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Article Excerpt
BALDOMERO FALCONES, EXECUTIVE CHAIRMAN & CEO, FOMENTO DE CONSTRUCCIONES Y CONTRATAS S.A.: (Audio starts in progress). Also those of you who are following over the Internet.
We are all aware of the situation we have in the different economies, different countries. And of course we are no exception because we operate in 50 countries although our main activities are in Europe, particularly in Spain. So we are part of this environment and we are affected by it.
And in a minute we will take a look at the earnings of the Group. And I think these earnings give us a lot of hope because although we are aware that we are a Group that is present in many sectors and industries and of course some of these have been affected by the situation in the economy. But the basic activities of our Group such as services and everything that is related to infrastructure, these activities have defended their market share very well, their spreads and their profits. But of course at a consolidated level the figures have been affected though by other activities which are also part of our Group.
This is the index, the outline of my presentation. There's a warning here, a disclaimer. It's always important to say this.
We had already announced this when we made our presentation in May, when we presented the strategic plan. We had announced it but we were already taking this into account in all our figures and our charts. We were going to change the accounting criteria that we use in the countries where we have control. Basically we're talking about Realia and Global Via.
In the May presentation when we presented the strategic plan these changes in the accounting criteria were already included. Now this has had to follow certain legal procedures and agreements with our main partners particularly Caja de Ahorros de Madrid. And of course according to the CNMV, until the end of the year we haven't done this. But the figures that you are about to see, the end year figures are already with this change of criterion with regards to consolidation basically of Realia and Global Via.
So why don't we start with the earnings announcement per se. We are going to look at the key figures of the 2008 results, the strategic strengths that we have from the point of view of our Group. A basic concept of which we are very proud of, which is that our cash flow is proprietary cash flow. It is carried out in activities that we know inside out, that we have been doing for many years and in companies where we basically have control.
The financial strength, it is true that because of this change in accounting criteria but also because of the management of our balance sheet, not only in 2008 but already in the budget for 2009. And this is one of the features of the Group, the shareholder structure, the very attractive valuation. Of course we would like that to be corrected and our corporate responsibility policy are basic for our Group.
Now with regards to the key results, this is already after the adjustment, the adjustment because of this change in accounting criterion. The revenues grow 4.4% reaching EUR14,016m. The international revenues grow 22.5%, EUR5.815m (sic - see presentation) and our backlog has grown 8.2%, EUR32,707m. I don't need to underline how important the management of our backlog is as future business activities.
With regards to the EBITDA, that;s gone down 9.8%. We're talking about EUR1.741b. The EBIT has gone down 24.8%, EUR947m as compared to EUR1.2b last year. Earnings per share have gone down 25.3%. We're at EUR2.7 per share. The net debt has gone down 11.3% to EUR6.901b, with recourse it's EUR5.3b.
As you can see the revenues for 2008 is EUR14.016b. The EBITDA is EUR1.741b and net income EUR337m, as compared to EUR465m that we had last year. So it's minus 27.5%. The EBITDA margin goes from 14.4% to 12.4%, 2 points less. Operating cash flow EUR1.105b from EUR1.252b. Total net debt EUR6.901b and our backlog EUR32.706b.
Now a few comments regarding the characteristics of our Group. What are our strategic strengths? I think there are two or three concepts that are basic here. First of all, we are in activities that are going to grow in the future, whatever happens. In other words, the demand for Infrastructure, the demand for Environmental Services and the demand for Renewable Energy which are our three basic activities at present with our diversification in energy, these are services where demand is going to grow whatever the economic situation is at an international or national level.
In Infrastructure we are in construction, we are in management. We are also involved in cement. The global investment is EUR53b (sic - see presentation). That is what is going to be invested and in Eastern Europe there's going to be a growth of more than 30%.
In Environmental Services where we are -- we are in the wastewater, and Versia, which are urban services. Waste is going to grow 35% as compared to waste generated in the year 2000 and the objective of the EU is to increase recycling and reuse by 20%. And Renewable Energy, I think everybody knows that 20% for the year 2020.
This is very significant. In other words, our Group is positioned in sectors that are going to grow a lot, where demand is going to grow in the future. That's my first concept.
The second concept is what markets we're in. We are in very sound markets. We are not in emerging markets. We are in sound, solid markets. Our activity, our basic activity in Western and Central Europe is a third of our business. More than a third of our business, almost 40% of it is in Europe. Another important part is in North America and the rest in other countries.
So we are in very sound markets and in some of these markets we have a very strong position. We are number one in waste in the UK. We're number two in the United States in industrial waste management. In Central Europe we have a very good position in Austria and [Czechia]. We are number two in water management in Spain and number five in the world.
Another important concept, our Company is in areas that are going to grow in the future, in solid, sound markets and where we can compete. In other words, our international activity is growing. It's grown about 23%, as I said earlier, more than 40% of revenues, and we've multiplied by nine the presence of our Group with different activities at an international level.
This concept of areas of growth and sound markets and leadership position, I think we're leaders in Spain in waste management, leaders in the UK, third in Europe. In water management we're number two in Spain, number five in world. In industrial waste management we're leaders in Spain, number two in the US. In construction we have become the first Spanish contractor, we are number two in Central Europe. In toll road management we are number five in the world. In cement production we're leaders in Spain.
So we have a critical mass in the markets we are in and that allows us to defend our market share and our margins. If we look at this in terms of EBITDA and debt, 35% of our EBITDA comes from Services, Construction represents 27%, Cement 24%. From the point of view of debt, Services represents 60% and this is because many of the contracts that we have are contracts where there's an initial investment and they are mid to long term contracts in water as well as in environmental services, and Cement represents 26%. By markets, Spain represents 58%, international 42% and within that international we have basically Central and Eastern Europe representing 67%.
Another concept that I went over very quickly earlier is proprietary cash flow. We invest and the origin of our cash flow is in activities that we control, companies that we control and companies and activities that we know, have known for years, where we have teams and technology that we know very well. In some of these activities we've been present in this market for 30 years. So these activities we know very well. We have the know-how, we can defend our market share and we have people and equipment that is the best. And I think this gives a lot of soundness to our cash flow and our business.
When it comes to the financial structure and this is also a characteristic of our Group because we have conservative management from the financial point of view. The net debt with regards to the EBITDA, EBITDA with recourse, is 3.68 times. The leveraging is 62.4%. 100% of the debt is assigned...
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