2016 Integrated Report Sacyr 24 Letter from the Chairman 30th Anniversary of Sacyr. Madrid, November 2016
1. Chapter 1.0. Letter from the Chairman 25
Letter from the Chairman G4-1, G4-13 2016 Integrated Report Sacyr 26 Transparency and a permanent dialogue with those with whom we interact is the key to fostering a culture of trust and belonging to a profitable, global and sustainable business project I am pleased to introduce our Integrated Report corresponding to 2016; An exercise that has confirmed the good course undertaken for the future of the Sacyr Group through the development of our Strategic Plan; And through a deep transformation of the Group, the consolidation of our business model, the improvement of financial balance and the achievement of sustainable growth. And at Sacyr we believe that the sustainability of our company is a source of long-term value creation for the societies where we are present and for the people who enjoy the infrastructures and services we develop. That is why we have successfully advanced in the development of the new strategic cycle consisting of an orderly and profitable growth of the key markets and the opening of new ones, emphasizing profitability and cash flow generation, increasing the international expansion of construction and Services, favouring the revenue generation of our concession business, growing steadily in the industrial world and applying innovation to differentiate us from the competition and in the creation of new markets. Our innovative capacity continues to be the differentiating element of our commercial offer and one of the pillars of the sustainability of our company; And it is through their implementation and development that we manage our business areas in the generation of new products, services and systems that add value to our activities. At Sacyr, we firmly believe that with the innovation we are continuously fostering, we continue to be a reference for the structural integration that a company must run, a company must assume the responsibility and the role of innovative and technological development in the interest of greater technical and managerial excellence. A solid and consolidated structure that conforms to a Sacyr open to incorporate those aspects that really concern the societies where we develop our activities. Transparency and a permanent dialogue with those with whom we interact is the key to fostering a culture of trust and belonging to a profitable, global and sustainable business project. That is the origin of our commitment to communicate relevant, balanced and concise information so that our stakeholders can know in a transparent and open way the work of the company.
And this openness to dialogue is reflected in our Corporate Social Responsibility policy, with which we structure our efforts in the three dimensions of sustainability, helping us to focus on the role we want to play as social and economic actors in the development of relationships that generate Value for all our stakeholders and contribute to respect for human rights. In the Sacyr Group, we join the United Nations initiative and its 17 sustainable development objectives to help achieve those goals and targets that are aligned with the activities of the Business Units. It is clear that 2016 has been a period of consolidation of our strategy but also a period of challenges, caused in particular by the uncertainty of growth in the major economies of the planet, the fluctuating capital markets, the need for new infrastructure in many Regions of the planet, scarcity of water resources and climate change. Challenges that are in line with the activities that we carry out and that generate opportunities to continue to grow in a sustained way. The Group s revenue was 2,860 million euros, down 3% on 2015, as a result of the decrease in billing in the construction division, which was due to the lower level of activity in Spain and the markets where Somague operates. The Group maintains its strong commitment to international growth and now has a solid foothold in countries including: Colombia, Chile, Portugal, Peru, Italy, Angola, Australia, Oman, Algeria, Uruguay, Qatar, Ecuador, Brazil, Bolivia, Mexico, Ireland, Cape Verde and Mozambique. EBITDA, excluding non-recurring expense (resulting from the redundancy programme in Construction), was 360 million euros, 13% higher than 2015, thanks to the positive performance of the Concessions, Services and Industrial businesses, giving a EBITDA margin of 12% versus the 11% obtained in 2015. Net attributable profit was 120 million euros. This figure is not comparable with 2015, which included the capital gain from the sale of Testa Inmuebles en Renta and the corresponding asset impairment for deferred tax, the adjustment in the carrying amount of the investment in Repsol to fair value, and the recognition of various working capital and financial provisions. I am pleased to note the continued deleveraging of the Group over the past eight years, from 19,526 million euros at 31 December 2008 to 3,726 million euros at 31 December 2016, a fall of 81%. The activity of the Sacyr Group is largely guaranteed by the backlog, which at 31 December 2016 stands at 25,956 million euros, being more than 51% international projects, well diversified and balanced both in terms of profitability and risks, allowing us guarantee activity for more than 40 months. Construction division revenue in 2016 amounted to 1,250 million euros, down 25% on 2015 due to the lower level of activity in Spain and the markets where Somague operates. Consequently, the necessary measures have already been taken to ensure the return to growth of this area in 2017 and in successive years. The strategy of internationally expanding the construction division is reflected in the weight of overseas billing, which represents 74% of total revenue. In this regard, noteworthy of mention is the performance of the business in Italy, Angola, Mexico, Portugal and Chile and Mexico, among others, where major contracts were awarded. Revenue in the Concession division amounted to 552 million euros in 2016, with income from concessions reaching 309 million euros, up 12% on 2015, thanks to improved traffic and 27 1.0. Letter from the Chairman 1. Chapter
Sacyr 2016 Integrated Report 28 Sacyr Innovation Awards 2016. Madrid, Spain
Letter from the Chairman G4-1, G4-13 the partial start-up of operations of the Chilean concessionaires Rutas de Algarrobo and Rutas del Desierto. EBITDA was 207 million euros, a 13% increase on last year, with an EBITDA margin of 67%. Revenue for Sacyr Industrial amounted to 401 million euros in 2016, up 38% on the previous year thanks to the contribution of the La Pampilla contracts (Peru); the regasification plant in Cartagena de Indias (Colombia) and the cement plant at Oruro (Bolivia); the new EPC (Engineering, Procurement and Construction) contracts awarded this year, in Oil and Gas (Spain and Peru), in electricity infrastructure (Chile) and in the Environment division (Ecuador); and also due to the strategic alliances made with companies like Fluor, Nervión and Isotrón in previous years. This positive performance of revenue was accompanied by a 43% year-on-year increase in EBITDA, which amounted to 30 million euros. This gave an EBITDA margin of 7.5%, also as a result due of the new EPC projects and the strategic alliances referred to above. new growth engines, such as construction project management and concessions, in addition to consolidate the most recent division of the Group: Sacyr Industrial. All of the above, together with management measures based on cost and debt reduction, will result in a stronger, more innovative, more competitive and more committed Group with the traditional values of our company: prudence, austerity, quality and the fulfilment of the commitments assumed. Manuel Manrique Cecilia Chairman and Managing Director 1.0. Letter from the Chairman In 2016, Valoriza posted revenues of 908 million euros, 19% higher than in 2015. This growth was fuelled by the Multiservices businesses (+28.5%), Environment (+10.9%) and Water (+16.8%). EBITDA was 76 million euros, with a year-on-year variation of 9%. The EBITDA margin was 8%. 1. Chapter At 31 December, Valoriza s backlog stood at 6,447 million euros, of which 29% derives from the international market. Valoriza remains firmly committed to tendering activity in all its business areas both in Spain and abroad. During this year, Sacyr has continued to develop the Group s new strategy, based on enhancing those businesses in which we are leaders and experts, as well as continuing to drive the two 29