EuroBusiness Media (EBM): VINCI, the world's largest concession and construction group, reports results for the full-year 2011. Xavier Huillard, welcome. You are the Chairman & CEO of VINCI. How would you characterize VINCI’s performance in 2011?
Xavier Huillard: Adrian, 2011 was a very good year for VINCI for several reasons. First, we had top line double digit growth. This was primarily thanks to a good rate of organic growth combined with the full year impact of acquisitions we made in 2010, namely Cegelec and Faceo in the Energies division as well as Tarmac in the road building division. The weather also helped out in 2011, especially the mild winter we had at the end of the year. Secondly, our focus on margins allowed us to exceed the targets we set for ourselves at the operating level. VINCI Autoroutes ended the year with an EBITDA margin of 69.4% which is a 60 basis point improvement. And on the Contracting side our EBIT margin improved to 4.6% when we had been expecting something slightly lower. Third, our overall financial structure continued to strengthen. Our net debt declined a half a billion Euros to 12.6 billion. The Group’s liquidity position also improved to 12.8 billion Euros, including 4.5 billion Euros of newly negotiated medium term bank credit facilities. And finally, we had a very good year in terms of order intake. In addition to winning the very large high speed rail link between Tours and Bordeaux, we had our best year ever in terms of order intake which stood at 36.1 billion Euros. As a result, our year-end backlog was also at an all time high of 30.6 billion Euros, an increase of 18% compared to the end of 2010.
EBM: Looking at this year and a little beyond, there is quite a bit of concern that austerity measures and the sovereign debt crisis in Europe could have a negative impact on the activity levels of groups such as VINCI. How would you respond to that?
Xavier Huillard: There is no denying that there is a possibility that new order intake could weaken in the coming months, particularly from French local authorities who are facing difficulties to finance their projects. Fortunately, a great thing about our business is that our backlog execution profile allows us anticipate. Right now we have on average about 12 months of activity in our contracting backlog. If we start to see that shorten as the year progresses, then we have a signal that we might need to do what we did in 2009: subcontract less, reduce the number of temporary workers in our headcount, downsize our overhead to adapt to the new reality of the available market. Having said that, we have recently been able to secure large infrastructure projects that will last for several years, such as Tours-Bordeaux in France, the Crossrail projects in the UK, the I-95 in the US or Western Basin Dredging Project in Australia. We also think that the French construction market, which accounts for more than 50% of our contracting business, should remain globally sound, fueled by the pressing needs for social housing, hospitals, universities and energy efficiency. Whatever happens, we will do what is necessary to preserve our operating margins, which I would remind you are best in class. We know what needs to be done, we have done it in the recent past with good results, and we will do it again if necessary.
EBM: Does the current environment have an impact on the way VINCI approaches its strategic initiatives? Is this a time to pull back and wait and see?
Xavier Huillard: Certainly not. Strategy is not a short term vision at VINCI. We think ours is well suited to create value over the medium and long terms. As a result we are still targeting balanced growth in our concessions and contracting activities. We want to expand our international footprint, focusing on emerging as well as oil and gas producing countries. We also need to build on our proven ability to successfully manage increasingly complex turnkey projects like the Renault factory in Morocco. Even our more mature markets offer numerous growth opportunities such as renewable energy projects, building energy efficiency and facilities management. But we need to do a better job at creating synergies and cross sell opportunities across existing business activities. The Tours-Bordeaux contract is a perfect example of how this pays off: all three of our contracting divisions working together with VINCI Concessions will provide VINCI with 4.2 billion Euros of revenue during the construction phase. Another example is Africa where our very strong and profitable infrastructure business could benefit other business lines.
EBM: And finally, in the nearer term, what should the market expect from you?
Xavier Huillard: A few things. First, as usual we are proposing to shareholders to maintain our dividend payout ratio at 50%, actually slightly above. Assuming they approve this at the annual meeting on April 12, our 2011 dividend will be €1.77 per share, an increase of 6%, and our shareholders will have received a dividend yield of around 5%. We also intend to continue our share buyback program in order to maintain the total number of shares in circulation unchanged.
As far as how we expect 2012 to shape up, it is still early days, particularly in the current unpredictable environment. But given our backlog as well as our clients’ potential projects that our teams on the ground have identified, we think it is reasonable that we could achieve at least overall stability in terms of our top line in 2012. We are also targeting to maintain our operating margins at the good level achieved in 2011.
EBM: Xavier Huillard, Chairman & CEO of VINCI, thank you very much.
Xavier Huillard: Thank you.
