Ferrovial has forecast the performance of its businesses for 2019 and the main markets in which it operates. this will be attained by developing the strategy, opportunities and risks analyzed in chapter 1.2 of this integrated report.
The performance of the toll roads in operation during 2019 will depend on macroeconomic factors and developments in the countries or states where the assets are located and their impact on traffic volumes and revenues. The company will continue to focus its efforts on providing maximum quality of service while optimizing revenues and costs to the fullest extent permitted under the concession agreements.
In addition, Cintra will continue its bidding activity in the company’s target regions (North America, Europe, Australia, New Zealand, Colombia, Chile and Peru), focusing primarily on complex greenfield projects, given their high potential for value creation.
Over the coming year, Ferrovial Airports will continue to focus efforts on its bidding activity and on maximizing the return on its assets, keeping a close eye on the expected impact of Brexit and the roll-out of the right contingency plans:
While bidding activity in 2019 will continue to focus on the North American market, new opportunities will also be analyzed in Europe and in markets that have been witnessing constant growth, such as Asia.
The outlook for 2019, by market, is as follows:
In international markets, the outlook remains positive due to the healthy state of the project pipeline and the company’s technical prowess and expertise with large contracts. That said, profit margins remain tight due to fierce levels of competition and inflationary pressures on costs across all the main markets:
In short, moderate sales growth is expected for 2019, but with promising opportunities to win contracts down the line. Last but not least, profitability margins are expected to remain below historical levels, in line with what happened in 2018. The company now aims to concentrate on selective bidding, on maintaining strategic discipline when selecting projects and countries and on implementing new control measures and active commercial management to improve the performance of its construction activities.
The outlook for Ferrovial Services in 2019 across all its main markets remains favorable. The company will press on with its strategic priorities: growing and optimizing the services order book (assigning resources and capacities to the most attractive prospects while selling non-strategic lines), improving operating margins and optimizing overheads.
In the United Kingdom, an economic growth similar to 2018 is expected, with considerable uncertainty regarding the impact of Brexit. While restrictions on public spending will continue in the short term, the government has now announced an end to the austerity measures. Budgets for some departments have already increased, including Network Rail, whose budget has been raised by 15% for the coming five years. The government is fully committed to the reform process. By ensuring a more balanced transfer of risks, it will make the services market more attractive to efficient and innovative suppliers.
The outlook for Amey is as follows:
In Australia, macroeconomic indicators continue to impress, driven by population growth, healthy public accounts and the steady recovery of the mining, oil and gas sectors.
The outlook at Broadspectrum is as follows:
In Spain, we expect macroeconomic conditions to remain stable during the year, although growth will be down on previous years. It is set to be an election year, with the ensuing political uncertainty and possible delays in bidding processes, large road concession projects and hospitals. Turning to the regulatory landscape, recent European regulations to promote the circular economy have opened up numerous opportunities for large projects relating to waste valorization and energy efficiency. We have also seen a new law on public sector tendering, which will affect the volume of services awarded to companies.
The outlook for Ferrovial Services is as follows:
The business of Ferrovial Services International will continue to combine growth and profitability across all regions. In the United States, where the macroeconomic outlook is particularly bright, the company will continue to focus heavily on its commercial and bidding activity as it seeks to earn a bigger share of its existing road maintenance and petrochemical infrastructure businesses, though first it will need to streamline and stabilize both businesses. Meanwhile, it will explore opportunities in new sectors such as airport services and energy efficiency by relying on the unique capabilities of Ferrovial Services. For the business in Chile, the company is confident of improving its margins and returning to its historical highs.