Ferrovial N.v. · BME:FER
Ferrovial — Investor Presentation (January 2018)
59 slides from Ferrovial's investor presentation, January 2018
Slide 1: Growing Infrastructure January 2018
ferrovial Growing Infrastructure January 2018 ferrovial App 1
Slide 2: People and Environment
FY2016 figures People Environment TALENT MANAGEMENT, ENGAGEMENT & CULTURE Operating excellence & innovation are possible given Ferrovial employees’ Ferrovial assumes a firm commitment on emissions reduction and environmental talent, high engagement & corporate culture. Over 96.000 people work in the
Slide 3: Innovation and Say on pay
FY2016 figures Innovation Say on pay Ferrovial understands innovation as a differential element that allows it to lead PRESIDENT & CEO REMMUNERATION the Infrastructure & Services transformation, offering its clients and users solutions that contribute in an efficient, sustainable and safe way to the
Slide 4: Community
FY2016 figures Community 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 dev
Slide 5: Table of Contents
Table of Contents Ferrovial overview 1. Overview 2. Main infrastructure assets 3. Construction & Services 4. What are investors worried about? 5. Looking ahead 6. What makes Ferrovial different? Additional Information A. Main value drivers B. Main infrastructure assets a. 407ETR b. Managed Lanes c.
Slide 6: World leading private infrastructure provider
World leading private infrastructure provider present in toll roads, airports and cities Solutions to CONGESTION Narrowing THE GAP between public budgets & huge infrastructure needs 6
Slide 7: Ferrovial Overview: Present in the whole value chain
1. Ferrovial Overview Present in the whole value chain of infrastructure Design Financing Building Operating Maintaining INFRASTRUCTURE PROJECTS Toll Roads Airports EX-INFRASTRUCTURE PROJECTS Services Construction 7
Slide 8: Cash Flow generation: Balanced Contribution
1. Ferrovial Overview FY16 figures Cash Flow generation: Balanced Contribution INFRASTRUCTURE PROJECTS OPERATING CASH FLOW 27% Toll Roads DIVIDENDS €424mn 13% Airports €290mn €134mn 37% Services €325mn €342mn €667mn EBITDA 23% Construction EX-INFRASTRUCTURE PROJECTS 8
Slide 9: Group Financial Structure
1. Ferrovial Overview 9M 2017 figures Group Financial Structure EX-INFRASTRUCTURE INFRASTRUCTURE PROJECTS PROJECTS NET CASH €268mn ferrovial NET DEBT €4,764mn NET DEBT €4,496mn TOLL ROADS* €4,244mn * €764mn related to NTE 35W & I77, toll roads under construction. Net Cash Position ex-Infrastructure
Slide 10: 407ETR: Long duration and pricing flexibility
2. Main infrastructure assets Canada, Greater Toronto 108 kms 407ETR 43%, Equity method LONG DURATION & PRICING FLEXIBILITY Tariff freedom Alternatives strongly congested Tariff flexibility Fast & reliable 81 years to maturity Free flow, fully electronic Strong collection security CAGR (2006-16) Tar
Slide 11: 407ETR map: Green Belt and Toronto Ring Road
Green Belt East extension 407 High density population Toronto Ring Road 108 km 407 11
Slide 12: 407ETR: The only non-congested road to cross Toronto
2. Main infrastructure assets 407ETR: The only non-congested road to cross Toronto Typical traffic on a Wednesday at 5:20 p.m. 407ETR 407ETR 407ETR Source: Google 12
Slide 13: 407ETR: Strong EBITDA growth
2. Main infrastructure assets 407ETR: Strong EBITDA growth … even with negative traffic and GDP 18.9 17.3 15.4 15.4 15.6 14.1 14.2 13.2 12.6 11.7 10.8 10.3 9.7 9.7 7.5 7.2 6.1 5.4 5.5 4.1 3.1 3.2 3.4 3.4 3.3 2.8 2.9 2.6 3.0 2.5 1.9 2.0 1.9 2.0 1.5 1.2 1.2 1.2 1.0 0.6 0.7 0 -0.5 -1.7 -2.7 2002 2003 2
Slide 14: 407ETR: Cash flow and valuation overview
2. Main infrastructure assets €mn 407ETR: Cash flow and valuation overview CASH GENERATION (1999 – 9M2017) MATURITY EQUITY VALUATION 100% 100% pay-back 81 years to maturity Analyst valuation in first 10 years 2098 up 35x 18.614 Cash Generation 35x Initial equity invest.(62%) -326 mn Dividends 1,956
Slide 15: Managed Lanes: Long duration and pricing flexibility
2. Main infrastructure assets Texas, USA Managed Lanes Global Consolidation. NTE 57%, LBJ 51%, NTE 35W 54% LONG DURATION & PRICING FLEXIBILITY Dynamic tolling Higher speed allowed Tariff freedom Free flow, fully electronic Tariff flexibility No collection risk 44 years to maturity TRANSACTIONS (mn)
Slide 16: Managed Lanes: Express Tollway within an Existing Highway
2. Main infrastructure assets Managed Lanes “Express Tollway within an Existing Highway” Free Tolled Lanes Free Lanes Speed >50mph Lanes A solution to congestion on “existing urban corridors” through Active management of “newly added capacity” through tolling 16
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Slide 18: Heathrow Airport
2. Main infrastructure assets Heathrow Airport Time based separation London, UK, Ferrovial stake 25%, Equity method landing at Heathrow THE BUSIEST AIRPORT… … WITH HIGH SERVICE STANDARDS 472,067 annual flights (1,293 a day) Best airport in Western Europe (3rd consec year) 183 destinations 82 countri
Slide 19: Construction & Services
3. Construction & Services Construction Services Proven competitive tool to successful int’l Recurrent cash flow generator with long duration bidding for complex greenfield infra projects order book, providing long term visibility Civil engineering, industrial, building & water projects Diversified
Slide 20: What are investors worried about?
4. What are investors worried about? Ferrovial looks expensive in … but cheap in private multiples transactions Negative reaction to reported Growing results in Infrastructure results & bottoming out in Contracting Exposure to UK Services sector … is negligible in valuation Impact from potential int
Slide 21: Ferrovial looks expensive in multiples
4. What are investors worried about? FY16 figures Ferrovial looks expensive in multiples Much of our value is in Equity Consolidated assets VALUE … but 64% contribute Toll Roads 0% to OCF Revenues & Airports EBITDA 407 ETR 44% Heathrow Aberdeen, Glasgow & Southampton Irish, Portuguese & Greek toll r
Slide 22: Negative reaction to reported results
4. What are investors worried about? FY16 figures Negative reaction to reported results Reported figures don’t reflect Ferrovial’s Business FULLY CONSOLIDATED EBITDA PROPORTIONAL EBITDA €944mn €1,727mn 31% 35% 32% 17% 20% 34% 32% 31% Infrastructure 63% Infrastructure Toll Roads Airports Services Con
Slide 23: Exposure to UK Services sector
4. What are investors worried about? Exposure to UK Services sector UK Services represents little of our results & valuation VALUATION PROPORTIONAL EBITDA 3% of valuation 2% of EBITDA Dec 2017 2016 Figures 23
Slide 24: Impact from potential interest rate hike
4. What are investors worried about? Impact from potential interest rate hike Our assets AMPLIFY ECONOMIC GROWTH PRICING POWER leads to benefit from better economic conditions Positive exposure to INFLATION DERISKING at our US assets should lead to lower discount rates 95% of our infrastructure debt
Slide 25: CF Generation vs dividends to shareholders
4. What are investors worried about? CF Generation vs dividends to shareholders EBITDA FROM CONTRACTING is bottoming out GROWING DIVIDENDS from infrastructure projects 25
Slide 26: Looking ahead: US transportation infrastructure focus
5. Looking ahead Strong focus on the US transportation infrastructure sector Texas, USA WHAT WE FOCUS ON Greenfield Traffic Risk Dynamic tolling High Complexity Concessions WHERE THIS MODEL WORKS Population growth Employment growth High household income Congestion Value of time / willingness to pay
Slide 27: What makes Ferrovial different?
6. What makes Ferrovial different? VALUE CREATION FROM PRICING POWER & DERISKING & ROLLING FLEXIBILITY FORWARD UNIQUE TRANSPORTATION INFRASTRUCTURE ASSETS & CAPABILITIES KNOW HOW IN DEMAND ATTRACTIVE SEGMENTATION SHAREHOLDER REMUNERATION 27
Slide 28: Additional Information
Additional Information A. Business split vs. valuation B. Main infrastructure assets a. 407ETR b. Managed Lanes c. 407ETR vs Managed Lanes d. Airports C. Capital Market Day (CMD) 2017: D. Historic data
Slide 29: Business split vs. valuation
A. Business split vs. valuation Infra assets are main value drivers (76%) with limited P&L contribution By BUSINESS By GEOGRAPHY Infra assets USA & Canada 76% of valuation 59% of valuation 5% of revenues 12% of revenues REVENUES 56% 39% 5% 30% 24% 12% 12% 15% 7% Services Construction Toll Roads VALU
Slide 30: Cintra: Main Infrastructure Assets
B. Main Infrastructure Assets Cintra: One of the world leaders in open-competition highway concessions Focus on North America (Canada & USA) Unique assets: high complexity, free tolling, TRAFFIC EVOLUTION (9M17) dynamic pricing & long term Canada 407ETR Strong dividends in 2016 +2.7% • €290mn divi
Slide 31: 407ETR: Financial Overview
B. Main Infrastructure Assets 2016 figures 407ETR: Financial Overview ($CAD million) REVENUES CAPITAL EXPENDITURE CAGR: 9.5% 1,135 97 90 88 72 77 70 74 70 72 55 456 38 81 years to maturity 2006 2016 OPEX DIVIDENDS CAGR: 3.8% 150 750 790 680 730 600 103 460 100% pay-back first 10 years 300 145 120 13
Slide 32: 407ETR: Reasons for success, Yesterday
B. Main Infrastructure Assets 407ETR: Reasons for 407 ETR’s success YESTERDAY Perfect location Excellent prospects for business growth GTA POPULATION 4.5 mn POPULATION EMPLOYMENT MEGAZONES Sources: - Planning for Prosperity – November 2015 - (Globalization, Competitiveness and the Growth Plan for th
Slide 33: 407ETR: Reasons for success, Today
B. Main Infrastructure Assets Perfect location 407ETR: Reasons for 407 ETR’s success TODAY Excellent prospects for business growth GTA POPULATION 6.5mn +44% vs 1996 407 avg PK hour speed : 100 Kph 401 avg PK hour speed : 20 Kph POPULATION AREA URBANIZED EMPLOYMENT MEGAZONES BETWEEN 2006 & 2016 33
Slide 34: 407ETR: Reasons for success, Tomorrow
B. Main Infrastructure Assets 407ETR: Reasons for 407 ETR’s success TOMORROW Future growth in population & employment to support traffic EMPLOYMENT GROWTH (2021 – 2041) POPULATION GROWTH (2021 – 2041) 407ETR Regions includes: Toronto, Durham, Peel, Halton & York Source: Government of Ontario Places
Slide 35: 407ETR vs Managed Lanes
B. Main Infrastructure Assets 407ETR vs Managed Lanes 407ETR Managed Lanes (NTE1-2) Participation: • 43%. Equity consolidated • 62.97%. Global consolidation Partners: • SNC Lavalin (17%), CPPIB (40%) • Meridiam (37%) Concession period: • 99 years • 52 years Opened 1999 (81 years remaining) Opened Oc
Slide 36: Managed Lanes: Toll rates and tariff threshold
B. Main Infrastructure Assets Managed Lanes: Toll rates – tariff threshold Toll Rate Toll Rate Cap 0.75 0.87 c/mi $/mi Demand threshold 3300 pce/h 2-lane sections Speed Speed Threshold 50 mi/h Demand 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 segme
Slide 37: Managed Lanes: Financial Overview
B. Main Infrastructure Assets Managed Lanes: Financial Overview Financial structure Figures in US Dollars Total Investment: 2.05 bn 2.62 bn 1.36 bn Private Equity: 21% 427 mn 25% 672 mn 32% 430 mn Cintra: 242 mn (57%) 343 mn (51%) 231 mn (54%) Meridiam: 141 mn (33%) 107 mn (16%) 75 mn (18%) DPFPS: 4
Slide 38: Managed Lanes: Growth since opening
B. Main Infrastructure Assets Managed Lanes GROWTH SINCE OPENING (NTE) GROWTH SINCE OPENING (LBJ) 400 240 350 220 200 300 180 250 160 200 140 150 120 100 100 Index 100 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'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Revenue Txns
Slide 39: Managed Lanes: North Tarrant Express
B. Main Infrastructure Assets Managed Lanes: North Tarrant Express Opened on October 2014, 9 months ahead of schedule KEY CHARACTERISTICS DESCRIPTION: Dallas-Fort Worth Metroplex, Major thoroughfares between Fort Worth and DFW Airport LENGTH: 13 mile section (IH 820 & SH 183 in Tarrant County) CONCE
Slide 40: Managed Lanes: Lyndon B Johnson
B. Main Infrastructure Assets Managed Lanes: Lyndon B Johnson Opened on September 10th 2015, 3 months ahead of schedule KEY CHARACTERISTICS DESCRIPTION: IH 635 (Dallas County), the most populous county in Texas LENGTH: 13 mile section of the IH 635 and IH 35E 108Km Electronic toll CONCESSION PERIOD:
Slide 41: Managed Lanes: North Tarrant Express 35W
B. Main Infrastructure Assets Managed Lanes: North Tarrant Express 35W Expected to open in 2H’2018 KEY CHARACTERISTICS DESCRIPTION: 2 “managed lanes” in each direction of the IH-35W, segments 3A and 3B (3B segment to be built by TxDOT) LENGTH: 10.2 mile section (segments 3A 6.2 miles and 3B 4 miles)
Slide 42: Airports: Heathrow and Regional UK Airports
B. Main Infrastructure Assets 100% GBP mn Airports HAH Regional UK Airports (Equity method, FERROVIAL stake 25%) (Equity method, FERROVIAL stake 50%) +25% dividend in 9M17 (to GBP281mn) AGS paid GBP112mn (9M17, incl. GBP75mn in extraord dividends after its refinancing). RAB: positive impact fr
Slide 43: CMD 2017: Interest & FX rate risks
C. CMD 2017: Interest & FX rate risks What the economic theory says… NOMINAL REAL PRICES INTEREST INTEREST REAL GDP (INFLATION) RATES RATES Output gap Central bank increases the Demand and inelastic Monetary policy nominal interest rate to meet supply its target real interest rate (Taylor rule) EXCH
Slide 44: Interest Rate Risk and Infra-Asset Valuation
C. CMD 2017: Interest & FX rate risks Interest Rate Risk Infra-Asset Valuation 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” VALUE (Price/yield curve) Bond: A string of future fixed se
Slide 45: Categories of infra-assets by variability of cash flows
C. CMD 2017: Interest & FX rate risks Categories of infra-assets as per variability of cash flows WITHOUT TRAFFIC RISK (NON-TOLL ROADS) 1. - Availability payment (no CPI adjusted) Towoomba (Australia) CF=K 2. - Availability payment (CPI adjusted) Norte Litoral ( Portugal) CF= (CPI) WITH TRAFFIC RISK
Slide 46: Effect of interest rates on asset valuation (I)
C. CMD 2017: Interest & FX rate risks Effect of interest rates on asset valuation by category1 (I) AVAILABILITY DEMAND RISK & CPI Adj 1 Project i.e.: TOOWOOMBA 3 Project i.e: AUSOL 0% 3% Cintra´s Value Cintra´s Value Value Value Significant Stable value decrease value (Bond proxy) RISK FREE RATE RIS
Slide 47: Effect of interest rates on asset valuation (II)
C. CMD 2017: Interest & FX rate risks Effect of interest rates on asset valuation by category (II) Demand risk & Total free-rate tolling 94% Cintra´s Value 5 PROJECT I.E.: 407 ETR Sub-optimal price Optimal price TRAFFIC - Traffic ( VKT ) increases when the real GDP increases TARIFFS - Maximum discre
Slide 48: CMD 2017: Different Concessions Models
C. CMD 2017: Different Concessions Models From value to standpoint … very different “animals” fall within the CATEGORY OF “HIGHWAY CONCESSION” AVAILABILITY PAYMENT PROJECTS DEMAND RISK PROJECTS TARIFFS LINKED TO LOW HIGH NOT CPI INDEXED CPI INDEXED CPI INDEXED TARIFFS REAL ECONOMY FREE TARIFF FLOW C
Slide 49: What makes the difference?
C. CMD 2017: Different Concessions Models What makes the difference? LOW COMPLEXITY CONCESSION THE BID IRR: the higher the Bid IRR, the larger AVAILABILITY PAYMENT CPI INDEXED O&M + Capex + Tax the room to reduce the rate of discount Debt Service Low Bid IRR Equity distributions (11%) Revenues + R
Slide 50: Highway Concession Business Value Creation
C. CMD 2017: Highway Concession Business Value Creation How does the highway concession business create value for shareholders? 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 Basic Rights: colle
Slide 51: How do sponsors create value?
C. CMD 2017: Highway Concession Business Value Creation How do sponsors create value? 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 o
Slide 52: Value creation: Derisking and rolling forward
C. CMD 2017: Highway Concession Business Value Creation How do sponsors create value? THE ROLLING FORWARD EFFECT: progressive increase of value as we get closer to back ended cash flows VALUE CREATION: DERISKING & ROLLING FORWARD €100M invested in one of our ML’s 1,702 1,662 VALUE* 1,426 1,296 1,058
Slide 53: Historical data: FY16 Results
D. Historical data € million FY16 Results Income Statement Revenues FY16 FY15 Var % LfL FY16 FY15 Var % LfL Construction 4,194 4,287 -2.2% -2.7% Revenues 10,759 9,701 10.9% 1.2% Airports 4 8 -49.9% -68.6% Toll Roads 486 513 -5.3% 24.8% EBITDA 944 1,027 -8.1% -4.0% Services 6,078 4,897 24.1% 2.8% Oth
Slide 54: Historic consolidated figures 2012-2016
D. Historical data € million Historic consolidated figures: 2012-2016 Operating CF ex-infra projects (before tax.) Net debt OCF ex-infra 939 1,097 1,076 889 995 ND -5,106 -5,352 -6,230 -4,542 -4,266 Op. CF (Construction 1,489 1,663 1,632 1,514 N. CASH EX- 697 & Services) 538 663 640 INFRA 591 560 Di
Slide 55: Construction figures 2012-2016
D. Historical data € million Construction figures: 2012-2016 Operating & investment CF (ex-projects) Revenues 304 4.326 4.064 4.287 4.194 272 3.942 OCF ex-infra 236 245 14% 15% 17% 17% 17% (before tax) 33% 29% 27% 29% 30% 100 53% 56% 54% 56% 2012 2013 2014 2015 2016 53% EBITDA ex-project 324 329 335
Slide 56: Services figures 2012-2016
D. Historical data € million Services figures: 2012-2016 Operating & investment CF (ex-projects) Revenues 6,078 491 359 4,897 OCF ex-infra 395 4,401 24% (before tax) 302 3,656 289 2,951 45% 63% 59% 62% 51% 2012 2013 2014 2015 2016 49% 39% 36% 34% 29% 2012 2013 2014 2015 2016 EBITDA ex-project 273 26
Slide 57: Toll roads figures 2012-2016
D. Historical data € million Toll roads figures: 2012-2016 Dividends received Managed Investment 290 7% 255 267 242 13% USA 220 25 46 25 31 1,894 km Canada 22 44% 7% Spain 27 concessions UK & Ireland 224 242 244 217 8% 198 10 countries Rest od Europe Rest of World 21% 2012 2013 2014 2015 2016 407-ET
Slide 58: Airports figures 2012-2016
D. Historical data Airports figures: 2012-2016 Portfolio Heathrow Heathrow shareholders Heathrow (25% stake) *AGS (50% stake) 2 runways Aberdeen 25% 20% 12.6% 11.2% 11.2% 10% 10% 183 destinations Glasgow 82 Countries Southampton Ferrovial Qatar Brittania GIC Alinda CIC USS 80 Airlines Dividends rece
Slide 59: Disclaimer
Disclaimer 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 regardin