Strong turnaround in cash flow from operations
Operational net profit shows a 36% increase to EUR 186m
Order book stable YTD at over EUR 39bn
Guidance for 2014 reaffirmed
HOCHTIEF results for the first nine months of the year continue to show positive progress, particularly in terms of cash flow and earnings. Cash flow from operations (post working capital changes) shows a positive cash inflow for the period of over EUR 70 million in contrast to the outflow of over EUR 220 million reported for the corresponding period of 2013. The improvement is highlighted in the figures for the third quarter which show a positive free operational cash flow (post capital expenditure) of approximately EUR 265 million compared with an outflow of around EUR 80 million in the same period of 2013. All three divisions contributed to this improvement.
HOCHTIEF also made progress in terms of net debt, which declined by over EUR 330 million between June and September helped by stronger balance sheets at all divisions.
Adjusted for one-off items, earnings before taxes went up in the first nine months to EUR 476 million. This marks a 17% increase on the prior-year period. Like-for-like consolidated net profit improved by 36% to EUR 186 million. The improvements are based on positive developments in all divisions – Americas, Asia Pacific and Europe.
New orders for the nine-month period of EUR 17.5 billion include a like-for-like increase of over 25% at both the Americas and Europe divisions. A lower level at Asia Pacific reflects both tighter order intake discipline and the very strong level seen in Q3 2013. It is noteworthy that the level of new orders at Leighton during the third quarter of this year shows a significant increase on the previous two quarters. On a like-for-like basis, work done increased relative to the first three quarters of the prior year by 3%. The Group consequently had a stable order backlog of EUR 39.2 billion as of the balance sheet date.
Chairman of the Executive Board Marcelino Fernández Verdes: “As the results illustrate we are delivering a solid performance which we aim to sustain, and improve upon, going forward.”
Strategic realignment
HOCHTIEF has further advanced the process of focusing on its core business of construction in recent months.
By modifying structures and processes, Group company Leighton aims to strengthen its balance sheet, streamline its operating model, and improve project delivery. To this end, Leighton’s activities have been reorganized into four operational units: Construction, Mining, Public Private Partnership, and Engineering. The restructuring will be substantially completed by year end. The exploration of divestment and partnering opportunities for the Services, Properties and John Holland businesses is also well progressed. If successful in the process, the proceeds will be used to further reduce gearing and strengthen the balance sheet, and to finance future growth particularly in PPPs.
In the Europe division, HOCHTIEF completed a further key step in implementing its strategy with the sale of formart, one of Germany’s leading residential developers. The property management business had already been sold in July. In October, the sale of HOCHTIEF Europe’s offshore assets was announced.
New orders
All divisions were able to secure attractive new orders in the third quarter in the core segments of building construction, transportation infrastructure, and energy infrastructure. U.S. subsidiary Turner is to build new projects including a 30-story office property in Atlanta and a large healthcare complex in New York. New orders won by U.S. civil engineering subsidiary Flatiron include a large bridge in Seattle. The HOCHTIEF Asia Pacific division chalked up three major new PPP contracts: Working in consortium projects, the Leighton Group is to build a rail link as part of the Sydney local transportation network and a prison in Melbourne. In New Zealand, Leighton Contractors in a joint venture will finance, design, build, and operate the Transmission Gully Motorway project. HOCHTIEF Solutions, which spearheads the HOCHTIEF Europe division, was awarded contracts including construction of the new Rastatt rail tunnel and a road tunnel to connect the international port in Bremerhaven.
Guidance
HOCHTIEF reaffirms the Group guidance for 2014. In 2013, we reported an operational net profit of EUR 207.5 million. In 2014, the Group continues to expect to achieve further progress with an operational Group net profit in the range of EUR 225-250 million.
HOCHTIEF Group: Key operating indicators
* Restated for IRFS 11. For details on the restatement, please see pages 18 et seq. of the 2014 Half-Year Report.
1) Operational figures excluding one-off impacts such as deconsolidation effects
HOCHTIEF Group: Reported figures
* Restated for IRFS 11. For details on the restatement, please see pages 18 et seq. of the 2014 Half-Year Report
** Note: The percentage changes are calculated at the level of precision used in the interim financial statements (thousands of euros).