In January this year, the HOCHTIEF subsidiary CIMIC announced its decision to exit its 45% non-controlling financial investment in the Middle East (BICC) in the context of an accelerated deterioration of local market conditions. This will allow CIMIC to focus its resources and capital allocation on the growth opportunities in its core markets Australia, New Zealand and Asia Pacific.
In this context, HOCHTIEF has recognized a one-off, post-tax, charge of EUR 833 million, after minorities, in its 2019 financial statements. As a consequence, the Group reported a nominal net loss of EUR 206 million. HOCHTIEF expects an associated cash out-lay, net of tax, of around EUR 0.4 billion during 2020, as CIMIC’s financial guarantees of certain BICC liabilities materialize. “Exiting the region is the right decision for the Group and improves the quality and visibility of our business mix going forward,” said CEO Marcelino Fernández Verdes. Following the announcement, the rating agency S&P’s ‘BBB’ investment-grade rating for HOCHTIEF is unchanged with a stable outlook.
Operational net profit, which excludes one-off effects, rose by EUR 146 million, or 28%, year on year to EUR 669 million. All three HOCHTIEF divisions contributed to an increase in the Group’s operational net profit which also includes a first-time contribution from the 20% stake in Abertis of EUR 122 million. Nominal net profit, excluding the BICC impact, rose by 16% year on year to EUR 627 million. “Based on the strong performance in our operating business and the robust balance sheet we propose to increase the 2019 dividend by 16 percent,” Fernández Verdes added.
Sales went by EUR 2 billion, or 8%, to EUR 25.9 billion. The Group delivered net cash from operating activities of EUR 1.6 billion. This corresponds to a significant increase of EUR 1.0 billion year on year on a comparable basis. Due to increased mining and job-costed tunneling work, net operating capital expenditure increased by EUR 174 million to EUR 518 million. Post this significant investment in the business, the Group achieved free cash flow from operations of EUR 1.1 billion. HOCHTIEF ended December 2019 with a robust net cash position of EUR 1.53 billion.
The Group’s order book increased by EUR 4 billion, or 9%, year on year to over EUR 51 billion at the end of 2019, the highest level ever. All divisions expanded their order books over the last twelve months. The quality of the order book is enhanced by the high level of visibility which the Group’s mining and services activities as well as the construction management and alliance-style contracts provide. They account for two-thirds of HOCHTIEF’s order book. A strong level of new orders, EUR 30.4 billion, was secured during the year, an 8% increase compared with 2018. A disciplined bidding approach remains a priority across the Group.
Looking forward, our local teams have identified a project tender pipeline worth around EUR 600 billion of relevant projects coming to our markets in North America, Asia-Pacific and Europe for 2020 and beyond. Our strong position in developed PPP markets is reflected in the PPP project pipeline the Group has identified and which stands at EUR 230 billion.
Shareholder remuneration continues to be a key element of the Group’s capital allocation strategy along with focusing on attractive organic and strategic growth opportunities. Given the positive prospects for our operating divisions and Abertis, and supported by a robust balance sheet, management intends to propose a dividend for 2019 of EUR 5.8 per share, which represents a 16% increase compared with 2018.
Group Outlook: “With a strong and growing pipeline of opportunities across our key markets, a strong balance sheet and our ongoing capital discipline our prospects are very positive,” said CEO Marcelino Fernández Verdes. HOCHTIEF expects to achieve an operational net profit in 2020 in the range of EUR 690–730 million compared with EUR 669 million in 2019, with all businesses contributing to this growth.