Alternative Performance Measures (APM)

EBITDA = EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

Definition: operating result before provisions for depreciation of property, plant and equipment.

Reconciliation: the company defines EBITDA in the consolidated income statement (see the Consolidated Income Statement in section 1.3 of the Management Report and the Consolidated Annual Financial Statements) as: EBITDA = Total operating income – Total operating expenses (excluding provisions relating to depreciation of property, plant and equipment, which are reported separately on another line).

Purpose: EBITDA shows operating results excluding depreciation and amortization, as these are non-cash variables that can vary substantially from company to company depending on accounting policies and the carrying amount of the assets. EBITDA is the best approximation to pre-tax operating cash flow and reflects cash generation before changes in working capital. EBITDA is used as a starting point to calculate cash flow, adding the change in working capital. Lastly, it is an APM indicator widely used by investors when valuing businesses (valuation using multiples) and by rating agencies and creditors when gauging levels of leverage by comparing EBITDA with net debt.

Benchmarks: the company presents comparative reports from previous years.

Consistency: the criteria used to calculate EBITDA are the same as for the previous year.

BENCHMARK (LIKE FOR LIKE GROWTH)

Definition: year-on-year relative change in like-for-like terms of revenues, EBITDA, operating results and the portfolio. The comparison is calculated by adjusting the present year and the previous one, in accordance with the following rules:

• Eliminating the exchange rate effect, calculating the results for both periods at the rate in the current period.
• Elimination from the operating result for both periods of the impact of fixed asset impairment and gains/(losses) from divestment at companies (corresponding to the figure reported in the line “Impairment and disposals of fixed assets”).
• For sales of companies and loss of control, operating result is standardized by eliminating the operating results of the sold company where the impact occurred in the previous year, or if it occurred in the year under analysis, then considering the same amount of months in both periods.
• Eliminating restructuring costs in both periods.
• In acquisitions of new companies that are considered material, elimination in the current period of the operating results obtained by those companies, except where this elimination is not possible due to the high level of integration with other reporting units (companies are considered material when their revenues represent ≥5% of the reporting unit’s revenues before the acquisition).
• Elimination in both periods of other any non-recurring impacts considered relevant (mainly related to tax and human resources) so as to better understand the company’s underlying results.
• Note: new contracts in the Toll Roads business for those assets entering service are not considered acquisitions and, therefore, are not adjusted in the comparison.

Reconciliation: comparable growth is presented in separate columns under Business Performance in section 1.3 (Key figures) of the Management Report.

Purpose: the benchmark is used provide a more uniform measure of the underlying profitability of the businesses, excluding non-recurring elements that could lead to a misinterpretation of the reported growth, or impacts such as exchange rate fluctuations or changes in the consolidation perimeter, which would make it more difficult to accurately compare the information. It also enables the presentation of homogenous information, thus ensuring uniformity and providing a better understanding of the performance of each one of our businesses.

Benchmarks: the comparison is itemized only for the current period compared with the previous period.

Consistency: the criteria used to calculate the Benchmark are the same as for the previous year.

FAIR VALUE ADJUSTMENTS

Definition: adjustments made to the Consolidated Income Statement related to earnings resulting from changes in the fair value of derivatives and other financial assets and liabilities, impairment of assets and the impact of the two previous elements on “profit sharing of companies accounted for using the equity method”.

Reconciliation: a detailed breakdown of the Fair value adjustments is included in the consolidated income statement (see consolidated income statement in section 1.3 of the Management Report and the Consolidated Annual Financial Statements).

Purpose: fair value adjustments can be useful to investors and financial analysts when assessing the company’s underlying profitability, because they are able to exclude items that do not generate cash and can vary significantly from one year to the next because of the accounting method used to calculate the fair value.

Benchmarks: the company presents comparative reports from previous years.

Consistency: the criteria used to calculate Fair value adjustments are the same as for the previous year.

CONSOLIDATED NET DEBT

Definition: means net cash and cash equivalents (including short and long-term restricted cash), less current and non-current financial debt (bank borrowings and bonds), including the balance relating to exchange rate derivatives covering debt issuances in currencies other from the currency of the issuing company and cash positions subject to exchange rate risk.

Reconciliation: a detailed reconciliation is provided in section 5.2 (Consolidated net debt) of the consolidated annual accounts and in the section of the Management Report given over to Net debt and Corporate reporting.

Purpose: financial indicator used by investors, financial analysts, rating agencies, creditors and other parties to ascertain a company’s debt position. Net debt can be broken down into two categories:

• Net Debt of Infrastructure Projects. Ring-fenced debt with no recourse for the shareholder or with recourse limited to the guarantees posted. It is the debt corresponding to companies considered Project enterprises.
• Net Debt, ex Projects. Net debt of the other businesses, including group holding companies and other businesses not considered Project enterprises. The debt included in this calculation is with recourse and is therefore the measure used by investors, financial analysts and rating agencies to appraise the company’s leverage, financial strength, flexibility and risks.

Benchmarks: the Company presents comparative reports from previous years.

Consistency: the criteria used to calculate net debt are the same as for the previous year.

ORDER BOOK

Definition: revenue pending performance in relation to contracts that the company has entered into as of the date in question and for which there is certainty regarding their future performance. The total revenue from a contract is equivalent to the agreed price, fee or rate in exchange for the delivery of goods and/or the rendering of services as agreed upon. If the performance of a contract is on hold until funding is secured, then the revenue under that contract will not be added to the order book until the funding is arranged. The order book is calculated by adding the contracts for the actual year to the balance shown in the order book of contracts for the end of the previous year, less the revenue recognized in the current year.

Reconciliation: the order book is presented under the key figures headings of the Services and Construction sections of the Management Report. There is no comparable financial measure under IFRS. However, we can provide a reconciliation with revenue from construction and services detailed in Note 2.1 (Operating income) of the Consolidated Financial Statements. This reconciliation is made on the basis of the order book value of a specific construction or build comprising its contract value less the construction work completed, which is the main component of the sales figure. The difference between the construction work completed and the Construction and Services sales figure reported in Ferrovial’s financial statements can be explained by the fact that the latter also includes consolidation adjustments, advances, the sale of machinery, reverse factoring income and other adjustments. In addition to contracts awarded and construction work completed, the exchange rate of contracts awarded in non-euro currencies, terminations (when a control is terminated early) or changes in the scope of consolidation can all lead to further impacts and differences between the starting order book (for the previous year) and the end order book (for the year in question), as shown in the tables provided at the end of this document.

Purpose: Management believes that the order book is a useful indicator of the company’s future revenue, as the order book for a given construction will comprise the final sale of said construction less the net construction work undertaken.

Benchmarks: the company presents comparative reports from previous years.

Consistency: the criteria used to calculate the portfolio are the same as for the previous year.

CHANGE IN WORKING CAPITAL

Definition: measurement providing a reconciliation between EBITDA and operating cash flows before taxes. It is the result of the non-cash-convertible gross income primarily from changes in the debt balance and commercial debts.

Reconciliation: Note 5.3 (Cash flows) of the Consolidated Financial Statements provides a reconciliation between the change in working capital shown on the balance sheet (see description provided in Section 4 (Working capital) of the Consolidated Financial Statements) and the change in working capital shown in the statement of cash flows.

Purpose: the change in working capital reflects the company’s ability to convert EBITDA into cash. It is the result of company activities related to inventory management, collections from customers and payments to suppliers. It is useful for users and investors because it provides a measure of the company’s efficiency and short-term financial situation.

Benchmarks: the company presents comparative reports from previous years.

Consistency: the criteria used to calculate the change in working capital are the same as for the previous year.

TOTAL SHAREHOLDER RETURN

Definition: the sum of all dividends received by shareholders, the revaluation/depreciation of stock and other payments such as the delivery of stock or buy-back plans.

Reconciliation: the total shareholder return is presented under section 1.1 (Company stock) of the Management Report. There is no comparable financial measure under IFRS.

Purpose: financial indicator used by investors and financial analysts to evaluate the return that shareholders received throughout the year in exchange for their contribution to the company’s capital.

Benchmarks: the Company presents comparative reports from previous years.

Consistency: the criteria used to calculate the shareholder return are the same as for the previous year.

MANAGED INVESTMENT

Definition: managed investment is discussed under section 1.2 (Toll roads) of the Management Report. During the construction phase, it is the total investment to be made. During the operating phase, this amount is increased by any additional investment that may be required. Projects are included once the contract has been signed with the corresponding authority (commercial completion). Provisional terms of borrowing will generally have been agreed upon by this date, but will be confirmed down the line upon signing the funding agreement. The entire investment (100%) is considered for all projects, including those accounted for using the equity method, irrespective of Ferrovial’s participation or stake. Projects are excluded by following criteria substantially similar to those used to remove or include companies from/within the scope of consolidation.

Reconciliation: Managed investments at the end of December 2018 came to EUR18,472 million, comprising 24 concessions in 9 different countries. The breakdown of managed investments by asset type is as follows:

1. Model projects Intangible Assets IFRIC 12 (in operation): EUR6,196 million. Managed investment matches the gross amount invested in these projects as shown in the table in section 3.3.1 of the Consolidated Financial Statements: EUR736 million from Ausol included in Toll Roads – Spain, EUR5,074 million from NTE, NTE35W and LBJ included in Toll Roads – USA and EUR386 million from the Azores, included in Toll Roads – Other.
2. Model projects Intangible Assets IFRIC 12 (under construction), EUR479 million. Includes North American toll roads NTE35W and I-77 (EUR918 million and EUR457 million in managed investment, respectively). As they are under construction, the balance at yearend only shows the fixed assets under construction as part of these project, amounting to EUR503 million, as included in the table provided in section 3.3.1 of the Consolidated Financial Statements, in Toll Roads – USA, but excluding future investment commitments
3. Model projects Accounts Receivable IFRIC 12 (in operation), EUR232 million. Includes the managed investment in Autema. The balance at year-end came to EUR669 million, including current and non-current items (see section 3.3.2 of the Consolidated Financial Statements) and includes, among others, financial remuneration from the account receivable, which is not considered an increase in the managed investment in the asset.
4. Consolidation using the equity method, EUR11,565 million. Includes both projects in operation and under construction that are consolidated using the equity method, such as 407ETR (EUR 3,063 million of managed investment, 100%) or I-66 (EUR2,642 million, 100%). On the consolidated balance sheet, these projects are shown under Investments at associates, making it impossible to reconcile the investment with the amount shown on the balance sheet.

Purpose: figure used by Management to indicate the size of the portfolio of managed assets.

Benchmarks: no comparisons with previous years are provided, though it is a figure provided annually.

Consistency: the criteria used to calculate managed investment is the same as for the previous year.

PROPORTIONAL RESULTS

Definition: means the contribution to consolidated earnings based on Ferrovial’s percentage of ownership in group companies, regardless of the consolidation criteria employed. This information is drawn up for revenue, EBITDA and operating income.

Reconciliation: the Appendix to this document provides a reconciliation between total figures and proportional figures. This year proportional results figures are provided for both continuing and discontinued operations ( due to the reclassification of the Services business as discontinued activity), see note 1.1.3 to the Consolidated Annual Financial Statements.

Purpose: proportional results can be useful to investors and financial analysts in order to better understand the real weight or contribution of the group’s different divisions to its operating results, particularly in view of the considerable value of certain assets accounted for using the equity method, such as the 407 ETR toll road in Toronto and Heathrow airport. It is an indicator also disclosed by other competitors with significant shares in infrastructure projects accounted for using the equity method.

Benchmarks: the company presents comparative reports from previous years.

Consistency: the criteria used to calculate proportional results are the same as for the previous year, although this is the first annual close for which this information has been presented and it is disaggregated between continuing and discontinued Operations.