Ferrovial remains committed to the full divestment of the business although the process is experiencing delays given the macroeconomic uncertainty due to COVID-19. The first milestone in the divestment process was reached with the sale of Broadspectrum which was fully closed by July 2020.
In line with Ferrovial’s commitment to divest Services, the division has been classified as “held for sale” however, in order to provide an analysis of the division, the main figures of the Services results are detailed below.
COVID-19 has had a negative impact on the Services division, especially during the lockdowns. Spain was the first geography where the impact of the pandemic was noticed, but also the geography where the recovery has been most noticeable with 4Q 2020 activity and results slightly above 4Q 2019. The most impacted businesses were services related to transport & infrastructure maintenance, support and logistics activities for the industry, industrial waste treatment area and other activities such as comprehensive management contracts for sports centers. In Amey, the effects from the pandemic were seen at a later date and are linked to delays in non-essential works in the transport sector, lower consulting activity & utilities, as well as construction stoppages and plant delays due to quarantines added to a drop in the price of recycled materials and electricity in the waste treatment area. In the International Services business, COVID-19 impact was mainly related to the Oil&Gas business in north America given drastically lower demand in the sector leading to lower maintenance and repair services.
2020 revenues by activity & change LfL vs 2019:
In 2020, EBITDA reached EUR186mn (-33.0% LfL vs 2019). The COVID-19 impact at EBITDA level (-EUR102mn) includes the positive impact of EUR49mn in costs reduction from the flexibility measures provided by Spanish and British Governments including temporary layoffs and furloughs. The impact has been calculated through a bottom-up analysis from contract level and comparing actual activity results to the budget 2020. The calculation includes the following types of impacts:
Spain: Revenues were down by -2.6% LfL while EBITDA decreased by -11.8% LfL. The most impacted activities were support and logistics activities for the industry, industrial waste treatment area and other activities such as transport and infrastructure services or comprehensive management contracts for sports centers. Other activities like waste treatment and collections showed more resilience. EBITDA margin stood at 10.5% (11.8% in 2019). Excluding the impact from COVID-19, EBITDA would have increased by +5.2%.
International: Revenues fell by -11.1% LfL and EBITDA by -26.7% LfL due to the COVID-19 impact on the Oil & Gas activity of N. America, as the reduction in the demand of oil led to a reduction in repair and maintenance work. Excluding the pandemic impact, EBITDA would have increased +EUR6mn vs 2019, mainly on new highway maintenance contracts in Canada.
UK: Revenues fell by -2.3% LfL. due to the delay in non-essential work in the transportation sector and utilities. Profitability was also impacted by COVID-19 (-EUR44mn at EBITDA level) although better performance from Defense contracts and Utilities, partially offset by the provisions related to contracts that could be sold separately.
Amey and Birmingham Agreement: Amey reached an agreement to terminate the Birmingham Highways PFI contract in 2019. The agreement will have no impact on Ferrovial P&L. Amey will pay GBP215mn, of which GBP160mn was paid in 2019 and the remaining GBP55mn will be paid up until 2025. As of December 2020, Amey has paid an additional GBP10mn.
The Services order book (EUR13,027mn) decreased by -0.3% LfL vs December 2019.
2020 Order book & LfL change vs 2019:
Broadspectrum sale: Following the agreement reached by Ferrovial with Ventia Services Group for the disposal of Broadspectrum in December 2019. On 30 June 2020, Ferrovial completed the sale, following the approval from regulators and competition authorities.
The transaction price (shares and shareholder loans) amounted to AUD465mn (EUR288mn including transaction costs). This figure did not include Ferrovial’s 50% stake in TW Power Services, which was acquired by the JV partner Worley, instead of Ventia, for AUD20mn (c. EUR12mn) in July. Both prices in euros include a positive impact from FX hedges (EUR5mn). Broadspectrum held EUR78mn net cash position.
After completion, a negative impact in the P&L of –EUR64mn was recorded mainly from foreign currency translation differences reflected in reserves are recycled to the consolidated profit and loss account with no effect in cash or equity.
Ferrovial classified all of its services activities as “discontinued operations” as of 31 December 2018. In accordance with IFRS 5, the classification of the Services business activities to discontinued operations continues at the date of this report.
The result from discontinued operations stood at -EUR3mn, which includes, as reported in June a negative result recorded from the sale of Broadspectrum of -EUR64mn, mainly due to the reclassification to the P&L of reserves corresponding to translation differences net of hedges according to IAS 21.
Additionally, a fair value provision was recognized in Amey (-EUR34mn) and International (-EUR25). Services business in Spain has registered a positive result of +EUR121mn in 2020 (without amortization, as per IFRS 5). The current situation of the COVID-19 introduces uncertainty regarding the assessment of fair value of these assets. The current assessment could change depending on the evolution of the pandemic. Ferrovial will continue to closely monitor the impact of COVID-19 on discontinued activities fair value as far as a higher evidence about the impact of the outbreak in these activities is obtained.
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