ferrovial Growing Infrastructure FY 2017 ferrovial App 1 Table - - PowerPoint PPT Presentation
ferrovial Growing Infrastructure FY 2017 ferrovial App 1 Table of Contents Ferrovial overview 1. Overview 2. What are investors worried about? 3. Looking ahead 4. What makes Ferrovial different? Ferrovial 2017 Results Additional
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ferrovial App
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€12,208mn €1,341mn
NET CASH*
+13.5% €999mn €32,063mn
ORDER BOOK** REVENUES
€13,858mn +11.3%
MARKET CAP
Figures as of FY 2017 (Market cap from Dec 2017) * Ex-Infrastructure projects ** Construction and Services, Including JVs
4
Design Financing Operating Building Maintaining
Construction Services EX-INFRASTRUCTURE PROJECTS Toll Roads Airports INFRASTRUCTURE PROJECTS
Present in the whole value chain of infrastructure
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26% 23% 38% 13%
Cash Flow generation: Balanced Contribution
OPERATING CASH FLOW
Construction Airports Toll Roads Services
2017 figures
EX-INFRASTRUCTURE PROJECTS INFRASTRUCTURE PROJECTS
€277mn €237mn €423mn €199mn EBITDA DIVIDENDS €515mn €622mn
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TOLL ROADS* €4,729mn * €844mn related to NTE 35W & I77, toll roads under construction.
INFRASTRUCTURE PROJECTS EX-INFRASTRUCTURE PROJECTS
2017 figures
NET DEBT €3,463mn
Group Financial Structure
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Focus on Six Main Markets
CANADA UK SPAIN POLAND Construction Airports Toll Roads Services USA AUSTRALIA
407 ETR toll road 407 East Extension Phase I & II Managed Lanes: NTE, LBJ, NTE35W, I-66, I-77 Denver Great Hall Project California High Speed Railway Grand Parkway Heathrow airport, Aberdeen, Glasgow & Southampton airports Crossrail project Thames Tideway Tunnel Network Rail Severn Trent water Warsaw 7 roads modernization Turow power station Gdansk roads network Toowoomba road Pacific highway road Melbourne roads network Autopista del Sol Terrassa-Manresa toll road Michelin plants Valdecilla Hospital
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525 18,614
1999 Dec'17
Tariff freedom Tariff flexibility 80 years to maturity
CAGR (2007-17)
Tariffs EBITDA
+9% +10.5%
100% payback first 10Y
LONG DURATION & PRICING FLEXIBILITY
Canada, Greater Toronto 108 kms
Alternatives strongly congested Fast & reliable Free flow, fully electronic Strong collection security
43%, Equity method
DIVIDEND GROWTH (CADmn) LEVERAGE (X EBITDA) EQUITY VALUATION 100% (€mn)
407ETR
120 135 190 300 460 600 680 730 750 790 845
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
27.1X 6.3x
1999 2017
Analyst consensus
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Dynamic tolling Tariff freedom Tariff flexibility 43 years to maturity
LONG DURATION & PRICING FLEXIBILITY
Texas, USA
Higher speed allowed Free flow, fully electronic No collection risk
2 in operation: NTE 63%, LBJ 55%. Global Consolidation. 3 under construction: NTE 35W 54%, , I-66 50%, I-77 50%
+10.6%* NTE +10.2%* LBJ +32.6%* NTE +37.4%* LBJ TRANSACTIONS (mn) EBITDA (USDmn)
Managed Lanes
* Growth 2017 vs 2016
38 57 75
2015 2016 2017
59 80
2016 2017
20 24 27
2015 2016 2017
38 41
2016 2017
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82% of passengers rate their experience in Heathrow as “Excellent” or “very good” Best airport Western Europe (3rd consecutive yr) Best airport for shopping (8th consecutive time) Continued improvements in security, punctuality & bag-gage performance
471,082 annual flights 204 destinations >30% UK exports (1.7mn tonnes) Strong traffic performance in 2017 +3.1%, 78mn passengers Operating at over 98% capacity Runway 3: Gov green light Oct 25th 2016
THE BUSIEST AIRPORT…
SERVICE STANDARDS STRONG EBITDA GROWTH (£mn)
… WITH HIGH SERVICE STANDARDS
2008-2016 CAGR : +9.8%
London, UK, Ferrovial stake 25%, Equity method
Time basedseparation landing at Heathrow
Heathrow Airport
63% 80% 2007 2017
Punctuality
48% 82%
2007 2017
% Passengers rating Heathrow as Excellent or Very Good
756 885 967 1,132 1,154 1,421 1,559 1,605 1,683 1,760
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Services: Recurrent CF generator with long
duration order book, providing long term visibility
Construction: Proven competitive tool for
successful int’l bidding for complex greenfield infra projects By Geography By Work
Video on Viaducto de Erques construction
Civil engineering, industrial, building & water projects Complex projects & broad diversification between sectors EBITDA 2017 BUDIMEX: Biggest Polish constructor WEBBER: Leader in Texas road construction
markets & Spain Diversified portfolio in public & private sector (maintenance &
resources and utilities; provision of facility mgmt services)
Video on F. Services
BROADSPECTRUM: A platform to grow in Australia (& New Zealand) SPAIN: stable profitability. Local government, environmental mgmt & treatment, infrastructures. INTERNATIONAL: USA, Chile (BRS Americas), Poland & Portugal. UK: Utilities, Facility mgmt, Highways, Consulting, Rail & environmental services
ORDER BOOK 2017
EBITDA 2017
By Geography ORDER BOOK 2017
20% 47% 28% 4%
International Broadspectrum Spain UK
66% 18% 16%
Agroman Webber Budimex 77% 3% 12% 7%
Civil work Residential work Non-residential work Industrial
12% 22% 45% 7% 14%
Spain Poland US UK RotW
47% 25% 20% 7%
UK Spain Broadspectrum International
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Ferrovial looks expensive in multiples … but cheap in private transactions Negative reaction to reported results Growing results in Infrastructure & bottoming out in Contracting Exposure to UK Services sector … is negligible in valuation Impact from potential interest rate hike … is positive. Our assets amplify economic growth Cash Flow generation vs dividends to shareholders Growing dividends from infrastructure
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Airports Toll Roads
407 ETR Heathrow Aberdeen, Glasgow & Southampton Irish, Portuguese & Greek toll roads Serranopark, A66 2017 figures
VALUE
(€510mn)
64% 51%
OCF
14
2017 figures
PROPORTIONAL EBITDA FULLY CONSOLIDATED EBITDA
Services
Toll Roads Construction Airports
21% 45% 34%
8% 25% 36% 31%
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PROPORTIONAL EBITDA VALUATION
Dec 2017
2017 figures
16
Our assets AMPLIFY ECONOMIC GROWTH
95% of our infrastructure debt is FIXED, 92% at Consolidated level We can REFINANCE MANAGED LANES DEBT at better rates
17
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High complexity concessions Greenfield Traffic risk Dynamic tolling
Texas, USA
Population growth Employment growth High household income Congestion Value of time / willingness to pay
Mitigating risks in contracting Capital allocation focused on infra projects, mainly in the US NTE & LBJ to pay dividends in 2019-2020
19
21
(€500mn hybrid bond issuance)
Excellent growth from
Solid cash generation & financial position
ex-infra projects
growth & inflation
information on assets consolidated under equity method
Share Price has underperformed vs peers
22
38% 13% 26% 23% Ex- Infrastructure Projects 49% DIVIDENDS FROM INFRA PROJECTS
AIRPORTS SERVICES
51% OCF FROM CONSTRUCTION AND SERVICES
TOLL ROADS CONSTRUCTION
OPERATING CASH FLOW pre-tax 2017 Toll roads (Dividends) 277 Airports (Dividends) 237 Services 396 Construction 134 Others
TOTAL 999
999 261 (102) (115) 520
Operating Cash Flow (pre-tax) Net Investment Taxes Activity Cash Flow Activity Cash Flow
€781mn
Shareholder remuneration
FROM OPERATING CF TO ACTIVITY CF OPERATING CF BALANCED CONTRIBUTION TO OPERATING CASH FLOW
€mn
23
2017 % % LfL Revenues 461
+15.7% EBITDA 320 +7.7% +23.8%
TRAFFIC EVOLUTION DIVIDENDS FROM TOLL ROADS FY 2017 RESULTS TOLL ROADS Canada
407ETR: +2.6%
US*
NTE +10.6% LBJ +10.2%
Spain
Ausol I
+10.3%
€162mn cash in €98mn net capital gains
* Transactions
217 224 242 244 262 25 31 25 46 15 242 255 267 290 277 2013 2014 2015 2016 2017 407ETR OTHERS
€mn
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Equity method, Ferrovial stake 43%
despite a difficult comparison in 2H 2017
Global consolidation
+32.6%
+37.4%
+20.5%
* Transactions ** Average toll rate per transaction
NTE LBJ
(CADmn)
2017 % Revenues 1,268 +11.7% EBITDA 1,104 +12.1% EBITDA mg 87.1% Traffic (VKTs'000) 2,708,589 +2.6% Dividends 845 +7.0%
38 57 75 2015 2016 2017 EBITDA (USDmn) 59 80 2016 2017 EBITDA (USDmn)
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7% 3% 3% 5% 4% 4% 3% 2% 2% 57% 56% 55% 51% 47% 43% 41% 38% 31% 5% 9% 9% 8% 7% 5% 8% 6% 6% 13% 20% 21% 22% 26% 31% 28% 25% 38%
Public transit A typical fast food restaurant 407ETR Your internet service Airplane travel your cell phone bill your electricity bill Taxis Your cable TV bill Very good good neither good nor bad not very good poor don't know / don't use
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Higher traffic & retail, despite lower aeronautical tariffs
£525mn (£150mn extraordinary dividend).
EBITDA since acquisition (2014): +35%
(PAX mn)
TRAFFIC
(Equity method, FER stake 25%) (Equity method, FER stake 50%):
DIVIDENDS (100% £mn)
2017 % LfL Heathrow 78.0 +3.1% AGS 15.1 +4.9% Glasgow 9.9 +5.7% Aberdeen 3.1 +1.9% Southampton 2.1 +6.1%
375 150 300 325 525 2015 2016 2017 HAH DIVIDENDS Ordinary Extraordinary 71 75 60 64 146 2015 2016 2017 AGS DIVIDENDS Ordinary Extraordinary
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€ million 2017 % % LfL Revenues 7,069 +16.3% +1.9% EBITDA 423 +30.2% +14.2% EBITDA % 6.0% Order book 20,918
EBITDA 2017 BY BUSINESS OPERATING CASH FLOW (pre tax)
302 289 395 396 2014 2015 2016 2017
20% 47% 28% 5%
UK Spain BRS International
* RPC: Regional processing centres
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66% 18% 16% Budimex Webber
contracts (Scotland -€54mn & Colombia -€31mn).
& Grand Parkway (Texas, EUR784mn).
around 1% (1Q) to 3 - 3.5% for FY 2018.
€ million
EBITDA 2017 BY BUSINESS ORDER BOOK BY COUNTRY
2017 % % LfL Revenues 4,628 +10.3% +11.0% EBITDA 199
EBITDA % 4.3% EBIT 162
EBIT % 3.5% Order book 11,145 +22.6% +26.7%
12% 22% 45% 7% 14% Spain Poland US UK RotW
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derivative
improved results from Managed Lanes
€ million
IMPAIRMENT & DISPOSALS (2017) NET FINANCIAL RESULT EQUITY ACCOUNTED TAXES MINORITIES
2017 2016 Revenues 12,208 10,759 EBITDA 932 944 Depreciation
Impairment & disposals 81 324 EBIT 638 926 Net Financial Result
Equity accounted 251 82 EBT 578 617 Taxes
Minorities
NET PROFIT 454 376
INFRASTRUCTURE PROJECTS EXCLUDING INFRASTRUCTURE PROJECTS
2017 PNT excluding Hybrid bond: €841mn
€ million 697 484 553
253
500 1,341
Net Cash Dec'16 EBITDA ex infra projects Dividends from Toll Roads & Airports WC Construction & Services Investment CF Divestments Shareholder remuneration Interest, taxes &
Hybrid Bond Net cash Dec'17
449
73
283
Net debt Dec'16 EBITDA Working Capital Net Investment Dividends & Interest Capital Perimeter changes/Divestments Taxes, Forex & Other Net debt Dec'17
31
Early application in January 2017 of IFRS 15 Standard: Revenue from contracts with customers.
evaluation of WIP/Debtor balance as of Dec.2016 according the new threshold. The impact of this review has to be charged to equity.
32
Scrip dividend (reference dividend /share)
First scrip dividend (equivalent to 2017 complementary dividend)*
0.312
Second scrip dividend (equivalent to 2018 interim dividend)*
0.402 TOTAL 0.714 up to €275mn
up to 19m shares
(*) Calculation based on average closing price from 30th January to 5th February of 18.103€
2017 2018 SHAREHOLDER REMUNERATION PROPOSAL (*)
Share buyback
up to €275mn
up to 19m shares 0.315 0.404 0.719
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15% 9% 64% 12% 24% 23% 14% 13% 21% 6%
REVENUES
>75% 5% infr frastruc uctur ures es
Construction Airports Toll Roads Services Construction Toll Roads Services
Infra assets 76% of valuation 4% of revenues USA & Canada 59% of valuation 14% of revenues
Infra assets are main value drivers (76%) with limited P&L contribution
Revenues FY 2017 results, Valuation December 2017
By GEOGRAPHY By BUSINESS
VALUATION
58% 38%
4%
16% 12% 59%
4%4%5%
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Focus mainly on North America (Canada & USA) Unique Assets High complexity, free tolling, dynamic pricing & long term
Cintra: One of the world leaders in open-competition highway concessions
DIVIDENDS FROM PROJECTS (€ mn)
159 220 242 255 267 290 277
2011 2012 2013 2014 2015 2016 2017
36
407
407
401
37
Typical traffic on a Wednesday at 5:20 p.m.
Source: Google
407ETR 407ETR 407ETR
407 ETR: The only non-congested road to cross Toronto
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407 ETR: Strong EBITDA growth … even with negative traffic & GDP
18.9 15.4 15.4 14.1 11.7 15.6 1.5 7.2 12.6 10.8 9.7 9.7 10.3 14.2 17.3 12.1 13.2 1.0 7.5 5.4 2.9 6.1
5.5
0.6 0.7 3.4 3.3 4.1 2.6 2.8 1.9 3.1 3.2 2.6 2.0 1.2
3.4 3.0 1.9 2.0 2.5 1.2 1.2 2.9 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EBITDA growth Traffic growth GDP growth (annual)
GDP growth source: World Bank %
39
80 years to maturity 2098 Analyst valuation up 35x
€mn
CASH GENERATION (1999 – 2017) EQUITY VALUATION 100% MATURITY
407 ETR: Cash flow and valuation overview 100% pay-back in first 10 years
* Analyst Consensus Valuation
35x
Cash Generation Initial equity invest.(62%)
Dividends 2,023 mn 10%Disposal 640 mn NET CASH IN 2,337 mn
525 18,614 1999 Dec'17
40 103 164
2006 2017
456 1,268
2006 2017
120 135 190 300 460 600 680 730 750 790 845
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
407 ETR: Financial Overview
CAPITAL EXPENDITURE DIVIDENDS NET DEBT / EBITDA x REVENUES OPEX EBITDA
97 90 38 72 77 88 70 74 55 70 72 104
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
27.0X 6.3x
1999 2017
CAGR: 9.7% CAGR: 4.3% 353 1104
77% 79% 76% 80% 82% 83% 83% 83% 83% 84% 87% 87%
2006 2017
CAGR: 10.9% CAD mn
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Perfect location Excellent prospects for business growth
Sources:
Golden Horseshoe to accommodate growth to 2031. Neptis Foundation.
GT GTA P POPUL ULATION
4.5 5 mn mn
POPULATION EMPLOYMENT MEGAZONES
YESTERDAY
407 ETR: Reasons for 407 ETR’s success
42
Perfect location Excellent prospects for business growth
POPULATION AREA URBANIZED BETWEEN 2006 & 2016 EMPLOYMENT MEGAZONES
407 7 av avg PK h hour spe peed d : 1 : 100 Kph ph 401 01 avg PK h hour s spe peed d : : 20 20 Kph ph
GT GTA P POPUL ULATION
6. 6.5mn mn
+44% vs vs 199 996
TODAY
407 ETR: Reasons for 407 ETR’s success
43
407ETR Regions includes: Toronto, Durham, Peel, Halton & York Source: Government of Ontario Places to Grow
POPULATION GROWTH (2021 – 2041) EMPLOYMENT GROWTH (2021 – 2041)
Future growth in population & employment to support traffic
TOMORROW
407ETR: Reasons for 407 ETR’s success
44
407ETR Managed Lanes (NTE1-2)
Opened October 2014 (43 years remaining)
2 lanes per direction Tollway within a freeway
Higher speed allowed on NTE (60mph in free lanes, 70mph NTE) Safety & comfort
Cap is lifted if av. speed <50m/hr of cars >3,300pce/h (2 lanes) Dynamic tolling (tariffs can be changed every 5 minutes) Different tariffs depending on segment, direction, time, day..
Opened 1999 (80 years remaining)
From 2+2 lanes up to 5+5 lanes per direction (dep on segment) Separate toll road
Alternative routes are highly congested Average speed: 100km/h vs 40km/h on the alternative Safety & comfort
Penalty paid if traffic falls below threshold Tariffs can be changed every 30 days Different tariffs depending on segment, direction, time, day..
Participation: Partners: Concession period: Location: Length: Benefits: Open tolling? Tariff Policy: Regulatory risk? Collection: Dividends:
407ETR vs Managed Lanes
45
Active management of “newly added capacity” through tolling
through Free Lanes Free Lanes
Tolled Lanes
Speed >50mph
Managed Lanes
46
Managed Lanes
47 Toll Rate Cap 0.75 c/mi Demand threshold 3300 pce/h 2-lane sections Speed Threshold 50 mi/h 12:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 Hour starting Analysis by segment and direction Freedom under the cap TOTAL FREEDOM Freedom under the cap Speed Demand Toll Rate 0.88 $/mi
Managed Lanes: Toll rates – tariff threshold
48
development project of its kind to reach financial close in 2010.
reach financial close since 2008.
PABs.
toll road.
made a direct investment in a highway concession.
21% 51% 28% 25% 56% 18%
Figures in US Dollars
32% 59% 9%
spite of the difficult market conditions.
program with its flexible amortizing structure during the first 25 years.
2.05 bn
427 mn 242 mn (57%) 141 mn (33%) 43 mn (10%) 1,048 mn 398 mn 650 mn 573 mn
2.62 bn
672 mn 343 mn (51%) 107 mn (16%) 44 mn (7%) 178 mn (26%) 1,456 mn 606mn 850 mn 490 mn
1.36 bn
430 mn 231 mn (54%) 75 mn (18%) 124 mn (29%) 805 mn 274 mn 531mn 126 mn
Total Investment:
Private Equity: Cintra: Meridiam: DPFPS: APG: Total Debt: PABs: TIFIA: Public Funds: Financial structure
* In September 2017, Cintra, along with the other Managed Lanes partners (Meridiam and APG) has acquired DPFPS’s stake in NTE (10%) and LBJ (7%). Cintra acquired 6.3% in NTE and 3.6% in LBJ, and now holds 62.97% in NTE and 54.6% in LBJ
Managed Lanes: Financial Overview
49
12am 3am 6am 9am 12pm 3pm 6pm 9pm 2014 2015 2016 2017 Cap (2017)
Eastbound workday on segment 1 CAP linked to inflation
2017 avg toll rate per transaction: USD3.4
Index 100
+13.2%
Managed Lanes
100 150 200 250 300 350 400 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Revenue Txns Rev/Txn
100 120 140 160 180 200 220 240 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Transactions Revenue Rev/Txn
GROWTH SINCE OPENING (LBJ) GROWTH SINCE OPENING (NTE) TOLL RATES EVOLUTION (NTE) SPEEDS AT NTE
30 40 50 60 70 80 12am 3am 6am 9am 12pm 3pm 6pm 9pm
2011 2017 Non-Tolled Lanes 2017 TEXpress Lanes
50
21% 52% 27% 63% 37%
CINTRA MERIDIAM
DESCRIPTION: LENGTH: CONCESSION PERIOD: TARIFF POLICY: Dallas-Fort Worth Metroplex, Major thoroughfares between Fort Worth and DFW Airport 13 mile section (IH 820 & SH 183 in Tarrant County) 52 years (since 2009) Open Road Tolling System (no toll booths) with a dynamic tolling regime (every 5 minutes) to maintain at all times a minimum speed of 50 mph
driving in non-tolled GP lanes or paying a toll to bypass such GP lanes
increases
EQUITY DEBT PUBLIC FUNDS
Opened on October 2014, 9 months ahead of schedule
KEY CHARACTERISTICS SHAREHOLDER STRUCTURE FINANCIAL STRUCTURE
Managed Lanes: North Tarrant Express
51
24% 56% 19% 55% 28% 17%
CINTRA MERIDIAM
108K 8Km Electron
tol
DESCRIPTION: LENGTH: CONCESSION PERIOD: TARIFF POLICY: IH 635 (Dallas County), the most populous county in Texas 13 mile section of the IH 635 and IH 35E 52 years (since 2009) Open Road Tolling System (no toll booths) with a dynamic tolling regime (every 5 minutes) to maintain at all times a minimum speed of 50 mph
driving in non-tolled GP lanes or paying a toll to bypass such GP lanes
increases
For further information on the concession, check the following links: https://youtu.be/9GMj3H5OovA https://youtu.be/pnNFZ8qJY-c
EQUITY DEBT PUBLIC FUNDS APG
SHAREHOLDER STRUCTURE FINANCIAL STRUCTURE KEY CHARACTERISTICS
Opened on September 10th 2015, 3 months ahead of schedule
Managed Lanes: Lyndon B Johnson
52
32% 59% 9% 54% 29% 18%
CINTRA MERIDIAM
DESCRIPTION: LENGTH: CONCESSION PERIOD: TARIFF POLICY: 2 “managed lanes” in each direction of the IH-35W, segments 3A and 3B (3B segment to be built by TxDOT) 10.2 mile section (segments 3A 6.2 miles and 3B 4 miles) 48 years (since 2013) Open Road Tolling System (no toll booths) with a dynamic tolling regime (every 5 minutes) to maintain at all times a minimum speed of 50 mph
congested roadway in Texas.
driving in non-tolled GP lanes or paying a toll to bypass such GP lanes
increases
EQUITY DEBT PUBLIC FUNDS APG
SHAREHOLDER STRUCTURE FINANCIAL STRUCTURE KEY CHARACTERISTICS
Expected to open in 2H’2018
Managed Lanes: North Tarrant Express 35W
53
100% £mn
(Equity method, FERROVIAL stake 25%)
dividends after its refinancing).
(Equity method, FERROVIAL stake 50%)
*RAB: Regulated Asset Base
85
Countries
25%
Transfer Share
3.1%
Growth
93%
Int’l
471k
Flights
78.0m
Passengers
204
Destinations
Airports
Revenues EBITDA EBITDA % 2017 Var. 2017 Var. 2017 Total AGS 209 +6.3% 92 +10.7% 43.8% Glasgow 122 +8.4% 58 +10.3% 47.6% Aberdeen 56 +0.6% 22 +8.0% 39.6% Southampton 31 +9.1% 11 +18.3% 36.5%
HAH P&L 2017 Var. Revenues 2,883 +2.6% EBITDA 1,760 +4.6% EBITDA % 61.0% Net debt 13,519
2017 Var. Glasgow 9.9 +5.7% Aberdeen 3.1 +1.9% Southampton 2.1 +6.1% Total AGS 15.1 +4.9%
54
REAL GDP NOMINAL INTEREST RATES PRICES
(INFLATION) TARIFFS
+ VALUE
VKT
+ VALUE
COST OF CAPITAL
“DISCOUNT RATE EFFECT”
EXCHANGE RATE
+ VALUE
“CASH FLOWS EFFECT”
Sources: Paper of professor Carles Vergara-Alert
WHICH IS THE PREVAILING EFFECT… AND HOW DOES IT AFFECT INFRA-ASSETS VALUE, ESPECIALLY 407 ETR & MLS?
REAL INTEREST RATES
Central bank increases the nominal interest rate to meet its target real interest rate (Taylor rule) Output gap Demand and inelastic supply Monetary policy
What the economic theory says…
55
Widespread belief among investors that “an increase in interest rates reduces the value of the infra-asset”. In other words “INFRASTRUCTURE ARE BOND-LIKE ASSETS”
KEY CONCEPT VARIABILITY IN CASH FLOWS
On what variables does revenue depend? How are these variables affected by interest rates?
Sources: Paper of professor Carles Vergara-Alert
Bond: A string of future fixed set of payments
0.03 0.035 0.04 0.045 0.05 0.055 0.06 0.065 0.07 0.075 0.08 0.085 0.09 0.095 0.1 0.105 0.11
Duration
(Price/yield curve) VALUE Ke
7.5% 8% 8.5% 9% 9.5% 10% 10.5% 4% 4.5% 5% 5.5% 6% 6.5% 7%
Valuation @ current constant cash flows
Infra asset: A string of future variable set of cash-flows
but…
Interest Rate Risk Infra-Asset Valuation
56
WITH TRAFFIC RISK (TOLL ROADS)
3.
AUSOL (Spain) CF= (CPI, traffic) 4.
“Chicago Skyway”, ITR (USA) CF= (CPI, traffic, GDP per capita) 5.
407 ETR (Canada), ML (USA) CF= (CPI, traffic, willingness to pay)
WITHOUT TRAFFIC RISK (NON-TOLL ROADS)
1.
Towoomba (Australia) CF=K 2.
Norte Litoral ( Portugal) CF= (CPI)
“INTEREST RISK METER OF CONCESSION VALUE”
Sources: Paper of professor Carles Vergara-Alert
High Mid Low Very Low None 1 2 3 4 5
94% Cintra´s Value
Categories of infra-assets as per variability of cash flows
57
1 Assumptions of the exercise: 100 “currency units” of investment, 50 years concession, Beta=1.0, ERP=5%, Leverage = 50%, Debt premium = 4.0%, Tax rate 30%.
Value Project i.e.: TOOWOOMBA
Significant value decrease
(Bond proxy)
0%
Cintra´s Value
1
RISK FREE RATE
Project i.e: AUSOL
3%
Cintra´s Value
Stable value
3
Value
RISK FREE RATE
Project i.e.: NORTE LITORAL
3%
Cintra´s Value
Slight value decrease
2
Value
RISK FREE RATE
Project i.e: CHICAGO SKYWAY
0%
Cintra´s Value
Modest value increase
4
Value
RISK FREE RATE
generated by CPI/GDP per capita
price” Sources: Paper of professor Carles Vergara-Alert
AVAILABILITY AVAILABILITY & CPI Adj DEMAND RISK & CPI Adj DEMAND RISK & CPI, GDP Adj
Effect of interest rates on asset valuation by category1 (I)
58
RISK FREE RATE Value
TARIFFS
generated by higher willingness-to-pay
PROJECT I.E.: 407 ETR
Optimal price Sub-optimal price
94% Cintra´s Value
TRAFFIC
increases 5th category is the only one that:
Sources: Paper of profesor Carles Vergara-Alert
Demand risk & Total free-rate tolling
THE EXCHANGE RATE OPERATES AS BONUS EFFECT IN OUR CANADIAN-US ASSET’S VALUE:
− Short-term: next 18-24 month of dividends fully hedged − Long-term: from a € based investor, US and Canada provided a better future economic outlook, that will lead us to a likely revaluation
Effect of interest rates on asset valuation by category (II)
59 NOT CPI INDEXED
(i.e. Toowoomba)
HIGH COMPLEXITY LOW COMPLEXITY
From value to standpoint … very different “animals” fall within the CATEGORY OF “HIGHWAY CONCESSION”
AVAILABILITY PAYMENT PROJECTS DEMAND RISK PROJECTS
CPI INDEXED
(i.e. Norte Litoral)
CPI INDEXED TARIFFS
(i.e. Ausol)
TARIFFS LINKED TO REAL ECONOMY GROWTH
(i.e. Chicago Skyway)
FREE TARIFF FLOW
(i.e. 407 ETR & MLs)
(1) After 10 years of operation, if currently expected CF´s are met (2) Ferrovial price per share impact: value generated / Ferrovial number of shares as of 31.12.16 (732.5M) Sources: Cintra Infraestructures, S.E.
VERY HIGH UPSIDE OF UNTAPPED VALUE
Long remaining concession periods, back-ended CF’s with high expected bid IRRs
1.6x Value at Present +7 €/ Fer. Sh(2)
5.5x Equity Committed 11 € / Fer. Sh(2) FOCUSED ON HIGH COMPLEXITY CONCESSIONS
MOST of Cintra portfolio
94%
74%
60
LOW COMPLEXITY CONCESSION
AVAILABILITY PAYMENT CPI INDEXED Long concession term (99 years)
THE BID IRR: the higher the Bid IRR, the larger the room to reduce the rate of discount THE CONCESION TERM: the longer the term, the higher the value produced by late cash flows with almost no value at present THE CASH FLOW PROFILE: the more back ended, the higher the value produced by late very high cash flows with almost no value at present
Low Bid IRR (11%)
Front ended CF’s (Low rev CAGR (2%))
Short concession term (25 years)
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039…
HIGH COMPLEXITY CONCESSION
407 ETR TYPE
… WHAT MAKES THE CF STREAM PROFILE MORE BACK ENDED?
2. HIGHER TARIFF GROWHTS:
High Bid IRR (15%)
Back ended CF’s (High rev CAGR (6%)) Sources: Cintra Infraestructures, S.E. analysis O&M + Capex + Tax Debt Service Equity distributions Revenues + Reserve Accounts releases
What makes the difference?
61
A HIGHWAY CONCESSION: a contractually defined set of rights and obligations with regards to vehicles
moving in a certain route during a period of time
− Design and build the highway (construction phase) − Ensure safe trips (operation phase): design, build, finance, operate and maintain
FINANCIALLY: string of cash flows that reflect annual monetary value of contractual rights net of obligations
expected values
created nor destroyed at this specific moment
THEN… WHAT HAVE WE CREATED?
How does the highway concession business create value for shareholders?
62
THE NORMAL WAY: meeting expected cash flows as we put risks behind, that is, DE-RISKING or reducing the market discount rate of the business as projects mature AN IMPORTANT “NICE TO HAVE”: cash flow outperforming original expectations
Operation )
Risks Disc. Rate
CONSTRUCTION
Design & Construction Cost environmental, RoW Traffic / Revenue Initial traffic, ramp up, long term variations Financial Closing Operation Maintenance Interest Rates 10% - 15%
RAMP-UP
Ramp up, long term variations Refinancing Operation Maintenance Interest Rates 8% - 13%
GROWTH / MATURITY
Long term variations
RISK
CONCESSION TERM
Sources: Cintra Infraestructures, S.E.
How do sponsors create value?
63
VALUE*
* NPV of remaining cash flow
CONCESSION TERM
186 812 1,058 1,426 1,662 1,702 1,296
Yr 0
@14.5%
@12%
Yr 10
@7.5%
Yr 15
@7%
Yr 20
@6%
Yr 25
@5.5%
Yr 30
@5%
Yr 40
@4%
Yr 47
THE ROLLING FORWARD EFFECT: progressive increase of value as we get closer to back ended cash flows
Sources: Cintra Infraestructures, S.E.
VALUE CREATION: DERISKING & ROLLING FORWARD
€100M invested in one of our ML’s
How do sponsors create value?
64
461 596 399 424 515 663 538 560 640 530
2013 2014 2015 2016 2017
& Services) Dividens from infra (Toll roads & Airports) Holding & Others
Operating CF ex-infra projects (before tax.) EBITDA & Margins
company)
Revenues Net debt
OCF ex-infra ND
Historic consolidated figures: 2013-2017
€mn
1,097 1,076 889 995 999
Construction 304 236 272 245 134 Services 359 302 289 395 396
Dividends:
Toll Roads 242 255 267 290 277 Airports 219 341 132 134 237
Holding & Others
1,663 1,632 1,514 697 1,341
2013 2014 2015 2016 2017
INFRA INFRA PROJ.
3,463
2,590 2,709 2,694 2,629 2,837 5,577 6,093 7,006 8,129 9,371 8,166 8,802 9,701 10,759 12,208
2013 2014 2015 2016 2017
Domestic International
934 983 1,027 944 932
11.4% 11.2% 10.6% 8.8% 7.6%
7 . 0 % 8 . 0 % 9 . 0 % 1 0 . 0 % 1 1 . 0 % 1 2 . 0 % 2 0 4 0 6 0 8 0 1 , 0 0 1 , 2 02013 2014 2015 2016 2017
EBITDA Margin
65 108 35 32 21 27 16 41 35 105 48 41 130 119 152 407 ETR 407 ETR E.I 407 ETR E. II NTE LBJ NTE35W I-77 I-66 Ausol I Autema Toowoomba Algarve Norte-Litoral Bucaramanga 80 27 29 43 43 43 40 48 28 18 25 12 13 26 407 ETR 407 ETR E.I 407 ETR E. II NTE LBJ NTE35W I-77 I-66 Ausol I Autema Toowoomba Algarve Norte-Litoral Bucaramanga
2,078 km 26 concessions 10 countries
(Km’s)
Dividends received Managed Investment Concession length Years to maturity
Years
Toll roads figures: 2013-2017
€mn
217 224 242 244 262 25 31 25 46 15 242 255 267 290 277
2013 2014 2015 2016 2017
407-ETR Others
39% 21% 6% 7% 27%
USA Canada Spain UK & Ireland Rest of World
66
1,441 1,541 1,608 1,683 1,760 2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Heathrow 72.3 73.4 75.0 75.7 78.0 AGS 12.6 13.3 14.0 14.4 15.1 Glasgow
7.4 7.7 8.7 9.4 9.9
Aberdeen
3.5 3.8 3.5 3.1 3.1
Southampton
1.7 1.8 1.8 2.0 2.1
Dividends received from airports (€mn) Heathrow (25% stake)
2 runways 204 destinations 85 countries 471K flights
*AGS (50% stake)
Aberdeen Glasgow Southampton
Traffic mn passengers HAH EBITDA (£mn ) Heathrow shareholders
Portfolio Heathrow
*Ferrovial increased its stake in AGS from 25% (held through HAH) to 50% in 2014.
Capital expenditure (mn £)
Ferrovial Qatar Brittania GIC CIC Alinda USS
Airports figures: 2013-2017
96 153 38 38 84
219 341 132 134 237
2013 2014 2015 2016 2017 AGS HAH
1,283 853 627 674 687 2013 2014 2015 2016 2017
25% 20% 12.6% 11.2% 11.2% 10% 10%
67
343 349 393 342 199
8.4% 8.8% 9.2% 8.1% 4.3%
0 . 0 % 1 . 0 % 2 . 0 % 3 . 0 % 4 . 0 % 5 . 0 % 6 . 0 % 7 . 0 % 8 . 0 % 9 . 0 % 1 0 . 0 % 5 0 1 0 1 5 2 0 2 5 3 0 3 5 4 02013 2014 2015 2016 2017
EBITDA Margin
2017 2017
Operating & investment CF (ex-projects) Backlog Revenues EBITDA & Margins
OCF ex-infra (before tax)
2017
*”Ferrovial Agroman” unit was created in 2013, previously, “Other markets” was the relevant unit.
Construction figures: 2013-2017
€mn
304 236 272 245 134
2013 2014 2015 2016 2017
EBITDA ex-project 329 335 380 329 186 Working Capital & others
Operating Cash Flow (b. tax.) 304 236 272 245 134 Investment Cash Flow 25
9
2,274 2,116 2,419 2,217 2,387 1,099 1,152 1,226 1,270 1,457 690 673 643 708 784
4,064 3,942 4,287 4,194 4,628
2013 2014 2015 2016 2017
*F.Agroman Budimex Webber
*F.Agroman
11.9% 11.1% 9.8% 8.4% 1.3%
Budimex
4.1% 4.8% 5.6% 8.7% 9.0%
Webber
3.9% 8.7% 13.8% 6.2% 4.6%
17% 83%
Domestic International
5,729 5,785 5,807 5,977 7,507 1,044 1,426 1,974 2,027 2,467 1,095 880 950 1,084 1,171
7,867 8,091 8,731 9,088 11,145
2013 2014 2015 2016 2017
*F.Agroman Budimex Webber 12% 88%
Domestic International
16% 3% 77%
Residential Industrial & Other Civil work
68
Operating & investment CF (ex-projects) Backlog with JV’s Revenues EBITDA & Margins
2017
OCF ex-infra (before tax)
Services figures: 2013-2017
€mn
359 302 289 395 396
2013 2014 2015 2016 2017
EBITDA ex-project 264 321 237 241 338 Dividends received 28 19 78 49 33 Working Capital & others 67
106 25 Operating Cash Flow (b. tax.) 359 302 289 395 396 Investment Cash Flow
1,421 1,599 1,677 1,762 1,898 2,163 2,717 3,103 2,732 2,501 2,206
3,656 4,401 4,897 6,078 7,069
2013 2014 2015 2016 2017 Spain UK Broadspectrum International
11,188 15,298 16,323 11,898 5,260 6,330 6,736 6,140 5,741 9,878 6,117 4,246 17,749 22,369 22,800 24,431 20,918
2013 2014 2015 2016 2017
UK España Broadspectrum Internacional
322 387 312 325 423
8.8% 8.8% 6.4% 5.4% 6.0%
0 . 0 % 1 . 0 % 2 . 0 % 3 . 0 % 4 . 0 % 5 . 0 % 6 . 0 % 7 . 0 % 8 . 0 % 9 . 0 % 1 0 . 0 % 1 1 . 0 % 1 2 . 0 % 5 0 1 0 1 5 2 0 2 5 3 0 3 5 4 02013 2014 2015 2016 2017 EBITDA Margin
EBITDA Margin España
12.4% 10.7% 10.7% 10.7% 10.4%
UK
6.3% 7.7% 3.9% 1.5% 3.5%
34% 66%
Domestic International
69 EMPLOYEE COMMITMENT & EXPERIENCE: focus on attracting & hiring the best talent to become an employer of choice in markets where Ferrovial operates. TALENT MANAGEMENT: help each employee to reach their maximum potential while promoting the best professional opportunities.
the critical capabilities that must be reinforced or created to position the company as a key player.
CULTURE: Ferrovial, with more than 110 nationalities in its workforce, shows a firm commitment to effective equality of opportunities, focused on three areas (Strategic Diversity Plan): gender, generational and multicultural.
FY17 figures CHAIRMAN & CEO REMMUNERATION
27% 44% 29%
VARIABLE FIXED LONG TERM INCENTIVES * BOARD REMMUNERATION * VARIABLE REMUNERATION (TARGET 125%, MAXIMUM 225%) * LONG -TERM REMUNERATION based on delivery of share plans structured into multi-year cycles (3y) overlapping, which turn into shares at the end of the cycle.
Metrics MAX MIN EBITDA/avg earning assets (70%) ≥10.5% <9% Total Shareholder Return (30%) Among top 5 positions Between position 11th & 18th
FER compares with IBEX-35 members & is in the median of non-executive directors remuneration.
EMPLOYEE COMMITMENT & EXPERIENCE, TALENT MANAGEMENT & CULTURE Promote a collaborative, flexible and inclusive culture based on meritocracy, to
to corporate values.
BY BUSINESS UNITS
SERVICES 81% AIRPORTS 0.05% TOLL ROADS 1% CONSTRUCTION 17%
BY COUNTRIES
CEO CHAIRMAN
QUALITATIVE QUANTITATIVE QUANTITATIVE QUALITATIVE 50% 50% 60% 40%
controlled risks.
95,978 600,000h 88%
training provided
(10Y of Summa University)
Employees (71% men; 29% women) Out of all the employees consider Ferrovial a good place to work
TSR COMPANIES: Serco, Strabag, SNC-Lavalin, Skanska, AENA, ACS, FCC, Eiffage, VINCI, KIER, Abertis, Transurban, B. Beatty, Fraport, ADP, Ferrovial, Carillion, OHL
70
INNOVATION PROJECTS
ACKNOWLEDGEMENTS Ferrovial has been included in the DJSI (Dow Jones Sustainability Index) for the last 16 consecutive years, at a global level; in the FTSE 4Good index for the past 13, in the Carbon Disclosure Project for the past 6, and is also a member of Stoxx and MSCI Global Sustainability Index. Ferrovial continues its efforts to offer services and infrastructures that respond to challenges such as climate change, water footprint management, the energy crisis, the reuse of waste and the loss of biodiversity, to create value by reducing the environmental impact and discover new business opportunities. Ferrovial believes that innovation is a difference maker that enables the company to lead transformation of infrastructures and services, providing customers and users with solutions that efficiently, sustainably and safely contribute to well- being and progress of society. The company works on new business models that increase offers of products & services; improvement of operational efficiency & cross-cutting management processes and increase of digital skills of employees. New technologies (robotics, artificial intelligence, IoT and Big Data) are having a significant and fast impact on all sectors. To respond to these challenges, Ferrovial is accelerating its process of implementing innovative solutions, within its open innovation strategy.
INNOVATION IN 2017
>110 €47mn 30
R&D investment R&D developed projects Pilot projects developed with Startups
REDUCTION OF CO2 EMISSIONS ELECTRICITY FROM RENEWABLE SOURCE
36%
IN RELATIVE TERMS (tCO2 eq/€mn) (2009-2017) IN ABSOLUTE TERMS (2009-2017) NEW REDUCTION 2020 TARGET WATERFOOT PRINT
Water consumption and discharge in activities carried out by the businessunits
Cadagua's water treatment processes impact and those of F. Services & Amey's leachate treatmentin landfills.
Impact of Social Action projects for water supply to communities in developing countries.
BIG DATA AND MOBILITY TRENDS Use of Big Data is a competitive advantage when analyzing new projects & optimizing existing ones. In Europe, Dallas & Canada toll roads, projects are already underway to analyze impact of autonomous and connected vehicles. INTERNET OF RADIO LIGHT IN TUNNELS LIFI (Light Fidelity) technology to improve communications in complex & difficult to access works (tunnel/confined areas). Communication solution based on wireless tech. that transmits ultra-fast data through a beam of light. ZITY CAR New car sharing mobility service in Madrid that has an electric vehicle with 400km autonomy and allows citizen to drive further and use the vehicle for longer. Recharged with 100% renewable energy & highest safety certification.
OF THE TOTAL CONSUMED
FY17 figures
71
FY17 figures Ferrovial works to create risk-free environments for all its employees, as well as for users of infrastructures and services by developing action plans under the premise
HEALTH & SAFETY TRAINING (hrs)
FREQUENCY INDEX(1)
SEVERITY INDEX(2)
753,818
HEALTH & SAFETY INSPECTIONS & AUDITS
79,058
+2.4mn since 2015
(1)YoY% in index: number of accidents occurring during working hours leading to days lost for 1 mn hrs worked. (2)YoY% in index :number of days lost as a result of occupational accidents for every 1,000 hrs worked.
PRINCIPLES OF HEALTH & SAFETY STRATEGY Ferrovial's Health & Safety strategy, together with the firm commitment from management and all employees, have improved the company's accident rates. Health & Safety is a Senior Management priority, and it is fully committed.
implemented in all work centers to establish the organization, planning and control systems needed to facilitate a safe work environment.
Ferrovial operates, paying attention to best practices when reasonably viable.
to encourage employees to contribute to a positive performance in matters of Occupational Health & Safety, promoting safety culture throughout Ferrovial.
efforts to involve workers increasingly in common goal of creating risk-free workplaces.
work safety culture, a reporting system is needed that identifies unsafe situations or actions before they occur and implement the necessary preventive measures to avoid any type of accident.
be developed over innovation, contributing to Target Zero goal achievement. UNITED NATIONS PARTNER IN SUSTAINABLE DEV’T & MEMBER OF PRIVATE SECTOR ADVISORY GROUP In its commitment to the scope of Sustainable Development Goals (SDG), Ferrovial actively participates in the community through the development and execution of social programs to significantly improve people's lives. The company has a key role in the social and economic development of the countries where it carries out activities.
305
COMMUNITY SUPPORT PROJECTS
212,605
BENEFICIARIES IN WATER &SANITATION PROJECTS
4.3
COMMUNITY INVESTMENT (M€)
Since 2011, Ferrovial has had a program to cooperate in the development of Social Infrastructures, which facilitates access to water in Africa and Latin America. Ferrovial, together with NGOs and Local Authorities, develops water and sanitation infrastructures. Company employees in turn participate as volunteers, contributing with their knowledge in the countrywhere the interventionis being carried out Since 2005, employees decide to contribute to social projects, which is doubled by Ferrovial. In 2017, three projects chosen: start-up of Day Center for Children’s Villages in Málaga, rehabilitation of a medical clinic in Haiti with ManosUnidas and caring for leprosy patients in India with the Fontilles Association. Ferrovial supports refurbishment & reconditioning of offices set up for distributing food & delivering social aid packages to underprivileged groups. In 2016, Ferrovial provided support with World Vision España to improve conditions in 6 food distribution centers(Madrid, Seville, Mieres,Valencia & Barcelona).
148,845 BENEFICIARIES €1,605,930 INVESTED €597,894 INVESTED 38,467 BENEFICIARIES €5,030,398 INVESTED 214,549 BENEFICIARIES 22 PROJECTS
SOCIAL INFRASTRUCTURES STRONGER TOGETHER COMMUNITY ENGAGEMENT IN SPAIN
COMMUNITY SUPPORT PROJECTS INVESTIMENT IN THE COMMUNITY
72
This document may contain statements that constitute forward looking statements about the Company. These statements are based on financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations, which refer to estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company. Such forward looking statements, by its nature, are not guarantees of future performance and involve risks and uncertainties, and
statements. Analysts and investors, and any other person or entity that may need to take decisions, or prepare or release opinions about the securities issued by the Company, are cautioned not to place undue reliance on those forward looking statements which speak only as of the date of this communication. They are all encouraged to consult the Company’s communications and periodic filings made with the relevant securities markets regulators and, in particular, with the Spanish Securities Markets Regulator.