. In both cases, the proceeds were applied to the early retirement of corporate debt. Group net debt reached EUR6,076mn. Sep-13 With this issuance, Ferrovial has managed to optimise the maturity schedule of its corporate debt, reduce its cost of debt and retire practically all its bank debt. Dec-12 NCP ex-infrastructures projects 834.6 1,488.1 Toll roads -6,583.7 -6,238.1 Year 60 Corporate debt maturities (EUR mn) Others -326.3 -356.5 2013 NCP infrastructures projects -6,910.1 -6,594.6 2014 22 2015 82 2016 21 Net Cash Position -6,075.5 -5,106.5 Credit rating 2017 11 2018 500 In August 2011, the credit rating agencies Standard&Poor’s and Fitch Ratings published their opinions on Ferrovial’s credit rating for the first time; in both cases the rating was investment grade. 2019 0 2020 Rating S&P BBB Stable Fitch Ratings BBB- Stable 15 2 2041 - 2050 Outlook 504 2031 - 2040 Standard & Poor’s upgraded Ferrovial’s rating from BBB- to BBB on 9 May 2013. Rating agency 0 2021 - 2030 1
  16. 16. Results January - September 2013 APPENDIX I: IMPORTANT MILESTONES  Ferrovial successfully issued EUR500mn of bonds maturing on 30 January 2018.  Portman Baela, S.L., the largest shareholder in Ferrovial, S.A., announces the launch of an accelerated placement of a block of shares equivalent to 1.4% of the company’s capital. (18 January 2013) (30 July 2013) Ferrovial Emisiones, S.A., a subsidiary of Ferrovial, successfully priced a EUR500mn bond issue maturing on 30 January 2018 and guaranteed by Ferrovial and some of its subsidiaries. The Bonds carry a 3.375% coupon payable annually. Portman Baela, the largest shareholder in Ferrovial, announced that Morgan Stanley & Co. International plc had started the private placement of a block of 10 million shares in the Company, representing approximately 1.4% of its capital, by means of an “accelerated placement” exclusively for eligible Spanish residents and institutional and or eligible investors abroad. On 3 January the Bonds were subscribed and paid for by the investors concerned, and the Bonds started trading in the regulated London market. On 31 July, Portman Baela announced the result of the accelerated placement. The sale totalled EUR127mn, or EUR12.70 per share. After the placement, Portman Baela’s stake in the Company is reduced to 301,126,351 shares, or approximately 41.1%. The net proceeds of EUR497.75mn were applied to amortising existing corporate debt.  Ferrovial Servicios reached an agreement with 3i Group plc to acquire 100% of the capital of Enterprise Plc. Events after the close (21 February 2013) The investment made by Ferrovial Servicios amounted to an EV of GBP385mn (EUR443mn). The perimeter of the transaction does not include Enterprise’s joint-venture with Mouchel Limited (Mouchel) for highway maintenance services in the UK.  Ferrovial reaches an agreement to sell an 8.65% stake in FGP Topco Ltd. (the HAH parent). (22 October 2013) Enterprise is one of the principal British supplier of services to energy and water companies (“utilities”), as well as to public-sector infrastructure clients. In 2012 it turned over GBP1,100mn (EUR1,267mn) with EBITDA of GBP60mn (EUR69.1mn), excluding the joint-venture with Mouchel. Ferrovial, which indirectly owns 33.65% of Heathrow Airport Holdings Ltd., reached an agreement with a wholly-owned subsidiary of Universities Superannuation Scheme Limited (acting as corporate trustee for Universities Superannuation Scheme, “USS”), to sell an 8.65% stake in FGP Topco Ltd. (parent company of Heathrow Airport Holdings Ltd.) for GBP392mn (EUR463mn). With this acquisition, Ferrovial Services – whose UK presence is through its subsidiary Amey – enters the utility supply services sector, and also strengthens its environmental services business. The deal was closed on 9 April 2013, once it had the competition authorities’ green light. The transaction was completed on 24 October 2013 upon the receipt of funds. Capital gain of EUR86mn is expected to be accounted before 2013 year end. Once the deal is closed, Ferrovial’s indirect stake in Heathrow Airport Holdings Ltd. thus falls to 25%.  The rating agency Standard & Poor’s upgraded Ferrovial, S.A.’s long-term rating from BBB - to BBB with stable outlook. Ferrovial remains the major shareholder in FGP Topco Ltd. and its only industrial partner.  Ferrovial's Board of Directors has declared an interim 2013 dividend of 0.40 euro gross per share to be paid on 10 December 2013. (9 May 2013)  Ferrovial successfully issued EUR500mn of bonds maturing on 7 June 2021. (28 May 2013) (28 October 2013) Ferrovial Emisiones, S.A., a subsidiary of Ferrovial, successfully priced the EUR500mn bond issue maturing on 7 June 2021 and guaranteed by Ferrovial and some of its subsidiaries. The Bonds carry a 3.375% coupon payable annually. At a meeting today, in accordance with the provisions of article 277 of the Capital Companies Act, the Company's Board of Directors has declared an interim 2013 dividend of 0.40 euro gross per share. The investors concerned subscribed and paid for the Bonds on 7 June, and they started trading in the regulated London bond market. It is foreseen that the Board of Directors would propose to the 2014 Ordinary General Shareholders meeting for approval a complementary dividend in the range of 0.25 to 0.30 euro gross per share. The dividend will be paid on 10 December 2013. The net proceeds of EUR496.58mn were applied to retire corporate debt (reducing the debt to EUR28mn of the syndicated credit). 16
  17. 17. Results January - September 2013 APPENDIX II: PRINCIPAL CONTRACT AWARDS BUDIMEX                         CONSTRUCTION  NTE Extensions, NTE mobility partners segments 3, USA.  Batinah Highway Package, Ministry of Transport and communications of Oman, Oman.  Metro Santiago T4 L3, Empresa de Tte Pasajeros Metro, S.A., Chile.  Construcción Al Ghubrah, Muscat City Desalination Company, Oman.  Nipigon Bridge, Ministry of Transportation, Canada.  Ferrocol Loma Hermosa, Departamento de Antioquia. Secretaria de Infraestructura Fisica, Colombia.  Hetco 2 Programme Change, Heathrow Airport, UK.  Edia Cinco Reis-Trindade, Edia, Portugal.  O&M Al Ghubrah, Muscat City Desalination Company, Oman.  Nelson Bay Road, Roads and Maritime Services, Australia.  School building, Juncal Alcobendas, Spain.  Edia Calicos-Pias, Edia, Portugal.  Mostoles University Hospital, Inversiones Sur 2012, S.A., Spain.  134 residential units, Miralbueno, Spain.  Waste treatment plant, Tomaszow Mazowiecki, Water Management Department, Tomaszow, Poland.  Corredor Mediterráneo Castellbisbal-Martorell, ADIF, Spain.  Abastecimiento Iregua, Aguas de las Cuencas de España, Spain.  Autovía Purchena, Autovía del Almanzora, Spain.  Drainage works in Sandin, Drainage & Aqueducts Department, Puerto Rico.  Waste treatment plant Viseu-Sul, Viseu Municipal Water Treatment Authority, Portugal.  Arroyo Niebla, Acuasur, Spain.  60 residential units, Bon Pastor, Barcelona, Spain.  51 residential units, Vitra Legazpi, Vitra Madrid, Spain.  Irrigation improvements, Sector 3, SEIASA del Norte, Spain.  Cesión Gomasper, Canary Islands government, Spain.  Refurbishment of Hotel Beach House, Evertmel, S.L., Spain.  65 residential units, La Térmica, Inmobiliaria Acinipo, Spain.  Phase 2, Yesa right bank, Ministry of the Environment, Spain.  Waste treatment plant Galapagar-Torrelodones, Canal de Isabel II, Spain.  Pevasa Bermeo HQ, Vasco-Montañesa fish farm, Spain.  Urbanisation, University of Cadiz, Spain.  Granada Metro station, Granada, Spain.  AVE Madrid-Valencia maintenance, ADIF, Spain.  Waste treatment plant Gorzow Wielkopolski, Department of Water & Waste Management, Poland.  Waste treatment plant maintenance, Ibiza Zona E-2, Balearic Islands government, Spain. Metropolitano de Pomerania Phase I, Poland. Continuation of works on the A4, Tarnow Rzeszow, Poland. A4 Rzeszow West - Rzeszow Central, Poland. University Hospital Clinic in Bialysto, Poland. Chemistry Faculty buildings, Jagellónica University, Poland. KGHM – industrial units, Poland. Expansion of take-off area, Warsaw Airport, Poland. Sienna apartments, Phase II, Poland. Clinics – University Hospital in Bydgoszcz, Poland. Four-dome pavilion, Muzeum Wroclawiu, Poland. Building A, Phase I - Katowice, Poland. Installations for LEK S.A., Poland. Research Management Centre, Warsaw Polytechnic, Poland. Waste treatment plant modernisation, Tomaszów Mazowiecki, Poland. Sea defences, Wicko Morsiec, Poland. Faculty of Philology buildings, Paderevian, Poland. Waste treatment plant, Belzyce, Poland. Teaching centre, Faculty of Chemistry, Poznan University, Poland. Bus shelters for MPK Lublin (municipal transport company), Poland. Landing zone at Okecie PPS Airport, Poland. Construction of additional floors, buildings in Wroclaw, Poland. Lodgings in Sabe-Swinoujscie, Poland. Construction of furnace for KGHM POLSKA MIEDZ SA, Poland. Breakwater remodelling in Dziwnow, Poland. WEBBER            17 NTE extension, Mobility partners segments 3 llc, USA. US 290, TxDOT, USA. Denton FM 1171, TxDOT, USA. I 10 Bexar County, TxDOT, USA. IH 30 ROCKWALL, TxDOT, USA. Tomball tollway mainlanes, HCTRA, USA. I-45 TMS Improvements, TxDOT, USA. US 59 Angelina, TxDOT, USA. Paving activities, USA. Lonestar Executive Airport Runway Ext, TxDOT, USA. IAH Project 647 Taxiway NB, Spawglass, USA.
  18. 18. Results January - September 2013 SERVICES UK  Design, construction and operation of a waste treatment complex in Milton Keynes  Highway management and maintenance in East Anglia  Maintenance and conservation of municipal buildings in three London boroughs (Chelsea, Kensington and Hammersmith & Fullham)  Street maintenance and highway cleaning in Liverpool  Waste collection, Northamptonshire  Extension of the infrastructure maintenance contract for water treatment (Yorkshire Water)  Infrastructure maintenance of the gas network for Northern Gas Networks  Extension of BBA contracts: maintenance of T4 and T5 at Heathrow Airport, Heathrow Express and Stansted Airport  New consultancy contract for integrated services for Kent  Meter installation and water distribution network maintenance for United Utilities SPAIN  Public service contract for cleaning and conservation of public spaces and green zones for Madrid. Lot 1 includes the Central, Chamberí, Tetuán and Argüelles districts.  Waste treatment and assessment plant, Vega Baja, Alicante.  Highway cleaning and domestic waste collection, treatment and elimination in the city of Alicante.  New maintenance contract for Telefónica data centres.  Cleaning and maintenance of Iberia installations at Barajas Airport.  Cleaning contract for first aid centres, Community of Madrid.  New contract for maintenance and energy services at the Social Services building, Castille and Leon regional government.  Renewal of maintenance contract for parks and gardens in Almeria.  Contract renewal for urban waste collection and highway cleaning, Premiá del Mar.  Prorogation of service contracts for various districts of Madrid (Usera, Fuencarral-El Pardo, Hortaleza and Centre).  Call centre services, Castile la Mancha.  Prorogation of the cleaning contract for the Virgen del Rocío University Hospital.  Prorogation of the cleaning contract for the University of Seville.  New contract for gardening services, Banco de Santander Financial City.  Prorogation of urban waste collection contract for Formentera. INTERNATIONAL  Incorporation of Steel Ingeniería Chile backlog  Renewal of urgan waste collection contraction for Planalto Beirao, Portugal  Various highway maintenance and FM contracts in Poland  New motorway conservation contract for the S-7 in Poland  Furnace cleaning, Chuquimata Mine  Various mining services contracts in Chile 18
  19. 19. Results January - September 2013 APPENDIX III: EXCHANGE-RATE MOVEMENTS Exchange-rate Last (Balance sheet) Change% 13/12 Exchange-rate Mean (P&L) Change% 13/12 GBP 0.8362 2.8% 0.8537 5.2% US Dollar 1.3531 2.5% 1.3181 2.5% Canadian Dollar 1.3932 6.1% 1.3548 5.3% Polish Zloty 4.2218 3.3% 4.2263 0.9% Exchange rates in units per euro, with negative variations representing euro depreciation and positive variations euro appreciation. INVESTOR RELATIONS DEPARTMENT ADDRESS: PRÍNCIPE DE VERGARA 135 - 28002 MADRID TELEPHONE: +34 91 586 25 65 FAX: +34 91 586 26 89 E-MAIL: IR@FERROVIAL.ES WEB: HTTP://WWW.FERROVIAL.COM Important information This document contains statements regarding the Company’s future intentions, expectations and forecasts at the time of writing. These statements are based on projections and financial estimates with underlying assumptions, announcements relating to plans, objectives and expectations that refer to various aspects, including the growth of the various lines of business and the global business, market share, the Company’s results and other aspects relating to its activities and situation. These estimates, projections and forecasts are not in themselves guarantees of future performance as they are subject to risks, uncertainties and other important factors that could result in the development and final results differing from those contained in these estimates, projections and forecasts. This should be taken into account by all individuals or institutions that might have to take decisions or form or transmit opinions relating to stocks and shares issued by the Company, and in particular, by the analysts and investors who consult this document. All interested parties are invited to consult the documentation and information publicly available or filed by the Company with stock market supervisory authorities and, in particular, the information filed with the CNMV (the Spanish stock market regulator). 19