Ferrovial | Resultados Anuales 2018 - Ernesto López Mozo

Well, indeed, this year, upon making the decision to put the services division up for sale, all this business must be treated as discontinued activity. This means that the rest—highways, airports, construction—are reported as always. All lines—revenue, gross operating profit, net profit—grow on a comparable basis. And then, for services, we have just two lines: one with the net result and another called fair value adjustments. In this line, we have a significant impairment this year. Why is there such an impairment in services? Well, it has to do with the flexibility we want to maintain in the sale process—that a country can be sold separately, everything together, different combinations. This forces us to compare each unit separately, its current book value with the expected transaction value in the market, minus transaction costs. And in the UK, the macroeconomic environment of the sector and also the dispute in the infrastructure maintenance contract in the city of Birmingham lead to a value lower than what was on the books. That doesn't mean that in the rest we couldn't have a transaction well above book value and have a capital gain when the sale materializes, but now that result cannot be taken.

Well, I always like to start with the highways division, which has the most weight in valuation in the group. Here we have traffic growth and results across the entire highway portfolio. Of course, the most important one, the 407 ETR in Toronto, has almost double-digit growth in revenue, in gross operating profit—we're talking double-digit in these lines—and almost double-digit in the dividends we receive. Perhaps I would highlight more compared to our expectations how the US part in Texas has gone, where the NTE and LBJ have grown gross operating profit by more than 25%, and this has accelerated at the end of the year with the opening of other roads connecting with ours, one of them the I-35 West, which is also ours and we operate, and it had a spectacular start. Regarding other businesses, we move to airports. Here, Heathrow has been setting a record for passengers every month, and yet it has maintained high customer satisfaction, good margins, gross operating profit grew by more than 4% with cost containment, and moreover, it has been achieved that parliament approves the policy that allows expansion, the third runway at Heathrow, which is very necessary. We have other airports in the UK: Aberdeen, Glasgow, and Southampton. Here we do see pressure in traffic because the low-cost airlines are under pressure, but despite that, gross operating profit grows with commercial initiatives and cost containment. Then we have construction. Construction has been in line with our expectations, an EBITDA margin of 2.5% on sales, and here we see cost pressure in all regions, especially in Poland at Budimex. And then we have services, where Spain stands out, growing more than 3% in revenue and gross operating profit with margins high compared to the sector. Australia has also had margins in line with expectations, and very importantly, in the latter part of the year, it has managed to contract and increase its portfolio, which grows by around 9% compared to last year. That's good for future growth. And then we have Amey in the UK, where, excluding the Birmingham contract, it has been in line with expectations with gross operating profit margins above 2.5%.

Yes, well, the cash flow this year, I think what stands out are the dividends we have received from projects, both infrastructure and service projects, which are over 600 million euros. And this is good for the future—I'll comment on it later—it looks good. Outside of these dividends, what we have is that the operating cash generation from construction and services has been lower this year than other years. In construction, the reason is that there haven't been large projects with financial close. Normally, when there is a financial close of a large project, a significant advance payment is received, and this year there haven't been those projects. Regarding services, what stands out is that in the UK, investment had to be made in Sefyl for the Capex of the life cycle; it's a very important contract. We also had to complete the investment in some waste treatment plants, like Milton Keynes, and then there has also been a reduction in payment days to suppliers. This has affected the contribution of these businesses, construction and services. But as I said, looking ahead, we see very important dividends in infrastructure, with dividends from the US, from the NORTAR starting in 2019 and from the LBJ in 2020. We really see a lot of value creation in these projects, and that is also what has encouraged the decision to allocate more capital to this and exit services, which has good growth, but our value creation is now clearer in these infrastructure projects.

Thank you.