CONSTRUCTION

In 2017, 3.9% stake in Budimex was sold, which did not impact Ferrovial’s P&L (as it retained its controlling 55.1% share), it did have an impact on cash flow, which was up by +EUR59mn.

The same positive trend as previous years continues to be displayed. Revenues in comparable terms increased by +11.8%, with growth in all business segments, with the faster completion of Industrial projects and Residential and Non-Residential construction being particularly notable. Profitability increased (+14.4% of EBITDA in LfL terms), primarily due to final payment on the infrastructure projects that have been completed.

The order book reached an all-time record high (EUR2,467mn) up by +15.3% in comparable terms as compared with December 2016. In 2017, new contracts reached more than EUR1,754mn, of which approximately 62% relate to the signing of Civil Works contracts awarded under the 2014-20 New Highway Plan. We would highlight the awarding of the Ricibórz Dam (EUR160mn), the Lagiewnicka Highway in Krakow (EUR154mn), the S3 Miękowo-Brzozów Beltway (EUR70mn) and rail works for approximately EUR310mn. Budimex also has contracts that are currently pending signing or have been signed since 31 December 2017 worth a total of more than EUR500mn.

Revenues were up +18.5%, thanks to the incorporation of Pepper Lawson for the full year, a company that specialises in water projects and non-residential construction and which was acquired in March 2016, and whose revenues in 2017 increased by EUR82mn for a contribution of EUR179mn in 2017. The fall in the EBIT margin to 3.4% was due to the lower proportion of toll road concession contracts in the portfolio of projects currently in progress.

New contracts in 2017 exceeded EUR980mn, more than double the amount contracted in 2016. We highlight the 30% stake in the Houston beltway (EUR235mn, Ferrovial Agroman holds 40%), as well as a section of the US 281 toll road in San Antonio for EUR181mn. The higher number of contracts has meant an increase in the order book of +23.2% LfL.

Revenues increased (+8.3% in Like for Like terms), driven by the awarding of new projects, though profitability decreased in 2017 (EBITDA margin 1.3%), mainly as the result of relevant losses resulting from an unfavourable ruling on a project carried out in Colombia in 2012/2013 and those incurred in an already completed contract in the United Kingdom, due to tight completion deadlines and failure to reach an agreement with the client on the implementation of alternative technical solutions. In addition, profitability was affected by several projects in initial phases of execution, with lesser level of complexity.

The order book reached a record figure (EUR11,145mn), with comparable growth of +26.7% compared to December 2016. This growth is primarily due to the introduction to the order book, after the financial close, of the I-66 (EUR1,9bn), the Denver Airport (EUR541mn) and the Houston Grand Parkway beltway in the USA (EUR784mn) projects.

The civil works segment remains the largest segment (at 77%). The international order book amounted to EUR9,836mn, far more than the domestic order book (EUR1,309mn), and represented 88% of the total.

The order book figure at December 2017 does not include pre-awarded contracts or contracts for which commercial or financial agreement has not been finalised. These amount to over EUR1bn, notable among which are the aforementioned Budimex contracts, as well as the construction of a Toll road in Colombia (Bucaramanga-Barrancabermeja-Yondó) and another in Chile (Rutas del Loa).