Presentation of VINCI Construction to financial analysts
Presentation of VINCI Construction to financial analysts
Presentation of VINCI Construction to financial analysts
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<strong>Presentation</strong> <strong>of</strong> <strong>VINCI</strong> <strong>Construction</strong><strong>to</strong> <strong>financial</strong> <strong>analysts</strong>Lille, France – 17 December 2004
<strong>VINCI</strong> <strong>Construction</strong>: overview<strong>VINCI</strong> <strong>Construction</strong>Philippe RatynskiFrançois RaveryFinanceJean Marc FonteyneHuman ResourcesJean RossiSOGEA<strong>Construction</strong>Robert HosseletGTM<strong>Construction</strong>Richard Francioli<strong>VINCI</strong><strong>Construction</strong>FilialesInternationalesJohn Stanion<strong>VINCI</strong> plcPhilippe Raty nski<strong>VINCI</strong><strong>Construction</strong>DeutschlandRenaud BentegeatCFE (45%)Pierre Berger<strong>VINCI</strong><strong>Construction</strong>Grands ProjetsBruno DupetyFreyssinetFranceFranceAfricaFrench overseasterri<strong>to</strong>riesCentral EuropeUKGermanyBelgiumFranceInternationalFranceInternational2
<strong>VINCI</strong> <strong>Construction</strong>: overviewIn mainland FranceA very tightly knit network <strong>of</strong> business units:Sogea <strong>Construction</strong>, GTM <strong>Construction</strong>Rest <strong>of</strong> the worldEuropean subsidiaries with local management:UK, Germany, Belgium, Central EuropeLong-standing presence in Africa (Sogea Sa<strong>to</strong>m) and in Frenchoverseas terri<strong>to</strong>riesSpecialist business activities in France and export markets<strong>VINCI</strong> <strong>Construction</strong> Grands Projets, Freyssinet, DEME19%20%19%48%47%48%33%33%33%Net salesOperating incomeNet income3
<strong>VINCI</strong> <strong>Construction</strong>: overviewDecentralised structure: 600 pr<strong>of</strong>it centresRisk control: clear guidelines46,000 employeesManagers/supervisors15%Labourer/<strong>of</strong>fice staff54%Technicians31%Rest <strong>of</strong> world43%France57%15,000 worksites a year4
Change in net sales by management centre(in € billions)200120022003AveragegrowthSOGEA <strong>Construction</strong>1,9391,8732,132+5%GTM <strong>Construction</strong>1,4911,5121,582+3%Filiales Internationales903886928+1%UK629794773+11%GERMANY (*)147431418+69%CFE850797793-3%Grands Projets595626669+6%Freyssinet389431420+4%TOTALElimination <strong>of</strong> inter-companytransactionsTOTAL CONSOLIDATED6,943-506,8937,350-487,3027,715-477,668+5%+5%Strong growth for 2004 expected in France and Central EuropeGrowth in the UK, Germany and Africa(*) Reclassification <strong>of</strong> Bautec within <strong>VINCI</strong> <strong>Construction</strong> in 2002 (formerly …… <strong>VINCI</strong> Energies)5
Some pho<strong>to</strong>s ….Lefor<strong>to</strong>vo /St Pétersbourg MetroCTRL / Medway viaductBerjaya Times Square6
Net sales by geographical areaAlmost 90% <strong>of</strong> net sales generated in EuropeGood balance between France and the rest <strong>of</strong> the worldRest <strong>of</strong> the world: 6%Africa: 5%Rest <strong>of</strong> Europe: 6%Central and Eastern Europe: 5%Germany: 5%France: 55%Belgium: 7%UK: 11%7
The majors in EuropeNet sales in € billions14121086420SkanskaHochtief<strong>VINCI</strong> <strong>Construction</strong>ACS ConstrucionBilfinger & BergerBouygues <strong>Construction</strong>Balfour Beatty ContractingFerrovial ConstrucionEiffage <strong>Construction</strong>8
Net sales by business lineVaried and complementary know-howHydraulicengineering7%Servicesand misc.10%Specialistactivities12%Building43%Civilengineering28%9
France: market and competitionIncreased market share <strong>of</strong> <strong>VINCI</strong> <strong>Construction</strong> in overall stable market200Total market<strong>VINCI</strong> <strong>Construction</strong>5 0001504 000National market(!bn)100503 0002 0001 000<strong>VINCI</strong> <strong>Construction</strong>(!m)02000 2001 2002 2003 2004E0Source: Euroconstruct June 2003,55th Conference<strong>VINCI</strong> <strong>Construction</strong>: No. 1 in France<strong>VINCI</strong> <strong>Construction</strong> business linesCompeti<strong>to</strong>rsCivilengineering30%Hydraulicengineering11%Services &misc. 2%Building57%Bouygues <strong>Construction</strong>:€5 bn, <strong>of</strong> which €2.4 bn in FranceEiffage <strong>Construction</strong>:€3.4 bn, <strong>of</strong> which €1.7 bn in FranceSpie Batignolles: €0.8 bnFayat: €1.1 bn, <strong>of</strong> which €0.4 bn inconstruction2003 net sales: €3.8 bn10
Germany: market and competitionSKE and <strong>VINCI</strong> Bautec: 2 specialist companies independent <strong>of</strong> traditionalconstruction markets:SKE: facilities management/PPP<strong>VINCI</strong> Bautec: building-related services250Total market<strong>VINCI</strong> <strong>Construction</strong>600200450National market(!bn)150100300<strong>VINCI</strong> <strong>Construction</strong>(!m)5015002000 2001 2002 2003 2004E0Source: Euroconstruct June 2003,55th Conference<strong>VINCI</strong> <strong>Construction</strong> business linesFacilitiesmanagement34% Buildingrelatedservices66%Competi<strong>to</strong>rsBilfinger & Berger: €5.5 bn (<strong>of</strong> which €2.5 bn in Germany)Walter Bau: €3.1 bn (<strong>of</strong> which €2 bn in Germany)Hochtief: €10 bn (<strong>of</strong> which €1.5 bn in Germany)2003 net sales: €418m11
UK: market and competitionNorwest Holst: a medium size player <strong>of</strong>fering a broad array <strong>of</strong> know-howNational market(!bn)1209060Total market<strong>VINCI</strong> <strong>Construction</strong>600450300<strong>VINCI</strong> <strong>Construction</strong>(!m)3015002000 2001 2002 2003 2004E0Source: Euroconstruct June 2003,55th Conference<strong>VINCI</strong> <strong>Construction</strong> business linesHydraulicengineering5%Services &misc.12%Competi<strong>to</strong>rsBalfour Beatty: €4.9 bnAmec: €3.1 bnMowlem: €2.1 bnLaing O’Rourke: €1.8 bnCivilengineering27%Building56%2003 net sales: €718m12
Belgium: market and competitionCFE (45%): one <strong>of</strong> Belgium’s leading construction companiesDEME: one <strong>of</strong> the world’s leading dredging companies30Total market<strong>VINCI</strong> <strong>Construction</strong>750National market(!bn)2010600450300<strong>VINCI</strong> <strong>Construction</strong>(!m)15002000 2001 2002 2003 2004E0Source: Euroconstruct June 2003,55th ConferenceCFE business linesDredging37%Building23%Besix: €0.7 bnCompeti<strong>to</strong>rsS<strong>of</strong>icom (Eiffage): €0.4 bnMisc.13%2003 net sales: €793mCivilengineering27%13
Poland: market and competitionWarbud: a growing company in a market with strong potential30Total market<strong>VINCI</strong> <strong>Construction</strong>250National market(!bn)201020015010050<strong>VINCI</strong> <strong>Construction</strong>(!m)02000 2001 2002 2003 2004E0Source: Euroconstruct June 2003, 55thConferenceWarbud business linesBuilding94%Civilengineering6%Competi<strong>to</strong>rsSkanska: €400mStrabag: €300mMitex (Eiffage): €200mHochtief Polska: €100m2003 net sales: €191m14
Hungary: market and competitionHídépítö: a strong growth infrastructure specialistin a very dynamic market30Total market<strong>VINCI</strong> <strong>Construction</strong>250200Nnational market(!bn)201015010050<strong>VINCI</strong> <strong>Construction</strong>(!m)02000 2001 2002 2003 2004E0Source: Euroconstruct June 2003,55th ConferenceHídépítö business linesHydraulicengineering3%Building10%Competi<strong>to</strong>rsStrabag: €400mVegyepszer: €250mCivilengineering87%2003 net sales: €62m15
Czech Republic: market and competitionA targeted presence:FCC: developing building projectsSMP: infrastructure15Total market<strong>VINCI</strong> <strong>Construction</strong>100National market(!bn)10580604020<strong>VINCI</strong> <strong>Construction</strong>(!m)02000 2001 2002 2003 2004E0<strong>VINCI</strong> <strong>Construction</strong> business linesHydraulicengineering6%Building37%Competi<strong>to</strong>rsMetrostav: €420mCivilengineering57%2003 net sales: €70m16
<strong>VINCI</strong> <strong>Construction</strong>: organisation/valuesA management model that fits the business:organisational structure: responsible, independent pr<strong>of</strong>it centresworksites at the heart <strong>of</strong> the companypeople and companies networkedShared values, in phase with our era:pr<strong>of</strong>it cultureindividual empowermentpr<strong>of</strong>essionalisma sense <strong>of</strong> belonging <strong>to</strong> a community/loyaltycus<strong>to</strong>mer satisfactionrespect for partnersThe approach:multi-disciplinary (building, hydraulic engineering, civil engineering,related services)presence throughout the value chain (structural work, fit out, design-build,project management, systems integra<strong>to</strong>r, PPP, property development)17
<strong>VINCI</strong> <strong>Construction</strong>: competitive positionSignificant market share in four markets:mainland FranceFrench overseas terri<strong>to</strong>riesBelgiumFrench-speaking AfricaGood positions in markets with strong potential:Poland, Hungary, Czech RepublicA good image and leadership positions in three world markets:major infrastructure: <strong>VINCI</strong> <strong>Construction</strong> Grands Projetsspecialist business activities: Freyssinet (pre-stressed concrete, cablestaying, reinforced earth, ground improvement)dredging: eme18
Financial statements
Income statement 1/2(in €m)200120022003AveragegrowthH1 03H1 04Δ %Net sales (*)6,8937,3027,668+5%3,7443,955+5.6%EBITDA337395449+15.4%178227+27.4%4.9%5.4%5.9%4.8%5.7%Operating income200213222+5.4%113166+47.4%2.9%2.9%2.9%3%4.2%Financial incomeOperating income afternet <strong>financial</strong> income152151422720242+6.1%411716182+55.6%EBITDA increased 33% between 2001 and 2003, 27% for 1st half 2004Substantial improvement in operating margins in 2004Growth <strong>of</strong> operating income after net <strong>financial</strong> income greater than that <strong>of</strong>net sales(*) After elimination <strong>of</strong> inter-company transactions20
Income statement 2/2(in €m)Operating income afternet <strong>financial</strong> income200121520022272003242Averagegrowth+6%H1 03117H1 04182Δ %+56%% <strong>of</strong> net salesExceptional income/(expense)Tax3.1%(36)(19)3.1%5(42)3.2%7(48)3.2%(10)(21)4.6%(2)(58)+176%Goodwill(15)(41)(11)(6)(5)Minority interests(7)2(12)(4)(5)Net income138151178+13.6%76112+47%% <strong>of</strong> net sales2%2.1%2.3%2.1%2.8%Almost 30% growth in net income over three yearsProgressing <strong>to</strong>wards net margin <strong>of</strong> 3% <strong>of</strong> net sales!21
<strong>Construction</strong>, a business line that generatesstrong cash flow(in €m)200120022003AveragegrowthH1 03H1 04ΔCash flow from operations298326379+13%142200+58Capital expenditureChange in working capitalrequirementFree cash flowFinancial investmentnet <strong>of</strong> disposals(210)241120(213)242355(27)(200)1119023+30%(88)(182)(128)(2)(94)(6)100(16)+176+228Dividends paid(23)(91)(109)+118%(25)(38)Exchange rate, consolidationscope and other <strong>financial</strong>flowsNet cash flow for the period(90)(1)703073714141(114)-46+160Cash at beginning <strong>of</strong> period689688995+20%9951,136Cash at end <strong>of</strong> period6889951,136+28%8811,182+30122
Change in cash and equivalents€m1500Continuous improvement in cash and equivalents, with surplusfor past four yearsLimited seasonal variation, reflecting good diversification (business lines,geographical areas)130011009007005002004200320022001300100DecemberJanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOc<strong>to</strong>berNovemberDecember23
Consolidated balance sheet at 31 December 2003(in €m)Tangible fixed assets731Shareholders’ equity*624Goodwill75Provisions and other long-termcommitments155Financial and otherfixed assets111Retirement commitments132Net cash and equivalents1,136WCR (incl. provisions foroperating risks)1,142Total assets2,053Total liabilities2,053Negative capital employed (€175m)Very sound <strong>financial</strong> situationPolicy <strong>of</strong> cautious provisionsEfficient management <strong>of</strong> WCR(*) Incl. minority interests: -€99m24
Return on equity(in €m)20022003H1 2003H1 2004Shareholders’ equity at 1 January(excl. minority interests)387442442525Net income15117776112ROE39%40%34%42%Very high and growing return on equity25
Strategy and outlook
Order intake <strong>to</strong> 31 Oc<strong>to</strong>ber 2004(in €m)10 months 2004Change over12 monthsSOGEA <strong>Construction</strong>GTM <strong>Construction</strong>Filiales InternationalesUK – USAGermanyCFEGrands ProjetsFreyssinetTOTAL2,1541,7891,2015835977165353957,970+18.8%+20.7%+73.3%+33.9%+21.4%+8.4%+293.2%+17.5%+30%FrenchnetworksInternationalnetworksSpecialistsubsidiariesExceptional level <strong>of</strong> orders taken by all divisions… reflecting good commercial positioning in dynamic markets27
Order backlog at new record high(in €m)SOGEA <strong>Construction</strong>GTM <strong>Construction</strong>Filiales InternationalesUK – USAGermanyCFEGrands ProjetsFreyssinetTOTALAt endOc<strong>to</strong>ber 20041,9931,8661,2475005229511,1733178,569Change over12 months+20.3%+22.6%+69.7%+52.5%+32.9%-1.6%+7.9%-0.4%+19.2%Months <strong>of</strong>activity11.312.625.68.612.6<strong>VINCI</strong> <strong>Construction</strong>’s order backlog gives excellent visibility for 200528
Our strategy: exploit our sources <strong>of</strong> value creationOne leitmotiv: pr<strong>of</strong>it is <strong>to</strong>p prioritythink net margin, not gross marginstrict application <strong>of</strong> project selection procedureperformance-linked remuneration for managersmargin objective: 5% before taxFor <strong>VINCI</strong> <strong>Construction</strong> managers, the quest for pr<strong>of</strong>it:is a constant challengeallows objective performance measurementis a way <strong>of</strong> fighting the individual’s egoa true long-term pr<strong>of</strong>it culture shared by allfor the benefit <strong>of</strong> shareholders29
Our strategy: exploit our sources <strong>of</strong> value creationExcellence:Focus on productivitypreparation <strong>of</strong> worksites, fac<strong>to</strong>ry-type organisation and management<strong>of</strong> worksitesaccurate measurement <strong>of</strong> difference between forecast and adjustedforecastquality, innovation, safety and accident preventionExcellence is a means:<strong>of</strong> differentiating ourselves from competi<strong>to</strong>rsusing our leadership position<strong>of</strong> giving our employees free rein <strong>to</strong> use their skills and talentsenabling them <strong>to</strong> give the best <strong>of</strong> themselves30
Our strategy: exploit our sources <strong>of</strong> value creationAugmenting the value added:Upstream:Combine design with constructionbetter control <strong>of</strong> the project and its costsbetter control <strong>of</strong> property development transactionspropose integrated projects <strong>to</strong> public cus<strong>to</strong>mers (PPP)Downstream:Remain on site after construction completed (facilities management)competitive advantage (already there)feedback on structure delivered <strong>to</strong> cus<strong>to</strong>mercomplete design-construction package (PPP)Augmenting the value added:is a supplementary goalgives us a better understanding <strong>of</strong> our environment and helps us adapt <strong>to</strong> itis a means <strong>of</strong> protecting our core businessgives us a recurring revenue stream31
Our strategy: exploit our sources <strong>of</strong> value creationContinued push <strong>to</strong> intensify geographical coverage <strong>of</strong> our markets:focus on organic growthtargeted policy <strong>of</strong> small acquisitionsmainly in France, the UK and Central Europe; on exceptional basiselsewhereIn 2002: acquisition <strong>of</strong> Crispin & Borst (maintenance/facilitiesmanagement) in the UK:representing net sales <strong>of</strong> €161 million25 acquisitions in France and Central Europe in 2002–2004:at Sogea (9), GTM (11) and <strong>VINCI</strong> <strong>Construction</strong> FilialesInternationales (5)representing <strong>to</strong>tal full-year net sales <strong>of</strong> €130 million32
Zoom on Central EuropeRemain reasonable:the 10 new countries represent less than 5% <strong>of</strong> the enlarged EU’sbuilding and public works market…. but they are growth markets:housing: strong growth expected in new build sec<strong>to</strong>r, but dependent onthe evolution <strong>of</strong> the credit marketindustrial buildings and <strong>of</strong>fices: steady growth, but watch for cyclesinfrastructure: the most buoyant market in the short term (significantneeds, structural funds from the EU)33
Zoom on Central EuropeProjected trend <strong>of</strong> international financing for infrastructurem€5 000Poland Hungary Czech Republic Slovakia4 5004 0003 5003 0002 5002 0001 5001 00050002001 2002 2003 2004 2005 2006 2007Source: OBSIC 2004 study on integration <strong>of</strong> C&EE34
What <strong>VINCI</strong> <strong>Construction</strong> contributes <strong>to</strong> <strong>VINCI</strong>Its earningsIts cash and equivalentsbut also:New concessions: Rion–Antirion, A19, Comarnic-Predeal, etc.A bridgehead in<strong>to</strong> new countries:Poland, Hungary, Greece, Chile, etc.The “product” made by independent managers, which can be used by other<strong>VINCI</strong> divisions;Opportunities for exchanging personnel (production, administration)Good projects shared with other <strong>VINCI</strong> divisions (Concessions, Energy,Roads)35
<strong>Presentation</strong> <strong>of</strong> <strong>VINCI</strong> <strong>Construction</strong><strong>to</strong> <strong>financial</strong> <strong>analysts</strong>Lille, France – 17 December 2004