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Ferrovial

Ferrovial - Integrated annual report 2013 / Letter from the Chairman

Fellow shareholder,

In 2013 Ferrovial became more international, with greater financial strength and more sustainable.

The year ended with a net cash position of 1,663 million euro excluding project debt from infrastructure projects. Net profit rose to 727 million euro, while EBITDA increased to 934 million euro and operating cash flow reached 1,050 million euro. Once again the company’s strong performance allowed adequate shareholder return.

During the year the company won important contracts in Services, Toll Roads and Construction, bringing the backlog to an all-time high and assuring our activity into the future. Our two main assets —Highway 407 ETR and Heathrow Airport— increased revenues and EBITDA, set new traffic records and improved their ratings in customer satisfaction surveys.

For the first time in five years the value of acquisitions undertaken by Ferrovial exceeded the amount of divestments. The acquisitions of Enterprise in the UK and Steel Ingeniería in Chile, strengthened and further diversified the Services international business. On the other hand, Heathrow Airport Holdings (HAH) incorporated to its shareholder base a prestigious British pension fund, while Ferrovial remains the main shareholder and industrial partner of the company.

In 2013 the company entered the corporate bond market with two issues for 500 million euro each, with five and eight years maturity respectively. The strong demand for these bonds highlights investor confidence in the company. Standard & Poor’s also upgraded Ferrovial’s investment grade rating to BBB with stable outlook.

The year 2013 was marked by a number of events:

Earnings.- Net profit increased by 5% to 727 million euro, EBITDA reached 934 million euro, a 1% increase, and revenues rose by 7% to 8,166 million euro.

Cash flow.- Operating cash flow excluding infrastructure projects maintained the positive trend of recent years increasing by 15% to 1,048 million euro. This was a result of strong cash flow generation in Services and Construction combined with dividends received from Heathrow and 407 ETR. The sale of an 8.65% stake in HAH provided 461 million euro and Ferrovial received an extraordinary dividend of 129 million euro as a result of the sale of Stansted Airport.

Investments.- The year was marked by the acquisition of Enterprise, whose integration into Amey almost doubled Ferrovial Services’ turnover in the UK. The acquisition of 70% of Steel Ingeniería, a mining services company in Chile, represents our first step into the services sector in Latin America and into this market segment.

Debt.- Consolidated net debt, including infrastructure projects, amounted to 5,352 million euro. The parent company does not have significant debt maturities until 2018.

Market capitalization.- Ferrovial shares performed well in 2013, their value increased by 26%. Total shareholder return was 32% including dividends paid during the year.

Internationalization.- Our international activity continued to expand. International revenues increased by 18% with respect to 2012 accounting for 68% of total, and overseas contracts now represent 66% of total backlog.

Backlog.- The combined Services and Construction backlog reached an all-time high of 25,616 million euro, mainly driven by growth in Services. New contracts obtained by this division include Valdecilla Hospital in Santander, and projects for road, water and gas infrastructure maintenance in the UK. Major contracts in the Toll Roads division include new sections of the NTE in Texas and the contract to complete the motorway network in central Scotland. Regarding Construction we may highlight the contracts to build a highway in Oman and a railway line in Poland.

Services.- Ferrovial Services had a good year increasing revenues by 26% and EBITDA by 2.6%. This growth was mainly due to the consolidation of Enterprise and also includes the effect of new contracts in the UK and Spain.

Toll roads.- Good traffic performance in North America enabled this division to increase revenues by 13% in 2013. Highway 407 ETR in Canada showed its good quality once again, increasing traffic, revenues and EBITDA.

Construction.- The positive contribution by international markets, particularly the US, once again offset the reduction in the Construction business in Spain. International revenues now account for 76% in this division.

Airports.- Traffic figures at HAH reached 85 million passengers—72.3 million at Heathrow alone, yet another record for London’s premier airport. HAH reported a 12% increase in revenues in 2013, to 2,652 million pounds, while EBITDA increased by 18% to 1,441 million pounds.

The company’s commitment to the environment and our communities was also shown during the year. Ferrovial has been included in the prestigious Dow Jones Sustainability Index for 12 consecutive years, it has also been part of the FTSE4Good index for nine years, and for the last four years it has been listed by the Carbon Disclosure Project as being among the companies that are most active in fighting climate change.

We are an industrial company in which our employees play a fundamental role. For that reason we focus particularly on workplace safety and conform to the highest international standards in this area. During 2013 health and safety performed well in all businesses and geographies, with a reduction in the number of accidents of 4.5% in absolute terms.

The good performance in 2013 is the result of the strategic initiatives undertaken in recent years. They are also the consequence of the outstanding talent, perseverance and skill of the company’s professionals, to whom I once again extend my gratitude for their dedication to Ferrovial.

We continue to focus on creating value for our shareholders to whom I am also grateful for their support and confidence, encouraging Ferrovial to continue to grow steadily, firmly and profitably.

Firma de Rafael del Pino
Rafael del Pino
Chairman of Ferrovial
June, 2014