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ACS forecasts double digit growth in 2008 and a 15% rise in ordinary profit

Florentino Pérez presents the first results since the operational and financial integration of Unión Fenosa in the ACS Group

26-05-2008
He defines “creation of value” as the essential objective of the Group’s corporate strategy

He proposed to the General Shareholders’ Meeting that shareholder returns be increased by 40% and that redemptions be increased to almost 5% of share capital


Madrid, 26 May 2008. At his speech to the General Shareholders’ Meeting on the date hereof, the Chairman of the ACS Group Florentino Pérez pointed out that “the objective set for this year was to increase sales by double digits and to boost net profits by about 15%”, which will mean that "2008 will once again be the best year in the Group’s history.” Florentino Pérez said that the first quarter data confirm these figures and even indicate that, once again, they can be beaten.

The Chairman and CEO noted, "we are optimistic about the ACS Group's outlook despite the fact that these years are not going to be easy." “The slowdown in economic activity, combined with the complex situation of the financial markets require us to rely on our inventiveness and maintain our current business initiative. We need to look for alternatives that allow us to maintain the growth and profitability levels we’ve offered up to now,”

The top executive of the ACS Group first reminded the shareholders that 2007 was the year of the operational and financial integration of Unión Fenosa in the group. Following this integration, the energy activity area was created and the strategic decision taken in 2005 was fulfilled.

In 2007 the main operating and financial aggregates of the ACS Group, which already employees close to 150,000 individuals, relates to the effects of this integration and reflected the positive performance of the other lines of business.Thus:

 Revenue reached 21,312 million euros, up 53.7% on 2006. Of this amount, over 5,000 million euros was earned in Spain, while over 5,000 million euros, i.e. almost 24%, was earned abroad.

 EBITDA stood at 3,491 million euros, which was 186% higher than in the previous year.

 Net profit amounted to 1,551 thousand euros, 24.1% higher than in the previous year.

 Ordinary profit after taxes, without taking extraordinary results into consideration, reached 1,010 million euros, representing an increase of 23.9%.

 Cash flows from operating activities increased by 83% to 2,361 million euros.

 Total investments amounted to 4,650 million euros.

 At the end of 2007, the Group's net equity amounted to 10,441million euros.

On this 25th anniversary of the initiation of the project now known as the ACS Group with the purchase of Construcciones Padrós in 1983, Florentino Perez wished to highlight the Group’s achievements since the creation of ACS, Actividades de Construcción through the merger of OCP Construcciones and Ginés Navarro Construcciones 11 years ago. In this time:

 Consolidated sales are 21 times higher, having increased from the 1,000 million euros invoiced in 1996 to over 21,300 million euros in 2007. In this connection, average annual growth was higher than 32%.

 Both ETBIDA and net operating profit have grown by an annual average of 43%.

 The Group’s net profit has risen from 24 million euros to 1,551 millions and has increased by an annual average of over 46%.

 Following adjustments for capital increases and share splits performed over the years, earnings per share has increased 26% annually.

 The total return for shareholders has been an annual 34%. In other words, all shareholders who purchased shares of OCP Construcciones at the end of 1996, the year prior to the merger leading to the creation of ACS, Actividades de Construcción y Servicios, and have kept these shares up to the current date, have obtained an annual average return of 34% taking into account the revaluation of their securities and the dividends paid.
At this point, Florentino Pérez reminded the shareholders that “the ACS Group has become one of the top ten Spanish companies in terms of size and profitability, and its balanced division of revenues and profit among its different business areas, as well as its internationalization, make these earnings extremely stable”. In this respect, the contribution of each area to revenue in 2007 was as follows: Construction contributed 34%, Environment and Logistics 13%, Industrial Services 25% and Energy 28% of total revenue. In terms of net ordinary profit (without taking extraordinary income and expenses for the year into account), the Construction area contributed 31%, Concessions 10%, Environment and Logistics 13%, Industrial Services 27% and Energy 19% of the total ordinary profit.

Dividends

The Chairman of the ACS Group also proposed that the shareholders approve an interim dividend of 1 euro per share, as a result of which the total dividend charged to income in 2007 will amount to EUR 1.75 per share.

Consequently, the total dividend will be equal to 40% of the earnings per share, and will be 40% higher than the dividends paid to shareholders already owning shares of the ACS Group in 2006.

Additionally, the Chairman proposed to the General Shareholders’ Meeting that 4.954% of the shares acquired in the market in recent months be redeemed, in which case the earnings on the shares would be increased by the same proportion.

Investments

According to the Chairman, its good results and strong cash generation capacity enable the Group “to continue with our growth strategy, based on a policy of coherent investments focused on stable and recurring business." In this respect, investments amounted to 4,650 million euros the past year, most significant of which was the acquisition of 25.1% of Hochtief for 1,265 million euros.

By operating areas, noteworthy were the investments made in Energy, where Unión FENOSA invested 1,273 million euros in the past year, mainly in the distribution network in Spain. Additionally, the Industrial Services area invested in renewable energies (267 million euros in thermal solar plants and 287 million in wind-powered facilities); the Environment and Logistics area invested 235 million euros in the acquisition of environmental assets and 158 million in container terminals, noteworthy of which is the new Bombay port terminal; the Concessions area invested 437 million euros on motorways and the Construction area invested over 200 million euros, half of which were allocated to the purchase of the US civil work construction company Schiavone.

According to Florentino Pérez, in line with its investment policy, the ACS Group has made a commitment to capital-intensive projects relating to our basic activities, which leads to continual increase in the profit recorded and future revenue stability. In this process we increase our diversification and internationalization, always respecting our profitability objectives”.

Part of these investments were financed with the divestments made in the 2007 amounting to 1,247 million euros, the most significant of which was the sale of Continental Auto for 659 million euros.

Florentino Pérez also highlighted the fact that “our operating activities have no related debt, which enables us to continue growing and investing, backed by our high capacity to generate sustainable, sound and stable cash flows." At the same time, he reminded the shareholders present that “in terms of financial rations, our total net debt is 4.7 times the Group’s annual EBITDA and that the net recourse debt only amounted to 66% of the Group’s net equity, which amounted to 10,441 million at the end of 2007 “.

The Chairman of the ACS Group also reminded the shareholder that the market value of the listed investees “at which we have directly allocated debt amounting to 9,000 million euros at the current date"• exceeds 14,000 million euros and gives rise to underlying gains of over 3,300 million euros.

Strategy

Florentino Pérez also stated “our operating and financial structure, together with the sound cash generation capacity of our businesses and its future expectations define a strategic platform which will enable us to continue growing in the future”. “The creation of value–he highlighted, “is the essential aim of our corporate strategy, which pursues stable revenues as a consequence of the diversification of our activities and increase in our recurring profit.”.

The Chairman of the ACS Group added that "maximum profitability would always be sought in each and every line of business and project in which the Group invests its capital, applying the strictest criteria in terms of its risk policy for this purpose, Both from the industrial standpoint of each business area and from a corporate standpoint.” In this respect, he reminded the shareholders that “our background guarantees this, since we are one of the three most profitable IBEX companies in terms of total return for shareholders, since 1997 and in the past five years, we have maintained a profit/equity ration of higher than 20%.

In addition to diversification by business areas, Florentino Pérez also referred to another significant element offering the group stability: international activity In this respect, he reminded the shareholders that 24% of the Group’s revenue in 2007 was earned in international markets and that ACS is already present in over 40 countries located in four large areas, which in the Chairman’s words are ”geographic expansion targets: The Mediterranean arch, including the south of Europe and the North of Africa, and practically all of Latin America, with countries such as Brazil, Mexico, Chile, and the US, and in an incipient manner, Eastern Europe, being of special relevance.