Fomento de Construcciones y Contratas : FCC gross operating profit (EBITDA) up 12.1% to 804 million euros in 2014

The efficiency and restructuring measures adopted in FCC Group's Strategic Plan launched during the second quarter of 2013 are beginning to bear fruit. The Spanish company's gross operating profit (EBITDA) in 2014 totalled €804 million, which represents an increase of 12.1% compared to the previous year.

Over the past year, the Citizen Services Group, that delivers environmental services, infrastructure and water management globally, has reduced its losses by more than half (51.9%) to €724 million, compared to €1.506 billion a year earlier. This loss occurs as a result of non-recurring provisions and impairments totalling €781 million booked in the third quarter which complete the restructuring process undertaken since 2013 .

Besides these efficiency and restructuring measures, the 12.1% improvement in EBITDA has also been helped by further stability in the Environmental Services (FCC Medio Ambiente) and Water (FCC Aqualia) areas. The overall result of this is that operating margin rose to 12.7%, compared to 10.6% last year. Split by business areas, Environment and Water account for three quarters of FCC Group's overall operating profit.

Another significant contribution to the growth in EBITDA came from cement subsidiary, Cementos Portland Valderrivas. The €104m end-of-year result obtained is double that of 2013. It was also helped by a recovery of the market in Spain that became visible in the third quarter of last year and is seen to continue during the early months of 2015.

The improvement in financial debt is one of the highlights of the 2014 results. At year end, after the capital increase carried out in December, the Group's debt stood at €5.016 billion, representing a decrease of 15.9% compared to the amount on the books at the end of 2013.

Turnover reached €6.334 billion, a drop of 6.2% over the previous year, largely attributable to the contraction that is still occurring in demand for construction in Spain and to the more selective approach to growth exercised by FCC Construction in overseas markets. Specifically, revenue from FCC Construction shrank by 20.1% year-on-year, due to the continuing downturn in recent years of public investment in infrastructure in Spain .

Indeed, the Spanish market accounts for 80% of the drop, and only 20% is due to projects in other countries around the world. On the international front, more selective objectives have been set, focusing on optimising profitability and the generation of cash rather than simply expanding business .

Looking at the situation by geographical regions, one sees a strong 90.3% growth in revenue in the Middle East and North Africa thanks to work commencing on the Riyadh Metro, in the Construction area. By contrast, revenues in Latin America decreased by 27.1%, mainly due to the completion of other projects such as the Metro Line 1 and road realignment in Panama City. The construction of the Lima Metro in Peru is scheduled to commence in the second quarter of 2015 .

Boost from Environment and Water

Excluding the Construction business, revenues from the rest of the Group increased by 2.5%. In the Environmental Services area, revenue grew by 1.2% thanks to business in the UK, while in Water, revenue went up by 0.9% on the strength of the concession business. In Cement, revenues showed a slight growth of 0.4% driven by increased exports, which offset the decline in revenue from Spain, linked to the closure of unprofitable sales operations of cement-based products .

For its part, the Group's business portfolio remains at the all-time highs achieved at the end of 2013. In December 2014, it stood at €32.9965 billion (-1.1% compared to one year earlier), supported by expansion in the Water business unit.

LAST YEAR'S MAJOR ACHIEVEMENTS

· Successful capital increase amounting to €1 billion

The Extraordinary General Meeting of 20 November 2014 approved a capital increase with preferential subscription rights amounting to €1 billion, equivalent to 133,269,083 new shares at a subscription price of 7.5 euros per share. The subscription was fully completed on 19 December, when demand for shares was 9.2 times higher than the available supply. As a result, capital currently stands at 260,572,379 shares .

This operation has enabled debt to be reduced by partial repayment and restructuring of Tranche B, included in the bank refinancing process accomplished in June 2014, together with covering other already pledged investment requirements. It has also strengthened the Group's equity structure and results by reducing the financial burden .

· Entry of a new major shareholder in FCC capital

On 27 November 2014, the company announced the successful conclusion of negotiations between the controlling shareholder (B1998) and Control Empresarial de Capitales SA de CV (CEC), controlled by the Slim family. Subsequently, during the preferential subscription period of the capital increase carried out by the FCC Group, CEC bought a total of 66,794,810 newly-issued shares in FCC, which represents 25.6% of FCC stock after the capital increase .

Following that operation and B1998's recent reduction of its shareholding, the structure of major shareholders in FCC shows CEC with 25.6%, B1998 with 22.4%, and 5.7% held by BGI (funds linked to Bill Gates) .

· FCC Construction wins new large-scale international railway contracts

Two consortia led by the Construction area achieved a series of projects worth more than €3.8 billion during last year. Significant among them are two underground construction projects. Indeed, the consortium was awarded the contract to design and construct Line 2 of the Lima Metro plus a branch on Line 4, amounting to €3.3 billion. Construction is due to last five years, followed by operation of the line for 30 years. In addition, FCC Construction is leading a consortium in the Middle East that was awarded the construction of the Red Line on the Doha (Qatar) Metro, for a value of €500m .

The portfolio of building work attributable to FCC Construction rises to €6.213 billion, thus guaranteeing over 35 months' business and in line with the Group's policy to achieve more profitable and selective positioning .

· FCC Aqualia consolidates its presence in the Middle East and North Africa

FCC Aqualia, leader of FCC's Water division , won the tender to construct a desalination plant in Djerba (Tunisia), worth €70 million. The contract includes commissioning and operating the plant, which will supply a total of 150,000 people .

Moreover, as part of a consortium, it has won a tender worth €300 million for the development and management of the sewage network in Al Dhakhira (Qatar) over the next 10 years. This contract marks the company's entry into the country and adds to its strategic presence in the area thanks to previous awards in Saudi Arabia and UAE. Thus, FCC Aqualia is now present in over 15 countries as part of its expansion process into Europe, the Middle East, North Africa and Latin America. With these new additions, the total population served stands at 23.5 million users, with a portfolio of income of €15.114 billion at year-end, i.e. a growth rate of 1.7% .

· Nearly 80% (€1,740m) of the Divestment Plan accomplished

Since the implementation of the current Strategic Plan in the second quarter of 2013, divestments of non-core assets have been accorded and implemented to a total value of €1.740 billion. That figure represents the achievement of 79% of the target €2.200 billion.

Other highlights of 2014 include the sale of the Logística business for €32 million, agreement for the sale of Cemusa (street furniture) for €80 million, which is pending certain regulatory approvals in order to complete transfer, and the sale of FCC Environmental (industrial waste in the USA) last October for €69 milliona.